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Profits warning! Premier Veterinary Group – how’s ‘narrower focus of resources’ working out?

By Steve Moore | Wednesday 24 October 2018

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.

Writing around this time last year on Premier Veterinary Group (PVG) I warned including that it looked to have little choice in more narrowly focusing resources and concluded a bargepole stock. The shares had risen strongly in recent months, but are currently slumping back towards 50p on the back of a “Trading Update”

This includes re. the UK “a reduction in revenues from other third parties. Overall revenue… at the lower end of management's expectations”, re. Europe “increased levels of clinic acquisitions by corporate veterinary groups… pressures on growth in the Netherlands are expected to slow overall growth in Europe in the future” and “the performance of the US business for the financial year ended September 2018 is below management's expectations”. The overall result?...

Even bullshit earnings (EBITDA) “for the year is expected to be a loss of £3.25m”. This is particularly problematic since “as at 30 September 2018, the group held cash balances of approximately £0.7m and has drawn down £1m of its £2.25m unsecured loan note facility”! It is then stated “PVG requires additional funding”. Er, you think?!

It points to a contract with “a major corporate veterinary consolidator”, which “upon completion of a successful pilot… will be pivotal in driving the US business of PVG towards profitability” and “advanced discussions to finalise an agreement with a leading UK corporate group to provide collection, administration and support services to facilitate the provision of animal health plans across all of that group's outlets. The contract would provide annual revenues of approximately £1 million based on the current number of pets on plan, once fully implemented”. However, it adds these only “would underpin PVG's existing growth expectations” and “there is no guarantee that PVG will finalise an agreement or that the US pilot and any subsequent US rollout will be successful”.

It notes it has received outline terms from a related party “for a long term secured loan facility with an increased level of funding”, but the overall trading and financial positions see me retain my prior caution; remains on the bargepole list.

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