CVS Group (AIM:CVSG) and Pets at Home Group PLC (LSE:PETS) plunged on Thursday after the UK’s competition agency launched an investigation to find out whether customers are being given the best deal when it comes to caring for their four-legged friends.
Members of the public have welcomed the review, with some pet owners taking to X to express their desire for the industry reform.
“Yes prices are astronomical and need reducing,” one person on X said, while another added, “Absolutely disgraceful the prices they charge.”
Vet sector review
From the family Labrador to your first pet hamster, Britain loves pets, with nearly two-thirds of households in the UK owning a furry companion—a figure which has soared since Covid.
When a pet becomes sick it is not just fear for its welfare that can be extremely stressful for owners, sky-high veterinary fees can be stressful too.
“Consumers have no choice but to turn to vets when their beloved pet is sick or injured – often footing eye-watering bills in the process,” Sue Davies at Which? said.
Just an initial consultation with a vet can cost upward of £60, with emergency calls setting customers back around £200 on average and some surgeries charging more than £2,000 for an operation.
It’s no wonder the veterinary service industry in the UK is estimated to be worth more than £2 billion and with figures indicating prices are rising ahead of the rate of inflation, the Competition and Markets Authority (CMA) reckons it’s time to investigate.
“Caring for an ill pet can create real financial pressure, particularly alongside other cost of living concerns. It’s really important that people get clear information and pricing to help them make the right choices,” Sarah Cardell, the chief executive officer of the CMA, said in a statement online.
One of the leading reasons for the investigation is the consolidation in the industry. In 2013, 89% of practices were independent but by 2021 the figure had dropped to 45%, with some companies owning hundreds of practices.
Some practices do not make it clear to customers that they’re part of a wider group, which owns suppliers of other practices, with groups like Pets at Home and CVS owning large proportions of sites in the country.
Hoping to better understand the state of the industry, the CMA is set to speak with all those involved in the industry— including pet owners —to better understand the pricing of services, how medication is arranged and sold, whether customers are aware of chains operating and how emergency services operate.
A review of veterinary services in the UK has been launched over concerns that pet owners could be paying too much.
George Lusty from the Competition and Markets Authority spoke to #BBCBreakfast https://t.co/PYFXiRSzkm pic.twitter.com/znfHeFRRYm
— BBC Breakfast (@BBCBreakfast) September 7, 2023
Vets respond
CVS, the veterinary service provider, sunk more than 26% on the back of the investigation, but the listed firm is adamant it provides the best possible service for its customers and their patients.
In a company statement, the group said: “[CVS] has always sought to ensure its prices are appropriate and reflect fair value to our clients. Our pricing structures are set by clinicians to ensure these align with our purpose.”
Arguing that the spike in prices is a result of shortages of vets in the UK, the group said employment costs make up the largest part of its cost base, with prices increasing to reflect this and inflation.
CVS is worth over £1.1 billion Source Evening Standard
CVS saw pre-tax profits jump by 13.5% to £41.1 million in the first six months of the 2023 financial year, with underlying EBITDA margins lifting by 0.5 percentage points to reach 19.5%.
“For the likes of CVS Group (AIM:CVSG), whose main business model centres around buying up smaller clinics and vet groups, the announcement could have direct and profound implications for its operations,” Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown PLC (LSE:HL.) said.
“Until there’s further detail on the scope and consequences of the CMA’s findings, it’s tough to map exactly what this will mean for listed vet companies. A slower rate of acquisitions could dent CVS Group (AIM:CVSG)’s growth, and a crackdown on treatments and pricing could hurt margins across the sector. For now, it’s wait-and-see mode.”