Pets at Home Group Plc

Good morning everybody and welcome. I'm Peter Pritchard. I'm the group CEO of Pepsahome and with me today is Mike Iddin and it gives us great pleasure to take you through today our full year 19 prelims. So in the next hour or so I'll cover up the group strategic update and Mike will cover off the review of FY19 and at the end of course we have time for your questions. Last year we launched our new strategy to become the best pet care business in the world and one year on I'm really pleased to say we've made really good progress. We've delivered everything we said we'd do and in line with the guidance that we gave back in November. Bringing our retail and vet business together to create a pet care solution for our customers is working. Our FY19 results are ahead of our expectations. Retail has returned to profit growth a year ahead of expectations, and our vet recalibration is on track, and our core business is performing well. The pet market remains attractive. It's in structural growth, and we're taking share across all categories, both online and offline. Our performance is driven by strong customer metrics. We have more VIP members, we have more customer shopping services, we have more people visiting our website, and better website conversion. So I'm really pleased with the progress that we're making. Our strategy to focus on pet care we believe is a compelling plan. So let me remind you of what that plan looks like. It's built on four pillars. Our first pillar is about bringing the pet experience to life. What really makes Petahome unique are not the components of the business, but the way in which we bring it together to make pet care easy, accessible, convenient and fun for pet owners. No one else can do this. We believe it's our secret sauce. That's why we're right-sizing our retail business and renewing our stores to ensure that our proposition is easily accessible to customers. That's why we put pets at the centre of what we do. It's where the brand really comes to life. That's why we use digital to join up the experience for customers and make it really easy. We're always ensuring we're competitive on price and we're growing private label to grow loyalty, uniqueness and a course margin. We're creating the best pet care experience and we think that's going to be very hard for others to match. Our second pillar is 50% of our sales coming from pet services. Services really allow us to access the entire £6 billion spend that customers spend each year in pet care. That's why we put more services into our business, leveraging our national physical scale. Today, we're in reach of 95% of the UK population within a 20-minute drive time of our estate. We're also re-engineering how we service those needs to make them more convenient and easy, and that's why subscriptions are so important to us. We have a great first opinion vet business, but we recognise we grew it too fast. So we're focused on those actions to get it back on track and release free cash flow growth. And finally, our specialist referral hospitals are attractive and resilient, so growing capacity and the footprint make sense. We have an unparalleled view of the pet care customer in the UK. Building our capabilities and unlocking that potential is the third pillar of our strategy. Using our data and VIP to better serve our customers. The actions and the capability we are building are starting to produce benefits and we're excited by the potential. And later on, I'm going to show you a few examples of how that potential is being released. But quite simply, data in isolation doesn't create value. Turning the data into actionable insight does. And we're using that insight to drive more retail customers into services. Better personalising our customer communications to drive more sales. Giving our store colleagues access to information as they need it when a customer's stood in front of them to help them work out the next best solution for that customer. And unlocking insight to make faster decisions. And moving forwards from looking behind to actually predicting what's about to happen and making better business decisions. Of course, as we become data and digitally savvy, I passionately believe the role of our people plays a more important role. When you speak to our customers, it's very simple. They come to stores and practices to interact with people, not machines. That's why the fourth pillar of our strategy is setting our people free to serve. People truly are the most precious asset in our business. And that's why I want to set them free from non-value-adding activity to spend more quality time with my customers. Quite simply, when they do, they create value. That's why we're focused on building systems, processes and automation to set our people free to serve. Our people are really valuable. We want them to do the things that machines can't do. Against our new strategy, we've created a set of strategic KPIs which track the progress of our delivery. These four measures align to each strategic pillar and will give us consistent KPIs to track delivery. And as you can see, we're making good progress. So in bringing the pet experience to life, our customer transactions are growing 5.3% over 59 million transactions. If you look at 50% of our services coming from pet services, our sales come from pet services, today we stand at 34%. That's 175 basis points year on year. And as we better serve customers using our VIP and data, we can see 591 million pounds worth of our sales are now associated to our VIP members. That's up 17.7% year on year. As we liberate our colleagues to better serve our customers, you can see that our sales are up 3.9% to 174,000 pounds per colleague. So let's turn our attention to our retail business. Our retail business is performing really strongly. It's returned to profit a year ahead, and we've now had nine quarters of like-for-like growth. We think that's an exceptional performance from our retail business. All parts of the business are performing strongly. If I look at my pure bricks business, that's growing at 2%. If I look at my pure econ business, it's growing at 27%. And if I look at my e-com business combined with store generator sales for e-com, such as ordering store and subscriptions, that's growing at an impressive 43% like for like. We're consistently running ahead of the market and we're taking share across all categories. I'm particularly proud of our two-year like-for-like. If you look at our final quarter in Q4, that 6.5% like-for-like goes up against a 6.1% of the prior year, which is giving us a two-year like-for-like in excess of 12%. I think by anybody's measure, that's a pretty strong performance. Of course, success in retail has many factors. Over the next few slides, I'll share with you the building blocks of that success, first turning our attention to price. Pricing in isolation hasn't driven our sales. We had become uncompetitive against a new breed of very aggressive price competitor, and they were mainly online. Our focus was on neutralising that competition, and that's been our goal. We always want to make sure that price is never a reason why you should not shop at Pets at Home. Over the last two years, we've worked really hard and really smart and we now think we've got ourselves to a compelling place. And quite simply, this is how we think about it. If I look at every single item that I sell, which is directly comparable to my most aggressive online competitor, I weight that volume back to our volume. We're within 5% of that most aggressive competitor. The toughest measure I could possibly use. But customers don't buy thousands of items in a basket. They buy items. So we then look at it through a customer lens and look at those items which are most important to them. The ones they spend most money on. The ones they buy most often. Such as things like big bags of advanced nutrition food. And on those items, our price gap is now zero or we are slightly cheaper. And on those same items, if you shop into our easy repeat service, means they arrive when you want them to, it's dead easy, we're cheaper. We're 2% cheaper than our most aggressive online competitor. We think that position has been a really hard one. It's taken us two years to get to this position. But our pricing journey, of course, as a retailer is never over. We always have to remain competitive for our customers and that's exactly what we will be doing. If you look at our key customer metrics, we're in a good place. We are recruiting more customers into our VIP loyalty club, up 12%. 20% more customers are coming to our website. 22% of our VIP customers are now buying product and services. And we're selling more private label cat and dog food than ever before, up 1.2 percentage points. We think that's really encouraging and reflective of the actions that we've taken over the last two years. Our focus is also on making sure that our digital experience is as good as our physical experience and we are demonstrating again good progress. Digital is important to us because it allows us to join up the pet care experience for customers, making it easy, making it convenient and most importantly making it accessible when the customer wants to access it. Last year we both overhauled and added to our digital experience. In the last year, we have redesigned every single digital channel with our customers. We've made it so much easier, faster and intuitive. We've significantly reduced the amount of clicks from shopping to checking out. Our new account feature puts the customer directly in charge of their journey. If they want to reorder something they've bought before, it's really quick. If you want to manage your subscriptions, it's really easy. If you want to update your pet profile, it's really simple. And they're all really important because they form the basis of a future highly personalised journey in our digital channels. You can now book your grooming for your dog online. Customers love this. No more ringing the salon. Colleagues love it too. They can focus on grooming and not answering the phone. We've also relaunched our VIP app. Your vouchers, they're now on your phone. Your card, they're now on your phone. And you can shop straight from the app, of course, to our website. Finally, you can now collect your parcels from our standalone vet practices. And that's something we'll continue to run out to more practices this year. We've also been really busy redesigning our store experience as well, and we call it the Petcare Centre. Two stores, Stockport and Chesterfield, have been refreshed in this new format. Now in the future, we recognise that stores are places that you both have to go to, but more importantly, they have to be places that you want to go to. In our new pet care centre, we just do exactly that. We're maximising our services footprint, the things today that you can't do digitally, like see the vet or like get a groom. But also we're maximising the reasons to go. We know the number one reason why people come to pets at home are because of the pets in our stores. And that's why in our new format, you have the ability to get up close and personal with our pets in our brand new interactive pet village. Customers have told us washing your dog at home is a bit of a nightmare. It destroys that 20 grand bathroom you just bought. Don't always want to groom it. So actually our new self-wash has been really well received by our customers. You can now adopt a cat from the store from our RSPCA Cat Adoption Lounge, the first of its kind in the country. Or you can attend a dog training class, a kid's pet workshop, a dog's birthday party, or indeed a child's birthday party in our new event zone. Don't smile, they're sold out. I can go on about it, but instead of thoughts, it's probably important that you can actually see it for yourself. So let's have a look at our new pet care experience. I've probably seen more pet stores around the world than you've had hot dinners. And I genuinely believe that this is one of the best pet care formats I've seen anywhere in the world. Winning new customers is the lifeblood of our pet care business. Quite simply, because our pet population changes frequently. A typical dog will live between 10 and 14 years. With a static dog population, that means every year there are hundreds of thousands of puppies being born. That's why our puppy club is so important. You want to get the customer at a very early stage. And our information shows us that actually the sooner a customer engages with us, the longer their lifetime value is to us, or the bigger their lifetime value is to us. And that's why our puppy club is focused on giving customers a very compelling reason to access all parts of our pet care experience right at the very beginning. We get them straight into VIP, which helps us control and manage our journey through their time with their puppy. It's been vitally important to our growth. The results are really compelling. Since launch, we now have 230,000 puppy owners join our club. That's roughly one in five puppies in the country have signed up to the club. They spend 17% more than puppy owners who are not in the club, and they're becoming our most valuable services customer. Of course, having done that for puppy, it makes perfect sense to do that for kitten. And since it's launched in September, we've already signed up 40,000 kittens into the club. Our focus on pet care means we access a customer's total spend on pet care. By focusing on doing so, we just access higher spend. Quite simply, the more services and channels a customer access with us, the more they spend with us. On that chart, the pink lozenges show the growth in customer numbers year on year, right through different parts of our business. So not only are we growing our customer numbers in store, We're doing a good job at leveraging the volume of customers in retail and moving them into our services business. I'm really pleased also with the work that we're moving in Ecom Anomaly Channel. That 65% growth is really strong, especially as you compare it up to a similarly strong number of last year. So let's turn our attention to our first opinion vet business. As we've previously discussed, our biggest opportunity is driving practice maturity. We don't acquire mature practices and consolidate them. We open every single practice from scratch. Only 18% of our practices are over 10 years of age. That's why practice maturity represents our biggest value creation opportunity, representing an opportunity to treble free cash flow from our vet business. Our focus is on releasing that free cash flow. But we recognised last year that following the rapid growth of our business in 2014 to 2018, a small number of practices could not be successful. And some of them needed a change in order to release their potential. In November last year, following a very thorough review, we announced plans to recalibrate our first opinion joint venture business. Everything we said we'd do is being done and exactly in line with the guidance that we set out in November 2018. Before I take you through this, one of the things I was delighted we were able to do is bring back Jane Balmain. Jane Balmain was the founder of our vet group and we encouraged Jane to come out of retirement on a temporary basis to support us. I'm delighted to say she is now the permanent COO of the vet business and we're delighted she's back permanently. Jane and the team are recalibrating our vet business focused on three actions. Firstly, we had to address practices that needed a significant intervention and we've made huge progress. We've already bought out 48 practices and we've closed 19 and we expect a further 5 to 10 buyouts and a further 10 to 15 closures in the coming months. Secondly, we identify that adjustments to some practices would accelerate their ability to become debt-free, and that's through making temporary adjustments to their fee agreements. So in doing so, that reduces the time for a JV to become debt-free, and it maximises free cash flow generation for pets. And finally, although practice openings are now a much smaller part of our future plans, we would change the fee model for new practices, resulting in lower fees in the early years and increasing the fees as a practice matures, making e-grooming simpler with fewer fee variables and also making sure that the practice is set off with more headroom on their borrowings. All three actions are progressing exactly as we planned and we are ruthlessly focused on executing them really well. Once we're complete, we will have a portfolio cleansed of issues, aligned to our ambitions of free cash flow growth. So let's turn our attention briefly to our specialist hospitals. The hospitals represent a unique and attractive opportunity in veterinary care. Today we have four hospitals across the country and we plan to continue to invest. At Dick White Referrals, we are executing a three-year plan to dramatically increase the capacity. On that photograph on the right-hand side, the red building at the back represents the extension, which increases the space by 250% or 20 consult rooms. We're doing that because Dick White is at capacity and we can see the demand for more capacity in that location. It will also cement its position as one of the leading vet hospitals in Europe. What's also important, as a centre of excellence, it's a really powerful tool in attracting and recruiting and retaining the very valuable and very scarce talent in the very senior vet professional population. Now, as we previously shared, we are building a strong subscription business. It's a key point of difference, and it's enormously value-creating for us. We're focused on making pet care really easy, simple, and convenient. And that's why customers like subscriptions. It does exactly that. but we really like them too. We like them because they maximise spend by providing repeatable, predictable revenue. We've already built a suite of great product and service solutions right across our business. And today, our performance in such a short space of time, I think is impressive. Today, we have 700,000 customers on some form of subscription plan with our business. And we're focused on growing the absolute numbers as well as growing the number of product and service solutions that we offer. Earlier, I said I'd share with you how we're building capability and value through our data. And I'm going to show you one very simple example. And this is how we build the range for our stores. So previously, it was a pretty manual process. We had a limited data set, and it's how we used that data to translate into what range was right for a store location. Today, we're now uniting a very complex set of data variables. Customer, store, product, comparatives, a lot more variables. And applying an artificial intelligence tool, we're able to analyze those results in a level that we haven't been able to do before. And more importantly, predict what we think the answer will be. The task I previously described took about a week for a store. Today, we can do 450 stores in 20 minutes. It's quite a powerful tool. So we've been implementing the results of that in a trial, and that requires us to relay stores. So in our first trial of six stores, we saw the sales in those stores versus control increased by 2%, and margin grew ahead of that. So very encouraging. So what we're now doing is stress testing that trial and putting it into more stores. But we're excited by it because once complete, we believe we've got the opportunity to build a phased rollout into subsequent years. Now, developing this step change in data insight requires investment in people and capability. And I'm delighted that we've been able to attract some very senior talent, which I think reinforces the excitement we find from our talent in the opportunity that sits inside pets at home. So I was delighted to have appointed Rob Kent as our Chief Data Officer last year, and he joined us from 10 years at Royal Mail, where he transformed their use of data. He's currently building a team of in-house experts, and that reduces our reliance on third parties, but more importantly, means we take control of data in-house. We're investing in systems to support the team in maximising their efforts, but most importantly, to help grow our business faster. And we're making good progress. So this year, we will land new, highly tailored marketing to drive more customers from retail into vets and services. We're increasing the quality of customer insights to drive more and better targeted communication. Again, that drives sales. And longer term, we'll be employing more artificial intelligence tools and building an unparalleled view of the pet care customer in the UK. And finally, all of this allows our colleagues to be set free to serve. We've been absolutely obsessed this year about freeing our colleagues up from tasks that does not create value. Employing technologies, changing systems, processes, or in some cases, just not doing things. And that drive for greater efficiency and focus on the customer is really paying dividends. As I said before, it's resulted in sales per colleague increasing by 3.9%. And we know that's a great start. The job's not done. We've got a lot more work to do. And we're going to continue to build on the success of that work. So to show you how our progress is translating into improved performance, I'm delighted to hand over to Mike, who will take you through our FY19 results. Thank you.

Good morning. As you just heard from Peter, we've made really good progress over the last year. We delivered profit ahead of expectations. Our retail business has returned to profit growth faster than we expected. And in the VET group, we're taking the right actions to drive future cash growth. That means the shape of our profit guidance for the year ahead remains unchanged, but it's from a much stronger base. So let me now give you some more details about these headlines, starting first with our key financial results. where strong revenue growth has helped us return the business to profit growth faster than planned. Total group revenue growth was 6.9%, and within that, our like-for-like sales growth was 5.7%. And that strong revenue growth helped drive the group underlying profit before tax to £89.7 million, and that's a growth year-on-year of 6.1%. The results today do include total non-underlying charges of £40.1 million and these mainly relate to the actions we're taking now in our first opinion vet business that we announced last year at our November interims and I'll give you more detail about these later. we had solid underlying free cash flow performance in the year, with cash flow growth of 14% to £63.6 million. And that's enabled us to maintain our full-year dividend at 7.5 pence a share. So let's take a closer look at what contributed to this financial result, starting first with our sales performance. We've seen strong customer revenue growth across both our retail and the VET group, helping grow group revenues in total to £961 million. We've strong like-for-like sales growth of 5.7%, and that 5.7% was even stronger than the 5.5% like-for-like sales we had in FY18. In retail, we've now benefited from nine successive quarters of like-for-like growth, as we've progressively improved both our pricing and our offer. And this growth has come from Omnichannel, it's come from our groom rooms, and it's come from our stores, which is a like-for-like growth of 2%. Competitive pricing is a key component of this growth alongside our continuing range development and product innovation. For example, advanced nutrition sales in the year grew by 10% and we've continued to see very strong growth of over 70% in monthly flea and worm subscriptions. In the vet group, revenues grew by 13.1% to over £106m. We're operating in a market underpinned by structural growth. And that's benefited both our first opinion practices and our specialist division, helping drive total like-for-like growth of 11.2%. The fee income from our joint venture VET practices grew by 5.2% to £52.6 million. And that £52.6 million excludes the £4.1 million of fee income from the practices we are buying out that we announced back in last November. So on a like-like basis, our joint venture fee income actually increased by 12.2% in the year. The revenue from company managed practices has increased to over £8 million. We now have 50 managed practices, including the practices we're buying out as part of the vet group recalibration. Back in November, we set out a plan to buy out up to 55 vet practices, and we're making good progress. The buyout programme is largely complete. Up until last Friday, we bought out a total of 48 practices and closed 19 of these. And as we buy out those practices, we will fully consolidate the revenues and operational costs from the date of acquisition. And finally, the specialist division revenues grew by nearly 10% to £37 million. And that's backed by the investments we're making to drive both capacity and capability in the division. Let's take a closer look at how these actions have flowed through into our gross margin, which reflects both our planned price investment and the actions we're taking to improve the VET group. Total gross margin in the year was 50.7%, and that's 102 basis points lower year on year. It's tracking in line with both our retail investment plans and our targets for the VET group. Within retail, our cumulative price investment has reduced our prices to within only 5% of our key competitors. In this year, the investment had an impact on group gross margin of 88 basis points, and that equates to £8.5 million in lower prices year on year. We also had a small impact of 21 basis points due to the mix effect from the strong growth we saw in omnichannel sales. These sales are cash accretive, but at a lower percentage gross margin due to the higher mix of food sales. Within the VET group, gross margin improved year-on-year to 48%. The underlying business performance drove 28 basis points, with strong revenue growth helping to leverage what is otherwise a fixed cost base. And finally, as I mentioned earlier, we have de-recognised the full-year fee income of £4.1 million from the joint venture practices we're buying out. Year on year, this reduced our gross margin by 21 basis points. Looking ahead, as we plan our gross margin, the major investment phase of our price reset in retail is largely complete. Our future price reductions will be self-funded through a combination of operational leverage, the growth of our own label, and better ranging, as Peter's just been explaining. To help support the investments we've been making in gross margin, we have continued to be very focused on managing operating costs. And here we've driven operational efficiencies at the same time as investing in our strategic growth areas. Total operating costs in the year grew by 4.6% to £357 million. That's a slower rate of growth in our sales growth of 6.9% and that's helped reduce our costs as a percent of sales by 90 basis points and mitigate some of the impacts of the investments we've been making in gross margin. We've continued to make good progress with a very comprehensive programme of operational efficiency. The programme addresses the whole of the cost base, from store payroll costs and rents, through to distribution and our support centre costs. And that's helped reduce the cost growth in the core areas of the business to only 0.6%. And that's enabled us to invest in our growth areas. And that includes 5.3 million into our omnichannel business, where our very strong sales growth, 43%, increased the fulfilment costs. And we've also invested behind our marketing and strengthening our support office team. And in the VEC group, we've invested 4.1 million to build capacity and people capability, both in our specialist division and in our first opinion shared service centre. In the year ahead, we will be adopting the new IFRS 16 lease accounting standard. And although the standard fundamentally changes the accounting treatment of our leases and rents, it makes no change whatsoever into our cash flows or how we intend to plan and manage the business. Our focus on managing rent costs will remain as strong as ever. Over the next five years, we have over 210 lease events. That's either a break or a lease renewal, and that gives us a lot of operational flexibility. So far, we've been able to reduce rents by up to 30% on the most recent lease renewals. As we enter the new financial year, we are already implementing the next phase of the actions to further reduce our operating costs. So turning now to profit. We've returned the business to underlying profit growth. Profit at the EBITDA level grew by 5.5% to £130 million. Our depreciation expense increased by 6.8% to £36.8 million, but that reflects our planned shift of capital investment to support the digital and data agenda that Peter just outlined, and those tend to be faster depreciating assets. Therefore, our EBIT profit measure grew by 5% to £93.2 million. Operating margin was 9.7%, and here we saw the 90 basis points improvement in our costs as a percentage of sales, helping offset the 102 basis points reduction in gross margin percent. As a result, underlying PBIC grew by 6.1% to £89.7 million, and that strong profit growth helped improve EPS to 14.1 pence, and we plan to maintain our four-year dividend at 7.5 pence a share. Non-underlying items are £40.1 million and in the main that's driven from the costs relating to the buyout of 55 first opinion practices we announced last November. So far we've spent £40.4 million and we expect to complete the full buyout programme within the overall total cost of £49 million we announced last year. That means we're expecting a further £8.5 million of non-underlying costs in FY20. Turning now to our CapEx spend in the year, our capital expenditure is now fully aligned to our strategic goals. Total capital spend in the year was £34.5 million. That compares to £40.7 million in FY18. Looking ahead, we are still planning to spend up to £40 million of capital a year, and that investment is going to be focused on four key areas. First, investing behind our strategy to make our stores complete pet care centres, offering our customers product, advice and services. Our first two in Stockport and Chesterfield are great examples of what we believe we can achieve. Second, investing behind our data and digital agenda. This year we relaunched our website across all platforms. That helped improve its look and feel, it increased the transactional speeds and it made shopping easier for our customers. Thirdly, we'll spend capital to improve the efficiency of our business, for example in distribution. In the year, we invested over £3 million in our seven distribution centres in Northamptonshire. That helped automate our online picking and reduced our cost to serve. Finally, We'll spend capital on building both capability and capacity in the VET group. For example, we're looking to expand our specialist referral centres, both through extensions to our existing centres, such as the investment that Peter just outlined in Dick White Referrals, but also through adding new centres that further increase our national coverage. Our overall cash return on invested capital remains strong at nearly 19%. and will continue to take a disciplined returns approach to all of our capital investment. That approach to capital investment, together with our solid operational performance, means that we continue to be strongly cash generative. And this has enabled us to maintain our dividend payment, as well as taking the right actions in the VET group. Our operating cash flow was £126.5m, After adjusting for non-operating cash items, including the lower capex, underlying free cash flow improved to 63.6 million. That gives us a strong conversion of nearly 49% on the underlying EBITDA. Non-underlying cash outflow of 8.9 million, you can see on the slide, in the main relates to our joint venture buyout programme and was used to repay bank debt and partner loans. we estimate that the full cash costs of the buyout programme will be within the £27 million we announced last November. Therefore, there's a further £19 million expected in FY20. After all the cash flows, including the buyout programme, retained cash was a positive £14.7 million. That helped reduce our net debt from £135 to £120 million and leverage from 1.1 to 0.9 times. Looking ahead into this year, we do need to comply with the new rules for the faster payment of corporation tax. This means we're going to make an additional one-time only tax payment of around £11 million. That equates to a full payment of our corporation tax in FY20, which previously we would have paid part of in FY21. The impact of this change in the payment of corporation tax means our group underlying free cash flow for the year ahead will be lower. Working capital is a really important component of that overall cash flow and our working capital remains strong and our operating loan balance has decreased. We continue to have a strong trade working capital cycle. The increase you see on the slide in our inventory of 7.3 million includes 4 million for the stock build we announced in January to protect the business from the potentially disruptive impacts of Brexit. Strong payables and receivables helped offset that stock build, giving an overall improvement of just over £12 million in our trade working capital. That helped fund an increase of £9.6 million in the operating loans to our ongoing joint venture practices, leaving a total group cash working capital improvement of £2.5 million. The bottom of the slide includes a table showing the movement on the operating loan balance and the split of the provision between the practices in our buyout programme and the underlying element for our ongoing practices. In total, we've got a provision of £14.3 million against an overall gross operating loan balance of £42.2 million. And that provision of £14.3 splits £7.2, which is a full provision held against the remaining operating loan balances for the practices we've still got to buy back, and £7.1 held against the operating loans for the ongoing practices. And as I mentioned earlier, we estimate that we'll complete the full buyout programme of 55 practices within the total P&L impact of £49 million and cash costs of £27 million that we announced at our interim results last November. So, in summary, we've delivered a strong set of financial results. As shown by our key financial measures, we've benefited from strong like-for-like sales growth across both VET group and retail... The underlying gross margin is in line with where we planned it to be. We've got underlying profit growth in both our VET group and retail. And the retail business has returned to profit growth faster than planned, helped by that very strong sales growth and a sharp focus on controlling our costs. Finally, we're generating strong underlying free cash flow and conversion in both VET group and retail. So in conclusion, we're coming to the new financial year with real momentum in the retail business, which in the year ahead will translate into profit growth in retail. And we're making meaningful progress to reset our VET group on a stronger foundation for future cash growth. The buyout programme is on track and we will be adjusting the fee arrangements for some practices to reduce the need for operating loans going forward. The progress we've made, which is in line with the plan we set out, means that the shape of our profit guidance for the year ahead remains unchanged, but builds from a much stronger base driven from last year's outperformance. Thanks for listening. I'll now hand back to Peter to wrap up and then we'll go into Q&A.

Thanks Mike. So you can see for yourself we're making good progress against our plans. We're delivering exactly what we set out to do. I think we're also demonstrating how a specialist like ourselves can continue to thrive and grow in a very changing consumer environment. We're a key player in the pet market and that market has continued to forecast to grow. And that I think provides a very exciting opportunity for us within that marketplace. We're leveraging our unique assets and creating compelling and unique proposition for customers as being a pet care business which is delivering for customers. We remain really confident about the year ahead and we enter the year with good momentum. As we were previously guided, this year we will complete the recalibration of our vet business alongside a retail business which is now back on track. We expect the business to return to profit and cash growth in FY21. So that's all from Mike and I now. We'd like to open the floor for questions. If you do have a question, it would be really helpful if you could raise your hand so we can get a microphone to you. Thank you.