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Half year report: Why the National Vet Care share price rose 4%

National Vet Care share price
Credit: Michael Gil

The National Veterinary Care Ltd (ASX: NVL) share price went up 4% today after the small cap vet business reported its half year result. With Greencross Limited (ASX: GXL) about to be permanently taken off the ASX due to being taken over, National Vet Care will be the biggest vet business left on the ASX.

National Vet Care reported that top line revenue increased by 30% to $54.1 million, largely due to all of the acquisitions that it has made during the period. That included 25 clinics from the Pet Doctors Group and an extra six Australian clinics during the half year. The Pet Doctors acquisitions was partially funded by an $18 million share placement.

Group like for like organic revenue growth was 2.91%, this measure is only for clinics held for more than 12 months and excludes divestments and clinic renovation periods.

National Vet Care’s reported net profit after tax (NPAT) dropped nearly 20% to $2.6 million and reported earnings per share (EPS) dropped 25% to 4.17 cents per share.

However, National Vet Care also outlined its ‘underlying’ profit numbers which excludes acquisition, integration, restructuring and “other one-off” costs.

National Vet Care’s underlying earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 29.9% to $8.2 million. Underlying NPAT went up 25.4% to $3.9 million and underlying EPS grew by 17.3% to 6.17 cents.

The underlying EBITDA margin came in at 15%, which was at the upper end of the FY19 full year guidance range of 14.5% to 15%.

There was no interim dividend declared, but one is expected again for the full-year dividend.

The company made more progress with its Pet Wellness Program called Best for Pet, which has now grown to 23,500 members. Pet Doctors aims to add more than 7,500 members over the next year.

Mr Steenackers, Managing Director of National Vet Care, said “Our commitment to long term business growth and investment in the business in FY18 has already delivered significant benefits to the business.

“The underlying EBITDA margin percentage of the NVL business (excluding Pet Doctors) for the half year of 16.1% has improved from 15.7% in the prior half year. We expect to see the benefit of Pet Doctors synergies and the impact of other margin improvement initiatives coming through in the second half of the year.”

Foolish takeaway

This was a solid report from National Vet Care, and it shows its strategy of acquiring and integrating additional clinics is working reasonably well.

If the profit margin can continue to grow then National Vet Care could be one to watch over the coming years.

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Motley Fool contributor Tristan Harrison owns shares of NATVETCARE FPO. The Motley Fool Australia owns shares of NATVETCARE FPO. The Motley Fool Australia has recommended Greencross Limited. 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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