Veterinary services consolidator CVS (CVSG:AIM) sheds 10p (1.1%) to 935p despite bounding in with outstanding results for the year to June.

Adjusted pre-tax profits are up more than 36% to a better-than-expected £24.9 million on like-for-like sales growth of 4.8%, while the company also hikes the dividend 16.7% to 3.5p.

So why the share price reverse? Some investors are taking profits following a fantastic run, the catalyst being the news 'investment in a number of longer term initiatives will have a slightly negative impact on our profits in the short term before generating positive returns'.

In an upbeat outlook statement, CVS explains 'the development of a small number of greenfield sites, the introduction of our own brand insurance and the introduction of an additional layer of management in the Veterinary Practice Division in order to enhance the support of the practices and maximise their potential' may keep profits growth ever-so-slightly on the leash.

Vet dog x-ray

Yet analysts are brushing aside management's caution and instead focusing on the strong momentum behind the business, as flagged by chairman Richard Connell. He insists 'like-for-like sales growth in the second half of the year ending 30 June 2016 was strong and pleasingly this has continued into the early part of 2017', adding that the acquisitions pipeline 'remains buoyant'.

This encourages Investec's Cora McCallum to write: 'The company acquired 67 surgeries during full year 2016 and three more after the year end, which should ensure the positive momentum continues into full year 2017. We raise EPS by 2% in full year 2017 and 4% thereafter, raising our target price to 995p. We move to Add from Buy in recognition of recent share performance but still see opportunity for future upgrades if acquisitions continue and on the launch of an insurance product.'

'The pleasing aspect of the results is that the positive second hald 2016 momentum has continued with a strong start to full year 2017,' writes N+1 Singer's Sahill Shan. 'We push through a 2% full year 2017 PBT upgrade today but see further upside potential as the year progresses. Whilst the shares have been strong coming into these results and are due a breather, we have high conviction of another strong year ahead and expect the shares to move up towards £11.00 on over delivery.'

CVS - Sept 2016Elsewhere within the outlook statement, CVS says its 'exposure to the potential impacts of "Brexit" appears to be limited and, whilst the referendum vote to leave the EU creates some uncertainty for the pace of growth in the UK economy over the next couple of years, the board believes that the characteristics of our business make it relatively resilient.'

If you want more on the high-quality earnings, strong cash flows and rising dividends on offer from the pets, vets and animal medicines niche, read our recent 'Animal magic' feature here.

Issue Date: 23 Sep 2016