Despite the economic squeeze Australians are under due to inflationary pressures, pet owners are prioritising spend on health and wellness as reflected by vet clinic operator Apiam Animal Health (ASX: AHX) in their March quarter update. 

For the 9 months ended 31 March 2024, Apiam reported $154.8 million revenue which represented a 8.5% increase on the previous corresponding YTD period. 

This reflected ongoing benefits from a business restructure undertaken by Apiam in 2023, following three years of national expansion through acquisitions and new clinic openings. Now the largest animal health services provider in regional Australia, Apiam operates 73 clinics that employ more than 350 clinical veterinarians. 

The restructure to remove over $2.6 million in operating expenses from the business saw a freeze on new acquisitions while Apiam consolidated its network. Initiatives that boosted recruitment and enhanced work-life balance for its team members such as flexible working weeks and shared support services between clinics, have also delivered better patient outcomes for Apiam customers. 

Animal health services have proven particularly resilient through economic pressures, proving to be non-discretionary. The 8.5% revenue increase came despite data from the Australian Bureau of Statistics (ABS) showing that retail (discretionary) spending across the country has fallen 0.2% over the same 9 month period. 

“Our operating cost base continues to benefit from the restructuring program we put in place during 2023,” said Apiam Managing Director, Dr Chris Richards. 

“The rollout of new service programs such as our Best Mates pet wellness program and the backend support model to clinics acquired over the past 2 years as well as greenfield clinics  has had a strong impact on earnings. In many instances, services such as centralised tele-triage have reduced the after-hours workloads for our vets, as well as generated revenue through nurse consults.”

The flow-on effect of these support services have been reflected in Apiam’s operating expenses and earnings. 

“Overall, our Group operating expenses on a like-for-like basis have fallen 2.4% in FY24 YTD as all areas of the business remain focused on generating workflow efficiencies. This is being reflected in our improved EBITA margins,” added Dr Richards. 

Across the 9 months YTD, Apiam’s underlying EBITA of $12.4 million is a 23% increase on the $10.1 million reported over the same previous corresponding period. Similarly, underlying NPATA of $5.9 million is a 9.1% increase, despite the impact of increased interest costs. 

While these results reflect the progressive nature of Apiam’s business which has undergone a period of consolidation after aggressive expansion, Dr Richards has flagged some improving industry conditions as catalysts for further growth in the June quarter. 

“As we move into the final quarter of the FY24 financial year we remain focused on targeting improvements in operating earnings and free cash flows for our shareholders. Historically, Q4 has contributed the largest share to our second half performance, because of the seasonal component of our dairy and other livestock business.” 

Apiam recently resumed its dividend payout to shareholders with all eligible Apiam Directors participating in the Dividend Reinvestment Program rather than taking cash, including Dr Richards who increased his holding in Apiam to 23.18%.