Vet firm could close 30 practices as profits fall
Cheshire based Pets at Home has announced it could close up to 30 veterinary practices as part of a drive to restructure the business.
The firm, which is based in Handforth, announced this morning it is carrying out a review of its vet business, which could cost at least £29m.
The firm currently has 471 practices under its First Opinion brand many of them operated on a Joint Venture basis.
The review found that the business is operating in a market growing at five per cent.
But increasing cost pressures, including fees charged by Pets at Home, mean certain practices are experiencing difficulties.
The firm said it is taking action to put its business on a stronger long-term footing and to deliver significant cashflow.
Pets at home said it plans to rebalance and simplify the fee structure for joint ventures to allow practices to mature more swiftly and generate returns for both Pets at Home and JVPs.
The company will also offer to buy back and consolidate up to 55 practices from JVPs.
A statement said: “Around 25 of these will be operated as company managed practices, whilst we will consider the options for the remainder, which may result in us proposing to close them.
“For all practices which we offer to buy back, JVPs will not be expected to repay outstanding borrowings to any parties and Pets at Home will settle any liabilities for third party bank loans and leases on behalf of the JVP.
“We expect this to result in total non-underlying income statement costs of up to £49m and non-underlying cash costs of up to £27m.”
A further non-underlying charge of £29m has been recognised against Vet Group, and group, gross profit to provide for the balance of funding provided by Pets at Home, guaranteed bank and lease obligations, and the cost of additional operating cash outflows forecast to be incurred by the Group through to buy-out.
Further costs, including closure costs if the decision to close practices, are expected to be provided over the next two years.
The announcement was made in the firm’s interim statement to the Stock Market.
Group revenues rose by 6.7% per cent to just under £500m.
Meanwhile profits were down 9.3% from £41.8m to £37.9m.
Chief executive Peter Pritchard said “Since becoming the Group CEO in May, I have had the opportunity to take stock of the wider group and shape my view of our future.
“What I have found fills me with confidence. Pets at Home is a healthy business and customers are loving what we do; responding to our price repositioning, investment in digital and the amazing service delivered by our vet partners.
“We have the ability to offer almost everything a pet owner needs, giving us opportunities our competitors simply don’t have.
“Which is why my vision is to develop a complete pet care company, uniting our retail and vet businesses.
“Reviewing our Vet Group has been a priority. I recognise we have grown at pace and more recently, have seen the pressure that rising costs and our fees are placing on this young business.
“We will need to recalibrate the business to deliver more measured growth, whilst maintaining our plan to generate significant cash profits.
“We are focused on maximising our unique assets and delivering a plan for sustainable cashflow and profit growth. Given the success of the changes we have made in retail, I’m confident we can do this.”
