Pet care group ahead of schedule for return to profit growth
Cheshire-based Pets at Home Group today unveiled strong first half results, with revenues rising to £546.338m from £499.345m the previous year, while statutory pre-tax profits soared from £8m to £37.3m in the six months to October 10.
The group said the huge increase in statutory pre-tax profits reflects the strength of underlying trading in retail operations, plus a reduced non-underlying charge of £7.7m, compared with £29.9m a year ago, largely relating to the recalibration of the First Opinion vet business.
Progress so far means the group is likely to return to profit growth a year ahead of its initial estimates, it said today.
Today’s results also reveal that the Handforth-based group is introducing more customers to its complete pet care offer, with the number of subscription customers across the group now more than 790,000.
After more than nine years as chairman, the group also revealed that a succession plan for Tony DeNunzio has commenced.
Group chief executive, Peter Pritchard, said: “I am very pleased with what we have achieved in the first half of the year.
“We have executed our plans well, and this has been reflected in the strong customer sales growth across the group.
“Our commitment, and that of the group’s joint venture partners, is to make sure pets and their owners get the very best advice, care and products; and this has led to record levels of VIPs, First Opinion practice clients and subscription customers. In short, our pet care strategy is working.
“We have seen sustained momentum in retail, with a two-year like-for-like of 13%.
“This has been complemented by a meticulous delivery of our Vet Group recalibration.
“The programme to buy out a number of joint venture practices is already complete, whilst changes we have made to the fee arrangements for ongoing practices are already showing signs of positive progress and will be followed by further planned adjustments in the second half of the year.”
He added: “All this provides a strong foundation, meaning we have much to look forward to in FY20 and beyond, and we now expect to return to profit growth a year ahead of our original plan. In the meantime, we will remain focused on serving our customers, their pets and our partners better than ever before.”
Looking ahead, he said: “We have been successful in sustaining profit growth in retail and expect this to continue.
“In the Vet Group, the second half of FY20 will see the full impact of changes to the fee arrangements for ongoing JV practices, in line with our original plan.
“In addition, we will incur certain pre-opening costs associated with the capacity extension at Dick White Referrals, plus the opening of our fifth Specialist Referral centre in Scotland, all of which will reduce Vet Group underlying profit in the year.
“Due to the progress we have made in the first half of FY20, we are confident about the rest of the year and now expect to deliver full year underlying profit growth, with group underlying profit before tax on a pre-IFRS16 basis towards the top end of current market consensus.
“We now expect full year group underlying free cashflow to be broadly flat, despite the previously disclosed one-off outflow of £10.7m relating to a change in timing to Corporation Tax payments.”
He said: “New openings will include up to five new stores, grooming salons and vet practices, and the one-off programme to buy out a number of JV practices is now complete.
“Our focus remains on sustaining the return to profit growth and we expect to generate further underlying profit and free cashflow growth from FY21, despite the potential headwind posed to retail gross margin by US dollar currency movements. Due to our current hedging position, such movements will not impact FY20 profit guidance.”
