Shares in CVS Group climbed 2% on Friday after Barclays upgraded the UK veterinary chain to an "overweight" rating and increased its price target by 18% to 1,630 pence.
The broker said its change in view followed fresh disclosures from CVS’ management that, in Barclays’ assessment, materially reduced prior uncertainty about the scale and returns profile of the group’s Australian expansion. Barclays highlighted that the company’s Australian acquisition programme is delivering returns in the 14% to 17% range, comfortably above the group’s 12% hurdle rate.
Alongside the returns figures, Barclays pointed to CVS’ stated ambition for the Australian unit to achieve adjusted EBITDA of between £105 million and £135 million - a level that would be multiple times its current scale.
Analysts at Barclays said their earlier "equal weight" recommendation primarily reflected doubts over how large the Australian opportunity would be and what returns acquisitions there would generate. They said management’s additional disclosures had materially addressed those concerns.
Company management told investors it is "comfortable" with Bloomberg consensus expectations for fiscal 2027 EBITDA, and it emphasised that pricing now represents a more meaningful lever for growth after the resolution of a Competition and Markets Authority investigation. The group implemented larger price increases this summer than in any of the previous three years, management said, and noted that similar price actions were being taken across the industry.
CVS also reported that acquisitions generally are performing "significantly above" the company’s 12% hurdle rate. Management said recent deals were completed at around six times EBITDA compared with approximately eight times historically, an improvement that Barclays sees as enhancing acquisition economics as CVS establishes a market presence in Australia.
Barclays quantified part of the opportunity, identifying roughly 230 potential additional Australian sites which it estimates represent about £90 million in EBITDA opportunity, or roughly £0.4 million in EBITDA per site.
On competitive dynamics, the broker observed that peer Vet Partners remains focused on New Zealand while smaller consolidator Vet Central tends to target regional rather than metropolitan assets - factors Barclays described as modestly supportive of continued expansion by CVS in Australia.
Financial forecasts included in Barclays’ analysis show revenue projections rising from £713 million in fiscal 2026 to £789 million in fiscal 2028, with adjusted EBITDA margins held near 20% across that period. Equity free cash flow is forecast to increase to £69 million by fiscal 2028 from £29 million in fiscal 2026.
Barclays also set out the principal risks to its thesis. These include the possibility that Australian assets do not come to market at the pace or scale expected, the growing complexity of integrating an expanding business, structurally subdued like-for-like UK growth, and uncertainty around chief executive succession.
CVS Group is scheduled to publish its next market update on September 24, when it will report fiscal 2026 results.
Context note: The market reaction and Barclays’ upgrade reflect the broker’s interpretation of management disclosures and the quantified opportunities Barclays has modelled for the Australian expansion. Management comments on pricing and acquisition multiples underpin Barclays’ adjusted forecasts.