CVS Group plc (CVSG) Earnings Call Transcript & Summary

Welcome to this live stream of the CVS Group interim results presentation following the release of our results early this morning. I'm Richard Fairman, CEO, and I'm joined by Robin Alfonso, our CFO; and Paul Higgs, our Chief Veterinary Officer. Our results show that we've made continued progress in delivery against our 5-year strategic plan despite some short-term headwinds from cost of living increases in the U.K. and the ongoing uncertainty from the CMA market investigation. Revenue increased by 6.6% in the first half to GBP 341.8 million. EBITDA increased by 4.5% to GBP 67.4 million, and EBITDA margin was 19.7%. Now following our entry into the Australia veterinary services market in July 2023, we've successfully established our presence. We now operate across 27 practices comprising 36 practice sites, of which 5 practices and 8 sites were acquired in the first half. And earlier this week, we exchanged contracts for the acquisition of a further 6 practice sites. We continue to support the CMA with their market investigation and are in the process of responding to their overview working paper and also their 5 detailed working papers, which they published earlier this month. Our strategy remains unchanged. And despite some continued short-term headwinds, we have a very strong veterinary services market with high levels of demand, and we are well positioned for future growth. So with that, I'll now hand over to analysts to ask questions. Given this event is being live streamed, it would be helpful before you ask a question if you can just state your name and the broking firm you work for. Thank you.

A couple of questions from me. I'll ask them each in turn. But starting with the like-for-like, obviously, one of the weakness or the weaker elements was the Animed Direct. But there's been a website change, I think, came in January, and I think you alluded to turning the taps on in February. I wondered if the reason for turning the taps on was a confidence of what had been delivered on the migration side. And maybe if there's any early indicators in that February period, I know it's early days.

I think it's sensible whenever you migrate from one website to another, just to reduce volume because there's a lot of data migration. It's not just a sale of pet food, but also it's an online pharmacy and therefore, making sure that data is migrated accurately and then making sure that we can dispense actually. There's a lot of UAT testing and testing that goes into that. So we actively reduced volume going into that online pharmacy, whilst we are conducting those checks, making sure the data migrated correctly before we start to turn the taps on. It's worth noting, I think, also that website, there are further developments coming down the line that I think will further enhance the customer experience, things like guest checkout is currently not live, and that will be soon. And things like Apple Pay. A lot of people are now purchasing on their phones and Apple Pay just makes it that much easier for someone to convert their purchase from what's in their basket.

Next question. I think it's really interesting to see you restate your 5-year plan of doubling EBITDA in the statement. Obviously, this was announced before the CMA got involved. I wondered if that restatement of confidence is more around the success you're seeing in Australia, the pipeline you're seeing there or maybe your recent conversations with the CMA, just understanding that reiteration and the confidence you have around that.

Yes. And Andrew, I guess the fundamentals of the sector remain strong, both in the U.K. and Australia with high levels of pet ownership and the humanization of pets is a trend that we've seen continue. Australia has gone well. We've been really pleased with the market entry. And I may ask Paul just to comment on some of the clinical lessons we're learning in Australia as well. But we've seen a strong entry. We've got a strong pipeline of further deals that we expect to complete in due course. And performance of the Australian business has been good as well. So we've been pleased with everything we found. In the U.K., we have seen cost of living pressures and some of those obviously continue. And I guess clients have choices in the consulting room, and they can take different options guided by our vets like Paul. And also clients can choose not to bring their pet to the vet in the first place and wait and delay access to treatment. So that's a factor in the U.K. as is the CMA process, and that clearly has led to uncertainty. At times, some of their announcements have led to adverse press articles about the sector. I think it was pleasing to see when the CMA published their working papers at the start of this month, there was no press release alongside those, which is helpful. But Paul, do you want to just touch on the performance in Australia and some of the lessons learned?

Yes. From a clinical perspective, as we mentioned before, we really are looking at practices that are very high quality of care. We launched our Australia Clinical Advisory Committee towards the end of last year, which is enabling us to bring together all of the different experiences across those what are very, very experienced veterinary teams. And certainly, we've learned quite a lot from a different approach to veterinary care. It's very similar, but there is definitely an approach, say, if we pick out dentistry, for example, around a real focus around preventative health care and getting ahead of a problem and trying to prevent welfare challenges around dentistry, for example, whereas maybe in the U.K., we can be a bit more reactive. So certainly, we're learning things, and hopefully, we'll be able to share things with them as well. But the quality of the practice there is fantastic. And the advisory committee has really been a great step forward to bring that community together.

Just one more from me. On the Net Promoter Score, I think this is particularly for Paul. So the Net Promoter Score you commented on in the slides. I just wonder, the importance of that, I think, is fairly well known in keeping that level. But the more incremental changes, what difference does that make? Is there anything that we should read in terms of those more marginal movements from one day to the next or one reporting period to the next or is it more about the overall trajectory and trend that's a more important part to look at?

I think always in the end, it's an overall trend that we noticed is a recovery from last year. And we know the reason for that during the cyber incident and the change of rollout of a new practice management system, which having been through that process myself and experienced that, it can feel very disempowering. And of course, that had to roll out at a rate that was much faster than we would have liked because of the cyber incident. And so we would expect that to recover. I think with the EMPS, it's a difference between having a target and feeling like actually our colleagues are well engaged. And we do know that on a practice level, it's very important that we have great engaged colleagues. On an individual level, the EMPS is less accurate. But certainly, from month-to-month, it's very difficult to interpret exactly what the reasons are around them. And of course, engagement is about everything that's going on around them. It's not just about how they feel about CVS. It's also about how they feel about being in the profession at the moment, and there is a lot going on in the profession around confidence, particularly in the veterinary profession because of the CMA investigation, not just around consumer confidence as well.

A couple of questions, please, if I may. Just on staffing, I think you said 3% organic increase in the number of vets that you've got at the moment. I'm just curious, what is that filling vet gaps? Is that additional vets serving more capacity that you've put in or is it like different shift patterns? Because that's all excluding the vet practices that you bought and brought people in with. So just what does that represent?

Yes. So I guess we've had a focus, Andrew, on recruiting and retaining vets. And as we all know, there has been a shortage of vets across the profession. And we have reported in previous results, our reliance on locum vets for some of our sites. So wherever we can replace a locum with an employed vet, that's clearly in our interest to do so because we know employed vets are more engaged in the success of the practice, more productive and clearly less expensive as well. So part of that is replacing locums with employed vets. Part of that is recruiting for future growth, and we recruited a number of graduates in the summer, and that graduate recruitment is also important. But clearly, that hopefully will drive further growth in the second half and beyond.

And then if I may, just flat like-for-like growth in the practice division. I know you typically don't give volume price splits in detail. I'm just wondering if you could share any light on how tolerant you think the market is to price rises at the moment? Or is that something that people are stepping away from given all the background?

I guess the key issue is with price. We have to price appropriately. And clearly, we are confident we can price to cover inflationary pressures. But I'll hand over to Paul actually because the issue with price is taking our vets on that journey and making sure vets are confident with the pricing we make and pricing decisions we make. And that confidence in the consulting room is critical to our business and our ability to grow. I don't know if you want to touch on that further.

Yes. I think as a profession, in the past, veterinary surgeons have not been as aware of the fact that actually you need a very healthy veterinary business to be able to continue to provide good quality of care. And I think that is changing. Actually, that's something that the CMA process has brought to the fore, and I think it's really helping the veterinary profession to mature into understanding how the value of what they deliver needs to be valued by them as individuals. as well. And so it can be challenging. But actually, that communication is the important part is helping our colleagues to understand why things are priced in the way that they are and to ensure that they feel that they can deliver a great quality of care, which is why investing in good facilities and good equipment is probably a very critical part of what we do to ensure that our colleagues feel that they can value what they do.

I'd also add because we talk about price volume in the moment, but I think we've shared in the past that our fee and revenue generation is also linked to where animals are in terms of age. And I think what we've shared in the past, pubs and kittens a lot of veterinary intervention. They tend to need less veterinary intervention during the healthy young adult stage. And as they start to age, which you would hope if you think about back to COVID and the puppy boom, as they start to age, they'll start to need more veterinary intervention. So we should start to see some growth coming in the coming years.

And a very quick last one. The debt went up a little bit. Leverage has gone up. I think you've said 2x is where you get to. There's no change in that thinking, i.e., we've got tons of opportunity in Australia. I'm sure you can spend in the U.K. We're still thinking 2x will be where you get to.

Yes. And we're conscious that a number of our investors have different appetites for leverage. Actually, we have some of our banks here today, and the bank covenant is actually 3.25x. That's clearly far too high. So we intend to keep leverage below 2x. We know that if we stop investing at any point, we delever relatively quickly because of the operating cash generation we make. That said, we do have good opportunities for investment, particularly in Australia, and we're keen not to limit that growth opportunity. So it's obviously a balance, but comfortably at the moment, we have good headroom in both leverage and also debt facilities.

A couple of questions. I'll just start with the first one, if I could. So you've mentioned you're comfortable with meeting market expectations for the current year, which seems to be somewhere close to 91p, give or take, for earnings per share. And you've done 40 in the first half. So I'm just wondering if you could walk us through the various factors that you see that are going to help drive that sequential growth in H2 relative to H1 because you've got a couple of headwinds there, minimum wage growth, national insurance contributions, various factors, but there's obviously other factors supporting growth. And if you could just outline those to help us, that would be helpful.

Yes. So I'll kick off, and I'll ask Robin to comment on the specifics. But in the first half, we saw like-for-like growth impacted by 2 areas of our business. One was Anime Direct, where, as we said, we were investing in a new website, and we scaled back some marketing spend to enable that development and to cope with the transition. That website is now live and hopefully, we'll see good growth in the second half from that. And in our laboratory business, we lost a major corporate customer this time last year, and that impact was seen in our first half. That's now through our numbers. And therefore, we should see like-for-like growth in our laboratory business in the second half. And clearly, the biggest part of our group is our practice division, and we're focused very heavily on like-for-like growth in our practices in the second half as well. But in terms of the specifics of the numbers, maybe Robin can touch on.

Yes. Maybe I'll touch on that. In terms of if I think about our biggest part of the business that Richard talked about, we are piloting a number of better customer engagement propositions. So things like online booking, a better website with clear call to actions. There are things we're currently piloting, and we're hoping to roll out across our practices shortly. And we have high confidence that they will deliver some positive growth. Clearly, we've made acquisitions through the year, so that will annualize through. So that will provide a benefit to the second half of the year. We've talked in the past, there's always a little bit of seasonality. So we tend to find a better revenue in the second half of the year, particularly around farms and our Equine businesses. I know they're a much smaller part of our business, but particularly around farm and Equine. And then you touched on national minimum wage and national insurance contributions. And clearly, that has an impact. From April, we've said that national insurance contributions will annualized cost to be GBP 8 million and national minimum wage, GBP 3 million. But we've also said that we're going to look to offset that mainly through 2 areas. One, we are seeing better synergy benefits in Australia, cost benefits than we thought we would be able to deliver and much sooner than we thought we'd be able to deliver. So that's really positive. We think that will go some way towards offsetting that increased cost burden. And we're just looking at other efficiency savings that we can make to offset that as well as we we've locked into utility costs. We've got some forward contracts for buying things like gas, electricity, and therefore, we have a clear line of sight that we should see utility costs come down also in the second half of the year. So there's a number of factors that will deliver that second half EPS growth.

Second question for me, just to do with the CMA review, which obviously ongoing on everybody's minds. And if you could just walk us through your latest thinking in terms of how this plays out. You've obviously got working papers coming out from CMA. There's a preliminary announcement I believe, around May time frame, you're thinking the conclusion in November. What's your latest thoughts on each of the various steps on that journey to getting the final conclusion from them?

So we've spent considerable time engaging with the CMA, both in meeting them. We had a teach-in session, first of all, with the panel last June. We then had some site visits with the panel members in July. And over the course of the period, we've been responding to a number of detailed requests for information. We actually met with the CMA panel on Tuesday. We had a hearing on Tuesday. And we've seen the CMA published recently their working papers. One was an overview paper of their findings so far. And in that working paper, they acknowledge the tremendous skill and professionalism of vets and nurses, not just in CVS, but across the sector. So that was pleasing to see that being recognized. Their overview paper was also quite balanced. And certainly, our meeting on Tuesday with the panel was very balanced as well. And we are keen to continue that engagement with the CMA to help them fully understand the sector and the complexities within the sector, which I think they recognize in their working papers. From here, we know that we have to respond to the detailed working papers published so far, and we're in the process of doing that. The CMA have said they'll publish further working papers over the coming months. So we expect a profitability paper and also an econometrics paper, which will look at price changes over the last 10 years. And then the CMA have also said they'll publish a remedies working paper in March or April. We expect April. But that will give us all, I guess, a first sense of remedies that the CMA might wish to put in place. And then their provisional decision, as you say, Colin, will be in May or June. And then the statutory deadline for the conclusion of their investigation is November. It's probably too early to speculate in terms of what the remedies the CMA might wish to impose are. But we still expect those to be similar to the proposals we put forward this time last year around sunlight remedies to help, I guess, a number of things. One is consumers need information clearly to select a first opinion vet practice. And there's plenty of choice in the U.K. as the CMA recognize, but helping consumers choose a practice based on more information about ownership or price or quality, the latter is more difficult. Measuring quality is inherently difficult. But if we and others can help consumers have some form of quality measure, that will be helpful. The second point, I guess, is helping consumers make choices once they've selected the vet practice in terms of how they care for their pets from time to time. So helping them access that care and deciding on the appropriate care. And I'll get Paul to talk a bit more about what we mean by contextualized care in that regard. And then the CMA have commented on the regulatory framework, which clearly hasn't changed since deregulation of the sector. So as you all are probably aware, up until 1999, only vets can own a vet practice and the sector was deregulated in 1999. I understand to actually prompt more competition in the sector. So corporates like CVS could start to own vet practices. And clearly, we've grown largely through acquisitions over the last 25 years. But clearly, regulation hasn't changed in that period, and the CMA have some observations on regulation. We don't want to speculate on what those remedies will be, but I expect they will be in those types of areas. Do you want to touch on contextualized care and the importance of that because I think that's important?

Yes. That's a term, if you've read any of the working papers that will have come through. And it's a term that the veterinary professionals currently adopted to describe the communication process in the consulting room, just to summarize it a little bit. And it's about rather than being instructional, it's about accounting for everything that the owner needs or wants from that interaction, taking account of the animal welfare needs, then also our expertise as the guide in the consulting room, even down to the facilities that we have. And all of that comes together to create a care plan in the full context. It's very easy to assume that contextualized care is just about whether or not an owner wants to have a low cost or a high-cost intervention. But actually, it's much more complex than that. It's around, for example, if your cat is diagnosed with diabetes, your context is, are you able with your lifestyle to commit to injecting your cat twice a day, a dedicated time frame, 7:00 in the morning, 7:00 in the afternoon for the rest of their lives. That's part of your context, and it's not just about whether or not you can afford to treat diabetes. And that's about building trust and rapport and that's something is a profession that we've been doing for a very long time. But clearly, the information that we've received, which is welcome is that we could do that better. And that's something that particularly with our ability to support our teams with education and mentorship is something that we are working quite hard on as well at the moment.

So Colin, we're encouraging the CMA to think about those sunlight remedies. Clearly, they have powers to impose other remedies. But yes, we'll all know more, I guess, in a couple of months' time.

I have a couple of questions. My first one, just following up on the return to like-for-like growth in sales in H2. What have you seen so far in terms of trading in January and February? Have you seen a return in footfall and demand, particularly in the U.K. in the practices division? And in terms of timing, when do you expect to get back to that 4% to 8% like-for-like growth that you're guiding to in the medium term?

Over the last couple of months, we've seen an improvement in performance, particularly through our Veterinary Practice division. Richard has already touched on some of the drags on like-for-like in the first half. So the laboratory division lost a key client. That's now rolled out of our comps. So that will benefit like-for-like. Animed Direct, I think we've already touched on, has been underperforming in the first half of the year. We expect good things from the website, but clearly, in the first couple of months as we had reduced marketing spend in that area, that will also have a drag on like-for-like performance.

And Tal, in terms of the 4% to 8%, we're still very confident in that range and that ambition. We can't put a timing in terms of where we'll get back to that level. But the fundamentals of the sector remain strong, increased pet population. As Robin said, the cohort of puppies and kittens born in the peak COVID period, they're now 4 or so years old. And as they start to age, they will bring inherent demand. And the humanization of pets is a trend that, as we said, we've continued in the U.K. and Australia. So the fundamentals of the sector are strong, and that's why we remain very confident of our future growth opportunity. But in terms of timing of when we'll get back to that 45%, we can't say.

And just a follow-up on the labs contract. You mentioned that you lost a key customer there. Are there any further risks to losing any others or are you able to expand a bit more on what happened there?

That was simply one corporate competitor acquiring a lab or their group acquiring a lab. And clearly, they brought that business into their own group. So yes, clearly, I think the majority of our lab work is still in-house, and therefore, we control that. But we do rely on third-party lab work. Much of our third-party work though is actually spread across a number of privately owned practices and therefore, the risk of any individual loss is therefore much more limited.

I would add there's also opportunity for us to win more clients going forward that would help drive performance in our lab business.

My final question is just on the EBITDA margin. You mentioned previously about doubling EBITDA. But just in terms of your target for 23%, you've talked about how you can offset some headwinds and your performance in Australia being better than expected. But are you still comfortable with that 23% by 2027? And if so, how do you expect the phasing in terms of getting there?

Yes, it's difficult to comment on the phasing. In terms of the opportunity to improve EBITDA margin, absolutely, we are confident there's an opportunity there. Australia is interesting because we are, as we said, focused on buying larger, high-quality practices with 4 or 5 vets and actually, the practices in Australia are margin accretive to the group. So clearly, if that continues in Australia, the more we grow in Australia, the more that supports the group EBITDA margins. And then in the U.K., there are opportunities to improve margin as we invest in practice facilities and clinical care. But as you say, there are some short-term headwinds with the high employment costs that we're facing into. But there are synergies that we didn't assume in Australia that we're starting to have confidence that they will come through and they're largely buying synergies from both drug manufacturers and wholesalers and also lab and crematoria synergies that we can access without actually owning labs and crematoria in Australia, but concentrating our spend with preferred suppliers.

Two questions I don't think have been asked yet. Capital allocation, you talked about doing a more selective U.K. property program. Can you just give us a sense of how you're tightening the focus on that and then how you balance that against the commitment to clinical care?

Yes. So there is uncertainty in the U.K., clearly with the CMA process. And we've seen like-for-like growth in our practice division being flat in the first half. In contrast, in Australia, we've got a great opportunity. There's clearly far more certainty around the regulatory environment, which is helpful. And we're seeing good opportunities to invest at lower multiples to acquire practices. And our performance so far and our experience so far has been really positive. So we have talked earlier about the 2x leverage cap that we've agreed and also the fact that whilst we delever quickly if we don't invest, and we've got headroom, clearly, if we continue to invest, we will see headroom reduce and leverage increase. So we do, frankly, have to make choices in terms of our capital allocation. The U.K. is clearly really important. And for our colleagues, in particular, it's really important that we invest in our practice facilities and also clinical equipment. That's important for attracting and retaining colleagues and supporting them and providing great clinical care, and it's also really important for our ability to deliver that care. So we have always been selective in terms of our investment, and we measure everything against our weighted average cost of capital, and we project cash flows and decide where we invest. But I guess we're just signaling at the moment, the opportunity in Australia is really good and the uncertainty in the U.K. just means we have to be a bit more disciplined in the U.K.

And then second question is on Australia. Can you just give a bit more color around the people-focused initiatives you've launched in the region? It might be a bit too early, but are you seeing any early successes and how that might be changing application levels into the business?

In terms of the people focus, I suppose that the early steps is to create a community there and to ensure that they understand really what the culture of CVS is and to bring that over from the U.K. That has been done very effectively by bringing the leaders together and to developing the new Clinical Advisory Committee. So with that, we have now originally led by myself, but we now have a Clinical Advisory Committee Chair in Australia itself, which is one of our previous practice owners. And then we have representatives from each of the different states, which contribute into that. So I think really what the main focus around the culture is reassuring them and confirming to them that we are a clinically led business and that clinical care is our main driver. And I think we've been doing that quite successfully.

And that, James, is actually now helping with our acquisition pipeline as well. Up until recently, the acquisition pipeline was really driven by a very experienced acquisition director in Australia and his focus will continue clearly, and he's instrumental in the pipeline that we've built. But what we're now starting to find, given our reputation in Australia is now strong and is established, we're starting to see vendors that have sold their practice to us recommending others to consider a sale to CVS as well, which is helping further build that pipeline. So that's encouraging.

Apologies if these questions have already been asked. Just going back to Australia for a minute. So just a couple of questions on Australia. Can you give us a sense of what the like-for-likes are actually in Australia? Because obviously, you've had some of these practices now for a while, and you can certainly see what they're doing against historic like-for-likes. And also in Australia, you've called out that you've been able to get synergy benefits earlier than expected. Where specifically have those come in terms of being earlier than expected? And was that just cautious thinking in the first place or was it something that's come up that you weren't expecting?

I'll start with the latter. So yes, caution in our business cases. So we assume no synergies. However, we were confident we could generate some synergies. And I guess they're largely cost synergies. So clearly, we're buying drugs in Australia from the same global manufacturers from which we buy drugs in the U.K. And as our scale builds, we clearly have more leverage to improve our purchasing power. There are 2 major wholesalers in Australia as a in the U.K., 2 or 3. And the practices we've acquired will be using different wholesalers. But we've got the practice leader together to decide which wholesaler they wish to prefer to use. And that means we can concentrate our spend with one wholesaler, and that hopefully leads to better terms with that wholesaler. And then as I touched on, for crematoria laboratories, we don't need to own those businesses in Australia, but we can still access synergies by concentrating the spend with chosen laboratories and crematoria. And Paul and I were with the practice leaders in the summer in Australia, and they decided on which was the preferred lab provider, which was the preferred crematoria. So we're now able to concentrate spend with preferred suppliers. And in terms of the like-for-like growth, we haven't commented on the like-for-like growth in Australia. And clearly, it's early days given our first acquisition was in July. But I think it's fair to say it's within the 4% to 8% range that we have as the ambition for the group.

And then on the CMA, what I'm specifically interested is whether you've got any more sense of whether they are taking a more realistic approach to the return on capital calculations from your conversations you've had with them because if they can't prove that the industry is making super profits, which they certainly can't prove through the margins, but the returns, they might be able to argue that if they take their slightly weird approach to it. If they can't prove that, then naturally the whole case starts falling down quite rapidly. So have you had any indications from them that they are listening to their working papers from the industry or are you still waiting to hear on that?

Still waiting to hear. We responded to their draft working paper in the autumn as many others did. And hopefully, the CMA will take on board ours and others' comments. But we're yet to see that working paper. I think that's due to be published in March, so we'll know more in the next month.

And then last question is, slightly controversially. I understand that you're focusing on your acquisition growth in Australia because there's certainty there, but no one is buying anything in the U.K. and there must be some assets that are up for sale, some situations where people are looking to exit. I'd hazard to guess there's some pretty good bargains out there to be had at the moment. Why not be more bold and go and buy some of those? Because if you really believe that it's going to be sunlight remedies, then actually this is going to be the time to be buying up those assets.

We certainly see the opportunity to make further acquisitions in the U.K., and we've publicly stated that before. I guess given the uncertainty at the moment and the fact that we should get resolution by the statutory deadline in November, we will soon know where we stand. And those acquisition opportunities in the U.K. will remain because, as you say, the market has dried up. Australia opportunities are a much lower multiple there. So I guess, given the earlier comments about capital and our need to manage capital, the deployment of capital into Australia for acquisition purposes is probably preferable at this time than the U.K. I sense U.K. multiples may have changed from pre-CMA era, but time will tell.

Does that mean that if everything does go as we think it might be in terms of sunlight remedies that acquisitions in the U.K. will be back on the cards or would you still really be allocating the capital to Australia?

I think U.K. acquisitions can definitely be part of our future plans. Clearly, the CMA have focused on local concentration. And I think their summary working paper concludes that if you look at the nationwide picture, there isn't a great deal of local concentration. There is in some clearly particularly isolated areas. So when we acquire in the U.K., we'll have to be sensitive to that. But notwithstanding that, we still think there will be good U.K. acquisition opportunities.

We have a question from Kane Slutzkin of Deutsche.

Probably everything has been asked by now. But maybe just a quick follow-up on the other side of Seb's question on M&A in the U.K. Just in terms of CMA, do you have any a base case for anything around divestments and whether that just could lead to reshuffling of the pack or reshuffling of practices within the major providers? And then just on Australia, you mentioned the lower multiples. I'm just wondering, given the low levels of consolidation, obviously, significantly lower than the U.K. I'm just wondering, are you seeing competition pick up in terms of more roll-up stories taking place? And how might that impact multiples? And then just finally, just the last one. Just wondering, it's probably been on the top of most people's minds over the last 1.5 years or so, whether you should have been buying back some shares at current levels, particularly if you've taken the view that it would be sunlight remedies. So just wondering, is that on the table or is it now past that in terms of your leverage is now closer to 2x, you're probably keeping your powder dry a bit for Australia?

So if I pick up the divestments question, Maybe, Paul, you can pick up the Australian competition and Robin can touch on share buybacks. But in terms of divestments, that's clearly a remedy the CMA can put in place. From their summary paper, they recognize that on a national scale, there isn't intense local concentration. And I guess the question for the CMA and any remedy that have to put in place clearly has to be proportionate to the findings. And I guess the question would be what would they achieve from foreseen divestment because if one group has to sell a practice, someone else has to acquire that and the obvious purchase will be the other corporate groups. So a divestment process might just result in a shuffling of the pack. And actually, for us, we might be net beneficiaries from that, whereas clearly, IBC with the biggest share of the U.K. market with about 1,000 practices possibly might be net losers from that. So I guess the question is, what would they achieve from that? And would that really help consumers with their choice of practice. It's still a remedy that can impose, but we would encourage the CMA to consider what would the outcome from that be, even though we would probably be net beneficiaries. In terms of Australian competition and the market more generally, maybe Paul can comment.

I think we've commented in the past that we're not the first to enter the Australian market, and there are 2 other major consolidators already in Australia. Really, I don't think we're seeing an increase in their activity. And I think probably the main message is that we in a number of cases, have not been the first necessarily to the table, but have won some very significant practices on the basis of the reputation that we're growing there. And I think to remember that veterinary practices are being sold by veterinary surgeons and the price that they get is not always the most important thing for them. What's really important for them is that what they have grown for themselves and for their teams, they are confident that's going to be maintained at the quality and the standards. And that's why our reputation at the moment in Australia is that we are a very preferred consolidator. We are growing a great deal of trust within those teams and our reputation is very good. So overall, I think we are seen as a very, very positive consolidator in Australia.

I'll add to that reputation. That is critical in Australian market in that it's very commonplace in Australia once you value the business for 80% of that or circa 80% of that will be paid upfront and then a proportion deferred. And the reason why reputation is so important is in the past, when vendors are sold to the other competitors, there is a risk that people leave and they're unable to earn the deferred element of their earnout, which is quite significant for them. And therefore, that's why for us, with our reputation, I think they have confidence, a, that we do the right thing, but also they have increasing confidence that they earn that significant element of deferred and which is why I think we are winning those deals and why reputation is so important. And then as Richard was saying, I mean to cut across was that we have been asked a question about share buybacks in the past before, we regularly look at what the impact would be for us over the long term of a share buyback versus capital deployment. We do have areas where we want to deploy capital. Richard comments on Australia, there's an opportunity right now for us to establish a really meaningful business. Who knows what may happen in the next 6, 12 months or further in terms of increasing competition there. I think it makes sense for us right now to really grow that business whilst we have the opportunity to. And we continue to have opportunity to deploy capital in the U.K., and we mentioned it before, around our CapEx deployment in our practices, not least in equipment or just small improvements to those practices, if not those big investments in multidisciplinary referral hospitals that we've made in the past. So look, we've got good uses for our capital. They provide us good returns, and we've been quite open so far that that's what we're keen to continue to do.

Any other further questions from the call?

There are no further questions from the call. handing it back over to you. Thank you.

Great. Well, thank you, everyone, for attending today, and thank you to all our shareholders who have dialed into this call. I'd just like to finish by thanking all CVS colleagues for their support and dedication, and we look forward to sharing further growth in due course. So thank you.