Pets at Home Group PLC · LSE:PETS
Pets at Home — Investor Day (May 2023)
61 slides from Pets at Home's investor day presentation, May 25, 2023
Slide 1: Building the world's best pet care platform
Building the world’s best pet care platform
Slide 2: Agenda for today
Agenda for today Our vision for the future of pet care Lyssa McGowan, Chief Executive Officer An integrated consumer experience Kathryn Imrie, Chief Consumer Officer Our unique data and digital platform William Hewish, Chief Information Officer Differentiated, sector-leading vets Louise Stonier, Vet
Slide 3: Our vision for the future of pet care
Our vision for the future of pet care Lyssa McGowan Chief Executive Officer 3
Slide 4: We have a unique position in a structurally growing market
We have a unique position in a structurally growing market We are the only true complete pet care provider with Structural trends will drive further growth a 24% share of a £7.2bn UK market £3.4bn £1.0bn £2.5bn £0.3bn Premiumisation Humanisation Penetration Food: 22% A step change Pet owners Human t
Slide 5: We are the clear market leader, with a strong platform for growth
We are the clear market leader, with a strong platform for growth A track record of taking share A leading market position 24% market A growing Well-invested Strong financials share consumer base infrastructure 18% £7.2bn Pets market Stat Revenue VIP Members Pet care centres share CAGR £1.4bn 7.7m 4
Slide 6: A clear strategy to unify the business and drive us forward
A clear strategy to unify the business and drive us forward Our purpose To create a better world for pets and the people that love them Our vision To build the world’s best pet care platform Integrated Omnichannel Consumer-centric a unified blend of products, services and advice seamlessly connected
Slide 7: Unified by a shared purpose
Unified by a shared purpose Our purpose To create a better world for pets and the people that love them 7
Slide 8: A bold, clear, and compelling vision
A bold, clear, and compelling vision Our vision To build the world’s best pet care platform Integrated Omnichannel Consumer-centric a unified blend of products, services and advice seamlessly connected an unrivalled experience • Nutrition • Physical petcare centres and • Accessories • Seamless and f
Slide 9: Our pet care platform drives differentiated economics
Our pet care platform drives differentiated economics Integrated Omnichannel Consumer-centric a unified blend of products, services and advice seamlessly connected an unrivalled experience Delivering economies of scope Driving economies of scale and Fuelling consumer and revenue higher productivity
Slide 10: Our values underpin everything we do
Our values underpin everything we do Our values Pets People Planet To improve the life of To be the best employer To make pet care every pet in the UK and developer of talent environmentally sustainable By being the leading advocate for pet By creating rewarding, sustainable By leading in sustainabl
Slide 11: Our strategy will drive compelling growth in sales, profit and FCF
Our strategy will drive compelling growth in sales, profit and FCF A growing Consistently Driving high- Reward market taking share quality growth shareholders c4% c300bps +10% £50m Forecast market CAGR over Market out performance pa, PBT grows at 10%, FCF to Progressive dividend, further the medium
Slide 12: Our new brand world brings it all together
Our new brand world brings it all together [video not included on web-ready version]
Slide 13: An integrated consumer experience
An integrated consumer experience Kathryn Imrie, Chief Consumer Officer 13
Slide 14: With years of caring for pets, we know our role
With 30 years of caring for pets and the people who love them, we know our role We provide everything We offer our expertise we know owners need, in through trusted and an easily accessible way, valued advice that helps that suits them. owners take great care of their pets. We provide the best produ
Slide 15: More pet owners trust us than anyone else
More pet owners trust us than anyone else… 73m 8.9m Transactions 5.2m Online orders 1.3m Vet Visits 0.9m Puppy & Kitten sign ups Dogs Groomed 70% of pet owners trust us – c7 times that of the nearest competitor 15
Slide 16: …and we understand their needs better than anyone else
…and we understand their needs better than anyone else We have the best proprietary data set in the industry Our data insights have already delivered significant with over 10 years of data on 8 million consumers. value, but we are only getting started. +0.7m non-VIP 170% Vet clients 7.7m Incremental
Slide 17: Behaviour is predictable and demand is sticky supporting high LTV
Behaviour is predictable and demand is sticky supporting high LTV …and we have acquired a lot of new consumers to support Spend is sticky and predictable… 12-15 years of future value Cohort (year of joining VIP club) 2019 2020 2021 2022 2023 42% of VIP pets are <3 years old Consumer ACV Pet age: 1 2
Slide 18: Growing share of wallet is our greatest opportunity
Growing share of wallet is our greatest opportunity Drivers of engagement Lower Quartile Second Quartile Third Quartile Upper Quartile Accessories participation 63% 77% 79% 84% Vet participation 3% 11% 23% 36% Own Brand participation 36% 47% 59% 73% ACV Fanatic c£950 Average VIP c£160 Engagement Inc
Slide 19: An integrated consumer experience
An integrated consumer experience • We know pet owners best and they trust us for our care and expertise • We are the only player that can integrate services to provide a complete pet care solution • Demand is sticky and predictable supporting attractive LTV and cohort dynamics • Gaining share of wa
Slide 20: Our unique data and digital platform
Our unique data and digital platform William Hewish, Chief Information Officer 20
Slide 21: Creating a truly integrated omnichannel petcare business
Creating a truly integrated omnichannel petcare business Colleague Device Consumer App and Practice Management Website System Digital Platform ACE Device Pet Care Centre Consumer Vet Practices Physical Platform 21
Slide 22: With the foundations built, we are now delivering sustained improvements
With the foundations built, we are now delivering sustained improvements in consumer experience Data Platform Fully in-housed cloud-based data Pets App solution bringing together VIP, Bringing together loyalty & ecommerce and clinical data to shopping with single sign on create our Customer DNA acro
Slide 23: Our digital capability will deliver a succession of improvements over the next 2 years
Our digital capability will deliver a succession of improvements over the next 2 years Joined-up Integrated Pet New PMS Pilot Pet Care Care experience One way to manage, subscribe, Personalised 121 experience, bringing Delivering improved interact and shop across together all your petcare needs effi
Slide 24: Our unique data and digital platform
Our unique data and digital • Our digital and data investment is core to our plan platform and is a key enabler for growth • We have already delivered a lot and there is much more to come • We have a clear plan ahead to create a truly joined up pet care experience across our digital and physical ass
Slide 25: Differentiated, sector-leading vets
Differentiated, sector-leading vets Louise Stonier Vet Chief Operating Officer 25
Slide 26: Our full service, primary care veterinary business is a clear differentiator
Our full service, primary care veterinary business is a clear differentiator in the sector Creating value for our Clinical freedom within Significant scale as one partners through our full service practices of UK’s largest providers unique JV model 68% £36m 69% of revenue from Dividends drawn by of
Slide 27: Our unique JV model delivers superior returns across the partnership
Our unique JV model delivers superior returns across the partnership JV model delivers sector-leading financial outcomes Driving strong, sustained practice performance Corporate JV practice competitor (debt free) £1.4m +13% CAGR £1.2m Average practice c£1.1m c£1.4m sales £1.0m £0.8m Average practice
Slide 28: It is now a c£500m consumer revenue business contributing almost half of Group FCF
It is now a c£500m consumer revenue business contributing almost half of Group FCF Practice growth translating to overall growth…. ….and a material contribution to the group Consumer +15% Revenue £140m CAGR 28% £120m c£493m £100m +14% CAGR PBT £80m £60m +23% CAGR 37% £50.9m £40m £20m FCF £0m FY19 FY
Slide 29: Maturity alone will drive a further 25% growth in practice sales
Maturity alone will drive a further 25% growth in practice sales Practice Estate Vet Group 100% 100% practice £1.6m practice £700m maturity maturity 36% £1.4m practice £600m 36% maturity practice maturity £1.2m £500m £1.0m £400m £0.8m £300m £0.6m £200m £0.4m £0.2m £100m £0.0m £0m FY23 At Maturity FY
Slide 30: Maturity also opens up multiple additional growth options
Maturity also opens up multiple additional growth options for our practices Multiple, complimentary levers of growth 20+ 10+ Extensions Advanced Practices in 2024 in medium term 5-15 24hr openings per year Hospitals 30
Slide 31: Together these opportunities will drive significant growth of our vet business
Together these opportunities will drive significant growth of our vet business +9% CAGR 50% of growth from 50% of growth from strategic investments embedded maturity £493m Consumer Revenue FY23 Embedded Practice Practice Advanced Medium Term Maturity Rollout Extension Capabilities 31
Slide 32: Our pet care platform delivers sustainable competitive advantages
Our pet care platform delivers sustainable competitive advantages for us and our vets to underpin this growth Clinical talent development, Operational and scale benefits Unique platform services retention and productivity …driving efficiencies and allowing …allowing us to effectively grow …allowing
Slide 33: Differentiated, sector-leading vets
Differentiated, sector-leading vets • Our vet business is among the best in the industry and our JV model is unique • Embedded maturity alone will drive a further 25% growth in practice sales • We have multiple levers to drive growth over and above practice maturity • There are clear benefits to our
Slide 34: Scale and category authority
Scale and category authority Lisa Miao Retail Chief Operating Officer 34
Slide 35: We have unrivalled scale and reach supported by a profitable, flexible physical estate
We have unrivalled scale and reach supported by a profitable, flexible physical estate # of pet care Average unexpired Average rent centres lease length reduction 457 5yrs 20% % of VIPs within 15m % of online orders1 % of subscription drivetime of a store collected in store signs ups in store 75% 40
Slide 36: We will continue to invest significantly in our physical assets
We will continue to invest significantly in our physical assets 40+ new pet care centres in medium term 5-15 new vet practices a year 20+ vet extensions in FY24 30+ space swaps in FY24 36
Slide 37: Food anchors our retail growth strategy, driving frequency and spend
Food anchors our retail growth strategy, driving frequency and spend Consumers who spend more on food, engage …and spend more with us overall with us more frequently… +c4x +60% uplift in uplift in non- frequency food spend Annual Spend on Non-Food Annual Frequency Grooming Grooming Acessories Access
Slide 38: We will build on our track record of innovating in high-value market segments
We will build on our track record of innovating and growing new and high-value market segments We already over index in the fastest growing …and we are uniquely placed to open up new segment… premium categories +£76m c1% c7% Frozen & Fresh forecast market CAGR forecast market CAGR 31% CAGR 46% 12% G
Slide 39: Our own brands are a winning proposition
Our own brands are a winning proposition and will continue to play a critical role We have strong own brand penetration, with Own brand offers a winning lots of opportunity ahead proposition to us and to consumers Lower Prices Lower Churn (25)% (5)% Higher Volumes Higher Margin 32% 12% 20% +21% ↑% m
Slide 40: Scale and category authority in accessories drives superior returns
Scale and category authority in accessories gives us clear differentiation and drives superior returns Own brand products Product SKUs in Accessories designed in-house extended range market share c100% 10,000 c50% New products Colleagues in HK Own brand launched in FY23 sourcing office participation
Slide 41: Our people, and their unrivalled expertise, are at the heart of our business
Our people, and their unrivalled expertise, are at the heart of our business 10,000 60% expert retail of store managers colleagues have >10yrs service 85% 10,000 of colleagues are colleagues awarded pet owners shares in FY23 80% 9months of colleagues paid at basic training period, least Real Living
Slide 42: Our new DC is onstream and will support more than a decade of growth
Our new DC is onstream and will support more than a decade of growth A well executed multi-year project, Delivering clear operational and commercial now in operation benefits • Single purpose-built 670k sq.ft. facility • Consolidating legacy infrastructure improves fulfilment capacity and inventory
Slide 43: Scale and category authority
Scale and category authority • Our physical estate gives us unrivalled reach and scale and we will continue to invest • We create and drive category growth and new revenue opportunities across both nutrition and accessories • Our people, and their unrivalled expertise, remain at the heart of our bus
Slide 44: A strong financial framework
A strong financial framework Mike Iddon Chief Financial Officer 44
Slide 45: A year of record profits driven by high quality, sustainable growth
A year of record profits driven by high quality, sustainable growth Consumer Revenue Group Revenue LFL Underlying PBT £1.8bn £1.4bn +7.9% £136.4m +6.5% YoY +6.6% YoY +4.8% YoY FCF Net Cash CROIC Dividend £98.2m £54.7m 22.7% 12.8p 3.5% YoY £(11.3)m YoY (231)bps YoY +8.5% YoY 45 1. All YoY growth metr
Slide 46: Profit growth into FY24 held back by external headwinds
Profit growth into FY24 held back by external headwinds +10% £136.4m Consensus £136m PBT FY23 FY24 pre cost Freight Foreign Additional FY24 impacts exchange NLW increase 46
Slide 47: Our petcare platform strategy drives differentiated economics
Our petcare platform strategy drives differentiated economics, delivering attractive returns Integrated a unified blend of products, services Omnichannel Consumer-centric and advice seamlessly connected an unrivalled experience Delivering economies of scope Driving economies of scale and Fuelling co
Slide 48: Our well invested strategy will continue to drive strong revenue growth
Our well invested strategy will continue to drive strong revenue growth +7% CAGR 24% market share Consumer Revenue £1.8bn 18% market +11% share CAGR £1.0bn New Distribution Centre Digital Platform FY17 FY23 Vet Vet Core Retail New & Medium Embedded Growth Growth Refitted Pet Term Maturity Drivers Ca
Slide 49: Profits grow ahead of sales driven by productivity gains
Profits grow ahead of sales driven by productivity gains, efficiency benefits and operational leverage +10% CAGR £136.4m PBT New Distribution Centre Fixed & semi- variable cost Digital Platform base FY23 Revenue Productivity Efficiency Operational Medium Term growth +7% gains benefits leverage Produ
Slide 50: Our growth plan is fully funded by targeted and disciplined investment
Our growth plan is fully funded by targeted and disciplined investment c£400m investment over the medium term Capex tapers to a normalised run (including capital + digital/opex investment) rate of £50m pa in outer years Veterinary c15% Pet care centres c40% 75 extensions and new PMS 40 new sites and
Slide 51: Our balanced capital allocation is closely aligned to our strategic priorities
Our balanced capital allocation is closely aligned to our strategic priorities Over £250m returned to Capital Priorities shareholders in the last 5 years Further 1. Investment in c£400m investment over medium term, maintaining CROIC £50m buyback in the business at c20%. Run rate of £50m capex pa in
Slide 52: Our financial framework will reward shareholders with compounding growth
Our financial framework will reward shareholders with compounding growth and strong cash flow 1. 2. 3. 4. Grow sales Grow profit Drive strong, Reward ahead of the ahead of sales improving FCF shareholders market +7% +10% c70% £50m CAGR sales growth, 300bps Grow PBT at 10% CAGR over FCF conversion to
Slide 53: Building the world's best pet care platform
Building the world’s best pet care platform 53
Slide 54: Questions
Questions 54
Slide 55: Appendix
Appendix 55
Slide 56: FY24 Outlook
FY24 Outlook Revenue Inline with medium term ambition Underlying PBT Inline with current consensus1 Investment c£90m (£60m capital + £30m digital/opex) Effective Tax Rate 26% 1. Current company-compiled consensus for FY24 full-year underlying pre-tax profit is £136m with a range of £127-£142m. 56
Slide 57: FY23 Revenue
FY23 Revenue Group Revenue (£m) FY23 FY22 YoY Total1 1,404,2 1,317.8 6.6% Like-for-like 7.9% 15.8% Retail Revenue (£m) FY23 FY22 YoY Food 744.8 668.8 11.4% Accessories 486.4 490.6 (0.9)% Other2 47.5 47.5 0.0% Total 1,278.7 1,206.9 5.9% Like-for-like 7.5% 15.8% Vet Group Revenue (£m) FY23 FY22 YoY Fe
Slide 58: FY23 Profit
FY23 Profit £m FY23 FY22 Change Underlying PBT 136.4 130.1 4.8% Non-underlying items1,2 (13.9) 18.6 n/a Statutory PBT 122.5 148.7 (17.7)% Underlying PBT margin 9.7% 9.9% (16)bps Underlying basic EPS (pence) 22.8 21.2 7.6% DPS (pence) 12.8 11.8 8.5% All FY22 figures are presented on a 53-week basis.
Slide 59: FY23 Investment
FY23 Investment £m FY23 FY22 Spend includes Investing in our Supply Chain 43.7 10.4 Development of new distribution facility Digitising the Business 37.8 30.9 Enhancing data capabilities, Project Polestar Store Refit Programme 17.5 17.2 Ongoing store refurbishment Vet Group 4.1 5.8 Systems and TVC N
Slide 60: FY23 Free cashflow
FY23 Free cashflow £m FY23 FY22 1 Group operating cashflow 205.6 200.3 Tax and interest (16.0) (34.2) Debt issue costs (0.1) (3.3) Net capex inc. ROU assets (77.2) (55.5) Purchase of own shares to satisfy colleague options (14.1) (12.3) Free cashflow 98.2 95.0 Equity dividend (58.7) (48.5) Acquisiti
Slide 61: Disclaimer
Disclaimer Forward-looking statements This presentation is provided for information only and is solely for use at the Pets at Home Group plc (“Pets at Home”) Full Year Results presentation held on 25 May 2023. It does not contain all of the information that is material to an investor. This presentat