- CVS eyes expansion in Australian where more attractive valuations are available
CVS Group has agreed to sell its crematorium business with plans to reinvest some of the cash in Australia after an extended period of regulatory pressure in the UK.
Britain’s veterinary sector has been under investigation by the Competition and Markets Authority amid concerns pet owners are being overcharged.
It has sparked vet industry fears that groups could be forced to cap prescription fees or sell off parts of their business.
AIM-listed CVS told shareholders on Thursday it would sell its crematoria unit for to European funeral services grim Anima Care UK for £42.4million.
CVS said the sale of the unit, which represents just 1.8 per cent of group revenues, follows an ‘attractive’ approach from Anima parent group Funecap.
The deal, set to close within the next five weeks, will also see Funecap provide clinical waste disposal and cremation services to CVS practices and clients.
CVS and other vet businesses are facing a probe from the Competition and Markets Authority
CVS said the divestment provides ‘additional firepower’ for continued selective investment in the UK and expansion in Australia.
The group has been actively expanding in Australia, where it said it can acquire assets at ‘attractive’ valuations.
It added: ‘This capital recycling is expected to be value accretive to the group in due course and allows CVS to focus on its core veterinary and diagnostics services, whilst continuing to provide a high-quality end to end client service.’
The CMA’s veterinary probe follows warnings in March 2024 about weak market competition, partly caused by rapid sector consolidation.
But analysts say recent commentary suggests a softening of the regulator’s stance.
Peel Hunt said: ‘The key driver of growth in the crematoria operations was the acquisition of first opinion practices, which has been held back by the CMA.
‘Reinvesting into Australia and selectively into the UK provides stronger long-term growth opportunities in our view.
‘Although the recent working papers provided some comfort that the CMA would not be taking any action to impact the relationship between first opinion practices and crematoria operations, this transaction removes any residual risks.’
The broker reiterated it’s ‘add’ rating with a target share price of 1,500p
CVS Group shares were up 2.4 per cent to 1,030p approaching midday, having added around 25 per cent since the start of the year.
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