Full Year Results

RNS Number : 5512N

Pets At Home Group Plc

21 May 2020

 

FOR IMMEDIATE RELEASE, 21 MAY 2020

Pets at Home Group Plc: FY20 Preliminary Results
for the 52 week period to 26 March 2020

Exceptional Q4 demand delivers FY20 profit ahead of expectations;
Focus on delivering a stronger pet care business in a post-pandemic future

· Group like-for-like^# (LFL) revenue growth of 9.0%

o  Total Group revenue exceeded £1bn for the first time, with growth of 10.2% to £1,058.8m

o  Retail LFL^# revenue growth of 9.4%, or 15% on a 2-year basis - Q4 LFL revenue growth of 15.9%

o  Omnichannel revenue^# growth of 27.8% or 83% on a 2-year basis, reflecting previous investment in capacity and fulfilment

o  Vet Group LFL^# revenue growth of 5.6%, with LFL customer sales^# growth across all First Opinion practices of 13.5%, and Joint Venture practices at 13.2%

· Growth in Group underlying PBT^# of 11.0% to £99.5m on a pre-IFRS16 basis, and Group underlying free cashflow^# of 40.7% to £89.6m

· Underlying basic earnings per share, excluding the impact of IFRS16, were 16.0 pence ^# (FY19: 14.1 pence)

· Resilient balance sheet with significant headroom on debt capacity and covenants

o  Net debt of £85.9m, with net debt/EBITDA of 0.6x vs leverage covenant of 3.25x; on a post IFRS16 basis, net debt of £549.8m with net debt/EBITDA of 2.5x

o  Total liquidity, comprising cash balances and undrawn portion of £248m RCF (maturity 2023), of approximately £162m; an additional £100m facility agreed post year end

o  Final dividend per share of 5.0p, reflecting our strong performance in FY20 and robust liquidity and balance sheet, giving a total of 7.5p for FY20, equal with the prior year

· Ongoing expansion of our pet care ecosystem:

o  Number of VIPs who purchase both products and a service grew 24% year-on-year, representing c16% of all 5.6m active members

o  Number of subscription customers across the Group is now over 865,000, up 23% YoY

o  Circa 20% of the UK puppy population signed up to VIP Puppy Club, typically spending 23% more than non-members across the Group

# Alternative Performance Measures (APMs) are defined and reconciled to IFRS information, where possible, on page 96. 
All FY20 APMs exclude the impact of IFRS16 unless explicitly stated. 

Peter Pritchard, Group Chief Executive Officer:

In normal circumstances, it would have given me great pleasure to reflect on another year in which we have grown sales and profits and successfully executed our proven pet care strategy. These are, however, far from normal circumstances with the rapid, wide-ranging and devastating effects of COVID-19 having an unprecedented impact on all of our lives.

Response to COVID-19

In response to this crisis, our planning and actions have focused on preparing the business for five distinct phases pre and post lockdown, remaining mindful of the need within each phase to ensure readiness for both the next stage and potential reversion to the previous one. We discuss each of these phases and our related assumptions in subsequent sections of this report.

Our immediate priorities were to ensure the wellbeing and safety of our colleagues, vet Partners, customers, suppliers and pets, and to support our most vulnerable colleagues and communities. In line with Government advice, we rapidly implemented a number of protocols in this respect, which enabled us to provide safe continuity of customer service, as a designated "essential retailer", across our Retail and Veterinary operations. We were also pleased to provide support to colleagues and communities that need us through £1.1m of funding to nominated pet charities, a £1m Hardship Fund for colleagues and their families, and discounts to NHS workers as they cared for the nation's health.

In light of uncertainty around the duration of lockdown, disciplined management of cash and prudent allocation of capital became increasingly important. In addition to welcoming certain Government-led initiatives, we implemented specific measures internally to preserve near-term cash flow, including, but not limited to, deferring capital and marketing spend and agreeing a temporary 20% reduction in remuneration across our Executive Management Team, Non-Executive Directors and senior leadership team. At the same time we have taken the decision across our business not to participate in the government's Job Retention Scheme (JRS). We continue to review the position regarding a small proportion of those colleagues for whom a prolonged period of shielding may be necessary - predominantly those who are either highly or extremely vulnerable or are carers - and, dependent upon government guidance, may participate in the JRS for these colleagues in future. Across our Vet Group, our Joint Venture Partners operate independent businesses and are solely responsible for the decisions made in respect of their colleagues, and a number of our Joint Venture Partners have chosen to participate in the JRS.

Current trading

As anticipated in our full-year trading update on 2 April, nearly all of the exceptional demand witnessed in the closing weeks of Q4 has unwound during Q1 of the current year which, combined with our adherence to guidelines on social distancing across our operations and restrictions on the sale of pet products and health care services deemed non-essential, has temporarily depressed normal levels of Group turnover.

http://www.rns-pdf.londonstockexchange.com/rns/5512N_1-2020-5-20.pdf

While online sales have remained at materially elevated levels, matched by improved capacity and good product availability, they are, in isolation, unable to mitigate the reduced level of in-store sales, and their weighting towards food, together with an additional £5m of costs relating to our initial response to COVID-19, has had an adverse effect on profits, margins and cashflow in the financial year to date.

Accordingly, we anticipate H1 FY21 Group pre-tax profit, including both the one-off benefit from the business rates holiday, which will be utilised to partially mitigate the estimated financial impact of COVID-19 this year, as well as additional operating costs related to social distancing, to be materially below the prior year. It remains difficult to make a clear assessment of how consumers will react as we emerge from lockdown and we, therefore, do not feel it is prudent to provide full-year guidance at this stage. We will, however, reassess this at our Q1 update at the end of July.

Looking ahead

Over and above managing the business through the pandemic, we must endeavour to continue creating value for our shareholders by being well-placed for a recovery in demand.

Early indications are that some of the behaviours that consumers have displayed during lockdown, notably social distancing and the preference to purchase goods and services safely and conveniently, may persist post exit. Preparing for this has meant adapting our working practices, introducing further precautionary measures around customer interaction, and implementing new ways of safely delivering products and services across all channels, all the while retaining discipline over cash utilisation, thereby maintaining a resilient balance sheet and low financial gearing.

The current environment lacks precedence in the UK and it is difficult, therefore, to assess the medium to long term effect it will have on consumer behaviour or when we might see normalisation in shopping habits. This crisis has, however, encouraged us to critique our business model and how we operate. While some things have changed, and will continue to do so in a post-pandemic world, we remain confident in the long-term sustainability of our business for a number of reasons, not least our sustainable retail and owner-managed veterinary models, our growing multichannel platform, our large and expanding loyal customer base and our unique solutions-based pet ecosystem.

We operate in a large, growing market with favourable demographics and clear, long-term demand drivers. While the current crisis is affecting consumer behaviour across the UK, our pet population is unchanged, pets remain an important part of our lives - possibly even more so as a result of our present circumstances - and still need to be fed, loved and cared for.

These are clearly unprecedented times and Pets at Home will not be immune to the challenges that we collectively face. We have had to respond quickly and make significant changes to the way we operate our business, and will undoubtedly need to remain focused yet agile as we respond to pandemic-driven issues and opportunities alike. I am proud to be surrounded by an experienced and adaptable management team who, with the support of our fantastic colleagues who have continued to work tirelessly in adverse circumstances, providing essential products and healthcare services for the nation's pets, are determined to create a stronger pet care business in a post-pandemic future.

Results webcast

An audio webcast and presentation of these results will be available on our website ( https://investors.petsathome.com/investors/ ) from 07.00am on 21 May 2020. Management will host a Q&A conference call for analysts and investors at 09.30am. Those wishing to participate should register their interest with Clinton Manning or Freddie Bendit at MaitlandAMO by emailing [e-mail]

Investor Relations Enquiries

Pets at Home Group Plc:

Roger Tejwani, Director of Investor Relations & External Communications

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Jonny Armstrong, Head of Investor Relations

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Media Enquiries

Pets at Home Group Plc:

Gillian Hammond, Head of Media & Public Affairs

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MaitlandAMO:  

Clinton Manning

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Freddie Bendit

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About Pets at Home

Pets at Home Group Plc is the UK's leading pet care business; our commitment is to make sure pets and their owners get the very best advice, products and care. Pet products are available online or from our 453 stores, many of which also have vet practices and grooming salons. Pets at Home also operates a UK leading small animal veterinary business, with 441 First Opinion practices located both in our stores and in standalone locations, as well as four Specialist Referral centres. For more information visit: http://investors.petsathome.com/

Disclaimer

This statement of preliminary results does not constitute an invitation to underwrite, subscribe for, or otherwise acquire or dispose of any Pets at Home Group Plc shares or other securities nor should it form the basis of or be relied on in connection with any contract or commitment whatsoever. It does not constitute a recommendation regarding any securities. Past performance, including the price at which the Company's securities have been bought or sold in the past, is no guide to future performance and persons needing advice should consult an independent financial adviser. Certain statements in this statement of preliminary results constitute forward-looking statements. Any statement in this document that is not a statement of historical fact including, without limitation, those regarding the Company's future plans and expectations, operations, financial performance, financial condition and business is a forward-looking statement. Such forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially. These risks and uncertainties include, among other factors, changing economic, financial, business or other market conditions. These and other factors could adversely affect the outcome and financial effects of the plans and events described in this statement. As a result you are cautioned not to place reliance on such forward-looking statements. Nothing in this statement should be construed as a profit forecast.

Chairman's Review

The Group ended the year in good shape, with a strong financial performance reflecting some early gains from our strategy to bring our retail and veterinary businesses closer together and become the best pet care business in the world. Our Retail business delivered sustained revenue, profit and free cashflow growth in the year, while our First Opinion veterinary business completed its planned recalibration, positioning it well for future growth. Together, with the benefit of further investment in data infrastructure and capabilities undertaken during the year, both businesses are now well-placed to deliver a best-in-class suite of products and services for customers across our pet care ecosystem, thereby setting us apart from our competitors.

As we approached the end of the financial year, our focus and attention turned to the far-reaching and devastating effects of COVID-19. Our Executive Management Team responded to the immediate challenges quickly and decisively, implementing protocols to safeguard the wellbeing and safety of colleagues, vet Partners and customers. These actions enabled the safe continuity of customer service across our Retail and Veterinary operations. We were also pleased to provide £1.1m of funding to nominated pet charities and discounts to NHS workers as they cared for the nation's health. The actions taken have had the full support and appreciation of the Board, and I would like to thank each member of the management team for their resilience and adaptability as we navigate the business through these unprecedented times.

Our people remain the foundation of our business and, during this crisis, we ensured that those colleagues in self-isolation received full pay. We were also pleased to create a Hardship Fund of £1.0m for colleagues, our vet Partners and their teams should their families experience financial difficulties. This year, more than ever, I would like to thank all our colleagues for their dedication and commitment, not least over the past three months when, throughout the entire business, they have worked tirelessly and with good humour in adverse circumstances to best serve our customers' needs.

Amidst this period of uncertainty, three things have become increasingly clear to me. First is that Pets at Home, like most businesses across all sectors of the economy, will not be immune to the challenges faced from COVID-19. Second is that in times of extreme difficulty, strong management teams build stronger businesses, and I have every confidence that our current management has the requisite skill and energy to ensure that Pets at Home can emerge a stronger business in a post-pandemic world. Finally, it remains clear that through good times and bad times, the UK is and will remain a nation of pet lovers. The resilience and growth of the UK pet market, coupled with our strong leadership team and adaptable pet care strategy, means that I hand over my role as Chairman to Ian Burke confident in the long term sustainability of our business.

Tony DeNunzio

Non-Executive Chairman

21 May 2020

Chief Executive Officer's Review

COVID-19

Most, if not all of us, have no prior experience of dealing with a pandemic, despite it having wide-ranging consequences on all of our daily lives. We have had to respond quickly, making significant changes to the way we operate our business, and will undoubtedly need to remain focused, disciplined and agile over the coming months.

Broadly speaking, in response to this crisis, our planning and actions have focused on preparing the business for five distinct phases, remaining mindful of the need within each phase to ensure readiness for both the next phase and potential reversion to the previous one. We have categorised these five phases as follows:

I.  Pre-lockdown

II.  Lockdown

III.  Preparing to emerge

IV.  Post lockdown

V.  A new normal 

I. Pre-lockdown

When the pandemic first appeared in China, we assumed that the main threat was to our supply chain. We engaged quickly and effectively with our Far East suppliers and colleagues to ensure continuity of supply and, as a result, were able to meet exceptional levels of pulled forward demand in the closing weeks of the financial year, both in-store and online, as existing customers increased average basket size ahead of an anticipated lockdown. We also experienced a higher than usual number of new customers shopping across our pet ecosystem, particularly consumables such as pet food and litter as supermarket availability declined, and healthcare services as veterinary peers closed practices. During this period, we were ranked #1 by market share of grocery dog food as consumers turned to our trusted brands and advice.

As the virus started to spread beyond Chinese borders, however, it soon became clear that the risk to demand would be a far greater challenge. Our planning moved to ensuring the wellbeing and safety of our colleagues, vet Partners, customers, suppliers and pets; the safe continuity of customer service across our operations; support for our most vulnerable colleagues and communities; and increased vigilance over cash preservation and allocation of capital.

II. Lockdown

Recognising the need to continue providing the nation's pets with food products and healthcare services, the UK government deemed Pets at Home an "essential retailer". At the same time, clear public guidance was issued on COVID-19 preventative measures and social distancing.

In seeking to strike a balance between providing those essential products and services alongside safeguarding the health and wellbeing of our stakeholders, we implemented a number of protocols across our Retail and Veterinary operations and provided clear advice and support to our vulnerable colleagues and the communities that rely on us. In view of uncertainty around the duration of lockdown, we also implemented specific measures internally to preserve near-term cash flow.

Retail

Across our stores, we introduced temporary purchase limits, restricted the number and type of products available for sale, removed pets on sale and closed all our Groom Room salons to discourage non-essential customer visits. We implemented all Government advice regarding social distancing by limiting the number of customers allowed in our stores at any one time and introducing a clear queuing protocol for customers both inside and outside of our stores. We also introduced sneeze guards and contactless only payment across all of our points of sale.

Across our two Distribution Centres, we increased the number of shifts and changed shift start times to reduce the number of colleagues on any one shift. We introduced social distancing measures into our centres and recruited around 250 temporary workers to ensure safe continuity of operations during a period of heightened online demand. The measures we implemented to protect our Support Office colleagues included removing all but essential travel and the adoption of alternative working arrangements.

Vet Group

While nearly all of our First Opinion veterinary practices, and all of our Specialist Referral centres, have remained open, albeit on reduced hours, we have strictly adhered to Government guidelines on social distancing and RCVS guidance on permitted procedures, which initially excluded elective and routine work broadly equivalent to half the services offered across our practices. In recent weeks, in line with updated RCVS guidance widening the range of permitted procedures, we have seen a positive response from customers and a partial recovery in practice revenues. We remain in close contact with all of our Joint Venture Partners, to assist them in navigating the current crisis, and have ensured that they are beneficiaries of any relevant Group-wide reliefs relating to COVID-19.

Colleagues and communities

We recognised that being an essential retailer comes with a responsibility to ensure that we can serve all of our pet owner customers through these uncertain times. In support of our truly heroic National Health Service we dedicated the first hour of trading on Tuesdays, Thursdays and Saturdays exclusively to NHS workers. Outside of these hours, across our stores, we implemented a fast track entrance, a dedicated checkout lane and a 10% discount scheme off their shopping and vet costs. We also recognised that vulnerable groups needed specific help and, therefore, opened all our stores exclusively on Mondays, Wednesdays and Fridays between 08.00am and 09.00am to enable our more vulnerable customers to shop in comfort and safety.

The crisis is also having a devastating effect on pet charities with many seeing their fundraising diminish while not being able to rehome pets. These charities need our support more than ever, and in recent weeks we allocated £1.1m to specific charities, comprising £0.4m of emergency grants from our charity, Support Adoption for Pets, and £0.7m of funding thanks to our VIP loyalty programme.

Caring for our hardworking colleagues has never been more important and we ensured that those colleagues who needed to self-isolate for several weeks continued to receive full pay. We also created a Colleague Hardship Fund of £1.0m for colleagues, our vet Partners and their teams should their families experience financial difficulties, and, outside of our normal bonus cycle, paid an additional £1.9m bonus primarily to store and other frontline colleagues in April in recognition of their tireless work in adverse circumstances.

Cash preservation and allocation of capital

Our strong performance during FY20 meant that we entered the new financial year with a resilient balance sheet, low financial leverage, significant headroom on our banking covenants, and total liquidity including cash balances of approximately £162m.

As anticipated, nearly all of the exceptional demand witnessed in the closing weeks of Q4 has unwound during Q1 of the current year which, combined with our adherence to guidelines on social distancing across our operations and restrictions on the sale of pet products and health care services deemed non-essential, has temporarily depressed normal levels of Group turnover. While online sales have remained at materially elevated levels, matched by improved capacity and good product availability, they are, in isolation, unable to mitigate the reduced level of in-store sales, and their weighting towards food, together with an additional £5m of costs relating to our initial response to COVID-19, has had an adverse effect on profits, margins and cashflow in the financial year to date.

We welcomed the government's business rates relief, providing us with approximately £33m for FY21, to partially mitigate the estimated financial impact of COVID-19 this year, as well as specific measures regarding the payment of VAT. At the same time we have taken the decision across our business not to participate in the government's Job Retention Scheme (JRS). We continue to review the position regarding a small proportion of those colleagues for whom a prolonged period of shielding may be necessary - predominantly those who are either highly or extremely vulnerable or are carers - and, dependent upon government guidance, may participate in the JRS for these colleagues in future. Across our Vet Group, our Joint Venture Partners operate independent businesses and are solely responsible for the decisions made in respect of their colleagues, and a number of our Joint Venture Partners have chosen to participate in the JRS.

We also implemented measures internally to preserve near-term cash flow, including, but not limited to, moving to monthly payment of store rents, deferring capital and marketing spend, agreeing a six-month loan repayment holiday with our Vet Group banking partners for all Joint Venture Partners who are not currently debt free, and passing a portion of any rent and rates benefit on to those practices situated in-store. We also ensured that all of our suppliers were paid in full on time. 

In view of uncertainty over the duration of lockdown, we arranged a new credit facility of £100m with support from our banking syndicate, to provide sufficient liquidity for the foreseeable future, and our Executive Management Team, Non-Executive Directors and senior leadership team voluntarily implemented a temporary 20% reduction in salary.

III. Preparing to emerge

It remains difficult to make precise judgements about how consumers will react as we emerge from lockdown. Over and above managing the business through the pandemic, however, we must endeavour to continue creating value for our shareholders by being well-placed for a recovery in demand.

Importantly, all of our stores and nearly all our First Opinion practices have remained open through the crisis, providing some insight into likely future trends. Early indications are that some of the shopping habits that consumers have displayed during lockdown, notably social distancing, channel shift and the preference to purchase goods and services safely and conveniently, may persist post lockdown, thereby impacting the volume of customers we can serve in-store.

Preparing for this has meant adapting our working practices and learning new ways to serve our customers across all channels, all the while remaining vigilant across our funding requirements, ongoing measures for cash preservation and prudent allocation of capital.

Retail

Our stores remain open and can respond quickly to changes in footfall. We maintain good availability across all of our product lines, branded and private label, and have extended the number of items we can sell across our full range of consumable and discretionary products.

We have introduced further precautionary measures to enhance safe interaction with our customers, including the provision of protective masks for all our store colleagues, and implemented training for specific colleagues on the safe delivery of grooming services and contactless sale of pets.

Recognising that we may need to maintain some form of social distancing post lockdown, we have successfully piloted a "Call and Deliver-to-Car" service, increased the contactless payment limit from £30 to £45, and made it easier for existing and new customers to sign up to our subscription services online as opposed to in-store. Importantly, the vast majority of our stores are situated on retail parks and, with an average trading space of approximately 6,400 sq ft., are more adaptable to social distancing than smaller, high street formats.

Our previous investment in automation, fulfilment and digital capability has given us capacity to process double the pre-COVID-19 level of online orders, both across our UK-wide network of stores, which can be leveraged to meet omni-channel demand, and delivery direct to home. Mindful of the prevailing channel shift to online, which we expect COVID-19 to accelerate, we have been assessing options across our logistics network to ensure that we have a well-invested, fit-for-purpose platform that is capable of managing future growth and driving efficiency benefits.

Vet Group

Across our First Opinion practices, we have implemented training for our vet colleagues to ensure the safe delivery of non-urgent procedures, vaccinations and health checks. Healthcare subscription products, such as Flea and Worm treatments, can now be delivered direct to home, as well as collected in-practice, and we have accelerated plans to enable remote contact and the performance of remote consults between our Joint Venture Partners and their veterinary customers through an arrangement with "Vet Help Direct".

IV. Post lockdown

It is challenging to forecast the level and shape of demand post lockdown. The speed of the economic downturn has been unprecedented, making comparisons on demand recovery with periods like the global financial crisis unhelpful, in our view. Moreover, while the duration of the recovery will in part depend on a number of variables that we can interpret over time, including levels of employment and consumer confidence, we cannot accurately predict how consumers will react and interact until either herd immunity is achieved or a vaccine has been developed.

While some market commentators have noted the rebound of economic activity in China, extrapolating China's experience into the outlook for developed markets is also unhelpful, in our view, given China's faster and more stringent virus containment measures and its predominance of manufacturing relative to our more consumer-facing services based economy.

We can, however, attempt to provide some sufficiently broad and caveated assumptions on what post lockdown demand might look like across the different areas of our business.

Retail

We expect food demand to remain inelastic given pets need to be fed through all economic cycles. It is, however, possible that consumers' purchasing intent may change during lockdown, potentially switching brands based on either availability, unit size or pricing, and we continue to offer a market leading range of branded and own label products across all price points, both in-store and online.

While accessories undoubtedly have greater demand elasticity, they comprise approximately one third of our retail sales, excluding cat litter and bedding. We have, in recent weeks, restored the full range of accessories on offer in-store, ahead of a potential increase in the attachment rate post lockdown reflecting pent up demand, higher capacity for discretionary spend across specific demographics, and the possibility that lockdown may have accelerated the perception of pets as a key part of the family.

We closed all of our Groom Room salons during lockdown, reflecting Government guidance on social distancing. Subject to consumers' attitude towards social distancing post lockdown, we anticipate a relatively quick resumption of grooming visits, given the procedures we have implemented for safe delivery of the service, a "feel good factor" post lockdown which could extend to pets, and an increasing awareness of the health benefits for pets. Prior to lockdown, grooming and pet sale revenues in FY20 averaged £3.3m per four-weekly period and we do, therefore, anticipate a period of recovery in building to historic levels.

Vet Group

Across our First Opinion practices, we have already seen a positive customer response to the adaptation of RCVS guidelines around permitted procedures, and would expect any further relaxation of guidelines to have a stimulatory effect on this economically-insensitive part of our business. We do, however, anticipate that it will take time post lockdown for our practices to reach normal levels of activity, with aggregate 4-weekly revenues averaging £27.0m for the first 48 weeks of FY20 prior to restrictions being imposed. Nevertheless, with practice recalibration now complete, third party debt and business rate payment holidays in effect, and the clear benefits of our unique owner-managed model still in place, our Vet Group is well-positioned for a recovery.

Mindful of prevailing circumstances, we recognise the potential need to support some of our First Opinion JV practices with additional operating loan funding during the year ahead. Such funding will be available for those businesses that remain viable over the longer term, taking into account the near-term benefit of the third party loan repayment holiday.

V. A new normal

There is no precedent of similar pandemics in the UK, making it difficult, therefore, to assess the medium to long term effect on consumer behaviour or when we might see normalisation in shopping habits. This crisis has, however, encouraged us to critique our business model and how we operate. While some things have changed, and will continue to do so in a post-pandemic world, we remain confident in the long-term sustainability of our business for a number of reasons:

Favourable market dynamics

We operate in a large, growing market with favourable demographics and clear, long-term demand drivers. Pets remain an important part of our lives - possibly even more so as a result of our present circumstances - and still need to be fed, loved and cared for. We believe that we can continue to take share of this market over the longer term given the significant headroom in core areas such as nutrition, veterinary services and food and healthcare subscriptions, as well as an increasing willingness among consumers to spend on convenience. 

A sustainable retail offering

In Retail, the majority of our inventory is small-ticket, non-seasonal and non-discretionary, and sourced across relatively short supply chains. Our nationwide store estate brings scale advantages, and the combination of our wide range of retail products and price points, as well as our service offering, positions us well across all demand cycles and against all manner of competition. The overwhelming majority of our stores are structurally profitable, and our longer term programme of conversion to new pet care formats, with a greater space weighting towards services, will help in moving the customer relationship from transactional to experiential, resulting in a more rewarding and convenient customer journey.

A scalable multichannel business

We have a growing multichannel business, which allows customers to shop with us however they choose. Our recent investment in automation and fulfilment has given us the capacity to process a significantly higher volume of online sales than in prior years. This brings a number of opportunities, not least around subscription services where we see considerable scope for expansion. Unlike many multichannel retailers, our unique solutions-based customer proposition allows us, in normal cycles, to grow all channels to market, simultaneously and profitably. 

A large and growing loyal customer base

We have a large and growing base of 5.6m VIP customers, many of whom already shop across our ecosystem of products, services and trusted advice. We have invested considerably over the past year in our data and analytics capability to drive customer insights that will enable us to offer more personalised, curated and rewarding solutions, both online and in-store, thereby deepening our customer relationships and increasing customer lifetime value. The benefits of this remain ahead of us over the longer term.

A scalable position in a growing veterinary market

Across our First Opinion veterinary business, the recalibration of viable and closure of specific non- viable practices has been completed. Our First Opinion practices benefit from a unique owner-manager structure and typically achieve industry leading operating metrics. Approximately, two thirds of practices are located in-store, and can benefit from retail referrals, and approximately one third of all practices have been in existence for four years or less, with practice maturity representing a significant future cash flow opportunity.

Attractive financial dynamics

Across normal cycles, our operations generate stable margins and good cash flow returns, and we have a growing stream of predictable annuity income. Our balance sheet is resilient, our leverage is low and we have various levers we can utilise, if required, to further control costs and conserve cash within the business. Over 50% of our store estate, for example, is scheduled to enter lease renewal negotiations over the next five years. Where rent reductions have historically been achieved with landlords, these have typically averaged 23%, even in a more benign rental environment.

Doing good as part of our purpose

We have raised over £5m for charities across our charitable foundation Support Adoption for Pets and our VIP loyalty programme. We have continued to reduce our environmental impact during our phase of growth through, for example, lowering our carbon footprint, using 100% renewable electricity, and recycling our pet bedding, cardboard and plastic waste.

These are clearly unprecedented times and Pets at Home will not be immune to the challenges that we collectively face. We have had to respond quickly and make significant changes to the way we operate our business, and will undoubtedly need to remain focused yet agile as we respond to pandemic-driven issues and opportunities alike. I am proud to be surrounded by an experienced and adaptable management team, who with the support of our fantastic colleagues and customers, are determined to create a stronger pet care business in a post-pandemic future.

Strategic review of FY20

We are uniquely positioned in the £6.5bn UK pet care market, which continued to demonstrate resilience and growth in 2019. We estimate that the overall size of the market increased by c4%, with the retail segment growing at c3% and the veterinary segment at c5%.  With the population of cats and dogs in the UK remaining broadly stable at c18million, this growth has been predominantly driven by continued humanisation and premiumisation - highlighting that pets are very much regarded as "one of the family".

Our pet care strategy delivered market share gains across all key areas, across our core product categories of food and accessories (both online and offline) as well as our services offering, which extends from the provision of pet grooming and First Opinion veterinary visits to our Specialist Referral centres.

Key Performance Indicators

Financial KPIs1		FY20	FY19	YoY change
Customer sales#, 2 (£m)		1,334.7	1,218.2	9.6%
Group underlying PBT (excluding IFRS16)# (£m)		99.5	89.7	11.0%
Group underlying free cashflow# (£m)		89.6	63.6	40.7%
Strategic KPIs	Measure	FY20	FY19	YoY change
Bring the pet experience to life	No. of customer transactions3 (m)	63.1	59.2	6.6%
50% of sales from pet care services	Customer sales#, 2 from services	34.1%	34.0%	9 bps
Use our data to better serve customers	VIP customer sales#, 2, 4 (£m)	817.2	591.6	38.1%
Set our people free to serve	Customer sales#, 2 per colleague (£k)	187.0	174.1	7.4%

1.  Financial KPIs shown above represent those used by the business to monitor performance.  Management recognise that as Alternative Performance Measures they differ to statutory metrics, but believe they represent the most appropriate KPIs.

2.  Customer sales include gross customer sales made by Joint Venture vet practices of £329.7m (FY19: £309.8m) (unaudited figures), and therefore differs to the fee income recognised within Vet Group revenue

3.  Includes customer transactions in-store, online, in First Opinion vet practices, cases treated in Specialist Referral centres plus pets groomed in Groom Room salons

4.  VIP customer sales are shown on a rolling 12 month basis and include gross spend at First Opinion vet practices

Strategic pillar: Bring the pet experience to life

We had another strong year in Retail, manifested in a 2-year LFL growth rate of 15%. This performance reflects the success of maintaining our competitive price position, investing in our omnichannel proposition and focussing on new customer acquisition in our Puppy and Kitten Club.

The rollout of a further 16 pet care centre formats during the year, bringing the total to 18 so far, is a good example of how we "bring the pet experience to life".  These centres create a destination for pet owners and pets alike, with dedicated multi-use event space, greater space allocated to pet care services, wider ranges of own brand Advanced Nutrition products and an emphasis on immersive, digital experiences. 

While our focus for the immediate future will be on ensuring we are well-placed for a recovery in demand, we will continue to evolve the way in which we serve customers over the longer term, to continue winning market share.

Strategic pillar: Deliver 50% of sales from pet care services

During FY20 34.1% of customer sales came from pet care services¹. By providing a variety of services to our customers, we are able to cater for their pet care needs in ways that the majority of our competitors cannot.

The greatest contributor by far was customer sales through First Opinion veterinary practices, which grew 10.4% despite ending the year with 29 fewer practices, largely due to our planned programme to buy out, or in some cases close, specific Joint Venture (JV) practices. Like-for-like customer sales delivered by our JV practices increased 13.2%, reflecting two key drivers: the immaturity of the estate (with 31% of all practices four years old or less) and the value of our unique JV model in incentivising practice growth, even when it reaches maturity.

I am particularly pleased at the way in which we delivered the recalibration of our First Opinion veterinary business over the past 18 months. The decision to buy out 57 JV practices, and subsequently close 36 of them, was made in the best interests of all the Partners involved and the longer term health of the Group.  The fee adjustments we have implemented across the remaining JV estate throughout FY20 should allow those practices to mature more swiftly, therefore improving practice cashflow.

The underlying performance of our First Opinion estate improved in FY20. We have fewer loss-making practices, more debt-free practices, and the combined profit of the estate increased significantly. This gives us confidence that our actions will help to release free cashflow as existing practices mature.

Performance across our Specialist Referral centres matched growth in the underlying market, which is the fastest growing segment of pet healthcare. Our capacity extension at Dick White Referrals in Cambridge is advancing, and we remain on track to open our first greenfield site in Scotland later this calendar year. These investments, in an attractive adjacent market to our First Opinion practices, will enable us to provide specialist treatment to even more of the nation's pets in future years.

Our various subscription services represent another key element of our offering, across which we now provide products or services to over 865,000 customers. Our monthly Flea & Worm service was successfully extended to cat wormers during the year, and subscribers to our flagship veterinary healthcare plan 'Complete Care' grew significantly in the period, while considerable headroom for longer term growth remains.

¹ including gross customer sales made by Joint Venture vet practices, revenue from our Specialist Referral centres and company managed vet practices, grooming services, subscriptions, pet sales and pet insurance commissions

Strategic pillar: Use our data to better serve customers

We ended the year with a record 5.6m active VIP loyalty club members comprising 75% of all store revenue. We have seen notable success in new customer acquisition, where new pet owners can benefit from membership of our Puppy and Kitten Clubs. By making the customer central to all aspects of our pet care ecosystem, supported by a structured and highly-engaging CRM experience, we have been able to increase spend per Puppy and Kitten Club member by up to 23%, improving the lifetime value of our customers.

A key focus over the past year has been migrating the day-to-day management and analytics of our VIP database in-house, whilst building a team of data scientists and the necessary infrastructure to optimise its output. While the financial results delivered in FY20 were largely achieved without any benefits flowing from this investment, we are increasingly well-placed to increase our share of VIP customer wallet in future years.

Strategic pillar: Set our people free to serve

Across our Retail estate, we reduced colleague hours by 3% year-on year, whilst delivering strong like-for-like sales growth and higher customer satisfaction scores. These savings were achieved by reducing non-customer facing tasks, thereby affording colleagues more time to share their expertise with customers.

We recently invested almost £5m in automation at our Northampton Distribution Centre to support the continued growth in omnichannel retailing, in particular across our subscription platform. This investment in capacity and efficiency enabled us to meet exceptional levels of demand in Q4 of FY20, as customers brought forward purchases and shopped more frequently online. 

We remain focussed on providing greater operational support across our First Opinion veterinary practices, recognising that each practice is unique. This has been particularly important during the uncertainty related to COVID-19, and our unwavering support will remain well beyond these challenging times.

Finally, in recognition of all our colleagues' commitment and determination through the recent crisis, we paid an additional colleague bonus amounting to £1.9m. I remain extremely grateful for their continued support.

Peter Pritchard

Group Chief Executive Officer

21 May 2020

Chief Financial Officer's Review

The FY20 audited period represents the 52 weeks from 29 March 2019 to 26 March 2020. The comparative period represents the 52 weeks from 30 March 2018 to 28 March 2019.

The Group's results are shown as two segments that represent the size of the respective businesses and our internal reporting structures: Retail (includes products purchased online and in-store, pet sales, grooming services and insurance products) and Vet Group (includes First Opinion practices and Specialist Referral centres).

The financial statements for FY20 have been prepared under the requirements of IFRS16 for the first time. To aid comparability with the prior period, adjusted financial information shown pre the impact of IFRS16 is also shown in the table below.  The impact of IFRS16 on the Group financial statements has been to reduce Group underlying profit before tax by £6.0m, and is shown in further detail on page 19.

	FY20 (post IFRS16)	FY20 (pre IFRS16)	FY19 (pre IFRS16)	YoY change (pre IFRS16)
Group like-for-like revenue growth#	9.0%	9.0%	5.7%
Retail	9.4%	9.4%	5.1%
Vet Group	5.6%	5.6%	11.2%
Group revenue (£m)	1,058.8	1,058.8	961.0	10.2%
Retail	937.6	937.6	854.6	9.7%
Vet Group	121.2	121.2	106.4	13.9%
Group underlying gross margin1	48.9%	48.9%	50.7%	(174) bps
Retail	49.7%	49.7%	51.0%	(127) bps
Vet Group1	42.7%	42.7%	48.0%	(531) bps
Group underlying EBIT2,3,# (£m)	111.3	103.3	93.2	10.9%
Retail	89.3	81.7	67.2	21.6%
Vet Group2	30.6	30.2	32.1	(5.9)%
Central	(8.6)	(8.6)	(6.1)	41.1%
Group underlying EBIT margin2,3,#	10.5%	9.8%	9.7%	6 bps
Retail	9.5%	8.7%	7.9%	85 bps
Vet Group2	25.2%	24.9%	30.1%	(526) bps
Group underlying PBT3,# (£m)	93.5	99.5	89.7	11.0%
Group statutory PBT3 (£m)	85.9	91.9	49.6	85.4%
Underlying basic EPS1,2,3,# (p)	15.0	16.0	14.1	13.3%
Statutory basic EPS3 (p)	13.5	14.4	6.1	136.8%
Group non-underlying charges1,2 (£m)	(7.6)	(7.6)	(40.1)	(81.1)%
Group non-underlying cash costs4 (£m)	(16.4)	(16.4)	(8.9)	83.6%
Group underlying free cashflow# (£m)	89.6	89.6	63.6	40.7%
Dividend (p)	7.5	7.5	7.5	-
Number of
Stores		453	452	1
Grooming salons		316	314	2
Joint Venture First Opinion vet practices		396	420	(24)
Company managed First Opinion vet practices		45	50	(5)

1.  FY20 non-underlying charges relating to costs incurred by the Group in buying out, and in some cases closing, certain JV practices include £6.6m charged against Vet Group, and Group, non-underlying gross margin (FY19: £40.4m)

2.  FY20 non-underlying charges also include £1.0m relating to an accounting charge for the potential future acquisition of minority stakes owned by vet Partners in the Specialist Referral centres, which has been charged against non-underlying operating costs (FY19: £0.4m)

3.  Adjusted financial metrics for FY20, which exclude the impact of the transition of IFRS16, have been provided to aid comparability with the prior period.  For further information on the impact of IFRS16, see page 19

4.  FY20 non-underlying cash costs include £10.0m relating to Joint Venture practices that we have bought out (FY19: £8.8m), plus £6.4m in relation to payments made to Shared Venture Partners in our Specialist Referral centres to acquire certain remaining minority stakes (FY19: £0.1m)

Financial review of FY20

Impact of COVID-19 on the FY20 financial statements

As we approached the end of our financial year, the impact of COVID-19 in the UK meant that we experienced exceptionally high levels of demand, notably across food products, both in-store and online. This was characterised by existing customers pulling forward purchases, as well as new customers accessing specific pet products and healthcare services, and delivered an uplift in revenue and profit for the year versus our previous expectations.

Impact of Vet Group recalibration on the FY20 financial statements

As part of the recalibration of our First Opinion veterinary business, a total non-underlying charge of £6.6m (FY19: £40.4m) has been recognised against both Vet Group, and Group, gross profit. This accounts for all costs incurred by the Group relating to practices that have been bought out and/or closed during the year. In addition to this income statement charge, an existing balance sheet provision of £9.3m brought forward from FY19 has been utilised.

Total cumulative non-underlying costs related to buying out a total of 57 Joint Venture practices, and subsequently closing 36 of them, since the beginning of FY19 have been £47.0m. With this one-off recalibration now complete, there will be no further non-underlying charges relating to the actions we have taken, and any further related cash outflow will be recognised within underlying free cashflow.

Impact of IFRS16 on the FY20 financial statements

To aid comparability, the financial information in pages 15 to 20 and associated commentary have been presented on a constant accounting basis and do not reflect the impact of IFRS16.  The impact of IFRS16 on the Group financial statements has been to reduce Group underlying profit before tax by £6.0m, and is shown in further detail on page 19.

Following the transition to reporting under IFRS16 in FY20, we will report on a post-IFRS16 basis from FY21 onwards.

Revenue

Group revenue exceeded £1bn for the first time in FY20, growing 10.2% to £1,058.8m (FY19: £961.0m) with like-for-like (LFL) revenue growth of 9.0% ^# .

Retail revenue grew 9.7% to £937.6m (FY19: £854.6m), with LFL revenue growth of 9.4% ^# . Strong growth in transaction volumes helped deliver a store LFL of 7.7%, whilst omnichannel revenue, including that generated by our subscription platforms, grew 27.8% to £93.9m.

We made particularly strong share gains in Food, where revenues grew by 13.6% to £517.4m (FY19: £455.4m). Within the Advanced Nutrition category, the ongoing trend of premiumisation enabled us to deliver revenue growth of 15.2 % to £242.1m (FY19: £210.1m) and grow category market share . The strong growth in Food revenue reflects not only our success in recruiting new customers throughout the year, particularly puppy and kitten owners, but also the exceptional level of sales seen in the closing weeks of the year as noted above. Accessories revenue grew 5.1% to £375.3m (FY19: £357.0m), with categories such as cat litter, dog toys and Health & Hygiene performing particularly well throughout the year.

Vet Group revenue grew 13.9% to £121.2m (FY19: £106.4m), with LFL growth of 5.6% ^# . Customer sales made by all First Opinion vet practices were up by 10.4% to £351.3m^# (FY19: £318.2m), whilst those made in Joint Venture veterinary practices were up 6.4% to £329.7m^# (FY19: £309.8m), all unaudited figures, despite ending the year with 24 fewer JV practices.

Total Joint Venture fee income increased by 2.1% to £53.8m (FY19: £52.6m), whilst LFL fee income growth was also 2.1%^# (FY19: 12.2%). This LFL growth in JV fee income was lower than the prior year due to adjustments made throughout FY20 to the fee arrangements for ongoing Joint Venture practices, but which have helped contribute to an improvement in the underlying performance of the estate. 

From the point at which any practice buy out was completed, the financial performance of that practice has been consolidated - please refer to Note 1 in the financial statements for more detail.  This has led to consolidated customer revenue from company managed First Opinion practices increasing significantly to £21.7m (FY19: £8.1m), as we ended the year with 45 practices under our ownership.

Elsewhere in the Vet Group, w e also saw steady performance in   our Specialist Referral division, where revenue grew 7.0% to £39.6m (FY19: £37.0m).

Gross margin  

Group underlying gross margin declined by 174 bps to 48.9% (FY19: 50.7%), whilst Group statutory gross margin increased to 48.3% (FY19: 46.5%).

Underlying (and statutory) gross margin within Retail was 49.7%, a reduction of 127 bps over the prior year (FY19: 51.0%). This was driven by strong performance in Food, as noted above, which delivered an adverse mix effect on margin.  In addition, while the growth in participation of Retail revenues from our omnichannel business to 10.0% (FY19: 8.6%) contributed to an overall increase in revenues, its greater mix of food product versus higher margin accessories had a dilutive impact on gross margin.

This combined mix impact of Food and omnichannel sales participation was particularly relevant during the final four weeks of the year when we saw exceptional demand due to COVID-19. Prior to that period, Retail gross margin for FY20 had been 50.4%.

Underlying gross margin within the Vet Group decreased by 531 bps to 42.7% (FY19: 48.0%). This decrease largely reflects the impact of fee adjustments implemented for JV practices throughout the year, which have supressed JV fee income, while the costs incurred in generating this fee income and charged against gross profit have remained relatively flat. Consolidation of the former JV practices which have been retained under a company managed model also had a dilutive impact on Vet Group gross margin, with the margin profile of an individual practice being significantly lower than that generated on JV fee income. 

Finally, we saw a positive impact on Vet Group gross margin resulting from a lower charge of £0.9m (FY19: £2.9m) being made to the underlying provision held against operating loan funding provided to First Opinion veterinary practices, which we expect to continue operating as Joint Ventures. This underlying provision represents c21% of the operating loan gross balance (FY19: c20%). While the year on year provision as a percentage of the gross balance has marginally increased, we believe this is appropriately prudent given we have only recently completed our recalibration actions and still have a Joint Venture estate of which a significant proportion is immature.

Statutory Vet Group gross margin, after all non-underlying charges, increased significantly to 37.2% (FY19: 10.1%). This reflects a reduced charge of £6.6m (FY19: £40.4m) relating to costs incurred by the Group completing the Vet Group recalibration .

Operating profit and operating costs

Underlying Group EBIT was £103.3m ^# (FY19: £93.2m), with a margin of 9.8% ^# (FY19: 9.7%).

Underlying Retail EBIT was £81.7m ^# (FY19: £67.2m) with a margin of 8.7% ^# (FY19: 7.9%), with operating cost growth, excluding depreciation and amortisation, of 4.5% to £349.2m (FY19: £334.3m).  This operating margin expansion was achieved despite the lower gross margin noted above, and represents careful management of operating costs.

Occupation costs (rent, service charges and other property costs) declined as a percentage of Retail sales to 13.7% (FY19: 14.9%) due to rent reductions achieved across a number of lease renewal negotiations. Colleague costs also decreased as a percentage of Retail sales to 16.9% (FY19: 17.8%), driven by efficiency initiatives in-store. Excluding IFRS16 right-of-use assets, depreciation and amortisation in Retail increased slightly to £35.3m (FY19: £34.3m).

Underlying Vet Group EBIT was £30.2m ^# (FY19: £32.1m) with a margin of 24.9%^# (FY19: 30.1%).  Operating costs in the Vet Group, excluding depreciation and amortisation, were £18.5m (FY19: £16.5m), growth of 12.5% on the prior year. This was largely due to consolidation of overhead costs relating to those JV practices which have been bought out, plus various pre-opening costs associated with expansion in our Specialist Referral division. Excluding IFRS16 right-of-use assets, depreciation and amortisation in the Vet Group increased to £3.0m (FY19: £2.5m).

In the Vet Group, non-underlying operating costs totalling £1.0m (FY19: £0.4m) were recognised in relation to the Shared Venture ownership model in our Specialist Referral division, where the option Pets at Home has to buy shares held by Shared Venture Partners in the future is accounted for as a forward contract. During the year, we exercised options to purchase shareholdings from certain Partners at a total cash cost of £6.4m, such that three centres are now wholly owned.

Central costs, including Group overheads and colleagues, increased to £8.6m (FY19 : £6.1m).

Finance expense

Excluding IFRS16 interest charges, the net finance expense for the year was £3.8m, a slight increase from the prior year (FY19: £3.5m).

Profit before tax

Excluding the impact of IFRS16, underlying pre-tax profit was £99.5m ^# (FY19: £89.7m) and pre-tax profit after charging for all non-underlying items increased significantly to £91.9m (FY19: £49.6m).  This increase in pre-tax profit reflects the strength of underlying trading in Retail, plus a reduced non-underlying charge of £7.6m (FY19: £40.1m), largely relating to the recalibration of the First Opinion veterinary business. Statutory pre-tax profit, including the impact of IFRS16, was £85.9m (FY19: £49.6m).

Taxation, net income & EPS

After removing the impact of IFRS16, the underlying tax expense for the period was £19.8m ^# , a rate of 19.9% on underlying pre-tax profit.

Excluding the impact of IFRS16, underlying net income for the year, after tax, increased by 13.3% to £79.7m ^# (FY19: £70.4m) and underlying basic earnings per share were 16.0 pence ^# (FY19: 14.1 pence).

Statutory basic earnings per share, including the impact of IFRS16, were 13.5 pence (FY19: 6.1 pence).

Cash working capital

The cash movement in trading working capital for FY20 was an inflow of £30.7m ^# (FY19: inflow of £17.9m). This comprised a £5.7m decrease in inventory, a £16.2m increase in payables and a £8.8m decrease in receivables.

We also provided support to some ongoing Joint Venture First Opinion veterinary practices in the form of £2.5m of cash operating loans in the year (FY19: £9.6m). This reduced the overall Group cash working capital inflow to £28.2m.

The gross value of operating loans at the end of the year was £37.5m (FY19: £42.2m).  Following the completion of our buy-out programme during the first half of FY20, operating loans totalling £7.2m relating to these practices were written off in full by utilising the 100% non-underlying provision established in FY19. As such, the total provision of £8.0m (FY19: £14.3m) now held against the gross value of operating loans is entirely an underlying provision held against the balance of operating loans for practices which we expect to continue operating as Joint Ventures, at an average of c21%.

Capital investment

Excluding IFRS16 right-of-use asset additions, capital investment was £38.3m (FY19: £34.5m), and was fully aligned to our strategic priorities. The ongoing refurbishment and maintenance of our existing store estate, including rollout of our pet care centre format across a further 16 stores during FY20, totalled £11.1m (FY19: £8.8m), and represented just 1.2% of Retail sales. I nvestment in omnichannel and business systems totalled £14.9m (FY19: £10.8m) as we continue to invest in our digital and data capabilities to support future growth, and a further £4.8m was invested in the organic growth of our Specialist Referrals division. Cash capital expenditure was £39.6m (FY19: £37.9m), and CROIC^# was 19.7% (FY19:18.9%).

Group underlying free cashflow

Group underlying free cashflow (FCF) after interest, tax and before acquisitions increased to £89.6m ^# (FY19: £63.6m), representing a cash conversion rate of 63% ^# (FY19: 49%). The increase in FCF compared with the prior year was achieved despite a one-off additional payment of £10.7m relating to a change in timing of Corporation Tax payments, which meant we paid a total of £30.8m during FY20.

Group underlying free cashflow #   (pre-IFRS16) (£m)	FY20	FY19
Group operating cashflow #	165.8	126.5
Tax	(30.8)	(18.6)
Net interest	(3.2)	(2.8)
Debt issue costs	-	(2.5)
Net capex	(39.4)	(37.2)
Purchase of own shares to satisfy colleague options	(2.8)	(1.8)
Group underlying free cashflow #	89.6	63.6

FY20 Group underlying free cashflow #	Underlying FCF (£m)	FCF conversion2
Retail	84.8	72.5%
Vet Group	16.7	50.2%
Central1	(11.9)	NM
Group underlying free cashflow #	89.6	63.2%

1.  Includes central costs of £8.6m plus interest paid of £3.8m, purchase of own shares of £2.8m and a Corporation Tax credit off £3.0m

2.  Calculated as underlying free cashflow as a percentage of underlying EBITDA

The Group's net debt position at the end of the year was £85.9m, which represents a leverage ratio of 0.6x underlying EBITDA ^# on a pre-IFRS16 basis or 2.5x on a post-IFRS16 basis.

Group net debt (£m)	FY20	FY19
Opening net debt (pre-IFRS16)	(120.5)	(135.2)
Underlying free cashflow#	89.6	63.6
Ordinary dividends paid	(37.1)	(37.2)
Acquisitions3	(1.5)	(2.8)
Non-underlying cash outflow4	(16.4)	(8.9)
Closing net debt (pre-IFRS16)	(85.9)	(120.5)
Pre-IFRS16 leverage (Net debt/ underlying EBITDA # )	0.6x	0.9x
Post-IFRS16 leverage (Net debt/ underlying EBITDA # )	2.5x	3.0x

3.  FY20 includes an investment in Tailster.com and in certain company managed practices. FY19 includes the purchase of two mature JV practices from Joint Venture Partners for £2.1m, which are now operated as company managed practices, £(0.3)m of net cash acquired by purchasing three other existing JV practices, and deferred consideration of £1.0m relating to one of our Specialist Referral centres. 

4.  FY20 includes £10.0m relating to practices bought out during the year (FY19: £8.8m), plus £6.4m in relation to payments made to certain Shared Venture Partners in our Specialist Referral centres to acquire remaining minority stakes (FY19: £0.1m)

Dividend

The Board has recommended a final dividend of 5.0 pence per share, reflecting the strength of our performance last year and our robust liquidity and balance sheet. This takes the total dividend for the year to 7.5 pence per share, equal with the prior year. The final dividend will be payable on 14 July 2020 to shareholders on the register at the close of trading on 19 June 2020. 

Transition to IFRS16

The financial statements for FY20 have been prepared under the requirements of IFRS16 for the first time. Implementation of IFRS16 has had no effect on how the business is run, or on cash flows generated. It has, however, had an impact on the assets, liabilities and income statement of the Group, as well as the classification of cash flows relating to lease contracts.

IFRS16 seeks to align the presentation of leased assets more closely to owned assets. In doing so, a right-of-use asset and lease liability are brought onto the balance sheet, with the lease liability recognised at the present value of future lease payments. Whilst the right-of-use asset is matched in value to the lease liability at inception, it differs in value through the life of the lease. The total value of the discounted lease liability under IFRS16 on the Group's Balance Sheet at the end of FY20 is £463.9m. 

IFRS16 permits a choice on the method of implementation and after careful consideration the Group has applied the modified retrospective approach. Under this method, all prior year comparative balances have not been restated, but the cumulative effect of adopting IFRS16 has been recognised as an adjustment to the opening balance sheet for FY20. Both the right-of-use asset and lease liability are recognised as the present value of future lease payments as of the date of transition, with the right-of-use asset adjusted for any remaining deferred income relating to landlord incentives and rent free periods, outstanding prepayments or provisions for onerous leases. 

In Retail, the application of IFRS16 results in all store and distribution centre rents no longer being included within operating costs but replaced instead by an additional depreciation charge. On a post-IFRS16 basis, Retail operating costs excluding depreciation and amortisation were £272.5m. Including all IFRS16 right-of-use assets, total depreciation and amortisation was £104.3m, leading to an operating margin of 9.5%. 

In the Vet Group, right-of-use assets relate predominantly to our Specialist Referral centres. On a post-IFRS16 basis, Vet Group operating costs excluding depreciation were £16.1m. Including all IFRS16 right-of-use assets, total depreciation and amortisation was £5.1m, leading to an operating margin of 25.2%. 

Including all IFRS16 interest charges, the net finance expense for the period was £17.8m.

The net impact of IFRS16 in the year was to reduce Group underlying and statutory profit before tax by £6.0m to £93.5m and £85.9m respectively.

In order to clearly show the impact of transitioning to IFRS16, we show a reconciliation of Group underlying profit before tax and cashflow as follows.

£m (unaudited)	Pre IFRS16	Exclude rent	Include depreciation	Include interest	Post IFRS16
Revenue	1,058.8	-	-	-	1,058.8
Operating lease rentals	(79.1)	79.1	-	-	-
Depreciation & amortisation	(38.3)	-	(71.1)	-	(109.4)
Underlying operating profit #	103.3	79.1	(71.1)	-	111.3
Finance income	0.4	-	-	0.1	0.5
Finance expense	(4.2)	-	-	(14.1)	(18.3)
Group underlying PBT #	99.5	79.1	(71.1)	(14.0)	93.5

£m (unaudited)	Pre IFRS16	Add back rent	Replace with interest & capital repayment	Post IFRS16
Group operating cashflow #	165.8	79.1	-	244.9
Tax	(30.8)	-	-	(30.8)
Interest	(3.2)	-	(14.0)	(17.2)
Repayment of lease obligations	-	-	(67.0)	(67.0)
Net capex	(39.4)	-	-	(39.4)
Purchase of own shares	(2.8)	-	-	(2.8)
Other cashflow items	-	-	1.9	1.9
Group underlying free cashflow	89.6	79.1	(79.1)	89.6

Impact of the UK's exit process from the EU

We continue our work to assess and mitigate the likely impact of the United Kingdom's exit from the European Union (EU).  With the UK currently working towards 31 December as the date we will exit the EU, we are keeping the following areas under review:

1)  Consumer demand - although we expect the UK pet care market to remain resilient, we will be vigilant to signs that consumer demand is being adversely affected, so that we may respond appropriately and expediently.

2)  Although pet products are unlikely to 'spoil' as a result of any border delays, there is a risk that our supply chain becomes disrupted. In such circumstances, we may consider increasing our inventory holding to mitigate the potential impact on our Retail division.

3)  We do not currently expect to see a material tariff impact, as the majority of our imported products are sourced from outside the EU. 

4)  Exchange rates - the exit process may prompt movements in the USD/GBP exchange rate. In FY20, t he Group purchased products from Asia to a value of around US$85m, although we expect to purchase slightly less than that in FY21. Our policy is to use a mix of foreign exchange forward contracts to hedge our USD requirement to cover the next 18 months. 83% of our FY21 forecast USD spend is currently hedged at an average rate of 1.28 USD:GBP, and we will monitor exchange rates closely as we look to mitigate any pressure on Retail gross margin.

5)  A significant number of colleagues, particularly within our Vet Group and distribution centres, are non-UK EU nationals. While Brexit may result in changes to UK immigration policy which could increase the risk around the availability, recruitment and retention of these individuals, it may also make it easier to recruit highly skilled workers. Although it is a positive step that the Government has accepted the Migration Advisory Committee's recommendation that veterinary surgeons be restored to the shortage occupation list, we will continue to work closely with professional bodies including the Royal College of Veterinary Surgeons and the British Veterinary Association to assess the potential impact of restrictions on free movement for EU nationals.

Mike Iddon

Chief Financial Officer

21 May 2020

Financial statements

Independent Auditor's Report

Consolidated income statement

Consolidated statement of comprehensive income

Consolidated balance sheet

Consolidated statement of changes in equity as at 26 March 2020

Consolidated statement of changes in equity as at 28 March 2019

Consolidated statement of cash flows

Company balance sheet

Company statement of changes in equity as at 26 March 2020

Company statement of changes in equity as at 28 March 2019

Company income statement

Company statement of cash flows

Notes (forming part of the financial statements)

Glossary - Alternative Performance Measures

Advisors and contacts

Financial Statements

The financial information set out below does not constitute the company's statutory accounts for the periods ended 26 March 2020 or 28 March 2019 but is derived from those accounts. Statutory accounts for 2019 have been delivered to the registrar of companies, and those for 2020 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006

Consolidated income statement

	Note	52 week period ended 26 March 2020			52 week period ended 28 March 2019
		Underlying trading £m	Non-underlying items (note 3) £m	Total £m	Underlying trading  £m	Non-underlying items (note 3) £m	Total £m
Revenue	2	1,058.8	-	1,058.8	961.0	-	961.0
Cost of sales		(540.0)	(6.9)	(546.9)	(471.2)	(22.5)	(493.7)
Impairment losses on receivables	3,17	(0.9)	0.3	(0.6)	(2.9)	(17.9)	(20.8)
Gross profit		517.9	(6.6)	511.3	486.9	(40.4)	446.5
Selling and distribution expenses		(313.8)	-	(313.8)	(314.5)	-	(314.5)
Administrative expenses	3	(92.8)	(1.0)	(93.8)	(79.2)	0.3	(78.9)
Operating profit	2,3	111.3	(7.6)	103.7	93.2	(40.1)	53.1
Financial income	6	0.5	-	0.5	0.6	-	0.6
Financial expense	7	(18.3)	-	(18.3)	(4.1)	-	(4.1)
Net financing expense		(17.8)	-	(17.8)	(3.5)	-	(3.5)
Profit before tax		93.5	(7.6)	85.9	89.7	(40.1)	49.6
Taxation	8	(18.6)	0.1	(18.5)	(19.3)	0.2	(19.1)
Profit for the period		74.9	(7.5)	67.4	70.4	(39.9)	30.5

All activities relate to continuing operations.

Basic and diluted earnings per share attributable to equity shareholders of the Company:

	Note	52 week period ended 26 March 2020	52 week period ended 28 March 2019
Equity holders of the parent - basic	5	13.5p	6.1p
Equity holders of the parent- diluted	5	13.2p	6.0p

Dividends paid and proposed are disclosed in note 9.

The notes on pages 31 to 95 form an integral part of these financial statements.

Consolidated statement of comprehensive income

	Note	52 week period ended 26 March 2020 £m	52 week period ended 28 March 2019   £m
Profit for the period		67.4	30.5
Other comprehensive income
Items that are or may be recycled subsequently into profit or loss:
Foreign exchange translation differences	22	(0.1)	(0.1)
Effective portion of changes in fair value of cash flow hedges	22	(5.5)	1.0
Other comprehensive income for the period, before income tax		(5.6)	0.9
Income tax on other comprehensive income	15,22	0.9	(0.4)
Other comprehensive income for the period, net of income tax		(4.7)	0.5
Total comprehensive income for the period		62.7	31.0

The notes on pages 31 to 95 form an integral part of these financial statements.

Consolidated balance sheet

	Note	At 26 March 2020 £m	At 28 March 2019 £m
Non-current assets
Property, plant and equipment	11	117.1	123.7
Right-of-use assets	12	425.2	-
Intangible assets	13	1,006.4	1,000.7
Other non-current assets	16	20.9	18.7
		1,569.6	1,143.1
Current assets
Inventories	14	62.8	68.2
Other financial assets	16	1.5	1.6
Trade and other receivables	17	55.9	68.9
Cash and cash equivalents	18	79.1	60.5
		199.3	199.2
Total assets		1,768.9	1,342.3
Current liabilities
Trade and other payables	20	(196.6)	(185.8)
Lease liabilities	12	(83.7)	-
Corporation tax		(0.5)	(10.2)
Provisions	21	(3.9)	(15.4)
Other financial liabilities	16	(2.2)	(7.3)
		(286.9)	(218.7)
Non-current liabilities
Other interest-bearing loans and borrowings	19	(163.3)	(178.8)
Other payables	20	-	(33.6)
Lease liabilities	12	(380.2)	-
Provisions	21	(1.3)	(1.7)
Other financial liabilities	16	(5.8)	(2.5)
Deferred tax liabilities	15	(0.4)	(4.0)
		(551.0)	(220.6)
Total liabilities		(837.9)	(439.3)
Net assets		931.0	903.0
Equity attributable to equity holders of the parent
Ordinary share capital	22	5.0	5.0
Consolidation reserve		(372.0)	(372.0)
Merger reserve		113.3	113.3
Translation reserve		(0.1)	(0.0)
Cash flow hedging reserve		(2.8)	0.8
Retained earnings		1,187.6	1,155.9
Total equity		931.0	903.0

On behalf of the Board:

Mike Iddon

Group Chief Financial Officer

Company number: 08885072

The notes on pages 31 to 95 form an integral part of these financial statements.

Consolidated statement of changes in equity as at 26 March 2020

	Share capital £m	Consolidation reserve £m	Merger reserve £m	Cash flow hedging reserve £m	Translation reserve £m	Retained earnings £m	Total equity £m
Balance at 28 March 2019	5.0	(372.0)	113.3	0.8	(0.0)	1,155.9	903.0
Total comprehensive income for the period
Profit for the period	-	-	-	-	-	67.4	67.4
Other comprehensive income (note 22)	-	-	-	(4.6)	(0.1)	-	(4.7)
Total comprehensive income for the period	-	-	-	(4.6)	(0.1)	67.4	62.7
Hedging gains & losses reclassified to inventory	-	-	-	1.0	-	-	1.0
Total hedging gains & losses reclassified to inventory	-	-	-	1.0	-	-	1.0
Transactions with owners, recorded directly in equity
Equity dividends paid	-	-	-	-	-	(37.1)	(37.1)
Share based payment charge	-	-	-	-	-	4.2	4.2
Purchase of own shares	-	-	-	-	-	(2.8)	(2.8)
Total contributions by and distributions to owners	-	-	-	-	-	(35.7)	(35.7)
Balance at 26 March 2020	5.0	(372.0)	113.3	(2.8)	(0.1)	1,187.6	931.0

Consolidated statement of changes in equity as at 28 March 2019

	Share capital £m	Consolidation reserve £m	Merger reserve £m	Cash flow hedging reserve £m	Translation reserve £m	Retained earnings £m		Total equity £m
Balance at 29 March 2018	5.0	(372.0)	113.3	(1.0)	0.1	1,160.9		906.3
Total comprehensive income for the period
Profit for the period	-	-	-	-	-	30.5		30.5
Other comprehensive income (note 22)	-	-	-	0.6	(0.1)	-		0.5
Total comprehensive income for the period	-	-	-	0.6	(0.1)	30.5		31.0
Hedging gains & losses reclassified to inventory1	-	-	-	1.2	-	-		1.2
Total hedging gains & losses reclassified to inventory	-	-	-	1.2	-		-	1.2
Transactions with owners, recorded directly in equity
Equity dividends paid	-	-	-	-	-	(37.2)		(37.2)
Share based payment charge	-	-	-	-	-	3.5		3.5
Purchase of own shares	-	-	-	-	-	(1.8)		(1.8)
Total contributions by and distributions to owners	-	-	-	-	-	(35.5)		(35.5)
Balance at 28 March 2019	5.0	(372.0)	113.3	0.8	(0.0)	1,155.9		903.0

¹ The comparative consolidated statement of changes in equity has been restated to show hedging gains & losses reclassified to inventory to enhance comparability.

Consolidated statement of cash flows

	52 week period ended 26 March 2020 £m	52 week period ended 28 March 2019 £m1
Cash flows from operating activities
Profit for the period	67.4	30.5
Adjustments for:
Depreciation and amortisation	109.4	36.8
Non-underlying impairment	3.4	-
Financial income	(0.5)	(0.6)
Financial expense	18.3	4.1
Settlement of 'put & call' liabilities (growth element)	(0.8)	(0.1)
Share based payment charges	4.2	3.5
Taxation	18.5	19.1
	219.9	93.3
Decrease/(increase) in trade and other receivables	5.4	(1.8)
Decrease/(increase) in inventories	5.7	(7.3)
Increase in trade and other payables	16.9	12.6
(Decrease)/increase in provisions	(0.7)	1.9
(Decrease)/increase in working capital relating to non-underlying items	(1.2)	27.7
	246.0	126.4
Tax paid	(30.8)	(18.6)
Net cash flow from operating activities	215.2	107.8
Cash flows from investing activities
Proceeds from the sale of property, plant and equipment	0.4	0.6
Interest received	0.5	0.6
Investment in other financial assets	(1.0)	-
Loans issued	-	(0.2)
Acquisition of subsidiaries, net of cash acquired (underlying)	(0.5)	(1.1)
Acquisition of subsidiaries, net of cash acquired (non-underlying)	(0.5)	(0.7)
Other costs associated with acquisition of subsidiaries (non-underlying)	(3.7)	(2.4)
Repayment of borrowings owed by JV practices in advance of acquisition of subsidiaries (underlying)	-	(0.7)
Repayment of borrowings owed by JV practices in advance of acquisition of subsidiaries (non-underlying)	(5.9)	(5.7)
Acquisition of property, plant and equipment and other intangible assets	(39.6)	(37.4)
Net cash used in investing activities	(50.3)	(47.0)
Cash flows from financing activities
Equity dividends paid	(37.1)	(37.2)
Proceeds from new loan	61.0	181.0
Repayment of borrowings	(77.0)	(195.0)
Debt issue costs	-	(2.5)
Capital lease payments	(67.0)	-
Settlement of 'put and call' liabilities (minimum amount)	(5.6)	(1.0)
Purchase of own shares	(2.8)	(1.8)
Finance lease obligations	(0.1)	(0.2)
Interest paid	(3.7)	(3.4)
Interest paid on lease obligations	(14.0)	-
Net cash used in financing activities	(146.3)	(60.1)
Net increase in cash and cash equivalents	18.6	0.7
Cash and cash equivalents at beginning of period	60.5	59.8
Cash and cash equivalents at end of period	79.1	60.5

¹ The comparative cash flow statement has been restated to enhance comparability.

The notes on pages 31 to 95 form an integral part of these financial statements.

Company balance sheet

	Note	At 26 March 2020 £m	At 28 March 2019 £m
Non-current assets
Investments in subsidiaries	28	936.2	936.2
		936.2	936.2
Current assets
Other financial assets	16	0.3	-
Trade and other receivables	17	579.2	578.3
Cash and cash equivalents	18	-	-
Deferred tax assets	15	0.4	0.0
		579.9	578.3
Total assets		1,516.1	1,514.5
Current liabilities
Trade and other payables	20	(387.8)	(330.1)
Other financial liabilities	16	-	(0.1)
		(387.8)	(330.2)
Non-current liabilities
Other interest-bearing loans and borrowings	19	(163.3)	(178.8)
Other financial liabilities	16	(2.3)	-
		(165.6)	(178.8)
Total liabilities		(553.4)	(509.0)
Net assets		962.7	1,005.5
Equity attributable to equity holders of the parent
Ordinary share capital	22	5.0	5.0
Merger reserve		113.3	113.3
Cash flow hedging reserve		(1.6)	(0.1)
Retained earnings		846.0	887.3
Total equity		962.7	1,005.5

On behalf of the Board:

Mike Iddon

Group Chief Financial Officer

Company number: 08885072

The notes on pages 31 to 95 form an integral part of these financial statements.

Company statement of changes in equity as at 26 March 2020

	Share capital £m	Merger reserve £m	Cash flow hedging reserve £m	Retained earnings £m	Total equity £m
Balance at 28 March 2019	5.0	113.3	(0.1)	887.3	1,005.5
Total comprehensive income for the period
Loss for the period	-	-	-	(5.6)	(5.6)
Other comprehensive income	-	-	(1.5)	-	(1.5)
Total comprehensive income for the period	-	-	(1.5)	(5.6)	(7.1)
Transactions with owners, recorded directly in equity
Equity dividends paid	-	-	-	(37.1)	(37.1)
Share based payment charge	-	-	-	4.2	4.2
Purchase of own shares	-	-	-	(2.8)	(2.8)
Total contributions by and distributions to owners	-	-	-	(35.7)	(35.7)
Balance at 26 March 2020	5.0	113.3	(1.6)	846.0	962.7

Company statement of changes in equity as at 28 March 2019

	Share capital £m	Merger reserve £m	Cash flow hedging reserve £m	Retained earnings £m	Total equity £m
Balance at 29 March 2018	5.0	113.3	0.8	932.8	1,051.9
Total comprehensive income for the period
Loss for the period	-	-	-	(6.9 )	(6.9)
Other comprehensive income	-	-	(0.9)	-	(0.9)
Total comprehensive income for the period	-	-	(0.9)	(6.9 )	(7.8 )
Transactions with owners, recorded directly in equity
Equity dividends paid	-	-	-	(37.2)	(37.2)
Share based payments charge	-	-	-	0.4	0.4
Purchase of own shares	-	-	-	(1.8)	(1.8)
Total contributions by and distributions to owners	-	-	-	(38.6)	(38.6)
Balance at 28 March 2019	5.0	113.3	(0.1)	887.3	1,005.5

Company income statement

As permitted by section 408 of the Companies Act 2006, the Company's income statement has not been included in these financial statements. The Company's loss for the 52 week period ended 26 March 2020 was £5.6m (loss for the 52 week period ended 28 March 2019 was £6.9m).

Company statement of cash flows

		52 week period ended 26 March 2020 £m	52 week period ended 28 March 2019   £m
Cash flows from operating activities
Loss for the period		(5.6)	(6.9)
Financial expense		4.2	4.1
Share based payment charges		4.2	0.4
Tax		(2.6)	-
		0.2	(2.4)
Increase in trade and other receivables		(1.3)	(1.5)
Increase in trade and other payables		57.7	61.1
Tax paid		3.0	-
Net cash flow from operating activities		59.6	57.2
Cash flows from financing activities
Equity dividends paid		(37.1)	(37.2)
Proceeds from new loan		61.0	181.0
Repayment of borrowings		(77.0)	(195.0)
Debt issue costs		-	(2.5)
Interest paid		(3.7)	(3.4)
Purchase of own shares		(2.8)	(1.8)
Net cash used in financing activities		(59.6)	(58.9)
Net decrease in cash and cash equivalents		-	(1.7)
Cash and cash equivalents at beginning of period		-	1.7
Cash and cash equivalents at end of period		-	-

Notes (forming part of the financial statements)

Pets at Home Group Plc (the Company) is a company incorporated in the United Kingdom and its registered office is Epsom Avenue, Stanley Green, Handforth, Cheshire, SK9 3RN.

1  Significant accounting policies

The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these consolidated financial statements.

1.1  Basis of preparation

The consolidated financial statements presented in this document have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. The Company's financial statements have been prepared in accordance with IFRS as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006. The Company has taken advantage of the exemption provided under section 408 of the Companies Act 2006 not to publish its individual income statement and related notes.

The financial statements are prepared under the historical cost convention, as modified by the revaluation of derivative financial instruments to fair value, and in accordance with those parts of the Companies Act 2006 applicable to companies reporting under IFRS as adopted by the European Union.

The Group has initially adopted the following new standards from 29 March 2019 and these have been applied in these financial statements.

IFRS 16 Leases (effective date 1 January 2019) 

IFRS 16 Leases is effective for the Group from 29 March 2019 and replaces existing lease guidance under IAS 17 Leases.  IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under IAS 17.

Leases in which the Group is a lessee

The majority of the Group's trading stores, standalone veterinary practices, specialist referral centres, distribution centres and support offices are leased.  The Group also has a number of non-property leases relating to vehicles, equipment and material handling equipment. 

Under IFRS 16, the Group recognises a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. The lease liability is initially measured at the present value of the remaining lease payments, discounted using the interest rate implicit in the lease, or if that rate cannot be readily determined, the Group's incremental borrowing rate.  The rate implicit in the lease cannot be readily determined and therefore a rate based on the Group's incremental borrowing rate is used.  This rate is adjusted to take into account the risk associated with the length of the lease.  A higher discount rate is applied to a longer lease.  Lease payments will include any fixed payments, including as a result of stepped rent increases.

The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the lease commencement date and any lease incentives received or premiums paid.

Under IAS 17, the Group recognised operating lease expenses on a straight line basis over the term of the lease, and recognised assets and liabilities only to the extent that there was a timing difference between actual lease payments and the expense recognised.  Lease incentives received or paid were recognised as an integral part of the total lease expense over the term of the lease.  Rent prepayments were disclosed within prepayments, and deferred income in respect of landlord incentives on property leases was disclosed within trade and other payables.  Under IFRS 16, the rent charge is replaced by a depreciation charge for the right-of-use asset and an interest expense on the lease liability.

After the commencement date, the lease liability will be increased as interest is charged and reduced as lease payments are made.  The carrying value of the lease liability will be reassessed on agreement of a lease modification event, such as a change in the fixed amount payable or a change in the lease term.  The discount rate used will be reassessed if the length of the lease is extended. 

There are recognition exemptions for low-value assets and short-term leases with a lease term of 12 months or less.  Any leases under a short term licence agreement are excluded as they fall into the lease term of 12 months or less.  The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the term of the lease. The total value of leases where the Group has taken a recognition exemption is disclosed in note 12.

Leases in which the Group is a lessor

Lessor accounting remains similar to current accounting under IAS 17.  At lease inception, lessors will determine whether each lease is a finance lease or an operating lease.  To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset.  If this is considered to be the case, then the lease is recognised as a finance lease, if not then it is recognised as an operating lease.  As part of this assessment, the Group considers certain factors such as whether the lease is for the majority of the economic life of the asset.

The Group has a small number of leases where it is an intermediate lessor.  For these leases, it accounts for the interest in the head lease and sub-lease separately.  It assesses the lease classification of the sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset. 

The Group has reassessed the classification of sub-leases in which the Group is a lessor.  Under IAS 17, the sub-leases were classified with reference to the underlying asset which resulted in all sub-leases being classified as operating leases.  The Group will reclassify a small number of sub-leases as a finance lease, resulting in recognition of a finance lease receivable of £2.4m as at 29 March 2019. Under IFRS 16, the finance lease is assessed by reference to the right-of-use asset under the head lease rather than the underlying asset. There will be no change to the accounting for the remaining sub-leases which continue to be accounted for as an operating lease, and income from these leases will continue to be recognised on a straight-line basis over the term of the lease, as disclosed in note 3.

The Group currently receives rental income from related Joint Venture veterinary practices which are located within the Group's retail stores.  These rental incomes are disclosed in note 3. Under IFRS 16, the lease classification of sub-leases is assessed by reference to the right-of-use asset under the head lease rather than the underlying asset. Therefore there will be no change in accounting for this rental income, which will continue to be presented as other income within operating expenses.

Notes (forming part of the financial statements) continued

1  Significant accounting policies (continued)

1.1  Basis of preparation (continued)

Transition

The Group has adopted IFRS 16 on 29 March 2019 using the modified retrospective approach.  The cumulative effect of adopting IFRS 16 has been recognised as an adjustment to the opening balance sheet as at 29 March 2019 with no restatement of comparable information. There is no impact to the statement of changes in equity.  Further details and the impact of changes are disclosed in note 29.

1.2  Measurement convention

The consolidated financial statements are prepared on the historical cost basis except that the following assets and liabilities are stated at their fair value: derivative financial instruments, financial instruments classified as fair value through the profit or loss. Non-current assets held for sale are stated at the lower of previous carrying amount and fair value less costs to sell.

1.3  Going concern

The Company's business activities, together with the factors likely to affect its future development, performance and position, are set out in the Strategic Report, including a detailed COVID-19 assessment within the Chief Executive's Statement. The financial position of the Company, its cash flows, liquidity position and borrowing facilities are described in the Chief Financial Officer's Review. In addition, note 23 to the financial statements includes the Company's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk.

In assessing the Group's continued adoption of the going concern basis of preparation, the Directors have carefully considered the impact of COVID-19 on the Group's financial position, liquidity and future performance. The Group is deemed an 'essential retailer' by the Government and as such stores and veterinary practices have continued to trade throughout, albeit at restricted levels, and higher levels of online orders have continued to be fulfilled from distribution centres. In forecasting cash flows over 12 months from the date of signing of the financial statements, the Directors have adjusted the Board approved business plan to reflect continued reduced sales in Retail and Vets within the first half of 2021 financial year (COVID-19 adjusted forecast), with a return to our original business plan thereafter. In the period post year end, online sales have remained at materially elevated levels compared to business plan, and in-store sales have outperformed the depressed level included within the COVID-19 adjusted forecast.

Strong performance during the financial year ended 26 March 2020 has meant that the Group has entered the next financial year with total liquidity including cash balances of £162m. The Group has access to a revolving facility of £248m, which expires in September 2023, with £165m drawn down at 26 March 2020. The lowest level of headroom forecast over the next 12 months from the date of signing of the financial statements under COVID-19 adjusted forecast referred to above is in excess of £80m; this is before the additional £100m facility discussed below. The Group has been in compliance with all covenants applicable to this facility within the financial year, and is forecast to continue to be in compliance for 12 months from the date of signing of the financial statements, including under the COVID-19 downside sensitivity discussed above. Given current uncertainty over the duration of lockdown / social distancing measures, post year end the Group have arranged for an additional credit facility of £100m to provide further certainty over liquidity, should it be required.

The Directors of Pets at Home Group Plc, having made appropriate enquiries, consider that adequate resources exist for the Group to continue in operational existence for the foreseeable future and that, therefore, it is appropriate to adopt the going concern basis in preparing the consolidated financial statements as at and for the period ended 26 March 2020.

1.4  Basis of consolidation

Subsidiaries

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable. The acquisition date is the date on which control is transferred to the acquirer. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.

The Group and Company operate an Employee Benefit Trust (EBT) for the purposes of acquiring shares to fund share awards made to employees.  The EBT is deemed to be a subsidiary of the Group and  Company as Pets at Home Group Plc is considered to be the ultimate controlling party for accounting purposes. The assets and liabilities of this trust have been included in the consolidated financial information.  The cost of purchasing own shares held by the EBT is accounted for in retained earnings.

Investment in Joint Venture veterinary practices

The Group has a number of non-participatory shareholdings in veterinary practice companies, which are accounted for as Joint Venture arrangements. The veterinary practices were established under terms that require mutual agreement between the Group and the Joint Venture Partner, and do not give the Group power over decision making to affect its exposure to, or the extent of, the returns from its involvement with the practices and therefore are not consolidated in these financial statements. Further, the Group is not entitled to profits, losses, or any surplus on winding up or disposal of the Joint Venture veterinary practices, and as such no participatory interest is recognised. The Group's category of shareholding in the Joint Venture veterinary practices entitles the Group to charge management fees for support services provided. For further details see notes 16, 17 and 27.

The investments have been equity accounted for in the Group's financial statements in accordance with IAS 28.10. As the Group's shares are non-participatory, and therefore the Group does not share in any profits, losses or other distribution of value from the Joint Venture company, the investments are held at cost less impairment, which is deemed to be their carrying value as explained further in note 16.

Notes (forming part of the financial statements) continued

1  Significant accounting policies (continued)

1.5  Foreign currency

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated to the functional currency at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement, except for differences arising on the retranslation of a financial liability designated as a hedge of the net investment in a foreign operation that is effective, or qualifying cash flow hedges, which are recognised directly in other comprehensive income. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are retranslated to the functional currency at foreign exchange rates ruling at the dates the fair value was determined.

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to the Group's presentational currency, sterling, at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated at an average rate for the period where this rate approximates to the foreign exchange rates ruling at the dates of the transactions. Exchange differences arising from this translation of foreign operations are reported as an item of other comprehensive income and accumulated in the translation reserve or non-controlling interest, as the case may be.

Functional currency

The consolidated financial statements are presented in sterling which is the Group and Company's functional currency and have been rounded to the nearest million.

1.6  Classification of financial instruments issued by the Group

Following the adoption of IAS 32, financial instruments issued by the Group are treated as equity only to the extent that they meet the following two conditions:

(a)  they include no contractual obligations upon the Company (or Group as the case may be) to deliver cash or other financial assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the Company (or Group); and

(b)  where the instrument will or may be settled in the Company's own equity instruments, it is either a non-derivative that includes no obligation to deliver a variable number of the Company's own equity instruments or is a derivative that will be settled by the Company exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.

To the extent that this definition is not met, the proceeds of issue are classified as a financial liability.

1.7  Non-derivative financial instruments

Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.

Trade and other receivables

Trade and other receivables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective interest method, less any expected credit loss.

Trade and other payables

Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective interest method.

Investments in debt and equity securities are explained in note 1.12.

Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose only of the cash flow statement.

Interest-bearing borrowings

Interest-bearing borrowings are recognised initially at fair value, net of attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost using the effective interest method.

Contingent consideration

Contingent consideration on acquisition of a subsidiary is valued at fair value at the time of acquisition. Any subsequent change in fair value is recognised in profit or loss (see 1.13).

Notes (forming part of the financial statements) continued

1  Significant accounting policies (continued)

1.8  Derivative financial instruments and hedging

Derivative financial instruments

Derivative financial instruments are recognised at fair value. The gain or loss on re-measurement to fair value is recognised immediately in profit or loss. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged (see below).

Cash flow hedges

Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, or a highly probable forecast transaction, the effective part of any gain or loss on the derivative financial instrument is recognised directly in the hedging reserve. Any ineffective portion of the hedge is recognised immediately in the income statement.

If a hedge of a forecast transaction subsequently results in the recognition of a financial asset or a financial liability, the associated gains and losses that were recognised directly in equity are reclassified into profit or loss in the same period or periods during which the asset acquired or liability assumed affects profit or loss, i.e. when interest income or expense is recognised.

For cash flow hedges, other than those covered by the preceding two policy statements, the associated cumulative gain or loss is removed from equity and recognised in the income statement in the same period or periods during which the hedged forecast transaction affects profit or loss.

When a hedging instrument expires or is sold, terminated or exercised, or the entity revokes designation of the hedge relationship but the hedged forecast transaction is still expected to occur, the cumulative gain or loss at that point remains in equity and is recognised in accordance with the above policy when the transaction occurs. If the hedged transaction is no longer expected to take place, the cumulative unrealised gain or loss recognised in equity is recognised in the income statement immediately.

1.9  Intra-group financial instruments

Financial guarantee contracts to guarantee the indebtedness of companies within the Group are considered to be insurance arrangements and accounted for as such. In this respect, the Group treats the guarantee contract as a contingent liability until such time as it becomes probable that a payment will be required under the guarantee.

1.10  Property, plant and equipment

Property, plant and equipment is stated at cost less accumulated depreciation and accumulated impairment losses. Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Land is not depreciated. The estimated useful lives are as follows:

Freehold property	-50 years
Fixtures, fittings, tools and equipment	-3-10 years
Leasehold improvements	-the term of the lease

Depreciation methods, useful lives and residual values are reviewed at each balance sheet date.

1.11  Intangible assets

Intangible assets acquired in a business combination

Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the acquisition date (which is regarded as their cost).

Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately. Customer lists are valued based on the forecast net present value of the future economic relationship with those customers, adjusted for forecast retention rates.  Customer lists are amortised on a straight line basis over 10 years. Software is stated at cost less accumulated amortisation and is amortised on a straight line basis between two and seven years.

1.12 Investments in debt and equity securities

Other investments in debt and equity securities held by the Group are classified at fair value, with any resultant gain or loss being recognised through other comprehensive income ('FVOCI') in the case of monetary items such as debt securities, foreign exchange gains and losses. Where these investments are interest-bearing, interest calculated using the effective interest method is recognised in profit or loss.

Notes (forming part of the financial statements) continued

1  Significant accounting policies (continued)

1.13 Business combinations

Business combinations are accounted for by applying the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group.

Acquisitions on or after 26 March 2010

For acquisitions on or after 26 March 2010, the Group measures goodwill at the acquisition date as:

the fair value of the consideration transferred; plus

the recognised amount of any non-controlling interests in the acquiree; plus

the fair value of the existing equity interest in the acquiree; less

the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

Costs related to the acquisition, other than those associated with the issue of debt or equity securities, are expensed as incurred.

Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not re-measured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or loss. If contingent consideration is payable and is dependent on future employment, it is recognised as an expense over the relevant period as a cost of continuing employment.

A combined put and call option over non-controlling interests is recognised at fair value at the acquisition date and included within the valuation of goodwill. Subsequent changes to fair value are recognised in profit or loss.

Where a combined written put and call option exists over a non-controlling interest, and the conditions of the agreement provide the Group with present access to the benefits of the ownership of the non-controlling interest, then the acquisition is deemed to reflect 100% ownership and no non-controlling interest is recognised. A liability is recorded for the expected future acquisition of the non-controlling interest, and is recognised as part of the fair value of the consideration. Where the written put and call option has an embedded valuation mechanism to reward and retain key individuals employed by the acquired business, who are also non-controlling shareholders, then the expected increase in the financial liability is charged to the income statement as employment costs evenly over the option period within non-underlying items. See note 1.22 for further details.

On a transaction-by-transaction basis, the Group elects to measure non-controlling interests, which have both present ownership interests and are entitled to a proportionate share of net assets of the acquiree in the event of liquidation, either at its fair value or at its proportionate interest in the recognised amount of the identifiable net assets of the acquiree at the acquisition date. All other non-controlling interests are measured at their fair value at the acquisition date.

Acquisitions prior to 26 March 2010 (date of adoption of IFRS)

IFRS 1 grants certain exemptions from the full requirements of Adopted IFRS for first time adopters. In respect of acquisitions prior to 26 March 2010, goodwill is included on the basis of its deemed cost.

1.14  Acquisitions and disposals of non-controlling interests

Acquisitions and disposals of non-controlling interests that do not result in a change of control are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognised as a result of such transactions. The adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. Any difference between the price paid or received and the amount by which non-controlling interests are adjusted is recognised directly in equity and attributed to the owners of the parent.

1.15  Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is based on the weighted average cost principle and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs in bringing them to their existing location and condition, less rebates and discounts.

Provision is made against specific inventory lines where market conditions identify an issue in recovering the full cost of that SKU (Stock Keeping Unit). The provision focuses on the age of inventory and the length of time it is expected to take to sell, and applies a progressive provision against the gross inventory based on the numbers of days stock on hand. Where necessary, further specific provision is made against inventory lines, where the calculated provision is not deemed sufficient to carry the inventory at net realisable value.

To the extent that the ageing profile of gross inventory as calculated by this provision methodology results in a material provision, it will be disclosed as an estimate that may have an impact on subsequent periods. To the extent this is material, it will be disclosed in note 1.22.

Notes (forming part of the financial statements) continued

1  Significant accounting policies (continued)

1.16  Impairment excluding inventories and deferred tax assets

Financial assets (including receivables)

Measurement of ECLs and definition of default

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Company expects to receive). ECLs are discounted at the effective interest rate of the financial asset.

The definition of default is applicable to intercompany and related party receivables, but not relevant to trade receivables where the lifetime expected credit loss is   considered. The Group defines default based on both qualitative and quantitative risk criteria. The Company considers a Joint Venture operating loan asset to be in default when the underlying veterinary practice is significantly under-performing against its business plan. Each practice is reviewed against this set of criteria and their appropriate risk weightings on an ongoing basis by management. Practices categorised within the high and medium credit risk categories are those considered to be in default, with the former category including those that have the highest loss given default due to their score card performance. Those within the low credit risk category are not deemed to be in default. The Company considers other intercompany and related party assets to be in default when the entity does not have the forecasted future funds available to repay the balance, if recalled.

Credit-impaired financial assets

At each reporting date, the Company assesses whether financial assets carried at amortised cost and debt securities at FVOCI are credit-impaired. A financial asset is 'credit-impaired' when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

Write-offs

The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery.

Details of these provisions are explained in note 1.22 and in note 17. 

Non-financial assets

The carrying amounts of the Group's non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. For goodwill, and intangible assets that have indefinite useful lives or that are not yet available for use, the recoverable amount is estimated each period at the same time.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the 'cash-generating unit'). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units ('CGUs'). Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment is tested reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination.

An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

Notes (forming part of the financial statements) continued

1  Significant accounting policies (continued)

1.17  Employee benefits

Defined contribution plans

A defined contribution plan is a post-employment benefit plan under which the Company pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an expense in the income statement in the periods during which services are rendered by employees.

Short term benefits

Short term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

Share based payments

A number of employees of the Company's subsidiaries (including Directors) receive an element of remuneration in the form of share based payments, whereby employees render services in exchange for shares in Pets at Home Group Plc or rights over shares.

Share based payments are measured at fair value at the date of grant. The fair value of transactions involving the granting of shares is determined by the share price at the date of grant. The fair value of transactions involving the granting of share options is calculated by an external valuer based on a binomial model. In valuing share based payments, no account is taken of any performance conditions, other than conditions linked to the price of the shares of Pets at Home Group Plc ('market conditions').

The cost of share based payments is recognised, together with a corresponding increase in equity, on a straight-line basis over the vesting period based on the Company's estimate of how many of the awards will eventually vest. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance conditions are satisfied.

Where the terms of a share based payment award are modified, as a minimum, an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modification, as measured at the date of the modification.

Where a share based payment award is cancelled, it is treated as if it had vested on the date of cancellation and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification to the original award, as described in the previous paragraph. The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.

Employee Benefit Trust

T he assets and liabilities of the Employee Benefit Trust (EBT) have been included in the Group and Company accounts.  The assets of the EBT are held separately from those of the Company.  Neither the purchase nor sale of own shares leads to a gain or loss being recognised in the Group consolidated statement of comprehensive income. 

Investments in the Company's own shares held by the EBT are presented as a deduction from reserves and the number of such shares is deducted from the number of shares in issue when calculating the diluted earnings per share.  The trustees of the holdings of Pets at Home Group Plc shares under the Pets at Home Group Employee Benefit Trust have waived or otherwise foregone any and all dividends paid.

1.18 Provisions

A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, that can be reliably measured and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects risks specific to the liability.

Notes (forming part of the financial statements) continued

1  Significant accounting policies (continued)

1.19 Revenue and cost of sales

Revenue represents the total amount receivable for goods and services, net of discounts, coupons, returns and excluding value added tax, sold in the ordinary course of business, and arises from activities in the United Kingdom.

Revenue is recognised when the Group transfers control of goods or services to a customer at the amount to which the Group expects to be entitled. Depending on whether certain criteria are met, revenue is recognised either over time, in a manner that best reflects the Group's performance, or at a point in time, when control of the goods or services is transferred to the customer.  

Sale of goods in-store and online

Retail revenue from the sale of goods is recorded net of value added tax, colleague discounts, coupons, vouchers, returns and the free element of multi-save transactions. Sale of goods represents food and accessories sold in-store and online, with revenue recognised at the point the customer obtains control of the goods, which is when the transaction is completed in-store and at point of delivery to the customer for online orders.  Revenue is adjusted to account for estimates for anticipated returns and a provision is recognised within trade and other payables. Estimates for anticipated returns are calculated using past data for both in-store and online transactions.  No separate asset has been recognised (with no corresponding adjustment to cost of sales) in relation to the value of products to be recovered from the customer as the products are not always in a resalable condition.

Gift vouchers and cards

Revenue from the sale of gift vouchers and cards is deferred until the voucher is redeemed.  In line with IFRS 15 the value of revenue deferred is based on expected redemption rates.  The Group continues to assess the appropriateness of the expected redemption rates against actual redemptions.

VIP loyalty scheme

Under the VIP loyalty scheme, points are earned by customers upon the purchase of goods and services. These points can be converted by nominated charities into gift cards for redemption against goods and services in-store and online. The sales value of the points earned under the VIP scheme are treated as deferred income; the sales are only recognised once the points have been redeemed by the charities. The points do not expire and have no value to the customer.

Subscription orders

Revenue for subscription orders is recognised at the point of delivery of each incremental order to the customer.  Subscription services primarily relate to the repeat order of flea and worm products sold online and in-store.

Provision of services

Revenue from the provision of services is recorded net of value added tax, colleague discounts, coupons and vouchers. Provision of services represents veterinary group income, grooming revenue and insurance commissions, with revenue recognised upon provision of the service to the customer. 

i)  Veterinary group income

Veterinary group income represents revenue from the provision of veterinary services (from specialist referral centres and managed First Opinion veterinary practices) and income from the provision of administrative support services to Joint Venture veterinary practices. Revenue received for the provision of veterinary services is recognised at the point of provision of the service and is recognised net of value added tax, colleague discounts, coupons and vouchers.  Fee income received from the Joint Venture veterinary practice companies for administrative support services is recognised in the period the services relate to and recorded net of value added tax. 

In accordance with IFRS 15, revenue for the period ended 26 March 2020 excludes certain fee income, on the basis of increased uncertainty of recoverability.  This relates to fee income from Joint Venture veterinary practices in which the Group had announced the intention to buy out the 'A' shares from the Joint Venture Partners, or where the Group has recognised an operating loan as being in default (as explained in note 1.16). This is recognised from the point at which the default event was recognised until the point at which the buyout was completed (at which point the practice was consolidated, see note 1.4).  Further details in relation to the income received from Joint Venture veterinary practices are disclosed in note 27.

Revenue derived from care plans is recognised on an apportioned basis relative to delivery of the service. Revenue on annual 'Complete Care' plans is deferred and recognised at the point at which treatment and/or services are provided against the plan at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Once the plan has expired, any un-utilised deferred revenue will be recognised as revenue. Revenue from 'Vac4Life' plans is deferred when payment is received and then recognised in reducing proportions over the first three years of the plan when vaccinations/boosters are provided.

Rental income received from in-store Joint Venture veterinary practices is disclosed within note 3 and is categorised as a credit within selling and distribution expenses.

ii)  Grooming revenue

Grooming revenue is recognised net of value added tax, colleague discounts, coupons and vouchers, at the point of provision of the service to the customer.  Deposits received are deferred until the grooming service has been performed. 

iii)  Insurance commissions

Insurance commissions are recognised on a pro-rated basis over the period the insurance policy relates to. 

Accrued income

Accrued income relates to income in relation to fees to Joint Venture veterinary practices, revenues generated through specialist referral centres, and overrider and promotional income from suppliers   which has not yet been invoiced .  Accrued income has been classified as current as it is expected to be invoiced and received within twelve months of the period end.  Supplier income is recognised on an accruals basis, based on the expected entitlement that has been earned up to the balance sheet date for each relevant supplier contract. 

Cost of sales

Cost of sales includes costs of goods sold and other directly attributable costs, promotional income and rebate income received from suppliers, including costs to deliver administrative support services to Joint Venture veterinary practices and costs to deliver grooming services.

Notes (forming part of the financial statements) continued

1  Significant accounting policies (continued)

1.19 Revenue and cost of sales (continued)

Non-underlying items

Income or costs considered by the Directors to be non-underlying are disclosed separately to facilitate year on year comparison of the underlying trade of the business.  The Directors consider that changes to the fair value of the put and call liabilities warrant separate disclosure due to the nature of these arrangements as they do not relate to the underlying trade of the business.

Alternative Performance Measures

The Directors measure the performance of the Group based on a range of financial measures, including measures not recognised by EU-adopted IFRS.  These alternative performance measures may not be directly comparable with other companies' alternative performance measures and the Directors do not intend these to be a substitute for, or superior to, IFRS measures.  Further information can be found in the Glossary on page 96.

Supplier income

A number of different types of supplier income are negotiated with suppliers via the joint business planning process in connection with the purchase of goods for resale, the largest of which being overrider income and promotional income, which is explained below. The supplier income arrangements are typically not co-terminus with the Group's financial period, instead running alongside the calendar year. Such income is only recognised when there is reasonable certainty that the conditions for recognition have been met by the Group, and the income can be measured reliably based on the terms of the contract. This income is recognised as a credit within gross margin to cost of sales and, to the extent that the rebate relates to unsold stock purchases, as a reduction in the cost of inventory.

Supplier income is recognised on an accruals basis, based on the expected entitlement that has been earned up to the balance sheet date for each relevant supplier contract. The accrued incentives, rebates and discounts receivable at year end are included within trade and other receivables.

Given the presence of the joint business plans, on the basis of the historic recoverability of accrued balances, and as amounts are typically agreed with suppliers prior to recognition, supplier income is not considered to be an area of significant estimation that could impact on the following financial year.

Supplier income comprises:

Overrider income

Overrider income comprises three main elements:

1.  Fixed percentage based income: These relate largely to volumetric rebates based on the joint business plan agreements with suppliers. The income accrued is based on the Group's latest forecast volumes and the latest contract agreed with the supplier. Income is not recognised until the Group has reasonable certainty that the joint business agreement will be fulfilled, with the amount of income accrued regularly re-assessed and re-measured throughout the contractual period, based on actual performance against the joint business plan.

2.  Fixed lump sum income: These are typically guaranteed lump sum payments made by the supplier and are not based on volume. Fixed lump sum income is usually predicated on confirmation of a supplier contract and typically includes performance conditions upon the Group, such as marketing and promotional campaigns. These amounts are recognised periodically when contractual milestones have been met such as the promotion being run or marketing in store.

3.  Growth income: These are tiered volumetric rebates relating to growth targets agreed with the supplier in the joint business planning process. These are retrospective rebates based on sales volumes or purchased volumes. Income is recognised to the extent that it is reasonably certain that the conditions will be achieved, with such certainty increasing in the latter part of the calendar year.

Promotional income

Promotional income relates to supplier funded rebates specific to promotional activity run in agreement between the Group and its suppliers. Rebates are agreed at an individual inventory article level for agreed periods of time and are systemically calculated based on article sales information. No estimation is applied in calculating the promotional income receivable.

Supplier income is recognised on an accruals basis, based on the expected entitlement that has been earned up to the balance sheet date for each relevant supplier contract. The accrued incentives, rebates and discounts receivable at year end are included within trade and other receivables.

1.20  Expenses

Financing income and expenses

Financing expenses comprise interest payable under the effective interest rate method, incorporating amortisation of loan arrangement fees, finance charges on shares classified as liabilities, unwinding of the discount on provisions , interest on lease liabilities and net foreign exchange losses that are recognised in the income statement (see foreign currency accounting policy). Borrowing costs that are directly attributable to the acquisition, construction or production of an asset that takes a substantial time to be prepared for use, are capitalised as part of the cost of that asset. Financing income comprises interest receivable on funds invested, dividend income, and net foreign exchange gains.

Interest income and interest payable is recognised in profit or loss as it accrues, using the effective interest method. Dividend income is recognised in the income statement on the date the entity's right to receive payment is established. Foreign currency gains and losses are reported on a net basis.

Notes (forming part of the financial statements) continued

1  Significant accounting policies (continued)

1.21 Taxation

Tax on the profit or loss for the period comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable or receivable on the taxable income or loss for the period, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous periods.

Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination; and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised.

1.22  Accounting estimates and judgements

The preparation of consolidated financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions concerning the future that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. These judgements are based on historical experience and management's best knowledge at the time and the actual results may ultimately differ from these estimates. Estimates and underlying assumptions are reviewed on an on-going basis and revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

The estimates and assumptions that have significant risk of causing a material adjustment to the carrying value of assets and liabilities are explained below.

Impairment of goodwill and other intangibles (significant estimate)

Determining whether goodwill and other intangibles are impaired requires an estimation of the value in use of the cash-generating units to which goodwill and other intangible assets have been allocated. The value in use calculation requires estimation of future cash flows expected to arise from the cash-generating unit (CGU) and a suitable discount rate in order to calculate present value. Details of CGUs as well as further information about the assumptions made are disclosed in note 13.  The Group consider that no reasonably possible change in assumptions underlying the carrying value of the goodwill and intangibles would result in an impairment within the next 12 months. Therefore, the carrying value of goodwill and intangibles is not considered a significant estimate as at 26 March 2020.

Joint Venture receivables (significant estimate)

The Group provides longer term operating loans and other loans to a number of Joint Venture veterinary practices as detailed in notes 16, 17 and 27 to support their working capital requirements.  The loans advanced to the practices are interest free and either repayable on demand or repayable within 90 days of demand. As detailed in these notes, provisions for expected credit losses are held in respect of operating and other loans to Joint Venture veterinary practices.  In line with IFRS 9, judgement is applied in determining expected credit losses on these receivables, the qualitative and quantitative risk-related criteria used to assess default and therefore also the probability of default (as defined in note 1.16), and in estimating an appropriate 'loss given default' percentage to apply to each loan. In assessing the qualitative and quantitative information, the Group takes into account factors including current performance against business plan, availability of suitable personnel to operate effectively, and level of indebtedness. The revenue, profit, and cash flow expectations of the practices are taken into account in determining the length of time that the practice is expected to take in order to repay the loans.  This is also the period over which losses are estimated should default occur within the contractual period. The provision for expected credit loss is based on forward-looking information, taking into account expected credit losses giving due consideration to the Joint Venture's business plan, as well as macro-economic factors such as growth in the size of the veterinary market, availability of veterinary practitioners and cost inflation within the industry.  The quantum of Joint Venture receivables and provision made against these receivables is disclosed in notes 16, 17 and 27.

Assessment of control with regard to Joint Ventures (significant judgement)

The Group has assessed, and continually assesses whether the level of an individual Joint Venture veterinary practices' indebtedness to the Group, particularly those with high levels of indebtedness, implies that the Group has the practical ability to control the Joint Venture, which would result in the requirement to consolidate. In making this judgement, the Group reviewed the terms of the Joint Venture agreement and the question of practical ability, as a provider of working capital to control the activities of the practice. This included consideration of barriers to the Group's ability to exercise such practical or other control which include difficulty in replacing Joint Venture Partners due to the shortage of veterinarians in the UK and reputational damage within the veterinary network should the Group attempt to exercise control, as well as potential barriers to the Joint Venture Partner exercising their own power over the activities of the practice. We note that under the terms of the Joint Venture agreement, the partners run their practices with complete operational and clinical freedom.  The Group is satisfied that on the balance of evidence from the Group's experience as shareholder and provider of working capital support to the practices, it does not have the current ability to exercise control over those practices to which operating loans are advanced, and therefore non consolidation is appropriate.

Notes (forming part of the financial statements) continued

1  Significant accounting policies (continued)

1.22  Accounting estimates and judgements (continued)

Put and call options (significant estimate)

The Group recognises put and call options over non-controlling interests (NCI) in its subsidiary undertakings as a liability in the consolidated balance sheet. The nature of the Group's option agreements are such that there is an element that is a minimum amount and a growth element to reward and retain key individuals employed by the acquired business who are also non-controlling shareholders which is linked to improvements in the results of the acquired business. The growth element would be forfeited under certain conditions by the NCI, including if they ceased to be employed by the Group.

Upon initial recognition, the minimum amount is recognised as a liability at fair value, which is estimated as the present value of the future exercise price based upon the fair value of the business at acquisition. For the growth element, the expected amount is charged to the income statement as employment costs over the option period within non-underlying items. The financial liability is valued based on management's best estimate of the future pay out, which is based on the estimated future earnings.  The charge is spread over the financial years before the put and call can be exercised for the first time.

The Group consider that no reasonably possible change in assumptions underlying the carrying value of the put and call options would result in a material range of estimation uncertainty in the next 12 months. Therefore, the carrying value of the options is not considered a significant estimate as at 26 March 2020.

Carrying value of inventory (significant estimate)

A provision is made for those items of inventory where the net realisable value is estimated to be lower than cost. Net realisable value is based on both historical experience and assumptions regarding future selling values and disposal channels, and is consequently a source of estimation uncertainty. At 26 March 2020 the inventory provision amounted to £3.2m (28 March 2019: £2.6m). The value of inventory against which an ageing provision is held is £7.1m (28 March 2019: £7.1m). Management consider the range of reasonably possible estimation uncertainty to be immaterial given the value of the provision, the value of inventory against which the provision is held, and the degree of historical accuracy in the provisioning policy. Therefore, the carrying value of inventory is not considered a significant estimate as at 26 March 2020.

IFRS 16 Leases (significant judgement)

Under IFRS 16, the Group recognises a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. The lease liability is initially measured at the present value of the remaining lease payments, discounted using the Group's incremental borrowing rate, adjusted to take into account the risk associated with the length of the lease which ranges between 1 and 27 years and the location of the lease. The Group has therefore made a judgement to determine the incremental borrowing rate used. As a result of the significant impact the transition to IFRS 16 has had on the Group's opening balance sheet (£473.1m right of use asset and £506.2m lease liability recognised as at 29 March 2019), the discount rate is considered to be a significant judgement. The discount rate applied ranges between 2.3% and 3.3% dependent on the length of the lease term.  The length of the lease term is based on the contractual right to utilise the asset and is not considered to involve a significant level of judgement because the Group has not taken into account break clauses unless they have been approved.

1.23  Dividends

Final dividends are recognised in the Group's financial statements as a liability in the period in which the dividends are approved by shareholders such that the Company is obliged to pay the dividend. Interim equity dividends are recognised in the period in which they are paid.

Notes (forming part of the financial statements) continued

2   Segmental Reporting

The Group has two reportable segments, Retail and Vet Group, which are the Group's strategic business units. The Group's operating segments are based on the internal management structure and internal management reports, which are reviewed by the Executive Directors on a periodic basis.  The Executive Directors are considered to be the Chief Operating Decision Makers

The Group is a pet care business with the strategic advantage of being able to provide products, services and advice, addressing all pet owners' needs. Within this strategic umbrella, the Group has two reportable segments, Retail and Vet Group, which are the Group's strategic business units, and a central support function. The strategic business units offer different products and services, are managed separately and require different operational and marketing strategies.

The operations of the Retail reporting segment comprise the retailing of pet products purchased online and in-store, pet sales, grooming services and insurance products. The operations of the Vet Group reporting segment comprise First Opinion practices and specialist referral centres.  Central includes group costs and finance expenses. Revenue and costs are allocated to a segment where reasonably possible. 

The following summary describes the operations in each of the Group's reportable segments.  Performance is measured based on segment operating profit as included in the management reports that are reviewed by the Executive Directors. These internal reports are prepared in accordance with IFRS accounting policies consistent with these financial statements. All material operations of the reportable segments are carried out in the UK and all revenue is from external customers.

			52 week period ended 26 March 2020
Income statement			Retail £m	Vet Group £m	Central £m	Total £m
Revenue			937.6	121.2	-	1,058.8
Gross profit			466.2	51.7	-	517.9
Underlying operating profit/(loss)			89.3	30.6	(8.6)	111.3
Non-underlying items			-	(7.6)	-	(7.6)
Segment operating profit/(loss)			89.3	23.0	(8.6)	103.7
Net financing (expense)			(13.3)	(0.3)	(4.2)	(17.8)
Profit/(loss) before tax			76.0	22.7	(12.8)	85.9

IFRS 16 has been adopted during the period ended 26 March 2020 and has had a significant impact on the Group's income statement. Further details of the impact of transition to IFRS 16 have been disclosed in notes 12 and 29.

The share based payment charge recognised in the statement of changes in equity is split across the 3 segments listed in the above table.

Non-underlying operating expenses in the periods ended 26 March 2020 and 28 March 2019 are explained in note 3.

			52 week period ended 28 March 2019
Income statement			Retail £m	Vet Group £m	Central £m	Total £m
Revenue			854.6	106.4	-	961.0
Gross profit			435.8	51.1	-	486.9
Underlying operating profit/(loss)			67.2	32.1	(6.1)	93.2
Non-underlying items			0.5	(40.6)	-	(40.1)
Segment operating profit/(loss)			67.7	(8.5)	(6.1)	53.1
Net financing income/(expense)			0.3	0.3	(4.1)	(3.5)
Profit/(loss) before tax			68.0	(8.2)	(10.2)	49.6

Notes (forming part of the financial statements) continued

2   Segmental Reporting (continued)

			52 week period ended 26 March 2020
Reconciliation of EBITDA before non-underlying items			Retail £m		Vet Group £m	Central £m	Total £m
Underlying operating profit/(loss)			89.3		30.6	(8.6)	111.3
Depreciation of property, plant and equipment			25.8		2.5	-	28.3
Depreciation of right-of-use assets			69.0		2.1	-	71.1
Amortisation of intangible assets			9.5		0.5	-	10.0
Underlying EBITDA			193.6		35.7	(8.6)	220.7
			52 week period ended 28 March 2019
Reconciliation of EBITDA before non-underlying items			Retail £m		Vet Group £m	Central £m	Total £m
Underlying operating profit/(loss)			67.2		32.1	(6.1)	93.2
Depreciation of property, plant and equipment			26.7		1.8	-	28.5
Depreciation of right-of-use assets			-		-	-	-
Amortisation of intangible assets			7.6		0.7	-	8.3
Underlying EBITDA			101.5		34.6	(6.1)	130.0

EBITDA before non-underlying items is defined on page 96.

			52 week period ended 26 March 2020
Segmental revenue analysis by revenue stream			Retail £m		Vet Group £m	Central £m	Total £m
Retail - Food			517.4		-	-	517.4
Retail - Accessories			375.3		-	-	375.3
Retail - Services			44.9		-	-	44.9
Vet Group - First Opinion fee income			-		53.8	-	53.8
Vet Group - Company managed practices			-		21.6	-	21.6
Vet Group - Other income			-		6.2	-	6.2
Vet Group - Specialist			-		39.6	-	39.6
Total			937.6		121.2	-	1,058.8
			52 week period ended 28 March 2019
Segmental revenue analysis by revenue stream			Retail £m		Vet Group £m	Central £m	Total £m
Retail - Food			455.4		-	-	455.4
Retail - Accessories			357.0		-	-	357.0
Retail - Services			42.2		-	-	42.2
Vet Group - First Opinion fee income			-		52.6	-	52.6
Vet Group - Company managed practices			-		8.1	-	8.1
Vet Group - Other income			-		8.7	-	8.7
Vet Group - Specialist			-		37.0	-	37.0
Total			854.6		106.4	-	961.0 9

Notes (forming part of the financial statements) continued

3  Expenses and auditor's remuneration

Included in operating profit are the following:

	52 week period ended 26 March 2020 £m	52 week period ended 28 March 2019 £m
Non-underlying items
Write off and provisions for operating loans, initial set-up loans, and trading balances with Joint Venture veterinary practices	(0.3)	17.9
Other costs associated with the purchase of Joint Venture veterinary practices	3.5	22.5
Impairment of right-of-use assets following acquisition of Joint Venture veterinary practices	1.6	-
Impairment of property, plant & equipment and intangible assets following acquisition of Joint Venture veterinary practices	1.8	-
Increase in fair value of put and call liability	1.0	0.4
Closure of Barkers stores	-	(0.5)
Aborted property and acquisition costs	-	(0.2)
Total non-underlying items	7.6	40.1
Underlying items
Impairment losses on receivables	0.9	2.9
Depreciation of property plant and equipment	28.3	28.5
Amortisation of intangible assets	10.0	8.3
Depreciation of right-of-use assets	71.1	-
Interest on lease liabilities	14.0	-
Rentals under operating leases:
Hire of plant and machinery	-	5.0
Property	-	76.9
Expenses relating to short-term leases1	0.1	0.1
Other income
Rental income from sub-leasing right-of-use assets to third parties2	(0.3)	(1.0)
Rental income from related parties2	(7.4)	(7.9)
Share based payment charges	4.2	3.5

¹ The comparative numbers have been restated to enhance comparability^.

² This other income is presented within selling and distribution expenses^.

During the periods ended 26 March 2020 and 28 March 2019, the Group completed a review and recalibration exercise of the First Opinion veterinary practices.  As part of this review, the Group has completed a buy out of the 'A' shares from the Joint Venture Partners in a total of 51 Joint Venture veterinary practices; with 24 of these occurring in the 52 week period ended 26 March 2020. In addition, the Group acquired a total of 9 further practices which did not form part of this review, with 4 of these occurring in the period ended 26 March 2020. 

The non-underlying operating expenses in the period ended 26 March 2020 of £7.6m relate to:

- (£0.3m) in relation to the release of allowances for expected credit losses for operating loans, initial set-up loans, and trading balances to Joint Venture veterinary practices which were provided for under IFRS 9 by the Group in the period ended 28 March 2019.  At 26 March 2020, all of the outstanding loans with these practices have been written off resulting in a balance of £nil on the balance sheet.

- £3.5m in relation to exit and closure costs (provided for under IAS 37) payable in relation to Joint Venture veterinary practices which the Group has acquired.  The release of negative goodwill and impairment of goodwill arising on the acquisition of the Joint Venture veterinary practices, as detailed in note 10, has been included within these costs. This balance includes £0.2m in relation to the profit from the disposal of assets acquired in the 52 week period ended 28 March 2019.

- £1.6m in relation to the write down of right-of-use assets to their expected recoverable amount, relating to First Opinion veterinary practices acquired in the period with the intention of being closed. Further details are disclosed in note 12.

- £1.8m relating to the impairment of property, plant and equipment and intangible assets relating to the review and recalibration exercise of the First Opinion veterinary practices. Further details are disclosed in notes 11 and 13.

- £1.0m of non-underlying operating expenses relate to an increase in the financial liability for put and call options over shares held by clinicians in Dick White Referrals Limited and Veterinary Specialists (Scotland) Limited. The charge represents an increase in the equity 'option' value held by those clinicians based on the Director's best estimate of the future settlement on exercise of the put and call.  The charge is classified within operating expenses as a clinician is required to remain an employee of the Group in order to access the full equity value of the option at the time of the exercise.

Income or costs considered by the Directors to be non-underlying are disclosed separately to facilitate year on year comparison of the underlying trade of the business. The Directors consider that changes to the fair value of the put and call liabilities warrant separate disclosure due to the nature of these arrangements as they do not relate to the underlying trade of the business.

Notes (forming part of the financial statements) continued

3  Expenses and auditor's remuneration (continued)

The non-underlying operating expenses in the period ended 28 March 2019 of £40.1m related to:

- £17.9m in relation to the write off and provision for operating loans, initial set-up loans, and trading balances (made by the Group) to Joint Venture veterinary practices, which are no longer expected to be recoverable, and therefore which were provided for under IFRS 9.  In total £12.7m of loans and receivables were written off in the year in relation to Joint Venture veterinary practices that have been acquired by the Group.  The balance of £5.2m was held within provisions against receivables.

- £22.5m in relation to provisions against payments to third parties for bank loans, overdrafts and lease obligations (provided for under IFRS 9) and associated exit and closure costs (provided for under IAS 37) payable in relation to Joint Venture veterinary practices which the Group acquired. The release of negative goodwill and impairment of goodwill arising on the acquisition of the Joint Venture veterinary practices, as detailed in note 10, was included within these costs.  At 28 March 2019, £8.6m had been incurred, and £5.4m was included within provisions in note 21 under IFRS 9, whilst £8.5m was included within provisions in note 21 under IAS 37. 

- £0.4m of non-underlying operating expenses related to an increase in the financial liability for put and call options over shares held by clinicians in Dick White Referrals Limited and Anderson Moores Veterinary Specialists Limited.  The charge represented an increase in the equity 'option' value held by those clinicians based on the Board's best estimate of the future settlement on exercise of the put and call. 

- Release of £0.5m in relation to a provision which was created in the period ended 29 March 2018 associated with the closure of seven trial Barkers stores. 

- Release of £0.2m of provisions which were created in the period ended 29 March 2018 associated with aborted property and acquisition costs.

Auditor's remuneration

	52 week period ended 26 March 2020 £m		52 week period ended 28 March 2019 £m
Audit of the parent company financial statements		0.0	0.0
Amounts receivable by the Company's auditor and its associates in respect of:
Audit of financial statements of subsidiaries pursuant to legislation		0.4	0.4
Review of interim financial statements		0.1	0.1
All other services		0.0	0.0
		0.5	0.5

Notes (forming part of the financial statements) continued  

4  Colleague numbers and costs

The average number of persons employed by the Group (including Directors) during the period, analysed by category, was as follows:

	52 week period ended 26 March 2020 Number	52 week period ended 28 March 2019 Number
Sales and distribution - FTE	6,432	6,400
Administration - FTE	707	597
	7,139	6,997
Sales and distribution - total	8,506	8,447
Administration - total	1,055	614
	9,561	9,061

The aggregate payroll costs of these persons were as follows:

	52 week period ended 26 March 2020 £m	52 week period ended 28 March 2019 £m
Wages and salaries	203.1	187.8
Social security costs	17.5	16.1
Contributions to defined pension contribution plans	6.9	6.2
	227.5	210.1

Remuneration of Executive Directors and Executive Management Team

	52 week period ended 26 March 2020 £m	52 week period ended 28 March 2019 £m
Executive Directors' emoluments including social security costs	1.8	1.9
Non-Executive Directors' emoluments including social security costs	0.5	0.5
Executive Directors' amounts receivable under share options	0.0	0.0
Executive Directors' pension contributions	0.1	0.1
Total Directors' remuneration	2.4	2.5
Executive Management Team emoluments including social security costs	2.6	2.7
Executive Management Team amounts receivable under share options	0.1	0.0
Executive Management Team pension contributions	0.1	0.1
Total Executive Management Team remuneration	2.8	2.8

In the opinion of the Board, the key management as defined under revised IAS 24 Related Party Disclosures are the Executive Directors and the Executive Management Team.  Executive Directors' emoluments are also included within the Executive Management Team emoluments disclosed above.

Notes (forming part of the financial statements) continued

5  Earnings per share

Basic earnings per share is calculated by dividing the net profit for the period attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.

Diluted earnings per share is calculated by dividing the net profit for the period attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on the conversion of all dilutive potential ordinary shares into ordinary shares. 

	52 week period ended 26 March 2020			52 week period ended 28 March 2019
	Underlying trading	After non-underlying items	Underlying  trading		After non-underlying items
Profit attributable to equity shareholders of the parent (£m)	74.9	67.4	70.4		30.5
Basic weighted average number of shares	500.0	500.0	500.0		500.0
Dilutive potential ordinary shares	9.6	9.6	5.1		5.1
Diluted weighted average number of shares	509.6	509.6	505.1		505.1
Basic earnings per share	15.0p	13.5p	14.1p		6.1p
Diluted earnings per share	14.7p	13.2p	13.9p		6.0p

6  Finance income

	52 week period ended 26 March 2020 £m	52 week period ended 28 March 2019 £m
Interest receivable on loans to Joint Venture veterinary practices	0.4	0.5
Other interest receivable	0.1	0.1
Total finance income	0.5	0.6

7  Finance expense

	52 week period ended 26 March 2020 £m	52 week period ended 28 March 2019 £m
Bank loans at effective interest rate	4.4	4.1
Interest expense on lease liability	14.0	-
Other interest expense	(0.1)	0.0
Total finance expense	18.3	4.1

Notes (forming part of the financial statements) continued

8  Taxation

Recognised in the income statement

	52 week period ended 26 March 2020 £m	52 week period ended 28 March 2019 £m
Current tax expense
Current period	22.0	20.6
Adjustments in respect of prior periods	(0.8)	(0.7)
Current tax expense	21.2	19.9
Deferred tax expense
Origination and reversal of temporary differences	(3.4)	(1.9)
Impact of difference between deferred and current tax rates	0.2	0.1
Adjustments in respect of prior periods	0.5	1.0
Deferred tax expense	(2.7)	(0.8)
Total tax expense	18.5	19.1

The UK corporation tax standard rate for the period is 19% (2019: 19%). A UK corporation tax rate of 19% (effective 1 April 2020) was substantively enacted on 17 March 2020, reversing the previously enacted reduction in the rate from 19% to 17%. This will increase the company's future current tax charge accordingly. The deferred tax liability at 26 March 2020 has been calculated at 19% (2019: 17%).

Deferred tax recognised in comprehensive income

	52 week period ended 26 March 2020 £m	52 week period ended 28 March 2019 £m
Effective portion of changes in fair value of cash flow hedges (note 22)	(0.9)	0.4

Reconciliation of effective tax rate

	52 week period ended 26 March 2020			52 week period ended 28 March 2019
	Underlying trading £m	Non-underlying items £m	Total £m	Underlying trading £m	Non-underlying items £m	Total £m
Profit for the period	74.9	(7.5)	67.4	70.4	(39.9)	30.5
Total tax expense	18.6	(0.1)	18.5	19.3	(0.2)	19.1
Profit excluding taxation	93.5	(7.6)	85.9	89.7	(40.1)	49.6
Tax using the UK corporation tax rate for the period of 19% (52 week period ended 28 March 2019: 19%)	17.8	(1.5)	16.3	17.0	(7.6)	9.4
Impact of difference between deferred and current tax rates	0.2	-	0.2	0.1	-	0.1
Depreciation on expenditure not eligible for tax relief	0.9	-	0.9	0.6	-	0.6
Expenditure not eligible for tax relief	0.1	1.4	1.5	1.3	7.4	8.7
Adjustments in respect of prior periods	(0.4)	-	(0.4)	0.3	-	0.3
Total tax expense	18.6	(0.1)	18.5	19.3	(0.2)	19.1

The UK corporation tax standard rate for the 52 week period ended 26 March 2020 was 19% (52 week period ended 28 March 2019: 19%). The effective tax rate before non-underlying items for the 52 week period ended 26 March 2020 was 20%.

Notes (forming part of the financial statements) continued

9  Dividends paid and proposed

	Group and Company
	52 week period ended  26 March 2020 £m	52 week period ended 28 March 2019 £m
Declared and paid during the period
Final dividend of 5.0p per share (2019: 5.0p per share)	24.8	24.8
Interim dividend of 2.5p per share (2019: 2.5p per share)	12.3	12.4
Proposed for approval by shareholders at the AGM
Final dividend of 5.0p per share (2019: 5.0p per share)	24.7	24.8

The trustees of the following holdings of Pets at Home Group plc shares under the Pets at Home Group Employee Benefit Trust have waived or otherwise foregone any and all dividends paid in relation to the periods ended 26 March 2020 and 28 March 2019 and to be paid at any time in the future (subject to the exceptions in the relevant trust deed) on its respective shares for the time being comprised in the trust funds:

Computershare Nominees (Channel Islands) Limited (holding at 26 March 2020: 5,749,377 shares, holding at 28 March 2019: 4,596,471 shares)

10  Business combinations

Acquisition of Joint Venture veterinary practices

In the 52 week period ended 26 March 2020, the Group has acquired 100% of the 'A' shares of 28 veterinary practices, which were previously accounted for as Joint Venture veterinary practices.  These practices were previously accounted for as Joint Venture veterinary practices as the Group only held 100% of the non-participatory 'B' ordinary shares, equating to 50% of the total shares.  Acquisition of the 'A' shares has led to the control and consolidation of these practices.  A detailed explanation for the basis of consolidation can be found in note 1.4.

In the 52 week period ended 26 March 2020, £7.1m operating loans, £1.1m initial loans and £0.7m other loans relating to these practices were written off in advance of the acquisitions.  In addition £5.9m of bank loans owed by these Joint Venture veterinary practices were repaid by the Group under the terms of the bank guarantee in advance of the acquisitions.  Further details of the amounts written off and the utilisation of the provisions are detailed in notes 16, 17 and 27. 

The practices have been categorised into the following groups:

-  Joint Venture veterinary practices acquired with the exchange of significant cash consideration, with the intention of trading as a going concern

-  Joint Venture veterinary practices acquired without the exchange of significant cash consideration, with the intention of trading as a going concern

-  Joint Venture veterinary practices acquired without the exchange of significant cash consideration, with the intention of being closed

Joint Venture veterinary practices acquired with the exchange of significant cash consideration, with the intention of trading as a going concern

In the 52 week period ended 28 March 2019, the entities listed below were all accounted for as a Joint Venture veterinary practice where the Group held 100% of the non-participatory 'B' ordinary shares. A detailed explanation for the basis of consolidation can be found in note 1.4. On the dates listed below, the Group acquired 100% of the 'A' shares of the practices, leading to control and consolidation.

Subsidiaries acquired

	Principal activity	Date of acquisition	Proportion of voting equity instruments acquired	Total proportion of voting equity instruments owned following the acquisition	Cash consideration transferred £m
Market Harborough Vets4Pets Limited	Veterinary practice	14 August 2019	50%	100%	0.0
Leicester St Georges Vets4Pets Limited	Veterinary practice	14 August 2019	50%	100%	0.0
Doncaster Vets4Pets Limited	Veterinary practice	5 September 2019	50%	100%	0.2
Companion Care (Maidstone) Limited	Veterinary practice	17 January 2020	50%	100%	0.4

Notes (forming part of the financial statements) continued

10  Business combinations (continued)

Assets acquired and liabilities recognised at the date of acquisition

The amounts recognised in respect of identifiable assets and liabilities relating to the acquisitions are as follows. The acquisition disclosures have been combined as each acquisition is considered to be individually immaterial to the Group.

	Book value of assets and liabilities acquired £m				Adjustments on acquisition £m	Fair value of assets and liabilities acquired £m
Current assets
Cash and cash equivalents				0.2	-	0.2
Trade and other receivables				0.4	-	0.4
Inventories				0.1	-	0.1
Non-current assets
Intangible assets				0.2	-	0.2
Tangible fixed assets				0.6	(0.3)	0.3
Current liabilities
Bank loans and overdrafts				(0.1)	-	(0.1)
Trade and other payables				(0.3)	-	(0.3)
Net assets				1.1	(0.3)	0.8

Goodwill arising on acquisition

	£m
Consideration	0.6
Less:  Fair value of assets acquired	(0.8)
Negative goodwill arising on acquisition	(0.2)
Release of negative goodwill	0.2
Carrying value of goodwill	-

Joint Venture veterinary practices acquired without the exchange of significant cash consideration, with the intention of trading as a going concern

In the 52 week period ended 26 March 2020 the Group has acquired the following veterinary practices, which were previously accounted for as Joint Venture veterinary practices, with the intention of trading as company managed practices. 

Subsidiaries acquired

	Principal activity	Date of acquisition	Proportion of voting equity instruments acquired	Total proportion of voting equity instruments owned following the acquisition	Cash consideration transferred for shares £m
Companion Care (Perth) Limited	Veterinary practice	15 April 2019	50%	100%	-
Companion Care (Stevenage) Limited	Veterinary practice	15 April 2019	50%	100%	-
Barnwood Vets4Pets Limited	Veterinary practice	23 April 2019	50%	100%	-
Pentland Vets4Pets Limited	Veterinary practice	24 April 2019	50%	100%	-
Prescot Vets4Pets Limited	Veterinary practice	2 September 2019	50%	100%	-
Leeds Kirkstall Vets4Pets Limited	Veterinary practice	4 October 2019	50%	100%	-
Bearsden Vets4Pets Limited	Veterinary practice	9 October 2019	50%	100%	-

Notes (forming part of the financial statements) continued

10  Business combinations (continued)

Assets acquired and liabilities recognised at the date of acquisition

The amounts recognised in respect of identifiable assets and liabilities relating to the acquisition are as follows.  The acquisition disclosures have been combined as each acquisition is considered to be individually immaterial to the Group.

	Book value of assets and liabilities acquired £m				Adjustments on acquisition £m	Fair value of assets and liabilities acquired £m
Current assets
Cash and cash equivalents				0.0	-	0.0
Trade and other receivables				0.3	-	0.3
Inventories				0.1	--	0.1
Non-current assets
Tangible fixed assets				0.6	(0.1)	0.5
Right-of-use assets				0.5	-	0.5
Non-current liabilities
Lease liabilities				(0.5)	-	(0.5)
Current liabilities
Bank loans and overdrafts				(0.4)	-	(0.4)
Trade and other payables				(0.4)	-	(0.4)
Net assets				0.2	(0.1)	0.1

Goodwill arising on acquisition

	£m
Consideration	0.1
Less:  Fair value of assets acquired	(0.1)
Goodwill arising on acquisition	0.0
Impairment of goodwill	(0.0)
Carrying value of goodwill	-

The consideration shown within the table above relates to the cash settlement of 'A' shareholder Joint Venture Partner loans, which were repaid to the 'A' shareholder at the point of acquisition. 

Joint Venture veterinary practices acquired without the exchange of significant cash consideration, with the intention of being closed

In the 52 week period ended 26 March 2020 the Group has acquired the following veterinary practices, which were previously accounted for as Joint Venture veterinary practices.  The Group's intention is to close these practices. 

Subsidiaries acquired

	Principal activity	Date of acquisition	Proportion of voting equity instruments acquired	Total proportion of voting equity instruments owned following the acquisition	Cash consideration transferred for shares £m
Companion Care (Newport) Limited	Veterinary practice	15 April 2019	50%	100%	-
Davidsons Mains Vets4Pets Limited	Veterinary practice	15 April 2019	50%	100%	-
Marlborough Vets4Pets Limited	Veterinary practice	15 April 2019	50%	100%	-
Sheldon Vets4Pets Limited	Veterinary practice	15 April 2019	50%	100%	-
Thamesmead Vets4Pets Limited	Veterinary practice	15 April 2019	50%	100%	-
Wokingham Vets4Pets Limited	Veterinary practice	15 April 2019	50%	100%	-
Wellingborough Vets4Pets Limited	Veterinary practice	17 April 2019	50%	100%	-
Andover Vets4Pets Limited	Veterinary practice	23 April 2019	50%	100%	-
Bonnyrigg Vets4Pets Limited	Veterinary practice	24 April 2019	50%	100%	-
Musselburgh Vets4Pets Limited	Veterinary practice	24 April 2019	50%	100%	-
Haverfordwest Vets4Pets Limited	Veterinary practice	29 April 2019	50%	100%	-
Linlithgow Vets4Pets Limited	Veterinary practice	28 May 2019	50%	100%	-
East Kilbride (South) Vets4Pets Limited	Veterinary practice	24 June 2019	50%	100%	-
Clitheroe Vets4Pets Limited	Veterinary practice	11 July 2019	50%	100%	-
Carmarthen Vets4Pets Limited	Veterinary practice	15 July 2019	50%	100%	-
Inverurie Vets4Pets Limited	Veterinary practice	24 July 2019	50%	100%	-
Uttoxeter Vets4Pets Limited	Veterinary practice	19 August 2019	50%	100%	-

Notes (forming part of the financial statements) continued

10  Business combinations (continued)

Assets acquired and liabilities recognised at the date of acquisition

The amounts recognised in respect of identifiable assets and liabilities relating to the acquisition are as follows. The acquisition disclosures have been combined as each acquisition is considered to be individually immaterial to the Group.

	Book value of assets and liabilities acquired £m				Adjustments on acquisition £m	Fair value of assets and liabilities acquired £m
Current assets
Cash and cash equivalents				0.0	-	0.0
Trade and other receivables				0.4	-	0.4
Inventories				0.2	-	0.2
Non-current assets
Tangible fixed assets				2.6	(2.6)	-
Right -of-use assets				2.2	-	2.2
Non-current liabilities
Lease liabilities				(2.2)	-	(2.2)
Current liabilities
Bank loans and overdrafts				(0.3)	-	(0.3)
Trade and other payables				(0.7)	-	(0.7)
Net assets/(liabilities)				2.2	(2.6)	(0.4)

Goodwill arising on acquisition

	£m
Consideration	0.4
Less:  Fair value of liabilities acquired	0.4
Goodwill arising on acquisition	0.8
Impairment of goodwill	(0.8)
Carrying value of goodwill	-

The tangible assets have been written down to their expected recoverable amount.

The consideration shown within the table above relates to the cash settlement of 'A' shareholder Joint Venture Partner loans, which were repaid to the 'A' shareholder at the point of acquisition. 

In line with IFRS 3, the right-of-use asset has been brought on at value equal to the lease liability, adjusted for any unfavourable market conditions. These leases relate to standalone veterinary practices. Subsequent to the acquisition, the right-of-use assets have been fully impaired as the Group does not expect to receive any benefit for these assets. This is disclosed in note 12.

Other acquisitions

On 26 July 2019, the Group acquired the 25% minority interest in Anderson Moores Veterinary Specialists Limited for a consideration of £4.0m, leading to 100% of the share capital being owned.

On 10 September 2019, the Group also acquired a further 15% minority interest in Dick White Referrals Limited for a consideration of £2.4m, leading to 91% of the share capital now being owned.

These acquisitions have had no impact on goodwill.

Other investments

On 26 June 2019, the Group acquired a 12% minority interest in Tailster.com (Dog Stay Limited) for a consideration of £1.0m. This has been accounted for as an investment, measured at fair value through other comprehensive income.

Notes (forming part of the financial statements) continued

11  Property, plant and equipment

	Freehold property £m	Short leasehold property £m	Fixtures, fittings, tools and equipment £m	Total £m
Cost
Balance at 28 March 2019	2.5	59.4	222.9	284.8
Additions	-	5.4	17.6	23.0
On acquisition (note 10)	-	0.5	0.3	0.8
Disposals	(0.1)	(1.4)	(0.9)	(2.4)
Balance at 26 March 2020	2.4	63.9	239.9	306.2
Depreciation
Balance at 28 March 2019	0.3	22.5	138.3	161.1
Depreciation charge for the period	0.0	4.3	24.0	28.3
Impairment of assets (non-underlying)	-	1.3	0.4	1.7
Disposals	(0.0)	(1.3)	(0.7)	(2.0)
Balance at 26 March 2020	0.3	26.8	162.0	189.1
Net book value
At 28 March 2019	2.2	36.9	84.6	123.7
At 26 March 2020	2.1	37.1	77.9	117.1

	Freehold property £m	Short leasehold property £m	Fixtures, fittings, tools and equipment £m	Total £m
Cost
Balance at 29 March 2018	2.5	53.7	206.9	263.1
Additions	-	4.7	16.0	20.7
On acquisition (note 10)	-	1.6	0.6	2.2
Disposals	-	(0.6)	(0.6)	(1.2)
Balance at 28 March 2019	2.5	59.4	222.9	284.8
Depreciation
Balance at 29 March 2018	0.3	18.7	114.2	133.2
Depreciation charge for the period	0.0	4.0	24.5	28.5
Disposals	-	(0.2)	(0.4)	(0.6)
Balance at 28 March 2019	0.3	22.5	138.3	161.1
Net book value
At 29 March 2018	2.2	35.0	92.7	129.9
At 28 March 2019	2.2	36.9	84.6	123.7

Notes (forming part of the financial statements) continued

12   Leases

As Lessee

Property, plant and equipment comprise owned and leased assets that do not meet the definition of investment property.

The majority of the Group's trading stores, standalone veterinary practices, specialist referral centres, distribution centres and support offices are leased under operating leases, with remaining lease terms of between 1 and 27 years.  The Group also has a number of non-property operating leases relating to vehicle, equipment and material handling equipment, with remaining lease terms of between 1 and 6 years.

Information about leases for which the Group is a lessee is presented below.

Right-of-use assets

	Property £m	Equipment £m	Total £m
Cost
Balance at 29 March 2019	463.0	10.1	473.1
Additions	20.6	1.5	22.1
On acquisition (note 10)	2.7	-	2.7
Balance at 26 March 2020	486.3	11.6	497.9
Depreciation
Balance at 29 March 2019	-	-	-
Depreciation charge for the period	67.5	3.6	71.1
Impairment (non-underlying)	1.6	-	1.6
Balance at 26 March 2020	69.1	3.6	72.7
Net book value
At 29 March 2019	463.0	10.1	473.1
At 26 March 2020	417.2	8.0	425.2

The costs relating to leases for which the Group applied the practical expedient described in paragraph 5a of IFRS 16 (leases with a contract term of less than 12 months) amounted to £0.1m in the 52 week period ended 26 March 2020.

The following table sets out the maturity analysis of lease payments, showing the undiscounted lease payments to be received after the reporting date:

Maturity analysis - contractual undiscounted cash flows

	At 26 March 2020 £m	At 29 March 2019 £m
Less than one year	82.2	82.6
Between one and five years	258.0	282.6
More than 5 years	182.6	208.3
Total undiscounted lease liabilities	522.8	573.5
Carrying value of lease liabilities included in the statement of financial position	463.9	506.2
Current	83.7	82.7
Non-current	380.2	423.5

For the lease liabilities at 26 March 2020 a 0.1% change in the discount rate used would have increased the carrying value of lease liabilities by £2.2m.

Surplus leases

The Group has a small number of leases on properties from which it no longer trades.  A small number of these properties are currently vacant or the sublet is not for the full term of the lease and there is deemed to be a risk on the sublet. 

On transition to IFRS 16, the Group has elected to apply the relief option which allows it to adjust the right-of-use asset by the amount of any provision for an onerous lease. £2.7m of the onerous lease provision has been offset against the opening right-of-use asset as at 29 March 2019.  The remaining onerous lease provision relates to rates, service charge and other costs and will remain classified within provisions. In the 52 week period ended 26 March 2020, the Group has charged a further £1.6m within non-underlying costs in relation to expected lease obligations (under IFRS 16).  This provision has been offset against the right-of-use assets. 

The non-underlying impairment loss recognised in the period relates to the veterinary practices acquired in the period with the intention of being closed. In line with IAS 36, the carrying value of these right-of-use assets was assessed for indicators of impairment and the planned closure was considered to be an indicator of impairment. The right-of-use asset has been written down to its expected recoverable value and costs of £1.6m have been charged in the year within non-underlying costs.

Notes (forming part of the financial statements) continued

12  Leases (continued)

Operating leases

The Group has a small number of leases on properties from which it no longer trades, or a subsection of a trading retail store. These properties are sublet to third parties at contracted rates.  The Group has classified these leases as operating leases, because they do not transfer substantially all the risks and rewards incidental to ownership of the right-of-use asset. 

In line with IAS 36, the carrying value of the right-of-use asset will be assessed for indicators of impairment and an impairment charge will be recognised if necessary.  Under IAS 17, an onerous lease provision was recognised where management believed there was a risk of default or where the property remained vacant for a period of time. As part of this review the Group has assessed the ability to sub-lease the property and the right-of-use asset has been written down to £nil where the Group does not consider a sublease likely.

13  Intangible assets

	Goodwill £m	Customer list £m	Software £m	Total £m
Cost
Balance at 28 March 2019	981.3	1.7	47.5	1,030.5
Additions	-	0.2	15.6	15.8
Balance at 26 March 2020	981.3	1.9	63.1	1,046.3
Amortisation
Balance at 28 March 2019	-	0.3	29.5	29.8
Amortisation charge for the period	-	0.1	9.8	9.9
Impairment of assets (non-underlying)	0.0	0.1	-	0.1
Impairment of goodwill (underlying)	0.1	-	-	0.1
Balance at 26 March 2020	0.1	0.5	39.3	39.9
Net book value
At 28 March 2019	981.3	1.4	18.0	1,000.7
At 26 March 2020	981.2	1.4	23.8	1,006.4
	Goodwill £m	Customer list £m	Software £m	Total £m
Cost
Balance at 29 March 2018	979.8	0.8	33.8	1,014.4
Additions	1.5	0.9	13.7	16.1
Disposals	-	-	-	-
Balance at 28 March 2019	981.3	1.7	47.5	1,030.5
Amortisation
Balance at 29 March 2018	-	0.2	21.3	21.5
Amortisation charge for the period	-	0.1	8.2	8.3
Disposals	-	-	-	-
Balance at 28 March 2019	-	0.3	29.5	29.8
Net book value
At 29 March 2018	979.8	0.6	12.5	992.9
At 28 March 2019	981.3	1.4	18.0	1,000.7

The goodwill impairment in the 52 week period ended 26 March 2020 relates to goodwill acquired as part of the buyout of Bicester Vets4Pets Limited in the 52 week period ended 28 March 2019.

Impairment testing

Cash generating units ('CGUs') within the Group are considered to be aligned to the two operating segments as disclosed in note 2. Within the Retail operating segment, the CGU comprises the body of stores, online operations, grooming operations and insurance operations. Within the Vet Group operating segment, the CGU comprises the First Opinion veterinary practices and specialist referral centres.

Notes (forming part of the financial statements) continued

13  Intangible assets (continued)

As at 26 March 2020 and 28 March 2019, the Group is deemed to have CGUs as follows:

	Goodwill
	At 26 March 2020 £m	At 28 March 2019 £m
Retail	586.1	586.1
Vet Group	395.1	395.2
Total	981.2	981.3

The recoverable amount of the CGU group has been calculated with reference to its value in use. The key assumptions of this calculation are shown below:

	52 week period ended  26 March 2020				52 week period ended 28 March 2019
	Retail	Vet Group		Retail	Vet Group
Period on which management approved forecasts are based (years)	5	5		5	5
Growth rate applied beyond approved forecast period	2.0%	3.5%		2.0%	3.5%
Discount rate (pre-tax)	10%	11%		12%	11%
Like-for-like sales growth	4%	11%		4%	9%
Gross profit margin	48%	49%		49%	51%

The goodwill is considered to have an indefinite useful economic life and the recoverable amount is determined based on 'value-in-use' calculations. These calculations use a post-tax cash flow projection based on a five-year plan approved by the Board. For the purposes of intangible asset impairment testing, the model removes all cash flows associated with business units (for example stores or practices yet to open, but within the planning horizon) which the Group has a strategic intention to invest capital in, but has not yet done so, thus ensuring that the future cash flows used in modelling for impairment exclude any cash flows where the investment is yet to take place, in accordance with the requirements of IAS 36 to exclude capital expenditure to improve asset performance.  Contributions from and costs associated with new stores and veterinary practices which are already operational at the impairment test date are included in the cash flows. The Group reviews components within CGUs such as stores and veterinary practices for indicators of impairment. This approach is consistent with impairment reviews carried out in the 2019 financial statements. Following the adoption of IFRS 16, the goodwill impairment model now includes right-of-use assets in the asset base and cash flows have been adjusted to reflect this.

The key assumptions in the business plans for both the Retail and Vet Group CGUs are like-for-like sales growth and gross profit margin. The Retail forecast assumptions reflect continual innovation and our deep understanding of our customers, incorporating assumptions based on past experience of the industry, products and markets in which the CGU operates, in order to generate the detailed assumptions used in the annual budget setting process, and five year strategic planning process. The Vet Group forecast assumptions are based on a deep understanding of the maturity profile of the practices and their performance, incorporating assumptions based on past experience of the industry, services and markets in which the CGU operates in order to generate the detailed assumptions used in the annual budget setting process, and five year strategic planning process.  The projections are based on all available information and growth rates do not exceed growth rates experienced in prior periods. A different set of assumptions may be more appropriate in future years depending on changes in the macro-economic environment and the industry in which each CGU operates.

The discount rate was estimated based on past experience and a market participant weighted average cost of capital.  A post tax discount rate was used within the value in use calculation.  The pre-tax discount rate is disclosed above in line with IAS 36 requirements.

The Directors have assumed a growth rate projection beyond the five-year period based on market growth rates based on past experience within the Group taking into account the economic growth forecasts within the relevant industries.

The total recoverable amount in respect of goodwill for the CGU group as assessed by the Directors using the above assumptions is greater than the carrying amount and therefore no impairment charge has been recorded in each period, with the exception of the goodwill impaired immediately following the acquisition of certain First Opinion veterinary practices as part of the review and recalibration exercise (see note 10).

Within the Retail CGU, a number of sensitivities have been applied to the assumptions in reaching this conclusion including:

- Reduction in growth rate applied beyond forecast period by 100 bps

- Increasing the discount rate by 100 bps

- Reduction in gross margin percentage of 100 bps

- Reduction in FY21 H1 Retail sales by 30% as a COVID-19 sensitivity

None of the above, considered reasonably possible changes in assumptions, would result in impairment when applied either individually or collectively.

Within the Vet Group CGU, a number of sensitivities have been applied to the assumptions in reaching this conclusion including:

- Reduction in growth rate applied beyond forecast period by 100 bps

- Increasing the discount rate by 100 bps

- Reduction in gross margin percentage of 100 bps

- Reduction in FY21 H1 Vet Group sales by 50% as a COVID-19 sensitivity

None of the above, considered reasonably possible changes in assumptions, would result in impairment when applied either individually or collectively. The Directors consider that it is not reasonably possible for the assumptions to change so significantly as to eliminate the excess of the recoverable amount over the carrying value.

Notes (forming part of the financial statements) continued

14  Inventories

	At 26 March 2020 £m	At 28 March 2019 £m
Finished goods	62.8	68.2

The cost of inventories recognised as an expense and included in 'cost of sales' is £438.3m (period ended 28 March 2019: £388.1m).

Inventory expensed to cost of sales includes the cost of the Stock Keeping Units (SKUs) sold, supplier income, stock wastage and foreign exchange variances.

At 26 March 2020 the inventory provision amounted to £3.2m (28 March 2019: £2.6m). The inventory provision is calculated by reference to the age of the SKU and the length of time it is expected to take to sell. The provision percentages applied in calculating the provision are as follows:

Discontinued stock greater than 365 days: 100%

Current stock greater than 365 days with a use by date: 50%

Current stock within 180 and 365 days with a use by date: 25%

Greater than 180 days with no use by date: 25%

In addition, a provision is held to account for store stock losses during the period since which the SKU was last counted.

The value of inventory against which an ageing provision is held is £7.1m (2019: £7.1m).

In the 52 week period ended 26 March 2020, the value of inventory written off to the income statement amounted to £8.7m (52 week period ended 28 March 2019: £8.1m).

15  Deferred tax assets and liabilities

Recognised deferred tax assets and liabilities

Deferred tax assets and liabilities are attributable to the following:

	At 26 March 2020			At 28 March 2019
	Assets £m	Liabilities £m	Total £m	Assets £m	Liabilities £m	Total £m
Property, plant and equipment	2.4	-	2.4	0.2	-	0.2
Financial assets	0.9	-	0.9	0.1	-	0.1
Financial liabilities	-	(0.2)	(0.2)	-	(0.3)	(0.3)
Other short term timing differences	2.2	(5.7)	(3.5)	1.5	(5.5)	(4.0)
Net deferred tax assets/(liabilities)	5.5	(5.9)	(0.4)	1.8	(5.8)	(4.0)

Movement in deferred tax during the period

	28 March 2019 £m		Recognised in income £m	Recognised in equity £m	26 March 2020 £m
Property, plant and equipment	0.2		2.2	-	2.4
Net financial (liabilities)/assets	(0.2)		-	0.9	0.7
Other short term timing differences	(4.0)		0.5	-	(3.5)
	(4.0)		2.7	0.9	(0.4)

Other short term timing differences primarily relate to share based payment schemes and inventory provisions.

Movement in deferred tax during the period

	29 March 2018 £m		Recognised in income £m	Recognised in equity £m	28 March 2019 £m
Property, plant and equipment	(0.8)		1.0	-	0.2
Net financial assets/ (liabilities)	0.2		-	(0.4)	(0.2)
Other short term timing differences	(3.8)		(0.2)	-	(4.0)
	(4.4)		0.8	(0.4)	(4.0)

Notes (forming part of the financial statements) continued

15  Deferred tax assets and liabilities (continued)

Company

Movement in deferred tax during the period

	28 March 2019 £m		Recognised in income £m	Recognised in equity £m	26 March 2020 £m
Net financial assets	0.0		-	0.4	0.4

The rate used to calculate deferred tax assets and liabilities is 19% in line with the corporation tax rate.

16  Other financial assets and liabilities

	Group		Company
	At 26 March 2020 £m	At 28 March 2019 £m	At 26 March 2020 £m	At 28 March 2019 £m
Non-current assets
Investments in Joint Venture veterinary practices	0.4	0.4	-	-
Loans to Joint Venture veterinary practices  - initial set up loans	13.3	13.3	-	-
Loans to Joint Venture veterinary practices - other loans	4.0	3.9	-	-
Other investments	1.1	0.1	-	-
Other receivables	1.8	1.0	-	-
Interest rate swaps	0.3	-	0.3	-
	20.9	18.7	0.3	-

Investments in Joint Venture veterinary practices

Investments represent £0.4m (2019: £0.4m) of the 'B' share capital in Joint Venture veterinary practice companies. These investments are held at cost less impairment.  The fair values of investments in unlisted equity securities are considered to be their carrying value as the impact of discounting future cash flows has been assessed as not material and the investment is non-participatory.  The share capital of the veterinary practice companies is split equally into 'A' ordinary shares (held by Joint Venture Partners) and 'B' ordinary shares (held by the Group). Any operational decisions require the agreement of the Joint Venture Partner.

Under the terms of the agreements, the Group ('B' shareholder) is not entitled to any profits, losses or dividends, or any surplus on winding up or disposal, although they are entitled to appoint Directors to the Board and carry the same shareholder voting rights as 'A' ordinary shareholders.

The agreements entitle the Group to receive income in relation to support services offered in such areas as clinical development, promotion and methods of operation as well as service activities including accountancy, legal and property.

Loans to Joint Venture veterinary practices - initial set up loans

Loans to Joint Venture veterinary practices of £13.3m (2019: £13.3m) are provided to Joint Venture veterinary practice companies trading under the Companion Care and Vets4Pets brands, in which the Group's share interest is non-participatory. These loans represent a long term investment in the Joint Venture, supporting their initial set up and working capital, and are held at amortised cost under IFRS 9.   The carrying value is cost as the impact of discounting future cash flows at a market rate of interest has been assessed as not material. Under the terms of the loans provided to veterinary companies trading under the Companion Care and Vets4Pets brands the loans attract varying interest rates between 2% and 3%. There is no set date for repayment of the loans due to the Group.

The balances above are shown net of provisions of £nil (2019: £1.1m).  The provision was in relation to loans with Joint Venture veterinary practices which the Group was in the process of offering to buy out and had therefore provided in full for the remaining loans on these practices, which were considered to be in default and credit impaired.  These costs were charged to non-underlying operating cost of sales.  The movement on the loans is detailed below.

	Gross loan value £m	Provision  m	Carrying value of loan  m
As at 28 March 2019	14.4	(1.1)	13.3
Net repayment and further advances	0.0	-	0.0
Provisions utilised during the period (non- underlying)	(1.1)	1.1	-
As at 26 March 2020	13.3	-	13.3
Closing position  (underlying)	13.3	-	13.3
Closing position  (non-underlying)	-	-	-

£1.1m of loans (2019: £1.5m) have been written off in the year in advance of the acquisition of 28 Joint Venture veterinary practices in the period.  Further details of these acquisitions are provided in note 10.

Notes (forming part of the financial statements) continued

16  Other financial assets and liabilities (continued)

Loans to Joint Venture veterinary practices - other loans

Loans to Joint Venture veterinary practices - other loans of £4.0m (2019: £3.9m) represent loan balances to Joint Venture veterinary practices and Shared Venture Partners. These loans are unsecured, typically for five to seven years and attract an interest rate of LIBOR plus 2.8%. The loans are accounted for at amortised cost under IFRS 9. The carrying value is considered to be cost as the impact of discounting future cash flows at a market rate of interest has been assessed as not material.  The loans are typically to support capacity expansion. The balances above are shown net of provisions held of £nil (2019: £1.1m). The movement on the loans is detailed below.

£0.7m (2019: £0.4m) of these loans have been written off in the year in advance of the acquisition of 28 Joint Venture veterinary practices in the period, with the remaining provision released through non-underlying costs in the income statement.  Further details of this are provided in note 3.

	Gross loan value £m	Provision  m	Carrying value of loan  m
As at 28 March 2019	5.0	(1.1)	3.9
Net repayment and further advances	(0.3)	-	(0.3)
Provisions utilised during the period (non-underlying)	(0.7)	0.7	-
Provisions released during the period (non- underlying)	-	0.4	0.4
As at 26 March 2020	4.0	-	4.0
Closing position  (underlying)	4.0	-	4.0
Closing position  (non-underlying)	-	-	-

Other investments

Other investments are held at fair value through other comprehensive income ('FVOCI'). The fair values of investments in unlisted equity securities are considered to be their carrying value as the impact of discounting future cash flows has been assessed as not material and the investment is non-participatory.  

Other financial assets	Group		Company
	At 26 March 2020 £m	At 28 March 2019 £m	At 26 March 2020 £m	At 28 March 2019 £m
Current assets
Fuel forward contracts	-	0.0	-	-
Forward exchange contracts	0.8	1.6	-	-
Other receivables	0.7	-	-	-
	1.5	1.6	-	-

Other financial liabilities	Group		Company
	At 26 March 2020 £m	At 28 March 2019 £m	At 26 March 2020 £m	At 28 March 2019 £m
Current liabilities
Fuel forward contracts	(0.4)	-	-
Forward exchange contracts	(1.7)	(0.5)	-	-
Interest rate swaps	(0.0)	(0.1)	(0.0)	(0.1)
Put and call liability	-	(6.6)	-	-
Finance lease liabilities	(0.1)	(0.1)	-	-
	(2.2)	(7.3)	(0.0)	(0.1)

	Group		Company
	At 26 March 2020 £m	At 28 March 2019 £m	At 26 March 2020 £m	At 28 March 2019 £m
Non-current liabilities
Interest rate swaps	(2.3)	-	(2.3)	-
Put and call liability	(3.4)	(2.3)	-	-
Finance lease liabilities	(0.1)	(0.2)	-	-
	(5.8)	(2.5)	(2.3)	-

Notes (forming part of the financial statements) continued

17  Trade and other receivables

	Group		Company
	At 26 March 2020 £m	At 28 March 2019 £m	At 26 March 2020 £m	At 28 March 2019 £m
Trade receivables	17.4	15.8	-	-
Amounts owed by Joint Venture veterinary practices - funding for new practices	1.6	0.3	-	-
Amounts owed by Joint Venture veterinary practices - operating loans	29.5	27.9	-	-
Other receivables	2.2	7.1	-	-
Amounts owed by Group undertakings	-	-	579.2	578.3
Prepayments	1.5	12.4	-	-
Accrued income	3.7	5.4	-	-
	55.9	68.9	579.2	578.3

Trade and other receivables

The impairment of trade and other receivables is assessed in line with IFRS 9.  As at 26 March 2020 and 28 March 2019 the impact of expected credit loss on these balances was deemed to be immaterial and as such no provision has been made.

Amounts owed by Joint Venture veterinary practices

Amounts owed by Joint Venture veterinary practices represent funding for new practices, trading balances and operating loans owed by J oint Venture veterinary practices to the Group.  Operating loans are provided on a short term monthly cycle to the extent that a practice needs additional funding above their external bank loan. Practices generate cash on a monthly basis which is applied to the repayment of brought forward operating loans.  For immature practices, loan balances may increase due to operating requirements. Based on a projected cash flow forecast on a practice by practice basis, the funding is expected to be required for a number of years, however as cash is applied against opening loan balances, the Group's expectation is that the brought forward balance will be repaid in cash within 12 months.  The loans have been classified as current on this basis and the Group has chosen not to charge interest on these balances, which are repayable on demand, and they are initially recognised under IFRS 9 at their nominal value as the effect of discounting the expected cash flows based on the effective interest rate at the market rate of interest is not material.  The loans advanced to the practices are interest free and either repayable on demand or repayable within 90 days of demand. No facility exists and the levels of loans are monitored in relation to review of the practices performance against business plan and a number of financial and non-financial KPIs.

For those practices in default, a credit impairment charge is recognised under IFRS 9, taking into the expected cash shortfall over the workout period.  For other practices, a credit impairment charge is recognised under IFRS 9, taking into account both the probability of loss and the loss proportion given default.

The balances above are shown net of allowances for expected credit losses held for operating loans of £8.0m (2019: £14.3m).  The basis for this allowance and the movement in the period is set out below and further detail is provided in note 1.22. 

Group

	Underlying £m	Non-underlying £m	Total £m
Gross value of operating loans
As at 28 March 2019	35.0	7.2	42.2
Loans written off	-	(7.2)	(7.2)
Net repayment and further advances	2.5	-	2.5
Gross value of operating loans as at 26 March 2020	37.5	-	37.5
Provision against operating loans
As at 28 March 2019	7.1	7.2	14.3
Utilisation of provision against loans written off	-	(7.2)	(7.2)
Provisions made during the period	-0.9	-	0.9
Provision against operating loans as at 26 March 2020	8.0	-	8.0
Carrying value of loan at 28 March 2019	27.9	-	27.9
% provision as at 28 March 2019	20.3%	100%	33.9%
Carrying value of loan at 26 March 2020	29.5	-	29.5
% provision as at 26 March 2020	21.3%	-	21.3%

During the period ended 26 March 2020, £7.2m of operating loans, which were deemed to be in default due to the significant underperformance of the practices, were written off as part of the review and recalibration exercise on Joint Venture veterinary practices.  This balance had been provided for in full at 28 March 2019.

Notes (forming part of the financial statements) continued

17  Trade and other receivables (continued)

The Group holds an underlying provision of £8.0m against the remaining operating loans of £37.5m.  The underlying provision has increased by £0.9m in the year (£2.9m as at 28 March 2019) as management have updated their expectation of the credit risk associated with the practices to reflect their latest view of performance and the level of risk in the market.  The Group is working with a number of Joint Venture Partners, where the Partners choose to follow Pets at Home's recommendations, on remediation plans aimed at improving practice performance. Further details regarding credit risk are provided in note 1.16.

The following table presents an analysis of the credit risk of debt securities, held at amortised cost, and indicates whether they were credit impaired.

Based on their score card performance, loans are categorised as high, medium or low credit risk. The loss allowance is calculated in accordance with the policy set out in note 1.16, depending on the credit risk of each loan.

	Not credit impaired	Credit impaired	Not credit impaired	Credit impaired
Credit risk	At 26 March 2020 £m	At 26 March 2020 £m	At 28 March 2019 £m	At 28 March 2019 £m
Low	26.6	-	4.5	-
Medium	6.7	-	30.5	-
High	4.2	-	-	7.2
Gross carrying amount	37.5	-	35.0	7.2
Loss allowance	(8.0)	-	(7.1)	(7.2)
Net carrying amount	29.5	-	27.9	-

Practices categorised as high risk, and credit impaired, in the prior year related to those practices the Group had identified to buy out as part of the review and recalibration exercise of the First Opinion veterinary practices.

Should each operating loan risk, as defined by the risk criteria in note 1.16, increase by 10%, this would lead to an increase in the required provision for operating loans of £1.9m (28 March 2019: £3.5m). This sensitivity is considered by management to represent a reasonably possible range of estimation uncertainty, based on the variance in current trading performance within these Joint Venture veterinary practices. The factors which give rise to the estimation uncertainty include macro-economic and industry specific factors, including the level of industry growth, as well as gross margin percentages achieved within the industry, which contain a number of factors including the availability of suitably qualified veterinary personnel.  Further details are provided in note 27.

Accrued income

Accrued income relates to income in relation to fees to Joint Venture veterinary practices, revenues generated through specialist referral centres, and overrider and promotional income from suppliers   which have not yet been invoiced .  Accrued income is classified as current as it is expected to be invoiced and received within 12 months of the period end date. Supplier income is recognised on an accruals basis, based on the expected entitlement that has been earned up to the balance sheet date for each relevant supplier contract.  As detailed in note 1.19, supplier income is recognised as a credit within gross margin to cost of sales and is outside of the scope of IFRS 15 and therefore a contract asset has not been separately recognised. Further detail of the Group's revenue recognition policy is provided in note 1.19.

Company

Amounts owed by Group undertakings

Amounts owed by Group undertakings have been assessed in line with IFRS 9 and an assessment is made of the expected credit loss.  As at 26 March 2020 and 28 March 2019 the impact of expected credit loss on these balances was deemed to be immaterial and as such no provision has been made.

18  Cash and cash equivalents

	Group		Company
	At 26 March 2020 £m	At 28 March 2019 £m	At 26 March 2020 £m	At 28 March 2019 £m
Cash and cash equivalents	79.1	60.5	-	-

Notes (forming part of the financial statements) continued

19  Other interest-bearing loans and borrowings

	Group		Company
	At 26 March 2020 £m	At 28 March 2019 £m		At 26 March 2020 £m	At 28 March 2019 £m
Non-current liabilities
Unsecured bank loans	163.3	178.8		163.3	178.8

Terms and debt repayment schedule

	Currency	Nominal interest rate	Year of maturity	Face value at 26 March 2020 £m	Carrying amount at 26 March 2020 £m	Face value at 28 March 2019 £m	Carrying amount at 28 March 2019 £m
Revolving credit facility	GBP	LIBOR +1.15%	2023	165.0	163.3	181.0	178.8

The Group has a revolving facility of £248.0m which expires in 2023.

The drawn amount was £165.0m at 26 March 2020 and this amount is reviewed each month. Interest is charged at LIBOR plus a margin based on leverage on a pre-IFRS 16 basis (net debt: EBITDA). Face value represents the principal value of the revolving credit facility. The facility is unsecured.

Interest-bearing borrowings are recognised initially at fair value, being the principal value of the loan net of attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at a carrying value, which represents the amortised cost of the loans using the effective interest method.

The analysis of repayments on the loans is as follows:

	At 26 March 2020 £m	At 28 March 2019 £m
Within one year or repayable on demand	-	-
Between one and two years	-	-
Between two and five years	165.0	181.0
	165.0	181.0

The loans at 26 March 2020 and 28 March 2019 are held by the Company.

The Group's policy with regard to interest rate risk is to hedge the appropriate level of borrowings by entering into fixed rate agreements.  The Group has entered into one fixed rate interest rate swap agreement over a total of £162.4m of the senior facility borrowings at the balance sheet date at a fixed rate of 0.814%, which expires on 30 March 2020.  The Group has a further fixed interest rate swap agreement over a total of £137.6m of the senior facility borrowings at the balance sheet date at a fixed rate of 0.918% which commences on 31 March 2020 and expires on 31 March 2021. The Group has further fixed interest rate swap agreements over a total of £100.0m of the senior facility borrowings at the balance sheet date at a blended fixed rate of 0.811% which commences on 31 March 2021 and expires on 25 September 2023.

The hedges are structured to hedge at least 70% of the forecast outstanding debt for the next 12 months.

Analysis of changes in net debt

	At 28 March 2019 £m	Cash flow £m	Non-cash movement £m	At 26 March 2020 £m
Cash and cash equivalents	60.5	18.6	-	79.1
Debt due within one year at face value	-	-	-	-
Debt due after one year at face value	(181.0)	16.0	-	(165.0)
Net debt	(120.5)	34.6	-	(85.9)

Notes (forming part of the financial statements) continued

20  Trade and other payables

	Group		Company
	At 26 March 2020 £m	At 28 March 2019 £m	At 26 March 2020 £m	At 28 March 2019 £m
Current
Trade payables	110.8	108.8	-	-
Accruals	45.1	43.5	0.1	0.6
Amounts owed to Joint Venture veterinary practices	6.7	4.0	-	-
Deferred income in relation to lease incentives	-	5.1	-	-
Other payables including tax and social security	34.0	24.4	-	-
Amounts owed to Group undertakings	-	-	387.7	329.5
	196.6	185.8	387.8	330.1
Non-current
Deferred income in relation to lease incentives	-	33.6	-	-

The current and non-current deferred income in the period ended 28 March 2019 represents deferred income in respect of store leases where incentives are spread over the life of the lease. This has been adjusted against the right-of-use assets as part of the transition to IFRS 16 in the 52 week period ended 26 March 2020.

Amounts owed to Joint Venture veterinary practices that relate to trading balances are interest free and repayable on demand.

Within accruals above, contract liabilities under IFRS 15 of £0.7m (2019: £0.7m) relate to advanced consideration received from customers in relation to gift vouchers, cards and points redeemable by charities. This revenue will be recognised as the vouchers, cards and points are redeemed, which is expected to be over the next two years.

Within accruals above, contract liabilities under IFRS 15 of £3.2m (2019: £0.2m) relate to advanced consideration received from customers in relation to online orders which have not yet been delivered. This revenue will be recognised as the online orders are delivered to customers, which is expected to be in less than one week.

21  Provisions

	Dilapidation provision £m	Closed stores provision £m	Provisions for guarantees and lease obligations relating to Joint Venture veterinary practices £m	Provisions for exit and closure costs relating to Joint Venture veterinary practices £m	Total £m
Balance at 28 March 2019	0.7	2.3	5.4	8.6	17.0
Provisions made during the period	1.3	1.2	0.9	5.2	8.6
Provisions utilised during the period	(0.1)	(1.6)	(6.3)	(9.7)	(17.7)
Provisions reclassified against right-of-use assets	--	(0.8)	-	(1.9)	(2.7)
Balance at 26 March 2020	1.9	1.1	-	2.2	5.2

	At 26 March 2020 £m	At 28 March 2019 £m
Current	3.9	15.4
Non-current	1.3	1.7
	5.2	17.1

The closed stores provision relates to the rates, service charge and utilities payable on sublet or vacant stores. The timing of the utilisation of these provisions is variable dependent upon the lease expiry dates of the properties concerned, which vary between 1 and 5 years. Market conditions have a significant impact and hence the assumptions on future cash flows are reviewed regularly and revisions to the provision made where necessary.

The provision is discounted in line with the discount rates used to calculate the value of a right-of-use asset. A decrease in this rate of 100 bps would increase the provision by £0.0m.

The provisions for guarantees and lease obligations relating to Joint Venture veterinary practices includes guarantees to third parties for bank loans, overdrafts and lease obligations payable by Joint Venture veterinary practices which the Group has bought out from Joint Venture Partners and therefore which have been provided for under IFRS 9.

The provisions for exit and closure costs relating to Joint Venture veterinary practices relate to expenses for any Joint Venture veterinary practices that the Group has bought out from Joint Venture Partners, and therefore which have been provided for under IAS 37.   The timing of the utilisation of these provisions is variable dependent upon the lease expiry dates of the properties concerned, which vary between 1 and 14 years. Market conditions have a significant impact and hence the assumptions on future cash flows are reviewed regularly and revisions to the provision made where necessary.

Notes (forming part of the financial statements) continued

22  Capital and reserves

Share capital

Group

	Share capital Number	Share capital £m
At 29 March 2018	500,000,000	5.0
At 28 March 2019	500,000,000	5.0
At 26 March 2020	500,000,000	5.0

Company

	Share capital 26 March 2020 £m
At beginning of period	5.0
On issue at period end	5.0

	Share capital 28 March 2019 £m
At beginning of period	5.0
On issue at period end	5.0

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.

Translation reserve

The translation reserve comprises all foreign exchange differences arising since 21 November 2011, the date of incorporation of Pets at Home Asia Ltd where the functional currency differs from that of the rest of the Group.

Cash flow hedging reserve

The cash flow hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred.

Retained earnings

Included within the Group is Pets at Home Employee Benefit Trust (EBT).  The EBT purchases shares to fund the share option schemes.  As at 26 March 2020, the EBT held 5,749,377 ordinary shares (28 March 2019: 4,596,471) with a cost of £11,805,745 (2019: £7,905,930).The market value of these shares as at 26 March 2020 was 268.80 pence per share (26 March 2019: 160.50). 

Other comprehensive income

26 March 2020

	Translation reserve £m	Cash flow hedging reserve £m	Total other comprehensive income £m
Other comprehensive income	(0.1)	-	(0.1)
Effective portion of changes in fair value of cash flow hedges	-	(5.5)	(5.5)
Deferred tax on changes in fair value of cash flow hedges	-	0.9	0.9
Total other comprehensive income	(0.1)	(4.6)	(4.7)

28 March 2019

	Translation reserve £m	Cash flow hedging reserve £m	Total other comprehensive income £m
Other comprehensive income	(0.1)	-	(0.1)
Effective portion of changes in fair value of cash flow hedges	-	1.0	1.0
Deferred tax on changes in fair value of cash flow hedges	-	(0.4)	(0.4)
Total other comprehensive income	(0.1)	0.6	0.5

Notes (forming part of the financial statements) continued

23  Financial instruments

Financial risk management

The Group's activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk and cash flow interest rate risk), credit risk and liquidity risk.

Risk management framework

Risk management in respect of financial risk is carried out by the Group Treasury function under policies approved by the Board of Directors. The Board of Directors has overall responsibility for the establishment and oversight of the Group's risk management framework. The Board provides written principles through its Group Treasury Policy for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.

The main objectives of the Group Treasury function are:

To ensure shareholder and management expectations are managed on cash flow and earnings volatility resulting from financial market movements;

To protect the expected cash flow and earnings from interest rate and foreign exchange fluctuations to within parameters acceptable to the Board and shareholders; and

To control banking costs and service levels.

Market risk

Foreign currency risk

The Group sources a significant level of purchases in foreign currency, in excess of US$70 million each financial year, and monitors its foreign currency requirements through short, medium and long term cash flow forecasting. The value of purchases in US dollars continues to increase each year and the risk management policy has evolved with this increased risk.

At 26 March 2020, the Group's policy is to hedge up to 95% of the next 12 months and additionally up to 60% of the following six months out to 18 months forecast foreign exchange transactions, using foreign currency bank accounts and forward foreign exchange contracts. The transactions are deemed to be 'highly probable' and are based on historical knowledge and forecast purchase and sales projections.

The Group's exposure to foreign currency risk is as follows. This is based on the carrying amount for monetary financial instruments, except for derivatives which are based on notional amounts:

26 March 2020

	Euro £m	US Dollar £m	HKD £m	Total £m
Cash and cash equivalents	0.8	0.4	0.0	1.2
Trade payables	(1.1)	(6.5)	-	(7.6)
Forward exchange contracts	(0.0)	(1.0)	-	(1.0)
Balance sheet exposure	(0.3)	(7.1)	0.0	(7.4)

28 March 2019

	Euro £m	US Dollar £m	HKD £m	Total £m
Cash and cash equivalents	0.5	-	0.0	0.5
Trade payables	-	(7.7)	-	(7.7)
Forward exchange contracts	(0.2)	1.4	-	1.2
Balance sheet exposure	0.3	(6.3)	0.0	(6.0)

Sensitivity analysis

A 5% weakening of the following currencies against the pound sterling at the period end date in both years would have increased/(decreased) profit or loss or equity by the amounts shown below. This calculation assumes that the change occurred at the balance sheet date and had been applied to risk exposures existing at that date.

This analysis assumes that all other variables, in particular other exchange rates and interest rates, remain constant.

	Equity		Profit or loss
	26 March 2020 £m	28 March 2019 £m	26 March 2020 £m	28 March 2019 £m
US Dollar	0.0	(0.1)	0.3	0.4
Euro	-	0.0	0.0	(0.0)

A 5% strengthening of the above currencies against the pound sterling in any period would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.

Notes (forming part of the financial statements) continued

23 Financial instruments (continued)

(ii) Interest rate risk

Cash flow and fair value interest rate risk

The Group's interest rate risk arises from long term borrowings. As at 26 March 2020, the Group had a revolving credit facility with a face value totalling £165.0m. The Group's borrowings as at 26 March 2020 incur interest at a rate of 1.15% plus LIBOR at the leverage prevalent in the period, which exposes the Group to cash flow interest rate risk. The analysis of loan repayments is detailed in note 19.

The Group's policy with regard to interest rate risk is to hedge the appropriate level of borrowings by entering into fixed rate agreements. The Group has a fixed rate interest rate swap agreement over a total of £162.4m of the revolving credit facility borrowings at the balance sheet date at a fixed rate of 0.814%, which expires on 30 March 2020.  The Group has a further fixed interest rate swap agreement over a total of £137.6m of the senior facility borrowings at the balance sheet date at a fixed rate of 0.918% which commences on 31 March 2020 and expires on 31 March 2021. The Group has further fixed interest rate swap agreements over a total of £100.0m of the senior facility borrowings at the balance sheet date at a blended fixed rate of 0.811% which commences on 31 March 2021 and expires on 25 September 2023. The hedge is structured to hedge at least 70% of the forecast outstanding debt for the next year.

Profile

At the balance sheet date the interest rate profile of the Group's interest-bearing financial instruments was:

	Group		Company
	Book value At 26 March 2020 £m	Book value At 28 March 2019 £m	Book value At 26 March 2020 £m	Book value At 28 March 2019 £m
Fixed rate instruments
Financial liabilities	162.4	142.1	163.3	142.1
Variable rate instruments
Financial liabilities	0.9	36.7	-	36.7
Total financial liabilities	163.3	178.8	163.3	178.8

All borrowings bear a variable rate of interest based on LIBOR. Group policy is to hedge at least 70% of the loan to ensure a fixed rate of interest. Therefore, designated above is the portion of the loan hedged by a fixed rate interest rate swap and the remaining un-hedged portion is designated as variable rate.

Sensitivity analysis

A change of 50 basis points in interest rates at the period end date would have increased/ (decreased) equity and profit or loss by the amounts shown below. This calculation assumes that the change occurred at the balance sheet date and had been applied to risk exposures existing at that date.

This analysis assumes that all other variables, in particular foreign currency rates, remain constant and considers the effect of financial instruments with variable interest rates, financial instruments at fair value through profit or loss or available for sale with fixed interest rates and the fixed rate element of interest rate swaps. The analysis is performed on the same basis for the comparative period.

	At 26 March 2020 £m	At 28 March 2019 £m
Equity
Increase	0.8	0.7
Decrease	(0.8)	(0.7)
Profit or loss
Increase	-	0.2
Decrease	-	(0.2)

Credit risk

Financial risk management

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Group's receivables from customers, investment securities and operating loans to Joint Venture veterinary practices.

Credit risk also arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions. The Group ensures that the banks used for the financing of the revolving credit facilities and interest rate swap agreements hold an acceptable risk rating by independent parties.

The Group has in place certain guarantees over the bank loans taken out by a number of Joint Venture veterinary practice companies in which it holds an investment. Further details of these guarantees are disclosed in note 27. The performance of the Joint Venture veterinary practice companies is reviewed on an on-going basis.

Exposure to credit risk

The Group's maximum exposure to credit risk, being the carrying amount of financial assets, is summarised in the table within the fair values section below.

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.

Management prepares and monitors rolling forecasts of the Group's cash balances based on expected cash flows to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions without risking damage to the Group's reputation. Covenants are monitored on a regular basis to ensure there is no risk or breach which would lead to an 'Event of Default' and compliance certificates are issued as required to the syndicate agent.

Notes (forming part of the financial statements) continued

23  Financial instruments (continued)

The following are the contractual maturities of financial liabilities, including estimated interest payments:

Group

26 March 2020

	Carrying amount £m	Contractual cash flows £m	1 year or less £m	1 to <2 years £m	2 to <5 years £m	5 years and over £m
Non-derivative financial liabilities
Bank loans (note 19)	163.3	165.0	-	-	165.0	-
Trade payables (note 20)	110.8	110.8	110.8	-	-	-
Finance lease liabilities (note 16)	0.2	0.2	0.1	0.1	-	-
Put and call liability (note 16)	3.4	3.4	-	3.0	0.2	0.2
Derivative financial liabilities
Interest rate swaps used for hedging:
Outflow (note 16)	2.3	2.3	0.0	1.0	1.3	-	-
Forward exchange contracts used for hedging:
Outflow (note 16)	1.7	1.7	1.7	-	-	-
Fuel forward contracts used for hedging:
Outflow (note 16)	0.4	0.4	0.4	0.0	-	-
	282.1	283.8	113.0	4.1	166.5	0.2

28 March 2019

	Carrying amount £m	Contractual cash flows £m	1 year or less £m	1 to <2 years £m	2 to <5 years £m	5 years and over £m
Non-derivative financial liabilities
Bank loans (note 19)	178.8	181.0	-	-	181.0	-
Trade payables (note 20)	108.8	108.8	108.8	-	-	-
Finance lease liabilities (note 16)	0.3	0.3	0.1	0.1	0.1	-
Put and call liability (note 16)	8.9	8.9	6.6	-	2.3	-
Derivative financial liabilities
Interest rate swaps used for hedging:
Outflow (note 16)	0.1	0.1	0.1	-	-	-
Forward exchange contracts used for hedging:
Outflow (note 16)	0.5	0.5	0.5	-	-	-
	297.4	299.6	116.1	0.1	183.4	-

Company

26 March 2020

	Carrying amount £m	Contractual cash flows £m	1 year or less £m	1 to <2 years £m	2 to <5 years £m	5 years and over £m
Non-derivative financial liabilities
Bank loans (note 19)	163.3	165.0	-	-	165.0	-
	163.3	165.0	-	-	165.0	-

28 March 2019

	Carrying amount £m	Contractual cash flows £m	1 year or less £m	1 to <2 years £m	2 to <5 years £m	5 years and over £m
Non-derivative financial liabilities
Bank loans (note 19)	178.8	181.0	-	-	181.0	-
	178.8	181.0	-	-	181.0	-

Liquidity risk and cash flow hedges

Cash flow hedges

The following table indicates the periods in which the cash flows associated with cash flow hedging instruments are expected to occur and to affect profit or loss:

Notes (forming part of the financial statements) continued

23  Financial instruments (continued)

Group

26 March 2020

	Carrying amount £m	Expected cash flows £m	1 year or less £m	1 to <2 years £m	2 to <5 years £m	5 years and over £m
Interest rate swaps:
Assets (note 16)	0.3	0.3	-	-	0.3	-
Liabilities (note 16)	(2.3)	(2.3)	0.0	(1.0)	(1.3)	-
Forward exchange contracts:
Assets (note 16)	0.8	0.8	0.8	-	-	-
Liabilities (note 16)	(1.7)	(1.7)	(1.7)	-	-	-
Fuel forward contracts:
Liabilities (note 16)	(0.4)	(0.4)	(0.4)	(0.0)	-	-
	(3.3)	(3.3)	(1.3)	(1.0)	(1.0)	-

28 March 2019

	Carrying amount £m	Expected cash flows £m	1 year or less £m	1 to <2 years £m	2 to <5 years £m	5 years and over £m
Interest rate swaps:
Liabilities (note 16)	(0.1)	(0.1)	(0.1)	-	-	-
Forward exchange contracts:
Assets (note 16)	1.6	1.6	1.6	-	-	-
Liabilities (note 16)	(0.5)	(0.5)	(0.5)	-	-	-
Fuel forward contracts:
Assets (note 16)	0.0	0.0	0.0	-	-	-
	1.0	1.0	1.0	-	-	-

Company

26 March 2020

	Carrying amount £m	Expected cash flows £m	1 year or less £m	1 to <2 years £m	2 to <5 years £m	5 years and over £m
Interest rate swaps:
Assets (note 16)	0.3	0.3	-	-	0.3	-
Liabilities (note 16)	(2.3)	(2.3)	-	(1.0)	(1.3)	-
	(2.0)	(2.0)	-	(1.0)	(1.0)	-

28 March 2019

	Carrying amount £m	Expected cash flows £m	1 year or less £m	1 to <2 years £m	2 to <5 years £m	5 years and over £m
Interest rate swaps:
Liabilities (note 16)	(0.1)	(0.1)	(0.1)	-	-	-
	(0.1)	(0.1)	(0.1)	-	-	-

Fair values of financial instruments

Investments

The fair values of investments are considered to be their carrying value as the impact of discounting future cash flows has been assessed as not material and the investment is non-participatory.

Trade and other payables and receivables

The fair values of these items are considered to be their carrying value as the impact of discounting future cash flows has been assessed as not material.

Cash and cash equivalents

The fair value of cash and cash equivalents is estimated as its carrying amount where the cash is repayable on demand. Where it is not repayable on demand (such as term deposits), then the fair value is estimated at the present value of future cash flows, discounted at the market rate of interest at the balance sheet date.

Long term and short term borrowings

The fair value of bank loans and other loans approximates its carrying value as it has an interest rate based on LIBOR.

Notes (forming part of the financial statements) continued

23  Financial instruments (continued)

Fair values of financial instruments

Short term deposits

The fair value of short term deposits is considered to be their carrying value as the balances are held in floating rate accounts where the interest rate is reset to market rates.

Derivative financial instruments

The fair values of forward exchange contracts and interest rate swap contracts are calculated by management based on external valuations received from the Group's bankers and are based on forward exchange rates and anticipated future interest yield respectively.

Contingent consideration

Contingent consideration on acquisition of a subsidiary is valued at fair value at the time of acquisition. Any subsequent changes in fair values are recognised in profit or loss.

Put and call options over non-controlling interests

Put and call options over non-controlling interests are recognised at fair value at the acquisition date and included within the valuation of goodwill. Subsequent changes to fair value are recognised in profit or loss

Fair values

The fair values of all financial assets and financial liabilities by class together with their carrying amounts shown in the balance sheet are as follows:

Fair value hierarchy

The table below shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy.

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)

Notes (forming part of the financial statements) continued

23  Financial instruments (continued)

26 March 2020
Carrying amount	Fair value - hedging instruments	FVOCI - equity instruments	Financial assets at amortised cost		Other financial liabilities	Total carrying amount
	£m	£m		£m	£m	£m
Financial assets measured at fair value
Investments in Joint Venture veterinary practices (note 16)	-	0.4		-	-	0.4
Other investments (note 16)	-	1.1		-	-	1.1
Forward exchange contracts used for hedging (note 16)	0.8	-		-	-	0.8
Interest rate swaps used for hedging (note 16)	0.3	-		-	-	0.3
	1.1	1.5		-	-	2.6
Financial assets not measured at fair value
Current trade and other receivables (note 17)	-	-		19.6	-	19.6
Amounts owed by Joint Venture veterinary practices - funding, trading and operating loans (note 17)	-	-		31.1	-	31.1
Cash and cash equivalents (note 18)	-	-		79.1	-	79.1
Loans to Joint Venture veterinary practices - initial set up loans (note 16)	-	-		13.3	-	13.3
Loans to Joint Venture veterinary practices - other loans (note 16)	-	-		4.0	-	4.0
Other receivables (note 16)	-	-		2.5	-	2.5
	-	-		149.6	-	149.6
Financial liabilities measured at fair value
Fuel forward contracts used for hedging (note 16)	(0.4)	-		-	-	(0.4)
Forward exchange contracts used for hedging (note 16)	(1.7)	-		-	-	(1.7)
Interest rate swaps used for hedging (note 16)	(2.3)	-		-	-	(2.3)
	(4.4)	-		-	-	(4.4)
Financial liabilities not measured at fair value
Finance lease liabilities (note 16)	-	-		-	(0.2)	(0.2)
Current lease liabilities (note 12)	-	-		-	(83.7)	(83.7)
Non-current lease liabilities (note 12)	-	-		-	(380.2)	(380.2)
Trade payables (note 20)	-	-		-	(110.8)	(110.8)
Amounts owed to Joint Venture veterinary practices (note 20)	-	-		-	(6.7)	(6.7)
Put & call liability (note 16)	-	-		-	(3.4)	(3.4)
Other interest-bearing loans and borrowings (note 19)	-	-		-	(163.3)	(163.3)
	-	-		-	(748.3)	(748.3)

Notes (forming part of the financial statements) continued

23  Financial instruments (continued)

	26 March 2020
	Fair value								Level 1		Level 2	Level 3	Total
									£m		£m	£m	£m
	Financial assets measured at fair value
	Investments in Joint Venture veterinary practices (note 16)								-		-	0.4	0.4
	Other investments (note 16)								-		-	1.1	1.1
	Forward exchange contracts used for hedging (note 16)								-		0.8	-	0.8
	Interest rate swaps used for hedging (note 16)								-		0.3	-	0.3
	Financial assets not measured at fair value
	Amounts owed by Joint Venture veterinary practices - Funding  and operating loans (note 17)								-		-	31.1	31.1
	Loans to Joint Venture veterinary practices - initial set up loans (note 16)							-			-	13.3	13.3
	Loans to Joint Venture veterinary practices - other loans (note 16)		-								-	4.0	4.0
	Other receivables (note 16)		-								-	2.5	2.5
	Financial liabilities measured at fair value
	Fuel forward contracts used for hedging (note 16)		-								(0.4)	-	(0.4)
	Forward exchange contracts used for hedging (note 16)		-								(1.7)	-	(1.7)
	Interest rate swaps used for hedging (note 16)		-								(2.3)	-	(2.3)
	Financial liabilities not measured at fair value
	Put & call liability		-								-	(3.4)	(3.4)
	Other interest-bearing loans and borrowings (note 19)			-							(165.0)	-	(165.0)
28 March 2019
Carrying amount					Fair value - hedging instruments		FVOCI - equity instruments			Financial assets at amortised cost		Other financial liabilities	Total carrying amount
					£m		£m			£m		£m	£m
Financial assets measured at fair value
Investments in Joint Venture veterinary practices (note 16)					-		0.4			-		-	0.4
Other investments (note 16)					-		0.1			-		-	0.1
Fuel forward contracts used for hedging (note 16)					0.0		-			-		-	0.0
Forward exchange contracts used for hedging (note 16)					1.6		-			-		-	1.6
					1.6		0.5			-		-	2.1
Financial assets not measured at fair value
Current trade and other receivables (note 17)					-		-			22.9		-	22.9
Amounts owed by Joint Venture veterinary practices - funding and operating loans (note 17)					-		-			28.2		-	28.2
Cash and cash equivalents (note 18)					-		-			60.5		-	60.5
Loans to Joint Venture veterinary practices - initial set up loans (note 16)					-		-			13.3		-	13.3
Loans to Joint Venture veterinary practices - other loans (note 16)					-		-			3.9		-	3.9
Other receivables (note 16)					-		-			1.0		-	1.0
					-		-			129.8		-	129.8
Financial liabilities measured at fair value
Forward exchange contracts used for hedging (note 16)					(0.5)		-			-		-	(0.5)
Interest rate swaps used for hedging (note 16)					(0.1)		-			-		-	(0.1)
					(0.6)		-			-		-	(0.6)
Financial liabilities not measured at fair value
Put and call liability (note 16)					-		-			-		(8.9)	(8.9)
Finance lease liabilities (note 16)					-		-			-		(0.3)	(0.3)
Trade payables (note 20)					-		-			-		(108.8)	(108.8)
Amounts owed to Joint Venture veterinary practices (note 20)					-		-			-		(4.0)	(4.0)
Other interest-bearing loans and borrowings (note 19)					-		-			-		(178.8)	(178.8)
					-		-			-		(300.8)	(300.8)

Notes (forming part of the financial statements) continued

23  Financial instruments (continued)

28 March 2019
Fair value	Level 1		Level 2	Level 3	Total
		£m	£m	£m	£m
Financial assets measured at fair value
Investments in Joint Venture veterinary practices (note 16)		-	-	0.4	0.4
Other investments (note 16)		-	-	0.1	0.1
Fuel forward contract used for hedging (note 16)		-	0.0	-	0.0
Forward exchange contracts used for hedging (note 16)		-	1.6	-	1.6
Financial assets not measured at fair value
Amounts owed by Joint Venture veterinary practices
- funding, trading and operating loans (note 17)		-	-	28.2	28.2
Loans to Joint Venture veterinary practices - initial set up loans (note 16)		-	-	13.3	13.3
Loans to Joint Venture veterinary practices - other loans (note 16)		-	-	3.9	3.9
Other receivables (note 16)		-	-	1.0	1.0
Financial liabilities measured at fair value
Forward exchange contracts used for hedging (note 16)		-	(0.5)	-	(0.5)
Interest rate swaps used for hedging (note 16)		-	(0.1)	-	(0.1)
Financial liabilities not measured at fair value
Put and call liability (note 16)		-	-	(8.9)	(8.9)
Other interest-bearing loans and borrowings (note 19)		-	(181.0)	-	(181.0)

Changes in liabilities arising from financing activities

		Loans and borrowings	Lease liabilities	Total
	£m		£m	£m
Balance at 29 March 2019	178.8		506.2	685.0
Changes from financing cash flows
Proceeds from loans and borrowings	61.0		-	61.0
Repayment of borrowings	(77.0)		-	(77.0)
Payment of lease liabilities	-		(81.0)	(81.0)
Total changes from financing cash flows	162.8		425.2	588.0
Other changes
Interest expense on lease liabilities	-		14.0	14.0
Additions to lease liabilities	-		24.7	24.7
Amortisation of debt issue costs	0.5		-	0.5
Total other changes	0.5		38.7	39.2
Balance at 26 March 2020	163.3		463.9	627.2

Measurement of fair values

The following table shows the valuation techniques used in measuring Level 2 and Level 3 fair values at the balance sheet dates, as well as the significant unobservable inputs used.

Type	Valuation technique	Significant unobservable inputs	Inter-relationship between significant unobservable inputs and fair value measurement
Investment in equity securities	The fair values of investments in unlisted equity securities are considered to be their carrying value as the impact of discounting future cash flows has been assessed as not material and the investment is non-participatory.	Not applicable	Not applicable
Forward exchange contracts and interest rate swaps	Market comparison technique - the fair values are based on broker quotes. Similar contracts are traded in an active market and the quotes reflect the actual transactions on similar instruments.	Not applicable	Not applicable
Other financial liabilities	Other financial liabilities include the fair values of the put and call options over the non-controlling interests of subsidiary undertakings.  The fair values represent the best estimate of amounts payable based on future earnings performance discounted to present value.	Future earnings performance	Fair value linked to increase or decrease in the best estimate of the future earnings performance

Notes (forming part of the financial statements) continued

23  Financial instruments (continued)

Hedge accounting

Cash flow hedges

At 26 March 2020 and 28 March 2019, the Group held the following instruments to hedge exposures to changes in foreign currency and interest rates.

	Maturity
	1-6 months	6-12 months	More than 1 year	1-6 months	6-12 months	More than 1 year
	2020	2020	2020	2019	2019	2019
Foreign currency risk
Forward exchange contracts
Net exposure (£m)	36.6	15.0	-	29.2	28.8	-
Average GBP-USD forward contract rate	1.27	1.31	-	1.38	1.32	-
Average GBP-EUR forward contract rate	1.14	1.19	-	1.13	1.11	-
Interest rate risk
Interest rate swaps
Net exposure (£m)	162.4	-	237.6	142.1	-	167.5
Average fixed interest rate	0.814%	-	0.865%	0.183%	-	0.814%

Company

The Company held interest rate swaps as at 26 March 2020 and 28 March 2019 which are valued as above.

Capital management

The Group's objectives when managing capital, which is deemed to be total equity plus total debt, are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders, through the optimisation of the debt and equity balance, and to maintain a strong credit rating and headroom on financial covenants. The Group manages its capital structure and makes appropriate decisions in light of the current economic conditions and strategic objectives of the Group.

The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the Group.

The funding requirements of the Group are met by the utilisation of external borrowings together with available cash, as detailed in note 19.

A key objective of the Group's capital management is to maintain compliance with the covenants set out in the revolving credit facility and to maintain a comfortable level of headroom over and above these requirements.

Management have continued to measure and monitor covenant compliance throughout the period and the Group has complied with the requirements set.

Notes (forming part of the financial statements) continued

24  Share based payments  

At 26 March 2020, the Group has five share award plans, all of which are equity settled schemes.

1 The Co-Invest Plan (CIP)

On 25 February 2014 the Company adopted the Co-Invest Plan (CIP). Matching awards under the CIP (as described in section 1(b) below) were made on 17 March 2014 to Executive Directors and the Senior Executives by reference to corresponding investment pledges by those colleagues.

These matching awards vested over a period of three years subject to the satisfaction of performance conditions and once vested as to performance became exercisable in equal one-third tranches in years three, four and five subject to continued employment with the Group. These awards were granted at nil cost.

(a)  Eligibility

Only the Executive Directors, the Senior Executives and certain other senior colleagues were selected to participate in the CIP.

(b)  Type of awards

Colleagues were invited to participate in the CIP by making an 'investment' or 'pledge' of their own shares (the 'Co-Invest Shares'), which could include existing, locked-in shares or new shares acquired with cash, in return for a nil cost-matching award over shares (the 'Matching Award').

Matching Awards were granted by reference to a ratio not exceeding one matched share for every Co-Invest Share 'pledged'. Matching Awards under the CIP did not form part of a participant's pensionable earnings and are not transferable other than on death.

(c)  Individual limits

The Executive Directors and the Senior Executives pledged Co-Invest Shares with a market value equal to 2.5 times their annual salary. Other senior colleagues who elected to participate in the CIP pledged Co-Invest Shares with a market value equal to a limit specified by the Remuneration Committee, but not exceeding 1 times their annual salary.

(d)  Performance, vesting and performance adjustment

The Matching Awards granted on 17 March 2014 vested subject to the satisfaction of the performance conditions outlined below. To the extent that any future awards are granted, different conditions may apply (in the absolute discretion of the Remuneration Committee).

The performance conditions were as follows:

75% of the Matching Award was subject to the CAGR in the Company's earnings per share ('EPS') over three financial years, namely FY15, FY16 and FY17 (together the 'Performance Period') (which, for the avoidance of doubt, ended on 30 March 2017). If the CAGR in the Company's EPS was 10%, then 10% of the total Matching Award would vest. If the CAGR in the Company's EPS was 17.5% or more, then 75% of the total Matching Award would vest. Vesting was on a straight-line basis between these two points. For the avoidance of doubt, if the CAGR in the EPS was less than 10% over the Performance Period then the amount of the Matching Award which would vest under this EPS performance condition would be nil.

25% of the total Matching Award was subject to the Company's total shareholder return ('TSR') as compared to a comparator group made up of a selected group of retail companies over the Performance Period. Vesting of 6.25% of the total Matching Award would occur for median performance. Vesting of the maximum 25% of the total Matching Award would occur for upper quartile performance or above. Vesting would occur on a straight-line basis between these two points. If the Company's TSR performance over the Performance Period was below median, then the amount of the Matching Award which would vest under this TSR performance condition would be nil.

To the extent vested as to performance, Matching Awards became exercisable in three equal amounts on the third, fourth and fifth anniversary of 17 March 2014, but subject to continued employment with the Group.

2 CSOP

On 25 February 2014 the Company adopted the CSOP. Part I of the CSOP is tax approved under Schedule 4 to the Income Tax (Earnings and Pensions) Act 2003 and provides for the grant of tax approved options. Part II of the CSOP provides for the grant of unapproved options.

The tax approved options under Part I of the CSOP will be exercisable between the third and tenth anniversary of the date of grant, subject to continued employment with the Group. These awards will be granted with an exercise price equal to the market value of the shares at the grant date (as agreed with HMRC).

(a)  Eligibility

All colleagues, including the Executive Directors and Senior Executives, are eligible to participate in the CSOP, at the discretion of the Remuneration Committee.

(b)  Grant of options

No options may be granted more than ten years after the adoption of the CSOP. Options under the CSOP will not form part of a colleague's pensionable earnings.

(c)  Vesting and performance

Colleagues who receive options under the CSOP and under the PSP in connection with Admission will be subject to the same performance conditions described in Section 1 (d) above in respect of both grants. Colleagues who only receive options under the CSOP in connection with Admission will not be subject to performance conditions.

(d)  Exercise price

The price at which an option holder may acquire shares on the exercise of an option shall be determined by the Board but shall not be less than the greater of market value of a share at the time of grant and its nominal value. The exercise price is therefore fixed at grant date.

(e)  Individual limits

No option may be granted to an eligible colleague under Part I of the CSOP which would result in the aggregate exercise prices of shares comprised in all outstanding options granted to him/her under Part I, when aggregated with outstanding options held under any other tax approved executive share option scheme established by the Company, exceeding the tax approved limit (currently £30,000).

Notes (forming part of the financial statements) continued

24  Share based payments (continued)

In addition, (both under Part I and II of the CSOP) the aggregate exercise price of shares comprised in options granted to a colleague under the CSOP and the PSP in any financial year shall not exceed 150% of his/her annual salary for that year.

For the purposes of these limits, market value will be calculated by reference to the market value of the shares on or prior to the relevant date of grant as determined by the Board (following consultation with the Remuneration Committee) and subject to HMRC approval if applicable.

Part II of the CSOP provides for the grant of unapproved options. This enables options to be granted under the same terms as Part I of the CSOP but without complying with the particular requirements of the legislation applicable to tax approved CSOP Schemes. The provisions of the CSOP that do not apply under Part II include the £30,000 limit and the need to seek HMRC approval for the scheme and subsequent amendments (as applicable).

3 PSP

On 25 February 2014 the Company adopted the PSP. Awards under the PSP were made on 17 March 2014 and annually thereafter up until 2017 after which no further awards were granted.  The awards will be exercisable between the third and tenth anniversary of the grant date, subject to continued employment with the Group and the satisfaction of performance conditions. These awards were granted at nil cost.

(a)  Eligibility

Only the Executive Directors, Senior Executives and certain other senior colleagues were selected to participate in the PSP.

(b)  Grant of awards

Awards under the PSP will not form part of a colleague's pensionable earnings. Awards are not transferable (other than on death) without the consent of the Remuneration Committee.

(c)  Exercise price

The price at which a colleague may acquire shares on the exercise or vesting of an award under the PSP shall be determined by the Remuneration Committee on the date of grant, and may, if the Remuneration Committee determines, be nil or nominal value only.

(d)  Scheme limits

The number of newly issued shares over which (or in respect of which) awards may be granted under the PSP on any date shall be limited so that: (i) the total number of shares issued and issuable in respect of options or awards granted in any ten year period under the PSP and any other discretionary share option scheme of the Company (including the CIP, RSA and the CSOP but other than to satisfy dividend equivalent payments) is restricted to 5% of the Company's issued shares calculated at the relevant time; and (ii) the total number of shares issued and issuable pursuant to options or awards granted in any ten year period under the PSP and any other employee share scheme operated by the Company (including the CIP, CSOP, SAYE and RSA but other than to satisfy dividend equivalent payments) is restricted to 10% of the Company's issued shares calculated at the relevant time.

For the purposes of these limits, no account will be taken of options or awards granted before, on or in connection with Admission and no account will be taken of options or awards which have lapsed, been surrendered or otherwise become incapable of exercise or vesting. Shares held in treasury will be treated as newly issued shares for the purposes of these limits (as long as this is required by institutional investor guidelines), but (for the avoidance of doubt) shares acquired in the market will not.

(e)  Individual limits

The aggregate market value of shares comprised in awards granted to a colleague under the PSP, RSA and the CSOP in any financial year shall not exceed 150% of their annual salary for that year.

For the purposes of awards granted on (or before) Admission, market value for these purposes was calculated by reference to the Offer Price. For the purposes of awards granted following Admission, market value for these purposes will be calculated by reference to the market value of the shares on the relevant date of grant as determined by the Board (following consultation with the Remuneration Committee) in its absolute discretion.

(f)  Performance

For awards granted on, or in connection with, Admission, the performance conditions are the same as for the CIP outlined in Section 1(d) above.

4 SAYE

On 25 February 2014, the Company adopted the SAYE (which was registered with and self-certified with HMRC on 4 April 2015). The rules of the SAYE were adopted pursuant to Schedule 3 of the Income Tax (Earnings and Pensions) Act 2003 and provide for the grant of tax approved options. In September each year, the Company issues invitations under the rules of the SAYE which provides eligible colleagues with an opportunity to receive share options at a 20% discount to the market price. The maximum monthly savings is £500 per month. The Executive Directors have elected to participate in the SAYE, along with 15.2% of eligible colleagues.

The options are granted once a year, and in normal circumstances they are not exercisable until completion of a three year savings period, beginning on 1 December each year, and will then be exercisable for a period of six months following completion of the relevant savings period.

(a)  Eligibility

All colleagues and full-time Directors of the Group, who have been in continuous service for such period of time (not exceeding five years) as may be determined by the Board prior to the relevant date of grant of an option and who are liable to UK income tax, are eligible to participate in the SAYE.

Participation may also be offered, at the discretion of the Board (taking account of the recommendations of the Remuneration Committee), to other Directors or employees who otherwise do not satisfy all of the above criteria, although Non-Executive Directors are not eligible to participate in the SAYE.

Notes (forming part of the financial statements) continued

24  Share based payments (continued)

(b)  Issue of invitations

Invitations to participate in the SAYE may be made during each 42 day period from (and including) (i) the date on which any amendment to the SAYE is approved or adopted by the Company's shareholders, (ii) the announcement of the Company's final or interim results for any financial period, (iii) the occurrence of an event which the Remuneration Committee considers to be an non-underlying event concerning the Group or (iv) changes to the legislation affecting tax approved SAYE option schemes coming into effect. If any of the above periods is a 'close period' as a result of the application of the Model Code for Securities Transactions by Directors of Listed Companies (or as a result of the Company's equivalent internal share dealing rules) and the Company is prohibited from issuing invitations and/or granting options as a result, then invitations may be made within 42 days of the end of the close period.

Invitations may be issued by the trustee of an employee benefit trust. No invitations may be issued or options granted more than ten years after the adoption of the SAYE.

(c)  Exercise price

The price at which an option holder may acquire shares on the exercise of an option shall be determined by the Board but shall not be less than the greater of 80% of the market value of a share at the time of grant and its nominal value.

(d)  Savings contract

Options may be granted by the Board or the trustee of an employee benefit trust. Upon applying for an option, the colleague will be required to enter into an approved savings contract with a savings institution nominated by the Company which lasts for three years. The maximum amount which an employee is permitted to contribute under SAYE contracts is £500 per month. The Board may set lower savings limits than this for different colleagues by reference to objective criteria such as levels of salary or length of service. The minimum contribution is £5 per month (or such greater amount as the Board may specify, not to exceed £10). The total exercise price of the shares over which the option is granted may not exceed the aggregate of the monthly contributions and bonus payable at the end of the colleague's related SAYE contract.

(e)  Scheme limits

The number of newly issued shares over which (or in respect of which) options may be granted under the SAYE on any date of grant shall be limited so that the total number of shares issued or capable of being issued in any ten year period under all the Company's employee share schemes (including the CIP, CSOP, PSP and RSA but other than to satisfy dividend equivalent payments) is restricted to 10% of the Company's issued shares calculated at the relevant time. Any options or rights to acquire shares granted before, on or in connection with Admission will be excluded from this limit, and no account will be taken of options or awards which have lapsed, been surrendered or otherwise become incapable of exercise or vesting.

(f)  Exercisability

Options will normally be exercisable during a period of six months following the allocation of a bonus under the related SAYE contract and will normally lapse upon cessation of employment. Earlier exercise is, however, permitted if the colleague dies or leaves employment through injury, disability, redundancy or retirement or where a colleague leaves employment of the Group by reason of his employing company ceasing to be a member of the Group, or if the undertaking in which he is employed is sold outside the Group. Early exercise will also be permitted in the event of a takeover, reconstructions or voluntary winding up of the Company.

5  RSA

On 20 July 2017 the Company adopted the RSA. Awards under the RSA were made on 20 July 2017 and annually thereafter and will be exercisable between the third and tenth anniversary of this date, subject to continued employment with the Group and the satisfaction of performance conditions. These awards were granted at nil cost.

(a)  Eligibility

All colleagues, including the Executive Directors and Senior Executives, are eligible to participate in the RSA, at the discretion of the Remuneration Committee.

(b)  Grant of awards

Awards under the RSA will not form part of a colleague's pensionable earnings. Awards are not transferable (other than on death) without the consent of the Remuneration Committee.

(c)  Exercise price

The price at which a colleague may acquire shares on the exercise or vesting of an award under the RSA shall be determined by the Remuneration Committee on the date of grant, and may, if the Remuneration Committee determines, be nil or nominal value only.

(d)  Scheme limits

The number of newly issued shares over which (or in respect of which) awards may be granted under the RSA on any date shall be limited so that: (i) the total number of shares issued and issuable in respect of options or awards granted in any ten year period under the RSA and any other discretionary share option scheme of the Company (including the CIP, PSP and the CSOP but other than to satisfy dividend equivalent payments) is restricted to 5% of the Company's issued shares calculated at the relevant time; and (ii) the total number of shares issued and issuable pursuant to options or awards granted in any ten year period under the RSA and any other employee share scheme operated by the Company (including the CIP, CSOP, SAYE and PSP but other than to satisfy dividend equivalent payments) is restricted to 10% of the Company's issued shares calculated at the relevant time.

For the purposes of these limits, no account will be taken of options or awards granted before, on or in connection with Admission and no account will be taken of options or awards which have lapsed, been surrendered or otherwise become incapable of exercise or vesting. Shares held in treasury will be treated as newly issued shares for the purposes of these limits (as long as this is required by institutional investor guidelines), but (for the avoidance of doubt) shares acquired in the market will not.

(e)  Individual limits

The aggregate market value of shares comprised in awards granted to a colleague under the RSA, PSP and the CSOP in any financial year shall not exceed 150% of their annual salary for that year.  Market value for these purposes will be calculated by reference to the market value of the shares on the relevant date of grant as determined by the Board (following consultation with the Remuneration Committee) in its absolute discretion.

Notes (forming part of the financial statements) continued

24  Share based payments (continued)

Fair value of share awards

The expected volatility is based on historical volatility of a peer group of companies over a relevant period prior to award. The expected life is the average expected period to exercise, which has been taken as three years. The risk free rate of return is the yield on zero-coupon UK government bonds with a life equal to this expected life.

Options are valued using a Black-Scholes option-pricing model for the non-market based (EPS element) performance conditions and a Monte-Carlo simulation for the market-based (TSR element) performance conditions.

Special provisions allow early exercise in the case of death, injury, disability, redundancy, retirement or because the Company which employs the option holder ceases to be part of the Group or in the event of a change in control, reconstruction or winding up of the Company.

The key assumptions used in the fair value of the awards were as follows:

		RSA		CIP		PSP
	2019	2018	2017	2015	2017	2016	2015
At grant date
Share price	£1.87	£1.37	£1.58	£2.45	£2.59	£2.75	£2.45
Exercise price	£0.0	£0.00	£0.00	£0.00	£0.00	£0.00	£0.00
Expected volatility	32%	32%	32%	30%	32%	30%	30%
Option life (years)	10	10	10	3	10	10	10
Expected dividend yield	2.00%	2.00%	2.00%	2.00%	2.00%	2.00%	2.00%
Risk free interest rate	n/a	n/a	n/a	n/a	0.50%	1.07%	1.07%
Weighted average fair value of options granted	£1.87	£1.37	£1.58	£2.06	£2.06	£2.06	£2.06

			CSOP				SAYE
		2017	2016	2015		2019	2018	2017
At grant date
Share price	£2.59		£2.75	£2.31		£2.37	£1.17	£1.97
Exercise price	£2.59		£2.75	£2.31		£1.98	£0.94	£1.57
Expected volatility	32%		32%	37%		30%	32%	32%
Option life (years)	10		10	10		3	3	3
Expected dividend yield	2.00%		2.00%	2.00%		2.00%	2.00%	2.00%
Risk free interest rate	0.50%		2.25%	2.25%		0.20%	0.20%	0.20%
Weighted average fair value of options granted	£0.65		£0.89	£0.75		£0.78	£0.39	£0.61

As both the RSA and PSP awards have a nil exercise price the risk free rate of return does not have any effect on the estimated fair value.

Movements in awards under share based payment schemes:

	CIP 000	PSP 000	CSOP 000	SAYE 000	RSA 000	Total 000
Outstanding at start of year	86	1,835	4,132	5,446	6,411	17,910
Granted	-	-	-	604	2,835	3,439
Forfeited	-	(1,827)	(762)	(941)	(1,944)	(5,474)
Exercised	(35)	-	(1,174)	(108)	(2)	(1,319)
Lapsed	-	-	-	-	-	-
Outstanding at end of year	51	8	2,196	5,001	7,300	14,556
Weighted average exercise price	-	-	2.59	1.12	-	NA

The Group income statement charge recognised in respect of share based payments for the current period is £4.2m (2019: £3.5m).

Notes (forming part of the financial statements) continued

25  Commitments

Capital commitments

At 26 March 2020, the Group is committed to incur capital expenditure of £3.7m (28 March 2019: £5.0m). Capital commitments predominantly relate to the cost of investment in new IT systems and refurbishment of Pets at Home stores.

At 26 March 2020, the Group has committed to provide funding to related party Joint Venture companies of £nil (28 March 2019: nil) which remains undrawn.

At 26 March 2020, the Group has a commitment to increase the loan funding to Joint Venture companies of £0.8m (28 March 2019: £1.4m), this increase in funding is written into the Joint Venture agreements and becomes payable when certain criteria are met.

Notes (forming part of the financial statements) continued

26  Contingencies

Veterinary practices

Provisions are maintained by the Group, where necessary, against certain balances held with the veterinary practices. During the period, the Group also had in place certain guarantees over the bank loans taken out by a number of veterinary practice companies in which it holds an investment in non-participatory share capital. At the end of the period, the total amount of bank overdrafts and loans guaranteed by the Group amounted to 10.9m (28 March 2019: £10.8m).

The Group is a guarantor for the lease for veterinary practices that are not located within Pets at Home stores. The Group is also a guarantor to a small number of third parties where the lease has been reassigned.

Exemption from audit by parent guarantee

The following wholly owned subsidiaries of the Company are covered by a guarantee provided by Pets at Home Group Plc and are consequently entitled to an exemption under s479A from the requirement of the Act relating to the audit of individual accounts. Under this guarantee, the Group will guarantee all outstanding liabilities of these entities.  No liability is expected to arise under the guarantee.  The entities covered by this guarantee are disclosed below.

Company	Registered number
Aberdeen Vets4Pets Limited	09393267
Aberdeen North Vets4Pets Limited	11024679
Alton Vets4Pets Limited	09639868
Andover Vets4Pets Limited	08132407
Companion Care (Ballymena) Limited	08294444
Bearsden Vets4Pets Limited	07780175
Bedminster Vets4Pets Limited	09267870
Belfast Stormont Vets4Pets Limited	09022077
Bicester Vets4Pets Limited	10285804
Blackpool Squires Gate Vets4Pets Limited	09578581
Bonnyrigg Vets4Pets Limited	10757330
Borehamwood Vets4Pets Limited	09319066
Bourne Vets4Pets Limited	10200670
Bracknell Vets4Pets Limited	10605544
Bramley Vets4Pets Limited	04238788
Carmarthen Vets4Pets Limited	09498169
Clitheroe Vets4Pets Limited	09878308
Corby Vets4Pets Limited	08163294
Craigavon Vets4Pets Limited	08846831
Davidsons Mains Vets4Pets Limited	07726992
Doncaster Vets4Pets Limited	04335358
Dorchester Vets4Pets Limited	08708025
East Kilbride Vets4Pets Limited	09628917
Ellesmere Port Vets4Pets Limited	09725644
Evesham Vets4Pets Limited	09269582
Companion Care (Exeter) Limited	04930076
Companion Care (Exeter Marsh) Limited	08314727
Barnwood Vets4Pets Limited	08562941
Haverfordwest Vets4Pets Limited	09485504
Inverurie Vets4Pets Limited	11056047
Kilmarnock Vets4Pets Limited	08850288
Companion Care (Kirkcaldy) Limited	07680864
Leeds Kirkstall Vets4Pets Limited	10291543
Leicester St Georges Vets4Pets Limited	09881176
Linlithgow Vets4Pets Limited	09966547
Liverpool OS Vets4Pets Limited	06959208
Companion Care (Speke) Limited	07149744
Companion Care (Macclesfield) Limited	08285995

Notes (forming part of the financial statements) continued

26  Contingencies (continued)

Company	Registered number
Companion Care (Maidstone) Limited	05094399
Maidstone Vets4Pets Limited	05171954
Malvern Vets4Pets Limited	10516552
Market Harborough Vets4Pets Limited	10602806
Marlborough Vets4Pets Limited	09869384
Monmouth Vets4Pets Limited	10756991
Musselburgh Vets4Pets Limited	10425760
Companion Care (Newport) Limited	08425358
Newton Mearns Vets4Pets Limited	07957431
Pentland Vets4Pets Limited	09360949
Companion Care (Perth) Limited	08285928
Prescot Vets4Pets Limited	08878815
Redditch Vets4Pets Limited	05612150
Sheffield Drakehouse Vets4Pets Limited	08790953
Sheldon Vets4Pets Limited	08822150
Companion Care (Slough) Limited	07427613
St Neots Vets4Pets Limited	09811640
Companion Care (Stevenage) Limited	08282080
Companion Care (Stratford-upon-Avon) Limited	07329166
Sudbury Vets4Pets Limited	09916308
Thamesmead Vets4Pets Limited	09881179
Tiverton Vets4Pets Limited	11023079
Uttoxeter Vets4Pets Limited	11145982
Wellingborough Vets4Pets Limited	07620413
Wokingham Vets4Pets Limited	09869355
Wrexham Vets4Pets Limited	07103838
Yeovil Vets4Pets Limited	08080466
Vets4Pets Services Limited	05055601
Vets4Pets Veterinary Group Limited	04263054

Notes (forming part of the financial statements) continued

27  Related parties

Joint Venture veterinary practice transactions

The Group has entered into a number of arrangements with third parties in respect of veterinary practices. These veterinary practices are deemed to be related parties due to the factors explained in note 1.4.

Financial commitments provided to related party veterinary practices for funding are set out in note 25.

During the period, the Group had in place certain guarantees over the bank loans taken out by a number of veterinary practice companies in which it holds an investment in non-participatory share capital. At the end of the period, the total amount of bank overdrafts and loans guaranteed by the Group amounted to 10.9m (28 March 2019: £10.8m).

The transactions entered into during the period and the balances outstanding at the end of the period are as follows:

	26 March 2020 £m	28 March 2019 £m
Transactions
- Fees for services provided to Joint Venture veterinary practices	54.7	55.0
- Rental and other occupancy charges to Joint Venture veterinary practices	12.2	12.7
Total income from Joint Venture veterinary practices	66.9	67.7
Acquisitions - Consideration for Joint Venture veterinary practices acquired (note 10)	1.3	3.1
Balances
Included within trade and other receivables (note 17):
- Funding for new practices	1.6	0.3
- Operating loans
- Gross value of operating loans	37.5	42.2
- Allowance for expected credit losses held for operating loans	(8.0)	(14.3)
- Net operating loans	29.5	27.9
Included within other financial assets and liabilities (note 16):
- Loans to Joint Venture veterinary practices - initial set up loans
- Gross value of initial set up loans	13.3	14.4
- Allowance for expected credit losses held for initial set up loans	-	(1.1)
- Net initial set up loans	13.3	13.3
- Loans to other related parties - other loans
- Gross value of other loans	4.0	5.0
- Allowance for expected credit losses held for other loans	-	(1.1)
- Net other loans	4.0	3.9
Included within trade and other payables (note 20):
- Trading balances	(6.7)	(4.0)
Total amounts receivable from veterinary practices (before provisions)	49.7	57.9

Fees for services provided to related party veterinary practices are included within revenue and relate to charges for support services offered in such areas as clinical development, promotion and methods of operation as well as service activities including accountancy, legal and property. In accordance with IFRS 15, revenue in the 52 week period ended 26 March 2020 and the 52 week period ended 28 March 2019 excludes irrecoverable fee income from Joint Venture veterinary practices.

Funding for new practices represents the amounts advanced by the Group to support veterinary practice opening costs. The funding is short term and the related party Joint Venture veterinary practice draws down their own bank funding to settle these amounts outstanding with the Group shortly after opening.

Trading balances represent costs incurred and income received by the Group in relation to the services provided to the Joint Venture veterinary practices that have yet to be recharged.

Notes (forming part of the financial statements) continued

27  Related parties (continued)

Operating loans represent amounts advanced to related party Joint Venture veterinary practices to support their working capital requirements and longer term growth. The loans advanced to the practices are interest free and either repayable on demand or repayable within 90 days of demand.   No facility exists and the levels of loans are monitored in relation to review of the practices performance against business plan. Based on the projected cash flow forecast on a practice by practice basis, the funding is often expected to be required for a number of years. As practices generate cash on a monthly basis it is applied to the repayment of brought forward operating loans.  For immature practices, loan balances may increase due to operating requirements. The balances above are shown net of allowances for expected credit losses held for operating loans of £8.0m (28 March 2019: £14.3m).  

In the 52 week period ended 26 March 2020, the value of loans written off recognised in the income statement amounted to £9.0m, which relates to operating loans (£7.2m), initial set up loans (£1.1m) and other loans (£0.7m). In the 52 week period ended 28 March 2019 the value of loans written off recognised in the income statement amounted to £12.6m, which relates to operating loans (£10.7m), initial set up loans (£1.5m) and other loans (£0.4m).

At 26 March 2020, the Group has committed to provide funding to related party Joint Venture companies of £nil (28 March 2019: nil) which remains undrawn.

At 26 March 2020, the Group had a commitment to increase the loan funding to Joint Venture companies of £0.8m (28 March 2019: £1.4m), this increase in funding is written into the Joint Venture agreements and becomes payable when certain criteria are met.

The Group is a guarantor for the lease for veterinary practices that are not located within Pets at Home stores.

Other related party loans

Included within trade and other receivables (note 17) is a loan to Pure Pet Food Ltd of £40,000 which has been provided to support working capital requirements. The loan incurs interest at LIBOR + 3.2% and is repayable within the next 12 months.

Key management personnel

Details of remuneration paid to key management personnel are set out in note 4.

28  Investments in subsidiaries

Company

	Investments in subsidiaries £m
At 26 March 2020	936.2

Impairment testing

The market capitalisation of the Company as at 26 March 2020 is lower than the carrying value of net assets, which is considered to be an indicator of impairment.  Management have considered this, in conjunction with the full impairment review which been undertaken on the Group's cash generating units of which the Company's investments form part.  The results of this review are disclosed in note 13, including a sensitivity analysis.  In this review, the goodwill on consolidation balance of £981.2m at 26 March 2020 exceeds the investments held in subsidiary undertakings of £936.2m, and therefore management have concluded that under IAS 36, no impairment has been identified with regard to the Company's investments in subsidiaries.

Registered office address

Pets at Home (Asia) Limited: Units 704 5A, 7/F, Tower B, Manulife Financial Centre, 223-231 Wai Yip Street, Kwun Tong, Kowloon, Hong Kong

PAH Pty Limited: Herbert Greer and Rundle, Level 21, 385 Bourke Street, Melbourne, VIC 3000, Australia

Pure Pet Food Limited: Unit 6, Brookmills Saddleworth Road, Greetland, Halifax, West Yorkshire, England, HX4 8LZ

Dog Stay Limited: 305 Regents Park Road, Finchley, London, United Kingdom, N3 1DP

The registered office of all the remaining companies in which the Group has an interest in the share capital is Epsom Avenue, Stanley Green, Handforth, Cheshire, SK9 3RN.

Group

Details of the subsidiary undertakings are as follows:

In the 52 week period ended 26 March 2020, the Group has acquired 100% of the 'A' shares of 28 companies.  These practices were previously accounted for as Joint Venture veterinary practices as the Group held 100% of the non-participatory 'B' ordinary shares.  Acquisition of the 'A' shares has led to the control and consolidation of these companies.  A detailed explanation for the basis of consolidation can be found in note 1. 

Further details of the acquisitions can be found in note 10.

Company	Holding	Country of incorporation	Class of shares held	At 26 March 2020 %	At 28 March 2019 %
Dick White Referrals Limited	Indirect	United Kingdom	Ordinary	91	76
Eye-Vet Limited	Indirect	United Kingdom	Ordinary	100	100
Anderson Moores Veterinary Specialists Ltd	Indirect	United Kingdom	Ordinary	100	75
Brand Development Limited	Indirect	Guernsey	Ordinary	100	100
Companion Care (Services) Limited	Indirect	United Kingdom	Ordinary	100	100
Companion Care Management Services Limited	Indirect	United Kingdom	Ordinary	100	100
Les Boues Limited	Indirect	Jersey	Ordinary	100	100
Northwest Veterinary Specialists Limited	Indirect	United Kingdom	Ordinary	100	100
PAH Pty Limited	Indirect	Australia	Ordinary	100	100
Pet Investments Limited	Indirect	United Kingdom	Ordinary	100	100
Pets at Home (Asia) Limited	Indirect	Hong Kong	Ordinary	100	100
PAH Financial Services Limited	Indirect	United Kingdom	Ordinary	100	100
Pets at Home Holdings Limited	Indirect	United Kingdom	Ordinary	100	100
Pets at Home Limited	Indirect	United Kingdom	Ordinary	100	100
Pets at Home No.1 Limited	Direct	United Kingdom	Ordinary	100	100
Pets at Home Superstores Limited	Indirect	United Kingdom	Ordinary	100	100
Pets at Home Veterinary Specialist Group Limited	Indirect	United Kingdom	Ordinary	100	100
Pets at Home Vets Group Limited	Indirect	United Kingdom	Ordinary	100	100
Pets at Home (ESOT) Limited	Indirect	United Kingdom	Ordinary	100	100
Pet City Holdings Limited	Indirect	United Kingdom	Ordinary	100	100
Pet City Limited	Indirect	United Kingdom	Ordinary	100	100
Pet City Resources Limited	Indirect	United Kingdom	Ordinary	100	100
Vets4Pets (Services) Limited	Indirect	United Kingdom	Ordinary	100	100
Vets4Pets Holdings Limited	Indirect	Guernsey	Ordinary	100	100
Vets4Pets I.P. Limited	Indirect	Guernsey	Ordinary	100	100
Vets4Pets Services Limited	Indirect	United Kingdom	Ordinary	100	100
Vets4Pets UK Limited	Indirect	United Kingdom	Ordinary	100	100
Vets4Pets Limited	Indirect	Guernsey	Ordinary	100	100
Vets4Pets Veterinary Group Limited	Indirect	United Kingdom	Ordinary	100	100
Veterinary Specialists (Scotland) Limited	Indirect	United Kingdom	Ordinary	94	100
Aberdeen North Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Aberdeen Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Addlestone Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Alton Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Andover Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	50
Aylesbury Berryfields Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Barnwood Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	50
Bearsden Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	50
Bedminster Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Belfast Stormont Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Bicester Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Bishop Auckland Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Blackpool Squires Gate Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Bodmin Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Bolton Central Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Bonnyrigg Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	50
Borehamwood Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Bourne Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Bracknell Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Bradford Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Bramley Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Bramley Vets4Pets (Newco) Limited	Indirect	United Kingdom	Ordinary	100	100
Bridlington Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Bromborough Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Cambridge Perne Road Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Canvey Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Carmarthen Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	50
Chorley Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Clitheroe Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	50
Coalville Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Colchester Layer Road Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Companion Care (Ballymena) Limited	Indirect	United Kingdom	Ordinary	100	100
Companion Care (Exeter Marsh) Limited	Indirect	United Kingdom	Ordinary	100	100
Companion Care (Exeter) Limited	Indirect	United Kingdom	Ordinary	100	100
Companion Care (Kendal) Limited	Indirect	United Kingdom	Ordinary	100	100
Companion Care (Kirkcaldy) Limited	Indirect	United Kingdom	Ordinary	100	100
Companion Care (Macclesfield) Limited	Indirect	United Kingdom	Ordinary	100	100
Companion Care (Maidstone) Limited	Indirect	United Kingdom	Ordinary	100	50
Companion Care (Newport) Limited	Indirect	United Kingdom	Ordinary	100	50
Companion Care (Nottingham) Limited	Indirect	United Kingdom	Ordinary	100	100
Companion Care (Perth) Limited	Indirect	United Kingdom	Ordinary	100	50
Companion Care (Slough) Limited	Indirect	United Kingdom	Ordinary	100	100
Companion Care (Speke) Limited	Indirect	United Kingdom	Ordinary	100	100
Companion Care (Stevenage) Limited	Indirect	United Kingdom	Ordinary	100	50
Companion Care (Stratford-Upon-Avon) Limited	Indirect	United Kingdom	Ordinary	100	100
Corby Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Coventry Canley Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Craigavon Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Crosby Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Cumbernauld Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	-
Davidsons Mains Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	50
Doncaster Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	60
Dorchester Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Dundee Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
East Grinstead Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
East Kilbride South Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	50
Ellesmere Port Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Evesham Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Falkirk Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Feltham Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Gillingham Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Great Yarmouth Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Haverfordwest Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	50
Heanor Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Hemsworth Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Hexham Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Horden Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Hucknall Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Inverness Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Inverurie Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	50
Kilmarnock Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Kingswood Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Leamington Spa Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Leeds Kirkstall Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	50
Leicester St Georges Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	50
Leven Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Linlithgow Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	50
Littleover Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Liverpool OS Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Long Eaton Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Maidstone Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Malvern Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Market Harborough Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	50
Marlborough Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	50
Melton Mowbray Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Mexborough Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Milton Keynes Broughton Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Monmouth Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Musselburgh Vet4sPets Limited	Indirect	United Kingdom	Ordinary	100	50
Newark Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Newbury Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Newhaven Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Newton Mearns Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Norwich Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Nottingham Castle Marina Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Pentland Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	50
Perth Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	-
Peterlee Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Poynton Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Prescot Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	50
Redditch Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Ripon Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Salford Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Scunthorpe Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Selby Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Sheffield Drakehouse Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Sheffield Heeley Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Sheldon Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	50
Shepton Mallet Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
St Austell Vets4Pets Limited	Indirect	United Kingdom	Ordinary	95	95
St Neots Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Stocksbridge Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Stoke-On-Trent Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Sudbury Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Teesside Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Thamesmead Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	50
The Heart of Dulwich Veterinary Care Limited	Indirect	United Kingdom	Ordinary	100	100
Thornbury Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Tiverton Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Uckfield Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Uttoxeter Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	50
Warrington Winnick Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Wellingborough Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	50
West Drayton Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Whitstable Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	-
Wokingham Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	50
Wrexham Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100
Yeovil Vets4Pets Limited	Indirect	United Kingdom	Ordinary	100	100

Investments in Joint Venture practices and other investments

The Group holds an indirect interest in the share capital of the following companies:

Company	Holding	Country of incorporation	Class of shares held	At 26 March 2020 %	At 28 March 2019 %
Abingdon Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
ABTW Limited	Indirect	United Kingdom	Ordinary	50	50
Accrington Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Airdrie Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Alsager Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Altrincham Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Amesbury Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Bagshot Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Bangor Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Bangor Wales Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Barnsley Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Barnstaple Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Barry Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Bath Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Bedford Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Bedlington Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Beeston Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Beverley Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Biggleswade Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Bishops Stortford Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Bishopston Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Bitterne Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Blackburn Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Blackheath Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Blackpool Warbreck Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Blackwood Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Bolton Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Bradford Idle Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Brighouse Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Bristol Emerson Green Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Bristol Imperial Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Bristol Kingswood Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Bristol Longwell Green Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Bromsgrove Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Buckingham Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	90
Bulwell Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Burscough Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Burton-On-Trent Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Bury St Edmunds Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Bury Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Byfleet Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Caerphilly Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Camborne Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Cannock Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Canterbury Sturry Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Cardiff Ely Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Cardiff Newport Road Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Carlisle Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Carrickfergus Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Castleford Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Catterick Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Cc (Rustington) Newco Limited	Indirect	United Kingdom	Ordinary	50	-
Chadwell Heath Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Cheadle Hulme Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Chester Caldy Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Chester Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Chesterfield Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Cirencester Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Clevedon Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Cleveleys Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Clifton Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Clowne Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Colne Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Aintree) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Andover) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Ashford) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Ashton) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Aylesbury) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Ayr) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Banbury) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Barnsley Cortonwood) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Basildon Pipps Hill) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Basildon) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Basingstoke) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Beckton) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Bedford) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Belfast) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Bishopbriggs) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Bletchley) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Bolton) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Bournemouth) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Braintree) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Brentford) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Bridgend) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Bridgwater) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Brislington) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Bristol Filton) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Broadstairs) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Burgess Hill) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Cambridge Beehive) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Cambridge) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Cannock) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Canterbury) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Cardiff) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Charlton) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Chatham) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Chelmsford) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Cheltenham) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Chesterfield) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Chichester) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Chingford) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Chippenham) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Christchurch) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Colchester) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Corstorphine) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Coventry Walsgrave) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Cramlington) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Crawley) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Crayford) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Croydon) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Derby Kingsway) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Derby) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Dunstable) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Eastbourne) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Ely) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Enfield) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Falmouth) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Fareham Collingwood) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Fareham) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Farnborough) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Farnham) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Folkestone) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Fort Kinnaird) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Friern Barnet) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Gloucester) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Harlow) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Hatfield) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Hemel Hempstead) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (High Wycombe) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Hove) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Huddersfield) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Huntingdon) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Ilford) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Ipswich Martlesham) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Keighley) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Kidderminster) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Kings Lynn) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Leicester Beaumont Leys) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Leicester Fosse Park) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Leighton Buzzard) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Linwood) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Lisburn) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Liverpool Penny Lane) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Livingston) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Llantrisant) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Merry Hill) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Milton Keynes) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (New Malden) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Newbury) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Newcastle Kingston Park) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Northampton Nene Valley) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Norwich Hall Road) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Norwich Longwater) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Norwich) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Oldbury) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Oldham) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Orpington) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Oxford) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Peterborough Bretton) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Peterborough) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Plymouth) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Poole) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Portsmouth) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Preston Capitol) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Pudsey) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Reading) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Redditch) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Redhill) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Romford) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Rotherham) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Rustington) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Salisbury) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Scarborough) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Southampton) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Southend-On-Sea) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Stirling) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Stockport) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Stoke Festival Park) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Swansea) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Swindon) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Tamworth) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Taunton) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Telford) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Truro) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Tunbridge Wells) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Wakefield) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Weston-Super-Mare) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Winchester) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Winnersh) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Woking) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Woolwell) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Worcester) Limited	Indirect	United Kingdom	Ordinary	50	50
Companion Care (Wrexham Holt Road) Limited	Indirect	United Kingdom	Ordinary	50	50
Craigleith Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Crescent Link Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Crewe Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Cross Hands Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Dagenham Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Darlington Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Daventry Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Denbigh Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	100
Denton Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Dewsbury Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Dog Stay Limited	Indirect	United Kingdom	Ordinary	12	-
Dover Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Droitwich Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Drumchapel Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Dudley Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Dumbarton Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Dunfermline Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Durham Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
East Kilbride Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Eastleigh Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Eastwood Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Eccleshill Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Epsom Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Filton Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Gamston Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Gateshead Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Glasgow Forge Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Glasgow Pollokshaws Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	100
Goldenhill Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Gosport Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Grantham Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Gravesend Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Greasby Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Greenford Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Grimsby Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Guernsey Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Halesowen Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Halifax Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Hamilton Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Harrogate New Park Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Harrogate Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Hartlepool Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Hastings Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Havant Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Haverhill Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Hayling Island Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Hedge End Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Hemel Hempstead Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Hendon Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Hereford Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Hertford Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
High Wycombe Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Hinckley Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Huddersfield Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Hull Anlaby Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Hull Stoneferry Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Hull Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Ilkeston Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Ipswich Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Irvine Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Kendal Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Kettering Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Kidderminster Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Kirkby in Ashfield Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Lancaster Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Larne Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Launceston Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Leeds Birstall Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Leeds Colton Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Leeds Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Leigh Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Leigh-On-Sea Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Letchworth Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Leyland Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Lichfield Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Lincoln South Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Lisburn Longstone Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Llandudno Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Llanelli Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Llanrumney Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Longton Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Loughborough Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Loughton Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Luton Gipsy Lane Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Luton Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Lytham Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Maidenhead Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Maldon Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Mansfield Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Mapperley Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Merthyr Tydfil Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Middlesbrough Cleveland Park Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Middlesbrough Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Middleton Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Millhouses Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	-
Morpeth Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
New Milton Vets4pets Limited	Indirect	United Kingdom	Ordinary	50	50
Newcastle-Upon-Tyne Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Newmarket Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Newport Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Newton Abbot Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Newtownabbey Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Newtownards Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
North Tyneside Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Northallerton Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Northampton Riverside Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Northampton Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Northwich Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Nottingham Chilwell Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Nottingham Netherfield Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Nuneaton Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Oadby Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Old Kent Road Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Oxford Cowley Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Paisley Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Penrith Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Penzance Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Peterborough Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Pontypridd Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Poole Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Portishead Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Portsmouth Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Prenton Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Preston Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Prestwich Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Pure Pet Food Ltd	Indirect	United Kingdom	Ordinary	19	19
Quinton Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Rawtenstall Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Rayleigh Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Rhyl Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Richmond Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Rochdale Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Rotherham Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Rugby Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Rugby Central Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Ruislip Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Runcorn Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Rushden Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Saffron Walden Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	100
Selly Oak Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Sevenoaks Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Sheffield Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Sheffield Wadsley Bridge Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Shelfield Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Shrewsbury Meole Brace Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Shrewsbury Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Sidcup Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Sittingbourne Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Solihull Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Somercotes Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
South Shields Quays Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
South Shields Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Southampton Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Southend Airport Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Southend-On-Sea Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Southport Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
St Albans Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
St Helens Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Stafford Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Stechford Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Stockton Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Stourbridge Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Street Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Sunderland South Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Sunderland Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Sutton Coldfield Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Sutton In Ashfield Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Swindon Bridgemead Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Swinton Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Sydenham Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Telford Madeley Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Thurrock Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Tilehurst Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Torquay Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Totton Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Trafford Park Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Trowbridge Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Wakefield Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Walkden Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Wallasey Bidston Moss Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Walsall Reedswood Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Waltham Abbey Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Walton on Thames Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Walton Vale Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Warminster Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Warrington Riverside Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Warrington Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Washington Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Waterlooville Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Watford Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
West Bromwich Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Weymouth Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Widnes Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Wigan Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Wimbledon Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Wolverhampton Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Worksop Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Worthing Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
WSM Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
Yate Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
York Clifton Moor Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50
York Vets4Pets Limited	Indirect	United Kingdom	Ordinary	50	50

During the 52 week period ended 26 March 2020, the Group has sold 100% of the 'A' shares in a number of companies which were previously classified as subsidiaries, and subsequent to sale of the 'A' shares, have been accounted for as Joint Venture veterinary practices, which has led to the reduction in the holding in 4 entities listed above to 50% investment. The 'A' shares in these entities were sold for consideration equal to the net book value of the assets and liabilities, and therefore there was no profit or loss on disposal.

Notes (forming part of the financial statements) continued

29  IFRS 16 transition note

The Group has adopted IFRS 16 Leases on 29 March 2019 using the modified retrospective approach.  The cumulative effect of adopting IFRS 16 has been recognised as an adjustment to the opening balance sheet as at 29 March 2019, with no restatement of comparable information and no impact on retained earnings. 

Under the modified retrospective approach the opening right-of-use asset can be measured one of two ways;

a)  as if the Group had applied IFRS 16 since the commencement date using its incremental borrowing rate at the date of initial application

b)  measured at an amount equal to the lease liability at the date of initial application

The Group elects to measure the right-of-use asset at an amount equal to the lease liability at the date of initial application.  The opening right-of-use asset is adjusted for remaining deferred income relating to landlord incentives and rent free periods, in addition to any outstanding prepayments in relation to the leases.

As part of the initial transition, the Group has elected to apply the relief option which allows it to adjust the right-of-use asset by the amount of any provision for onerous leases recognised in the balance sheet, immediately before the date of initial application.

The Group applies the practical expedient, not to reassess whether a contract is or contains a lease at the date of initial application.  This means the Group applies IFRS 16 to all contracts entered into before 29 March 2019 and identified as leases in accordance with IAS 17 and IFRIC 4.

The Group has elected to use the exemptions proposed by the standard on lease contracts for which the lease term ends within 12 months as of the date of initial application, except for leases which are expected to be renewed or replaced by a lease with a term greater than 12 months. These leases are accounted for as short-term leases and the lease payments associated with them are recognised as an expense.

The impact on the consolidated income statement in the 52 week period ended 26 March 2020 is as follows:

	Note	52 week period ended 26 March 2020 (excluding IFRS 16 adjustments)				52 week period ended 26 March 2020 (including IFRS 16 adjustments)
		Underlying trading £m	Non-underlying items (note 3)  m	Total £m	IFRS 16 adjustment  m	Underlying  trading  m	Non-underlying items (note 3)  m	Total £m
Revenue	2	1,058.8	-	1,058.8	-	1,058.8	-	1,058.8
Cost of sales		(540.0)	(6.9)	(546.9)	-	(540.0)	(6.9)	(546.9)
Impairment losses on receivables	3,17	(0.9)	0.3	(0.6)	-	(0.9)	0.3	(0.6)
Gross profit		517.9	(6.6)	511.3	-	517.9	(6.6)	511.3
Selling and distribution expenses		(321.8)	-	(321.8)	8.0	(313.8)	-	(313.8)
Administrative expenses	3	(92.8)	(1.0)	(93.8)	-	(92.8)	(1.0)	(93.8)
Operating profit	2,3	103.3	(7.6)	95.7	8.0	111.3	(7.6)	103.7
Financial income	6	0.4	-	0.4	0.1	0.5	-	0.5
Financial expense	7	(4.2)	-	(4.2)	(14.1)	(18.3)	-	(18.3)
Net financing expense		(3.8)	-	(3.8)	(14.0)	(17.8)	-	(17.8)
Profit before tax		99.5	(7.6)	91.9	(6.0)	93.5	(7.6)	85.9
Taxation	8	(19.8)	0.1	(19.7)	1.2	(18.6)	0.1	(18.5)
Profit for the period	(i)	79.7	(7.5)	72.2	(4.8)	74.9	(7.5)	67.4

Notes (forming part of the financial statements) continued

29  IFRS 16 transition note (continued)

The impact on the statement of financial position as at 29 March 2019 is as follows:

		At 28 March 2019 £m	IFRS 16 adjustment	At 29 March 2019 £m
Non-current assets
Property, plant and equipment		123.7	-	123.7
Right-of-use assets	(ii)	-	473.1	473.1
Intangible assets		1,000.7	-	1,000.7
Other non-current assets	(iii)	18.7	1.7	20.4
		1,143.1	474.8	1,617.9
Current assets
Inventories		68.2	-	68.2
Other financial assets	(iii)	1.6	0.7	2.3
Trade and other receivables	(v)	68.9	(9.4)	59.5
Cash and cash equivalents		60.5	-	60.5
		199.2	(8.7)	190.5
Total assets		1,342.3	466.1	1,808.4
Current liabilities
Trade and other payables	(v)	(185.8)	5.0	(180.8)
Corporation tax		(10.2)	-	(10.2)
Lease liabilities	(iv)	-	(82.7)	(82.7)
Provisions	(v)	(15.4)	1.9	(13.5)
Other financial liabilities		(7.3)	-	(7.3)
		(218.7)	(75.8)	(294.5)
Non-current liabilities
Other interest-bearing loans and borrowings		(178.8)	-	(178.8)
Other payables	(v)	(33.6)	32.4	(1.2)
Lease liabilities	(iv)	-	(423.5)	(423.5)
Provisions	(v)	(1.7)	0.8	(0.9)
Other financial liabilities		(2.5)	-	(2.5)
Deferred tax liabilities		(4.0)	-	(4.0)
		(220.6)	(390.3)	(610.9)
Total liabilities		(439.3)	(466.1)	(905.4)
Net assets		903.0	-	903.0
Equity attributable to equity holders of the parent
Ordinary share capital		5.0	-	5.0
Consolidation reserve		(372.0)	-	(372.0)
Merger reserve		113.3	-	113.3
Translation reserve		(0.0)	-	(0.0)
Cash flow hedging reserve		0.8	-	0.8
Retained earnings		1,155.9	-	1,155.9
Total equity		903.0	-	903.0

Notes (forming part of the financial statements) continued

29  IFRS 16 transition note (continued)

(i)  Income statement

Under previous lease accounting standards (IAS 17), lease costs were recognised on a straight line basis over the term of the lease.  The Group recognised these costs within operating expenses, and costs of £79.1m would have been recognised in the 52 week period ended 26 March 2020 if IAS 17 had still been applied. Under IFRS 16 these costs have been removed and replaced with depreciation of the right-of-use assets, which has resulted in a depreciation charge of £71.1m and a net impact to profit before tax of £6.0m for the 52 week period ended 26 March 2020.

The impact on net financing expense in the 52 week period ended 26 March 2020 was £14.0m. 

The net impact of applying IFRS 16 to the profit for the period in the 52 week period ended 26 March 2020 was a reduction of £4.8m after tax. 

This difference to profit for the period represents a timing difference in the recognition of costs under IFRS 16 compared to IAS 17. IAS 17 recognises costs on a straight line basis, whereas under IFRS 16 finance charges are recognised in relation to the value of the lease liability and costs will therefore reduce as the liability reduces.

(ii)  Right-of-use assets

A right-of-use asset is recognised under IFRS 16, representing the Group's contractual right to access an identified asset under the terms of the lease contract.

(iii)  Other non-current assets

Sublease assets have been recognised in respect of finance leases under IFRS 16 for a number of the properties which are subleased to third parties. The finance lease is assessed by reference to the right-of-use asset under the head lease rather than the underlying asset. A number of subleases continue to be accounted for as operating leases which has resulted in no change to their accounting treatment under IFRS 16.

(iv)  Lease liabilities

A lease liability is recognised under IFRS 16, representing the Group's contractual obligation to minimum lease payments during the lease term.  The lease liability is initially measured at the present value of the remaining lease payments, discounted using the rates based on the Group's incremental borrowing rate.  The weighted average discount rate used to discount the lease liability as at 26 March 2020 was 2.8%.  The element of the liability payable in the next 12 months is shown within current liabilities, with the balance shown in non-current liabilities.

(v)  Working capital

Under IAS 17, balances relating to lease incentives, rent prepayments, accruals, onerous leases and similar balances were held within other receivables, other payables and provisions.  Under IFRS 16 these balances are reflected in either the right-of-use asset or the lease liability. On transition to IFRS 16, the Group has elected to apply the relief option which allows it to adjust the right-of-use asset by the amount of any provisions for onerous leases. At 29 March 2019, £2.7m of the onerous lease provision has been offset against the opening right-of-use asset. The Group has used the C10(b) practical expedient for onerous leases.

The following table details the reconciliation between the operating lease obligations as at 28 March 2019 and the opening lease liability balance at 29 March 2019:

 Maturity analysis - contractual undiscounted cash flows

	Land and buildings £m	Other £m	Total £m
Operating lease obligations as at 28 March 2019	571.9	9.9	581.8
Working capital movements	(9.0)	-	(9.0)
Relief option for leases of low value	-	-	-
Other	-	0.7	0.7
Gross lease liabilities at 29 March 2019	562.9	10.6	573.5
Discounting	(66.7)	(0.7)	(67.4)
Total lease liabilities at 29 March 2019	496.2	9.9	506.1
The working capital movements of £9.0m relate to the lease prepayments on the balance sheet as at 28 March 2019 which were not reflected in the operating lease disclosure made at 28 March 2019. Under IFRS 16, this prepayment amount has been included in the right-of-use asset but not the lease liability as the amounts have already been paid.

Glossary - Alternative Performance Measures

Guidelines on Alternative Performance Measures (APMs) issued by the European Securities and Markets Authority came into effect for all communications released on or after 3 July 2016 for issuers of securities on a regulated market.

In the reporting of financial information, the Directors have adopted various APMs of historical or future financial performance, position or cash flows other than those defined or specified under International Financial Reporting Standards (IFRS).

The Directors measure the performance of the Group based on the following financial measures which are not recognised under EU-adopted IFRS, and consider these to be important measures in evaluating the Group's strategic and financial performance. The Directors believe that these APMs assist in providing additional useful information on the underlying trends, performance and position of the Group.

APMs are also used to enhance the comparability of information between reporting periods by adjusting for non-underlying items, to aid the user in understanding the Group's performance.

Consequently, APMs are used by the Directors and management for performance analysis, planning, reporting and incentive setting purposes and have remained consistent with the prior year.

All APMs relate to the current period's results and comparative periods where provided. Due to the Group adopting the modified retrospective approach to IFRS 16, all prior year numbers have not been restated. Where the current APM has been amended to exclude the impact of transition to IFRS 16, this has been set out in the definition below.

The key APMs used by the Group are:

'Like for Like' sales growth comprises total revenue in a financial period compared to revenue achieved in a prior period for stores, online operations, grooming salons, veterinary practices and specialist referral centres that have been trading for 52 weeks or more, excluding fee income from Joint Venture veterinary practices where the Group has bought out the Joint Venture Partners or will offer to buy out the Joint Venture Partners in the future

Omni-channel revenue: Revenue net of discounts and VAT from core online sales, subscriptions and order to store

Underlying EBITDA: Earnings before interest, tax, depreciation and amortisation before the effect of non-underlying items in the period

Underlying free cash flow: Net cash from operating activities, after tax, less net cash used in investing activities (excluding acquisitions), less interest paid and debt issue costs before the effect of non-underlying items in the period

Underlying CROIC: Cash return on invested capital, represents cash returns divided by the average of gross capital invested (GCI) for the last 12 months. Cash returns represent underlying operating profit before property rentals and share based payments subject to tax, then adjusted for depreciation and amortisation. GCI represents gross property, plant and equipment, plus software and other intangibles excluding the goodwill created on the acquisition of the Group by KKR (£906,445,000) plus net working capital, plus capitalised rent multiplied by a factor of 8x, before the effect of non-underlying items in the period

Non-underlying items: Certain costs or incomes that derive from events or transactions that fall outside the normal activities of the Group, and are excluded by virtue of their size and nature in order to reflect management's view of the performance of the Group

References to Underlying GAAP measures and Underlying APMs throughout the financial statements are measured before the effect of non-underlying items.

APM	Definition		Reconciliation
Cash EBITDA	Underlying EBITDA (see below) adjusted for IFRS 16 transactions and share based payment charges.		Cash EBITDA (£m) FY19 FY20 Note Underlying EBITDA 130.0 220.7 2 Effect of IFRS 16 on EBITDA - (79.1) EBITDA before IFRS 16 130.0 141.6 Share based payment charge 3.5 4.2 3 Cash EBITDA 133.5 145.8
Underlying EBITDA	Earnings before interest, tax, depreciation and amortisation before the effect of non-underlying items in the period.		Underlying EBITDA (£m) FY19 FY20 Note Statutory operating profit 53.1 103.7 2 Depreciation on tangible fixed assets 28.5 28.3 3 Amortisation of intangible assets 8.3 10.0 3 Non-underlying items 40.1 7.6 3 Underlying EBITDA  before IFRS 16 130.0 149.6 Depreciation on right-of-use assets - 71.1 3 Underlying EBITDA 130.0 220.7
Underlying CROIC	Cash return on invested capital, represents cash returns divided by the average of gross capital (GCI) invested for the last 12 months. Cash returns represent underlying operating profit before property rentals and share based payments subject to tax, then adjusted for depreciation and amortisation. GCI represents gross property, plant and equipment, plus software and other intangibles excluding the goodwill created on the acquisition of the Group by KKR (£906,445,000) plus net working capital, plus capitalised rent multiplied by a factor of 8x. CROIC is stated before the impact of IFRS16 as it is based on a 12 month rolling average.		CROIC FY19 FY20 Note Cash returns: Underlying operating profit (pre IFRS 16) 93.2 103.3 29 Property rental costs 77.0 76.1 Share based payment charges 3.5 4.2 3 173.7 183.6 Effective tax rate 21% 20% Tax charge on above (37.0) (36.7) 136.7 146.9 Depreciation and amortisation 36.8 38.3 3 Cash returns 173.5 185.2 Gross capital invested (GCI): Gross property, plant and equipment 284.8 306.2 11 Intangibles 1,030.5 1,046.3 13 Less KKR goodwill (906.5) (906.5) Investments 13.8 14.8 16 Net working capital (pre IFRS 16) (103.7) (125.2) see definition Capitalised operating leases 615.8 608.8 8x GCI 934.7 944.4 Average 919.1 939.6 Underlying CROIC 18.9% 19.7%
Underlying free cash flow	Net cash from operating activities, after tax, less net cash used in investing activities (excluding acquisitions), less interest paid and debt issue costs before the effect of non-underlying items in the period.		Underlying free cash flow (£m) FY19 FY20 Note Underlying free cash flow 63.6 89.6 Non-underlying working capital (27.7) 1.2 Free cash flow 35.9 90.8 Underlying cash flow Dividends (37.2) (37.1) CFS Investments - (1.0) CFS Acquisition of subsidiary (1.1) (0.5) CFS Repayment of borrowings on acquisition (0.7) - CFS Proceeds from new loan 181.0 61.0 CFS Repayment of borrowings (195.0) (77.0) CFS Non-underlying cash flow Proceeds from sale of PPE - 0.4 CFS Proceeds from sale of PPE relating to GVs - (0.3) Payment of deferred consideration (1.0) - CFS Settlement of put & call (0.1) (6.4) CFS Acquisition of subsidiary (2.4) (3.7) CFS Costs associated with acquisitions (0.7) (0.5) CFS Repayment of borrowings on acquisition (5.7) (5.9) CFS Non-underlying working capital 27.7 (1.2) CFS Net increase/(decrease) in cash 0.7 18.6 CFS = Consolidated statement of cash flows
Like-for-like	'Like-for-like' sales growth comprises total revenue in a financial period compared to revenue achieved in a prior period for stores, online operations, grooming salons, veterinary practices and specialist referral centres that have been trading for 52 weeks or more, excluding fee income from Joint Venture veterinary practices where the Group has bought out the Joint Venture Partners or will offer to buy out the Joint Venture Partners in the future.		Not applicable.
2-year like-for-like	2-year like-for-like sales growth comprises total revenue in a financial period compared to revenue achieved in the financial period before the prior period for stores, online operations, and grooming salons that have been trading for 104 weeks or more.		Not applicable.
Underlying basic EPS	Underlying basic earnings per share (EPS) is based on earnings per share after the impact of IFRS 16, but before the impact of certain costs or incomes that derive from events or transactions that fall outside the normal activities of the Group, and are excluded by virtue of their size and nature in order to reflect management's view of the performance of the Group.		Underlying basic EPS (p) FY19 FY20 Note Underlying basic EPS 14.1 15.0 5 Non-underlying items (8.0) (1.5) 5 Basic earnings per share 6.1 13.5
Underlying operating profit	Underlying operating profit is based on operating profit before the impact of certain costs or incomes that derive from events or transactions that fall outside the normal activities of the Group, and are excluded by virtue of their size and nature in order to reflect management's view of the performance of the Group.		Underlying operating profit (£m) FY19 FY20 Note Underlying operating profit 93.2 111.3 2 Non-underlying items (40.1) (7.6)  3 Operating profit 53.1 103.7
Underlying profit before tax	Underlying profit before tax (PBT) is based on pre-tax profit before the impact of certain costs or incomes that derive from events or transactions that fall outside the normal activities of the Group, and are excluded by virtue of their size and nature in order to reflect management's view of the performance of the Group.		Underlying PBT (£m) FY19 FY20 Note Underlying PBT 89.7 93.5 CIS Non-underlying items (40.1) (7.6) 3 PBT 49.6 85.9 CIS = Consolidated income statement
Underlying profit after tax	Underlying profit after tax (PAT) is based on post tax profit before the impact of certain costs or incomes that derive from events or transactions that fall outside the normal activities of the Group, and are excluded by virtue of their size and nature in order to reflect management's view of the performance of the Group.		Underlying PAT (£m) FY19 FY20 Note Underlying PAT 70.4 74.9 CIS Non-underlying items (39.9) (7.5) CIS PAT 30.5 67.4 CIS = Consolidated income statement
Underlying total tax expense	Underlying total tax expense is based on the statutory tax expense for the period (being the net of current and deferred tax) before the impact of certain costs of incomes that derive from events or transactions that fall outside the normal activities of the Group, and are excluded by virtue of their size and nature in order to reflect management's view of the performance of the Group.		Underlying total tax expense (£m) FY19 FY20 Note Underlying tax expense (19.3) (18.6) 8 Non-underlying items 0.2 0.1 8 Tax expense (19.1) (18.5)
Underlying net working capital	Net working capital movement is a measure of the cash required by the business to fund its inventory, receivables and payables. The change year on year reflects the cash in/outflow in relation to changes in the working capital cycle excluding non-underlying items. The change in net working capital is a key component of the free cash flow measure of the Group.		Underlying net working capital movement (£m) FY19 FY20 Note Net working capital per cash flow statement 5.4 27.3 CFS Being: Movement in trade and other receivables 10.7 8.8 CFS Movement in inventories (7.3) 5.7 CFS Movement in trade and other payables 12.6 16.9 CFS Movement in provisions 1.9 (0.7) CFS Trading working capital movement 17.9 30.7 Movement in gross operating loans (9.6) (2.5) CFS Cash working capital movement 8.3 28.2 Underlying allowance for expected credit losses against operating loans (2.9) (0.9) CFS Net working capital movement 5.4 27.3 CFS = Consolidated statement of cash flows
			(£m) FY19 FY20 Note Receivables 68.9 55.9 17 Inventory 68.2 62.8 14 Trade and other payables (223.7) (204.6) Provisions (15.4) (3.9) 21 Non-current provisions (1.7) (1.3) 21 Net working capital (103.7) (91.1)
Underlying cash working capital	Working capital before increase/decrease in gross operating loans to Joint Venture practices		Underlying cash working capital (£m) FY19 FY20 Note Net working capital (above) 5.4 27.3 Net loans and borrowings (1.8) 1.6 27 Underlying cash working capital 3.6 28.9
Operating cash flow	Net cash flow from operating activities per the cash flow statement, before the effects of corporation tax payments, non-underlying elements, and IFRS16		Operating  free cash flow(£m) FY19 FY20 Note Net cash flow from operating activities (per cash flow statement) 107.8 215.2 CFS Add back: Tax paid 18.6 30.8 CFS Settlement of put & call liabilities (growth element) 0.1 0.8 CFS Pre-tax underlying operating cash flow 126.5 246.8 Capital lease payments - (67.0) CFS Interest paid on lease obligations - (14.0) CFS Operating cash flow 126.5 165.8 Tax paid (18.6) (30.8) CFS Interest paid (3.4) (3.7) CFS Interest received 0.6 0.5 CFS Debt issue costs (2.5) - CFS Purchase of own shares (1.8) (2.8) CFS Acquisition of PPE and intangible assets (37.4) (39.6) CFS Proceeds from  sale of PPE 0.6 0.4 CFS Proceeds from  sale of PPE (non-underlying) (0.4) (0.2) CFS Underlying free cash flow 63.6 89.6 CFS = Consolidated statement of cash flows
Omni-channel revenue	Revenue net of discounts and VAT from core online sales, subscriptions and order to store.		Omni-channel revenue (£m) FY19 FY20 Note Omni-channel revenue 73.5 93.9
Underlying EBIT	Earnings before interest and tax agreed to operating profit relating to underlying trading.		Underlying EBIT (£m) FY19 FY20 Note Operating profit relating to underlying trading (EBIT) 93.2 111.3 2
Retail underlying EBIT	Earnings before interest and tax agreed to operating profit relating to underlying trading for the Retail division.		Retail Underlying EBIT (£m) FY19 FY20 Note Retail operating profit relating to underlying trading (EBIT) 67.2 89.3 2
Vet Group underlying EBIT	Earnings before interest and tax agreed to operating profit relating to underlying trading for the Vet Group division.		Vet Group Underlying EBIT (£m) FY19 FY20 Note Vet Group operating profit relating to underlying trading (EBIT) 32.1 30.6 2
Net debt	Cash and cash equivalents less loans and borrowings.		Net debt (£m) FY19 FY20 Note Cash and cash equivalents 60.5 79.1 18 Loans and borrowings (181.0) (165.0) 19 Net debt (120.5) (85.9)
Customer sales	Customer sales being statutory Group revenue, less Joint Venture veterinary practice fee income (which forms part of statutory revenue within the Vet Group), plus gross customer sales made by Joint Venture veterinary practices (unaudited).		Customer sales (£m) FY19 FY20 Note Statutory Group revenue 961.0 1,058.8   CIS Fee income (52.6) (53.8) 2 Sales by Joint Venture veterinary practices 309.8 329.7 Customer sales 1,218.2 1,334.7 IS = Consolidated income statement

 

END

 

 

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