December 2016 1 DISCLAIMER This presentation has been prepared, - - PowerPoint PPT Presentation

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December 2016 1 DISCLAIMER This presentation has been prepared, - - PowerPoint PPT Presentation

December 2016 1 DISCLAIMER This presentation has been prepared, issued and disclosed to you for the sole purpose of introducing Premier Veterinary Group plc (the "Company") and its group (together, the "Group"). For the


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December 2016

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DISCLAIMER

This presentation has been prepared, issued and disclosed to you for the sole purpose of introducing Premier Veterinary Group plc (the "Company") and its group (together, the "Group"). For the purposes of this notice, "presentation" means this document, its contents or any part of it, any oral presentation, any question or answer session and any written or oral material discussed or distributed during the presentation. This presentation does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities in the Company, nor shall any part of it nor the fact of its distribution form part of or be relied on in connection with any contract or investment decision relating thereto, nor does it constitute a recommendation regarding the securities of the Company. This presentation has not been independently verified, does not purport to contain all information that a prospective investor may require and is subject to updating, revision and amending. The information and opinions contained in this presentation are provided as at the date of this presentation and are subject to change without notice. In furnishing this presentation, the Company does not undertake or agree to any obligation to provide you with access to any additional information or to update this presentation or to correct any inaccuracies in, or omissions from, this presentation that may become apparent. You should make your

  • wn independent evaluation of the Company and should make such other investigations as you deem necessary.

No reliance may be placed for any purposes whatsoever on the information or opinions contained in this presentation or on its completeness. No representation or warranty, express or implied, is given by or on behalf of the Company its directors, officers or employees or any other person as to the accuracy or completeness of the information or opinions contained in this presentation and no liability whatsoever is accepted by the Company or any of its members, directors, officers or employees nor any other person for any loss howsoever arising, directly or indirectly, from any use of such information or opinions or otherwise arising in connection therewith. The presentation may not be recorded, reproduced, stored in a retrieval system, or transmitted, in any form or by any means to any other person (whether within or

  • utside such person’s organisation or firm) without prior permission in writing from the Company. This presentation and its contents are confidential and may not be

reproduced, redistributed or passed on, directly or indirectly, to any other person or published, in whole or in part, for any purpose. In member states of the European Economic Area ("EEA") this presentation is only addressed to and directed at persons who are qualified investors within the meaning of Article 2(1)(e) of the Prospectus Directive (Directive 2003/71/EC), as amended ("Qualified Investors"). In addition, in the United Kingdom, this presentation is addressed and directed only at Qualified Investors who (i) are persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order"), (ii) are persons who are high net worth entities falling within Article 49(2)(a) to (d) of the Order, and (iii) to persons to whom it may otherwise be lawful to communicate it to (all such persons being referred to as "Relevant Persons"). Nothing in this presentation constitutes investment advice.

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DISCLAIMER (cont’d)

The Company's securities have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the "Securities Act"), or qualified for sale under the law of any state or jurisdiction of the United States of America and may not be offered or sold in the United States of America except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Neither the United States Securities and Exchange Commission nor any securities regulatory body of any state or other jurisdiction of the Unites States of America, nor any securities regulatory body of any other country or political subdivision thereof, has approved or disapproved of this presentation or the securities discussed herein or passed on the accuracy or adequacy of the contents of this presentation. Any representation to the contrary is unlawful. Certain statements, beliefs and opinions in this presentation are "forward-looking statements". These statements, which may be preceded by, followed by or include forward-looking terminology such as the words "targets", "believes", "estimates", "expects", "aims", "intends", "will", "can", "may", "anticipates", "would", "should", "could" or similar expressions or the negative thereof reflect the Company's, or as appropriate, the Company's directors' current expectations and projections about future events. Such forward-looking statements involve inherent known and unknown risks, uncertainties and other important factors beyond the Group’s control that could cause the actual results, performance or achievements of the Group to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Group’s present and future business strategies and the environment in which the Group will operate in the future. Forward-looking statements contained in this presentation regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. These forward-looking statements speak

  • nly as of their date and the Group and its directors, officers, employees, agents, affiliates and advisers expressly disclaims any obligation or undertaking to

supplement, amend, update or revise any of the forward-looking statements contained in this presentation to reflect any change in the Group’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based, except where it would be required to do so under applicable law. As a result of these factors, you are cautioned not to place undue reliance on such forward-looking statements. By attending the presentation to which this presentation relates, you agree to be bound by the foregoing limitations and conditions and, in particular, will be deemed to have represented, warranted and undertaken that (i) if you are in the United Kingdom, you are a Relevant Person, (ii) if you are in any member state of the EEA other than the United Kingdom, you are a Qualified Investor, (iii) you have read and agree to comply with the contents of this notice, including, without limitation, the obligation to keep this presentation and its contents confidential, and (iv) you will not at any time have any discussion, correspondence or contact concerning the information in this presentation with any director, officer, employee or agent of the Company nor with any of its suppliers, nor any governmental or regulatory body, without the prior written consent of the Company. The contents of this presentation should not be construed as legal, tax, regulatory, financial or accounting advice and you are urged to consult your own advisers in respect of such matters.

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  • 22% increase in contracted clinics to 1,076 (2015: 880)
  • 33% increase in Group revenues to £2.99m (2015: £2.25m)
  • 75% increase in global revenues from Premier Pet Care Plan to £1.87m (2015:

£1.07m)

  • 70% increase in global pets on plan to 139,000 (2015: 82,000)
  • 53% increase in UK pets on plan to 121,000 (2015: 79,000)
  • 77% increase in global transactions processed to 1,402,000 (2015: 794,000)
  • £1.1m stable revenue generation from Premier Buying Group (2015: £1.2m)

Highlights for year ended 30 September 2016

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  • Sticky and diverse customer base
  • Recurring revenue stream with compounding growth
  • Bespoke scalable IT platform underpinning international operations
  • No bad debt exposure
  • PVG are creating a global market
  • An aggressive growth opportunity underpinned by cooperation

agreements (Zoetis, MVS, VPI)

Business fundamentals

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  • Strategy reset to focus on Premier Pet Care plan and Buying group in December 2015
  • Sale of veterinary businesses December 2015 for total consideration of £6.5m
  • Appointment of Juliet Thompson as Chairman, April 2016
  • US expansion commenced May 2016
  • Major agreements signed in US in June 2016:
  • Veterinary Products, Inc. ("VPI") with 600 hospitals , announced June 2016
  • Merritt Veterinary Supplies Inc. (“MVS”), distributor with 9,000 member hospitals, announced
  • Europe building on Netherlands model with operations started in France, Germany and re-launch in Denmark
  • Major agreements signed in Europe to support growth:
  • Zoetis collaboration agreement in Netherlands
  • Additional collaboration agreement signed with a major global pharmaceutical company in Netherlands
  • Medivet contract extension
  • 3 year contract extension with Medivet Group Limited, one of the UK’s largest veterinary groups. Medivet currently has
  • ver 143 clinics across the UK with further growth plans
  • Loan note issue of £1.25m generating funding to drive expansion in all markets

Recent news

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Premier Pet Care Plan

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What are Preventative Health Plans?

  • A structured monthly payment scheme for cats, dogs and rabbits covering many of the fixed

cost, non-insurable items exclusive to veterinary practices

  • Delivers gold standard care to the pet at an affordable price
  • Delivers for the practice, significant improvements in contracted revenue, cash flow, clients,

footfall and loyalty from clients

  • PVG collects direct debit fee per pet per month plus set up fee per new pet plus practice set up

fee plus manufacturer support fees Typically included in the plan would be:

  • Annual booster
  • 2 consultations with the Vet
  • 12 months Flea/tick control
  • 12 months worm control

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Benefits of the plan

  • Significantly improved sales due to increased compliance
  • Bringing new value added business services to the practices
  • Brand reinforcement to new and existing clients
  • Improved accuracy in sales forecasting

Guaranteed monthly revenue Improved client retentions Attract new clients Improved cash flow Costs spread evenly over 12 months Gold standard health plan

Manufacturer/ Distributor/ Wholesaler

Practice The Client

Loyalty discounts on additional purchases Value for money on premium products

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PCP 100% compliance, higher sales

  • Assuming 150,000 pets on plan
  • Compliance for non PCP pets is approximately:
  • 1.2 wormers per annum (full compliance 4)
  • 3.9 flea/tick pipettes per annum (full

compliance 12)

  • 213% increase in product sales for every pet on

plan

  • PCP compliance rates are a clear benefit to

wholesalers and manufacturers as well as ensuring best care for pets

180,000 585,000 600,000 1,800,000 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 1,800,000 2,000,000 Worming products Flea products

  • No. of

products

Annual Product Sales (based on 150,000 pets on plan)

Normal PCP (full compliance) 10

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Global IT platform

  • Modular system

architecture

  • Common customer portal

interfaces with multiple payment processing methodologies

  • Portal interface to “best in

class” off-the-shelf processing systems

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Global PCP Web Portal

GoToBilling Credit Card Gateway

WorldPay

Payment Processing Systems

Customer interface & Data capture BACS Active

FundTech

BACS Clearing SEPA Clearing

Denmark Clearing

Citizen Bank

3rd party platforms

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Quarterly collection statistics – UK and Europe

  • 401,000 transactions in Q3

2016 (equivalent to 1.60m annual transactions)

  • Customer spend of £5.8m

in Q3 2016 (equivalent to £23.2 annualised spend)

  • Generates sticky revenues

for PVG

  • 70% increase in pets on

plan in last financial year

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£0 £1,000,000 £2,000,000 £3,000,000 £4,000,000 £5,000,000 £6,000,000 £7,000,000 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016

  • 50,000

100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000

Value of payments processed Number of payments processed

Gross cash value £ Transaction processed

Pets on plan # of fee generating pets on plan Live pets 000s Sept - 15 Dec - 15 Mar - 15 Jun-16 Sep-16 25 Nov 16 UK 79 99 107 115 121 132 Europe 3 5 10 14 18 20 US

  • 1

Total 82 104 117 119 139 153

Calendar Quarters

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Global Clinic relationships

13 1076 291 378 901 701

  • 200

400 600 800 1,000 1,200 PVG IVC (UK) CVS (UK) Banfield (US) VCA (US)

  • NO. OF CLINICS

Global Clinic Relationships (30 September 2016)

  • Number of relationships

with clinics held by PVG greater than other significant industry players

  • Important influence when

negotiating with pharmaceutical manufacturers and wholesalers/distributors

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Diverse customer base

  • Total of 258 contracts with

practices in the UK and Europe*

  • Group has limited exposure

to large corporate veterinary practices – reducing risk of revenue fluctuation from corporate acquisition activity

  • Only Medivet, the Group’s

largest customer practice, has over 10,000 pets on plan

  • Vast majority of practices

have less than 1,000 pets on plan

147 56 35 11 6 2 1 20 40 60 80 100 120 140 160 Less than 250 Between 250 and 500 Between 500 and 1000 Between 1000 and 2000 Between 2000 and 5000 Between 5000 and 10000 Greater than 10000

Number of practices Number of Pets on plan

14 *Practices represent the contractual relationship. One practice may have multiple clinics

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Loyal customer base – practices

  • Over last 5 years 159 practices joined PPCP

(each with multiple clinics), only 8 practices have left (excluding consolidation activity)

  • Once the practice has joined this gives long

term access to increase the number of Pets on plan for that practice

  • Pet “churn” is low at long run rate of ~1.8%

(detail in Appendix)

15 Customer retention analysis Leavers since PPCP start up * 2011 2012 2013 2014 2015 2016 Number of practices left in the year

  • 3

2 3 % of total practices N/A N/A N/A 2.7% 1.4% 1.8% * Excludes practices leaving following acquisition

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Market opportunities

16 Market data UK Neth Germany France Denmark USA Population 64m 17m 81m 66m 5.5m 319m Households 26m 7.4m 41m 26m 2.6m 123m Dog population 8.5m 1.6m 5.3m 7.4m 0.6 70m Dog ownership households 24% 19% 13% 21% 21% 36% Cat population 8.5m 2.6m 8.2m 11.4m 0.5m 74m Cat owner households 19% 26% 16% 27% 18% 30%

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Addressable market - UK

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5% 7% 1% 7% 1% 3% 7% 69%

UK Market Share/Opportunity IVC CVS Goddards Vets4Pets Best Friends Medivet Pet Care Plan PVA Pet Care Plan Market Opportunity

  • UK market for PPCP is

better established than in US and Europe

  • PPCP does not just

serve independent sector - Medivet and Best Friends both use PPCP

  • A substantial market
  • pportunity remains
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Addressable market analysis – Europe

  • PPCP quickly established 12% market share in Netherlands
  • Exploring German and French market opportunities
  • French market has closer attributes to UK with distributors and buying groups

which may facilitate growth

  • Specifics of Danish market make it attractive. Whilst smaller the market can be

addressed quickly

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12% 88%

Netherlands Market Share/Opportunity PVA Pet Care Plan Market Opportunity

14% 86%

Germany Market Opportunity Pet Care Plan primary targets Remaining market opportunity

18% 82%

France Market Opportunity Pet Care Plan primary targets Remaining market opportunity

46% 54%

Denmark Market Opportunity Pet Care Plan primary targets Remaining market opportunity

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Addressable market analysis – the USA

  • Expansion in the US focussed on South Eastern states
  • As at 23 November, 58 practices signed contracts with 26

launched.

  • Seeking to replicate South Eastern model in other focussed

areas of the US.

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3% 2% 95%

USA Market Opportunity

Banfield VCA Market opportunity

Total small animal clinics – c26,500 (UK c4,800)

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Buying Group

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What is PVA Buying Group?

  • Delivers great savings to independent clinics by being part of a larger buying group
  • Creates more freedom and choice vis a vis suppliers and wholesaler
  • Allows access to additional products and services that will help the independent veterinary clinic best develop their

business

  • PVG earns a fee based on the level of rebate earned by its member clinics

The Buying Group has been successful because:

  • No change to the wholesaler relationship
  • Ability to opt in or out of deals
  • Suitable for small and large animal clinics
  • Provides 12 month saving analysis

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Financials

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Year ended 30 September Revenues £000s 2016 2015 % change PPCP – UK 1,606 1,034 55% PPCP – overseas 263 36 631% PPCP - total 1,869 1,070 75% Buying Group 1,120 1,184 (5%) Total 2,989 2,254 33%

Profit and Loss - revenues

  • Very strong revenue growth in PPCP both in UK and
  • verseas
  • No revenue from USA in 2016 results, launches in

late September generate revenues at start of 2017

  • Buying Group impacted by corporate consolidation

activity

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12 month extrapolated run rate September £000s 2016 PPCP – UK 1,800 PPCP – overseas 402 PPCP - total 2,202

  • Run rate revenues are measured by annualising the

latest month’s revenue

  • Run rate PPCP revenues of £2.2m based on

annualising September 2016 –18% up on the full year to September 2016

  • Given the very early stage of development in the US

expected US growth is not reflected in run rate numbers at all at this stage

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Profit and Loss – profits and EBITDA

  • Buying Group and PCP UK providing strong source
  • f profit to subsidise international expansion
  • Resource investment in IT and sales impacted

further profit improvement in PPCP UK

  • Significant cost base investment in overseas

markets

  • Finance expense reduced following repayment of

debt after veterinary business disposal

  • Profit on discontinued operation includes £162k

pre-disposal trading and £4,091k profit on disposal

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Year ended 30 September Profits £000s 2016 2015 % change PPCP – UK 409 349 17% PPCP – overseas (1,488) (518) (187%) PPCP - total (1,079) (169) Buying Group 766 931 (18%) Total segment operating profit (313) 762 Central unallocated costs (1,908) (1,493) Operating profit (2,221) (731) Finance expense (208) (861) Loss before and after tax from continuing operations (2,429) (1,592) Profit on discontinued operations 4,253 595 Profit/(loss) attributable to equity holders 1,824 (997) EBITDA before central costs (221) 856 EBITDA after central costs (2,129) (637)

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Balance sheet

  • Significantly strengthened balance sheet following

sale of veterinary businesses in December 2015

  • Investment in IT platform – both capitalised and

investment in ongoing team

  • No bad debt risk
  • Net cash position to pursue international expansion

strategy

  • Escrow balance of £1m, anticipated to be received

in December 2016 and 2nd tranche of loan note issue in January 2017

  • Capital restructure complete to restructure reserves

to remove historic Ark losses

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Year ended 30 September £000s 2016 2015 Non-current assets 446 330 Trade and other receivables 1,719 578 Trade and other payables (871) (896) Net working capital 848 (318) Cash 1,254 421 Debt (900) (2,870) Net cash/(debt) 354 (2,449) Net assets held for resale

  • 2,150

Deferred tax (10) (10) Net assets 1,638 (297)

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Cash flow

  • Significant investment in international and

IT capabilities impacting EBITDA

  • Ongoing capital investment in IT around

£250k per annum

  • Loan interest significantly reduced

following repayment of debt after disposal

  • f veterinary business
  • Headline initial disposal proceeds of £6.5m

reduced by £0.3m cash remaining in the disposed entities and £1m withheld in escrow.

  • £1m escrow release expected December

2016

26 Year ended 30 September £000s 2016 2015 £'000 £'000 EBITDA after central costs (2,129) (637) Net working capital movement (151) 843 Investment in IT and equipment (286) (248) Interest on loans and finance leases (208) (865) Free cash flow (2,774) (907) Net disposal proceeds 5,197 17 Discontinued activities 41 (190) Issue of share capital 97 1,197 Movement in net cash/(debt) 2,561 117 Opening net debt (2,207) (2,324) Closing net debt 354 (2,207) Net debt made up of; Cash 1,254 663 Debt (900) (2,870) 354 (2,207)

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  • Sticky and diverse customer base
  • Recurring revenue stream with compounding growth
  • Bespoke scalable IT platform underpinning international operations
  • No bad debt exposure
  • PVG are creating a global market
  • An aggressive growth opportunity underpinned by cooperation

agreements (Zoetis, MVS, VPI)

Business fundamentals

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Appendix – pet churn

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Loyal customer base – practices and pet owners

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0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0% Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nov-15 Feb-16

Average monthly atrrition (%) Month pet first came on plan

Attrition - monthly contract cancellation percentage

  • Graph shows average monthly attrition for

pets that came on plan in that month

  • Monthly churn of Pets on plan 1.8% -

reflects a significant number of “Put to Sleep” animals

  • Once established churn is very low. In first

three months, churn is higher due to “cooling off” period. This is not shown as distorts long term analysis.

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Thank you for your time

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