Tuesday 26 November 2019 3:08 pm

Pets At Home profit jumps in first half as it eyes top-end full-year earnings

Pets At Home’s share price surged in trading today after it posted a bumper profit increase and strong like-for-like sales growth for the first half of its financial year.

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The figures

The retailer enjoyed an 18.9 per cent year-on-year increase in underlying profit before tax to £45m for the six months to 10 October. The increase was fuelled by strong retail revenue growth of eight per cent.

Group revenue rose 7.6 per cent on a like-for-like basis to £546.3m, a 9.4 per cent increase in overall sales growth.

Net debt crept up by £15.8m to £136.3m compared to the end of its last full financial year, with underlying free cash flow standing at £24.9m.

Underlying basic earnings per share climbed 18 per cent year on year to hit 7.2p, while Pets At Home kept its dividend flat at 2.5p per share.

Why it’s interesting

Investors sent the Pets At Home share price up 14.5 per cent to 245.4p in trading as they responded to the robust earnings.

The retailer revealed that in view of the robust earnings, it now expects annual pre-tax profit to beat analyst expectations and hit the top end of the current market view.

Like-for-like revenue for its veterinary business rose 6.4 per cent. The business also cited 22 per cent year-on-year growth in the number of member card holders who signed up to its complete pet care service.

Meanwhile the firm’s programme to buy out its joint venture practices is now complete, having bought 57 sites from the 471 stores run by the Vet Group chain, closing 36 of them.

Julie Palmer, partner at Begbies Traynor, praised Pets At Home for bucking the trend of struggling companies to boost sales following a strategy revamp last year.

“Going against the general trend in retail to boldly invest rather than drastically cut in light of growing online competition is starting to pay off,” she added.

“It is a tricky move to expand while keeping brand messaging clear but Pets at Home seems to have managed it. The investment in pet walking website, Tailster.com, and reduced prices on a variety of products have turned Pets at Home stores into a one-stop-shop for pet owners making it a convenient location for customers, but also allowing the business to get the most returns from each customer that walks through the door – whether on four legs or two.”

But Palmer added a note of caution as the festive shopping period opens, warning the firm must guard against online rivals.

“Investors will be keeping a close eye on the company as the Christmas period begins, but with people spending more than ever on their pets and the constant threat of new online competitors, the business needs to remain ahead of the pack,” she said.

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What Pets At Home said

Chief executive Peter Pritchard said:

I am very pleased with what we have achieved in the first half of the year.  We have executed our plans well, and this has been reflected in the strong customer sales growth across the Group. Our commitment, and that of the Group’s Joint Venture Partners, is to make sure pets and their owners get the very best advice, care and products; and this has led to record levels of VIPs, First Opinion practice clients and subscription customers. In short, our pet care strategy is working.

We have seen sustained momentum in Retail, with a two-year like-for-like of 13 per cent.  This has been complemented by a meticulous delivery of our Vet Group recalibration. The programme to buy out a number of Joint Venture practices is already complete, whilst changes we have made to the fee arrangements for ongoing practices are already showing signs of positive progress and will be followed by further planned adjustments in the second half of the year.

All this provides a strong foundation, meaning we have much to look forward to in FY20 and beyond, and we now expect to return to profit growth a year ahead of our original plan. In the meantime, we will remain focussed on serving our customers, their pets and our partners better than ever before.