Pets at Home: Demand for vet services soars
Pets at Home has reported flat year-on-year revenue, with a starkly diverging performance in retail sales and veterinary services.
Underlying profit before tax in retail fell by 16.6 per cent year on year to £72.9m, while underlying profit before tax from the company’s vet arm grew by 23.3 per cent year on year to £75.9m – outperforming retail for the first time.
Shares rose nearly three per cent in early trades in response.
Revenue from vet services grew by 13 per cent year on year, now accounting for a third of total revenue at the company.
Revenue from retail sales, meanwhile, fell by 1.8 per cent year on year to £1.3bn.
Pets at Home has struggled with slow retail sales for the last few years, which it has previously attributed to weak footfall and a “challenging UK consumer backdrop”.
Overall statutory revenue rose by 0.1 per cent to £1.48bn in the year on March 27, Pets at Home told markets this morning.
Statutory profit before tax rose by 14.1 per cent to £120.6m from £105.7m the prior year.
Pets at Home increased its dividend by 1.6 per cent year on year, from 12.8p to 13p.
‘Profound transformation’ at Pets at Home
Boss Lyssa McGowan said the company has been through a “profound transformation” in the last two years.
“We have moved from a business with a strong presence in pet retail and vets, to a true pet care platform,” she added.
“We saw another outstanding year of growth in our vets business,” McGowan said.
“Our practices significantly outperformed a more subdued industry backdrop and delivered this progress despite the ongoing uncertainty of the CMA investigation – further demonstration of the power of our unique joint venture model,” she added.
The UK’s competition watchdog began a probe into the vet sector last year.
The most recent published papers on the probe, released by the CMA on February 6, noted concerns that customers had a limited choice of services and said that the price of vet services has risen faster than inflation.
‘Guidance won’t set tails wagging’
Analysts were broadly positive about Pets at Home’s results, although
“The retail outlook remains subdued. Pets expects to outperform market growth of 2 per cent but with costs rising by up to 5 per cent due to various bits of unhelpful legislation, profits are likely to fall.
“The Vets outlook looks stronger with over 10 new openings planned this year and the Group looking relatively well insulated from the likely findings of the Competition and Markets Authority industry-wide probe,” Derren Nathan, head of equity research at Hargreaves Lansdown, said.
But “despite the challenges, the cash keeps flowing,” he added.
“Pets at Home delivered a steady performance,” Russell Pointon, director of content at Edison Group, said.
“From a macroeconomic lens, Pets at Home has been operating under the weight of sustained cost inflation, while contending with muted consumer spending and a cautious recovery in retail footfall.
“Nonetheless, management’s proactive cost controls and strategic focus on platform efficiency and subscription growth have helped preserve earnings quality.”