Continued expansion of Australia’s population beyond capital cities is seeing an influx of residents and jobs in regional towns which has resulted in veterinary clinic operator Apiam Animal Health (ASX: AHX) delivering a 24% jump in profit, capitalising on pet ownership and dairy industry trends.
For FY21, Apiam has reported revenue of $126.2 million which represents a 6.6% increase on the previous year. But with a strategy to expand their animal business network undertaken over the past 12 months via acquisitions in regional growth corridors, realised synergies from the new businesses delivered net profit after tax of $5.1 million, a 24.1% increase.
Alongside their rising profits, shareholders have been rewarded with a 1.2 cents final dividend which makes its FY21 total dividends 20% higher than the previous year, and more may be in store going forward with Apiam Managing Director, Dr Chris Richards foreseeing further upswing in their key markets.
“Pet ownership in Australia continues to rise with at least 15% more households now owning a pet compared to 2019 which is providing our mixed animal clinics with new business opportunities in regional areas undergoing explosive population growth.
“Changing trends in the veterinary dynamics and Apiam’s diversified species mix has created opportunities for Apiam to open new greenfield clinics as well as expand the network by acquisition. As customer demand grows, we are finding established clinics which can benefit from Apiam’s ancillary services which attracts new customers and provides operators with better work-life balance courtesy of additional support that includes tele-triage and back-office support.
“Greenfield clinics opened in Shepparton and Torquay North have been well received by the locals which is hugely satisfying because local communities are at the heart of our services where we will support both within our clinics, and beyond.”
This increased community awareness of Apiam’s services has seen a 76% increase in uptake of their Best Mates program for pet owners which now boasts 5,557 members. Additionally, it is also now being rolled out across the 8 other clinics acquired by Apiam during FY21 which has attracted new customers to clinics seeking to benefit from the all-inclusive services provided by membership and its convenience.
For an annual $575 membership fee, Apiam’s Best Mates program provides pet owners with unlimited consultations throughout the year, and discounts other animal health services. Rising membership numbers have supplemented other areas of the business subject to market cycles which have now started to swing upwards again.
As experts in regional animal health, the feedlot industry has long been a key growth driver of Apiam’s business but a downturn in cattle on feed during the year has seen an impact on revenues. However, head counts began increasing again in the June quarter and Dr Richards expects they will continue into FY22.
“Recent feedlot cattle data released showed a 168k increase in cattle head count to 1.17 million between April and June 2021. The industry has capacity for approximately 1.45 million head, meaning that as feeder cattle numbers increase it can immediately expand numbers by 30% in a market where Apiam has a strong foothold.”
While pet ownership played a large role in Apiam’s revenue growth, the Company is still actively expanding its network which had 61 animal health businesses as of 30 June 2021. Since then, Apiam has been busy acquiring 3 more established regional clinics as well as opening a greenfield clinic in Geelong, taking their total to 65 with more on the horizon.
Owning ancillary animal health services that include tele-triage, pathology, vaccines and pet supplies, new clinics entering the Apiam network can access support services and marketing that retain customer spending within the Apiam ecosystem.
Data released by Animal Medicines Australia revealed Aussies spend $30.7 billion per annum on cats and dogs at an average of $2,074 per cat and $3,237 per dog on food, veterinary services, and pet healthcare products.
Given that spend, it’s understandable why pet owners are flocking to Apiam’s Best Mates program with it being offered in more and more locations as part of Apiam’s regional expansion plans which are showing no signs of slowing.
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*Owners of this website are AHX shareholders
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