National Veterinary Care purring as profits lift

National Veterinary Care purring as profits lift

National Veterinary Care (ASX: NVC) plans to scale down acquisition growth and consolidate in FY20, following a stellar result buoyed by the rapid absorption of new businesses in Australia and New Zealand.

The Gold Coast-based company saw its revenue surge 43.6 per cent to reach $118.4 million in FY19, while net profit after tax jumped 28.9 per cent to hit $8 million.

"It's always nerve racking making those big statements that you're recession-proof in a way - and no one is really recession proof - but what we can see is that even when the customer sentiment is not that great in Australia, vet services is still going strong," founding CEO Tomas Steenackers (pictured) tells Business News Australia.

The company's growth was driven by 32 acquisitions in FY19 of which 26 were were integrated in just 90 days.

Now Steenackers plans to slow it down to 10 or 12 new acquisitions in FY20, with economies of scale leading to a 0.5 percentage point boost in the underlying EBITDA margin.

"We're getting bigger so when we buy now we have a pretty strong support office, we have really committed staff and a really good system which we spent the last two years investing in," he says.

"I think we're just a more mature vehicle that can really manage non-performing assets."

The next piece of the puzzle for National Veterinary Care is raising the profile of its United Vets Group (UVG) management services and procurement business, which now services 426 independent clinics across Australia and New Zealand.

Within a month's time, Steenackers expects to complete an acquisition of another group procurement organisation that will further strengthen the division. 

"I think adding another 80 clinics to the UVG or the managed services will bring us to a little bit over the 500 vet clinics that are independent that are using us for any services," he says.

"It's going to bring the representation of NVC to around 24 per cent of the market that NVC is representing between the clinics that we own and the independents that we're helping, and our view has always been to try to get to 30 per cent of the market.

"The objective of going up to 30 per cent, it's truly close to get there from my point of view, but it's also going to mean that we can provide more services to those independents now that it's getting better."

The group is going beyond procurement with that side of the business to include marketing, HR, IT and leadership and development in training.

That creates the ability to hopefully upsell some of our members that are just using the procurement side of things to other services such as marketing, such as HR, such as IT, and leadership and development in training. The company recently hired two new sales representatives in Australia and New Zealand who will go on the road to give the business a push.

"When we have an independent vet clinic that comes on with us, it's not just about the procurement benefit but all the other things - it's going to be a bit healthier how they manage their businesses, and if one day they sell to us we know we're going to have a solid business that's quite aligned," says Steenackers.

"Also, to negotiate a better supply agreement, when you represent 24% of the market people have to stop and think two seconds to see how they want to service you and how they want to position themselves."

NVC is forecasting underlying revenue growth of 20 per cent to $140 million in FY20. Shares in the company were up 4.17 per cent at $2.50 in early trading. 

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