Interim Results

RNS Number : 2952Z
CVS Group plc
14 March 2012
 



For Immediate Release

14 March 2012

 

CVS GROUP plc

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

Interim Results for the six months ended 31 December 2011

 

CVS, one of the UK's leading providers of veterinary services, is pleased to announce its interim results for the six months ended 31 December 2011.

 

Financial highlights

 


Six months ended 31 December 2011 (Unaudited)

Six months ended 31 December 2010 (Unaudited)

 

Change
       %

 





Adjusted EBITDA1

£7.8m

£7.2m

+9.0

Profit before income tax, before exceptional finance expense

£2.7m

£2.2m

+25.2

Adjusted earnings per share2

7.8p

6.3p

+23.8





Reported results:




Revenue

£54.0m

£50.5m

+6.9

Operating profit

£3.5m

£3.2m

Mm

+9.2

Profit before income tax

£1.1m

£2.2m

-47.7

Cash generated from operations

£7.9m

£8.8m

-10.3

Basic earnings per share

1.7p

2.6p

-34.6

*

·      Sales growth of 6.9%

·      Like-for-like sales3 increase of +2.1%

·      Adjusted EBITDA up at £7.8m, +9.0%

·      Continued reduction in net debt £31.6m (June 2011: £33.5m)

·      Significant improvement in laboratory division performance

·      New bank facilities in place(maturing 2016), including a 2 year capital repayment holiday

·      Two acquisitions during the period with a further acquisition in January 2012

1See page 5 for a reconciliation of profit before income tax for the period to adjusted earnings before income tax, net finance expense (including exceptional finance expense), depreciation, amortisation, costs relating to business combinations and share option expense("adjusted EBITDA")

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

3 See note 2 of the interim financial information for a definition of like-for-like sales

 

Chief Executive Comment

"I am pleased to report that revenue and underlying profits have continued to grow significantly, with positive like-for-like sales having been delivered during a period of economic uncertainty.  The Group is maintaining its focus on developing the core business, maximising potential revenue opportunities, identifying cost reduction opportunities and growing through selective strategic acquisitions."

Simon Innes

 

Chairman's statement

Introduction

I am pleased to announce the results of CVS Group plc ("CVS", "the Group", or "the Company") for the six month period ended 31 December 2011.  The Group has delivered a strong set of results showing further growth in revenue and underlying profit, in line with the Board's expectations.

I am also pleased to confirm the new banking facilities which were put into place immediately prior to the period end.  These facilities secure funding for the Group until 2016 and are expected to deliver interest expense savings over their duration.

Acquisition activity in the period comprised the purchase of Woolpack Veterinary Surgery,a practice based in Buntingford, in August 2011 and the purchase of Birch Heath Veterinary Clinic, a practice based in Tarporley, in October 2011. I am pleased to report that since acquisition these practices have performed in line with expectations.Subsequent to the half year end, we have acquired Brook House, a practice in Southampton, which complements the Group's presence on the South Coast.  These three newly acquired practices had historical revenue of circa £2.1m per annum.

 

Results

Overall the Group has grown revenue in the period to £54.0m (2010: £50.5m), net of inter-company sales of £1.5m.  The period saw like-for-like sales increase by 2.1% continuing the trend of sustained improvement that is particularly pleasing against an environment where the consumer is facing significant pressure.

Adjusted EBITDA rose to £7.8m (2010: £7.2m) and adjusted EBITDA margin increased to 14.5% (2010 full year: 14.3%, 2010 half year: 14.2%) reflecting a trend of continuing improvement.

Operating profit increased to £3.5m (2010: £3.2m).

Adjusted profit before tax increased to £2.7m (2010:£2.2m) after adding back the exceptional interest expense of £1.6m.  The exceptional interest expense represents the acceleration of future interest charges that would have been payable had the previous hedging arrangement not been terminated during the period as part of the refinancing.

Cash generated from operations reduced to £7.9m (2010: £8.8m) mainly due to reductions in working capital being less than in prior periods, offset by the enhanced profit generation for the six months.  The prior periodsreflect the benefit of a one-off improvement in supplier payment terms.  Net debt reduced by £1.9m despite having settled the exceptional interest expense of £1.6m, and paid the maiden dividend of £0.6m.

 

Divisional performance

Practice

CVS is the leading national veterinary surgery group. At the half year, it operated225 veterinary surgeries (2010: 214) across the UK under a number of well-established local brands, primarily focused on the small animal market.  We estimate that CVS has a 10% share of the total UK small animal veterinary market.

This is the principal operating division of the Group, accounting for £50.6m (93.7%) of Group revenues.  The division has generated £3.5m of revenue growth over the comparative period which primarily reflects the impact of acquisitions and the growth in our online platform,Animed Direct.  Animed Direct continues to grow strongly, selling competitively priced animal medicines and a wide range of pet products direct to UK consumers.

Adjusted EBITDA for the practice division grew by 5.7% from £8.6m to £9.1m. Adjusted EBITDA margins for the division fell from 18.3% to 18.0%, reflecting the change in sales mix most notably due to the margins generated through Animed Direct as the Group continued to build its presence in this strategically important distribution channel.

The Group has further developed its subscription based loyalty schemes providing an attractive and growing source of recurring revenue.  The schemes aim to protect practice sales by bonding pet owners to their local surgery, offering discounted products and services and improving clinical compliance levels amongst members.  The schemes have grown significantly with membership now in excess of 47,000 pets, an increase of some 70% over the six month period.

The Board continues to focus on reducing the Company's cost base by the more efficient use of resources and continuing to improve buying terms wherever possible.

The growth in this division continues to support development in the complementary services offered by both the Laboratory and Crematorium divisions.

Laboratory

The laboratory division had a much improved trading performance during the period, generating £4.4m (8.2%) of Group revenues from its six sites.  These laboratories provide diagnostic services to third party owned veterinary surgeries as well as our own practices.  Services are generally offered via postal and courier services allowing complete coverage of the UK.  Third party sales accounted for 70% (2010: 74%) of the division's revenues with the balance derived fromCVS owned surgeries.

Revenue was 3.8% up on the prior period whilstadjusted EBITDA increased by £0.3m to £0.7m.

 

Crematorium

In addition to CVS practices in the North and Midlands, the Rossendale crematorium provides the majority of its services (2011: 66%, 2010: 67%), to non-Group practices and the general public.

The crematorium division continues to deliver results ahead of the Board's expectations with revenue up on the prior period by 8.1% at £0.4m (2010: £0.4m) and adjusted EBITDA up by 1.1% at £0.2m (2010: £0.2m).

 

Central administrative function

An integral part of the Group's strategy is to centralise administration and management, enabling other divisions to focus on operational matters.  This proposition makes CVS one of the acquirers of choice within the sector.

On an adjusted basis the total costs for the segment were £2.2m (2010: £2.1m), as a percentage of revenue this has dropped from the 4.4% for the year ended 30 June 2011 to 4.1% for the half year.

The Group continues to invest in systems development to facilitate the provision of better quality management information and improved efficiency.  It is anticipated that the on-going investment in systems will continue to be funded from within the normal capital expenditure budget.

 

Cash flow and funding position

Net debt stands at £31.6m at 31 December 2011 (see note 12), an overallreduction of £1.9m since the last fiscal year end in spite of a £1.6m one-off cash payment in respect of the termination of the hedging arrangement.

Internally generated cash was used to fund the £1.0m purchase of The Woolpack Veterinary Surgery in August 2011, the £0.4m purchase of Birch Heath Veterinary Clinic in October 2011, and the £0.2m purchase of Brook House Veterinary Hospital in Southampton (subsequent to the half year in January 2012).

The Group has made scheduled term loan repayments of £1.0m since 30 June 2011 in relation to the, then existing, facilities.  As reported at the AGM in December 2011, the Board took the opportunity to negotiate improved banking arrangements, and thus secure funding for the Group at a competitive interest rate.  These facilities comprise a new five year term loan facility of £36m and a £4m overdraft, and replaced the existing credit lines.  Capital repayments under the term loan commence in December 2013.  The new facilities secure funding for the Group until December 2016 and are expected to deliver interest expense savings over that period.

In conjunction with the new banking facility, the Board also secured terms to hedge 60% of the outstanding term loan. The existing derivative instrument was terminated resulting in an exceptional interest expense of £1.6m. This represents the acceleration of future interest charges that would have been payable over the remaining duration had the previous hedging arrangement not been terminated early.

 

Earnings per share

Adjusted earnings per share increased by 1.5p (23.8%) to 7.8p from 6.3p in the comparable period.  Basic and diluted earnings per share were 1.7p and 1.6p respectively (2010: both at 2.6p) reflecting the increase in operating profits offset with exceptional finance expenses and an increase in the average number of shares in issue.

 

Dividends

A maiden dividend in respect of the year ended 30 June 2011 of 1p per share was paid in December 2011.  The Board will continue to review its dividend policy on an on-going basis and expects that a final dividend will be paid in December 2012, which, in the absence of any unforeseen change in market conditions, will be at least equal value to the maiden dividend.

 

Our people

The Group continues to be the largest employer in the veterinary profession with over 2,300 staff at 31 December 2011. Even so, the Group only employs an estimated 4% of practising vets in the UK, which indicates the significant scope left for further expansion in the UK market.

 

Our people enable the Group to deliver its strategy and I would therefore like to thank each of them, including those new to CVS, for their skill and professionalism in providing the best possible care and service.

 

Further business development

The Board estimates that CVS accounts for approximately 10% of the UK small animal veterinary sector and believes that this fragmented market will provide opportunities for further consolidation and strategic acquisitions.  The Group will continue to focus on profitably developing the organic business by further enhancement to revenue streams and delivery of improvements to operating efficiency.

 

Outlook

The Board is pleased to report that trading since the half year has been in line with Board expectations.

 

 

 

 

Richard Connell

Chairman

14 March 2012

 

 

Consolidated income statement for the six month period ended 31 December 2011 (unaudited)



 

Note

Six months ended 31 December  2011

(Unaudited)
£'000

Six months ended 31 December 2010

Re-presented* (Unaudited)
£'000

Year ended 30 June 2011
(Audited)
£'000

Revenue


4

53,976

50,502

101,491

Cost of sales



(34,468)

(32,431)

(64,817)

Gross profit



19,508

18,071

36,674

Administrative expenses



(15,981)

(14,840)

(30,316)

Operating profit



3,527

3,231

6,358

Fair value adjustments in respect of financial assets and liabilities


5

15

(49)

(183)

Other finance expense


5

(864)

(1,041)

(1,945)

Exceptional finance expense in relation to hedge termination


5

(1,569)

-

-

Finance income


5

15

10

24

Net finance expense



(2,403)

(1,080)

(2,104)

Profit before income tax



1,124

2,151

4,254

Income tax expense


8

(170)

(690)

(767)

Profit for the period attributable to owners of the Parent



954

1,461

3,487

Earnings per ordinary share for profit attributable to the owners of the Company (expressed in pence per share) ("EPS")

Basic


6

1.7p

2.6p

6.2p

Diluted


6

1.6p

2.6p

6.1p

* The comparatives for Cost of sales and Administrative expenses have been re-presented to more accurately reflect the nature of the underlying transactionsand the classifications adopted in the year ended 30 June 2011.  The net effect on Profit for the period and Net assets is £nil.

The above results relate to continuing operations, including acquisitions (further details of which are provided in note 10).

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

Non-GAAP measure: Adjusted EBITDA

Note

£'000

£'000

£'000

Profit before income tax


1,124

2,151

4,254

Adjustments for:





Net finance expense

5

2,403

1,080

2,104

Depreciation

9

1,151

1,108

2,233

Amortisation

9

2,780

2,623

5,348

Costs relating to business combinations


112

35

139

Share option expense

7

231

 

159

435

Adjusted EBITDA


7,801

7,156

14,513

 

Statement of consolidated comprehensive income for the six month period ended 31 December 2011 (unaudited)

 

 

 

Six months ended 31 December  2011

(Unaudited)
£'000

Six months ended 31 December 2010

(Unaudited)
£'000

Year ended 30 June 2011
(Audited)
£'000

Profit for the period

 

954

1,461

3,487

Other comprehensive income

 

 

 

 

Revaluation of available for sale investments

 

(2)

2

3

Cash flow hedges:

 

 

 

 

Fair value (losses)/gains

 

(249)

382

715

Deferred tax on fair value (losses)/gains

 

62

(106)

(185)

Recycled and adjusted against interest

 

1,614

39

83

Deferred tax on items recycled against interest

 

(468)

(11)

(22)

Other comprehensive income for the period, net of tax

 

957

306

 

594

Total comprehensive income for the period attributable to owners of the Parent

 

1,911

1,767

4,081

 

  

Consolidated balance sheet as at 31 December 2011 (unaudited)





Note

31 December

 2011

(Unaudited)
£'000

31 December

 2010

(Unaudited)
£'000

30 June

 2011
(Audited)
£'000

Non-current assets





Intangible assets

9

53,198

55,692

54,486

Property, plant and equipment

9

8,119

8,597

8,465

Investments


75

76

77

Deferred income tax assets


275

736

697



61,667

65,101

63,725

Current assets





Inventories


2,809

2,521

2,633

Trade and other receivables


8,261

6,786

8,049

Cash and cash equivalents


4,156

910

3,193



15,226

10,217

13,875

Total assets

4

76,893

75,318

77,600

Current liabilities





Trade and other payables


(16,664)

(13,420)

(15,894)

Current income tax liabilities

(971)

(925)

(932)

Borrowings


(11)

(3,956)

(3,962)



(17,646)

(18,301)

(20,788)

Non-current liabilities





Borrowings


(35,748)

(34,709)

(32,777)

Deferred income tax liabilities


(5,092)

(6,421)

(5,795)

Derivative financial instruments


(260)

(1,912)

(1,669)



(41,100)

(43,042)

(40,241)

Total liabilities

4

(58,746)

(61,343)

(61,029)

Net assets


18,147

13,975

16,571






 

Consolidated balance sheet as at 31 December 2011 (unaudited) (continued)






31 December

 2011

(Unaudited)
£'000

31 December

 2010

(Unaudited)
£'000

30 June

 2011

(Audited)
£'000

Shareholders' equity





Share capital


113

113

113

Share premium


8,640

8,640

8,640

Capital redemption reserve


592

592

592

Revaluation reserve


125

125

125

Merger reserve


(61,420)

(61,420)

(61,420)

Retained earnings


70,097

65,925

68,521

Total shareholders' equity


18,147

13,975

16,571

 

The interim financial information on pages 5 to 22 was approved by the board of directors on 14 March 2012.

  

Consolidated statement of changes in equity for the six month period ended 31 December 2011 (unaudited)

 




 

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 2010

113

8,640

592

125

(61,420)

63,999

12,049

Profit for the period

-

-

-

-

-

1,461

1,461

Other comprehensive income








Revaluation of available for sale investments

-

-

-

-

-

2

2

Cash flow hedges:








Fair value gains

-

-

-

-

-

   382 

      382 

Deferred tax on fair value (losses)

-

-

-

-

-

(106)

(106)

Recycled and adjusted against interest

-

-

-

-

-

39

39

Deferred tax on items recycled against interest

-

-

-

-

-

(11)

(11)

Total other comprehensive income 

-

-

-

-

-

306

306

Total comprehensive income

-

-

-

-

-

1,767

1,767

Transactions with owners








Credit to reserves for share- based payments

-

-

-

-

-

159

159

Transactions with owners

-

-

-

-

-

159

159

At 31 December 2010

113

8,640

592

125

(61,420)

65,925

13,975

 

 

Consolidated statement of changes in equity for the six month period ended 31 December 2011 (unaudited) (continued)

 




 

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 2011

113

8,640

592

125

(61,420)

68,521

16,571

Profit for the period

-

-

-

-

-

954

954

Other comprehensive income








Revaluation of available for sale investments

-

-

-

-

-

(2)

(2)

Cash flow hedges:








Fair value (losses)

-

-

-

-

-

(249)

(249)

Deferred tax on fair value gains

-

-

-

-

-

62

62

Recycled and adjusted against interest

-

-

-

-

-

1,614

1,614

Deferred tax on items recycled against interest

-

-

-

-

-

(468)

(468)

Total other comprehensive income 

-

-

-

-

-

957

957

Total comprehensive income

-

-

-

-

-

1,911

1,911

Transactions with owners








Credit to reserves for share-based payments

-

-

-

-

-

231

231

Deferred tax relating to share-based payments

-

-

-

-

-

1

1

Dividends to equity holders of the Company

-

-

-

-

-

(567)

(567)

Transactions with owners

-

-

-

-

-

(335)

(335)

At 31 December 2011

113

8,640

592

125

(61,420)

70,097

18,147

 

 

 

Consolidated statement of cash flows for the six month period ended 31 December 2011 (unaudited)




Note

Six months ended 31

 December 2011

(Unaudited)
£'000

Six months ended 31

 December 2010

(Unaudited)
£'000

Year ended 30 June  2011

(Audited)
£'000

Cash flows from operating activities





Cash generated from operations

11

7,891

8,802

17,639

Taxation paid


(819)

(531)

(1,267)

Interest received


15

  10

24

Interest paid


(564)

(721)

(1,840)

Exceptional finance expense in relation to hedge termination


(1,598)

-

-

Net cash generated from operating activities


4,925

7,560

14,556

Cash flows from investing activities





Acquisition of businesses

10

(1,411)

(2,307)

(4,040)

Acquisition of subsidiaries (net of cash acquired)


-

(152)

(152)

Purchase of property, plant and equipment

9

(782)

(831)

(1,803)

Purchase of intangible assets

9

(76)

(70)

(141)

Proceeds from sale of property, plant and equipment


44

17

111

Net cash used in investing activities


(2,225)

(3,343)

(6,025)

Cash flows from financing activities





Dividends paid

14

(567)

-

-

Finance lease principal payments


(6)

-

(7)

Repayment of bank loan


(1,012)

(3,151)

(5,175)

Drawdown of new bank loan


100

-

-

Debt issuance costs


(252)

-

-

Net cash from financing activities


(1,737)

(3,151)

(5,182)

Net increase in cash and cash equivalents


963

1,066

3,349

Cash and cash equivalents at start of period


3,193

(156)

(156)

Cash and cash equivalents at end of period


4,156

910

3,193

 

Notes to the interim consolidated financial information

1.  General information

The principal activity of the Group is to operate companion animal veterinary practices, complementary veterinary diagnostic businesses and a pet crematorium.

CVS Group plc is a public limited company incorporated and domiciled in England and Wales and its shares are quoted on the AIM market of the London Stock Exchange.

The address of the registered office is CVS House, Vinces Road, Diss, Norfolk, IP22 4AY and the registered number of the Company is 06312831.

This interim consolidated financial information does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The statutory accounts of CVS Group plc in respect of the year ended 30 June 2011 have been delivered to the Registrar of Companies, upon which the Company's auditors have given a report which was unqualified and did not contain any statement under Section 498 of the Companies Act 2006.

Forward looking statements

Certain statements in this interim report are forward-looking. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, we 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. We undertake no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

2.  Basis of preparation

The interim consolidated financial information of CVS Group plc is for the six months ended 31 December 2011. It is unaudited and has been prepared in accordance with the AIM Rules for Companies and with IAS 34, "Interim Financial Reporting" as adopted by the European Union. The interim consolidated financial information should be read in conjunction with the annual financial statements for the year ended 30 June 2011, which have been prepared in accordance with IFRSs adopted by the European Union.

The interim consolidated financial information has been prepared on a going-concern basis.

Use of non-GAAP measures

Adjusted EBITDA, adjusted EPS and like-for-like sales

The Directors believe that adjusted EBITDA and adjusted EPS provide additional useful information for shareholders on underlying trends and performance. These measures are used for internal performance analysis. These measures are not defined by IFRS and therefore may not be directly comparable with other companies' adjusted measures. It is not intended to be a substitute for, or superior to, IFRS measurements of profit or earnings per share.

Adjusted EBITDA is calculated by reference to profit before income tax, adjusted for interest (net finance expense), depreciation, amortisation, costs relating to business combinations, share option expense and exceptional costs. Adjusted EPS is calculated by dividing the profit for the period attributable to equity shareholders excluding amortisation, share option expense, fair value adjustments in respect of financial assets and liabilities and costs relating to business combinations by the weighted average number of shares in issue during the period.

 

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.

3. Summary of significant accounting policies

The accounting policies adopted are consistent with those set out on pages 41 to 50 of the consolidated financial statements of CVS Group plc for the year ended 30 June 2011 (which are available upon request from the Company's registered office or on the Company's website), except as described below.

Adoption of new and revised standards

The following accounting standards and amendments, issued by the InternationalAccounting Standards Board (IASB) or IFRS Interpretations Committee (IFRIC), areeffective for the first time in the current financial year and have been adopted by the Group with no impact on this interim consolidated financial information:

·      Amendments to IFRS 7 "Financial Instruments: Disclosures"

·      Annual improvements to IFRSs (2010)

·      IAS 24 (Amended) 'Related Party Disclosures'

 

4. 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, costs relating to business combinations and head office salary and premises.

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 (head office) for business segment analysis:

Six month period ended 31 December 2011

 

Veterinary practices
£'000

Laboratories
£'000

Crematorium        £'000

Head     office
£'000

Group
£'000

Revenue1

50,593

4,424

442

(1,483)

53,976

Profit/(loss) before income tax

5,865

624

155

(5,520)

1,124

Adjusted EBITDA

9,104

732

181

(2,216)

7,801

Total assets

69,130

5,692

1,233

838

76,893

Total liabilities

(15,519)

(2,059)

(136)

(41,032)

(58,746)







Reconciliation of adjusted EBITDA






Profit/(loss) before income tax

5,865

624

155

(5,520)

1,124

Net finance expense

2

(3)

-

2,404

2,403

Amortisation

2,265

9

-

506

2,780

Depreciation

972

102

26

51

1,151

Share option expense

-

-

-

231

231

Costs relating to business combinations

-

-

-

112

112

Adjusted EBITDA

9,104

732

181

(2,216)

7,801

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

  

 

Six month period ended 31 December 2010

 

Veterinary practices
£'000

Laboratories
£'000

Crematorium        £'000

Head     office
£'000

Group
£'000

Revenue1

47,094

4,260

409

(1,261) 1

50,502

Profit/(loss) before income tax

5,169

259

145

(3,422)

2,151

Adjusted EBITDA

8,617

451

179

(2,091)

7,156

Total assets

69,436

4,150

973

759

75,318

Total liabilities

(12,899)

(1,327)

(119)

(46,998)

(61,343)







Reconciliation of adjusted EBITDA






Profit/(loss) before income tax

5,169

259

145

(3,422)

2,151

Net finance expense

-

-

-

1,080

1,080

Amortisation

2,452

130

18

23

2,623

Depreciation

996

62

16

34

1,108

Share option expense

-

-

-

159

159

Costs relating to business combinations

-

-

-

35

35

Adjusted EBITDA

8,617

451

179

(2,091)

7,156

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

 

Year ended 30 June 2011

 

Veterinary practices
£'000

Laboratories
£'000

Crematorium
£'000

Head     office
£'000

Group
£'000

Revenue1

94,704

8,584

835

(2,632)

101,491

Profit/(loss) before income tax

11,456

585

294

(8,081)

4,254

Adjusted EBITDA

17,696

994

333

(4,510)

14,513

Total assets

71,316

4,533

1,104

647

77,600

Total liabilities

(14,734)

(1,276)

(64)

(44,955)

(61,029)







Reconciliation of adjusted EBITDA






Profit/(loss) before income tax

11,456

585

294

(8,081)

4,254

Net finance expense

4

(1)

-

2,101

2,104

Amortisation

4,290

261

-

797

5,348

Depreciation

1,946

149

39

99

2,233

Share option expense

-

-

-

435

435

Costs relating to business combinations

-

-

-

139

139

Adjusted EBITDA

17,696

994

333

(4,510)

14,513

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

5.  Finance (income) and expense



Six months ended 31 December 2011 (Unaudited) £'000

Six months ended 31 December 2010 (Unaudited) £'000

Year ended 30 June 2011 (Audited) £'000

Interest expense, bank loans and overdraft


633

965

1,818

Debt finance costs


230

76

124

Finance charges in respect of finance leases


1

-

3



864

1,041

1,945






Fair value adjustments in respect of financial assets and liabilities


(15)

49

183

Exceptional finance expense (see below)


1,569

-

-



1,554

49

183






Bank interest receivable


(15)

(10)

(13)

Other interest receivable


-

-

(11)



(15)

(10)

(24)

Net finance expense


2,403

1,080

2,104

Fair value adjustments in respect of financial assets and liabilities for the six month period ended 31 December 2011 reflect the ineffective portion of derivative financial instruments that qualify for hedge accounting (amounting to £11,000 (2010: £10,000)), the recycling of fair value adjustments in respect of the time value of the option accumulated in equity prior to the adoption of the amendments to IAS 39 (amounting to £45,000 (2010: £39,000)), and the gain on settlement of derivative financial instruments terminated during the period (amounting to £71,000 (2010: £nil)).

 

The exceptional finance expense relates to fair value gains and losses previously recognised directly in equity on hedge arrangements that were terminated during the period.  In accordance with IAS 39, these amounts have been recycled to the income statement.

 

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.


Six months ended 31

 December 2011

(Unaudited)

Six months ended 31

 December 2010

(Unaudited)

Year ended

30 June

 2011
(Audited)

Earnings attributable to Ordinary shareholders (£'000)

954

1,461

3,487

Weighted average number of Ordinary shares in issue

56,520,657

56,318,411

56,408,647

Basic earnings per share (pence per share)

1.7

2.6

6.2

 

 

(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.


Six months ended 31

 December 2011

(Unaudited)

Six months ended 31

 December 2010

(Unaudited)

Year ended

30 June

 2011
(Audited)

Earnings attributable to Ordinary shareholders (£'000)

954

1,461

3,487

Weighted average number of Ordinary shares in issue

56,520,657

56,318,411

56,408,647

Adjusted for contingently issueable shares

 

1,320,985

861,229

1,003,090

Weighted average number of Ordinary shares for diluted earnings per share

 

57,841,642

57,179,640

57,411,737

Diluted earnings per share (pence per share)

1.6

2.6

6.1



 

(c)      Non-GAAP measure: Adjusted earnings per share

Adjusted earnings per ordinary share is calculated by dividing the profit on ordinary activities after taxation excluding amortisation, share option expense, fair value adjustments, exceptional costs and costs relating to business combinations, by the weighted average number of shares in issue during the period.

 


Six months ended 31 December 2011 (Unaudited) £'000

Six months ended 31 December 2010  (Unaudited) £'000

 

Year ended   30 June 2011 (Audited)  £'000

Earnings attributable to ordinary shareholders

954

1,461

3,487

Adjustments for:




Amortisation (note 9)

2,780

2,623

5,348

Share option expense (note 7)

231

159

435

Fair value adjustments in respect of financial assets and liabilities (note 5)

(15)

49

183

Exceptional finance expense (note 5)

1,569

-

-

Costs relating to business combinations

112

35

139

Tax effect of the above adjustments at 26% (2010: 27.8%)

(1,216)

(797)

(1,679)

Adjusted profit after income tax and earnings attributable to ordinary shareholders

4,415

3,530

7,913

Weighted average number of ordinary shares in issue

56,520,657

56,318,411

56,408,647

Weighted average number of ordinary shares  for diluted earnings per share

57,841,642

57,179,640

57,411,737



Pence


Adjusted earnings per share

7.8p

6.3p

14.0p

Diluted adjusted earnings per share

7.6p

6.2p

13.8p

 

 7.  Share-based payments

 

Long Term Incentive Plans

 

The Group operates an incentive scheme for certain senior executives, the CVS Group Long Term Incentive Plan ("LTIP"). The LTIP scheme was introduced after the flotation of the Company on AIM in October 2007.

 

Under the LTIP scheme awards are made at an effective nil nominal cost (0.2p), vesting over a three year performance period conditional upon the Group's adjusted earnings growth.  On vesting, the LTIP scheme awards are settled in equity.

 

On 15 July 2011, LTIP5 was issued with an option life of 3 years over 757,377 shares, of which 757,377 were outstanding at the period end.  The share price at the grant date was £1.11 with an exercise price of 0.2p.

 

During the six months to 31 December 2011, directors and employees exercised 194,896 (2010: 194,779) share options with a nominal value of £390 (2010: £400), in respect of the LTIP2 scheme.

 

The share-based payment charge for the period in respect of the options issued under the LTIP schemes amounted to £187,000 (2010: £139,000) and has been charged to administrative expenses. National Insurance contributions amounting to £73,000 (2010: £15,000) have been accrued in respect of the LTIP scheme transactions and are treated as cash-settled transactions.

 

Save As You Earn (SAYE)

 

The Group operates an incentive scheme for all staff, the CVS Group Save As You Earn ("SAYE") plan, an HM Revenue and Customs approved scheme. Under the SAYE schemes awards are made at a 20% discount of the closing mid-market price on date of invitation, vesting over a three year period. There are no performance conditions attached to the SAYE scheme.

 

SAYE4 scheme was opened for subscription in November 2011.  401,315 options were granted in November 2011, with the first salary deductions taking place in December 2011 and a contract start date of 1 January 2012.  The exercise price was £0.95p.

 

Options were valued using the Black-Scholes option pricing model and the share-based payment charge for the period in respect of the options issued under the SAYE schemes amounted to £44,000 (2010: £20,000) and has been charged to administrative expenses.

8.  Income tax expense

Income tax expense is recognised based on management's best estimate of the weighted average annual statutory income tax rate expected for the full financial year as a percentage of taxable profit ("the effective tax rate").

 

 

9.  Non-current assets

 

 

Property, plant and equipment


£'000

£'000

Six months ended 31 December 2011



Opening net book value at 1 July 2011

54,486

8,465

Additions arising through business combinations

1,416

66

Additions

76

782

Disposals

-

(43)

Depreciation and amortisation

(2,780)

(1,151)

Closing net book value at 31 December 2011

53,198

8,119




Six months ended 31 December 2010



Opening net book value at 1 July 2010

56,695

8,835

Additions arising through business combinations

1,550

50

Additions

70

831

Disposals

-

(11)

Depreciation and amortisation

(2,623)

(1,108)

Closing net book value at 31 December 2010

55,692

8,597

 

10.  Business combinations

Details of business combinations in the six month period ended 31 December 2011 are set out below.

Practice acquisitions

 

 Date of acquisition

 

   Fair value of property plant and equipment acquired

£'000

Fair value
of inventory acquired

£'000

Fair value of intangible assets acquired1£'000

 

 

 

Consideration    £'000

A practice in:






Hertfordshire

22/08/2011

16

22

1,062

1,100

Cheshire

10/10/2011

50

7

354

411



66

29

1,416

1,511

1Intangible assets acquired represents patient data records (£1,416,000).

In addition to the payment detailed above, estimated contingent deferred consideration of £75,000 relating to the Cheshire business combination has not been recognised at the period end.  In accordance with IFRS 3 (revised), these costs will be recognised in the income statement in future periods by reference to the crystallisation of the contingent event.

  

11.  Cash generated from operations


Six months ended 31

 December 2011

(Unaudited)
£'000

Six months ended 31

 December 2010

(Unaudited)
£'000

Year ended 30 June

 2011
(Audited)
£'000

Profit for the period

954

1,461

3,487

Taxation

170

690

767

Total finance costs

2,418

1,090

2,128

Investment income

(15)

(10)

(24)

Amortisation of intangible assets

2,780

2,623

5,348

Depreciation of property, plant  and equipment

1,151

1,108

2,233

(Profit)/loss on disposal of property, plant and equipment

(1)

(6)

36

(Increase) in inventories

(147)

(163)

(115)

(Increase) in trade and other receivables

(212)

(184)

(1,082)

Increase in trade and other payables

562

2,034

4,426

Share option expense

231

159

435

Total cash flows from operating activities

7,891

8,802

17,639

 

 

12. Analysis of movement in net debt


At 1 July  2011

£'000

    Cash flow
£'000

      Non-cash  movements  

£'000

At 31 December 2011

£'000

Cash and cash equivalents

3,193

963

-

4,156

Borrowings - current

(3,952)

1,012

2,940

-

Finance leases - current

(10)

6

(7)

(11)

Total current debt

(3,962)

1,018

2,933

(11)

Borrowings - non-current

(32,737)

(100)

(2,878)

(35,715)

Finance leases - non-current

(40)

-

7

(33)

Total non-current debt

(32,777)

(100)

(2,871)

(35,748)

Net debt

(33,546)

1,881

62

(31,603)

Non-cash movements relate to the amortisation of issue costs on bank loans and transfers between categories of borrowings.

 

In December 2011, the Group cancelled its existing term loan and drew down on its new facility comprising a term loan of £36m and an overdraft of £4m.

 

Additional refinancing costs of £289,000 were incurred during the period ended 31 December 2011 in respect of the negotiation of the new credit facilities, which will be amortised over the term of the facility.

Relnternational Holdings Limited and OSI International Foods Limited are both members of the Gands (UK) group.Foods Limited.

13. Post balance sheet events

         On 23 January 2012, the Group acquired the trade and related assets of a veterinary practice based in Southampton for cash consideration of £180,000.  The assets acquired comprised plant and equipment of £39,000 and intangible patient data records with a provisional fair value of £141,000.

14.  Dividends

The dividends paid in December 2011, representing the final dividend payable for the year ended 30 June 2011, amounted to £567,000 (1p per share) (2010: £nil).

 


This information is provided by RNS
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