TIDMPETS
RNS Number : 0003Q
Pets At Home Group Plc
24 November 2016
FOR IMMEDIATE RELEASE, 24 NOVEMBER 2016
Pets at Home Group Plc, Interim Financial Results FY17
for the 28 week period from 1st April to 13th October 2016
(GBPm) H1 FY16 H1 FY17 Change
Group revenue 404.5 441.3 9.1%
Merchandise 362.6 379.5 4.7%
Of which Food 202.1 209.6 3.7%
Of which Accessories 160.5 169.9 5.9%
Services 41.9 61.9 47.6%
Group Like For Like growth 1.8% 2.5%
Merchandise 1.0% 1.9%
Services 10.5% 8.7%
Group gross margin 54.1% 53.9% (15)bps
Pre-exceptional EBITDA margin 15.0% 14.8% (25)bps
Pre-exceptional profit before tax 45.2 47.0 3.9%
Statutory profit before tax 40.9 46.0 12.4%
Dividend per share (p) 2.0 2.5 25.0%
Free cashflow 30.8 34.4 11.5%
Leverage (Net Debt / pre exceptional EBITDA(*) ) 1.5x 1.3x
-------------------------------------------------- -------- -------- --------
All financial definition can be found on page 6. Exceptional
items in H1 FY17 refer to GBP1.0m of exceptional costs related to
the disposal of Farm Away Limited, the Group's equestrian retailing
business
-- Robust Group LFL revenue growth of 2.5%
-- Good performance in strategic drivers: fee income from Joint
Venture vet practices up 23.6%, Services LFL growth 8.7%, Advanced
Nutrition revenue growth 6.5%
-- Space rollout on track: 8 new superstores, 17 vet practices
and 18 grooming salons. 49% of superstores now have both a vet
practice and grooming salon
-- Seamless shopping omnichannel investment delivering results
with order volumes and basket spend increasing
-- Strong dividend growth of 25.0%, in line with our increased
dividend payment policy which commenced at FY16 year end
Ian Kellett, Group Chief Executive Officer, commented:
"We have again demonstrated strong performance in Services, with
47.6% revenue growth. We have also seen robust trading in
Merchandise where Health & Hygiene sales returned to a more
normalised level after a poor season last year. We are pleased that
our investment in seamless shopping is delivering results with
increased volumes, basket spend and the launch of our first
subscription service.
In a more difficult trading environment, we continue to build
Pets at Home for the future and are confident in the long term
outlook for our unique offer in the resilient pet market, in
particular, the developing potential of our Services business as we
see it mature and grow."
Outlook
Whilst recent trading has been softer than in the first half,
our profit outlook for FY17 remains in line with market
expectations as we maintain a focus on both margins and costs.
Board update
Brian Carroll, Non-Executive Director, will resign from the
Board on 2nd December 2016. Mr Carroll has been a Director of Pets
at Home since 2011. Nicolas Gheysens, Director, Private Equity at
KKR & Co LP will replace Mr Carroll with effect from 2(nd)
December 2016. Nicolas has been a key part of the business since
the acquisition by KKR in 2010, and has been a Board Observer since
IPO.
Results presentation
A presentation for analysts and investors will be held today at
8.30am at Bank of America Merrill Lynch, 2 King Edward St, London,
EC1A 1HQ, attendance is by invitation only. An audio webcast and
statement of these results will be available at
http://investors.petsathome.com
Investor Relations Enquiries
+44 (0)161 486
Pets at Home Group Plc: 6688
Amie Gramlick, Head Of Investor Relations
Media Enquiries
+44 (0)161 486
Pets at Home Group Plc: 6688
Brian Hudspith, Director Of Corporate Affairs
+44 (0)20 7379
Maitland: 5151
Rebecca Mitchell, Tom Eckersley
About Pets at Home
Pets at Home Group Plc is the UK's leading specialist pet
omnichannel retailer and services provider. Pets at Home operates
from 427 superstores located across the UK. The Group operates the
UK's largest small animal veterinary business with 405 practices,
run principally under a Joint Venture model using the Vets4Pets and
Companion Care brand names, and four veterinary specialist referral
centres. Pets at Home is the UK's leading operator of pet grooming
services offered through its 258 grooming salons. The Group also
operates 7 specialist High Street based dog stores, called Barkers.
For more information visit: http://investors.petsathome.com/
Chief Executive Officer's Review
Operational Highlights
ROLLOUT H1 FY16 H1 FY17 FY16
Stores Number of stores(1) 408 435 427
New stores (gross) (1) 8 8 27
Vets Number of vet practices (total) 353 405 388
Number of standalone vet practices 130 143 138
Number of in-store vet practices 223 262 250
% of stores with vet 55% 60% 59%
New vet practices (total) 15 17 50
New standalone vet practices 3 5 11
New in-store vet practices 12 12 39
Groomers Number of groomers(1) 190 258 240
% of stores with groomer 46% 58% 55%
New groomers 10 18 60
VIP CLUB
VIP Club active members (m) (2) 3.1 3.6 3.4
VIP swipe as % revenue(3) 67% 65% 64%
COLLEAGUES Net Promoter Score 88% 88% 79%
PRODUCT
Proportion of product SKUs refreshed 22% 22% 40%
1 Includes Barkers and Whiskers 'n Paws by Pets at Home
2 Active defined as customers who have purchased during the past
twelve months
3 Average swipe rate of the card at store tills over latest
quarterly period
Strategic Update
More specialist and most loved
Nearly all of our colleagues are pet owners and at the heart of
our business is the emotional bond we have with customers, created
by our shared love of pets. Our strategy is underpinned by our
drive and investment to become even more specialist, and most
loved, by engaged pet owners.
With our specialist credentials, we give pet owners more reasons
to shop with us. We do this by delivering an exciting retail and
services environment, expert advice from highly trained colleagues,
an unmatched product range and seamless omnichannel
convenience.
Expanding like-for-like growth
Giving customers something new and different
Innovation supports customer loyalty and we again maintained our
product refreshment rate during the half, changing 22% of the total
range. For example, as part of our ongoing drive to encourage
customers to feed better quality diets and trade up, we launched
two new private label foods, AVA in the science segment of Advanced
Nutrition, and Step Up To Naturals in the intermediate bridging
segment. We have also introduced one of the most popular UK
naturals brands, Lily's Kitchen.
More than just a shop
A fun and educational environment gives customers more reasons
to visit our stores, with our small animal pet villages visited by
70% of all customers who come into store. Every week our store
colleagues host children's pet workshops delivering a hands on
approach to educating children about responsible ownership with
over 150,000 attendees this calendar year.
Innovation in the VIP club
Our strategic focus through our successful and growing VIP
loyalty club is to increase our share of customers' spend in Food
and in Services. We have developed our VIP marketing materials to
include more vet focused communications and we are also utilising
more personalised communications to encourage particular subsets of
customers to trade up into better quality pet foods.
We launched our first subscription service during the quarter,
exclusively for VIPs, which creates another signup driver.
'Subscribe and save flea treatment' allows customers to receive a
single flea treatment through the post each month, which acts as a
convenient reminder to treat their dog or cat. We have seen a
strong start to customer sign ups, the majority of which are
incremental sales from pet owners who have never previously
purchased flea treatments from us.
The VIP App launched during the first quarter of the year and
removes the need for customers to physically carry the VIP card to
swipe and build points for their nominated charity. We are seeing
encouraging behaviour from App users, including improved voucher
redemption rates and higher transaction values.
Seamless shopping investment delivering results
The convenience of our UK wide footprint remains paramount, with
around 50% of all online orders picked up in-store. We have been
developing our omnichannel capabilities through both systems
investment, which has enabled better inventory management and
delivery capability, alongside customer facing improvements in
website content and ease of use, collection and delivery options.
As a result, we have seen an enhanced customer experience and
significant improvements in commercial KPIs, including online
conversion, volume and average transaction values.
A fast growing Services business
Our Joint Venture veterinary business continues to perform well,
with mature practices growing ahead of the market rate. This is
achieved through our excellent level of patient care, the
convenience of practice locations and opening hours and our
national TV and marketing campaigns, which are all driving new
client acquisition. We have also launched the first of our
Care4Life healthcare plans, which provide bespoke levels of more
affordable treatment cover for chronic illnesses, such as diabetes
and osteoarthritis.
We are building a presence in the veterinary referrals market
through acquisition. Specialist referrals represents the premier
tier of veterinary medicine, and by acquiring such centres, we gain
access to an additional area of customer spend in the market,
whilst improving the retention of customer revenue from our first
opinion practice network. Our future growth in this area will come
through a combination of further acquisition, and greenfield
development, as we seek to establish a UK network of between 10-15
referral centres.
We also continue to explore other opportunities in the wider
veterinary services market, that will deliver growth to our
business whilst retaining a disciplined approach to capital
allocation.
Space rollout and footprint development
We are on track to achieve our space rollout targets for the
year, finishing the period with 427 Pets at Home stores, opening 8
new stores. Our grooming salon network saw 18 new openings, taking
the total number of Groom Rooms to 258, with grooming salons now
present in 58% of our store estate. In addition we opened 17 vet
practices, bringing the total portfolio to 405, consisting of 262
within 60% of our stores, and 143 standalone practices.
Growing margins
As previously guided, Group gross margin declined by 15 bps to
53.9% due to the dilutive mix impact of newly acquired specialist
referral centres outweighing the good gross margin progression in
the first opinion veterinary business and the Merchandise business.
This mix effect was reflected in pre-exceptional EBITDA margin
declining by 25 bps, which also saw the cost of the National Living
Wage and foreign exchange movements outweighing the margin support
of our vet and grooming services.
Looking forward, our guidance on Group gross margin and EBITDA
margin is unchanged.
We remain confident that the maturation of our vet and grooming
businesses will provide support to Group EBITDA margin and we are
committed to leveraging this contribution to drive long term margin
expansion for the Group.
Ian Kellett
Group Chief Executive Officer
24 November 2016
Chief Financial Officer's Review
The H1 FY17 accounting period represents the 28 week period from
1(st) April to 13(th) October 2016. The H1 FY16 period represents
the 28 week period from 27(th) March to 8(th) October 2015.
Financial Key Performance Indicators
FINANCIALS H1 FY16 H1 FY17 Change
Revenue
Revenue Split (GBPm)
Food 202.1 209.6 3.7%
Accessories 160.5 169.9 5.9%
Total Merchandise(1) 362.6 379.5 4.7%
Services(2) 41.9 61.9 47.6%
Total Group 404.5 441.3 9.1%
Like For Like growth(3) 1.8% 2.5%
Merchandise LFL 1.0% 1.9%
Services LFL 10.5% 8.7%
Revenue Mix (% of total revenues)
Food 50.0% 47.5% (248)bps
Accessories 39.6% 38.5% (117)bps
Total Merchandise 89.6% 86.0% (365)bps
Services 10.4% 14.0% 366 bps
Gross Margin Merchandise Gross Margin 56.6% 57.5% 89 bps
Services Gross Margin 32.2% 32.0% (19)bps
Total Gross Margin 54.1% 53.9% (15)bps
EBITDA Pre-exceptional EBITDA(4) (GBPm) 60.7 65.2 7.3%
Pre-exceptional EBITDA margin(4) 15.0% 14.8% (25)bps
Other
Income Statement Pre-exceptional profit before tax (GBPm)(4) 45.2 47.0 3.9%
Statutory profit before tax (GBPm) 40.9 46.0 12.4%
Pre-exceptional basic EPS (pence) (4) 7.2 7.4 3.7%
Dividend (pence) 2.0 2.5 25.0%
Cashflow & Leverage Free cashflow (GBPm)(5) 30.8 34.4 11.5%
Conversion(5,6) 49.5% 51.4% 193 bps
CROIC(7,8) 22.2% 21.3% (96) bps
Leverage (Net Debt / pre exceptional EBITDA) (8) 1.5x 1.3x
1 Includes Food & Accessories revenue
2 Includes veterinary Joint Venture fees & other veterinary
income, including specialist referrals, grooming salon revenue,
revenue from live pet sales & insurance commission
3 'Like-for-Like' sales growth comprises total sales/fee revenue
in a financial period compared to revenue achieved in a prior
period, for stores, online operations, grooming salons, vet
practices & referral centres that have been trading for 52
weeks
4 Earnings before interest, tax, depreciation &
amortization. H1 FY17 excludes GBP1.0m of exceptional costs related
to the disposal of Farm Away Limited (see note 3 of the financial
statements)
5 Free Cashflow is defined as net cash from operating
activities, after tax, less net cash used in investing activities
(excluding acquisitions), less interest paid & debt issue
costs, and is stated before cash flows for exceptional costs
6 Conversion represents Free cashflow as a percentage of
pre-exceptional EBITDA
7 Represents cash returns divided by the average of gross
capital (GCI) invested for the last twelve months. Cash returns
represent pre-exceptional operating profit before property rentals
and share based payments subject to tax then adjusted for
depreciation and amortisation. GCI represents Gross Property, Plant
and Equipment plus Software and other intangibles excluding the
goodwill created on the acquisition of the group by KKR
(GBP906,445,000) plus net working capital plus capitalised rent
being property rentals multiplied by a factor of 8x. A multiple of
8 is the industry standard methodology. (Last twelve month
definition uses the second half of the 53 week FY16 ended 31(st)
March 2016.)
8 Represents last twelve months EBITDA and period end net debt.
(Last twelve month definition uses the second half of the 53 week
FY16 ended 31(st) March 2016.)
Revenue
Total revenue in H1 FY17 grew 9.1% to GBP441.3m (H1 FY16:
GBP404.5m), with strong performance in Accessories and pet
services. Like-for-like sales grew 2.5%, driven by vet and grooming
services, omnichannel, Advanced Nutrition and Health & Hygiene
products.
Total Merchandise revenues, which includes Food and Accessories,
grew 4.7% to GBP379.5m (H1 FY16: GBP362.6m).
Food revenues grew by 3.7% to GBP209.6m (H1 FY16: GBP202.1m),
reflecting good performance in dog Advanced Nutrition (AN) and
treats. AN revenues grew 6.5% to GBP94.5m (H1 FY16: GBP88.7m), with
our private label Wainwright's growing 7.4% to GBP26.9m (H1 FY16:
GBP25.1m). Grocery food performance was soft, as we continue to
shift focus away from this declining and highly competitive market
area, alongside weak performance in wild bird food which was
tightly correlated with the warmer temperatures in Autumn.
Accessories revenues grew 5.9% to GBP169.9m (H1 FY16: GBP160.5m)
where we returned to more normalised performance in Health &
Hygiene, reflecting the soft prior year comparative. We also saw
excellent growth across dog accessories, which benefitted from
range refreshment and innovation. This was somewhat offset by
weakness in aquatics accessories.
Services revenues grew 47.6% to GBP61.9m (H1 FY16: GBP41.9m),
reflecting particularly strong performance in our Joint Venture vet
practices, where fee income was up 23.6% to GBP22.7m (H1 FY16:
GBP18.4m), good growth in our grooming salons and the contribution
from newly acquired veterinary referral centres.
Gross margin
Group H1 FY17 gross margin declined by 15 bps to 53.9% (H1 FY16:
54.1%).
Gross margin within Merchandise was 57.5%, a significant
expansion of 89 bps over the prior year (H1 FY16: 56.6%), despite
absorbing a negative foreign currency impact of GBP0.9m. This has
primarily been achieved through the good growth in dog accessories,
the mix shift from grocery to AN foods and pricing activity across
selected products.
Gross margin within Services declined by 19 bps to 32.0% (H1
FY16: 32.2%). Whilst we saw gross margin accretion in our core
first opinion vet business, this was more than offset by the mix
impact of three new veterinary specialist referral centres, the
large number of new grooming salons which are initially loss
making, and our investment into the care of pets in stores.
EBITDA and operating costs
Pre-exceptional EBITDA of GBP65.2m represented a 7.3% increase
on the previous year (H1 FY16: GBP60.7m), with a margin of 14.8%
(H1 FY16: 15.0%).
Selling and distribution expenses of GBP158.1m increased
slightly as a percentage of Group revenue, to 35.8% (H1 FY16:
35.6%). Within this, occupation costs (rent, service charges and
other costs) again declined as a percentage of sales as we benefit
from the rental costs paid by vet practices within our stores,
which contributed GBP5.6m during the half (H1 FY16: GBP4.7m).
Colleague costs increased as a percentage of sales, primarily due
to the introduction of the National Living Wage at the start of the
period, which lead to additional wage costs of around GBP1m.
Underlying administration expenses of GBP30.2m were 6.8% of
revenue (H1 FY16: 6.5%), where we are seeing growth in vet group
and referral centre operating costs, alongside our investment in
business systems. Exceptional administration costs of GBP1.0m are
recognised in relation to the sale of the Group's equestrian
retailing business, Farm Away Limited (see paragraph below).
Depreciation and amortisation, which is contained within our
total operating costs, increased to GBP15.4m (H1 FY16 GBP12.5m) as
a result of the overall increase in, and type of, capital
investments we make. Our increased investment in business systems
to build our on-line capability results in assets that have a
shorter depreciable life. There have been no changes to our
depreciation policy.
Finance expense
Underlying net finance expense for the half year period was
GBP2.7m, a reduction from the prior year (H1 FY16: GBP3.0m) as a
result of declining leverage.
Taxation, net income & EPS
Pre-exceptional pre tax profit, was GBP47.0m and grew by 3.9%
compared with the prior year (H1 FY16: GBP45.2m). Statutory pre tax
profit was GBP46.0m and grew by 12.4% compared with the prior year
(H1 FY16: GBP40.9m).
Underlying total tax expense for the period was GBP9.9m, a rate
of 21% on underlying pre tax profit, and in line with our expected
tax rate for the full financial year.
Pre-exceptional profit for the period, after tax, was GBP37.1m
(H1 FY16: GBP35.8m) and pre-exceptional basic earnings per share
were 7.4 pence, growth of 3.7% compared with the prior year (H1
FY16: 7.2 pence.)
Cash flows and acquisitions
Cash flow generation remains strong. The Group generated
GBP60.5m in operating cash flow during the period (H1 FY16:
GBP48.7m). Free cash flow after interest, tax and before
acquisitions was GBP34.4m (H1 FY16: GBP30.8m), representing an
improved cash conversion rate of 51.4% (H1 FY16: 49.5%).
We acquired two veterinary specialist referral centres during
the period, with cash outflows related to acquisitions of GBP15.0m.
Dick White Referrals (DWR), based in Cambridgeshire, is one of the
UK's largest small animal specialist referral centres. We acquired
a 76% ownership stake in DWR for a consideration of GBP13.8m and
will operate the practice as a shared venture model through which
the founder, Professor Dick White, and the key clinicians, will
retain 24% equity ownership. Eye-Vet Referrals (EVR), based in
Cheshire, is a dedicated opthalmology centre with six veterinary
clinicians. EVR already provides services to one of our referral
centres, NorthWest Surgeons, as well as to other primary opinion
veterinary practices. EVR will also operate as a shared venture,
with the founders retaining 10% equity ownership.
Freecashflow calculation(1) H1 FY16 H1 FY17
(GBPm)
Cash EBITDA(2) 62.3 66.9(3)
Working capital(4) (8.3) 2.6
Tax (5.3) (8.6)
Interest cost (3.6) (2.5)
Capex (14.7) (24.0)
Other 0.5 0.0
----------------------------- -------- --------
Free cashflow 30.8 34.4
1 Free Cashflow is defined as net cash from operating
activities, after tax, less net cash used in investing activities
(excluding acquisitions), less interest paid & debt issue
costs, and is stated before cash flows for exceptional costs
2 Defined as pre-exceptional EBITDA plus IFRS2 share based
payment charges
3 Excludes GBP1.0m of exceptional costs associated with the
disposal of Farm Away Limited
4 Includes provisions movement
Disposal of Ride-away
On 4(th) October 2016 the Group disposed of its equestrian
retailing business, Farm Away Limited, which operated under the
Ride-away brand. Sale proceeds were GBP0.7m, resulting in a loss on
disposal of GBP0.7m. Costs of disposal of GBP0.3m are also
recognised as an exceptional expense within the income
statement.
Borrowings and net debt
The Group's net debt position at the end of the half year period
was GBP170.8m, which represents a leverage ratio of 1.3x
pre-exceptional EBITDA. This is in-line with the FY16 position of
1.3x, reflecting the cashflow requirements of a higher ordinary
dividend payment and acquisitions in the veterinary referrals
market.
GBPm FY16 H1 FY17
Audited
53 weeks
to 31
March
2016
Opening net debt (192.0) (162.0)
Free cashflow(1) 71.6 34.4
Ordinary dividends
paid (27.9) (27.4)
Acquisitions (8.1) (15.0)
Other (5.6) (0.8)
-------------------------------- ---------- --------
Closing net debt (162.0) (170.8)
Leverage (ND / pre-exceptional
EBITDA) 1.3x 1.3x
1 Free Cashflow is defined as net cash from operating
activities, after tax, less net cash used in investing activities
(excluding acquisitions), less interest paid & debt issue
costs, and is stated before cash flows for exceptional costs
Working capital
The cash movement in working capital for H1 FY16 was an inflow
of GBP2.6m, comprised of a GBP7.7m increase in inventory, a GBP2.6m
increase in receivables, offset by a GBP12.9m increase in trade
payables. We normally see a working capital outflow in the first
half of the year as a result of Christmas range stocking. The
inflow this year primarily relates to improved processes in
settling trade receivables, and the presence of a 53(rd) trading
week in the prior financial year, which improved the payables
inflow by GBP3.7m in this period.
Capital investment
Capital investment was GBP20.9m (H1 FY16: GBP13.7m), of which
GBP3.6m is part of an energy savings programme to fit LED lighting
and smart energy management systems in our store estate. This
investment is part of a one-off GBP8m project, of which a total of
cGBP5m will be invested in the current financial year, followed by
cGBP3m in FY18, in line with our previous guidance.
Within the underlying capital investment of GBP17.3m, GBP5.6m is
represented by the retrofit of services into our existing store
estate, having retrofitted almost double the number of vet and
grooming salons when compared with the prior year (H1 FY16
GBP2.1m). New store capital investment totalled GBP3.3m (H1 FY16:
GBP4.5m) and investment in business systems totalled GBP2.8m (H1
FY16: GBP2.1m), largely reflective of our seamless shopping
development plan.
Cash capital expenditure for the H1 FY17 was GBP22.5m (H1 FY16:
GBP14.7m).
Capital returns and cash utilisation policy
The Board has declared an interim dividend of 2.5 pence per
share, which represents growth of 25.0% over the prior year (H1
FY16: 2.0 pence), in line with our policy. The interim dividend
will be payable on the 6(th) January 2017 to shareholders on the
register at the close of trading on 2(nd) December 2016. The Board
remains confident in maintaining a total full year dividend payment
of around 50% of earnings.
Our policy remains to target leverage of up to 1.5x net
debt/EBITDA(1) under normal circumstances, moving to a maximum of
around 1.75x in the event suitable investment or acquisition
opportunities arise. We believe this maintains appropriate
flexibility for our business. Dependent upon our acquisition
outlook and if we do not foresee investment uses, it is our
intention to return surplus free cashflow(2) to shareholders
through special dividends.
1 On an annualised basis
2 Free cashflow is defined as net cash from operating
activities, less net cash used in investing activities, interest
paid and finance lease commitments. Free cashflow is stated before
cash flows for loans issued, exceptional costs and acquisitions of
subsidiaries
Foreign exchange outlook and Brexit commentary
The Group purchases products from Asia to a value of US$50-55
million each year and our policy is to hedge up to 95% of forecast
foreign exchange transactions on a rolling 12 month basis. As
confirmed previously, our hedging requirements for FY17 are in
place, which will have a negative impact of around GBP2m on
operating profit. Our average hedged FY17 rate is 1.48 USD:GBP. At
present, around two thirds of our expected FY18 purchases are
hedged at an average rate of 1.32 USD:GBP.
Prolonged uncertainty over the UK's exit terms from the European
Union, and the continued weakness in Sterling, could lead to a
slowdown in the UK economy and consequent loss of consumer
confidence, impacting trading conditions for the Group. However,
Pets at Home has a strong position in a traditionally resilient UK
pet market, with a destination retail and services offering
leveraging scale, innovation, price competitiveness and customer
engagement. With our strategic focus based on being even more
specialist and most loved by our customers, we believe we retain a
more resilient position in the retail market.
Mike Iddon
Group Chief Financial Officer
24 November 2016
Risks and Uncertainties
An effective risk management process has been adopted to help
the Group achieve its strategic objectives and enjoy long term
success. The Board does not consider that the principal risks and
uncertainties have changed since the publication of the annual
report for the year ended 31 March 2016. These comprise:
-- Protecting reputation
-- Competition with other retailers and vet practices, including
other pet specialists, supermarkets, discounters, and online
retailers
-- Stores and services expansion and rollout
-- Retaining and developing engaged colleagues
-- Keeping core business systems up to date and with the
capability to support the Group's growth plans
-- Supply chain and sourcing risk
-- Liquidity and credit risk
-- Treasury and financial risk from exposure to US dollar
fluctuations, in respect of goods sourced from Asia
-- Regulatory and compliance risk
-- Extreme weather, where prolonged unusual weather patterns can impact footfall to stores
A detailed explanation of these risks can be found on pages 38
to 43 of the 2016 Annual Report which is available at
http://investors.petsathome.com
Responsibility Statement
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted by
the EU;
-- the interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being
an indication of important events that have occurred during the
first 28 weeks of the financial year and their impact on the
condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining 24 weeks of the
year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
By order of the Board on 23 November 2016
Ian Kellett, Chief Executive Officer Mike Iddon, Chief Financial
Officer
Disclaimer
This statement of interim financial results does not constitute
an invitation to underwrite, subscribe for, or otherwise acquire or
dispose of any Pets At Home Group Plc shares or other securities
nor should it form the basis of or be relied on in connection with
any contract or commitment whatsoever. It does not constitute a
recommendation regarding any securities. Past performance,
including the price at which the Company's securities have been
bought or sold in the past, is no guide to future performance and
persons needing advice should consult an independent financial
advisor.
Certain statements in this statement of interim financial
results constitute forward-looking statements. Any statement in
this document that is not a statement of historical fact including,
without limitation, those regarding the Company's future
expectations, operations, financial performance, financial
condition and business is a forward-looking statement. Such
forward-looking statements are subject to risks and uncertainties
that may cause actual results to differ materially. These risks and
uncertainties include, among other factors, changing economic,
financial, business or other market conditions. These and other
factors could adversely affect the outcome and financial effects of
the plans and events described in this statement of interim
financial results. As a result you are cautioned not to place
reliance on such forward-looking statements. Nothing in this
statement should be construed as a profit forecast.
Independent Review Statement
Introduction
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
28 weeks ended 13 October 2016 which comprises condensed
consolidated statements of comprehensive income, changes in equity,
and cash flows and the related explanatory notes. We have read the
other information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the Disclosure and Transparency Rules ("the DTR")
of the UK's Financial Conduct Authority ("the UK FCA"). Our review
has been undertaken so that we might state to the company those
matters we are required to state to it in this report and for no
other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company
for our review work, for this report, or for the conclusions we
have reached.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
The annual financial statements of the group are prepared in
accordance with IFRSs as adopted by the EU. The condensed set of
financial statements included in this half-yearly financial report
has been prepared in accordance with IAS 34 Interim Financial
Reporting as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
(UK and Ireland) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the 28 weeks ended 13
October 2016 is not prepared, in all material respects, in
accordance with IAS 34 as adopted by the EU and the DTR of the UK
FCA.
Nicola Quayle
for and on behalf of KPMG LLP
Chartered Accountants
1 St Peter's Square
Manchester
M2 3AE
23 November 2016
Condensed Consolidated Income Statement
Note 28 week 28 week 28 week 28 week 28 week 28 week 53 week 53 week 53 week
period period period period period period period period period
ended ended ended ended ended ended ended ended ended
13 October 13 October 13 October 8 October 8 October 8 October 31 March 31 March 31 March
2016 2016 2016 2015 2015 2015 2016 2016 2016
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Underlying Exceptional Total Underlying Exceptional Total Underlying Exceptional Total
Trading Items Trading Items Trading Items
(note (note (note
3,6) 5,6) 3,6)
Revenue 2 441,316 - 441,316 404,503 - 404,503 793,126 - 793,126
Cost of sales (203,325) - (203,325) (185,748) - (185,748) (360,702) - (360,702)
Gross profit 237,991 - 237,991 218,755 - 218,755 432,424 - 432,424
Selling and
distribution
expenses (158,113) - (158,113) (144,184) - (144,184) (279,293) - (279,293)
Administrative
expenses (30,164) (996) (31,160) (26,372) - (26,372) (50,868) (835) (51,703)
Operating
profit 3 49,714 (996) 48,718 48,199 - 48,199 102,263 (835) 101,428
Financial
income 258 - 258 178 - 178 668 - 668
Financial
expense 5 (2,980) - (2,980) (3,146) (4,326) (7,472) (5,628) (4,326) (9,954)
Net financing
expense (2,722) - (2,722) (2,968) (4,326) (7,294) (4,960) (4,326) (9,286)
Profit before
tax 46,992 (996) 45,996 45,231 (4,326) 40,905 97,303 (5,161) 92,142
Taxation 6 (9,868) 61 (9,807) (9,443) 865 (8,578) (20,224) 865 (19,359)
Profit for
the period 37,124 (935) 36,189 35,788 (3,461) 32,327 77,079 (4,296) 72,783
Basic and diluted earnings per share attributable
to equity shareholders of the Company
Note 28 week 28 week 53 week period
period period ended
ended ended 31 March
13 October 8 October 2016
2016 2015
Equity holders of the parent
- after exceptional items
- basic 4 7.2p 6.5p 14.6p
Equity holders of the parent
- after exceptional items
- diluted 4 7.2p 6.4p 14.5p
Condensed Consolidated Statement of Comprehensive Income
28 week 28 week 53 week
period period period
ended ended ended
13 October 8 October 31 March
2016 2015 2016
GBP000 GBP000 GBP000
Profit for the period 36,189 32,327 72,783
Other comprehensive income
Items that are or may be
recycled subsequently into
profit or loss:
Foreign exchange translation
differences 37 (1) (5)
Cash flow hedges - reclassified
to profit and loss 536 (1,474) (1,064)
Effective portion of changes
in fair value of cash flow
hedges 3,811 (824) (536)
Other comprehensive income
for the period, before income
tax 4,384 (2,299) (1,605)
Tax on other comprehensive
income (869) 460 320
Other comprehensive income
for the period, net of income
tax 3,515 (1,839) (1,285)
Total comprehensive income
for the period 39,704 30,488 71,498
Condensed Consolidated Balance Sheet
Note At 13 October At 8 October At 31 March
2016 2015 2016
GBP000 GBP000 GBP000
Non-current assets
Property, plant and
equipment 7 121,738 104,325 114,746
Intangible assets 8 988,637 959,344 973,549
Other financial assets 13,885 8,724 10,161
1,124,260 1,072,393 1,098,456
Current assets
Inventories 59,316 59,927 52,476
Other financial assets 6,211 42 1,947
Trade and other receivables 63,544 54,658 59,028
Cash and cash equivalents 42,171 28,358 39,998
171,242 142,985 153,449
Total assets 1,295,502 1,215,378 1,251,905
Current liabilities
Trade and other payables (175,312) (155,075) (160,140)
Provisions (475) (365) (436)
Other financial liabilities (606) (282) (1,318)
(176,393) (155,722) (161,894)
Non-current liabilities
Other interest-bearing
loans and borrowings 9 (212,198) (211,902) (201,091)
Other payables (34,001) (29,917) (33,165)
Provisions (1,377) (1,461) (1,387)
Deferred tax liabilities (4,676) (4,374) (4,885)
Other financial liabilities (9,366) (994) (5,999)
(261,618) (248,648) (246,527)
Total liabilities (438,011) (404,370) (408,421)
Net assets 857,491 811,008 843,484
Equity attributable
to equity holders of
the parent
Ordinary share capital 5,000 5,000 5,000
Consolidation reserve (372,026) (372,026) (372,026)
Merger reserve 113,321 113,321 113,321
Cash flow hedging reserve 3,049 (987) (429)
Translation reserve 32 (1) (5)
Retained earnings 1,108,115 1,065,701 1,097,623
Total equity 857,491 811,008 843,484
Condensed Consolidated Statement of Changes in Equity
Share Share Consolidation Merger Cash flow Translation Retained Total
capital premium reserve reserve hedging reserve earnings equity
reserve
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 31
March 2016 5,000 - (372,026) 113,321 (429) (5) 1,097,623 843,484
Total
comprehensive
income for the
period
Profit for the
period - - - - - - 36,189 36,189
Other
comprehensive
income - - - - 3,478 37 - 3,515
Total
comprehensive
income for
the period - - - - 3,478 37 36,189 39,704
Transactions
with owners,
recorded
directly in
equity
Equity
dividend - - - - - - (27,396) (27,396)
Share based
payment
transactions - - - - - - 1,699 1,699
Total
contributions
by and
distributions
to owners - - - - - - (25,697) (25,697)
Balance at 13
October 2016 5,000 - (372,026) 113,321 3,049 32 1,108,115 857,491
Condensed Consolidated Statement of Changes in Equity
Share Share Consolidation Merger Cash flow Translation Retained Total
capital premium reserve reserve hedging reserve earnings equity
reserve
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 8
October 2015 5,000 - (372,026) 113,321 (987) (1) 1,065,701 811,008
Total
comprehensive
income for the
period
Profit for the
period - - - - - - 40,456 40,456
Other
comprehensive
income - - - - 557 (4) - 553
Total
comprehensive
income for
the period - - - - 557 (4) 40,456 41,009
Transactions
with owners,
recorded
directly in
equity
Equity
dividend paid - - - - - - (9,962) (9,962)
Share based
payment
transactions - - - - - - 1,428 1,428
Total
contributions
by and
distributions
to owners - - - - - - 8,534 8,534
Balance at 31
March 2016 5,000 - (372,026) 113,321 (430) (5) 1,097,623 843,483
Condensed Consolidated Statement of Changes in Equity
Share Share Consolidation Merger Cash flow Translation Retained Total
capital premium reserve reserve hedging reserve earnings equity
reserve
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 26
March 2015 5,000 - (372,026) 113,321 851 - 1,049,729 796,875
Total
comprehensive
income for the
period
Profit for the
period - - - - - - 32,327 32,327
Other
comprehensive
income - - - - (1,838) (1) - (1,839)
Total
comprehensive
income for
the period - - - - (1,838) (1) 32,327 30,488
Transactions
with owners,
recorded
directly in
equity
Equity
dividend - - - - - - (17,932) (17,932)
Share based
payment
transactions - - - - - - 1,577 1,577
Total
contributions
by and
distributions
to owners - - - - - - (16,355) (16,355)
Balance at 8
October 2015 5,000 - (372,026) 113,321 (987) (1) 1,065,701 811,008
Condensed Consolidated Statement of Cash Flows
28 week 28 week 53 week
period period period
ended ended ended
13 October 8 October 31 March
2016 2015 2016
GBP000 GBP000 GBP000
Cash flows from
operating activities
Profit for the period 36,189 32,327 72,783
Adjustments for:
Depreciation and
amortisation 15,440 12,543 25,106
Financial income (258) (178) (668)
Financial expense 2,980 7,472 9,954
Share based payment
charges 1,699 1,577 3,005
Loss on disposal 690 - -
of subsidiary
Taxation 9,807 8,578 19,359
----------- ---------- ----------
66,547 62,319 129,539
Increase in trade
and other receivables (2,573) (3,031) (6,784)
Increase in inventories (7,748) (11,453) (3,627)
Increase in trade
and other payables 12,938 6,408 7,021
Increase/(decrease)
in provisions 29 (245) (248)
69,193 53,998 125,901
Tax payable (8,649) (5,307) (14,823)
Net cash from operating
activities 60,544 48,691 111,078
----------- ---------- ----------
Cash flows from
investing activities
Proceeds from sale
of property, plant
and equipment 1,026 776 3,082
Interest received 258 271 413
Investment in other
financial assets (2,503) (591) (1,010)
Loans issued (1,194) - (1,674)
Acquisition of subsidiary,
net of cash acquired (14,964) (2,426) (8,113)
Disposal of subsidiary, 677 - -
net of cash disposed
Acquisition of property,
plant and equipment
and other intangible
assets (22,465) (14,683) (36,804)
Net cash used in
investing activities (39,165) (16,653) (44,106)
----------- ---------- ----------
Cash flows from
financing activities
Equity dividends
paid (27,396) (17,932) (27,894)
Proceeds from new
loan 11,000 213,000 202,000
Repayment of borrowings - (325,000) (325,000)
Repayment of borrowings
on acquisition - (1,751) (1,808)
Finance lease obligations (106) - (28)
Interest paid (2,704) (3,640) (5,985)
Debt issue costs - (1,323) (1,225)
Net cash used in
financing activities (19,206) (136,646) (159,940)
----------- ---------- ----------
Net increase/(decrease)
in cash and cash
equivalents 2,173 (104,608) (92,968)
Cash and cash equivalents
at beginning of
period 39,998 132,966 132,966
Cash and cash equivalents
at end of period 42,171 28,358 39,998
----------- ---------- ----------
Notes
1 Basis of preparation
Pets at Home Group Plc (the Company) is a company incorporated
in the United Kingdom and its registered office is Epsom Avenue,
Stanley Green, Handforth, Cheshire, SK9 3RN.
The company is listed on the London Stock Exchange.
The condensed consolidated interim financial statements as at
and for the 28 week period ended 13 October 2016 comprise the
Company and its subsidiaries (together referred to as the
Group).
The consolidated financial statements of the Group as at and for
the 53 week period ended 31 March 2016 are available on request
from the Company's registered office and via the Company's
website.
The consolidated financial statements are prepared on the
historical cost basis except for derivative financial instruments,
share based payments and certain investments measured at their fair
value.
Statement of compliance
These condensed consolidated interim financial statements have
been prepared in accordance with the Disclosure and Transparency
Rules of the Financial Conduct Authority and with IAS34 Interim
Financial Reporting as adopted by the EU. They do not include all
of the information required for full annual financial statements,
and should be read in conjunction with the consolidated financial
statements of the Group as at and for the 53 week period ended 31
March 2016.
The financial information included in this interim statement of
results does not constitute statutory accounts within the meaning
of Section 435 of the Companies Act 2006 (the "Act"). The statutory
accounts for the 53 weeks ended 31 March 2016 have been reported on
by the Company's auditors and delivered to the Registrar of
Companies. The auditor's report was (i) unqualified, (ii) did not
include a reference to any matters to which the auditor drew
attention by way of emphasis without qualifying their report, and
(iii) did not contain a statement under section 498(2) or (3) of
the Companies Act 2006.
Going concern
The Directors of Pets at Home Group Plc, having made appropriate
enquiries, consider that adequate resources exist for the Group to
continue in operational existence for the foreseeable future and
that, therefore, it is appropriate to adopt the going concern basis
in preparing the condensed consolidated interim financial
statements as at and for the 28 week period ended 13 October
2016.
Significant accounting policies
The accounting policies adopted in preparation of the condensed
consolidated interim financial statements as at and for the 28 week
period ended 13 October 2016 are consistent with the policies
applied by the Group in its consolidated financial statements as at
and for the 53 week period ended 31 March 2016, except as described
below:
-- Taxes on income in the interim periods are accrued using the
tax rate that would be applicable to expected total annual profit
or loss.
Accounting estimates and judgments
The preparation of the condensed consolidated interim financial
statements in conformity with the Disclosure and Transparency Rules
of the Financial Conduct Authority and with IAS34 Interim Financial
Reporting as adopted by the EU requires management to make
judgments, estimates and assumptions concerning the future that
affect the application of accounting policies and the reported
amounts of assets, liabilities, income and expenses. These
judgments are based on historical experience and management's best
knowledge at the time and the actual results may ultimately differ
from these estimates. Estimates and underlying assumptions are
reviewed on an ongoing basis and revisions to accounting estimates
are recognised in the period in which the estimates are revised and
in any future periods affected.
The estimates and assumptions that have significant risk of
causing a material adjustment to the carrying value of assets and
liabilities are discussed below.
Carrying value of inventories
The Directors review the market value of and demand for its
inventories on a periodic basis to ensure inventory is recorded in
the financial statements at the lower of cost and net realisable
value. Any provision for impairment is recorded against the
carrying value of inventories. The Directors use their knowledge of
market conditions to assess future demand for the Group's products
and achievable selling prices.
Impairment of goodwill and other intangibles
Determining whether goodwill and other intangibles are impaired
requires an estimation of the value in use of the cash-generating
units to which goodwill and other intangible assets have been
allocated. The value in use calculation requires estimation of
future cash flows expected to arise from the cash-generating unit
and a suitable discount rate in order to calculate present
value.
Assumptions relating to tax
The Group recognises expected assets for tax based on an
estimation of the likely taxes receivable, which requires
significant judgment as to the ultimate tax determination of
certain items. Where the actual asset arising from these issues
differs from these estimates, such differences will have an impact
on income tax and deferred tax assets in the period when such
determination is made.
Provisions
Provisions have been made for dilapidations and for closed
stores. The provisions are based on historical experience and
management's best knowledge at the time and are reviewed at each
balance sheet date. The actual costs and timing of future cash
flows are dependent on future events. Any difference between
expectations and the actual future liability will be accounted for
in the period when such determination is made.
Investment in veterinary practices
The Group has a number of non-participatory shareholdings in
veterinary practice companies, which are accounted for as joint
venture arrangements. The veterinary practices were established
under terms that require mutual agreement between the Group and the
joint venture partner, and that do not give the Group power over
decision making to affect its exposure to, or the extent of, the
returns from its involvement with the practices and therefore are
not consolidated in these financial statements. Further, the Group
is not entitled to profit, losses, or any surplus on winding up or
disposal of the veterinary practices, and as such no participatory
interest is recognised.
Supplier income
A number of different types of supplier income are negotiated
with suppliers via the joint business planning process, in
connection with the purchase of goods for resale. The supplier
income arrangements typically are not co-terminus with the Group's
financial period, instead running alongside the calendar year. Such
income is only recognised when there is reasonable certainty that
the conditions for recognition have been met by the Group, and the
income can be measured reliably based on the terms of the contract.
This income is recognised as a credit within gross margin and, to
the extent that the rebate relates to unsold stock purchases, as a
reduction in the cost of inventory. Supplier income comprises three
main elements:
1. Fixed percentage based income: These relate largely to
volumetric rebates based on the joint business plan agreements with
suppliers. The income accrued is based on the Group's latest
forecast volumes and the latest contract agreed with the supplier.
Income is not recognised until the Group has reasonable certainty
that the joint business agreement will be fulfilled, with the
amount of income accrued regularly re-assessed and re-measured
throughout the contractual period, based on actual performance
against the joint business plan.
2. Fixed lump sum income: These are typically guaranteed lump
sum payments made by the supplier and are not based on volume.
Fixed lump sum income is usually predicated on confirmation of a
supplier contract and typically includes performance conditions
upon the Group, such as marketing and promotional campaigns. These
amounts are recognised periodically based on the most recent
assessment of contractual performance.
3. Growth income: These are tiered volumetric rebates relating
to growth targets agreed with the supplier in the joint business
planning process. These are retrospective rebates based on sales
volumes or purchased volumes. Income is recognised to the extent
that it is reasonably certain that the conditions will be achieved,
with such certainty increasing in the latter part of the calendar
year.
Supplier income is recognised on an accruals basis, based on the
expected entitlement that has been earned up to the balance sheet
date for each relevant supplier contract. The accrued incentives,
rebates and discounts receivable at period end are included within
trade and other receivables.
Put/Call options
The Group has acquired the controlling interest in a number of
subsidiary specialist veterinary referral centres, where a
non-controlling interest is retained by the previous
shareholder/key clinicians. The acquisition documents contain a
written put and call option for the non-controlling shareholder and
Group to acquire the non-controlling shares. Where the rights of
the non-controlling shareholders are restricted in accessing the
full risks and rewards of their shareholding then the written put
and call is treated as a forward contract and on acquisition forms
part of the fair value of consideration paid for their controlling
shareholding. The written put and call is recognised as a financial
liability and measured each period in line with management's best
estimate of future exercise and settlement.
2. Segmental reporting
The Directors consider there to be one reportable segment, being
that of the sale of pet products and services through retail
outlets, specialist vet referral services and the Group's
website.
The Group's Board receives monthly financial information at this
level and uses this information to monitor the performance of the
store portfolio, allocate resources and make operational decisions.
The internal reporting received focuses on the Group as a whole and
does not identify individual segments. To increase transparency,
the Group has decided to include an additional voluntary disclosure
analysing revenue within the reportable segment.
28 week 28 week 53 week
period period period
ended ended ended
13 October 8 October 31 March
Revenue 2016 2015 2016
GBP000 GBP000 GBP000
Food 209,544 202,108 390,041
Accessories 169,922 160,489 320,162
Services and other 61,850 41,906 82,923
441,316 404,503 793,126
The 'services and other' category includes veterinary group
income, veterinary referral centres, grooming revenue, insurance
commissions and the sale of pets.
3. Operating profit
The performance of the operating segment is primarily based on a
measure of Earnings Before Interest, Tax, Depreciation and
Amortisation (EBITDA) before exceptional items. This can be
reconciled to statutory operating profit as follows:
28 week 28 week 53 week
period period period
ended ended ended
13 October 8 October 31 March
2016 2015 2016
GBP000 GBP000 GBP000
Operating profit 48,718 48,199 101,428
Exceptional items (see
below) 996 - 835
Depreciation and amortisation 15,440 12,543 25,106
Earnings Before Interest,
Tax, Depreciation and
Amortisation (EBITDA) 65,154 60,742 127,369
=========== ========== =========
Included in operating profit are the following:
28 week 28 week 53 week
period period period
ended ended ended
13 October 8 October 31 March
2016 2015 2016
GBP000 GBP000 GBP000
Exceptional items 996 - 835
Depreciation of tangible
fixed assets 13,216 11,116 21,915
Amortisation of intangible
assets 2,224 1,427 3,191
Rentals under operating
leases:
Hire of plant and machinery 2,865 1,923 3,886
Property 39,400 36,307 70,405
Rental income from sublets (6,203) (5,291) (10,171)
Share based payment
charges 1,699 1,577 3,005
During the period, Pets at Home Group Plc disposed of its 100%
holding in the subsidiary Farm-Away Ltd. The exceptional items in
the period ended 13 October 2016 represent costs incurred in
relation to this disposal and consist of the following:
28 week
period ended
13 October
2016
GBP'000
Loss on disposal of net assets 690
Costs of disposal 306
996
==============
The provisions made include legal and professional fees,
redundancy costs and property costs.
Exceptional items in the 53 week period ended 31 March 2016
represent costs incurred in relation to the acquisitions completed
during the period and subsequent to the period end.
4. Earnings per share
Basic earnings per share is calculated by dividing the net
profit for the period attributable to ordinary shareholders by the
weighted average number of ordinary shares outstanding during the
period.
Diluted earnings per share is calculated by dividing the net
profit for the period attributable to ordinary shareholders by the
weighted average number of ordinary shares outstanding during the
period plus the weighted average number of ordinary shares that
would be issued on the conversion of all dilutive potential
ordinary shares into ordinary shares.
28 week period 28 week period 53 week period
ended ended ended
13 October 8 October 31 March
2016 2015 2016
Underlying After Underlying After Underlying After
Exceptionals Exceptionals Exceptionals
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Profit attributable
to equity shareholders
of the parent 37,124 36,189 35,788 32,327 77,079 72,783
'000s '000s '000s '000s '000s '000s
Basic weighted average
number of shares 500,000 500,000 500,000 500,000 500,000 500,000
Dilutive potential
ordinary shares 1,941 1,941 3,452 3,452 2,048 2,048
Diluted weighted
average number of
shares 501,941 501,941 503,452 503,452 502,048 502,048
Basic earnings per
share 7.4p 7.2p 7.2p 6.5p 15.4p 14.6p
Diluted earnings
per share 7.4p 7.2p 7.1p 6.4p 15.4p 14.5p
5. Financial expense
Recognised in the income statement
28 week 28 week 53 week
period period period
ended ended ended
13 October 8 October 31 March
2016 2015 2016
GBP000 GBP000 GBP000
Bank loans at effective
interest rate 2,885 3,146 5,628
Other interest
expense 95 - -
Total underlying
financial expense 2,980 3,146 5,628
Exceptional amortisation
costs - 4,326 4,326
Total exceptional
financial expense - 4,326 4,326
Total financial
expense 2,980 7,472 9,954
Exceptional financial expenses in the 28 week period ended 8
October 2015 and the 53 week period ended 31 March 2016 related to
GBP4,326,000 of accelerated amortisation following the repayment of
the senior banking facilities.
6. Taxation
Recognised in the income statement
28 week period ended 28 week period ended 53 week period ended
13 October 2016 8 October 2015 31 March 2016
Underlying Exceptional Total Underlying Exceptional Total Underlying Exceptional Total
------------- ----------- ------
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Current tax
expense
Current period 11,109 (61) 11,048 9,419 (865) 8,554 20,306 (865) 19,441
Adjustments in
respect
of prior periods - - - - - - (294) - (294)
Current tax
expense 11,109 (61) 11,048 9,419 (865) 8,554 20,012 (865) 19,147
Deferred tax
(credit)/expense
Origination and
reversal of
temporary
differences (1,241) - (1,241) 24 - 24 155 - 155
Reduction in tax
rate - - - - - - (263) - (263)
Adjustments in
respect
of prior periods - - - - - - 320 - 320
Deferred tax
(credit)/expense (1,241) - (1,241) 24 - 24 212 - 212
Total tax expense 9,868 (61) 9,807 9,443 (865) 8,578 20,224 (865) 19,359
The UK corporation tax standard rate for the period was 20%
(2016: 20%). The March 2015 budget announced that the UK
corporation tax rate will further reduce to 19% (effective from 1
April 2017). The March 2016 budget announced a further reduction in
the corporation tax rate to 17% from 1 April 2020. Deferred tax at
13 October 2016 has been calculated based on the rate of 19% which
is the rate at which the majority of items are expected to
reverse.
Deferred tax recognised in other comprehensive income
28 week 28 week 53 week
period ended period ended period ended
13 October 8 October 31 March
2016 2015 2016
GBP000 GBP000 GBP000
Effective portion of changes
in fair value of cash flow
hedges 869 (460) (320)
Reconciliation of effective tax rate
28 week period ended 28 week period ended 53 week period ended
13 October 2016 8 October 2015 31 March 2016
Underlying Exceptional Total Underlying Exceptional Total Underlying Exceptional Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Profit for
the period 37,124 (935) 36,189 35,788 3,461 32,327 77,079 (4,296) 72,783
Total tax expense 9,868 (61) 9,807 9,443 865 8,578 20,224 (865) 19,359
Profit excluding
taxation 46,992 (996) 45,996 45,231 4,326 40,905 97,303 (5,161) 92,142
Tax using the
UK corporation
tax rate for
the period 9,398 (199) 9,199 9,046 (865) 8,181 19,460 (1,032) 18,428
Difference
between
corporation
tax and deferred
tax rates 66 - 66 - - - (263) - (263)
Expenditure
not eligible
for tax relief 404 138 542 397 - 397 862 - 862
Other - - - - - - 139 167 306
Adjustments
in respect
of prior periods - - - - - - 26 - 26
Total tax expense 9,868 (61) 9,807 9,443 (865) 8,578 20,224 (865) 19,359
The UK corporation tax standard rate for the period was 20%
(period ended 26 March 2015: 21%; period ended 9 October 2015:
20%)
7. Tangible fixed assets
Freehold Leasehold Fixtures, Total
buildings improvements fittings,
tools
and equipment
GBP000 GBP000 GBP000 GBP000
Cost
Balance at 31 March
2016 2,517 41,174 155,235 198,926
Additions 48 1,846 16,602 18,496
On acquisition - 1,762 1,291 3,053
Disposals - (674) (1,811) (2,485)
Balance at 13 October
2016 2,565 44,108 171,317 217,990
Depreciation
Balance at 31 March
2016 158 12,608 71,414 84,180
Depreciation charge
for the period 21 1,631 11,564 13,216
Disposals - (67) (1,077) (1,144)
Balance at 13 October
2016 179 14,172 81,901 96,252
Net book value
At 26 March 2015 2,390 25,247 75,253 102,890
At 8 October 2015 3,902 26,164 74,259 104,325
At 31 March 2016 2,359 28,566 83,821 114,746
At 13 October 2016 2,386 29,936 89,416 121,738
8. Intangible assets
Goodwill Software Total
GBP000 GBP000 GBP000
Cost
Balance at 31 March 2016 965,925 19,133 985,058
Additions 14,888 2,424 17,312
Balance at 13 October 2016 980,813 21,557 1,002,370
Amortisation
Balance at 31 March 2016 - 11,509 11,509
Amortisation for the period - 2,224 2,224
Balance at 13 October 2016 - 13,733 13,733
Net book value
At 26 March 2015 952,032 3,480 955,512
At 8 October 2015 954,865 4,479 959,344
At 31 March 2016 965,925 7,624 973,549
At 13 October 2016 980,813 7,824 988,637
Amortisation and impairment charge
The amortisation charge is recognised in total in operating
expenses within the income statement.
Impairment testing
Cash Generating Units ('CGU') within the Group are considered to
be the body of stores including vets practices, and the Group's
websites as disclosed in note 2. The Group is deemed to have one
overall group of CGUs as follows:
Goodwill
At 13 October At 8 At 31
2016 October March
2015 2016
GBP000 GBP000 GBP000
Pets at Home Group 980,813 954,865 965,925
The recoverable amount of the CGU has been calculated with
reference to its value in use. The key assumptions of this
calculation are shown below:
At 13 October At 8 At 31
2016 October March
2015 2016
GBP000 GBP000 GBP000
Period on which management
approved forecasts are based
(years) 3 3 3
Growth rate applied beyond
approved forecast period 3% 3% 3%
Discount rate (pre-tax) 9% 9% 10%
The goodwill is considered to have an indefinite useful economic
life and the recoverable amount is determined based on
"value-in-use" calculations. These calculations use pre-tax cash
flow projections based on a 3 year business plan submitted to the
Board. These projections are based on all available information and
growth rates do not exceed growth rates achieved in prior
periods.
The discount rate was estimated based on past experience and
industry average weighted average cost of capital. Management have
assumed a growth rate projection beyond the 3 year period based on
inflationary increases. Sensitivity analysis was performed with a
2% movement in the discount rate with no indicators of impairment
identified.
The total recoverable amount in respect of goodwill for the CGU
group as assessed by the Directors using the above assumptions is
greater than the carrying amount and therefore no impairment charge
has been booked in each period. The Directors consider that it is
not reasonably possible for the assumptions to change so
significantly as to eliminate the excess.
9. Other interest-bearing loans and borrowings
On 14 April 2015, the Company and certain of its subsidiaries
entered into the Amendment Agreement to the Senior Facilities
Agreement. The Amendment Agreement became effective on 15 April
2015 (the "Effective Date").
The Amendment Agreement provided that a new revolving facility
of GBP260 million (the "Revolving Facility 2") was incorporated
into the Senior Facilities Agreement. The existing term loans and
revolving facilities were repaid on 15 April 2015, with cash held
on the balance sheet and the proceeds of a drawing under Revolving
Facility 2. Upon repayment these term loans and revolving
facilities were cancelled.
Revolving Facility 2 is available for drawing to finance and/or
refinance (as applicable) the general corporate purposes and/or
working capital requirements of the Group. The interest rate
applicable to Revolving Facility 2 is LIBOR plus a margin ranging
between 0.75% and 2.00% per annum depending on the ratio of
consolidated EBITDA to total net debt. The margin currently
applicable to utilisations under Revolving Facility 2 is 1.25% per
annum.
The Group has available to it the Revolving Facility 2 up to a
maximum of GBP260m, of which GBP47m was undrawn at the period end.
Subject to certain conditions being met, the Amendment Agreement
allows the Group to add additional facilities, on consistent terms
up to GBP150,000,000 if required ("Additional Facilities"). Such
Additional Facilities would not require further consent from the
existing lenders.
The Amendment Agreement commenced on 15 April 2015 and will
terminate on 14 April 2020.
All bank borrowings are secured by fixed and floating charges
over substantially all of the assets of the Pets at Home Group Plc
and certain of its subsidiaries. The security includes fixed
charges over the head office freehold property, the distribution
centre leasehold properties, and any plant and machinery owned by
the Company or the relevant subsidiaries.
At 13 At 8 At 31
October October March
2016 2015 2016
GBP000 GBP000 GBP000
Non-current liabilities
Revolving credit facility 212,198 211,902 201,091
212,198 211,902 201,091
========= ========= ========
Total liabilities
Revolving credit facility 212,198 211,902 201,091
212,198 211,902 201,091
========= ========= ========
The analysis of repayments on the combined loan principal is as
follows:
At 13 At 8 October At 31
October 2015 March
2016 2016
GBP000 GBP000 GBP000
Within one year or repayable - - -
on demand
Between one and two years - - -
Between two and five years 213,000 213,000 202,000
After five years - - -
213,000 213,000 202,000
Terms and debt repayment schedule
Nominal
interest Year of Face Face Face
rate maturity value Carrying amount value Carrying amount value Carrying amount
13 October 2016 13 October 2016 8 October 2015 8 October 2015 31 March 2016 31 March 2016
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Senior
Facility
Revolving
Credit
Facility LIBOR
2 +1.5% 2020 - - 213,000 211,902 202,000 201,091
Senior
Facility
Revolving
Credit
Facility LIBOR +
2 1.25% 2020 213,000 212,198 - - - -
213,000 212,198 213,000 211,902 202,000 201,091
Pets at Home Group Plc has entered into fixed rate interest rate
swap agreements over the senior facility borrowings at various
fixed rates using a number of hedging instruments which expire
between 30 March 2016 and 30 March 2019. The instruments are
structured to hedge at least 70% of outstanding debt.
The notional values set out according to the expiry date of the
instrument is as follows:
Period in which the instrument expires: 30 March 2017 29 March 2018 29 March 2018 28 March 2019
Notional value contracted GBP150.0m GBP85.0m GBP67.8m GBP142.1m
Rate payable 1.087% 1.639% 0.183% 0.183%
Rate receivable LIBOR LIBOR LIBOR LIBOR
Commencement 30/03/2016 30/03/2017 30/03/2017 30/03/2018
Expiry 30/03/2017 30/03/2018 30/03/2018 30/03/2019
10. Financial instruments
Fair value hierarchy
The table below analyses financial instruments measured at fair
value, into a fair value hierarchy based on the valuation technique
used to determine fair value.
-- Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities.
-- Level 2: inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from
prices).
-- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
13 October 2016 Level 1 Level 2 Level 3 Total
GBP000 GBP000 GBP000 GBP000
Available for sale financial assets
Investment in equity securities - - 11,646 11,646
Derivative financial assets
Forward rate contracts - 5,159 - 5,159
Fuel forward contracts - 21 - 21
Interest rate swaps - 362 - 362
Derivative financial liabilities
Interest rate swaps - (1,732) - (1,732)
Other financial liabilities - - (8,240) (8,240)
8 October 2015 Level 1 Level 2 Level 3 Total
GBP000 GBP000 GBP000 GBP000
Available for sale financial assets
Investment in equity securities - - 8,724 8,724
Derivative financial assets
Forward rate contracts - 42 - 42
Derivative financial liabilities
Interest rate swaps - (1,186) - (1,186)
Fuel forward contracts - (90) - (90)
31 March 2016 Level 1 Level 2 Level 3 Total
GBP000 GBP000 GBP000 GBP000
Available for sale financial assets
Investment in equity securities - - 9,143 9,143
Derivative financial assets
Forward rate contracts - 1,290 - 1,290
Derivative financial liabilities
Interest rate swaps - (1,709) - (1,709)
Fuel forward contracts - (116) - (116)
Other financial liabilities - - (5,413) (5,413)
Measurement of fair values
Valuation techniques and significant unobservable inputs
The following table shows the valuation techniques used in
measuring Level 2 and Level 3 fair values at the balance sheet
dates, as well as the significant unobservable inputs used.
Type Valuation technique Significant Inter-relationship
unobservable between significant
inputs unobservable
inputs and
fair value
measurement
Investment The fair value Not applicable Not applicable
in equity of investments
securities in unlisted equity
securities are
considered to be
their carrying
value as the impact
of discounting
future cash flows
has been assessed
as not material
and the investment
is
non-participatory.
Forward Market comparison Not applicable Not applicable
exchange technique - the
contracts fair values are
and interest based on broker
rate swaps quotes. Similar
contracts are traded
in an active market
and the quotes
reflect the actual
transactions on
similar instruments.
11. Dividends
On 22 November 2016 the Directors declared an interim dividend
of 2.5 pence per share, amounting to GBP12.5 million, which is
payable on 6 January 2017 to ordinary shareholders on the register
at the close of business on 2 December 2016.
12. Seasonality of operations
The Group's sales can be sensitive to periods of extreme weather
conditions. The Group sometimes sees a reduction in sales during
periods of hot weather in the UK, due to reduced customer footfall
and reduced demand as pets eat less and generally spend more time
outdoors, reducing the need for essentials such as food and cat
litter. If temperatures are extremely high for a prolonged period,
declines in sales can be material. The number of customers visiting
Pets at Home's stores also declines during periods of snow or
extreme weather conditions affecting the local catchment area. In
addition, the sales of certain products and services designed to
address pet health needs, such as flea and tick problems, can also
be seasonal, increasing in times of warm and wet weather.
Traditionally the financial performance of the Group in the
four-week period to the end of December is marginally stronger than
in the other periods, due to Christmas purchasing. Purchasing of
Accessories is also more prevalent during this season. Timing of
the holiday season and any adverse weather conditions that may
occur during that season impacting delivery may adversely affect
sales in our stores.
13. Related party transactions
Veterinary practice transactions
The Group has entered into a number of arrangements with third
parties in respect of veterinary practices. These veterinary
practices are deemed to be related parties.
The transactions entered into during the period, and the
balances outstanding at the end of the period are as follows:
28 week 28 week 53 week
period ended period period
13 October ended 8 ended 26
2016 October March 2016
2015
GBP000 GBP000 GBP000
Transactions
Fees for services
provided to veterinary
practices 27,151 18,356 42,935
Rental charges to
veterinary practices 5,642 4,746 10,171
============== ============= ============
At 13 October At 8 October At 31 March
2016 2015 2016
GBP000 GBP000 GBP000
Due from veterinary
practice companies
at end of period
included within
other receivables 5,363 18,189 8,929
============== ============= ============
14 Business Combinations
Eye-Vet Limited
On 5 April 2016, the Group acquired 90% of the total share
capital of Eye-Vet Limited in exchange for cash of GBP1,425,000.
The remaining share capital of Eye-Vet Limited is held by
non-controlling interests.
A put and call option, written into the Articles of Association,
allows the non-controlling shareholders to require sale of their
shares to the Group based on an agreed pricing methodology at
certain points in the future. The Articles also contain provision
for the Group to buy the non-controlling shares under the same
pricing mechanism at certain times.
The put and call option has been treated as a forward contract
and as a result, the financial statements are prepared on the basis
that the Group owns 100% of the total share capital of Eye-Vet
Limited. Therefore no non-controlling interest is recognised. The
deemed value of the put and call option is treated as a forward
contract.
The provisional fair value of consideration was GBP1,567,000,
comprising GBP1,425,000 of cash and GBP142,000 being the fair value
of the forward contract. The fair value of nets asssets acquired
was GBP249,000 including GBP133,000 of tangible fixed assets. There
were no provisional fair value adjustments to acquired carrying
values. Provisional goodwill of GBP1,318,000 has resulted and has
been recognised on the balance sheet within these interim financial
statements. Provisional acquisition related costs of GBP95,000 have
been excluded from the consideration transferred and have been
recognised as an expense in the profit and loss account in the
previous year, within the 'exceptional administrative expenses'
line item.
Dick White Referrals Limited
On 28 April 2016, the Group acquired 76% of the total share
capital of Dick White Referrals Limited in exchange for cash of
GBP13,780,000 and contingent consideration. The remaining share
capital of Dick White Referrals Limited is held by non-controlling
interests.
A put and call option, written into the Articles of Association,
allows the non-controlling shareholders to require sale of their
shares to the Group based on an agreed pricing methodology at
certain points in the future. The Articles also contain provision
for the Group to buy the non-controlling shares under the same
pricing mechanism at certain times.
The put and call option has been treated as a forward contract
and as a result, the financial statements are prepared on the basis
that the Group owns 100% of the total share capital of Dick White
Referrals Limited. Therefore no non-controlling interest is
recognised. The deemed value of the put and call option is treated
as a forward contract.
The provisional fair value of consideration was GBP17,731,000,
comprising GBP13,780,000 of cash and GBP3,951,000 being the fair
value of the forward contract. The fair value of nets asssets
acquired was GBP2,660,000 including GBP2,920,000 of tangible fixed
assets. There were no provisional fair value adjustments to
acquired carrying values. Provisional goodwill of GBP15,071,000 has
resulted and has been recognised on the balance sheet within these
interim financial statements. Provisional acquisition related costs
of GBP228,000 have been excluded from the consideration transferred
and have been recognised as an expense in the profit and loss
account in the previous year, within the 'exceptional
administrative expenses' line item.
Anderson Moores Limited
During the period the provisional values in relation to the fair
value of consideration offered to acquire a controlling interest in
Anderson Moores Limited, acquired in the prior year, have been
updated. This has resulted in a decrease in the associated goodwill
of GBP1,501,000.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR AKNDNFBDDCDB
(END) Dow Jones Newswires
November 24, 2016 02:01 ET (07:01 GMT)
Pets At Home (LSE:PETS)
Historical Stock Chart
From Jun 2024 to Jul 2024
Pets At Home (LSE:PETS)
Historical Stock Chart
From Jul 2023 to Jul 2024
