Pets at Home backs FY guidance as interim revenues grow

28th Nov 2023 07:21

(Sharecast News) - Pets at Home backed its full-year guidance on Tuesday as it posted a jump in interim revenues, although profits fell as it continued to invest in its new digital platform and moved to a new distribution centre.

In the 28 weeks to 12 October, total group revenue rose 6.5% to £774.2m, with like-for-like revenue up 6.2%.

Vet Group revenue was ahead 19%, with LFL revenue 17.3% higher, accelerating in the second quarter. The company said record sales were supported by higher average transaction value, mix and visits as it increased vet capacity.

Meanwhile, retail revenue grew 5.2%, with LFL sales up 5.2%. After first-quarter LFL growth of 7.1%, sales in Q2 were hit by short-term availability issues as the distribution centre ramped up, causing LFL growth to dip to 2.7%.

Pets said the impact was contained and "swiftly corrected" with availability having now normalised.

Underlying pre-tax profit declined 19.3% to £47.8m as the company continued to invest in its new digital platform. Pets pointed to higher logistics cots of around £8m and a £2m brand relaunch. The company also highlighted non-underlying costs of £13.1m associated with its distribution centre transition.

Despite an uncertain consumer environment, Pets backed its guidance for full-year underlying pre-tax profit of around £136m, in line with analyst consensus.

Chief executive Lyssa McGowan said: "H1 has been a critical period in laying the foundations of our platform for future growth. This was the period of high activity when we relaunched our brand, launched our new distribution centre, built our new digital platform, and made progress expanding and improving our physical assets across Retail and Vets.

"This period has not been without challenges, but we have been able to manage these well and are on track to finish FY24 with a refreshed, modernised infrastructure, fit to deliver growth for many years to come."

Pets said the early weeks of the third quarter have started well, with retail LFL growth of around 4%.

At 1215 GMT, the shares were up 2.3% at 293.86p.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "Desires to keep our four-legged friends fed, watered, and entertained has helped the company reach £1 billion in half year sales. Conditions still seem clement for the pet chain, although the Competition and Markets Authority's ongoing investigation into the vet sector is still a headwind. While this isn't the entire business case, an unfavourable set of rulings could hamper sentiment, but there's cautious optimism that this won't be the case.

"In the broader business, fears that the lockdown surge in ownership would subside don't seem to be materialising. Working from home habits have kept the trend strong and recurring revenue is bedded in. However, given the competitiveness online, the company must ensure it keeps all its ducks in a row as it continues to expand."