National Veterinary Care’s Acquisition Update, Veterinary Services Businesses Tally At 99

National Veterinary Care Ltd (ASX: NVL) today, 26 April 2019, announced that it has made progress on the acquisition front which takes the total of its veterinary services businesses to 99 from 97. This is a result of the company signing a new binding agreement to acquire two veterinary clinics in New Zealand.

The agreement is conditional on due diligence, board approval and lease assignments. The settlements of this would be finalised within the next month. The new clinics are believed to generate an aggregate annual revenue of approximately NZ$3.65 million and an aggregate annual EBIT of approximately NZ$0.76 million,

The cost of the two acquisitions sums up to NZ$3.94 million, with total upfront payments of NZ$3.25 million and deferred components (subject to earnout conditions) of NZ$0.72 million. They are located in the present existing NVL geographic clusters in New Zealand.

Managing Director Tomas Steenackers stated that the location of these clinics in such key areas would highly support the existing operations team that was established at the time Pet Doctors was acquired. The pet doctors were acquired last year in December.

Recently NVF had also released its half-yearly results presentation. The company reported strong revenue growth, with the revenue coming in at $54.1 million registering a 30% growth as compared to its pcp. The underlying EBITDA grew by 29.9% to $8.2 million. Further, the underlying EBITDA margin saw a 70-bps contraction at 15%. However, the underlying EBITDA margin was at the upper end of the guidance range. The underlying NPAT grew by 23.4% to $3.9 million.

Total gross margin of 74.3% is down from 75.0% in FY2018, due to the dilutionary impact of the larger scale New Zealand (NZ) operations following the Pet Doctor acquisition. Whilst the Pet Doctor Group operates at similar gross margins to NVC’s NZ clinics, as previously reported the NZ clinics generally operate at lower gross margins to their Australian counterparts mainly due to a higher retail sales mix.

Updates on the Operations front, the company reported that it acquired 31 clinics, including Pet Doctors Group (NZ) and 6 Australian clinics acquired with a $12.0M per annum historical revenue and $3.1M pa historical EBIT. Also, an $18M share placement was completed in Sept 2018 to fund the acquisition of Pet Doctors.

National Veterinary Care represents around 20% Australia and NZ veterinary industry through NVC clinics and MS clinics.

The organic growth performance was aided by 81 clinics promoting the program, with 23,583 members. Introduction of receipt savings initiative helped to Accelerate Member Conversion and Existing Member Retention.

On the Balance Sheet front, the cash and cash equivalents stood at $13.48 million in 1HFY2019 as against $11.86 million in FY2018. On the liability side, the borrowings were at $52.74 million in 1H FY2019. The net assets were reported at $91.99 million.

The company’s net cash from operating activities came in at $1.89 million, the total cash used in investing activities stood at $33.68 million, and the net cash from financing activities was $33.69 million.

Stock Price Performance:

NVL delivered a negative 19.29 percent in the past one year. Further, it has delivered a return of -9.11 percent, 14.41 percent, and 6.87 percent in the past six months, three months, and one-month respectively.

NVL’s shares closed the day’s trade at $1.920 on ASX (As on 26 April 2019) down by 1.285 percent. As on 26 April 2019 closing price the market capitalisation stands at $130.32 million, with 67 million shares outstanding, PE stands at 21.070x, EPS stands at $0.092, and dividend yield stands at 1.54%.

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