Pets at Home Group Plc (LON:PETS) has announced its FY24 Interim Results for the 28-week period to 12 October 2023.
Highlights
- H1 was the period of highest execution risk in building our Petcare Platform as we relaunched our brand, transitioned our stores to the new Stafford Distribution Centre (DC) and continued to build a new digital platform.
- H1 consumer revenue# grew 8.6%, ahead of our 7% ambition, to £1.0bn, with all channels in growth and further progress in retaining and acquiring new customers. Underlying consumer demand was resilient with structural trends underpinning sustained market growth.
- We finished H1 with 7.8m active VIP members, up 3% YoY. Puppy & Kitten sign ups continued to normalise as expected. However, new sign-ups in our vets remained strong at over 18k per week, as early life pet acquisition was increasingly complemented by winning new clients with older pets, attracted by our compelling consumer proposition.
- Total Group revenue growth of 6.5% to £774.2m, with Group like-for-like# (LFL) revenue up 6.2%.
- Vet Group revenue grew 19.0%, and LFL# up 17.3%, accelerating in Q2, with record sales supported by higher Average Transaction Value (ATV), mix and visits as we increased vet capacity through improved attraction, retention, and productivity.
- Retail revenue grew 5.2%, and LFL# up 5.2%. After Q1 LFL growth of 7.1%, sales in Q2 were impacted by short term availability issues as the DC ramped up, causing LFL growth to dip to 2.7%. The impact was contained and swiftly corrected with availability having now normalised and the early weeks of Q3 showing a c4% LFL.
- Underlying PBT# of £47.8m is down 19.3%, impacted by continued investment in the platform with higher logistics costs (c£8m) and our brand relaunch (c£2m). This shape of H1/H2 profits was broadly as expected, as we outlined at Q1.
- Statutory PBT was £34.7m, down 35.2% reflecting the decline in underlying PBT and non-underlying costs of £13.1m associated with our DC transition, the consolidation of our support offices and a writedown of our investment in Tailster.
- Underlying basic EPS was 7.4p, down 22.9%, and statutory basic EPS was 5.2p, down 40.2%.
- Interim dividend per share held at 4.5p.
- Free cash flow# down 44.3% to £23.1m reflecting YoY profit shape and the phasing of investments into our key strategic growth areas.
- Balance sheet remains robust with net cash# of £12.1m (before lease liabilities of £398.1m). Cash and cash equivalents £60.4m at the end of H1, down £82.7m YoY.
- First £25m tranche of our buyback is completed, with the second £25m tranche to commence shortly.
DC transition
The first half saw us move our store logistics operations into our new Stafford DC. This was the period of highest risk in our move to a single DC and the DC is now fulfilling deliveries to 100% of stores, with availability having now normalised.
However, in getting to this position, we experienced a period of disruption during Q2. From the early part of Q2, we saw a deterioration in our in-store availability from normal levels of around 95%, to c80% at peak disruption. This understandably impacted our sales performance. However, the business responded quickly to address the issue and our availability and sales performance have now normalised.
In total, we estimate this period of disruption resulted in a c3% LFL drag on Retail sales, and we expect to
incur extra logistics costs in FY24 of £14m (£9m underlying and £6m non-underlying) as a result.
However, these impacts were managed within the scope of our uPBT guidance, without compromising our commercial proposition or overstretching our operations. We are also now past the point of highest risk having moved 85% of our sales base into Stafford with just our online operations to move across. We
expect to have exited all legacy DCs by mid-2024, completing our transition.
Pets at Home is a British pet supplies retailer selling pet products including food, toys, bedding, medication, accessories and pets. It is listed on the London Stock Exchange and is a constituent of the FTSE 250 Index. Founded in 1991, the company operates 453 stores across the UK, as well as an online store.
