Pets At Home Group Plc · LSE:PETS
Pets At Home — Investor Presentation (January 2021)
49 slides from Pets At Home's investor presentation, January 2021
Slide 1: Investor presentation
Investor presentation Becoming the best pet care business in the world January 2021
Slide 2: Forward looking statements
Pets at Home Group Plc 2 Forward looking statements INCLUDED IN THIS PRESENTATION ARE FORWARD-LOOKING MANAGEMENT COMMENTS AND OTHER STATEMENTS THAT REFLECT MANAGEMENT’S CURRENT OUTLOOK FOR FUTURE PERIODS These expectations are based on currently available competitive, financial, and economic data al
Slide 3: Contents
Pets at Home Group Plc 3 Contents Market overview and business model Our Retail business Our Vet Group Our pet care strategy FY20 financials
Slide 4: Market overview and business model
Market overview and business model
Slide 5: The UK pet care market is worth an estimated £6.5bn, having grown at 3.9% CAGR since 2012
Pets at Home Group Plc 5 The UK pet care market is worth an estimated £6.5bn, having grown at 3.9% CAGR since 2012 Market dynamics Pets at Home share of pet care market in CY2019 Stable base population 45% of c18m dogs & cats, with c2m puppies & 40% c42% kittens showing signs of 35% growth in 2020 3
Slide 6: Our pet care company: a unique combination of product, services and expertise
Pets at Home Group Plc 6 Our pet care company: a unique combination of product, services and expertise Our differentiators Business activities Value created Trusted and well For pets: known brand ˃ Everything a pet needs to keep them happy and healthy Passionate and expert ˃ Supported by our welfare
Slide 7: Intelligent use of data underpins our strategy to leverage our pet care ecosystem
Pets at Home Group Plc 7 Intelligent use of data underpins our strategy to leverage our pet care ecosystem Only c16% of all VIPs currently shop some combination of products and services, but numbers have grown 24% YoY The proportion of VIPs engaged £900 across all three elements is greater in recent
Slide 8: By focusing on new puppies & kittens we can create significant lifetime value
Pets at Home Group Plc 8 By focusing on new puppies & kittens we can create significant lifetime value for the business Growing population of puppies and kittens in the UK Recruit on to VIP Puppy & Kitten Clubs Low customer acquisition cost Already have c20% of puppies and c10% of kittens signed up
Slide 9: Our Retail business
Pets at Home Group Plc 9 Our Retail business © 2019
Slide 10: Retail sales are balanced across both food and accessories
Pets at Home Group Plc 10 Retail sales are balanced across both food and accessories Group revenue (£m) Retail revenue in FY20 121 £45m 938 Food Accessories £375m Vet Group Retail Other £517m Includes Advanced Nutrition sales of £242m Note: Financials shown are for the Financial Year ended 26 March
Slide 11: Our Retail business
Pets at Home Group Plc 11 Our Retail business Locations nationwide and VIP loyalty club knowledgeable colleagues ˃ 453 stores (as of Q1 FY21) ˃ More than 5.7m active members (as of Q1 FY21) ˃ 316 grooming salons (as of Q1 FY21) ˃ 75% of store Retail revenues transacted by VIPs ˃ More than 6,900 coll
Slide 12: We have seen sustained trading momentum in our Retail business over the past 3 years
Pets at Home Group Plc 12 We have seen sustained trading momentum in our Retail business over the past 3 years FY20 LFL growth across all channels 2-year LFL growth Key drivers of LFL performance: ˃ Store1 growth 8% ˃ Store1 10% ˃ Competitive pricing ˃ Online2 growth 36% ˃ Omnichannel3 83% ˃ Growth
Slide 13: Omnichannel revenue growth has been particularly strong, and we have taken share online
Pets at Home Group Plc 13 Omnichannel revenue growth has been particularly strong, and we have taken share online Omnichannel1 revenue (£m) £100 £90 £94m £80 £70 £74m £60 £50 £51m £40 £30 £29m £20 £19m £10 £15m £0 FY15 FY16 FY17 FY18 FY19 FY20 Participation of 2.2% 2.6% 3.8% 6.3% 8.6% 10.0% total Re
Slide 14: We believe being an omnichannel business is a strategic advantage vs competitors
Pets at Home Group Plc 14 We believe being an omnichannel business is a strategic advantage vs competitors c55% 98% 2.5x Of omnichannel1 Of Pets at Home More spend from revenues involve stores are customers who colleagues in store profitable2 shop across channels3 1. Defined as Retail revenues gener
Slide 15: Our Vet Group
Pets at Home Group Plc 15 Our Vet Group © 2019
Slide 16: Our Vet Group business
Pets at Home Group Plc 16 Our Vet Group business Group revenue (£m) Vet Group revenue in FY20 121 £6.2m Joint Venture First Opinion practice fee income 938 Company managed First £39.6m £53.8m Opinion practice consolidated customer revenue Vet Group Retail Specialist Referral centre consolidated cust
Slide 17: Our Vet Group has its core business in First Opinion veterinary practices
Pets at Home Group Plc 17 Our Vet Group has its core business in First Opinion veterinary practices, plus presence in the Specialist Referral segment First Opinion small animal Specialist Referral centres veterinary practices ˃ 441 practices: 301 in-store & 140 standalone ˃ 5 independently run centr
Slide 18: Our Vet Group benefits from a unique model and has a number of strategic advantages
Pets at Home Group Plc 18 Our Vet Group benefits from a unique model and has a number of strategic advantages Partnership model which Unified brand driving incentivises growth customer recognition ˃ Entrepreneurial Joint Venture ˃ Largest branded veterinary Partners who own their own business in the
Slide 19: Partnership is at the heart of our Vet Group business model
Pets at Home Group Plc 19 Partnership is at the heart of our Vet Group business model; incentivising growth and delivering returns for both sides First Opinion Joint Venture Model Type of partner Joint Venture Partner (JVP) ˃ JVP funded set-up loan (c£30k) Funding requirements ˃ Pets at Home investm
Slide 20: Our Joint Venture model is unique in the industry and allows vets to become business owners
Pets at Home Group Plc 20 Our Joint Venture (JV) model is unique in the industry and allows vets to become business owners Initial funding and practice economics at maturity Key features of the JV model ˃ Day to day operations managed by the JVP, who has complete clinical and operational freedom ˃ P
Slide 21: We have many young JV practices, all planned to be loss making in early years
Pets at Home Group Plc 21 We have many young JV practices, all of which are planned to be loss making in early years All practices are open as new, but fee income is generated from year one Even mature practices grow their customer revenues ahead of the underlying market (c5%), £1,400 driven by the
Slide 22: The long term free cashflow opportunity from First Opinion practice maturity remains significant
Pets at Home Group Plc 22 The long term free cashflow opportunity from First Opinion practice maturity remains significant Practice age and Vet Group FCF in Practice age and FCF in the future FY20 at maturity1 Includes the impact of all adjustments to JV fee arrangements 24% Up to £60m 45% 100% £17m
Slide 23: Our pet care strategy
Pets at Home Group Plc 23 Our pet care strategy © 2019
Slide 24: Our Group strategy: building the best pet care business in the world
Pets at Home Group Plc 24 Our Group strategy: building the best pet care business in the world Bring the pet Use data and VIP to experience to life better serve customers ˃ Repurpose and right size our store network ˃ Connect our data across the retail and vet businesses ˃ Put our pets centre stage
Slide 25: Our pet care strategy delivered strong results in FY20
Pets at Home Group Plc 25 Our pet care strategy delivered strong results in FY20 Bring the pet Use data and VIP to experience to life better serve customers 63.1m £817.2m number of customer VIP customer transactions1 sales2 Vision +6.6% y/y Be the best +38.1% y/y Pet Care business Set our people in
Slide 26: Omnichannel represented 10.0% of Retail revenues in FY20, with all components growing
Pets at Home Group Plc 26 Omnichannel represented 10.0% of Retail revenues in FY20, with all components growing Bring the pet Our integrated model maximises convenience for experience to life customers, making our business stronger c20%* Order in store Easy Repeat food subscription Collect in store
Slide 27: Our growing subscription base of 906,000 customers presents considerable opportunity
Pets at Home Group Plc 27 Our growing subscription base of 906,000 customers presents considerable opportunity to create annuity revenue streams 50% of sales from pet services Our 3 main subscription platforms each provide convenient and affordable elements of pet care With c18m cats and dogs in the
Slide 28: Our recalibration actions in First Opinion vet practices have positioned them well
Pets at Home Group Plc 28 Our recalibration actions in First Opinion vet practices have positioned them well for future sustainable growth 50% of sales from Customer sales growth Improved underlying pet services ahead of market practice profitability ˃ Even in mature practices, ˃ Improved gross marg
Slide 29: Investment in our data capabilities will underpin future growth
Pets at Home Group Plc 29 Investment in our data capabilities will underpin future growth Using our data to People: created a dedicated team of 42 data scientists, data Foundations serve customers visualisation specialists and cloud engineers Platform: creating our pet care customer view and bringin
Slide 30: Enabling our talented and passionate colleagues to serve customers whilst protecting their wellbeing
Pets at Home Group Plc 30 Enabling our talented and passionate colleagues to serve customers whilst protecting their wellbeing Setting our people free to serve Efficiency initiatives across the Group… ˃ 3% reduction store colleague hours y/y, driven by streamlining non- customer facing tasks ˃ Autom
Slide 31: We remain confident in the long-term sustainability of our business in the 'new normal'
Pets at Home Group Plc 31 We remain confident in the long-term sustainability of our business in the ‘new normal’ Unique owner-driver model in attractive Favourable market dynamics veterinary market - £6.5bn pet care market in structural growth - Joint Venture model in First Opinion vet and resilien
Slide 32: By providing complete pet care, we make our business resilient
Pets at Home Group Plc 32 By providing complete pet care, we make our business resilient Flea subscription 15kg bag of Wainwrights Vet practice consultation fees set from £4 per month dry dog food c£39 locally by JVPs, but ATV typically >£65 Popular accessories Full groom for a Healthplans, covering
Slide 33: We have a strong sense of social purpose and aim to share the value we create
Pets at Home Group Plc 33 We have a strong sense of social purpose and aim to share the value we create as a business ˃ Pets are at the heart of everything we do, with our support organised around 3 main programmes ‒ Charitable foundation Support Adoption for Pets, which has raised >£35m since launc
Slide 34: FY20 financials
Pets at Home Group Plc 34 FY20 financials © 2019
Slide 35: Pets at Home business segments
Pets at Home Group Plc 35 Pets at Home business segments Revenue in FY20 Underlying EBIT in FY20 11% 27% 73% 89% Vet Group Retail Vet Group Retail Note: Underlying EBIT shown above excludes £8.6m of central costs
Slide 36: A record financial performance in FY20 demonstrates the progress we have made
Pets at Home Group Plc 36 A record financial performance in FY20 demonstrates the progress we have made ˃ Group revenue growth of 10.2% to over £1bn, with LFL growth of 9.0% ˃ Full year Retail LFL revenue growth of 9.4% ‒ Had been 7.2% prior to the final 4 weeks of FY20, when exceptional demand in M
Slide 37: We have seen excellent revenue growth in Retail, with Vet Group in line with plan
Pets at Home Group Plc 37 We have seen excellent revenue growth in Retail, with Vet Group revenues in line with our plan Group Revenue (£m) FY19 FY20 Change Total 961.0 1,058.8 10.2% Like-for-like 5.7% 9.0% Retail Revenue (£m) FY19 FY20 Change Food 455.4 517.4 13.6% Accessories 357.0 375.3 5.1% Othe
Slide 38: Underlying gross margin reflects the exceptional demand for food in March
Pets at Home Group Plc 38 Underlying gross margin reflects the exceptional demand for food in March and the actions taken in our Vet Group Group underlying gross margin bridge Retail (112) bps Vet Group (62) bps 50.7% (38) bps (18) bps (56) bps 48.9% (132) bps +70 bps FY19 Annualisation of Growth of
Slide 39: We continue to drive operational efficiencies whilst investing in strategic growth areas
Pets at Home Group Plc 39 We continue to drive operational efficiencies whilst investing in strategic growth areas Underlying operating cost bridge excluding D&A (pre-IFRS16) Operational Efficiency Investing in Growth 5.4% £380m 3.1% growth growth +£1.7m +£0.6m +£0.6m +£1.2m +£5.4m £360m +£3.3m +£3.
Slide 40: Underlying PBT is 11% higher year on year, driven by strong performance in Retail
Pets at Home Group Plc 40 Underlying PBT is 11% higher year on year, driven by strong performance in Retail £m (pre-IFRS16) FY19 FY20 Change Underlying EBITDA1 130.0 141.6 8.9% Depreciation & amortisation (36.8) (38.3) 4.1% Underlying EBIT 93.2 103.3 10.9% EBIT margin % 9.7% 9.8% 6 bps Net interest
Slide 41: Capital investment fully supports our pet care strategy
Pets at Home Group Plc 41 Capital investment fully supports our pet care strategy £m FY19 FY20 Spend includes Enhancing in-house data capabilities and investment in online Business Systems and omnichannel 10.8 14.9 customer experience Ongoing store refurbishment, plus launch of 16 further pet Existi
Slide 42: We have generated strong free cashflow, driven by the strength of trading within Retail
Pets at Home Group Plc 42 We have generated strong free cashflow, driven by the strength of trading within Retail £m (pre-IFRS16) FY19 FY20 1 Group operating cashflow 126.5 165.8 Tax and interest (21.4) (34.0) Debt issue costs (2.5) - Net capex (37.2) (39.4) Purchase of own shares to satisfy colleag
Slide 43: Working capital remains positive, and we saw a reduced need to extend operating loans
Pets at Home Group Plc 43 Working capital remains positive, and we saw a reduced need to extend operating loans £m FY19 movement FY20 movement Inventories (7.3) 5.7 Trade and other payables 14.5 16.2 Trade and other receivables 10.7 8.8 Trading working capital 17.9 30.7 Increase in gross operating l
Slide 44: In summary: FY20 key financial measures
Pets at Home Group Plc 44 In summary: FY20 key financial measures Revenue & like-for-like growth Underlying gross margin1 & YoY change +5.6% +9.4% (531) bps (127) bps £937.6m 49.7% 42.7% £121.2m Vet Group Retail Vet Group Retail Underlying EBIT1,2,3 & margin Underlying free cashflow4 & conversion5 2
Slide 45: Appendices
Pets at Home Group Plc 45 Appendices © 2019
Slide 46: IFRS16 does not change how we run the business
Pets at Home Group Plc 46 IFRS16 does not change how we run the business ˃ We have adopted the modified retrospective approach to implementation of IFRS16 ‒ Simplest methodology and ensures consistency between Group and subsidiary financial statements ‒ Total value of the leases on the Group’s Balan
Slide 47: The impact of IFRS16 on the Group financial statements in FY20
Pets at Home Group Plc 47 The impact of IFRS16 on the Group financial statements in FY20 was to decrease PBT by £6.0m, but leave FCF unchanged All IFRS16 adjustments are non-cash Pre Exclude Include Include Post £m IFRS16 rent depreciation interest IFRS16 Revenue 1,058.8 - - - 1,058.8 Operating leas
Slide 48: Track record of financial metrics
Pets at Home Group Plc 48 Track record of financial metrics £m FY15 FY161 FY17 FY18 FY19 FY20 Group LFL 4.2% 2.2% 1.5% 5.5% 5.7% 9.0% - Retail 1.7% 0.7% 4.6% 5.1% 9.4% - Vet Group 14.9% 15.2% 15.0% 11.2% 5.6% - Merchandise2 3.7% 1.5% 0.8% 5.0% - Services2 10.7% 10.4% 7.9% 8.5% Group revenue £729m £7
Slide 49: Financial definitions
Pets at Home Group Plc 49 Financial definitions ‘Like-for-like’ sales growth comprises CROIC being Cash Return on Invested total revenue in a financial period Capital, represents cash returns divided by compared to revenue achieved in a prior the average of gross capital invested (GCI) period, for s
Pets at Home Group — Investor Presentation (January 2021) on 6ix