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LONDON (Alliance News) - Shares in veterinary firm CVS Group PLC slumped Tuesday as the company warned annual earnings will likely miss market expectations.
CVS shares were down 25% on Tuesday at 492.00 pence each.
Over the past two years, CVS said, it has moved into the Farm and Equine markets, but early performance of these new divisions has been "disappointing", with results falling short of board expectations.
Pharmaceutical companies have offered "poor support", and CVS said it is continuing to push for "transparent and appropriate" pricing.
Further, CVS had to pay much higher employment costs in its half-year ended January due to shortages of vets, meaning the company is still "heavily reliant" on locum cover.
This will lead to flat earnings before interest, tax, depreciation, and amortisation for the first half ended January. In its prior year, interim adjusted Ebitda was GBP20.7 million.
"Given the financial performance in first half 2019, CVS now expects full-year Ebitda to be materially below current market expectations," warned CVS.
"A number of cost savings have been identified across the group and these are expected to generate savings both in second half 2019 and in the remainder of calendar year 2019, with ongoing effect thereafter," the company continued.
"In conjunction with cost savings, additional procedures have been implemented over the employment of locums in practices and the group expects to see a reduction in locum costs in the remainder of the financial year as a result."
In the first half to December, group sales rose 24%, and 4.0% like-for-like.
CVS Practices sales were up 24% year-on-year and 3.2% like-for-like, while Laboratory sales rose 6.3%, Crematoria sales by 11%, and Animed Direct sales by 16%.
CVS' gross margins for the half fell to 76.2% from 79.5%, due to a increased mix of the lower-margin Farm operations, which now make up 8.9% of group sales, up from 3.2% in the same period a year ago.
The company also bought three practices in December, totalling GBP5.0 million.
"The group believes that acquisition multiples being sought by practice owners are increasingly above levels which will deliver acceptable financial returns," CVS warned, however.
"Whilst the group has a further pipeline of acquisitions, for which terms have been agreed in principle, the board is re-evaluating all acquisitions and particularly the multiples it is willing to pay."
