Pets at Home Group Plc

Good morning. I hope you're all safe and well, and thank you for joining our Financial Year 2021 results. I'm Peter Pritchard, the Group CEO, and with me today is Mike Iden, our Group CFO. I'm sure I'm not alone in characterising the past year as one of the most challenging environments in living memory. I can clearly recall standing here one year ago, early into a new financial year, with the world looking a very unfamiliar place. Covid has been disruptive, destructive and for some, life-changing. But even in tough times, positive things happen. This last year has seen the role pets have played in our lives. More people than ever have become pet owners and are experiencing the highs and the lows of being a pet owner. It's a life-enriching experience which, as many pet owners will testify, has provided comfort and companionship in such challenging times. The UK has always been a nation of pet lovers, and this last year more people than ever have enjoyed this uniquely rewarding experience. As such, our market has fundamentally changed, not just through COVID, but for many, many years to come. and we're looking to the future. And as we look forward, we are optimistic about our plans and ambitions for our business. Our strategy is really simple to grow our share of the pet care wallet by meeting all of the pet owners needs. We aspire to be the best pet care business in the world. There are four messages to take away from today's announcement, and they underpin the opportunity for pets at home. First, the pet care market has grown, driven by the growth in pets and owners and the market was strong pre-Covid and we now believe the market will accelerate around 4.5% in Kegel for the foreseeable. Second, we have a plan that will drive a 600 million customer revenue opportunity over the medium term, continuing to grow our share of the growing pet care market. Third, we are cementing our position as the UK's leading omnichannel pet care business, executing our transformational plan. We're investing and transforming our shops into pet care centres, investing £20 million into Project Polestar, our 18-month plan to create our pet care digital platform. And as previously announced, we'll also deliver our new single distribution centre in 2023. That will increase our capacity, our speed and our efficiency to serve our growing business. And finally, we will continue to leverage our investment into our data capabilities as we build our pet care subscriptions volumes and continue to personalise our customer experience. Our track record shows great progress and the latest results are further evidence of the achievements that we've made, despite the incredibly difficult backdrop. Now, speaking of results, I'll hand you over to Mike, who will run you through the headlines for FY21.

Thanks, Peter. We are very pleased with our full year results, especially in the context of a year dominated by the COVID pandemic. And these really positive results demonstrate the resilience of the pet care market, the strength of our business model and the relevance of our strategy. And just before I run through our headline numbers, it's worth pulling out four standout highlights from our results. We delivered £87.5 million of profit before tax that exceeds market expectations and we've built strong momentum in our sales with second half group like-for-like growth of over 12%. Secondly, over the last 12 months we've gained a significant number of new customers and we've grown our market share from 20% to 23%. We've benefited from a step change in the growth of the market, with the overall number of pets increasing by about 8%. And our unique pet care ecosystem means we are really well placed to benefit from this in the coming years. And finally, we exit the year with our strongest ever balance sheet. And that gives us both the confidence and the capacity to step up our investment across our strategic growth areas. So turning now to the full year numbers. and looking first at our strong revenue performance. Total group revenue increased by 7.9%, with like-for-like growth of 8.7%. That's 17% on a two-year like-for-like basis. And this reflects the acceleration in our momentum across all channels as the year progressed, with our group like-for-like increasing by 12.4% in the second half. In our retail business, like-for-like revenues grew by 8.8% and our total revenue exceeded a billion pounds for the first time and that was despite a 29% decline in revenue from our grooming operations which were impacted by Covid restrictions for much of the year. Within the overall retail performance, omnichannel revenues grew by almost 72% year-on-year and its participation in total retail revenue increased from 10% to 15.8%. Our stores also benefited from strong growth with second half like-for-like of 4.9% and this clearly demonstrates the key role our stores play within our pet care ecosystem. Category wise, food revenue grew by just under 7% in the year, well in excess of the underlying market and we saw strong growth in new customers and accessories revenues including consumables such as litter and bedding grew 15% as more pets came into the market and into our stores. In our vet group, full year light for light revenue growth was 7.9% and that was despite the impact of restrictions placed on veterinary procedures especially in our first half. And like-for-like growth in the second half was an impressive 17.2% as those onerous restrictions began to lift and growth in pet ownership led to strong levels of new client registrations across our practices. Turning now to our full-year profit results. Group underlying pre-tax profit was £87.5 million and that was driven by strong revenue growth stable gross margin and robust underlying cost control. That result is slightly ahead of guidance and although profit declined 6% year on year, it was after an adverse impact of approximately £30 million from a combination of revenue restrictions and incremental operating costs relating to the pandemic, some of which we expect to continue throughout the coming year. And this profit result also includes the voluntary repayment of £28.9 million in business rates relief. Adjusting for the timing of the rates repayment, underlying pre-tax profit in our second half was up 22% year on year. Group statutory profit was £116.4 million. And that includes £30 million profit on the disposal of our specialist referral hospitals, which we sold at the end of December. The cash and deferred consideration of up to £100 million. we continue to be good cash generative. Group underlying free cash flow was 67.4 million. That includes a year-on-year increase in working capital of about 6 million as inventory levels were rebuilt following customer stock piling at the end of last year. That was partly offset by a 10.8 million reduction in the gross value of operating loans to our joint venture practices as the profitability and the cash generation stepped up across our veterinary estate. Cash capital expenditure was £35 million and that reflects the investment in our strategically important areas including our distribution network, our store transformation programme and data analytics and systems. We ended the year with a net cash position of £1.4 million including £80 million of the initial proceeds from the disposal of our hospitals and that gives us significant capacity to invest both organically and inorganically to drive future profitable growth and our net debt on a post IFRS 16 basis reduced by over 140 million pounds to 408 million giving us leverage of 1.9 times and that's down from 2.5 times in the prior year the strong cash generation in the year has enabled us to increase our final dividend by 10% to 5.5p or 8p for the full year. And going forward, as part of a refreshed framework for capital allocation, we intend, after any organic investment, to pay a progressive dividend each year which equals about 50% of our earnings. Our strong liquidity and robust cash flow gives us the confidence to invest to grow the business and we plan to step up our capital investment to about £70 million in the year ahead to take full benefit from the step change we've seen in market growth. In summary, Pets at Home continues to go from strength to strength We've seen a step change in the growth rate of the pet care market and our unique business model and the investments we are making to further improve it will enable us to continue to grow our market share. I'll now hand back to Peter. Thank you. Thanks, Mike.

I'm incredibly proud, proud of our business and proud of the collective efforts of our colleagues and partners from across the group who have helped adapt our business to provide essential pet care through the pandemic and they've worked tirelessly to serve our customers needs often in adverse circumstances. I'm also proud of the way we continue to treat all our stakeholders respectfully and fairly through the crisis, from supporting our colleagues' emotional and financial well-being, increasing our support to nominated pet charities and continuing to pay our suppliers and landlords throughout. We're a far stronger pet care business emerging from the pandemic without government support, and voluntarily repaying £29 million worth of business rates relief. This year we celebrate our 30th birthday, starting with a single pet shop in Chester, growing into the pet care provider we are today. Our business has always been successful at adapting and responding to the needs of pet owners. Over the last five years, we've proactively repositioned our business from a pet shop to an omnichannel complete pet care provider. We've increased our share of high growth segments such as the first opinion veterinary services, online pet care and subscription product services. Our rate of growth has consistently outperformed the underlying market in all the segments in which we operate. Our business is unique in its capabilities and in the unique appeal to pet owners by providing everything they need easily and conveniently. The plans we're laying out for our next five years are equally as exciting because we believe in life we're better with pets. We believe the best of pets is yet to come. Thanks for watching. Stay safe and take care.