National Veterinary Care Ltd (ASX: NVL) has announced that it is acquiring four more clinics, is it a buy?
National Vet Care is the second largest veterinary business in Australia and New Zealand, it's rapidly catching up to Greencross Limited (ASX: GXL).
These four new clinics are based in Australia and are in the company's existing geographic clusters along the eastern seaboard. They generate annualised revenue of around $6.5 million and total earnings before interest and tax (EBIT) of approximately $1.36 million.
This seemingly puts the four clinics on an EBIT margin of nearly 21%, which is attractive compared to the company's current network which is targeting a longer-term earnings before interest, tax, depreciation and amortisation (EBITDA) margin of 16%.
The total cost for the four acquisitions will be $7 million, consisting of upfront payments of $5.6 million and deferred components of $1.4 million.
Managing Director Tomas Steenackers said "In addition to our recent acquisition in New Zealand of the Pet Doctors Group, we have identified four high quality acquisitions in Australia that have been performing strongly and are aligned culturally with NVC in terms of focus on people and systems."
He also said that the Pet Doctors acquisition integration is tracking ahead of schedule.
Once these acquisitions are completed the total number of clinics for National Vet Care will reach 97. In has come a long way in only a few years.
Foolish takeaway
Before these acquisitions National Vet Care was projecting revenue to grow by 40% in FY19 and a slight deterioration in the EBITDA margin due to the Pet Doctors acquisition, which should have led to a decent double-digit increase of profit.
National Vet Care continues to grow its annualised revenue and EBITDA. Until it reaches 150 clinics it seems there is plenty of growth ahead. I'd be happy to buy some shares at today's price.
