Apiam Animal Health (ASX:AHX) on growth in veterinary services


by Jessica Amir

Apiam Animal Health Limited (ASX:AHX) Managing Director, Dr Chris Richards, speaks about a year of acquisitions and growth as Australia's leading rural veterinary practice operator.

Jessica Amir:
Hi I’m Jessica Amir for the Finance News Network. Joining me now from Apiam Animal Health Limited (ASX:AHX) is Managing Director, Dr Chris Richards. Hi Chris and welcome.

Dr Chris Richards: Thank you.

Jessica Amir: First up for those new to Apiam Animal Health, just give us an introduction to the company?

Dr Chris Richards: Apiam Animal Health is a vertically integrated veterinary business. We listed on the ASX in December 2015. And we provide veterinary services as well as other services, to the production animal and companion animal industries, in rural and regional Australia. So our business consists of many of the larger veterinary businesses in Australia, as well as zoogenic services and we provide other ancillary services. Our clinics are located in the production animal areas of Australia, so we have about 130 veterinarians and they work across the species, across the entire business. And we have a market cap of $91 million.

Jessica Amir: Turning to financials now. What were some of the highlights from FY17?

Dr Chris Richards: On the financial side, we generated revenue of $98 million and an EBITDA of $8.3 million. And these were at the higher end of the May guidance. We’re very pleased with these results, particularly in light of our low Q1, as a result of challenges in the beef and dairy industry. We’re also very pleased that we were able to have an increase in our gross margin; our H2 at a revenue level was six per cent above the first half year. We also paid a dividend of 1.6 cents per share.

Jessica Amir: Turning to operations Chris, can you give us an introduction to each of your business units, starting with veterinary services?

Dr Chris Richards: We’re providing advice to farmers and integrating that advice with products, to improve their profitability and sustainability. We’re also in the companion animal side; we’re investing quite heavily in increasing the skill set amongst our vets. As well as giving them the tools, so that they can provide similar services in rural and regional Australia, that we see in the capital cities. We provide genetic services in the pig industry, supplying Australian pig farmers out of two genetic centres. One located near Geelong in Victoria and one near Toowoomba in Queensland.

And we have three sheep and goat genetic businesses, which we’ve amalgamated recently to form Apiam Genetic Services, to provide a larger capacity to be able to service new customers. 75 per cent of our revenue is generated through products. We have four warehouses located in the four of the production animal areas in Australia - in Bendigo Victoria, Toowoomba, in Perth in WA and in Smithton in northwest Tasmania, in the heart of the dairy country. We then have our own logistics and transport business, where we have a number of vehicles that deliver our products. Not just to our clinics, but directly to a number of our customers, up to three days a week.

Jessica Amir: Can you give us an update on your acquisitions?

Dr Chris Richards: In FY17 we acquired Quirindi Vet Group, which specialises in the feedlot industry, as well as providing rural services in their local area. Our Quirindi business has performed in line with expectations and we’re starting to integrate the benefits that they’ve brought to Apiam. We also acquired AllStock (NSW) Pty Limited, which is a sheep genetics business; performs embryo transfer services and artificial insemination services. And we’ve seen some very solid growth since the acquisition of that business.

We’ve also integrated that business with our two other sheep genetics businesses, into a consolidated entity called Apiam Genetic Services. And our third acquisition has been Terang and Mortlake Veterinary Clinic, which is based in the Western District of Victoria. They provide services in both the dairy industry as well as the beef industry. And we see that acquisition as being extremely important to increasing our footprint, in both those sectors.

Jessica Amir: Could you tell us about your strategy and why your offering is so unique?

Dr Chris Richards: We’re Australia’s only vertically integrated veterinary business, in the production animal segment. We’re in a unique position where we’re in a very fast growing segment, particularly in the production animals, where there’re significant export opportunities for our industries to grow. In FY18, we have three areas that we’re initiating for business growth. One is to expand our regional and rural strategy, through acquisitions and further development of satellite sites.

We also have a focus on companion animal industry in rural and regional Australia, which we believe is underserviced. And we’ll continue to invest in new technologies and increase the skill sets of our veterinarians, so that they can provide a higher level of service. Our third area of business growth that we anticipate in FY18 is through further vertical integration of our supply chain. And further development of our private label range.

Jessica Amir: Last question now Chris. Where would you like to be 12 months from now and longer-term?

Dr Chris Richards: We expect that we’ll have made a number of further acquisitions, and that we’ll still have a very strong pipeline ahead of us for acquisitions. And we’ll also have integrated the existing clinics and rolled out our platform that we’ve been working on, across the entire business.

Jessica Amir: It’s been a pleasure Dr Chris Richards, thank you so much for the update.

Dr Chris Richards: Thank you.