CVS Group plc (CVSG) Earnings Call Transcript & Summary

Welcome to this presentation of CVS Group's Interim Financial Results for the 6-month period ended 31st of December 2024. I'm Richard Fairman, CEO, and I'm joined by Robin Alfonso, CFO; and Paul Higgs, Chief Veterinary Officer. I am pleased to report that the Group has delivered further growth in both revenue and adjusted EBITDA in the first half, proactively managing the current weaker consumer demand for veterinary care in the U.K., whilst focusing on increasing CVS footprint and growth in the Australian veterinary market. We delivered revenue of GBP 341.8 million in the first half, and this represents growth of 6.6% over the equivalent period in the previous financial year. Like-for-like sales declined 1.1% in the period, impacted by softer market conditions in the U.K., most notably in our online retail and laboratory businesses. Performance across our core Veterinary Practice division was flat, although we expect to deliver year-on-year growth in this division and across the Group in the second half of the year. Adjusted EBITDA was GBP 67.4 million, an increase of 4.5% over the corresponding period in the previous year. Adjusted EBITDA margin was 19.7%, benefiting from acquisitions in Australia, which offset inflationary pressures in the U.K. In light of the uncertainty in the U.K. due to the ongoing CMA market investigation, we have reprioritized investment activity into Australia, where there is a more stable and supportive regulatory environment around the sector. U.K. investment in facilities, equipment and technology will be undertaken on an exceptionally disciplined basis with no U.K. acquisitions. We invested GBP 16.8 million in the first half under this disciplined approach. We completed a further 5 Australian small animal first-opinion practice acquisitions in the first half for consideration of GBP 23.3 million. We have exchanged contracts for the acquisition of a further 6 practice sites in Australia with completion expected in the coming weeks. We remain on track to achieve 70% operating cash conversion for the full year with leverage, which closed the half at 1.66x, remaining comfortably below our 2x stated maximum. Our strategy for growth remains unchanged, and I'm pleased with the progress we are making as we continue to lay the foundations for growth over the medium term. Our purpose and vision are centered around providing great care to our clients and their animals through our exceptional team of passionate and highly skilled colleagues. This purpose and vision are underpinned by 4 strategic pillars, our ESG focus and our company values. We continue to focus on organic growth through providing appropriate care in accordance with our clients' requirements, and we remain focused on recruiting, retaining and developing our colleagues and in providing them with appropriate facilities and clinical equipment. We are confident that this focus on people and clinical care will continue to drive organic growth. This will be augmented through acquisitions with our current focus on growing our presence in Australia. We operate in a resilient market where clients continue to seek high-quality care. We are focused on enhancing our client offering with new technology, which Paul will comment on later. The health and well-being benefits of animal ownership are well recognized, and well over half of U.K. households own pets. We continue to see growth in our preventative health scheme, the Healthy Pet Club, and we are exploring opportunities to develop this offering further. We first entered the Australian veterinary services market in July 2023 and have invested over GBP 100 million in the past 19 months, acquiring 27 practices operating across 36 sites. We made 5 acquisitions in the first half. In addition, we have now exchanged contracts for the acquisition of a further 6 sites. We now have presence in and around 6 major urban areas, and we continue to focus on acquiring larger, high-quality small animal first-opinion practices with strong management teams, great facilities and an excellent reputation. Multiples are lower than in the U.K., and our acquisitions are performing well, in line with business cases. We expect annualized revenue of circa GBP 55 million from the practices acquired to date. In addition, we expect to benefit increasingly over time from additional advantages of scale as our expansion continues, including improved drug purchasing terms and laboratory and crematoria synergies from preferred suppliers. Importantly, we have established a local management team, led by our Australian MD, who is supported in country by our experienced Acquisitions Director, an operational team, and finance, legal and HR resource. We have launched a number of people-focused initiatives in Australia, which are helping us attract talent and further acquisition leads. We naturally have an attractive reward and benefits package. And taking learning from the U.K., we have introduced a new 2-year graduate induction course and provided access to a wealth of online courses, programs and webinars. We have recently formed a Clinical Advisory Committee, which is focused on advancing clinical care and is chaired by an experienced Australian vet. We continue to build the reputation of CVS as a people and clinical-focused business, which differentiates us from our competitors in Australia. And I'm proud to say we now have over 600 colleagues in Australia, including 200 vets and 300 nurses. We continue to support the CMA with their market investigation. The CMA recently published a summary working paper, alongside 5 detailed working papers, which set out their observations so far and the areas in which they intend to undertake further work. The CMA have announced that they will publish 3 further working papers in the spring, covering pricing analysis, profitability and possible remedies. It was pleasing to see the CMA state in their summary working paper that they have been hugely impressed by the dedication and commitment to pet owners and their animals shown by individual vets and vet nurses and that this was reflected in their pet owner survey. I remain immensely proud of all CVS colleagues for the care they provide to our clients and their animals. Under the CMA timetable, we expect their provisional decision to be announced in May or June this year. The statutory deadline for the completion of the CMA's investigation is the 22nd of November 2025. I will now pass over to Robin, who will provide an update on our financials.

Thanks, Richard. I'm pleased to share another set of results that demonstrates continued progress towards our 5-year plan to double adjusted EBITDA by full year 2028, with growth in both revenue and adjusted EBITDA, underpinned by acquisitions. We continue to focus on delivering the very best care our clients require for their animals, notwithstanding the wider economic challenges and softer demand in the U.K., and executing on our acquisition strategy in Australia. Revenue grew in the half by 6.6% to GBP 341.8 million, benefiting from acquisitions made during the current and prior year, offset by like-for-like sales reducing by 1.1%, primarily impacted by performance in our laboratories and online retail business. Our like-for-like sales growth is adjusted for working days. It excludes current year acquisitions, and it only includes prior year acquisitions from the same month this year as they were acquired in the previous year. Adjusted EBITDA grew 4.5% to GBP 67.4 million, benefiting from top line revenue growth. Adjusted EBITDA margin of 19.7% was down 0.4 percentage points versus prior year, impacted by inflation, mainly in wages, as well as continued investment in people. During the period, GBP 7 million was recognized in respect of net research and development expenditure tax credits, which was up from GBP 6 million in the prior half. Free cash flow reduced to GBP 31.4 million from GBP 33.7 million, with the increase in adjusted EBITDA, offset by an increase in finance expense from increases in both cost of borrowing and net debt to support our strategy of investment in acquisitions. Operating cash conversion was 72%, remaining in line with our stated ambition of greater than 70% operating cash conversion. Despite strong cash generation, the acquisition investment of GBP 23.3 million and continued CapEx investment resulted in an increase in net bank borrowings to GBP 182.9 million and an increase in leverage to 1.66x, which remains well below our 2x target ceiling. Adjusted EPS of 40p was down 8.3p, impacted by an increase in depreciation from capital investments in recent years, in finance expense from both higher cost of borrowing and net debt, and by an increase in the effective tax rate. In line with the Group's strategy to provide the best possible facilities and infrastructure for its clients and staff, the Group has invested GBP 16.8 million in the first half in technology, clinical equipment, practice refurbishment and relocations. Following the accelerated investment made into the Group's technology platform in 2024, the Group has also launched its new website for Animed Direct in February 2025, which improves both speed and usability. The Group is also piloting several client engagement projects on a number of trial sites, facilitated by the Group's cloud-based technology platform. Consideration for acquisitions of GBP 23.3 million represents our continued expansion into Australia with a further 5 acquisitions completed in the half. The Group's short-term expansion focus will be in Australia, where there is a continued strong pipeline of exciting opportunities. Revenue increased to GBP 341.8 million from GBP 320.5 million, underpinned by investments in acquisitions and our ongoing commitment to deliver the care our clients require. This primarily benefits the Veterinary Practices division, comprising our companion animal, referrals, farm animal and equine veterinary practices, as well as our buying groups, Vet Direct and MiPet insurance. This division delivered 8.1% growth in revenue. Like-for-like performance in this division was flat with performance impacted by a more challenging economic environment and lower footfall, but I'm pleased that we have seen the number of members of our Healthy Pet Club membership increase to 507,000. The Laboratories division provides analyzers and practices, which supports testing in-house, for which we supply the reagents for the tests, and diagnostic testing services. Revenue in this division decreased 4.3%, primarily impacted by lower diagnostic testing volumes, following the loss of a key client in H1 of the prior year. The Crematoria division grew 3.3%. This division provides both individual and communal cremations, as well as clinical waste disposal services. Revenue growth was underpinned by the Direct Pet Cremation service, which puts customers directly in contact with the crematoria to make pet after care arrangements and allows them more time to consider their range of options, which has resulted in significant changes to customers' choice and improved customer care. And our online retail business had a challenging period with a revenue decline of 6% with the economic environment impacting demand for our premium life stage and veterinary diet ranges. Whilst this is a much smaller part of our Group, we are confident that the launch of our new website in February 2025 will bring future growth. We've seen good EBITDA performance with adjusted EBITDA increasing 4.5% to GBP 67.4 million from GBP 64.5 million, benefiting from increased revenue from acquisitions. Adjusted EBITDA margin decreased 0.4 percentage points to 19.7% from 20.1%, with gross margin improvement offset by inflationary cost pressures. Employment wage inflation and investment in colleagues resulted in employment costs as a percentage of revenue increasing to 52.4% from 51.5%. And other costs as a percentage of revenue stayed flat at 6.6%. U.K. budget changes in November 2024 will result in an annualized increase in employment costs of circa GBP 8 million from increased National Insurance contributions and circa GBP 3 million from increases in National Living and National Minimum Wage, both from April 2025. We aim where possible to protect adjusted EBITDA margins through cost efficiencies, margin benefits from previous investments and synergies from Australia. Whilst we are experiencing some short-term headwinds, I'm pleased with the underlying progress made and expect to return to organic revenue growth in H2 2025. As pets age, they require more medical intervention. Alongside the new client engagement and revenue opportunities opened up with our new practice management system and enhancement in offering from our new Animed website, we look forward to delivering further growth over the medium, longer term. We have a healthy balance sheet, a GBP 350 million debt facility, headroom within our leverage target ceiling, and therefore, capital available to support our investment opportunities. Our stated ambition is to invest between GBP 30 million to GBP 50 million per annum on capital investment. We expect this to be towards the lower end for full year 2025, and over GBP 50 million on acquisitions, which for now will be focused in Australia. We continue to assess each of our investment opportunities against our disciplined investment criteria, ensuring long-term returns remain above 10% IRR. Our investments are value-accretive and delivers an attractive return on investment in excess of our cost of capital. The Group continues to generate healthy cash flows with operating cash conversion for the half being 72%, ahead of our Capital Markets Day ambition of 70%. Notwithstanding the continued investment in capital expenditure and acquisitions, resulting in a net cash outflow of GBP 40.1 million in the half, leverage remained well below our target leverage ceiling of less than 2x at 1.66x. I will hand over to Paul, our Chief Veterinary Officer, to update you on our strategic progress.

Thanks, Robin. Providing the right clinical care remains a key focus of ours and is at the heart of what we do. We know that culture, ownership, leadership support, alignment and visibility promotes clinical care, and we encourage this within our operations to ensure our clinicians feel empowered to provide great clinical care. This is championed throughout our clinical governance framework, which we introduced to you last February. We launched a campaign in the autumn, Let's Learn from Mistakes, where colleagues are encouraged to complete a learning review after an adverse event and to record these on VetSafe, the Veterinary Defense Society's confidential adverse event recording platform. Supported by over 500 clinical improvement advocates, this not only improves psychological safety amongst our teams, but we can learn from trends, disseminating learnings as appropriate to continually improve the care that we provide. Our responsible focus on antimicrobial stewardship continues to see reductions in the prescribing of the Highest Priority Critically Important Antibiotics, HPCIA, with an average reduction of 1.1% in 2024 compared to the benchmark, which equates to about 35,000 fewer prescriptions of these types of antibiotics. We voluntarily adopted the Practice Standards Scheme across all of our U.K. operations, adhering to the highest consistency of standards expected of our profession. This voluntary scheme allows the Royal College of Veterinary Surgeons to review our practices and provide recommendations where appropriate. We currently have 103 awards where we are recognized for going above and beyond the standard expected across the categories, primarily in client service. We remain committed to our vision to be the veterinary company people most want to work for. As we continue to grow our business, we have once again increased the number of vets that we employ. We've seen an increase in the number of vets employed in calendar year 2024 versus calendar 2023 of approximately 3%, excluding acquisitions. Our colleague satisfaction is important to us. And in the prior year, our employee net promoter score reduced to its lowest level since September 2019 due to specific factors in quarter 4, financial year 2024, including a cyber incident, our consequential accelerated rollout of our cloud-based systems and ongoing CMA review. I'm delighted that this was short term, and this score has bounced back to positive 3.8 and well on its way to our target for full year 2025 of positive 5. Continuing to celebrate our people and the great place to work that we've created, we hosted over 1,100 colleagues at our 25th Anniversary Conference, celebrating their achievements and looking forward to what we will achieve for 2025 and beyond. Some of this, I'll touch on shortly. I'm pleased that despite the challenges on our profession, our total colleague attrition has remained stable during the period. In H1 2025, we invested GBP 16.8 million in comparison to H1 2024 of GBP 16.9 million in CapEx. Of this, GBP 10.4 million was on practice relocations, refurbishments, clinical equipment and IT modernization, including the launch of our new Animed Direct website in February 2025, an investment in a program of modernization, building cloud-based system foundations within our new practice management system, aimed at enhancing client experience. Our investment provides an opportunity for growth, improves well-being and satisfaction across our teams, provides a pleasant and welcoming environment for our clients and their animals, and helps us deliver individualized clinical care. At our Capital Markets Day in 2022, we committed to spending between GBP 30 million to GBP 50 million per annum on CapEx to further improve our facilities. And over the medium to longer term, we will continue to do this. In light of the uncertainty in the U.K. due to the ongoing CMA market investigation, the group continues to be more selective about investment in the U.K. with a very disciplined and selective capital investment in facilities, equipment and IT. As part of our disciplined investment, we are building on our cloud-based system foundations and focusing on improving the client journey. With enhancements to our local practice websites, we will be piloting online booking for reminder-led appointments in H2 2025, launching more convenient ways to pay and providing digital product and prescription reminders with home delivery available to improve convenience for our clients. The step forward in technology also benefits our practice teams with improved usability and flexibility of the system and trialing artificial intelligence that turns veterinary consultations into clinical notes, improving efficiency in the consulting room. We also launched our new Animed Direct website in February 2025, our e-commerce platform. This improves the shopping experience, provides enhanced product ranges and comes with a complete brand refresh to bring the consumer proposition up to date with consumer expectations. Our fourth strategic pillar is that we take our responsibilities seriously. This spans across everything that we do as a company and as the veterinary profession. Encompassed into this is our sustainability and ESG initiatives, for which we updated you on our progress in September when we released our third sustainability report. On the slide, we have shared various initiatives within our operations from helping diagnose complex cases to extending the animals' quality of life with their families, and where this is not possible, helping children process and understand a pet bereavement. We do this whilst balancing animal welfare requirements of the wider environment, public health and with our continued focus on antimicrobial stewardship. I'll now pass back to Richard for some closing remarks.

Thank you, Paul. I remain confident in our ability to deliver further growth and to benefit from the sizable market and continued humanization of pets. We have adapted our capital allocation, given the uncertainty surrounding the CMA market investigation, but our strategy for growth remains unchanged. Our Australia operations continue to go from strength to strength, and we have a strong pipeline of further acquisition opportunities, including the 6 practices for which we have exchanged in the past few days. Our migration to new cloud-based technology and investment in improving our client journey will make it easier for clients to engage with us and should lead to efficiencies for our vets and nurses. We have maintained a healthy balance sheet with capital to invest. I and the wider Board remain confident of our delivery of full year results in line with market expectations. I would like to take this opportunity to thank all CVS colleagues for their dedication and support in providing great care to our clients and their animals. Thank you.

Thank you, Richard. [Operator Instructions] I would now like to hand over to Charlotte Page, Group Investor Relations and Financial Controller, to begin taking questions.

Thank you. You've been quite focused on Australia recently in terms of new investments. But once the U.K. regulatory review is completed, what opportunities do you foresee in the U.K.?

Okay. Thanks. I'll take that question. So in the U.K., we see good opportunity for further growth and investment in delivering that growth. Some of that investment will be our continued focus on improving our practice facilities, our clinical equipment and the technology we use. And also though, we see an opportunity to make further practice acquisitions in the U.K. You may recall that in the previous financial year, we made 5 acquisitions in the first half, and all of those 5 acquisitions were blessed by the CMA merger team. We have around 400 first opinion small animal practices in the U.K. and about 450 in total. So we have some farm and some equine practices. And we have about an 8% share of the market in terms of number of practices. And therefore, there's a significant opportunity for us to expand further. We hope multiples in the U.K. will come down certainly from the peak of a few years, okay. And hence, as far as the Australia opportunity, there is certainly opportunity to invest in the U.K. growth as well.

Thank you. In the last 6 months, you purchased 5 Australian businesses. What is your current pipeline looking like? And are they all in Australia? Can we also touch on what makes the Australian market so much more attractive than the U.K. market?

So if I kick off and then Robin can talk through the kind of attractive features of the market. But in terms of pipeline, we've got a strong pipeline of opportunity. We recruited an acquisitions director in Australia as our first entry into the market. And he's got significant experience of the veterinary market in Australia from his previous roles. He was previously the Acquisitions Director at VetPartners, one of the 2 major corporate consolidators that have previously been established. And prior to that, he worked for Lyppard, one of the 2 kind of major wholesalers. So he's been instrumental in building our initial pipeline. What we found more recently though is as we've grown our scale and as we've been true to our word as a very clinically focused and people-focused business, the vendors that have sold to us are now introducing further opportunities for us. So word of mouth and our reputation has been established in Australia, and that's quite helpful in terms of our future acquisition opportunity. But maybe Robin could just talk through why we found the Australian market attractive and also some of the kind of similarities between Australia and the U.K.

Thanks, Richard. I think when it comes to Australia, our focus is on small animals, so companion animal practices. It's on 4 to 5 vet practices, so premium assets in premium locations. So around the major conurbations where people live and vets want to work. The opportunity is fantastic in that there's low levels of consolidation in that market. It's about 15% consolidated. Clinical care is strong. There are a lot of similarities in clinical care in Australia and the same in the U.K. There have been historically lots of vets in the U.K. working in Australia and Australian vets working in the U.K. and we equally see an opportunity in time to establish a second program where we can support vets who want to work in Australia to go work in one of our practices and equally for vets in Australia that want to work in the U.K. to work in one of our practices, too. So culturally same, culturally similar, language very similar, low levels of consolidation and a good opportunity for us to grow within that territory.

I guess, importantly, we've been really pleased with the performance of our Australia practices. And the returns -- the margins are actually slightly higher than the group margins. We've seen no synergies in our business cases, but we are starting to see some cost synergies coming through. And obviously, those are incremental. So really pleased with the performance so far and very excited about the opportunity ahead.

Thank you. How do you see the competitive landscape within the U.K. and Australia? And once the CMA Market Investigation has concluded, would you return to U.K. acquisitions?

Yes. So absolutely, as I said earlier, we will consider future U.K. acquisitions. The U.K. market is highly consolidated. There are about 5,400 or so vet practices in the U.K. Of those, about just under 60% are owned by 6 major corporate groups, ourselves being one of them. We have about an 8% share of the U.K. market, but there are high levels of competition in the U.K. and we're all competing, I guess, for clients and also competing for vets and nurses. In Australia, the market is less consolidated. It feels like the U.K. market did probably 10 or 15 years ago. Two established corporate groups being vet partners, different from the U.K. business of the same name and Greencross. And between the 2 of those groups, they have about 450 practices. There are about 3,500 practices in Australia. We currently operate across 36 sites. We've just announced the exchange of contracts for a further 6 sites that we'll acquire and complete those acquisitions shortly. But clearly, a big opportunity in Australia. We are very focused and disciplined on acquiring small animal practices, larger sites in the urban areas where people live in high populations with pets. And obviously, those are the areas where young vets in particular, want to live and work. So that certainly derisks our entry into Australia, but both markets are highly competitive.

Thank you. Are there any other markets that you'd be looking at other than those 2 territories?

We've certainly done work over many years looking at other opportunities. For now, we have a significant opportunity in both the U.K. and Australia. So certainly, in the short to medium term, we're not looking elsewhere.

Thank you. Do you expect to fund the current expansion entirely through internal cash flows for the foreseeable future? Or are there any other scenarios where you need additional funding down the line?

Yes, probably a good obvious question for Robin to pick up.

I think what's helpful for our business is that we're highly cash generative. We are confident in good recurring cash flows. We have a strong balance sheet. So we have committed facilities through to February 2028. So our expectation at the moment is that we can fund our acquisition opportunity with the internal cash generation and the committed facilities we have available.

Thank you. Moving away from acquisitions, where do you see the greatest potential for growth from our 4 divisions and why?

I guess we're fortunate to be able to offer the full range of services across our 4 divisions, and we can provide end-to-end care for our clients and their pets and their needs. Clearly, the biggest part of our group is our veterinary practice division, but our vets and nurses are supported by our laboratories, our crematoria and clients can buy drugs and food through our online retail business. The biggest part of the group is the veterinary practice division. And clearly, that's where the biggest opportunity is. And that opportunity is both to expand through acquisitions to improve the existing facilities we operate from, to increase the clinical equipment and capability to provide great care and also to use technology in a more modern way. So we are -- we have migrated the majority of our practices onto a new cloud-based practice management system. That brings benefits of efficiency and all of our vets can access patient records from that new system. So the benefit of that is if a client's pet is referred to a specialist hospital, the specialist can see the entire pet's patient history, and that's certainly a benefit. What we're now doing as well is investing in technology that will help improve the client journey. And that will also be quite interesting. So we've -- we're trialing online booking for clients. We're also trialing a piece of AI software that allows us to record the consultation and actually produces clinical notes for the vet. That should benefit us in 2 ways. One, it reduces the time that it takes for a vet to write up their clinical notes at the end of the consultation. But also the software obviously listens to the vet and their conversation. So it will help vets verbalize the examination. And hopefully, that's better for clients as well. They'll understand more of what the vet is doing in examining their animal and expecting it. So benefits to come from that technology investment as well.

Thank you. CVS' approach to quality improvement could be regarded as the best in the industry, but I'm not sure clients are aware of this. What more can be done to improve client awareness in this regard?

Good question. I guess clients are increasingly looking for the best possible care. We've seen the trend of humanization of pets across the industry in the U.K. and also globally. So clients where they've got the financial means to do so, absolutely want the best thing for their pets. And that means access to the best clinical care. But there is obviously a big discrepancy or difference between the expertise of the vet and the clients' knowledge. Clinical development and clinical focus is obviously important for us in developing the services we can provide, reducing adverse events. So we take quality improvement very seriously. And we do invest significant amounts in research as well to support either our vets in terms of their career progression towards becoming specialists or advanced practitioners. But we also take learning to improve the day-to-day offering of clients. So yes, difficult for clients to really measure quality improvement. But I guess that investment we're making hopefully reduces adverse outcomes. It means we're doing our part for the environment as well. So we're reducing the use of those kind of highly important, critically important antibiotics, and that's for the good of kind of human health care as well.

Thank you. Can you provide some more detail on the laboratory division? What types of machines do you provide? And how much of the business is related to providing reoccurring reagents versus equipment sales?

Robin?

Yes. So our laboratory business provides analyzers in practice to provide a range of tests around blood work, urinary tests as well and for which we provide the reagents. And also, we have 2 reference labs and a courier network across the U.K. So where needed, we will collect samples overnight, the reference labs will look at those tests early in the morning and they'll push results back to practices. The revenue is broadly split pretty evenly across the analyzers, reagents and the tests within our reference labs and also evenly split between work that we do for our own practices, but also work that we do for third-party practices.

Thank you. With revenue outside the U.K. just over 7%, is this where you see the potential for growth?

I guess similar to the previous question, we see the opportunity for growth both in the U.K. and in Australia. The acquisition focus at the moment is absolutely in Australia, but we are very focused on delivering growth in the U.K. and that includes investment, as I said, in facilities, equipment and clinical care and growing, I guess, our patient numbers and our client numbers.

Can you talk about the sunlight measures that the CMA may be looking at?

Yes. So the CMA are clearly in the process of the market investigation. And we, amongst other corporate groups, did offer some proposed kind of sunlight remedy measures to the CMA this time last year, and that was as their market review was progressing. We are now in a market investigation, and we've reiterated the kind of remedies that we can offer that we feel will actually improve clients' ability to make choices of first opinion practices to help clients make decisions about the clinical care they access for their pets from time to time and also where they should access that care and also to maintain the high levels of trust that the CMA have recognized in the profession. So their consumer survey respondents reported a high level of trust in their vets. But clearly, it's important that we maintain that trust. And it's also important that regulation is evolved to, I guess, reflect the fact that corporate groups are now owning and operating vet practices. So for example, Robin and I, as directors of a veterinary group and as non-vets, we should be regulated and subject to some form of regulation. So those sunlight remedies, I think, will go a long way to improve client kind of choice and make it easier for clients to be more informed about the choice of practice and procedure and also to help clients have confidence that there is an appropriate regulatory environment and also that they have access to complain when things go wrong.

Thank you. CVS has a good number of high-quality own brand medicines. However, the CMA has highlighted this is a possible area of concern. Is there a risk that the CMA may seek to change the way these products are dispensed?

Robin?

I think, I mean, the CMA have a number of concerns that they're looking at. We feel that those transparency measures are appropriate to address many of their concerns. Clearly, one area of focus for them is medicines and our own brand medicines. I think for me, within our sector and for us, we provide a fantastic service to our clients, and we make a very reasonable margin off the back of that fantastic service and any remedies would have to be proportionate to any findings or concerns that the CMA has. And I'm entirely comfortable with the margins that we make for the service that we provide.

Thank you. Why have the directors not taken advantage of the share price and bought more shares?

So we are very committed to the group, and we do have significant shareholdings and certainly a significant part of our wealth is tied up in the success of the company. We are absolutely committed to growing our shareholdings. And that includes retaining shares when we are awarded kind of LTIP schemes, but also investing our own cash in share purchases over the years. We've also changed and supported the remuneration committee in changing some of the kind of terms and conditions. So we've introduced new 2-year hold periods for any LTIP vesting and we've committed to a 200% shareholding target, so 200% of salary. So we are absolutely invested in the success of CVS, and we are committed to growing our shareholding further.

You've engaged with the CMA for about 1.5 years now. Can you talk about how the discussions have evolved over this time? And do you feel that the CMA has a greater appreciation of the complex issues facing the veterinary industry?

Yes. So the CMA process has evolved from a market review initially, which kicked off in September 2021, and that concluded with the launch of the market investigation in May last year. On the announcement of the investigation, the CMA appointed a panel of 5 people who are essentially the decision-makers in the process. And that panel is chaired by Martin Coleman, but it also includes people with significant business background. So someone from a private equity background, someone from -- who used to work from an economist firm and a couple of lawyers. So the panel are the decision-makers, and we generally feel they want to understand the sector a fresh. They want to understand the complexities of the sector and some of the challenges facing vets and nurses. And actually, their recent working papers, certainly their overview working paper gave a very balanced summary of what they found. And they do, we feel recognize the complexities of the sector and some of the challenges that we are all facing. And they also recognize the tremendous commitment and professionalism of vets and nurses and also the feedback from clients in that they very much trust their vets and understand their vets and nurses are trying to do the very best for their animals. So we definitely get the sense that the CMA really want to understand the sector and now do understand some of the complexities we face.

Thank you. With the labor government saying they are pro-business, how could they help a business like CVS Group? And what would your message to the Chancellor be?

I'll let Robin answer that one.

Yes. Look, I'm not keen to make overly political statements. But what I will say is in their recent budget, clearly, the impact -- the combined impact of national minimum wage increases coming in from April, the impact of the increased burden of national insurance contribution is unhelpful. It's particularly unhelpful for us given that the majority of our costs in our P&L are for our colleagues and employment. So anything that anyone can do to, I suppose, reduce the cost of our ability to employ people would be helpful.

Thank you. What is the company's dividend policy? And how confident are you in a full year dividend?

Yes. So we've maintained a fairly progressive dividend policy over many years. So we absolutely do intend to pay a final dividend. As ever, we only make a decision on the final dividend post the full year results being finalized. So we'll announce that in due course. But typically, we announced that in September alongside the publication of our financial results.

Thank you. Can I now hand back to you, Richard, for any final closing remarks.

Great. Thank you, Charlotte. Well, first of all, thank you for joining this presentation, and thank you for your support. The fundamentals of the sector remain strong. There's an increased pet population in the U.K., certainly post-COVID. And that cohort of puppies and kittens born in the COVID years, they're now kind of 4 or 5 years old and very much in the early adult kind of healthy life stage. But as they age, they will drive increased demand for us and other veterinary groups. And the humanization of pets means that owners are willing to spend more on the care. And we're also seeing pets live longer and so life expectancy of pets is increasing. And that should benefit us as well because obviously, older pets need more clinical care. There are some short-term headwinds, cost of living pressures and also the CMA process, but we are very confident in the future growth prospects of CVS, and we look forward to sharing further success in due course. Thank you.

Thank you for joining us today. That concludes the CVS Group investor presentation. Please take a moment to complete a short survey following this event. I hope you enjoy today's webinar.