FY23 Interim Results

RNS Number : 2811H

Pets At Home Group Plc

23 November 2022

FOR IMMEDIATE RELEASE, 23 NOVEMBER 2022

Pets at Home Group Plc: FY23 Interim Results
for the 28-week period to 13 October 2022

Record customer levels drive +7.3% H1 sales; FY PBT guidance held at £131m

· Total Group revenue growth of 7.3% to £727.2m, with Group like-for-like^# (LFL) revenue up 6.4%, with Q2 LFL^# accelerating versus the Q1 run rate, and the final period of H1 the strongest to date

· Vet Group revenue increased by 12.4%, with LFL^# revenue up 10.5%. LFL^# customer sales² across all General Practices up 7.1% and LFL^# Joint Venture fee income up 10.7%

· Retail revenue growth of 6.8%, and LFL^# growth of 5.9%. Omnichannel^# revenue growth of 16.2%; participation of total Retail revenue of 16.5% in H1

· Group underlying PBT^# down 9.3% to £59.2m in line with plan, impacted by increased freight and energy costs and the YoY increase in investment in digital assets, which, in line with IAS 38 accounting, are expensed through the P&L.

· No change to full year guidance, and we continue to expect full-year Group underlying profit before tax to be in line with analyst consensus, which is currently £131m and would reflect a return to our more normal H1:H2 PBT split

*Due to a clarification of accounting policies, certain cloud computing costs, previously capitalised as intangible assets, have been expensed through the income statement in the current and prior years. The £8.1m YoY impact reflects peak investment in Project Polestar in FY23

· Group free cash flow^# down 54.8% to £41.4m reflecting YoY profit performance, planned increased investment, and annualisation against working capital timing benefits reported at FY22 H1

· Balance sheet remains robust with net cash (excluding lease liabilities) of £43.1m

· Interim dividend per share of 4.5p, an increase of 4.7% YoY

· Sustained momentum across key strategic KPIs and customer acquisition metrics;

· Sign ups to our Puppy and Kitten Club continued at pace, averaging 29,000 per week in Q2, more than three-fold higher than pre-pandemic, and ahead of the FY22 exit rate

· The number of active VIPs increased 9% YoY to 7.6m, with those engaging across more than one channel up 10% YoY and representing 27% of VIPs

· New client registrations across our veterinary practices remained strong, growing to an average of 8,800 per week, increasing our active client base to 1.7m

· The number of subscription plans across the Group grew 11% YoY to 1.6m, generating over £135m in annualised recurring customer revenue²

Current trading and outlook

The business, and the wider pet care market, remains resilient and in growth. New customer acquisition remains strong with registrations into our Puppy & Kitten club accelerating throughout H1 and customer spend maintained across the Group. Consumer demand remains strong, with a record number of UK pet owners continuing to prioritise spending on their pets, underpinned by the structural trends of humanisation and premiumisation. Trading post period end has continued in line with the Q2 run rate with LFLs in mid-single digits.

We are conscious of the macro-economic backdrop and continue to manage the business proactively. The inflationary environment creates pressures for both our customers and the business. We are conscious of the challenges faced by many consumers, and continue to prioritise making pet care as convenient and affordable as possible. We will never let price be a reason not to shop with us.

We continue to actively manage industry-wide cost headwinds , which we see persisting in the near term, in particular the impact of foreign exchange, energy, and National Living Wage. As well as directly mitigating these costs where possible, we are also proactively offsetting them through a range of self-help levers including our programme of rent reductions, and initiatives to target efficiencies across consumables and goods not for resale. We are driving further productivity gains across our stores and supply chain, leveraging technology to lower our overall cost to serve.

We continue to expect full-year Group underlying profit before tax to be in line with analyst consensus , despite the challenging macro-economic environment. Consensus is currently £131m, with a range of £121m-£136m. The business remains highly cash generative, and we expect to finish the year in a net cash position.

Looking further ahead, the prospects for the business remain strong. We are continuing with our strategic investments, and our £2.3bn medium term customer revenue opportunity remains intact, having made better than expected progress to date.

Our next scheduled update will be our Q3 FY23 release on 31 January 2023.

Lyssa McGowan, Chief Executive Officer:

In my first six months as CEO, I have spent my time forming a deep understanding of the business and sector, learning from the ground up how the business operates. I am more convinced that Pets at Home is well positioned to capitalise on an attractive growth opportunity in our structurally growing pet care market, supported by our unique blend of products and services, deeply embedded culture and expert, passionate colleagues, and partners.

Our first half performance shows progress and resilience across the business. In a challenging macro-environment, the pet care industry remains in growth across all channels, and we have continued to acquire new customers at an impressive rate, setting new records for customer numbers in recent months.

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 23 November. Management will host a Q&A conference call for analysts and investors at 09.30am. To join the call in listen-only mode, please click on the following link ( https://stream.brrmedia.co.uk/broadcast/634ed7c76815e65bb9fdc1b2 ). Those wishing to participate in the Q&A session should email petsathome-maitland@h-advisors.global for call details.

Investor Relations Enquiries

Pets at Home Group Plc:

Andrew Porteous, Director of Investor Relations	+44 (0) 7740 361 849
Chris Ridgway, Head of Investor Relations	+44 (0) 7788 783 925

Media Enquiries

Pets at Home Group Plc:

Natalie Cullington, Head of Communications

+44 (0) 7974 594 701

H/Advisors Maitland:

Clinton Manning	+44 (0) 7711 972 662
Joanna Davidson	+44 (0) 7827 254 567

About Pets at Home

Pets at Home Group Plc is the UK's leading pet care business, providing pets and their owners with the very best advice, products and care. Pet products are available online or from our 457 stores, many of which also have vet practices and grooming salons. The Group also operates a leading small animal veterinary business, with 444 veterinary General Practices located both in our stores and in standalone locations. For more information visit: http://investors.petsathome.com/

Disclaimer

This trading statement 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 trading statement 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.

Key Performance Indicators

Financial KPIs¹		H1 FY23	H1 FY22	YoY
Customer revenue^{#, 2} (£m)		928.2	867.6	7.0%
Group underlying PBT^{#, 7} (£m)		59.2	65.3	(9.3)%
Group free cashflow^# (£m)		41.4	91.6	(54.8)%
Cash Return on Invested Capital (CROIC)³		21.5%	22.0%	(49)bps

Strategic KPIs	Measure	H1 FY23	H1 FY22	YoY
Bring the pet experience to life	Number of active VIPs⁴ (m)	7.6	6.9	9.3%
50% of revenue from pet care services	Customer revenue^{#, 2} from services⁵ (£m)	306.5 33.0%	284.3 32.8%	7.8% 25bps
Use our data to better serve customers	VIP customer revenue^{#, 2, 6} (£m)	1,158.2	1,021.7	13.4%
Set our people free to serve	Customer revenue^{#, 2} per FTE colleague(£k)	114.6	114.9	(0.3)%

1. Financial KPIs 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. GAAP Measures are presented on pages 20-23.

2. Customer revenue includes customer sales made by Joint Venture vet practices, and therefore differs to the fee income recognised within Vet Group revenue.

3. Cash return on invested capital, represents cash returns divided by the average of gross capital invested (GCI) for the last twelve months. Cash returns represent underlying operating profit before share based payments subject to tax, then adjusted for depreciation of PPE, right-of -use assets and amortisation. GCI represents gross PPE, right-of-use assets and software, and other intangibles excluding the goodwill created on the acquisition of the Group by KKR (£906,445,000) plus net working capital, before the effect of non-underlying items in the period.

4. Number of VIP loyalty club members who transacted across the group in the last 52 weeks from end of the reporting period.

5. Defined as customer sales made by JV vet practices, company managed vet practices, grooming services, subscriptions, pet sales and pet insurance commissions.

6. VIP customer revenue is shown on a rolling 12 month basis rather than a year-to-date basis.

7. The comparative Group underlying PBT has been restated to reflect the reclassification of expenditure to the income statement following the impact of the accounting policy change detailed in note 1 of the accounts.

Chief Executive Officer's Review

A unique business in a resilient and growing market

Six months into the CEO role, I am more convinced than ever that this is a great business built on a strong and differentiated platform. Our pet care market is underpinned by structural growth trends where premiumisation and humanisation continue to drive spend and innovation. These have been joined by another trend of increased pet-ownership. Far from being a COVID boom - elevated levels of pet ownership are here to stay and continue to drive growth.

Our market leadership within the UK gives us economies of scale and positions us as the partner of choice in the sector. We are the 'go-to' brand for consumers embarking on a new pet care journey or requiring advice for their beloved companion. Our omnichannel and data capabilities are industry leading and our special colleague culture and deep expertise is a distinctive and hard to replicate competitive advantage, and something we will continue to protect and grow. We have real category authority in pet care, reinforced by the clinical freedom and expertise of our vet partners, our commitment to pet welfare, and our shared purpose of making lives better for pets and the people that love them.

Since joining, I've undertaken a re-organisation to de-layer, simplify and speed up decision-making and to better integrate the vets and retail businesses. We have been able to promote and rotate our best people, securing expertise and providing continuity. As part of this change in structure I have also created a new Consumer function bringing together customer value proposition, digital, and marketing. This team will be led by the newly created Chief Consumer Officer role which will step-change our customer centricity. As you would expect I've taken a good look at our strategic initiatives to ensure our big investments (such as our new distribution centre, our digital re-platforming, and our store refurbishment programme) land well.

Looking forward, our vision is to be the world's best pet care business, providing the best products, services and advice to guide pet owners through their pet care journey. I would argue that we are already a global leader, having created a unique pet care platform bringing together retail, vets and grooming, but there remains a very significant opportunity ahead of us. We will extend and deepen our strategy to create a customer-centric, omnichannel, pet care ecosystem, delivering exactly what pet owners need, where and how they need it, to power our growth.

A strategy to drive long-term, sustainable growth

Our strategy of building an integrated omnichannel pet care ecosystem continues to deliver. We will continue investing to grow the business as planned, focusing on our key strategic initiatives to drive long-term sustainable growth. We remain firmly on track to achieve our medium-term customer revenue opportunity of at least £2.3bn. Our balance sheet strength underpins the ability to invest to reach this target and continue to grow beyond it.

I. A customer-centric focus

A growing base of highly engaged pet owners

· We continue to grow and deepen our relationship with our 7.6m VIP customers, +9% YoY

· 2m VIPs use more than one channel, +10% YoY, contributing c60% of total customer spend

· New customer acquisition continues at pace; c750k Puppy & Kitten Club members added in H1, with members typically spending 20% more and exhibiting a lower churn rate

An extensive and growing data capability

· Proprietary in-house data capability provides unparalleled insights to drive customer engagement, having doubled the response rate to our flagship reward mailer

· AI-based predictive churn model has supported a c230bps reduction in churn, and over 95% of average customer spend is retained beyond their first year

· Leveraging data across the business, using basket profiling to optimise localised store ranging

A scalable subscriptions platform

· Pet care plans offer convenience and value, whilst driving share of wallet and long-term loyalty

· Three core plans up 11% YoY to 1.6m, generating over £135m in annualised customer revenue

· Representing 8% of Group customer revenue, the opportunity ahead is significant

II. A unique omnichannel approach

Digitising the business

· Polestar will seamlessly connect our ecosystem of products and services into a single customer platform

· Recently launched enhanced mobile app brings together VIP and shopping in one easy to use experience

· Clearly phased programme giving customers even more choice over how they engage with us

Investing in our pet care centres to provide a best-in-class customer experience

· Pet care centres bring together the best of our retail offer with enhanced services proposition

· Omnichannel approach enables best-in-class fulfilment, with c25% of all online sales now fulfilled from our store network

· 13 refurbishments in H1, with 65 pet care centres across the estate now incorporating our latest thinking. Plan to open new 5 pet care centres and refurbish c40 each year

Our future-focused distribution platform will enhance our service proposition

· Development of our new distribution facility remains on budget and on track to become operational by summer 2023

· Purpose-built and highly automated facility; improved fulfilment capacity and inventory flexibility, while lowering our overall cost to serve

· Future proofing operations, providing capacity to support 10+ years of revenue growth

III. A truly integrated ecosystem

Innovating and growing our unique veterinary business

· Estate goes from strength to strength. In past 4 years the profitability of the underlying practice estate has increased six-fold, with over 60% of practices still to reach maturity

· We will continue to invest in infrastructure and resource across our veterinary estate and plan to open between 5 and 15 new practices each year

· We are innovating our formats, extending existing sites and opening new sites with enhanced capabilities. Extended sites are delivering an 8% increase in active clients and 30% growth in sales

Enhancing the synergies across our ecosystem

· Our Pathfinder initiative, now launched across 21 vet practices, is designed to improve allocation of clinical resource, enhance client engagement, and optimise cross-referral opportunities

· Early results point to improved productivity and performance across a range of key metrics including health plan penetration, average transaction value and client visits

· This approach will inform rollout more broadly across the practice estate going forward

Integrating our physical and digital proposition

· Our telehealth business broadens our digital capabilities in the provision of trusted advice and pet care solutions, handling over 95,000 remote consultations per year

· Trial of Pet Expert Live video functionality, connecting online customers to expert colleagues in-store, proven highly successful with approximately 1,000 calls per week to date

· Store colleagues can now be digitally connected into our ecosystem via a single handheld device, simplifying daily tasks and empowering colleagues to deliver a joined-up pet care experience

Maintaining our strong commitment to a sustainable future

We are firmly committed to meeting our wider obligations as a responsible corporate citizen and made good progress during the period in our social value strategy, aligned across the three pillars of Pets, Planet and People.

Pets

· The Pets at Home Foundation is the largest supporter to rescues in the UK and, during our first half awarded grants and donations to charities worth c£3.2m

· In partnership with pet charity Blue Cross, we have recently launched a nationwide trial of pet foodbank donation points in stores to help support pets and owners during the cost-of-living crisis

Planet

· We rolled out collection units for the recycling of pet food packaging across more than 375 stores to date, and plan to further extend this across our estate

· Received approval from the science-based target initiative (sbti) for our target to reduce our overall supply chain emissions by 42% in absolute terms by 2030 versus our 2020 base

People

· In partnership with the Prince's Trust, we have provided work opportunities to over 170 young people under the Government's Kickstart programme, many of which have led to permanent roles

· All colleagues are encouraged to take one paid day each year to support a charity of their choice. These 'Better World Pledge' days are integral to our annual bonus scheme, with approximately 12,000 hours collectively volunteered to date

Lyssa McGowan

Chief Executive Officer

23 November 2022

Chief Financial Officer's Review

The H1 FY23 period represents the 28 weeks from 1 April 2022 to 13 October 2022. The comparative period represents the 28 weeks from 26 March 2021 to 7 October 2021.

The Group's results are shown as three 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), Vet Group (includes General Practices) and Central (includes Group costs, finance expenses and the Group's veterinary telehealth business).

	H1 FY23	H1 FY22	YoY change
Group like-for-like revenue growth^#	6.4%	22.2%
Retail	5.9%	21.9%
Vet Group	10.5%	26.2%

Group revenue (£m)	727.2	677.6	7.3%
Retail	661.5	619.6	6.8%
Vet Group	63.8	56.8	12.4%
Central	1.9	1.2	60.2%

Group underlying gross margin^1,#	47.5%	48.7%	(123)bps
Retail	46.7%	48.1%	(142)bps
Vet Group	55.3%	54.6%	65bps

Group underlying PBT^1,2,# (£m)	59.2	65.3	(9.3)%
Retail	39.5	48.7	(19.0)%
Vet Group	27.8	24.0	15.5%
Central	(8.1)	(7.4)	(8.6)%

Group underlying PBT margin^1,2,#	8.1%	9.6%	(151)bps
Retail	6.0%	7.9%	(190)bps
Vet Group	43.5%	42.3%	119bps

Group statutory PBT² (£m)	53.4	65.7	(18.7)%
Underlying basic EPS^1,2,# (p)	9.6	11.0	(12.9)%
Statutory basic EPS² (p)	8.7	11.1	(21.8)%

Group non-underlying items¹ (£m)	(5.8)	0.4	NM
Group underlying free cashflow^# (£m)	41.4	91.6	(54.8)%
Cash and cash equivalents (£m)	143.1	164.7	(21.6)
Dividend (p)	4.5	4.3	4.7%

Number of
Stores	457	453	4
Grooming salons	339	317	22
Joint Venture vet practices	387	390	(3)
Company managed vet practices	57	52	5

1. H1 FY23 non-underlying items of £4.5m relate to pre-opening costs relating to our new distribution centre recognised within Retail, and £1.3m relating to restructuring of certain support functions recognised within Central, both allocated against non-underlying operating costs. H1 FY22 non-underlying credit of £0.4m relates to the release of a provision held against property leases recognised within Vet Group, allocated against non-underlying gross margin.

2. The comparative figures have been restated to reflect the reclassification of expenditure to the income statement following the impact of the accounting policy change detailed in note 1 of the accounts.

Revenue

LFL Revenue Growth	FY23
LFL Revenue Growth	Q1	Q2	H1
Retail	5.6%	6.3%	5.9%
Vet Group	8.6%	13.1%	10.5%
Group	6.0%	6.8%	6.4%

Group revenue in H1 FY23 grew 7.3% to £727.2m (H1 FY22: £677.6m) and like-for-like (LFL) revenue grew 6.4%^#.

Retail revenue grew 6.8% to £661.5m (H1 FY22: £619.6m), including omnichannel revenue growth of 16.2% to £108.9m, representing 16.5% of total Retail revenue (H1 FY22: 15.1%). The LFL revenue growth in Retail was 5.9%^# for the period.

Store revenues increased by 5.0% in the first half to £535.0m (H1 FY22: £509.3m), with store LFL +4.2%, and grooming revenues up by 7.4% to £16.7m (H1 FY22: £15.5m) with 4% more dogs groomed YoY.

Food revenue grew by 15.1% to £387.6m (H1 FY22: £336.7m), underpinned by strong volume growth as we continue to grow our customer base.

Accessories revenue was down 3.5% to £248.8m (H1 FY22: £257.7m), with strong growth in consumables (cat litter, hygiene products, licensed medicines) offset by weaker performance in categories such as dog toys and fashion. Product innovation remains an important driver of performance, with our recent Halloween and Christmas ranges continuing to trade well.

Vet Group LFL revenue grew by 10.5% for the period, with total revenue up 12.4%.

Total Joint Venture fee income increased by 10.4% to £40.7m (H1 FY22: £36.9m), with LFL fee income up 10.7%^#. LFL growth in General Practice customer sales was 7.1%, and revenues ^# from company managed practices increased by 18.7% to £19.2m (H1 FY22: £16.2m).

Revenue of £1.9m (H1 FY22: £1.2m) was recognised within our Central division in relation to The Vet Connection, our growing telehealth business.

Gross margin

Underlying group gross margin^# decreased YoY in line with expectations by 123 bps to 47.5% (H1 FY22: 48.7%).

Gross margin within Retail was 46.7%, a reduction of 142 bps over the prior period (H1 FY22: 48.1%), impacted by food growing ahead of accessories (147bps impact on Group gross margin) and a £4.0m year-on-year increase in freight container rate costs (49bps impact on Group gross margin).

Underlying gross margin^# within the Vet Group increased by 65 bps to 55.3% (H1 FY21: 54.6%). This increase reflects the strong sales growth across our Joint Venture estate driving strong fee income growth with the cost base to support those practices remaining relatively fixed.

Operating costs and profit before tax

Underlying Group profit before tax was £59.2m (H1 FY22: £65.3m), with a profit margin of 8.1%^# (H1 FY22: 9.6%), impacted by increased freight and energy costs and the YoY increase in investment in digital assets, which are expensed through the P&L in line with IAS38 accounting policies. Group statutory profit before tax was £53.4m (H1 FY22: £65.7m).

Group underlying operating costs, excluding depreciation and amortisation, of £223.6m (H1 FY22: £200.9m) grew at 11.3%. Before growth in our fulfilment costs and investment in our digital proposition, underlying cost growth was 4.1%.

We continue to maintain a tight operational grip on industry-wide cost headwinds, including raw materials, wages, energy, and freight costs. As well as directly mitigating these costs where possible, we are also proactively offsetting them through our ongoing self-help initiatives. Our programme of rent reductions is progressing well, achieving an average cash reduction on 25%, and we continue to target efficiencies across consumables and goods not for resale. We are driving further productivity gains across our stores and supply chain, leveraging technology to lower our overall cost to serve.

We have seen some normalisation in container rates since year end, whilst the Government's energy support plan for businesses provides certainty over the balance of year. In addition, our foreign exchange requirements are fully hedged at $1.34 for FY23. We have hedged our dollar requirements forward in line with our treasury policy, with currently c50% of FY24 hedged at an average rate of $1.17.

Retail underlying profit before tax was £39.5m (H1 FY22: £48.7m) with a profit margin of 6.0%^# (H1 FY22: 7.9%) reflecting the sustained strong trading across the first half, offset by the cost headwinds described above. Operating cost growth, excluding depreciation and amortisation, was 11.4% to £211.0m (H1 FY22: £189.4m). Before growth in our fulfilment costs and investment in our digital proposition, underlying cost growth was 3.5%.

Vet Group underlying profit before tax was £27.8m^# (H1 FY22: £24.0m) with a profit margin of 43.5%^# (H1 FY22: 42.3%).

Net costs of £8.1m (H1 FY22: £7.4m) in our Central division reflecting continued investment in group capabilities.

Finance expense

The net finance expense, including interest charged on lease liabilities, decreased to £7.2m (H1 FY22: £7.8m) predominantly driven by a YoY increase in interest received on cash balances.

Group profit before tax

Underlying profit before tax was £59.2m^# (H1 FY22: £65.3m), a decrease of 9.3%. Statutory profit before tax, including all non-underlying items was £53.4m (H1 FY22: £65.7m).

Taxation, profit after tax & EPS

Underlying total tax expense for the period was £11.4m^#, a rate of 19% on underlying profit before tax. Total tax expense was £10.3m for the period.

Underlying profit after tax decreased by 13.3% to £47.8m^# (H1 FY22: £55.1m). Statutory profit after tax decreased by 22.2% to £43.1m (H1 FY22: £55.4m). Underlying basic earnings per share were 9.6 pence (H1 FY22: 11.0 pence) and statutory basic earnings per share were 8.7 pence (H1 FY22: 11.1 pence).

Working capital

The movement in trade working capital for H1 FY23 was an inflow of £26.6m^#. This compares to a trade working capital inflow of £58.1m in H1 FY22 predominantly driven by one-off timing benefits estimated at £21m, resulting in stronger working capital inflows in the prior year.

The strong financial performance across our Joint Venture vet practices, supported by favourable market dynamics, contributed to the gross value of operating loans reducing by £5.3m to £14.9m from £20.2m at FY22 year end (H1 FY22: £22.3m). The provision held against the gross value of operating loans decreased by £0.6m to £4.4m from £5.0m at FY22 year end (H1 FY22: £5.2m).

This increased the underlying net working capital inflow to £31.3m (H1 FY22: £61.5m inflow).

Investment

Total Group investment in H1 was £55.8m, split £39.0m capital investment and £16.8m of cloud-based digital investments which are expensed through the P&L, up from £8.7m in the previous year. We expect full year investment of c£100m, with approximately £70m in capital, and the balance to be expensed.

Total investment of £55.8m (H1 FY22: £32.9m) was focused on three strategic growth areas; investment in data analytics and business systems totalling £20.1m (H1 FY22: £16.9m), as we continue to progress our data and digital agenda, a £19.3m (H1 FY22: £5.7m) investment as we build out our new distribution centre, and £13.4m (H1 FY22: £3.7m) to continue with our store refurbishment programme.

Group free cashflow

Group free cashflow after interest and tax, but before acquisitions was £41.4m^# (H2 FY22: £91.6m), representing a cash conversion rate¹ of 33.3% (H1 FY22: 69.5%). The decrease in free cashflow compared with the prior year is driven by year-on-year profit performance, planned increased investment, and annualisation against working capital timing benefits described above.

Group free cashflow^# (£m)		H1 FY23		H1 FY22
Operating cashflow^#		105.6		150.5
Tax and Interest		(8.4)		(15.8)
Net Capex		(41.0)		(28.0)
Purchase of own shares for colleague share schemes		(14.8)		(15.1)
Group free cashflow^#		41.4		91.6

Divisional free cashflow^#	FCF (£m)		FCF conversion¹
Retail	8.6		8.8%
Vet Group	50.6		167.7%
Central	(17.8)		NM
Group free cashflow^#	41.4		33.3%

1. Calculated as free cashflow as a percentage of underlying cash EBITDA.

The cash generation described above, enables us to pay a record dividend payment and fund our ongoing share buyback programme. The Group's net cash position at the end of the period was £43.1m, and net debt was £379.7m on a lease-adjusted basis. This represents a leverage ratio of (0.3)x underlying EBITDA^# or 1.6x on a lease-adjusted basis.

Group net cash/(debt) (£m)	H1 FY23	FY22
Opening net cash/(debt)	66.0	1.4
Underlying free cashflow^#	41.4	95.0
Ordinary dividends paid	(37.0)	(48.5)
Share buyback	(27.2)	-
Acquisitions²	(0.1)	(1.7)
Disposals³	-	19.8
Closing net cash/(debt)	43.1	66.0
Leverage (Net cash/(debt) / underlying EBITDA^#)	(0.3)x	(0.4)x
Lease-adjusted leverage (Net cash/(debt) / underlying EBITDA^#)	1.6x	1.4x

2. Includes investment in certain company managed practices.

3. FY22 includes the cash proceeds in relation to the disposal of the Specialist Group net of fees and cash held upon disposal.

The Group's cash return on invested capital^# in the period decreased to 21.5% (H1 FY22: 22.0%) in part as our invested capital base increased as we took the £46.4m lease asset for our Stafford DC onto our balance sheet. But for this addition, CROIC would have been stable.

Capital allocation

Our capital allocation policy prioritises investing cash in areas that will expand the Group and deliver attractive returns. These areas include organic investment (into our digital capability, our infrastructure, and our store regeneration program), our progressive ordinary dividend policy (which approximates to 50% of earnings per share) and value-accretive opportunities including M&A (which are strategically aligned to expanding our ecosystem in core and adjacent markets). We will return to shareholders any surplus free cashflow after these items, and it is the Board's intention to review this on an annual basis.

At our preliminary results in May 2022, we announced a 12 month share buyback programme of up to £50m. The programme commenced on 20 June 2022 and continues to progress well.

Dividend

The Board has recommended an interim dividend of 4.5 pence per share, an increase of 4.7% on the prior year. The interim dividend will be payable on 6 January 2023 to shareholders on the register at the close of trading on 2 December 2022.

Mike Iddon

Chief Financial Officer

23 November 2022

# Alternative Performance Measures (APMs) are defined and reconciled to IFRS information, where possible, on pages 15-19.

Risks and Uncertainties

An effective risk management process has been adopted to help the Group achieve its strategic objectives and enjoy long term success. The Board has continued to refresh the principal risks and uncertainties since the publication of the annual report for the 53 week period ended 31 March 2022, and recognise that those risks and uncertainties impacted by macro-economic factors and geopolitical tensions have become more acute. The principal risks and uncertainties comprise:

Technological

· Security of information assets and business systems

· Data protection

· Delivery and execution of key business system projects

· Loss of IT services

· Delivery against our data and analytics opportunity

Financial

· Inflation

· Level of joint venture profitability and indebtedness

· Competition

· Delivery and execution of distribution centre project

Pets

· Pet welfare

· Product availability

People

· Recruitment and retention of critical talent

· Joint Venture Partner pipeline

Planet

· Ability to achieve our net carbon zero targets

· Delivery of sustainable product and service ranges

The Board continues to review the risks and uncertainties that may arise as a result of geopolitical tensions and the actual and potential impact on supply chains, as well as energy cost inflation and foreign exchange volatility.

A detailed explanation of the risks and uncertainties which were identified for the 53 week period ended 31 March 2022 can be found on pages 72 to 85 of the 2022 Annual Report which is available at http://investors.petsathome.com .

Responsibility Statement

We confirm that to the best of our knowledge:

· T he condensed set of interim financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting adopted for use in the UK;

· The interim management report includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first 28 weeks of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining 24 weeks of the year; and

(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first 28 weeks of the current financial year and that have materially affected the financial position or performance of the entity during that period, and any changes in the related party transactions described in the last annual report that could do so.

By order of the Board on 23 November 2022

Lyssa McGowan, Chief Executive Officer

Mike Iddon, Chief Financial Officer

Disclaimer

This statement of interim financial 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 advisor.

Certain statements in this statement of interim financial 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 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 of interim financial results. 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.

INDEPENDENT REVIEW REPORT TO PETS AT HOME GROUP PLC

(a) Conclusion

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the 28 week period ended 13 October 2022 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity and the condensed consolidated statement of cash flows comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity and the condensed consolidated statement of cash flows and the related explanatory notes.

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the 28 weeks ended 13 October 2022 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted for use in the UK and the Disclosure Guidance and Transparency Rules ('the DTR') of the UK's Financial Conduct Authority ('the UK FCA').

(b) Basis for conclusion

We conducted our review in accordance with International Standard on Review Engagements (UK) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity ('ISRE (UK) 2410') issued for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. We read the other information contained in the half-yearly financial report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusions relating to going concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis of conclusion section of this report, nothing has come to our attention that causes us to believe that the directors have inappropriately adopted the going concern basis of accounting, or that the directors have identified material uncertainties relating to going concern that have not been appropriately disclosed.

This conclusion is based on the review procedures performed in accordance with ISRE (UK) 2410. However, future events or conditions may cause the group to cease to continue as a going concern, and the above conclusions are not a guarantee that the group will continue in operation.

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.

The annual financial statements of the group are prepared in accordance with UK-adopted international accounting standards.

The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted for use in the UK.

In preparing the condensed set of financial statements, the directors are responsible for assessing the group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or to cease operations, or have no realistic alternative but to do so.

(d) Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. Our conclusion, including our conclusions relating to going concern, are based on procedures that are less extensive than audit procedures, as described in the Basis for conclusion section of this report.

(e) The purpose of our review work and to whom we owe our responsibilities

This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the DTR of the UK FCA. Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.

Ailsa Griffin

for and on behalf of KPMG LLP

Chartered Accountants

8 Princes Parade

Liverpool

L31QH

23 November 2022

Alternative Performance Measures ('APMs')

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 UK-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 prior year.

All APMs relate to the current period's results and comparative periods where provided.

Comparative period APMs have been restated to reflect the reclassification of expenditure to the income statement following the impact of the accounting policy change outlined in note 1.

Several APMs exclude non-underlying items (see definition below) in order to reflect management's view of the performance of the business. This can result in a difference between APMs and total results. As such, APMs should not be viewed in isolation but as supplementary information to the interim financial statements.

A full glossary of APMs is included in the most recent Annual Report & Accounts which are available at http://investors.petsathome.com .

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 and veterinary practices that commenced trading more than 53 weeks prior to the reporting date, excluding fee income from Joint Venture practices where the Group has bought out the Joint Venture Partners or will offer to buy out the Joint Venture Partners in the future.

Underlying PBT: 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 non-recurring nature, in order to reflect management's view of the performance of the Group.

Underlying free cash flow: Net increase/(decrease) in cash before the impacts of dividends paid, acquisition of subsidiaries, share buybacks proceeds from new loans and repayment of borrowings.

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 non-recurring nature, in order to reflect management's view of the performance of the Group.

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

APM

Definition

Reconciliation

Cash EBITDA

Underlying EBITDA (see below) adjusted for share based payment charges.

HY23	HY22 (restated)	Note
121.6	129.0	2
2.8	2.8	3
124.4	131.8

Underlying EBITDA

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

HY23	HY22 (restated)	Note
60.6	73.5	2
13.7	13.5	3
36.2	37.1	3
5.3	5.3	3
5.8	(0.4)	3
121.6	129.0

Underlying CROIC

Underlying cash return on invested capital, represents cash returns divided by the average of gross capital invested (GCI) for the last 53 weeks. Cash returns represent underlying operating profit before share based payments subject to tax, then adjusted for depreciation of PPE, right-of-use assets and amortisation. GCI represents gross PPE, right-of-use assets and software, and other intangibles excluding the goodwill created on the acquisition of the Group by KKR (£906,445,000) plus net working capital, before the effect of non-underlying items in the period.

Average GCI is calculated as the average of the GCI from HY23 and FY22 (HY FY22: HY22 and FY21).

HY23	HY22 (restated)	Note

132.9	101.1
4.9	4.7
137.8	105.8
19%	19%
(26.2)	(20.1)
111.6	85.7
99.4	107.0
211.0	192.7

374.5	326.5	8
626.7	533.5	9
1,041.0	1,028.8	10
(906.4)	(906.4)
8.5	11.5
(121.9)	(134.7)	see definition
1,022.4	859.2
980.0	874.6
21.5%	22.0%

Underlying free

cash flow

Net increase/(decrease) in cash before the impacts of dividends paid, acquisition of subsidiaries, share buybacks, proceeds from new loans and repayment of borrowings.

HY23	HY22 (restated)	Note
41.4	91.6

(37.0)	(27.2)	CFS
(0.1)	(1.1)	CFS
(27.2)	-	CFS
(22.9)	63.3

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 and veterinary practices that commenced trading more than 53 weeks prior to the reporting date, excluding fee income from Joint Venture 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.

Underlying basic EPS

Underlying basic earnings per share (EPS) is based on earnings per share 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 non-recurring nature, in order to reflect management's view of the performance of the Group.

HY23	HY22 (restated)	Note
9.6	11.0	4
(0.9)	0.1
8.7	11.1

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 non-recurring nature, in order to reflect management's view of the performance of the Group.

HY23	HY22 (restated)	Note
66.4	73.1	2
(5.8)	0.4	3
60.6	73.5

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 non-recurring nature, in order to reflect management's view of the performance of the Group.

Underlying PBT (£m)	HY23	HY22 (restated)	Note
Underlying PBT	59.2	65.3	CIS
Non-underlying items	(5.8)	0.4	3
53.4		65.7

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 non-recurring nature, in order to reflect management's view of the performance of the Group.

HY23	HY22 (restated)	Note
47.8	55.1	CIS
(4.7)	0.3	CIS
43.1	55.4

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 tax and deferred tax) 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 non-recurring nature, in order to reflect management's view of the performance of the Group.

HY23	HY22 (restated)	Note
11.4	10.2	5
(1.1)	0.1	5
10.3	10.3

Underlying net working capital movement

Underlying 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 working capital is a key component of the free cash flow measure of the Group.

HY23	HY22 (restated)	Note
31.3	61.5	CFS


(7.7)	(1.3)
(15.3)	2.9	CFS
46.0	55.3	CFS
3.6	1.2	CFS
26.6	58.1
5.3	4.4
31.9	62.5
(0.6)	(1.0)
31.3	61.5

HY23	HY22 (restated)	Note
64.0	55.4	CBS
99.8	80.9	CBS
(268.9)	(263.4)
(5.1)	(4.6)	CBS
(11.7)	(3.0)	CBS
(121.9)	(134.7)

Underlying cash working capital

Working capital before decrease in gross operating loans to Joint Venture practices

HY23	HY22 (restated)	Note
31.3	61.5
(4.7)	(3.4)	15
26.6	58.1

Underlying operating cash flow

Net cash flow from operating activities per the cash flow statement, before the effects of corporation tax payments, non-underlying items, lease payments, proceeds from the sale of PPE and costs to acquire right-of-use assets.

HY23	HY22 (restated)	Note
142.9	179.2	CFS

7.0	14.6	CFS
149.9	193.8
(37.2)	(36.9)	CFS
(5.7)	(6.2)	CFS
(1.4)	(0.2)	CFS
105.6	150.5
(7.0)	(14.6)	CFS
(2.1)	(1.3)	CFS
0.7	0.1	CFS
(14.8)	(15.1)	CFS
(41.0)	(28.0)	CFS
41.4	91.6
CFS = Consolidated statement of cash flows

Net cash/(debt)

Cash and cash equivalents less loans and borrowings.

HY23	HY22 (restated)	Note
143.1	164.7	CBS
(100.0)	(100.0)	12
43.1	64.7

CBS = Consolidated balance sheet

Total indebtedness

Cash and cash equivalents less loans and borrowings plus lease liabilities.

HY23	HY22 (restated)	Note
143.1	164.7	CBS
(100.0)	(100.0)	12
43.1	64.7
(422.8)	(397.9)	9
(379.7)	(333.2)

Customer sales

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).

HY23	HY22 (restated)	Note
727.2	677.6	2
(40.7)	(36.9)	2
241.7	226.9
928.2	867.6

Condensed consolidated income statement

	Note	28 week period ended 13 October 2022			28 week period ended 7 October 2021 (restated)¹
	Note	Underlying trading £m	Non-underlying items (note 3) m	Total £m	Underlying trading m	Non-underlying items (note 3) m	Total £m
Revenue	2	727.2	-	727.2	677.6	-	677.6
Cost of sales		(382.1)	-	(382.1)	(347.7)	0.4	(347.3)
Gross profit		345.1	-	345.1	329.9	0.4	330.3
Selling and distribution expenses		(212.5)	(4.5)	(217.0)	(195.4)	-	(195.4)
Administrative expenses		(66.2)	(1.3)	(67.5)	(61.4)	-	(61.4)
Operating profit	2	66.4	(5.8)	60.6	73.1	0.4	73.5
Financial income		0.7	-	0.7	0.1	-	0.1
Financial expense		(7.9)	-	(7.9)	(7.9)	-	(7.9)
Net financing expense		(7.2)	-	(7.2)	(7.8)	-	(7.8)
Profit before tax		59.2	(5.8)	53.4	65.3	0.4	65.7
Taxation	5	(11.4)	1.1	(10.3)	(10.2)	(0.1)	(10.3)
Profit for the period		47.8	(4.7)	43.1	55.1	0.3	55.4

¹ See note 1 for an explanation of the prior year restatement.

All activities relate to continuing operations.

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

Note

28 week period ended

13 October 2022

28 week period ended

7 October 2021 (restated)¹

Equity holders of the parent - basic

8.7p

11.1p

Equity holders of the parent - diluted

8.6p

10.9p

¹ See note 1 for an explanation of the prior year restatement.

Dividends paid and proposed are disclosed in note 6.

Condensed consolidated statement of comprehensive income

	28 week period ended 13 October 2022 £m	28 week period ended 7 October 2021 (restated)¹ £m
Profit for the period	43.1	55.4
Other comprehensive income
Items that are or may be recycled subsequently into profit or loss:
Foreign exchange translation differences	(0.1)	0.0
Effective portion of changes in fair value of cash flow hedges	0.9	4.4
Other comprehensive income for the period, before income tax	0.8	4.4
Income tax on other comprehensive income (note 5)	(1.2)	(0.5)
Other comprehensive income for the period, net of income tax	(0.4)	3.9
Total comprehensive income for the period	42.7	59.3

¹ See note 1 for an explanation of the prior year restatement.

The notes on pages 24 to 51 form an integral part of these consolidated interim financial statements.

Condensed consolidated balance sheet

	Note	At 13 October 2022 £m	At 7 October 2021 (restated)¹ £m	At 31 March 2022 £m
Non-current assets
Property, plant and equipment	8	127.5	102.9	108.9
Right-of-use assets	9	382.3	356.9	340.1
Intangible assets	10	988.7	982.6	987.1
Other non-current assets		11.7	14.6	14.1
		1,510.2	1,457.0	1,450.2
Current assets
Inventories	11	99.8	80.9	84.5
Other financial assets		9.9	1.8	3.0
Deferred tax assets		-	2.7	1.1
Trade and other receivables		64.0	55.4	62.8
Cash and cash equivalents		143.1	164.7	166.0
		316.8	305.5	317.4
Total assets		1,827.0	1,762.5	1,767.6
Current liabilities
Trade and other payables		(268.7)	(262.8)	(224.8)
Lease liabilities	9	(71.3)	(79.5)	(78.3)
Provisions		(5.1)	(4.6)	(6.5)
Other financial liabilities		(0.2)	(0.1)	(0.0)
		(345.3)	(347.0)	(309.6)
Non-current liabilities
Other interest-bearing loans and borrowings	12	(97.4)	(99.2)	(96.9)
Lease liabilities	9	(351.5)	(318.4)	(304.7)
Provisions		(11.7)	(3.0)	(6.7)
Deferred tax liabilities		(2.6)	-	-
Other financial liabilities		-	(0.5)	-
		(463.2)	(421.1)	(408.3)
Total liabilities		(808.5)	(768.1)	(717.9)
Net assets		1,018.5	994.4	1,049.7
Equity attributable to equity holders of the parent
Ordinary share capital		4.9	5.0	5.0
Treasury shares		(1.1)	-	-
Consolidation reserve		(372.0)	(372.0)	(372.0)
Merger reserve		113.3	113.3	113.3
Translation reserve		(0.1)	(0.0)	(0.0)
Cash flow hedging reserve		7.4	0.6	3.4
Capital redemption reserve		0.1	-	-
Retained earnings		1,266.0	1,247.5	1,300.0
Total equity		1,018.5	994.4	1,049.7

¹ See note 1 for an explanation of the prior year restatement.

The notes on pages 24 to 51 form an integral part of these consolidated interim financial statements .

Condensed consolidated statement of changes in equity

	Share capital £m	Treasury shares £m	Consolidation reserve £m	Merger reserve £m	Cash flow hedging reserve £m	Translation reserve £m	Capital redemption reserve £m	Retained earnings £m	Total equity £m
Balance at 31 March 2022	5.0	-	(372.0)	113.3	3.4	(0.0)	-	1,300.0	1,049.7
Total comprehensive income for the period
Profit for the period	-	-	-	-	-	-	-	43.1	43.1
Other comprehensive income	-	-	-	-	(0.3)	(0.1)	-	-	(0.4)
Total comprehensive income for the period	-	-	-	-	(0.3)	(0.1)	-	43.1	42.7
Hedging gains & losses reclassified to inventory	-	-	-	-	4.3	-	-	-	4.3
Total hedging gains & losses reclassified to inventory	-	-	-	-	4.3	-	-	-	4.3
Transactions with owners, recorded directly in equity
Equity dividends paid	-	-	-	-	-	-	-	(37.0)	(37.0)
Share based payment charge	-	-	-	-	-	-	-	2.8	2.8
Deferred tax movement on IFRS 2 reserve	-	-	-	-	-	-	-	(1.9)	(1.9)
Share buyback	(0.1)	(1.1)	-	-	-	-	0.1	(26.2)	(27.3)
Purchase of own shares	-	-	-	-	-	-	-	(14.8)	(14.8)
Total contributions by and distributions to owners	(0.1)	(1.1)	-	-	-	-	0.1	(77.1)	(78.2)
Balance at 13 October 2022	4.9	(1.1)	(372.0)	113.3	7.4	(0.1)	0.1	1,266.0	1,018.5

	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 25 March 2021 (as previously reported)	5.0	(372.0)	113.3	(1.5)	(0.0)	1,248.9	993.7
Impact of change in accounting policy¹	-	-	-	-	-	(17.2)	(17.2)
Balance at 25 March 2021 (restated)	5.0	(372.0)	113.3	(1.5)	(0.0)	1,231.7	976.5
Total comprehensive income for the period
Restated profit for the period¹	-	-	-	-	-	55.4	55.4
Other comprehensive income	-	-	-	3.9	0.0	-	3.9
Total comprehensive income for the period	-	-	-	3.9	-	55.4	59.3
Hedging gains & losses reclassified to inventory	-	-	-	(1.8)	-	-	(1.8)
Total hedging gains & losses reclassified to inventory	-	-	-	(1.8)	-	-	(1.8)
Transactions with owners, recorded directly in equity
Equity dividends paid	-	-	-	-	-	(27.2)	(27.2)
Share based payment charge	-	-	-	-	-	2.8	2.8
Deferred tax movement on IFRS 2 reserve	-	-	-	-	-	(0.1)	(0.1)
Purchase of own shares	-	-	-	-	-	(15.1)	(15.1)
Total contributions by and distributions to owners	-	-	-	-	-	(39.6)	(39.6)
Restated balance at 7 October 2021¹	5.0	(372.0)	113.3	0.6	(0.0)	1,247.5	994.4

¹ See note 1 for an explanation of the prior year restatement.

The notes on pages 24 to 51 form an integral part of these consolidated interim financial statements.

Condensed consolidated statement of cash flows

	28 week period ended 13 October 2022 £m	28 week period ended 7 October 2021 (restated)¹ £m
Cash flows from operating activities
Profit for the period	43.1	55.4
Adjustments for:
Depreciation and amortisation	55.2	55.9
Financial income	(0.7)	(0.1)
Financial expense	7.9	8.0
Share based payment charges	2.8	2.8
Taxation	10.3	10.3
	118.6	132.3
(Increase)/decrease in trade and other receivables	(3.0)	2.1
(Increase)/decrease in inventories	(15.3)	2.9
Increase in trade and other payables	46.0	55.3
Increase in provisions	3.6	1.2
	149.9	193.8
Tax paid	(7.0)	(14.6)
Net cash flow from operating activities	142.9	179.2
Cash flows from investing activities
Interest received	0.7	0.1
Costs to acquire right-of-use assets	(1.4)	(0.2)
Acquisition of subsidiaries, net of cash acquired (underlying)	(0.1)	(1.1)
Acquisition of property, plant and equipment and other intangible assets	(41.0)	(28.0)
Net cash used in investing activities	(41.8)	(29.2)
Cash flows from financing activities
Equity dividends paid	(37.0)	(27.2)
Capital lease payments	(37.2)	(36.9)
Purchase of own shares	(14.8)	(15.1)
Share buyback	(27.2)	-
Interest paid	(2.1)	(1.3)
Interest paid on lease obligations	(5.7)	(6.2)
Net cash used in financing activities	(124.0)	(86.7)
Net increase in cash and cash equivalents	(22.9)	63.3
Cash and cash equivalents at beginning of period	166.0	101.4
Cash and cash equivalents at end of period	143.1	164.7

¹ See note 1 for an explanation of the prior year restatement.

The notes on pages 24 to 51 form an integral part of these consolidated interim financial statements.

Notes (forming part of the condensed consolidated interim financial statements)

1 Accounting policies

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

Basis of preparation

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. The Company is listed on the London Stock Exchange.

The condensed consolidated interim financial statements as at and for the 28 week period ended 13 October 2022 comprise the Company and its subsidiaries (together referred to as the 'Group').

The consolidated financial statements of the Group as at and for the 53 week period ended 31 March 2022 are available on request from the Company's registered office and via the Company's website.

The interim 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 UK adopted international accounting standards. The following interpretation issued by the International Financial Reporting Interpretations Committee (IFRIC) has had a material impact on the Group's financial statements during the 28 week period ended 13 October 2022 and the 28 week period ended 7 October 2021.

IFRIC: Configuration or Customisation Costs in a Cloud Computing Arrangement (IAS38 Intangible Assets)

In April 2021, the IFRS Interpretations Committee published an agenda decision in relation to configuration and customisation expenditure relating to cloud computing arrangements, including Software as a Service (SaaS). The Committee has clarified the position that configuration and customisation expenditure that is distinct from access to the cloud software can only be capitalised to the extent it gives rise to an asset for a SaaS customer, i.e., they have the power to obtain the future economic benefits and can restrict others' access to those benefits, otherwise such expenditure should be expensed. Following the interpretation being published, the Group reviewed and revised its accounting policy in relation to IAS38 Intangible Assets, which includes accounting for computer software. The full impact of the change in accounting policy was finalised after the 2021 interim results had been released. This change in accounting policy was reflected in the financial statements for the 53 week period ended 31 March 2022. Consequently, the prior period comparatives in these interim financial statements have now been restated to reflect the change in accounting policy. This change has resulted in a reduction to net assets at 25 March 2021 by £17.2m. In respect of the 28 week period ended 7 October 2021, this has resulted in reclassifying £8.7m of expenditure that was previously capitalised as an intangible asset and expensing this to the income statement as administrative expenses. Accordingly, £3.8m of amortisation charged in the 28 week period ended 7 October 2021 relating to expenditure previously capitalised has been reversed. The impact on profit before tax for the 28 week period ended 7 October 2021 is a reduction in PBT of £4.9m. The cumulative reduction to net assets at 7 October 2021 is £18.5m. The detailed impact of the restatement is set out below:

	28 week period ended 7 October 2021 (previously reported) £m		Restatement £m	28 week period ended 7 October 2021 Restated £m
Consolidated income statement impact
Administrative expenses		(56.5)	(4.9)	(61.4)
Profit before tax		70.6	(4.9)	65.7
Tax charge		(13.9)	3.6	(10.3)
Profit for the period		56.7	(1.3)	55.4
Basic earnings per share		11.4p	(0.3p)	11.1p
Diluted earnings per share		11.2p	(0.3p)	10.9p

	At 7 October 2021 (previously reported) £m		Restatement £m	At 7 October 2021 restated £m
Consolidated statement of financial position impact
Intangible assets		1,008.2	(25.6)	982.6
Deferred tax asset Trade and other receivables Total assets		0.9 50.1 1,781.0	1.8 5.3 (18.5)	2.7 55.4 1,762.5
Net assets		1,012.9	(18.5)	994.4
Retained earnings		1,266.0	(18.5)	1,247.5
Total equity		1,012.9	(18.5)	994.4

	28 week period ended 7 October 2021 (previously reported) £m		Restatement £m	28 week period ended 7 October 2021 restated £m
Consolidated statement of cash flows impact
Profit for the period		56.7	(1.3)	55.4
Depreciation and amortisation		59.7	(3.8)	55.9
Taxation		13.9	(3.6)	10.3
Net cashflow from operating activities		187.9	(8.7)	179.2
Acquisition of property plant and equipment and other intangible assets		(36.7)	8.7	(28.0)
Net cash used in investing activities		(37.9)	8.7	(29.2)

	At 25 March 2021 (previously reported) £m		Restatement £m	At 25 March 2021 restated £m
Consolidated statement of financial position impact
Intangible assets		1,000.2	(20.7)	979.5
Deferred tax asset Corporation tax receivable Total assets		2.9 1,724.0 -	0.9 1.1 (18.7)	3.8 1.1 1,705.3
Corporation tax payable		(1.5)	1.5	-
Total liabilities		(730.3)	1.5	(728.8)
Net assets		993.7	(17.2)	976.5
Retained earnings		1,248.9	(17.2)	1,231.7
Total equity		993.7	(17.2)	976.5

Statement of compliance

These condensed consolidated interim financial statements have been prepared in accordance with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority and with IAS 34 Interim Financial Reporting as adopted by the UK. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group as at and for the 53 week period ended 31 March 2022.

The financial information included in this interim statement of results does not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006 (the 'Act'). The statutory accounts for the 53 weeks ended 31 March 2022 have been reported on by the Company's auditors and delivered to the Registrar of Companies. The auditor's report was (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.

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 of the Annual Report for the 53 week period ended 31 March 2022.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 12 and 13 to these interim financial statements includes the Company's policies and processes for managing its capital; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk.

The Directors of the Group have prepared cash flow forecasts for a period of at least 12 months from the date of the approval of these interim financial statements which indicate that, taking account of reasonably possible downsides, the Group will have sufficient funds, through its revolving credit facility, to meet its liabilities as they fall due for that period.

In preparing the forecasts for the Group, the Directors have carefully considered the impact of consumer confidence, climate change, geopolitical tensions, and the actual and potential impact on supply chains, energy cost inflation and foreign exchange volatility on liquidity and future performance.

The Group has access to a revolving facility of £300m, which expires in March 2027, with £100.0m drawn down on 13 October 2022 and cash balances of £143.1m. The lowest level of liquidity headroom forecast over the next 12 months from the date of signing of the financial statements is in July 2023 and is in excess of £346.6m in the base case scenario. Under the most severe but plausible downside scenario described below (scenario 3), the lowest level of headroom forecast over the next 12 months from the date of approving of the financial statements is £325.3m.

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.

A number of severe but plausible downside scenarios were calculated compared to the base case forecast of profit and cash flow to assess headroom against facilities for the next 12 months. These scenarios included:

Scenario 1: Reduction on Group like-for-like sales growth assumptions of 1% in each year throughout the forecast period, with margin also falling 1.1% compared to forecast. Interest rates rise to 6.85% but ordinary dividends continue to be paid.

Scenario 2: Using scenario 1 outcomes and further impacted by GBP/USD exchange rates assumed at par and an additional £10.5m per year on energy (+120% vs year ended 31 March 2022) as a result of high global energy prices. Dividends held at 11.8p per share

Scenario 3: Group like-for-like sales growth declines to 0% in each year and a conflated risk impact of £102.5m on sales (£74.5m Retail and £28.0m Vet Group) and £50.3m on PBT (£37.3m Retail and £13.0m Vet Group) on PBT is applied, with dividends cut to nil to conserve cash.

Against these negative scenarios, adjusted projections showed no breach of covenants. Further mitigating actions could also be taken in such scenarios should it be required, including reducing capital expenditure.

Despite net current liabilities of £28.5m in the Company, 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 a period of at least 12 months from the date of approval of these financial statements and that, therefore, it is appropriate to adopt the going concern basis in preparing the consolidated financial statements as at and for the 28 weeks ended 13 October 2022.

Significant accounting policies

The accounting policies adopted in preparation of the condensed consolidated interim financial statements as at and for the 28 week period ended 13 October 2022 are consistent with the policies applied by the Group in its consolidated financial statements as at and for the 53 week period ended 31 March 2022, except as described below:

· Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual profit or loss

Accounting estimates and judgments

The preparation of the condensed consolidated interim financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions concerning the future that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. These judgments 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 10. The Directors consider that it is not reasonably possible for the assumptions for the current financial year to change so significantly to warrant inclusion as a significant estimate but acknowledge that there is estimation uncertainty over the assumptions used in future financial periods when calculating future cash flows.

2 Segmental reporting

The Group has three reportable segments, Retail, Vet Group and Central 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 three reportable segments, Retail, Vet Group and Central which are the Group's strategic business units. 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 veterinary General Practices. Central includes a veterinary telehealth business, group costs and finance expenses. Revenue and costs are allocated to a segment where reasonably possible. For the purposes of goodwill allocation, the veterinary telehealth business (hereafter known as TVC) is classed as a separate CGU which sits within the central operating segment.

The following summary describes the operations in each of the Group's reportable segments. Performance is measured based on segment underlying 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 interim financial statements. All material operations of the reportable segments are carried out in the UK and all revenue is from external customers.

28 week period ended 13 October 2022

Income statement

Retail

£m

Vet Group

£m

Central

£m

Total

£m

Revenue

661.5

63.8

1.9

727.2

Gross profit

308.8

35.3

1.0

345.1

Underlying operating profit/(loss)

45.0

28.1

(6.7)

66.4

Non-underlying items

(4.5)

(1.3)

(5.8)

Segment operating profit/(loss)

40.5

28.1

(8.0)

60.6

Net financing expenses

(5.5)

(0.3)

(1.4)

(7.2)

Profit/(loss) before tax

35.0

27.8

(9.4)

53.4

Income statement

Retail

£m

Vet Group

£m

Central

£m

Total

£m

Revenue

619.6

56.8

1.2

677.6

Gross profit

298.1

31.0

0.8

329.9

Underlying operating profit/(loss)

54.7

24.0

(5.6)

73.1

Non-underlying items

0.4

Segment operating profit/(loss)

54.7

24.4

(5.6)

73.5

Net financing expenses

(6.0)

(0.0)

(1.8)

(7.8)

Profit/(loss) before tax

48.7

24.4

(7.4)

65.7

¹ See note 1 for an explanation of the prior year restatement.

Non-underlying items are explained in note 3.
	28 week period ended 13 October 2022
Reconciliation of EBITDA before non-underlying items	Retail £m	Vet Group £m	Central £m	Total £m
Underlying operating profit/(loss)	45.0	28.1	(6.7)	66.4
Depreciation of property, plant and equipment	13.1	0.6	0.0	13.7
Depreciation of right-of-use assets	35.4	0.8	-	36.2
Amortisation of intangible assets	4.3	0.7	0.3	5.3
Underlying EBITDA	97.8	30.2	(6.4)	121.6


	28 week period ended 7 October 2021 (restated)¹
Reconciliation of EBITDA before non-underlying items	Retail £m	Vet Group £m	Central £m	Total £m
Underlying operating profit/(loss)	54.7	24.0	(5.6)	73.1
Depreciation of property, plant and equipment	12.9	0.6	-	13.5
Depreciation of right-of-use assets	36.4	0.7	-	37.1
Amortisation of intangible assets	4.7	0.4	0.2	5.3
Underlying EBITDA	108.7	25.7	(5.4)	129.0

¹ See note 1 for an explanation of the prior year restatement.

EBITDA before non-underlying items is defined on page 16.

		28 week period ended 13 October 2022
Segmental revenue analysis by revenue stream	Retail £m		Vet Group £m	Central £m	Total £m
Retail - Food	387.6		-	-	387.6
Retail - Accessories	248.8		-	-	248.8
Retail - Services	25.1		-	-	25.1
Vet Group - General Practice fee income	-		40.7	-	40.7
Vet Group - Company managed practices	-		19.2	-	19.2
Vet Group - Other income	-		3.9	-	3.9
Central - Veterinary telehealth services	-		-	1.9	1.9
Total	661.5		63.8	1.9	727.2


		28 week period ended 7 October 2021
Segmental revenue analysis by revenue stream		Retail £m	Vet Group £m	Central £m	Total £m
Retail - Food		336.7	-	-	336.7
Retail - Accessories		257.7	-	-	257.7
Retail - Services		25.2	-	-	25.2
Vet Group - General Practice fee income		-	36.9	-	36.9
Vet Group - Company managed practices		-	16.2	-	16.2
Vet Group - Other income		-	3.7	-	3.7
Central - Veterinary telehealth services		-	-	1.2	1.2
Total		619.6	56.8	1.2	677.6

3 Expenses

Included in operating profit are the following:

	28 week period ended 13 October 2022 £m	28 week period ended 7 October 2021(restated)¹ £m
Non-underlying items
Impairment of right of use asset following acquisition of Joint Venture subsidiaries	-	(0.4)
Pre-opening costs for new distribution centre	4.5	-
Group restructure	1.3
Total non-underlying items	5.8	(0.4)
Underlying items
Software as a service (SaaS) expense¹	16.8	8.7
Depreciation of property, plant and equipment	13.7	13.5
Amortisation of intangible assets¹	5.3	5.3
Depreciation of right-of-use assets	36.2	37.1
Rentals under operating leases:
Expenses relating to short-term leases	0.0	0.0
Other income
Rental income from sub-leasing right-of-use assets to third parties²	(0.1)	(0.2)
Rental income from related parties²	(3.9)	(3.9)
Share based payment charges	2.8	2.8

¹ See note 1 for an explanation of the prior period restatement.

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

Non-underlying items

The Group is in the process of building a new distribution centre which is due to become operational in summer 2023. This will replace the existing distribution centres. The process is a significant operational change for the Group, outside of the ordinary course of business. As part of the transition, the Group has incurred operational and payroll costs which it has classed as non-underlying.

£2.6m of non-underlying charges relate to a provision for voluntary redundancies for colleagues employed within the existing distribution centres.

£0.7m of non-underlying charges relate to retention bonuses for colleagues at the existing distribution centres to remain employed by the Group until the point at which the sites close.

£1.2m of non-underlying charges relate to pre-opening costs for the new distribution centre such as rent and utilities which have been incurred despite the site not being fully operational.

£1.3m of non-underlying charges relate to redundancy costs for a restructure within the Group. These have been finalised and have either been paid or are due for payment in the second half of the financial year.

The non-underlying credit of £0.4m recognised in the 28 week period ended 7 October 2021 related to the reversal of the impairment of a right-of-use asset previously recognised on acquisition of a Joint Venture veterinary practice. The property has now been subleased, and therefore the impairment was reversed. The credit was treated as a non-underlying item since the original impairment was also treated in this way.

Income or expenses 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 non-underlying costs to be those that are not generated from ordinary business operations, non-recurring in nature and unlikely to reoccur in the foreseeable future.

Underlying items

The rentals under short-term leases disclosed in relation to the 28 week period ended 13 October 2022 and the 28 week period ended 7 October 2021 relate to leases under short term agreements. These fall under the short-term exemption so are excluded from the requirements of IFRS 16 on the basis that the lease terms are 12 months or less.

4 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.

	28 week period ended 13 October 2022		28 week period ended 7 October 2021 (restated)¹
	Underlying trading	After non-underlying items	Underlying trading	After non-underlying items
Profit attributable to equity shareholders of the parent (£m)	47.8	43.1	55.1	55.4

Basic weighted average number of shares (m)	497.2	497.2	500.0	500.0
Dilutive potential ordinary shares (m)	5.6	5.6	8.4	8.4
Diluted weighted average number of shares	502.8	502.8	508.4	508.4
Basic earnings per share	9.6p	8.7p	11.0p	11.1p
Diluted earnings per share	9.5p	8.6p	10.8p	10.9p

¹ See note 1 for an explanation of the prior period restatement.

5 Taxation

Recognised in the income statement

	28 week period ended 13 October 2022 £m	28 week period ended 7 October 2021 (restated)¹ £m
Current tax expense
Current period	10.1	9.8
Current tax expense	10.1	9.8
Deferred tax expense
Origination and reversal of temporary differences	0.1	0.5
Impact of difference between deferred and current tax rates	0.1	0.1
Adjustments in respect of prior periods	-	(0.1)
Deferred tax expense	0.2	0.5
Total tax expense	10.3	10.3

¹ See note 1 for an explanation of the prior period restatement.

The UK corporation tax standard rate for the period was 19% (2021: 19%). Deferred tax at 13 October 2022 has been calculated based on the rate of 25% apart from deferred tax on derivatives which is calculated at the rate the items are expected to reverse. This is due to the increase in the main rate of corporation tax to 25% from April 2023, which was substantively enacted on 24 May 2021.

Deferred tax recognised in comprehensive income

28 week period ended

13 October 2022

£m

28 week period ended

7 October 2021

£m

Effective portion of changes in fair value of cash flow hedges

1.2

0.5

Reconciliation of effective tax rate

	28 week period ended 13 October 2022			28 week period ended 7 October 2021(restated)¹
	Underlying trading £m	Non-underlying items £m	Total £m	Underlying trading £m	Non-underlying items m	Total £m
Profit for the period	47.8	(4.7)	43.1	55.1	0.3	55.4
Total tax expense	11.4	(1.1)	10.3	10.2	0.1	10.3
Profit excluding taxation	59.2	(5.8)	53.4	65.3	0.4	65.7
Tax using the UK corporation tax rate for the period of 19% (28 week period ended 7 October 2021:19%)	11.2	(1.1)	10.1	12.4	0.1	12.5
Impact of change in tax rate on deferred tax balances	0.2	-	0.2	0.1	-	0.1
Depreciation on expenditure not eligible for tax relief	0.2	-	0.2	0.3	-	0.3
Adjustments in respect of prior periods	-	-	-	(0.7)	-	(0.7)
Capital allowances super deduction	(0.7)	-	(0.7)	-	-	-
Income not taxable	0.5	-	0.5	-	-	-
Expenditure not eligible for tax relief	-	-	-	(1.9)	-	(1.9)
Total tax expense	11.4	(1.1)	10.3	10.2	0.1	10.3

¹ See note 1 for an explanation of the prior period restatement.

6 Dividends paid and proposed

	28 week period ended 13 October 2022 £m	28 week period ended 7 October 2021 £m
Declared and paid during the period
Final dividend of 7.5p per share (2021: 5.5p per share)	37.0	27.2
Proposed for approval by shareholders at the AGM
Interim dividend of 4.5p per share (2021 4.3p per share)	22.1	21.5

The trustees of the following holdings of Pets at Home Group Plc shares under the Pets at Home Group Employee Benefit Trusts have waived or otherwise foregone any and all dividends paid in relation to the period ended 13 October 2022 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 13 October 2022 5,766,243 shares, holding at 7 October 2021: 5,189,945 shares).

7 Business combinations

Acquisition of Joint Venture veterinary practices

In the 28 week period ended 13 October 2022, the Group has acquired 100% of the 'A' shares of 3 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 of the annual consolidated financial statements for the 53 week period ended 31 March 2022.

In the 28 week period ended 13 October 2022, £1.0m of operating loans relating to these practices were written off in advance of the acquisitions.

Up to the date of acquisition and in the 53 week period ending 31 March 2022, 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. Acquisition of the 'A' shares has led to control and consolidation of these practices on the dates below, leading to control from the date of acquisition and consolidation from that date forward.

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
Accrington Vets4Pets Limited	Veterinary practice	16 June 2022	50%	100%	-
Companion Care (Banbury) Limited	Veterinary practice	24 June 2022	50%	100%	-
Companion Care (Chippenham) Limited	Veterinary practice	28 June 2022	50%	100%	-

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

The impairment of goodwill relates to loss making practices.

In line with IFRS3, the right-of-use asset has been brought on at a value equal to the lease liability, adjusted for any unfavourable market conditions. These leases relate to standalone veterinary practices.

8 Property, plant and equipment

	Freehold property £m	Short leasehold property £m	Fixtures, fittings, tools and equipment £m	Assets under construction £m	Total £m
Cost
Balance at 31 March 2022	2.4	65.7	261.6	12.7	342.4
Additions	-	3.6	9.7	18.8	32.1
Assets acquired on acquisition	-	0.1	0.1	-	0.2
Disposals	-	(0.1)	(0.1)	-	(0.2)
Balance at 13 October 2022	2.4	69.3	271.3	31.5	374.5
Depreciation
Balance at 31 March 2022	0.4	32.9	200.2	-	233.5
Depreciation charge for the period	-	2.4	11.3	-	13.7
Disposals	-	(0.1)	(0.1)	-	(0.2)
Balance at 13 October 2022	0.4	35.2	211.4	-	247.0
Net book value
At 31 March 2022	2.0	32.8	61.4	12.7	108.9
At 13 October 2022	2.0	34.1	59.9	31.5	127.5

	Freehold property £m	Short leasehold property £m	Fixtures, fittings, tools and equipment £m	Total £m
Cost
Balance at 25 March 2021	2.4	62.4	245.3	310.1
Additions	-	5.0	11.6	16.6
Assets acquired on acquisition	-	0.4	0.0	0.4
Disposals	-	(0.3)	(0.3)	(0.6)
Balance at 7 October 2021	2.4	67.5	256.6	326.5
Depreciation
Balance at 25 March 2021	0.3	29.4	180.8	210.5
Depreciation charge for the period	0.0	2.1	11.4	13.5
Disposals	-	(0.2)	(0.2)	(0.4)
Balance at 7 October 2021	0.3	31.3	192.0	223.6
Net book value
At 25 March 2021	2.1	33.0	64.5	99.6
At 7 October 2021	2.1	36.2	64.6	102.9

9 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, distribution centres and support offices are leased under operating leases, with remaining lease terms of between 1 and 20 years. The Group also has a number of non-property leases relating to vehicle, equipment and material handling equipment, with remaining lease terms of between 1 and 5 years.

Right-of-use assets

	Property £m	Equipment £m	Total £m
Cost
Balance at 31 March 2022	531.6	16.6	548.2
Additions	76.9	1.7	78.6
Reallocation of accumulated amortisation¹	(0.1)	-	(0.1)
Balance at 13 October 2022	608.4	18.3	626.7
Depreciation
Balance at 31 March 2022	199.2	8.9	208.1
Depreciation charge for the period	34.5	1.7	36.2
Reallocation of accumulated amortisation¹	0.1	-	0.1
Balance at 13 October 2022	233.8	10.6	244.4
Net book value
At 31 March 2022	332.4	7.7	340.1
At 13 October 2022	374.6	7.7	382.3

¹ Included within the cost of property right-of use assets brought forward at 31 March 2022 was (£0.1m) which related to accumulated amortisation. This has been reallocated to accumulated amortisation and has no impact on net book value.

	Property £m	Equipment £m	Total £m
Cost
Balance at 25 March 2021	493.5	14.7	508.2
Additions	24.6	0.7	25.3
Balance at 7 October 2021	518.1	15.4	533.5
Depreciation
Balance at 25 March 2021	132.8	6.7	139.5
Depreciation charge for the period	35.3	1.8	37.1
Balance at 7 October 2021	168.1	8.5	176.6
Net book value
At 25 March 2021	360.7	8.0	368.7
At 7 October 2021	350.0	6.9	356.9

At 13 October 2022, the Group has recognised a right-of-use asset and lease liability for a new Distribution Centre in line with IFRS 16. The Distribution Centre is still under construction and rental payments have not yet been incurred.

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

Lease liability maturity analysis - contractual undiscounted cash flows

	At 13 October 2022 £m	At 7 October 2021 £m	At 31 March 2022 £m
Less than one year	71.3	79.5	78.3
Between one and five years	249.5	242.4	236.9
More than five years	163.8	120.8	108.1
Total undiscounted lease liabilities	484.6	442.7	423.3
Carrying value of lease liabilities in the statement of financial position	422.8	397.9	383.0
Current	71.3	79.5	78.3
Non-current	351.5	318.4	304.7

For lease liabilities at 13 October 2022, a 0.1% reduction in the discount rate 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.

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.

Short-term subleases

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.

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.

10 Intangible assets

	Goodwill £m	Customer list £m	'Know how' - call scripts £m	Software £m	Total £m
Cost
Balance at 31 March 2022	959.1	4.1	2.6	68.3	1,034.1
Additions	-	-	-	6.8	6.8
On acquisition	-	0.2	-	-	0.2
Disposals	-	(0.1)	-	-	(0.1)
Balance at 13 October 2022	959.1	4.2	2.6	75.1	1,041.0
Amortisation
Balance at 31 March 2022	0.1	0.7	0.3	45.9	47.0
Amortisation charge for the period	-	0.2	0.1	5.0	5.3
Balance at 13 October 2022	0.1	0.9	0.4	50.9	52.3
Net book value
At 31 March 2022	959.0	3.4	2.3	22.4	987.1
At 13 October 2022	959.0	3.3	2.2	24.2	988.7

	Goodwill £m	Customer list £m	'Know how' - call scripts £m	Software £m	Total £m
Cost
Balance at 25 March 2021	958.5	3.6	2.6	55.7	1,020.4
Additions¹	-	-	-	7.6	7.6
On acquisition	0.6	0.5	-	-	1.1
Disposals	(0.3)	-	-	-	(0.3)
Restated balance at 7 October 2021¹	958.8	4.1	2.6	63.3	1,028.8
Amortisation
Balance at 25 March 2021	0.1	0.4	-	40.4	40.9
Restated amortisation charge for the period¹	-	0.3	0.1	4.9	5.3
Restated balance at 7 October 2021¹	0.1	0.7	0.1	45.3	46.2
Net book value
At 25 March 2021	958.4	3.2	2.6	15.3	979.5
At 7 October 2021	958.7	3.4	2.5	18.0	982.6

¹ See note 1 for an explanation of the prior period restatement.

Amortisation and impairment charge

The amortisation charge is recognised in total in operating expenses within the income statement.

Impairment testing

Cash generating units (CGUs), as defined by IAS 36, within the Group are considered to be aligned to the three operating segments as shown in the table below. 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 veterinary General Practices. The veterinary telehealth business, hereafter disclosed as The Vet Connection (TVC) CGU, forms part of the Central operating segment. Revenue and costs are allocated to a segment and CGU where reasonably possible.

As at 13 October 2022 and 7 October 2021, the Group is deemed to have three overall groups of CGUs as follows:

	Goodwill
	At 13 October 2022 £m	At 7 October 2021 £m
Retail	586.1	586.1
Vet Group	361.8	361.5
TVC	11.1	11.1
Total	959.0	958.7

In line with previous practice, the Group conducts goodwill impairment tests as part of the interim financial statements and the annual financial statements. There were no indicators of impairment as at 13 October 2022. 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:

	28 week period ended 13 October 2022				28 week period ended 7 October 2021
	Retail		Vet Group	TVC	Retail	Vet Group	TVC
Period on which management approved forecasts are based (years)		5	5	5	5	5	5
Growth rate applied beyond approved forecast period		2.0%	3.5%	2.0%	2.0%	3.5%	2.0%
Discount rate (pre-tax)		11.3%	11.1%	11.1%	10.2%	10.6%	10.6%
Like-for-like sales growth		7.2%	9.9%	35.0%	7.6%	9.9%	34.0%
Gross profit margin		47.8%	70.0%	69.0%	47.6%	58.2%	65.0%

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 2022 financial statements.

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 related pre-tax discount rate is disclosed above in line with IAS 36 requirements.

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. Due to the timing of the Group's forecasting cycle, assumptions used for the Retail, Vet and TVC CGUs are from the strategic plan presented to the board on 4 November 2021.

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 long term growth rate in the Vet Group CGU exceeds the long term average for the UK but is an appropriate rate for the industry.

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 General veterinary practices (see note 7).

Within the Retail, Vet Group and TVC CGUs, 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

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.

11 Inventories

At 13 October 2022

£m

At 7 October 2021

£m

At 31 March 2022

£m

Finished goods

99.8

80.9

84.5

The cost of inventories recognised as an expense and included in 'cost of sales' is £334.6m (period ended 7 October 2021: £304.6m).

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 13 October 2022 the inventory provision amounted to £4.9m (7 October 2021: £3.8m). 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 £10.3m (7 October 2021: £9.5m).

In the 28 week period ended 13 October 2022, the value of inventory written off to the income statement amounted to £4.8m (28 week period ended 7 October 2021: £4.8m).

12 Other interest-bearing loans and borrowings

	At 13 October 2022 £m	At 7 October 2021 £m	At 31 March 2022 £m
Non-current liabilities
Unsecured bank loans	97.4	99.2	96.9

Terms and debt repayment schedule

				At 13 October 2022
	Currency	Nominal interest rate	Year of maturity	Face value £m	Carrying amount £m
Revolving credit facility	GBP	SONIA +1.35%	2027	100.0	97.4
				At 7 October 2021
	Currency	Nominal interest rate	Year of maturity	Face value £m	Carrying amount £m
Revolving credit facility	GBP	LIBOR +1.15%	2023	100.0	99.2

During the 53 week period ended 31 March 2022, the Group entered into a new revolving credit facility of £300.0m which expires on 31 March 2027.

The drawn amount on the £300.0m facility was £100.0m at 13 October 2022 (£100.0m at 7 October 2021) and this amount is reviewed each month. Interest is charged at SONIA plus a margin based on leverage (net debt: EBITDA) and ESG targets. Face value represents the principal value of the revolving credit facility. The facility is unsecured.

Following the cessation of Sterling LIBOR on 31 December 2021 the Group transitioned its existing revolving credit facility and interest rate swap hedging products from LIBOR to SONIA. The effect of the transition was less than £0.1m. The new £300.0m revolving credit facility entered into on 29 March 2022 is also linked to SONIA and the existing interest rate hedges continue to be effective.

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 13 October 2022 m	At 7 October 2021 £m	At 31 March 2022 £m
Within one year or repayable on demand	-	-	-
Between one and two years	-	100.0	-
Between two and five years	100.0	-	100.0
	100.0	100.0	100.0

The Group has 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 commenced 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.

13 Financial instruments

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)

At 13 October 2022
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	-	0.2		-		-	0.2
Other investments	-	1.2		-		-	1.2
Forward exchange contracts used for hedging	5.5	-		-		-	5.5
Fuel forward contract used for hedging	0.5	-		-		-	0.5
Interest rate swaps used for hedging	3.7	-		-		-	3.7
	9.7	1.4		-		-	11.1
Financial assets not measured at fair value
Current trade and other receivables	-	-		41.4		-	41.4
Amounts owed by Joint Venture veterinary practices - funding, trading and operating loans	-	-		10.9		-	10.9
Cash and cash equivalents	-	-		143.1		-	143.1
Loans to Joint Venture veterinary practices - initial set up loans	-	-		7.1		-	7.1
Loans to Joint Venture veterinary practices - other loans	-	-		1.7		-	1.7
Other receivables	-	-		1.8		-	1.8
	-	-		206.0		-	206.0
Financial liabilities measured at fair value
Fuel forward contract used for hedging	(0.0)	-		-		-	(0.0)
Forward exchange contracts used for hedging	(0.2)	-		-		-	(0.2)
Interest rate swaps used for hedging	-	-		-		-	-
	(0.2)	-		-		-	(0.2)
Financial liabilities not measured at fair value
Current lease liabilities (note 9)	-	-		-		(71.3)	(71.3)
Non-current lease liabilities (note 9)	-	-		-		(351.5)	(351.5)
Trade payables	-	-		-		(113.7)	(113.7)
Amounts owed to Joint Venture veterinary practices	-	-		-		(22.6)	(22.6)
Other interest-bearing loans and borrowings (note 12)	-	-		-		(97.4)	(97.4)
	-	-		-		(656.5)	(656.5)

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		-	-	0.2	0.2
Other investments		-	-	1.2	1.2
Financial assets not measured at fair value
Amounts owed by Joint Venture veterinary practices - funding, trading and operating loans		-	-	10.9	10.9
Loans to Joint Venture veterinary practices - initial set up loans		-	-	7.1	7.1
Loans to Joint Venture veterinary practices - other loans		-	-	1.7	1.7
Other receivables		-	-	1.8	1.8
Financial liabilities not measured at fair value
Other interest-bearing loans and borrowings (note 12)	-		(100.0)	-	(100.0)

At 7 October 2021
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		-		0.2	-	-	0.2
Other investments		-		1.1	-	-	1.1
Forward exchange contracts used for hedging		1.0		-	-	-	1.0
Fuel forward contracts used for hedging		0.3		-	-	-	0.3
Interest rate swaps used for hedging		0.0		-	-	-	0.0
		1.3		1.3	-	-	2.6
Financial assets not measured at fair value
Current trade and other receivables		-		-	23.6	-	23.6
Amounts owed by Joint Venture veterinary practices - funding, trading and operating loans		-		-	17.1	-	17.1
Cash and cash equivalents		-		-	164.7	-	164.7
Loans to Joint Venture veterinary practices - initial set up loans		-		-	10.3	-	10.3
Loans to Joint Venture veterinary practices - other loans		-		-	2.6	-	2.6
Other receivables		-		-	0.9	-	0.9
		-		-	219.2	-	219.2
Financial liabilities measured at fair value
Fuel forward contracts used for hedging		(0.0)		-	-	-	(0.0)
Forward exchange contracts used for hedging		(0.1)		-	-	-	(0.1)
Interest rate swaps used for hedging		(0.5)		-	-	-	(0.5)
		(0.6)		-	-	-	(0.6)
Financial liabilities not measured at fair value
Current lease liabilities (note 9)		-		-	-	(79.5)	(79.5)
Non-current lease liabilities (note 9)		-		-	-	(318.4)	(318.4)
Trade payables		-		-	-	(124.4)	(124.4)
Amounts owed to Joint Venture veterinary practices		-		-	-	(5.1)	(5.1)
Other interest-bearing loans and borrowings (note 12)		-		-	-	(99.2)	(99.2)
		-		-	-	(626.6)	(626.6)

At 7 October 2021
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					-	-	0.2			0.2
Other investments					-	-	1.1			1.1
Financial assets measured at fair value
Amounts owed by Joint Venture veterinary practices- funding, trading and operating loans					-	-		17.1		17.1
Loans to Joint Venture veterinary practices- initial set up loans					-	-		10.3		10.3
Loans to Joint Venture veterinary practices-other loans					-	-		2.6		2.6
Other receivables					-	-		0.9		0.9
Financial liabilities not measured at fair value
Other interest-bearing loans and borrowings (note 12)					-	(100.0)		-		(100.0)


	At 31 March 2022
	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			-	0.2	-	-		0.2
	Other investments			-	1.1	-	-		1.1
	Forward exchange contracts used for hedging			2.2	-	-	-		2.2
	Fuel forward contracts used for hedging			0.5	-	-	-		0.5
	Interest rate swaps used for hedging			1.6	-	-	-		1.6
				4.3	1.3	-	-		5.6
	Financial assets not measured at fair value
	Current trade and other receivables			-	-	28.0	-		28.0
	Amounts owed by Joint Venture veterinary practices - funding, trading and operating loans			-	-	15.2	-		15.2
	Cash and cash equivalents			-	-	166.0	-		166.0
	Loans to Joint Venture veterinary practices - initial set up loans			-	-	8.6	-		8.6
	Loans to Joint Venture veterinary practices - other loans			-	-	2.1	-		2.1
	Non-current other receivables			-	-	0.5	-		0.5
	Other receivables			-	-	0.3	-		0.3
				-	-	220.7	-		220.7
	Financial liabilities measured at fair value
	Fuel forward contracts used for hedging			(0.0)	(0.0)	-	-		(0.0)
				(0.0)	(0.0)	-	-		(0.0)
	Financial liabilities not measured at fair value
	Current lease liabilities (note 9)			-	-	-	(78.3)		(78.3)
	Non-current lease liabilities (note 9)			-	-	-	(304.7)		(304.7)
	Trade payables			-	-	-	(118.5)		(118.5)
	Amounts owed to Joint Venture veterinary practices			-	-	-	(9.2)		(9.2)
	Other interest-bearing loans and borrowings (note 12)			-	-	-	(96.9)		(96.9)
				-	-	-	(607.6)		(607.6)

At 31 March 2022
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		-	-		0.2	0.2
Other investments		-	-		1.1	1.1
Financial assets measured at fair value
Amounts owed by Joint Venture veterinary practices - funding, trading and operating loans		-	-	15.2		15.2
Loans to Joint Venture veterinary practices - initial set up loans		-	-	8.6		8.6
Loans to Joint Venture veterinary practices - other loans		-	-	2.1		2.1
Other receivables		-	-	0.5		0.5
Financial liabilities not measured at fair value
Other interest-bearing loans and borrowings (note 12)		-	(100.0)	-		(100.0)

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 value 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 contingent consideration in relation to acquisitions. 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

Hedge accounting

Cash flow hedges

At 13 October 2022 and 7 October 2021, 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
	HY 2023	HY 2023	HY 2023	HY 2022	HY 2022	HY 2022
Foreign currency risk
Forward exchange contracts
Net exposure (£m)	35.8	29.1	-	37.4	26.5	-
Average GBP-USD forward contract rate	1.29	1.16	-	1.38	1.38	-
Average GBP-EUR forward contract rate	1.16	1.14	-	1.16	1.16	-

Interest rate risk
Interest rate swaps
Net exposure (£m)	-	100.0	-	-	-	100.0
Average fixed interest rate	-	0.811%	-	-	-	0.811%

		Loans and borrowings	Lease liabilities	Total
	£m		£m	£m
Balance at 31 March 2022	96.9		383.0	479.9
Changes from financing cash flows	-		-	-
Proceeds from loans and borrowings	-		-	-
Repayment of borrowings	-		-	-
Payment of lease liabilities	-		(44.2)	(44.2)
Total changes from financing cash flows	-		(44.2)	(44.2)
Other changes
Interest expense on lease liabilities	-		5.7	5.7
Additions to lease liabilities	-		78.3	78.3
Disposal of lease liabilities	-		-	-
Capitalisation of debt issue costs	-		-	-
Accelerated amortisation of debt issue costs	-		-	-
Amortisation of debt issue costs	0.5		-	0.5
Total other changes	0.5		84.0	84.5
Balance at 13 October 2022	97.4		422.8	520.2

		Loans and borrowings	Lease liabilities	Total
	£m		£m	£m
Balance at 25 March 2021	98.7		409.7	508.4
Changes from financing cash flows	-		-	-
Proceeds from loans and borrowings	-		-	-
Repayment of borrowings	-		-	-
Payment of lease liabilities	-		(43.2)	(43.2)
Total changes from financing cash flows	-		(43.2)	(43.2)
Other changes
Interest expense on lease liabilities	-		6.1	6.1
Additions to lease liabilities	-		25.3	25.3
Disposal of lease liabilities	-		-	-
Capitalisation of debt issue costs	-		-	-
Accelerated amortisation of debt issue costs	-		-	-
Amortisation of debt issue costs	0.3		-	0.3
Total other changes	0.3		31.4	31.7
Balance at 7 October 2021	99.0		397.9	496.9

14 Seasonality of operations

The Group's sales can be sensitive to periods of extreme weather conditions. The Group sometimes sees a reduction in sales during periods of hot weather in the UK, due to reduced customer footfall and reduced demand as pets eat less and generally spend more time outdoors, reducing the need for essentials such as food and cat litter. If temperatures are extremely high for a prolonged period, declines in sales can be material. The number of customers visiting Pets at Home's stores also declines during periods of snow or extreme weather conditions affecting the local catchment area. In addition, the sales of certain products and services designed to address pet health needs, such as flea and tick problems, can also be seasonal, increasing in times of warm and wet weather.

Traditionally the financial performance of the Group in the four-week period to the end of December is marginally stronger than in the other periods, due to Christmas purchasing. Purchasing of Accessories is also more prevalent during this season. Timing of the holiday season and any adverse weather conditions that may occur during that season impacting delivery may adversely affect sales in our stores.

15 Related parties

Veterinary practice transactions

The Group has entered into a number of arrangements with third parties in respect of veterinary practices. 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 9.7m (7 October 2021: £11.7m).

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

	13 October 2022 £m	7 October 2021 £m	31 March 2022 £m
Transactions
- Fees for services provided to Joint Venture veterinary practices	40.7	36.9	69.9
- Rental and other occupancy charges to Joint Venture veterinary practices	6.4	6.3	11.7
Total income from Joint Venture veterinary practices	47.1	43.2	81.6
Acquisitions
- Consideration for Joint Venture veterinary practices acquired (note 7)	-	1.6	2.1
Balances
Included within trade and other receivables:
- Funding for new practices	0.4	-	-
- Trading balances	-	-	-
- Operating loans
- Gross value of operating loans	14.9	22.3	20.2
- Allowance for expected credit losses held for operating loans	(4.4)	(5.2)	(5.0)
- Net operating loans	10.5	17.1	15.2
Included within other financial assets and liabilities:
- Loans to Joint Venture veterinary practices - initial set up loans
- Gross value of initial set up loans	8.5	11.3	9.8
- Allowance for expected credit losses for initial set up loans	(1.4)	(1.0)	(1.2)
- Net initial set up loans	7.1	10.3	8.6
- Loans to other related parties (other loans)
- Gross value of other loans	1.7	2.6	2.1
- Allowance for expected credit losses held for other loans	-	-	-
- Net other loans	1.7	2.6	2.1
Included within trade and other payables:
- Trading balances	(22.6)	(5.1)	(9.2)
Total amounts receivable from veterinary practices (before provisions)	2.9	31.1	22.9

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 28 week period ended 13 October 2022, the 53 week period ended 31 March 2022 and the 28 week period ended 7 October 2021 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/income received by the Group in relation to the services provided to the veterinary practices that have yet to be recharged.

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 practice's 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 £4.4m (31 March 2022: £5.0m, 7 October 2021: £5.2m).

In the 28 week period ended 13 October 2022, the value of loans written off recognised in the income statement amounted to £1.0m (7 October 2021: £0.9m).

At 13 October 2022, the Group had a commitment to increase the loan funding to Joint Venture companies of £0.7m (31 March 2022: £0.8m, 7 October 2021: £0.5m), 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 leases for veterinary practices that are not located within Pets at Home stores.

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