7th Sep 2023 13:22
(Alliance News) - Pet-focused stocks in London plunged on Thursday after the UK competition watchdog launched a review into the country's household veterinary sector amid concern that pet owners are not getting value for money.
Shares in CVS Group PLC dropped 27% to 1,516.26 pence, while shares in pet supplies retailer Pets at Home Group PLC, which also operates veterinary practices, fell 6.7% at 353.40p.
The UK Competition & Markets Authority on Thursday said it will examine consumer experiences and business practices among UK providers of veterinary services for household pets.
The regulator said it is "concerned that pet owners may not find it easy to access the information they need about prices and treatment options to make good choices about which vet to use and which services to purchase".
The CMA added that independent practices only comprised about 45% of the industry in 2021. Many practices could be one of hundreds belonging to a larger company without consumers knowing, it said, and this could affect their choices and reduce incentives for competition among local practices.
"Households are under strain from the rising cost of living, and it is important that pet owners get value for money from their vets. But figures suggest that the cost of vet services has risen faster than the rate of inflation," the CMA added.
Sarah Cardell, chief executive of the CMA, said: "It's really important that people get clear information and pricing to help them make the right choices. There has been a lot of consolidation in the vet industry in recent years, so now is the right time to take a look at how the market is working."
The veterinary services industry in the UK is currently worth an estimated GBP2 billion, with pet ownership having increased significantly during the Covid-19 pandemic.
"There are certain things households don't scrimp on, and patching up our furry companions is one of them. That makes vet services a very attractive business, but the sector is now under the watchful eye of the Competition & Markets Authority," said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown.
"The size of the market's reaction shows how much of a hurdle this investigation could be for companies focused on pets."
For the likes of CVS, whose "main business model" centres around buying up smaller clinics and vet groups, the announcement could have "direct and profound" implications for its operations, according to Lund-Yates.
For Pets at Home, though primarily a retailer, the company's "substantial" vet business means it "won't be immune to scrutiny" in Lund-Yates's eyes.
Until there's further detail on the scope and consequences of the CMA's findings, however, the HL analyst said it would be tough to map out exactly what this will mean for listed vet companies.
"A slower rate of acquisitions could dent CVS Group's growth, and a crackdown on treatments and pricing could hurt margins across the sector. For now, it's wait-and-see mode," she said.
AJ Bell's Russ Mould cautioned that Thursday's stock sell-off could be an "overreaction" but said that, with a further update not due until early 2024, the anticipation could weigh on both stocks for "some time to come".
By Heather Rydings, Alliance News senior economics reporter
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