Pets at Home Group Plc (LON:PETS), the UK’s leading pet care business, announced today the following post-close trading update for the year ended 26 March 2020.
Full-year underlying pre-tax profit slightly ahead of expectations
For most of our fourth quarter the Group traded in line with market expectations1, reflecting the continuous execution of our proven pet care strategy. In the closing weeks of the financial year we have, however, experienced exceptional levels of demand, both in-store and online, as the COVID-19 crisis has developed, and have seen existing customers increase average basket size by pulling forward purchases as well as new customers access our pet products and healthcare services.
Our previous investments in omnichannel capacity, new customer acquisition channels and subscription services had equipped us to meet above-trend levels of demand and, with disruption in Far East supply stabilising relatively quickly, our product availability held up well.
Accordingly, we now expect underlying pre-tax profit for the full year to be slightly above the top end of the range of current market expectations1.
Balance sheet and liquidity
Our balance sheet is resilient and we maintain strong and supportive relationships with our banking partners. We have extensive headroom on debt capacity and covenants with a significant proportion of our committed £248m Revolving Credit Facility (RCF) remaining available for drawdown pre maturity in 2023. Total liquidity including cash balances is approximately £160m, and we expect to end FY20 with a net debt/EBITDA ratio pre IFRS16 of under 1.0x.
In view of the prevailing backdrop, we remain vigilant across our funding requirements, ongoing measures for cash preservation and prudent allocation of capital.
Our priorities are first and foremost to safeguard the wellbeing and safety of our colleagues, Partners, suppliers, customers and pets, as well as ensure continuity of customer service in our stores, Distribution Centres and support offices, and we have implemented a number of protocols in this respect. These include removing all but essential travel, the adoption of alternative working arrangements for colleagues, procedures to protect the health and safety of our colleagues and customers and advice and support to colleagues on maintaining good health and wellbeing.
Our designation by the UK Government as an “essential retailer”, together with the national distribution of our UK store estate, means that we can continue providing those pet products and health care services that are deemed essential to the nation’s pet owners, at a time when pets are playing an increasingly vital role in our daily lives.
In seeking to strike a balance between providing essential services to the public alongside safeguarding the health and wellbeing of our customers and colleagues, we have closed our Groom Room salons and implemented all Government advice regarding social distancing across our operations. While nearly all of our First Opinion veterinary practices, and all of our Specialist Referral centres, currently remain open to provide urgent and emergency pet health care, in line with industry guidance, we do anticipate reduced customer revenues. This, together with the likelihood of lower store revenues resulting from other necessary measures we have implemented, is expected to have a negative impact on our normal levels of Group turnover as we start the new financial year.
Pets at Home is a resilient business with the capability to adapt and respond quickly to changing market conditions. We have an experienced management team who are not only determined to successfully navigate the Group through these unprecedented times, but also to create a stronger pet care business for the future, in line with our previously communicated longer-term strategy.
Given the uncertain backdrop, we do not think it is appropriate to give financial guidance for FY21 and beyond at this stage. Subject to audit completion timelines, the Group currently plans to announce its final results on Thursday, 21 May 2020, although this date will be confirmed in due course.
Peter Pritchard, Pets at Home Group Chief Executive Officer, commented:
“While FY20 has undoubtedly ended strongly for Pets At Home during this unprecedented time, the period ahead is uncertain for us all, and Pets At Home will not be immune to these challenges that we collectively face. I am extremely grateful that our colleagues and operations have shown such resilience and flexibility to meet the recent exceptional level of demand from both existing and new customers. As ever, in difficult times consumers turn to trusted brands and advice, and that is why we are working tirelessly to ensure that we continue to provide essential products and healthcare services for the UK’s pets.
The health and safety of our colleagues, Partners, suppliers, customers and pets remains our top priority. We continue to take all appropriate action in line with Government advice and remain vigilant to the potential impact of COVID-19 as we start the new financial year. We are also providing support for the communities that need us through £1.1m of funding to nominated pet charities, a £1m crisis fund for colleagues and discounts to NHS workers as they care for the nation’s health. Finally, I would like to thank all our fantastic colleagues, Partners and customers for their amazing support during this challenging period. Amidst an unprecedented backdrop, never has our role as a pet care provider been more important, and never have we been more determined to serve the nation’s pet owners”.
- As at 26 March 2020, the Company compiled consensus for full year pre-IFRS16 pre-tax profit was £93.7m, ranging from £92.0m to £97.1m. The impact of IFRS16 is expected to reduce Group underlying profit before tax by c£6-7m in FY20