National Veterinary Care Ltd (ASX: NVL) has reported its annual result for the year to 30 June 2018.
The veterinary clinic operator reported 26% growth of revenue to $84.2 million. General practice clinic organic revenue growth achieved was 2.51%, which is not bad compared to the standalone vet segment of Greencross Limited (ASX: GXL).
During the year National Vet Care acquired and integrated 13 vet businesses.
Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 8.5% to $13.1 million. However, the underlying EBITDA margin decreased by 220 basis points to 15.9%, which was a major decrease.
Underlying net profit after tax (NPAT) grew by 6.5% to $6.29 million and the underlying earnings per share (EPS) declined by 6% to 10.73 cents.
The statutory NPAT grew by 41.9% to $6.24 million and statutory EPS increased by 25.7% to 10.63 cents.
The annual dividend was maintained at 3 cents per share, fully franked.
National Vet Care achieved operating ungeared, pre-tax cash flow conversion of 111%. The net debt/EBITDA leverage ratio stood at a fairly healthy 1.82 times at the end of FY18.
The company's pet wellness program, called 'Best for Pet', continues to be a key business initiative and a driver of organic growth. The membership number has swelled to 20,000 members and is offered in 56 clinics.
Managing Director Tomas Steenackers said "The size of National Vet Care's addressable market within Australia and New Zealand has increased and is now more than $3 billion. The new acquisitions, together with organic growth within the clinics, strong growth in member numbers for the wellness program and a focus on value initiatives and refining our offering through the Management Services and Procurement Group, have all contributed to National Veterinary Care's FY18's result."
Trading update and FY19 guidance
The company said that general practice organic growth for July 2018 was 2.5%.
In FY19 the company has guided for revenue growth of 25%, the gross margin will be in line with FY18 and an underlying EBITDA margin of 16%.
Foolish takeaway
The collapse of the EBITDA margin was the most disappointing part of the result, which led to the muted profit growth despite the strong revenue growth. It was pleasing to see that like for like (LFL) growth continues in FY19, even if it's only a little faster than inflation.
As long as the margin doesn't deteriorate further, FY19 could be a bumper year. I'm still happy to hold my shares for the long-term.
