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Pets At Home Group PLC (PETS) Ordinary shares GBP0.01

Sell:146.20p Buy:146.50p 0 Change: No change
FTSE 250:0.16%
Market closed Prices as at close on 20 May 2019 Prices delayed by at least 15 minutes | Switch to live prices |
Sell:146.20p
Buy:146.50p
Change: No change
Deal now Deal for just £11.95 per trade in a ISA, Lifetime ISA, SIPP or Fund & Share Account
Market closed Prices as at close on 20 May 2019 Prices delayed by at least 15 minutes | Switch to live prices |
Sell:146.20p
Buy:146.50p
Change: No change
Market closed Prices as at close on 20 May 2019 Prices delayed by at least 15 minutes | Switch to live prices |
Deal now Deal for just £11.95 per trade in a ISA, Lifetime ISA, SIPP or Fund & Share Account
The selling price currently displayed is higher than the buying price. This can occur temporarily for a variety of reasons; shortly before the market opens, after the market closes or because of extraordinary price volatility during the trading day.

HL comment (22 January 2019)

Pets at Home is on track to deliver full year targets, including profit before tax of £80m - £85m.

Group like-for-like revenues grew 5.1% in the third quarter.

The shares rose 3.5% in early trading.

Our view

Pets at Home serves a resilient and growing market, and its stores are slicker and larger than most independent rivals.

In the past that's helped it hoover up business just by rolling out stores to new locations. Once open, additional services like grooming and vet practices can be tacked on, driving footfall up and increasing the likelihood of repeat custom.

Unfortunately all's not been so simple more recently. Cheaper online alternatives have forced Pets to cut prices to remain competitive. In an online world, Pets is by no means a big fish and competitors are much more dangerous than the independent stores the group has made light work of.

Despite lower sales prices trashing margins, we feel the group made a sensible choice given the options available. Pets needs to keep customers coming through the door if it's to effectively cross-sell those additional vet and grooming services.

The turnaround is going well, with customers returning on the back of price changes. But the problems now seem to have shifted to the veterinary business.

That's partly due to factors outside Pets' control. A decline in the number of EU vets in the UK is putting pressure on salaries and also making it more difficult to find new partners.

A shakeup of the business is going to be expensive, and Pets at Home is buying back some of its struggling franchised clinics. But sales momentum is positive, and the bumpy start shouldn't hinder longer-term progress. Pets still has the chance to make its stores a relatively attractive one stop shop for owners.

For now, the dividend remains covered by free cash flow, and debt is well within target levels. So, provided restructuring costs don't get out of hand and recent sales momentum continues, investors should get a prospective yield of 5.9% while they find out if there's a recovery around the corner.

As ever though, there are no guarantees.

Register for updates on Pets at Home

Third Quarter Results

Group revenue increased 6.3% to £237.2m.

Pets' Retail division saw revenues rise 5.5% to £213.4m in the third quarter, with online sales rising 41.5% to £19m and like-for-like (LFL) growth of 4.7%. The group continues to keep prices low.

The Vets Group saw total revenue rise 13.6% to £23.8m, as mature practices continue to grow ahead of the market.

Vet LFLs grew 9.1%. That's behind 16.7% growth at the half year, as fee income for the practices being bought back buy the group has not been included this quarter.

Active VIP club members have increased by 400,000 since the same period last year, to 4.2m and 70% of revenue is now accompanied by a VIP card swipe.

Looking ahead, the group expects a charge of up to £42m, including a cash charge of up to £13m, relating to the Vet Group restructure. It also said it will consider increasing inventories by £8m in response to Brexit.

Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Thomson Reuters. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.


Previous Pets At Home Group PLC updates

Data policy - All information should be used for indicative purposes only. You should independently check data before making any investment decision. HL cannot guarantee that the data is accurate or complete, and accepts no responsibility for how it may be used.
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