TIDMPETS
RNS Number : 1726G
Pets At Home Group Plc
25 May 2017
Pets at Home Group Plc: Preliminary Results FY17
Pets at Home Group Plc, the UK's leading specialist retailer of
pet food, accessories, veterinary and grooming services, today
announces audited preliminary results for the 52 weeks to 30 March
2017. The audited comparative period represents 53 weeks to 31
March 2016, but to provide a meaningful comparison, the more
appropriate prior year period is the 52 weeks to 24 March 2016. All
commentary in this statement in respect of the comparative period
is based on the proforma 52-week period to 24 March 2016 unless
otherwise stated.
Financial summary and highlights
GBPm FY17 Change Change
Audited 52 weeks to 30 FY17 vs 52 weeks to 24 FY17 vs 53 weeks to 31
March 2017 March 2016 March 2016
Group like-for-like revenue
growth(#) 1.5%
Merchandise LFL(#) 0.8%
Services LFL(#) 7.9%
Group revenue 834.2 7.2% 5.2%
Merchandise revenue 716.7 2.9% 0.9%
Services revenue 117.5 44.5% 41.7%
Group gross margin 54.2% (35) bps (35) bps
Pre-exceptional EBITDA(1,
#) 130.5 4.7% 2.5%
Pre-exceptional PBT(1,2,)
(#) 96.4 1.1% (1.0)%
Statutory PBT 95.4 5.8% 3.5%
Free cashflow(#) 64.6 (17.0)% (9.8)%
1. FY16 52 & 53 week periods exclude GBP0.8m of acquisition
related expenses. FY17 excludes GBP1.0m of expenses for the
disposal of Farm Away Limited, the Group's equestrian retailing
business. 2. FY16 52 & 53 weeks excludes an exceptional finance
expense of GBP4.3m associated with the amortisation of capitalised
fees from the previous finance facility.
-- Total income from Joint Venture vet practices up 24.6%(*) to GBP47.1m
-- Positive response to the launch of pricing initiatives in
Advanced Nutrition private labels and everyday pet essentials.
Pricing initiatives now extending to branded foods
-- Progress in Q4 with Merchandise returning to growth. Q4
LFLs(#) : Group 1.2%, Merchandise 0.5% & Services 7.1% when
adjusted for the impact of Easter(3)
-- New openings in line with targets: 15 superstores, 50 vet
practices and 50 grooming salons. A further two veterinary
specialist referral centres acquired
-- Strong results from omnichannel investment with online
revenue growth of 53%: launched colleague assisted 'Order in-store'
and a subscription platform with potential for broader product
application
-- Total dividend payable of 7.5 pence per share
3. Compares trading in the 11 weeks from 6th January 2017, with
the 11 weeks from 6th January 2016
Ian Kellett, Group Chief Executive Officer, commented:
"We have delivered a solid performance over the year with
profits in line with expectations, reflecting in part the strength
of our Joint Venture vet practices where our total income grew
24.6%.
We are uniquely positioned as the only UK pet business
delivering an integrated omnichannel and services offer, supported
by our fast growing Vet Group, market leading private labels and
expert colleagues. In an evolving consumer environment, we are
taking steps to reposition prices on own label Advanced Nutrition
and pet essentials and have made some initial changes to branded
food lines. Encouraged by the reaction of our customers and having
seen an improvement in Merchandise LFL to 1.0% in the 16 weeks
since launch, we will move swiftly to deliver even better value. We
are confident this is the right path for success and will give us a
strong platform for sustainable future growth."
Outlook
We operate in a resilient market, which is forecast to grow at
c4.5%(3) over the next five years. Whilst in the near term we are
repositioning the Merchandise business and investing in the
customer, we are seeing results from our actions and believe this
will deliver profitable growth benefits in future years. We will
also continue the fast pace of top line and profit growth in our
veterinary business. Our existing Joint Venture vet practices
already deliver income to the Group of GBP47.1m, but have the
potential to generate more than GBP80m when fully mature. We remain
a cash generative business, with a priority to invest in our core
capabilities.
Market data sourced from OC&C Strategy Consultants
FY18 guidance
-- Rollout: c10 superstores, 40-50 vet practices, 40-50 grooming salons
-- Group gross margin (100) - (200) bps, which includes price investment and FX cost
-- Operational cost growth (excluding depreciation and
amortisation) of 4.5-5.5%, which includes cost from the step up in
National Living Wage and Apprenticeship Levy, new store openings
and operational cost savings
-- Depreciation and amortisation GBP34 - 35m, weighted more to the H1
-- Net interest GBP4-5m
-- Effective tax rate 20%
-- Capital investment cGBP40-42m - includes the remainder of the
one-off energy savings project at GBP3m
-- Ordinary dividend payment maintained at least at the prior year level
-- Working capital outflow of around GBP5m to support vet practice growth
-- Non-underlying items: accounting treatment of the minority
stakes owned by vet partners in the specialist referral centres may
lead to a non cash operating expense charge of up to GBP2m. See
page 13 for further detail
Board appointments
Paul Coby and Amy Stirling, Independent Non-Executive Directors,
will step down from the Board at the Annual General Meeting on 11
July 2017. Paul will be succeeded by Stansilas Laurent, former
President and CEO of Photobox and COO of AOL.com Europe. Amy
Stirling, will be succeeded by Sharon Flood as Chairman of the
Audit Committee. Sharon is the Chairman of ST Du Pont S.A and Audit
Chair at Crest Nicholson plc and Network Rail.
Results presentation
A presentation for analysts and investors will be held today at
9am 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
Pets at Home Group Plc: +44 (0)161 486 6688
Amie Gramlick, Director of Investor Relations
1. Media Enquiries
Pets at Home Group Plc: +44 (0)161 486 6688
Brian Hudspith, Director of Corporate Affairs
Maitland: +44 (0)20 7379 5151
Rebecca Mitchell, Neil Bennett
2. 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 434 superstores located across the UK. The Group operates the
UK's largest small animal veterinary business with 438 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 290 grooming salons. The Group also
operates seven specialist High Street based dog stores, called
Barkers. For more information visit:
http://investors.petsathome.com/
Disclaimer
This statement of preliminary 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 preliminary 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. 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.
Chief Executive Officer's Review
Operational Highlights
ROLLOUT FY16 FY17
Audited 53 weeks to 31 March 2016 Audited 52 weeks to 30 March 2017
Stores Number of stores(1) 427 442
New stores(1) 27 15
Vets Number of vet practices (total) 388 438
Number of standalone vet practices 138 149
Number of in-store vet practices 250 289
New vet practices (total) 50 50
Groomers Number of groomers(1) 240 290
New groomers 60 50
% of stores with a vet practice & grooming
salon 42% 54%
VIP CLUB
VIP Club active members (m) (2) 3.4 3.7
VIP swipe as % revenue(3) 64% 68%
PRODUCT
Proportion of product SKUs refreshed 40% 39%
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
Market review
Market data sourced from OC&C Strategy Consultants
The UK pet market has increased its rate of growth over the past
two years to a CAGR of 4.5% and was worth GBP6.8bn in calendar year
2016. This step forward has been driven by faster growth in the
veterinary, insurance and accessories segments.
The veterinary market grew at a CAGR of 5.6% over this same
period, which is being driven by the widening availability of more
complex procedures and diagnostics, supported by increasing numbers
of pet owners with insurance. In food, strong growth in Advanced
Nutrition continued at a CAGR of 8.9%, balanced with a flat grocery
food market where volumes are falling and pricing remains highly
competitive. With the accessories market CAGR at 1.9%, this led to
an overall pet products market CAGR of 2.1%.
The transition of the market to online has been consistent with
our expectations, accelerating slightly compared with historical
rates, reaching 11% of the pet market in 2016.
Over the two year period from 2014 to 2016 we have taken share
across the pet market both online and offline. Overall we have
grown our share of the important strategic categories including
Advanced Nutrition, accessories and veterinary. From 2014-2016, our
total share of the pet products market increased from 19% to 20%
and in the primary opinion veterinary market from 9% to 12%.
Expanding like-for-like growth
Better value for customers
In the Merchandise business our focus is on delivering even
better value for our customers. Value includes price, but also
innovation, service and advice. The strong sales of dog accessories
this year are continuing proof that our range innovation drives a
positive customer response. And to improve further on our service
to customers, we are refocusing our Steps training programme to
ensure more colleagues can develop their expertise at a faster rate
in more specialist areas.
We also understand there is a need to provide better pricing to
customers. This will involve a move away from promotional offers
and vouchers, and towards a simpler, more competitive approach.
We therefore initiated pricing changes in the fourth quarter
with the Switch & Save campaign, which highlights the value in
our private label foods, Wainwright's and AVA. The prices on our
large bag private label dog foods are now 15-25% lower. Initial
results from the campaign have been encouraging and since its
launch in January 2017 we have seen an average 50% uplift in the
volume of products that have seen a price change. We have also seen
an increase in new shoppers, alongside the switching of existing
customers from branded foods into our own labels.
In the current financial year we have launched price reductions
across a number of everyday pet essentials and are also starting to
reposition prices in branded foods.
Whilst it is early days, we are encouraged by the improvement in
the run rate of Merchandise LFL(#) to 1.0%* in the 16 weeks from
the start of our price repositioning actions.
*Refers to the 16 week period from 26 Jan - 18 May 2017
Fast growth and embedded upside in our veterinary business
Our Vet Group continues to go from strength to strength;
transacting more than GBP260m in total customer revenues during the
financial year. In the first opinion business, mature practices
grew their customer revenues at 8%(*) , ahead of the market rate of
around 5%. We now have over 100 mature practices that are on
average delivering income to the Group of more than GBP160,000 per
year. Combined with our maturing practices, this translated into
strong total JV practice income of GBP47.1m, up 24.6%.
The average age of a practice in our Group is less than five
years, when maturity is typically reached at eight years post
opening; and having already invested the majority of cost required
to support their future growth, there is an inherent embedded
profit upside in the current portfolio.
Our newer specialist referral centres also performed well and
their integration is delivering group benefits through the sharing
of best practice and leveraging scale.
In the year ahead, to accelerate growth in the existing
practices, we will increase the number of practices with extended
opening hours, invest further in marketing to increase brand
awareness and customer care plan participation. And we continue to
explore opportunities in the market that will deliver growth to our
first opinion and referral businesses, whilst retaining a
disciplined approach to capital allocation.
Omnichannel capabilities growing
Our online business performed very well during the year, growing
revenues at 53%. The convenience of our UK wide store footprint
remains, with almost half the revenue of online orders delivered
for customer pickup in-store. Alongside our ongoing improvements in
website customer experience, there were a number of major
initiatives launched this year:
Order in-store: our colleagues can now place an order for all
the products in our extended online range from their PetPads. This
gives store customers easy access to even more of our range and has
already delivered over GBP2m in revenue since its launch at the end
of the financial year, which we believe is driving incremental
sales.
Our first subscription service; 'Subscribe & Save flea
treatment' exclusively for VIP members, 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. The convenience of
this plan has proved very popular with customers, with subscription
sales now representing 16% of our total licensed medicine revenues.
We plan to extend subscription with another licensed medicine
launch in the coming months.
Having seen such a positive customer response to these
developments, we will continue to invest and improve our
omnichannel offer and develop our subscription platform in the
coming year.
A more personalised approach through VIP
We have seen more successes in the VIP club this year, having
launched the VIP App, which removes the need for customers to
physically carry the VIP card to swipe and build points for their
nominated charity. We have increased the overall VIP swipe rate of
the VIP card at tills to 68% of store revenues (prior year 64%),
and expect the rate to be stable going forward.
We are successfully encouraging our VIPs to spend more, the
longer they are members of the VIP club. And we are encouraging our
VIPs to shop multiple brands, with nearly 500,000 members
purchasing both products and a service, a number which has grown by
14% compared with the prior year. The benefits of multibrand
shoppers are very clear; a customer who purchases online or in our
stores, but does not use any services spends around GBP140 a year.
Whilst a customer who also uses either of our vet and grooming
services will spend over GBP180 on products, plus an additional
GBP200 per year on services. This reflects the increased loyalty
and shopping frequency of services customers.
Space rollout and footprint development
We delivered our rollout targets for the year, having opened 15
new superstores (total 434), 50 vet practices (total 438) and 50
grooming salons (total 290). Paybacks and returns on our new and
maturing units remain in line with our expectations.
In the year ahead, our vet practice and grooming salon rollout
will continue at a similar pace, with openings of 40-50 vet
practices and 40-50 grooming salons. We expect to open around ten
superstores, lower than in the previous year, as we come closer to
our UK rollout target of 500 stores and maintain a disciplined
approach to approving suitable new sites.
Supporting margins
As planned, Group gross margin declined by (35) bps(*) to 54.2%;
driven by the dilutive mix impact of newly acquired specialist
referral centres and increase in overall Services participation,
which has a lower gross margin than the Merchandise business. In
operating costs, the first year of the National Living Wage, our
slower top line growth and gross margin dilution contributed to
pre-exceptional EBITDA(#) margin declining by 38 bps(*) to
15.6%.
In the coming year, we will invest in product pricing, and widen
our marketing campaigns, to drive sales. We will also see an
increase in cost pressures that impact both gross and operating
margins, including Sterling depreciation, another step up in the
National Living Wage, and the Apprenticeship Levy.
In order to mitigate some of these pressures, we have already
begun to implement a comprehensive simplification programme, which
will deliver operational cost savings over the coming year. These
will be achieved through efficiencies in store, a simplification of
processes in our distribution centre, a reduction in the number of
products we stock; and energy savings from the installation of LED
lights and energy management systems across the store estate. This
will mitigate some of the overall cost challenges, alongside the
profit and margin support provided by our growing Services business
and private label products, but overall, we expect to see a decline
in Group gross margin(#) . This reflects the coming year as one of
repositioning the business, which we are confident is the right
path for the future success of the Group.
Ian Kellett
Group Chief Executive Officer
25 May 2017
Chief Financial Officer's Review
The FY17 audited period represents the 52 weeks to 30 March
2017. The audited comparative period represents 53 weeks to 31
March 2016, but to provide a meaningful comparison, the more
appropriate prior year period is the 52 weeks to 24 March 2016. All
commentary in this statement in respect of the comparative period
is based on the proforma 52-week period to 24 March 2016 unless
otherwise stated.
Financial Highlights
FINANCIALS FY16 FY16 FY17 Change
Audited 53 Proforma 52 Audited 52 Onproforma
weeks to 31 weeks to 24 weeks to 30 52 weeks to 24
March 2016 March 2016 March 2017 Mar 2016
Revenue Revenue Split (GBPm)
Food 390.0 382.5 395.1 3.3%
Accessories 320.2 314.0 321.6 2.4%
Total Merchandise 710.2 696.5 716.7 2.9%
Services & other(1) 82.9 81.3 117.5 44.5%
Total Group 793.1 777.8 834.2 7.2%
Like-For-Like growth(#) 2.1% 2.2% 1.5%
Merchandise LFL (#) 1.4% 1.5% 0.8%
Services & other LFL (#) 10.0% 10.4% 7.9%
Revenue Mix (% of total
revenues)
Merchandise 89.5% 89.5% 85.9% 363 bps
Services & Other 10.5% 10.5% 14.1% 363 bps
Gross Margin Merchandise Gross Margin 57.0% 57.0% 57.6% 56 bps
Services & Other Gross Margin 32.9% 33.0% 33.3% 34 bps
Total Gross Margin 54.5% 54.5% 54.2% (35) bps
Pre-exceptional EBITDA(2,)
EBITDA (#) (GBPm) 127.4 124.7 130.5 4.7%
Pre-exceptional EBITDA margin(2,) (#) 16.1% 16.0% 15.6% (38)bps
Other
Income Pre-exceptional PBT (2,3,)
Statement (#) (GBPm) 97.3 95.3 96.4 1.1%
Statutory PBT (GBPm) 92.1 90.2 95.4 5.8%
Pre-exceptional basic EPS(3,) (#) (p) 15.4 15.1 15.3 1.0%
Statutory basic EPS 14.6 - 15.1 3.4%
Dividend (p) 7.5 - 7.5 0%
Cashflow &
Leverage Free cashflow(#) (GBPm) 71.6 77.8 64.6 (17.0)%
CROIC(#) 22.1% - 20.6% (150)bps
Leverage (ND/pre-exceptionalEBITDA) (#) 1.3x 1.2x 1.2x
1 Includes veterinary Joint Venture fees & other veterinary
income, specialist referrals revenue, grooming salon revenue,
revenue from live pet sales & insurance
2 FY17 excludes GBP1.0m of costs related to the disposal of Farm
Away Limited. FY16 52 & 53 weeks excludes GBP0.8m of
acquisition related expenses
3 FY16 52 & 53 weeks excludes an exceptional finance expense
of GBP4.3m associated with the amortisation of capitalised fees
from the previous finance facility
Sales and revenue
Group revenue grew by 7.2%(*) to GBP834.2m (FY16: GBP777.8m(*)
), with good performance in Advanced Nutrition and pet services.
Like-for-like sales (LFL) grew 1.5%(*, #) , driven by veterinary
and grooming services, omnichannel, and Advanced Nutrition.
Merchandise revenue, which includes Food and Accessories, grew
by 2.9%(*) to GBP716.7m (FY16: GBP696.5m(*) ), with LFL sales of
0.8%(*, #) . Whilst this reflects an overall slower performance in
the business, we have also reduced Merchandise LFL space by around
0.5% during the year through the retrofit of services into existing
stores.
Food revenue grew by 3.3%(*) to GBP395.1m (FY16: GBP382.5m(*) ),
with strong performance in dog Advanced Nutrition and natural based
treats, reflecting the ongoing trend for dog owners to feed a
higher quality diet. Advanced Nutrition revenue grew by 4.1%(*) to
GBP179.1m (FY16: GBP172.0m(*) ). Grocery food performance was soft,
reflective of the overall market growth in this declining and
highly competitive product area, alongside weak performance in wild
bird food, which was tightly correlated with the warmer
temperatures in Autumn.
Accessories revenue grew by 2.4%(*) to GBP321.6m (FY16:
GBP314.0m(*) ). We saw excellent growth across dog accessories and
an improved performance in Health & Hygiene. This was somewhat
offset by weakness in aquatics accessories, an area in the store
where space is typically reduced following vet practice and
grooming salon retrofits.
Services revenue grew by 44.5%(*) to GBP117.5m (FY16:
GBP81.3m(*) ), with LFL sales of 7.9%(*, #) . This reflects the
acquisition of referral centres and another year of excellent
growth in our vet practices and grooming salons. Growth in our
Joint Venture (JV) veterinary practices was strong, generating
total income of GBP47.1m (FY16: GBP37.8m(*) ), up 24.6%(*) compared
with the prior year.
Gross margin
Group gross margin declined by 35bps(*) to 54.2% (FY16: 54.5%(*)
), driven primarily by the increasing mix of Services with the
business.
Gross margin within Merchandise was 57.6%, an expansion of 56
bps(*) on the prior year (FY16: 57.0%(*) ), where we absorbed a
negative foreign currency impact of GBP2.2m.
Gross margin within Services grew by 34 bps(*) to 33.3% (FY16:
33.0%(*) ), a very good outcome considering the dilutive mix impact
from the acquisition of referral centres and was driven by strong
gross margin accretion in our core first opinion vet business and a
decline in low margin pet sales.
EBITDA and operating costs
Pre-exceptional EBITDA(#) of GBP130.5m represented a 4.7%(*)
increase on the previous year (FY16: GBP124.7m(*) ), with a margin
of 15.6% (FY16: 16.0%).
Selling and distribution expenses of GBP296.0m increased
slightly as a percentage of Group revenue, to 35.5% (FY16: 35.3%(*)
). Within this, occupation costs (rent, service charges and other
costs) again declined as a percentage of sales as we benefit from
the rent and rates paid by vet practices within our stores, which
contributed GBP10.7m (FY16: GBP9.1m(*) ). Colleague costs of
GBP181.5m (FY16: GBP156.2m(*) ), 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 GBP1.6m.
Pre-exceptional administration expenses of GBP54.9m were 6.6% of
revenue (FY16: 6.4%*), 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 GBP29.6m (FY16 GBP24.5m(*) ) 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.
Finance expense
Pre-exceptional net finance expense(#) for the year was GBP4.5m,
a reduction from the prior year (FY16: GBP4.8m(*) ) as a result of
declining leverage.
Taxation, trading profit & EPS
Pre-exceptional pre tax profit(#) was GBP96.4m and grew by
1.1%(*) compared with the prior year (FY16: GBP95.3m(*) ).
Statutory pre tax profit was GBP95.4m and grew by 5.8%(*) compared
with the prior year (FY16: GBP90.2m(*) ).
Underlying total tax expense(#) for the period was GBP20.1m, a
rate of 21% on pre-exceptional 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
GBP76.3m (FY16: GBP75.5m(*) ) and pre-exceptional basic earnings
per share(#) were 15.3 pence, growth of 1.0%(*) compared with the
prior year (FY16: 15.1 pence(*) )
Working capital
The underlying cash movement in trading working capital(#) was
an inflow of GBP8.2m, with an increase in inventory of GBP5.0m and
an decrease in trade receivables of GBP1.7m, offset by an increase
of GBP11.5m in payables which reflects our efforts to drive a wide
range of efficiencies.
We have also supported our younger first opinion veterinary
practices with short term funding to underpin their growth. Such
operating loans to Joint Venture practices support their day to day
working capital management, but also enables them to support
extended hours, additional services or capacity extensions. This
increased the total reported trade receivables movement to GBP8.9m.
We expect to continue this support to vet practices in the coming
year to underpin the growth of the business.
Cashflow and capital structure
Cash flow generation remains good. Free cashflow(#) after
interest, tax and before acquisitions was GBP64.6m (FY16:
GBP77.8m(*) ), with a decline in the cash conversion rate to 49%
(FY16: 62%(*) ) as a result of increased capital expenditure and
cash working capital requirements compared with the prior year.
Free cashflow (#) (GBPm) FY16 FY17
Cash EBITDA(1,#) 127.7 133.0
Working capital 5.0 (2.3)
Tax (14.8) (19.3)
Interest cost (5.3) (4.2)
Capex (34.8) (42.6)
-------------------------- ------- -------
Reported free cashflow 77.8 64.6
1 Defined as pre-exceptional EBITDA plus IFRS2 share based
payment charges
We acquired two veterinary specialist referral centres during
the period, with cash outflows related to acquisitions of GBP14.8m.
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 cash 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 ophthalmology centre with six veterinary
clinicians. EVR already provides services to one of our referral
centres, NorthWest Veterinary Specialists, as well as to other
primary opinion veterinary practices. EVR will also operate as a
shared venture, with the founders retaining 10% equity
ownership.
The Group's leverage ratio at year end was 1.2x net
debt:pre-exceptional EBITDA(#) . This is a slight reduction from
the FY16 position of 1.3x (FY16 audited 53 week period), reflecting
the cashflow requirements of acquisitions in the veterinary
referrals market and increased working capital requirements during
the year.
GBPm FY16 FY17
(Audited (53 weeks)xxxx
53 weeks xxxx
to 31 March
2016)
Opening net debt (192.0) (162.0)
Free cashflow(#) 71.6 64.6
Ordinary dividends paid (27.9) (39.9)
Acquisitions (8.1) (14.8)
Other (5.6) (1.6)
-------------------------------------------- -------------- ----------------
Closing net debt (162.0) (153.7)
Leverage (ND / pre-exceptional EBITDA(#) ) 1.3x 1.2x
Looking forward, our capital structure and allocation policy
remains as previously stated. We remain a cash generative business
and our priority is to invest in areas that will expand the Group
and deliver appropriate returns - as evidenced by our acquisitions
in the veterinary referrals market. We are comfortable with a
leverage position of up to 1.5x net debt/EBITDA(2) 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, operating
in a resilient market with strong cash generation capabilities. And
dependent upon our acquisition outlook and if we do not foresee
investment uses, it is our intention to return surplus free
cashflow to shareholders through a combination of ordinary and
special dividends.
2 On an annualised basis
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.
Capital investment
Capital investment was GBP44.5m (FY16 53 week period: GBP41.5m),
in line with our expectations, of which GBP5.8m 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 the remaining GBP3m will be
invested in FY18, in line with our previous guidance.
Within the underlying capital investment, GBP11.1m is
represented by the retrofit of services into our existing store
estate, (FY16 53 week period GBP8.0m), where we increased both the
number of retrofits, with more built on mezzanine floors. New store
capital investment declined to GBP6.4m (FY16 53 week period:
GBP11.5m) in line with our reduced rollout during the year, and
investment in business systems also declined to GBP7.2m (FY16 53
week period: GBP10.0m) as we move out of the investment phase, and
into the refreshment phase of our omnichannel developments.
Cash capital expenditure was GBP40.9m (FY16 53 week period:
GBP36.8m).
Dividend
The Board has recommended a final dividend of 5.0 pence per
share, giving a total dividend of 7.5 pence per share in respect of
the 2017 financial year, equal with the prior year. Looking forward
to the financial year 2018, the Board has committed to maintaining
the ordinary dividend at the same level as the prior year.
The final dividend will be proposed by the Directors at the 2017
AGM and is in addition to the interim dividend of 2.5 pence per
share, paid to shareholders on the 6 January 2017. The ex-dividend
date will be 15 June 2017 and, if approved at the Company's
forthcoming AGM, will be paid to shareholders on 14 July 2017 to
those shareholders on the register at the close of business on 16
June 2017.
Foreign exchange outlook
The Group purchases products from Asia to a value of around
US$55 million each year and our policy is to hedge up to 95% of
forecast foreign exchange transactions on a rolling 12 month basis.
The movement in hedged contract rates for FY17, which were at an
average rate of 1.47 USD:GBP, created a GBP2.2m adverse cost to the
Group. Our hedging requirements for FY18 are in place, at an
average rate of 1.30 USD:GBP, which will have a negative impact of
around GBP5m.
Accounting treatment of veterinary specialist referral
centre
Three of our four veterinary specialist referral centres are
structured as a shared venture ownership model, where Pets at Home
maintains a minimum 75% controlling share, with the remaining
shares owned by multiple clinician Shared Venture Partners (SVPs).
This structure maintains strong commercial incentives for the
existing SVPs to grow the businesses.
Under this ownership structure, Pets at Home has an option to
buy the SVPs shares in the future, typically from three years and
onwards post the point of acquisition. The potential value uplift
in these shares is related to stretching profit performance targets
of the referral centre and the accounting treatment of such an
option is therefore structured as a forward contract.
The required accounting treatment of the referral centres is
full consolidation of the income statement, balance sheet and
cashflow. Within the income statement, the discounted future value
of the SVPs shares is recognised as an expense over the period to
which the option can be exercised, on our best estimate of the
future value. In the event that the referral centres' long term
stretching targets are achievable, a non cash charge will be
recognised as a non-underlying expense within operating costs,
which could be up to GBP2m in FY18.
Mike Iddon
Chief Financial Officer
25 May 2017
Alternative Performance Measures ("APMs")
Guidelines on Alternative Performance Measures (APMs) issued by
the European Securities and Markets Authority came into effect for
all communications released on or after 3 July 2016 for issuers of
securities on a regulated market.
In the reporting of financial information, the Directors have
adopted various Alternative Performance Measures (APMs) of
historical or future financial performance, position or cashflows
other than those defined or specified under International Financial
Reporting Standards (IFRS).
The Directors measure the performance of the Group based on the
following financial measures which are not recognised under
EU-adopted IFRS, and consider these to be important measures in
evaluating the Group's strategic and financial performance. The
Directors believe that these APMs assist in providing additional
useful information on the underlying trends, performance and
position of the Group.
APMs are also used to enhance the comparability of information
between reporting periods, by adjusting for non-underlying items,
to aid the user in understanding the Group's performance.
Consequently, APMs are used by the Directors and management for
performance analysis, planning, reporting and incentive setting
purposes and have remained consistent with prior year.
All APMs relate to the current period's results and comparative
periods where provided.
The key APMs used by the Group are:
'Like-for-Like' sales growth comprises total 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 or more
Pre-exceptional EBITDA being Earnings before interest, tax,
depreciation & amortisation before the effect of exceptional
items in the period.
EBITDA being Earnings before interest, tax, depreciation &
amortization.
Free Cash flow being 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
CROIC being Cash Return on Invested Capital, 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 multiplied by a factor of 8x
Those that are able to be reconciled back to IFRS reported
figures are reconciled below.
53 week prior year comparison
The FY17 audited period represents the 52 weeks to 30 March
2017. The audited comparative period represents 53 weeks to 31
March 2016, but to better reflect the business' underlying
performance, the more appropriate comparable period is the 52 weeks
to 24 March 2016. On this basis, all commentary in respect of the
comparative period is based on the proforma 52 week period to 24
March 2016 unless otherwise stated. In order to calculate the 52
week financials, where applicable, the outcome of the 53rd week has
been used as the basis for the adjustment, although in some
instances, a degree of judgement has been applied in deriving
certain income statement costs in relation to the final week. The
full statutory financials, which compare the current financial year
to the 53 week prior year, are detailed starting on page 18.
A reconciliation on key lines between a 52 week basis and a 53
week statutory basis are included in the reconciliations below.
EBITDA (GBPm) FY16 FY17 Note
EBITDA on 52 week basis 124.7 130.5
Impact of 53rd week 2.7 0.0
EBITDA 127.4 130.5 2
Depreciation & Amortisation (25.1) (29.6) 2
Exceptional Items (0.8) (1.0) 3
Statutory Operating Profit 101.4 99.9
Free cashflow (GBPm) FY16 FY17 Note
Free Cashflow on 52 week basis 77.8 64.6
Impact of 53rd week (6.2) 0.0
Free Cashflow 71.6 64.6
Dividends (27.9) (39.9) CFS
Acquisition of subsidiary (8.1) (14.8) CFS
Disposal of subsidiary 0.0 0.7 CFS
Exceptional Items (0.8) 0.0 CFS
Loans issued (1.7) (2.2) CFS
Loan repayment on acquisition (1.8) 0.0 CFS
Proceeds from new loan 202.0 8.0 CFS
Repayment of borrowings (325.0) 0.0 CFS
Refinancing costs (1.2) 0.0 CFS
Net (decrease)/increase in
cash (92.9) 16.3
CFS = Consolidated Statement
of Cash Flows
Revenue (GBPm) FY16 53rd FY16 FY17
week
Proforma Audited Audited
52 weeks 53 weeks 52 weeks
to 24 to 31 to 30
March March March
2016 2016 2017
Revenue Split:
Food 382.5 7.5 390.0 395.1
Accessories 314.0 6.2 320.2 321.6
Total Merchandise 696.5 13.7 710.2 716.7
Services & other 81.3 1.6 82.9 117.5
Group Revenue 777.8 15.3 793.1 834.2
Depreciation & Amortisation FY16 53rd FY16 FY17
(GBPm) week
Proforma Audited Audited
52 weeks 53 weeks 52 weeks
to 24 to 31 to 30
March March March
2016 2016 2017
Depreciation & Amortisation (24.6) (0.5) (25.1) (29.6)
Pre-exceptional net finance FY16 FY17 Note
expense (GBPm)
Pre-exceptional net finance
expense (52 week basis) (4.8) (4.5)
Impact of 53rd week (0.2) 0.0
Pre-exceptional net finance
expense (53 week basis) (5.0) (4.5)
Exceptional Items (4.3) 0.0 7
----------------------------- ------ ------ -----
Net finance expense (9.3) (4.5)
Pre-exceptional PBT (GBPm) FY16 FY17 Note
Pre-exceptional PBT (52 week
basis) 95.3 96.4
Impact of 53rd week 2.0 0.0
Pre-exceptional PBT (53 week
basis) 97.3 96.4
Exceptional Items (5.2) (1.0) 3
Profit before tax 92.1 95.4
Net working capital (GBPm) FY16 FY17 Note
Net working capital (52 week
basis) 5.0 (2.3)
Impact of 53rd week (8.6)
Net working capital (53 week
basis) (3.6) (2.3)
Being:
Increase in trade and other
receivables (6.8) (8.9) CFS
Increase in inventories (3.6) (5.0) CFS
Increase in trade and other
payables 7.0 11.5 CFS
Decrease/(increase) in provisions (0.2) 0.1 CFS
Net working capital (3.6) (2.3)
CFS = Consolidated Statement
of Cash Flows
Pre-exceptional EPS (p) FY16 FY17 Note
Pre-exceptional EPS (52 week
basis) 15.1 15.3
Impact of 53rd week 0.3 0.0
Pre-exceptional EPS (53 week
basis) 15.4 15.3
Exceptional Items (0.8) (0.2) 2
Earnings Per Share 14.6 15.1
Financial Statements
Financial Information
The financial information set out in this preliminary statement
of annual results has been extracted from the Group's financial
statements, which have been approved by a resolution of the Board
of directors of the Company on 24 May 2017 and agreed with the
Company's auditor.
The financial information set out in this preliminary statement
does not constitute the Company's statutory accounts for the year
ended 30 March 2017 as defined in section 434 of the Companies Act
2006 (the "Act") which have not yet been delivered to the Registrar
of Companies.
The Company's auditor has reported on the FY17 financial
statements. Its reports were unqualified and did not draw attention
to any matters by way of emphasis. The reports also did not contain
statements under section 498 of the Act.
Consolidated Income Statement
52 week period ended 53 week period ended
30 March 2017 31 March 2016
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Underlying Exceptional Total Underlying Exceptional Total
Trading Items Trading Items
(note (note,8)
3)
Revenue 2 834,169 - 834,169 793,126 - 793,126
Cost of sales (382,287) - (382,287) (360,702) - (360,702)
Gross profit 451,882 - 451,882 432,424 - 432,424
Selling and
distribution
expenses (296,012) - (296,012) (279,293) - (279,293)
Administrative
expenses 3 (54,950) (996) (55,946) (50,868) (835) (51,703)
Operating
profit 2,3 100,920 (996) 99,924 102,263 (835) 101,428
Financial
income 6 760 - 760 668 - 668
Financial
expense 7 (5,300) - (5,300) (5,628) (4,326) (9,954)
Net financing
expense (4,540) - (4,540) (4,960) (4,326) (9,286)
Profit before
tax 96,380 (996) 95,384 97,303 (5,161) 92,142
Taxation 8 (20,061) 41 (20,020) (20,224) 865 (19,359)
Profit for
the period 76,319 (955) 75,364 77,079 (4,296) 72,783
=========== ============ ========== =========== ============ ==========
All activities relate to continuing operations.
Basic and diluted earnings per share attributable to equity
Shareholders of the Company:
52 week 53 week
period ended period ended
30 March 31 March
Note 2017 2016
Equity holders of the parent
- after exceptional items - basic 5 15.1p 14.6p
Equity holders of the parent
- after exceptional items - diluted 5 15.0p 14.5p
Dividends paid and proposed are disclosed in note 9.
Consolidated Statement of Comprehensive Income
52 week 53 week
period ended period ended
30 March 31 March
2017 2016
GBP000 GBP000
Profit for the period 75,364 72,783
Other comprehensive income
Items that are or may be recycled
subsequently into profit or loss:
Foreign exchange translation differences (26) (5)
Cash flow hedges - reclassified
to profit and loss (330) (1,064)
Effective portion of changes in
fair value of cash flow hedges 1,862 (536)
Other comprehensive income for the
period, before income tax 1,506 (1,605)
Income tax on other comprehensive
income 8 (297) 320
Other comprehensive income for the
period, net of income tax 1,209 (1,285)
Total comprehensive income for the
period 76,573 71,498
============== ==============
Consolidated Balance Sheet
Note At 30 March At 31 March
2017 2016
GBP000 GBP000
Non-current assets
Property, plant and equipment 128,835 114,746
Intangible assets 990,266 973,549
Other non-current assets 16,990 10,161
1,136,091 1,098,456
------------ ------------
Current assets
Inventories 56,420 52,476
Other financial assets 1,863 1,947
Trade and other receivables 69,567 59,028
Cash and cash equivalents 56,345 39,998
184,195 153,449
------------ ------------
Total assets 1,320,286 1,251,905
============ ============
Current liabilities
Trade and other payables (165,887) (150,445)
Corporation tax (10,609) (9,695)
Provisions (492) (436)
Other financial liabilities (1,509) (1,318)
(178,497) (161,894)
------------ ------------
Non-current liabilities
Other interest-bearing loans
and borrowings 11 (209,296) (201,091)
Other payables (35,028) (33,165)
Provisions (1,394) (1,387)
Other financial liabilities (8,023) (5,999)
Deferred tax liabilities (5,404) (4,885)
(259,145) (246,527)
------------ ------------
Total liabilities (437,642) (408,421)
============ ============
Net assets 882,644 843,484
============ ============
Equity attributable to equity
holders of the parent
Ordinary share capital 5,000 5,000
Consolidation reserve (372,026) (372,026)
Merger reserve 113,321 113,321
Translation reserve (31) (5)
Cash flow hedging reserve 806 (429)
Retained earnings 1,135,574 1,097,623
Total equity 882,644 843,484
============ ============
On behalf of the Board:
Mike Iddon
Group Chief Financial Officer
Company number: 08885072
Consolidated Statement of Changes in Equity as at 30 March
2017
Cash
flow
Share Consolidation Merger hedging Translation Retained Total
capital reserve reserve reserve reserve earnings equity
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 - - - - 75,364 75,364
Other comprehensive
income - - - 1,235 (26) - 1,209
Total comprehensive
income for the
period - - - 1,235 (26) 75,364 76,573
--------- -------------- --------- --------- ------------ ---------- ---------
Transactions
with owners,
recorded directly
in equity
Equity dividend
paid - - - - - (39,850) (39,850)
Share based payment
transactions - - - - - 2,437 2,437
Total contributions
by and distributions
to owners - - - - - (37,413) (37,413)
--------- -------------- --------- --------- ------------ ---------- ---------
Balance at 30
March 2017 5,000 (372,026) 113,321 806 (31) 1,135,574 882,644
========= ============== ========= ========= ============ ========== =========
Consolidated Statement of Cash Flows
52 week 53 week
period period
ended ended
30 March 31 March
2017 2016
GBP000 GBP000
Cash flows from operating activities
Profit for the period 75,364 72,783
Adjustments for:
Depreciation and amortisation 29,621 25,106
Financial income (760) (668)
Financial expense 5,300 9,954
Loss on disposal of subsidiary 690 -
Profit on disposal of property, (176) -
plant and equipment
Share based payment charges 2,437 3,005
Taxation 20,020 19,359
----------
132,496 129,539
Increase in trade and other
receivables (8,863) (6,784)
Increase in inventories (4,979) (3,627)
Increase in trade and other
payables 11,469 7,021
Increase/(decrease) in provisions 63 (248)
------------ ----------
130,186 125,901
Tax paid (19,299) (14,823)
Net cash flow from operating
activities 110,887 111,078
------------ ----------
Cash flows from investing activities
Proceeds from sale of property,
plant and equipment 1,830 3,082
Disposal of subsidiary, net 677 -
of cash disposed
Interest received 722 413
Investment in other financial
assets (3,420) (1,010)
Loans issued (2,247) (1,674)
Loans repaid 500 -
Acquisition of subsidiary, net
of cash acquired (14,831) (8,113)
Acquisition of property, plant
and equipment, and other intangible
assets (40,896) (36,804)
Net cash used in investing activities (57,665) (44,106)
------------ ----------
Cash flows from financing activities
Equity dividends paid (39,850) (27,894)
Proceeds from new loan 8,000 202,000
Repayment of borrowings - (325,000)
Loan repayment on acquisition - (1,808)
Finance lease obligations (109) (28)
Issue costs - (1,225)
Interest paid (4,916) (5,985)
Net cash used in financing activities (36,875) (159,940)
------------ ----------
Net increase/(decrease) in cash
and cash equivalents 16,347 (92,968)
Cash and cash equivalents at
beginning of period 39,998 132,966
Cash and cash equivalents at
end of period 56,345 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 consolidated financial statements for the 52 week period
ended 30 March 2017 have been prepared in accordance with
International Financial Reporting Standards as adopted by the EU
(Adopted IFRS) and were approved by the Directors of the Company on
24th May 2017 along with this preliminary announcement.
The consolidated financial statements are prepared on the
historical costs basis except for derivative financial instruments,
share based payments and certain investments measured at their fair
value.
The financial information included in this preliminary statement
of results does not constitute statutory accounts within the
meaning of Section 435 of the Companies Act 2006 (the "Act"). The
financial information for the 52 week period ended 30 March 2017
has been extracted from the statutory accounts on which an
unqualified audit opinion has been issued. Statutory accounts for
the 52 week period ended 30 March 2017 will be delivered to the
Registrar of Companies following the Company's Annual General
Meeting.
The auditors have consented to the publication of the
Preliminary Announcement as required by Listing Rule 9.7a having
completed their procedures under APB bulletin 2008/2.
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 consolidated financial statements for the 52 week
period ended 30 March 2017.
2 Segmental reporting
The Directors consider there to be one operating and reportable
segment, being that of the sale of pet products and services
through retail outlets, specialist vet referral services and the
Group's websites.
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.
52 week 53 week
period period
ended ended
30 March 31 March
Revenue 2017 2016
GBP000 GBP000
Food 395,121 390,041
Accessories 321,550 320,162
Services and other 117,498 82,923
834,169 793,126
The 'services and other' category includes revenue from
management fees for first opinion veterinary surgeries, veterinary
referral centres, grooming services, insurance commissions and the
sale of pets.
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:
52 week 53 week
period period
ended ended
30 March 31 March
2017 2016
GBP000 GBP000
Operating profit 99,924 101,428
Exceptional items 996 835
Underlying operating profit before exceptional
items 100,920 102,263
Depreciation and amortisation 29,621 25,106
Underlying Earnings Before Interest, Tax, Depreciation,
and Amortisation (EBITDA) (before exceptional
items) 130,541 127,369
3 Operating Profit
Included in operating profit are 52 week 53 week
the following: period period
ended ended
30 March 31 March
2017 2016
GBP000 GBP000
Exceptional operating expenses 996 835
Depreciation of tangible fixed assets 25,690 21,915
Amortisation of intangible assets 3,931 3,191
Rentals under operating leases:
Hire of plant and machinery 4,484 3,886
Property 73,002 70,405
Rental income from third party sublets (828) (1,033)
Rental income from related parties (6,277) (5,367)
Profit on disposal of fixed assets (176) -
Share based payment charges 2,437 3,005
========= =========
During the period Pets at Home Group Plc disposed of its 100%
holding in its subsidiary Farm-Away Ltd. The exceptional items in
the period to 30 March 2017 represent costs incurred in relation to
the disposal as follows:
GBP'000
Consideration received (740)
Net assets disposed of 1,430
--------
Loss on disposal of net assets 690
Costs borne by the Group 306
--------
996
The costs include legal and professional fees, redundancy costs
and property costs
Exceptional items in operating profit in the 53 week period
ended 31 March 2016 of GBP835,000 represents costs incurred in
relation to the acquisitions completed during the period and
subsequent to the period end.
4 Colleague numbers and costs
The average number of persons employed (full time equivalents)
by the Group (including Directors) during the period, analysed by
category, was as follows:
52 week period 53 week period
ended ended
30 March 31 March
2017 2016
Number Number
Sales and distribution 6,152 5,008
Administration 659 466
6,811 5,474
=============== ===============
The aggregate payroll costs of these persons were as
follows:
52 week period 53 week period
ended ended
30 March 31 March
2017 2016
GBP000 GBP000
Wages and salaries 161,118 143,553
Social security costs 13,337 11,044
Contributions to defined
contribution plans 7,069 4,294
181,524 158,891
=============== ===============
5 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.
52 week 52 week 53 week 53 week
period period period period ended
ended ended ended
30 March 30 March 31 March 31 March
2017 2017 2016 2016
Underlying After Exceptional Underlying After Exceptional
Trading Items Trading Items
Profit attributable
to equity shareholders
of the parent (GBP000s) 76,319 75,364 77,079 72,783
76,319 75,364 77,079 72,783
============ ================== ============ ==================
Basic weighted average
number of shares 500,000,000 500,000,000 500,000,000 500,000,000
Dilutive potential ordinary
shares 4,032,406 4,032,406 2,048,984 2,048,984
Diluted weighted average
number of shares 504,032,406 504,032,406 502,048,984 502,048,984
============ ================== ============ ==================
Basic earnings per share 15.3p 15.1p 15.4p 14.6p
Diluted earnings per
share 15.1p 15.0p 15.4p 14.5p
6 Finance Income
52 week period ended 53 week period
ended
30 March 2017 31 March 2016
GBP000 GBP000
Interest receivable 760 401
Other finance income - 267
Total finance income 760 668
======= ======
7 Finance Expense
52 week period ended 53 week period
ended
30 March 2017 31 March 2016
GBP000 GBP000
Bank loans at effective interest
rate 5,113 5,628
Other interest expense 187 -
Total underlying finance expense 5,300 5,628
Exceptional amortisation costs - 4,326
Total exceptional finance expense - 4,326
Total finance expense 5,300 9,954
===================== ===============
Exceptional finance expenses in the 53 week period ended 31
March 2016 related to GBP4,326,000 of accelerated amortisation
following the repayment of the senior bank facility of
GBP325,000,000 in the period.
8 Taxation
Recognised in the income statement
52 week period 53 week period
ended ended
30 March 31 March
2017 2016
GBP000 GBP000
Current tax expense
Current period 20,953 19,441
Adjustments in respect of prior periods (964) (294)
Current tax expense 19,989 19,147
--------------- ---------------
Deferred tax expense
Origination and reversal of temporary
differences (907) 155
Impact of difference between deferred
and current tax rates 45 (263)
Adjustments in respect of prior periods 893 320
Deferred tax expense 31 212
--------------- ---------------
Total tax expense 20,020 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. The deferred tax
liability has been calculated based on the rate of 19% which is the
rate at which items are expected to reverse.
Deferred tax recognised in other comprehensive income
52 week 53 week
period ended period ended
30 March 31 March
2017 2016
GBP000 GBP000
Effective portion of changes in fair value
of cash flow hedges 297 (320)
======== ========
Reconciliation of effective tax rate
52 week 52 week 52 week 53 week 53 week 53 week
period period period period period period
ended ended ended ended ended ended
30 March 30 March 30 March 31 March 31 March 31 March
2017 2017 2017 2016 2016 2016
Underlying Exceptional Total Underlying Exceptional Total
Trading Items Trading Items
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Profit for
the period 76,319 (955) 75,364 77,079 (4,296) 72,783
Total tax expense 20,061 (41) 20,020 20,224 (865) 19,359
Profit excluding
taxation 96,380 (996) 95,384 97,303 (5,161) 92,142
========== =========== ========= ========== =========== =========
Tax using the
UK corporation
tax rate for
the period
of 20% (53
week period
ended 31 March
2016: 20%) 19,276 (199) 19,077 19,460 (1,032) 18,428
Impact of change
in tax rate
on deferred
tax balances 45 - 45 (263) - (263)
Depreciation
on expenditure
not eligible
for tax relief 706 - 706 862 - 862
Expenditure
not eligible
for tax relief 105 158 263 139 167 306
Adjustments
in respect
of prior periods (71) - (71) 26 - 26
Total tax expense 20,061 (41) 20,020 20,224 (865) 19,359
========== =========== ========= ========== =========== =========
The UK corporation tax standard rate for the 52 week period
ended 30 March 2017 was 20% (53 week period ended 31 March 2016:
20%). The effective tax rate before exceptional items for the 52
week period ended 30 March 2016 was 21%. The principal reason for
the difference in rate relates to the non-deductibility of
depreciation charged on certain items of capital expenditure.
9 Dividends paid and proposed
Group and Company
52 week period 53 week period
ended ended
30 March 31 March
2017 2016
GBP000 GBP000
Declared and paid during the period
Final dividend of 5.5p per share (2016:
3.6p per share) 27,396 17,932
========= ===========
Interim dividend of 2.5p per share (2016:
2p per share) 12,454 9,962
========= ===========
Proposed for approval by shareholders at
the AGM
Final dividend of 5.0p per share (2016:
5.5p per share) 24,912 27,394
========= ===========
The trustees of the following holdings of Pets at Home Group Plc
shares under the Pets at Home Group Employee Benefit Trusts have
waived or otherwise foregone any and all dividends paid in relation
to the period ended 31 March 2016 and to be paid at any time in the
future (subject to the exceptions in the relevant trust deed) on
its respective shares for the time being comprised in the Trust
Funds: Computershare Nominees (Channel Islands) Limited (holding at
30 March 2017:1,319,091 shares, holding at 31 March 2016: 1,466,540
shares) and Wealth Nominees Limited (holding at 30 March 2017:
434,056 shares, holding at 31 March 2016: 434,056 shares).
10 Business combinations
Subsidiaries acquired
Principal activity Date of Proportion Cash Consideration
acquisition of voting transferred
equity instruments
acquired
GBP000
Dick White Referrals Veterinary referral 28 April
Limited centre 2016 76% 13,839
Veterinary referral 5 April
Eye-Vet Limited centre 2016 90% 1,350
Acquisition of 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 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 at an agreed pricing method linked to future
earnings performance 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.
As a consequence 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. No non-controlling
interest is recognised. The put and call option is treated as a
forward contract measured at fair value reflecting the Group's best
estimate of future settlement, linked to forecasted future earnings
performance.
Consideration transferred
Dick White Referrals
Limited
GBP000
Cash 13,839
Forward contract 3,951
Total consideration 17,790
Acquisition related costs amounting to GBP228,000 have been
excluded from the consideration transferred and were recognised as
an expense in the profit and loss account in the prior year, within
the 'administrative expenses' exceptional line item.
Assets acquired and liabilities recognised at the date of
acquisition
The provisional amounts recognised in respect of identifiable
assets and liabilities relating to the acquisition are as
follows:
Accounting Assets
Carrying policy Fair value and liabilities
amounts adjustments adjustments acquired
GBP000 GBP000 GBP000 GBP000
Current assets
Cash and cash equivalents 604 - - 604
Trade and other receivables 1,637 - - 1,637
Inventories 238 - - 238
Non-current assets
Intangible asset- customer
list - - 771 771
Tangible fixed assets 2,920 - - 2,920
Current liabilities
Trade and other payables (2,176) - - (2,176)
Deferred tax liabilities (150) - - (150)
Non-current liabilities
Other financial liabilities (439) - - (439)
2,634 - 771 3,405
Provisional goodwill arising on acquisition
Dick White Referrals
Limited
GBP000
Cash consideration 13,839
Forward contract 3,951
Less: fair value of
net assets acquired (3,405)
Goodwill arising on
acquisition 14,385
====================
The key assets acquired are the expertise and skills of the
surgeons within the business; these represent the assembled
workforce which does not meet the definition of an intangible
asset. The cost of the combination also included a control premium,
effectively including amounts in relation to the benefits of
expected synergies, revenue growth and future market development.
These benefits are not recognised separately from goodwill because
they do not meet the recognition criteria for identifiable
intangible assets.
Consideration has been given to other intangibles that are
recognisable under IFRS 3 Business Combinations. No brand name has
been recognised due to the specialist nature of the services
provided meaning that repeat referral is not expected and the
company name is not recognisable to the general public. No
favourable leases or patents were owned by the company at the time
of acquisition. A customer list intangible asset of GBP771,000 for
the on-site laboratory has been identified and recognised
separately from goodwill at fair value.
None of the goodwill identified on these acquisitions is
expected to be deductible for tax purposes. The goodwill is deemed
to be provisional as it is considered that further information
could come to light that could affect the fair value of net assets
acquired.
Net cash outflow on acquisition of subsidiary
Dick White
Referrals
Limited
GBP000
Cash consideration 13,839
Less: cash and cash equivalents
acquired (604)
Total cash paid 13,235
Impact of acquisition on the results of the Group
Included in the operating profit for the period ended 30 March
2017 is GBP1,367,000 attributable to the additional business
generated by Dick White Referrals Limited. Revenue for the period
ended 30 March 2017 includes GBP13,039,000 in respect of Dick White
Referrals Limited.
Had the business combination been effected at 1 April 2016, the
revenue for the Group from continuing operations would have been
GBP835,109,000 and the operating profit for the period from
continuing operations would have been GBP99,941,000.
Acquisition of Eye-Vet Limited
On 5 April 2016, the Group acquired 90% of the total share
capital of Eye-Vet Limited in exchange for cash and contingent
consideration. 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 at an agreed pricing method linked to future
earnings performance 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.
As a consequence, 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. No non-controlling interest is
recognised. The put and call option is treated as a forward
contract measured at fair value reflecting the Group's best
estimate of future settlement, linked to forecasted future earnings
performance.
Consideration transferred
Eye-Vet Limited
GBP000
Cash 1,350
Forward contract 142
Total consideration 1,492
Acquisition related costs amounting to GBP95,000 have been
excluded from the consideration transferred and have been
recognised as an expense in the profit and loss account in the
prior year, within the 'administrative expenses' exceptional line
item.
Assets acquired and liabilities recognised at the date of
acquisition
The provisional amounts recognised in respect of identifiable
assets and liabilities relating to the acquisition are as
follows:
Accounting Assets
Carrying policy Fair value and liabilities
amounts adjustments adjustments acquired
GBP000 GBP000 GBP000 GBP000
Current assets
Cash and cash equivalents 49 - - 49
Trade and other receivables 297 - - 297
Inventories 38 - - 38
Non-current assets
Tangible fixed assets 133 - - 133
Current liabilities
Trade and other payables (186) - - (186)
Deferred tax liabilities (25) - - (25)
306 - - 306
Provisional goodwill arising on acquisition
Eye-Vet Limited
GBP000
Cash consideration 1,350
Forward contract 142
Less: fair value of
net assets acquired (306)
Goodwill arising on
acquisition 1,186
The key assets acquired are the expertise and skills of the
surgeons within the business; these represent the assembled
workforce which does not meet the definition of an intangible
asset. The cost of the combination also included a control premium,
effectively including amounts in relation to the benefits of
expected synergies, revenue growth and future market development.
These benefits are not recognised separately from goodwill because
they do not meet the recognition criteria for identifiable
intangible assets.
Consideration has been given to other intangibles that are
recognisable under IFRS 3 Business Combinations. No brand name has
been recognised due to the specialist nature of the services
provided meaning that repeat referral is not expected and the
company name is not recognisable to the general public. No
favourable leases or patents were owned by the company at the time
of acquisition.
None of the goodwill identified on these acquisitions is
expected to be deductible for tax purposes. The goodwill is deemed
to be provisional as it is considered that further information
could come to light that could affect the fair value of net assets
acquired.
Net cash outflow on acquisition of subsidiary
Eye-Vet Limited
GBP000
Cash consideration 1,350
Less: cash and cash equivalents
acquired (49)
Total cash paid 1,301
================
Impact of acquisition on the results of the Group
Included in the operating profit for the period ended 30 March
2017 is GBP131,000 attributable to the additional business
generated by Eye-Vet Limited. Revenue for the period ended 30 March
2017 includes GBP1,509,000 in respect of Eye-Vet Limited.
Eye-Vet Limited was acquired at the start of the period and
therefore the revenue and operating profit of the group are fully
reflective of the revenue and operating profit of Eye-Vet
Limited.
Anderson Moores Veterinary Specialists Limited
The put and call liability in relation to the acquisition of
Anderson Moores Ltd was overstated by GBP1,651,000 in the initial
acquisition accounting. This is considered immaterial but has been
corrected in the current year - a decrease in the associated
goodwill of GBP1,651,000 and an equal decrease in the
liability.
11 Other interest-bearing loans and borrowings
At 30 March At 31 March
2017 2016
GBP000 GBP000
Non-current liabilities
Secured bank loans 209,296 201,091
Total liabilities
------------ ------------
Secured bank loans 209,296 201,091
============ ============
Terms and debt repayment schedule
Carrying Carrying
Face value amount Face value amount
at 30 at 30 March at 31 March at 31 March
Year March 2017 2016 2016
Nominal of 2017
Currency interest maturity
rate GBP000 GBP000 GBP000 GBP000
Senior Finance LIBOR
Bank Loans GBP +1.25% 2019-2020 210,000 209,296 202,000 201,091
In April 2015, the Group's Senior Financing Facilities were
amended, with the introduction of a further revolving credit
facility (RCF) with a total facility amount of GBP260m. As part of
the amendment, GBP325m of the Group's term loans under the previous
terms of the Senior Financing Facilities were repaid via drawings
under the Group's RCF along with cash from the Group's existing
resources. The amended RCF expires in April 2020 and is reviewed
each period. Interest is charged at LIBOR plus a margin based on
leverage (net debt: EBITDA). Face value represents the principal
value of the Senior Finance Bank Loans. The bank loan is secured
against the various tangible, intangible and monetary assets of the
Group (excluding investments in joint ventures and hedging
agreements).
Interest-bearing borrowings are recognised initially at fair
value, being the principal value of the loan net of attributable
transaction costs. Subsequent to initial recognition,
interest-bearing borrowings are stated at a carrying value, which
represents the amortised cost of the loans using the effective
interest method less any impairment losses.
At 30 March 2017 the Group had a revolving credit facility of
GBP260m with a drawn amount of GBP210m.
The analysis of repayments on the loans is as follows:
At 30 March At 31 March
2017 2016
GBP000 GBP000
Within one year or repayable on demand - -
Between one and two years - -
Between two and five years 210,000 202,000
210,000 202,0000
------------ ------------
Analysis of changes in net debt
At 31 March Non-cash At 30 March
2016 Cash flow movement 2017
GBP000 GBP000 GBP000 GBP000
Cash and cash equivalents 39,998 16,347 - 56,345
Debt due within one year -
at face value
Debt due after one year
at face value (202,000) (8,000) - (210,000)
Net debt (162,002) 8,347 - (153,655)
============ ========== ========== ============
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SEWFULFWSEII
(END) Dow Jones Newswires
May 25, 2017 02:01 ET (06:01 GMT)
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