TIDMPETS
RNS Number : 2811H
Pets At Home Group Plc
23 November 2022
FOR IMMEDIATE RELEASE, 23 NOVEMBER 2022
Pets at Home Group Plc: FY23 Interim Results
for the 28-week period to 13 October 2022
Record customer levels drive +7.3% H1 sales; FY PBT guidance
held at GBP131m
-- Total Group revenue growth of 7.3% to GBP727.2m, with Group
like-for-like(#) (LFL) revenue up 6.4%, with Q2 LFL(#) accelerating
versus the Q1 run rate, and the final period of H1 the strongest to
date
-- Vet Group revenue increased by 12.4%, with LFL(#) revenue up
10.5%. LFL(#) customer sales(2) across all General Practices up
7.1% and LFL(#) Joint Venture fee income up 10.7%
-- Retail revenue growth of 6.8%, and LFL(#) growth of 5.9%.
Omnichannel(#) revenue growth of 16.2%; participation of total
Retail revenue of 16.5% in H1
-- Group underlying PBT(#) down 9.3% to GBP59.2m in line with
plan, impacted by increased freight and energy costs and the YoY
increase in investment in digital assets, which, in line with IAS
38 accounting, are expensed through the P&L.
-- No change to full year guidance, and we continue to expect
full-year Group underlying profit before tax to be in line with
analyst consensus, which is currently GBP131m and would reflect a
return to our more normal H1:H2 PBT split
*Due to a clarification of accounting policies, certain cloud
computing costs, previously capitalised as intangible assets, have
been expensed through the income statement in the current and prior
years. The GBP8.1m YoY impact reflects peak investment in Project
Polestar in FY23
-- Group free cash flow(#) down 54.8% to GBP41.4m reflecting YoY
profit performance, planned increased investment, and annualisation
against working capital timing benefits reported at FY22 H1
-- Balance sheet remains robust with net cash (excluding lease liabilities) of GBP43.1m
-- Interim dividend per share of 4.5p, an increase of 4.7% YoY
-- Sustained momentum across key strategic KPIs and customer acquisition metrics;
-- Sign ups to our Puppy and Kitten Club continued at pace,
averaging 29,000 per week in Q2, more than three-fold higher than
pre-pandemic, and ahead of the FY22 exit rate
-- The number of active VIPs increased 9% YoY to 7.6m, with
those engaging across more than one channel up 10% YoY and
representing 27% of VIPs
-- New client registrations across our veterinary practices
remained strong, growing to an average of 8,800 per week,
increasing our active client base to 1.7m
-- The number of subscription plans across the Group grew 11%
YoY to 1.6m, generating over GBP135m in annualised recurring
customer revenue(2)
Current trading and outlook
The business, and the wider pet care market, remains resilient
and in growth. New customer acquisition remains strong with
registrations into our Puppy & Kitten club accelerating
throughout H1 and customer spend maintained across the Group.
Consumer demand remains strong, with a record number of UK pet
owners continuing to prioritise spending on their pets, underpinned
by the structural trends of humanisation and premiumisation.
Trading post period end has continued in line with the Q2 run rate
with LFLs in mid-single digits.
We are conscious of the macro-economic backdrop and continue to
manage the business proactively. The inflationary environment
creates pressures for both our customers and the business. We are
conscious of the challenges faced by many consumers, and continue
to prioritise making pet care as convenient and affordable as
possible. We will never let price be a reason not to shop with
us.
We continue to actively manage industry-wide cost headwinds ,
which we see persisting in the near term, in particular the impact
of foreign exchange, energy, and National Living Wage. As well as
directly mitigating these costs where possible, we are also
proactively offsetting them through a range of self-help levers
including our programme of rent reductions, and initiatives to
target efficiencies across consumables and goods not for resale. We
are driving further productivity gains across our stores and supply
chain, leveraging technology to lower our overall cost to
serve.
We continue to expect full-year Group underlying profit before
tax to be in line with analyst consensus , despite the challenging
macro-economic environment. Consensus is currently GBP131m, with a
range of GBP121m-GBP136m. The business remains highly cash
generative, and we expect to finish the year in a net cash
position.
Looking further ahead, the prospects for the business remain
strong. We are continuing with our strategic investments, and our
GBP2.3bn medium term customer revenue opportunity remains intact,
having made better than expected progress to date.
Our next scheduled update will be our Q3 FY23 release on 31
January 2023.
Lyssa McGowan, Chief Executive Officer:
In my first six months as CEO, I have spent my time forming a
deep understanding of the business and sector, learning from the
ground up how the business operates. I am more convinced that Pets
at Home is well positioned to capitalise on an attractive growth
opportunity in our structurally growing pet care market, supported
by our unique blend of products and services, deeply embedded
culture and expert, passionate colleagues, and partners.
Our first half performance shows progress and resilience across
the business. In a challenging macro-environment, the pet care
industry remains in growth across all channels, and we have
continued to acquire new customers at an impressive rate, setting
new records for customer numbers in recent months.
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 09.30am. To join the call in listen-only
mode, please click on the following link (
https://stream.brrmedia.co.uk/broadcast/634ed7c76815e65bb9fdc1b2 ).
Those wishing to participate in the Q&A session should email
petsathome-maitland@h-advisors.global for call details.
Investor Relations Enquiries
Pets at Home Group Plc:
Andrew Porteous, Director of
Investor Relations +44 (0) 7740 361 849
Chris Ridgway, Head of Investor
Relations +44 (0) 7788 783 925
Media Enquiries
Pets at Home Group Plc:
Natalie Cullington, Head of Communications +44 (0) 7974 594 701
H/Advisors Maitland:
Clinton Manning +44 (0) 7711 972 662
Joanna Davidson +44 (0) 7827 254 567
About Pets at Home
Pets at Home Group Plc is the UK's leading pet care business,
providing pets and their owners with the very best advice, products
and care. Pet products are available online or from our 457 stores,
many of which also have vet practices and grooming salons. The
Group also operates a leading small animal veterinary business,
with 444 veterinary General 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.
Key Performance Indicators
Financial KPIs(1) H1 FY23 H1 FY22 YoY
-------------------------- -------------------------- -------- -------- --------
Customer revenue(#, 2) (GBPm) 928.2 867.6 7.0%
------------------------------------------------------ -------- -------- --------
Group underlying PBT(#, 7) (GBPm) 59.2 65.3 (9.3)%
------------------------------------------------------ -------- -------- --------
Group free cashflow(#) (GBPm) 41.4 91.6 (54.8)%
------------------------------------------------------ -------- -------- --------
Cash Return on Invested Capital (CROIC)(3) 21.5% 22.0% (49)bps
------------------------------------------------------ -------- -------- --------
Strategic KPIs Measure H1 FY23 H1 FY22 YoY
-------------------------- -------------------------- -------- -------- --------
Bring the pet experience Number of active VIPs(4)
to life (m) 7.6 6.9 9.3%
-------------------------- -------------------------- -------- -------- --------
50% of revenue from Customer revenue(#, 2) 306.5 284.3 7.8%
pet care services from services(5) (GBPm) 33.0% 32.8% 25bps
-------------------------- -------------------------- -------- -------- --------
Use our data to better VIP customer revenue(#,
serve customers 2, 6) (GBPm) 1,158.2 1,021.7 13.4%
-------------------------- -------------------------- -------- -------- --------
Set our people free Customer revenue(#, 2)
to serve per FTE colleague(GBPk) 114.6 114.9 (0.3)%
-------------------------- -------------------------- -------- -------- --------
1. Financial KPIs 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. GAAP Measures are
presented on pages 20-23.
2. Customer revenue includes 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 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.
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, 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
rather than a year-to-date basis.
7. The comparative Group underlying PBT has been restated to
reflect the reclassification of expenditure to the income statement
following the impact of the accounting policy change detailed in
note 1 of the accounts.
Chief Executive Officer's Review
A unique business in a resilient and growing market
Six months into the CEO role, I am more convinced than ever that
this is a great business built on a strong and differentiated
platform. Our pet care market is underpinned by structural growth
trends where premiumisation and humanisation continue to drive
spend and innovation. These have been joined by another trend of
increased pet-ownership. Far from being a COVID boom - elevated
levels of pet ownership are here to stay and continue to drive
growth.
Our market leadership within the UK gives us economies of scale
and positions us as the partner of choice in the sector. We are the
'go-to' brand for consumers embarking on a new pet care journey or
requiring advice for their beloved companion. Our omnichannel and
data capabilities are industry leading and our special colleague
culture and deep expertise is a distinctive and hard to replicate
competitive advantage, and something we will continue to protect
and grow. We have real category authority in pet care, reinforced
by the clinical freedom and expertise of our vet partners, our
commitment to pet welfare, and our shared purpose of making lives
better for pets and the people that love them.
Since joining, I've undertaken a re-organisation to de-layer,
simplify and speed up decision-making and to better integrate the
vets and retail businesses. We have been able to promote and rotate
our best people, securing expertise and providing continuity. As
part of this change in structure I have also created a new Consumer
function bringing together customer value proposition, digital, and
marketing. This team will be led by the newly created Chief
Consumer Officer role which will step-change our customer
centricity. As you would expect I've taken a good look at our
strategic initiatives to ensure our big investments (such as our
new distribution centre, our digital re-platforming, and our store
refurbishment programme) land well.
Looking forward, our vision is to be the world's best pet care
business, providing the best products, services and advice to guide
pet owners through their pet care journey. I would argue that we
are already a global leader, having created a unique pet care
platform bringing together retail, vets and grooming, but there
remains a very significant opportunity ahead of us. We will extend
and deepen our strategy to create a customer-centric, omnichannel,
pet care ecosystem, delivering exactly what pet owners need, where
and how they need it, to power our growth.
A strategy to drive long-term, sustainable growth
Our strategy of building an integrated omnichannel pet care
ecosystem continues to deliver. We will continue investing to grow
the business as planned, focusing on our key strategic initiatives
to drive long-term sustainable growth. We remain firmly on track to
achieve our medium-term customer revenue opportunity of at least
GBP2.3bn. Our balance sheet strength underpins the ability to
invest to reach this target and continue to grow beyond it.
I. A customer-centric focus
A growing base of highly engaged pet owners
-- We continue to grow and deepen our relationship with our 7.6m VIP customers, +9% YoY
-- 2m VIPs use more than one channel, +10% YoY, contributing c60% of total customer spend
-- New customer acquisition continues at pace; c750k Puppy &
Kitten Club members added in H1, with members typically spending
20% more and exhibiting a lower churn rate
An extensive and growing data capability
-- Proprietary in-house data capability provides unparalleled
insights to drive customer engagement, having doubled the response
rate to our flagship reward mailer
-- AI-based predictive churn model has supported a c230bps
reduction in churn, and over 95% of average customer spend is
retained beyond their first year
-- Leveraging data across the business, using basket profiling
to optimise localised store ranging
A scalable subscriptions platform
-- Pet care plans offer convenience and value, whilst driving
share of wallet and long-term loyalty
-- Three core plans up 11% YoY to 1.6m, generating over GBP135m in annualised customer revenue
-- Representing 8% of Group customer revenue, the opportunity ahead is significant
II. A unique omnichannel approach
Digitising the business
-- Polestar will seamlessly connect our ecosystem of products
and services into a single customer platform
-- Recently launched enhanced mobile app brings together VIP and
shopping in one easy to use experience
-- Clearly phased programme giving customers even more choice over how they engage with us
Investing in our pet care centres to provide a best-in-class
customer experience
-- Pet care centres bring together the best of our retail offer
with enhanced services proposition
-- Omnichannel approach enables best-in-class fulfilment, with
c25% of all online sales now fulfilled from our store network
-- 13 refurbishments in H1, with 65 pet care centres across the
estate now incorporating our latest thinking. Plan to open new 5
pet care centres and refurbish c40 each year
Our future-focused distribution platform will enhance our
service proposition
-- Development of our new distribution facility remains on
budget and on track to become operational by summer 2023
-- Purpose-built and highly automated facility; improved
fulfilment capacity and inventory flexibility, while lowering our
overall cost to serve
-- Future proofing operations, providing capacity to support 10+ years of revenue growth
III. A truly integrated ecosystem
Innovating and growing our unique veterinary business
-- Estate goes from strength to strength. In past 4 years the
profitability of the underlying practice estate has increased
six-fold, with over 60% of practices still to reach maturity
-- We will continue to invest in infrastructure and resource
across our veterinary estate and plan to open between 5 and 15 new
practices each year
-- We are innovating our formats, extending existing sites and opening new sites with enhanced capabilities. Extended sites are delivering an 8% increase in active clients and 30% growth in sales
Enhancing the synergies across our ecosystem
-- Our Pathfinder initiative, now launched across 21 vet
practices, is designed to improve allocation of clinical resource,
enhance client engagement, and optimise cross-referral
opportunities
-- Early results point to improved productivity and performance
across a range of key metrics including health plan penetration,
average transaction value and client visits
-- This approach will inform rollout more broadly across the practice estate going forward
Integrating our physical and digital proposition
-- Our telehealth business broadens our digital capabilities in
the provision of trusted advice and pet care solutions, handling
over 95,000 remote consultations per year
-- Trial of Pet Expert Live video functionality, connecting
online customers to expert colleagues in-store, proven highly
successful with approximately 1,000 calls per week to date
-- Store colleagues can now be digitally connected into our
ecosystem via a single handheld device, simplifying daily tasks and
empowering colleagues to deliver a joined-up pet care
experience
Maintaining our strong commitment to a sustainable future
We are firmly committed to meeting our wider obligations as a
responsible corporate citizen and made good progress during the
period in our social value strategy, aligned across the three
pillars of Pets, Planet and People.
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 cGBP3.2m
-- In partnership with pet charity Blue Cross, we have recently
launched a nationwide trial of pet foodbank donation points in
stores to help support pets and owners during the cost-of-living
crisis
Planet
-- We rolled out collection units for the recycling of pet food
packaging across more than 375 stores to date, and plan to further
extend this across our estate
-- Received approval from the science-based target initiative
(sbti) for our 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, we have provided work
opportunities to over 170 young people under the Government's
Kickstart programme, many of which have led to permanent roles
-- All colleagues are encouraged to take one paid day each year
to support a charity of their choice. These 'Better World Pledge'
days are integral to our annual bonus scheme, with approximately
12,000 hours collectively volunteered to date
Lyssa McGowan
Chief Executive Officer
23 November 2022
Chief Financial Officer's Review
The H1 FY23 period represents the 28 weeks from 1 April 2022 to
13 October 2022. The comparative period represents the 28 weeks
from 26 March 2021 to 7 October 2021.
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 General Practices) and Central (includes Group
costs, finance expenses and the Group's veterinary telehealth
business).
H1 FY23 H1 FY22 YoY change
Group like-for-like revenue growth(#) 6.4% 22.2%
Retail 5.9% 21.9%
Vet Group 10.5% 26.2%
Group revenue (GBPm) 727.2 677.6 7.3%
--------------------------------------- -------- -------- -----------
Retail 661.5 619.6 6.8%
-----------
Vet Group 63.8 56.8 12.4%
-----------
Central 1.9 1.2 60.2%
--------------------------------------- -------- -------- -----------
Group underlying gross margin(1,#) 47.5% 48.7% (123)bps
-----------
Retail 46.7% 48.1% (142)bps
-----------
Vet Group 55.3% 54.6% 65bps
===========
Group underlying PBT(1,2,#) (GBPm) 59.2 65.3 (9.3)%
Retail 39.5 48.7 (19.0)%
Vet Group 27.8 24.0 15.5%
--------------------------------------- -------- -------- -----------
Central (8.1) (7.4) (8.6)%
--------------------------------------- -------- -------- -----------
Group underlying PBT margin(1,2,#) 8.1% 9.6% (151)bps
--------------------------------------- -------- -------- -----------
Retail 6.0% 7.9% (190)bps
--------------------------------------- -------- -------- -----------
Vet Group 43.5% 42.3% 119bps
-----------
Group statutory PBT(2) (GBPm) 53.4 65.7 (18.7)%
-----------
Underlying basic EPS(1,2,#) (p) 9.6 11.0 (12.9)%
-----------
Statutory basic EPS(2) (p) 8.7 11.1 (21.8)%
-----------
Group non-underlying items(1) (GBPm) (5.8) 0.4 NM
-----------
Group underlying free cashflow (#)
(GBPm) 41.4 91.6 (54.8)%
Cash and cash equivalents (GBPm) 143.1 164.7 (21.6)
Dividend (p) 4.5 4.3 4.7%
Number of
--------------------------------------- -------- -------- -----------
Stores 457 453 4
-----------
Grooming salons 339 317 22
-----------
Joint Venture vet practices 387 390 (3)
--------------------------------------- -------- -------- -----------
Company managed vet practices 57 52 5
--------------------------------------- -------- -------- -----------
1. H1 FY23 non-underlying items of GBP4.5m relate to pre-opening
costs relating to our new distribution centre recognised within
Retail, and GBP1.3m relating to restructuring of certain support
functions recognised within Central, both allocated against
non-underlying operating costs. H1 FY22 non-underlying credit of
GBP0.4m relates to the release of a provision held against property
leases recognised within Vet Group, allocated against
non-underlying gross margin.
2. The comparative figures have been restated to reflect the
reclassification of expenditure to the income statement following
the impact of the accounting policy change detailed in note 1 of
the accounts.
Revenue
LFL Revenue Growth FY23
-------------------- ---------------------
Q1 Q2 H1
-------------------- ----- ------ ------
Retail 5.6% 6.3% 5.9%
Vet Group 8.6% 13.1% 10.5%
Group 6.0% 6.8% 6.4%
-------------------- ----- ------ ------
Group revenue in H1 FY23 grew 7.3% to GBP727.2m (H1 FY22:
GBP677.6m) and like-for-like (LFL) revenue grew 6.4%(#) .
Retail revenue grew 6.8% to GBP661.5m (H1 FY22: GBP619.6m),
including omnichannel revenue growth of 16.2% to GBP108.9m,
representing 16.5% of total Retail revenue (H1 FY22: 15.1%). The
LFL revenue growth in Retail was 5.9%(#) for the period.
Store revenues increased by 5.0% in the first half to GBP535.0m
(H1 FY22: GBP509.3m), with store LFL +4.2%, and grooming revenues
up by 7.4% to GBP16.7m (H1 FY22: GBP15.5m) with 4% more dogs
groomed YoY.
Food revenue grew by 15.1% to GBP387.6m (H1 FY22: GBP336.7m),
underpinned by strong volume growth as we continue to grow our
customer base.
Accessories revenue was down 3.5% to GBP248.8m (H1 FY22:
GBP257.7m), with strong growth in consumables (cat litter, hygiene
products, licensed medicines) offset by weaker performance in
categories such as dog toys and fashion. Product innovation remains
an important driver of performance, with our recent Halloween and
Christmas ranges continuing to trade well.
Vet Group LFL revenue grew by 10.5% for the period, with total
revenue up 12.4%.
Total Joint Venture fee income increased by 10.4% to GBP40.7m
(H1 FY22: GBP36.9m), with LFL fee income up 10.7%(#) . LFL growth
in General Practice customer sales was 7.1%, and revenues (#) from
company managed practices increased by 18.7% to GBP19.2m (H1 FY22:
GBP16.2m).
Revenue of GBP1.9m (H1 FY22: GBP1.2m) was recognised within our
Central division in relation to The Vet Connection, our growing
telehealth business.
Gross margin
Underlying group gross margin (#) decreased YoY in line with
expectations by 123 bps to 47.5% (H1 FY22: 48.7%).
Gross margin within Retail was 46.7%, a reduction of 142 bps
over the prior period (H1 FY22: 48.1%), impacted by food growing
ahead of accessories (147bps impact on Group gross margin) and a
GBP4.0m year-on-year increase in freight container rate costs
(49bps impact on Group gross margin).
Underlying gross margin(#) within the Vet Group increased by 65
bps to 55.3% (H1 FY21: 54.6%). 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 relatively fixed.
Operating costs and profit before tax
Underlying Group profit before tax was GBP59.2m (H1 FY22:
GBP65.3m), with a profit margin of 8.1%(#) (H1 FY22: 9.6%),
impacted by increased freight and energy costs and the YoY increase
in investment in digital assets, which are expensed through the
P&L in line with IAS38 accounting policies. Group statutory
profit before tax was GBP53.4m (H1 FY22: GBP65.7m).
Group underlying operating costs, excluding depreciation and
amortisation, of GBP223.6m (H1 FY22: GBP200.9m) grew at 11.3%.
Before growth in our fulfilment costs and investment in our digital
proposition, underlying cost growth was 4.1%.
We continue to maintain a tight operational grip on
industry-wide cost headwinds, including raw materials, wages,
energy, and freight costs. As well as directly mitigating these
costs where possible, we are also proactively offsetting them
through our ongoing self-help initiatives. Our programme of rent
reductions is progressing well, achieving an average cash reduction
on 25%, and we continue to target efficiencies across consumables
and goods not for resale. We are driving further productivity gains
across our stores and supply chain, leveraging technology to lower
our overall cost to serve.
We have seen some normalisation in container rates since year
end, whilst the Government's energy support plan for businesses
provides certainty over the balance of year. In addition, our
foreign exchange requirements are fully hedged at $1.34 for FY23.
We have hedged our dollar requirements forward in line with our
treasury policy, with currently c50% of FY24 hedged at an average
rate of $1.17.
Retail underlying profit before tax was GBP39.5m (H1 FY22:
GBP48.7m) with a profit margin of 6.0%(#) (H1 FY22: 7.9%)
reflecting the sustained strong trading across the first half,
offset by the cost headwinds described above. Operating cost
growth, excluding depreciation and amortisation, was 11.4% to
GBP211.0m (H1 FY22: GBP189.4m). Before growth in our fulfilment
costs and investment in our digital proposition, underlying cost
growth was 3.5%.
Vet Group underlying profit before tax was GBP27.8m(#) (H1 FY22:
GBP24.0m) with a profit margin of 43.5%(#) (H1 FY22: 42.3%).
Net costs of GBP8.1m (H1 FY22: GBP7.4m) in our Central division
reflecting continued investment in group capabilities.
Finance expense
The net finance expense, including interest charged on lease
liabilities, decreased to GBP7.2m (H1 FY22: GBP7.8m) predominantly
driven by a YoY increase in interest received on cash balances.
Group profit before tax
Underlying profit before tax was GBP59.2m(#) (H1 FY22:
GBP65.3m), a decrease of 9.3%. Statutory profit before tax,
including all non-underlying items was GBP53.4m (H1 FY22:
GBP65.7m).
Taxation, profit after tax & EPS
Underlying total tax expense for the period was GBP11.4m(#) , a
rate of 19% on underlying profit before tax. Total tax expense was
GBP10.3m for the period.
Underlying profit after tax decreased by 13.3% to GBP47.8m(#)
(H1 FY22: GBP55.1m). Statutory profit after tax decreased by 22.2%
to GBP43.1m (H1 FY22: GBP55.4m). Underlying basic earnings per
share were 9.6 pence (H1 FY22: 11.0 pence) and statutory basic
earnings per share were 8.7 pence (H1 FY22: 11.1 pence).
Working capital
The movement in trade working capital for H1 FY23 was an inflow
of GBP26.6m(#) . This compares to a trade working capital inflow of
GBP58.1m in H1 FY22 predominantly driven by one-off timing benefits
estimated at GBP21m, resulting in stronger working capital inflows
in the prior year.
The strong financial performance across our Joint Venture vet
practices, supported by favourable market dynamics, contributed to
the gross value of operating loans reducing by GBP5.3m to GBP14.9m
from GBP20.2m at FY22 year end (H1 FY22: GBP22.3m). The provision
held against the gross value of operating loans decreased by
GBP0.6m to GBP4.4m from GBP5.0m at FY22 year end (H1 FY22:
GBP5.2m).
This increased the underlying net working capital inflow to
GBP31.3m (H1 FY22: GBP61.5m inflow).
Investment
Total Group investment in H1 was GBP55.8m, split GBP39.0m
capital investment and GBP16.8m of cloud-based digital investments
which are expensed through the P&L, up from GBP8.7m in the
previous year. We expect full year investment of cGBP100m, with
approximately GBP70m in capital, and the balance to be
expensed.
Total investment of GBP55.8m (H1 FY22: GBP32.9m) was focused on
three strategic growth areas; investment in data analytics and
business systems totalling GBP20.1m (H1 FY22: GBP16.9m), as we
continue to progress our data and digital agenda, a GBP19.3m (H1
FY22: GBP5.7m) investment as we build out our new distribution
centre, and GBP13.4m (H1 FY22: GBP3.7m) to continue with our store
refurbishment programme.
Group free cashflow
Group free cashflow after interest and tax, but before
acquisitions was GBP41.4m(#) (H2 FY22: GBP91.6m), representing a
cash conversion rate(1) of 33.3% (H1 FY22: 69.5%). The decrease in
free cashflow compared with the prior year is driven by
year-on-year profit performance, planned increased investment, and
annualisation against working capital timing benefits described
above.
Group free cashflow(#) (GBPm) H1 FY23 H1 FY22
---------------------------------------------- ------------ -----------
Operating cashflow(#) 105.6 150.5
---------------------------------------------- ------------ -----------
Tax and Interest (8.4) (15.8)
---------------------------------------------- ------------ -----------
Net Capex (41.0) (28.0)
---------------------------------------------- ------------ -----------
Purchase of own shares for colleague share
schemes (14.8) (15.1)
---------------------------------------------- ------------ -----------
Group free cashflow(#) 41.4 91.6
---------------------------------------------- ------------ -----------
Divisional free cashflow(#) FCF (GBPm) FCF conversion(1)
--------------------------------- ---------------- ----------------------
Retail 8.6 8.8%
--------------------------------- ---------------- ----------------------
Vet Group 50.6 167.7%
--------------------------------- ---------------- ----------------------
Central (17.8) NM
--------------------------------- ---------------- ----------------------
Group free cashflow(#) 41.4 33.3%
--------------------------------- ---------------- ----------------------
1. Calculated as free cashflow as a percentage of underlying cash EBITDA.
The cash generation described above, enables us to pay a record
dividend payment and fund our ongoing share buyback programme. The
Group's net cash position at the end of the period was GBP43.1m,
and net debt was GBP379.7m on a lease-adjusted basis. This
represents a leverage ratio of (0.3)x underlying EBITDA(#) or 1.6x
on a lease-adjusted basis.
Group net cash/(debt) (GBPm) H1 FY23 FY22
-------------------------------------------------- -------- -------
Opening net cash/(debt) 66.0 1.4
-------------------------------------------------- -------- -------
Underlying free cashflow (#) 41.4 95.0
-------------------------------------------------- -------- -------
Ordinary dividends paid (37.0) (48.5)
-------------------------------------------------- -------- -------
Share buyback (27.2) -
-------------------------------------------------- -------- -------
Acquisitions(2) (0.1) (1.7)
-------------------------------------------------- -------- -------
Disposals(3) - 19.8
-------------------------------------------------- -------- -------
Closing net cash/(debt) 43.1 66.0
-------------------------------------------------- -------- -------
Leverage (Net cash/(debt) / underlying EBITDA(#)
) (0.3)x (0.4)x
-------------------------------------------------- -------- -------
Lease-adjusted leverage (Net cash/(debt)
/ underlying EBITDA(#) ) 1.6x 1.4x
================================================== ======== =======
2. Includes investment in certain company managed practices.
3. FY22 includes the cash proceeds in relation to the disposal
of the Specialist Group net of fees and cash held upon
disposal.
The Group's cash return on invested capital(#) in the period
decreased to 21.5% (H1 FY22: 22.0%) in part as our invested capital
base increased as we took the GBP46.4m lease asset for our Stafford
DC onto our balance sheet. But for this addition, CROIC would have
been stable.
Capital allocation
Our capital allocation policy prioritises investing cash in
areas that will expand the Group and deliver attractive returns.
These areas include organic investment (into our digital
capability, our infrastructure, and our store regeneration
program), our progressive ordinary dividend policy (which
approximates to 50% of earnings per share) and value-accretive
opportunities including M&A (which are strategically aligned to
expanding our ecosystem in core and adjacent markets). We will
return to shareholders any surplus free cashflow after these items,
and it is the Board's intention to review this on an annual
basis.
At our preliminary results in May 2022, we announced a 12 month
share buyback programme of up to GBP50m. The programme commenced on
20 June 2022 and continues to progress well.
Dividend
The Board has recommended an interim dividend of 4.5 pence per
share, an increase of 4.7% on the prior year. The interim dividend
will be payable on 6 January 2023 to shareholders on the register
at the close of trading on 2 December 2022.
Mike Iddon
Chief Financial Officer
23 November 2022
# Alternative Performance Measures (APMs) are defined and
reconciled to IFRS information, where possible, on pages 15-19.
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 has continued to refresh the principal risks and
uncertainties since the publication of the annual report for the 53
week period ended 31 March 2022, and recognise that those risks and
uncertainties impacted by macro-economic factors and geopolitical
tensions have become more acute. The principal risks and
uncertainties comprise:
Technological
-- Security of information assets and business systems
-- Data protection
-- Delivery and execution of key business system projects
-- Loss of IT services
-- Delivery against our data and analytics opportunity
Financial
-- Inflation
-- Level of joint venture profitability and indebtedness
-- Competition
-- Delivery and execution of distribution centre project
Pets
-- Pet welfare
-- Product availability
People
-- Recruitment and retention of critical talent
-- Joint Venture Partner pipeline
Planet
-- Ability to achieve our net carbon zero targets
-- Delivery of sustainable product and service ranges
The Board continues to review the risks and uncertainties that
may arise as a result of geopolitical tensions and the actual and
potential impact on supply chains, as well as energy cost inflation
and foreign exchange volatility.
A detailed explanation of the risks and uncertainties which were
identified for the 53 week period ended 31 March 2022 can be found
on pages 72 to 85 of the 2022 Annual Report which is available at
http://investors.petsathome.com .
Responsibility Statement
We confirm that to the best of our knowledge:
-- T he condensed set of interim financial statements has been
prepared in accordance with IAS 34 Interim Financial Reporting
adopted for use in the UK;
-- T he interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency
Rules, being an indication of important events that have occurred
during the first 28 weeks of the financial year and their impact on
the condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining 24 weeks of the
year; and
(b) DTR 4.2.8R of the Disclosure Guidance 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 23 November 2022
Lyssa McGowan, Chief Executive Mike Iddon, Chief Financial Officer
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
(a) 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 week period ended 13 October 2022 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 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 13
October 2022 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').
(b) Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity ('ISRE (UK) 2410') issued 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.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis of conclusion
section of this report, nothing has come to our attention that
causes us to believe that the directors have inappropriately
adopted the going concern basis of accounting, or that the
directors have identified material uncertainties relating to going
concern that have not been appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410. However, future events or
conditions may cause the group to cease to continue as a going
concern, and the above conclusions are not a guarantee that the
group will continue in operation.
(c) Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
The annual financial statements of the group are prepared in
accordance with 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.
In preparing the condensed set of financial statements, the
directors are responsible for assessing the group's ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the
group or to cease operations, or have no realistic alternative but
to do so.
(d) 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. Our conclusion, including our
conclusions relating to going concern, are based on procedures that
are less extensive than audit procedures, as described in the Basis
for conclusion section of this report.
(e) 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.
Ailsa Griffin
for and on behalf of KPMG LLP
Chartered Accountants
8 Princes Parade
Liverpool
L31QH
23 November 2022
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.
Comparative period APMs have been restated to reflect the
reclassification of expenditure to the income statement following
the impact of the accounting policy change outlined in note 1.
Several APMs exclude non-underlying items (see definition below)
in order to reflect management's view of the performance of the
business. This can result in a difference between APMs and total
results. As such, APMs should not be viewed in isolation but as
supplementary information to the interim financial statements.
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 53 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 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 non-recurring 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,
share buybacks proceeds from new loans and repayment of
borrowings.
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
non-recurring 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 HY23 HY22
below) adjusted for (restated) Note
share based payment ----- ----------- ----
charges. 121.6 129.0 2
2.8 2.8 3
----- ----------- ----
124.4 131.8
-------------------- ------------------------------------ ---- -------------------------------------------------
Underlying Earnings before interest, HY23 HY22
EBITDA tax, depreciation and (restated) Note
amortisation before ----- ----------- ----
the effect of non-underlying 60.6 73.5 2
items in the period. 13.7 13.5 3
36.2 37.1 3
5.3 5.3 3
5.8 (0.4) 3
----- ----------- ----
121.6 129.0
-------------------- ------------------------------------ ---- -------------------------------------------------
Underlying Underlying cash return HY23 HY22
CROIC on invested capital, (restated) Note
represents cash returns ------- ------------- --------------
divided by the average
of gross capital invested 132.9 101.1
(GCI) for the last 53 4.9 4.7
weeks. Cash returns ------- ------------- --------------
represent underlying 137.8 105.8
operating profit before 19% 19%
share based payments (26.2) (20.1)
subject to tax, then ------- ------------- --------------
adjusted for depreciation 111.6 85.7
of PPE, right-of-use 99.4 107.0
assets and amortisation. ------- ------------- --------------
GCI represents gross 211.0 192.7
PPE, right-of-use assets
and software, and other 374.5 326.5 8
intangibles excluding 626.7 533.5 9
the goodwill created 1,041.0 1,028.8 10
on the acquisition of (906.4) (906.4)
the Group by KKR (GBP906,445,000) 8.5 11.5
plus net working capital, (121.9) (134.7) see definition
before the effect of 1,022.4 859.2
non-underlying items 980.0 874.6
in the period. ------- ------------- --------------
21.5% 22.0%
Average GCI is calculated
as the average of the
GCI from HY23 and FY22
(HY FY22: HY22 and FY21).
-------------------- ------------------------------------ ---- -------------------------------------------------
Underlying Net increase/(decrease) HY23 HY22
free in cash before the impacts (restated) Note
cash flow of dividends paid, acquisition ------ --------------- ------
of subsidiaries, share 41.4 91.6
buybacks, proceeds from
new loans and repayment (37.0) (27.2) CFS
of borrowings. (0.1) (1.1) CFS
(27.2) - CFS
(22.9) 63.3
-------------------- ------------------------------------ ---- -------------------------------------------------
Like-for-like Like-for-like sales Not applicable.
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 53
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 Underlying basic earnings HY23 HY22
basic EPS per share (EPS) is based (restated) Note
on earnings per share ----- ----------- ----
before the impact of 9.6 11.0 4
certain costs or incomes (0.9) 0.1
that derive from events ----- ----------- ----
or transactions that 8.7 11.1
fall outside the normal
activities of the Group
and are excluded by
virtue of their size
and non-recurring nature,
in order to reflect
management's view of
the performance of the
Group.
------------------ -------------------------------------- ---- -----------------------------------------------
Underlying Underlying operating HY23 HY22
operating profit profit is based on operating (restated) Note
profit before the impact ----- ----------- ----
of certain costs or 66.4 73.1 2
incomes that derive (5.8) 0.4 3
from events or transactions ----- ----------- ----
that fall outside the 60.6 73.5
normal activities of
the Group and are excluded
by virtue of their size
and non-recurring nature,
in order to reflect
management's view of
the performance of the
Group.
------------------ -------------------------------------- ---- -----------------------------------------------
Underlying Underlying profit before Underlying PBT HY23 HY22
profit before tax (PBT) is based on (GBPm) (restated) Note
tax pre-tax profit before -------------------- ----- ----------- ----
the impact of certain Underlying PBT 59.2 65.3 CIS
costs or incomes that Non-underlying items (5.8) 0.4 3
derive from events or -------------------- ----- ----------- ----
transactions that fall 53.4 65.7
outside the normal activities
of the Group and are CIS = Consolidated Income Statement
excluded by virtue of
their size and non-recurring
nature, in order to
reflect management's
view of the performance
of the Group.
------------------ -------------------------------------- ---- -----------------------------------------------
Underlying Underlying profit after HY23 HY22
profit after tax (PAT) is based on (restated) Note
tax post tax profit before ----- ----------- ----
the impact of certain 47.8 55.1 CIS
costs or incomes that (4.7) 0.3 CIS
derive from events or ----- ----------- ----
transactions that fall 43.1 55.4
outside the normal activities CIS = Consolidated Income Statement
of the Group and are
excluded by virtue of
their size and non-recurring
nature, in order to
reflect management's
view of the performance
of the Group.
------------------ -------------------------------------- ---- -----------------------------------------------
Underlying Underlying total tax HY23 HY22
total tax expense expense is based on (restated) Note
the statutory tax expense ----- ----------- ----
for the period (being 11.4 10.2 5
the net of current tax (1.1) 0.1 5
and deferred tax) before ----- ----------- ----
the impact of certain 10.3 10.3
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 non-recurring
nature, in order to
reflect management's
view of the performance
of the Group.
------------------ -------------------------------------- ---- -----------------------------------------------
Underlying Underlying net working HY23 HY22
net working capital movement is (restated) Note
capital movement a measure of the cash 31.3 61.5 CFS
required by the business
to fund its inventory,
receivables and payables. (7.7) (1.3)
(15.3) 2.9 CFS
The change year on year 46.0 55.3 CFS
reflects the cash in/outflow 3.6 1.2 CFS
in relation to changes ------- ----------- -----
in the working capital 26.6 58.1
cycle excluding non-underlying 5.3 4.4
items. ------- ----------- -----
31.9 62.5
The change in working ------- ----------- -----
capital is a key component (0.6) (1.0)
of the free cash flow 31.3 61.5
measure of the Group.
HY23 HY22 Note
(restated)
64.0 55.4 CBS
99.8 80.9 CBS
(268.9) (263.4)
(5.1) (4.6) CBS
(11.7) (3.0) CBS
------- ----------- -----
(121.9) (134.7)
------------------ ------------------------------------ --- --------------------------------------------------
Underlying Working capital before HY23 HY22
cash working decrease in gross operating (restated) Note
capital loans to Joint Venture ----- ----------- ----
practices 31.3 61.5
(4.7) (3.4) 15
----- ----------- ----
26.6 58.1
------------------ ------------------------------------ --- --------------------------------------------------
Underlying Net cash flow from operating HY23 HY22
operating cash activities per the cash (restated) Note
flow flow statement, before --------- ----------------- -----
the effects of corporation 142.9 179.2 CFS
tax payments, non-underlying --------- ----------------- -----
items, lease payments,
proceeds from the sale 7.0 14.6 CFS
of PPE and costs to 149.9 193.8
acquire right-of-use --------- ----------------- -----
assets. (37.2) (36.9) CFS
(5.7) (6.2) CFS
(1.4) (0.2) CFS
--------- ----------------- -----
105.6 150.5
--------- ----------------- -----
(7.0) (14.6) CFS
(2.1) (1.3) CFS
0.7 0.1 CFS
(14.8) (15.1) CFS
(41.0) (28.0) CFS
41.4 91.6
CFS = Consolidated statement of
cash flows
-----------------------------------
------------------ ------------------------------------ --- --------------------------------------------------
Net cash/(debt) Cash and cash equivalents HY23 HY22
less loans and borrowings. (restated) Note
------- ----------- ----
143.1 164.7 CBS
(100.0) (100.0) 12
------- ----------- ----
43.1 64.7
CBS = Consolidated balance sheet
------------------ ------------------------------------ --- --------------------------------------------------
Total indebtedness Cash and cash equivalents HY23 HY22
less loans and borrowings (restated) Note
plus lease liabilities. ------- ----------- ----
143.1 164.7 CBS
(100.0) (100.0) 12
------- ----------- ----
43.1 64.7
(422.8) (397.9) 9
(379.7) (333.2)
------------------ ------------------------------------ --- --------------------------------------------------
Customer sales Statutory Group revenue, HY23 HY22
less Joint Venture veterinary (restated) Note
practice fee income ------ ----------- ----
(which forms part of 727.2 677.6 2
statutory revenue within (40.7) (36.9) 2
the Vet Group), plus 241.7 226.9
gross customer sales ------ ----------- ----
made by Joint Venture 928.2 867.6
veterinary practices
(unaudited).
------------------ ------------------------------------ --- --------------------------------------------------
Condensed consolidated income statement
28 week period ended 28 week period ended
13 October 2022 7 October 2021 (restated)(1)
------------------------- ---- ----------------------------------- -----------------------------------
Non-underlying Non-underlying
items items
Underlying (note Underlying (note
trading 3) Total trading 3) Total
Note GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ---- ---------- -------------- ------- ---------- -------------- -------
Revenue 2 727.2 - 727.2 677.6 - 677.6
Cost of sales (382.1) - (382.1) (347.7) 0.4 (347.3)
Gross profit 345.1 - 345.1 329.9 0.4 330.3
Selling and distribution
expenses (212.5) (4.5) (217.0) (195.4) - (195.4)
Administrative expenses (66.2) (1.3) (67.5) (61.4) - (61.4)
------------------------- ---- ---------- -------------- ------- ---------- -------------- -------
Operating profit 2 66.4 (5.8) 60.6 73.1 0.4 73.5
Financial income 0.7 - 0.7 0.1 - 0.1
Financial expense (7.9) - (7.9) (7.9) - (7.9)
------------------------- ---- ---------- -------------- ------- ---------- -------------- -------
Net financing expense (7.2) - (7.2) (7.8) - (7.8)
------------------------- ---- ---------- -------------- ------- ---------- -------------- -------
Profit before tax 59.2 (5.8) 53.4 65.3 0.4 65.7
Taxation 5 (11.4) 1.1 (10.3) (10.2) (0.1) (10.3)
Profit for the period 47.8 (4.7) 43.1 55.1 0.3 55.4
------------------------- ---- ---------- -------------- ------- ---------- -------------- -------
(1) See note 1 for an explanation of the prior year
restatement.
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
13 October 7 October
Note 2022 2021 (restated)(1)
--------------------------------------- ---- ------------- -------------------
Equity holders of the parent - basic 4 8.7p 11.1p
Equity holders of the parent - diluted 4 8.6p 10.9p
--------------------------------------- ---- ------------- -------------------
(1) See note 1 for an explanation of the prior year
restatement.
Dividends paid and proposed are disclosed in note 6.
Condensed consolidated statement of comprehensive income
28 week
28 week period
period ended ended
13 October 7 October
2022 2021 (restated)(1)
GBPm GBPm
----------------------------------------------- ------------- -------------------
Profit for the period 43.1 55.4
Other comprehensive income
Items that are or may be recycled subsequently
into profit or loss:
Foreign exchange translation differences (0.1) 0.0
Effective portion of changes in fair value
of cash flow hedges 0.9 4.4
------------------------------------------------ ------------- -------------------
Other comprehensive income for the period,
before income tax 0.8 4.4
Income tax on other comprehensive income (note
5) (1.2) (0.5)
------------------------------------------------ ------------- -------------------
Other comprehensive income for the period,
net of income tax (0.4) 3.9
------------------------------------------------ ------------- -------------------
Total comprehensive income for the period 42.7 59.3
------------------------------------------------ ------------- -------------------
(1) See note 1 for an explanation of the prior year
restatement.
The notes on pages 24 to 51 form an integral part of these
consolidated interim financial statements.
Condensed consolidated balance sheet
At 13 October At 31
2022 March
At 7 October 2022
GBPm 2021 (restated)(1)
Note GBPm GBPm
------------------------------ ---- ------------- ------------------- -------
Non-current assets
Property, plant and equipment 8 127.5 102.9 108.9
Right-of-use assets 9 382.3 356.9 340.1
Intangible assets 10 988.7 982.6 987.1
Other non-current assets 11.7 14.6 14.1
1,510.2 1,457.0 1,450.2
------------------------------ ---- ------------- ------------------- -------
Current assets
Inventories 11 99.8 80.9 84.5
Other financial assets 9.9 1.8 3.0
Deferred tax assets - 2.7 1.1
Trade and other receivables 64.0 55.4 62.8
Cash and cash equivalents 143.1 164.7 166.0
------------------------------ ---- ------------- ------------------- -------
316.8 305.5 317.4
------------------------------ ---- ------------- ------------------- -------
Total assets 1,827.0 1,762.5 1,767.6
------------------------------ ---- ------------- ------------------- -------
Current liabilities
Trade and other payables (268.7) (262.8) (224.8)
Lease liabilities 9 (71.3) (79.5) (78.3)
Provisions (5.1) (4.6) (6.5)
Other financial liabilities (0.2) (0.1) (0.0)
(345.3) (347.0) (309.6)
------------------------------ ---- ------------- ------------------- -------
Non-current liabilities
Other interest-bearing loans
and borrowings 12 (97.4) (99.2) (96.9)
Lease liabilities 9 (351.5) (318.4) (304.7)
Provisions (11.7) (3.0) (6.7)
Deferred tax liabilities (2.6) - -
Other financial liabilities - (0.5) -
(463.2) (421.1) (408.3)
------------------------------ ---- ------------- ------------------- -------
Total liabilities (808.5) (768.1) (717.9)
------------------------------ ---- ------------- ------------------- -------
Net assets 1,018.5 994.4 1,049.7
------------------------------ ---- ------------- ------------------- -------
Equity attributable to equity
holders of the parent
Ordinary share capital 4.9 5.0 5.0
Treasury shares (1.1) - -
Consolidation reserve (372.0) (372.0) (372.0)
Merger reserve 113.3 113.3 113.3
Translation reserve (0.1) (0.0) (0.0)
Cash flow hedging reserve 7.4 0.6 3.4
Capital redemption reserve 0.1 - -
Retained earnings 1,266.0 1,247.5 1,300.0
Total equity 1,018.5 994.4 1,049.7
------------------------------ ---- ------------- ------------------- -------
(1) See note 1 for an explanation of the prior year
restatement.
The notes on pages 24 to 51 form an integral part of these
consolidated interim financial statements .
Condensed consolidated statement of changes in equity
Cash Capital
flow redemption
Share Treasury Consolidation Merger hedging Translation reserve Retained Total
capital shares reserve reserve reserve reserve GBPm earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- -------- -------- ------------- -------- -------- ----------- ----------- --------- -------
Balance at 31
March
2022 5.0 - (372.0) 113.3 3.4 (0.0) - 1,300.0 1,049.7
Total
comprehensive
income for the
period
Profit for the
period - - - - - - - 43.1 43.1
Other
comprehensive
income - - - - (0.3) (0.1) - - (0.4)
----------------- -------- -------- ------------- -------- -------- ----------- ----------- --------- -------
Total
comprehensive
income for the
period - - - - (0.3) (0.1) - 43.1 42.7
----------------- -------- -------- ------------- -------- -------- ----------- ----------- --------- -------
Hedging gains &
losses
reclassified to
inventory - - - - 4.3 - - - 4.3
Total hedging
gains
& losses
reclassified
to inventory - - - - 4.3 - - - 4.3
Transactions with
owners,
recorded directly
in
equity
Equity dividends
paid - - - - - - - (37.0) (37.0)
Share based
payment
charge - - - - - - - 2.8 2.8
Deferred tax
movement
on IFRS 2
reserve - - - - - - - (1.9) (1.9)
Share buyback (0.1) (1.1) - - - - 0.1 (26.2) (27.3)
Purchase of own
shares - - - - - - - (14.8) (14.8)
----------------- -------- -------- ------------- -------- -------- ----------- ----------- --------- -------
Total
contributions
by and
distributions
to owners (0.1) (1.1) - - - - 0.1 (77.1) (78.2)
----------------- -------- -------- ------------- -------- -------- ----------- ----------- --------- -------
Balance at 13
October
2022 4.9 (1.1) (372.0) 113.3 7.4 (0.1) 0.1 1,266.0 1,018.5
----------------- -------- -------- ------------- -------- -------- ----------- ----------- --------- -------
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
(as previously reported) 5.0 (372.0) 113.3 (1.5) (0.0) 1,248.9 993.7
Impact of change in accounting
policy(1) - - - - - (17.2) (17.2)
------------------------------------ -------- ------------- -------- -------- ----------- --------- -------
Balance at 25 March 2021
(restated) 5.0 (372.0) 113.3 (1.5) (0.0) 1,231.7 976.5
------------------------------------ -------- ------------- -------- -------- ----------- --------- -------
Total comprehensive income
for the period
Restated profit for the period(1) - - - - - 55.4 55.4
Other comprehensive income - - - 3.9 0.0 - 3.9
------------------------------------ -------- ------------- -------- -------- ----------- --------- -------
Total comprehensive income
for the period - - - 3.9 - 55.4 59.3
------------------------------------ -------- ------------- -------- -------- ----------- --------- -------
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)
------------------------------------ -------- ------------- -------- -------- ----------- --------- -------
Restated balance at 7 October
2021(1) 5.0 (372.0) 113.3 0.6 (0.0) 1,247.5 994.4
------------------------------------ -------- ------------- -------- -------- ----------- --------- -------
(1) See note 1 for an explanation of the prior year
restatement.
The notes on pages 24 to 51 form an integral part of these
consolidated interim financial statements.
Condensed consolidated statement of cash flows
28 week 28 week
period period
ended ended
13 October 7 October
2022 2021 (restated)(1)
GBPm
GBPm
--------------------------------------------------- ----------- -------------------
Cash flows from operating activities
Profit for the period 43.1 55.4
Adjustments for:
Depreciation and amortisation 55.2 55.9
Financial income (0.7) (0.1)
Financial expense 7.9 8.0
Share based payment charges 2.8 2.8
Taxation 10.3 10.3
--------------------------------------------------- ----------- -------------------
118.6 132.3
(Increase)/decrease in trade and other receivables (3.0) 2.1
(Increase)/decrease in inventories (15.3) 2.9
Increase in trade and other payables 46.0 55.3
Increase in provisions 3.6 1.2
149.9 193.8
Tax paid (7.0) (14.6)
--------------------------------------------------- ----------- -------------------
Net cash flow from operating activities 142.9 179.2
--------------------------------------------------- ----------- -------------------
Cash flows from investing activities
Interest received 0.7 0.1
Costs to acquire right-of-use assets (1.4) (0.2)
Acquisition of subsidiaries, net of cash acquired
(underlying) (0.1) (1.1)
Acquisition of property, plant and equipment
and other intangible assets (41.0) (28.0)
--------------------------------------------------- ----------- -------------------
Net cash used in investing activities (41.8) (29.2)
--------------------------------------------------- ----------- -------------------
Cash flows from financing activities
Equity dividends paid (37.0) (27.2)
Capital lease payments (37.2) (36.9)
Purchase of own shares (14.8) (15.1)
Share buyback (27.2) -
Interest paid (2.1) (1.3)
Interest paid on lease obligations (5.7) (6.2)
--------------------------------------------------- ----------- -------------------
Net cash used in financing activities (124.0) (86.7)
--------------------------------------------------- ----------- -------------------
Net increase in cash and cash equivalents (22.9) 63.3
Cash and cash equivalents at beginning of
period 166.0 101.4
--------------------------------------------------- ----------- -------------------
Cash and cash equivalents at end of period 143.1 164.7
--------------------------------------------------- ----------- -------------------
(1) See note 1 for an explanation of the prior year
restatement.
The notes on pages 24 to 51 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 13 October 2022 comprise the
Company and its subsidiaries (together referred to as the
'Group').
The consolidated financial statements of the Group as at and for
the 53 week period ended 31 March 2022 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 UK adopted international accounting standards. The
following interpretation issued by the International Financial
Reporting Interpretations Committee (IFRIC) has had a material
impact on the Group's financial statements during the 28 week
period ended 13 October 2022 and the 28 week period ended 7 October
2021.
IFRIC: Configuration or Customisation Costs in a Cloud Computing
Arrangement (IAS38 Intangible Assets)
In April 2021, the IFRS Interpretations Committee published an
agenda decision in relation to configuration and customisation
expenditure relating to cloud computing arrangements, including
Software as a Service (SaaS). The Committee has clarified the
position that configuration and customisation expenditure that is
distinct from access to the cloud software can only be capitalised
to the extent it gives rise to an asset for a SaaS customer, i.e.,
they have the power to obtain the future economic benefits and can
restrict others' access to those benefits, otherwise such
expenditure should be expensed. Following the interpretation being
published, the Group reviewed and revised its accounting policy in
relation to IAS38 Intangible Assets, which includes accounting for
computer software. The full impact of the change in accounting
policy was finalised after the 2021 interim results had been
released. This change in accounting policy was reflected in the
financial statements for the 53 week period ended 31 March 2022.
Consequently, the prior period comparatives in these interim
financial statements have now been restated to reflect the change
in accounting policy. This change has resulted in a reduction to
net assets at 25 March 2021 by GBP17.2m. In respect of the 28 week
period ended 7 October 2021, this has resulted in reclassifying
GBP8.7m of expenditure that was previously capitalised as an
intangible asset and expensing this to the income statement as
administrative expenses. Accordingly, GBP3.8m of amortisation
charged in the 28 week period ended 7 October 2021 relating to
expenditure previously capitalised has been reversed. The impact on
profit before tax for the 28 week period ended 7 October 2021 is a
reduction in PBT of GBP4.9m. The cumulative reduction to net assets
at 7 October 2021 is GBP18.5m. The detailed impact of the
restatement is set out below:
28 week
period ended 28 week
7 October period ended
2021 (previously 7 October
reported) Restatement 2021 Restated
GBPm GBPm GBPm
--------------------------------------- -------------------- ------------ --------------
Consolidated income statement impact
Administrative expenses (56.5) (4.9) (61.4)
Profit before tax 70.6 (4.9) 65.7
Tax charge (13.9) 3.6 (10.3)
Profit for the period 56.7 (1.3) 55.4
Basic earnings per share 11.4p (0.3p) 11.1p
Diluted earnings per share 11.2p (0.3p) 10.9p
--------------------------------------------------- --------- ------------ --------------
At 7 October
2021 (previously At 7 October
reported) Restatement 2021 restated
GBPm GBPm GBPm
-------------------------------------- -------------------- ------------ --------------
Consolidated statement of financial
position impact
Intangible assets 1,008.2 (25.6) 982.6
Deferred tax asset 0.9 1.8 2.7
Trade and other receivables 50.1 5.3 55.4
Total assets 1,781.0 (18.5) 1,762.5
Net assets 1,012.9 (18.5) 994.4
Retained earnings 1,266.0 (18.5) 1,247.5
Total equity 1,012.9 (18.5) 994.4
------------------------------------------------- ---------- ------------ --------------
28 week
period ended 28 week
7 October period ended
2021 (previously 7 October
reported) Restatement 2021 restated
GBPm GBPm GBPm
--------------------------------------- ------- -------------------- ------------ --------------
Consolidated statement of cash
flows impact
Profit for the period 56.7 (1.3) 55.4
Depreciation and amortisation 59.7 (3.8) 55.9
Taxation 13.9 (3.6) 10.3
Net cashflow from operating activities 187.9 (8.7) 179.2
Acquisition of property plant and
equipment and other intangible assets (36.7) 8.7 (28.0)
Net cash used in investing activities (37.9) 8.7 (29.2)
----------------------------------------------------------- --------- ------------ --------------
At 25 March
2021 (previously At 25 March
reported) Restatement 2021 restated
GBPm GBPm GBPm
-------------------------------------- -------------------- ------------ --------------
Consolidated statement of financial
position impact
Intangible assets 1,000.2 (20.7) 979.5
Deferred tax asset 2.9 0.9 3.8
Corporation tax receivable 1,724.0 1.1 1.1
Total assets - (18.7) 1,705.3
Corporation tax payable (1.5) 1.5 -
Total liabilities (730.3) 1.5 (728.8)
Net assets 993.7 (17.2) 976.5
Retained earnings 1,248.9 (17.2) 1,231.7
Total equity 993.7 (17.2) 976.5
------------------------------------------------- ---------- ------------ --------------
Statement of compliance
These condensed consolidated interim financial statements have
been prepared in accordance with the Disclosure Guidance 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 53 week period
ended 31 March 2022.
The financial information included in this interim statement of
results does not constitute statutory accounts within the meaning
of Section 435 of the Companies Act 2006 (the 'Act'). The statutory
accounts for the 53 weeks ended 31 March 2022 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 53
week period ended 31 March 2022.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 consumer confidence, climate
change, geopolitical tensions, and the actual and potential impact
on supply chains, energy cost inflation and foreign exchange
volatility on liquidity and future performance.
The Group has access to a revolving facility of GBP300m, which
expires in March 2027, with GBP100.0m drawn down on 13 October 2022
and cash balances of GBP143.1m. The lowest level of liquidity
headroom forecast over the next 12 months from the date of signing
of the financial statements is in July 2023 and is in excess of
GBP346.6m in the base case scenario. Under the most severe but
plausible downside scenario described below (scenario 3), the
lowest level of headroom forecast over the next 12 months from the
date of approving of the financial statements is GBP325.3m.
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
margin also falling 1.1% compared to forecast. Interest rates rise
to 6.85% but ordinary dividends continue to be paid.
Scenario 2: Using scenario 1 outcomes and further impacted by
GBP/USD exchange rates assumed at par and an additional GBP10.5m
per year on energy (+120% vs year ended 31 March 2022) as a result
of high global energy prices. Dividends held at 11.8p per share
Scenario 3: Group like-for-like sales growth declines to 0% in
each year and a conflated risk impact of GBP102.5m on sales
(GBP74.5m Retail and GBP28.0m Vet Group) and GBP50.3m on PBT
(GBP37.3m Retail and GBP13.0m Vet Group) on PBT is applied, with
dividends cut to nil to conserve cash.
Against these negative scenarios, adjusted projections showed no
breach of covenants. Further mitigating actions could also be taken
in such scenarios should it be required, including reducing capital
expenditure.
Despite net current liabilities of GBP28.5m in the Company, 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 13 October 2022.
Significant accounting policies
The accounting policies adopted in preparation of the condensed
consolidated interim financial statements as at and for the 28 week
period ended 13 October 2022 are consistent with the policies
applied by the Group in its consolidated financial statements as at
and for the 53 week period ended 31 March 2022, 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. The Directors consider
that it is not reasonably possible for the assumptions for the
current financial year to change so significantly to warrant
inclusion as a significant estimate but acknowledge that there is
estimation uncertainty over the assumptions used in future
financial periods when calculating future cash flows.
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 veterinary General Practices.
Central includes a veterinary telehealth business, group costs and
finance expenses. Revenue and costs are allocated to a segment
where reasonably possible. For the purposes of goodwill allocation,
the veterinary telehealth business (hereafter known as TVC) is
classed as a separate CGU which sits within the central operating
segment.
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 13
October 2022
------------------------------------ ---------------------------------------------------
Retail Vet Group Central Total
Income statement GBPm GBPm GBPm GBPm
------------------------------------ ---------- ----------------- ---------- --------
Revenue 661.5 63.8 1.9 727.2
Gross profit 308.8 35.3 1.0 345.1
------------------------------------ ---------- ----------------- ---------- --------
Underlying operating profit/(loss) 45.0 28.1 (6.7) 66.4
Non-underlying items (4.5) - (1.3) (5.8)
------------------------------------ ---------- ----------------- ---------- --------
Segment operating profit/(loss) 40.5 28.1 (8.0) 60.6
Net financing expenses (5.5) (0.3) (1.4) (7.2)
------------------------------------ ---------- ----------------- ---------- --------
Profit/(loss) before tax 35.0 27.8 (9.4) 53.4
------------------------------------ ---------- ----------------- ---------- --------
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) 54.7 24.0 (5.6) 73.1
Non-underlying items - 0.4 - 0.4
------------------------------------- ---------- ----------------- ---------- --------
Segment operating profit/(loss) 54.7 24.4 (5.6) 73.5
Net financing expenses (6.0) (0.0) (1.8) (7.8)
Profit/(loss) before tax 48.7 24.4 (7.4) 65.7
------------------------------------- ---------- ----------------- ---------- --------
(1) See note 1 for an explanation of the prior year restatement.Non-underlying items are
explained in note 3.
28 week period ended 13 October
2022
------------------------------------ ----- -------------------------------------
Reconciliation of EBITDA Retail Vet Group Central Total
before non-underlying items GBPm GBPm GBPm GBPm
------------------------------------ ----- --------- ---------- ------- -----
Underlying operating profit/(loss) 45.0 28.1 (6.7) 66.4
Depreciation of property,
plant and equipment 13.1 0.6 0.0 13.7
Depreciation of right-of-use
assets 35.4 0.8 - 36.2
Amortisation of intangible
assets 4.3 0.7 0.3 5.3
------------------------------------ ----- --------- ---------- ------- -----
Underlying EBITDA 97.8 30.2 (6.4) 121.6
------------------------------------ ----- --------- ---------- ------- -----
28 week period ended 7 October
2021 (restated)(1)
------------------------------------ ----- -------------------------------------
Reconciliation of EBITDA before Retail Vet Group Central Total
non-underlying items GBPm GBPm GBPm GBPm
------------------------------------ ----- --------- ---------- ------- -----
Underlying operating profit/(loss) 54.7 24.0 (5.6) 73.1
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 4.7 0.4 0.2 5.3
------------------------------------ ----- --------- ---------- ------- -----
Underlying EBITDA 108.7 25.7 (5.4) 129.0
------------------------------------ ----- --------- ---------- ------- -----
(1) See note 1 for an explanation of the prior year restatement.
EBITDA before non-underlying items is defined on page 16.
28 week period ended 13 October
2022
------------------------------ --------- -------------------------------------
Segmental revenue analysis Retail Vet Group Central Total
by revenue stream GBPm GBPm GBPm GBPm
------------------------------ --- --------------- ---------- ------- -----
Retail - Food 387.6 - - 387.6
Retail - Accessories 248.8 - - 248.8
Retail - Services 25.1 - - 25.1
Vet Group - General Practice
fee income - 40.7 - 40.7
Vet Group - Company managed
practices - 19.2 - 19.2
Vet Group - Other income - 3.9 - 3.9
Central - Veterinary telehealth
services - - 1.9 1.9
------------------------------------- --------------- ---------- ------- -----
Total 661.5 63.8 1.9 727.2
------------------------------------- --------------- ---------- ------- -----
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 - General Practice
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
------------------------------------- ---- --------- ---------- ------- -----
3 Expenses
Included in operating profit are the following:
28 week period
ended 28 week period
13 October ended
2022 7 October 2021(restated)(1)
GBPm GBPm
---------------------------------------------- -------------- ----------------------------
Non-underlying items
Impairment of right of use asset following
acquisition of Joint Venture subsidiaries - (0.4)
Pre-opening costs for new distribution
centre 4.5 -
Group restructure 1.3
Total non-underlying items 5.8 (0.4)
Underlying items
Software as a service (SaaS) expense(1) 16.8 8.7
Depreciation of property, plant and equipment 13.7 13.5
Amortisation of intangible assets(1) 5.3 5.3
Depreciation of right-of-use assets 36.2 37.1
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(2) (0.1) (0.2)
Rental income from related parties(2) (3.9) (3.9)
Share based payment charges 2.8 2.8
---------------------------------------------- -------------- ----------------------------
(1) See note 1 for an explanation of the prior period
restatement.
(2) This other income is presented within selling and
distribution expenses.
Non-underlying items
The Group is in the process of building a new distribution
centre which is due to become operational in summer 2023. This will
replace the existing distribution centres. The process is a
significant operational change for the Group, outside of the
ordinary course of business. As part of the transition, the Group
has incurred operational and payroll costs which it has classed as
non-underlying.
GBP2.6m of non-underlying charges relate to a provision for
voluntary redundancies for colleagues employed within the existing
distribution centres.
GBP0.7m of non-underlying charges relate to retention bonuses
for colleagues at the existing distribution centres to remain
employed by the Group until the point at which the sites close.
GBP1.2m of non-underlying charges relate to pre-opening costs
for the new distribution centre such as rent and utilities which
have been incurred despite the site not being fully
operational.
GBP1.3m of non-underlying charges relate to redundancy costs for
a restructure within the Group. These have been finalised and have
either been paid or are due for payment in the second half of the
financial year.
The non-underlying credit of GBP0.4m recognised in the 28 week
period ended 7 October 2021 related 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 was reversed.
The credit was treated as a non-underlying item since the original
impairment was also treated in this way.
Income or expenses considered by the Directors to be
non-underlying are disclosed separately to facilitate year-on-year
comparison of the underlying trade of the business. The Directors
consider non-underlying costs to be those that are not generated
from ordinary business operations, non-recurring in nature and
unlikely to reoccur in the foreseeable future.
Underlying items
The rentals under short-term leases disclosed in relation to the
28 week period ended 13 October 2022 and the 28 week period ended 7
October 2021 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
13 October 2022 (restated)(1)
------------------------------------------- --------------------------- ---------------------------
After After
Underlying non-underlying Underlying non-underlying
trading items trading items
------------------------------------------- ---------- --------------- ---------- ---------------
Profit attributable to equity shareholders
of the parent (GBPm) 47.8 43.1 55.1 55.4
------------------------------------------- ---------- --------------- ---------- ---------------
Basic weighted average number of
shares (m) 497.2 497.2 500.0 500.0
Dilutive potential ordinary shares
(m) 5.6 5.6 8.4 8.4
------------------------------------------- ---------- --------------- ---------- ---------------
Diluted weighted average number of
shares 502.8 502.8 508.4 508.4
------------------------------------------- ---------- --------------- ---------- ---------------
Basic earnings per share 9.6p 8.7p 11.0p 11.1p
Diluted earnings per share 9.5p 8.6p 10.8p 10.9p
------------------------------------------- ---------- --------------- ---------- ---------------
(1) See note 1 for an explanation of the prior period
restatement.
5 Taxation
Recognised in the income statement
28 week period
28 week period ended
ended 7 October 2021
13 October 2022 (restated)(1)
GBPm GBPm
---------------------------------------- ---------------- ---------------
Current tax expense
Current period 10.1 9.8
Current tax expense 10.1 9.8
---------------------------------------- ---------------- ---------------
Deferred tax expense
Origination and reversal of temporary
differences 0.1 0.5
Impact of difference between deferred
and current tax rates 0.1 0.1
Adjustments in respect of prior periods - (0.1)
Deferred tax expense 0.2 0.5
---------------------------------------- ---------------- ---------------
Total tax expense 10.3 10.3
---------------------------------------- ---------------- ---------------
(1) See note 1 for an explanation of the prior period
restatement.
The UK corporation tax standard rate for the period was 19%
(2021: 19%). Deferred tax at 13 October 2022 has been calculated
based on the rate of 25% apart from deferred tax on derivatives
which is calculated at the rate the 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
13 October 2022 7 October 2021
GBPm GBPm
------------------------------------- ---------------- ---------------
Effective portion of changes in fair
value of cash flow hedges 1.2 0.5
------------------------------------- ---------------- ---------------
Reconciliation of effective tax rate
28 week period ended 28 week period ended
13 October 2022 7 October 2021(restated)(1)
--------------------------------- ---------------------------------
Underlying Non-underlying Underlying Non-underlying
trading items Total trading items Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- ---------- -------------- ----- ---------- -------------- -----
Profit for the period 47.8 (4.7) 43.1 55.1 0.3 55.4
Total tax expense 11.4 (1.1) 10.3 10.2 0.1 10.3
------------------------------- ---------- -------------- ----- ---------- -------------- -----
Profit excluding taxation 59.2 (5.8) 53.4 65.3 0.4 65.7
------------------------------- ---------- -------------- ----- ---------- -------------- -----
Tax using the UK corporation
tax rate for the period
of 19% (28 week period
ended 7 October 2021:19%) 11.2 (1.1) 10.1 12.4 0.1 12.5
Impact of change in tax
rate on deferred tax balances 0.2 - 0.2 0.1 - 0.1
Depreciation on expenditure
not eligible for tax relief 0.2 - 0.2 0.3 - 0.3
Adjustments in respect
of prior periods - - - (0.7) - (0.7)
Capital allowances super
deduction (0.7) - (0.7) - - -
Income not taxable 0.5 - 0.5 - - -
Expenditure not eligible
for tax relief - - - (1.9) - (1.9)
Total tax expense 11.4 (1.1) 10.3 10.2 0.1 10.3
------------------------------- ---------- -------------- ----- ---------- -------------- -----
(1) See note 1 for an explanation of the prior period
restatement.
6 Dividends paid and proposed
28 week period
28 week period ended ended
13 October 2022 7 October 2021
GBPm GBPm
-------------------------------------- -------------------- ---------------
Declared and paid during the
period
Final dividend of 7.5p per share
(2021: 5.5p per share) 37.0 27.2
Proposed for approval by shareholders
at the AGM
Interim dividend of 4.5p per share
(2021 4.3p per share) 22.1 21.5
-------------------------------------- -------------------- ---------------
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 13 October 2022 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 13
October 2022 5,766,243 shares, holding at 7 October 2021: 5,189,945
shares).
7 Business combinations
Acquisition of Joint Venture veterinary practices
In the 28 week period ended 13 October 2022, the Group has
acquired 100% of the 'A' shares of 3 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 53 week period ended 31
March 2022.
In the 28 week period ended 13 October 2022, GBP1.0m of
operating loans relating to these practices were written off in
advance of the acquisitions.
Up to the date of acquisition and in the 53 week period ending
31 March 2022, 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 Cash
equity equity instruments consideration
Principal instruments owned following transferred
activity Date of acquisition acquired the acquisition GBPm
---------------------------- ----------- -------------------- ------------ ------------------- --------------
Accrington Vets4Pets Veterinary
Limited practice 16 June 2022 50% 100% -
Companion Care (Banbury) Veterinary
Limited practice 24 June 2022 50% 100% -
Companion Care (Chippenham) Veterinary
Limited practice 28 June 2022 50% 100% -
---------------------------- ----------- -------------------- ------------ ------------------- --------------
Intangible assets acquired
--------------------------------- ------
GBPm
--------------------------------- ------
Consideration -
Add: Fair value of liabilities
acquired 0.8
--------------------------------- ------
Goodwill arising on acquisition 0.8
--------------------------------- ------
Impairment of goodwill (0.8)
--------------------------------- ------
Carrying value of goodwill: -
--------------------------------- ------
The impairment of goodwill relates to loss making practices.
In line with IFRS3, the right-of-use asset has been brought on
at a value equal to the lease liability, adjusted for any
unfavourable market conditions. These leases relate to standalone
veterinary practices.
8 Property, plant and equipment
Short Fixtures, Assets
Freehold leasehold fittings, under Total
property property tools and construction
equipment
GBPm GBPm GBPm GBPm GBPm
-------------------- --------- ---------- ---------- ------------- -----
Cost
Balance at 31
March 2022 2.4 65.7 261.6 12.7 342.4
Additions - 3.6 9.7 18.8 32.1
Assets acquired
on acquisition - 0.1 0.1 - 0.2
Disposals - (0.1) (0.1) - (0.2)
Balance at 13
October 2022 2.4 69.3 271.3 31.5 374.5
-------------------- --------- ---------- ---------- ------------- -----
Depreciation
Balance at 31
March 2022 0.4 32.9 200.2 - 233.5
Depreciation charge
for the period - 2.4 11.3 - 13.7
Disposals - (0.1) (0.1) - (0.2)
Balance at 13
October 2022 0.4 35.2 211.4 - 247.0
-------------------- --------- ---------- ---------- ------------- -----
Net book value
At 31 March 2022 2.0 32.8 61.4 12.7 108.9
-------------------- --------- ---------- ---------- ------------- -----
At 13 October
2022 2.0 34.1 59.9 31.5 127.5
-------------------- --------- ---------- ---------- ------------- -----
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
--------------------- --------- --------------- ---------- -----
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 20 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 5 years.
Right-of-use assets
Property Equipment Total
GBPm GBPm GBPm
-------------------------------------------- -------- --------- -----
Cost
Balance at 31 March 2022 531.6 16.6 548.2
Additions 76.9 1.7 78.6
Reallocation of accumulated amortisation(1) (0.1) - (0.1)
Balance at 13 October 2022 608.4 18.3 626.7
-------------------------------------------- -------- --------- -----
Depreciation
Balance at 31 March 2022 199.2 8.9 208.1
Depreciation charge for the period 34.5 1.7 36.2
Reallocation of accumulated amortisation(1) 0.1 - 0.1
Balance at 13 October 2022 233.8 10.6 244.4
-------------------------------------------- -------- --------- -----
Net book value
At 31 March 2022 332.4 7.7 340.1
-------------------------------------------- -------- --------- -----
At 13 October 2022 374.6 7.7 382.3
-------------------------------------------- -------- --------- -----
(1) Included within the cost of property right-of use assets
brought forward at 31 March 2022 was (GBP0.1m) which related to
accumulated amortisation. This has been reallocated to accumulated
amortisation and has no impact on net book value.
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
----------------------------------- -------- --------- -----
At 13 October 2022, the Group has recognised a right-of-use
asset and lease liability for a new Distribution Centre in line
with IFRS 16. The Distribution Centre is still under construction
and rental payments have not yet been incurred.
The following table sets out the maturity analysis of lease
payments, showing the undiscounted lease payments to be paid after
the reporting date:
Lease liability maturity analysis - contractual undiscounted
cash flows
At 13 October At 7 October At 31 March
2022 2021 2022
GBPm GBPm GBPm
---------------------------------------- ------------- ------------ -----------
Less than one year 71.3 79.5 78.3
Between one and five years 249.5 242.4 236.9
More than five years 163.8 120.8 108.1
---------------------------------------- ------------- ------------ -----------
Total undiscounted lease liabilities 484.6 442.7 423.3
---------------------------------------- ------------- ------------ -----------
Carrying value of lease liabilities
in the statement of financial position 422.8 397.9 383.0
Current 71.3 79.5 78.3
Non-current 351.5 318.4 304.7
---------------------------------------- ------------- ------------ -----------
For lease liabilities at 13 October 2022, a 0.1% reduction in
the discount rate would have increased the carrying value of lease
liabilities by GBP2.2m
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.
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.
Short-term subleases
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.
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 31 March
2022 959.1 4.1 2.6 68.3 1,034.1
Additions - - - 6.8 6.8
On acquisition - 0.2 - - 0.2
Disposals - (0.1) - - (0.1)
Balance at 13 October
2022 959.1 4.2 2.6 75.1 1,041.0
---------------------- -------- -------- -------- -------- -------
Amortisation
Balance at 31 March
2022 0.1 0.7 0.3 45.9 47.0
Amortisation charge
for the period - 0.2 0.1 5.0 5.3
Balance at 13 October
2022 0.1 0.9 0.4 50.9 52.3
---------------------- -------- -------- -------- -------- -------
Net book value
At 31 March 2022 959.0 3.4 2.3 22.4 987.1
---------------------- -------- -------- -------- -------- -------
At 13 October 2022 959.0 3.3 2.2 24.2 988.7
---------------------- -------- -------- -------- -------- -------
'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 55.7 1,020.4
Additions(1) - - - 7.6 7.6
On acquisition 0.6 0.5 - - 1.1
Disposals (0.3) - - - (0.3)
Restated balance at
7 October 2021(1) 958.8 4.1 2.6 63.3 1,028.8
-------------------------- -------- -------- -------- -------- -------
Amortisation
Balance at 25 March
2021 0.1 0.4 - 40.4 40.9
Restated amortisation
charge for the period(1) - 0.3 0.1 4.9 5.3
Restated balance at
7 October 2021(1) 0.1 0.7 0.1 45.3 46.2
-------------------------- -------- -------- -------- -------- -------
Net book value
At 25 March 2021 958.4 3.2 2.6 15.3 979.5
-------------------------- -------- -------- -------- -------- -------
At 7 October 2021 958.7 3.4 2.5 18.0 982.6
-------------------------- -------- -------- -------- -------- -------
(1) See note 1 for an explanation of the prior period
restatement.
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 veterinary General 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 13 October 2022 and 7 October 2021, the Group is deemed to
have three overall groups of CGUs as follows:
Goodwill
---------- ---------------------------
At 13 October At 7 October
2022 2021
GBPm GBPm
---------- ------------- ------------
Retail 586.1 586.1
Vet Group 361.8 361.5
TVC 11.1 11.1
Total 959.0 958.7
In line with previous practice, the Group conducts goodwill
impairment tests as part of the interim financial statements and
the annual financial statements. There were no indicators of
impairment as at 13 October 2022. 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
13 October 2022 7 October 2021
Vet Vet
Retail Group TVC Retail Group TVC
Period on which management
approved forecasts are based
(years) 5 5 5 5 5 5
Growth rate applied beyond
approved forecast period 2.0% 3.5% 2.0% 2.0% 3.5% 2.0%
Discount rate (pre-tax) 11.3% 11.1% 11.1% 10.2% 10.6% 10.6%
Like-for-like sales growth 7.2% 9.9% 35.0% 7.6% 9.9% 34.0%
Gross profit margin 47.8% 70.0% 69.0% 47.6% 58.2% 65.0%
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 2022 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, Vet and TVC CGUs are 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
General 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 7 October At 31 March
At 13 October 2022 2021 2022
GBPm GBPm GBPm
------------ -----------
Finished goods 99.8 80.9 84.5
--------------- ------------ -----------
The cost of inventories recognised as an expense and included in
'cost of sales' is GBP334.6m (period ended 7 October 2021:
GBP304.6m).
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 13 October 2022 the inventory provision amounted to GBP4.9m
(7 October 2021: GBP3.8m). 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 GBP10.3m (7 October 2021: GBP9.5m).
In the 28 week period ended 13 October 2022, the value of
inventory written off to the income statement amounted to GBP4.8m
(28 week period ended 7 October 2021: GBP4.8m).
12 Other interest-bearing loans and borrowings
At 7 October At 31 March
At 13 October 2022 2021 2022
GBPm GBPm GBPm
------------ -----------
Non-current liabilities
Unsecured bank loans 97.4 99.2 96.9
Terms and debt repayment schedule
At 13 October
2022
----------------
Face Carrying
Nominal interest Year of value amount
Currency rate maturity GBPm GBPm
--------- ------ --------
Revolving credit
facility GBP SONIA +1.35% 2027 100.0 97.4
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
--------- --------
During the 53 week period ended 31 March 2022, the Group entered
into a new revolving credit facility of GBP300.0m which expires on
31 March 2027.
The drawn amount on the GBP300.0m facility was GBP100.0m at 13
October 2022 (GBP100.0m at 7 October 2021) and this amount is
reviewed each month. Interest is charged at SONIA plus a margin
based on leverage (net debt: EBITDA) and ESG targets. Face value
represents the principal value of the revolving credit facility.
The facility is unsecured.
Following the cessation of Sterling LIBOR on 31 December 2021
the Group transitioned its existing revolving credit facility and
interest rate swap hedging products from LIBOR to SONIA. The effect
of the transition was less than GBP0.1m. The new GBP300.0m
revolving credit facility entered into on 29 March 2022 is also
linked to SONIA and the existing interest rate hedges continue to
be effective.
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 13 At 31 March
October At 7 October 2022
2022 2021 GBPm
GBPm GBPm
------------ -----------
Within one year or repayable on demand - - -
Between one and two years - 100.0 -
Between two and five years 100.0 - 100.0
-------- ------------ -----------
100.0 100.0 100.0
-------- ------------ -----------
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 13 October 2022
Carrying amount Fair FVOCI Financial Other Total
value - equity assets financial carrying
- hedging instruments at amortised liabilities amount
instruments cost
GBPm GBPm GBPm GBPm GBPm
Financial assets measured
at fair value
Investments in Joint Venture
veterinary practices - 0.2 - - 0.2
Other investments - 1.2 - - 1.2
Forward exchange contracts
used for hedging 5.5 - - - 5.5
Fuel forward contract used
for hedging 0.5 - - - 0.5
Interest rate swaps used for
hedging 3.7 - - - 3.7
9.7 1.4 - - 11.1
Financial assets not measured
at fair value
Current trade and other receivables - - 41.4 - 41.4
Amounts owed by Joint Venture
veterinary practices - funding,
trading and operating loans - - 10.9 - 10.9
Cash and cash equivalents - - 143.1 - 143.1
Loans to Joint Venture veterinary
practices - initial set up
loans - - 7.1 - 7.1
Loans to Joint Venture veterinary
practices - other loans - - 1.7 - 1.7
Other receivables - - 1.8 - 1.8
- - 206.0 - 206.0
Financial liabilities measured
at fair value
Fuel forward contract used
for hedging (0.0) - - - (0.0)
Forward exchange contracts
used for hedging (0.2) - - - (0.2)
Interest rate swaps used for - - -
hedging - -
(0.2) - - - (0.2)
Financial liabilities not
measured at fair value
Current lease liabilities
(note 9) - - - (71.3) (71.3)
Non-current lease liabilities
(note 9) - - - (351.5) (351.5)
Trade payables - - - (113.7) (113.7)
Amounts owed to Joint Venture
veterinary practices - - - (22.6) (22.6)
Other interest-bearing loans
and borrowings (note 12) - - - (97.4) (97.4)
- - - (656.5) (656.5)
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 - - 1.2 1.2
Financial assets not measured
at fair value
Amounts owed by Joint Venture veterinary
practices - funding, trading and
operating loans - - 10.9 10.9
Loans to Joint Venture veterinary
practices - initial set up loans - - 7.1 7.1
Loans to Joint Venture veterinary
practices - other loans - - 1.7 1.7
Other receivables - - 1.8 1.8
Financial liabilities not measured
at fair value
Other interest-bearing loans
and borrowings (note 12) - (100.0) - (100.0)
At 7 October 2021
Carrying amount Fair FVOCI Financial Other Total
value - equity assets financial carrying
- hedging instruments at amortised liabilities amount
instruments 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 contracts 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 contracts 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 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 31 March 2022
Carrying amount Fair FVOCI Financial Other Total
value - equity assets financial carrying
- hedging instruments at amortised liabilities amount
instruments 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 2.2 - - - 2.2
Fuel forward contracts used
for hedging 0.5 - - - 0.5
Interest rate swaps used for
hedging 1.6 - - - 1.6
4.3 1.3 - - 5.6
Financial assets not measured
at fair value
Current trade and other receivables - - 28.0 - 28.0
Amounts owed by Joint Venture
veterinary practices - funding,
trading and operating loans - - 15.2 - 15.2
Cash and cash equivalents - - 166.0 - 166.0
Loans to Joint Venture veterinary
practices - initial set up
loans - - 8.6 - 8.6
Loans to Joint Venture veterinary
practices - other loans - - 2.1 - 2.1
Non-current other receivables - - 0.5 - 0.5
Other receivables - - 0.3 - 0.3
- - 220.7 - 220.7
Financial liabilities measured
at fair value
Fuel forward contracts used
for hedging (0.0) (0.0) - - (0.0)
(0.0) (0.0) - - (0.0)
Financial liabilities not
measured at fair value
Current lease liabilities
(note 9) - - - (78.3) (78.3)
Non-current lease liabilities
(note 9) - - - (304.7) (304.7)
Trade payables - - - (118.5) (118.5)
Amounts owed to Joint Venture
veterinary practices - - - (9.2) (9.2)
Other interest-bearing loans
and borrowings (note 12) - - - (96.9) (96.9)
- - - (607.6) (607.6)
At 31 March 2022
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 - - 15.2 15.2
Loans to Joint Venture veterinary
practices - initial set up loans - - 8.6 8.6
Loans to Joint Venture veterinary
practices - other loans - - 2.1 2.1
Other receivables - - 0.5 0.5
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 contingent consideration decrease in the
in relation to acquisitions. best estimate
The fair values represent of the future
the best estimate of earnings performance
amounts payable based
on future earnings performance
discounted to present
value.
Hedge accounting
Cash flow hedges
At 13 October 2022 and 7 October 2021, the Group held the
following instruments to hedge exposures to changes in foreign
currency and interest rates.
Maturity
1-6 6-12 More 1-6 6-12 More
months months than 1 months months than
year 1 year
HY 2023 HY 2023 HY 2023 HY 2022 HY 2022 HY 2022
Foreign currency risk
Forward exchange contracts
Net exposure (GBPm) 35.8 29.1 - 37.4 26.5 -
Average GBP-USD forward
contract rate 1.29 1.16 - 1.38 1.38 -
Average GBP-EUR forward
contract rate 1.16 1.14 - 1.16 1.16 -
Interest rate risk
Interest rate swaps
Net exposure (GBPm) - 100.0 - - - 100.0
Average fixed interest
rate - 0.811% - - - 0.811%
Loans Lease Total
and borrowings liabilities
GBPm GBPm GBPm
Balance at 31 March 2022 96.9 383.0 479.9
Changes from financing cash flows - - -
Proceeds from loans and borrowings - - -
Repayment of borrowings - - -
Payment of lease liabilities - (44.2) (44.2)
Total changes from financing cash flows - (44.2) (44.2)
Other changes
Interest expense on lease liabilities - 5.7 5.7
Additions to lease liabilities - 78.3 78.3
Disposal of lease liabilities - - -
Capitalisation of debt issue costs - - -
Accelerated amortisation of debt issue - - -
costs
Amortisation of debt issue costs 0.5 - 0.5
Total other changes 0.5 84.0 84.5
Balance at 13 October 2022 97.4 422.8 520.2
Loans Lease Total
and borrowings liabilities
GBPm GBPm GBPm
Balance at 25 March 2021 98.7 409.7 508.4
Changes from financing cash flows - - -
Proceeds from loans and borrowings - - -
Repayment of borrowings - - -
Payment of lease liabilities - (43.2) (43.2)
Total changes from financing cash flows - (43.2) (43.2)
Other changes
Interest expense on lease liabilities - 6.1 6.1
Additions to lease liabilities - 25.3 25.3
Disposal of lease liabilities - - -
Capitalisation of debt issue costs - - -
Accelerated amortisation of debt issue - - -
costs
Amortisation of debt issue costs 0.3 - 0.3
Total other changes 0.3 31.4 31.7
Balance at 7 October 2021 99.0 397.9 496.9
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 GBP9.7m (7 October 2021: GBP11.7m).
The transactions entered into during the period, and the
balances outstanding at the end of the period are as follows:
13 October 31 March
2022 7 October 2022
GBPm 2021 GBPm GBPm
---------------------------------------------
Transactions
- Fees for services provided to Joint
Venture veterinary practices 40.7 36.9 69.9
- Rental and other occupancy charges
to Joint Venture veterinary practices 6.4 6.3 11.7
Total income from Joint Venture veterinary
practices 47.1 43.2 81.6
Acquisitions
- Consideration for Joint Venture veterinary
practices acquired (note 7) - 1.6 2.1
Balances
Included within trade and other receivables:
- Funding for new practices 0.4 - -
- Trading balances - - -
- Operating loans
- Gross value of operating loans 14.9 22.3 20.2
- Allowance for expected credit losses
held for operating loans (4.4) (5.2) (5.0)
- Net operating loans 10.5 17.1 15.2
Included within other financial assets
and liabilities:
- Loans to Joint Venture veterinary
practices - initial set up loans
- Gross value of initial set up loans 8.5 11.3 9.8
- Allowance for expected credit losses
for initial set up loans (1.4) (1.0) (1.2)
- Net initial set up loans 7.1 10.3 8.6
- Loans to other related parties (other
loans)
- Gross value of other loans 1.7 2.6 2.1
- Allowance for expected credit losses
held for other loans - - -
---------- ---------- --------
- Net other loans 1.7 2.6 2.1
Included within trade and other payables:
- Trading balances (22.6) (5.1) (9.2)
Total amounts receivable from veterinary
practices (before provisions) 2.9 31.1 22.9
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 13 October 2022, the 53 week
period ended 31 March 2022 and the 28 week period ended 7 October
2021 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 GBP4.4m (31
March 2022: GBP5.0m, 7 October 2021: GBP5.2m).
In the 28 week period ended 13 October 2022, the value of loans
written off recognised in the income statement amounted to GBP1.0m
(7 October 2021: GBP0.9m).
At 13 October 2022, the Group had a commitment to increase the
loan funding to Joint Venture companies of GBP0.7m (31 March 2022:
GBP0.8m, 7 October 2021: GBP0.5m), 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
IR DDBDBXUDDGDD
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