H1 FY23 Results Release
Bendigo, Feb 23, 2023 AEST (ABN Newswire) - Apiam Animal Health Limited (ASX:AHX) is pleased to release its full year results for the 6-months to 31 December 2022 (H1 FY23).
Apiam has recorded strong growth across key Group profit metrics. Over the period Apiam also continued its accelerated acquisition program to capture opportunities in fast-growing regional locations. Apiam is the leading regional veterinary services provider in Australia and has implemented a strategy to deliver shareholders the benefits of its enhanced scale.
Total Apiam Group revenue in H1 FY23 increased 24.7% to $93.7 million (H1 FY22: $75.1 million) driven by continued growth in the dairy & mixed animal segment, which contributes a less cyclical revenue stream as well as higher gross margins to the Group. This segment accounted for 77.2% of Company revenues in H1 FY23 and is a key growth driver of Apiam's financial results.
Revenue growth in the dairy & mixed animal segment for H1 FY23 was 36.5% vs the prior corresponding period (PCP) and was driven by a combination of acquisition growth as well as underlying organic growth. On a like-for-like basis (excluding acquisitions) segment revenue growth was 3.5% for H1 FY23 and for FY23 year-to-date (to 31 January 2023) was 5.7%, reflecting a strong January performance and the impact of some timing differences impacting December 2022 revenues.
In H1 FY23, Apiam completed 4 mixed animal acquisitions, following the settlement of 9 mixed animal acquisitions during FY22. A further two acquisitions have been settled on 1 February 2023.
The number of clinics Apiam operates grew from 61 as at the end of FY21 to 79 currently.
Acquisitions are performing well under Apiam's ownership, with the clinics acquired in FY22 delivering average revenue growth of 7.8% in H1 FY23 (vs H1 FY22).
The beef feedlot and pig segments also remain integral to Apiam's rural vet services. Market cycles however did continue to impact revenue growth in Apiam's beef feedlot segment, with overall revenue in the feedlot and pig segments down 3.7% in H1 FY23 vs PCP. Apiam expects to deliver further recovery in beef feedlot revenues in-line with industry forecasts. Recent events impacting H1 FY23 include an over-supply of beef in the US which adversely affected domestic export markets, as well as workforce shortages in local abattoirs. Pleasingly, revenues and gross profit have been stabilising in the pig segment.
Apiam also continues to play a leading role in industry innovation within these segments, making strong progress in H1 FY23 in the areas of vaccine development, client-centric technologies and sustainable production.
From an earnings perspective, the Company's gross margin continued to increase strongly in H1 FY23 to 65.5% up from 61.5% in the PCP. This is a direct result of the strategic changes in Apiam's business over the past 18 months and the growth in the dairy & mixed animal segment.
Underlying EBITA grew 26.7% in H1 FY23 to $6.9 million (H1 FY22: $5.4 million), despite the planned (and previously reported) uplift in operating expenses associated with the accelerated acquisition program and Apiam's investment in employing higher skill-set veterinarians to increase Average Transaction Values. The investment in Apiam's business support network required for the Company's enlarged scale did slow considerably in H1 FY23, with growth contained to 5.8% halfon-half (vs H2 FY22) despite a high inflationary environment.
Underlying NPAT was $3.7 million in H1 FY23, up 14.9% on PCP. Reported NPAT increased 65.6% in H1 FY23 given a return in one-off expenses to normalised levels (following a $1.4 million one-off stamp duty charge related to acquisitions in Queensland in H1 FY22).
Apiam's operating cash flow in H1 FY23 increased 24.2% to $7.4 million, with operating cash conversion to underlying EBITDA (pre AASB 16 lease adjustments) of 103.7%, in-line with Management's long-term target.
Accelerated growth program
The focus of Apiam's acquisition strategy has been to capture growth in attractive regional growth centres and in animal segments with fast-growth profiles.
In H1 FY23 Apiam completed four mixed animal acquisitions that are expected to add $23.8 million in pro-forma annualised revenue to the Company (FY22 normalised basis).
Apiam also completed two further veterinary business acquisitions on 1 February 2023, being Singleton Veterinary Hospital as well as the Merimbula, Pambula & Eden vet clinics (three clinics operated together by joint founders). All clinics are mixed animal clinics, with most of their revenues derived from rapidly expanding companion animal services. These acquisitions are expected to add $8.3 million in pro-forma annualised revenue to Apiam.
Apiam's revised greenfields program, with a greater focus on the scale-up of costs, also delivered strong outcomes for the Company. In H1 FY23 revenue growth in greenfields clinics (opened across FY21 -
FY23 YTD) was 31% vs PCP, with operating costs reduced by 7.3% for these clinics in the same period.
In H2 FY23, Apiam plans to focus on the delivery of integration benefits and growth synergies from recent acquisitions in order to maximise free cash flow generation. The Company's acquisition pipeline remains strong with phasing of future acquisitions to reflect optimisation of capital resources and cash flow.
FY23 YTD trading (to 31 January 2023)
Veterinary services revenues continue to grow into early H2 FY23 as demand for pet care continued to be resilient and non-discretionary.
Following revenue phasing impacts that affected the dairy & mixed animal segment in H1 FY23, Apiam delivered strong earnings leverage in January with double-digit like-for-like Group revenue growth recorded for January 2023 (vs January 2022).
Average Transaction Values also continued to increase driven by consumer demand for high standards of animal care.
Underlying EBITA for FY23 Jan YTD (being the seven months to 31 January 2023) increased 42.0% compared to PCP, with underlying EBITA margins growing to 7.8% (up from 6.9% in FY22 Jan YTD).
Outlook & strategy
Apiam's financial and operational progress during H1 FY23 provides strong momentum for FY23 and beyond.
Revenues and earnings from the Company's dairy & mixed animal segment are expected to continue to perform strongly as they have over recent periods. The financial performance of Apiam's beef feedlot and pig segments is expected to rebound in-line with industry forecasts.
Dr Chris Richards, Apiam's Managing Director said "our operational focus for FY23 is now the integration of recent acquisitions made over the past 12-months and to leverage additional opportunities for synergies. We see opportunities to deliver greater organic growth across the business and strong early trading in H2 FY23 is supportive of this trend".
Delivering greater improvements in operating earnings margins and maximising free cash flow generation remains a key priority for Apiam's Management team.
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About Apiam Animal Health Limited
Apiam Animal Health Limited (ASX:AHX) is one of Australia's leading rural veterinary businesses made up of more than 80 Veterinary Clinics and 330 highly experienced veterinarians as part of a team of over 1300 dedicated professionals. The majority of Apiam's vet clinics, production animal, and allied businesses have been around a long time, many of them decades and are spread Australia wide reaching into the heart of dairy, beef, sheep and pig country and the regional towns that are at their centre.
Apiam Animal Health is committed to providing best in class care for its clients, the animals in their care and the communities where people live and work. The Company's purpose, to enrich the lives of animals, people and communities, is applied across all businesses from vet clinic to production animal consultancy, logistics and laboratory with vets and allied staff sharing expertise and specialist knowledge. Apiam is focused on meeting the needs of its clients and shaping the future of the industry to deliver best practice animal health and welfare at a local level and nationally.