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National Veterinary Care Ltd (ASX:NVL) share price down on more acquisitions

The National Veterinary Care Ltd (ASX: NVL) share price is down 0.8% after announcing that it has entered into binding agreements to acquire two clinics and it’s finalising terms for the acquisition of a third clinic.

Settlement of these acquisitions is expected to take place by 31 July 2018 and this will bring the total number of veterinary service businesses up to 67.

The new clinics are within existing National Veterinary Care’s geographical clusters in Queensland and Victoria. They are expected to generate revenue of $6 million and combined earnings before interest and tax (EBIT) of $1.84 million.

The total cost for the three acquisitions will be $9.6 million, which consists of $6.56 million upfront and a deferred component of $3.04 million.

The Managing Director, Tomas Steenackers, said “The acquisition of these high quality clinics will see National Vet Care start the new financial year having increased our portfolio by 14 clinics since 1 July 2017. These additional three clinics, collectively delivering higher than average annual revenue and strong EBIT margins, will bring total historical annual revenue for the 14 clinics to $20.7 million.”

Considering National Vet Care generated nearly $67 million of revenue in the 2017 financial year, this would suggest that National Vet Care will have added close to a third of additional annualised revenue since FY17.

Foolish takeaway

This is another step on National Vet Care’s acquisition journey. The actual acquisitions appear to profitable and high quality, although the price seems to be a bit higher than what it has paid for other clinics in the past, when including the deferred amounts.

I’ll be interested to see how National Vet Care reports in a few months, but I can understand why the market reacted negatively to this news – there is a concern in the market around Greencross Limited’s (ASX: GXL) standalone vets.

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Motley Fool contributor Tristan Harrison owns shares of NATVETCARE FPO. The Motley Fool Australia owns shares of NATVETCARE FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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