CVS Group plc (CVSG) Earnings Call Transcript & Summary

Welcome to this presentation of CVS Group's interim results for the six-month period to December 2025. I'm Richard Fairman, CEO. And later, you will also hear from Robin Alfonso, our Chief Financial Officer; and Paul Higgs, our Chief Veterinary Officer. Our purpose at CVS is to give the best possible care to as many animals as possible, and I'm pleased to report on continued progress in the period. We completed our step-up from AIM to the main market on the 29th of January 2026, and we hope this will bring benefits from improved liquidity, access to a more diverse pool of capital, index inclusion for March and an increase in our profile as a company. We have launched our new consumer-facing U.K. companion animal joint brand under CVS Vets, and you will see this reflected in this presentation. Now this reflects the care, value and service, which we are renowned for as a trusted partner for our clients. Our presence in Australia is growing with three acquisitions completed in the period and a further two practice acquisitions completed so far in the second half of the year. We have continued our disciplined capital investment, improving our facilities, clinical equipment and technology, and we are confident this investment will drive long-term growth in shareholder value. We welcome the launch by DEFRA of a consultation into the outdated Veterinary Surgeons Act from 1966, and we are engaging with that process and encouraging CVS colleagues to do so. And we look forward to the CMA's final decision in the coming weeks. We continue to trade in line with market expectations, and Robin will provide further detail on our financial performance later. Highlights for the first half include revenue increased by 5.8% in the period with growth across all divisions and like-for-like sales improving. Adjusted EBITDA increased by 3.9% to GBP 67.7 million. We invested GBP 17.5 million in capital expenditure, but maintained leverage at 1.41x. We saw an improvement in both our client Net Promoter Score, which improved to 81.2 and our employee Net Promoter Score to 10. Having first entered Australia in July 2023, we have grown to 33 practices operating across 55 sites. Our Australia practices are performing well and now present circa 10% of group revenue. We have consciously focused on acquiring larger, high-quality small animal first opinion practices with strong leadership teams, great facilities and excellent reputations. These practices tend to deliver higher margins, and hence, Australia now represents circa 15% of group EBITDA. The Australian market has low levels of consolidation, and we have a strong pipeline and an expectation that we will complete a number of further acquisitions in the remainder of this financial year. Whilst the level of corporate consolidation is higher in the U.K. at circa 60%, we have less than a 9% market share, and we are confident there will be an opportunity for CVS to make further high-quality acquisitions following the conclusion of the CMA process. The CMA market investigation has been underway for the past 2.5 years, and we have proactively engaged with the CMA throughout this time. This is to both help the CMA understand the sector and some of the challenges, but importantly, to ensure an appropriate outcome in the best interest of consumers. The CMA announced their provisional decision in October 2025, and this has brought much needed certainty. We do not agree with all of the CMA proposed remedies and feel some such as the proposed price gap on prescription fees are not justified by their findings. However, we are comfortable with them and have already implemented price lists on our practice websites and have commenced the rollout of our new joint branding. We will continue to support the CMA during the remainder of their investigation and look forward to the publication of their final decision scheduled for the coming weeks. I will now pass over to Robin, who will provide further color on our financial performance in the period.

Thanks, Richard. H1 2026 marked a return to organic like-for-like sales growth as well as growth from acquisitions, cementing a positive first half performance. In May 2025, we sold our crematoria operations and have therefore restated our H1 2025 numbers to reflect these operations as discontinued. Revenue grew 5.8% to GBP 356.9 million, benefiting from acquisitions made in the current and prior year with like-for-like growth of plus 2.7%. Our like-for-like sales growth is adjusted for working days and on a constant currency basis. It excludes current year acquisitions, and it only includes prior year acquisitions from the same month this year as they acquired in the previous year. We are pleased that revenue growth has been achieved across all divisions. This growth was achieved despite continued softer market conditions in the U.K. and a backdrop of lower visit numbers in small animal practices. Client demand for our most advanced referral care remains strong. Adjusted EBITDA grew 3.9% to GBP 67.7 million, benefiting from increased revenue. An adjusted EBITDA margin of 19% was down 0.3 percentage points versus prior year with cost efficiencies and synergies largely offsetting the increase in National Living and National Minimum Wage alongside increases in employers' national insurance contributions from April 2025, which have an annualized impact of circa GBP 4 million and GBP 8 million, respectively. Margin of 19% continues to be within our 19% to 23% range ambition. During the period, GBP 7 million was recognized in respect of net research and development expenditure tax credits, which was the same as H1 2025. And free cash flow increased 16.2% to GBP 34.4 million due to the increase in adjusted EBITDA and favorable operating cash conversion, which was up 3.3 percentage points on H1 2025 and in line with our stated ambition of greater than 70% operating cash conversion. With robust cash generation and a strong balance sheet, we've continued to invest in future growth through CapEx investment and further acquisitions. We also undertook a small share buyback to support the move to the main market, which concluded in January 2026. As a result of these investments, net bank borrowings increased to GBP 28.8 million since June 2025 to GBP 160.2 million and leverage increased to 1.41x. Leverage is well below our 2x target ceiling and provides firepower to continue with our ongoing expansion in Australia and the U.K. in due course. Adjusted EPS of 40.2p was up 2.2p, benefiting from an increase in EBITDA. We continue to invest in our practice facilities, clinical equipment and technology with total capital expenditure of GBP 17.5 million, and Paul will touch on these more later. Consideration for acquisitions of GBP 23.3 million represents continued momentum in Australia with a further two acquisitions of nine practice sites. Pleasingly, performance has been in line with expectations. The group's short-term expansion focus will be in Australia, where there is a strong pipeline of exciting opportunities. There may also be acquisition opportunities in the U.K. following the end of the CMA investigation. Moving on to Slide 10. I'm pleased with the resilient EBITDA performance, which has been underpinned by growth and acquisitions. Revenue increased to GBP 356.9 million from GBP 337.3 million, benefiting from acquisitions and like-for-like growth of 2.7%. Australia now represents about 10% of group revenue. EBITDA increased to GBP 67.7 million from GBP 65.1 million, benefiting from revenue growth with resilient adjusted EBITDA margin, which largely held up despite wage inflation in addition to investments in online marketing and IT. We are pleased to have offset the vast majority of cost headwinds from the national insurance contributions and National Living and minimum wage pressure and deliver EBITDA margin within our stated range of between 19% to 23%. We continue to target investments primarily in practice facilities and equipment to expand margins over the longer term. We've seen revenue growth across all our divisions. The Veterinary Practices division comprises our companion animal, referrals, farm animal and equine veterinary practices as well as our buying groups, Vet Direct and MiPet Insurance. This division delivered 5.4% growth in revenue, benefiting from acquisitions and a return to like-for-like growth despite softer market conditions in the U.K. and a backdrop of lower visit numbers in small animal practices. Client demand for our most advanced referral care, however, remains strong. EBITDA grew 6.3%. The Laboratories division provides analyzers in practice, which supports testing in-house, for which we supply the reagents for the tests and diagnostic testing services. Revenue in this division increased 10.3%, benefiting from improved case volume and increased analyzers in practice. EBITDA grew 17.8%. And our online retail business, revenue increased 8.5%, benefiting from improved visits and conversion rates following the launch of the new website in February 2025. Profitability in the first half was impacted by cost of living, compounded by price elasticity testing, resulting in the division only breaking even in the first half. Profit is expected to return in the second half of the year. And in head office, we saw an increase in cost of GBP 1.2 million due to increased share option costs with options having not vested in the past few years, continued investment in people, especially in Australia and continued investment in IT. I'm pleased to say the momentum seen across the group in the first half has continued into H2 2026, and we continue to trade in line with market expectations. On to Slide 12, we have a healthy balance sheet with GBP 350 million of debt facility and headroom within our leverage target ceiling and therefore, capital available to support our investment opportunities. Our stated ambition is to invest GBP 30 million to GBP 50 million per annum on capital investment and over GBP 50 million on acquisitions, which has primarily been in Australia, but acquisition opportunities may open up in the U.K. post the CMA conclusion. We have funding in place to support this growth. The group continues to generate healthy cash flows with operating cash conversion of 75%, which is in line with our Capital Markets Day ambition of 70%. Free cash flow of GBP 34.4 million benefited from increased EBITDA and operating cash conversion. With robust cash generation and a strong balance sheet, we've been able to continue to invest in future growth through CapEx investment and further acquisitions. We also undertook a small share buyback to support the move to the main market, which concluded in January 2026. As a result of these investments, net bank borrowings increased GBP 28.8 million from June 2025 to GBP 160.2 million and leverage increased to 1.41x. Leverage is well below our 2x target ceiling and provides firepower to continue with our ongoing expansion in Australia and the U.K. in due course. We have committed bank facilities to February 2028 and have also hedged GBP 100 million of debt, swapping variable SONIA to fixed, securing an interest rate, including current margin of circa 5.5% through to February 2028. We take a considered and disciplined approach to capital allocation, actively engaging with shareholders and reviewing the approach on a regular basis. Presently, it's considered that investments in capital expenditure and acquisitions to be appropriate uses of capital to deliver long-term accretive growth to shareholders. Investments are carefully appraised against our hurdle rate of greater than 10% IRR and in most cases, deliver positive return on capital employed over the longer term. Our investment unlocks opportunities as well as continued investment opportunities in facilities, clinical equipment and technology, there is a strong pipeline of acquisition opportunities in Australia and acquisition opportunities in the U.K. in due course. We look forward to enhancing the client experience further and delivering on our purpose to give the best possible care to as many animals as possible. I will now pass to Paul, our Chief Veterinary Officer, to update you on our strategic progress.

Thanks, Robin. Our new brand reflects who we are and what the letters CVS stands for: care, value and service. In the half, we have launched our dual brand approach initially to colleagues at our leadership conference in November, digitally to clients on our new consumer websites and then through updated signage, which is being rolled out across our U.K. companion animal sites as we speak. Our colleagues have welcomed this fantastic opportunity to speak about our common purpose and identity. Our client-friendly branding encapsulates why pet owners trust us, CVS, how our colleagues support and guide pet owners to find the most appropriate and individualized care and what we offer pets and their owners day in and day out. We are just a short walk away. Our new signage is fresh and it's consistent where practices retain their local name, but shows that they are part of the wider CVS Vet Group. I'm pleased that our vision of being the veterinary company people most want to work for is delivering high colleague satisfaction and reduced attrition. We've launched our new clear employer brand centered around clinical quality, learning, progression and support. And these four elements encapsulate what our colleagues tell us is great about working at CVS. We aim to provide the best possible care to animals. We have a market-leading learning, education and development program with the platform Knowledge Hub and have established career pathways in our teams, especially for nurses and receptionists. Finally, we support. A practitioner is never alone, whether that's through support from our practice teams, our market-leading VetOracle service or well-being support. We listen and we care. We also inspire to support exceptional employee experience, we have empowered accountable leaders, which drive and support our teams. Our colleague satisfaction has taken a knock in recent years, and we're pleased with the progression of our employee Net Promoter Score to positive 10 at December, ahead of our FY 2026 target of plus 5. Attrition continues to be stable and even reduced marginally in the half. And I would like to take this opportunity to thank all of our CVS colleagues for their outstanding commitment and dedication and for the care they provide to our clients and their animals. Our considered approach to capital allocation supports our disciplined investment program. In H1 2026, we invested GBP 17.5 million in capital expenditure and continue to be committed to invest in our U.K. practices. In the half, we spent GBP 6.5 million on practice relocations, refurbishments and associated clinical equipment. We have a consistent, welcoming look and feel, which provides attractive spaces for both clients and colleagues. This investment has contributed to the improvement in both our client and employee engagement as measured through the group's respective Net Promoter Scores. A practice-wide refurbishment or where required full relocation can benefit the clinical offering, practice teams and clients over the long term. We typically seek larger footprints, providing additional space to address the client demand for our services, improve clinical activity, for example, through imaging equipment, dental or endoscopy and these new facilities provide a positive environment for our clinical teams to work in, which not only can improve their well-being, but also attract further clinicians and provide secure business continuity over the long term. For now, the focus on capital expenditure remains in the U.K., but there will be opportunities to invest in Australia sites as we grow. Over my career as a vet, the progress of veterinary care is second to none. What we can offer today is vastly improved from that of 2010 or even five years ago and what clients expect from us has changed too. The research underpins evidence-based veterinary medicine and CVS is committed to turning evidence into improved patient care. Each year, our colleagues contribute to over 100 peer-reviewed publications and present more than 30 research abstracts at leading conferences, sharing insights that shape the future of veterinary practice. We also fund external research collaborations with a recently funded research collaboration making the national news by providing a comprehensive human and feline comparative oncogenomics analysis that gives insight into feline cancer but also potentially human cancers, too. The CVS is shaping the future of veterinary nursing through a pioneering nurse optimization PhD launched in partnership with the Royal Veterinary College. This three-year project will explore how evidence-based frameworks can enhance job satisfaction, patient care and workforce sustainability and helping define the role of veterinary nurses for years to come. In 2025, antimicrobial stewardship, AMS, remains a key research priority. Antimicrobial resistance is one of the most urgent global health challenges, and CVS is leading efforts to promote responsible prescribing and robust infection control. Our CVS-funded PhD project with the University of Liverpool is focused on reducing the use of highest priority, critically important antibiotics or HPCIAs and promoting diagnostic-led prescribing. Alongside this, a 12-month collaboration with the University of Bristol across more than 50 CVS practices is already showing promising results, reducing antibiotic use and encouraging behavior change through CPD training and case-based learning. Now these are just a small number of examples of the wide-reaching research that we support. By embedding research into everyday practice and partnering with leading institutions, CVS is driving continuous improvement and fostering a culture of learning across our group. Our research agenda is focused on practical solutions that benefit patients, clients and the profession. I'll now pass over to Richard for some closing remarks.

Thank you, Paul. We have taken a number of positive steps in the period, which positions CVS to deliver further enhanced value for all our stakeholders. As you have seen through this presentation, our new CVS Vs companion animal consumer brand is now live with circa 60 practices already rebranded. Our strategy for growth is clear to provide great client service and care to as many animals as possible. Our clients appreciate this care and the value and service we provide as reflected by the further increase in our client Net Promoter Score. We maintain a disciplined investment approach and have a healthy balance sheet. Strong operating cash flows support our ability to make further investment in growth. Our step-up to the main market is complete, and we look forward to index inclusion in March. We remain on course to deliver against market consensus for the full year. And notwithstanding short-term headwinds in the U.K., we remain confident in delivering further growth. These interim results and the improvements we have made in the financial year-to-date reflect the continued dedication and professionalism of all our colleagues. I would like to take this opportunity to thank them all for their support, and I look forward to sharing further success in the future.

Thank you for joining CVS Group today for the Engage Investor Q&A. We have Richard Fairman and Robin Alfonso here to answer questions. We have had a number of questions pre-submitted and submitted live. [Operator Instructions] So kicking off with the first question, what has been driving sales growth lately? And are there any standout products and services?

So we've announced like-for-like growth of 2.7% for the first half, which is across all three of our divisions. Our largest division is our practice division, and that includes our Australian practices and also all of our U.K. practices. And there, we've seen growth in Australia, so strong growth there. In the U.K., we've seen mixed growth. We've seen strong demand for our referral hospitals and some of our practices that provide the more advanced care. So where animals get ill or injured, we've seen strong demand for those types of services. We've seen weaker demand for the more preventative care, so regular checkups, routine checkups or free and welling treatments. Online, we've seen strong growth in revenue across both food and drugs. And in our laboratory business, we've also seen growth both from our own practices, but also third-party independent practices. And roughly half of our revenue in labs is from CVS internal practices and roughly half external. So good growth across the group, albeit mixed within the U.K. companion animal practices.

Are you able to give an indication of the revenue that comes from preventative care plan versus reactive treatment?

We can. We can do. I think what we've shared in the past is our Healthy Pet Club membership is now over 0.5 million members. It provides -- it's an annual contract pay monthly, provides annual vaccination, half yearly checkup, your annual flea and warming and also access to discounted veterinary services. I think we've shared in the past, and you can look in terms of the average cost per month is around GBP 15. So the annual revenue from that, which is ostensibly a preventive health care scheme is about GBP 80 million to GBP 90 million per annum. What we've not done is then share the split of preventative care within our fees and drugs revenue. But for a Healthy Pet Club scheme, it's about GBP 80 million to GBP 90 million per annum.

Cost of living is a concern for many households. Are you seeing these pressures flow through into the pet industry? And can you explain why vet bills have gone up so much in recent years?

So cost of living pressures do impact. We're not immune from recessions or clients feeling some of those cost of living pressures themselves. What we have seen is strong demand where animals get injured, clients invariably bring them in for treatment. And as I said earlier, that's reflected in the strong demand we've seen for our referral hospitals and also those sites that can do the more advanced reactive care. Where we have seen weaker demand is for the more, I guess, discretionary spend, so healthy animals visiting practices less often and maybe consumers tightening their belts somewhat in those areas. In terms of veterinary bills, bills across the industry have increased over the last 10 years, and the CMA have given some data on that. When you take account of the kind of inflationary pressures, the increase above inflation is actually driven by the quality of care that we can now provide and also the way that care is provided and the structure of veterinary practices. So 10 or 20 years ago, out of care, for instance, was provided by day vets who were on call in the evenings and weekends. Now out of those care is more advanced. It's provided by dedicated teams. And those teams are often trained in emergency and critical care. So the quality of care we can give out of ours is vastly improved. And elsewhere, we can do far more for animals now than ever before. And therefore, there is a cost that comes with that, but clients invariably want the best possible care for their animals. And clearly, there's a cost to delivering that care. So when you take account of inflation and quality of care, prices have risen in line with those two factors.

Maybe I could just add, if you look at the stat the CMA themselves announced, they said they saw price increases of between 60% to 70% over the last 8 to 10 years. Now as a headline stat, that sounds like a lot. But when you break that down, that's rough just over a 5% increase for each of those years. And as Richard said, inflation during that period was about 3.5% to 4% of that 5%. And therefore, the small incremental amount above inflation, we think is because of the improved quality of care that's been available over that period.

Is there a margin benefit from owning your own labs, online retail business, buying groups and white label pharmaceutical products?

There is, I guess, some synergies from having an integrated group. If you take our labs, they do provide obviously services to our practices. And clearly, having that work provided in-house improves our group margin. If it wasn't for us having our own labs, we'll be using third-party labs and obviously missing out on that revenue, but also the margin it brings. Online retail, we tend to attract non-practice clients. So most of our online retail clients are not CVS practice clients. And again, that does create incremental margin. In the first half, having said that, the margins in Animed Direct or online retailer were pretty flat. We do expect to return to growth in the second half. Buying groups provide a service to third-party independent practices because -- we have scale. We can buy drugs more cost effectively than an independent practice can. But for a fee, we allow independent practices to access our scale and share some of that buying power. And obviously, the more practices and the more drugs we are buying drugs for, that increases the volumes overall. So that also helps our group margins.

And on white label pharma, is that beneficial?

Most of our drugs we buy through a wholesaler, and we negotiate a wholesaler discount based on the volume of drugs we provide -- we purchase. We then also go to the manufacturers and negotiate rebates based on the volumes of drugs we buy from those manufacturers. So we work to kind of what we call net-net prices, so net of the wholesaler discount, net of the manufacturer rebate. For certain drugs where there's high volume and predictability of future demand, we have approached manufacturers directly and negotiated directly with them. That means we bypass the wholesaler and we negotiate slightly better rates and the manufacturer will work with us to brand those under our own brand. So that can improve margins. Equally, though, we need to make sure that we are going to sell the entire quantity we've committed to purchase. And therefore, it's not that straightforward. We need to tread carefully there. But we have seen slightly enhanced margins that -- but also the ability to pass on cheaper prices to consumers from having own brand medicines.

Are existing practices growing? Or are you relying on buying more clinics to drive growth?

So across the group, we are seeing growth, but we are actively acquiring additional practices in Australia, and those acquisitions are driving incremental growth to the group. In the U.K., we stopped acquiring practices just over two years ago when it became clear that the CMA were moving towards a market investigation. We just felt it wasn't appropriate to carry on acquiring because of the uncertainty of the CMA process. Now that we've had the CMA's provisional decision in October, we have certainty again at last. So we do consider there will be U.K. acquisition opportunities present themselves in the future, and we do -- we are confident in our ability to make further acquisitions. So that should also hopefully drive incremental growth in the future.

Is the long-term growth driver for CVS more about increasing spend per pet or increasing the number of pets under care?

Both, but I'll let Robin elaborate.

Yes. I think definitely both. I think the third category I would add to that is just increasing the number of visits per animal under our care. So I think the one thing that we have seen recently, we've delivered good growth. I think what Richard referenced earlier that within our companion animal business, we've seen the higher acuity work, our referral hospitals perform well. But where we have seen some footfall challenges is for those preventative health care visits into our companion animal first opinion practices. And our focus there is how do we -- how do you drive volume through our practices. And we think that we're keen to remind our clients and prospective clients about the benefits of visiting a veterinary practice. And then we want to make it really easy for them to access our services. So we've recently launched online booking across all of our practices. There are improvements that we can make to that journey. We want to make more of the slots available online, so that makes it easier for them to book. And also, we've been focusing on opening up our clinicians' diaries to allow them to book further in advance. And that's true for online booking and also within practices because we're really keen to ensure that clients don't leave our practice without knowing when their next appointment is. And then from a communication perspective, I think we've got one common practice management system, which is great. We have all of our client information, contact details, their animals, what life stage they're at. Historically, a lot of our marketing has been led locally, but there is an opportunity for us to really stand up a true trigger-based kind of customer engagement program to really kind of remind people of the value of listening a vet and encourage footfall into our practices. So I actually think that one of the biggest areas of potential like-for-like growth going forward is volume in terms of number of visits. But equally, as we improve the customer experience, I'm also hopeful that we can win more clients. And when we have those clients, we can do more in terms of the work that we perform for them.

What is your acquisition pipeline looking like? And how important is it to your growth strategy?

So we do see good growth opportunities from further acquisitions. In Australia, we have a pipeline. We have a number of deals where we've had offers accepted, and we're in the process of undertaking due diligence, and we are confident of making further acquisitions in this second half of this financial year. We've now got 55 practice sites in Australia, and we're very confident of growing further through acquisitions. In the U.K., we don't have any offers accepted. It's the very early stages of acquisitions hopefully opening up again. But we have had some conversations with vendors. And hopefully, that does lead to a pipeline building over the course of this calendar year.

Is Australia more profitable than the U.K.?

Structurally, no, but we've consciously acquired very high-quality practices in Australia. So typically, we are buying larger practice groups, so four or five vets or more. And we're also buying really good quality facilities in great locations. And those types of practices do deliver higher margins. So we've said consistently that our Australia business is higher margin than the group, and we've talked about sort of 25% plus EBITDA margins. Those types of practices though in the U.K. are also high margin. So, at the moment, Australia margins are higher than the group, but equally, it's because of the quality of the facilities we've acquired.

So, Australia sounds like it's been successful to date. Are you looking at new markets?

Yes, I can do. I think from a capital perspective, we have a strong balance sheet. We have low leverage. So we do have the ability to deploy capital. We assess all of our investments based on a minimum hurdle rate of 10% IRR, be it capital investment in our own facilities in the U.K., be it U.K. acquisitions if they present themselves at a value that are as appropriate for us and acquisitions in Australia. So I think what I'm trying to say is that we have plenty of places currently to deploy capital. The U.K. market, we represent 9% of the market. And therefore, we know the CMA are comfortable with local market share up to 30%. And there's 40% of the market that's yet is unconsolidated independent practices. So there's a large runway in the U.K. if the valuations come down. In Australia, low levels of consolidation, so 15% to 20% consolidation. So, again, a long runway and opportunities for us to grow there. So I don't think there's any need for us to enter a new market. And actually, for me, I'm keen to reestablish a meaningful footprint in Australia. Having said that, as a management team, we always assess what new opportunities are available. And therefore, we keep a watching brief across other territories. And if something looks like it's an opportunity for us, then that's something we will consider seriously.

Will tele vet services become a threat to CVS and the veterinary industry?

I think tele services can play a part as they did during the peak COVID period where we were restricted for a period of time from providing the kind of more routine services. So, back in COVID, we could only provide emergency and critical care. And we found telemedicine was a way of contacting clients, having discussions about their pets. But there's no substitute for vets physically examining animals. And it's a bit like pediatric care in human health care. Pets can't talk and can't tell you what's wrong with them. So telemedicine is never going to replace the requirement for vets to examine animals and then come up with treatment plans and diagnosis. So, yes, it can play a part, and I think it can play a part in things like triage, particularly out of hours. So if a client has a concern about their animal, the ability to phone up a vet and talk through their concerns, absolutely telemedicine plays a part there. But ultimately, animals need to be examined by vets and the vet expertise is kind of required. So I don't really see it as a threat. I think it's an opportunity to improve kind of operational performance, but it won't be ultimately a threat.

I mean I agree. I don't think it's a substitute, but it will be complementary to the services we already provide.

Can you update us on the historic vet shortages in the industry? And our newly qualified vets staying longer at CVS compared to industry averages?

So I'm pleased to say the position there has improved. A few years back, probably in the early 2020s, we saw more of a chronic shortage of vets, partly because of the Brexit referendum results and the fact that the uncertainty that caused created less European vets coming to the U.K. and also some of the European vets working in the U.K. previously decided to return home. Now we've got Brexit certainty. We're seeing a return of EU vets coming to work in the U.K. We've also seen the number of university vet schools in the U.K. increase, and therefore, the number of graduate vets increasing each year, and that will accelerate further from here. So the Royal College of Veterinary Surgeons are now modeling and suggesting that there won't actually be a shortage of vets at all in the U.K. for companion animal practices in the next kind of five to six years. So things are looking much more positive than they were. In terms of graduates, we have a very advanced graduate induction program, and it's recognized, I think, across the industry as being a leading graduate induction program. So we attract our fair share of graduates, and we have the pick of the best graduates. And we've seen our retention across not just graduate vets, but also experienced vets improve significantly over the last six or seven years. And that's reflected in the attrition rates that have fallen significantly, but also the engagement scores. So we measure colleague engagement monthly through a very simple kind of eNPS survey and colleague engagement has improved in that period as well.

Can you update us on the CMA and what the findings mean for CVS?

Robin?

Yes, I can do. So CMA have issued their draft remedies. We're expecting the decision on the final remedies to happen at some point in March, and that's the current timetable. The statutory deadline is May 22, so that has to be concluded by then. If I think about some of the remedies, I suppose I can put them into broad buckets. There's some transparency measures that we are entirely comfortable with. So things like price transparency, which we already put on our websites, things like transparency of ownership. We'd like to think that most of our customers are aware that they're using a CVS practice, but we are going through a process of jointly branding and rebranding our sites. There's a bucket around regulatory change. And actually, that's more around the regulator's ability to be able to regulate the likes of myself and Richard as directors of veterinary businesses. whereas at the moment, they can only regulate the vets themselves that work at veterinary businesses, and we're entirely comfortable with that. There's some other kind of regulatory changes they're recommending around access to our sites and minimum standards. And we already voluntarily comply with the practice standard scheme that's run by the RCVS. So we're ready to do that. And then the third bucket is just around access and pricing of medicines within our practices. And the biggest remedy of which currently is this recommendation to cap prescription fees at GBP 16. Now we currently charge more than GBP 16. However, I think the impact for us is small, and it takes a very small increase in fees to offset the impact for us in the P&L. I suspect if they do continue with that remedy, then the entire market will behave in the same way. I think when you look at the evidence and proportionality of those remedies, that's the one that feels slightly disproportionate for us. But having said that, when you look across the 21 or so remedies that they've outlined, we're comfortable with all of them. In fact, I suppose our expectation is potentially the CMA will rein them in and they may be slightly narrower when it comes to the final decision, which we expect imminently.

I would just add as well that I think the CMA process has been painful, frankly. It's had a significant impact on vets who have read and nurses who have read the press articles, accusing them of being expensive. There have been articles accusing vets of not caring about the animals and only being in it for the money, which are completely so far from the truth. It's -- those are unfair. But finally, we've got CMA certainty. And as Robin said, we'll get the final decision very shortly, and that will bring a close to the process, which is, yes, long overdue.

What is the impact of AI on the veterinary sector? And will it be positive or negative?

Positive again, I think similar to the kind of telemedicine question. So AI can play a part. But as I said earlier, there's no substitute for vets examining animals and a physical inspection. So AI can't replace vets. AI won't be able to treat animals. What AI can do is help with the efficiency of our operations. We're already trialing AI in the consulting room. So we are trialing an AI scribing tool, which actually will lead to hopefully a richer experience for the client because the tool works by listening to the vet and the vet having to vocalize their examination, but it essentially produces the clinical notes for the vet at the end of the consultation. And that should reduce time, but also lead to a richer experience for the client because the vet has to vocalize their examination and then the clients will really understand what's happening and what the vet is doing. The other benefit from that as well is it allows the vet to very simply give a summary of the consultation and the discussion and send that summary to the client post consultation via e-mail. And there are stats that show that most clients forget kind of 90% of what's told to them in the consulting room. And so that also gives clients hopefully a better experience and also prompts in terms of things they need to watch out for post the visit or actions they need to take or the next checkup they need to book in due course.

With an enterprise value of 7x, would you consider share buybacks rather than U.K. M&A, which may cost more than 7x EBITDA?

So our share -- our market cap compared to our EBITDA is around about the kind of 8x level. And so we do consider capital allocation very seriously as a Board. We do believe in the ability to deploy capital and drive long-term shareholder value, whether through capital expenditure or through acquisitions. But clearly, we have a duty to maximize shareholder value as well as grow the business and provide the right facilities for our colleagues and the right experience for our clients. So this is something we will keep under regular review, but we have no plans to do further share buybacks at the moment.

Do you expect the issues in the Middle East to have any impact on your business and forecast?

Very limited impact. We have very little reliance on the oil price or impact from the oil price. We obviously buy energy and utilities. And there, we have forward bought contracts, so we are protected at the moment. Clearly, if there's a knock-on impact on consumer spending power, that can impact us in due course. So, hopefully, the conflict is short-lived and things get resolved very quickly. On a practical point, traveling to Australia is more problematic and the flights will therefore be more expensive and longer, but that's a very practical minor point, but very limited impact expected from that conflict.

I suppose it's been helpful that we've just appointed our first permanent Managing Director of Australia. So previously, we have had an Australia MD, but it's been a second from the U.K. So we now have our first permanent Managing Director. They have support colleagues in Australia also supporting the operations. So I don't think it necessarily needs us to travel to Australia actually for those operations to run very smoothly because we have a team already in place.

Okay. Thank you to Richard and Robin from the management team today for joining us. This concludes CVS Group's investor presentation. Please take a moment to complete a short survey following this event, and the recording of this presentation will be made available on the Engage Investor. I hope you enjoy today's webinar.