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Tuesday 11 June, 2019

Pets at Home Grp

Annual Report & Accounts and AGM Notice

RNS Number : 7471B
Pets At Home Group Plc
11 June 2019





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

Pets at Home Group Plc (LSE: PETS) ("Company") today announces that its Annual Report and Accounts for the year ended 28  March 2019 ("Annual Report"), Notice ("Notice") of the 2019  Annual General Meeting ("AGM") and Form of Proxy for the 2019 AGM have been sent to shareholders and the Annual Report and Notice are available on the Company's website at

In compliance with LR9.6.1, the Company has 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

·    Annual Report and Accounts for the year ended 28 March 2019

·    Notice of the 2019 AGM

·    Form of Proxy for the 2019 AGM

The Company's AGM will be held at 11.00 am on 11 July 2019 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 2019 included, in addition to the preliminary financial results for the year ended 28 March 2019, 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 28 March 2019.




Pets at Home Group Plc:

+44 (0)161 486 6688

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 452 stores, many of which also have vet practices and grooming salons. Pets at Home also operates a UK leading small animal veterinary business, with 470 First Opinion practices located both in our stores and in standalone locations, as well as four Specialist Referral centres. For more information visit: 




Directors Responsibility Statement

The responsibility statement below has been prepared in connection with the Company's Annual Report and Accounts for the year ended 28 March 2019.

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 22 May 2019 and signed on its behalf by Peter Pritchard, Group Chief Executive Officer.


Principal Risks and Uncertainties

An effective risk management framework is in place allowing a robust assessment of the principal risks that may impact the achievement of our strategic objectives and delivering long term success.


Board and Executive Management Team


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 Retail and Vet Group Executive Board's are responsible for closely managing the most significant risks. The Executive Management Team receives regular risk updates and reports from Board committees, internal audit, assurance teams and external advisers.


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.


Internal Audit

Gives objective assurance to the Board and Audit and Risk Committee on the effectiveness of the risk management framework.

Co-ordinates the risk management process and holds meetings with all risk owners across the business four times per year following which the individual risk registers are updated including actions and progess made. Assesses risk ratings and documents the controls in place that help mitigate each risk. Shares risk management information and best practice across the Group. Recommends improvements and corrective actions.

Corporate Social Responsibilty and Pets Come First Committee and Health and Safety Committee

Assists the Executive Management Team in managing the risks of pet welfare, health, safety and security. Ensures robust risk management procedures in their area of responsibility are implemented and complied with. Assesses the measurement of risk and compliance with Group policies and applicable regulations. Recommends appropriate policies  and procedures to the Executive Management Team. Ensures that appropriate insurance is in place over property and other assets. Hold meetings quarterly with stakeholders from across the Group. Updates the Executive Management Team on key performance indicators across the Group.


The key risks identified by the Board are summarised below.




The Board has reviewed the risks and opportunities that may arise as a  result of Brexit and has implemented appropriate and balanced mitigation plans where it is expecting to see an impact. Whilst the longer term effects remain unclear, we continue to monitor developments closely and will continue to plan accordingly. Brexit has the potential to affect the following principal risks:

·    Our people

·    Supply chain and sourcing

·    Liquidity and credit

·    Treasury and finance

·    Regulatory and compliance


Brand and reputation


Description and impact

Our vision is to be the best pet care business in the world. Our number one value is "We put pets first" and pet welfare remains our highest priority. Protecting our strong brand, reputation and customer loyalty is essential to our business. Failure to do so could result in loss of trust and confidence by both customers and colleagues.



Pet welfare across the Group is overseen by the Corporate Social Responsibility and Pets Come First Committee which meets three times a year. Its remit is to review pet welfare and clinical standards, and check that appropriate processes are in place to ensure we maintain our high welfare standards. Advancing pet welfare continues to be a priority.


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 breeders. All are assessed regularly against a comprehensive set of welfare standards both by internal and external independent assessors. We also have a highly visible field operations team where trained colleagues are focused on maintaining the highest pet welfare standards in stores and grooming salons.


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. Over Christmas we encourage customers to buy the relevant housing, accessories and food and to take gift vouchers home 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.


Every store colleague is also empowered to refuse to sell a pet if they have any doubts about the suitability of its forever 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 and specialist hospitals. All veterinary surgeons and nurses are subject to the Royal College of Veterinary Surgeon's (RCVS) Code of Conduct. 76% of practices are now also accredited under the Practice Standards Scheme (PSS). This is a voluntary scheme run by the RCVS, which aims to promote and maintain the highest standards of veterinary care. 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, and will continue to drive and support PSS accreditation.



As we continue to increase our size and scale of our pet care services offering, we must ensure that pet welfare standards continue to be maintained at a high level across the Group. We will continue to monitor welfare standards closely, taking appropriate steps where required to maintain them whilst continually looking for ways to improve.


Risk appetite: Low


Change on prior year: Stable


Links to strategy: Bring the pet experience to life, Set our people free to serve, Use data and VIP to better serve customers, 50% of sales from pet services




Description and impact

The Group competes with a wide variety of retailers and veterinary groups and practices, including other pet specialists, supermarkets, discounters and vet groups. Online competition is also a risk, as large well-known internet businesses expand into pet products and established pet product sites improve and expand their offer. Failure to offer an attractive model to our future Joint Venture Partners whilst keeping abreast of, and responding to, developments by all our competition in the areas of price, range, quality, clinical care and customer service could have an adverse impact on the Group's financial performance and impact opportunities for growth.



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.


In response to a change in shopping habits of our customers we initiated targeted pricing changes with private label Advanced Nutrition foods and branded food lines and pet essentials. Overall, we have seen strong results, particularly in food and Advanced Nutrition, where increased sales volumes offset the price reductions, leading to overall revenue growth in those categories. We have a clear pricing strategy and we are executing the plan to keep our prices competitive, and to deliver everyday low prices for our most loyal customers. We will continue to target price investment into product areas that we believe drive shopper frequency and loyalty, not simply reducing prices across the entire range.


We continue to evolve our proposition through the addition of vets and groomers into our existing store estate whilst continuing to innovate our superstore format - with the intention  of making our stores more experiential destinations for our current and prospective customers and 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 and trained store colleagues is a key element of our proposition and we continue to invest to ensure our service standards are continually improved.


At the same time we appreciate that in this digital, omnichannel era, customer buying behaviour is rapidly changing and in an increasingly challenging and competitive retail landscape, consumers have greater demands around price, convenience, service and experience. As part of our continued investment in the digital shopping experience we have completed a full site user experience redesign across mobile, tablet and desktop customer experiences. The redesign brings together our amazing pet care proposition and is easier for customers to find great information, advice and recommendations, product solutions and services from our vets, groomers, insurance and much more.


Our veterinary business continues to have a differentiated strategy versus its scale UK competitors, which all employ variations of a 'buy and build' model. The relationship with our Retail stores and VIP club, Joint Venture model, and ability to advertise at national scale under a single brand are key aspects of a strategy that remain difficult for any competitor to replicate - in part or in whole. Whilst we continued to leverage these competitive advantages during the past year to drive above market customer sales growth across our estate, we also took important action to recalibrate our veterinary business to create a more sustainable cash return profile for our Group and for our Joint Venture Partners.


The VIP (Very Important Pet) club, launched in November 2012, has now attracted 4.4m 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.



The increase in the number of pure play online competitors and other retailers moving into services is not expected to have a significant impact on our business. We have also seen an expansion of the pet offer among discounters.


We will use our unique strengths to attract new pet owners, through our brand, cross-Group offers, and our VIP club and will keep our prices competitive for our most loyal customers.


By 2022, it is expected that 75% of the small animal veterinary market in the UK will be corporately owned. We can benefit from our strong strategic footing as the only corporate vet business in the UK focusing on a shared ownership model, offering the opportunity for our partners to own their own business.


Risk appetite: Medium



Change on prior year: Stable


Links to strategy: Bring the pet experience to life, Set our people free to serve, Use data and VIP to better serve customers, 50% of sales from pet services



Services and stores expansion


Description and impact

A key part of the Group's growth strategy is to deliver 50% of sales from pet care services, by having a complete pet care strategy aligned across the Group. If we are unable to deliver the initiatives laid out in our strategy our expected financial performance could be adversely impacted.



We regularly review our store proposition and portfolio to maximise the potential from our retail estate to ensure that our brand remains relevant, maintains its position as a UK pet market leader and crucially, that our stores are still fulfilling our customers' needs. Our approach is to build on the foundations of the current Pets at Home store format, reviewing all aspects of the store model, service provision and all customer touch points. As our store proposition is much more than the standard supermarket or pure online offering, securing those points of difference within our store environment is vital, giving customers compelling and tangible reasons to return whilst building long term brand loyalty. An exciting milestone in the year was the launch of our new pet care centre format at two existing stores where we have invested in a truly experiential destination for customers, with an emphasis on putting pet care centre stage with a more digital shopping experience. This trial represents our response to the changing needs and expectations of the modern customer, and we expect to learn a lot as we monitor performance of these stores throughout FY20, with a view to refining the design and rolling out to further stores in the years ahead.


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 services 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.


Our store estate is also 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, to close or relocate a unit. We continue to monitor and plan to mitigate the risk of landlords redeveloping sites for alternative uses at lease expiry.


We have extended our subscription expertise into pet care plans, offering combination packages of products, vet care and grooming. In October 2018 we launched pet care plan recommendations, which brings together all of our different subscription plans and allows our colleagues to find the best pet care plan based on a pet's individual needs. It also allows us to recommend and introduce customers in our retail stores to the wide range of services available from our vets and groomers. After nearly three successful years of our VIP Subscribe & Save flea service we have broadened the proposition with the addition of a new cat worming proposition and great value bundles of flea and worm treatments. Our "Easy Repeat" delivery service was launched in May 2018 to help customers buy the products they need on a regular basis. This new service enables customers to schedule deliveries for their selected products at a special easy-repeat price.


The continued growth of our veterinary business, both First Opinion and Specialist Referrals, is a key building block for achieving our growth strategy. We made meaningful progress to increase the long-term sustainability and competitive position of both of these businesses in FY19. In our First Opinion vet business, we announced a recalibration, to realise free cashflow growth by accelerating maturity in existing practices. The plan remains on-track and throughout the process we have worked closely with our Joint Venture Partners to reach decisions about their businesses in a collaborative manner.


A key priority for our Specialist Division is to expand our capacity and to achieve national coverage of Specialist Referral centres. We remain active in looking at locational opportunities in this sector as well as completing extensive expansion programmes at three out of four of our existing sites, the last of which will come on stream in April 2020.



We are confident in our plans to deliver 50% of sales from pet care services in the long run, given both the shift we expect in consumer spending toward services and the strong competitive position of our Group to capture this opportunity with our differentiated pet care offering and well-developed plans to further develop our services offering over the coming years.


We will continue to optimise our store network with services, developing our stores of tomorrow, whilst growing the estate in priority locations, relocating  or closing a small number of stores, accommodated by lease breaks  or expiry.


We will continue to monitor market developments and dynamically adjust our plans as necessary.


Risk appetite: Medium


Change on prior year: Stable


Links to strategy: Bring the pet experience to life, Set our people free to serve, Use data and VIP to better serve customers, 50% of sales from pet services


Our People


Description and impact

As a pet care business, attracting and retaining highly trained and engaged colleagues is fundamental to delivering outstanding clinical care and customer service. This 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 cannot attract, recruit and retain high calibre, talented leaders.



Our colleagues across the Group 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 ensure that we are attracting diverse talent by staying ahead of future workforce trends, by offering flexibility, career choices and relevant benefits to meet the needs of our diverse pool of candidates. We continue to invest in our progressive training and learning programmes across the Group to develop and retain our talent, whilst building teams with the capability and skills to meet the changing needs of  our customers and help deliver our strategic plan.


A key part of our people strategy is to continue to grow our own capabilities through our exclusive Vet Group Learning Academy, leadership development programmes and our apprenticeship offering. Currently we offer various apprenticeships across the Group including our vet nurse academy and grooming apprenticeships to draw talent into these critical roles. We will continue to map more training programmes to apprenticeships over the next year including key leadership development programmes and believe this will not only support our attraction strategy but drive retention of key colleagues across the Group.


To mitigate the risk of clinical talent shortages we have initiated our talent strategy which includes bursaries for vet students, talent ambassadors in universities, increasing our presence at vet schools, international attraction campaigns, and lobbying the government. We have re-launched our veterinary graduate programme to make sure we are early to market. The programme is proving very successful having increased our intake numbers  by 175% in two years. This financial year we have recruited 110 graduates.


Our Remuneration Policy, as set out on pages 93 to 100 of the Annual Report and Accounts, 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.


Listening to our colleagues is critical to our business and last year we launched our new listening survey in Retail which gave us in-depth colleague engagement data and helps us continue to embed our culture, values and behaviours, whilst providing benchmarking data with other companies in our sector. This year, we will extend the weCARE survey across the whole Group to obtain feedback from all colleagues and partners to better assess our engagement levels and to understand culturally how the business is feeling. In addition "Pulse" surveys are conducted throughout the year on key themes, such as colleague benefits, to gain a detailed view from which plans are actioned.


We are very proud to partner with Mind and Vet Mind Matters as part of the Group's wellbeing strategy.


An Audience with the Executive Management Team has been introduced which is a twice yearly listening group hosted by senior management and one of our Non-Executive Directors. The sessions are attended by colleagues from all parts of the Group to ensure the culture of our business is heard and understood by the Board. Talent reviews and succession plans are in place for key roles which are regularly reviewed by the Board and senior management. This will be enhanced further this year by a refresh of our review cycle with updated training and records to gain consistency across the Group and also ensure all colleagues, regardless of role, are having regular, quality reviews and career conversations.


We continue to review the impact of Brexit and any change to UK immigration policy which may impact the availability, recruitment and retention of colleagues across the Group. 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. As the outline of EU citizens right of settlement 'indefinite leave to remain' is now known, we have initiated a communication plan with our JVPs and all affected colleagues to clarify an EU citizen's right of settlement.



We need to ensure that the Group continues to be an attractive place to work, meeting the changing needs of our workforce, particularly if employment levels continue to increase nationally and there is more competition in the job market.


Risk appetite: Medium


Change on prior year: Stable


Links to strategy: Bring the pet experience to life, Set our people free to serve, Use data and VIP to better serve customers, 50% of sales from pet services

Business Systems and Information Security


Description and impact

The need to maintain core business systems and mitigate against security risks whilst supporting our strategy remains paramount again this year. In complying with 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 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 deliver our strategy, maintain target growth levels and be secure from data security breach and legal challenge.



To deliver our data strategy and improve data governance, the Group Executive Management Team has appointed a Chief Data Officer and a Chief Information Officer, both roles are new to the Group. We remain committed to delivering secure high performance systems that underpin our strategic plan. We continue to move to managed services and scalable, secure, cloud based solutions where they support our strategy. The information security programme  is now well progressed with new automated security solutions, improved processes and strengthened controls to manage our systems and data. Projects are in place to further improve our disaster recovery capability by moving to cloud based backups to enable  a faster recovery time. Last year we completed a full revision of the information security policies for the Group.  We continue awareness campaigns to educate colleagues to the risks associated with data and physical security.



In order to deliver our vision to become the best pet care business in the world  we will be utilising cloud based data and analytics platforms, new digital solutions and automation technologies. Whilst delivering the strategy we will ensure  that data security is built in and compliance is maintained. The information security programme  and education of colleagues will continue through the year as we work to reduce  the risk further.


Risk appetite: Low


Change on prior year: Down


Links to strategy: Bring the pet experience to life, Set our people free to serve, Use data and VIP to better serve customers



Supply Chain/Sourcing


Description and impact

During the financial year, approximately US$72m 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 domestic and overseas supply chains still remains largely unknown but may be significant, particularly in view of probable changes to the UK's trading terms with the EU and the rest of the world. We are also exposed to the risks associated with the quality and safety of products produced locally and globally on behalf of the Group, many of which are own brand 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.




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 visits to further monitor compliance with Group policies.


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 continue to monitor Brexit developments closely and will respond to any impact on our supply chain proportionately. We have performed a detailed operational risk assessment of our supply chain. For our own label and private label food products we have identified alternative suppliers where appropriate and have developed contingency plans. We have also invested in our stock protection by building a prudent stock position covering our top cash sale product lines from UK and EU suppliers, in addition to key suppliers confirming that they are also building their own stock levels. To support this stock build we have secured access to additional storage in a third party warehouse. The Vet Group has also secured the provision of critical medicines by contractually ring fencing stock with our suppliers and has built relationships with manufacturers should we encounter any difficulties in our supply chain.


Exposure to foreign currency movements is mitigated through our hedging strategy;  see the Treasury and finance risk.



We continue to monitor Brexit developments and manage our mitigation plan accordingly. We are  also continuing to invest in our quality assurance processes and to ensure the effectiveness of our Far East sourcing office in mitigating our sourcing risks  in the region.


Risk appetite: Low


Change on prior year: Stable


Links to strategy: Bring the pet experience to life, Use data and VIP to better serve customers, 50% of sales from pet services



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 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.



The Group's finances are continually monitored in the context of its growth plans.  The Group's financing facilities were reviewed in September 2018 and are in place until September 2023. As a result, the Group is confident that it has adequate revolving facilities  in place, with a broad syndicate of seven 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 underpin 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. The Group has engaged in a project to buy out and consolidate a number of Joint Venture veterinary practices, as part of which, the Group will settle any liabilities for third party bank loans and leases within these practices on behalf of the Joint Venture Partner, with all such liabilities being fully provided against. For the practices which the Group does not intend to offer to buy out, the Group has 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 recognised 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.



We will continue to monitor our finances and build relationships with our finance providers. We do not anticipate any significant macro-economic changes in the short to medium term that may affect this risk area although the outcome of  the evolving relationship that the United Kingdom has with the EU may have some bearing.


Risk appetite: Low


Change on prior year: Stable


Links to strategy: Bring the pet experience to life, 50% of sales from pet services



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.



This exposure to exchange rate 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.  Further details can be found on page 160 of the Annual Report and Accounts. 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 cash flows, with speculative transactions specifically prohibited.



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.


Risk appetite: Low


Change on prior year: Stable


Links to strategy: Bring the pet experience to life, 50% of sales from pet services



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, packaging, product quality, health and safety, pet shop licensing, national minimum wage, national living wage, modern slavery, bribery, data protection, environment and the RCVS Code of Professional Conduct for Veterinary Surgeons. Failure to comply with these obligations  may result in financial or reputational damage.



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 whistleblowing hotline for colleagues to raise concerns regarding any potential breach of legal or regulatory obligations in confidence. Our suppliers commit to and are audited against adhering to relevant regulations, such as the Modern Slavery Act 2015, the Bribery Act 2010 and the General Data Protection Regulation (implemented in the UK by means of the Data Protection Act 2018) (GDPR). In response to GDPR the Group has appointed a Data Protection Officer and has a steering committee with executive sponsorship which monitors Group compliance with legal requirements and supports the work of our Information Security Steering Committee which monitors data security. The Group supported the introduction of the Animal Welfare (Licensing of Activities Involving Animals) (England) Regulations 2018 which was implemented in October 2018. The licensing process across the Group is ongoing and will continue for much of 2019 as the local authorities require time to familiarise themselves with the new regulations. DEFRA (the Department for Environment, Food and Rural Affairs) is planning to review the regulations again in late 2019. As a key stakeholder we will actively engage in the consultation process to ensure the licensing requirements are clear and consistent, driving an update if required to the statutory guidance. The Group has continued to monitor the potential changes to law and regulation which could be brought about by Brexit or any proposed withdrawal agreement with the EU. Continued political uncertainty has however made it difficult to assess the full impact  on the regulatory and compliance landscape.



We continue to monitor legal and regulatory developments across the UK and Europe and will plan accordingly.


Risk appetite: Low


Change on prior year: Stable


Links to strategy: Bring the pet experience to life, Set our people free to serve, 50% of sales from pet services



Extreme Weather


Description and impact

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



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.



Further improvements to our subscription and omnichannel services offering will continue to improve our resilience to reduced store footfall during periods of extreme weather.


Risk appetite: Medium 


Change on prior year: Stable


Links to strategy: Bring the pet experience to life, 50% of sales from pet services


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.

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