Revenues race ahead at Cheshire pet care group

Cheshire pet care business, Pets at Home, announced annual results including a revenue performance ahead of expectation today as retail returned to profit growth faster than expected.

The Handforth-based business announced turnover for the year to March 28, of £961m, a 5.7% improvement on last year’s £898.9m, while pre-tax profits of £49.6m compared with £79.56m.

This year’s profit figure includes non-underlying operating expenses of £40.064m relating to a “recalibration” of the business in buying out the ‘A’ shares from the joint venture partners in up to 55 First Opinion veterinary practices.

The board said it is confident about the year ahead, entering financial year 2020 with good momentum and on a higher revenue and profit base than previously anticipated.

Chief executive Peter Pritchard said today: “We are trading strongly and taking share across the pet market.

“Customers are loving our lower prices, the convenience of subscription packages, high quality veterinary care and pet healthplans.

“We launched our pet care strategy last year and we’re already making good progress, bringing our retail and vet businesses closer together.

“Our commitment is to make sure pets and their owners get the very best advice, care and products, and we’re able to join this up for customers in a way that competitors just can’t.”

He added: “I’m pleased with our progress and the results we have delivered, but there remains plenty to do.

“I’m confident we will successfully reposition our Vet Group so that, with the strong performance in retail, we will be well placed to deliver our strategy.”

Looking ahead, the business said its focus remains on returning the company to profit growth and it expects to generate underlying profit and free cashflow growth from financial year 2021, following the completion of the Vet Group recalibration.

Russ Mould, investment director at Manchester investment firm AJ Bell, said: “Retail businesses have to balance the volume of products they sell against the price they sell them at.

“Pet care outfit Pets at Home recently tilted the scales away from price to volume in its stores.

“It has been rewarded with like-for-like sales growth as well as a slightly better-than-expected full year performance for the group as a whole, earning itself a pat on the head from investors.

“Though inevitably, while the discount prices have been lapped up by customers, they have also dogged margins.

“In theory this proposition should do well, Britons love their pets and are likely to be willing to part with hard-earned cash to keep them healthy, well-fed and comfortable.

“In reality the company has been all over the place since it was let off the leash at its IPO in 2014 – the substantial borrowings which it carried from the outset didn’t help – and they are still tagged some way below the 245p they floated at.”

He added: “Pets at Home is not alone in having spotted the potential in this space and it has faced competitive threats from online players and discount supermarkets.

“The firm’s joint venture vet practices also aren’t expected to be profitable for a number of years and a shortage of veterinary practitioners is pushing up vet salaries.

“Today’s results are a step in the right direction, but there is more to do to earn the market’s full approval.”