National Vet Care dogs ASX-listed Greencross
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After defecting from ASX-listed vet services and pet retailer Greencross, Tomas Steenackers is taking on his former employer and asking investors to back his own vet clinic roll-up National Veterinary Care.
NVC currently owns and operates a vet clinic at Albion in Brisbane and has conditional agreements in place to acquire another 34 vets if fund managers decide to back the initial public offering, which is planned for July this year.
Including those acquisitions the group would have about $50 million in revenue.
‘‘There are 2600 vet practices in the country. We plan to have 35 to start and acquire 10 in the first year and 15 a year after that,’’ Mr Steenackers said.
‘‘Greencross has 125 practices and after that it is only small players. If we are successful in what we want to do we will be the second-biggest player straight away.’’
IBISWorld estimates that 63 per cent of Australian households own a pet. The veterinary services industry is estimated to be worth $2.6 billion a year while the broader pet industry in Australia is worth approximately $8 billion a year.
‘‘The place of pets in the household has changed dramatically around the world. I’m not sure that 10 years ago people would have spent $5000 on a pet. Cremation is a big thing now as well,’’ Mr Steenackers said.
Mr Steenackers, a French Canadian, worked for Mayne Pharma in Canada before moving to Australia in 2003 with his Australian wife Melissa.
He oversaw 165 chemists as an operations manager for Terry White Chemists and then spent two years as a general manager at Greencross.
The NVC board is chaired by Susan Forrester who sits on the boards of G8 Education, Healthdirect Australia and Oncore Group. The other three board members are all ex-Greencross guys: Wesley Coote, Greencross founding chief financial officer, Stephen Coles, Greencross founding executive director, and Mr Steenackers.
Greencross listed in 2007 with a market value of around $30 million and is now worth $700 million.
However a recent earnings downgrade has hit the share price and raised questions about the decision to push into retail pet food and pet stores.
Greencross said in May that it expects underlying earnings per share of 33.5¢ to 35¢ in 2014-15, down from previous expectations of 36¢ per share. The stock is down 23 per cent since January to $6.14.
Last week Deutsche Bank analyst Wassim Kisirwani initiated coverage on Greencross with a ‘‘hold’’ recommendation and $7 price target.
Mr Kisirwani said that industry growth is solid and the move to premium products and more private label products in retail are positives for Greencross. But he is cautious about its sub-par margins and lacklustre return on equity, high debt levels and poor cash generation, and the lack of an integrated supply chain.
Mr Steenackers said he doesn’t know what happened at Greencross since he left, but he pointed to the big retail part of the business as something NVC has no intention of emulating.
‘‘We will focus on one thing and do it well and that’s professional [vet] services. We are not going to focus on big box retail stores … [another] difference in model is in training. We will build a training environment to upskill the vets,’’ he said.
NVC plans to offer regular training opportunities for its vets and nurses in things like pathology, surgery, and dental.
The training, it is hoped, will ensure difficult procedures stay in-house rather than being referred to non-NVC specialists and will allow nurses to take on bigger roles, freeing up the vets to do other more complex tasks.
Mr Steenackers said that 80 per cent of vets are now female and the vast majority of them do not want to be business owners, which means older clinic owners struggling with succession planning often view a sale to a corporate as the perfect exit strategy.
Vets will be acquired for between 3 and 5 times normalised earnings before interest and tax.
One thing NVC will take from Greencross is the idea of a loyalty program in which customers pay a fee upfront and in return receive discounts and perks like free consults.
Mr Steenackers said that he cannot talk margins or how much NVC hopes to raise at this stage, but all of that detail will be available shortly with the offer prospectus.
He kicks off the investor roadshow on June 22 and the prospectus is expected early next month for a listing in late July.
Wilson HTM and Shaw Stockbroking are handling the raising.
We will focus on one thing and do it well and that’s professional vet services. We are not going to focus on big box retail stores … another difference in the model is in training.
