TIDMPETS
RNS Number : 1954T
Pets At Home Group Plc
23 November 2021
FOR IMMEDIATE RELEASE, 23 NOVEMBER 2021
Pets at Home Group Plc: FY22 Interim Results
for the 28-week period to 07 October 2021
Sustained growth in new pets significantly increases our market
opportunity
-- Total Group revenue growth of 18.0% to GBP677.6m, with the
continuing increase in active customers
underpinning strong volume growth
-- Group like-for-like(#) (LFL) revenue growth of 22.2%, or 28.6% on a 2-year basis
-- Retail LFL(#) revenue growth of 21.9%, or 28.9% on a 2-year
basis, with broad-based growth across categories and LFL growth
across stores of 21.1%
-- Omnichannel revenue(#) growth of 21.5%, or 101.4% on a 2-year
basis; Participation of total Retail revenue of 15.1% in H1
-- Vet Group LFL(#) revenue growth of 26.2%, or 23.8% on a
2-year basis; LFL customer sales(#) (1) growth across all First
Opinion practices of 26.9% (28.4% 2-year basis), and LFL Joint
Venture fee income up 29.3% (25.2% 2-year basis)
-- Group underlying PBT(#) growth of 77.2% to GBP70.2m, with growth of 68.3% on a 2-year basis
-- Group headline free cash flow(#) of GBP91.6m, up 51.3% YoY,
reflecting strong cash generation across our First Opinion
veterinary practices and GBP21m in working capital timing benefits
which are expected to reverse in H2; Net cash (excluding lease
liabilities) of GBP64.7m
-- Interim dividend per share of 4.3p, an increase of 72% YoY,
reflecting continued strong cash generation and a robust balance
sheet
-- Sustained momentum across our omnichannel pet care ecosystem:
-- The number of active VIPs increased 13% YoY to 6.8m, with
those shopping across more than one channel up 19% YoY and
representing 27% of VIPs
-- The number of Puppy and Kitten Club members grew 107% YoY
with members typically spending a third more per annum across the
Group compared to non-members
-- New client registrations across our First Opinion veterinary
practices averaged approximately 10,000 per week; comprising
approximately 10% of all veterinary visits
-- The number of pet care plan subscriptions across the Group
grew 45% YoY to over 1.4m, generating over GBP110m in annualised
recurring customer revenue(1)
-- No change to full year guidance, with FY22 Group underlying
pre-tax profit anticipated to be at the top end of the current
range of analyst expectations
-- The stronger than expected and continuing growth in the pet
population over the past eighteen months is materially increasing
the size of our addressable market. In conjunction with our
continued strong performance and good progress across strategic
initiatives, we now see a pathway to GBP2.3bn of customer revenue
across our business over the medium term, compared to the GBP1.4bn
achieved last year.
1 Customer revenue includes customer sales made by Joint Venture
vet practices and differs to the fee income recognised within Vet
Group revenue.
# Alternative Performance Measures (APMs) are defined and
reconciled to IFRS information, where possible, on page 18.
All FY22 APMs include the impact of IFRS16 unless explicitly
stated.
Current trading and outlook
Current trading
Strong growth in pet ownership continues, reflected in the
elevated level of customer registrations across our Puppy and
Kitten club, and the performance across our retail and veterinary
operations continues to be robust, notwithstanding some widely
reported challenges in the near-term operating environment relating
to supply, logistics and labour availability.
We are not immune to such challenges, but are, as the UK's
leading pet care retailer, well placed to manage them, having
adapted our operations to be able to continue providing our segment
leading levels of pet care to customers with minimal
disruption.
The vast majority of our product range is sourced domestically
on long lead times and is neither perishable nor seasonal.
Inventory levels across our distribution centres are good, with
range breadth in stores and online enabling good levels of product
substitution, where required.
We have, to date, managed the challenges around the cost and
availability of shipping containers well, and we utilise a small
number of HGVs and in-house drivers to support our overall
logistics requirement. Our competitive reward structure and clear
focus on wellbeing gives us a high level of colleague
retention.
We are also making good progress in our programme of rent
reductions and initiatives to target efficiencies across goods not
for resale and continue to work closely with our broad base of
long-term suppliers and partners to mitigate inflationary pressures
across the supply chain and maintain our competitive price
index.
Outlook
At this stage, considering both the ongoing momentum across our
business and the challenges in the near-term operating environment,
we anticipate that FY22 Group underlying pre-tax profit will be at
the top end of the current range of analyst expectations*.
Looking further ahead, the stronger than expected and continuing
growth in the pet population over the past eighteen months,
combined with continued customer themes of pet humanisation,
premiumisation and renewal, is increasing the size of our market
and scale of the opportunity facing us. In conjunction with the
clear advantages of our omnichannel model in consistently taking
market share by providing everything a pet owner needs through the
full lifetime of their pet, we now see a pathway to GBP2.3bn of
customer revenue across our business over the medium term.
Our next scheduled update will be our Q3 FY22 release on 26
January 2022.
*As at 22 November 2021, the company-compiled consensus estimate
of analyst expectations for the 53-weeks FY22 full-year post
IFRS-16 underlying pre-tax profit was GBP131m, with a range of
GBP128m to GBP135m.
Peter Pritchard, Group Chief Executive Officer:
Our business has never been more robust. Our pet care strategy
continues to deliver, we continue to take market share and improve
spend per customer and the benefits of our investment in capacity
and capability are really starting to deliver.
Notwithstanding some near-term, industry-wide challenges, we
continue to grow ahead of our plans and, based on trading year to
date, we are on track to report a record year of sales and profit
growth.
I am very proud of the progress we are making and was
particularly pleased to note external recognition of our collective
efforts through our recent Retail Week awards as Best Retailer and
Best Place to Work 2021. I would like to express my sincere thanks
to all our colleagues and Partners across the Group for their
tireless work and dedication.
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulations (Regulation (EU)
No.596/2014). For the purposes of MAR and Article 2 of Commission
Implementing Regulation (EU) 2016/1055, this announcement is being
made on behalf of the Company by Roger Tejwani, Director of
Investor Relations & External Communication.
Results webcast
An audio webcast and presentation of these results will be
available on our website (
https://investors.petsathome.com/investors/ ) from 07.00am on 23
November. Management will host a Q&A conference call for
analysts and investors at 10.00am. To join the call in listen-only
mode, please click on the following link (
https://brrmedia.news/petsathome ). Those wishing to participate in
the Q&A session should email petsathome-Maitland@maitland.co.uk
for call details.
Investor Relations Enquiries
Pets at Home Group Plc:
Roger Tejwani, Director of Investor Relations & External
Communication
+44 (0)1279 927022
Chris Ridgway, Head of Investor Relations
+44 (0)7788 783925
Media Enquiries
Pets at Home Group Plc:
Natalie Cullington, Head of Media & Corporate Affairs
+44 (0)7974 594 701
Maitland/AMO:
Clinton Manning
+44 (0)7711 972662
Joanna Davidson
+44 (0)7827 254567
About Pets at Home
Pets at Home Group Plc is the UK's leading pet care business;
our commitment is to make sure pets and their owners get the very
best advice, products and care. Pet products are available online
or from our 453 stores, many of which also have vet practices and
grooming salons. Pets at Home also operates a UK leading small
animal veterinary business, with 442 First Opinion practices
located both in our stores and in standalone locations. For more
information visit: http://investors.petsathome.com/
Disclaimer
This trading statement 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 adviser. Certain statements
in this trading statement 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 plans and 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
The strong performance across both parts of our business during
the last year accelerated throughout the past six months.
In Retail, broad-based growth across key categories and channels
contributed to strong like-for-like progression on both a one and
two-year basis and good profit conversion. In Veterinary, strong
growth in new client registrations has underpinned a significant
uplift in practice profitability and cash flow, with almost 90% of
practices making a profit and operating loans continuing their
downward trajectory.
There are three key factors underlying this strong
performance:
First, stronger than anticipated growth in new pets over the
past eighteen months continues to lead to a significant increase in
new customers across our loyalty clubs, subscription platforms and
veterinary practices, and has strengthened the outlook for growth
across the UK pet care market.
Second, our omnichannel pet care model, providing pet owners
with everything they need through the lifetime of their pets,
enables us to access all components of spend within this growing
market. Our unique ability to combine a growing portfolio of
products, services and advice across multiple channels into
tailored, convenient propositions for pet owners is a key enabler
of how we consistently outgrow the market in which we operate.
Third, we continue to build capacity and capability at pace,
using intelligent data and digital innovation to join up our pet
ecosystem, own the end-to-end customer experience and, by making
pet care more convenient and rewarding for customers, entrench the
long-term competitive advantages of our omnichannel model.
The early success in growing our subscription business to circa
9% of Group revenue is one example of how we are leveraging
in-house capability, integrating analytics into our extensive pet
dataset to generate unparalleled insights that support investment
decision-making to drive long-term, high-quality growth. Our
growing analytics expertise is empowering us to increasingly use
intelligent data across our wider business and is key to unlocking
significant future value.
We are also making meaningful progress across our digital
agenda, marrying our in-house data and digital expertise to create
digital-first, customer-led pet care journeys across our end-to-end
platform of products and services, as well as digitising the wider
business to improve our service proposition and drive operational
efficiencies.
And we continue with our programme of infrastructure investment,
transforming our stores into experiential pet care centres,
futureproofing our supply chain, deploying new technology to
support best-in-class fulfilment, and enhancing the client and vet
experience across practices.
I am very proud of our achievements to date and hugely excited
by the opportunity for the business ahead. The significant step-up
in pet ownership over the last eighteen months, the pace of which
has been sustained over the last six months beyond previous
expectations, is increasing the size of our addressable market and
has led to a material step up in our medium-term customer revenue
opportunity.
The demonstrable advantages of our omnichannel model in
acquiring new customers and, by providing their full pet care needs
through the lifetime of their pets, increasing our share of wallet
are clear, and we will continue to make the right investments in
capacity and capability to deliver quality and profitable
growth.
Key Performance Indicators
YoY
Financial KPIs(1) H1 FY22 H1 FY21 change
-------------------------- --------------------------- -------- -------- ---------
Customer revenue(#, 2) (GBPm) 867.6 724.7 19.7%
------------------------------------------------------- -------- -------- ---------
Group underlying PBT(#) (GBPm) 70.2 39.6 77.2%
------------------------------------------------------- -------- -------- ---------
Group headline free cashflow(#) (GBPm) 91.6 60.5 51.3%
------------------------------------------------------- -------- -------- ---------
Cash Return on Invested Capital (CROIC) (3) 25.1% 22.7% 238bps
------------------------------------------------------- -------- -------- ---------
YoY
Strategic KPIs Measure H1 FY22 H1 FY21 change
-------------------------- --------------------------- -------- -------- ---------
Bring the pet experience Number of active VIPs(4)
to life (m) 6.8 6.0 12.8%
-------------------------- --------------------------- -------- -------- ---------
50% of revenue from Customer revenue(#, 2) 284.3 242.4 17.3%
pet care services from services(5) (GBPm) 32.8% 33.4%
(67)bps
-------------------------- --------------------------- -------- -------- ---------
Use our data to better VIP customer revenue(#,
serve customers 2, 6) (GBPm) 1,046.5 826.6 26.6%
-------------------------- --------------------------- -------- -------- ---------
Set our people free Customer revenue(#, 2)
to serve per FTE colleague (GBPk) 114.9 95.0 20.9%
-------------------------- --------------------------- -------- -------- ---------
1. Financial KPIs shown above represent those used by the
business to monitor performance. Management recognise that as
Alternative Performance Measures they differ to statutory metrics,
but believe they represent the most appropriate KPIs
2. Customer revenue includes total revenue across the Group
including customer sales made by Joint Venture vet practices, and
therefore differs to the fee income recognised within Vet Group
revenue
3. Cash return on invested capital, represents cash returns
divided by the average of gross capital invested (GCI) for the last
twelve months. Cash returns represent underlying operating profit
before property rentals and share based payments subject to tax,
then adjusted for depreciation of PPE, right-of -use assets and
amortisation. GCI represents gross PPE, right-of-use assets and
software, and other intangibles excluding the goodwill created on
the acquisition of the Group by KKR (GBP906,445,000) plus net
working capital, before the effect of non-underlying items in the
period. The comparative CROIC numbers have been restated to reflect
the impact of IFRS 16 and enhance comparability.
4. Number of VIP loyalty club members who transacted across the
group in the last 52 weeks from end of the reporting period
5. Defined as customer sales made by JV vet practices, revenue
from our Specialist Referral centres (up until the date of disposal
on 31 December 2020) and company managed vet practices, grooming
services, subscriptions, pet sales and pet insurance
commissions
6. VIP customer revenue is shown on a rolling 12-month basis and
include spend at First Opinion vet practices
I. The outlook for the UK pet care market continues to
strengthen
The UK pet care market was strong pre-Covid, growing on average
between 3% and 4% each year, with pet humanisation and
premiumisation driving higher spend across a pet population that
was broadly stable, but continually renewed.
Covid-19 was a clear catalyst for a significant step-up in pet
ownership over the last eighteen months, the pace of which
continues to be sustained above previous expectations and, combined
with structural demand drivers such as humanisation, premiumisation
and renewal, is increasing the estimated future annual underlying
growth rate of our addressable market to between 4% and 5%.
II. Leveraging our growing data capability to increase customer
share of wallet
Generating unparalleled data insights
Our growing, in-house data capability is underpinned by a
50-strong team of colleagues across a range of analytical and CRM
disciplines, providing deep, actionable insights across our unique
and growing dataset of eight million pets and their owners.
At the household level, our holistic and integrated view of pets
and owners across all parts of our business enables us to
communicate with customers individually by relevant category,
service or channel. At the individual customer level, our "customer
DNA" profiling dynamically segments pet owners across more than 300
customer-specific attributes, including life stage, affluence,
transaction history and propensity to engage with other pet
products and services.
In aggregate, this equates to over 150 billion customer data
points on our cloud-based platform and represents a truly
unparalleled view of the UK's pet owning population. This enables
us to predict our customers' future pet care requirements better
than any other provider and, combining our suite of products and
physical and digital services, provide relevant, joined-up pet care
solutions through the full lifetime of a pet.
Greater personalisation leading to improved responsiveness and
efficacy
The speed at which we now iterate, supported by approximately
250,000 unique segmentation requests each month, is enabling a
significant step up in marketing velocity while lowering the cost
of customer acquisition. Across the last six months, we have
launched over 300 targeted marketing campaigns and a threefold
increase in supplier-driven communications, improving response
rates and marketing efficacy:
- Our subscription plans grew 45% during the period as we
utilised data insights across existing subscribers to identify more
customers with propensity to take an additional product or service
across the Group. Subscription growth remains a significant
opportunity, with a customer demographic well-attuned to shopping
multiple channels and an approximate ninefold uplift in annual
spend from those who do.
- Across recent, established marketing campaigns, our enhanced
"threshold offers", which optimise incentives based on anticipated
spend, have achieved a two-fold increase in basket spend from
customers redeeming the offer compared to those not targeted.
- Our recent churn campaign, using an "always on" predictive
model to target customers most at risk of churn with relevant
interventions, saw more than two-thirds of reactivated customers
return for a second time outside of the offer.
While our ability to leverage our data insights will only
increase over the coming months, these early indications of the
potential for higher levels of engagement and spend are highly
encouraging.
Beyond our CRM activities, we are increasingly using intelligent
data to optimise decision-making across the wider business and
empower colleagues and Partners across stores and veterinary
practices.
- Our new pet lifetime value model, incorporating retail and
veterinary data specific to over four million dogs, is being used
to predict the full lifetime of spend across all major breeds,
thereby improving the planning of sales, resource, and treatments
at practice level.
- Across our retail operations, profiling customer baskets and
determining substitute and complementary products at individual
store level is helping to optimise inventory management and
ranging, and the continued success of our Contactless Collection
service is being supported by real-time monitoring of KPIs.
III. Digitising our business to create a seamless pet care
experience
Progressing Project "Polestar"
Our 100-strong team of in-house analysts, developers, testers
and customer experience experts commenced the initial sprints in
this digital transformation during the period.
"Polestar" underpins our overarching aim to make pet care as
easy, convenient, supportive, and rewarding as possible, by
marrying the data-led insights we have on our customers' pet care
needs with personalised journeys across a unique, proprietary
digital interface that seamlessly connects our ecosystem of
products and services across all channels and entrenches the
competitive advantages of our omnichannel model.
This clearly phased programme will deliver new features and
functionality in the first stages such as the ability for customers
to access all our pet products and services through a frictionless
single login and a new iteration of our mobile app for a
much-improved shopping experience.
Digitising the wider business
We continue to harness our digital capabilities in stores and
for colleagues, with a focus on convenience and speed across the
end-to-end pet care experience:
- Our one-hour Click and Collect service, available across our
full estate, continues to perform well and, in conjunction with our
Contactless Collection service which has been extended to 360
stores, is embedding best-in-class fulfilment for customers while
generating operational efficiencies across the Group.
- Initial results from our Deliver from Store trial have been
highly encouraging, with the capability to do this now available
across more than 130 stores, almost half of which are trialling
same day delivery. Our Click and Collect and Deliver from Store
proposition currently account for almost one fifth of our
omnichannel revenue and are a major driver of our omnichannel
growth.
- Our store operations are increasingly benefitting from digital
innovation, with the launch of 'Go-in-Store' video functionality
connecting online customers live to expert store colleagues, and
the rollout of our in-house developed handheld device, "One
Device", simplifying daily tasks and empowering store colleagues to
deliver a joined-up pet care experience.
IV. Investing in infrastructure to provide a best-in-class
customer experience
Retail operations
Our store transformation programme continues at pace across our
existing estate, and five new pet care centres so far this year in
Handforth, Clacton-on-Sea, Guildford, Balham and Brighton, the
latter incorporating several new initiatives on energy efficiency
and sustainability which can be rolled out across the wider
estate.
These next generation centres play a pivotal role in bringing
the pet experience to life by connecting local communities of pet
owners and their pets to all their pet care requirements. The
performance across recent openings continues ahead of plan and is
helping to inform our thinking on future transformations.
Development of our new storage and distribution facility in
Stafford commenced in July and remains on track to become fully
operational by Summer 2023. This purpose-built and highly automated
facility will significantly improve our fulfilment capacity and
inventory flexibility and is being designed with a clear focus on
sustainability through use of LED lighting, solar energy, rainwater
harvesting and a BREEAM rating target of "Excellent" for the
build.
Veterinary operations
We continued to invest in infrastructure and resource across our
veterinary practices to broaden our service proposition, improve
the client experience and accelerate practice maturity.
Our 'Pathfinder' initiative, launched in our new pet care
centres in Handforth and Guildford, combining design innovation,
the latest client-facing technology and our new "Pet Care Advisor"
role, is helping to optimise allocation of clinical resource,
enhance client engagement, and improve practice economics, and will
be rolled out across additional practices over the coming
months.
V. Sustainable, profitable growth over the medium term
Our financial position remains strong, with our robust balance
sheet and strong cash generation giving us the flexibility not only
to invest in strategically important initiatives that will help us
achieve our medium-term growth ambitions, but also to pay a
progressive dividend and assess other opportunities to maximise
returns for our shareholders.
We are firmly committed to meeting our wider obligations as a
responsible corporate citizen and made good progress during the
half in our social value strategy, aligned across the three pillars
of Planet, People and Pets.
Planet
We sell close to 200 million pet food pouches each year. As part
of our commitment to 100% recyclable packaging by 2025, we rolled
out collection units for the recycling of pet food packaging across
75 stores, and plan to extend this across much of our store estate
by the end of 2022. Currently over 75% of our packaging is
recyclable.
We have committed to become net zero carbon operationally (scope
1 and 2) by 2030 and aim to have a net zero carbon value chain
(scope 3) by 2040. During the period, using the guidance of the
science-based target initiative (sbti), we set a target to reduce
our overall supply chain emissions by 42% in absolute terms by 2030
versus our 2020 base.
People
In partnership with the Prince's Trust, Pets at Home is
supporting the Government's Kickstart programme to provide work
opportunities to young people. We have had over 130 "kickstarters"
to date working in a variety of roles across our business, and plan
to extend this in the current financial year.
Colleague wellbeing remains of paramount importance, with our
continued focus on diversity and inclusion leading to the recent
launch of four new colleague diversity networks on gender balance,
disability, LGBTQ+ and race and ethnicity, as well as our Diversity
& Inclusion Charter.
Pets
The Pets at Home Foundation is the largest supporter to rescues
in the UK and, during our first half awarded grants and donations
to charities worth over GBP1m, taking the total level of donations
to date to over GBP23m. This year we broadened our remit to also
support charities that help people through pets and were delighted
to donate to both Dogs4Good and Pets as Therapy.
We have extended our partnership with the Woodland Trust to
introduce a 'pet memory scheme', which enables our veterinary
practices to donate in memory of each pet that passes, thereby
supporting the creation, restoration, and planting of 20,000 acres
of woodland by 2030, and the capture of 5,000 tonnes of carbon a
year.
Our strong performance over the first half would not have been
possible without the ongoing support of our hardworking, passionate
and skilled colleagues and Partners across the Group. I am
incredibly grateful for their commitment and equally proud of their
successes.
Peter Pritchard
Group Chief Executive Officer
23 November 2021
Chief Financial Officer's Review
The H1 FY22 period represents the 28 weeks from 26 March 2021 to
7 October 2021. The comparative period represents the 28 weeks from
27 March 2020 to 8 October 2020.
The Group's results are shown as three segments that represent
the size of the respective businesses and our internal reporting
structures; Retail (includes products purchased online and
in-store, pet sales, grooming services and insurance products), Vet
Group (includes First Opinion practices) and Central (includes
Group costs, finance expenses and the Group's veterinary telehealth
business).
The Group completed its disposal of its five Specialist Referral
centres (the "Specialist Group") on 31 December 2020 and therefore
the Vet Group, and Group, financial information shown for H1 FY21,
includes an element of discontinued operations, however given the
immateriality of these operations (revenue GBP22.9m, underlying PBT
GBP1.1m) to Group revenue and profit they have not been disclosed
separately.
H1 FY22 H1 FY21 YoY change
---------------------------------------- -------- -------- -----------
Group like-for-like revenue growth(#) 22.2% 5.3%
Retail 21.9% 5.8%
Vet Group 26.2% 1.2%
Group revenue (GBPm) 677.6 574.4 18.0%
---------------------------------------- -------- -------- -----------
Retail 619.6 507.8 22.0%
-----------
Vet Group 56.8 66.6 (14.7)%
-----------
Central 1.2 - NM
---------------------------------------- -------- -------- -----------
Group underlying gross margin(1,#) 48.7% 47.7% 101bps
-----------
Retail 48.1% 48.5% (34)bps
-----------
Vet Group(1) 54.6% 41.7% 1,289bps
===========
Group underlying PBT(1,#) (GBPm) 70.2 39.6 77.2%
Retail 53.1 32.3 64.4%
Vet Group(1) 24.5 16.4 49.2%
---------------------------------------- -------- -------- -----------
Central (7.4) (9.1) 18.8%
---------------------------------------- -------- -------- -----------
Group underlying PBT margin(1,#) 10.4% 6.9% 346bps
---------------------------------------- -------- -------- -----------
Retail 8.6% 6.4% 221bps
---------------------------------------- -------- -------- -----------
Vet Group(1) 43.1% 24.7% 1,847bps
-----------
Group statutory PBT (GBPm) 70.6 38.9 81.3%
-----------
Underlying basic EPS(1,#) (p) 11.3 6.3 78.1%
-----------
Statutory basic EPS (p) 11.4 6.2 82.9%
-----------
Group non-underlying items(1) (GBPm) 0.4 (0.7) NM
-----------
Group non-underlying cash costs (GBPm) - - NM
-----------
Group headline free cashflow (#)
(GBPm) 91.6 60.5 51.3%
Dividend (p) 4.3 2.5 72.0%
Number of
---------------------------------------- -------- -------- -----------
Stores 453 451 2
-----------
Grooming salons 317 315 2
-----------
Joint Venture First Opinion vet
practices 390 394 (4)
---------------------------------------- -------- -------- -----------
Company managed First Opinion vet
practices 52 46 6
---------------------------------------- -------- -------- -----------
1. H1 FY22 non-underlying credit of GBP0.4m relates to the
release of a provision held against property leases. H1 FY21
non-underlying charge of GBP0.7m relates to an accounting charge
for the potential future acquisition of minority stakes owned by
vet partners in the Specialist Group (disposed of on 31 December
2020). Both have been allocated against non-underlying gross
margin.
Impact of Covid-19 on the interim financial statements
Throughout the prior year and particularly in its first quarter,
Covid-19 impacted the Group by placing revenue restrictions on the
business and leading us to incur both one-off costs and ongoing,
additional operational costs.
This resulted in an estimated GBP30m adverse financial impact in
the prior year, all of which is included in our underlying results,
and we are planning for operational costs relating to Covid-19 of
GBP5m in the current year.
Revenue
Group revenue in H1 FY22 grew 18.0% to GBP677.6m (H1 FY21:
GBP574.4m) and like-for-like (LFL) revenue grew 22.2%(#) . On a
2-year basis, Group LFL(#) revenue grew 28.6%.
Retail revenue grew 22.0% to GBP619.6m (H1 FY21: GBP507.8m),
including omnichannel revenue growth of 21.5% to GBP93.7m,
representing 15.1% of total Retail revenue (H1 FY21: 15.2%). The
LFL revenue growth in Retail was 21.9%(#) for the period and 28.9%
on a 2-year basis.
Food revenue grew by 21.4% to GBP336.7m (H1 FY21: GBP277.4m),
reflecting our continued success in recruiting new customers
throughout the period as well as an increase in Advanced Nutrition
participation.
Accessories revenue grew 20.9% to GBP257.7m (H1 FY21:
GBP213.2m), with strong growth in categories such as dog toys,
consumables and training accessories.
Grooming revenues increased by 62.2% in the first half to
GBP15.5m (H1 FY21: GBP9.6m), annualising against the closure of all
salons for the first 10 weeks of the prior year.
Vet Group LFL revenue grew by 26.2% for the period, however
total revenue declined by 14.7% to GBP56.8m (H1 FY21: GBP66.6m),
driven by the disposal of the Specialist Group on 31 December 2020.
LFL revenue grew by 23.8% on a 2-year basis.
Total Joint Venture fee income increased by 29.1% to GBP36.9m
(H1 FY21: GBP28.6m), with LFL fee income up 29.3%(#) . As our
program of fee adjustments was fully implemented and annualised in
the prior year as planned, LFL fee income growth was more closely
aligned to LFL growth in Joint Venture customer sales, at
27.4%.
Revenues (#) from company managed First Opinion practices
increased by 31.3% to GBP16.2m (H1 FY21: GBP12.3m).
Revenue of GBP1.2m (H1 FY21: GBPnil) was recognised within our
Central division in relation to The Vet Connection, the financial
performance of which has been fully consolidated since the
acquisition on 30 November 2020.
Gross margin
Underlying group gross margin (#) increased year-on-year by 101
bps to 48.7% (H1 FY21: 47.7%).
Gross margin within Retail was 48.1%, a reduction of 34 bps over
the prior period (H1 FY21: 48.5%), with positive contributions from
improved product mix and increased grooming revenue offset by a
GBP5.9m (87bps) year-on-year increase in freight costs.
Underlying gross margin(#) within the Vet Group increased by
12.9% to 54.6% (H1 FY21: 41.7%). This increase reflects the strong
sales growth across our Joint Venture estate driving strong fee
income growth with the cost base to support those practices
remaining largely fixed. The year-on-year movement in gross margin
also reflects the disposal of the Specialist Group on 31 December
2020 (+5.8% YoY impact).
Operating costs and profit before tax
Underlying Group pre-tax profit was GBP70.2m (H1 FY21:
GBP39.6m), with a profit margin of 10.4%(#) (H1 FY21: 6.9%). Group
underlying operating costs of GBP192.2m (H1 FY21: GBP164.9m) grew
at 16.6% or 11.2% adjusting for non-recurring impacts; specific
COVID-19 costs, the timing of business rates payment, and the
disposal of the Specialist Group in the prior year. Before
investment in fulfilment, customer acquisition, and our Support
Office capabilities, underlying cost growth was 3.6%.
At the beginning of the current financial year, we planned for
additional operational costs relating to Covid-19 of GBP9m. Based
on our year-to-date position, we now estimate the full year impact
to be approximately GBP5m and will continue to closely monitor the
evolving external environment.
We continue to assess and mitigate where possible the widely
reported challenges in the near-term operating environment relating
to supply, logistics and labour availability. While we are not
immune to such challenges, we are well placed to manage them.
Retail pre-tax profit was GBP53.1m (H1 FY21: GBP32.3m) with a
profit margin of 8.6%(#) (H1 FY21: 6.4%) reflecting the sustained
strong trading across the first half, and annualisation of the
revenue and cost implications of Covid-19 in the prior year.
Operating cost growth, excluding depreciation and amortisation, was
20.5% to GBP181.3m (H1 FY21: GBP150.5m), or 8.2% after normalising
the timing of payment of business rates; in the prior year no
P&L charge was recognised in H1, with GBP28.9m voluntarily
repaid in H2.
Underlying Vet Group pre-tax profit was GBP24.5m(#) (H1 FY21:
GBP16.4m) with a profit margin of 43.1%(#) (H1 FY21: 24.7%).
Operating costs in the Vet Group, excluding depreciation and
amortisation, were GBP4.7m (H1 FY21: GBP8.4m), a decrease of 43.5%
on the prior year. The year-on-year change in operating costs
reflects the disposal of the Specialist Group part way through the
prior year, as well as achieved cost efficiencies across several
areas.
Our Central division generated a loss of GBP7.4m (H1 FY21:
GBP9.1m), reflecting reduced interest charge and the profit
generated by the Vet Connection, acquired on 30 November 2020,
offset by increased investment in group headcount.
Finance expense
The net finance expense for the period decreased to GBP7.8m (H1
FY21: GBP10.0m) with the decrease driven by reduction in debt as
well as non-recurring fees incurred in the prior year relating to
an additional credit facility arranged as part of our Covid-19
response. This facility remained unutilised for the entire term and
has been allowed to expire without seeking renewal.
Group profit before tax
Underlying pre-tax profit was GBP70.2m(#) (H1 FY21: GBP39.6m) an
increase of 77.2%. Statutory pre-tax profit, including all
non-underlying items was GBP70.6m (H1 FY21: GBP38.9m).
Taxation, profit after tax & EPS
Underlying total tax expense for the period was GBP13.8m(#) , a
rate of 19.6% on underlying pre-tax profit.
Underlying profit after tax increased by 78.1% to GBP56.4m(#)
(H1 FY21: GBP31.7m). Underlying basic earnings per share were 11.3
pence (H1 FY21: 6.3 pence) and statutory basic earnings per share
were 11.4 pence (H1 FY21: 6.2 pence).
Cash working capital
The cash movement in trading working capital for H1 FY22 was an
inflow of GBP58.1m(#) . This was predominantly driven by one-off
timing benefits estimated at GBP21m, resulting in a much stronger
working capital position than otherwise.
The strong financial performance across our Joint Venture First
Opinion vet practices, supported by favourable market dynamics,
contributed to the gross value of operating loans reducing by
GBP4.4m to GBP22.3m from GBP26.7m at FY21 year end (H1 FY21:
GBP29.1m). This increased the overall Group cash working capital
inflow to GBP62.5m (H1 FY21: GBP22.0m) and helped support the
strong cash generation of the Vet Group.
The provision held against the gross value of operating loans
was GBP5.2m (H1 FY21: GBP7.4m) representing 23% of the gross value
of the loans.
Capital investment
Capital investment was GBP32.9m (H1 FY21: GBP17.4m) and was
focused on three strategic growth areas; investment in data
analytics and business systems totalling GBP16.9m (H1 FY21:
GBP8.4m), as we continue to progress our data and digital agenda, a
GBP5.7m (H1 FY21: GBP1.9m) investment as we build capacity across
our distribution network, and GBP3.7m (H1 FY21: GBP1.8m) to rollout
our next generation store format. Cash capital expenditure was
GBP36.7m (H1 FY21: GBP16.3m).
Group headline free cashflow
Group headline free cashflow after interest and tax, but before
acquisitions and disposals increased to GBP91.6m(#) (H1 FY21:
GBP60.5m), representing a cash conversion rate(1) of 65.2% (H1
FY21: 54.3%). The increase in free cashflow compared with the prior
year is largely driven by the strong year-on-year profit growth, as
well as disciplined capital investment, and the one-off timing
benefit to working capital described above, offset by the timing of
business rates payment, with GBP28.9m repaid in H2 of last
year.
Group headline free cashflow(#) (GBPm) H1 FY22 H1 FY21
--------------------------------------------- -------- --------
Operating cashflow(#) 159.2 89.4
--------------------------------------------- -------- --------
Tax and Interest (15.8) (9.9)
--------------------------------------------- -------- --------
Debt issue costs - (0.2)
--------------------------------------------- -------- --------
Net Capex (36.7) (16.3)
--------------------------------------------- -------- --------
Purchase of own shares to satisfy colleague
options (15.1) (2.5)
--------------------------------------------- -------- --------
Group headline free cashflow(#) 91.6 60.5
--------------------------------------------- -------- --------
Headline FCF
Divisional headline free cashflow(#) (GBPm) FCF conversion(1)
-------------------------------------- ------------- ------------------
Retail 43.1 36.9%
-------------------------------------- ------------- ------------------
Vet Group 64.6 245.8%
-------------------------------------- ------------- ------------------
Central (16.1) NM
-------------------------------------- ------------- ------------------
Group headline free cashflow(#) 91.6 65.2%
-------------------------------------- ------------- ------------------
1. Calculated as headline free cashflow as a percentage of underlying cash EBITDA.
As a result of strong cash generation and the initial proceeds
from the disposal of the Specialist Group in the prior year, the
Group's net cash position at the end of the period was GBP64.7m,
and net debt was GBP333.2m on a lease-adjusted basis. This
represents a leverage ratio of -0.4x underlying EBITDA(#) or 1.4x
on a lease-adjusted basis.
Group net cash/(debt) (GBPm) H1 FY22 FY21
-------------------------------------------------- -------- -------
Opening net cash/(debt) 1.4 (85.9)
-------------------------------------------------- -------- -------
Headline free cashflow (#) 91.6 67.4
-------------------------------------------------- -------- -------
Ordinary dividends paid (27.2) (37.1)
-------------------------------------------------- -------- -------
Acquisitions(2) (1.1) (16.8)
-------------------------------------------------- -------- -------
Disposals(3) - 79.4
-------------------------------------------------- -------- -------
Non-underlying cash outflow - (5.5)
-------------------------------------------------- -------- -------
Closing net cash/(debt) 64.7 1.4
-------------------------------------------------- -------- -------
Leverage (Net cash/(debt) / underlying EBITDA(#)
) -0.4x 0.0x
-------------------------------------------------- -------- -------
Lease-adjusted leverage (Net cash/(debt)
/ underlying EBITDA(#) ) (4) 1.4x 1.9x
================================================== ======== =======
2. H1 FY22 and H1 FY21 includes investment in certain company managed practices.
3. In FY21 includes the GBP80m cash proceeds in relation to the
disposal of the Specialist Group in the year net of fees and cash
held upon disposal.
4. Underlying EBITDA for H1 FY22 is GBP137.7m on a lease-adjusted basis.
The Group's cash return on invested capital(#) in the period
increased to 25.1% (H1 FY21: 22.7%).
Capital allocation
At our preliminary results in May 2021, we communicated an
updated policy which prioritises investing cash in areas that will
expand the Group and deliver attractive returns. This includes
organic investment into our digital capability and our
infrastructure, including our store regeneration program. Our next
priority is to provide a progressive ordinary dividend to
shareholders which approximates to 50% of earnings per share. We
will consider value-accretive opportunities, including M&A,
which are strategically aligned to expanding our ecosystem in core
and adjacent markets and where we consider the potential
opportunity to drive incremental value as attractive. Finally, post
all other identified and anticipated uses for capital, including
the ordinary dividend, we would expect to return surplus free
cashflow to shareholders through a special dividend or share
buyback. We continue to keep our balance sheet and capital
structure under ongoing review.
Dividend
The Board has recommended an interim dividend of 4.3 pence per
share, an increase of 72% on the prior year. The interim dividend
will be payable on 7 January 2022 to shareholders on the register
at the close of trading on 3 December 2021.
Impact of the UK's exit from the European Union
Following the United Kingdom's exit from the European Union (EU)
and the end of the transition period on 31 December 2020, we
continue to take actions across the Group to mitigate any related
impact on tariffs, logistics, vet availability and currency.
Our foreign exchange policy uses a mix of forward contracts to
hedge our USD requirement to cover the next 12-18 months. Our
hedging requirements for FY22 are in place at an average rate of
1.37 (H1 FY21: 1.29) USD:GBP, and any foreign exchange impact is
included within financial guidance.
We continue to monitor the potential regulatory implications for
our operations in Northern Ireland, specifically concerning Export
Health Certificates. We continue to work with the relevant
professional bodies to assess the protocols involved in bringing
products into Northern Ireland, and our planning for the current
year includes an increase in associated logistics costs.
Mike Iddon
Chief Financial Officer
23 November 2021
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 25 March 2021. 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
-- Sustainability and climate change risk, including extreme
weather, where prolonged unusual weather patterns can impact
footfall to stores
The Board continues to review the risks and opportunities that
may arise as a result of either COVID-19 or Brexit, particularly
the impact on domestic haulage and international freight.
Mitigation plans are continuing to be developed in the following
areas:
-- Our people
-- Supply chain and sourcing
A detailed explanation of these risks can be found on pages 54
to 63 of the 2021 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 interim financial statements has been
prepared in accordance with IAS 34 Interim Financial Reporting as
issued by the IASB and adopted for use in the UK;
-- 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 25 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 28 weeks 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 22 November 2021
Peter Pritchard, 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.
INDEPENT REVIEW REPORT TO PETS AT HOME GROUP PLC
Conclusion
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 7th October 2021 which comprises the condensed
consolidated income statement, the condensed consolidated statement
of comprehensive income, the condensed consolidated balance sheet,
the condensed consolidated statement of changes in equity and the
condensed consolidated statement of cash flows and the related
explanatory notes.
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 7th
October 2021 is not prepared, in all material respects, in
accordance with IAS 34 Interim Financial Reporting as adopted for
use in the UK and the Disclosure Guidance and Transparency Rules
("the DTR") of the UK's Financial Conduct Authority ("the UK
FCA").
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. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) 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.
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 latest annual financial statements of the group were
prepared in accordance with International Financial Reporting
Standards pursuant to Regulation (EC) No 1606/2002 as it applies in
the European Union and in accordance with international accounting
standards in conformity with the requirements of the Companies Act
2006 and the next annual financial statements will be prepared in
accordance with UK-adopted international accounting standards. The
directors are responsible for preparing the condensed set of
financial statements included in the half-yearly financial report
in accordance with IAS 34 as adopted for use in the UK.
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.
The purpose of our review work and to whom we owe our
responsibilities
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 DTR of 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.
Stuart Burdass
for and on behalf of KPMG LLP
Chartered Accountants
1 St Peter's Square
Manchester
M2 2AE
22(nd) November 2021
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 APMs of historical or future financial performance,
position or cash flows 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
UK-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.
A full glossary of APMs is included in the most recent Annual
Report & Accounts which are available at
http://investors.petsathome.com .
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 and veterinary practices
that commenced trading more than 52 weeks prior to the reporting
date, excluding fee income from Joint Venture practices where the
Group has bought out the Joint Venture Partners or will offer to
buy out the Joint Venture Partners in the future.
Omni-channel revenue: Revenue net of discounts and VAT from
online sales, subscriptions and order to store.
Underlying PBT: Underlying profit before tax (PBT) is based on
pre-tax profit before the impact of certain costs or incomes that
derive from events or transactions that fall outside the normal
activities of the Group and are excluded by virtue of their size
and nature in order to reflect management's view of the performance
of the Group.
Underlying free cash flow: Net increase/(decrease) in cash
before the impacts of dividends paid, acquisition of subsidiaries,
proceeds from new loans and repayment of borrowings.
Underlying CROIC: Cash return on invested capital represents
cash returns divided by the average of gross capital invested (GCI)
for the last twelve months. Cash returns represent underlying
operating profit before property rentals and share based payments
subject to tax, then adjusted for depreciation on PPE and
right-of-use assets and amortisation. GCI represents gross PPE,
right-of-use assets and software, and other intangibles excluding
the goodwill created on the acquisition of the Group by KKR
(GBP906,445,000), plus net working capital, before the effect of
non-underlying items in the period.
Non-underlying items: Certain costs or incomes that derive from
events or transactions that fall outside the normal activities of
the Group and are excluded by virtue of their size and nature in
order to reflect management's view of the performance of the
Group.
References to Underlying GAAP measures and Underlying APMs
throughout the interim statements are measured before the effect of
non-underlying items.
APM Definition Reconciliation
----------------- ---------------------------------- ----------------------------------------------------------
Cash EBITDA Underlying EBITDA (see Cash EBITDA (GBPm) HY22 HY21 Note
below) adjusted for Underlying EBITDA 137.7 108.9 2
share based payment Share based payment
charges. charge 2.8 2.4 3
-------------------- ----- ----- ----
Cash EBITDA 140.5 111.3
----------------- ---------------------------------- ----------------------------------------------------------
Underlying EBITDA Earnings before interest, Underlying EBITDA
tax, depreciation and (GBPm) HY22 HY21 Note
amortisation before Statutory operating
the effect of non-underlying profit 78.4 48.9 2
items in the period. Depreciation on
tangible fixed
assets 13.5 14.8 3
Depreciation on
right-of-use assets 37.1 37.9 3
Amortisation of
intangible assets 9.1 6.6 3
Non-underlying
items (0.4) 0.7 3
--------------------- ----- ----- ----
Underlying EBITDA 137.7 108.9
----------------- ---------------------------------- ----------------------------------------------------------
Underlying CROIC Cash return on invested Underlying CROIC
capital, represents (GBPm) HY22 HY21 Note
cash returns divided Cash returns:
by the average of gross Underlying operating
capital invested (GCI) profit 134.4 109.2
for the last twelve Share based payment
months. Cash returns charges 5.1 4.3
represent underlying ----------------------- ------- ------- --------------
operating profit before 139.5 113.5
property rentals and Effective tax rate 19% 20%
share based payments Tax charge on above (26.5) (22.7)
subject to tax, then ----------------------- ------- ------- --------------
adjusted for depreciation 113.0 90.8
of PPE, right-of -use Depreciation and
assets and amortisation. amortisation 111.1 108.8
GCI represents gross ----------------------- ------- ------- --------------
PPE, right-of-use assets Cash returns 224.0 199.6
and software, and other Gross capital invested
intangibles excluding (GCI):
the goodwill created Gross property,
on the acquisition of plant and equipment 326.5 313.6 8
the Group by KKR (GBP906,445,000) Gross right-of-use
plus net working capital, assets 533.5 525.9
before the effect of Intangibles 1,071.8 1,056.8 10
non-underlying items Less KKR goodwill (906.4) (906.4)
in the period. Investments 11.5 14.4
Net working capital (140.0) (111.7) see definition
The comparative CROIC
numbers have been restated GCI 896.9 892.6
to reflect the impact Average 893.5 879.9
of IFRS 16 and enhance ----------------------- ------- ------- --------------
comparability. Underlying CROIC 25.1% 22.7%
----------------- ---------------------------------- ----------------------------------------------------------
Underlying free Net increase/(decrease) Underlying free
cash flow in cash before the impacts cash flow (GBPm) HY22 HY21 Note
of dividends paid, acquisition ---------------------------- ------ ------ ------
of subsidiaries, proceeds Underlying free
from new loans and repayment cash flow 91.6 60.5
of borrowings. Underlying free
cash flow
Dividends paid (27.2) (24.7) CFS
Acquisition of subsidiaries (1.1) (0.8) CFS
Proceeds from new
loans - 20.0 CFS
Repayment of borrowings - (20.0) CFS
Net increase in
cash 63.3 35.0
CFS = Consolidated
Statement of Cash
Flows
Like-for-like Like-for-like sales growth Not applicable.
comprises total revenue
in a financial period
compared to revenue achieved
in a prior period for
stores, online operations,
grooming salons and veterinary
practices that commenced
trading more than 52
weeks prior to the reporting
date, excluding fee income
from Joint Venture practices
where the Group has bought
out the Joint Venture
Partners or will offer
to buy out the Joint
Venture Partners in the
future.
-------------------- --------------------------------- ------------------------------------------
2-year like-for-like 2-year like-for-like Not applicable.
sales growth comprises
total revenue in a financial
period compared to revenue
achieved in a prior period
for stores, online operations,
grooming salons and veterinary
practices that commenced
trading more than 104
weeks prior to the reporting
date, excluding fee income
from Joint Venture practices
where the Group has bought
out the Joint Venture
Partners or will offer
to buy out the Joint
Venture Partners in the
future
-------------------- --------------------------------- ------------------------------------------
Underlying basic Underlying basic earnings Underlying basic
EPS per share (EPS) is based EPS (p) HY22 HY21 Note
on earnings per share Underlying basic
before the impact of EPS 11.3 6.3 4
certain costs or incomes Non-underlying items 0.1 (0.1)
that derive from events --------------------- ---- ----- ----
or transactions that Basic earnings per
fall outside the normal share 11.4 6.2
activities of the Group
and are excluded by virtue
of their size and nature
in order to reflect management's
view of the performance
of the Group.
-------------------- --------------------------------- ------------------------------------------
Underlying operating Underlying operating Underlying operating
profit profit is based on operating profit (GBPm) HY22 HY21 Note
profit before the impact Underlying operating
of certain costs or incomes profit 78.0 49.6 2
that derive from events Non-underlying items 0.4 (0.7) 3
or transactions that --------------------- ---- ----- ----
fall outside the normal Operating profit 78.4 48.9
activities of the Group
and are excluded by virtue
of their size and nature
in order to reflect management's
view of the performance
of the Group.
-------------------- --------------------------------- ------------------------------------------
Underlying profit Underlying profit before Underlying PBT (GBPm) HY22 HY21 Note
before tax tax (PBT) is based on Underlying PBT 70.2 39.6 CIS
pre-tax profit before Non-underlying items 0.4 (0.7) 3
the impact of certain ---------------------- ---- ----- ----
costs or incomes that PBT 70.6 38.9
derive from events or
transactions that fall CIS = Consolidated Income Statement
outside the normal activities
of the Group and are
excluded by virtue of
their size and nature
in order to reflect management's
view of the performance
of the Group.
-------------------- --------------------------------- ------------------------------------------
Underlying profit Underlying profit after Underlying PAT (GBPm) HY22 HY21 Note
after tax tax (PAT) is based on Underlying PAT 56.4 31.7 CIS
post tax profit before Non-underlying items 0.3 (0.7) CIS
the impact of certain ---------------------- ---- ----- ----
costs or incomes that PAT 56.7 31.0
derive from events or CIS = Consolidated Income Statement
transactions that fall
outside the normal activities
of the Group and are
excluded by virtue of
their size and nature
in order to reflect management's
view of the performance
of the Group.
-------------------- --------------------------------- ------------------------------------------
Underlying total Underlying total tax Underlying total
tax expense expense is based on the tax expense (GBPm) HY22 HY21 Note
statutory tax expense Underlying tax expense 13.8 7.9 5
for the period (being Non-underlying items 0.1 - 5
the net of current tax ----------------------- ---- ---- ----
and deferred tax) before Tax expense 13.9 7.9
the impact of certain
costs or incomes that
derive from events or
transactions that fall
outside the normal activities
of the Group and are
excluded by virtue of
their size and nature
in order to reflect management's
view of the performance
of the Group.
Underlying net Underlying net working Underlying net working
working capital capital movement is a capital movement (GBPm) HY22 HY21 Note
measure of the cash required Net working capital
by the business to fund per cash flow statement 61.5 21.4 CFS
its inventory, receivables
and payables. Being:
Movement in trade and
The change year on year other receivables (1.3) (15.4)
reflects the cash in/outflow Movement in inventories 2.9 (17.0) CFS
in relation to changes Movement in trade and
in the working capital other payables 55.3 44.8 CFS
cycle excluding non-underlying Movement in provisions 1.2 1.2 CFS
items. ---------------------------- ------- ------- -----
Trading working capital
The change in working movement 58.1 13.6
capital is a key component Movement in gross operating
of the free cash flow loans 4.4 8.4
measure of the Group. ---------------------------- ------- ------- -----
Cash working capital
movement 62.5 22.0
---------------------------- ------- ------- -----
Underlying allowance
for expected credit
losses against operating
loans (1.0) (0.6)
Net working capital
movement 61.5 21.4
CFS = Consolidated
statement of cash flows
(GBPm) HY22 HY21 Note
Receivables 50.1 64.3 CBS
Inventory 80.9 79.8 CBS
Trade and other payables (263.4) (250.4)
Provisions (4.6) (2.7) CBS
Non-current provisions (3.0) (3.5) CBS
---------------------------- ------- ------- -----
Net working capital (140.0) (112.5)
CBS = Consolidated
statement of cash flows
------------------ ------------------------------- --- --------------------------------------------------------
Underlying cash Working capital before Underlying cash
working capital decrease in gross operating working capital (GBPm
loans to Joint Venture ) HY22 HY21 Note
practices Net working capital
(above) 61.5 21.4
Net loans and borrowings (3.4) (7.8) 15
------------------------- ----- ----- ----
Underlying cash working
capital 58.1 13.6
------------------ ------------------------------- --- --------------------------------------------------------
Operating cash Net cash flow from operating Operating cash flow
flow activities per the cash (GBPm) HY22 HY21 Note
flow statement, before --------------------------- ------ ------ ----
the effects of corporation Net cash flow from
tax payments, non-underlying operating activities
items, lease payments, (per cash flow statement) 187.9 123.9
proceeds from the sale --------------------------- ------ ------ ----
of PPE and costs to acquire Add back:
right-of-use assets. Tax paid 14.6 8.1
Pre-tax underlying
operating cash flow 202.5 132.0
--------------------------- ------ ------ ----
Capital lease payments (36.9) (35.1)
Interest paid on
lease liabilities (6.2) (7.1)
Proceeds from sale
of PPE - 0.1
Costs to acquire
right-of-use assets (0.2) (0.5)
--------------------------- ------ ------ ----
Operating cash flow 159.2 89.4
--------------------------- ------ ------ ----
Tax paid (14.6) (8.1)
Interest paid (1.3) (2.0)
Interest received 0.1 0.2
Debt issue costs - (0.2)
Purchase of own shares (15.1) (2.5)
Acquisition of PPE
and intangible assets (36.7) (16.3)
Underlying free cash
flow 91.6 60.5
CFS = Consolidated statement of
cash flows
-------------------------------------------------
Omni-channel Revenue net of discounts Omni-channel revenue
revenue and VAT from core online (GBPm) HY22 HY21 Note
sales, order to store --------------------- ---- ---- ----
and subscriptions. Omni-channel revenue 93.7 77.1
--------------------- ---- ---- ----
Net cash/(debt) Cash and cash equivalents Net cash/(debt) (GBPm) HY22 HY21 Note
less loans and borrowings. -------------------------- ------- ------- ----
Cash and cash equivalents 164.7 114.1 CBS
Loans and borrowings (100.0) (165.0) 12
-------------------------- ------- ------- ----
Net cash/(debt) 64.7 (50.9)
CBS = Consolidated balance sheet
------------------ ------------------------------- --- --------------------------------------------------------
Total indebtedness Cash and cash equivalents Total indebtedness
less loans and borrowings (GBPm) HY22 HY21 Note
plus lease liabilities. -------------------------- ------- ------- ----
Cash and cash equivalents 164.7 114.1 CBS
Loans and borrowings (100.0) (165.0) 12
-------------------------- ------- ------- ----
Net cash/(debt) 64.7 (50.9)
Lease liabilities (397.9) (456.3) 9
Total indebtedness (333.2) (507.2)
------------------ ------------------------------- --- --------------------------------------------------------
Customer sales Customer sales being Customer sales (GBPm) HY22 HY21 Note
statutory Group revenue, Statutory Group revenue 677.6 574.4 2
less Joint Venture veterinary Fee income (36.9) (28.6) 2
practice fee income (which Sales by Joint Venture
forms part of statutory veterinary practices 226.9 178.9
revenue within the Vet ------------------------ ------ ------ ----
Group), plus gross customer Customer sales 867.6 724.7
sales made by Joint Venture
veterinary practices
(unaudited).
------------------ ------------------------------- --- --------------------------------------------------------
Condensed consolidated income statement
28 week period
ended 7 October 28 week period ended
2021 8 October 2020
------------------------- ---- ----------------------------------- -----------------------------------
Non-underlying Non-underlying
items items
Underlying (note Underlying (note
trading 3) Total trading 3) Total
Note GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ---- ---------- -------------- ------- ---------- -------------- -------
Revenue 2 677.6 - 677.6 574.4 - 574.4
Cost of sales (348.9) 0.4 (348.5) (301.2) - (301.2)
Impairment gains on
receivables 3 1.2 - 1.2 0.6 - 0.6
------------------------- ---- ---------- -------------- ------- ---------- -------------- -------
Gross profit 329.9 0.4 330.3 273.8 - 273.8
Selling and distribution
expenses (195.4) - (195.4) (165.2) - (165.2)
Administrative expenses (56.5) - (56.5) (59.0) (0.7) (59.7)
------------------------- ---- ---------- -------------- ------- ---------- -------------- -------
Operating profit 2 78.0 0.4 78.4 49.6 (0.7) 48.9
Financial income 0.1 - 0.1 0.2 - 0.2
Financial expense (7.9) - (7.9) (10.2) - (10.2)
------------------------- ---- ---------- -------------- ------- ---------- -------------- -------
Net financing expense (7.8) - (7.8) (10.0) - (10.0)
------------------------- ---- ---------- -------------- ------- ---------- -------------- -------
Profit before tax 70.2 0.4 70.6 39.6 (0.7) 38.9
Taxation 5 (13.8) (0.1) (13.9) (7.9) - (7.9)
Profit for the period 56.4 0.3 56.7 31.7 (0.7) 31.0
------------------------- ---- ---------- -------------- ------- ---------- -------------- -------
All activities relate to continuing operations.
Basic and diluted earnings per share attributable to equity
shareholders of the Company:
28 week
28 week period
period ended ended
7 October 8 October
Note 2021 2020
--------------------------------------- ---- ------------- ----------
Equity holders of the parent - basic 4 11.4p 6.2p
Equity holders of the parent - diluted 4 11.2p 6.1p
--------------------------------------- ---- ------------- ----------
Dividends paid and proposed are disclosed in note 6.
Condensed consolidated statement of comprehensive income
28 week
28 week period
period ended ended
7 October 8 October
2021 2020
GBPm GBPm
----------------------------------------------- ------------- ----------
Profit for the period 56.7 31.0
Other comprehensive income
Items that are or may be recycled subsequently
into profit or loss:
Foreign exchange translation differences 0.0 -
Effective portion of changes in fair value
of cash flow hedges 4.4 3.8
------------------------------------------------ ------------- ----------
Other comprehensive income for the period,
before income tax 4.4 3.8
Income tax on other comprehensive income (0.5) (0.1)
------------------------------------------------ ------------- ----------
Other comprehensive income for the period,
net of income tax 3.9 3.7
------------------------------------------------ ------------- ----------
Total comprehensive income for the period 60.6 34.7
------------------------------------------------ ------------- ----------
The notes on pages 27 to 52 form an integral part of these
consolidated interim financial statements.
Condensed consolidated balance sheet
At 25
At 7 October At 8 October March
2021 2020 2021
Note GBPm GBPm GBPm
------------------------------ ---- ------------ ------------ -------
Non-current assets
Property, plant and equipment 8 102.9 110.0 99.6
Right-of-use assets 9 356.9 415.3 368.7
Intangible assets 10 1,008.2 1,010.3 1,000.2
Other non-current assets 14.6 20.0 16.7
1,482.6 1,555.6 1,485.2
------------------------------ ---- ------------ ------------ -------
Current assets
Inventories 11 80.9 79.8 83.7
Other financial assets 1.8 1.0 2.9
Deferred tax assets 0.9 3.5 1.5
Trade and other receivables 50.1 64.3 49.3
Cash and cash equivalents 164.7 114.1 101.4
------------------------------ ---- ------------ ------------ -------
298.4 262.7 238.8
------------------------------ ---- ------------ ------------ -------
Total assets 1,781.0 1,818.3 1,724.0
------------------------------ ---- ------------ ------------ -------
Current liabilities
Trade and other payables (262.8) (243.9) (212.6)
Lease liabilities 9 (79.5) (80.8) (78.4)
Provisions (4.6) (2.7) (4.3)
Other financial liabilities (0.1) (1.0) (1.3)
(347.0) (328.4) (296.6)
------------------------------ ---- ------------ ------------ -------
Non-current liabilities
Other interest-bearing loans
and borrowings 12 (99.2) (163.8) (98.7)
Lease liabilities 9 (318.4) (375.5) (331.3)
Provisions (3.0) (3.5) (2.1)
Other financial liabilities (0.5) (6.8) (1.6)
(421.1) (549.6) (433.7)
------------------------------ ---- ------------ ------------ -------
Total liabilities (768.1) (878.0) (730.3)
------------------------------ ---- ------------ ------------ -------
Net assets 1,012.9 940.3 993.7
------------------------------ ---- ------------ ------------ -------
Equity attributable to equity
holders of the parent
Ordinary share capital 5.0 5.0 5.0
Consolidation reserve (372.0) (372.0) (372.0)
Merger reserve 113.3 113.3 113.3
Translation reserve (0.0) (0.1) (0.0)
Cash flow hedging reserve 0.6 (2.5) (1.5)
Retained earnings 1,266.0 1,196.6 1,248.9
Total equity 1,012.9 940.3 993.7
------------------------------ ---- ------------ ------------ -------
The notes on pages 27 to 52 form an integral part of these
consolidated interim financial statements .
Condensed consolidated statement of changes in equity
Cash
flow
Share Consolidation Merger hedging Translation Retained Total
capital reserve reserve reserve reserve earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------ -------- ------------- -------- -------- ----------- --------- -------
Balance at 25 March 2021 5.0 (372.0) 113.3 (1.5) (0.0) 1,248.9 993.7
Total comprehensive income
for the period
Profit for the period - - - - - 56.7 56.7
Other comprehensive income - - - 3.9 0.0 - 3.9
------------------------------------ -------- ------------- -------- -------- ----------- --------- -------
Total comprehensive income
for the period - - - 3.9 - 56.7 60.6
------------------------------------ -------- ------------- -------- -------- ----------- --------- -------
Hedging gains & losses reclassified
to inventory - - - (1.8) - - (1.8)
Total hedging gains & losses
reclassified to inventory - - - (1.8) - - (1.8)
Transactions with owners,
recorded directly in equity
Equity dividends paid - - - - - (27.2) (27.2)
Share based payment charge - - - - - 2.8 2.8
Deferred tax movement on
IFRS 2 reserve - - - - - (0.1) (0.1)
Purchase of own shares - - - - - (15.1) (15.1)
------------------------------------ -------- ------------- -------- -------- ----------- --------- -------
Total contributions by and
distributions to owners - - - - - (39.6) (39.6)
------------------------------------ -------- ------------- -------- -------- ----------- --------- -------
Balance at 7 October 2021 5.0 (372.0) 113.3 0.6 (0.0) 1,266.0 1,012.9
------------------------------------ -------- ------------- -------- -------- ----------- --------- -------
Cash
flow
Share Consolidation Merger hedging Translation Retained Total
capital reserve reserve reserve reserve earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------ -------- ------------- -------- -------- ----------- --------- -------
Balance at 26 March 2020 5.0 (372.0) 113.3 (2.8) (0.1) 1,187.6 931.0
Total comprehensive income
for the period
Profit for the period - - - - - 31.0 31.0
Other comprehensive income - - - 3.7 0.0 - 3.7
------------------------------------ -------- ------------- -------- -------- ----------- --------- -------
Total comprehensive income
for the period - - - 3.7 0.0 31.0 34.7
------------------------------------ -------- ------------- -------- -------- ----------- --------- -------
Hedging gains & losses reclassified
to inventory - - - (3.4) - - (3.4)
------------------------------------ -------- ------------- -------- -------- ----------- --------- -------
Total hedging gains & losses
reclassified to inventory - - - (3.4) - - (3.4)
------------------------------------ -------- ------------- -------- -------- ----------- --------- -------
Transactions with owners,
recorded directly in equity
Equity dividends paid - - - - - (24.7) (24.7)
Share based payment charge - - - - - 2.4 2.4
Deferred tax movement on
IFRS 2 reserve - - - - - 2.8 2.8
Purchase of own shares - - - - - (2.5) (2.5)
------------------------------------ -------- ------------- -------- -------- ----------- --------- -------
Total contributions by and
distributions to owners - - - - - (22.0) (22.0)
------------------------------------ -------- ------------- -------- -------- ----------- --------- -------
Balance at 8 October 2020 5.0 (372.0) 113.3 (2.5) (0.1) 1,196.6 940.3
------------------------------------ -------- ------------- -------- -------- ----------- --------- -------
The notes on pages 27 to 52 form an integral part of these
consolidated interim financial statements.
Condensed consolidated statement of cash flows
28 week
28 week period period
ended ended
7 October 8 October
2021 2020
GBPm GBPm
--------------------------------------------------- -------------- ----------
Cash flows from operating activities
Profit for the period 56.7 31.0
Adjustments for:
Depreciation and amortisation 59.7 59.3
Financial income (0.1) (0.2)
Financial expense 8.0 10.2
Share based payment charges 2.8 2.4
Taxation 13.9 7.9
--------------------------------------------------- -------------- ----------
141.0 110.6
Decrease/(increase) in trade and other receivables 2.1 (7.6)
Decrease/(increase) in inventories 2.9 (17.0)
Increase in trade and other payables 55.3 44.8
Increase in provisions 1.2 1.2
202.5 132.0
Tax paid (14.6) (8.1)
--------------------------------------------------- -------------- ----------
Net cash flow from operating activities 187.9 123.9
--------------------------------------------------- -------------- ----------
Cash flows from investing activities
Proceeds from sale of property, plant and
equipment - 0.1
Interest received 0.1 0.2
Costs to acquire right-of-use assets (0.2) (0.5)
Acquisition of subsidiaries, net of cash acquired
(underlying) (1.1) (0.8)
Acquisition of property, plant and equipment
and other intangible assets (36.7) (16.3)
--------------------------------------------------- -------------- ----------
Net cash used in investing activities (37.9) (17.3)
--------------------------------------------------- -------------- ----------
Cash flows from financing activities
Equity dividends paid (27.2) (24.7)
Proceeds from new loan - 20.0
Repayment of borrowings - (20.0)
Debt issue costs - (0.2)
Capital lease payments (36.9) (35.1)
Purchase of own shares (15.1) (2.5)
Finance lease obligations - (0.0)
Interest paid (1.3) (2.0)
Interest paid on lease obligations (6.2) (7.1)
--------------------------------------------------- -------------- ----------
Net cash used in financing activities (86.7) (71.6)
--------------------------------------------------- -------------- ----------
Net increase in cash and cash equivalents 63.3 35.0
Cash and cash equivalents at beginning of
period 101.4 79.1
--------------------------------------------------- -------------- ----------
Cash and cash equivalents at end of period 164.7 114.1
--------------------------------------------------- -------------- ----------
The notes on pages 27 to 52 form an integral part of these
consolidated interim financial statements.
Notes (forming part of the condensed consolidated interim
financial statements)
1 Accounting policies
The accounting policies set out below have, unless otherwise
stated, been applied consistently to all periods presented in these
consolidated interim financial statements.
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 7 October 2021 comprise the
Company and its subsidiaries (together referred to as the
Group).
The consolidated financial statements of the Group as at and for
the 52 week period ended 25 March 2021 are available on request
from the Company's registered office and via the Company's
website.
The interim financial statements are prepared under the
historical cost convention, as modified by the revaluation of
derivative financial instruments to fair value, and in accordance
with those parts of the Companies Act 2006 applicable to companies
reporting under IFRS as adopted by the UK.
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 IAS 34 Interim
Financial Reporting as adopted by the UK. 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 52 week period ended 25
March 2021.
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 52 weeks ended 25 March 2021 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 Company's business activities, together with the factors
likely to affect its future development, performance and position,
are set out in the Strategic Report of the Annual Report for the
year ended 25 March 2021, including a detailed COVID-19 assessment
within the Chief Executive's Statement. The financial position of
the Company, its cash flows, liquidity position and borrowing
facilities are described in the Chief Financial Officer's Review.
In addition, note 12 and 13 to these interim financial statements
includes the Company's policies and processes for managing its
capital; details of its financial instruments and hedging
activities; and its exposures to credit risk and liquidity
risk.
The Directors of the Group have prepared cash flow forecasts for
a period of at least 12 months from the date of the approval of
these interim financial statements which indicate that, taking
account of reasonably possible downsides, the Group will have
sufficient funds, through its revolving credit facility, to meet
its liabilities as they fall due for that period.
In preparing the forecasts for the Group, the Directors have
carefully considered the impact of COVID-19 on the Group's
financial position, liquidity and future performance.
The Group has access to a revolving facility of GBP248m, which
expires in September 2023, with GBP100.0m drawn down on 7 October
2021 and cash balances of GBP164.7m. The lowest level of headroom
forecast over the next 12 months from the date of signing of the
financial statements is in July 2022 and is in excess of GBP248.2m
in the base case scenario. On a sensitised basis, the lowest level
of headroom forecast over the next 12 months from the date of
approving of the financial statements is GBP214.7m.
The Group has been in compliance with all covenants applicable
to this facility within the financial year and is forecast to
continue to be in compliance for 12 months from the date of signing
of the financial statements.
A number of severe but plausible downside scenarios were
calculated compared to the base case forecast of profit and cash
flow to assess headroom against facilities for the next 12 months.
These scenarios included:
Scenario 1: Reduction on Group like-for-like sales growth
assumptions of 1% in each year throughout the forecast period, with
ordinary dividends continuing to be paid
Scenario 2: Using scenario 1 outcomes and further impacted by a
conflated risk impact of GBP12.0m on sales and GBP6.0m on PBT, with
dividends held at 8.0p per share
Scenario 3: Group like-for-like sales decline to 0% over the
next year and a conflated risk impact of GBP82.5m on sales and
GBP42.75m on PBT is used, with dividends cut to nil to conserve
cash
Against these negative scenarios, adjusted projections showed no
breach of covenants with the lowest level of headroom in the
strategic planning horizon being GBP187.4m at the end of March
2026. Further mitigating actions could also be taken in such
scenarios should it be required, including reducing capital
expenditure.
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 a period of at least 12
months from the date of approval of these financial statements and
that, therefore, it is appropriate to adopt the going concern basis
in preparing the consolidated financial statements as at and for
the 28 weeks ended 7 October 2021.
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 7 October 2021 are consistent with the policies
applied by the Group in its consolidated financial statements as at
and for the 52 week period ended 25 March 2021, 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 IFRS 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 on-going 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 explained below.
Impairment of goodwill and other intangibles (significant
estimate)
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
(CGU) and a suitable discount rate in order to calculate present
value. Details of CGUs as well as further information about the
assumptions made are disclosed in note 10.
Joint Venture receivables (significant estimate)
The Group provides longer term operating loans and other loans
to a number of Joint Venture veterinary practices to cover their
working capital requirements. The operating loans advanced to the
practices are interest free and either repayable on demand or
repayable within 90 days of demand. In line with IFRS 9, judgement
is applied in determining expected credit losses on these loans,
the qualitative and quantitative risk-related criteria used to
assess default and therefore also probability of default, and in
estimating an appropriate 'loss given default' percentage applied
to each loan based on future cash flows. In assessing the
qualitative and quantitative information the Group takes into
account factors including current performance against business
plan, availability of suitable personnel to operate effectively,
and level of indebtedness. The revenue, profit and cash flow
expectations of the practices are taken into account in determining
the length of time that the practice is expected to take in order
to repay the loans. This is also the period over which losses are
estimated should default occur within the contractual period. The
provision for expected credit loss is based on forward-looking
information, taking into account expected credit losses giving due
consideration to the Joint Venture's business plan, as well as
macro-economic factors such as growth in the size of the veterinary
market, availability of veterinary practitioners and cost inflation
within the industry. The quantum of operating loans and other loans
and expected credit loss made against these receivables is
disclosed in notes 16, 17 and 27 in the annual consolidated
financial statements.
Assessment of control with regard to Joint Ventures (significant
judgement)
The Group has assessed, and continually assesses whether the
level of an individual Joint Venture veterinary practices'
indebtedness to the Group, particularly those with high levels of
indebtedness, implies that the Group has the practical ability to
control the Joint Venture, which would result in the requirement to
consolidate. In making this judgement, the Group reviewed the terms
of the Joint Venture agreement and the question of practical
ability as a provider of working capital to control the activities
of the practice. This included consideration of barriers to the
Group's ability to exercise such practical or other control, which
include difficulty in replacing Joint Venture Partners due to the
shortage of veterinarians in the UK and reputational damage within
the veterinary network should the Group attempt to exercise
control, as well as potential barriers to the Joint Venture Partner
exercising their own power over the activities of the practice. We
note that under the terms of the Joint Venture agreement, our
partners run their practices with complete operational and clinical
freedom. The Group is satisfied that on the balance of evidence
from the Group's experience as shareholder and provider of working
capital support to the practices, it does not have the current
ability to exercise control over those practices to which operating
loans are advanced, and therefore non consolidation is
appropriate.
2 Segmental reporting
The Group has three reportable segments, Retail, Vet Group and
Central which are the Group's strategic business units. The Group's
operating segments are based on the internal management structure
and internal management reports, which are reviewed by the
Executive Directors on a periodic basis. The Executive Directors
are considered to be the Chief Operating Decision Makers.
The Group is a pet care business with the strategic advantage of
being able to provide products, services and advice, addressing all
pet owners' needs. Within this strategic umbrella, the Group has
three reportable segments, Retail, Vet Group and Central which are
the Group's strategic business units. The strategic business units
offer different products and services, are managed separately and
require different operational and marketing strategies.
The operations of the Retail reporting segment comprise the
retailing of pet products purchased online and in-store, pet sales,
grooming services and insurance products. The operations of the Vet
Group reporting segment comprise First Opinion practices. Central
includes a veterinary telehealth business, group costs and finance
expenses. Revenue and costs are allocated to a segment where
reasonably possible.
The following summary describes the operations in each of the
Group's reportable segments. Performance is measured based on
segment underlying operating profit, as included in the management
reports that are reviewed by the Executive Directors. These
internal reports are prepared in accordance with IFRS accounting
policies consistent with these interim financial statements. All
material operations of the reportable segments are carried out in
the UK and all revenue is from external customers.
28 week period ended 7
October 2021
-------------------------------------------- --------------------------------------------------
Retail Vet Group Central Total
Income Statement GBPm GBPm GBPm GBPm
-------------------------------------------- -------- -------------- --------------- -------
Revenue 619.6 56.8 1.2 677.6
Gross profit 298.1 31.0 0.8 329.9
-------------------------------------------- -------- -------------- --------------- -------
Underlying operating profit/(loss) 59.1 24.5 (5.6) 78.0
Non-underlying items - 0.4 - 0.4
-------------------------------------------- -------- -------------- --------------- -------
Segment operating profit/(loss) 59.1 24.9 (5.6) 78.4
Net financing expenses (6.0) (0.0) (1.8) (7.8)
-------------------------------------------- -------- -------------- --------------- -------
Profit/(loss) before tax 53.1 24.9 (7.4) 70.6
-------------------------------------------- -------- -------------- --------------- -------
28 week period ended 8
October 2020
------------------------------------------- --------------------------------------------------
Retail Vet Group Central Total
Income Statement GBPm GBPm GBPm GBPm
------------------------------------------- -------- -------------- --------------- -------
Revenue 507.8 66.6 - 574.4
Gross profit 246.1 27.7 - 273.8
Underlying operating profit/(loss) 38.9 16.7 (6.0) 49.6
Non-underlying items - (0.7) - (0.7)
--------------------------------------------- -------- -------------- --------------- -------
Segment operating profit/(loss) 38.9 16.0 (6.0) 48.9
Net financing expenses (6.6) (0.3) (3.1) (10.0)
Profit/(loss) before tax 32.3 15.7 (9.1) 38.9
--------------------------------------------- -------- -------------- --------------- -------
Non-underlying items are
explained in note 3.
28 week period ended 7 October
2021
---------------------------------- ------- --------------------------------------
Reconciliation of EBITDA before Retail Vet Group Central Total
non-underlying items GBPm GBPm GBPm GBPm
---------------------------------- ------- ---------- --------- ------- ------
Underlying operating profit/(loss) 59.1 24.5 (5.6) 78.0
Depreciation of property,
plant and equipment 12.9 0.6 - 13.5
Depreciation of right-of-use
assets 36.4 0.7 - 37.1
Amortisation of intangible
assets 8.4 0.5 0.2 9.1
---------------------------------- ------- ---------- --------- ------- ------
Underlying EBITDA 116.8 26.3 (5.4) 137.7
---------------------------------- ------- ---------- --------- ------- ------
28 week period ended 8 October
2020
---------------------------------- ------- --------------------------------------
Reconciliation of EBITDA before Retail Vet Group Central Total
non-underlying items GBPm GBPm GBPm GBPm
---------------------------------- ------- ---------- --------- ------- ------
Underlying operating profit/(loss) 38.9 16.7 (6.0) 49.6
Depreciation of property,
plant and equipment 13.6 1.2 - 14.8
Depreciation of right-of-use
assets 36.8 1.1 - 37.9
Amortisation of intangible
assets 6.2 0.4 - 6.6
---------------------------------- ------- ---------- --------- ------- ------
Underlying EBITDA 95.5 19.4 (6.0) 108.9
---------------------------------- ------- ---------- --------- ------- ------
EBITDA before non-underlying items is defined on page 19.
28 week period ended 7 October
2021
------------------------------- ----------- -------------------------------------
Segmental revenue analysis Retail Vet Group Central Total
by revenue stream GBPm GBPm GBPm GBPm
------------------------------- ---- ----------------- --------- ------- -----
Retail - Food 336.7 - - 336.7
Retail - Accessories 257.7 - - 257.7
Retail - Services 25.2 - - 25.2
Vet Group - First Opinion
fee income - 36.9 - 36.9
Vet Group - Company managed
practices - 16.2 - 16.2
Vet Group - Other income - 3.7 - 3.7
Central - Veterinary telehealth
services - - 1.2 1.2
-------------------------------------- ----------------- --------- ------- -----
Total 619.6 56.8 1.2 677.6
-------------------------------------- ----------------- --------- ------- -----
28 week period ended 8 October
2020
------------------------------- ----------- -------------------------------------
Segmental revenue analysis Retail Vet Group Central Total
by revenue stream GBPm GBPm GBPm GBPm
------------------------------- ----------- ---------- --------- ------- -----
Retail - Food 277.4 - - 277.4
Retail - Accessories 213.2 - - 213.2
Retail - Services 17.2 - - 17.2
Vet Group - First Opinion
fee income - 28.6 - 28.6
Vet Group - Company managed
practices - 12.3 - 12.3
Vet Group - Other income - 2.8 - 2.8
Vet Group - Specialist - 22.9 - 22.9
-------------------------------------- ----- ---------- --------- ------- -----
Total 507.8 66.6 - 574.4
-------------------------------------- ----- ---------- --------- ------- -----
The Group completed its disposal of its five Specialist Referral centres
(the "Specialist Group") on 31 December 2020 and therefore the financial
information shown for H1 FY21 includes an element of discontinued operations,
however given the immateriality of these operations (revenue GBP22.9m,
underlying PBT GBP1.1m) to Group revenue and profit they have not been
disclosed separately.
3 Expenses
Included in operating profit are the following:
28 week period 28 week period
ended ended
7 October 2021 8 October 2020
GBPm GBPm
---------------------------------------------- --------------- ---------------
Non-underlying items
Impairment of right of use asset following
acquisition of Joint Venture subsidiaries (0.4) -
Increase in fair value of put and call
liability - 0.7
Total non-underlying items (0.4) 0.7
Underlying items
Impairment gains on receivables (1.2) (0.6)
Depreciation of property, plant and equipment 13.5 14.8
Amortisation of intangible assets 9.1 6.6
Depreciation of right-of-use assets 37.1 37.9
Rentals under operating leases:
Expenses relating to short-term leases 0.0 0.0
Other income
Rental income from sub-leasing right-of-use
assets to third parties(1) (0.2) (0.1)
Rental income from related parties(1) (3.9) (4.0)
Share based payment charges 2.8 2.4
---------------------------------------------- --------------- ---------------
(1) The other income is presented within selling and
distribution expenses
Non-underlying items
The non-underlying credit of GBP0.4m recognised in the 28 week
period ended 7 October 2021 relates to the reversal of the
impairment of a right-of-use asset previously recognised on
acquisition of a Joint Venture veterinary practice. The property
has now been subleased, and therefore the impairment has been
reversed. The credit has been treated as a non-underlying item
since the original impairment was also treated in this way.
The non-underlying operating expenses of GBP0.7m in the period
ended 8 October 2020 related to an increase in the financial
liability for put and call options over shares held by clinicians
in Dick White Referrals Limited and Veterinary Specialists
(Scotland) Limited, both of which were disposed of in the 52 week
period ended 25 March 2021. The charge represented an increase in
the equity 'option' value held by those clinicians based on the
Board's best estimate of the future settlement on exercise of the
put and call. The charge was classified within operating expenses
as a clinician was required to remain an employee of the Group in
order to access the full equity value of the option at the time of
the exercise.
Income or costs considered by the Directors to be non-underlying
were disclosed separately to facilitate year on year comparison of
the underlying trade of the business. The Directors consider that
changes to the fair value of the put and call liabilities warranted
separate disclosure due to the nature of these arrangements as they
did not relate to the underlying trade of the business.
Underlying items
The rentals under short-term leases disclosed in relation to the
28 week period ended 7 October 2021 and the 28 week period ended 8
October 2020 relate to leases under short term agreements. These
fall under the short-term exemption so are excluded from the
requirements of IFRS 16 on the basis that the lease terms are 12
months or less.
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
ended ended
7 October 2021 8 October 2020
------------------------------------------- --------------------------- ---------------------------
After After
Underlying non-underlying Underlying non-underlying
trading items trading items
------------------------------------------- ---------- --------------- ---------- ---------------
Profit attributable to equity shareholders
of the parent (GBPm) 56.4 56.7 31.7 31.0
------------------------------------------- ---------- --------------- ---------- ---------------
Basic weighted average number of
shares (m) 500.0 500.0 500.0 500.0
Dilutive potential ordinary shares
(m) 8.4 8.4 6.8 6.8
------------------------------------------- ---------- --------------- ---------- ---------------
Diluted weighted average number of
shares 508.4 508.4 506.8 506.8
------------------------------------------- ---------- --------------- ---------- ---------------
Basic earnings per share 11.3p 11.4p 6.3p 6.2p
Diluted earnings per share 11.1p 11.2p 6.3p 6.1p
------------------------------------------- ---------- --------------- ---------- ---------------
5 Taxation
Recognised in the income statement
28 week period 28 week period
ended ended
7 October 2021 8 October 2020
GBPm GBPm
-------------------------------------- --------------- ---------------
Current tax expense
Current period 12.5 9.1
Current tax expense 12.5 9.1
-------------------------------------- --------------- ---------------
Deferred tax expense
Origination and reversal of temporary
differences 1.2 (1.2)
Impact of difference between deferred
and current tax rates 0.2 -
Deferred tax expense 1.4 (1.2)
-------------------------------------- --------------- ---------------
Total tax expense 13.9 7.9
-------------------------------------- --------------- ---------------
The UK corporation tax standard rate for the period was 19%
(2020: 19%). Deferred tax at 7 October 2021 has been calculated
based on the rate of 22% which is the blended rate at which the
majority of items are expected to reverse. This is due to the
increase in the main rate of corporation tax to 25% from April
2023, which was substantively enacted on 24 May 2021.
Deferred tax recognised in comprehensive income
28 week period 28 week period
ended ended
7 October 2021 8 October 2020
GBPm GBPm
------------------------------------- --------------- ---------------
Effective portion of changes in fair
value of cash flow hedges 0.5 0.1
------------------------------------- --------------- ---------------
Reconciliation of effective tax rate
28 week period ended 28 week period ended
7 October 2021 8 October 2020
--------------------------------- ---------------------------------
Underlying Non-underlying Underlying Non-underlying
trading items Total trading items Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- ---------- -------------- ----- ---------- -------------- -----
Profit for the period 56.4 0.3 56.7 31.7 (0.7) 31.0
Total tax expense 13.8 0.1 13.9 7.9 - 7.9
------------------------------- ---------- -------------- ----- ---------- -------------- -----
Profit excluding taxation 70.2 0.4 70.6 39.6 (0.7) 38.9
------------------------------- ---------- -------------- ----- ---------- -------------- -----
Tax using the UK corporation
tax rate for the period
of 19% (28 week period
ended 8 October 2020:19%) 13.3 0.1 13.4 7.5 (0.1) 7.4
Impact of change in tax
rate on deferred tax balances 0.3 - 0.3 - - -
Depreciation on expenditure
not eligible for tax relief 0.4 - 0.4 - - -
Enhanced tax reliefs (0.5) - (0.5) - - -
Expenditure not eligible
for tax relief 0.3 - (0.2) 0.4 0.1 0.5
Total tax expense 13.8 0.1 13.9 7.9 - 7.9
------------------------------- ---------- -------------- ----- ---------- -------------- -----
6 Dividends paid and proposed
28 week period
ended
28 week period ended 8 October
7 October 2021 2020
GBPm GBPm
-------------------------------------- -------------------- --------------
Declared and paid during the period
Final dividend of 5.5p per share
(2020: 5.0p per share) 27.2 24.7
Proposed for approval by shareholders
at the AGM
Interim dividend of 4.30p per
share (2020 2.5p per share) 21.5 12.4
-------------------------------------- -------------------- --------------
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 7 October 2021 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 7
October 2021 6,593,610 shares, holding at 8 October 2020: 5,189,945
shares).
7 Business combinations
Acquisition of Joint Venture veterinary practices
In the 28 week period ended 7 October 2021, the Group has
acquired 100% of the 'A' shares of 5 veterinary practices, which
were previously accounted for as Joint Venture veterinary
practices. These practices were previously accounted for as Joint
Venture veterinary practices as the Group only held 100% of the
non-participatory 'B' ordinary shares equating to 50% of the total
shares. Acquisition of the 'A' shares has led to the control and
consolidation of these practices. A detailed explanation for the
basis of consolidation can be found in note 1.4 of the annual
consolidated financial statements for the 52 week period ended 25
March 2021.
In the 28 week period ended 7 October 2021, GBP0.9m of operating
loans relating to these practices were written off in advance of
the acquisitions.
Up to the date of acquisition and in the 52 week period ending
25 March 2021, the entities listed below were all accounted for as
a Joint Venture veterinary practice where the Group held 100% of
the non-participatory 'B' ordinary shares. Acquisition of the 'A'
shares has led to control and consolidation of these practices on
the dates below, leading to control from the date of acquisition
and consolidation from that date forward.
Subsidiaries acquired
Proportion Total proportion
of voting of voting
equity equity instruments Cash consideration
Principal instruments owned following transferred
activity Date of acquisition acquired the acquisition GBPm
------------------------- ----------- -------------------- ------------ ------------------- ------------------
South Shields Quays Veterinary
Vets4Pets Limited practice 8 April 2021 50% 100% -
Companion Care (Barnsley Veterinary
Cortonwood) Limited practice 29 April 2021 50% 100% -
Veterinary
Crewe Vets4Pets Limited practice 20 July 2021 50% 100% -
Lancaster Vets4Pets Veterinary 19 August
Limited practice 2021 50% 100% 0.9
Veterinary 13 September
Ely Vets4Pets practice 2021 50% 100% 0.7
------------------------- ----------- -------------------- ------------ ------------------- ------------------
Intangible assets acquired
------------------------------ ------
GBPm
------------------------------ ------
Consideration 1.6
Less: Fair value of assets
acquired 0.8
------------------------------ ------
Intangible assets arising
on acquisition 2.4
------------------------------ ------
Impairment of goodwill (1.3)
------------------------------ ------
Carrying value of intangible
assets: 1.1
Split between:
Goodwill 0.6
Customer list 0.5
------------------------------ ------
8 Property, plant and equipment
Fixtures,
Freehold Short leasehold fittings, Total
Property property tools and
equipment
GBPm GBPm GBPm GBPm
--------------------- --------- --------------- ---------- -----
Cost
Balance at 25 March
2021 2.4 62.4 245.3 310.1
Additions - 5.0 11.6 16.6
Assets acquired on
acquisition - 0.4 0.0 0.4
Disposals - (0.3) (0.3) (0.6)
Balance at 7 October
2021 2.4 67.5 256.6 326.5
--------------------- --------- --------------- ---------- -----
Depreciation
Balance at 25 March
2021 0.3 29.4 180.8 210.5
Depreciation charge
for the period 0.0 2.1 11.4 13.5
Disposals - (0.2) (0.2) (0.4)
Balance at 7 October
2021 0.3 31.3 192.0 223.6
--------------------- --------- --------------- ---------- -----
Net book value
At 25 March 2021 2.1 33.0 64.5 99.6
--------------------- --------- --------------- ---------- -----
At 7 October 2021 2.1 36.2 64.6 102.9
--------------------- --------- --------------- ---------- -----
Fixtures,
Freehold Short leasehold fittings, Total
Property property tools and
equipment
GBPm GBPm GBPm GBPm
--------------------- --------- --------------- ---------- -----
Cost
Balance at 26 March
2020 2.4 63.9 239.9 306.2
Additions - 1.9 5.8 7.7
Assets acquired on
acquisition - 0.1 0.0 0.1
Disposals - (0.2) (0.2) (0.4)
--------------------- --------- --------------- ---------- -----
Balance at 8 October
2020 2.4 65.7 245.5 313.6
--------------------- --------- --------------- ---------- -----
Depreciation
Balance at 26 March
2020 0.3 26.8 162.0 189.1
Depreciation charge
for the period 0.0 2.2 12.6 14.8
Disposals - (0.1) (0.2) (0.3)
--------------------- --------- --------------- ---------- -----
Balance at 8 October
2020 0.3 28.9 174.4 203.6
--------------------- --------- --------------- ---------- -----
Net book value
At 26 March 2020 2.1 37.1 77.9 117.1
--------------------- --------- --------------- ---------- -----
At 8 October 2020 2.1 36.8 71.1 110.0
--------------------- --------- --------------- ---------- -----
9 Leases
As Lessee
Property, plant and equipment comprise owned and leased assets
that do not meet the definition of investment property.
The majority of the Group's trading stores, standalone
veterinary practices, distribution centres and support offices are
leased under operating leases, with remaining lease terms of
between 1 and 21 years. The Group also has a number of non-property
leases relating to vehicle, equipment and material handling
equipment, with remaining lease terms of between 1 and 6 years.
Right-of-use assets
Property Equipment Total
GBPm GBPm GBPm
----------------------------------- -------- --------- -----
Cost
Balance at 25 March 2021 493.5 14.7 508.2
Additions 24.6 0.7 25.3
Balance at 7 October 2021 518.1 15.4 533.5
----------------------------------- -------- --------- -----
Depreciation
Balance at 25 March 2021 132.8 6.7 139.5
Depreciation charge for the period 35.3 1.8 37.1
Balance at 7 October 2021 168.1 8.5 176.6
----------------------------------- -------- --------- -----
Net book value
At 25 March 2021 360.7 8.0 368.7
----------------------------------- -------- --------- -----
At 7 October 2021 350.0 6.9 356.9
----------------------------------- -------- --------- -----
Property Equipment Total
GBPm GBPm GBPm
----------------------------------- -------- --------- -----
Cost
Balance at 26 March 2020 486.3 11.6 497.9
Additions 25.0 2.8 27.8
On acquisition 0.2 - 0.2
Balance at 8 October 2020 511.5 14.4 525.9
----------------------------------- -------- --------- -----
Depreciation
Balance at 26 March 2020 69.1 3.6 72.7
Depreciation charge for the period 36.4 1.5 37.9
Balance at 8 October 2020 105.5 5.1 110.6
----------------------------------- -------- --------- -----
Net book value
At 26 March 2020 417.2 8.0 425.2
----------------------------------- -------- --------- -----
At 8 October 2020 406.0 9.3 415.3
----------------------------------- -------- --------- -----
The following table sets out the maturity analysis of lease
payments, showing the undiscounted lease payments to be received
after the reporting date:
Maturity analysis - contractual undiscounted cash flows
At 7 October At 8 October At 25 March
2021 2020 2021
GBPm GBPm GBPm
---------------------------------------- ------------ ------------ -----------
Less than one year 79.5 81.1 78.4
Between one and five years 242.4 255.7 241.9
More than five years 120.8 177.7 131.9
---------------------------------------- ------------ ------------ -----------
Total undiscounted lease liabilities 442.7 514.5 452.2
---------------------------------------- ------------ ------------ -----------
Carrying value of lease liabilities
in the statement of financial position 397.9 456.3 409.7
Current 79.5 80.8 78.4
Non-current 318.4 375.5 331.3
---------------------------------------- ------------ ------------ -----------
For lease liabilities at 7 October 2021, a 0.1% reduction in the
discount rate would have increased the carrying value of lease
liabilities by GBP1.6m
Surplus leases
The Group has a small number of leases on properties from which
it no longer trades. A small number of these properties are
currently vacant or the sublet is not for the full term of the
lease and there is deemed to be a risk on the sublet.
Short-term leases
The Group has a small number of leases on properties from which
it no longer trades, or a subsection of a trading retail store.
These properties are sublet to third parties at contracted
rates.
In line with IAS 36, the carrying value of the right-of-use
asset will be assessed for indicators of impairment and an
impairment charge will be recognised if necessary. Under IAS 17 an
onerous lease provision was recognised where management believed
there was a risk of default or where the property remained vacant
for a period of time. As part of this review the Group has assessed
the ability to sub-lease the property and the right-of-use asset
has been written down to GBPnil where the Group does not consider a
sublease likely.
10 Intangible assets
'Know
how'
Customer - Call
Goodwill list Scripts Software Total
GBPm GBPm GBPm GBPm GBPm
-------------------------- -------- -------- -------- -------- -------
Cost
Balance at 25 March
2021 958.5 3.6 2.6 88.7 1,053.4
Additions - - - 16.3 16.3
On acquisition 1.9 0.5 - - 2.4
Disposals (0.3) - - - (0.3)
Balance at 7 October
2021 960.1 4.1 2.6 105.0 1,071.8
-------------------------- -------- -------- -------- -------- -------
Amortisation
Balance at 25 March
2021 0.1 0.4 - 52.7 53.2
Amortisation charge
for the period - 0.3 0.1 8.7 9.1
Impairment on acquisition 1.3 - - - 1.3
Balance at 7 October
2021 1.4 0.7 0.1 61.4 63.6
-------------------------- -------- -------- -------- -------- -------
Net book value
At 25 March 2021 958.4 3.2 2.6 36.0 1,000.2
-------------------------- -------- -------- -------- -------- -------
At 7 October 2021 958.7 3.4 2.5 43.6 1,008.2
-------------------------- -------- -------- -------- -------- -------
Customer
Goodwill list Software Total
GBPm GBPm GBPm GBPm
-------------------------- -------- -------- -------- -------
Cost
Balance at 26 March 2020 981.3 1.9 63.1 1,046.3
Additions - - 9.7 9.7
On acquisition 0.4 0.5 - 0.9
Disposals - - (0.1) (0.1)
Balance at 8 October 2020 981.7 2.4 72.7 1,056.8
-------------------------- -------- -------- -------- -------
Amortisation
Balance at 26 March 2020 0.1 0.5 39.3 39.9
Amortisation charge for
the period - 0.1 6.5 6.6
Balance at 8 October 2020 0.1 0.6 45.8 46.5
-------------------------- -------- -------- -------- -------
Net book value
At 26 March 2020 981.2 1.4 23.8 1,006.4
-------------------------- -------- -------- -------- -------
At 8 October 2020 981.6 1.8 26.9 1,010.3
-------------------------- -------- -------- -------- -------
Amortisation and impairment charge
The amortisation charge is recognised in total in operating
expenses within the income statement.
Impairment testing
Cash generating units (CGUs), as defined by IAS 36, within the
Group are considered to be aligned to the three operating segments
as shown in the table below. Within the Retail operating segment,
the CGU comprises the body of stores, online operations, grooming
operations and insurance operations. Within the Vet Group operating
segment, the CGU comprises the First Opinion practices. The
veterinary telehealth business, hereafter disclosed as The Vet
Connection (TVC) CGU, forms part of the Central operating segment.
Revenue and costs are allocated to a segment and CGU where
reasonably possible.
As at 7 October 2021 and 8 October 2020, the Group is deemed to
have three overall groups of CGUs as follows:
Goodwill
---------- ------------------------------
At 8 October
At 7October 2021 2020
GBPm GBPm
---------- ---------------- ------------
Retail 586.1 586.1
Vet Group 361.5 395.5
Central 11.1 -
---------- ---------------- ------------
Total 958.7 981.6
---------- ---------------- ------------
In line with previous practice, the Group conducts goodwill
impairment tests as part of the interim financial statements and
the annual financial statements. The recoverable amount of the CGU
group has been calculated with reference to its value in use. The
key assumptions of this calculation are shown below:
28 week period
28 week period ended ended
7 October 2021 8 October 2020
---------------------------------------------------- --------------------
Vet Vet
Retail Group TVC Retail Group TVC
------------------------------------- ------ ----- ------ ------ ----
Period on which management
approved forecasts are based
(years) 5 5 5 5 5 NA
Growth rate applied beyond
approved forecast period 2.0% 3.5% 2.0% 2.0% 3.5% NA
Discount rate (pre-tax) 10.2% 10.6% 10.6% 10.7% 10.1% NA
Like-for-like sales growth 7.6% 9.9% 34.0% 3.7% 10.7% NA
Gross profit margin 47.6% 58.2% 65.0% 47.8% 49.4% NA
------------------------------- ----- ------ ----- ------ ------ ----
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 a post-tax cash
flow projection based on a five-year plan approved by the Board.
For the purposes of intangible asset impairment testing, the model
removes all cash flows associated with business units (for example
stores or practices yet to open, but within the planning horizon)
which the Group has a strategic intention to invest capital in, but
has not yet done so, thus ensuring that the future cash flows used
in modelling for impairment exclude any cash flows where the
investment is yet to take place, in accordance with the
requirements of IAS 36 to exclude capital expenditure to improve
asset performance. Contributions from and costs associated with new
stores and veterinary practices which are already operational at
the impairment test date are included in the cash flows. The Group
reviews components within CGUs such as stores and veterinary
practices for indicators of impairment. This approach is consistent
with impairment reviews carried out in the 2021 financial
statements.
The discount rate was estimated based on past experience and a
market participant weighted average cost of capital. A post tax
discount rate was used within the value in use calculation. The
related pre-tax discount rate is disclosed above in line with IAS
36 requirements.
The key assumptions in the business plans for both the Retail
and Vet Group CGUs are like-for-like sales growth and gross profit
margin. The Retail forecast assumptions reflect continual
innovation and our deep understanding of our customers,
incorporating assumptions based on past experience of the industry,
products and markets in which the CGU operates, in order to
generate the detailed assumptions used in the annual budget setting
process, and five year strategic planning process. The Vet Group
forecast assumptions are based on a deep understanding of the
maturity profile of the practices and their performance,
incorporating assumptions based on past experience of the industry,
services and markets in which the CGU operates, in order to
generate the detailed assumptions used in the annual budget setting
process, and five year strategic planning process. The projections
are based on all available information and growth rates do not
exceed growth rates experienced in prior periods. A different set
of assumptions may be more appropriate in future years depending on
changes in the macro-economic environment and the industry in which
each CGU operates. Due to the timing of the Group's forecasting
cycle, assumptions used for the Retail and Vet Group CGUs are from
the strategic plan presented to the board on 5 November 2020. The
TVC CGU uses assumptions from the strategic plan presented to the
Board on 4 November 2021.
The Directors have assumed a growth rate projection beyond the
five-year period based on market growth rates based on past
experience within the Group taking into account the economic growth
forecasts within the relevant industries. The long term growth rate
in the Vet Group CGU exceeds the long term average for the UK but
is an appropriate rate for the industry.
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 recorded in each period, with the exception of the
goodwill impaired immediately following the acquisition of certain
First Opinion veterinary practices (see note 7).
Within the Retail, Vet Group and TVC CGUs, a number of
sensitivities have been applied to the assumptions in reaching this
conclusion including:
- Reduction in growth rate applied beyond forecast period by 100
bps
- Increasing the discount rate by 100 bps
- Reduction in gross margin percentage of 100 bps
None of the above, considered reasonably possible changes in
assumptions, would result in impairment when applied either
individually or collectively.
The Directors consider that it is not reasonably possible for
the assumptions to change so significantly as to eliminate the
excess of the recoverable amount over the carrying value.
11 Inventories
At 8 October At 25 March
At 7 October 2021 2020 2021
GBPm GBPm GBPm
--------------- ----------------- ------------ -----------
Finished goods 80.9 79.8 83.7
--------------- ----------------- ------------ -----------
The cost of inventories recognised as an expense and included in
'cost of sales' is GBP304.6m (period ended 8 October 2020:
GBP245.0m).
Inventory expensed to cost of sales includes the cost of the
Stock Keeping Units (SKUs) sold, supplier income, stock wastage and
foreign exchange variances.
At 7 October 2021 the inventory provision amounted to GBP3.8m (8
October 2020: GBP4.4m). The inventory provision is calculated by
reference to the age of the SKU and the length of time it is
expected to take to sell. The provision percentages applied in
calculating the provision are as follows:
Discontinued stock greater than 365 days: 100%
Current stock greater than 365 days with a use by date: 50%
Current stock within 180 and 365 days with a use by date:
25%
Greater than 180 days with no use by date: 25%
In addition, a provision is held to account for store stock
losses during the period since which the SKU was last counted.
The value of inventory against which an ageing provision is held
is GBP9.5m (8 October 2020: GBP7.2m).
In the 28 week period ended 7 October 2021, the value of
inventory written off to the income statement amounted to GBP4.8m
(28 week period ended 8 October 2020: GBP4.7m).
12 Other interest-bearing loans and borrowings
At 8 October At 25 March
At 7 October 2021 2020 2021
GBPm GBPm GBPm
------------------------ ----------------- ------------ -----------
Non-current liabilities
Unsecured bank loans 99.2 163.8 98.7
Terms and debt repayment schedule
At 7 October
2021
----------------- ---------- ----------------------------- ----------------
Face Carrying
Nominal interest Year of value amount
Currency rate maturity GBPm GBPm
----------------- --------- ----------------- ---------- ------ --------
Revolving credit
facility GBP LIBOR +1.15% 2023 100.0 99.2
At 8 October
2020
----------------- ---------- ----------------------------- ----------------
Face Carrying
Nominal interest Year of value amount
Currency rate maturity GBPm GBPm
----------------- --------- ----------------- ---------- ------ --------
Revolving credit
facility GBP LIBOR +1.15% 2023 165.0 163.8
--------------------- --------- ----------------- ------ ------ --------
The Group has revolving facilities of GBP248.0m, which expire in
2023.
The drawn amount on the GBP248.0m facility was GBP100.0m at 7
October 2021 (GBP165.0m at 8 October 2020) and this amount is
reviewed each month. Interest is charged at LIBOR plus a margin
based on leverage (net debt: EBITDA). Face value represents the
principal value of the revolving credit facility. The facility is
unsecured.
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.
The analysis of repayments on the loans is as follows:
At 7 October At 8 October At 25 March
2021 2020 2021
GBPm GBPm GBPm
--------------------------------------- ------------ ------------ -----------
Within one year or repayable on demand - - -
Between one and two years 100.0 - -
Between two and five years - 165.0 100.0
--------------------------------------- ------------ ------------ -----------
100.0 165.0 100.0
--------------------------------------- ------------ ------------ -----------
The Group has fixed interest rate swap agreements over a total
of GBP100.0m of the senior facility borrowings at the balance sheet
date at a blended fixed rate of 0.811% which commenced on 31 March
2021 and expires on 25 September 2023.
The hedges are structured to hedge at least 70% of the forecast
outstanding debt for the next 12 months.
13 Financial instruments
Fair value hierarchy
The table below shows the carrying amounts and fair values of
financial assets and financial liabilities, including their levels
in the fair value hierarchy.
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)
At 7 October 2021
------------------------------------- -----------------------------------------------------------------------
Carrying amount Fair value FVOCI Financial Other Total
- hedging - equity assets financial carrying
instruments instruments at amortised liabilities amount
cost
GBPm GBPm GBPm GBPm GBPm
------------------------------------- ------------- ------------- -------------- ------------- ----------
Financial assets measured
at fair value
Investments in Joint Venture
veterinary practices - 0.2 - - 0.2
Other investments - 1.1 - - 1.1
Forward exchange contracts
used for hedging 1.0 - - - 1.0
Fuel forward contract used
for hedging 0.3 - - - 0.3
Interest rate swaps used for
hedging 0.0 - - - 0.0
1.3 1.3 - - 2.6
------------------------------------- ------------- ------------- -------------- ------------- ----------
Financial assets not measured
at fair value
Current trade and other receivables - - 23.6 - 23.6
Amounts owed by Joint Venture
veterinary practices - funding,
trading and operating loans - - 17.1 - 17.1
Cash and cash equivalents - - 164.7 - 164.7
Loans to Joint Venture veterinary
practices - initial set up
loans - - 10.3 - 10.3
Loans to Joint Venture veterinary
practices - other loans - - 2.6 - 2.6
Other receivables - - 0.9 - 0.9
------------------------------------- ------------- ------------- -------------- ------------- ----------
- - 219.2 - 219.2
------------------------------------- ------------- ------------- -------------- ------------- ----------
Financial liabilities measured
at fair value
Fuel forward contract used
for hedging (0.0) - - - (0.0)
Forward exchange contracts
used for hedging (0.1) - - - (0.1)
Interest rate swaps used for
hedging (0.5) - - - (0.5)
------------------------------------- ------------- ------------- -------------- ------------- ----------
(0.6) - - - (0.6)
------------------------------------- ------------- ------------- -------------- ------------- ----------
Financial liabilities not
measured at fair value
Current lease liabilities
(note 9) - - - (79.5) (79.5)
Non-current lease liabilities
(note 9) - - - (318.4) (318.4)
Trade payables - - - (124.4) (124.4)
Amounts owed to Joint Venture
veterinary practices - - - (5.1) (5.1)
Other interest-bearing loans
and borrowings (note 12) - - - (99.2) (99.2)
------------------------------------- ------------- ------------- -------------- ------------- ----------
- - - (626.6) (626.6)
------------------------------------- ------------- ------------- -------------- ------------- ----------
At 7 October 2021
-------------------------------------------- -------------------------------------
Fair value Level 1 Level Level Total
2 3
GBPm GBPm GBPm GBPm
-------------------------------------------- --------- -------- ------ --------
Financial assets measured at fair
value
Investments in Joint Venture veterinary
practices - - 0.2 0.2
Other investments - - 1.1 1.1
Financial assets not measured at
fair value
Amounts owed by Joint Venture veterinary
practices - funding, trading and
operating loans - - 17.1 17.1
Loans to Joint Venture veterinary
practices - initial set up loans - - 10.3 10.3
Loans to Joint Venture veterinary
practices - other loans - - 2.6 2.6
Other receivables - - 0.9 0.9
-------------------------------------------- --------- -------- ------ --------
Financial liabilities not measured
at fair value
Other interest-bearing loans
and borrowings (note 12) - (100.0) - (100.0)
------------------------------------------- ---------- -------- ------ --------
At 8 October 2020
------------------------------------- -----------------------------------------------------------------------
Carrying amount Fair value FVOCI Financial Other Total
- hedging - equity assets financial carrying
instruments instruments at amortised liabilities amount
cost
GBPm GBPm GBPm GBPm GBPm
------------------------------------- ------------- ------------- -------------- ------------- ----------
Financial assets measured
at fair value
Investments in Joint Venture
veterinary practices - 0.2 - - 0.2
Other investments - 1.1 - - 1.1
Forward exchange contracts
used for hedging 0.3 - - - 0.3
Interest rate swaps used for
hedging 0.2 - - - 0.2
0.5 1.3 - - 1.8
------------------------------------- ------------- ------------- -------------- ------------- ----------
Financial assets not measured
at fair value
Current trade and other receivables - - 31.1 - 31.1
Amounts owed by Joint Venture
veterinary practices - funding,
trading and operating loans - - 25.8 - 25.8
Cash and cash equivalents - - 114.1 - 114.1
Loans to Joint Venture veterinary
practices - initial set up
loans - - 13.1 - 13.1
Loans to Joint Venture veterinary
practices - other loans - - 3.9 - 3.9
Other receivables - - 2.2 - 2.2
------------------------------------- ------------- ------------- -------------- ------------- ----------
- - 190.2 - 190.2
------------------------------------- ------------- ------------- -------------- ------------- ----------
Financial liabilities measured
at fair value
Fuel forward contracts used
for hedging (0.2) - - - (0.2)
Forward exchange contracts
used for hedging (0.7) - - - (0.7)
Interest rate swaps used for
hedging (2.7) - - - (2.7)
(3.6) - - - (3.6)
Financial liabilities not
measured at fair value
Finance lease liabilities - - - (0.1) (0.1)
Current lease liabilities
(note 9) - - - (80.8) (80.8)
Non-current lease liabilities
(note 9) - - - (375.5) (375.5)
Trade payables - - - (115.1) (115.1)
Amounts owed to Joint Venture
veterinary practices - - - (1.9) (1.9)
Put and call liability - - - (4.1) (4.1)
Other interest-bearing loans
and borrowings (note 12) - - - (163.8) (163.8)
------------------------------------- ------------- ------------- -------------- ----------
- - - (741.3) (741.3)
------------------------------------- ------------- ------------- -------------- ----------
At 8 October 2020
----------------------------------
Fair value Level 1 Level Level Total
2 3
GBPm GBPm GBPm GBPm
Financial assets measured at fair
value
Investments in Joint Venture veterinary
practices - - 0.2 0.2
Other investments - - 1.1 1.1
Financial assets measured at fair value
Amounts owed by Joint Venture veterinary
practices- funding, trading and
operating loans - - 25.8 25.8
Loans to Joint Venture veterinary
practices- initial set up loans - - 13.1 13.1
Loans to Joint Venture veterinary
practices-other loans - - 3.9 3.9
Other receivables - - 2.2 2.2
Financial liabilities not measured
at fair value
Put and call liability - - (4.1) (4.1)
Other interest-bearing loans and
borrowings (note 12) - (165.0) - (165.0)
At 25 March 2021
Carrying amount Fair value FVOCI Financial Other Total
- hedging - equity assets financial carrying
instruments instruments at amortised liabilities amount
cost
GBPm GBPm GBPm GBPm GBPm
Financial assets measured at
fair value
Investments in Joint Venture
veterinary practices - 0.2 - - 0.2
Other investments - 1.1 - - 1.1
Forward exchange contracts
used for hedging 0.8 - - - 0.8
Fuel forward contracts used
for hedging 0.1 - - - 0.1
Interest rate swaps used for
hedging 0.2 - - - 0.2
1.1 1.3 - - 2.4
Financial assets not measured
at fair value
Current trade and other receivables - - 20.4 - 20.4
Amounts owed by Joint Venture
veterinary practices - funding,
trading and operating loans - - 20.8 - 20.8
Cash and cash equivalents - - 101.4 - 101.4
Loans to Joint Venture veterinary
practices - initial set up
loans - - 11.3 - 11.3
Loans to Joint Venture veterinary
practices - other loans - - 3.3 - 3.3
Other receivables - - 1.2 - 1.2
- - 158.4 - 158.4
Financial liabilities measured
at fair value
Fuel forward contracts used
for hedging (0.0) - - - (0.0)
Forward exchange contracts
used for hedging (1.2) - - - (1.2)
Interest rate swaps used for
hedging (1.7) - - - (1.7)
(2.9) - - - (2.9)
Financial liabilities not measured
at fair value
Current lease liabilities (note
9) - - - (78.4) (78.4)
Non-current lease liabilities
(note 9) - - - (331.3) (331.3)
Trade payables - - - (107.1) (107.1)
Amounts owed to Joint Venture
veterinary practices - - - (17.6) (17.6)
Other interest-bearing loans
and borrowings (note 12) - - - (98.7) (98.7)
- - - (633.1) (633.1)
At 25 March 2021
---------------------------------
Fair value Level 1 Level Level Total
2 3
GBPm GBPm GBPm GBPm
Financial assets measured at fair
value
Investments in Joint Venture veterinary
practices - - 0.2 0.2
Other investments - - 1.1 1.1
Financial assets measured at fair
value
Amounts owed by Joint Venture veterinary
practices - Funding and operating
loans - - 20.8 20.8
Loans to Joint Venture veterinary
practices - initial set up loans - - 11.3 11.3
Loans to Joint Venture veterinary
practices - other loans - - 3.3 3.3
Other receivables - - 1.2 1.2
Financial liabilities not measured
at fair value
Other interest-bearing loans and
borrowings (note 12) - (100.0) - (100.0)
Measurement of fair values
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 of investments Not applicable Not applicable
in equity in unlisted equity securities
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 exchange Market comparison technique Not applicable Not applicable
contracts - the fair values are
and interest based on broker quotes.
rate swaps Similar contracts are
traded in an active market
and the quotes reflect
the actual transactions
on similar instruments.
Other financial Other financial liabilities Future earnings Fair value linked
liabilities include the fair values performance to increase or
of the put and call options decrease in the
over the non-controlling best estimate
interests of subsidiary of the future
undertakings and contingent earnings performance
consideration in relation
to acquisitions. The
fair values represent
the best estimate of
amounts payable based
on future earnings performance
discounted to present
value.
Hedge accounting
Cash flow hedges
At 7 October 2021 and 8 October 2020, the Group held the
following instruments to hedge exposures to changes in foreign
currency and interest rates.
Maturity
1-6 months 6-12 More than 1-6 6-12 More
months 1 year months months than
1 year
2022 2022 2022 2021 2021 2021
Foreign currency risk
Forward exchange contracts
Net exposure (GBPm) 37.4 26.5 - 34.1 25.0 -
Average GBP-USD forward
contract rate 1.38 1.38 - 1.27 1.30 -
Average GBP-EUR forward
contract rate 1.16 1.16 - 1.13 1.10 -
Interest rate risk
Interest rate swaps
Net exposure (GBPm) - - 100.0 140.0 - 100.0
Average fixed interest
rate - - 0.811% 0.918% - 0.811%
14 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.
15 Related parties
Veterinary practice transactions
The Group has entered into a number of arrangements with third
parties in respect of veterinary practices. During the period, the
Group had in place certain guarantees over the bank loans taken out
by a number of veterinary practice companies in which it holds an
investment in non-participatory share capital. At the end of the
period, the total amount of bank overdrafts and loans guaranteed by
the Group amounted to GBP11.7m (8 October 2020: GBP9.4m).
The transactions entered into during the period, and the
balances outstanding at the end of the period are as follows:
7 October 25 March
2021 8 October 2021
GBPm 2020 GBPm GBPm
--------------------------------------------- --------- ---------- --------
Transactions
- Fees for services provided to Joint
Venture veterinary practices 36.9 28.6 57.0
- Rental and other occupancy charges
to Joint Venture veterinary practices 6.3 4.5 8.2
Total income from veterinary practices 43.2 33.1 65.2
Acquisitions
- Consideration for Joint Venture veterinary
practices acquired (note 7) 1.6 1.6 1.6
Balances
Included within trade and other receivables:
- Funding for new practices - 0.3 0.3
- Trading balances - 3.8 -
- Operating loans
- Gross value of operating loans 22.3 29.1 26.7
- Allowance for expected credit losses
held for operating loans (5.2) (7.4) (6.2)
- Net operating loans 17.1 21.7 20.5
Included within other financial assets
and liabilities:
- Loans to Joint Venture veterinary
practices - initial set up loans
- Gross value of initial set up loans 11.3 13.1 12.5
- Allowance for expected credit losses
for initial set up loans (1.0) - (1.2)
- Net initial set up loans 10.3 13.1 11.3
- Loans to other related parties (other
loans)
- Gross value of other loans 2.6 3.9 3.3
- Allowance for expected credit losses -
held for other loans - -
--------- ---------- --------
- Net other loans 2.6 3.9 3.3
Included within trade and other payables:
- Trading balances (5.1) (1.9) (17.6)
Total amounts receivable from veterinary
practices (before provisions) 31.1 48.3 25.2
Fees for services provided to related party veterinary practices
are included within revenue and relate to charges for support
services offered in such areas as clinical development, promotion
and methods of operation as well as service activities including
accountancy, legal and property. In accordance with IFRS 15,
revenue in the 28 week period ended 7 October 2021, the 52 week
period ended 25 March 2021 and the 28 week period ended 8 October
2020 excludes irrecoverable fee income from Joint Venture
veterinary practices.
Funding for new practices represents the amounts advanced by the
Group to support veterinary practice opening costs. The funding is
short term and the related party Joint Venture veterinary practice
draws down their own bank funding to settle these amounts
outstanding with the Group shortly after opening.
Trading balances represent costs incurred/income received by the
Group in relation to the services provided to the veterinary
practices that have yet to be recharged.
Operating loans represent amounts advanced to related party
Joint Venture veterinary practices to support their working capital
requirements and longer term growth. The loans advanced to the
practices are interest free and either repayable on demand or
repayable within 90 days of demand. No facility exists and the
levels of loans are monitored in relation to review of the
practice's performance against business plan. Based on the
projected cash flow forecast on a practice by practice basis, the
funding is often expected to be required for a number of years. As
practices generate cash on a monthly basis it is applied to the
repayment of brought forward operating loans. For immature
practices, loan balances may increase due to operating
requirements. The balances above are shown net of allowances for
expected credit losses held for operating loans of GBP5.2m (25
March 2021: GBP6.2m, 8 October 2020: GBP7.4m).
In the 28 week period ended 7 October 2021, the value of loans
written off recognised in the income statement amounted to GBP0.9m
(8 October 2020: GBPnil).
At 7 October 2021, the Group had a commitment to increase the
loan funding to Joint Venture companies of GBP0.5m (25 March 2021:
GBP0.8m, 8 October 2020: GBP0.8m), this increase in funding is
written into the Joint Venture agreements and becomes payable when
certain criteria are met.
The Group is a guarantor for the leases for veterinary practices
that are not located within Pets at Home stores.
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END
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