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Pets at Home Grp (PETS)

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Tuesday 24 November, 2020

Pets at Home Grp

FY21 Interim Results

RNS Number : 2475G
Pets At Home Group Plc
24 November 2020
 

FOR IMMEDIATE RELEASE, 24 NOVEMBER 2020

Pets at Home Group Plc: FY21 Interim Results
for the 28 week period to 08 October 2020

Accelerating growth across our customer-centric pet care platform

· Total Group revenue growth of 5.1% to £574.4m

· Group like-for-like# (LFL) revenue growth of 5.3% with Q2 LFL# revenue growth of 12.7%

· Retail LFL# revenue growth of 5.8%, or 14.8% on a 2-year basis; Q2 LFL# revenue growth of 12.5%

· Omnichannel revenue# growth of 65.8%, or 118.2% on a 2-year basis, with previous investment in capacity and good online availability supporting a step change in participation of Retail revenue from 10.0% in the prior year to 15.2% in H1 FY21

· Vet Group LFL# revenue growth of 1.2%, with LFL customer sales#1 growth across all First Opinion practices of 1.2%, and Joint Venture practices at 1.6%; LFL customer sales# growth across all First Opinion practices of 14.2% in Q2, and Joint Venture practices at 14.6%

· Decline in Group underlying PBT# of 5.1% to £39.6m; Growth in Q2 Group underlying PBT# of 43.7%

· Group underlying free cash flow# of £60.5m, reflecting good cash generation from our First Opinion veterinary practices post recalibration

· Resilient balance sheet with net debt (pre-IFRS16) of £50.9m (net debt/EBITDA of 0.4x) and total liquidity, comprising cash balances and undrawn portion of combined £348m RCF, of £297.1m

· Interim dividend per share of 2.5p, maintained with the prior year

· The start of our financial year coincided with implementation of national lockdown in the UK, with growth in the half-year, post the unwind of Q4 FY20 stockpiling, weighted to our second quarter

· Q2 Retail LFL# revenue growth reflecting a strong performance from merchandise sales across all channels, including store LFL# growth of 7.9%, demonstrating the strategic advantages of a true omnichannel pet care business

· Q2 LFL customer sales# growth across all First Opinion practices reflecting strong demand recovery post the easing of regulatory restrictions, good growth in new clients through our Puppy & Kitten Club, and an increase in new client registrations during Q2 YoY; continued improvement in the underlying health of our Joint Venture estate is testament to the successful recalibration process and advantages of our unique joint venture model

· Customer acquisition and retention strategy is increasing our share of customer wallet and enhancing the proportion of recurring revenues:

· Number of VIPs increased 15% YoY to 6.0m, with those shopping across more than one channel up 20% YoY, and representing 26% of members. The number of VIPs purchasing both product and a service continued to grow year-on-year, despite restrictions on the provision of services during Q1

· Number of subscription customers across the Group is now over 970,000, up 22% YoY, generating on an annualised basis over £80m in visible, recurring customer sales

The number of Puppy and Kitten Club members grew 25% YoY in the half; Puppy and Kitten Club members typically spend c20% more than non-members across the Group.  

 

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

# Alternative Performance Measures (APMs) are defined and reconciled to IFRS information, where possible, on pages 21 to 24. 
All FY21 APMs include the impact of IFRS16 unless explicitly stated.

 

Current trading and outlook

The sustained strength in performance we saw across both our Retail and Veterinary operations during Q2 has continued into our third quarter, and we continue to take market share across all channels.

While we are less seasonally-dependent than many other retailers, our final quarter last year included an exceptional period of brought forward demand, ahead of national lockdown across the UK.

Furthermore, COVID-19 continues to create a number of material uncertainties around the near-term trading environment, from a potential escalation of current restrictions on a national level, to reversion to a tiered system of localised restrictions.

We remain an "essential" retailer and have adapted our operations well to be able to continue providing pet care to our customers with minimal disruption. Our stores and First Opinion practices continue to follow the protocols we introduced earlier this year around safe provision of goods and services, and we have increased our capability to engage, serve and fulfil our customers remotely. Our liquidity remains strong and our balance sheet robust. 

At this stage, absent any escalation of restrictions, or other significant disruption to our operations, we now anticipate full-year underlying pre-tax profit to be in line with the prior year1, with the estimated financial impact of the pandemic not fully offset by this year's business rates relief. We will update further on trading during our third quarter towards the end of January 2021.

 

Peter Pritchard, Group Chief Executive Officer:

"In spite of the ongoing and wide-ranging impact of COVID-19, there is much to be optimistic about.

The market in which we operate remains resilient, with recent changes to our work and leisure patterns supporting rising levels of pet ownership, a good proxy for future growth in both the underlying market and our business.

We adapted our operations rapidly post the onset of the pandemic, and our focus on customer acquisition is underpinning market share gains across all channels and strong growth in our VIP and Puppy and Kitten clubs, thereby increasing the long-term opportunity of using data-driven, joined-up solutions across our range of products and services to drive customer share of wallet and lifetime value.

We are introducing new ways to meet our customers' needs across all channels, making pet care as affordable, convenient, engaging and flexible as possible, and our customer-centric pet care platform, underpinned by the most extensive and unique proprietary pet dataset in the UK and a true omnichannel backbone, provides us with significant competitive advantages.

There is much to be proud of over the last six months and much to look forward to in equal measure. While we will continue to remain focused and agile in our execution, we are, more than ever, confident in the resilience and longevity of our pet care platform".

1 FY20 Group underlying pre-tax profit on a post-IFRS16 basis was £93.5m and included exceptional levels of demand in the closing weeks of the financial year as customers pulled forward purchases ahead of national lockdown.

 

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulations (Regulation (EU) No.596/2014). For the purposes of MAR and Article 2 of Commission Implementing Regulation (EU) 2016/1055, this announcement is being made on behalf of the Company by Roger Tejwani, Director of Investor Relations & External Communication.

 

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 24 November. Management will host a Q&A conference call for analysts and investors at 08.45am. Those wishing to join should email [email protected] for call details.

Investor Relations Enquiries

Pets at Home Group Plc:

Roger Tejwani, Director of Investor Relations & External Communication

+44 (0)1279 927022 

 

Chris Ridgway, Head of Investor Relations

+44 (0)7788 783925

Media Enquiries

Pets at Home Group Plc:

Gillian Hammond, Head of Media & Public Affairs

+44 (0)7442 500138

 

Maitland/AMO:  

Clinton Manning

+44 (0)7711 972662

 

Freddie Bendit

+44 (0) 7557 833442

 

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 451 stores, many of which also have vet practices and grooming salons. Pets at Home also operates a UK leading small animal veterinary business, with 440 First Opinion practices located both in our stores and in standalone locations, as well as five Specialist Referral centres. 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.

 

Chief Executive Officer's Review

An extraordinary six months

The last six months of trading have been like no other during my ten years in the business.

The start of our new financial year coincided almost exactly with the implementation of lockdown across the UK. This required us to rapidly adapt our operations, not only to manage the business as an "essential" retailer through the pandemic, providing the nation's pets with pet products and healthcare services while keeping colleagues, customers, suppliers and, of course, pets as safe as possible, but also to continue creating value for shareholders by being well-placed for a post-lockdown recovery in demand, with the core aim of emerging a stronger pet care business.

We successfully introduced a number of initiatives to meet changes in customer behaviour and preferences, many of which may be permanent, and to grow revenues while adhering to guidelines around social distancing and safe provision of goods and services.

 

Adapting our operations

Across our operations, beyond changing protocols around customer engagement and providing personal protective equipment, we introduced contactless collection of products for customers, implemented additional training for colleagues on the safe provision of services, and enabled delivery of healthcare subscription products direct to home.

These measures, giving choice and confidence to our customers, together with the inherent resilience of our pet care platform and the underlying pet care market, underpinned the strong momentum witnessed across both our Retail and Veterinary operations from the mid-point of Q1 FY21.

More recently, above and beyond the impact of the pandemic, we have been preparing for a potential "No Deal" Brexit once the transition period ends on 31 December 2020, with actions being taken to mitigate any related impact on tariffs, logistics, vet availability and currency. We are also evaluating the potential regulatory implications for our operations in Northern Ireland, specifically concerning Export Health Certificates.

I would personally like to take this opportunity, on behalf of our Executive Management Team, to thank all of our colleagues across the Group for their tireless work and dedication in adapting our proposition and serving our customers' needs during such challenging times. As a small, but tangible sign of our appreciation, I have decided to close all of our stores on Boxing Day this year, to give our colleagues much-needed time with their families and loved ones.

 

COVID-related trends create opportunity to extend our competitive advantage

It is evident from our key pet care indicators - growth in our VIP and Puppy and Kitten Club members and subscription plans - that the underlying pet care market is in good health. Pet ownership, a proxy for longer term market growth, is increasing, and lockdown has, if anything, accentuated our emotional bond with pets, as they play a more significant role in our daily lives. 

Our designation by the UK Government as an "essential" retailer has enabled our operations to remain open throughout the pandemic, including the current lockdown, providing valuable insight into behavioural changes across our customer base. Beyond the need to provide a safe shopping experience in-store, several COVID-related trends have become increasingly apparent, with consumers:

 

· More focused on health and well-being, which is extending to pets;

· Communicating virtually more frequently, which is increasing the need for personalised digital journeys in the way they engage, shop and transact; and

· Spending more time at home, which is driving a preference for greater choice and flexibility around how they receive products and services.

 

We see these trends as a significant opportunity to extend our competitive advantages, using our customer-centric strategy to make pet care even more convenient, engaging and flexible.

 

· Creating more digital journeys

A key focus over the past six months has been investing in our ability to offer customers a seamless and digital journey across our suite of products and services. We have undertaken more joined-up TV and digital marketing campaigns across our subscription platforms and free-to-join Puppy and Kitten Club, which is designed to attract new pet owners at the start of their journey and introduce them to all parts of our platform.

Across our Retail estate, we simplified the customer sign up process to our VIP programme, Puppy and Kitten Club and subscription platforms, both in-store and remotely online or via our App, achieving our strongest half to date for new Puppy and Kitten sign ups. Across our First Opinion veterinary estate, we introduced a remote appointment booking platform and accelerated plans to enable remote consultations between our Joint Venture Partners and their clients.

 

· Offering customers more choice and flexibility

We are also investing significantly in our fulfilment capability. Many of our customers do not think or shop according to distinct channels; in reality, they shop across multiple channels and, when they do, their level of spend does not transfer between channels, but increases in aggregate.

For us to increase our share of customer wallet, we must match their preferences for choice and flexibility around how they shop for and receive goods with a seamless and integrated omnichannel approach, providing frictionless execution, convenience and speed, while generating operating and financial synergies for the Group.

One of our many sustainable advantages is having a truly omnichannel backbone, with a growing and scalable online platform complemented by a 451-strong estate of well-invested, conveniently-located stores across the UK, many of which can play an increasingly important role in the fulfilment process.

We recently launched a new one hour Click & Collect service across our store estate, which significantly improves our customer proposition. We are also developing the capability to ship from store in future, embedding choice and flexibility for our customers by offering, alongside our other delivery and collection options, best-in-class fulfilment.

 

Leveraging data to drive customer lifetime value

Our growing database of 6.0m active VIP members, many of whom are multiple pet owners, gives us the most extensive and unique proprietary dataset of pet ownership in the UK.

While many of our VIPs already shop a range of our products and services, a significant opportunity remains, across core areas such as advanced nutrition, grooming, veterinary and subscription services, to drive loyalty, visible and recurring income, and increasing lifetime value by moving the customer from a product or service-specific relationship to a more tailored and solutions-based approach, incorporating the full pet care offering across our platform. Integral to this shift from a channel-centric to customer-centric proposition are the actionable insights from our investment in data. 

As we finalise the in-housing of our CRM database, we are proactively segmenting our customer data, and using artificial intelligence, to develop a customer and household view of pet ownership. The granularity this provides will enable us to more accurately understand customer preferences and responsiveness to pet care solutions, thereby increasing engagement, activity and aggregate share of wallet through highly targeted and personalised communications and recommendations. Early indications are extremely encouraging, with the benefits we expect to derive from this investment largely ahead of us.

 

Doing the right thing

Throughout the pandemic, meeting our obligations as a responsible corporate citizen has remained paramount. We have ensured that our landlords and suppliers are paid in full. Since the onset of the pandemic, outside of our normal bonus cycle, we have paid a one-off incremental "Thank You" bonus to our frontline colleagues, created a £1.0m Colleague Hardship Fund for colleagues, vet Partners and their teams, allocated £1.1m to nominated charities, many of which have seen their fundraising diminish, and provided a 10% discount scheme to our heroic NHS workers. Our priority is, and will remain, the well-being and safety of all of our stakeholders.

Our new social value strategy, "Our Better World Pledge", with a key ambition of being carbon "net zero" by 2040, is gaining momentum. We are also increasing our focus on educating and supporting communities of pet owners on the merits of responsible pet ownership during this period of heightened demand.

 

Many reasons to be optimistic

We are increasingly well-positioned to achieve sustainable, long-term growth. We operate in a large, growing and resilient market, benefitting from favourable demographics and clear, structural demand drivers such as humanisation and premiumisation of pets.

Across our Retail operations, our nationwide store estate combines a wide range of competitively-priced branded and own label products, suitable for all demand cycles, with economically-resilient services, including grooming and veterinary. We are simultaneously growing our online share of the pet care market, increasingly matching customer preference for choice and convenience with frictionless, fast and flexible omnichannel execution.

Our base of loyal subscription customers is also growing strongly, increasing the visibility, resilience and quality of our sales profile, and we see a clear opportunity, as we increase our offering of integrated, pet care solutions, in leveraging data to drive engagement, wallet share and lifetime value across our 6.0m VIP customers, in a way that competitors simply cannot replicate. 

We will continue to make the right investments to prioritise growth opportunities across our pet care platform, supported by the financial resources that our robust balance sheet and strong liquidity provide.

I am very pleased with the progress we have made in the period, particularly in such challenging circumstances. As we continue our transformational journey, there remains plenty to strive for and achieve, and we will remain both focused and agile in our determination to succeed.

 

Strategic review: becoming the best pet care platform in the world

The UK pet care market is in structural growth and remains resilient against a backdrop of continued uncertainty. By providing complete pet care solutions to customers, we are able to strengthen our position and deliver market share gains across all segments.

We have seen growth across our pet care platform in H1 FY21 - whether that is in the number of VIP members, Puppy and Kitten Club members or subscription customers; put simply, pet owners are shopping with us more than ever before.

 

Key Performance Indicators

Financial KPIs1

 

H1 FY21

H1 FY20

YoY change

Customer sales#, 2 (£m)

724.7

695.3

4.2%

Group underlying PBT# (£m)

39.6

41.7

(5.1)%

Group underlying free cashflow# (£m)

60.5

24.9

142.6%

 

 

 

 

 

Strategic KPIs

Measure

H1 FY21

H1 FY20

YoY change

Bring the pet experience to life

No. of customer transactions3 (m)

29.5

30.2

(2.3)%

50% of sales from pet care services

Customer sales#, 2 from services

33.4%

35.4%

(199)bps

Use our data to better serve customers

VIP customer sales#, 2, 4 (£m)

826.6

715.8

15.5%

Set our people free to serve

Customer sales#, 2 per colleague (£k)

95.0

93.3

1.8%

 

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

2.  Customer sales include gross customer sales made by Joint Venture vet practices of £178.9m (H1 FY20: £178.6m) (unaudited figures), and therefore differs to the fee income recognised within Vet Group revenue

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

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

 

Strategic pillar: Bring the pet experience to life

We saw continued momentum in Retail, manifested in a 2-year LFL # growth of 14.8% as we continued to bring the pet experience to life for a growing number of pet owners. We achieve this by making pet care affordable, convenient, engaging and flexible, investing in our physical and digital assets to create a seamless, omnichannel experience which puts customers in charge of how they shop for and receive their goods. Our 451-strong store estate plays an important role in supporting this.

· Affordable:   We maintained our competitive price position throughout the period, with good availability across branded and own label product lines. Our market-leading, own label Advanced Nutrition brands, supported by in-store nutritional consultants and dedicated consultation areas, offer a compelling alternative for grocery-led customers to provide their pets with an attractively priced nutritionally-advanced diet.

· Convenient : Our stores are located across the UK, typically within a fifteen minute drive from 90% of the UK adult population. The vast majority are located on retail parks, offering easy access and free parking, with large formats and steady intra-day footfall making them adaptable to social distancing. The majority of our estate combines the sale of merchandise with grooming and First Opinion veterinary services, representing convenient, safe and localised hubs of complete pet care solutions across product, services and trusted advice. Testament to this is our overall point of sale "swipe rate" from VIP members, which in Q2 averaged 72% compared to 67% over the same period last year.

· Engaging: Our 19 next generation pet care centre formats are a good example of how we bring the pet experience to life, creating a destination to connect local communities of pet owners and their pets using dedicated multi-use event space, higher weighting of space to pet care services, and an emphasis on immersive, digital experiences. While COVID-19 made further rollout logistically difficult in the first half, we intend to restart this process once conditions permit, and have, in addition, identified the potential for a number of smaller formats inside the M25 orbital.

· Flexible:   Our stores already play an important role in accelerating our omnichannel offering, with approximately 60% of online orders pre-COVID being "colleague-assisted". We have also invested in innovative ways to fulfil customers' online orders utilising our stores, including a "Call and Deliver-to-Car" service and contactless Click and Collect, using dedicated customer parking bays and QR code notifications.

As we accelerate our omnichannel investment, the role our stores play in the fulfilment and delivery process is evolving. We recently launched a new one hour Click and Collect service across our estate, with product picked from store. Customers are now able to search live product availability using an advanced merchandise filtering tool, select and pay online for the items they want, and then collect from a store of their choice within one hour.

Underpinning this functionality is a new Order Management System (OMS) providing real-time intelligence on optimal order management and routing across our nationwide store estate, which not only leverages our existing assets and delivery schedules to improve our fulfilment capacity and customer proposition, but also generates cost efficiencies relative to our existing, centrally fulfilled model.

This OMS also gives us the capability to ship from store in future, embedding choice and flexibility for our customers by offering, alongside our other delivery and collection options, best-in-class fulfilment.

 

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

33.4% of customer sales came from pet care services 1 in H1 FY21; by providing a variety of services to our customers, we are able to cater for their pet care needs in ways that the majority of our competitors cannot.

First Opinion veterinary services

Our most important measure of success in increasing sales from services is like-for-like # growth in customer sales #   through our First Opinion veterinary practices, which grew 1.2% in the period, and 14.2% in Q2 YoY.

Growth in new client registrations post lockdown moved back to and above pre-COVID levels, and currently comprise approximately 10% of all veterinary visits. Early indications are that this reflects an increase in new pet ownership and more existing pet owners using our services, as well as the continued success of our in-store referral scheme.

The underlying health of our Joint Venture veterinary practices continued to improve during the period, giving us confidence that the actions previously taken are helping to accelerate both practice maturity and the release of embedded free cash flow:

 

· We ended the period with 72 loss-making First Opinion practices, the majority of which are still immature, less than half the number reported at the end of FY20; we have more debt-free practices, and the aggregate profit of the estate increased in the period;

· The  balance of operating loans, previously extended to certain practices, reduced further during the first half, in spite of the restrictive guidelines placed on our First Opinion operations by the RCVS during Q1;

· Growth across all practice cohorts, not merely those deemed mature, was ahead of plan during Q2.

 

This performance is testament to a number of factors: the advantages of our unique joint venture model in incentivising practice growth, the support and commitment provided to our Joint Venture partners, and specific initiatives which were implemented at practice level post the onset of COVID-19.

 

_________________________

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

Mindful of the curtailed operating environment that initial RCVS guidelines on permitted procedures created, we agreed a six-month loan repayment holiday with our Vet Group banking partners for all Joint Venture Partners who were not debt free, and passed a portion of this year's rates benefit on to those practices situated in-store.

Veterinary clients were given the choice to receive healthcare subscription products, such as Flea and Worm treatments, direct to home, and we accelerated plans, through an arrangement with "Vet Help Direct", to enable remote contact and remote consultations between our Joint Venture Partners and their clients to facilitate effective triage of new and existing clients.

 

Subscription services

Our base of loyal subscription customers grew 22% in the period to over 970,000, and now represents over £80m on an annualised basis (up 28% YoY), giving our sales profile increased visibility and resilience. Our low cost, auto-shipped Flea & Worm subscription grew 24%, with pet healthplans, an important driver of lifetime value, growing 20%, as we made it easier for customers to sign up both remotely and in-store. 

As we continue our journey to being a provider of integrated customer-centric pet care solutions, we see significant headroom for growth across our subscription platforms, combining a new dedicated, cross-functional propositions team and data-driven insights to grow the annuity portion of our sales base.

 

Strategic pillar: Use our data to better serve customers

We ended the period with a record 6.0m active VIP loyalty club members, comprising approximately 85% of all store revenue, with particular success in new customer acquisition through our Puppy and Kitten Club, which is key in attracting new pet owners at the start of their journey and introducing them to all parts of our platform using a tailored and highly-engaging CRM programme.

Empowering customers to shop in a way that best meets their needs requires a true omnichannel approach, using data to integrate a well-invested store estate, a fast-growing online business and an efficient, modern and responsive supply chain into a single customer-centric platform delivering a seamless pet care experience. During the period, we continued our investment in leveraging data to make pet care even more convenient, engaging and flexible, creating value for both our customers and our shareholders.

Across our Retail and First Opinion veterinary operations we have the most extensive proprietary dataset of pet ownership in the UK, spanning the last seven years and including customer data on spend and frequency, and pet-related data on name, age, breed and medical history.

The process of in-housing this data onto Google Cloud is virtually complete, and we have built a team of 45 data engineers and scientists who are proactively mining this data to provide actionable insights, which will drive the digitisation of our business, make our proposition increasingly customer-centric, and extend our competitive advantage. In particular, our development of a customer and household view of pets will increase our ability to:

 

· Predict customer preferences and responsiveness to specific campaigns and messaging , enabling the use of highly targeted communications and tailored recommendations by preferred communication channel, to drive engagement, frequency and spend while reducing "contact fatigue";

· Personalise customer interaction through informed, pet-specific thinking and, utilising our dedicated propositions team, provide integrated pet care plans across the full lifecycle of the pet, thereby moving the customer from a product or service-specific relationship to one that is solutions-based across our entire platform;

· Predict which customers are most at risk of churn at both brand and range level, and generate targeted intervention and retention campaigns; and

· Achieve better return on marketing investment. Our VIP reward mailer in September, the first using 350 measures of customer data (compared to approximately 25 historically) to optimise the audience based on probability of response, achieved our highest level of redemptions to date.

 

We are simultaneously building a new cross-functional, dedicated propositions team to extrapolate these data insights into actionable, pet-specific plans and solutions, with the benefits flowing from this, and our data agenda generally, still ahead of us. 

 

Strategic pillar: Set our people free to serve

The onset of COVID-19 required us to rapidly adapt our operations, introducing new protocols into our stores, Distribution Centres and First Opinion veterinary practices to support colleagues and clinicians in serving customers in a safe and appropriate manner.

 

· Stores:   We introduced clear social distancing protocols both inside and outside of our stores and  contactless only payment across all points of sale. We provided all store colleagues with appropriate personal protective equipment including masks, enhanced sanitisation and sneeze guards. Our grooming salon colleagues received additional training on the safe delivery of their service. 

· Distribution Centre: Our planned investment in automation over the previous 18 months played an important part in ensuring safe continuity of operations during a period of heightened online demand, and will support the continued growth in omnichannel operations ahead of our planned consolidation of storage and distribution facilities.

· First Opinion: In addition to the strategic and operational support across our First Opinion veterinary practices detailed earlier, our veterinary partners introduced adaptable consulting and treatment units to ensure the safe and flexible delivery of their services.

 

During the period, we also signalled a clear ambition to transform our longer-term omnichannel capabilities by signing a conditional lease agreement of a purpose-built, highly automated 670,000 sq.ft. storage and distribution facility in Stafford. Consolidating our legacy infrastructure into a single, modern, well-located and future focused platform, that serves both our stores and online orders, will allow us to better serve our customers through maximum flexibility in stock holding and order fulfilment capacity, while delivering enhanced efficiencies for the Group.

Across our Retail estate, we increased store revenue per colleague hour by 7% year-on year and delivered higher customer satisfaction scores in a challenging environment.

Looking ahead, our investment in data will support a degree of liberation as we simplify store processes. We are also developing a suite of forecasting models that will allow us to predict sales patterns at store level, providing additional flexibility in our management of store resource.

Finally, as part of our commitment to identify and drive further efficiencies across our operations, we have recently recruited an experienced Director of Productivity.

There is much to be proud of over the last six months, and much to look forward to as we continue our transformational journey. We will remain both focused and agile in our determination to succeed.

 

Peter Pritchard

Group Chief Executive Officer

24 November 2020

Chief Financial Officer's Review

The H1 FY21 period represents the 28 weeks to 8 October 2020. The comparative period represents the 28 weeks to 10 October 2019.

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

The financial statements for H1 FY21 have been prepared under the requirements of IFRS16 and all figures presented, as well as prior period comparatives, are shown after the impact of IFRS16. The impact of IFRS16 on the Group interim financial statements is shown on page 15.

 

H1 FY21

H1 FY20

YoY change

Group like-for-like revenue growth#

5.3%

7.6%

 

  Retail

5.8%

7.8%

 

  Vet Group

1.2%

6.4%

 

 

 

 

 

Group revenue (£m)

574.4

546.3

5.1%

  Retail

507.8

479.8

5.8%

  Vet Group

66.6

66.5

0.1%

 

 

 

 

Group underlying gross margin1,#

47.7%

49.0%

(136) bps

  Retail

48.5%

49.9%

(144) bps

  Vet Group1

41.7%

42.8%

(105) bps

 

 

 

 

Group underlying EBIT2,# (£m)

49.6

51.7

(4.1)%

  Retail

38.9

38.1

2.0%

  Vet Group2

16.7

17.6

(5.1)%

  Central

(6.0)

(4.0)

(49.6)%

 

 

 

 

Group underlying EBIT margin2,# 

8.6%

9.5%

(83) bps

  Retail

7.7%

7.9%

(29) bps

  Vet Group2

25.1%

26.4%

(138) bps

 

 

 

 

Group underlying PBT# (£m)

39.6

41.7

(5.1)%

Group statutory PBT (£m)

38.9

34.0

14.6%

Underlying basic EPS1,2,# (p)

6.3

6.7

(4.8)%

Statutory basic EPS (p)

6.2

5.1

21.7%

 

 

 

 

Group non-underlying charges1,2 (£m)

(0.7)

(7.7)

(91.5)%

Group non-underlying cash costs3 (£m)

-

(15.8)

NM

Group underlying free cashflow# (£m)

60.5

24.9

142.6%

Dividend (p)

2.5

2.5

-

 

 

 

 

Number of

 

 

 

  Stores

451

452

(1)

  Grooming salons

315

313

2

  Joint Venture First Opinion vet practices

394

393

1

  Company managed First Opinion vet practices

46

46

-

 

1.  H1 FY21 non-underlying charges relating to costs incurred by the Group in buying out, and in some cases closing, JV practices include £nil charged against Vet Group, and Group, non-underlying gross margin (H1 FY20: £7.6m)

2.  H1 FY21 non-underlying charges of £0.7m relate to an accounting charge for the potential future acquisition of minority stakes owned by vet partners in the Specialist Referral centres, which has been charged against non-underlying operating costs (H1 FY20: £0.1m)

3.  H1 FY21 non-underlying cash costs include £nil relating to practices that we have bought out (H1 FY20: £9.4m), plus £nil in relation to payments made to Shared Venture Partners in our Specialist Referral centres to acquire certain remaining minority stakes (H1 FY20: £6.4m)

 

Impact of COVID-19 on the interim financial statements

Throughout the earlier part of the financial year, the impact of COVID-19 placed restrictions on our business and led us to incur incremental costs.

We closed our grooming salons and stopped the sale of pets, and our First Opinion practices and Specialist Referral centres were both subject to regulatory restrictions on permitted procedures. This, combined with reversal of the exceptional, brought forward demand witnessed in the closing weeks of FY20, resulted in reduced levels of revenue in the period.

Since the start of the pandemic, we have also incurred approximately £8.0m in one-off costs relating to COVID-19, including £1.8m on personal protective equipment, cleaning and sanitisation and £1.1m on pet welfare. We paid a one-off bonus of £1.9m to frontline colleagues, in addition to our normal annual bonus, and created a £1.0m Colleague Hardship Fund for colleagues, our vet Partners and their teams should their families experience financial difficulties. We also allocated £1.1m to specific charities, many of which have seen their fundraising diminish during the pandemic, including £100,000 to the Retail Trust in support of workers across the wider retail sector, and implemented a 10% discount scheme to NHS workers.

In addition, there remain ongoing operational costs relating to the pandemic of approximately £0.15m per week across both our stores and distribution centres, and social distancing measures continue to place capacity constraints on our grooming salons.

 

Impact of IFRS16 on the inter im financial statements

The financial information in pages 12 to 16, and associated commentary, have been presented on a constant accounting basis and reflect the impact of IFRS16. The impact of IFRS16 on the Group interim financial statements is shown on page 15.

 

Revenue

Group revenue in H1 FY21 grew 5.1% to £574.4m (H1 FY20: £546.3m) and like-for-like (LFL) revenue grew 5.3%#. In Q2 Group revenue grew by 12.8%, with Group LFL revenue growth of 12.7%.

Retail revenue grew 5.8% to £507.8m (H1 FY20: £479.8m), including omnichannel revenue growth of 65.8% to £77.1m, representing 15.2% of total Retail revenue (FY20: 10.0%). The LFL revenue growth in Retail was 5.8%# for the period and 12.5% in Q2. Food revenue grew by 6.2% to £277.4m (H1 FY20: £261.1m), reflecting our success in recruiting new customers throughout the period, as more people became pet owners for the first time. Accessories revenue grew 10.0% to £213.2m (H1 FY20: £193.9m), with significant growth from lower margin consumable categories such as cat litter. Grooming revenues declined by 36.4% in the period, reflecting restrictions as a result of COVID-19.

Vet Group revenues grew 0.1% to £66.6m (H1 FY20: £66.5m), with LFL growth of 1.2%#. In Q2 Vet Group revenues grew by 14.0%, with LFL growth of 14.2%. Customer sales made by all First Opinion vet practices were up 0.5% to £191.2m# (H1 FY20: £190.2m), with regulatory guidelines on permitted procedures impacting sales in the early part of the financial year, followed by strong recovery thereafter. Total Joint Venture fee income decreased by 3.7% to £28.6m (H1 FY20: £29.7m), whilst LFL fee income reduced by 3.0%# (H1 FY20: 2.5%).  The reduction in fee income differs to the growth seen in customer sales due to the fee adjustments which have been in place for some JV practices throughout the period. 

Consolidated customer revenues # from company managed First Opinion practices increased by 5.8% to £12.3m (H1 FY20: £11.6m). 

 

Gross margin

Underlying gross margin declined by 136 bps to 47.7% (H1 FY20: 49.0%), with Group statutory gross margin also at 47.7% (H1 FY20: 47.6%).

Gross margin within Retail was 48.5%, a reduction of 144 bps over the prior period (H1 FY20: 49.9%).  This was driven by strong growth in omnichannel revenue which, although cash-accretive, is at a lower gross margin percentage due to the higher mix of food relative to accessories. In addition, the restrictions on grooming services due to social distancing measures had a dilutive impact on gross margin as we continued to employ our grooming colleagues, whose costs are allocated to gross margin.

In addition, we incurred a year-on-year foreign exchange impact of £2.9m - 57bps on Retail margin - as our average dollar hedged rate weakened from 1.33 to 1.27.

Underlying gross margin # within the Vet Group decreased by 105 bps to 41.7% (H1 FY20: 42.8%). This decrease reflects the temporary restrictions imposed by the RCVS early in the financial year as well as the impact of planned fee adjustments, both of which have supressed Joint Venture fee income whilst we maintained the cost base in our support centre.

 

Operating profit and operating costs

Underlying Group EBIT was £49.6m# (H1 FY20: £51.7m), with a margin of 8.6%# (H1 FY20: 9.5%).

Retail EBIT was £38.9m# (H1 FY20: £38.1m) with a margin of 7.7%# (H1 FY20: 7.9%) and operating cost growth, excluding depreciation and amortisation, was 3.1% to £150.5m (H1 FY20: £146.0m).  Profit in our first half was impacted by the aforementioned revenue restrictions as well as the one-off and ongoing costs of COVID-19. We benefitted from business rates relief but this was less than the negative impact of COVID-19 in the half. 

Underlying Vet Group EBIT was £16.7m# (H1 FY20: £17.6m) with a margin of 25.1%# (H1 FY20: 26.4%).  Operating costs in the Vet Group, excluding depreciation and amortisation, were £8.4m (H1 FY20: £8.1m), an increase of 4.4% on the prior year. The year on year change in operating costs reflects achieved cost efficiencies across a number of areas, offset by our ongoing investment in our digital infrastructure and capabilities.

In the Vet Group, non-underlying operating costs totalling £0.7m were recognised in relation to the ownership structures and accounting treatment of the Specialist Referral centres (H1 FY20: £0.1m).

Central costs, including Group overheads and colleagues, increased to £6.0m (H1 FY20: £4.0m), partly driven by an investment in our now fully recruited Executive Management.

 

Finance expense

The net finance expense for the half year period remained at £10.0m (H1 FY20: £10.0m). 

 

Profit before tax

Underlying pre-tax profit was £39.6m# (H1 FY20: £41.7m) and statutory pre-tax profit, including all non-underlying items, increased to £38.9m (H1 FY20: £34.0m).  Underlying pre-tax profit declined 5.1% in the period, however grew 43.7% in Q2.

 

Taxation, net income & EPS

Underlying total tax expense for the period was £7.9m#, a rate of 20.0% on underlying pre-tax profit.

Underlying net income for the year, after tax, decreased by 4.8% to £31.7m# (H1 FY20: £33.3m).  Underlying basic earnings per share were 6.3 pence# (H1 FY20: 6.7 pence) and statutory basic earnings per share were 6.2 pence (H1 FY20: 5.1 pence).

 

Cash working capital

The cash movement in trading working capital for H1 FY21 was an inflow of £13.6m#. This comprised a £46.0m increase in payables offset by a £17.0m increase in inventory and a £15.4m increase in receivables. The increase in payables was partly driven by the move from quarterly to monthly rental payments, with the increase in inventory reflecting our continued replenishment of stock levels throughout the period following the stockpiling seen towards the end of FY20.

We saw a number of Joint Venture First Opinion vet practices make repayments against operating loans in the period, such that the net cash inflow from these practices was £8.4m (H1 FY20: £0.4m). This increased the overall Group cash working capital inflow to £22.0m.

The gross value of operating loans at the end of the period was £29.1m (H1 FY20: £34.6m). This reflects the positive impact our fee remediation measures have had in terms of reducing the need to extend operating loans to Joint Venture practices, as well as the 6-month loan repayment holiday agreed with third party banks as part of the COVID-19 response. The provision held against the gross value of operating loans was £7.4m (H1 FY20: £7.7m) at an average of c25%.

 

Capital investment

Capital investment was £17.4m (H1 FY19: £16.8m) including a £1.9m (H1 FY20: £2.9m) investment within our distribution network and £1.8m (H1 FY20: £5.6m) to rollout our next generation store format. Investment in data analytics and business systems totalled £8.4m (H1 FY20: £4.1m), as we continue to progress our digital agenda. Cash capital expenditure was £16.3m (H1 FY20: £15.6m). 

 

Group underlying free cashflow

Group underlying free cashflow after interest, tax and before acquisitions increased to £60.5m# (H1 FY20: £24.9m), representing a cash conversion rate of 54.3%# (H1 FY20: 22.2%). The increase in free cashflow compared with the prior year is largely driven by the working capital movements described above and a year-on-year benefit relating to a change in timing of Corporation Tax payments in the prior year, as well as a timing benefit of working capital within the Vet Group.

 

Group underlying free cashflow#  (£m)

H1 FY21

H1 FY20

Operating cashflow#

89.4

65.9

Tax

(8.1)

(20.2)

Interest

(1.8)

(1.9)

Debt issue costs

(0.2)

-

Capex

(16.3)

(15.9)

Purchase of own shares to satisfy colleague options

(2.5)

(3.0)

Group underlying free cashflow#

60.5

24.9

 

H1 FY21 Group underlying free cashflow#

Underlying FCF (£m)

FCF conversion2

Retail

32.6

33.6%

Vet Group

37.1

187.3%

Central1

(9.2)

NM

Group underlying free cashflow#

60.5

54.3%

 

1.  Includes central costs of £6.0m plus interest paid of £2.9m, purchase of own shares of £2.5m, £0.2m of debt issue costs, a WCAP inflow of £1.9m  and a credit relating to IFRS2 of £0.4m

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

The Group's net debt position at the end of the half year period was £50.9m, which represents a leverage ratio of 0.4x underlying EBITDA# on a pre-IFRS16 basis or 2.3x on a post-IFRS16 basis.

 

Group net debt (£m)

H1 FY21

FY20

Opening net debt (pre-IFRS16)

(85.9)

(120.5)

Underlying free cashflow#

60.5

89.6

Ordinary dividends paid

(24.7)

(37.1)

Acquisitions3

(0.8)

(1.5)

Non-underlying cash outflow4

-

(16.4)

Closing net debt

(50.9)

(85.9)

Pre-IFRS16 leverage (Net debt/ underlying EBITDA#)

0.4x

0.6x

Post-IFRS16 leverage (Net debt/ underlying EBITDA#)

2.3x

2.5x

 

3.  FY21 includes investment in certain company managed practices. FY20 includes an investment in Tailster.com and in certain company managed practices

4.  FY21 includes £nil relating to practices bought out during the year (FY20: £10.0m), plus £nil in relation to payments made to certain Shared Venture Partners in our Specialist Referral centres to acquire remaining minority stakes (FY20: £6.4m)

 

The Group's cash return on invested capital in the period grew to 19.4% (H1 FY20: 19.3%).

 

Capital allocation

Our capital allocation policy prioritises investing our cash generation in areas that will expand the Group and deliver appropriate returns.  This includes organic investment and the working capital needs of our Vet Group, plus bolt-on acquisition opportunities where we consider the potential opportunity to drive incremental value as attractive. Our second priority is to maintain an ordinary dividend payment where, despite the reduction in profits due to the impact of COVID-19, but reflecting our confidence in the business performance, we propose to maintain our dividend at the prior year level. Finally, dependent upon our acquisition outlook, and should we not foresee any alternative investment uses, we would expect to return surplus free cashflow to shareholders through a special dividend or share buyback.

 

Dividend

The Board has recommended an interim dividend of 2.5 pence per share, maintained with the prior year. The interim dividend will be payable on 8 January 2021 to shareholders on the register at the close of trading on 4 December 2020. 

 

Application of IFRS16

The financial statements for H1 FY21, and the prior period comparatives, have been prepared under the requirements of IFRS16. Implementation of IFRS16 has had no effect on how the business is run, nor on cash flows generated. It has, however, had an impact on the assets, liabilities and income statement of the Group, as well as the classification of cash flows relating to lease contracts.

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

 

£m

Pre IFRS16

Exclude rent

Include depreciation

Include interest

Post IFRS16

Revenue

  574.4

  - 

  - 

  - 

  574.4

Operating lease rentals

  (40.9)

  40.9

  -

  -

  -

Depreciation & amortisation

  (21.4)

  - 

  (37.9)

  - 

  (59.3)

Underlying operating profit#

  46.6

  40.9

  (37.9)

  - 

  49.6

 

 

 

 

 

 

Finance income

  0.3

  - 

  - 

  - 

  0.3

Finance expense

  (3.2)

  - 

  - 

  (7.1)

  (10.3)

Underlying PBT#

  43.7

  40.9

  (37.9)

  (7.1)

  39.6

 

£m

Pre IFRS16

Add back rent

Capital lease payments

Lease interest payments

Costs to acquire ROU assets

Post IFRS16

Operating cashflow#

89.4

 42.7

(35.1)

(7.1)

(0.5)

89.4

 

 

 

 

 

 

 

Tax

 (8.1)

  - 

  - 

  - 

  (8.1)

Interest

  (1.8)

-

-

-

-

  (1.8)

Debt issue costs

  (0.2) 

-

-

-

-

  (0.2)

Capex

(16.3)

-

-

-

-

  (16.3)

Purchase of own shares

  (2.5)

-

  - 

  - 

  - 

  (2.5)

 

 

 

 

 

 

 

Group underlying free cashflow#

60.5

42.7

(35.1)

(7.1)

  (0.5)

60.5

 

Impact of the UK's exit process from the EU

We continue our work to assess and mitigate the likely impact of the transition agreement following the United Kingdom's exit from the European Union (EU). With the UK currently working towards 31 December 2020 as the date the transition period will end, we are keeping the following areas under review:

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

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

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

4)  Exchange rates - the exit process may prompt movements in the USD/GBP exchange rate. The Group purchases products from Asia to a value of around US$90m each year. Our policy is to use a mix of foreign exchange forward contracts to hedge our USD requirement to cover the next 18 months. Our hedging requirements for FY21 are in place at an average rate of 1.27 (FY20: 1.33) USD:GBP, and any foreign exchange impact is included within financial guidance.  Looking ahead to FY22, forward contracts are already in place for approximately 28% of our total requirement at an average rate of 1.30 USD:GBP, and we will monitor exchange rates closely as we look to mitigate any pressure on Retail gross margin. 

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

 

Mike Iddon

Chief Financial Officer

24 November 2020

 

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 does not consider that the principal risks and uncertainties have changed since the publication of the annual report for the year ended 26 March 2020. These comprise:

 

· Protecting reputation

· Competition with other retailers and vet practices, including other pet specialists, supermarkets, discounters, and online retailers

· Stores and services expansion and rollout

· Retaining and developing engaged colleagues

· Keeping core business systems up to date and with the capability to support the Group's growth plans

· Supply chain and sourcing risk

· Liquidity and credit risk

· Treasury and financial risk from exposure to US dollar fluctuations, in respect of goods sourced from Asia

· Regulatory and compliance risk

· Sustainability and climate change risk, including extreme weather, where prolonged unusual weather patterns can impact footfall to stores

 

The Board continues to review the risks and opportunities that may arise as a result of either COVID-19 or Brexit.  Mitigation plans are continuing to be developed in the following areas:

· Our people

· Supply chain and sourcing

· Treasury and finance

 

A detailed explanation of these risks can be found on pages 52 to 61 of the 2020 Annual Report which is available at http://investors.petsathome.com .

 

Responsibility Statement

 

We confirm that to the best of our knowledge:

· the condensed set of financial statements has been prepared in accordance with IAS 34

Interim Financial Reporting as adopted by the EU;

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

(a) DTR 4.2.7R of the Disclosure 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 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 24 November 2020

 

Peter Pritchard, 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

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 8 October 2020 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated cash flow statement, the condensed consolidated statement of changes in equity 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 week ended 8 October 2020 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the Disclosure Guidance and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA"). 

Scope of review 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board 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. 

The impact of uncertainties due to the UK exiting the European Union on our review

Uncertainties related to the effects of Brexit are relevant to understanding our review of the condensed financial statements. Brexit is one of the most significant economic events for the UK, and at the date of this report its effects are subject to unprecedented levels of uncertainty of outcomes, with the full range of possible effects unknown. An interim review cannot be expected to predict the unknowable factors or all possible future implications for a company and this is particularly the case in relation to Brexit.

Directors' responsibilities 

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 International Financial Reporting Standards as adopted by the EU.  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 by the EU

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. 

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. 

 

Stuart Burdass

for and on behalf of KPMG LLP 

Chartered Accountants  

1 St Peter's Square 

Manchester

M2 2AE

 

24 November 2020

 

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 EU-adopted IFRS, and consider these to be important measures in evaluating the Group's strategic and financial performance. The Directors believe that these APMs assist in providing additional useful information on the underlying trends, performance and position of the Group.

 

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

 

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

 

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

 

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, vet practices & Specialist Referral centres that commenced trading more than 52 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.

 

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

 

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

 

Underlying free cash flow: Net increase/(decrease) in cash before the impacts of dividends paid, acquisition of subsidiaries, investments, proceeds from new loans, repayment of borrowings, proceeds from the sale of PPE and settlement of put and call liabilities.

 

Underlying CROIC: 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 property rentals and share based payments subject to tax, then adjusted for depreciation and amortisation. GCI represents gross property, plant and equipment plus software and other intangibles excluding the goodwill created on the acquisition of the Group by KKR (£906,445,000) plus net working capital, plus capitalised rent multiplied by a factor of 8x, before the effect of non-underlying items in the period. CROIC is stated before the impact of IFRS 16 as it is based on a 12 month rolling average.

 

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

 

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

 

Alternative Performance Measures ("APMs") (continued)

APM

Definition 

 

Reconciliation

Cash EBITDA

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

 

Cash EBITDA (£m)

HY21

HY20

Note

Underlying EBITDA

108.9

109.8

2

Share based payment charge

2.4

2.4

3

Cash EBITDA

111.3

112.2

 

 

Underlying EBITDA

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

 

 

 

Underlying EBITDA (£m)

HY21

HY20

Note

Statutory operating profit

48.9

44.0

2

Depreciation on tangible fixed assets

14.8

14.9

3

Depreciation on right-of-use assets

37.9

38.2

3

Amortisation of intangible assets

6.6

5.0

3

Non-underlying items

0.7

7.7

3

Underlying EBITDA 

108.9

109.8

 

 

Underlying CROIC

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 property rentals and share based payments subject to tax, then adjusted for depreciation and amortisation. GCI represents gross property, plant and equipment plus software and other intangibles excluding the goodwill created on the acquisition of the Group by KKR (£906,445,000) plus net working capital, plus capitalised rent multiplied by a factor of 8x. CROIC is stated before the impact of IFRS 16 as it is based on a 12 month rolling average.

 

Underlying CROIC (£m)

HY21

HY20

Note

Cash returns:

 

 

 

Underlying operating profit

102.7

100.6

 

Property rental costs

75.4

77.3

 

Share based payment charges

4.3

3.9

 

 

182.4

181.8

 

Effective tax rate

20%

20%

 

Tax charge on above

(36.5)

(36.4)

 

 

145.9

145.4

 

Depreciation and amortisation

39.8

37.4

 

Cash returns

185.7

182.8

 

Gross capital invested (GCI):

 

 

 

Gross property, plant and equipment

313.6

296.8

8

Intangibles

1,056.8

1,036.1

10

Less KKR goodwill

(906.4)

(906.4)

 

Investments

14.4

13.3

 

Net working capital

(111.7)

(98.0)

see definition

Capitalised operating leases

603.4

618.6

8x

GCI

970.1

960.4

 

Average

957.3

947.6

 

Underlying CROIC

19.4%

19.3%

 

         

 

Underlying free

cash flow

Net increase/(decrease) in cash before the impacts of dividends paid, acquisition of subsidiaries, investments, proceeds from new loans, repayment of borrowings, proceeds from the sale of PPE and settlement of put and call liabilities.

 

Underlying free cash flow (£m)

HY21

HY20

Note

Free cash flow

60.5

26.1

 

Non-underlying working capital

-

(1.2)

 

Underlying  free cash flow

60.5

24.9

 

Underlying free cash flow

 

 

 

Dividends

(24.7)

(24.8)

CFS

Acquisition of subsidiary

(0.8)

(0.3)

CFS

Investments

-

(1.0)

CFS

Proceeds from new loan

20.0

36.0

CFS

Repayment of borrowings

(20.0)

(36.0)

CFS

Non-underlying cash flow

 

 

 

Proceeds from sale of PPE

-

0.3

CFS

Settlement of put & call

-

(6.4)

CFS

Acquisition of subsidiary

-

(3.8)

CFS

Repayment of borrowings

-

(5.9)

CFS

Non-underlying working capital

-

1.2

CFS

Net increase/(decrease) in cash

35.0

(15.8)

 

CFS = Consolidated Statement of Cash Flows 

 

 

 

           

 

 

 

 

 

 

Alternative Performance Measures ("APMs") (continued)

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, vet practices & Specialist Referral centres that commenced trading more than 52 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.

2-year like-for-like

2-year like-for-like sales growth comprises total revenue in a financial period compared to revenue achieved in the financial period before the prior period for stores, online operations, and grooming salons that commenced trading more than 104 weeks prior to the reporting date.

 

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 nature in order to reflect management's view of the performance of the Group.

 

Underlying basic EPS (p)

HY21

HY20

Note

Underlying basic EPS

6.3

6.7

4

Non-underlying items

(0.1)

(1.6)

 

Basic earnings per share

6.2

5.1

 

 

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 nature in order to reflect management's view of the performance of the Group.

 

Underlying operating profit (£m)

HY21

HY20

Note

Underlying operating profit

49.6

51.7

2

Non-underlying items

(0.7)

(7.7)

3

Operating profit

48.9

44.0

 

 

Underlying profit before tax

Underlying profit before tax (PBT) is based on pre-tax profit before the impact of certain costs or incomes that derive from events or transactions that fall outside the normal activities of the Group, and are excluded by virtue of their size and nature in order to reflect management's view of the performance of the Group.

 

Underlying PBT (£m)

HY21

HY20

Note

Underlying PBT 

39.6

41.7

CIS

Non-underlying items

(0.7)

(7.7)

3

PBT

38.9

34.0

 

         

CIS = Consolidated Income Statement 

Pre-IFRS 16 underlying profit before tax

Pre-IFRS 16 underlying profit before tax (PBT) is calculated as underlying PBT adding back interest on lease obligations and depreciation on right-of-use assets, and deducting rental costs under IAS 17.

 

Underlying PBT (£m)

HY21

HY20

Note

Underlying PBT 

39.6

41.7

CIS

Interest on lease obligations

7.1

7.8

 

Depreciation on ROU assets

37.9

38.2

3

Rental costs under IAS 17

(40.9)

(42.7)

 

Pre-IFRS 16 Underlying PBT

43.7

45.0

 

         

 

Underlying profit after tax

Underlying profit after tax (PAT) is based on post tax profit before the impact of certain costs or incomes that derive from events or transactions that fall outside the normal activities of the Group, and are excluded by virtue of their size and nature in order to reflect management's view of the performance of the Group.

 

Underlying PAT (£m)

HY21

HY20

Note

Underlying PAT 

31.7

33.3

CIS

Non-underlying items

(0.7)

(7.7)

3

PAT

31.0

25.6

 

 

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 nature in order to reflect management's view of the performance of the Group.

 

Underlying total tax expense (£m)

HY21

HY20

Note

Underlying tax expense 

7.9

8.4

5

Non-underlying items

-

-

5

Tax expense

7.9

8.4

 

 

 

Alternative Performance Measures ("APMs") (continued)

Underlying net working capital

Net working capital movement is a measure of the cash required by the business to fund its inventory, receivables and payables.

 

The change year on year reflects the cash in/outflow in relation to changes in the working capital cycle excluding non-underlying items.

 

The change in working capital is a key component of the free cash flow measure of the Group.

 

Underlying net working capital movement (£m)

HY21

HY20

 

Note

Net working capital per cash flow statement

21.4

2.2

CFS

 

 

 

 

Being:

 

 

 

Movement in trade and other receivables

(15.4)

(6.6)

 

Movement in inventories

(17.0)

(3.7)

CFS

Movement in trade and other payables 

44.8

13.4

CFS

Movement in provisions 

1.2

(1.9)

CFS

Trading working capital movement

13.6

1.2

 

Movement in gross operating loans

8.4

0.4

 

Cash working capital movement

22.0

1.6

 

Underlying allowance for expected credit losses against operating loans

(0.6)

0.6

 

Net working capital movement

21.4

2.2

 

CFS = Consolidated statement of cash flows

 

 

 

(£m)

HY21

HY20

Note

Receivables

64.3

66.3

 

Inventory

79.8

72.2

 

Trade and other payables

(250.4)

(200.4)

 

Provisions

(2.7)

(4.2)

 

Non-current provisions

(3.5)

(1.2)

 

Net working capital

(112.5)

(67.3)

 

 

 

 

 

 

Underlying cash working capital

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

 

Underlying cash working capital (£m )

HY21

HY20

Note

Net working capital (above) 

21.4

2.2

 

Net loans and borrowings

(7.8)

(1.0)

15

Underlying cash working capital

13.6

1.2

 

 

Omni-channel revenue

Revenue net of discounts and VAT from core online sales, order to store and subscriptions.

 

Omni-channel revenue (£m)

HY21

HY20

Note

Omnichannel revenue

77.1

46.5

 

 

Underlying EBIT

Earnings before interest and tax agreed to operating profit relating to underlying trading.

 

Underlying EBIT (£m)

HY21

HY20

Note

Operating profit relating to underlying trading (EBIT)

49.6

51.7

2

 

Retail underlying EBIT

Earnings before interest and tax agreed to operating profit relating to underlying trading for the Retail division.

 

Retail underlying EBIT (£m)

HY21

HY20

Note

Retail operating profit relating to underlying trading (EBIT)

38.9

38.1

2

 

Vet Group underlying EBIT

Earnings before interest and tax agreed to operating profit relating to underlying trading for the Vet Group division.

 

Vet Group underlying EBIT (£m)

HY21

HY20

Note

Vet Group operating profit relating to underlying trading (EBIT)

16.7

17.6

2

 

Net debt

Cash and cash equivalents less loans and borrowings.

 

Net debt (£m)

HY21

HY20

Note

Cash and cash equivalents 

114.1

44.7

CBS

Loans and borrowings

(165.0)

(181.0)

12

Net Debt

(50.9)

(136.3)

 

CBS = Consolidated balance sheet

Customer sales

Customer sales being statutory Group revenue, less Joint Venture veterinary practice fee income (which forms part of statutory revenue within the Vet Group), plus gross customer sales made by Joint Venture veterinary practices.

 

Customer sales (£m)

HY21

HY20

Note

Statutory Group revenue 

574.4

546.3

2

Fee income

(28.6)

(29.7)

2

Sales by Joint Venture veterinary practices

178.9

178.7

 

Customer sales

724.7

695.3

 

 

           

 

Condensed consolidated income statement

 

 

Note

 28 week period ended 8 October 2020

 28 week period ended 10 October 2019

Underlying trading

£m

Non-underlying items

(note 3)

 m

Total

£m

Underlying  trading

 m

Non-underlying items

(note 3)

 m

Total

£m

Revenue

2

574.4

-

574.4

546.3

-

546.3

Cost of sales

 

(301.2)

-

(301.2)

(277.8)

(7.9)

(285.7)

Impairment gains/(losses) on receivables

3

0.6

-

0.6

(0.6)

0.3

(0.3)

Gross profit

 

273.8

-

273.8

267.9

(7.6)

260.3

Selling and distribution expenses

 

(165.2)

-

(165.2)

(165.8)

-

(165.8)

Administrative expenses

 

(59.0)

(0.7)

(59.7)

(50.4)

(0.1)

(50.5)

Operating profit

2

49.6

(0.7)

48.9

51.7

(7.7)

44.0

Financial income

 

0.2

-

0.2

0.2

-

0.2

Financial expense

 

(10.2)

-

(10.2)

(10.2)

-

(10.2)

Net financing expense

 

(10.0)

-

(10.0)

(10.0)

-

(10.0)

Profit before tax

 

39.6

(0.7)

38.9

41.7

(7.7)

34.0

Taxation

5

(7.9)

-

(7.9)

(8.4)

-

(8.4)

Profit for the period

 

31.7

(0.7)

31.0

33.3

(7.7)

25.6

All activities relate to continuing operations.

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

 

Note

28 week period ended

8 October 2020

28 week period ended

10 October 2019

Equity holders of the parent - basic

4

6.2p

5.1p

Equity holders of the parent - diluted

4

6.1p

5.1p

Dividends paid and proposed are disclosed in note 6.

 

Condensed consolidated statement of comprehensive income

 

 

28 week period ended

8 October 2020

£m

28 week period ended

10 October 2019

£m

Profit for the period

 

31.0

25.6

Other comprehensive income

 

 

 

Items that are or may be recycled subsequently into profit or loss:

 

 

 

Foreign exchange translation differences

 

0.0

(0.0)

Effective portion of changes in fair value of cash flow hedges

 

3.8

(1.5)

Other comprehensive income for the period, before income tax

 

3.8

(1.5)

Income tax on other comprehensive income

 

(0.1)

0.1

Other comprehensive income for the period, net of income tax

 

3.7

(1.4)

Total comprehensive income for the period

 

34.7

24.2

The notes on pages 29 to 57 form an integral part of these consolidated interim financial statements.

 

Condensed consolidated balance sheet

 

Note

At 8 October

2020

£m

At 10 October

2019

£m

At 26 March

2020

£m

Non-current assets

 

 

 

 

Property, plant and equipment

8

110.0

120.0

117.1

Right-of-use assets

9

415.3

452.3

425.2

Intangible assets

10

1,010.3

1,001.2

1,006.4

Other non-current assets

 

20.0

20.0

20.9

 

 

1,555.6

1,593.5

1,569.6

Current assets

 

 

 

 

Inventories

11

79.8

72.2

62.8

Other financial assets

 

1.0

2.5

1.5

Deferred tax assets

 

3.5

-

-

Trade and other receivables

 

64.3

66.3

55.9

Cash and cash equivalents

 

114.1

44.7

79.1

 

 

262.7

185.7

199.3

Total assets

 

1,818.3

1,779.2

1,768.9

Current liabilities

 

 

 

 

Trade and other payables

 

(243.9)

(196.4)

(197.1)

Lease liabilities

9

(80.8)

(84.1)

(83.7)

Provisions

 

(2.7)

(4.2)

(3.9)

Other financial liabilities

 

(1.0)

(0.7)

(2.2)

 

 

(328.4)

(285.4)

(286.9)

Non-current liabilities

 

 

 

 

Other interest-bearing loans and borrowings

12

(163.8)

(179.0)

(163.3)

Other payables

 

-

(0.2)

-

Lease liabilities

9

(375.5)

(404.6)

(380.2)

Provisions

 

(3.5)

(1.2)

(1.3)

Other financial liabilities

 

(6.8)

(3.3)

(5.8)

Deferred tax liabilities

 

-

(2.6)

(0.4)

 

 

(549.6)

(590.9)

(551.0)

Total liabilities

 

(878.0)

(876.3)

(837.9)

Net assets

 

940.3

902.9

931.0

Equity attributable to equity holders of the parent

 

 

 

 

Ordinary share capital

 

5.0

5.0

5.0

Consolidation reserve

 

(372.0)

(372.0)

(372.0)

Merger reserve

 

113.3

113.3

113.3

Translation reserve

 

(0.1)

(0.0)

(0.1)

Cash flow hedging reserve

 

(2.5)

0.4

(2.8)

Retained earnings

 

1,196.6

1,156.2

1,187.6

Total equity

 

940.3

902.9

931.0

The notes on pages 29 to 57 form an integral part of these consolidated interim financial statements .

 

Condensed consolidated statement of changes in equity

 

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 26 March 2020

5.0

(372.0)

113.3

(2.8)

(0.1)

1,187.6

931.0

Total comprehensive income for the period

 

 

 

 

 

 

 

Profit for the period

-

-

-

-

-

31.0

31.0

Other comprehensive income

-

-

-

3.7

0.0

-

3.7

Total comprehensive income for the period

-

-

-

3.7

0.0

31.0

34.7

Hedging gains & losses reclassified to inventory

-

-

-

(3.4)

-

-

(3.4)

Total hedging gains & losses reclassified to inventory

-

-

-

(3.4)

-

-

(3.4)

Transactions with owners, recorded directly in equity

 

 

 

 

 

 

 

Equity dividends paid

-

-

-

-

-

(24.7)

(24.7)

Share based payment charge

-

-

-

-

-

2.4

2.4

Deferred tax movement on IFRS 2 reserve

-

-

-

-

-

2.8

2.8

Purchase of own shares

-

-

-

-

-

(2.5)

(2.5)

Total contributions by and distributions to owners

-

-

-

-

-

(22.0)

(22.0)

Balance at 8 October 2020

5.0

(372.0)

113.3

(2.5)

(0.1)

1,196.6

940.3

 

 

Share capital

£m

Consolidation reserve

£m

Merger reserve

£m

Cash flow hedging reserve

£m

Translation reserve

£m

Retained earnings

£m

Total

equity

£m

Balance at 28 March 2019

5.0

(372.0)

113.3

0.8

(0.0)

1,155.9

903.0

Total comprehensive income for the period

 

 

 

 

 

 

 

Profit for the period

-

-

-

-

-

25.6

25.6

Other comprehensive income

-

-

-

(1.4)

(0.0)

-

(1.4)

Total comprehensive income for the period

-

-

-

(1.4)

(0.0)

25.6

24.2

Hedging gains & losses reclassified to inventory1

-

-

-

1.0

-

-

1.0

Total hedging gains & losses reclassified to inventory

-

-

-

1.0

-

-

1.0

Transactions with owners, recorded directly in equity

 

 

 

 

 

 

 

Equity dividends paid

-

-

-

-

-

(24.8)

(24.8)

Share based payment charge

-

-

-

-

-

2.4

2.4

Purchase of own shares

-

-

-

-

-

(2.9)

(2.9)

Total contributions by and distributions to owners

-

-

-

-

-

(25.3)

(25.3)

Balance at 10 October 2019

5.0

(372.0)

113.3

0.4

(0.0)

1,156.2

902.9

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

The notes on pages 29 to 57 form an integral part of these consolidated interim financial statements.

 

Condensed consolidated statement of cash flows

 

28 week period

ended

8 October 2020

£m

28 week period

ended

10 October 2019

£m

Cash flows from operating activities

 

 

Profit for the period

31.0

25.6

Adjustments for:

 

 

Depreciation and amortisation

59.3

58.1

Non-underlying impairment

-

4.0

Financial income

(0.2)

(0.2)

Financial expense

10.2

10.2

Settlement of 'put & call' liabilities (growth element)

-

(0.8)

Share based payment charges

2.4

2.4

Taxation

7.9

8.4

 

110.6

107.7

Increase in trade and other receivables

(7.6)

(5.7)

Increase in inventories

(17.0)

(3.7)

Increase in trade and other payables

44.8

13.4

Increase/(decrease) in provisions

1.2

(1.9)

Increase in working capital relating to non-underlying items

-

1.2

 

132.0

111.0

Tax paid

(8.1)

(20.2)

Net cash flow from operating activities

123.9

90.8

Cash flows from investing activities

 

 

Proceeds from sale of property, plant and equipment

0.1

0.3

Interest received

0.2

0.3

Investment in other financial assets

-

(1.0)

Costs to acquire right-of-use assets

(0.5)

-

Acquisition of subsidiaries, net of cash acquired (underlying)

(0.8)

(0.3)

Acquisition of subsidiaries, net of cash acquired (non-underlying)

-

(3.8)

Repayment of borrowings owed by Joint Venture practices in advance of acquisition of subsidiaries (non-underlying)

-

(5.9)

Acquisition of property, plant and equipment and other intangible assets

(16.3)

(15.6)

Net cash used in investing activities

(17.3)

(26.0)

Cash flows from financing activities

 

 

Equity dividends paid

(24.7)

(24.8)

Proceeds from new loan

20.0

36.0

Repayment of borrowings

(20.0)

(36.0)

Debt issue costs

(0.2)

-

Capital lease payments

(35.1)

(37.1)

Settlement of 'put & call' liabilities (minimum amount)

-

(5.6)

Purchase of own shares

(2.5)

(2.9)

Finance lease obligations

(0.0)

(0.2)

Interest paid

(2.0)

(2.2)

Interest paid on lease obligations

(7.1)

(7.8)

Net cash used in financing activities

(71.6)

(80.6)

Net increase/(decrease) in cash and cash equivalents

35.0

(15.8)

Cash and cash equivalents at beginning of period

79.1

60.5

Cash and cash equivalents at end of period

114.1

44.7

The notes on pages 29 to 57 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 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 8 October 2020 comprise the Company and its subsidiaries (together referred to as the Group).

The consolidated financial statements of the Group as at and for the 52 week period ended 26 March 2020 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 IFRS as adopted by the European Union.

Statement of compliance

 

These condensed consolidated interim financial statements have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34 Interim Financial Reporting as adopted by the EU. 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 52 week period ended 26 March 2020.

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 52 weeks ended 26 March 2020 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

 

In assessing the Group's continued adoption of the going concern basis of preparation, the Directors have carefully considered the impact of COVID-19 on the Group's financial position, liquidity and future performance. The Group is deemed an 'essential retailer' by the Government and as such stores and veterinary practices have continued to trade throughout and higher levels of online orders have continued to be fulfilled from distribution centres.

The Group has access to a revolving facility of £248.0m, which expires in September 2023, with £165.0m drawn down at 8 October 2020, and cash balances of £114.1m. In addition to this, the Group has taken out a further £100.0m 364 day liquidity facility which commenced on 13 May 2020. At 8 October 2020, the balance drawn down on this facility was £nil. The lowest level of headroom forecast over the next 12 months from the date of signing of the interim financial statements under COVID-19 adjusted forecast referred to above is in excess of £162.5m. The Group has been in compliance with all covenants applicable to these facilities within the first half of the financial year, and is forecast to continue to be in compliance for 12 months from the date of signing of the interim financial statements.

The Directors of Pets at Home Group Plc, having made appropriate enquiries, consider that adequate resources exist for the Group to continue in operational existence for the foreseeable future and that, therefore, it is appropriate to adopt the going concern basis in preparing the interim financial statements as at and for the period ended 8 October 2020.

 

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 8 October 2020 are consistent with the policies applied by the Group in its consolidated financial statements as at and for the 52 week period ended 26 March 2020, 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 the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34 Interim Financial Reporting as adopted by the EU 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 Group consider that no reasonably possible change in assumptions underlying the carrying value of the goodwill and intangibles would result in an impairment within the next 12 months. Therefore, the carrying value of goodwill and intangibles is not considered a significant estimate as at 8 October 2020.

Joint Venture receivables (significant estimate)

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

 

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

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

Put and call options (significant estimate)

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

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

The Group consider that no reasonably possible change in assumptions underlying the carrying value of the put and call options would result in a material range of estimation uncertainty in the next 12 months. Therefore, the carrying value of the options is not considered a significant estimate as at 8 October 2020.

Carrying value of inventory (significant estimate)

A provision is made for those items of inventory where the net realisable value is estimated to be lower than cost. Net realisable value is based on both historical experience and assumptions regarding future selling values and disposal channels, and is consequently a source of estimation uncertainty. At 8 October 2020, the inventory provision amounted to £4.4m (10 October 2019: £2.6m). Of this, £2.3m (10 October 2019: £1.9m) related to a provision against ageing inventory. The value of inventory against which an ageing provision is held is £7.2m (10 October 2019: £6.6m). The remaining £2.1m (10 October 2019: £0.7m) of the inventory provision relates to specific inventory provisioning relating to factors other than ageing. Management consider the range of reasonably possible estimation uncertainty to be immaterial given the value of the provision, the value of inventory against which the provision is held, and the degree of historical accuracy in the provisioning policy. Therefore, the carrying value of inventory is not considered a significant estimate as at 8 October 2020.

 

IFRS 16 Leases (significant judgement)

Under IFRS 16, the Group recognises a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. The lease liability is initially measured at the present value of the remaining lease payments, discounted using the Group's incremental borrowing rate, adjusted to take into account the risk associated with the length of the lease which ranges between 1 and 26 years and the location of the lease. The Group has therefore made a judgement to determine the incremental borrowing rate used. As a result of the significant impact the transition to IFRS 16 has had on the Group's opening balance sheet (£473.2m right of use asset and £506.1m lease liability recognised as at 29 March 2019), the discount rate is considered to be a significant judgement. The discount rate applied ranges between 2.3% and 3.3% dependent on the length of the lease term. The length of the lease term is based on the contractual right to utilise the asset and is not considered to involve a significant level of judgement because the Group has not taken into account break clauses unless they have been approved.

 

2  Segmental reporting

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

 

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

 

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

 

The following summary describes the operations in each of the Group's reportable segments.  Performance is measured based on segment operating profit, as included in the management reports that are reviewed by the Executive Directors. These internal reports are prepared in accordance with IFRS accounting policies consistent with these 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 8 October 2020

 

Income Statement

 

 

Retail

£m

  Vet Group

£m

Central

£m

Total

£m

 

Revenue

 

 

507.8

66.6

-

574.4

 

Gross profit

 

 

246.1

27.7

-

273.8

 

Underlying operating profit/(loss)

 

 

38.9

16.7

(6.0)

49.6

 

Non-underlying items

 

 

-

(0.7)

-

(0.7)

 

Segment operating profit/(loss)

 

 

38.9

16.0

(6.0)

48.9

 

Net financing expenses

 

 

(6.6)

(0.3)

(3.1)

(10.0)

 

Profit/(loss) before tax

 

 

32.3

15.7

(9.1)

38.9

 

 

 

 

 

 

 

28 week period ended 10 October 2019

 

Income Statement

 

 

Retail

£m

  Vet Group

£m

Central

£m

Total

£m

 

Revenue

 

 

479.8

66.5

-

546.3

 

Gross profit

 

 

239.4

28.5

-

267.9

 

 

 

 

 

 

 

 

 

Underlying operating profit/(loss)

 

 

38.1

17.6

(4.0)

51.7

 

Non-underlying items

 

 

-

(7.7)

-

(7.7)

 

Segment operating profit/(loss)

 

 

38.1

9.9

(4.0)

44.0

 

Net financing expenses

 

 

(7.3)

(0.3)

(2.4)

(10.0)

 

Profit/(loss) before tax

 

 

30.8

9.6

(6.4)

34.0

 

Non-underlying items are explained in note 3.

 

 

 

 

28 week period ended 8 October 2020

Reconciliation of EBITDA before non-underlying items

 

 

Retail

£m

  Vet Group

£m

Central

£m

Total

£m

Underlying operating profit/(loss)

 

 

38.9

16.7

(6.0)

49.6

Depreciation of property, plant and equipment

 

 

13.6

1.2

-

14.8

Depreciation of right-of-use assets

 

 

36.8

1.1

-

37.9

Amortisation of intangible assets

 

 

6.2

0.4

-

6.6

Underlying EBITDA

 

 

95.5

19.4

(6.0)

108.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

28 week period ended 10 October 2019

Reconciliation of EBITDA before non-underlying items

 

 

Retail

£m

  Vet Group

£m

Central

£m

Total

£m

Underlying operating profit/(loss)

 

 

38.1

17.6

(4.0)

51.7

Depreciation of property, plant and equipment

 

 

13.5

1.4

-

14.9

Depreciation of right-of-use assets

 

 

37.0

1.2

-

38.2

Amortisation of intangible assets

 

 

4.7

0.3

-

5.0

Underlying EBITDA

 

 

93.3

20.5

(4.0)

109.8

               

EBITDA before non-underlying items is defined on page 22.

 

 

 

 

28 week period ended 8 October 2020

Segmental revenue analysis by revenue stream 

 

 

Retail

£m

  Vet Group

£m

Central

£m

Total

£m

Retail - Food

 

 

277.4

-

-

277.4

Retail - Accessories

 

 

213.2

-

-

213.2

Retail - Services

 

 

17.2

-

-

17.2

Vet Group - First Opinion fee income

 

 

-

28.6

-

28.6

Vet Group - Company managed practices

 

 

-

12.3

-

12.3

Vet Group - Other income

 

 

-

2.8

-

2.8

Vet Group - Specialist

 

 

-

22.9

-

22.9

Total

 

 

507.8

66.6

-

574.4

 

 

 

 

 

 

 

 

 

 

 

28 week period ended 10 October 2019

Segmental revenue analysis by revenue stream 

 

 

Retail

£m

  Vet Group

£m

Central

£m

Total

£m

Retail - Food

 

 

261.1

-

-

261.1

Retail - Accessories

 

 

193.9

-

-

193.9

Retail - Services

 

 

24.8

-

-

24.8

Vet Group - First Opinion fee income

 

 

-

29.7

-

29.7

Vet Group - Company managed practices

 

 

-

11.6

-

11.6

Vet Group - Other income

 

 

-

3.9

-

3.9

Vet Group - Specialist

 

 

-

21.3

-

21.3

Total

 

 

479.8

66.5

-

546.3

                 

 

 

3  Expenses

Included in operating profit are the following:

 

28 week period ended

8 October 2020

£m

28 week period ended

10 October 2019

£m

Non-underlying items

 

 

Write off and provisions for operating loans, initial set-up loans, and trading balances with Joint Venture veterinary practices

-

(0.3)

Other costs associated with the purchase of Joint Venture veterinary practices

-

3.9

Impairment of right-of-use assets following acquisition of Joint Venture veterinary practices

-

2.2

Impairment of property, plant & equipment and intangible assets relating to the review and recalibration exercise of the First Opinion veterinary practices

-

1.8

Increase in fair value of put and call liability

0.7

0.1

Total non-underlying items

0.7

7.7

 

Underlying items

 

 

Impairment (gains)/losses on receivables

(0.6)

0.6

Depreciation of property, plant and equipment

14.8

14.9

Amortisation of intangible assets

6.6

5.0

Depreciation of right-of-use assets

37.9

38.2

Rentals under short-term leases:

 

 

Expenses relating to short-term leases

0.0

0.0

Other income

 

 

Rental income from sub-leasing right-of-use assets to third parties1

(0.1)

(0.1)

Rental income from related parties1

(4.0)

(3.9)

Share based payment charges

2.4

2.4

1 The other income is presented within selling and distribution expenses

 

Non-underlying items

The non-underlying operating expenses of £0.7m in the period ended 8 October 2020 relate to an increase in the financial liability for put and call options over shares held by clinicians in Dick White Referrals Limited and Veterinary Specialists (Scotland) Limited. The charge represents an increase in the equity 'option' value held by those clinicians based on the Board's best estimate of the future settlement on exercise of the put and call.  The charge is classified within operating expenses as a clinician is required to remain an employee of the Group in order to access the full equity value of the option at the time of the exercise.

During the 28 week period ended 10 October 2019, the Group completed a review and recalibration exercise of the First Opinion veterinary practices.  As part of this review, the Group completed a buy out of the 'A' shares from the Joint Venture Partners in a total of 51 Joint Venture veterinary practices, with 24 of these occurring in the 28 week period ending 10 October 2019.

The non-underlying operating expenses in the period ended 10 October 2019 of £7.7m relate to:

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

- £3.9m in relation to exit and closure costs (provided for under IAS 37) payable in relation to Joint Venture veterinary practices which the Group had acquired.  The release of negative goodwill and impairment of goodwill arising on the acquisition of the Joint Venture veterinary practices has been included within these costs. This balance includes £0.2m in relation to the profit from the disposal of assets acquired in the 52 week period ended 28 March 2019.

- £2.2m in relation to the write down of right of use assets to their expected recoverable amount, relating to First Opinion veterinary practices acquired in the period with the intention of being closed. Further details are disclosed in note 9.

- £1.8m relating to the impairment of property, plant and equipment and intangible assets relating to the review and recalibration exercise of the First Opinion veterinary practices. Further details are disclosed in notes 8 and 10.

- £0.1m of non-underlying operating expenses relate to an increase in the financial liability for put and call options over shares held by clinicians in Dick White Referrals Limited. The charge represents an increase in the equity 'option' value held by those clinicians based on the Director's best estimate of the future settlement on exercise of the put and call.  The charge is classified within operating expenses as a clinician is required to remain an employee of the Group in order to access the full equity value of the option at the time of the exercise.

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

 

Underlying items

The rentals under short-term leases disclosed in relation to the 28 week period ended 8 October 2020 and the 28 week period ended 10 October 2019 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 

8 October 2020

28 week period ended 

10 October 2019

Underlying

trading

After non-underlying items

Underlying

 trading

After non-underlying items

Profit attributable to equity shareholders of the parent (£m's)

31.7

31.0

33.3

25.6

 

 

 

 

 

Basic weighted average number of shares (m)

500.0

500.0

500.0

500.0

Dilutive potential ordinary shares (m)

6.8

6.8

3.9

3.9

Diluted weighted average number of shares

506.8

506.8

503.9

503.9

Basic earnings per share

6.3p

6.2p

6.7p

5.1p

Diluted earnings per share

6.3p

6.1p

6.6p

5.1p

 

5  Taxation

Recognised in the income statement

 

28 week period ended

8 October 2020

£m

28 week period ended

10 October 2019

£m

Current tax expense

 

 

Current period

9.1

9.7

Adjustments in respect of prior periods

-

-

Current tax expense

9.1

9.7

Deferred tax expense

 

 

Origination and reversal of temporary differences

(1.2)

(1.4)

Impact of difference between deferred and current tax rates

-

0.1

Deferred tax expense

(1.2)

(1.3)

Total tax expense

7.9

8.4

The UK corporation tax standard rate for the period was 19% (2019: 19%). Deferred tax at 8 October 2020 has been calculated based on the rate of 19% which is the blended rate at which the majority of items are expected to reverse.

 

Deferred tax recognised in comprehensive income

 

28 week period ended

8 October 2020

£m

28 week period ended

10 October 2019

£m

Effective portion of changes in fair value of cash flow hedges

0.1

(0.1)

 

Reconciliation of effective tax rate

 

28 week period ended 8 October 2020

28 week period ended 10 October 2019

 

Underlying trading

£m

Non-underlying items

£m

Total

£m

Underlying trading

£m

Non-underlying

 items

 m

Total

£m

Profit for the period

31.7

(0.7)

31.0

33.3

(7.7)

25.6

Total tax expense

7.9

-

7.9

8.4

-

8.4

Profit excluding taxation

(0.7)

38.9

41.7

(7.7)

34.0

Tax using the UK corporation tax rate for the period of 19% (28 week period ended 10 October 2019:19%)

7.5

(0.1)

7.4

7.9

(1.5)

6.4

Impact of change in tax rate on deferred tax balances

-

-

-

0.1

-

0.1

Expenditure not eligible for tax relief

0.4

0.1

0.5

0.4

1.5

1.9

Total tax expense

7.9

-

7.9

8.4

-

8.4

 

6  Dividends paid and proposed

 

28 week period ended

8 October 2020

£m

28 week period ended

10 October 2019

£m

Declared and paid during the period

 

 

Final dividend of 5.0p per share (2019: 5.0p per share)

24.7

24.8

Proposed for approval by shareholders at the AGM

 

 

Interim dividend of 2.5p per share (2019: 2.5p per share)

12.4

12.4

 

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 8 October 2020 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 8 October 2020: 5,189,945 shares, holding at 10 October 2019: 5,887,997 shares).

7  Business combinations

 

Acquisition of Joint Venture veterinary practices

 

In the 28 week period ended 8 October 2020, the Group has acquired 100% of the 'A' shares of 2 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 52 week period ended 26 March 2020.

 

In the 52 week period ended 26 March 2020, 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. On the dates listed below, the Group acquired 100% of the 'A' shares of the practices, leading to control and consolidation.

 

Subsidiaries acquired

 

Principal activity

Date of acquisition

Proportion of voting equity instruments acquired

 

 

 

Total proportion of voting equity instruments owned following the acquisition

Cash consideration transferred

£m

Sidcup Vets4Pets Limited

Veterinary practice

30 June 2020

50%

100%

0.9

Sydenham Vets4Pets Limited

Veterinary practice

30 June 2020

50%

100%

0.7

 

Goodwill arising on acquisition

 

£m

Consideration

1.6

Less:  Fair value of assets acquired

(0.7)

Goodwill arising on acquisition

0.9

 

8  Property, plant and equipment

 

 

Freehold

Property

 

£m

Short leasehold property

 

£m

Fixtures, fittings, tools and equipment

£m

Total

 

 

£m

Cost

 

 

 

 

Balance at 26 March 2020

2.4

63.9

239.9

306.2

Additions

-

1.9

5.8

7.7

On acquisition

-

0.1

0.0

0.1

Disposals

-

(0.2)

(0.2)

(0.4)

Balance at 8 October 2020

2.4

65.7

245.5

313.6

Depreciation

 

 

 

 

Balance at 26 March 2020

0.3

26.8

162.0

189.1

Depreciation charge for the period

0.0

2.2

12.6

14.8

Disposals

-

(0.1)

(0.2)

(0.3)

Balance at 8 October 2020

0.3

28.9

174.4

203.6

Net book value

 

 

 

 

At 26 March 2020

2.1

37.1

77.9

117.1

At 8 October 2020

2.1

36.8

71.1

110.0

 

 

Freehold

Property

 

£m

Short leasehold property

 

£m

Fixtures, fittings, tools and equipment

£m

Total

 

 

£m

Cost

 

 

 

 

Balance at 28 March 2019

2.5

59.4

222.9

284.8

Additions

-

2.7

9.5

12.2

Assets acquired on acquisition

-

0.5

0.3

0.8

Disposals

(0.1)

(0.4)

(0.5)

(1.0)

Balance at 10 October 2019

2.4

62.2

232.2

296.8

Depreciation

 

 

 

 

Balance at 28 March 2019

0.3

22.5

138.3

161.1

Depreciation charge for the period

0.0

2.3

12.6

14.9

Impairment of assets (non-underlying)

-

1.3

0.4

1.7

Disposals

(0.0)

(0.4)

(0.5)

(0.9)

Balance at 10 October 2019

0.3

25.7

150.8

176.8

Net book value

 

 

 

 

At 28 March 2019

2.2

36.9

84.6

123.7

At 10 October 2019

2.1

36.5

81.4

120.0

 

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, Specialist Referral centres, distribution centres and support offices are leased under leases, with remaining lease terms of between 1 and 26 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 7 years.

Right-of-use assets

 

 

Property

£m

Equipment

£m

Total

£m

Cost

 

 

 

Balance at 26 March 2020

486.3

11.6

497.9

Additions

25.0

2.8

27.8

On acquisition

0.2

-

0.2

Balance at 8 October 2020

511.5

14.4

525.9

Depreciation

 

 

 

Balance at 26 March 2020

69.1

3.6

72.7

Depreciation charge for the period

36.4

1.5

37.9

Balance at 8 October 2020

105.5

5.1

110.6

Net book value

 

 

 

At 26 March 2020

417.2

8.0

425.2

At 8 October 2020

406.0

9.3

415.3

 

 

Property

£m

Equipment

£m

Total

£m

Cost

 

 

 

Balance at 29 March 2019

463.0

10.1

473.1

Additions

14.3

2.6

16.9

On acquisition

2.7

-

2.7

Balance at 10 October 2019

480.0

12.7

492.7

Depreciation

 

 

 

Balance at 29 March 2019

-

-

-

Depreciation charge for the period

35.9

2.3

38.2

Impairment (non-underlying)

2.2

-

2.2

Balance at 10 October 2019

38.1

2.3

40.4

Net book value

 

 

 

At 29 March 2019

463.0

10.1

473.1

At 10 October 2019

441.9

10.4

452.3

 

 

The costs relating to leases for which the Group applied the practical expedient describes in paragraph 5a of IFRS 16 (leases with a contract term of less than 12 months) amounted to £0.0m in the 28 week period ended 8 October 2020 (£0.0m in the period ended 10 October 2019).

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

 

Maturity analysis - contractual undiscounted cash flows

 

At 8 October 2020

£m

At 10 October 2019

£m

At 26 March 2020

£m

Less than one year

81.1

84.1

82.2

Between one and five years

255.7

276.2

258.0

More than five years

177.7

195.0

182.6

Total undiscounted lease liabilities

514.5

555.3

522.8

Carrying value of lease liabilities in the statement of financial position

456.3

488.7

463.9

Current

80.8

84.1

83.7

Non-current

375.5

404.6

380.2

 

 

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. 

Short-term leases

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

 

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

 

10  Intangible assets

 

 

Goodwill

£m

Customer list

£m

Software

£m

Total

£m

Cost

 

 

 

 

Balance at 26 March 2020

981.3

1.9

63.1

1,046.3

Additions

-

-

9.7

9.7

On acquisition

0.4

0.5

-

0.9

Disposals

-

-

(0.1)

(0.1)

Balance at 8 October 2020

981.7

2.4

72.7

1,056.8

Amortisation

 

 

 

 

Balance at 26 March 2020

0.1

0.5

39.3

39.9

Amortisation charge for the period

-

0.1

6.5

6.6

Balance at 8 October 2020

0.1

0.6

45.8

46.5

Net book value

 

 

 

 

At 26 March 2020

981.2

1.4

23.8

1,006.4

At 8 October 2020

981.6

1.8

26.9

1,010.3

 

 

Goodwill

£m

Customer list

£m

Software

£m

Total

£m

Cost

 

 

 

 

Balance at 28 March 2019

981.3

1.7

47.5

1,030.5

Additions

-

-

5.6

5.6

Balance at 10 October 2019

981.3

1.7

53.1

1,036.1

Amortisation

 

 

 

 

Balance at 28 March 2019

-

0.3

29.5

29.8

Amortisation charge for the period

-

0.1

4.9

5.0

Impairment of assets (non-underlying)

0.0

0.1

-

0.1

Balance at 10 October 2019

0.0

0.5

34.4

34.9

Net book value

 

 

 

 

At 28 March 2019

981.3

1.4

18.0

1,000.7

At 10 October 2019

981.3

1.2

18.7

1,001.2

 

Amortisation and impairment charge

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

Impairment testing

The group of cash generating units (CGUs) are considered to be aligned to the two operating segments as disclosed in note 2. Within the Retail reporting segment, these groups comprise the stores, company website, grooming operations and insurance operations. Within the Vet Group, the groups comprise the First Opinion practices and Specialist Referral centres.

As at 8 October 2020 and 10 October 2019, the Group is deemed to have two overall groups of CGUs as follows:

 

Goodwill

At 8 October 2020

£m

At 10 October 2019

£m

Retail

586.1

586.1

Vet Group

395.5

395.2

Total

981.6

981.3

 

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

 

 

28 week period ended 

8 October 2020

28 week period ended 

10 October 2019

Retail

Vet Group

Retail

Vet Group

Period on which management approved forecasts are based (years)

5

5

5

5

Growth rate applied beyond approved forecast period

2.0%

3.5%

2.0%

3.5%

Discount rate (pre-tax)

10.7%

10.1%

10.9%

10.4%

Like-for-like sales growth

3.7%

10.7%

3.7%

10.7%

Gross profit margin

47.8%

49.4%

47.8%

49.4%

           

 

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 2020 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.

 

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

The total recoverable amount in respect of goodwill for the CGU group as assessed by the Directors using the above assumptions is greater than the carrying amount and therefore no impairment charge has been recorded in each period, with the exception of the goodwill impaired immediately following the acquisition of certain First Opinion veterinary practices as part of the review and recalibration exercise (see note 7).

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

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

- Increasing the discount rate by 100 bps

- Reduction in gross margin percentage of 100 bps

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

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

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

- Increasing the discount rate by 100 bps

- Reduction in gross margin percentage of 100 bps

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 8 October 2020

£m

At 10 October 2019

£m

At 26 March 2020

£m

Finished goods

79.8

72.2

62.8

 

The cost of inventories recognised as an expense and included in 'cost of sales' is £245.0m (period ended 10 October 2019: £222.9m).

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 8 October 2020 the inventory provision amounted to £4.4m (10 October 2019: £2.6m). The inventory provision is calculated by reference to the age of the SKU and the length of time it is expected to take to sell. The provision percentages applied in calculating the provision are as follows:

Discontinued stock greater than 365 days: 100%

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

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

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

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

The value of inventory against which an ageing provision is held is £7.2m (10 October 2019: £6.6m).

In the 28 week period ended 8 October 2020, the value of inventory written off to the income statement amounted to £4.7m (52 week period ended 10 October 2019: £4.3m).

12  Other interest-bearing loans and borrowings

 

At 8 October 2020

£m

At 10 October 2019

£m

At 26 March 2020

£m

Non-current liabilities

 

 

 

Unsecured bank loans

163.8

179.0

163.3

 

 

 

 

Terms and debt repayment schedule

 

 

 

 

 

 

At 8 October 2020

 

 

 

 

 

Currency

Nominal interest rate

Year of maturity

Face

value

£m

Carrying amount

£m

Revolving credit facility

 

 

 

 

GBP

LIBOR +1.15%

2023

165.0

163.8

 

 

 

 

 

 

At 10 October 2019

 

 

 

 

 

Currency

Nominal interest rate

Year of maturity

Face

value

£m

Carrying amount

£m

Revolving credit facility

 

 

 

 

GBP

LIBOR +1.15%

2023

181.0

179.0

 

The Group has revolving facilities of £248.0m and £100.0m, which expire in 2023 and 2021 respectively. 

The drawn amount on the £248.0m facility was £165.0m (£181.0m at 10 October 2019) and this amount is reviewed each month. Interest is charged at LIBOR plus a margin based on leverage (net debt: EBITDA). Face value represents the principal value of the revolving credit facility. The facility is unsecured. In addition to this, the Group has taken out a further £100.0m 364 day liquidity facility which commenced on 13 May 2020. The drawn amount on the £100.0m facility at 8 October 2020 was £nil.

 

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 8 October 2020

 m

At 10 October  2019

£m

At 26 March 2020

£m

Within one year or repayable on demand

-

-

-

Between one and two years

-

-

-

Between two and five years

165.0

181.0

165.0

 

165.0

181.0

165.0

 

Pets at Home Group's policy with regard to interest rate risk is to hedge the appropriate level of borrowings by entering into fixed rate agreements.  The Group has entered into one fixed rate interest rate swap agreement over a total of £140.0m of the senior facility borrowings at the balance sheet date at a fixed rate of 0.918% which expires on 31 March 2021. The Group has further fixed interest rate swap agreements over a total of £100.0m of the senior facility borrowings at the balance sheet date at a blended fixed rate of 0.811% which commences on 31 March 2021 and expires on 25 September 2023.

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

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 8 October 2020

 

 

 

Carrying amount

Fair value - hedging instruments

FVOCI - equity instruments

Financial assets at amortised cost

Other financial liabilities

Total carrying amount

 

 

 

£m

£m

£m

£m

£m

 

 

Financial assets measured at fair value

 

 

 

 

 

 

 

Investments in Joint Venture veterinary practices

-

0.2

-

-

0.2

 

 

Other investments

-

1.1

-

-

1.1

 

 

Forward exchange contracts used for hedging

0.3

-

-

-

0.3

 

 

Interest rate swaps used for hedging

0.2

-

-

-

0.2

 

 

 

0.5

1.3

-

-

1.8

 

 

Financial assets not measured at fair value

 

 

 

 

 

 

 

Current trade and other receivables

-

-

31.1

-

31.1

 

 

Amounts owed by Joint Venture veterinary practices - funding, trading and operating loans

-

-

25.8

-

25.8

 

 

Cash and cash equivalents

-

-

114.1

-

114.1

 

 

Loans to Joint Venture veterinary practices - initial set up loans

-

-

13.1

-

13.1

 

 

Loans to Joint Venture veterinary practices - other loans

-

-

3.9

-

3.9

 

 

Other receivables

-

-

2.2

-

2.2

 

 

 

-

-

190.2

-

190.2

 

 

Financial liabilities measured at fair value

 

 

 

 

 

 

 

Fuel forward contract used for hedging

(0.2)

-

-

-

(0.2)

 

 

Forward exchange contracts used for hedging

(0.7)

-

-

-

(0.7)

 

 

Interest rate swaps used for hedging

(2.7)

-

-

-

(2.7)

 

 

 

(3.6)

-

-

-

(3.6)

 

 

Financial liabilities not measured at fair value

 

 

 

 

 

 

 

Finance lease liabilities

-

-

-

(0.1)

(0.1)

 

 

Current lease liabilities (note 9)

-

-

-

(80.8)

(80.8)

 

 

Non-current lease liabilities (note 9)

-

-

-

(375.5)

(375.5)

 

 

Trade payables

-

-

-

(115.1)

(115.1)

 

 

Amounts owed to Joint Venture veterinary practices

-

-

-

(1.9)

(1.9)

 

 

Put and call liability

-

-

-

(4.1)

(4.1)

 

 

Other interest-bearing loans and borrowings (note 12)

-

-

-

(163.8)

(163.8)

 

 

 

-

-

-

(741.3)

(741.3)

 

 

 

At 8 October 2020

 

 

Fair value

Level 1

Level 2

Level 3

Total

 

 

 

£m

£m

£m

£m

 

 

Financial assets measured at fair value

 

 

 

 

 

 

Investments in Joint Venture veterinary practices

-

-

0.2

 

 

Other investments

-

-

1.1

1.1

 

 

Fuel forward contract used for hedging

-

0.3

-

0.3

 

 

Interest rate swaps used for hedging

-

0.2

-

0.2

 

 

Financial assets not measured at fair value

 

 

 

 

 

 

Amounts owed by Joint Venture veterinary practices - funding, trading and operating loans

-

-

25.8

25.8

 

 

Loans to Joint Venture veterinary practices - initial set up loans

-

-

13.1

13.1

 

 

Loans to Joint Venture veterinary practices - other loans

-

-

3.9

3.9

 

 

Other receivables

-

-

2.2

2.2

 

 

Financial liabilities measured at fair value

 

 

 

 

 

 

Fuel forward contract used for hedging

-

(0.2)

-

(0.2)

 

 

Forward exchange contracts used for hedging

-

(0.7)

-

(0.7)

 

 

Interest rate swaps used for hedging

-

(2.7)

-

(2.7)

 

 

Financial liabilities not measured at fair value

 

 

 

 

 

 

Put and call liability

-

-

(4.1)

(4.1)

 

 

Other interest-bearing loans and borrowings (note 12)

-

(165.0)

-

(165.0)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 10 October 2019

 

 

 

Carrying amount

Fair value - hedging instruments

FVOCI - equity instruments

Financial assets at amortised cost

Other financial liabilities

Total carrying amount

 

 

 

£m

£m

£m

£m

£m

 

 

Financial assets measured at fair value

 

 

 

 

 

 

 

Other investments

-

1.0

-

-

1.0

 

 

Forward exchange contracts used for hedging

1.8

-

-

-

1.8

 

 

 

1.8

1.0

-

-

2.8

 

 

Financial assets not measured at fair value

 

 

 

 

 

 

 

Current trade and other receivables

-

-

29.4

-

29.4

 

 

Amounts owed by Joint Venture veterinary practices - funding, trading and operating loans

-

-

27.6

-

27.6

 

 

Cash and cash equivalents

-

-

44.7

-

44.7

 

 

Loans to Joint Venture veterinary practices - initial set up loans

-

-

13.2

-

13.2

 

 

Loans to Joint Venture veterinary practices - other loans

-

-

4.0

-

4.0

 

 

Other receivables

-

-

0.9

-

0.9

 

 

 

-

-

119.8

-

119.8

 

 

Financial liabilities measured at fair value

 

 

 

 

 

 

 

Fuel forward contracts used for hedging

(0.0)

-

-

-

(0.0)

 

 

Forward exchange contracts used for hedging

(0.5)

-

-

-

(0.5)

 

 

Interest rate swaps used for hedging

(0.7)

-

-

-

(0.7)

 

 

 

(1.2)

-

-

-

(1.2)

 

 

Financial liabilities not measured at fair value

 

 

 

 

 

 

 

Finance lease liabilities

-

-

-

(0.1)

(0.1)

 

 

Current lease liabilities (note 9)

-

-

-

(84.1)

(84.1)

 

 

Non-current lease liabilities (note 9)

-

-

-

(404.6)

(404.6)

 

 

Trade payables

-

-

-

(109.7)

(109.7)

 

 

Amounts owed to Joint Venture veterinary practices

-

-

-

(1.8)

(1.8)

 

 

Put and call liability

-

-

-

(2.6)

(2.6)

 

 

Other interest-bearing loans and borrowings (note 12)

-

-

-

(179.0)

(179.0)

 

 

 

-

-

-

(781.9)

(781.9)

 

 

 

 

 

At 10 October 2019

 

 

Fair value

Level 1

Level 2

Level 3

  Total

 

 

£m

£m

£m

£m

 

Financial assets measured at fair value

 

 

 

 

 

Other investments

-

-

1.0

1.0

 

Forward exchange contracts used for hedging

-

1.8

-

1.8

 

Financial assets measured at fair value

 

 

 

 

Amounts owed by Joint Venture veterinary practices - funding, trading and operating loans

-

-

27.6

27.6

Loans to Joint Venture veterinary practices - initial set up loans

-

-

13.2

13.2

Loans to Joint Venture veterinary practices - other loans

-

-

4.0

4.0

 

Other receivables

-

-

0.9

0.9

 

Financial liabilities measured at fair value

 

 

 

 

 

Fuel forward contracts used for hedging

-

(0.0)

-

(0.0)

 

Forward exchange contracts used for hedging

-

(0.5)

-

(0.5)

 

Interest rate swaps used for hedging

-

(0.7)

-

(0.7)

 

Financial liabilities not measured at fair value

 

 

 

 

 

Put and call liability

-

-

(2.6)

(2.6)

 

Other interest-bearing loans and borrowings (note 12)

-

(181.0)

-

(181.0)

 

 

 

 

 

 

 

 

At 26 March 2020

 

 

Carrying amount

Fair value - hedging instruments

FVOCI - equity instruments

Financial assets at amortised cost

Other financial liabilities

Total carrying amount

 

 

£m

£m

£m

£m

£m

 

Financial assets measured at fair value

 

 

 

 

 

 

Investments in Joint Venture veterinary practices

-

0.4

-

-

0.4

 

Other investments

-

1.1

-

-

1.1

 

Forward exchange contracts used for hedging

0.8

-

-

-

0.8

 

Interest rate swaps used for hedging

0.3

-

-

-

0.3

 

 

1.1

1.5

-

-

2.6

 

Financial assets not measured at fair value

 

 

 

 

 

 

Current trade and other receivables

-

-

19.6

-

19.6

 

Amounts owed by Joint Venture veterinary practices - funding, trading and operating loans

-

-

31.1

-

31.1

 

Cash and cash equivalents

-

-

79.1

-

79.1

 

Loans to Joint Venture veterinary practices - initial set up loans

-

-

13.3

-

13.3

 

Loans to Joint Venture veterinary practices - other loans

-

-

4.0

-

4.0

 

Other receivables

-

-

2.5

-

2.5

 

 

-

-

149.6

-

149.6

 

Financial liabilities measured at fair value

 

 

 

 

 

 

Fuel forward contracts used for hedging

(0.4)

-

-

-

(0.4)

 

Forward exchange contracts used for hedging

(1.7)

-

-

-

(1.7)

 

Interest rate swaps used for hedging

(2.3)

-

-

-

(2.3)

 

 

(4.4)

-

-

-

(4.4)

 

Financial liabilities not measured at fair value

 

 

 

 

 

 

Finance lease liabilities

-

-

-

(0.2)

(0.2)

 

Current lease liabilities (note 9)

-

-

-

(83.7)

(83.7)

 

Non-current lease liabilities (note 9)

-

-

-

(380.2)

(380.2)

 

Trade payables

-

-

-

(110.8)

(110.8)

 

Amounts owed to Joint Venture veterinary practices

-

-

-

(6.7)

(6.7)

 

Put and call liability

-

-

-

(3.4)

(3.4)

 

Other interest-bearing loans and borrowings (note 12)

-

-

-

(163.3)

(163.3)

 

 

-

-

-

(748.3)

(748.3)

 

 

 

 

At 26 March 2020

 

 

Fair value

Level 1

Level 2

Level 3

  Total

 

 

 

£m

£m

£m

£m

 

 

Financial assets measured at fair value

 

 

 

 

 

 

Investments in Joint Venture veterinary practices

-

-

0.4

0.4

 

 

Other investments

-

-

1.1

1.1

 

 

Forward exchange contracts used for hedging

-

0.8

-

0.8

 

 

Interest rate swaps used for hedging

-

0.3

-

0.3