Notice of AGM

RNS Number : 8442Q

Pets At Home Group Plc

08 June 2018

 

FOR IMMEDIATE RELEASE, 8 JUNE 2018

Pets at Home Group Plc: Posting of Annual Report & Accounts and Notice of AGM

Pets at Home Group Plc (LSE: PETS) (the "Company") today announces that its Annual Report and Accounts for the year ended 29  March 2018 ("Annual Report"), Notice ("Notice") of the 2018  Annual General Meeting ("AGM") and Form of Proxy for the 2018 AGM have been sent to shareholders and the Annual Report and Notice are available on the Company's website at https://investors.petsathome.com .

In compliance with LR9.6.1, the Company has today submitted electronic copies of the following documents to the National Storage Mechanism appointed by the Financial Conduct Authority and these will shortly be available for inspection at http://www.morningstar.co.uk/uk/NSM :

·     Annual Report and Accounts for the year ended 29 March 2018

·     Notice of the 2018 AGM

·     Form of Proxy for the 2018 AGM

The Company's AGM will be held at 11.00 am on 12 July 2018 at the Hallmark Hotel, Stanley Road, Handforth, Wilmslow, Cheshire, SK9 3LD.

The directors of the Company have determined that all of the resolutions to be put to a vote at the AGM will be decided on a poll.

The Company's preliminary results announcement on 22 May 2018  included, in addition to the preliminary financial results for the year ended 29 March 2018, information on important events that occurred during the year and their impact on those financial statements. That information, together with the information set out in the Appendix below is provided in compliance with the requirements of DTR6.3.5(2) (b). This information is not a substitute for reading the full Annual Report and Accounts for the year ended 29 March 2018.

ENDS

Enquiries

Pets at Home Group Plc:                                                                 [phone]

Louise Stonier, Company Secretary

About Pets At Home

Pets at Home Group Plc is the UK's leading pet care business; our commitment is to make sure pets and their owners get the very best advice, products and care. Pet products are available online or from our 448 superstores, many of which also have vet practices and grooming salons. Pets at Home also operates a UK leading small animal veterinary business, with 461 First Opinion practices located both in our stores and in standalone locations, as well as four Specialist Referral centres. For more information visit: http://investors.petsathome.com/

Appendix

Directors Responsibility Statement

The responsibility statement below has been prepared in connection with the Company's Annual Report and Accounts for the year ended 29 March 2018.

The Directors of Pets At Home Group Plc confirm that to the best of their knowledge:

·     the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

·     the strategic report/directors' report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

The Directors of Pets at Home Group Plc consider the annual report and accounts taken as a whole, is fair, balanced and understandable and provides the necessary information for shareholders to assess the Group's position and performance, business model and strategy.

This responsibility statement was approved by the Board of Directors on 21 May 2018 and signed on its behalf by Peter Pritchard, Group Chief Executive Officer.

Principal 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 and the Executive Management Team are collectively responsible for managing risk across the Group.  Key risks are allocated to an Executive Management Team member for oversight and ultimate ownership. The full Executive Management Team supported by key members of the Operating Board are responsible for closely managing the most significant risks.

Internal Audit co-ordinates the risk management process and holds meetings with all risk owners across the business three times a year following which the individual risk registers are updated including actions and progess made and an assessment of risk ratings by evaluating each risk and assigning a  score

The Health and Safety Committee assists the Board in managing the risk of health and safety and security and holds quarerlty meetings with stakeholders from across the Group. It recommends to the Board and Group appropriate policies and procedures.

Audit and Risk Committee

Assists the Board fulfil its corporate governance and oversees responsibilities in relation to financial reporting, internal controls and the risk management framework.

Provides oversight and challenge to the assessment of principal risks.

Reviews internal financial controls and the risk management framework and assesses their effectiveness in mitigating Group level risks and advises the Executive Management Team on risk appetite.

Reviews and oversees the Group risk register - reviews detailed risk reports at each sitting with supplementary reporting from the management team on specific key risks.

Conducts regular deep dives into key risk areas with relevant Directors to understand the nature of the risks and adequacy of the mitigations and controls that are in place.

The key risks identified by the Board are summarised below.

Brand and reputation

Description and impact

The Group's number one value is Pets Before Profit, and pet welfare is its highest priority. The Group also recognises the need to protect its brand and reputation. Failure to do so could result in loss of trust and confidence by both customers and colleagues.

Mitigation

Pet welfare across the Group is overseen by the Pets Before Profit Committee. This meets regularly to review pet welfare and check that appropriate processes are in place to ensure we maintain our high welfare standards.

As a retailer of small pets the highest possible welfare standards must be maintained at all times. We have rigorous processes in place to ensure this across all our stores, including in-store adoption centres, and with our pet suppliers. All are assessed regularly against a comprehensive set of welfare standards by vets, third party assessors and an animal welfare organisation. We also have a highly visible field operations team in respect of in-store pets and grooming, where trained colleagues are focused on maintaining the highest pet welfare standards.

Examples of where we prioritise pet welfare include our decision to suspend the sale and adoption of rabbits over Easter and instead provide workshops to educate about the responsibilities of pet ownership. Also, at Christmas we encourage customers to buy the relevant housing, accessories and food but to take gift vouchers rather than pets. This allows new owners the chance to visit one of our stores after Christmas to learn about the welfare needs of their pet before taking it home.

We operate a confidential 'Pet Promise Line' where colleagues are able to raise concerns about pet care directly with our Head of Pets. Any calls to this line result in appropriate action to address the concerns raised.

The Group also deals with customers' pets on a daily basis through its veterinary practices. The veterinary practices have a clear set of operational protocols, which are subject to the professional standards mandated by the Royal College of Veterinary Surgeons. To support the practices we have a clinical development team who are all veterinary surgeons. They conduct clinical excellence audits focusing on the quality of care to ensure a high standard of clinical practice is maintained

Outlook

As we continue to increase our size and scale, we must work to ensure that pet welfare standards continue to be maintained at a high level across the Group. We will continue to monitor welfare standards closely and take appropriate steps where required to maintain them.

Change on prior year: unchanged

Strategic priorities: grow like for like, grow space and optimise footprint, grow margins

Competition

Description and impact

The Group competes with a wide variety of retailers and vet practices, including other pet specialists, supermarkets and discounters. Online competition is also a risk, as large well-known internet businesses expand into pet products and the established pet product sites improve and expand their offer.

Failure to keep abreast of, and respond to, developments by our competition in the areas of price, range, quality and service could have an adverse impact on the Group's financial performance and impact opportunities for growth.

Mitigation

In response to a change in shopping habits of our customers we initiated targeted pricing changes at the start of 2017 beginning with private label Advanced Nutrition foods. We have followed this with price reductions in branded food lines and pet essentials. Overall, we have seen good initial results, particularly in Food and Advanced Nutrition, where increased sales volumes offset the price reductions, leading to overall revenue growth in those categories. Our plan remains to target price investment into product areas that we believe drive shopper frequency and loyalty, not simply reducing prices across the entire range.

Market research is carried out to review the pet market both at home and abroad to understand what our competitors are doing worldwide. This helps identify further changes or initiatives that need to be implemented to help keep Pets at Home ahead of the competition and remain a leader in the UK market.

We continue to evolve our proposition through the addition of vets and groomers into our existing store estate whilst continuing to innovate with the regular introduction of new and exclusive products into our food and accessory ranges.

As a specialist retailer, the delivery of friendly expertise through our highly engaged/trained store colleagues is a key element of our proposition and we continue to invest to ensure our service standards are continually improved. We have invested in two major initiatives. Order-In-Store allows colleagues in every store to advise and sell from our extended online range, while Subscription services deliver flea treatments in convenient individual pipettes to customers at the right time to administer a single preventative dose to their pet dog or cat. In the medium term we intend to extend our Subscription initiative in further product areas.

As part of our investment in the digital shopping experience we have redesigned our mobile checkout process to make it more convenient and deliver a better experience for customers shopping with Pets at Home while on the move. Further investment is planned in our digital engagement with customers. The VIP (Very Important Pet) club was launched in November 2012 and has been very successful - attracting 3.9m active members at financial year-end. This customer and pet database enables more targeted marketing, which helps drive up basket values and enables us to build a stronger sense of engagement with our customers and their pets.

Outlook

There has been some increase in the number of pure play online competitors but this is not expected to have a significant impact on our business. We have seen an expansion of the pet offer among discounters.

Change on prior year: unchanged

Strategic priorities: grow like for like, grow retail and services space, grow margins

Stores and services expansion

Description and impact

A key part of the Group's growth strategy is to increase the growth in its in-store and standalone veterinary practices, Groom Room salons and to increase the number of stores, whilst maintaining our existing estate. If we are unable to deliver the number of sites necessary to fulfil the services and stores expansion laid out in our strategy our expected financial performance could be adversely impacted.

Mitigation

The business maintains a pipeline of Joint Venture partner opportunities to deliver its plans for new First Opinion vet practices. We have a plan to expand our specialist vet division to achieve national coverage of Specialist Referral Centres. We also maintain a regular review of our store portfolio to maximize the potential from our retail estate. This enables the Board to monitor progress in delivering our growth strategy. Our store rollout is mostly complete so our attention will be more focused upon how we can ensure our full services offer is accommodated amongst the existing estate. Our store estate is entirely leased which gives us great flexibility. As leases come up for expiry or contain a break, we will assess our portfolio on a case by case basis before deciding whether to renew the lease, or to close or relocate a unit. We have the ability, with smaller footprint stores, to utilise mezzanine space to deploy vet and Groom Room services, maximising the opportunity to offer a full range of service in our retail stores. Any proposed new veterinary practice, grooming salon or store investment has to deliver an appropriate financial return after taking into account any financial impact on the existing store portfolio.

Before we are able to open a new First Opinion veterinary practice we need to recruit a Joint Venture partner with the ability to both fund their investment into the Joint Venture and to provide the personal guarantee to the bank providing the third party financing to the Joint Venture practice. We continue to investigate opportunities for new store formats, including the trial of a convenience store within a Tesco superstore.

Outlook

Our strategy is to cautiously grow our estate in priority locations and to optimise the existing store estate with services. Store space vacancy levels are starting to increase with retailer administrations and consolidation of existing retail space, providing further opportunities for our future store rollout.

Change on prior year: unchanged

Strategic priorities: grow like for like, grow retail and services space, grow margins

Our People

Description and impact

As a specialist retailer and services group, retaining highly trained and engaged colleagues is fundamental to delivering outstanding customer service, which is a key element of our proposition and drives our continued success and the delivery of our future growth. Our growth plans and future success are also at risk if we do not recruit and retain high calibre, talented senior management. A significant number of colleagues in certain areas of our business are EU nationals. Brexit may result in changes to UK immigration policy which increases the risk around the availability, recruitment and retention of these individuals.

Mitigation

Our colleagues are the foundations on which we have built our success. We recognise that their knowledge and passion are at the heart of the relationships we build with our customers and their pets. We continue to ensure that we are attracting diverse talent by updating our recruitment process, including

our recruitment website, policies and procedures, with the aim of being able to attract diverse candidates with the requisite skillset. By driving continued investment in progressive training and learning programmes across the business we ensure that we are developing and retaining our talent.

Our Remuneration Policy, as set out on pages 85 to 94, is designed to ensure executives of the necessary calibre are attracted and retained and that through our Restricted Share Plan, colleagues across the business can share in our success. Similarly, we continually review the remuneration and benefits packages for our colleagues to make sure they are appropriately rewarded for the substantial contribution they make to our growth and success. We continue to communicate these benefits and the value they bring to colleagues to ensure they are taking advantage of them. We also closely monitor colleague engagement and retention rates.

Listening to our colleagues is critical to our business so we are launching a new listening survey, which will help to identify issues, and further embed our culture and values, whilst providing benchmarking data with other companies in our sector. Succession plans are in place for key roles which are regularly reviewed by the Board and senior management. We continue to review the impact of Brexit and the possible change to UK immigration policy which may impact the availability, recruitment and retention of colleagues in both our Vet Group and distribution centres. We have employed long term strategies to mitigate the expected impact, including operating flexible recruitment and retention initiatives across the Group, launching international experienced and graduate recruitment programmes for veterinary surgeons, whilst reviewing opportunities in non-EU vet recruitment markets. We are working closely with

professional bodies including the Royal College of Veterinary Surgeons and the British Veterinary Association and support them in their calls on Government to formally recognise the shortages of veterinary surgeons across all disciplines, particularly in light of restrictions on free movement for EU nationals following Brexit.

Outlook

The ongoing Brexit negotiations may impact our employment of EU nationals. We need to ensure that the Group continues to be an attractive place to work, particularly if employment levels continue to increase nationally and there is more competition in the job market

Change on prior year: unchanged

Strategic priorities: grow like for like, grow retail and services space, and grow margins

Business Systems and Information Security

Description and impact

The need to maintain core business systems and mitigate against security risk whilst supporting the Group's growth plans and delivering cost efficiency remains paramount again this year. With the arrival of GDPR, there comes a significant increase in the level of scrutiny organisations are being placed under regarding the management and use of personal data. With this comes additional cost linked to the evaluation and remediation of associated risks (data, people and infrastructure). Our ability to balance these challenging demands is key to ensuring that the business is able to maintain target growth levels and be secure from data security breach and legal challenge.

Mitigation

To ensure the stability of our IT systems whilst supporting sustained business growth, we are developing operational monitoring capabilities to assess performance and capacity of the live systems. This will enable a proactive stance to be taken regarding the visibility and management of issues prior to their manifesting at customer touch points. In addition we are working with our suppliers where appropriate, looking at opportunities to move to managed

services and cloud based solutions. A recent example of this includes the migration of the Retail platform into a hosted environment as part of a managed service, simplifying our hosting and support arrangements. This also aligns with our Disaster Recovery strategy to exit our Stoke backup site by 2020, moving disaster recovery (DR) capability into the cloud, and further increasing the already distributed nature of our architecture. We have conducted network and web infrastructure DR tests, with Retail platform testing to follow once the move to the hosted environment is complete.

The Information Security programme has already delivered Group wide training and awareness campaigns, educating colleagues to the risks associated with data and physical security. In addition, IT Security policies have been revised for re-issue to the wider Group. A significant programme of work remains ongoing to deliver a range of security enhancements, to include secure email and device encryption, revised IT standards and procedures, enhanced asset management, user authentication and vulnerability scanning amongst others. GDPR drives the requirement to ensure that personal data is protected at all times, and this has formed the key principle in the design of our data centric strategy bringing customer and other data together across the Group. The selection of a cloud based platform enables us to anonymise certain data to allow full analysis whilst reducing the risk of customer data being exposed. The solution also allows us to link customer information more easily, enabling full trace back to core operational systems that the customer has been identified in so that we can better update information and remove/archive where appropriate.

Outlook

Systems stability continues to improve with the move to cloud based solutions and managed service provision. Greater focus on operational stability and performance over the coming year will enable a more proactive stance in the mitigation of performance, capacity and stability issues with the creation of teams focused on these aspects. Disaster Recovery testing will be conducted at the point of change, ensuring ongoing coverage. Big data will enable greater insight into customer behaviour and retail opportunity in an environment which ensures GDPR compliance.

Change on prior year: unchanged

Strategic priorities: grow like for like and grown margins

Supply Chain/Sourcing

Description and impact

During the financial year, approximately US$65m of the Group's merchandise cost of goods was globally sourced, and therefore we are exposed to the risks associated with international trade, such as inflation, changing regulatory frameworks and currency exposure. We have two national distribution centres covering the north and south of the UK respectively. A disaster at one of these may result in a significant interruption to the supply of stock for a large number of stores and in the fulfilment of internet orders.

The impact of Brexit on our overseas supply chain remains unknown but may be significant, particularly in view of probable changes to the UK's trading terms with the rest of the world. We are also exposed to the risks associated with the quality and safety of products produced globally on behalf of the Group, many of which are own branded or exclusive private labels. A failure to manage this risk adequately could lead to reputational damage, reflected in a lack of confidence by customers and colleagues in the Group brands.

Mitigation

Having Pets at Home colleagues on the ground in the Far East working collaboratively with suppliers enables us to monitor closely compliance with the Group's Code of Ethics and Business Conduct policy, and our Supplier Quality Manual. In addition, an independent third party undertakes unannounced visits to further monitor compliance with Group policies.

We have made significant investments in both our sourcing strategy and our quality and food technical function, in terms of people, processes, testing and reporting, to ensure we have the capability to meet the future ambitions of the business. Business continuity plans are in place for the distribution centres which have been tested. They help us mitigate the impact of a disaster by enabling us to service all stores and orders for a priority range of SKUs from a single distribution centre whilst we source a second facility and recover full product supply. We will continue to monitor Brexit developments closely and respond to any impact on our supply chain proportionately. Exposure to foreign currency movements is mitigated through our hedging strategy; see the Treasury and financial risk.

Outlook

We continue to develop our quality assurance processes and to ensure the effectiveness of our Far East sourcing office in mitigating our sourcing risks in the region.

Change on prior year: unchanged

Strategic priorities: grow like for like, grow margins

Liquidity and Credit Risk

Description and impact

The business requires adequate cash resources to enable it to fund its growth plans through its capital projects and/or an expansion of the Group's working capital requirement.

Without adequate cash resources, the Group may be unable to deliver its growth plans, with a consequent impact on future financial performance.

Mitigation

The Group's finances are continually monitored in the context of its growth plans. The Group's current financing facilities are in place until April 2020, As a result, the Group is confident that it has adequate revolving facilities in place, with a broad syndicate of ten banks. The Group's growth plans in respect of Joint Venture veterinary practices is predicated on the availability of finance for new Joint Venture veterinary partners to fund both the capital cost and working capital requirement for each new practice opening. The Group also provides additional financial support to First Opinion practices to support their working capital requirements and growth in clinical capacity. This investment is a particular feature of the Joint Venture operating model and in making this investment the Group considers its total returns across all practices on a portfolio basis. We have established a provision to reflect the assessment of extended investments being repaid over different lengths of time, with different risks of return, to provide for any potential shortfall.

The Group has facilities in place with major high street lenders that give us confidence that our medium term growth plans are financed adequately. The Group ensures that all cash surpluses are invested with banks that have credit ratings and investment criteria that meet the requirements set out in the Group Treasury policy, which has been approved by the Board. The Group's key suppliers are exposed to credit risk and as part of the Group's overall risk management programme, the business has identified alternative suppliers where appropriate and developed contingency plans in respect of own label and private label food products.

Outlook

We will continue to monitor our finances and build relationships with our finance providers. We do not anticipate any significant macroeconomic changes in the short to medium term that may affect this risk area although the outcome of the EU referendum may have some bearing.

Change on prior year: unchanged

Strategic priorities: grow retail and services space

Treasury and Financial Risk

Description and impact

The Group has an exposure to exchange rate risk in respect of the US dollar that is the principal purchase currency for goods sourced from the Far East. The political and macro-economic environment has increased currency pressures and we may see this continue for some time. The Group also faces risks from changes to interest rates and compliance with taxation legislation. If we do not adequately manage this exposure there could be an impact on the

Group's financial performance with a consequential impact on operational and growth plans

Mitigation

This exposure to FX fluctuation is managed via forward foreign currency contracts that are designated as cash flow hedges. The Group has borrowings with floating interest rates linked to LIBOR, thereby exposing the Group to fluctuations in LIBOR and the consequent impact on interest cost. To manage this risk the Group has interest rate swaps in place that fix the interest rate on a significant proportion of the Group borrowings.

All hedging activity is undertaken by the Group Treasury function in accordance with the Group Treasury policy that sets out the criteria for counterparties with whom the Group can transact and clearly states that all hedging activities are undertaken in the context of known and forecast cashflows, with speculative transactions specifically prohibited. Dedicated tax resource is in place and specialist tax advisors are retained to assist in this area.

Outlook

Ongoing currency movements between the US dollar and GBP may result in further exchange risk, particularly in light of the ongoing Brexit process. We will continue to monitor this and adjust our approach to hedging where necessary

Change on prior year: unchanged

Strategic priorities: grow margins

Regulatory and Compliance

Description and impact

Many of the Group's activities are regulated by legislation and standards including, but not limited to, trading, advertising, product quality, health and safety, pet shop licensing, national minimum wage, national living wage, modern slavery, bribery, data protection, carbon emission and gender pay gap information reporting, Failure to comply with these obligations may result in financial or reputational damage.

Mitigation

We actively monitor both regulatory developments in the UK and Europe and compliance with our existing obligations where we have internal policies and

standards to ensure compliance where appropriate. We also provide training for colleagues where required and operate a confidential hotline for colleagues to raise concerns in confidence. Our suppliers commit to and are audited against adhering to relevant regulations, such as Modern Slavery Act 2015, the Bribery Act 2010, the Data Protection Act 1998, and from 25 May 2018, the General Data Protection Regulation (GDPR), along with our mandatory standards as outlined in our Quality Manual. In response to GDPR we have a steering committee with executive sponsorship which is supported by defined working groups to ensure our GDPR compliance plan is actioned. The Animal Welfare (Licensing of Activities Involving Animals (England) Regulations 2018 were laid before Parliament in Feb 2018 and come into force in Oct 2018. This updated legislation follows an extensive consultation which began in December 2015. We supported the changes proposed to improve pet welfare and engaged proactively in the consultation and with ministers and officials directly. Having demonstrated our expertise and commitment to high welfare standards, we were able to play a leading role in the development of the detailed guidelines that underpin the new regulations and form the basis of future licensing inspections by local authorities.

Outlook

We welcome the Government's recent proposals around animal establishments licensing which comes into force in October 2018. We continue to monitor these and other regulatory developments across the UK and Europe and will plan accordingly

Change on prior year: unchanged

Strategic priorities: grow like for like and grown margins

Extreme Weather

Description and impact

Prolonged extreme or unseasonal weather conditions may reduce footfall in our stores, resulting in weak sales, leading to adverse impacts on profit and inventory.

Mitigation

We actively monitor and forecast demand and, should this risk occur, we would review planned and tactical promotional activity to determine whether strengthening this would drive sales.

Outlook

Further improvements to our Omnichannel offering will continue to improve our resilience to reduced store footfall during periods of extreme weather.

Change on prior year: unchanged

Strategic priorities: grow like for like

Related Party Transactions

Veterinary practice transactions                                                                            

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

Commitments relating to these veterinary practices are included within notes 25 to 27 of the financial statements.

The transactions entered into during the period, and the balances outstanding at the end of the period are contained in note 27 to the financial statements.

 

END

 

 

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