CVS Group revenue rises 6% as Australian veterinary business reaches £79m

CVS Group plc (LSE: CVSG), a Norfolk-based veterinary services group operating hundreds of practices across the United Kingdom and Australia alongside laboratories and online pharmacy activities, increased FY26 revenue by 5.9% to £712.8 million. Adjusted EBITDA rose 5.1% to £141.5 million and adjusted profit before tax increased 7.6% to £84.9 million, while adjusted earnings per share advanced 6.9% to 85.6p. The shares nevertheless fell 6.2% to 1,221p on September 24 and declined another 1.1% to 1,208p the following day.

Australia was the standout growth engine. Revenue from the country increased from £52.1 million to £79.1 million and the group ended June with 35 Australian practices operating across 57 sites, compared with 43 sites a year earlier. Since entering Australia in 2023, CVS Group has increasingly positioned the market as a second strategic growth platform alongside the mature UK veterinary business.

Why did CVS Group shares fall despite higher revenue and EBITDA?

The results were solid rather than transformational, and several balance-sheet and cash-flow metrics moved in a less favourable direction. Operating cash conversion declined from 76.9% to 70.6%, free cash flow fell from £72.2 million to £69.2 million and net bank borrowings increased by £68.2 million to £199.6 million. Leverage rose from 1.18 times to 1.63 times adjusted EBITDA, still below the group’s stated two-times threshold but substantially higher than a year earlier.

That increase reflects deliberate capital allocation rather than solely weak trading. CVS Group spent £43.3 million on acquisitions and £36.4 million on capital expenditure while also undertaking substantial share buybacks. Yet investors can reasonably ask whether the company is trying to pursue too many uses of cash simultaneously.

UK trading also remained softer than the group’s long-term ambitions. Like-for-like revenue growth improved to 2.1% from only 0.2%, but it remains below CVS Group’s medium-term target range of 4% to 8%. Unusually hot weather during May and June contributed to weaker veterinary activity late in the year, but the underlying UK consumer backdrop also remains subdued.

The share-price response therefore looks less like a rejection of the business and more like a repricing of the balance between growth and capital intensity. Investors can see the Australian opportunity, but they also see nearly £200 million of net bank borrowings and softer cash conversion.

How important has Australia become to CVS Group?

Australian revenue increased by roughly 52% year on year and now represents about 11% of group sales. The group acquired six practices comprising 14 sites during FY26 for initial consideration of £43.3 million, including Sydney Animal Hospitals, and has already completed or agreed further transactions after year-end.

Australia also appears to be contributing a disproportionate share of earnings relative to revenue, reflecting attractive veterinary-market economics and acquisition opportunities. The country gives CVS Group access to a fragmented market where practice owners can sell into a larger network while retaining clinical identities and local relationships.

The investment case, however, depends on acquisition returns rather than raw site count. Paying higher multiples simply to sustain revenue growth would eventually undermine the strategy, particularly as leverage rises. Investors need evidence that acquired clinics generate attractive returns after integration costs, working capital and the capital required to refurbish facilities.

CVS Group’s continued pipeline of Australian acquisitions suggests management still sees compelling opportunities. The next stage is demonstrating that the scale already purchased translates into stronger group margins and cash conversion rather than permanently higher debt.

Is CVS Group returning too much capital while borrowing rises?

The company completed a £20 million share buyback in January and subsequently launched another £50 million programme. Once the second programme is finished, CVS Group says £70 million will have been returned through buybacks in just over 12 months, alongside a progressive dividend that includes a proposed 9p final payment.

Buybacks can be highly attractive when management believes the shares trade below intrinsic value, particularly because repurchasing stock increases each remaining shareholder’s percentage ownership. Yet the decision is more debatable when acquisitions, investment and distributions collectively require a larger debt balance.

CVS Group generated £69.2 million of free cash flow during FY26, but acquisition expenditure, investment capital spending and shareholder returns all competed for that cash. Net borrowings consequently rose despite healthy underlying profitability.

The company has refinanced its £350 million facilities through May 2030 on improved terms and retains covenant headroom, so the balance sheet is not under immediate stress. The investor question is instead one of optimisation: whether another pound is best spent acquiring an Australian practice, upgrading an existing hospital, paying down debt or buying back CVS shares.

Has the UK competition investigation stopped being a major uncertainty?

The Competition and Markets Authority process has moved considerably closer to resolution. CVS Group said the final remedies order issued in September was in line with expectations, reducing one of the regulatory uncertainties that had weighed on the broader UK veterinary sector.

That does not mean regulation becomes irrelevant. Greater transparency around pricing and treatment options can alter customer behaviour and require operational changes across veterinary groups, while public scrutiny of pet-care costs remains elevated.

For CVS Group, the benefit is greater visibility. Investors can focus more directly on underlying veterinary demand, acquisition returns and capital allocation rather than trying to price an unknown regulatory outcome.

The group’s move from AIM to the Main Market and inclusion in the FTSE 250 also changes the shareholder audience. Larger institutional investors typically place greater emphasis on cash returns, leverage and governance consistency, making disciplined capital allocation increasingly important.

What needs to happen for CVS Group shares to recover from the results sell-off?

The strongest evidence would be accelerating UK like-for-like sales combined with continued Australian growth and leverage stabilisation. CVS Group has retained medium-term targets of 4% to 8% like-for-like growth, margins between 19% and 23% and operating cash conversion above 70%. FY26 achieved the cash-conversion threshold and a 19.9% adjusted EBITDA margin, but like-for-like growth remains below the targeted range.

Management transition adds another variable because chief executive Richard Fairman plans to retire once a successor is found. A new CEO will inherit a larger, more international group whose capital-allocation choices are becoming as important as clinical operations.

The September 24–25 share-price decline leaves CVS Group around 1,208p compared with a 52-week range of approximately 1,062p to 1,648p. That is not distressed territory, but it demonstrates that investors want more than revenue growth from acquisitions.

Australia has already proved it can expand the group. The next phase must prove that expansion can coexist with stronger cash conversion, disciplined leverage and sustainable per-share returns.