Interim results presentation - Half year ended 31 March 2017 1 - - PowerPoint PPT Presentation

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Interim results presentation

• Half year ended 31 March 2017

DISCLAIMER

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. 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 own independent evaluation

• f the Company and should make such other investigations as you deem necessary.

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

• r 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. Certain statements, beliefs and opinions in this presentation are "forward-looking statements". These statements reflect the Company's, or as appropriate, the Company's directors' current expectations and projections about future events. Such forward-looking statements involve 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 only 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.

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• 38% increase in global pets on plan to 161,000 (2015: 117,000)
• 35% increase in Group continuing revenues to £1.2m (March 2016: £0.9m)
• 16% increase in UK PPCP revenues to £0.9m (March 2016: £0.8m)
• 144% increase in PPCP overseas revenues to £0.3m (March 2016: £0.1m)
• Significant investment in expansion of overseas operations
• Co-operation agreement signed with Midwest Veterinary Supply Inc, a major

veterinary distributor, in February 2017

• Loss after tax from continuing operations £2.1m (2016: £1.5m)

Highlights

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• Sale of business, trade and assets of the Premier Buying Group (“PBG”)
• £4.8m net cash proceeds from PBG sale to repay existing debt and fund

international growth strategy

• Actions being implemented to address identified differences between UK

and US markets

Post period events

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

agreements (Mid- West, Zoetis, MVS, VPI)

Business fundamentals

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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
• Revenue streams come from:
• 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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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

£0 £1,000,000 £2,000,000 £3,000,000 £4,000,000 £5,000,000 £6,000,000 £7,000,000 £8,000,000

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 Q4 2016 Q1 2017

• 100,000

200,000 300,000 400,000 500,000 600,000

Value of payments processed Number of payments processed Gross cash value £ Transactions processed

Quarterly collection statistics – UK and Europe

• 483,000 transactions in Q1

2017 (equivalent to 1.9m annual transactions) – 45% increase on same quarter last year

• Customer spend of £7.0m

in Q1 2017 (equivalent to £28.0m annualised spend)

• Generates sticky revenues

for PVG

• 38% increase in pets on

plan in last twelve months

• 164,000 fee generating

pets in April 2017 with growth in all regions

10 Pets on plan # of fee generating pets on plan 000s Mar - 16 Jun – 16 Sep – 16 Dec – 16 Mar-17 UK 107 115 121 132 137 Europe 10 14 18 21 22 US

• 1

2 Total 117 129 139 154 161

Calendar Quarters

Global Clinic relationships

11 885 353 410 901 751

• 100

200 300 400 500 600 700 800 900 1,000 PVG IVC (UK) CVS (UK) Banfield (US) VCA (US)

• NO. OF CLINICS

Global Clinic Relationships (31 March 2017)

• Despite disposal of Buying

Group, PVG still maintains number of relationships with clinics in line with

• ther significant industry

players

• Important influence when

negotiating with pharmaceutical manufacturers and wholesalers/distributors

Diverse customer base

• Total of 385 contracts with

practices throughout UK, Europe and US*

• 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

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

50 100 150 200 250 300 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 Active Plans

UK Europe US

Market opportunities

13 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%

New clinic addressable market - UK

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7% 9% 1% 8% 1% 3% 7% 64%

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

Total small animal clinics – c4,800

Addressable market analysis – Europe

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

which may facilitate growth

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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

Addressable market analysis – the USA

• 3rd cooperation agreement signed in the region with Midwest

Veterinary supplies.

• Midwest has over 12,000 client hospitals across 35 states
• Midwest deal expands PVG beyond South Eastern states to Mid

West and California.

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3% 3% 94%

USA Market Opportunity

Banfield VCA Market opportunity Total small animal clinics – c26,500 (UK c4,800)

• Contracts signed in highlighted states
• Contracts signed with 101 hospitals with 228 FTVE.
• Launched 60 hospitals with 129 FTVE
• Headcount of 17 now working in US operation

Financials

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Profit and Loss - revenues

• Strong revenue growth in all territories

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• Run rate revenues are measured by annualising the

latest month’s revenue

• Run rate PPCP revenues of £2.6m based on

annualising March 2017

• an increase of 36% of annualised revenues at

March 2016

Period ended 31 March 2017 Revenues £000s 2017 2016 % change PPCP – UK 887 762 16% PPCP – Europe 221 97 128% PPCP – US 49 N/A Total - continuing operation 1,157 859 35% 12 month extrapolated run rate March March £000s 2017 2016 PPCP – UK 1,836 1620 PPCP – Europe 600 294 PPCP – US 168

• Total - continuing operation

2,604 1,914

Profit and Loss – profits and EBITDA

• Significant people and operating cost investment in both

Europe (£0.3m) and US (£0.8m) increasing operating loss

• Investment in IT development and finance team in UK to

support expansion and development requirements

• Finance expense reduced following repayment of debt after

veterinary practices business disposal

• Profit on discontinued operation in 2017 represents trading

profit of Buying Group for first 6 months of financial year

• Anticipated net profit on disposal after tax of £4.7m which

will be accounted for in 2nd half 2017

• 6 months to March 2016 includes £163k pre-disposal

trading and £4,091k profit on disposal relating to veterinary practices business

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Period ended 31 March 2017 Profits £000s 2017 2016 % change PPCP – UK 246 160 54% PPCP - Europe (502) (247) 103% PPCP – US (889) (102) (772)% Total - continuing operations operating profit (1,145) (189) Central unallocated costs (857) (1,064) Operating profit (2,002) (1,253) Finance expense (67) (205) Loss before and after tax from continuing operations (2,069) (1,458) Profit on discontinued operations 321 4,644 Profit/(loss) attributable to equity holders (1,748) 3,186 EBITDA before central costs (1,084) (158) EBITDA after central costs (1,941) (1,222)

Balance sheet

• Trade and other receivables reduced following

receipt of escrow money from sales of veterinary practices business

• Net liabilities resulting from losses arising from
• verseas investment
• No bad debt
• Sale of Buying Group post period end will strengthen

balance sheet position with £4.8m net proceeds

• Part of proceeds will be used to repay loan notes

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Period ended 31 March 2017 £000s 2017 2016 Non-current assets 401 146 Trade and other receivables 708 1,678 Trade and other payables (705) (597) Net working capital 3 1,081 Cash 711 1,566 Debt (1,250)

• Net cash/(debt)

(539) 1,566 Net assets held for resale 83 106 Deferred tax (10) (10) Net assets (62) 2,889

Cash flow

• Significant investment in international

expansion impacting EBITDA

• Ongoing capital investment in IT around

£250k per annum

• Net disposal proceeds in H1 2017 and H1

2016 relate to veterinary practices business

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Period ended 31 March 2017 £000s 2017 2016 £'000 £'000 EBITDA after central costs (1,941) (1,222) Net working capital movement (146) (388) Investment in IT and equipment (137) (22) Interest on loans and finance leases (67) (64) Free cash flow (2,291) (1,696) Net disposal proceeds 1,000 5,197 Discontinued activities 350 272 Issue of share capital 48

• Movement in net cash/(debt)

(893) 3,773 Opening net debt 354 (2,207) Closing net debt (539) 1,566 Net debt made up of; Cash 711 1,566 Debt (1,250)

• (539)

1,566

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

agreements (Mid- West, Zoetis, MVS, VPI)

Business fundamentals

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Appendix

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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) 24

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)

25 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

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.

Thank you for your time

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