Pets at Home shares gained 8.8% to 305.6p in late morning trading on Wednesday, following record sales of £1.3 billion and a like-for-like rise of 15.8%.
The company confirmed an increase in group customer revenue of 16.5% to £1.6 billion, reflecting market share gains spread throughout all business sectors.
The pet specialist firm reported an underlying pre-tax profit growth of 65.3% to £144.7 million compared to the previous year, ahead of market expectations.
The group reported a free cash flow of £95 million, marking a 40.9% rise year-on-year, including positive cash generation across its First Opinion veterinary practices.
Business Development
Pets at Home confirmed a record VIP number of 7.3 million members, representing an increase from FY 2021 of 18% to 1.1 million.
The firm reported approximately 23,000 weekly registrations per year, marking a 16,000 member rise compared to FY 2019.
The company noted that 27% of VIPs bought items across more than one channel over the year, bringing the proportion up 22% since the last year, boosting the group’s lifetime value interest.
The firm also saw an increase in new client registrations to its First Opinion practices to 1.7 million, with an average of 9,000 new client registrations per week.
Pets at Home noted a 23% uptick in pet care plan subscriptions to 1.5 million, generating approximately £120 million in annualised recurring customer revenue.
“The UK pet market’s grown 4% per year on a compound basis over the past 5 years and continues to look strong as the pandemic fuelled surge in pet ownership doesn’t look to be going anywhere,” said Hargreaves Lansdown equity analyst Matt Britzman.
“Revenue’s outpaced that, growing around 10% over the same period which is testament to the work done at Pets at Home to push the omnichannel experience and sign customers up to the pet care ecosystem with subscription services now generating over £120m in recurring revenue.”
CEO Lyssa McGowan
The company reported a soaring slate of positive results, right in time for new CEO Lyssa McGowan to step up to the plate and steer Pets at Home into its next stage of growth.
“We are well placed to accelerate our growth in market share. The robust backdrop of the UK pet care market, coupled with our clear strategic priorities, proven omnichannel model and strong Executive Team, mean that I hand over leadership of this great business to Lyssa McGowan with the utmost confidence that Pets at Home will continue to create value for all stakeholders in both the near and longer-term,” said Pets at Home CEO Peter Pritchard.
Analysts commented that McGowan had her challenges cut out for her as inflationary pressures rose, however it appeared unlikely that customer demand for the firm’s services and products would be disappearing en mass anytime soon.
“Lyssa McGowan has big shoes to fill. With yet another record year in the books for Pets at Home, the incoming CEO has her work cut out for her,” said Freetrade analyst Gemma Boothroyd.
“Red hot inflation and the growing cost of living mean the UK could continue to feel the heat. [However], Pets at Home has proven it’s not a one hit wonder. The lockdown winner has maintained sustainable revenue growth as we emerge from the pandemic too.”
“Pets at Home’s already proven its services segments are critical for its revenue growth. They’re also how the retailer can prove the value behind its brick and mortar locations, which provide the benefit of up-sell opportunities as well. Services will also protect the firm from international behemoths like Amazon from gobbling up more of the UK retailer’s market share.”
Inflation
Pets at Home assured investors that inflation across its supply chain was being managed proactively, with a projected underlying pre-tax profit of £146 million to £157 million, according to analyst expectations.
Dividend and Share Buyback
The firm mentioned a strong balance sheet, with net cash of £66 million, excluding lease liabilities, and announced a final dividend uptick of 36% to 7.5p, bringing its total dividend to 11.8p per share for FY 2022.
Pets at Home also confirmed the launch of a 12-month share buyback scheme of up to £50 million in the coming year.
“Record new VIP customers mean cash is flowing through Pets at Home … The strong performance and balance sheet with net cash mean investors are being rewarded with a £50m buyback as pet ownership shows little sign of slowing down,” said Britzman.
