Pets at Home positioned for profit growth … next year
Pets at Home is anticipating better pre-tax profits next year and believes it will benefit from the investment it has made in a “pivotal year”.
Reporting top line revenue growth of 5.2% to £1.5bn, the business made profits before tax of £105.7m, down 13.7%, which it attributed to “non-underlying costs of £26.3m, mostly associated with our Distribution Centre transition and our support office consolidation.”
The Cheshire-headquartered retailer and vet care group also said it has plans for further capital expenditure for the year ahead of £60m and will also focus on strategic investments and bolt-on M&A.
Over the last two years Pets has purchased £100m of its own shares in a share buy back programme, and has plans to buy £25m more.
The company has been encouraged by “low double-digit growth” in its Vet Group, but with Retail at -2%, broadly in line with plan.
Looking ahead, the statement accompanying the results this morning said the board “are comfortable with current analyst consensus for underlying PBT, currently c£144m.”
Lyssa McGowan
Lyssa McGowan, Chief Executive Officer, said: “FY24 has been a pivotal year for the business, having delivered some key building blocks of our platform for long term growth. I am proud of the progress we have made in the year; we relaunched our brand, opened our new Distribution Centre, built our new digital platform, made progress in our sustainability agenda, and enhanced our physical estate. The business has come together brilliantly to navigate any challenges faced this year, and we have delivered some key milestones of our strategy.
“Our medium-term strategy and financial framework is unchanged and, looking ahead, the fundamental strengths of the business position us well to deliver growth. We hold a leading position in a structurally growing market, with an unrivalled retail store network, and a unique, differentiated and integrated vet business. We know the nation’s pets better than anyone else, with over 10 years of analytical data on 10 million pets, and we now have a best-in-class digital platform, and a modern efficient Distribution Centre.
“Above all else, we have the best colleagues in the industry, who use their passion and expertise to guide customers through their pet care journey every day. All of this positions us incredibly well as we continue to execute our strategy to build the world’s best pet care platform.”
Other highlights of this morning’s results include a commitment to “continue to maintain a tight operational grip on industry-wide cost headwinds”, but the company noted that a 9.8% increase in National Living Wage, was “a c£16m unmitigated cost headwind to the business” and the removal of business rates relief was a £2m cost.
The company has negotiated new property leases on stores and expects to complete 40 lease renegotiations in FY25.
AJ Bell investment analyst Dan Coatsworth said the drop in profits was expected by the markets and that shares have held up in early trading today.
“Shares in Pets at Home, which have been buffeted by weakening demand and a CMA probe into the vet industry, were steady following the company’s full-year results. Profit fell, as expected, but more significantly the company stuck with guidance for what CEO Lyssa McGowan has described as a ‘pivotal year’ ahead as the company launches a new digital platform.
“It’s no secret that Britons love their pets but while people might still buy the basics, demand for all the little extras like toys and treats, which are lucrative sales for Pets at Home, has waned.
“By offering everything under one roof, including grooming and veterinary services, Pets at Home hopes to drive loyalty and bat off the competitive threat from non-specialists like the supermarkets.”
