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By Steve Moore | Wednesday 18 October 2017
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
A March AGM update saw Premier Veterinary Group (PVG) “confident in the prospects for the US business and has agreed to significantly increase PVG's investment commitment in the current financial year in the US”. An update today includes a narrower focus of resources in the US “until such time that the changes the group is implementing to improve sign up rates take effect and are sustained”. And there’s worse…
The above follows an update last month that in the US “initiatives that have been implemented are taking longer than originally expected to reverse the slow down in pet sign up rates after the initial launch and further enhancements are now being implemented, which requires additional investment. As a result of the above, it is estimated that a further period of twelve months may be required to achieve the volumes previously envisaged in the US and accordingly the board expect the group's sales and profits for the next financial year to be materially below the board's previous expectations”.
The company attempts to mitigate today’s further move by also noting UK and Europe growth and that it in the US “is pleased to announce that it has signed a further cooperation agreement with The Veterinary Cooperative” (a group purchasing organisation with more than 3,000 member clinics) and “the decision to focus the group's resources will be reflected in a lower and slower growing cost base than previously envisaged”. It adds “as at 30 September 2017, the group had in excess of £3 million of cash”. However…
… “Additional funds may be required towards the end of the current financial year. The board is exploring a number of funding options and the directors are confident of being able to raise any additional finance required”. I.e. it’s cash crunch ahoy!
Little choice then I’d suggest on currently more narrowly focusing resources in the US! And confidence on additional finance is one thing, but meaningfully achieving it on respectable terms from the type of position the company is currently heading to is quite another. As such, presently a bargepole stock.
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