It’s raining cats, canines & vets

Even before the pandemic started the panic puppy buying phenomenon, Australian pet ownership was on the rise due to the strong demographic trend towards single-person households.

With pooches and moggies and other random beasts supplanting children in the family hierarchy, spending on pet care has increased even more.

According to a survey by Animal Medicines Australia, two-thirds of Australian households owned a pet in 2019, with 29 million animals registered (more than the bipedal population of 25 million).

Unsurprisingly, dogs made up 5.1 million of this national menagerie, followed by cats (3.8 million). Canberra housekeepers are more likely to own dogs – so much for fat cat officials – while South Australians are more likely to own (crow-eating) cats.

Fish may be little reward pets – albeit low maintenance – but we still own 11.3 million of them. And 2% of households owned pets “like horses, goats, cows, alpacas and hermit crabs”.

According to the recently listed data Crazy Paws (MPA), Australians spend $ 13 billion on their pets every year. That includes $ 3.9 billion for groceries, $ 2.6 billion for veterinarians, and $ 1.4 billion for products.

While the supermarket shelves are full of gourmet delights, investors are not exactly spoiled for choice when it comes to public exposure to one of the most promising growth sectors.

Founded by Glen Richards of Shark Tank, Greencross Vets went public in 2007 and merged with retail chain Petbarn in 2013. The union was less than mind-blowing, and the company was acquired by private equity giant TPG for $ 675 million.

With just over 100 clinics, National Veterinary Care was snapped up by another private equiteer at the end of 2019 with a handy 56% premium, equivalent to a market valuation of $ 251 million.

Mad Paws was listed in late March this year after raising $ 12 million in an oversubscribed IPO.

Mad Paws, the airtasker of the pet world, enables third-party services such as dog walks, pet care and grooming. The company generates its income from the ticket reduction of 20% with the service provider and 7% with the pet owner.

The company is also moving into the online subscription to pet food delivery. with a start-up called Dinner Bowl. We suspect this is what makes them more of the Uber Eats of the pet world.

But if your columnist has a pet herd, it is Apiam Animal Health (AHX), which runs a chain of rural and urban veterinarians.

With this in mind, Apiam is facing both the pet boom and the (currently buoyant) agricultural sector.

Apiam was listed in December 2015 and raised $ 40 million at $ 1 apiece. The initial funds were used to fund the sale of a seller and buy 12 veterinary practices (the company already had interests in five of them).

Headquartered in Bendigo, Victoria, Apiam is now the only publicly traded ASX-listed veterinary company, providing services in 46 clinics in all states except South Australia, as well as on-farm advice to pig, dairy and beef farmers.

With 150 veterinarians, Apiam serves 35% of the country’s pig and dairy industries and more than half of the beef cattle sector.

It’s not all James Herriot does with guns to the rear. In addition, the company generates income from products such as medicines, vaccines, nutritional supplements, and high-quality pig semen from its gene laboratories.

Meanwhile, Apiam’s pet bills were about 14% of sales at the time of listing, now about 25%.

Apiam reports six months of “bumper” on the pets side, aided by the opening of two clinics with its JV partner Petstock. The Torquay North and Shepparton clinics are benefiting from the pandemic Seachange / Treechange trend.

The Shepparton Clinic includes an isolation ward for infectious diseases like parvovirus (no, not Covid), a dentist’s room, and a path room with the ability to flip a test in 14 minutes.

Try to find this quality of service in a public hospital!

Apiam posted sales of $ 30.3 million in March, down 2.8% from the previous year, largely due to Covid reasons. However, gross profit rose 1.5% to $ 17.5 million, which wasn’t bad given the “unusually high” purchases from farmers in the previous quarter at the start of the pandemic.

Perhaps a better clue: annual sales since the beginning of the year totaled 91.6 million.

Apiam still faces Covid-related challenges in the beef and pig segments, but the overall message is that everything is calm on the farm.

In mid-April, Apiam raised $ 6 million in an 80 cents apiece placement. Interestingly enough, Petstock has taken on a 16% share, which will lead to tongue wagging at the muster yards.

Back to Mad Paws, the company’s prospectus shows a loss of $ 3.17 million in 2019-20 on sales of just under $ 2 million. Last year, Mad Paws lost $ 3.77 million on sales of $ 1.57 million.

The gross merchandise value increased to $ 10.2 million from $ 8.6 million previously.

After closing at 24 cents – a 20% premium – on debut, Mad Paws shares are sneaking just below the 20 cents issue price, with a market cap of $ 33 million.

Mad Paws has the bones of growth: in 2019-20, the company completed 180,000 transactions, with 400,000 owners and 19,000 vendors signing up on the platform.

But the company has to show its size in a homework sector. As with the recently listed Airtasker, Mad Paws must ensure that providers and end customers do not migrate offline and leave out the middleman after getting to know each other.

On the positive side, Mad Paws recognized the potential of the pet insurance sector. Pet cover was not popular compared to the U.S., but Mad Paws estimates the local market is worth $ 745 million (based on premiums) and growing strongly.

Mad Paws plans to partner with Pacific Insurance and AI Insurance to offer its own insurance product. In fact, the white label arrangement means Mad Paws collects a commission and leaves the underwriting risks (and rewards) to the experts.

In your columnist’s own experience with a sickly dog, the insurance avoids awkward family conversations when it requires $ 5,000 bladder stone surgery (even happened twice and you asked if the patient was okay).

But it’s expensive, especially when it goes beyond the premiums of humanoid health insurance.

The private health insurance companies listed Medibank Private (MPL) and NIB stocks (NHF) offer pet insurance, but the business isn’t even an item in their accounts.

With pressures on the fund to keep healthy human customers, this may change as the fond owners go out of their way to keep their furry friends – and hermit crabs – healthy.

tim@independentresearch.com.au