Veterinary services provider CVS' (CVSG:AIM) reputation as a profitable, resilient pet project for investors is only enhanced by an upgrades-driving year-end trading update.

The Diss-headquartered industry consolidator expects sales and adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) for the year to June will come in 'modestly ahead' of market expectations following pleasing sales growth acceleration through the second half.

Shares in CVS perk up 6.25% to 756p as the small cap flags 4.8% annual growth in like-for-like sales, comfortably ahead of the 3.8% anticipated by broker N+1 Singer, up from 'a more customary' 3% growth rate delivered in the first half and reflecting strong organic progress in its core vet practices business.

Providing support was a boost from burgeoning membership of CVS' Healthy Pet Cub loyalty scheme, membership rising 19% from 213,000 at the start of the year to 253,000 at year-end.

N+1 Singer analyst Sahill Shan upgrades his 2016 earnings per share estimate by 6% to 31.9p accordingly, implying impressive year-on-year growth of 33%, though CVS does trade on a punchy price-to-earnings ratio of 23.7 times.

Last year was a record one for acquisitions for CVS, viewed as a potential Brexit winner, since pet owners always tend to pay for treatments no matter what the economic weather, viewing their feline and canine friends like family members.

CVS gobbled up 67 surgeries as well as three crematoria, the Vetshare buying group and instrumentation business VETisco, for a total outlay of £63.7 million, during the period. Since March's interims alone, the cash-generative company has completed a further 10 deals, including another crematorium and a first move into Northern Ireland.

Web chart - CVS - July 16

CEO and former Vision Express boss Simon Innes 'anticipates further like-for-like growth although this is likely to moderate to more normal levels following the unusually high growth seen over the last six months. In addition, the full year impact of the acquisitions made during the year ended 30 June 2016 will add significantly to the profitability of the group.'

'With the acquisition pipeline full, we envisage further consolidation and good underlying momentum to be sustained over the next 12 months,' writes N+1 Singer's Shan, who sees no consolidation let-up in the current year. 'Whilst there is some post Brexit demand risk, we feel the broader consumer scenario is relatively better than 2009/10. Moreover, CVS is now a much stronger entity with multiple growth levers. CVS remains a high conviction growth story with strong fundamentals.'

Issue Date: 25 Jul 2016