CVS Group plc (CVSG) Earnings Call Transcript

Good afternoon, everyone, and welcome to CVS Group's investor presentation. I'm Richard Fairman, CEO, and presenting alongside me today are Robin Alfonso, CFO; Paul Higgs, our Chief Veterinary Officer; and Ben Avery, our Australia MD. And whilst not presenting, Charlotte Page, our Head of Investor Relations, is also present. Following this presentation, we will answer questions from analysts. And if time permits, Charlotte will then pose any questions from investors. I'm especially delighted to introduce Ben, who joined CVS in February this year. Ben lives in Sydney and has a wealth of operational health care experience through his previous roles in both human and veterinary health care, and Ben will provide a fuller introduction later. We are holding this presentation today to provide additional clarity on our long-standing and unchanged capital allocation policy, which we first set out in our Capital Markets Day in November 2022, and to give additional color on the returns we have generated from our investments. So in this presentation, we will cover the following. I will kick off by discussing the favorable veterinary market dynamics and explain why CVS is well positioned within the sector. I will then provide some detail on our financial year to the 30th of June just gone following the publication of our full year trading update earlier this morning. Robin will provide a recap of our capital allocation priorities, explain the strong cash dynamics of our company and our healthy balance sheet. Robin and Ben will then discuss our disciplined approach to acquisitions and will provide a recap on why we chose to enter the Australia veterinary services market back in July 2023. They will also provide additional color on our Australia business and our success to date, including the returns we are generating, the size of the opportunity ahead and also the synergies, which we expect to increase further with additional scale. Paul will then discuss our disciplined approach to capital expenditure and the benefits and returns that grow CapEx, and Robin will share further details on returns we've generated from capital we have deployed in the past few years. And then I will wrap up with some closing remarks. This event is being live streamed, and a recording will be available on our investor website following this presentation. We have analysts present here in London, and there will be a chance for analyst questions at the end of this session. And as I mentioned earlier, if time permits, Charlotte will pose any investor questions from the call. Now, I'm conscious many of you are very familiar with CVS and the veterinary sector we operate in, but others may be new to the story. And hence, I will kick off with an overview of CVS and the sector, give an update on recent developments and also share my own thoughts on why I believe you should invest in the sector and specifically invest in CVS and also why I believe now is an opportune time to do so. So CVS was formed in 1999 when the sector was first deregulated, and we have grown significantly over the past 27 years, largely through acquisitions. And the graphic on the left of this slide gives a potted history of our development. We first became a public company in 2007, and we stepped up to the main market in January of this year with FTSE 250 inclusion following in March. We operate 3 divisions. Firstly, we have our veterinary practices, which currently generate circa 89% of group revenue. We operate over 475 practices in the U.K. and Australia. Here in the U.K., we have 387 first opinion companion animal practices, 9 specialist-led referral hospitals, 23 equine practices and 15 farm practices, including a specialist poultry practice, Slate Hall. And in Australia, we now operate across 57 practice sites, all of which are first opinion companion animal practices. Secondly, we have our laboratories, which contribute 4.5% of group revenue. We have 2 reference laboratories, Finn Pathologists in East Anglia and Axiom in the Southwest of the U.K. And we have a desktop laboratory analyzer business called MiLab. We provide laboratory services to our own practices and also to independent practices in the U.K. And thirdly, we have an online retail business in the U.K. called Animed Direct, which currently accounts for circa 7% of group revenue. And this supplies pet food and also drugs to individual customers throughout the U.K. And across the group, we employ circa 9,000 colleagues, including 2,500 vets and 3,300 nurses. We are focused on providing high-quality clinical care to clients and their animals, delivered by a skilled team of clinical colleagues. We are positioned as an employer of choice in the sector and are focused on attracting, retaining, developing and supporting our colleagues so that they are able to provide this great care. CVS operates in a market with strong fundamentals, which has delivered long-term structural growth through economic cycles. There are a number of compelling market dynamics, which make the veterinary sector attractive. Firstly, the continued humanization of pets means that owners increasingly treat their pets as an integral part of their family and wish to look after them. This is evidenced by pets increasingly sleeping in bedrooms and often on beds, but is also seen in many other walks of life. For instance, it's now common for pets to be welcomed into shops and restaurants, and we increasingly see pets traveling on trains and airplanes. I also understand that some owners have created social media accounts for their pets and are gaining increasing numbers of followers. Ultimately, this benefits us with clients willing to spend more to access high-quality veterinary care in order to keep their pets fit and healthy for as long as possible. Secondly, we have seen an increase in the global pet population following the COVID-19 pandemic. This increase was more pronounced at the peak of COVID lockdowns when I think the benefits of companion animal ownership were widely recognized by us all. Most of the surge in demand then was satisfied through breeders increasing the supply of puppies and kittens. And hence, there's a COVID cohort of pets that are now 5 to 6 years old, and these will gradually age from here and naturally require more clinical care. We recognize that the surge in ownership during peak COVID was partly an acceleration given it was a great time to train a puppy for those owners thinking about getting a dog. Hence, we have seen a reduction in pet ownership since peak COVID, but nonetheless, the pet population remains higher now than it was prior to the pandemic. And as those COVID pets age, we will naturally see increased demand. And I will ask Paul to provide some additional color on this shortly. Thirdly, pets are living longer. And hence, not only is the current pet population larger, the pets under our care will require our veterinary services for a longer period of time. This increase in expectancy is driven by improved diet, but also by the advances in clinical care. And those very advances in clinical care are the fourth key driver. We are now able to provide better clinical care to animals than we could even 20 years ago. For example, in the area of oncology, we are now able to offer much more advanced and effective cancer treatment. And finally, the veterinary sector is proving to have a high degree of resilience through economic cycles. Given the humanization of pets, when animals get ill or injured, clients invariably bring them in for treatment, and this makes the market resilient. Surveys of pet owners consistently reveal that they are willing to sacrifice other spend to look after their pets. And this is reflected by the fact that we have never experienced a full year of negative growth. From the chart on the right, you can see that CVS was consistently delivering like-for-like revenue growth between 5% and 6% prior to the COVID pandemic. This growth was against a backdrop then of a flat pet population and hence, was achieved through a combination of pricing and increased care. Now the past few years have seen far more volatility due to a number of factors, including the COVID-19 pandemic, the Competition and Markets Authority investigation, more modest price increases in the past 3 years, cost-of-living pressures and reduced consumer confidence, which has had an impact on footfall across the U.K. veterinary sector. Notwithstanding the volatility in this period, we have still delivered average like-for-like revenue growth between 5% and 6%. We have also seen some significant inflationary increases in areas such as employers' national insurance, national minimum wage and national living wage increases and of course, higher utility costs. And as a result of the CMA process, we have applied more modest price increases over the past 3 years. And hence, we have had to work hard to maintain margins in this period, whilst also investing to position CVS well for further growth. And this brings me neatly on to why I believe you should consider investing in the veterinary sector, why specifically you should consider investing in CVS and why I believe now is a great time to do so. The veterinary sector has delivered secular growth through economic cycles and outside of economic downturns has consistently delivered 4% to 6% growth. This is driven by the structurally favorable market dynamics and the advances in clinical care, which I discussed earlier. Demand for clinical care has proven resilient through economic cycles. And I believe that AI will be an enabler to improving operational efficiencies over time, and I do not see AI as a threat. There will always be a need for vets to physically examine and provide treatment to animals. The sector has also proven to be relatively price inelastic. And now that we have the CMA final decision, I am confident that we can pass through price increases to cover inflationary costs. These attractive features are evident in the U.K., Australia and other markets such as the U.S. and have been widely recognized. This is reflected in the significant number of corporate groups now operating in the veterinary sector and the extensive private equity investments we have seen. So why invest in CVS? We have established scale in the U.K. and are rapidly expanding our operations in Australia following our entry 3 years ago this very week. The U.K. and Australia are both attractive markets, and we are well placed for further expansion through acquisition. CVS Australia is already a material contributor to the group. And we have a strong pipeline of Australian acquisition opportunities, which will bring further scale and improved synergies. And Ben will discuss this later. And we see an opportunity to return to accretive U.K. acquisitions. We have made a number of developments over the past few years, which position CVS well for future growth. Through providing support and development opportunities to our colleagues, we have built a reputation as an employer of choice in both the U.K. and Australia. But this is naturally important in the recruitment, retention and engagement of our colleagues, but it's also important in positioning CVS as an acquirer of choice. Our U.K. companion animal practices have been on a common practice management system for a number of years. But we migrated to an improved cloud-based practice management system in the U.K. over 2 years ago. This modern platform allows us to further enhance our customer experience and also streamline our operations through technology. We have a strong balance sheet and comfortable levels of leverage. And our recent successful refinancing means we have committed facilities through to May 2030 with a further 1-year extension at our discretion. Therefore, we are well placed to deliver further accretive growth through selective acquisitions. And as I previously said, we have proven our ability to maintain margins despite the inflationary pressures we have faced into. And why do I believe now is a good time to invest in CVS? I referenced the increased pet ownership earlier and the specific COVID cohort of puppies and kittens. These pets are now typically 5 to 6 years old, and I have one at home and for the most part, still in their early healthy adult life stage. However, these pets will gradually age. And as they do, they will naturally require more clinical intervention. Through the clinical care we can provide, CVS is best placed to capitalize on this growth. We now have CMA certainty, and we are advancing the implementation of the CMA remedies with prices displayed on all of our U.K. companion animal websites from late 2025 and now over 80% of our U.K. practices jointly branded. And this joint branding creates new opportunities for us to increase client registrations and to drive increased footfall through targeted marketing and CRM. Notwithstanding the strong market fundamentals, the strength of CVS, the opportunity for growth through further acquisitions and the potential for margin enhancement in our existing operations, our valuation remains significantly below pre-CMA levels. We have not seen the re-rating we hoped for following our step-up from AIM to the Main Market and following the announcement of the CMA's final decision with the remedies generally considered benign. In light of this, we recently announced a GBP 50 million share buyback program, and Robin will talk more about capital allocation later. I truly believe in the opportunity and indeed, a significant chunk of my own retirement savings are tied up in the success of CVS. Before we conclude this session, I mentioned earlier the benefit we will get over the next few years as the COVID cohort of puppies and kittens age. And I will now ask Paul to join me on stage to illustrate this. Paul?

Thank you, Richard, and good afternoon, everybody. There's no doubt that the years 2020 and 2021 will be imprinted on all of our memories due to COVID. But during those years, many people found comfort in pet ownership and the sales of puppies and kittens soared. This larger-than-normal cohort of animals are now between the ages of 5 and 6 and on average, are in their most healthy and well-behaved years. And this slide is to demonstrate the common patterns that we see in veterinary care involvement in the average pet. Look, it's fair to say that like anything, there will always be a spectrum of needs and some pretty big outliers. I personally have diagnosed a life-shortening cancerous bladder tumor in a 9-month-old Doberman puppy. I've also seen a very healthy 18-year-old cat who stepped into a veterinary surgery for the first time since they were neutered. But the graph here in front of you is an illustration of Fido Smith, the average Joe of the dog world. So puppies and kittens should begin life with a few visits to the vet to set them up for a long and healthy life with vaccinations, preventative flea and worming and usually neutering. After that, most dogs and cats spend the next few years benefiting from occasional minor interventions for things like an ear infection, just like my own Springer Spaniel, intestinal upsets because younger dogs are definitely more likely to eat things that they definitely really shouldn't. And then some minor injuries such as a torn claw or a cut. And a few unlucky pets will experience something much more significant, such as a fracture or an intestinal blockage. But thankfully, for our animals, these are, on average, not common occurrences. So during these early years, we focus on improving the overall well-being to help to try to delay the onset of age-based diseases through things like dental hygiene, good dietary management and weight control. And HPC Advanced, our new PC offering, which we launched on the 1st of July, is a great product to help our clients to engage with this more. Now sadly, as much as we would all rather that this wouldn't be the case, age comes to our pets far too soon. And we haven't put the ages on here specifically because this varies dependent upon breeds, with the biggest negative predictor for life expectancy being body size. However, certain breed types have genetic predispositions to diseases that make it less likely that they're going to reach double figures. And sadly, such as flat-coated retrievers who are rather prone to white blood cell cancers. And in fact, if you like to, you can challenge me in the Q&A to name a common breed associated disease for any breed you mentioned, although the more random that breed gets, the more unlikely it is that it's actually a breed. But as age increases, we see progressively more interventions needed to maintain a good quality of life. Now sometimes this is just a bit of arthritis or maybe some infected teeth need to come out. But for some, we see a development of common age-related diseases such as heart disease, diabetes, kidney failure, Cushing's disease, overactive thyroid in cats and of course, dreaded cancer. Now thankfully, veterinary care has moved on over the years, meaning that where owners want to and where we believe it is ethically acceptable, there is much more that we can do. In my career, the biggest step forward, as Richard has mentioned, has probably been in our capabilities to treat cancers, either with surgery, chemotherapy or radiotherapy. And critically, though, unlike ourselves, we only ever use these treatments to improve quality of life for as long as possible. Curative treatment doses often come with side effects that we can't really tolerate ethically. So our case here represented by the bars, the blue and the pink, a Cavapoo puppy shows how she begins life, with spend mostly related to preventative health care in the blue. And then a period of relative health in which -- and this is the blue in her, she has some allergic skin disease, which results in ear infections but comes under good control with hypoallergenic diets. And then she's doing pretty well until at a health check at the age of 10, she's identified with a heart murmur, be a left-sided atypical systolic grade 3/6, if you all know what I mean by that. And she has a heart scan. And this heart scan confirms the presence of something we would call Stage B2 mitral valve disease. And that means that she started on a medication called pimobendan, which she will stay on for the rest of her life. And again, she does pretty well for a couple of years after that. She needs some dental extractions at the age of 12. This is for cavity in her at this time and she has regular checkup for her heart. And about 6 months later, her owner feels that her exercise tolerance is lower. And following our instructions, she finds that she's breathing fast when she's asleep, which is a warning sign of heart failure that we have prepared her for. X-rays confirmed that she has heart failure with some pulmonary edema or fluid in the lungs, and she is started on some diuretics. Sadly, like many heart failure cases, she has a number of episodes of deterioration, needing about 24 hours of hospitalization and increased medication until the ripe old age of 13 years old. Her owner and her veterinary team agreed that euthanasia is the kindest final treatment for her. Her owner stays with her throughout her veterinary -- throughout as her veterinary team care as much for puppy's family as they do for puppy, ensuring that her last moment is calm and quiet as possible.

Thank you, Paul. I will now turn to our financial year just gone following the publication of our full year trading update earlier this morning. Revenue for the financial year was in excess of GBP 710 million, an increase of 5.9% over the previous year, with this growth being generated across all 3 of our divisions. Within this, like-for-like growth for the full year was 2.1%. Our like-for-like growth was impacted in the final quarter by continued weakness in U.K. consumer confidence and the exceptionally hot spells of weather in the U.K. at the end of May and at the end of June. We saw clients less willing to travel in their cars with their pets in these periods and a number of routine appointments were deferred and some scheduled procedures were canceled. We expect to report full year adjusted EBITDA in line with market consensus. Adjusted EBITDA margin is expected to be broadly flat at circa 20%, reflecting our ability to maintain margins in the face of inflationary pressures. We completed a further 6 acquisitions in Australia in the financial year, comprising 14 sites for initial consideration of GBP 45 million. And we have signed 2 further acquisitions, which we expect to complete in the coming weeks. And we currently now operate across 57 sites. Net debt at the end of June was circa GBP 200 million, and we have finished the financial year with leverage of 1.63x. Now we have significant headroom in both debt facilities and financial covenants and leverage remains below our 2x stated maximum. We will announce our full year results on the 24th of September, and I look forward to sharing further details then. However, I'll now hand over to Robin, who will discuss our capital allocation priorities. Robin?

Thank you, Richard, and good afternoon, everyone. So this slide is a reminder of our disciplined approach to capital allocation, which we've applied consistently as a management team over the past few years. Whilst our approach hasn't changed, I think it's important to reiterate our capital allocation priorities and to update on our recently announced share buyback program. Our capital allocation framework is underpinned by a hierarchy of clear priorities, supported by a disciplined approach under which each investment opportunity is assessed based on what is most accretive over the long term against other capital deployment opportunities before making investment decisions. So our first priority is to maintain a healthy balance sheet. We recently completed a successful refinancing of our bank debt, and we now have committed facilities through to May 2030 with a 1-year extension at our discretion. We are pleased that these new facilities were secured with a syndicate of 8 banks and a 20 basis point improvement in margins with increased flexibility. We benefit from favorable cash flow dynamics with operating cash conversion in excess of 70%. This cash generation alongside our committed bank facilities and leverage at 30th of June of 1.63x provides us with capital for organic and inorganic growth and also gives us resilience through economic cycles. We have significant headroom in both committed and undrawn bank facilities and bank covenants. One use of this capital is dividends. We recognize that ordinary dividends are an important component of shareholder returns, which is more important for some investors than for others. We have maintained a progressive dividend policy under which we expect to recommend the payment of a final dividend in respect to the financial year just gone. And we'll announce details of this alongside our full year results in September. The remaining capital is then directed to whichever option generates the highest risk-adjusted returns over the longer term. We have 3 main options. Acquisitions, we have an attractive pipeline of accretive bolt-on acquisition opportunities currently focused in Australia. We expect to deploy circa GBP 50 million per annum in Australia, subject to timing and availability of opportunities that meet the group's criteria, and Ben will provide more color on these Australian opportunities later. We'll also look to make accretive U.K. acquisitions and see an opportunity to further expand our presence in the U.K. We are confident that incremental long-term shareholder value will be created from further acquisitions. And whilst we anticipate investing GBP 50 million per annum, we will retain flexibility to make additional attractive acquisitions where the opportunity presents. We have CapEx. We have capital investment opportunities to invest in organic growth. Please note, essential maintenance CapEx is included within our 70% plus operating cash conversion. We take a disciplined approach to capital investment, which is aimed at delivering accretive shareholder returns significantly in excess of the company's cost of capital. This investment is focused on driving increased revenue and enhanced margins through improved clinical facilities and equipment, enhanced client experience and loyalty through new technology and improved employee engagement and retention. This investment naturally also leads to increased operational resiliency. Total capital investment, including maintenance CapEx, is expected to amount to approximately GBP 30 million per annum with each investment assessed against our criteria and other uses of capital. And Paul will provide further detail on this investment later. And shareholder returns. Any capital deemed surplus to our requirements may be returned to shareholders, and that will include situations where a return to shareholders is the most accretive of the 3 options. We recently announced a GBP 50 million share buyback program. And as of last week, we've acquired 1.4 million shares at an average price of GBP 12.28 and spent over GBP 17 million in doing so. We recognize differing shareholder appetite for leverage, but we continue to believe leverage should be maintained at no more than 2x bank debt to EBITDA. However, if additional attractive acquisitions arise, we would consider temporarily increasing leverage above 2x, provided that there's a clear runway to return to below 2x leverage. We will continue to keep capital allocation under close review, and we'll provide additional color on our approach and the returns we're generating in the remainder of this presentation, starting with acquisitions. I'll now ask Ben to join me on stage to discuss our disciplined approach to acquisitions and the opportunity ahead.

Thank you, Robin, and good afternoon, everyone. As Richard mentioned, I joined CVS in February, and I can honestly say it's a business that I've wanted to be a part of for quite some time. Before I tell you why, just a quick personal note. I live in Sydney with my wife and daughter. And for how I got here, I've spent 15 years in health care across Australia and New Zealand, all of it in multisite clinical businesses, much of it growing through acquisition. Most relevantly, I spent almost 5 years at VetPartners in Australia and New Zealand. I have to note that it is different to VetPartners here in the U.K. My role there included leading the business operations and strategy for -- across their 270-plus clinic network. That's where I worked first closely with Nathan Micallef, now our Acquisitions Director, integrating newly acquired clinics and setting them up to thrive. It's also where I came to genuinely respect the veterinary profession and the dedication of the people within it. Most recently, I was the Chief Operating Officer at MoleMap under private equity ownership, overseeing 110 skin cancer clinics across Australia and New Zealand and leading the strategy and execution behind the network's growth. For a lot of that time at MoleMap, I was watching CVS from a distance. I saw the clinics being acquired and thought this business is getting something right to attract the caliber of clinic and clinician they were acquiring. So when the opportunity came for me to join CVS, I couldn't be more excited. The thread running through my career is scaling multisite businesses on clinical excellence and commercial discipline. And that's exactly what I found here at CVS, and it's why I'm so pleased to be a part of it. I'll shortly provide some more color on the Australian operations. But first, Robin will introduce this session with a brief recap.

As Richard mentioned, CVS was formed in 1999, and we were one of the first corporate consolidators of veterinary practices in the U.K. We've grown largely through acquisitions over the last 27 years, and most of that growth has been in the U.K., but we entered the Australian veterinary market in July 2023, 3 years ago this week. Both these markets are large and attractive with high levels of pet ownership and the same trend in humanization of pets. We maintain a very disciplined approach to acquisitions as a management team and have consciously focused on acquiring high-quality companion animal practices. The multiples we are willing to pay for acquisitions are linked to our own current share price and the implied CVS multiple. Prior to the CMA investigation, we were acquiring practices in the U.K. at a multiple of circa 10x EBITDA, and this made sense at the time given CVS' multiple exceeded this. Following the CMA process, together with the weaker economic backdrop in the U.K. and other macroeconomic factors, our implied CVS multiple has reduced to circa 8x, and hence, it does not currently make sense for us to acquire above this. Our recent focus has been on Australia, where we've been very selective in acquiring only the best practices at multiples of circa 6x. The market is large at GBP 3 billion with around 3,600 practices. Consolidation is low at around 20%, with CVS representing roughly 1.5%. We are applying a proven model in a market that is years behind the U.K. in consolidation terms, and there's both a significant and exciting runway ahead. We've been selective about what we buy. Our focus has been on larger companion animal first opinion practices with good facilities in the major urban areas. Buying the right clinics with the right teams, operating to the right standard derisks our investment. The U.K. market is larger at circa GBP 6.7 billion with around 5,600 practices. Whilst consolidation is much higher at around 60%, CVS only has circa 8% to 9% market share. Post the CMA, we expect multiples to fall and with plenty of white space, there is also an exciting opportunity to consolidate further. On this slide is an illustration of what the acquisition funnel in Australia looks like and the process we follow. The majority of our leads are self-sourced with a number filtered out at Stage I, if they don't meet our selection criteria around location, number of vets, required clinical standards. For the roughly 60% that do meet our selection criteria, a business case is prepared to support a valuation and offer. 40% of the total will reach offer stage. All offers are approved by Executive Board members before they are issued. A number of opportunities will fall out between meeting the acquisition criteria stage and the offer stage often because of more detailed inspection, there are gaps against our selection criteria. Of the offers made, roughly half are accepted. Whilst we're not prepared to overpay for assets, we will take into consideration in our valuation strategic opportunities that unlock value. The majority of offers accepted are completed. There are often issues that arise during due diligence, but that needs to be dealt with, but it is rare that it leads us to pulling out, but it does happen. In Australia, the CMA equivalent is the ACCC. And since the 1st of Jan 2026, legislation changed that moved ACCC merger approval, in some cases, from a voluntary process to a mandatory one. We have proactively approached ACCC on a voluntary basis for some of our acquisitions to date, and all of those have been approved. The process is therefore well known to us, which is helpful because we're now almost of the size that we will need to approach the ACCC more regularly. As you see, this disciplined approach leads to us acquiring only 20% of all opportunities with many dropping out because they don't currently meet our selection criteria or valuation.

We now operate across 57 practice sites. As you can see on the map, these are located in major urban areas, such as Brisbane, Sydney, Melbourne, Adelaide and Perth. These are established high-quality practices, each with a strong reputation in its local community. That quality is what makes our growing presence in Australia create a genuine 2-way exchange. Our Australian teams benefit from the depth and experience of the wider group, and our U.K. colleagues gain fresh insights from high-quality practices we have acquired in Australia. We are actively facilitating that change across the group. Standards of care are very similar across Australia and New Zealand. But I'm delighted to say Australia is ahead in some of the preventative medicine areas. Preventative dentistry is a really good example. Australian owners routinely bring their pets in for the kind of dental care people expect for themselves, such as scale and polishes and dental X-rays. While in the U.K., dentistry until now has been more reactive, resulting in extractions that could have been prevented if earlier intervention had occurred. These are insights we are sharing across the group and we are learning in return. The U.K., for example, is more advanced in antimicrobial stewardship, which helps slow antibiotic resistance, an issue that matters for animals and people alike. That exchange of clinical knowledge points to something fundamental about this business. We are a people business and to sustain this financial performance and grow revenues and earnings over time, we need to attract and develop and retain high-quality colleagues. Clinical development is a major driver of where vets and nurses choose to work. And our portfolio is built to deliver it. Our disciplined approach to acquisition and the clinical depth that follows creates a natural environment for colleagues to grow and develop. That depth is real and tangible across our Australian portfolio. We have sites offering CT imaging, advanced surgical capability, Internal Medicine and laparoscopic procedures. Clinical offerings that aren't offered in everyday GP practices routinely. The practices we have acquired invested in those capabilities for a good reason. They deliver better outcomes for the pets in our care, and they attract and develop top talented colleagues, and they support strong revenues and healthy margins. Beyond local clinical development, we are using the breadth of our team to develop -- to deliver hands-on learning across the portfolio. And we are building meaningful clinical careers and pathways so that, that depth of opportunity is visible, structured and retained. Together, that is something central to building CVS' reputation as a veterinary employer of choice in Australia. Australia -- CVS Australia is also reaching a scale where we're becoming known beyond just the veterinary sector into the broader health care market. And this is changing the caliber of talent we can attract. Leaders who have built and scaled businesses in complex regulated health care environments are now actively reaching out to join us. Our Head of People and Culture is a good example. She brings deep M&A experience from a highly regulated aged care business that doubled in size in just 3 years. And we also balance that commercial capability with clinical leadership from within the veterinary profession. Our Veterinary Medical Director brings more than 23 years in practice, and that clinical credibility sits at the heart of everything that we do. We take the same deliberate approach to how we build our in-country support office. We size appropriately so that the business always has what it needs for the next phase of growth. We leverage the strength of our established U.K. functions in areas such as finance, IT and procurement, which keeps our cost base efficient and creates real synergies. And where we add roles locally, we add proven leaders with the depth to scale with us. The result is that our foundations, our people and our systems are enablers of growth, never constraints on it. And let me bring this to life with you with the clinical depth, the investment in people and the returns it generates with 2 examples from our portfolio. This is a single site practice in Adelaide, employing 5 vets. It's a great modern facility with modern clinical equipment, and it's a good example of a pattern we see right across our portfolio, where we invest in clinical depth and in developing our colleagues, patients get better standards of care and a strong performing business follows. You can see that in 3 ways within this clinic. First, client acquisition is built on clinical education. The practice has published hundreds of clinical articles on its website. So that way, when pet owners search online for their pet's diagnosis, the practice's content ranks highly and bring those clients through the door. Footfall stays consistently strong because the marketing is genuinely useful to pet owners. This is something that we've actively learned from at this practice, and we're now building it into a scalable approach across the network rather than leaving it to -- leaving it as one clinic's advantage. Second, we invest in developing our people. At this practice, we invested in in-clinic dental radiography training, lifting the vet confidence in identifying and recommending the right treatment. And dental procedures now account for strong patient volumes through this practice. When we build our team's clinical skills, patients get better care and the business benefits follow. Third, the patient -- the clinic -- my apologies. Third, the clinic retains high-value surgical work in-house, including a substantial volume of orthopedic surgery rather than referring those cases out. Patients get continuity of care in a practice they know. Our colleagues get hands-on exposure to more complex cases, which builds their skills and their careers. And it makes the practice a referral center inside our own network because other clinics know their patients will get a great standard of care here. That clinical focus shows up in the numbers. The practice has performed well since acquisition with revenues, margin and EBITDA all increasing. Gross margin has improved by 590 basis points and EBITDA margin around 1,000 basis point improvement. As you can see from the slide, we are generating good returns from our investment with an IRR pre-synergies of 17%, an expected payback period of 8 years based upon our current projections and an expected 3- to 5-year return on capital employed of between 26% and 31%. Another example is this practice in New South Wales. This is a larger practice operating across 3 sites and employing 8 vets, again, with a great modern facility and the right clinical equipment. Like the Adelaide example, this practice shows the same pattern. Clinical depth and colleague development translates into better care for the patients and a strong performing business. It's an accredited hospital of excellence with an excellent reputation in its community. This is an industry accreditation awarded by the Australian Small Animal Veterinarians Group to practices that meet the highest standards of clinical care, facilities and practice management, and it's held by only 50 hospitals nationally. Around 10% of those hospitals already sit within our own network, proof that practices holding the highest standards in the country are choosing CVS. The clinical offering is advanced, including soft tissue, surgery and orthopedic. And the practice is Fear Free certified. It's a recognized veterinary standard for reducing stress and anxiety in patients. That certification reflects real investment in training the whole team, and it matters twice over. It supports better clinical outcomes and builds a level of trust with clients that keep them coming back and referring to others. And alongside the clinical investment sits the commercial benefit every practice gains on joining us. Group buying power on drugs and consumables that deliver significant leverage in gross margin. This practice shows what that combination produces with clinical excellence driving revenues and group scale protecting the margin on every dollar of it. The results follow. Revenue has grown by around 18% since acquisition. EBITDA margin has improved by around 990 basis points, reflecting a healthy, sustainable business built on that clinical foundation. This investment has an IRR, again, of pre-synergies of 14%, an expected payback period of 10 years based upon our current projections and an expected 3- to 5-year return on capital employed of between 19% and 23%.

Thanks, Ben. So there's a lot of information on this slide. The vertical axis on the chart is ROCE, return on capital employed. And the horizontal axis is time in years. The line on the chart represents what ROCE would have been over time based on a conservative IRR of 12%, which is above our weighted average cost of capital. You can see ROCE starts off low and increases over time. The bars represent the ROCE performance for acquisitions in that cohort. So the first bar is the ROCE performance for acquisitions we've held for 1 year, so acquisitions we made in 2025. The bar is above the IRR line, so we're overperforming. The final bar represents the ROCE performance for acquisitions we've held for 7 years, so acquisitions that we made in 2019. Again, the bar is significantly this time above the IRR line, so we're overperforming. Over the past 7 years, acquisitions in total are performing significantly above conservative IRR of 12%. For our Australian acquisitions, which does not currently include synergies in the business case, but we do expect synergies to add up to 3 percentage points on IRR. If we were to include exit assumptions as might be considered by, say, private equity, IRRs would potentially be significantly higher. I said earlier that Australia represents both a significant and exciting runway, and I've tried to illustrate the size of the potential opportunity on this slide. In Australia, there are circa 3,600 practice sites, albeit given the size of Australia, many of these are in more rural areas. Our focus is in metro areas where there are significant populations of people and hence, a significant number of both pets and vets. Circa 1,440 practices will fall into metro areas. Of these, about 80% are in private ownership, which represents 1,152 independent practice sites. And our experience is that roughly 40% will end up in an offer, which represents 461 practice sites. And at a win rate of 50%, would represent 230 sites and at an average EBITDA per site of GBP 0.4 million would represent a potential EBITDA opportunity of circa GBP 90 million. Importantly, as we grow, our criteria can also evolve. We have turned away more deals than we've gone ahead with, some because we felt they were slightly too small and some where the practice facilities needed improvement. The majority of these remain in private ownership, and we have continued our dialogue with the vendors. Some of these will become attractive to us once they've reached the scale or once their facilities have been improved. If we include practices we already own, potential market growth -- and potential market growth, the Australia business can conservatively deliver between GBP 105 million and GBP 135 million EBITDA in time. Hence, our target addressable market in Australia is significant. And I can easily see CVS Australia being as big as our U.K. business. We will continue to take a disciplined approach to acquisitions, both in Australia and in the U.K. and have a strong pipeline of Australian acquisition opportunities, and I look forward to completing further deals in due course. I will now ask Paul to join me on stage to discuss our disciplined approach to capital expenditure.

Thanks, Robin. So alongside our focus on acquisitions to drive inorganic growth, we also recognize the opportunity to drive organic growth through capital investment. And this growth capital investment, whether in facilities, clinical equipment or technology is focused on delivering increased revenue and enhanced margins. Where it makes financial sense, and we are confident in the returns we are likely to generate, this growth capital investment brings an added advantage of increasing the engagement and productivity of our clinical teams. And over the past few years, we've consciously invested in 3 key areas. Firstly, we've improved our practice property and facilities through refurbishments and in some cases, relocations. Back in November 2022, we held a Capital Markets Day, in which we shared the bell curve distribution of our practice margins. And we said that this was closely correlated with the quality of the practices. And we've invested over the past 4 years to improve the average quality of our practices, and this brings increased capacity and the ability to provide better clinical care. Secondly, we've invested in our clinical equipment to drive revenues and margins. And as Chief Veterinary Officer, I can clearly see the clinical benefits from investing in new kit. However, I must stress that we only invest where we believe that financial returns merit it. We don't invest in shiny new clinical equipment simply to help engage our clinicians. And I'd expect all of my clinical colleagues to fully understand that the investment is only possible where expected financial returns support it. Thirdly, we've consciously invested in our IT and technology. This includes our new cloud-based practice management system, but we've also invested in our websites and our client experience. I'll expand on each of these 3 areas shortly. Before I do, I also need to explain that there's a certain level of maintenance capital expenditure, which we have to incur. This is the minimum investment that we're committed to in order to maintain our existing facilities, and we expect this to be circa GBP 12 million per annum. Any capital investment in excess of this is a conscious investment decision. And although I recognize that some growth capital expenditure may also bring a maintenance benefit. At the November '22 Capital Markets Day, we set out guidance that our annual capital expenditure, including this essential maintenance CapEx was likely to be between GBP 30 million to GBP 50 million per annum. This was due to the portfolio of practices that we've inherited, and we have made really good progress in improving our facilities over the past few years. We now expect that capital investment to be no greater than GBP 30 million over the coming years with each individual investment needing to generate sufficient returns. So I'll now discuss each of these investment areas in turn, starting with investment in facilities. This investment in our practice sites has been targeted with priority given to those sites that we believe have growth opportunities and where improving the client front-of-house experience and expanding our clinical capability will lead to good financial returns. We consciously invested in a limited number of property refurbishments and relocations as a result of this. More recently, we focused on improving a larger number of sites through modest investment at each. And as shown in the chart on the top right of this slide, I'm pleased to report that we've seen an improvement in the RAG rating of our practices from this investment. Importantly, the chart below shows that we've also seen an improvement in our client Net Promoter Score. Whether for property investment or other growth CapEx, our approach to assessing capital expenditure is similar to that for acquisitions, which Robin explained earlier. Our operational teams will consider opportunities for investment and where considered appropriate and where the expected financial returns are considered attractive by finance business partners, these opportunities are worked up into capital expenditure business cases. These business cases would include an overview of the proposed investment, the upfront capital expenditure and any ongoing operational costs or savings as a result, the revenue and margin upside expected, the implementation plan and timing, detailed financials showing the upfront and any ongoing investment, the revenue and margin upside, resulting cash flow -- projected cash flows, net of taxation, the overall payback period, IRR, ROCE and return on invested capital and business cases for capital investment above GBP 100,000 are presented to the capital expenditure committee, which comprises myself, Richard and Robin, the CEO and CFO, respectively, and the relevant operational property, IT and finance team members. Any approved capital projects are then allocated a CapEx number so that investment and returns can be appropriately tracked. We also then undertake post-investment appraisal, which Robin will discuss later. So this is an example of one of our property relocations, Maison Dieu. It's a practice in Dover in the southeast of the U.K. We previously operated this from a former residential property. We saw a really good growth opportunity in the area and invested circa GBP 1 million in relocating it to a new facility with 2 additional consulting rooms and an additional operating theater, which we opened 2 years ago. We've seen a steady growth in revenue and gross margin in that period and notwithstanding increased employment costs, EBITDA has increased. This investment is expected to have a 10-year payback period and to generate an internal rate of return of 14% and a 3- to 5-year return on capital employed of between 13% and 17%. And another example of a practice relocation is Ruddington, a practice in Nottingham in the center of the U.K., which again was housed in a former residential property with limited parking. We invested just under GBP 1 million in relocating this practice to a facility -- a new facility, which opened in the winter of 2022. Again, we expanded the capacity of the practice through adding 2 consulting rooms and an additional operating theater. And as for Maison Dieu, we saw an increase in both revenue and EBITDA post the investment, and we expect a 7-year payback for this investment with an internal rate of return of 21% and a 3- to 5-year return on capital employed of up to 39%. Both of these relocations have delivered enhanced revenue and EBITDA. And given the challenges that we faced in the past 3 years through the CMA process, weaker consumer confidence and significant inflationary pressures and the global macroeconomic and political uncertainty, these returns may not be as strong today as we forecast, but they are still expected to be accretive.

Thanks, Paul. So this chart is similar to the one I shared earlier on acquisitions. The vertical axis on the chart, again, is return on capital employed and the horizontal axis, again, is time in years. And the line on the chart represents what return on capital employed would be over time based on a conservative IRR of 15% for CapEx, which again is above our weighted average cost of capital. And again, you can see ROCE starts off low and increases over time. And again, the bars represent the return on capital performance for CapEx investments in that cohort, and we pick out renovations and relocations. So the first bar is the return on capital employed performance for capital investments we have benefited from for 1 year, so capital investments made in 2025. The final bar represents the return on capital employed performance for capital investments we have benefited from for 5 years from capital investments made in 2021. When we expand facilities, it can take time for us to grow our customer list and realize the full value. However, we do see a gradual improvement in revenue and EBITDA over time, and we typically expect an IRR of greater than 15%.

The second focus of our investment CapEx is clinical equipment to drive improved client service and patient outcomes, which in turn drives enhanced revenue and EBITDA. The 2 examples are dental X-ray machines and CT scanners. Back in 2021, we had 82 practices with dental x-ray machines, and these are really important in enabling vets to provide a full range of dental services, which are increasingly demanded by clients. Through investing in more dental x-ray machines, we have more than doubled our revenues from dental procedures. And as Ben flagged earlier, we still have some way to go before we achieve the preventative dental revenues, which are being generated by our Australia practices. And we've almost doubled the number of CT machines across our practice estate. As a specialist myself in Internal Medicine, I recognize the importance of highly detailed cross-sectional 3-dimensional images and clearer images than can be obtained from X-ray alone. I personally could not provide my specialist services without one of these. However, these are more expensive pieces of equipment, and it would never be appropriate for each first opinion practice to have their own CT. However, we have installed CT machines in selected practices where they're performing more advanced clinical work and where their use can be shared by other practices in the region. And this has led to an almost 50% increase in imaging revenue to date. Across all of our investments in clinical equipment, we've generated good returns with payback averaging 5 years, an internal rate of return of over 20% and a return on capital employed of over 30% by year 3. The third area of our capital investment is in technology. As a vet, I'm proud of the profession and the clinical care that my fellow clinicians consistently provide to the animals under our care. And we've always put animals first, and we've seen ourselves as a service for them. However, I recognize that we may not always have focused on the service that accompanies that for the client. As Chief Veterinary Officer, I'm encouraging all of our clinical teams to focus on providing contextualized care to our clients and their animals, so the needs of all parties are properly reflected in the choices presented to our clients and the care that we ultimately provide to their animals. As part of this enhanced client focus, we are consciously investing in our technology to improve the ease in which our customers can engage with us. And this is expected to drive both enhanced customer experience as well as efficiency savings for CVS. Our cloud-based practice management system is the foundation for this and all our U.K. vets working in our companion animal practices and referral hospitals have access to all clinical records of every pet under our care. This brings a significant benefit. For example, again, as a specialist vet, for any CVS client whose animal is referred to me, I can see the full clinical history. I no longer have to rely on the first opinion practice e-mailing records or in the case of an emergency, the client having to provide their own version. This undoubtedly leads to improved patient outcomes. And the cloud-based nature of this system and the open API interfaces mean that we're now able to add additional features to drive a better client experience. We launched online booking across all our U.K. companion animal practices over a year ago, and we've been trialing an AI scribing tool to enhance the client experience and also to improve efficiency for our vets. We've got a number of features, additional features in development or trial, including the ability for 2-way client conversations via an app. And our aim is for all clients to be able to access our services and to receive reminders via their phones, including the ability to pay for services. And on the subject of phones, as a CVS vet, I already have access to, if I can find it, a range of clinical services, resources, and information at the tap of a button, and maybe I'll show you this later on, but we provide our colleagues with an app called MiGuide, which provides them access to all of the clinical guidelines at the click of a button. I genuinely believe that our vets have the best training development and clinical support of any in the profession. And I'm confident that the investment that we have made over the past few years positions CVS incredibly well for future growth. I look forward to sharing further details in future updates. But for now, I'll hand back to Robin.

Thanks, Paul. So one key area of focus has been improving the look and feel of our online retail business, Animed Direct. Whilst our previous website was functional, we recognize that the user experience fell short of expectations, and hence, we have consciously invested in the new website and functionality. So this chart depicts my own recent buying journey on Animed Direct. At the start of the journey, I landed on our new refreshed website. It's quicker, it's more secure than our old one, and we know that a quicker website drives higher conversion rates. We've also improved our taxonomy and search. So I was able to find the product I wanted quickly. And when trying to place a product in the basket, I was clearly offered a Subscribe & Go option. What we do know is that if someone is coming to buy pet food, they will need another bag of pet food in the future. Subscribe & Go makes up a relatively small part of our revenue, and there is potential for significant growth in repeat orders. I decided I only wanted one bag of pet food. And when I placed my product in the basket, I was offered relevant cross-sell options, which was not always the case. So that was good. I then went to checkout, and I was offered a guest checkout option. This option has only recently launched, where previously you would have had to either register or remember your log-in details, both of which are potential barriers to completion. Guest checkout clearly will not be available for prescription medicines because we need to have details of the pet and sites of the prescription in order to dispense. In the checkout, for an additional fee, I was offered next-day delivery, which was only introduced in the last month. Our distribution center in Diss is now operating 7 days a week at minimal incremental cost. And then when I went to pay, I was offered Apple Pay and Google Pay, which were new payment options, which made it incredibly easy for me to transact. And hey, presto, the next day, I had a bag of pet food delivered to my door for very little effort. These enhancements have helped significantly improve the performance of Animed Direct in the second half of the financial year just gone, and I look forward to sharing further details of this in our annual report, and there is still more to come. To summarize, this slide highlights group return on capital employed over the past 8 years. There's clearly been some factors that put pressure on ROCE over this period. In the latter years, we've seen weaker like-for-like, high inflation, but also the initial dilutive impact of CapEx and acquisitions. That said, given the characteristics of the market we operate in and the characteristics of the growth opportunities we have, I'd expect ROCE to gradually improve over time. I'll now hand back to Richard for some closing remarks.

Thank you, Robin. The investments which Robin, Ben, and Paul have discussed position CVS well for future growth. CVS has consistently delivered like-for-like growth of 6% through economic cycles, and margins have been maintained despite the inflationary pressures we have seen in recent years. We have an opportunity to enhance margins further through acquisitions and the scale advantages which flow from them. We have a healthy balance sheet, and we benefit from high operating cash conversion from our predictable and recurring revenue streams. Our ability to deliver compound returns through acquisitions is evident through our recent growth in Australia and selective investment in facilities, equipment, and technology can enhance those returns through supporting inorganic growth. And the returns from this investment are enhanced over time, and we are targeting high teens returns on all capital employed. And our balance sheet strength and cash generation mean that we have options under our clear capital allocation priorities. The attractiveness of each option is clearly somewhat dependent on our prevailing share price. And I hope we see a re-rating of our valuation over time. I would like to close this presentation with a brief recap. We operate in a large and attractive veterinary market, which has strong fundamentals and where I expect AI to be an enabler to improve operational margins over time. There will ultimately always be a need for vets to physically examine and treat animals. And hence, I do not see a significant threat from AI. We have delivered consistent growth across a number of periods. EBITDA margins have been maintained despite inflationary headwinds. We have a disciplined approach to capital allocation, a healthy balance sheet and capital to deploy, and we have a history of delivering accretive returns. Our target addressable markets in the U.K. and Australia are large, and we are confident in our ability to generate accretive returns from further acquisitions. We have strengthened our operations and have built a platform for growth. And we have all the characteristics of a growth compounder. Our valuation remains significantly below pre-CMA levels, and I firmly believe now is a great time to invest in this sector and in CVS. Thank you. So I'd now like to open this session to analyst questions. And feel free to take Paul up on his offer earlier and challenge him to think of an obscure breed and test his clinical knowledge. But if I could ask my colleagues to come back on stage, and we'll open the session for analyst questions. Charles?

Thanks, Richard. Lots to get through there. Thanks for that info. I think the standout for me was the scale of opportunity in Australia, which looks a lot bigger than we've discussed in the past. Do you want to just talk through why the scope of the increase has been so great? Is that because you expect to make more acquisitions? Or you think that the like-for-like growth will be higher or percentages will be higher or a combination of all of those?

Yes. I think it's a combination of all. We are very pleased with our entry, delighted to have Ben on board as well and leading our operations in Australia. We've seen good performance from the practices we've acquired, but we have been selective as we talked through earlier. We, as Robin said, have turned away more deals than we've gone ahead with. And a number of those smaller deals or those practices with facilities that just need some improvement. We are in dialogue still with those potential vendors, and we expect some of those will return to us as opportunities. I also think as we build more scale in the regions we are already operating in, that allows us to kind of add bolt-on acquisitions that make more sense once we've got scales in operating regions. The market is significant, and we are at an early stage of consolidation. And I think, Ben, you described it as probably a bit like the U.K. market maybe 10 years ago. So there's plenty of opportunity for growth. And maybe you can touch on the opportunity for synergies and what we're seeing already and also the like-for-like growth we're achieving.

Yes. So from a like-for-like position, we're actually really pleased with what we're seeing. A lot of that like-for-like growth is actually coming from the disciplined acquisition approach that we are taking. Now I spoke around clinical depth really drives growth and revenue growth. And because we've been disciplined in that acquisition and the types of clinics that we have been acquiring, it has been a really, really positive trend from a like-to-like position. I think not only that, the Australian economy is reasonably resilient. And I think that it's the 2 bases. The first is we have one of the largest pension funds in the world, and that is used as a vehicle to stimulate the economy. Second to that is that our mining and minerals aspect is also quite supportive. So we do -- we're not immune to, obviously, the global macroeconomic conditions, but we do find that we are somewhat more resilient. I think from a synergies perspective that Richard spoke about, that's only going to get greater as we continue to add acquisitional growth in. I touched on the gross margin aspect earlier where we see that more and more acquisitional growth that we are having with local suppliers, the heavier or the larger the leverage capability that we have to gain more synergies and better buying power within those aspects. Equally, just from an employment position and a support office position, we have the likes of our IT functions as well as areas such as accounts payable, if you will, where it does not make sense to have local delivery when we can leverage a lot of our U.K. colleagues and the functions that are already built.

The size of the opportunity has always been there. I think we have increasing confidence given our experience of both the acquisitions, the process and the post-investment analysis that we've carried out. It makes it a bit easier for us to then quantify the size of the opportunity. But the opportunity -- I mean, it's one of the reasons why we entered that market because there was a large opportunity for us to potentially benefit from.

And that like-for-like growth that you're still targeting of 4% to 8%, where would Australia fit into that target then?

Australia is performing well. We haven't actually given a like-for-like number for Australia, but it's performing well.

And Robin, the -- you talked about buying the practice at roughly 6x EBITDA. I think we've previously talked about 6x to 8x. Can you just be clear, is that including the contingency consideration?

So the multiple ranges probably just under 6x up to close to 7x over 3 years. But on average, it's a 6x EBITDA multiple. So it starts off slightly lower as you have the deferred contingent consideration that you referred to that we pay typically over 2 years. And just as a reminder for everyone, we value Australia acquisitions. We have a valuation for the enterprise value. We then pay 80%, often as 80 -- 70% to 80% upfront and then we defer a proportion over a period of time. For us, that's important because it's a good retention tool for the vendor. It allows us to establish ourselves within the practice. And also, we hope that the vendors will stay, but if they don't, it allows us to manage succession. So it's an important part of how we acquire practices. So 20%, 30% deferred. And if they hit certain profitability gateways, then that deferred gets paid out. If they don't, it doesn't get paid out. So it starts off at 6x as an average over the 3 years, including the deferred.

And has that come down? Or you just got a larger number of contributors to that?

I think it will depend on the type of practice that we acquire. I think when we initially entered the Australian market, we purposely focused on the really premium assets. And we probably, given that we were new to the market, had to pay slightly higher multiples. I think as we establish our reputation in Australia, we have seen some improvement in terms of what we need to pay from a valuation's perspective. Having said that, for strategically important assets, the multiple may be slightly higher, but it has slowly improved over time.

One last question. Could you just comment about competition for acquisitions in Australia?

Yes. And Ben, please expand. We knew when we entered the market, there were 2 established large consolidators, a company called VetPartners, Ben knows very well, having worked there, currently owned by EQT, previously owned by JAB Holding. They're the largest consolidator in Australia with just -- well, about 270 perhaps I believe. They -- under new ownership, I think EQT acquired them in the last 18 months. They are acquisitive, more focused on New Zealand at the moment than Australia, but we expect them to provide some competition for assets. The other large established consolidator is Greencross, currently owned by TPG. You may have seen there were rumors that TPG were going to sell to Coles. That sale, I feel -- I understand it fell through at the weekend. They have about 170, 180 sites. And then Ben, there's 1 or 2 smaller consolidators in Australia, such as Vets Central.

Yes, that's correct. So Vets Central is supported by Pemba Capital. It is a smaller fund and has been focused on assets that are really more regional based as opposed to metro based. So from a competitive tension positioning, I think our reputation from being from -- in the U.K. and having such a large footprint in the U.K., we actually have vendors seeking us out. And when it comes to a competitive tension position, there are cultural elements that our vendors actually choose us over our competitors because of the way in which we go about how we operate and the clinical offering that we do support.

Charles, you have your hand up.

Charles Weston from RBC. A couple of questions from me, please. First of all, I appreciate this has been quite high level and strategic. But if I can have one question on the trading statement. The net debt number of GBP 199 million, I think it was, seems a little bit higher than I could figure out from the acquisitions and the buybacks and obviously, the EBITDA and the cash conversion. So I was just wondering if there have been any one-offs or working capital changes perhaps in the second half?

When I think about net debt for the year, we have delivered operating cash conversion of around just over 70%. We have seen an uptick in interest. I mean we have carried a higher net debt through the year. So our interest payments are slightly higher. And we have seen an uptick in our tax payments as well. Outside of that will be the -- well, it will be the investment -- CapEx investment, acquisition investment. We do have some exceptional costs that have gone through the P&L, largely in relation to the CMA and largely in relation to some of the CMA remedies. There will be an element within our cash flow relating to the deferred consideration that the other Charles just mentioned earlier. So that will come out. And then obviously, we've had our share buyback, which we completed a GBP 20 million share buyback that step-up, and then we announced a further GBP 50 million. So during the year, we've had a share buyback of over GBP 30 million.

Okay. Second question, it would be great to get an understanding of your expectation of, kind of, self-help contribution to like-for-likes versus consumer. You painted a picture where I think from -- I don't know, in 2027 or from 2027, there would be this sort of aim to get back to the 4% to 8% level. But clearly, you can't call consumer confidence return. So how much can you generate yourself, self-help investments, et cetera, organically like-for-like versus relying on the consumer to step back up?

Yes. And Charles, that's exactly how we're looking at things because as you say, we can't control the consumer confidence. We can't control the economic outlook, but we can influence things within our business. We are very focused on providing great clinical care but also recognize the need to be offering an improved client service and helping clients engage with us in a much more digital and frictionless way. We launched online booking just over a year ago across all of our U.K. companion animal practices. We have a common practice management system now, which is cloud-based, and that gives us a richness of data. And maybe Paul can talk about some of the data analysis we can do and segmentation we can now do. We are improving our marketing. We now have a joint brand across all of our U.K. practices. I guess that was somewhat forced upon us by the CMA process, but actually it does bring benefits to us because we now have CVS Vets plastered outside of the majority now of all of our U.K. animal practices and every one of our practices will be jointly branded, well, within a few weeks now. And that brings benefits because we now have a national brand. We can now do central marketing. We can do central CRM and drive kind of footfall back into practice ourselves. Pricing is also another factor, clearly. And as we've said previously, we have been more cautious on price changes over the past 3 years. Now we have CMA certainty. We have put price changes through this summer. We're not going to give you the number, but we have put higher prices through than we have done in the previous 3 years. But maybe, Paul, you can talk about some of the data capability we now have and the richness of data.

Maybe before I do that, I think probably just to come back to your question around the self-help. It's an oversimplification to consider preventative health care to be discretionary and health care providers in illness and injury to be fully nondiscretionary. There is certainly preventative health care that would be considered to be discretionary and there is an element of that work that we need to do to improve footfall around those discretionary spending. When a pet is ill or injured, much of the decisions that pet owners make, those discretionary decisions about whether to fix a fracture or to amputate, the examples I think I have given to lots of you in the past are based upon the confidence that we can give our clients about the outcomes, the quality of the work that we can do and the value that, that brings. And much of that is around communication rather than necessarily just price. And so there's a lot of work that we're currently doing about building our colleagues' confidence in how to communicate that. That's the contextualized care element. So there is -- just to sort of remind that there is -- when a pet is ill or injured, there is discretionary spend within that. And there's a lot we can do around improving that average transaction value, for example, through how our colleagues communicate and how we -- and the services that we can provide. And then in the background, now that we have Provet and we have all of that wealth of data, we can see, for example, the types of diseases that appear at certain ages in certain breeds, and we can start doing targeted marketing to clients who own a 10-year-old labrador or an age of -- we talk about those breeds we talked about earlier on. At what point would I want to definitely see a Cavalier King Charles Spaniel to do a cardiac check. I should be ideally reminding them that this would be maybe the most common time for a mitral valve disease to appear. And therefore, we'd want to see the physical examination, listen to the heart, and for a certain percentage of those, we're going to identify evidence of heart disease. And that drug I mentioned earlier on, pimobendan is a life-extending drug. So actually, it's a great opportunity to provide our clients with that. So I think the Provet provides us with much better access and ability to do targeted marketing, but also to provide clients with the opportunity to extend the health and welfare of their pet and live longer and healthier lives. And our clients love that and our colleagues love that opportunity as well.

And Ben mentioned earlier the extent of preventive dentistry that happens in Australia, and that's definitely something we are trying to learn from here in the U.K. and encouraging our colleagues to have -- well, to develop the skills to be able to provide that, but also hopefully then driving further footfall for more preventative dentistry for animals.

I can just add one additional comment. So I think Richard did -- he mentioned the fact we want to be more visible digitally, so it's increased marketing. I think some of the data is how do we use our data to also engage with clients that we do have to remind them of the value of visiting a vet practice and how do we encourage footfall. I think Paul also mentioned earlier that we launched our Healthy Pet Club Advanced product. So we've talked in the past about Healthy Pet Club preventative health care scheme. It's annual, pay monthly. You have your half-yearly checkups, vaccinations, flea and worming. But we've also recently launched Healthy Pet Club Advanced, which has been quite popular in that, that also includes unlimited consultations for those clients. And what we've seen is that if clients come in and they want to come in, they want cover for their animals and vets have hands on pets, then invariably, they'll have to diagnose issues and address them earlier. And I think that is another area where we will drive further footfall and revenue growth.

James Bayliss from Berenberg. Two questions, I think. You made comments about temporarily exceeding the 2x net debt-EBITDA leverage ceiling for attractive acquisitions. Not necessarily looking for numbers here, but given the nature of your presentation, everything looks relatively attractive in the first place. So is that a comment that you would be looking to see even more attractive attributes? Or is it more about where there's a certain kind of scale or geography? Or how do we think about that?

I guess what we recognize is we can't control the decision point when a vendor decides to sell. And therefore, acquisitions are sometimes like buses, three come along at once, et cetera. We are very confident in the ability to grow through acquisitions in Australia. We're also confident we will return to U.K. acquisitions at sensible multiples and Robin did talk about the multiples we might be willing to pay in the U.K., clearly linked to our own share price. So that comment was -- and also, we know that we delever quickly when we stop investing because we generate cash and we have good levels of operating cash conversion. So if in the short term, we had a number of deals coming along at once, we can see ourselves taking leverage slightly above 2x but knowing we will delever quite quickly. So that's what that point was about.

I think given our strong operating cash conversion, our expectations around capital investment, acquisition investment, we will -- and given our current share buyback program, we may see leverage increase up to 2x. We're not currently expecting it to exceed 2x. I think really, it's just a nod to flexibility. If something then happened that was super accretive that we were keen to do, then we just wanted to mention we are flexible in our approach.

And then the second question, if you look at everything you've shown on returns, Client Promoter Score, everything looks like it's validating the investments you're making in the facilities, the patient care practices. If we think about the rest of the market perhaps in the U.K. in terms of the capital constraints on the independent practices or even some of the larger guys with more full balance sheets, does that lead us to believe that all this should come together to suggest you take share because you're able to deliver a better experience and modernize and drive growth, I guess, for your growth CapEx more so than others? Or is that potentially quite unfair given we have seen market disruption in the short term?

Yes, it's a good question. And yes, it's a very competitive market in the U.K. We see strong competition in Australia as well. So we have to be delivering a great service to our clients and their animals. And we do pride ourselves on that. We have been competing hard for colleagues as well. And obviously, the need to recruit and retain and develop and train strong clinicians is at the heart of what we do. So with competition, obviously brings opportunity as well, and we are competing hard for clients, for vets and nurses and we are competing for acquisition opportunities as well, probably less competition just now than we've seen in the past, and we do need to reset seller expectations as to what multiples they can achieve. But we are having conversations. We are hoping to complete some acquisitions this financial year. Nothing concrete at the moment, which is clearly why we haven't disclosed anything, but we will compete hard and continue to do so. Seb has been very patient. So do you want to come to Seb first?

Thanks, Richard. I knew if I waved my hand enough, I'd get somewhere. Seb Jantet from Panmure Liberum. So just first question, if I can take you back to Slide 14, where you set out the relative sizes of the market. And it always kind of struck me that if you look at the pet population in the U.K., 37 million and Australia is 32 million, it's about a 15% difference. And yet you're saying the veterinary market size in the U.K. is GBP 6.7 billion and the veterinary market in Australia is GBP 3.3 billion. So why is it half the size for only a 15% pet population difference?

Robin, you kick off.

I was just going to say there are -- I mean they are survey data points, and we've included the survey data that we've included on there. I think one of those populations may also include a volume of birds, for example, that we may not count in the other. So I think whilst Australia has a higher pet propensity, and I'm sure Ben will talk about that. It's not quite correlative, I would say, to market size, not fully anyway.

I think my only other comments to that is Australia has one of the most highest pet populations per capita in the world. I was speaking the other day, myself have 3 animals, my next-door neighbor has 2. We are very humanized. We bring our pets into our families as humanization sort of continues. In terms of that specific question from a density, I would echo Robin's comments that you do have quite a variety of pets within Australia, and you have things from exotics, so snakes, birds, et cetera, but there is a high proportion of companion animal in there as well.