COVID19 and Vet Practice Values
Since the introduction of the COVID-19 pandemic restrictions in Australia, many industries have been severely impacted, and the road to recovery for many of them is still uncertain. While there are some chicken littles out there, running around saying that the sky is falling and hoarding enough toilet paper to satisfy a small country, the facts on the ground show a brighter outcome for the vet industry than many would have predicted.
Below is an interview with Paolo and Anne Lencioni, managing directors of ValuVet and APL, where we ask them some of the frequent questions that are being asked about the impact that COVID-19 has had on vet practice fortunes.
Q. What has the impact of COVID-19 been on Vet practices?
A . We are in the fortunate position to have a solid overview of the situation, as we have hard data from 200 vet clients across Australia that we monitor.
During the first few weeks when restrictions were announced, vets were worried that their trading would be restricted, or people would spend less. Our statistics show that this didn’t happen – vets continued trading as normal; in fact, in many cases turnover increased. People weren’t spending on going to restaurants and entertainment and in many cases ended up spending more on their pets. From a valuation perspective, things did go quiet in late March and April, but since May it has rebounded and we have been catching up the backlog from those first months.
Q. Have some areas and practices have been disproportionately affected?
A. Areas with migratory workforces and holiday makers have probably been more negatively affected than other areas.
The restrictions on travel have had some limited impacts on consumer spending for vets. For example, we have seen that:
• vets in holiday areas have been more affected than others and
• spending on boarding services have been down on what they would have otherwise been.
Q. How did Vet corporates fare?
A. We get the feeling that the vet corporates will have suffered more than privately owned practices during the COVID-19 economic shut down. It certainly seems that most vet corporates reduced their opening hours over this period. We feel that this may have been because of a lack of availability of staff.
Staff in the industry had legitimate concerns about working when everyone in other industries was told to stay at home because it wasn’t safe.
Owner operator vets had an easier time convincing staff to work, because the staff could see their boss was willing to do so. A corporate head office in another state asking staff to return to work had a harder time with this.
Q. What has the impact of COVID 19 been on Practice Sales and start-ups:
A. When restrictions started, people paused on all deals, but now it seems like supply and demand are back to normal. We certainly have buyers and sellers still coming to us with transactions at the same pace as before. It may be impacted by the banks willingness to lend.
Q. Are banks lending as freely for vet practice purchases as before?
A. It is too early to tell. They are being more cautious and looking at things more carefully, but we feel that if you can show trading has been stable, there is no reason not to lend. Specialised lenders will realise quickly that vets are a stable bet, but high street banks will probably be more hesitant.
Q. Has government stimulus helped vet practice sales?
Lower interest rates, instant asset write off/ accelerated asset write off may mean that people who are looking to buy equipment might do it now. It will make it easier for vet buyers to spend more.
We feel that JobKeeper won’t influence the industry much. Overall, our vets don’t seem to qualify (We only have 2 out of 200 clients that have qualified for it).
Q. Do you think that COVID-19 will impact the Supply chain for vet consumables? Will it make consumables harder to get or more expensive?
A. I have had no indication this is happening to significant levels; however, we can monitor our clients’ costs easily and will be able to tell in the near future.
Q. Do you think that COVID-19 will make recruitment of vets easier or harder?
A. I think recruitment will be easier as vets are one of the few industries that seem untouched by the financial insecurity at this time. That said, vets that have previously left the profession may return for job security and income security at this time if they or their spouses lose their work.
To get an appraisal or to speak to Anne or Paolo about your practice circumstances email firstname.lastname@example.org or email@example.com or call 07 3488 0131.