Pets at Home gets a new boss as profits take a plunge

Lucy White

Pets at Home has woken up to news this morning that it would get a new chief executive in the new year, as it announced revenue and sales were on the rise.

The figures

The animal paraphernalia retailer saw like-for-like revenue grow 3.9 per cent in the first half of its 2018 financial year, as group revenue lifted by six per cent to £468m.

Revenue generated from merchandise grew 4.6 per cent, but money generated from services (such as the new veterinary business) saw a 15.3 per cent boost.

However, earnings before deductions sank by 4.6 per cent to £62.2m and profit before tax slid 11.2 per cent to £41.7m.

Read more: In the doghouse? Pets at Home shares fall on softer merchandise sales

Why it's interesting

Pets at Home, which is still 12 per cent-owned by private equity giant KKR, has been dogged by problems since its £2.5bn 2014 listing.

Concerns have been raised over the last year about its debt and the strength of its board, and today saw the departure of chief executive Ian Kellett and the immediate resignation of KKR board member Nicolas Gheysens.

Kellett said his decision to leave the company, which will take effect in May 2018, was due to his desire to “step away from corporate life” and pursue his own business interests. Gheysens' departure was not explained, but it is likely KKR will be looking to sell down the rest of its position in the near future.

Peter Pritchard, currently chief executive of the retail branch of Pets at Home, will step into Kellett's shoes. KKR has said it will not replace Gheysens.

KKR has been selling down its stake at a discount to the IPO price, ditching £119m worth of stock in October at a price of 195p per share as opposed to the 245p debut.

Analysts at Liberum reiterated a “sell” rating and target price of 145p, noting that profits were broadly in line with expectation but that management had guided down expectations on gross margin. The business is still investing heavily to boost its competitive position.

“A key concern is the weakening of cash flow generation as the group invests to reposition the business and set a platform to return to profit growth,” said analyst Adam Tomlinson.

Read more: Pets at Home dogged by sliding share price as KKR sells down a chunk of its stake worth £119m

What Pets at Home said

“Our veterinary business is taking market share and hitting the revenue and profit growth levels expected,” said Kellett.

We are confident we are taking the right actions to reposition our merchandise business and having seen the results from our initial investments, we are accelerating our plans.

“There remains much to do and we will continue to evolve our strategy and adapt to customers’ needs in what remains a competitive market place."

Read more: No bone to pick here? Pets at Home sales boosted by vet services as it rolls out further expansion