Can Premier Veterinary recover from 48% plunge?
24th October 2018 13:13
by Graeme Evans from interactive investor
A growth warning comes little more than a year after the last one, but can this pet plan firm stage another miraculous recovery? Graeme Evans checks the details.
A pet plan business whose share price had been on the recovery trail was back in the doghouse today amid concerns over funding and future growth.
Premier Veterinary Group, which joined the stockmarket in March 2015, lost almost half its value at one stage Wednesday, as a trading update returned shares to where they were before a mid-summer revival.
The disappointment for investors comes despite a 30% year-on-year jump in the number of pets signed up to the company's Premier Pet Care Plan to 244,000 at the end of September. Revenues were up 24% to £3.15 million
Growth remains healthy in the UK, with pet plan growth up 24% to 193,000, but conditions are toughening in Europe and the performance of the new United States business has been below hopes.
The news comes a year after PVG warned that predicted US volumes would take an extra 12 months to achieve as a different approach was required for the provision of preventative healthcare plans there (see left hand bubble in chart below).
Source: TradingView Past performance is not a guide to future performance
Driving the US business towards profitability is likely to hinge on a current pet care pilot scheme being rolled out to more of the customer's animal hospitals. In the UK, PVG is also in discussions to finalise an agreement with a "leading UK corporate group" potentially worth £1 million a year.
The company said:
"Excluding the agreement and the US contract, the outlook for further growth for the group remains positive albeit at a slower rate than expected."
The other concern for shareholders is that PVG needs additional funding to support its business, having drawn down £1 million of its £2.25 million unsecured loan facility. It is now considering the offer of a new long-term secured loan with an increased level of funding to replace the current facility.
The company said:
"PVG requires additional funding to support the directors' going concern assessment, maximise the growth opportunities and to reach overall profitability."
Underlying losses are expected to be in the region of £3.25 million for the year to the end of last month.
With a quarter of UK households owning a dog and 19% having a cat, PVG believes there's a big opportunity to grow its pet plan business. In the United States, the rate of ownership rises to 36% and 30% respectively.
As well as its preventative healthcare programme for pets, the company operates a buying group in the UK and Ireland which offers enhanced discounts to member practices on pharmaceutical and consumable spending.
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