Pets at Home Group Plc
Annual Report and Accounts 2018
Home
of all things pet
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Home
of all things pet
Pets at Home is the UK’s leading
pet care company
Strategy and performance
Delivering our strategy supports
growth across like-for-like revenues,
space rollout and margins.
Page 18
Grow like-for-like revenues
Grow retail and services space
Grow margins
Corporate Social Responsibility
Strategy
Online Annual Report 2018
investors.petsathome.com/ar2018
Responsibility
investors.petsathome.com/responsibility
Strategic report
Governance report
Financial statements
Governance report
48
Board and Executive management 60
Directors’ Report
62
Statement of Directors’
Responsibilities
Audit and Risk Committee Report
Nomination and Corporate
Governance Committee Report
Corporate Social Responsibility
and Pets Before Profit Committees
Report
Directors’ Remuneration Report
80
82
71
72
77
Overview
The year in review
At a glance
Pets at Home way
Market overview
Business model
Chairman’s statement
Strategy
Chief Executive’s statement
Strategy and performance
Performance
Chief Financial Officer’s review
Operating review
Risk management
Risks and uncertainties
Corporate social responsibility
IFC
2
4
10
12
14
16
18
24
28
32
34
38
110
110
108
109
103
108
Independent Auditor’s report
Consolidated income statement
Consolidated statement of
comprehensive income
Consolidated balance sheet
Consolidated statement of changes
in equity as at 29 March 2018
Consolidated statement of changes
in equity as at 30 March 2017
Consolidated statement
of cash flows
Company balance sheet
Company statement of changes
in equity as at 29 March 2018
Company statement of changes
113
in equity as at 30 March 2017
Company income statement
113
Company statement of cash flows 114
Notes (forming part of the
financial statements)
Glossary – Alternative
Performance Measures
Advisors and contacts
111
112
115
113
169
172
The year in review
Financial highlights
Revenue (£m)
Gross margin (%)
£898.9m +7.8%
51.7% -249bps
2018
2017
2016
898.9
834.2
777.8
2018
2017
2016
51.7
54.2
54.5
Operational highlights
Better value for customers
Like-for-like revenue growth of 5.0%
in the Merchandise business has been
significantly accelerated by our new
pricing initiatives, accessories innovation
and puppy product relaunch
Even more available in store
Launching online Order-In-Store and
flea product subscription plans has
given our colleagues the ability to
offer more products and services to
customers in-store
Visit our online Annual Report 2018:
investors.petsathome.com/ar2018
Gross margin (%)
Underlying basic earnings per share (pence)1
Dividend per share (pence)
51.7% -249bps
13.5p -11.2%
2018
2017
2016
13.5
15.3
15.1
FY18 statutory basic earnings per share were 12.6p.
7.5p
2018
2017
2016
7.5
7.5
7.5
Improved website experience
Customers are having a faster and
smoother online experience with a
revamped checkout process, which
has helped increase our omnichannel
revenue1 growth to 75.1%
More veterinary services
in even more locations
We have seen our veterinary business
growing ahead of the market, achieved
through our new First Opinion practice
openings, healthcare plans, and space
extensions to our Specialist Referral Centres
1
Alternative Performance Measures (APMs) are defined and
reconciled to IFRS information, where possible, on page 169.
Home of
all things pet
Our commitment is to make
sure pets and their owners get
the very best advice, care and
products. Happy and healthy
pets are our priority
Home of all
things pet
Page 4
Home of value
and convenience
Page 6
Home of veterinary
excellence
Home of doing
the right thing
Page 8
Page 38
1
Strategic report OverviewPets at Home Group PlcAnnual Report and Accounts 2018 At a glance
Everything your pet
needs for a happy
and healthy life
Specialist
Referral Centres
Standalone vet
practices
Veterinary Specialist
Referral Centres
2
Pets at Home Group PlcAnnual Report and Accounts 2018 Business model
Page 12
Services
We provide veterinary services through
our network of First Opinion practices and
Specialist Referral Centres. Our First Opinion
practices are operated mainly under the
Vets4Pets brand and are situated in stores
and in standalone locations. Our Referral
centres provide highly specialist services
to vets working in our own and in other
First Opinion practices.
Grooming services are provided primarily
from salons within our retail stores.
Specialist
Referral Centres
Standalone vet
practices
Veterinary Specialist
Referral Centres
Services revenue (£m)
£133.5m
The Groom Room
Our dog and cat grooming salons,
located predominantly in stores.
309
Grooming salons
First Opinion practices
Our network of First Opinion small
animal veterinary practices operates
in conjunction with our Joint Venture
Partners. This arrangement, operating
mainly under the Vets4Pets brand,
offers clinical freedom to veterinary
surgeons, supported by our business
expertise. Practices are located
within Pets at Home stores and
in standalone locations.
461
First Opinion practices
Specialist Referral Centres
Our specialist centres represent
the cutting edge of veterinary
care. They provide medicine and
surgery for the most complex cases,
including orthopaedic surgery,
neurosurgery, oncology and state
of the art diagnostic imaging.
4
Referral centres
Merchandise
Pet products are available both online or
from our stores, where our well-trained
colleagues provide advice on areas such as
pet nutrition and the set-up of home aquaria.
Merchandise revenue (£m)
£765.4m
Click and collect in-store
Our extended range of food
and accessories is available for
customers to shop online and
have their order delivered to store.
11,700
products in our extended
online range
Product not in-store?
Order with our experts
on their PetPads
Colleagues can order from our
extended range using a dedicated
PetPad app. The PetPad is also
set up for subscription orders of
licensed flea prevention products.
3
Strategic report OverviewPets at Home Group PlcAnnual Report and Accounts 2018 Pets at Home way
Home of all
things pet
4
Pets at Home Group PlcAnnual Report and Accounts 2018 Corporate social responsibility
Page 38
As a new puppy owner there’s a lot to think
about, it’s a big responsibility – we’re here to
give customers the very best for their puppy
across Pets at Home products, Vets4Pets
practices and the Groom Room
VIP puppy club
Creating a positive experience with
customers as they welcome their
new puppy can ensure we are seen
as more than just a shop. Our aim
is to make sure customers can also
benefit from our vet practices and
grooming salons as their dog grows
and matures, not just the initial
puppy shop.
Every new puppy owner is greeted
with a VIP welcome in our stores,
along with the ‘Little Book of Puppy’,
which is filled with advice, as well
as vouchers to help with that first
puppy shop.
By joining the VIP puppy club, we
can offer customers 10% off their
first puppy product shop, a free bag
of food with a nutrition consultation,
their first month for free with a flea
product subscription, 50% discount
on their first puppy groom and even
a free nurse check at one of our
vet practices.
Being part of the VIP puppy club
also means that customers will
receive regular emails packed with
tips, advice and product offers that
are tailored to their needs.
‘Best Start in Life’
veterinary healthcare plan
Brand new puppy
product range
Our puppy healthcare plans are
offered by our in-store and
standalone vet practices and
include everything they’ll need from
a veterinary perspective to grow
up happy and healthy. The plan
includes; a first vaccination course,
microchip, three months worth of
flea and worm treatment, a 10%
neutering discount, a bag of food
and four weeks Petplan insurance.
Puppies need the best food,
accessories and toys, which is why
we relaunched our entire puppy
product range during the year.
New branding, designs, products
and a bigger range of food and
treats. We want to make Pets at
Home the first destination for every
new puppy owners’ first shop.
Over
60,000
puppies have joined
the VIP puppy club
Only
£85
for the ‘Best Start in Life’
veterinary puppy plan
5
Strategic report OverviewPets at Home Group PlcAnnual Report and Accounts 2018 Pets at Home way continued
Home of value
and convenience
6
Pets at Home Group PlcAnnual Report and Accounts 2018 Operating review
Page 28
We have invested to deliver great
value, whenever and however
customers choose to shop with us
Prices repositioned
in key product areas
During the year we repositioned
our pricing in key product areas
to better reflect what is important
to customers. Having tested our
pricing strategy in a pilot study,
we understood that we needed
to focus on very specific areas
rather than take a blanket approach.
We began with the Switch & Save
campaign, which highlights the
value in our private label Advanced
Nutrition foods. We have followed
this with price reductions in branded
food lines and pet essentials. This
move to everyday lower prices
removed price as a barrier for our
customers, allowing us to maximise
all the unique attributes of Pets at
Home that competitors don’t have.
The reduction in promotional activity
also delivered operational savings
in stores.
Digital investment
provides easy access
to our online offer
The introduction of Order-In-
Store, an addition to the services
available through our proprietary
iPad platform, PetPad, allows
colleagues to advise and sell from
our extended online range. This
initiative makes our full range of
food and accessories available in
every store and has proven popular
with both customers and colleagues,
delivering additional sales.
We have also improved the online
experience for customers, by
redesigning our mobile checkout,
making it much easier to buy using
a smartphone or tablet. This has
driven an increase in conversion,
encouraging us to make similar
improvements to our PC checkout.
Our successful subscription
service has also been expanded
to offer additional flea treatments
in convenient individual pipettes
delivered to customers at the
right time to administer a single
preventative dose to their pet
dog or cat.
Increase in omnichannel
revenue
£51m
75.1%
Omnichannel revenue1 growth,
driven by new initiatives
£29m
60%
of omnichannel
revenues involve
either a colleague
assisted sale or
are collected
from store
2017
2018
1
Alternative Performance Measures (APMs) are
defined and reconciled to IFRS information, where
possible, on page 169.
7
Strategic report OverviewPets at Home Group PlcAnnual Report and Accounts 2018
Pets at Home way continued
Home of
veterinary
excellence
8
Pets at Home Group PlcAnnual Report and Accounts 2018 Corporate social responsibility
Page 38
Our preferred model is to work
in partnership, providing clinical
freedom for vets to do what they
judge to be in the best interest
of their clients and patients
Creating Joint Venture
partnerships
Expanding our specialist
network
In our First Opinion practices
we provide opportunities for
entrepreneurial vets to partner
with us to establish their own
business. Our Joint Venture
Partnership model is a framework
within which vets have complete
clinical freedom, supported by our
experienced business professionals
and a proven business model under
the umbrella of the brand, Vets4Pets.
Clinical freedom means that vets
use their professional judgement
to decide on the most appropriate
treatment for their patient. Our role
is to leverage the scale of the Group,
providing business advice, services
and administrative support.
Specialist centres are much larger
than First Opinion practices and are
invested with state of the art facilities
and technology, which enable
specialist vets to deal with the most
complex cases that are referred
to them. Reflecting our preference
to work in partnership, we have
developed a shared ownership
model for these specialist centres,
whereby the Group becomes the
majority shareholder and clinicians
have an opportunity to own a share
in the future growth of the business.
Having acquired four Specialist
Referral Centres, our aim is to
achieve national coverage in
this premium segment of the
veterinary market.
In addition, we continue to
invest in our existing specialist
centres. Recent investments include
the establishment of a Feline
Hyperthyroid Clinic at Anderson
Moores Veterinary Specialists in
Hampshire, making it one of only
a handful of veterinary centres in
the south of England to provide a
state of the art radioactive iodine
treatment for geriatric cats. This
“gold standard treatment” attracts
none of the risks associated with
a surgical thyroidectomy and has
a cure rate of approximately 95%.
9
Strategic report OverviewPets at Home Group PlcAnnual Report and Accounts 2018 Market overview
The UK pet market is growing
and we have taken share
We are the
UK’s largest pet
care business
The UK pet market
UK market by sector 20171
Grooming
£252m
Veterinary3
£2.3bn
1 Source: Pets at Home data, UK marketing reports, OC&C 2017.
2 Includes online spend from pet products.
3 Veterinary includes First Opinion and Specialist Referrals market.
10
Food2
£2.5bn
Accessories2
£850m
Online market is
12%
of total products market
Pets at Home Group PlcAnnual Report and Accounts 2018 Strategy and performance
Page 18
Pet market has shown resilient growth
Market growth dynamics
• A stable UK dog and cat population.
• Increasing numbers of specialist
pedigree and mixed breed dogs,
whose owners spend more on
products and care.
• Humanisation of pets is increasing
the desire for a wider range of
products and services.
• Shift to higher quality foods driven
by the health benefits to pets.
• Advances in veterinary care, supported
by growing insurance coverage.
• Continued transition of sales to the
online market.
Our approach
• Frequent innovation and range
change in pet products.
• New brands and range extensions
in higher quality pet foods.
• Rollout of new vet practices and
grooming salons.
Market growth during 20171
c9%
c5%
c2.5%
c2%
Food2
Accessories2
Veterinary3
Grooming
Pets at Home growing market share
Market share in 20171
Key trends
• Pets at Home is growing market
share across all areas.
• In the pet products market, share
growth is being experienced by
omnichannel retailers and online
businesses who have scale.
• In the veterinary market, corporate
owners are growing their share
through consolidation.
Our actions
• Growing share in pet products
through improved pricing, innovation
and omnichannel investments.
• Growing share in the vet market
through new practice rollout and
delivering excellent clinical service
to clients.
1
Source: Pets at Home data, UK marketing reports,
OC&C 2017.
2 Includes online spend from pet products.
3
Veterinary includes First Opinion and Specialist
Referrals market.
11
Food2 OtherPets at Home16%Accessories2 OtherPets at Home39%Veterinary3OtherPets at Home13%Grooming OtherPets at Home11%Strategic report OverviewPets at Home Group PlcAnnual Report and Accounts 2018 Business model
Delivering the ultimate
pet care experience
Specialist capabilities
Everything a pet needs
We’re not just a pet shop, we’re a pet care business.
We can give pet owners access to products, vet care,
grooming, nutrition advice and pet experts, all from
Pets at Home.
Passionate and expert colleagues
As pet owners too, our store, vet and grooming colleagues
can understand and help support our customers through
all the moments they share. An industry leading training
programme ensures we can share our knowledge, as well
as our passion.
Great value private brands
Our private label food and accessories brands deliver high
quality at value prices and are only available at Pets at Home.
58%
of stores have a
vet practice and
a grooming salon
>90%
of store colleagues
own a pet
41%
of Merchandise
revenues are
private label
Responsibility at the heart of our business
Behaving responsibly is integral to how our business
operates. Our approach is based on doing the right thing
for pets, for people and for the planet.
34%
reduction in energy
consumption
12
Pets at Home Group PlcAnnual Report and Accounts 2018 At a glance
Page 2
Revenue generating activities
Value creation
Services
£133.5m
Revenue
Specialist
Referral Centres
Standalone vet
practices
Veterinary Specialist
Referral Centres
Omnichannel
Merchandise
£765.4m
Revenue
For pets
• Everything a pet
needs to keep them
happy and healthy
• Supported by our
welfare and care
standards
CSR
Page 38
For customers
• The ultimate specialist
pet care experience
• Value for money, new
and different products,
pet services and advice
Home of all things pet
Page 4
For colleagues
• Sector leading
retention rates
• Externally accredited
training schemes
CSR
Page 38
For the Group
• Returns to
shareholders through
optimal allocation
of cash resources
KPIs
Page 20
13
Strategic report OverviewPets at Home Group PlcAnnual Report and Accounts 2018
Chairman’s statement
The Group has made
excellent headway
in repositioning
our retail business
in a challenging
environment and in
growing our successful
vet business. I am
confident that under
the leadership of
Peter Pritchard, we will
make further progress
in the years ahead.”
Tony DeNunzio
Non-Executive Chairman
14
I am pleased to report a year of good
progress for the Group. This has been
achieved against a retail environment
that remains competitive, with cost
pressures from the introduction of
the National Living Wage and less
favourable foreign exchange rates.
The UK pet market has a track record
of resilience in more difficult economic
times and, uniquely, Pets at Home is
able to provide everything a pet owner
needs for their pet to live a happy,
healthy and safe life. Our Group strategy
is centred around providing pets and
their owners with the very best advice,
care and products.
In the second half of the previous
financial year, we noted a change
in customer behaviour in our retail
business, in response to which we
recognised the need to deliver better
pricing. This involved a move away
from promotional offers and vouchers,
and towards a simpler, more competitive
approach. We are pleased with the
results we have seen from these
initiatives and our plan remains to
target price investment into those
product areas that we believe drive
shopper frequency and loyalty.
We have also invested in our digital
capability, with successful initiatives like
Order-In-Store and subscription services.
In the veterinary market, our First
Opinion practices, Vets4Pets, already
represent a strong and fast growing
proportion of Group revenues.
We have also seen good performance
from our four Specialist Referral Centres,
where we are gradually adding capacity
and introducing new treatment
specialisms to accelerate growth.
Overall we generated revenue growth
of 7.8%, to £898.9m, within which like-for-
like sales1 grew 5.5%. Underlying profit
before tax1 declined to £84.5m in the
year, primarily due to the repositioning
of our retail business. The Board
proposes an ordinary dividend of 7.5p
per share.
Management
I am delighted to welcome Peter
Pritchard as Group Chief Executive
Officer. Peter joined Pets at Home
in 2011 as Commercial Director and
moved to the role of CEO of Retail in
2015. In that time he has overseen the
establishment of our sourcing office
in China, the launch of the VIP club,
the development of our digital strategy,
and more recently, the repositioning
of our Merchandise business.
Peter’s appointment follows Ian Kellett’s
decision to resign after 12 years
with Pets at Home. During that time,
Ian made a significant contribution,
first as Chief Financial Officer, and
most recently as Group Chief Executive
Officer. He played a leading role in the
transformation of Pets at Home from
its retail roots into the much wider
services and omnichannel business
it is today. I would like to thank Ian for
the contribution he has made over his
long tenure with the business.
1
Alternative Performance Measures (APMs) are defined
and reconciled to IFRS information, where possible,
on page 169.
Pets at Home Group PlcAnnual Report and Accounts 2018 Governance report
Page 48
I am also pleased to welcome two new
Non-Executive Directors to the Board.
Sharon Flood joined the Board in July
2017 and is Chair of our Audit and Risk
Committee. Stanislas (Stan) Laurent also
joined the Board in July 2017. Sharon
and Stan replaced Amy Stirling and Paul
Coby, both of whom stood down from the
Board in order to fulfil commitments in
their full time roles. Nicolas Gheysens
stood down from the Board in November
2017. I would like to thank Amy, Paul and
Nicolas for their contribution to the Board.
At the end of the financial year Sally
Hopson resigned as CEO of our Vet
Group. She is succeeded by Andrei
Balta, formerly Chief Operating Officer
of the Vet Group. Andrei has great
strategic and operational skills and
worked with Sally to deliver many of
the most significant developments in
our Vet Group in recent years, including
our move into the market for Specialist
Referrals. I’d like to thank Sally for the
contribution she has made to both our
retail and vet businesses.
Colleagues
As a specialist retailer it is the knowledge
and commitment of our colleagues, at
all levels and across all disciplines, that
creates the special bond we share with
our customers – a love of pets. Again
this year, I want to thank colleagues for
their hard work and commitment.
Outlook
While the year ahead will undoubtedly
pose new challenges, the Board is
confident we have the right strategy,
with an experienced leadership team
that is committed to delivering further
success in the year ahead. We look
forward to the future with confidence.
Introducing new members
of our Board and Executive team
Peter Pritchard
Group Chief Executive Officer
Peter joined Pets at Home in 2011 as
Commercial Director and in 2016 was
appointed CEO of Retail. He has worked
in retail for 30 years in various senior
management and commercial roles
at Asda, Sainsbury’s, Iceland, Marks
and Spencer and Wilkinson Hardware
Stores. Peter has been responsible for
the launch of a number of successful
retail initiatives and will provide
strong leadership to the Group.
Sharon Flood
Independent Non-Executive Director
Sharon brings impeccable retail and
financial credentials to the Board,
having worked with Kingfisher, John
Lewis and more recently as Chair
of French luxury goods company
ST Du Pont. Her plc experience and
understanding of the retail market will
contribute greatly to the growth of
the business. She chairs the Audit
and Risk Committee.
Stanislas Laurent
Independent Non-Executive Director
Stanislas was formerly President
and CEO of Photobox and COO
of AOL Europe. He is currently a
partner with Highland Europe. His
entrepreneurial background and
understanding of the digital online
space in consumer facing businesses
adds significant value as we expand
our omnichannel capabilities.
Membership of the Board
Andrei Balta
CEO, Vet Group
Andrei joined Pets at Home in 2011
as Director of Group Strategy and
moved to the veterinary business in
2013, firstly as Commercial Director
and subsequently as Chief Operating
Officer. Prior to Pets at Home, Andrei
was a management consultant at
Bain & Company for seven years.
Gender breakdown
Board of Directors
Tony DeNunzio
Non-Executive Chairman
22 May 2018
Non-Executive Chairman
Executive Directors
Independent
Non-Executive Directors
Male
Female
1
2
5
75%
25%
15
Strategic report OverviewPets at Home Group PlcAnnual Report and Accounts 2018 Chief Executive’s statement
I’m proud and excited
to be taking over as
CEO. The value of
our business is much
greater than being
a retailer or a vet
care provider. It’s the
way we can give pet
owners a breadth of
products, grooming,
vet care and other
services. Combined
with the way we can
serve them through
stores, the website and
our pet professionals,
the colleagues and vets
who genuinely care
about customers and
their pets.
Our plans to reposition retail are working,
more customers are coming back to
shop with us, and we are committed to
returning the business to profit growth.
But it hasn’t been easy. We took decisive
action, threw passion and energy into it,
and delivered targeted pricing changes
to give customers the products that
mattered most to them, with the service
and value they expect from us. Our
product innovation this year has been
the best I can remember and the
investment we made in the development
of a subscription service is bringing some
excellent results, as is Order-In-Store,
which brings our full online range to
every store in the business.
The veterinary services market is a very
attractive space in which we can grow.
We have a profitable business delivering
strong returns, achieved largely through
our preference to work in partnership with
vets who share in the success of their
practice. The shortage of qualified vets in
the UK remains an industry wide problem,
so we have chosen to slow our practice
16
rollout to be sure we open practices in
quality locations for the best vet partners.
With slower rollout we can, and need to,
focus more on strategies to accelerate
growth in our existing practices, where
we know there is still huge potential.
About 84%1 of our First Opinion practices
are relatively young and whilst they
require more funding from us over the
next four to five years, the long term prize
for us and our vet partners is substantial.
We have a bright future. Year one of our
three-year strategy has delivered, and as a
business we are on a stronger competitive
footing to return to sustainable profit
growth. But the job isn’t done yet. As our
new CEO, my plan has a bigger focus on
digital, tapping into the vast potential of
our customer and pet data, and taking
action to ensure our vet business reaches
its potential. Our market has a track record
of resilience in a downturn and as we
adapt to a changing environment, we
will emphasise the things that make
Pets at Home unique and best placed
to serve the UK’s pet loving owners.”
Peter Pritchard
Group Chief Executive Officer
Strategic update
Drivers of our like-for-like growth
Home of all things pet
Our biggest competitive asset is the
ability to give pet owners the full breadth
of pet care; customers who shop across
retail, grooming and vet have around
three times the spend of those who are
just retail customers.
Puppy owners are an opportunity to
develop a relationship at one of the
most important milestones – the first
puppy shop. With that in mind, we gave
a complete overhaul to our range and
also launched the VIP Puppy Club. By
joining the club, customers receive 10%
off their first puppy product shop, a free
bag of Advanced Nutrition food, their
first month for free with a flea product
subscription, a free puppy groom and
a free vet nurse check. We have seen
some great results from our initiative,
with a 25% spending increase by Puppy
Club customers.
Home of value and convenience
During the year, we invested c£13m in
pricing to deliver better value for our
customers. We have taken a targeted
approach, which began with a campaign
that lowered prices and highlighted the
value in our private label Advanced
Nutrition. This was followed by price
adjustments across branded Advanced
Nutrition, more food categories and
pet essentials. We are confident this is
driving a positive reaction with
customers, having seen such a strong
rebound in Merchandise trade during the
year. Advanced Nutrition also performed
very well, with 12.7% volume growth
and significantly increased private label
participation. Looking forward,
maintaining a competitive price position
will always be part of everyday strategy
but this will not be to the same scale as
the prior financial year.
Delivering better value for customers is
also a priority in our grooming business,
where we experienced some slower
trading during the year. We are set to
launch a trial package in selected salons
where, for an annual fee, customers can
bring their dog for unlimited bath and
brush treatments.
Pets at Home Group PlcAnnual Report and Accounts 2018 Strategy and performance
Page 18
Whilst price has been an important
part of our improved trading, it doesn’t
present the full story. Investing in digital
helped deliver omnichannel revenue
growth of 75%. The two initiatives
driving such strong growth are Order-
In-Store and subscription for flea
products. We have also improved our
website experience with a faster
checkout process across mobile, tablet
and desktop, and have started to trial
repeat order across food products.
Looking to the year ahead will see
ongoing upgrades to our website look,
content and navigation, with more
subscription products in our plan.
Home of veterinary excellence
We have a successful veterinary
business growing ahead of the market
in both First Opinion practices and
Specialist Referral Centres. The Vet
Group generates cash returns on
invested capital2 of 24% despite the
majority of practices (c84%1) being
relatively young.
We can attribute the strong revenue
growth in our First Opinion practices
to a number of competitive differences;
but also to the drive of our vet partners
in the JV model, who share in the
success of the practice. Our model
provides vets with business services and
cashflow support as they grow, in return
for management fees.
The revenue progression for practices,
and therefore our fee income, has been
relatively consistent. In coming years,
as our rollout profile swings more to
standalone, rather than in-store
practices, we may see some variations
in revenue performance, although we
still expect the standalone practices
to deliver strong returns for the Group.
The path to profit growth for some
practices is lengthening as a result of
the upward pressure on payroll costs.
This factor, combined with the large
number of young practices in the
business, is leading to increased funding
requirements from Pets at Home in the
form of working capital operating loans.
We expect the overall funding level to
continue to grow for the next four to
five years, after which we expect to see
the balance decline, and are comfortable
this is mainly a feature of the immaturity
of our estate.
With a long term view of growing our
practices to maturity, the prize remains:
for us in the mature profits from a
mainly fixed cost business, and for our
vet partners in the form of dividends
and the capital value of their practice.
We currently have 87 such practices
that have fully repaid all debts and
we are focusing more on strategies
to accelerate growth in our existing
practices, to ensure we can deliver
the inherent potential of the business.
Retail space evolution and vet
practice rollout
With a total of 448 superstores, our store
estate is nearing its optimum size. In the
coming year we will open only a small
number of stores in carefully selected
areas, in up to five new locations. At the
same time, we will continue to rollout
grooming salons amongst the existing
store estate and expect to open 10-20.
In our veterinary business we opened a
net number of 25 new practices to bring
our total to 461. We also transformed
more practices to give them extra
consulting space, or longer opening
hours, so that we have ten ‘super
surgeries’ and six practices opening 24/7.
The challenging supply of veterinarians
has long been a feature of the UK
market and was exacerbated after the
Brexit vote (around 30% of vets in the UK
are thought to be EU domiciled). In
addition, our practice rollout has always
been heavily weighted towards the end
of our financial year, which has placed
an excessive burden on the business
and we are taking an active decision to
spread this profile more evenly through
the year. The supply of veterinarians
is unlikely to change in the short term
and our priority is to open practices
in quality locations for the best vet
partners. We expect to open 20-25
practices in the year ahead and have
already opened four in the new financial
year to date.
Strategic evolution and outlook
in the year ahead
The pet care market remains resilient,
with growth in pet products estimated
at c2% in 2017, and veterinary services at
c5%. We again grew our market share in
the vet segment and are pleased to say
that following our price repositioning
work in retail, we have won back share
in the food and accessories markets.3
FY19 will be the second of our three-
year financial transition back to
sustainable profit growth, and following
our progress in FY18, we are determined
to achieve our plan. In the coming
financial year we are targeting like-for-
like revenue growth ahead of the market
in both Retail and our Vet Group, and
a transition back to low single digit
underlying Group profit2 growth. We
remain a cash generative business
with a priority to invest in our core
capabilities, particularly our Vet Group.
Delivering the financial plan does
not require adhering to our historical
strategic priorities of growing like-for-
like, space and margins. Our strategy
should evolve with the market and
competitive changes, our challenges
and our ambitions. Our immediate
priorities are to address the few
remaining areas of our price
repositioning programme and take
action to ensure the vet business
can deliver on its potential. But in the
coming months, we will evolve our
longer term strategic plan to become
the best pet care business in the world;
a bigger focus on digital, data, more
services and changing the shape of
our stores in an ongoing environment
of channel shift.
Peter Pritchard
Group Chief Executive Officer
22 May 2018
1 Refers to vet practices younger than 10 years.
2
Alternative Performance Measures (APMs) are defined
and reconciled to IFRS information, where possible,
on page 169.
Market information sourced using internal data and UK
pet market reports, OC&C 2017.
3
17
Strategic report StrategyPets at Home Group PlcAnnual Report and Accounts 2018 Strategy and performance
Delivering our strategy
Our mission:
To be the best pet
shop in the world
The PawPrint:
Pets Before Profit
World class shopping
Friendly experts
At the heart of every
community
Always new and exciting
The best vets and groomers
A truly amazing place to work
Delivery of our strategy across
the PawPrint supports growth
in like-for-like revenues, space
rollout and margins, as well
as putting responsibility at
the heart of our business.
18
Grow like-for-like
revenues
Multiple opportunities to
improve our offer to customers
and deliver resilient growth.
Grow retail and
services space
Increase our footprint across the UK
to improve convenience to existing
customers and access new customers.
Grow margins
Focus on strategies that will
deliver long term operating
margin improvement.
CSR strategy
Put responsibility at the heart
of our business.
Pets at Home Group PlcAnnual Report and Accounts 2018 Key performance indicators
Page 20
Innovation
Evolve our food range to give pets better quality diets.
Develop new and exciting accessories to ensure
customers are always seeing something different.
Private brands
Expand and grow our private labels in food and
accessories, which are only stocked in Pets at Home.
Services
Develop our vet, grooming and advisory services,
which create more reasons for customers to visit us.
Loyalty
Grow the VIP club and personalise our approach
to marketing so we can increase our share of
customers’ spend.
Value
Ensure a tight focus on delivering overall value for
customers; through pricing, product features, service
and convenience.
Engagement
Maintain leading levels of customer engagement with
our highly trained colleagues, to ensure we are the
trusted pet experts.
Read more
Page 20
Omnichannel
Stay relevant to customers’ evolving shopping habits
through an improved online experience and convenient
delivery and collection options.
New stores & services
Open selected new superstores containing vet practices
and grooming salons, in optimal locations, to access
unmet market spend.
Retrofit services
Retrofit vet practices and grooming salons to improve the
customer offer in stores that do not have pet services.
Vet business growth
As well as in-store practices, open practices in
standalone locations.
Expand into veterinary market areas that are
complementary to our core business and provide
additional growth opportunities.
Read more
Page 22
Vet services
Focus on the growth of our veterinary services, which
deliver premium operating margins when mature.
Private brands
Grow the participation of private brands to increase the
mix of premium margin products within the business.
Simplicity
Simplify processes, product management
and behaviours to maintain an optimal cost
base.
Read more
Page 23
For pets
Ensure we maintain our number one value,
Pets Before Profit.
For people
Be a great place to work.
For the planet
Efficiently use and respect resources.
Read more
Page 38
19
Strategic report StrategyPets at Home Group PlcAnnual Report and Accounts 2018 Strategy and performance continued
Grow like-for-like revenues
Highlights of 2018
Value
• Invested significantly in price points
across retail, particularly in food.
• Moved to a simpler and consistent pricing
approach, away from promotional offers
and vouchers.
Omnichannel
• Launched ‘Order-In-Store’, where
colleagues can order from our extended
online range.
Services
• Grew new client registrations in our
First Opinion vet practices through our
TV and online Vets4Pets advertising,
extended opening hours in existing
practices, and educated clients on the
importance of care plans for their pets.
• Added extra space to our Specialist
Referral Centres to give them extra
consulting and treatment areas.
• Introduced better value grooming
• Expanded our popular subscription
packages in our salons.
service to offer additional flea prevention
products.
• Developed a faster online checkout
process for mobile device users.
Innovation
• Relaunched our puppy product range,
with a new look and feel.
• Launched new lines, with fresh designs,
across dog bedding, leads and collars.
Private brands
• Repositioned private label dog Advanced
Nutrition pricing so it is now amongst the
best value in the UK.
• Launched an extension to our private
label science dog food range, AVA, with
breed specific diets.
Future plans
As we look to the year ahead we
continue with the remainder of our price
repositioning programme in the retail
business. Omnichannel, the digital space
and our website will also be core areas of
investment, as we adapt to customers’
changing shopping habits. In our veterinary
business, our growth initiatives will focus
on delivering the highest levels of clinical
care, convenient opening hours, capacity
extensions, and educating customers on
the importance of proactive healthcare.
We expect our strategic initiatives to deliver
like-for-like revenue growth ahead of the
market across both retail products and
veterinary services.
1
Alternative Performance Measures (APMs) are defined and reconciled to IFRS information, where possible, on page 169.
20
Key Performance
Indicators
Like-for-like1 growth
Performance in 2018
Group like-for-like growth
significantly improved as a
result of our pricing, online,
and innovation initiatives in
the Merchandise business.
Our Services business yet again
delivered a consistently high
level of like-for-like growth,
primarily driven through our
vet business.
Key risks associated
• Brand and reputation
• Competition
• Our people
• Business systems and
information security
• Supply chain/sourcing
• Services and store expansion
• Regulatory and compliance
• Extreme weather
Group like-for-like
growth1
5.5%
2018
2017
1.5
2016 2.2
5.5
Services like-for-like
growth1
8.5%
2018
2017
2016
8.5
7.9
10.4
Merchandise like-for-like
growth1
5.0%
2018
2017 0.8
2016
1.5
5.0
Pets at Home Group PlcAnnual Report and Accounts 2018 Private label
participation
Performance in 2018
Our aim during the year was
to increase the participation
of private label products in
the business. Whilst a steady
participation is the outcome
from a percentage of revenue
perspective, participation
has increased as a proportion
of our volumes, which is a
reflection of our price reduction
initiatives over the year.
Product refreshment
VIP club
Performance in 2018
We changed around 2,500
products in the year, and
whilst this was a lower number
than the prior year, our focus
was on achieving more
significant innovation and
change, in fewer areas. This
delivered highly successful
range relaunches in areas like
dog accessories.
Performance in 2018
We again grew the number of
Very Important Pet loyalty club
members, and also increased
the swipe rate of the card at
store tills, which reflects a higher
proportion of shoppers opting
to be part of our loyal customer
following.
Store colleague
retention
Performance in 2018
In line with our aim, we
broadly maintained our
colleague retention rate
during the year, which is
underpinned by our benefits,
education and training,
and engagement we have
with colleagues through
the business.
Key risks associated
• Our people
• Supply chain/sourcing
• Competition
Key risks associated
• Our people
• Supply chain/sourcing
Key risks associated
• Brand and reputation
• Our people
• Business systems and
information security
• Competition
Key risks associated
• Brand and reputation
• Our people
• Competition
• Services and store
expansion
Private label participation
in Merchandise revenues
Products refreshed
and changed
Active VIP club
members
41%
2018
2017
2016
31%
41
41
42
2018
2017
2016
3.9m
31
39
40
2018
2017
2016
Store colleague
retention
76%
3.9
3.7
3.4
2018
2017
2016
76
78
79
VIP card swipe rate
in-store2
70%
2018
2017
2016
70
68
64
2
Average swipe rate of the card at store
tills over latest quarterly period.
21
Strategic report StrategyPets at Home Group PlcAnnual Report and Accounts 2018
Strategy and performance continued
Grow retail and services space
Highlights
of 2018
Stores
• Opened 13 superstores
(net), bringing our total
store numbers to 448.
• Took the decision to
discontinue our trial of
Barkers for dogs stores.
Vet practices
• Opened 25 vet First
Opinion practices (net),
bringing our total
numbers to 461 practices.
Grooming salons
• Opened 27 grooming
salons (net), bringing our
total numbers to 309 salons.
Future plans
In the coming year we will
open up to five new stores.
At the same time, we will
continue to rollout grooming
salons amongst the existing
store estate and expect to
open 10-20. In our veterinary
business, we expect to
open 20-25 First Opinion
practices in the year ahead.
Our aim remains to acquire
or open more veterinary
Specialist Referral Centres.
Key Performance
Indicators
Stores
Performance in 2018
We opened 13 superstores
(net), slightly ahead of our
target of ten.
Grooming salons
Performance in 2018
We opened 27 salons, in line
with our target of 20-30.
Vet practices and
referral centres
Performance in 2018
We opened 25 practices (net),
below our target of 40-50,
where the shortage of qualified
vets in the UK continues to be
an industry wide challenge.
We did not open any further
referral centres during the year.
Key risks associated
• Services and store expansion
• Competition
• Brand and reputation
• Our people
• Liquidity and credit risk
Key risks associated
• Services and store expansion
• Competition
• Brand and reputation
• Our people
• Liquidity and credit risk
Key risks associated
• Services and store expansion
• Competition
• Brand and reputation
• Our people
• Liquidity and credit risk
Pets at Home
superstores
448
2018
2017
2016
First Opinion
vet practices
461
448
2018
442
419
2017
2016
Grooming salons
309
461
2018
436
388
2017
2016
309
290
240
Veterinary Specialist
Referral Centres
4
2018
2017
2016
2
4
4
22
Pets at Home Group PlcAnnual Report and Accounts 2018
Grow margins
Highlights
of 2018
Services
• Services revenues grew to
14.9% of the Group, up from
14.1% in the prior year.
Private brands
• Increased our participation
of private brands within
Advanced Nutrition, and
kept participation broadly
similar in other areas of
the business.
Future plans
Delivering the maturity of
our veterinary business is
key to supporting operating
margins in the Group. Our
activities will focus on driving
revenue growth in First
Opinion practices and
supporting them as they
grow, as well as opening
new practices.
We will expand our private
label food business further
and encourage customers
to purchase our brands,
ensuring they receive the
most appropriate products
for their pet.
Key Performance
Indicators
Gross margin
EBITDA margin1
Performance in 2018
Group gross margin declined,
driven primarily by our price
investment in the Merchandise
business, which more than
offset the increase in Services
gross margin.
Performance in 2018
We maintained good
operating cost control, aided
by our simplicity initiatives in
stores and the cost savings
delivered by our energy saving
programme, which helped
to offset part of the gross
margin dilution.
Key risks associated
• Brand and reputation
• Competition
• Supply chain/sourcing
• Treasury and financial risk
• Services and store expansion
Key risks associated
• Brand and reputation
• Competition
• Supply chain/sourcing
• Treasury and financial risk
• Services and store expansion
Group gross margin
Group underlying
EBITDA margin1
13.7%
51.7
2018
2017
2016
54.2
54.5
13.7
15.6
16.0
51.7%
2018
2017
2016
Services gross margin
34.1%
2018
2017
2016
34.1
33.3
33.0
Merchandise gross
margin
54.8%
2018
2017
2016
54.8
57.6
57.0
1
Alternative Performance Measures
(APMs) are defined and reconciled
to IFRS information, where possible,
on page 169.
23
Strategic report StrategyPets at Home Group PlcAnnual Report and Accounts 2018
Chief Financial Officer’s review
We have successfully
completed the first
of our three year
financial transition back
to sustainable profit
growth and remain
confident in our plan.”
Mike Iddon
Group Chief Financial Officer
Financial highlights
Financials
Revenue
Revenue split (£m)
Food
Accessories
Total Merchandise
Services & Other2
Total Group
Like-for-like growth1
Merchandise LFL1
Services & Other LFL1
Revenue mix (% of total revenues)
Merchandise
Services & Other
Gross margin Merchandise gross margin
EBITDA
Other income
statement
Cashflow &
leverage
Services & other gross margin
Total gross margin
Underlying EBITDA1,3 (£m)
Underlying EBITDA margin1,3
Underlying PBT1,3 (£m)
Statutory PBT (£m)
Underlying basic EPS1,3 (p)
Statutory basic EPS
Dividend (p)
Free cashflow1 (£m)
CROIC1
Leverage (ND/underlying EBITDA)1
FY17
FY18 Change
395.1
321.6
716.7
117.5
834.2
1.5%
0.8%
7.9%
85.9%
14.1%
57.6%
33.3%
54.2%
130.5
15.6%
96.4
95.4
15.3
15.1
7.5
64.6
20.6%
1.2x
6.8%
6.8%
6.8%
13.7%
7.8%
421.9
343.5
765.4
133.5
898.9
5.5%
5.0%
8.5%
85.1% (79) bps
14.9%
79 bps
54.8% (285) bps
34.1%
78 bps
51.7% (249) bps
123.3
(5.6)%
13.7% (194) bps
(12.3)%
(16.6)%
(11.2)%
(16.6)%
0%
(13.6)%
19.4% (89) bps
84.5
79.6
13.5
12.6
7.5
55.8
1.1x
The FY18 audited period represents the 52 weeks to 29 March 2018.
The audited comparative period represents 52 weeks to 30 March 2017.
3
24
1 Alternative Performance Measures (APMs) are defined & reconciled to IFRS, where possible, on page 169.
2
Includes veterinary Joint Venture fees & other veterinary income, Specialist Referrals revenue, grooming salon revenue,
revenue from live pet sales & insurance.
Non-underlying items in FY18 includes £2.7m associated with the closure of Barkers, £1.6m accounting charge for
the acquisition of minority stakes owned by vet partners in Specialist Referral Centres, and £0.6m of other expenses.
Non-underlying items in FY17 includes £1.0m of expenses for the disposal of Farm Away Limited, the Group’s
equestrian retailing business.
Pets at Home Group PlcAnnual Report and Accounts 2018 Sales and revenue
Group revenue grew by 7.8% to £898.9m
(FY17: £834.2m) and Group like-for-like
revenues1 (LFL) grew 5.5%.
Merchandise revenue, which includes
food and accessories, grew by 6.8%
to £765.4m (FY17: £716.7m), with LFL
revenue1 of 5.0%. This reflects
particularly strong performance from
our omnichannel business, which grew
its revenues by 75.1% to £51.4m, but also
from store sales, which grew by 3.9%.
Food revenue grew by 6.8% to £421.9m
(FY17: £395.1m), with strength across
all areas of dog and cat food, including
Advanced Nutrition, where revenue
grew by 6.0% to £189.8m (FY17: £179.1m).
Accessories revenue grew by 6.8% to
£343.5m (FY17: £321.6m), where dog
accessories and toys were a core driver,
alongside subscription plans in licensed
flea prevention products.
Services revenue grew by 13.7% to
£133.5m (FY17: £117.5m), with LFL
revenues1 of 8.5%. We saw good growth
across our Vet Group in both Specialist
Referral Centres and also the First
Opinion business, where practice
income increased by 16.1% to £53.1m
(FY17: £45.8m). Also within Services,
our grooming salons experienced
slower growth than in prior periods,
and we also saw some weakness in
trade from declining pet sales, which
is an ongoing trend.
Gross margin
Group gross margin declined by 249 bps
to 51.7% (FY17: 54.2%).
Gross margin within Merchandise
was 54.8%, a reduction of 285 bps
over the prior year (FY17: 57.6%), in line
with our plans. This mainly reflects our
price repositioning activities of c£13m,
a foreign currency impact of £5.7m
from the movement in USD versus
GBP and the growth of our omnichannel
business, which has a greater mix
of food product versus higher margin
accessories.
Gross margin within Services increased
by 78 bps to 34.1% (FY17: 33.3%). We
saw expansion in the underlying gross
margin of veterinary First Opinion
practices and Specialist Referral Centres,
but at an overall level, the First Opinion
business saw a decline in gross margin
due to a £5.0m increase in the provision
held for practice operating loans.
We also experienced a significant
improvement in the margin of pet sales
in store, which reflects our activities
to improve and simplify the care and
welfare routines. This benefit is expected
to be a one-off feature of FY18.
Underlying EBITDA1 and
operating costs
Underlying EBITDA1 was £123.3m
(FY17: £130.5m), with a margin of 13.7%
(FY17: 15.6%).
Selling and distribution (S&D) expenses
of £309.5m decreased as a percentage
of Group revenue, to 34.4% (FY17: 35.5%).
Within this, we saw £2.5m in cost
savings as a result of our energy saving
programme, and occupation costs (rent,
service charges and other costs) again
declined as a percentage of sales as
we benefit from the rent paid by vet
practices in our stores, which
contributed £11.7m (FY17: £10.7m).
Colleague costs also declined as a
percentage of sales, particularly in
relation to stores, where we have
reduced payroll hours by streamlining
non customer facing activities.
Underlying administration expenses
of £66.3m were 7.4% of revenue (FY17:
6.6%), where we are seeing growth in
Vet Group operating costs, alongside
our investment in business systems
and omnichannel.
Non-underlying costs totalled £4.9m.
Of this, £2.7m relates to the closure
of our trial Barkers stores and the
associated lease commitments and
write down of fixed assets. In addition,
£1.6m of non-underlying costs were
recognised in relation to the ownership
structures and accounting treatment of
the veterinary Specialist Referral Centres
(see detailed note below on page 27).
There were also £0.6m of M&A related
expenses, for transactions that were
not completed.
Depreciation and amortisation, which
is contained within our total operating
costs, increased to £34.5m (FY17 £29.6m).
7.8% 1
Group revenue growth
5.5% 1
Group like-for-like revenue
(LFL) growth
51.7%
Group gross margin
£123.3m1
Underlying EBITDA
1
Alternative Performance Measures (APMs) are defined and reconciled to IFRS information, where possible, on page 169.
25
Strategic report PerformancePets at Home Group PlcAnnual Report and Accounts 2018 Chief Financial Officer’s review continued
Underlying finance expense
Underlying net finance expense1 for
the year was £4.3m (FY17: £4.5m).
Taxation, trading profit & EPS
Underlying pre tax profit1 was £84.5m
(FY17: £96.4m) and statutory pre tax
profit was £79.6m (FY17: £95.4m).
Underlying total tax expense1 for the
period was £17.0m, a rate of 20% on
underlying pre tax profit1.
Underlying profit for the period1, after
tax, was £67.5m (FY17: £76.3m) and
underlying basic earnings per share1
were 13.5 pence (FY17: 15.3 pence).
Statutory basic earnings per share
were 12.6 pence (FY17: 15.1 pence).
Working capital1 and funding
for vet practices
The cash movement in trading working
capital1 for FY18 was an inflow of £9.4m.
This was comprised of a £4.1m increase
in inventory, offset by a £3.9m decrease
in receivables and a £9.6m increase
in payables.
We increased our working capital
support to First Opinion veterinary
practices with £14.8m in operating
loans. This created an overall increase
in Group receivables of £10.9m and
overall Group cash working capital
outflow of £5.4m.
Operating loans represent cash funding
we choose to provide to Joint Venture
First Opinion veterinary practices,
to assist with their working capital
requirements and underpin their growth
to maturity. The gross value of operating
loans at the end of the financial year was
£38.0m (FY17: £23.2m), against which a
provision of £8.3m is held (FY17: £3.3m).
The increased provision reflects both the
longer maturity curves for practices as
well as an improvement in methodology
used to assess the operating loan
balance. A provision has been applied to
all outstanding practice loan balances,
which we believe is more appropriate
considering the growing size of our First
Opinion business.
Capital investment
Capital investment was £40.7m (FY17:
£44.5m), where £12.8m is represented
by the refurbishment and retrofit of
services into our existing store estate
(FY17 £16.8m) and new store capital
investment totalled £7.3m (FY17: £6.4m).
Investment in business systems totalled
£10.0m (FY17: £7.2m), and £2.3m was
part of the energy savings programme
to fit LED lighting and smart energy
management systems in our store estate
(FY17: £5.8m). Cash capital expenditure
was £41.6m (FY17: £40.9m).
Cashflow and capital structure
Free cash flow (FCF) after interest, tax and
before acquisitions1 was £55.8m (FY17:
£64.6m), representing a cash conversion
rate of 45% (FY17: 49%). The decline in
FCF when compared with the prior year
is driven by our price investments in the
Merchandise business, increased working
capital requirements and the purchase
of shares to satisfy colleague stock
option schemes.
Free cashflow1 (£m)
Cash EBITDA1,4
Working capital1
Operating loans provision
movement
Tax
Interest cost
Capital expenditure
Purchase of shares for
colleague stock options
Reported free cashflow
FY17
133.0
(2.4)
0.1
(19.3)
(4.2)
(42.6)
0.0
64.6
FY18
127.2
(5.4)
5.0
(19.1)
(3.9)
(44.0)
(4.0)
55.8
4
Defined as underlying EBITDA plus IFRS 2 share based
payment charges.
The Group’s net debt position at the
end of period was £135.2m, which
represents a leverage ratio1 of 1.1x
underlying EBITDA.
£m
Opening net debt
Free cashflow1
Ordinary dividends paid
Acquisitions
Other
Closing net debt
Leverage (ND/
underlying EBITDA1)
FY17
(162.0)
64.6
(39.9)
(14.8)
(1.6)
(153.7)
FY18
153.7
55.8
(37.3)
0.0
0.0
(135.2)
1.2x
1.1x
Our capital structure and allocation
policy remains as previously stated,
with a priority to invest in areas that
will expand the Group and deliver
appropriate returns, particularly
within our veterinary business. It is
our intention to maintain a prudent
approach to balance sheet management
in the current economic environment,
but retain some flexibility to increase
leverage to an appropriate level in the
£84.5m1
Underlying profit before tax
£79.6m
Statutory pre tax profit
7.5p
Recommended final dividend
of 7.5 pence per share
1 Alternative Performance Measures (APMs) are defined & reconciled to IFRS, where possible, on page 169.
26
Pets at Home Group PlcAnnual Report and Accounts 2018 £m
LFL revenue growth1
Revenue
Gross margin
Underlying EBITDA1
Underlying EBIT1
Retail
4.6%
804.9
52.2%
97.3 5
65.1 5
Vet
Group
15.0%
94.1
47.1%
31.9 6
29.6 6
Central
costs
(5.8)
(5.8)
Total
Group
5.5%
898.9
51.7%
123.3
88.8
5
6
Non-underlying items: £2.7m associated with the closure of Barkers.
Non-underlying items: £1.6m accounting charge for the acquisition of minority stakes owned by vet partners in Specialist
Referral Centres, and £0.6m of other expenses.
Accounting treatment of veterinary
Specialist Referral Centres
Three of our four centres are structured
as a Shared Venture ownership model,
where Pets at Home maintains a
minimum 75% controlling share, with
the remaining shares owned by multiple
clinician Shared Venture Partners (SVPs).
Pets at Home has an option to buy
the SVP shares in the future, with the
value of these shares related to profit
performance targets. The accounting
treatment of such an option is therefore
structured as a forward contract. Within
the income statement, the discounted
future value of the SVP’s shares is
recognised as an expense over the
period to which the option can be
exercised, and recognised as an
non-underlying expense. We continue
to expect this charge to be £1.5-2m
for FY19.
New financial reporting disclosure
In FY19 our financial reporting will
change to two segments that better
represent the size of the respective
businesses and our internal reporting
structures: Retail (includes products
purchased online and in-store, pet sales
and grooming services) and Vet Group
(includes our First Opinion practices
both in-store and online, and Specialist
Referral veterinary centres).
In order to familiarise readers of the
accounts, and provide a basis for
comparability, we show a pro-forma
unaudited segmentation for the 52
weeks to 29 March 2018.
Mike Iddon
Chief Financial Officer
22 May 2018
£(135.2)m
Group’s net debt position
event that suitable investment or
acquisition opportunities arise. And
dependent upon our acquisition outlook
and if we do not foresee investment
uses, it is our intention to return surplus
free cashflow to shareholders.
Dividend
The Board has recommended a final
dividend of 5.0 pence per share, giving
a total dividend of 7.5 pence per share
in respect of the 2018 financial year,
equal to the prior year.
The final dividend will be proposed by
the Directors at the 2018 AGM and is in
addition to the interim dividend of 2.5
pence per share, paid to shareholders on
12 January 2018. The ex-dividend date
will be 14 June 2018 and, if approved
at the Company’s forthcoming AGM,
it will be paid on 17 July 2018 to those
shareholders on the register at the
close of business on 15 June 2018.
Foreign exchange outlook
The Group purchases products from
Asia to a value of around US$65m
each year. Our policy is to use a mix
of foreign exchange forward contracts
to hedge our USD requirement for the
next 12 months and up to 50% of the
following six months. The movement in
hedged contract rates for FY18, which
were at an average rate of 1.30 USD:GBP,
created a £5.7m adverse cost to the
Group. The majority of our hedging
requirement for FY19 is in place, at an
average rate of 1.34 USD:GBP, which is
expected to have a positive financial
impact of around c£1m.
£40.7m1
Capital investment
£55.8m1
Free cash flow
1 Alternative Performance Measures (APMs) are defined & reconciled to IFRS, where possible, on page 169.
27
Strategic report PerformancePets at Home Group PlcAnnual Report and Accounts 2018 Operating review
Merchandise
Food
• Advanced Nutrition
• Grocery food
• Treats
• Other food
Accessories
• Pet homes and habitats
• Toys, collars, leads, clothing and
other accessories
• Health & Hygiene products
Our Merchandise brand
Merchandise revenue
£765.4m
+6.8%
Revenue split (%)
Revenue split
Food
Accessories
£421.9m
£343.5m
Growth
+6.8%
+6.8%
28
Pets at Home Group PlcAnnual Report and Accounts 2018
Our Merchandise segment comprises food and
accessories for a wide range of popular pets.
As a result of these initiatives, we
have driven strong volume growth
in Advanced Nutrition, up 12.7%,
and increased participation of
private label brands in the category.
We have also continued to develop
our range of pet treats. A broader
range of natural products includes
freeze-dried meat and fish. Items that
mirror trends in human food continue
to be popular, including our ranges
of celebration products, formulated
specifically for pets.
Accessories
Accessories revenues increased 6.8%
to £343.5m and account for 45% of our
Merchandise revenues. Our accessories
ranges are displayed by pet type,
particularly dogs, cats, small mammals,
fish, birds and reptiles. These include
collars, leads and harnesses, bedding,
housing, feeding, health & hygiene,
travel, training and enrichment.
Innovation is critical to growth in this
category, particularly in our own label
brands. We have made a significant
investment in the creation of a broad
range specifically aimed at puppies,
with incentives to encourage puppy
owners to experience our veterinary and
grooming services. The introduction of
harnesses, including a range specifically
designed for small dogs, has driven
growth in the collars and leads category.
We have seen growth from a new range
of cooling products for dogs.
Integrating online with stores
Our in-store ranges are supported
by an expanded offer of 11,700
products available online. ‘Order-In-
Store’ provides colleagues with the
opportunity to advise customers and
place orders from the expanded range
while the customer is still in the store.
We have also developed a subscription
platform which provides a convenient
solution for customers to receive a
regular delivery of products such as
preventative flea treatments in a timely
manner to benefit their dogs and cats.
Food
We provide a wide range of pet foods
for dogs, cats, small mammals, fish,
reptiles and birds. With revenues of
£421.9m, pet food is the largest part
of our business and represents 55%
of our Merchandise revenues.
We aim to provide customers with a
full spectrum of dietary choices to suit
their pet and their pocket, from grocery
brands, to our comprehensive range
of Advanced Nutrition diets, which are
a more considered purchase offering
significant health benefits to dogs and
cats. Our ‘bridging’ ranges, which sit
between grocery brands and Advanced
Nutrition and help customers make
a step up to a better diet for their pets,
have been a particular success in the
past year.
Pets at Home own label and our private
label brands, such as Wainwright’s
and AVA, account for 31% of our total
food revenues. Private labels give us
a great opportunity to highlight the
value of Advanced Nutrition diets,
where we recently lowered prices,
and subsequently extended our price
investment to branded ranges.
29
Strategic report PerformancePets at Home Group PlcAnnual Report and Accounts 2018 Operating review continued
Services
Services & Other
• First Opinion veterinary
practices
• Specialist Referral veterinary
centres
• Grooming salons
• Insurance
• Pets
Our Services brands
Services revenue
£133.5m
+13.7%
Revenue split (%)
Revenue split
First Opinion Joint
Venture fee income
Other services
Growth
+16.1%
+12.1%
£53.1m
£80.4m
30
Pets at Home Group Plc
Annual Report and Accounts 2018
Our Services segment comprises First Opinion
practices and Specialist Referral Centres,
grooming salons and pet insurance, in addition
to sales of pets.
Pet grooming
The pet grooming market in the UK
is highly fragmented. With 309 pet
grooming salons in Pets at Home stores,
The Groom Room is the largest branded
chain of pet grooming salons in the UK.
Groom Rooms are separated from the
main store by fully glazed partition walls,
affording customers an excellent view
of our highly trained colleagues at work.
In addition to having a strong, national
brand, our grooming operation relies
on having highly trained colleagues as
stylists in every salon to deliver a full
range of grooming services.
Pet insurance
We recognise the importance of pet
insurance as a key underpin of our
veterinary business. Across the Group
we continue to work with Petplan,
the UK’s most trusted provider of pet
insurance products.
Pets
We invest in a dedicated team of experts,
headed by an experienced vet, to
provide fully for the welfare needs of
the fish, small mammals and reptiles
available for sale in our stores. Only fully
trained colleagues are permitted to sell
pets and they must be confident that the
pet’s welfare needs will be met fully in its
new home before a sale can conclude.
The partner has access to all the profits
of the business once the loans are
repaid. They are also entitled to any
increase in value of the business if it
is sold to a new partner from our vet
partner pipeline.
To allow prospective partners to
work with us before committing
to a Joint Venture agreement, we
operate a number of practices that
are wholly owned.
Specialist Division
Specialist Referral Centres are
considerably larger than First Opinion
practices. Recognising the strength of
our Joint Venture model in First Opinion,
we developed a shared ownership
model for our entry into Specialist
Referrals, which not only allows the
centre’s vets or Directors to retain a
significant interest in the business, it also
supports future growth and clinical
development. We are already seeing
synergies from consolidating services,
such as pathology, into one of our
centres, allowing us to build our
specialist capability to the advantage
of the Group as a whole.
With four specialist centres now in the
Group, we have retained the experience
of many talented individuals who have
been instrumental in establishing and
developing these centres of excellence.
This is a powerful resource which will
be invaluable to us as we seek to build
our presence in the specialist veterinary
segment through organic growth and
bolt-on acquisitions.
Veterinary practices
We operate the largest branded network
of First Opinion veterinary practices in
the UK, with 461 practices operating
mainly under the Vets4Pets brand name.
Two thirds of these practices are located
in Pets at Home stores, with the
remainder in standalone locations.
We also operate four Specialist Referral
Centres around the UK which handle
the most complex veterinary cases.
First Opinion Division
Our preferred model has always
been to build value through shared
ownership. We operate the only
large-scale Joint Venture veterinary
services business in the UK in which
practices, which are all established as
individual small businesses, are funded
by a small investment from the vet and
the Pets at Home Vet Group to create
the Joint Venture. A larger independent
bank loan provides for the fit-out and
initial working capital requirements,
with further funding provided by Pets at
Home over time if needed. The Group
receives a percentage of the income of
the practice in return for the business
services we provide. A service rental
charge is also levied on those practices
located in a Pets at Home store.
31
Strategic report PerformancePets at Home Group PlcAnnual Report and Accounts 2018 Risk management
Effective risk management
Our risk management framework
Like all businesses, we face risks
and uncertainties that could
impact the delivery of the
Group’s long term strategy.
These range from operational
risks in our day-to-day
operations; strategic risks due
to execution of our strategy;
and external risks emerging
from our sector, the competitive
market environment, and any
change in political or regulatory
frameworks. The Board is
responsible for the level and
type of the principal risks that
we are willing to take and has
carried out a robust assessment
of those risks, including those
that would threaten our
business model, future
performance, solvency or
liquidity (please see page 67).
The key roles
and delegated
responsibilities:
We have an effective risk
management framework that
helps us identify, appropriately
monitor and manage risks to
within appetite, whilst taking
advantage of opportunities as
they are presented. This allows
us to deliver our strategy
effectively and protect value
for our stakeholders.
IDENTIFY
REPORTING
ASSESS
Risk management and the
system of internal control
are the responsibility of the
Board. Risk management
informs our strategic and
operational planning.
MONITORING
MANAGE
Executive
Management Team
Collectively responsible
for managing risk.
The Executive Management
Team is responsible for
closely managing the most
significant risks.
Key risks are allocated to a
Executive Management Team
member for oversight
and ultimate ownership.
Receives regular risk updates and
reports from assurance teams.
Audit and Risk Committee
Internal Audit
Gives objective assurance
to the Board and Audit
and Risk Committee on the
effectiveness of the risk
management framework.
Holds meetings with risk owners
across the business four times
per year.
Updates the individual risk
registers, including actions
and progress made, assesses
risk ratings and documents
the controls in place that help
mitigate each risk.
Shares risk management
information and best practice
across the Group.
Recommends improvements
and corrective actions.
Assists the Board fulfil its
corporate governance and
oversees responsibilities in
relation to financial reporting,
internal controls and the risk
management framework.
Provides oversight and
challenge to the assessment
of principal risks.
Reviews internal financial
controls and the risk management
framework and assesses their
effectiveness in mitigating
Group level risks and advises
the Executive Management
Team on risk appetite.
Reviews and oversees the Group
risk register – reviews detailed
risk reports at each sitting with
supplementary reporting from
the management team on
specific key risks.
Conducts regular deep dives
into key risk areas with relevant
Directors to understand the
nature of the risks and adequacy
of the mitigations and controls
that are in place.
32
Pets at Home Group PlcAnnual Report and Accounts 2018 An effective risk management framework is
in place to help the Group achieve its strategic
objectives and enjoy long term success.”
IDENTIFY
• Key risks are identified in
each business.
• Strategic risks are reviewed
by the Board.
MONITORING
• Assurance gathered from
across the three lines of
defence to assess the
effectiveness of the controls.
• Annual horizon scanning
• Internal Audit inform
exercise with senior
management.
ASSESS
• Risk appetite set by the Board
for all principal risks.
• Standardised scoring
methodology used across
the Group to aid escalation
and consolidation of risks.
MANAGE
• Each principal risk is owned
by a member of the Executive
Management Team.
• Controls and mitigation plans
are in place to manage risk to
within appetite.
the Board, the Executive
Management Team and the
Audit and Risk Committee
on how effectively risks are
being managed.
REPORTING
• Audit and Risk Committee
and the Executive
Management Team review
risks four times per year.
• The Group’s principal risks
are reviewed and agreed
by the Board.
Principal risk rating matrix
n
i
a
t
r
e
c
t
s
o
m
A
l
y
t
i
l
i
b
a
b
o
r
P
e
r
a
R
10
5
2
4
3
8
6
7
9
1
Low
Impact
High
Colleagues
1. Brand and reputation
6. Supply chain and sourcing
Manage our day-to-day risks.
Identify and assess day-to-day
risks in their area of responsibility.
Ensure procedures are
implemented and complied with.
Communicate significant risks
via reporting processes to the
senior management team.
For further details about key
roles and responsibilities
within our governance
structure, please see the
Governance report on
page 48.
2. Competition
7. Liquidity and credit
3. Services and stores
8. Treasury and finance
expansion
4. Our people
5. Business systems and
information security
9. Regulatory and compliance
10. Extreme weather
Brexit
The Board has reviewed the
risks and opportunities that
may arise as a result of Brexit.
Whilst the longer term effects
remain unclear, we continue
to monitor developments
closely. We are starting to
see an impact in the following
areas and have mitigation
plans in place:
• Our people
• Supply chain and sourcing
• Treasury and finance
Please see the risk management
section on pages 34 to 37 for
further detail.
Pets Before Profit and Health
and Safety Committees
Assist the Executive
Management Team in
managing the risks of pet
welfare, health, safety and
security. Ensure robust risk
management procedures
in their area of responsibility
are implemented and
complied with.
Assess the measurement
of risk and compliance with
Group policies and applicable
regulations.
Recommend appropriate policies
and procedures to the Executive
Management Team.
Ensure that appropriate
insurance is in place over
property and other assets.
Hold meetings quarterly
with stakeholders from across
the Group.
Update the Executive
Management Team on key
performance indicators across
the Group.
33
Strategic report PerformancePets at Home Group PlcAnnual Report and Accounts 2018
Risks and uncertainties
Strategic priorities
The table below summarises the
assessment of our principal risks
and how we seek to mitigate them.
Grow like-for-like
Grow margins
Grow retail and services space
Corporate Social
Responsibility Strategy
Strategic priorities
Outlook
As we continue to increase our size
and scale, we must ensure that pet
welfare standards continue to be
maintained at a high level across
the Group. We will continue to
monitor welfare standards closely
and take appropriate steps where
required to maintain them.
Risk appetite
Low
High
Change on prior year
Risk profile
High
Strategic priorities
Outlook
There has been some increase
in the number of pure play online
competitors but this is not expected
to have a significant impact on
our business. We have seen an
expansion of the pet offer among
discounters.
Risk appetite
Low
High
Change on prior year
Risk profile
Med
Brand and reputation
Description and impact
The Group’s number one value is
Pets Before Profit, and pet welfare
is its highest priority.
Mitigation
Pet welfare across the Group is overseen by the Pets Before Profit Committee.
This meets regularly to review pet welfare and check that appropriate
processes are in place to ensure we maintain our high welfare standards.
The Group also recognises the
need to protect its brand and
reputation. Failure to do so
could result in loss of trust and
confidence by both customers
and colleagues.
Competition
Description and impact
The Group competes with a wide
variety of retailers and vet practices,
including other pet specialists,
supermarkets, discounters and vet
groups. Online competition is also
a risk, as large well-known internet
businesses expand into pet
products and established pet
product sites improve and expand
their offer. Failure to keep abreast
of, and respond to, developments
by our competition in the areas
of price, range, quality and service
could have an adverse impact on
the Group’s financial performance
and impact opportunities
for growth.
As a retailer of small pets the highest possible welfare standards must be
maintained at all times. We have rigorous processes in place to ensure this across
all our stores, including in-store adoption centres, and with our pet suppliers. All are
assessed regularly against a comprehensive set of welfare standards by vets, third
party assessors and an animal welfare organisation. We also have a highly visible
field operations team in respect of in-store pets and grooming, where trained
colleagues are focused on maintaining the highest pet welfare standards.
Examples of where we prioritise pet welfare include our decision to suspend
the sale and adoption of rabbits over Easter and instead provide workshops to
educate about the responsibilities of pet ownership. Also, at Christmas we
encourage customers to buy the relevant housing, accessories and food but to
take gift vouchers rather than pets. This allows new owners the chance to visit
one of our stores after Christmas to learn about the welfare needs of their pet
before taking it home.
We operate a confidential ‘Pet Promise Line’ where colleagues are able to raise
concerns about pet care directly with our Head of Pets. Any calls to this line
result in appropriate action to address the concerns raised.
The Group also deals with customers’ pets on a daily basis through its veterinary
practices. The veterinary practices have a clear set of operational protocols, which
are subject to the professional standards mandated by the Royal College of
Veterinary Surgeons. To support the practices we have a clinical development team
who are all veterinary surgeons. They conduct clinical excellence audits focusing
on the quality of care to ensure a high standard of clinical practice is maintained.
Mitigation
In response to a change in shopping habits of our customers we initiated
targeted pricing changes at the start of 2017 beginning with private label
Advanced Nutrition foods. We have followed this with price reductions in
branded food lines and pet essentials. Overall, we have seen good initial results,
particularly in Food and Advanced Nutrition, where increased sales volumes
offset the price reductions, leading to overall revenue growth in those
categories. Our plan remains to target price investment into product areas that
we believe drive shopper frequency and loyalty, not simply reducing prices
across the entire range.
Market research is carried out to review the pet market both at home and
abroad to understand what our competitors are doing worldwide. This helps
identify further changes or initiatives that need to be implemented to help keep
Pets at Home ahead of the competition and remain a leader in the UK market.
We continue to evolve our proposition through the addition of vets and
groomers into our existing store estate whilst continuing to innovate with
the regular introduction of new and exclusive products into our food and
accessory ranges.
As a specialist retailer, the delivery of friendly expertise through our highly
engaged/trained store colleagues is a key element of our proposition and we
continue to invest to ensure our service standards are continually improved.
We have invested in two major initiatives. Order-In-Store allows colleagues
in every store to advise and sell from our extended online range, while
Subscription services deliver flea treatments in convenient individual pipettes
to customers at the right time to administer a single preventative dose to their
pet dog or cat. In the medium term we intend to extend our Subscription
initiative in further product areas.
As part of our investment in the digital shopping experience we have
redesigned our mobile checkout process to make it more convenient and
deliver a better experience for customers shopping with Pets at Home while
on the move. Further investment is planned in our digital engagement with
customers. The VIP (Very Important Pet) club was launched in November 2012
and has been very successful – attracting 3.9m active members at financial
year-end. This customer and pet database enables more targeted marketing,
which helps drive up basket values and enables us to build a stronger sense
of engagement with our customers and their pets.
34
Pets at Home Group PlcAnnual Report and Accounts 2018 Services and Stores expansion
Description and impact
A key part of the Group’s growth
strategy is to increase the growth
in its in-store and standalone
veterinary practices, Groom Room
salons and to increase the number
of stores, whilst maintaining our
existing estate. If we are unable
to deliver the number of sites
necessary to fulfil the services
and stores expansion laid out
in our strategy our expected
financial performance could
be adversely impacted.
Mitigation
The business maintains a pipeline of Joint Venture partner opportunities to
deliver its plans for new First Opinion vet practices. We have a plan to expand
our specialist vet division to achieve national coverage of Specialist Referral
Centres. We also maintain a regular review of our store portfolio to maximise
the potential from our retail estate. This enables the Board to monitor progress
in delivering our growth strategy. Our store rollout is mostly complete so our
attention will be more focused upon how we can ensure our full services offer
is accommodated amongst the existing estate. Our store estate is entirely
leased which gives us great flexibility. As leases come up for expiry or contain
a break, we will assess our portfolio on a case by case basis before deciding
whether to renew the lease, or to close or relocate a unit. We have the ability,
with smaller footprint stores, to utilise mezzanine space to deploy vet and
Groom Room services, maximising the opportunity to offer a full range of
service in our retail stores. Any proposed new veterinary practice, grooming
salon or store investment has to deliver an appropriate financial return after
taking into account any financial impact on the existing store portfolio.
Before we are able to open a new First Opinion veterinary practice we need
to recruit a Joint Venture partner with the ability to both fund their investment
into the Joint Venture and to provide the personal guarantee to the bank
providing the third party financing to the Joint Venture practice. We continue
to investigate opportunities for new store formats, including the trial of a
convenience store within a Tesco superstore.
Strategic priorities
Outlook
Our strategy is to cautiously grow
our estate in priority locations and
to optimise the existing store estate
with services. Store space vacancy
levels are starting to increase
with retailer administrations and
consolidation of existing retail space,
providing further opportunities for
our future store rollout.
Risk appetite
Low
High
Change on prior year
Risk profile
Med
Our people
Description and impact
As a specialist retailer and services
group, retaining highly trained and
engaged colleagues is fundamental
to delivering outstanding customer
service, which is a key element of
our proposition and drives our
continued success and the delivery
of our future growth. Our growth
plans and future success are also at
risk if we do not recruit and retain
high calibre, talented senior
management. A significant number
of colleagues in certain areas of
our business are EU nationals.
Brexit may result in changes to UK
immigration policy which increases
the risk around the availability,
recruitment and retention of these
individuals.
Strategic priorities
Mitigation
Our colleagues are the foundations on which we have built our success. We
recognise that their knowledge and passion are at the heart of the relationships
we build with our customers and their pets. We continue to ensure that we
are attracting diverse talent by updating our recruitment process, including
our recruitment website, policies and procedures, with the aim of being able
to attract diverse candidates with the requisite skillset. By driving continued
investment in progressive training and learning programmes across the
business we ensure that we are developing and retaining our talent.
Outlook
The ongoing Brexit negotiations
may impact our employment of
EU nationals. We need to ensure
that the Group continues to be an
attractive place to work, particularly
if employment levels continue to
increase nationally and there is
more competition in the job market.
Risk appetite
Low
High
Change on prior year
Risk profile
Med
Our Remuneration Policy, as set out on pages 85 to 94, is designed to ensure
executives of the necessary calibre are attracted and retained and that
through our Restricted Share Plan, colleagues across the business can share
in our success. Similarly, we continually review the remuneration and benefits
packages for our colleagues to make sure they are appropriately rewarded
for the substantial contribution they make to our growth and success. We
continue to communicate these benefits and the value they bring to colleagues
to ensure they are taking advantage of them. We also closely monitor colleague
engagement and retention rates.
Listening to our colleagues is critical to our business so we are launching a
new listening survey, which will help to identify issues, and further embed our
culture and values, whilst providing benchmarking data with other companies
in our sector. Succession plans are in place for key roles which are regularly
reviewed by the Board and senior management. We continue to review the
impact of Brexit and the possible change to UK immigration policy which may
impact the availability, recruitment and retention of colleagues in both our
Vet Group and distribution centres. We have employed long term strategies
to mitigate the expected impact, including operating flexible recruitment and
retention initiatives across the Group, launching international experienced and
graduate recruitment programmes for veterinary surgeons, whilst reviewing
opportunities in non-EU vet recruitment markets. We are working closely with
professional bodies including the Royal College of Veterinary Surgeons and the
British Veterinary Association and support them in their calls on Government
to formally recognise the shortages of veterinary surgeons across all
disciplines, particularly in light of restrictions on free movement for EU
nationals following Brexit.
35
Strategic report PerformancePets at Home Group PlcAnnual Report and Accounts 2018 Risks and uncertainties continued
Strategic priorities
Grow like-for-like
Grow margins
Grow retail and services space
Corporate Social
Responsibility Strategy
Strategic priorities
Outlook
Systems stability continues to
improve with the move to cloud
based solutions and managed
service provision.
Greater focus on operational
stability and performance over the
coming year will enable a more
proactive stance in the mitigation
of performance, capacity and
stability issues with the creation
of teams focused on these aspects.
Disaster Recovery testing will be
conducted at the point of change,
ensuring ongoing coverage. Big
data will enable greater insight into
customer behaviour and retail
opportunity in an environment
which ensures GDPR compliance.
Risk appetite
Low
High
Change on prior year
Risk profile
High
Strategic priorities
Outlook
We continue to develop our quality
assurance processes and to ensure
the effectiveness of our Far East
sourcing office in mitigating our
sourcing risks in the region.
Risk appetite
Low
High
Change on prior year
Risk profile
Low
Business systems and information security
Mitigation
To ensure the stability of our IT systems whilst supporting sustained business
growth, we are developing operational monitoring capabilities to assess
performance and capacity of the live systems. This will enable a proactive
stance to be taken regarding the visibility and management of issues prior to
their manifesting at customer touch points. In addition we are working with
our suppliers where appropriate, looking at opportunities to move to managed
services and cloud based solutions. A recent example of this includes the
migration of the Retail platform into a hosted environment as part of a
managed service, simplifying our hosting and support arrangements. This
also aligns with our Disaster Recovery strategy to exit our Stoke backup site
by 2020, moving disaster recovery (DR) capability into the cloud, and further
increasing the already distributed nature of our architecture. We have
conducted network and web infrastructure DR tests, with Retail platform
testing to follow once the move to the hosted environment is complete.
The Information Security programme has already delivered Group wide
training and awareness campaigns, educating colleagues to the risks
associated with data and physical security. In addition, IT Security policies
have been revised for re-issue to the wider Group. A significant programme
of work remains ongoing to deliver a range of security enhancements,
to include secure email and device encryption, revised IT standards and
procedures, enhanced asset management, user authentication and
vulnerability scanning amongst others. GDPR drives the requirement to
ensure that personal data is protected at all times, and this has formed the
key principle in the design of our data centric strategy bringing customer
and other data together across the Group. The selection of a cloud based
platform enables us to anonymise certain data to allow full analysis whilst
reducing the risk of customer data being exposed. The solution also allows
us to link customer information more easily, enabling full trace back to core
operational systems that the customer has been identified in so that we can
better update information and remove/archive where appropriate.
Mitigation
Having Pets at Home colleagues on the ground in the Far East working
collaboratively with suppliers enables us to monitor closely compliance
with the Group’s Code of Ethics and Business Conduct policy, and our
Supplier Quality Manual. In addition, an independent third party undertakes
unannounced visits to further monitor compliance with Group policies.
We have made significant investments in both our sourcing strategy and our
quality and food technical function, in terms of people, processes, testing and
reporting, to ensure we have the capability to meet the future ambitions of the
business. Business continuity plans are in place for the distribution centres
which have been tested. They help us mitigate the impact of a disaster by
enabling us to service all stores and orders for a priority range of SKUs from
a single distribution centre whilst we source a second facility and recover
full product supply. We will continue to monitor Brexit developments closely
and respond to any impact on our supply chain proportionately. Exposure to
foreign currency movements is mitigated through our hedging strategy; see
the Treasury and financial risk.
Description and impact
The need to maintain core business
systems and mitigate against
security risk whilst supporting the
Group’s growth plans and
delivering cost efficiency remains
paramount again this year.
With the arrival of GDPR, there
comes a significant increase in the
level of scrutiny organisations are
being placed under regarding the
management and use of personal
data. With this comes additional
cost linked to the evaluation and
remediation of associated risks
(data, people and infrastructure).
Our ability to balance these
challenging demands is key to
ensuring that the business is able
to maintain target growth levels
and be secure from data security
breach and legal challenge.
Supply chain and sourcing
Description and impact
During the financial year,
approximately US$65m of the
Group’s merchandise cost of goods
was globally sourced, and therefore
we are exposed to the risks
associated with international trade,
such as inflation, changing
regulatory frameworks and
currency exposure. We have two
national distribution centres
covering the north and south of the
UK respectively. A disaster at one of
these may result in a significant
interruption to the supply of stock
for a large number of stores and in
the fulfilment of internet orders.
The impact of Brexit on our
overseas supply chain remains
unknown but may be significant,
particularly in view of probable
changes to the UK’s trading terms
with the rest of the world. We are
also exposed to the risks associated
with the quality and safety of
products produced globally on
behalf of the Group, many of which
are own branded or exclusive
private labels. A failure to manage
this risk adequately could lead to
reputational damage, reflected in
a lack of confidence by customers
and colleagues in the Group brands.
36
Pets at Home Group PlcAnnual Report and Accounts 2018 Liquidity and credit
Description and impact
The business requires adequate
cash resources to enable it to fund
its growth plans through its capital
projects and/or an expansion of
the Group’s working capital
requirement. Without adequate
cash resources, the Group may be
unable to deliver its growth plans,
with a consequent impact on future
financial performance.
Treasury and finance
Description and impact
The Group has an exposure to
exchange rate risk in respect of
the US dollar that is the principal
purchase currency for goods
sourced from the Far East. The
political and macro-economic
environment has increased currency
pressures and we may see this
continue for some time. The Group
also faces risks from changes to
interest rates and compliance with
taxation legislation. If we do not
adequately manage this exposure
there could be an impact on the
Group’s financial performance
with a consequential impact on
operational and growth plans.
Regulatory and compliance
Description and impact
Many of the Group’s activities
are regulated by legislation and
standards including, but not limited
to, trading, advertising, product
quality, health and safety, pet shop
licensing, national minimum wage,
national living wage, modern
slavery, bribery, data protection,
carbon emission and gender pay
gap information reporting, Failure
to comply with these obligations
may result in financial or
reputational damage.
Extreme weather
Description and impact
Prolonged extreme or unseasonal
weather conditions may reduce
footfall in our stores, resulting in
weak sales, leading to adverse
impacts on profit and inventory.
Mitigation
The Group’s finances are continually monitored in the context of its growth plans.
The Group’s current financing facilities are in place until April 2020, As a result, the
Group is confident that it has adequate revolving facilities in place, with a broad
syndicate of ten banks. The Group’s growth plans in respect of Joint Venture
veterinary practices is predicated on the availability of finance for new Joint Venture
veterinary partners to fund both the capital cost and working capital requirement
for each new practice opening. The Group also provides additional financial
support to First Opinion practices to support their working capital requirements
and growth in clinical capacity. This investment is a particular feature of the Joint
Venture operating model and in making this investment the Group considers its
total returns across all practices on a portfolio basis. We have established a provision
to reflect the assessment of extended investments being repaid over different
lengths of time, with different risks of return, to provide for any potential shortfall.
The Group has facilities in place with major high street lenders that give us
confidence that our medium term growth plans are financed adequately.
The Group ensures that all cash surpluses are invested with banks that have
credit ratings and investment criteria that meet the requirements set out in
the Group Treasury policy, which has been approved by the Board. The Group’s
key suppliers are exposed to credit risk and as part of the Group’s overall risk
management programme, the business has identified alternative suppliers
where appropriate and developed contingency plans in respect of own label
and private label food products.
Mitigation
This exposure to FX fluctuation is managed via forward foreign currency
contracts that are designated as cash flow hedges. The Group has borrowings
with floating interest rates linked to LIBOR, thereby exposing the Group to
fluctuations in LIBOR and the consequent impact on interest cost. To manage
this risk the Group has interest rate swaps in place that fix the interest rate on a
significant proportion of the Group borrowings. Further details can be found
on page 142. All hedging activity is undertaken by the Group Treasury function
in accordance with the Group Treasury policy that sets out the criteria for
counterparties with whom the Group can transact and clearly states that all
hedging activities are undertaken in the context of known and forecast cash
flows, with speculative transactions specifically prohibited. Dedicated tax
resource is in place and specialist tax advisors are retained to assist in this area.
Mitigation
We actively monitor both regulatory developments in the UK and Europe and
compliance with our existing obligations where we have internal policies and
standards to ensure compliance where appropriate. We also provide training for
colleagues where required and operate a confidential hotline for colleagues to
raise concerns in confidence. Our suppliers commit to and are audited against
adhering to relevant regulations, such as Modern Slavery Act 2015, the Bribery
Act 2010, the Data Protection Act 1998, and from 25 May 2018, the General Data
Protection Regulation (GDPR), along with our mandatory standards as outlined
in our Quality Manual. In response to GDPR we have a steering committee with
executive sponsorship which is supported by defined working groups to ensure
our GDPR compliance plan is actioned. The Animal Welfare (Licensing of Activities
Involving Animals (England) Regulations 2018 were laid before Parliament in
Feb 2018 and come into force in Oct 2018. This updated legislation follows an
extensive consultation which began in December 2015. We supported the
changes proposed to improve pet welfare and engaged proactively in the
consultation and with ministers and officials directly. Having demonstrated our
expertise and commitment to high welfare standards, we were able to play a
leading role in the development of the detailed guidelines that underpin the new
regulations and form the basis of future licensing inspections by local authorities.
Mitigation
We actively monitor and forecast demand and, should this risk occur, we
would review planned and tactical promotional activity to determine whether
strengthening this would drive sales.
Strategic priorities
Outlook
We will continue to monitor our
finances and build relationships
with our finance providers. We
do not anticipate any significant
macro-economic changes in the
short to medium term that may
affect this risk area although the
outcome of the evolving relationship
that the United Kingdom has with
the EU may have some bearing.
Risk appetite
Low
High
Change on prior year
Risk rating before
mitigation
Low
Strategic priorities
Outlook
Ongoing currency movements
between the US dollar and GBP
may result in further exchange risk,
particularly in light of the ongoing
Brexit process. We will continue to
monitor this and adjust our approach
to hedging where necessary.
Risk appetite
Low
High
Change on prior year
Risk profile
Med
Strategic priorities
Outlook
We welcome the Government’s
recent proposals around animal
establishments licensing which
comes into force in October 2018.
We continue to monitor these and
other regulatory developments
across the UK and Europe and will
plan accordingly.
Risk appetite
Low
High
Change on prior year
Risk profile
Low
Strategic priorities
Outlook
Further improvements to our
omnichannel offering will continue
to improve our resilience to reduced
store footfall during periods of
extreme weather.
Risk appetite
Low
High
Change on prior year
Risk profile
Low
37
Strategic report PerformancePets at Home Group PlcAnnual Report and Accounts 2018 Corporate social responsibility
Home of doing
the right thing
38
Pets at Home Group PlcAnnual Report and Accounts 2018 We celebrate the love of pets so we
believe that we have a responsibility
to do the right thing…
For pets
We are a pet care specialist and it is a
love of pets that forms the unique bond
we share with our colleagues and our
customers and clients. Nothing is more
important to us than the welfare of pets
and we have Pets Before Profit as one of
our core values. As well as the care we
take of our own pets, the product ranges
we offer and the services we provide are
all carefully designed to keep pets
happy, healthy and safe.
More information
Page 40
For people
For the planet
Our customers and clients look to us
to provide the expert advice they seek,
whether in our stores and grooming
salons or in our veterinary practices.
So it is really important that we develop,
retain and reward talented colleagues
in every facet of our business and look
after their wellbeing. We also believe
it is important that we take our expertise
out into the community to share
our understanding of the benefits
of pet ownership and the responsibility
it entails.
We understand that we have a
responsibility to use natural resources
wisely. So, while we have to provide
a safe and comfortable environment
for our colleagues, customers and pets,
we have plans in place that address
consumption, covering areas like
energy, fuel and packaging. At the
same time we aim to reduce waste and
harmful emissions from our activities.
More information
Page 46
More information
Page 44
Responsibility online
investors.petsathome.com/responsibility
39
Strategic report PerformancePets at Home Group PlcAnnual Report and Accounts 2018 Corporate social responsibility continued
Doing the right thing
for Pets
A lifetime of care for pets
We have created a range of Health
Plans that make essential routine
veterinary treatments more
convenient and more affordable to
help pet owners do the right thing
for their pets. The main focus of our
care plans is preventative healthcare
for dogs, cats and rabbits, including
vaccinations, flea and worm
treatments and regular health checks.
To help pet owners we send timely
reminders when boosters or
treatments are due, resulting in pets
visiting vets more frequently for the
care they need to keep them healthy.
We offer different plans tailored to
different life stages and have
developed what we believe to be
the first care plan that goes beyond
preventative healthcare to focus on
chronic diseases, Care4Life. Care4Life
is a bespoke plan for dogs or cats
with lifelong conditions including
diabetes, osteoarthritis and
heart disease.
We have also entered into a
partnership with Battersea Dogs
and Cats Home to provide all their
rehomed dogs and cats with
vouchers for a free veterinary
consultation at one of our practices
and a free Vac4Life care plan. Our
nationwide practice network means
that all pets rehomed by Battersea
can remain fully vaccinated
throughout their life and receive
a free annual health check.
Home of pet welfare
As our core belief is Pets Before Profit,
nothing is more important to us than
keeping pets happy, healthy and safe.
To ensure our policies and practices
provide the best possible welfare
standards for the pets in our stores
we maintain an expert pet team,
headed by an experienced vet who
is supported by three qualified
veterinary nurses, and specialists
in freshwater and marine biology,
and in pet and reptile welfare.
We also have a dedicated field
team responsible for ensuring we
implement the best possible standards
consistently across all our stores and
breeders. A confidential hotline is
in place for colleagues to raise any
concerns they may have directly
with our Head of Pets.
During the year we implemented
a number of changes to improve
welfare standards further.
In our aquatics section we have
removed the gravel from the tank
floor and reduced the ornamentation.
This not only makes the fish more
visible so our trained aquatics
colleagues can identify potential
problems more easily, it also makes
it easier to maintain the water quality
which is less stressful for the fish. We
have also reduced the number of fish
species stocked, focusing on the most
popular varieties. This has allowed us
to concentrate our efforts to improve
the sourcing and transport of our
fish. We have also introduced ‘fish
points’, a simple way to help
customers understand the correlation
between the volume of a particular
tank and the number of fish it can
safely support.
With small mammals it is essential
that they have access to clean, fresh
water throughout the day. Cleansing
traditional water bottles can be
difficult and risks spreading disease
if it is not done thoroughly so we
investigated ways that this risk could
be minimised. Working with suppliers
we now have bottled mineral water
delivered to stores so our pets have
access to fresh spring water every day.
The used bottles are collected to be
recycled, further minimising the risk
of contamination.
40
Pets at Home Group PlcAnnual Report and Accounts 2018 Understanding pet nutrition
We take great care to ensure the pets
in our stores receive the best possible
diet. A variety of fresh vegetables every
day, different types of hay – nothing
is too much trouble. So when research
was published which highlighted
issues with rabbit muesli, we took steps
to replace muesli with nuggets. We no
longer sell rabbit muesli.
Being a pet specialist, customers turn
to us for advice and it’s important we
can address their questions specifically
in relation to their individual pet and
their personal experience. This is
what sets us apart from supermarkets,
discounters and online retailers, all
of which sell pet food. So we have
colleagues in every store who are
specifically trained in pet nutrition
and who undertake a programme
of continuous personal development
to keep their knowledge up to date.
Our belief is that pets deserve the
best possible diet. Our ranges of food
for dogs and cats are particularly
extensive, providing customers with
choice that will suit every pet and
budget – from grocery products,
to breed specific formulations and
Advanced Nutrition ranges.
We have found that, mirroring trends
in human nutrition, customers are
increasingly interested to understand
more about what makes up their pet’s
diet so they can make more informed
choices. To address this need we
undertook extensive research during
the year ahead of launching our
‘recipes’ campaign to highlight initially
what goes into dry dog food and
explain some of the terms used
in labelling.
More information about what’s in
the recipe for a wide range of dry dog
foods can be found on our website
www.petsathome.com/shop/en/
pets/recipe
41
Strategic report PerformancePets at Home Group PlcAnnual Report and Accounts 2018 Corporate social responsibility continued
Educating new pet owners
As pet owners ourselves, we
recognise the joy that a new pet
brings. For children in particular the
prospect of owning a new pet can
be particularly thrilling, so to make
them aware of the responsibility that
comes with pet ownership, we offer
a programme of workshop events
which we call “My Pet Pals”. These
workshops cover aquatics, small
mammals and reptiles. Because
of the association of bunnies with
Easter, over the Easter holiday we
focus our workshops on the care
of rabbits. In addition we suspend
the sale and adoption of rabbits
over the Easter weekend.
45,550
people registered to attend one
of our Easter workshops in 2018
We provide a wide range of pet
information leaflets free in every store.
These have been written to ensure
customers are aware of their
responsibility, under the Animal Welfare
Act, to care for their animals properly
and in particular to provide for the five
welfare needs. Many of these have been
produced in conjunction with the
RSPCA and are co-branded to highlight
this endorsement.
Before we sell any pet, colleagues
must first check that customers are
aware of their responsibilities in relation
to the welfare needs of that pet.
PetPads, our proprietary iPad
application, guide colleagues to ensure
that all the information that is pertinent
to a particular type of pet is covered.
Customers sign electronically to record
that this has been done before the sale
can progress. All colleagues are
empowered to refuse the sale of a pet
if they have concerns that its welfare
needs may not be properly met in its
new home.
42
Pets at Home Group PlcAnnual Report and Accounts 2018 More than
£4.4m
was raised for Support Adoption
For Pets this year
£100,000
grant to Hope Rescue in
South Wales
£2.2m
worth of lifelines were donated
to support the rehoming of pets
£475,450
worth of Wainwright’s dog food
was donated to Dogs Trust
43
Giving pets a second chance
of happiness
We go to great lengths to find the
right home for every pet and the right
pet for every customer. However,
often through no fault of their own,
for some pets it isn’t always possible
for them to enjoy a permanent loving
home and for these pets, rescue and
rehoming centres offer a second
chance of happiness.
Pets at Home established the charity
Support Adoption For Pets in 2006 to
provide vital support for pets in need.
We provide rehoming centres for the
charity in our stores where colleagues
care for smaller pets. In addition the
charity provides grant funding to
external organisations to help with
capital projects and running costs,
subject to Trustee approval.
This year more than £4.4m was raised
for Support Adoption For Pets. The
biggest fundraising event in the year is
the annual Santa Paws Appeal, where
customers are invited to donate 50p
to buy a Christmas dinner for a pet in
rescue. Through the hard work of our
store colleagues and the generosity of
our customers we raised £1.4m which
was split between Support Adoption
For Pets and locally partnered
rescues who support our in-store
fundraising efforts.
During the year Support Adoption
For Pets made its largest ever grant
of £100,000 to Hope Rescue in
South Wales. This transformational
grant enabled the development of
a state of the art isolation block,
providing facilities to rehome an
additional 300 stray dogs every year,
and improve the welfare of 800
dogs in their care. A video of this
transformation is available on the
Support Adoption For Pets website
www.supportadoptionforpets.co.uk
Through our VIP loyalty scheme
we also provide ‘lifelines’ which
enable animal charities nominated
by customers to purchase food and
accessories from local stores. This
year £2.2m worth of lifelines were
donated to support the rehoming
of pets.
We continue to support the rehoming
of pets through Dogs Trust with
donations of Wainwright’s dog food.
This year £475,450 worth of food
was donated.
Strategic report PerformancePets at Home Group PlcAnnual Report and Accounts 2018 Corporate social responsibility continued
Doing the right thing
for People
Valuing our colleagues
as individuals
We engage with and value our
colleagues as whole people, not
simply as employees. This is reflected
in our approach to reward and
benefits, where we recognise the
importance of work-life balance and
in our approach to wellbeing.
Our colleagues represent a very broad
spectrum – from specialist veterinary
surgeons to client care advisors, from
experts in marine and freshwater
biology to store colleagues – all are
different and all are uniquely talented.
Recognising this diversity, we
structure our approach to wellbeing in
four dimensions – physical, mental,
financial and nutritional.
Recognising the pressures on people
working in the veterinary profession
we prioritise the wellbeing of our
veterinary colleagues, with a focus on
mental health awareness. We have
partnered with the Retail Trust and Port
of Call to offer services for colleagues
who need support, advice or guidance
in times of difficulty. Port of Call
specifically support people affected
by addiction. We provide ‘Mind Matters’
mental health awareness training
with full day courses available for our
practice colleagues to attend. The
course was designed with the Royal
College of Veterinary Surgeons to
help individuals understand their
own mental health and to identify
and manage mental health in
the workplace.
In our Retail business we will also
focus on mental health and wellbeing.
Managers have asked for support in
dealing with colleagues’ mental health
challenges to enable us to better
support those colleagues. We want to
create a culture where mental health
is not a subject that people shy away
from. We have partnered with MIND
and have signed their pledge ‘Time to
Change’ to help us educate managers
so we can offer the right support at
the right time and experiences can
be safely shared.
Occupational Health Advisors
have been appointed to help with
appropriate support, guidance
and intervention for our colleagues
with health concerns, including
mental health.
Supporting local
communities
As part of our rewards and benefits
package all colleagues are able to take
a charity leave day every year. This
year colleagues from our Vet Group
Support Office in Swindon volunteered
to work with seven local organisations
while colleagues from our Distribution
Centres raised more than £9,000 in
support of a range of charities.
Colleagues in the Vet Group also
nominate a Charity of the Year which
they work to support. This year Medical
Detection Dogs have benefited from
our fundraising, which included a book
sale, children’s party and sponsored
cycle ride and raised around £8,000.
Proceeds from the sales of single-use
carrier bags in stores have enabled
Pets as Therapy to pilot a number
of schemes to provide outreach and
companionship to people living in
isolation and they are now working to
expand these services. Dogs for Good
have also been able to expand their
animal assisted intervention services
which aid families with a child with
autism to integrate a dog into their
routine, helping to reduce stress
for both the child and the family.
Working with the Alzheimer’s Society
we have launched a campaign to
enrol colleagues as ‘dementia friends’
to improve their awareness and
understanding of how they can help
people who are living with dementia.
44
Diversity –
gender pay gap
We want every colleague to see
Pets at Home as a place where
they can make the most of all of
the opportunities we offer and
where talent is the only determining
factor in their success. So we
welcomed the UK Government’s
requirement to publish gender pay
gap information. Our Retail division
is the only Group entity to fall
within the parameters set by
the government.
Our median gender pay gap is 9.7%.
In common with many retailers,
women make up the majority of
our colleagues and across 75% of
our colleagues we are encouraged
to see the gender pay gap is either
less than 1% or is favourable to
women. In the highest paid quartile,
where men outnumber women,
our gender pay gap is less than the
UK average.
The report also sets out a range
of actions we are taking to help
close the gap, including overhauling
our recruitment website and
guidelines to make sure that we are
showcasing the diverse and flexible
opportunities we offer, making sure
we are putting in place clear career
pathways and making sure that the
benefits we offer support a healthy
work-life balance.
Our full gender pay gap report
is available at investors.
petsathome.com/responsibility
Pets at Home Group PlcAnnual Report and Accounts 2018 Together with the Institute of
Apprenticeships and other like-minded
employers we are working to secure
a new pathway dedicated to dog
grooming. Within our Support Offices
and Distribution Centres we offer
apprenticeships in leadership, human
resources, finance, customer service,
software development, data analysis,
recruitment marketing, supply chain
and warehousing.
Helping colleagues to
develop their full potential
Across the Group we are passionate
about offering opportunities to
colleagues who seek to develop their
skills. Our well established ‘Steps’
programme has been updated to
provide retail colleagues with the most
up-to-date and relevant training in
retail operations, pet welfare and pet
nutrition as well as qualifications that
allow colleagues to serve customers
with certain licensed medicines.
Apprenticeships fit perfectly with
our ethos and can be invested in
colleagues of any age, experience
level or qualifications.
Within our veterinary practices we
offer Veterinary Nurse apprenticeships
for both internal colleagues and as
an opportunity to recruit new talent.
We have partnered with colleges that
offer the best value and method of
delivery to ensure that we can offer
these apprenticeships to colleagues
in every one of our practices.
In addition, we are creating a bespoke
apprenticeship programme for our
client care advisors to ensure that they
can provide our clients with the best
possible experience through their
knowledge, passion and expertise.
Dick White Referrals, one of our
specialist veterinary referral centres,
has invested in its training academy
with an experienced team of
Registered Veterinary Nurses. Here
students become proficient in the
areas of veterinary care that are crucial
to the smooth running of a practice.
The Dick White Academy has been
accredited as a training provider for
Veterinary Nurses (level 3 diploma)
and Veterinary Care Assistants (level
2 qualification) which supports the
growth of talent across the veterinary
profession.
In our Groom Room salons we offer
apprenticeships to new colleagues
looking to develop a career in pet
grooming. Upon completion our
grooming apprentices are promoted
to an available position of Stylist.
Supporting our vet
partners in delivering
clinical excellence
We operate a Joint Venture model in
our First Opinion veterinary practices
which allows our veterinary partners
to focus on their clinical practice while
we provide the business services
needed to run an efficient business.
We support individual vets having the
freedom to make medical and surgical
decisions, including the procedures
they carry out and the products they
use within their practices. We have the
utmost respect for their professional
knowledge and expertise.
While clinical freedom is a central
tenet of our veterinary business,
having unified Vets4Pets branding
across most of our practice estate
has led us to develop an innovative
approach to clinical governance,
helping vet partners aspire to common
standards of clinical excellence.
We have introduced the new role of
Clinical Development Manager (CDM)
to provide Quality Assurance, promote
clinical excellence and best practice,
and support our practices with
clinical audits, coaching and support.
Experienced veterinary surgeons have
been recruited into these regional,
field-based roles. We have developed
the Aspiring to Clinical Excellence
(ACE) programme based on similar
schemes operating in medical
organisations as well as professional
requirements from the Royal College
of Veterinary Surgeons and the
Veterinary Medicines Directorate.
Our CDMs are conducting ACE audits
in every First Opinion practice across
the Group. These audits review 20
critical areas of practice process and
policy and will be updated regularly
to drive continual improvement.
Sadly, bereavement is an inevitable
factor of pet ownership and an
everyday occurrence in veterinary
practice. We have developed a
unique suite of resources to support
practices in providing bereavement
services to clients in a sensitive and
compassionate manner.
45
Strategic report PerformancePets at Home Group PlcAnnual Report and Accounts 2018 Corporate social responsibility continued
Doing the right thing
for the planet
Protecting the
UK’s biosecurity
Recognising the importance of
educating customers about their
responsibilities in relation to invasive
non-native species, our fish bags
carry a message asking customers
not to release fish or aquarium
plants into the wild as this can be
harmful for both the fish and our
natural environment. This message
is being extended across our range
of tanks and accessories. If a
customer is no longer able to look
after their fish, we ask them to
contact their nearest Pets at Home
store where we have trained
colleagues who will do their best
to help. During the year we were
pleased to host a visit to one of our
stores, together with the Ornamental
Aquatic Trade Association, to
discuss this important issue with the
Parliamentary Under Secretary of
State responsible for these matters.
Delivering the goods
Saving water
We recognise that water is a precious
natural resource and we are looking
to further develop our approach to
water management. To help us better
understand how water is used in a
typical store we have installed water
sub meters and data loggers in some
of our stores in Scotland. Analysis
of these data will help us to identify
areas of highest water use and
target these with programmes to
reduce consumption. With the water
market in England opening up to
competition we have tendered for
a single supply contract for our sites
in England. Whilst this is a fairly
new market we expect this to drive
further water saving activity over
coming years.
Trading from 448 locations around
the country we rely on an efficient
transport network and a well-invested
fleet to keep our stores replenished
and to recycle our waste. Our entire
fleet of delivery vehicles is compliant
with Euro 6 vehicle emission
standards which, with nitrogen oxides
(NOX) emissions of 0.4 grams per
kilowatt hour of energy, represent a
significant advancement over NOX
limits of 2.0 grams per kilowatt hour
of energy from the Euro 5 standard.
For our fleet this delivers a saving of
more than 28,000kg NOX compared
to equivalent emissions from a Euro 5
fleet, with falls also in emissions of
both hydrocarbons and particulates.
In addition, we track the number of
km travelled for every 1,000 cases
delivered which we believe represents
a good indicator of scheduling
efficiency. Over the past year we
have achieved an improvement
of 7% in our scheduling efficiency.
Minimising the impact of packaging
We have implemented a sustainable
packaging policy to ensure that any
packaging necessary to deliver our
products to customers in the perfect
condition we intend is created in the
most sustainable way we can,
throughout the packaging life cycle.
The principles that underpin our policy
can be summarised as “use a little; use
the old; use it again and use it wisely”.
Through these principles we aim to
reduce packaging volume, material
weight and optimise volume;
maximise recycled content and
post-use recyclability; and minimise
environmental impact throughout
our process. We are applying these
principles to all packaging materials
and plastics used in our stores.
Having retendered our waste
contract in 2016 we have continued
to achieve our goal of sending zero
waste direct to landfill. The housings
for all the pets in our stores are
cleaned every day of the year. Used
bedding, wood shavings and other
waste is collected and returned to our
distribution centres for recycling.
We continually seek ways to increase
the volume of waste that is recycled
every year.
46
Pets at Home Group PlcAnnual Report and Accounts 2018 Minimising our
carbon footprint
We continue to reduce our carbon
footprint. Electricity remains our
largest source of emissions and is
the focus of our reduction efforts.
We continue to target other areas
to reduce emissions, particularly
our logistics fleet.
Becoming carbon neutral
in gas and electricity use
During the year we successfully
completed our programme to install
LED lighting and Building Energy
Management Systems across our store
estate. This programme helped to
reduce our energy consumption by
34% with improvements to pet welfare.
Since October 2017 we have become
carbon neutral in relation to our use
of natural gas and electricity across
all of our stores, veterinary practices,
distribution centres and support
offices. To achieve this, we are now
sourcing green renewable electricity
and purchasing Gold Standard carbon
offsets equal to the volume of natural
gas we use across the estate to heat
our stores and vet practices.
The full year carbon saving is
significant. As our electricity is now
carbon neutral, we expect to reduce
CO2 emissions from electricity
consumption by more than 30,000
tonnes per year. For each tonne of
CO2 emitted from the gas used to heat
our premises, we now also purchase
one gold standard UN-backed carbon
offset. Purchasing carbon offsets
supports families and communities
in some of the poorest countries in
the world. For example, one project
we are supporting in Kenya provides
families with a new cooking stove.
These new stoves are more efficient
than open fires and significantly
reduce the harmful air pollution to
which young children are exposed.
These projects support UN sustainable
development goals.
One project we are supporting in Kenya provides families with a new cooking stove.
Total carbon footprint
Scope 1
Scope 2
Scope 3
Total
Tonnes CO2e emissions
2017/18
(Location-based)
2017/18
(Market-based)
9,649
21,584
5,799
9,649
9,974
5,799
2016/17
9,619
28,840
6,620
37,031
25,422
45,079
tCO2e per £m revenue
41.20
28.28
54.04
Inclusion of 1,200 carbon offsets
35,831
24,222
•
•
•
•
•
•
•
•
•
•
Methodology: We have applied the UK Government’s 2017 Conversion Factors for Company Reporting and GHG
Protocol standards in order to quantify and report our greenhouse gas emissions.
Methodology: An operational control approach has been used to define to reporting process. A financial control
approach was used for previous years.
Boundary: Pets at Home leases a small number of company cars, emissions from these had previously been reported
in error as Scope 3 emissions in previous years. From this reporting year these emissions will be reported correctly as
Scope 1 emissions.
Additional inclusions: This is the first year that we have included the emissions from our stand-alone vet practices
and referral centres. The impact of these is de minimis.
Exclusions: Due to technical issues with data collection, fugitive emissions from air conditioning and refrigeration are
not reported although these are considered minimal.
Estimation: Forecasted energy consumption used for budgeting purposes has been applied in the occasional instance
where estimation was required.
Independent verification: Our 2018 Scope 1, 2 and 3 emissions are verified to a limited level of assurance by Ramboll
Environment & Health Limited using the ISO 14064-3 standard. A link to the verification statement is available on the
Pets at Home website.
Normalisation: We have chosen to report gross Scope 1 and 2 emissions in tones of CO2e per £m revenue as this is
a common metric used in corporate greenhouse gas reporting.
Market-based criteria: Since October 2017 we have procured 100% renewable electricity backed by REGOs and
assessed for conformance with GHG Protocol Scope 2 Quality Criteria. An emission factor of zero has therefore been
applied since that date to calculate our Scope 2 market-based figure, whilst a location-based factor was used to
calculate Scope 3 emissions from transmission and distribution losses.
Carbon offsets: We work with ClimateCare to offset our Scope 1 GHG emissions (equivalent to the emissions from
the natural gas used in our buildings) through best practice Gold Standard emissions reduction projects, which both
cut carbon and improve lives. Our support for the distribution of clean cook stoves, through the Paradigm Healthy
Cookstoves and Water Treatment Project, is cutting indoor air pollution and waterborne disease, as well as tackling
climate change. The notice of retirement be found here: https://products.markit.com/br-reg/public/index.
jsp?name=pets%20at%20home&entity=retirement&entity_domain=Markit,GoldStandard
47
Strategic report PerformancePets at Home Group PlcAnnual Report and Accounts 2018 Governance report
Clear and consistent
governance framework
development of our omnichannel strategy,
and more recently, the repositioning of
our Merchandising business.
Corporate Social Responsibility Committees
and brings valuable veterinary services
sector experience to the Board.
In November 2017, Nicolas Gheysens
also resigned from the Board. Nicolas
had been appointed to the Board as
the nominated representative of the
Company’s then Principal Shareholder,
KKR My Best Friend Limited, an affiliate of
Kohlberg Kravis Roberts & Co. L.P.. KKR My
Best Friend Limited determined at that
time not to replace Nicolas on the Board
as it was otherwise entitled to do under
the terms of the Relationship Agreement
entered into with the Company.
During the financial period Amy Stirling
and Paul Coby stepped down from the
Board with effect from the close of the
Annual General Meeting on 11 July 2017
in order to fulfil commitments in their
full time roles. Amy was succeeded by
Sharon Flood, Chair of ST Du Pont S.A, the
Paris based luxury goods company and
Audit Chair at Crest Nicholson plc and
Network Rail. Paul was replaced by
Stanislas Laurent who was appointed
on 25 May 2017. Stanislas was formerly
President and CEO of Photobox and COO
of AOL Europe. Sharon has been appointed
as Chair of the Audit and Risk Committee
and is a member of the Remuneration
Committee and the Nomination and
Governance Committee. Stanislas is a
member of the Audit and Risk Committee,
Nomination and Governance Committee,
Corporate Social Responsibility Committee
and Pets Before Profit Committee.
More recently Tessa Green confirmed that
she will step down from the Board with
effect from close of the Annual General
Meeting on 12 July 2018. Tessa has been
a Director of Pets at Home since 2014 and
during that time has been Chair of the
Corporate Social Responsibility Committee
and the Pets Before Profit Committee. I
would like to thank Tessa for her valuable
contribution to the business and convey the
Group’s best wishes to her going forward.
Tessa will be succeeded by Professor Susan
Dawson, Dean of the Institute of Veterinary
Science at the University of Liverpool and
council member of the Royal College of
Veterinary Surgeons. Professor Dawson
will Chair the Pets Before Profit and
During the year, further elements of
our succession plan were implemented,
with Andrei Balta being appointed into
the role of CEO of the Vet Group
following Sally Hopson’s resignation
on 23 March 2018. Andrei joined Pets
at Home in 2011 as Director of Group
Strategy and moved to the veterinary
business in 2013, firstly as Commercial
Director and subsequently as Chief
Operating Officer. Prior to Pets at Home,
Andrei was a management consultant
at Bain & Company for seven years.
We progressed the actions that were
highlighted from the 2017 internal Board
evaluation which emphasised the need to
further increase the Board’s focus on talent
and succession planning particularly below
Board and Executive Management Team
level. To support this work, the Board
commissioned a review of the Group’s
banding structure in order to develop
clearer career pathways for colleagues
and the Group’s People strategy has
been revised to provide for a greater
emphasis on colleague development
and talent retention. The Non-Executive
Directors continued to spend time with
the leadership teams outside of formal
meetings to gain a deeper insight into key
rising talent throughout the organisation.
The following pages set out our
governance processes within the
Group. We recognise that corporate
governance touches all aspects of our
business, it underpins the management
of our risk profile and it also affects our
colleagues in many different ways.
I look forward to meeting shareholders at
our next Annual General Meeting which
will be held on 12 July 2018 at 11.00 a.m.
at the Hallmark Hotel, Stanley Rd,
Handforth, Wilmslow, Cheshire, SK9 3LD.
Tony DeNunzio
Chairman, Pets at Home Group Plc
21 May 2018
The Board aims to achieve
the highest standards of
corporate governance.”
Tony DeNunzio
Non-Executive Chairman
Chairman’s introduction
On behalf of the Board, I am pleased
to present our Corporate Governance
Report for the financial year ended
29 March 2018. As Chairman, my role is to
manage the Board, ensuring it operates
effectively and contains the right balance
of skills, diversity and experience to
successfully execute the Group’s long
term strategy. The Group is committed to
promoting high standards of corporate
governance to ensure that the Group is
managed with integrity and transparency.
This has been reflected in the activities that
we have undertaken throughout the year.
Principal governance activities
during the financial year
In November 2017, Ian Kellett notified me
of his intention to step down as Group
Chief Executive Officer. Ian’s resignation
as a Director took effect on 27 March 2018
although he will remain employed by the
Group until 31 May 2018. Ian joined Pets
at Home in April 2006 as Chief Financial
Officer and moved to the role of Group
Chief Executive Officer in April 2016. As
part of the Board’s succession plan, we
are delighted that Peter Pritchard, CEO
of the Retail Group, has succeeded
Ian as Group Chief Executive Officer.
Peter joined Pets at Home in 2011 as
Commercial Director and moved to the
role of CEO of Retail in 2015. During his
time with the Group, Peter has overseen
the establishment of our sourcing office
in China, the launch of the VIP club, the
48
Pets at Home Group PlcAnnual Report and Accounts 2018 Statement of Compliance with the UK Corporate Governance Code
The following Governance Report outlines how the Board has applied the main principals
of good governance as required by the UK Corporate Governance Code published in April
2016 (Code), the Disclosure Guidance and Transparency Rules (DTRs) and the Listing Rules
(LRs). The Board is committed to the highest standards of corporate governance and,
except as set out below, the Board has complied with and intends to continue to comply
with the requirements of the Code.
Pets at Home Group Plc Board
The Company is led and controlled by the Board. The Board has delegated certain responsibilities to Board Committees and
the day-to-day management to the Executive Management Team. Further details can be found on pages 55 to 57.
Board Committees
Audit and Risk Committee
Due consideration of laws
and regulations, framework
of controls, the provisions
of the Code and the
requirements of the
Listing Rules.
Members
Sharon Flood (Chair)
Dennis Millard
Paul Moody
Stanislas Laurent
Nomination and Corporate
Governance Committee
Oversight of Board
composition and
succession planning.
Remuneration Committee
Assists the Board in
determining responsibilities
on Directors’ remuneration.
Pets Before
Profit Committee
Oversight on pet welfare
and achieving strategy on
responsible pet retailing.
Corporate Social
Responsibility Committee
Oversight on strategy
for responsible retailing
including engagement,
sourcing, community
and the environment.
Members
Tony DeNunzio (Chair)
Dennis Millard
Tessa Green
Paul Moody
Sharon Flood
Stanislas Laurent
Members
Paul Moody (Chair)
Dennis Millard
Tessa Green
Sharon Flood
Members
Tessa Green (Chair)
Tony DeNunzio
Dennis Millard
Stanislas Laurent
Members
Tessa Green (Chair)
Tony DeNunzio
Dennis Millard
Stanislas Laurent
Executive Management Team
Investment Committee
Health and Safety Committee
Executive Management Team and Retail and
Vet Group Executive Management Teams
• Ensures the Group’s new store, veterinary surgery
and Specialist Referral Centre investment process
is managed effectively.
• Oversees Group Health and Safety matters.
• Executive Management Team (as detailed
on page 61) leads on strategy and its execution;
and
• Retail and Vet Group Executive Management
Teams implement strategy set by the Executive
Management Team in their respective divisions.
Governance Report
The Governance Report for FY18 covers the following areas:
Leadership
Read more
Page 50
Effectiveness of the Board
Board Committees
Relations with the Company’s
shareholders and the Annual
General Meeting
Read more
Page 52
Read more
Page 55
Read more
Page 58
49
Pets at Home Group PlcAnnual Report and Accounts 2018 Governance report Governance report continued
Leadership
Matters reserved for Board approval
A formal schedule of matters is reserved to the Board for its approval, which
includes the matters listed below. The separation of responsibilities between
the Chairman and the Group Chief Executive Officer, coupled with the reserved
matters described below, ensures that no individual has unfettered powers
of decision-making.
Group strategy and risk management
• Agreement of the Group’s strategy;
• Approval of extension of activities into
new businesses or geographical areas;
• Approval of any decisions to cease to
operate all or any material part of the
Group’s business;
Financial and internal controls
• Changes to the structure and capital
of the Group;
• Reviewing the effectiveness of
internal controls;
• Approval of financial statements and
results announcements;
• Approving significant expenditure,
material transactions and contracts;
• Reviewing and agreeing Group tax
and treasury policy;
The Role of the Board
Division of responsibilities
The Company is led and controlled
by the Board which is collectively
responsible for the long term and
sustainable performance of the Group.
The roles of Chairman and Group Chief
Executive Officer are separate and
clearly defined, with the division of
responsibilities set out in writing and
agreed by the Board. The definitions of
the roles are published on the Group’s
website https://investors.petsathome.
com/investors/shareholder-
information/governance/our-
committees.
The Code recommends that, on
appointment, the chairman of a
company with a premium listing on
the Official List should meet the
independence criteria set out in the
Code. Tony DeNunzio joined Pets at
Home in 2010 and has been Non-
Executive Chairman of the Group since
March 2010. Notwithstanding that the
Board did not consider at the time of
50
Board membership,
Committees, notices
• Delegation of authority to the Group
Chief Executive Officer;
• Board, Executive Management Team and
Senior Management appointments,
arrangements and succession planning;
• Setting of Board Committees’ Terms
of Reference;
• Approval of shareholder communications,
circulars and Notices of Meetings;
Corporate governance
• Review of the Group’s corporate
governance matters;
listing, and continue to believe that
Tony DeNunzio does not meet the
independence criteria set out in the
Code, the Board believes that Tony
should remain as Non-Executive
Chairman of the Group since he
brings vast retail experience and
knowledge to the Pets at Home
team. The Directors consider that
he exercises his role as Chairman
independently of management
and exercises his judgement in
the interests of all shareholders.
Board composition
Board balance and independence
The Code recommends that at least
half the board of directors of a UK-listed
company, excluding the chairman,
should comprise non-executive
directors determined by the board
to be independent in character and
judgement and free from relationships
or circumstances which may affect,
or could appear to affect, the
directors’ judgement.
Board composition
Board tenure
6 years or more
3-5 years
1-2 years
1
3
1
Less than one year
3
Membership of the Board
Non-Executive Chairman
Executive Directors
Independent
Non-Executive Directors
1
2
5
Role of the Board and delegating duties
Board collectively
responsible
for sustainable
performance
Group success
and sustainability
Delegation
of duties to
Committees
approved by
the Board
The Board currently consists of five
Independent Non-Executive Directors
and one Non-Executive Chairman.
The Directors’ biographies are contained
on pages 60 to 61. The Board considers
that all of its Non-Executive Directors
are independent in character and
judgement and that both individually
and collectively, the Directors have the
range of skills, knowledge, diversity of
experience and dedication necessary
to lead the Group and also contribute
significantly to the work of the Board
together with the requisite strategic and
commercial experience. More than half
of the Directors excluding the Chairman
are considered to be independent in
accordance with the Code.
Pets at Home Group PlcAnnual Report and Accounts 2018 Directors’ biographies
Page 60
Board responsibilities
Role
Main responsibilities
Chairman
of the Board
• Manages and provides leadership to the Board of Directors;
• Acts as a direct liaison between the Board and the management of the Company, through the Group Chief
Executive Officer;
Group Chief
Executive Officer
• Ensures that the Directors are properly informed and that sufficient information is provided to enable the Directors
to form appropriate judgements;
• In conjunction with the Group Chief Executive Officer and Company Secretary, develops and sets the agendas
for meetings of the Board;
• Recommends an annual schedule of the date, time and location of Board and Committee meetings; and
• Ensures effective communications with shareholders and other stakeholders.
• Responsible for the day-to-day management of the Company;
• Together with the Executive Management Team, is responsible for executing the strategy, once it has been agreed
by the Board;
• Creates a framework that optimises resource allocation to deliver the Group’s agreed strategic objectives over
varying timeframes;
• Ensures the successful delivery against the financial business plan and other key business objectives, allocating
decision making and responsibilities accordingly;
• Together with the Executive Management Team identifies and executes new business opportunities and potential
acquisitions or disposals; and
• Manages the Group with reference to its risk profile in the context of the Board’s risk appetite.
Senior
Independent
Director
• An Independent Non-Executive Director;
• Provides a sounding board for the Chairman;
• Serves as an intermediary for the other Directors when necessary; and
• Is available to shareholders if they have concerns, which contact through the normal channels of the Group Chief
Executive Officer has failed to resolve, or for which such contact is inappropriate.
Non-Executive
Directors
• Provide constructive challenge to the Executive Management Team;
• Help develop proposals on strategy;
• Scrutinise management’s performance in meeting agreed goals and objectives;
• Monitor performance reports;
• Satisfying themselves on the integrity of financial information and that controls and risk management systems
are robust and defensible; and
• Determining appropriate levels of remuneration for Executive Directors, appointing and removing Executive
Directors, and succession planning.
• Management of the financial risks of the Group;
• Responsible for financial planning and record-keeping, as well as financial reporting to the Board of Directors and
shareholders; and
• Ensures effective compliance and control and responding to ever increasing regulatory developments, including
financial reporting, capital requirements, and corporate responsibility.
Group Chief
Financial Officer
Board observer
• The CEO of the Vet Group is a Board observer;
• Right to receive notice of, attend and speak at Board meetings; and
• No entitlement to vote on any matter requiring a resolution of the Board.
51
Pets at Home Group PlcAnnual Report and Accounts 2018 Governance report Governance report continued
Appointment of Directors by the
Principal Shareholder
Pursuant to the terms of the Relationship
Agreement with the Principal
Shareholder, KKR My Best Friend Limited,
an affiliate of Kohlberg Kravis Roberts &
Co. L.P., had, during the financial period,
the ability to appoint:
• two Non-Executive Directors to the
Board for so long as the Principal
Shareholder (and/or any of its
associates, when taken together) held
20% or more of the voting rights
attaching to the Company’s Ordinary
Shares; or
• one Non-Executive Director for so
long as it (and/or any of its associates,
when taken together) held 10% or
more but less than 20% of the voting
rights attaching to the Company’s
Ordinary Shares.
Although Tony DeNunzio had not been
appointed as a Director by the Principal
Shareholder, the Principal Shareholder
had agreed that for so long as it had the
right to appoint two Directors to the Board
and Tony DeNunzio was a Director, the
Principal Shareholder would not exercise
its right to appoint a second Director to
the Board. The Principal Shareholder
also had the right to appoint one Board
observer for so long as it held voting rights
over more than 10% of the Company’s
shares. The Principal Shareholder had
appointed Nicolas Gheysens as a
Non-Executive Director and to be its
nominated representative on the Board.
In November 2017, Nicolas Gheysens
resigned from the Board and the
Principal Shareholder determined at that
time not to exercise its rights under the
Relationship Agreement entered into
with the Company to replace Nicolas’
position on the Board.
For further details of the Relationship
Agreement and confirmation of
compliance with the provisions set out in
the Relationship Agreement, see page 70
of the Directors’ Report. On 29 January
2018, the Principal Shareholder divested
of its remaining stake in the Company
and reduced its shareholding in the
Company to nil. The Relationship
Agreement has accordingly terminated.
Effectiveness of the Board
Directors’ induction and
ongoing training
It is important to the Board that Non-
Executive Directors have the ability to
influence and challenge appropriately.
New Directors receive a full, formal and
tailored induction on joining the Board,
including meeting with the Executive
Management Team and advisors. The
induction includes visits to the Group’s
stores, veterinary surgeries, distribution
centres, Specialist Referral Centres and
other operational locations together
with training on the Group’s core values
including environmental, social and
governance issues. Individual training
needs are reviewed regularly and training
is provided where a need is identified or
requested. All Directors receive frequent
updates on a variety of issues relevant
to the Group’s business, including
regulatory and governance issues.
Appointments
In November 2017, Ian Kellett notified the
Chairman of his intention to step down
as Group Chief Executive Officer. Ian’s
resignation as a Director took effect on
27 April 2018 although he will remain
employed by the Group until 31 May
2018. Ian’s resignation required the Group
to implement its succession plan and
Peter Pritchard, CEO of the Retail Group,
succeeded Ian as Group Chief Executive
Officer with effect from 27 April 2018.
As noted above, in November 2017,
Nicolas Gheysens also resigned from the
Board. Nicolas had been appointed to the
Board as the nominated representative
of the Company’s then Principal
Shareholder, KKR My Best Friend Limited,
an affiliate of Kohlberg Kravis Roberts &
Co. L.P.. KKR My Best Friend Limited
determined at that time not to exercise its
rights under the Relationship Agreement
entered into with the Company to
replace Nicolas’ position on the Board.
During the financial period Amy Stirling
and Paul Coby stepped down from the
Board with effect from the close of the
Annual General Meeting on 11 July 2017
in order to fulfil commitments in their
full time roles. Amy was succeeded by
Sharon Flood whilst Paul was replaced
by Stanislas Laurent. Sharon has been
appointed as Chair of the Audit and
Risk Committee and is a member of
the Remuneration Committee and
the Nomination and Governance
Committee. Stanislas is a member of the
Audit and Risk Committee, Nomination
and Governance Committee, Corporate
Social Responsibility Committee and
Pets Before Profit Committee.
More recently Tessa Green confirmed
that she will step down from the Board
with effect from the close of the Annual
General Meeting on 12 July 2018. Tessa
has been a Director of Pets at Home
since 2014 and during that time has
been Chair of the Corporate Social
Responsibility Committee and the Pets
Before Profit Committee. I would like to
thank Tessa for her valuable contribution
to the business and convey the Group’s
best wishes to her going forward. Tessa
will be succeeded by Professor Susan
Dawson, Dean of the Institute of
Veterinary Science at the University of
Liverpool and council member of the
Royal College of Veterinary Surgeons.
Professor Dawson will Chair the Pets
Before Profit and Corporate Social
Responsibility Committees.
Appointment terms and elections
of Directors
All Directors have service agreements or
letters of appointment and the details of
their terms are set out in the Directors’
Remuneration Report on pages 91 to 93.
The service agreements and letters of
appointment are available for inspection
at the Company’s registered office
during normal business hours.
At each Annual General Meeting of the
Company all Directors will stand for
re-election in accordance with the Code.
Considering diversity
The Board understands the importance
of having a diverse membership and
recognises that diversity encompasses not
only gender but also background and
experience. Whilst the Board believes that
appointments should be made solely on
merit, we seek to ensure that the Board
maintains an appropriate balance through
52
Pets at Home Group PlcAnnual Report and Accounts 2018 Gender diversity
2018 Board considerations
During the year the Board spent its time considering a wide range of matters.
These included:
Board
Male
6 (75%)
• Strategy;
• Succession planning;
• Performance overall of individual
businesses and functions in the Group;
• Budgets and long term plans for
Female 2 (25%)
the Group;
• Approving significant items of capital
expenditure and contracts, investments,
treasury and dividend policy;
• Job levelling and banding across
the Group;
• Shareholder feedback and reports
from brokers and analysts;
• Regulatory updates;
• Risk management and controls in
the Group including reputational
risks and corporate governance; and
• Delegated authorities.
• Financial statements, announcements
and financial reporting matters;
• Reviewing reports from the Committees,
notably on audit strategy, remuneration,
succession planning, the Group’s
corporate social responsibility strategy
and measures in place to ensure that
Pets Before Profit is maintained as the
Company’s number one value;
Executive Management Team
Male
3 (75%)
Female 1 (25%)
Retail Group Executive
Management Team
Male
6 (67%)
Female
3 (33%)
Vet Group Executive
Management Team
Male
2 (50%)
Female 2 (50%)
Group
Male
3,466 (26%)
Female
9,950 (74%)
a diverse mix of experience, backgrounds,
skills, knowledge and insight, to further
strengthen the diversity of gender and
experience already on the Board. Notably,
two of the five Independent Non-Executive
Directors, Tessa Green and Sharon Flood,
are female together with the Chief People
and Legal Officer and Company Secretary,
Louise Stonier. These appointments were
made entirely on merit, and not on the
basis of gender, the appointees being
by far the strongest candidates for the
positions with their skill sets and overall
experience fitting the objective role
description approved by the Board at
the outset of the recruitment process.
This policy applies equally to all
appointments in the Company including
in respect of the Retail Group Executive
Management Team where Lisa Miao is
How the Board is spending its time through the year
Project
approvals
Strategic
matters
5%
20%
Financial
performance/
reporting
25%
10%
Leadership
and people
development,
inc. succession
20%
Risk management
and internal controls
20%
Governance,
inc. shareholder
engagement
53
Pets at Home Group PlcAnnual Report and Accounts 2018 Governance report Governance report continued
Board meetings and attendance
Number of meetings attended
Attendance for all scheduled Board and Board Committee meetings in the financial period is given in the table below.
Board
Remuneration
Committee
Audit & Risk
Committee
Nomination
& Corporate
Governance
Committee
Corporate
Social
Responsibility
Committee
Pets
Before Profit
Committee
Number of meetings 1
Director 2
Tony DeNunzio (Chairman)
Dennis Millard (Deputy Chairman)
Ian Kellett
Mike Iddon
Tessa Green
Paul Moody
Sharon Flood 3
Stanislas Laurent 4
Amy Stirling 5
Paul Coby 6
Nicolas Gheysens 7
9
9/9
9/9
8/9
9/9
9/9
8/9
6/9
7/9
2/9
2/9
6/9
3
n/a
3/3
n/a
n/a
3/3
2/3
2/3
n/a
1/3
0/3
n/a
4
n/a
4/4
n/a
n/a
n/a
4/4
3/4
3/4
1/4
1/4
n/a
2
2/2
2/2
n/a
n/a
1/2
2/2
2/2
2/2
0/2
0/2
1/2
2
2/2
2/2
n/a
n/a
2/2
n/a
n/a
1/2
n/a
1/2
n/a
3
3/3
3/3
n/a
n/a
3/3
n/a
n/a
3/3
n/a
0/3
n/a
1 Excludes the strategy day which all Directors attended.
2 Only attendance of formal members of the meetings is included. Attendance as an observer is not included.
3 Sharon Flood was appointed as a Non-Executive Director on 25 May 2017.
4 Stanislas Laurent was appointed as a Non-Executive Director on 25 May 2017.
5 Amy Stirling resigned as a Non-Executive Director with effect from 11 July 2017.
6 Paul Coby resigned as a Non-Executive Director with effect from 11 July 2017.
7 Nicolas Gheysens resigned as a Non-Executive Director with effect from 28 November 2017.
appointed Commercial Director and Suzie
Williams as Business Systems Director and
the Vet Group Executive Management
Team, where Fiona Briault and Julie Ross
are appointed as respectively Director for
People, Operations and Partnerships and
Commercial Director. We were delighted
to see Julie Ross appointed into this role
in this last financial year.
Board meetings and attendance
In this financial year, the Board met
formally nine times, plus attended
an annual strategy meeting. Ad hoc
meetings of both the Board and
Committees were arranged to deal
with matters between scheduled
board meetings as appropriate. Board
meetings were preceded by Committee
meetings with the meetings lasting
the majority of the day in most cases.
Topics for the Board meetings are
determined at the beginning of the
year and new items are added to this
as and when appropriate in
consultation with the Board and
Executive Management Team.
All Directors receive papers in advance
of Board meetings via an electronic
board paper system which enables the
fast dissemination of quality information
in a safe and secure manner. These
include a monthly Board report with
updates from each of the Executive
Management Team, which monitors the
achievements against the Group’s key
performance indicators, both financial
and strategic. Performance against
budget is reported to the Board monthly
and any substantial variances are
explained. Forecasts for the year are
revised and reviewed monthly.
Members of the Retail Group Executive
Management Team and Vet Group
Executive Management Team are also
invited to present at Board meetings
from time to time so that Non-Executive
Directors keep abreast of developments
in the Group. For the Board, these
meetings are an opportunity to meet
colleagues below the level of the
Executive Management Team and for
colleagues asked to present, this is a
valuable part of their career development.
The Chairman meets regularly with
the Non-Executive Directors without
the Executive Directors present and
this practice will continue in the future.
The Senior Independent Director also
attended these sessions.
It is important to the Group that all
Directors understand external views
of the Group. Throughout the year,
regular reporting is provided to the
Board by the Company’s Director of
Investor Relations, covering broker
reports and the output of meetings
with significant shareholders.
54
Pets at Home Group PlcAnnual Report and Accounts 2018 Board Committees
The Board has established three
Board Committees: an Audit and
Risk Committee, a Nomination and
Corporate Governance Committee, and
a Remuneration Committee. In addition,
the Board has also established the Pets
Before Profit Committee and the
Corporate Social Responsibility (CSR)
Committee which comprise both
Non-Executive Directors, Executive
Directors and colleagues. The Board
has also established the Investment
Committee and Health and Safety
Committee which comprises Executive
Directors and colleagues. If the need
should arise, the Board may set up
additional committees as appropriate.
Each Committee has written terms of
reference which are approved by the
Board and subject to review each year.
These are available on request from the
Company Secretary and are published
on the Group’s website https://
investors.petsathome.com/investors/
governance/our-committees
Key objectives and responsibilities of the Board Committees
Audit and Risk
Committee
Key objectives
Main responsibilities/duties
• to assist the Board fulfil its
corporate governance and
overseeing responsibilities
in relation to an entity’s
financial reporting, internal
control system, risk
management system and
internal and external audit
functions;
• monitor the integrity of Group financial statements;
• review and challenge accounting policies, unusual transactions;
• assumptions/qualifications on viability;
• compliance with accounting standards;
• review clarity and completeness of financial statements;
• oversee material information presented with financial statements;
• review content of Annual Report and Accounts to advise if fair, balanced and
appropriate for shareholders;
• assessment and advice on risk management system;
• review and advice on adequacy and effectiveness of the Company’s internal
Remuneration
Committee
• to assist the Board in
determining its
responsibilities in relation
to Directors’ remuneration.
Nomination
and Corporate
Governance
Committee
• to assist the Board in
considering the structure,
size and composition of
the Board whilst advising
on succession planning.
Pets Before Profit
Committee
• to oversee Group strategy
on pet welfare.
financial and regulatory controls;
• monitoring and review of internal and external audit; and
• review of whistleblowing, fraud and compliance.
• responsibility for setting, monitoring and reviewing the remuneration policy;
• consultation on major changes to employee benefit structure;
• approval and determination of performance related pay schemes (with regard
to the Code and LRs);
• responsible for selection and appointment of remuneration consultants;
• review, design and assessment of share incentive plans;
• review of Director pension arrangements; and
• approval of Director service contracts and severance.
• reviewing structure, size and composition of the Board;
• Board succession planning;
• evaluation of Board appointments – with consideration to matters such as skill,
experience, knowledge, diversity;
• review of Non-Executive Directors’ time required;
• review matters relating to continuation of Directors’ office;
• conduct Board performance evaluation process; and
• review all conflicts of interest.
• monitoring, reviewing and considering pet welfare standards across the Group;
• monitoring and reviewing compliance with legislation relating to the sale of pets,
welfare standards and veterinary medicine and engaging in the development of
such legislation where appropriate;
• monitoring and reviewing colleague feedback on pet welfare standards;
• overseeing welfare in relation to pet supply, transportation and audit;
• monitoring impact of PR and social media; and
• monitoring pet processes, including audits and vet clinical standards.
Corporate Social
Responsibility
Committee
• to oversee Group corporate
social responsibility matters.
• reviewing Group CSR policy and strategy; and
• monitoring implementation of CSR activity.
55
Pets at Home Group PlcAnnual Report and Accounts 2018 Governance report Governance report continued
Management committees
Details of our management committees
are set out below:
Investment Committee
The Investment Committee assists
the Board with the Group’s store and
veterinary surgery rollout process to
ensure the Group’s investment process
is managed effectively and rigorously
throughout the Group. The Investment
Committee is chaired by Mike Iddon and
its other members are Andrei Balta and
Peter Pritchard. A number of the Group’s
colleagues are entitled to attend meetings
of the Investment Committee as observers
including the Director of Property, the
Group Development Director and the
Vet Group Partner Recruitment, Property
and People Director.
The Investment Committee meets
formally at least nine times a year and
otherwise as may be required. Duties
of the Investment Committee include
reviewing and considering all proposals
presented for the acquisition of new
stores, stand-alone First Opinion
veterinary surgeries, Specialist Referral
Centres, support offices, distribution
centres and any other type of property
for which occupation is proposed for
use by a member of the Group;
approving all material variations and
works of a capital nature proposed to
be carried out to any property in which
the Group has a right of occupation;
approving all material variations to
proposed property and stand-alone
surgery acquisitions; periodically
reviewing proposed changes to the
reporting and presentation of property
investment criteria; reviewing all
proposals presented for lease renewals
and reviewing alternative strategies for
new store investment, formats and
geographical markets and reporting
on such strategies to the Board for final
approval on the terms of any such
matter; and reviewing all proposals
for the dispositions of all or part of any
of the lease on stores including any
sub-letting, assignments, surrenders or
relocations and approving or rejecting
any such proposals as appropriate.
Each of the matters approved by the
Investment Committee is subject to
the further approval of the Board where
it falls within the level of expenditure
requiring full Board approval. The
Investment Committee formally updates
the Board at least once a year in addition
to regular updates on matters approved
within the monthly Board packs.
Executive Management Team,
Retail Group and Vet Group
Executive Management Teams
In addition to the Board, the Group has
the Executive Management Team as
detailed in the Governance Report
on page 61. Supporting the Executive
Management Team is an appointed
divisional executive management team
for both the Retail Group and the Vet
Group for which roles are clearly
defined. The Retail Group Executive
Management Team and the Vet Group
Executive Management Team support
the Executive Management Team in
the implementation of strategy across
their respective divisions.
Health and safety
Health and safety is a key priority for
the Board and senior management
and is an item for review and discussion
at each Board meeting. The Board
has established a health and safety
committee that meets at least on a
quarterly basis and is chaired by the
Chief People and Legal Officer with the
agenda led by the Group Head of Health
and Safety. The committee is attended
by key individuals in the business
that are responsible for certain areas
of health and safety including the
veterinary business, retail and grooming
and the committee is tasked with
reviewing the Group’s overall health
and safety performance. A health and
safety policy is in place for the Group
which is reviewed on a regular basis.
The distribution centres have their
own dedicated health and safety
manager and a separate health and
safety sub-committee which also meets
on a regular basis. The veterinary
business also has a designated health
and safety manager and three health
and safety assessors.
Further details of the work of the health
and safety committee are contained on
pages 68 to 69 of the Directors’ Report.
Internal control and risk management
The Board is responsible for the Group’s
system of internal control and for
reviewing its effectiveness and has
carried out a robust assessment of
the principal risks facing the Group
including those that would threaten its
business model, future performance,
solvency or liquidity as detailed on
pages 33 to 37 of the Strategic Report.
The Board delegates to the Executive
Management Team, the responsibility
for designing, operating and monitoring
these systems. The systems are based
on a process of identifying, evaluating
and managing key risks and include the
risk management processes set out on
pages 33 to 37 of the Strategic Report
and page 75 of the Audit and Risk
Committee Report.
The systems of internal control were
in place throughout the period and up
to the date of approval of the Annual
Report. The systems of internal control
are designed to manage rather than
eliminate the risk of failure to achieve
business objectives. They can only
provide reasonable and not absolute
assurance against material errors,
losses, fraud or breaches of law and
regulations. A number of internal
controls operate across the business.
The key controls the business relied
upon during the year are set out below:
56
Pets at Home Group PlcAnnual Report and Accounts 2018 • The annual Group wide strategic
review of the business took place in
November 2018 culminating in the
preparation of a detailed three-year
strategic plan which was reviewed
and approved by the Board. Following
this approval, the business carried out
its annual business plan and budget
cycle, again culminating in formal
review and approval by the Board
on 26 April 2018.
• Management accounts have been
reviewed at meetings of the Board.
These reviews covered the
comparison of actual performance
against budget in the period end
management accounts and
consideration of outturn for the year.
The period end accounts are prepared
by the management accounts team
and reviewed by the Group Chief
Financial Officer.
• All capital investments during the
year have been approved by the
Group Chief Financial Officer; an
authority framework is in place
which details the approvals required
for specific levels of capital spend
including those capital projects
requiring full Board approval. In line
with delegation by the Board, the
Investment Committee, chaired by
the Group Chief Financial Officer, has
reviewed and approved investments
in respect of the acquisition and fit-out
of new stores, and new standalone
and in store veterinary practices and
for Specialist Referral Centres.
• There is an Internal Audit department
in place that has its scope agreed
with the Audit and Risk Committee
and has reported at each Audit and
Risk Committee meeting throughout
the year. All internal audit reports
are presented to the Audit and
Risk Committee for review and
consideration of any material findings.
Where audit findings have been raised,
management have agreed appropriate
actions and these are prioritised based
on risk. Further details of the areas
covered in the internal audit reports
can be found in the Audit and Risk
Committee Report on page 75.
• A clearly articulated delegated
authority framework in respect of all
purchasing activity is in place across
the Group. This is complemented by
systemic controls including a contract
approval policy that reflects the agreed
authority framework and clear
segregation of duties between relevant
functions and departments.
• A schedule of matters reserved for
the Board is in place for approving
significant transactions and strategic
and organisational change.
• Board discussion of the key risks and
uncertainties facing the Group and
the risk management system together
with deep dives on a number of key
risk areas. Further details are contained
in the Audit and Risk Committee
Report on page 72.
57
Pets at Home Group PlcAnnual Report and Accounts 2018 Governance report Governance report continued
Shareholder relations
The Board’s primary role is to promote
the success of the Company and the
interests of shareholders. The Board is
accountable to shareholders for the
performance and activities of the Group.
The Board is responsible for ensuring
the Company maintains a satisfactory
dialogue with shareholders. The Board
believes it is important to explain
business developments and financial
results to the Company’s shareholders
and to understand any shareholder
concerns. We communicate with
shareholders on a regular basis.
The Board communicates with its
shareholders in respect of the Group’s
business activities through its Annual
Report, yearly and half yearly
announcements and other regular
trading statements. This information
is also made publicly available via
the Company’s website.
During the year, the Company met
regularly with analysts and institutional
investors and such meetings will
continue. The Group Chief Executive
Officer and Group Chief Financial
Officer have lead responsibility for
investor relations. They are supported
by a dedicated Director of Investor
Relations who, amongst other matters,
organises presentations for analysts
and institutional investors and ensures
that procedures are in place to keep
the Board regularly informed of such
investors’ views. In addition, the
Company arranges visits to its stores
and other operations for analysts and
shareholders and this year held a
capital markets day in order to explain
aspects of business performance and
strategy. This last financial year also
saw the Company undertake an
extensive consultation process with
major shareholders in connection
with the Group’s review, development
and ultimate adoption, at the 2017
Annual General Meeting, of its current
Directors’ Remuneration Policy.
All of the Non-Executive Directors
are available to meet with major
shareholders, if they wish to raise issues
separately from the arrangements as
described above.
All Directors will be available at the
Annual General Meeting to meet with
shareholders and answer their questions.
Directors’ conflicts of interest
The Articles of Association of the
Company give the Directors the power
to consider and, if appropriate, authorise
conflict situations where a Director’s
declared interest may conflict or
does conflict with the interests of
the Company.
Procedures are in place at every
meeting for individual Directors to
report and record any potential or
actual conflicts which arise. The register
of reported conflicts is reviewed by
the Board at least annually. The Board
has complied with these procedures
during the year.
Whistleblowing policy
The Company has a duty to conduct its
affairs in an open and responsible way.
We are committed to high standards of
corporate governance and compliance
with legislation and appropriate codes
of practice. By knowing about any
wrong doing or malpractice at an early
stage, we stand a good chance of taking
the necessary steps to stop it. We
relaunched our whistleblowing policy
in FY17. The policy is designed to
encourage colleagues to identify such
situations and report them without fear
of repercussions or recriminations
provided that they are acting in good
faith. The policy sets out how any
concerns may be raised and the
response which can be expected from
the Company and in what timescales.
A copy of the Group’s Code of Ethics
and Business Conduct is published on
the Group’s website https://investors.
petsathome.com/responsibility/
policies-and-procedures/code-of-
ethics-and-business-conduct.
This policy and the procedures in place
to deal with concerns raised under the
policy were reviewed by the Audit and
Risk Committee during the year.
Share dealing code
The Company has adopted a share
dealing code in relation to its shares.
The share dealing code applies to the
Directors, its other Persons Discharging
Managerial Responsibility and certain
colleague insiders of Group companies
and they are responsible for procuring
the compliance of their respective
connected persons with the Company’s
share dealing code.
Board evaluation and effectiveness
The effectiveness of the Board is
important to the success of the Group,
and the Board’s annual evaluation
provides a useful opportunity for the
Directors to reflect on their collective
and individual effectiveness and
consider changes.
Process and focus
The Board evaluation for 2018 was
carried out internally using an online
questionnaire. The online questionnaire
was prepared by the Company Secretary.
The questionnaire asked questions to
assess performance in a range of areas
including Board strategy, leadership and
culture and sought to gauge the extent
of perceived progress of the Board and
the Board Committees in the areas of
development identified in the Board
evaluation undertaken in 2017. Due to the
changes to the Board during the financial
period and in preparation for Peter
Pritchard stepping up to the role of Group
Chief Executive Officer, the evaluation
also focused on Board composition
and expertise and Board dynamics.
58
Pets at Home Group PlcAnnual Report and Accounts 2018 Outputs of the evaluation
At a dedicated Board session, a report
of the findings of the evaluation and
its recommendations were discussed
and specific actions agreed. Overall,
the majority of areas have seen an
improvement in the scoring, however,
the following have been identified as
requiring additional focus:
• redefining the relationship between
the Board and the Executive
Management Team following a period
of management change;
• succession and talent management
and development below Board and
Executive Management Team level;
• visibility and depth of the People
strategy and Company culture;
• presentation and understanding
of the Group’s digital and business
systems strategy; and
• re-visiting the roles and terms of
reference for the Pets Before Profits
and Corporate Social Responsibility
Committees.
Beyond the annual evaluation, the
performance of the Group Chief
Executive Officer is continuously
monitored throughout the year by the
Chairman and the Senior Independent
Director. The Senior Independent
Director and the Non-Executive
Directors also met to discuss the
performance of the Chairman without
the Executive Directors or Chairman
being present.
Pets at Home’s investor website is
also regularly updated with news
and information, including this Annual
Report which sets out our strategy
and performance together with
our plans for future growth
(http://investors.petsathome.com).
59
Pets at Home Group PlcAnnual Report and Accounts 2018 Governance report Board and Executive management
Board of Directors
Tony DeNunzio CBE
Non-Executive Chairman
Dennis Millard
Deputy Non-Executive
Chairman and
Senior Independent
Non-Executive Director
Sharon Flood
Independent
Non-Executive Director
Stanislas Laurent
Independent
Non-Executive Director
Paul Moody
Independent
Non-Executive Director
Appointment to the Board
2014
Appointment to the Board
2014
Appointment to the Board
2017
Appointment to the Board
2017
Appointment to the Board
2014
Committees
Nomination and Corporate
Governance, Pets Before
Profit, Corporate Social
Responsibility
Committees
Nomination and Corporate
Governance, Audit and Risk,
Remuneration, Pets Before
Profit, Corporate Social
Responsibility
Committees
Nomination and Corporate
Governance, Audit and Risk,
Remuneration
Committees
Nomination and Corporate
Governance, Audit and Risk,
Pets Before Profit, Corporate
Social Responsibility
Committees
Audit and Risk,
Remuneration, Nomination
and Corporate Governance
Current roles
• Deputy Chairman
and Senior Independent
Director at Dixons
Carphone Plc
• Non-Executive Director
of PrimaPrix SL.
• Senior Adviser to
Kohlberg, Kravis, Roberts
& Co. L.P.
Current roles
• Non-Executive Chairman
of Halfords Group Plc
• Senior Independent
Current roles
• Chair of ST Du Pont S.A.
• Chair of Audit Committee
at Network Rail
Chairman of Superdry plc
• Chair of Audit Committee
Current roles
• Partner at Highland
Europe
Current roles
• Non-Executive Chairman
of Johnson Service Group
• Non-Executive Chairman
of 4imprint Group Plc
at Crest Nicholson
• Chair of Finance at
Science Museum Group
Past roles
• Non-Executive Chairman
Past roles
• Senior Independent
Past roles
• Group CFO at Sun
of Maxeda
• Non-Executive Director
of Alliance Boots GmbH
• President and Chief
Executive Officer of Asda
• Deputy Chairman of
Galiform Plc (now
Howdens Plc)
• Chairman of the advisory
board of Manchester
Business School
Director of Debenhams Plc
European
• Finance Director at John
Lewis Department Stores
• Chair of Audit at Shelter
• Chairman of Connect
Group Plc
• Senior Independent
Director of Premier
Farnell Plc
• Senior Independent
Director of Xchanging Plc
• Non-Executive Director
of Exel plc
Past roles
• President and CEO
of Photobox
• COO of AOL Europe
Past roles
• Chief Executive Officer
of Food Freshness
Technology
• Over 17 years at Britvic
Plc, with the last eight
years as Chief Executive
Officer
Brings to the Board
Vast retail and financial
experience. Tony was
also awarded a CBE for
services to retail in 2005.
Brings to the Board
Wide ranging public
company experience
and retail and financial
expertise. Dennis is also
a Chartered Accountant.
Brings to the Board
Retail, finance and public
company experience.
Sharon is also a Chartered
Accountant.
Brings to the Board
Entrepreneurial background
with digital and technology
experience.
Brings to the Board
Deep consumer goods
and public company
experience.
Pets
Pets
Nandi
Boris
Casie
60
Pets at Home Group PlcAnnual Report and Accounts 2018
Board of Directors
Group Executive Management Team
Tessa Green
Independent
Non-Executive Director
Peter Pritchard
Group Chief Executive
Officer
Mike Iddon
Group Chief
Financial Officer
Louise Stonier
Chief People and
Legal Officer and
Company Secretary
Andrei Balta
Chief Executive Officer
Vet Group
Appointment to the Board
2014
Appointment to the Board
2018
Appointment to the Board
2016
Committees
Remuneration, Nomination
and Corporate Governance,
Pets Before Profit, Corporate
Social Responsibility
Current roles
• Chair of Moorfields
Eye Hospital NHS
Foundation Trust
• Trustee of the Royal
Foundation of the
Duke and Duchess
of Cambridge and
Prince Harry
• Member of Advisory
Board of Healthcare U.K.
• Member of Bupa Medical
Advisory Panel
• Member of Bupa
Association
• Director of UCL Partners
Past roles
• Chair of the Royal
Marsden NHS
Foundation Trust
• Trustee of The Institute
of Cancer Research
• Trustee of the Royal
Botanical Gardens, Kew
Current roles
• Group Chief Executive
Officer of Pets at Home
• Trustee of Community
Integrated Care
Current roles
• Chief Financial Officer
since 2016
Current roles
• CEO of the Pets at Home
Vet Group since 2018
Current roles
• Chief People and Legal
Officer and Company
Secretary of Pets at Home
Group since 2017
• Chair and Trustee of the
charity Support Adoption
For Pets
Past roles
• Joined Pets at Home as
Commercial Director in
2011 and became CEO of
the Retail business in 2016
• Senior commercial and
management roles
at Asda, Sainsbury’s,
Iceland, Marks and
Spencer and Wilkinson
Hardware Stores
Past roles
• Chief Financial Officer
of New Look from
2014-2016
• A number of finance roles
at Tesco plc over 13 years,
with his final role as
Group Planning, Treasury
and Tax Director
Past roles
• Joined Pets at Home as
Legal Director and
Company Secretary
in 2004
• Associate in the corporate
team at DLA Piper LLP
from 2000–2004
• Solicitor at CMS
Cameron McKenna
from 1997–2000
Past roles
• Joined Pets at Home as
Group Strategy Director
in 2011 and moved to
the Vet Group in 2013
• Management Consultant
at Bain & Company
Brings to the Board
Considerable background
in healthcare and
not-for-profit/charitable
sectors.
Brings to the Board
Significant retail
background and long term
operational experience
across Pets at Home.
Brings to the Board
Financial knowledge and
retail industry expertise.
Brings to the Board
Legal knowledge
and people expertise.
Brings to the Board
Strategic advisory
background and
operational experience
at Pets at Home.
Pets
Pets
Flash
Easton
Oscar
Leo
Strider
Pets
Skye
61
Pets at Home Group PlcAnnual Report and Accounts 2018 Governance report
Directors’ Report
This section of the Annual Report
includes additional information
required to be disclosed under the
Companies Act 2006 (Companies
Act), the UK Corporate Governance
Code 2016 (Code), the Disclosure
Guidance and Transparency Rules
and the Listing Rules of the Financial
Conduct Authority.
Pets At Home Group Plc
Registered Number:
8885072
Statutory information
The Company has chosen in accordance with section
414C(11) of the Companies Act to provide disclosures and
information in relation to a number of additional matters
which are covered elsewhere in this Annual Report. These
matters and cross-references to the relevant sections of
this Annual Report are shown in the table below.
Statutory information
Section heading
Page
number
Amendment of the Articles
Appointment and
Removal of Directors
Board of Directors
Branches outside of the UK
Change of Control
Colleague Involvement
Directors’ Report
Directors’ Report
Directors’ Report
Board of Directors
Directors’ Report
Directors’ Report
Strategic Report –
Corporate Social
Responsibility
Directors’ Report
66
64
60–61
60–61
69
69
39–46
63
63
84
36–46
64
70
Registered Office:
Epsom Avenue, Stanley Green Trading
Estate, Handforth, Cheshire, SK9 3RN
Colleague Diversity and Disabilities
Directors’ Report
Colleague Share Ownership and Plans Directors’
Telephone Number:
+44 161 486 6688
Date of Incorporation:
10 February 2014
Country of Incorporation: England and Wales
Community
Remuneration Report
Strategic Report –
Corporate Social
Responsibility
Type:
Public Limited Company
Compensation for loss of office
Directors’ Report
Compliance with the terms of the
Relationship Agreement (including
the independence provisions)
Directors’ Report
Directors’ Biographies
Board of Directors
60–61
Directors’ information to Auditors
Directors’ Report
Directors’ Insurance and Indemnities
Directors’ Report
Directors’ Interests
Directors’ Report
Directors’ Responsibility Statement
Directors’ Report
Executive Share Plans
Financial Instruments
Directors’
Remuneration Report
Note 21 to the
consolidated financial
statements
Future Developments of the Business
Strategic Report
Financial position of the Group,
its cash flow, liquidity position
and borrowing facilities
Greenhouse Gas Emissions
Going Concern
Health and Safety
Human Rights and Modern
Slavery Statement
Independent Auditors
Chief Financial Officer’s
Review
Corporate Social
Responsibility
Directors’ Report
Governance Report
Directors’ Report
Directors’ Report
Directors’ Report
Audit and Risk
Committee Report
Internal Controls and Risk Management Governance Report
Political Donations
Profits and Dividend
Post Balance Sheet Events
Directors’ Report
Directors’ Report
Directors’ Report
70
64
64
71
87, 90–92
150
18–23
24–27
47
67
56
68
67
70
76
56
66
66
66
62
Pets at Home Group PlcAnnual Report and Accounts 2018 Statutory information
Section heading
Page
number
Powers for the Company to issue
or buy back its shares
Powers of the Directors
Principal Activities
Relationship Agreement
Research and Development
Directors’ Report
Directors’ Report
Directors’ Report
Directors’ Report
Directors’ Report
Strategic Report
Restrictions on transfer of securities
Directors’ Report
Share capital
Directors’ Report
Note 20 to the
consolidated
statements
Significant related party transactions
Directors’ Report
Note 26 to the
consolidated
statements
Significant Shareholders
Directors’ Report
Subsidiary and Associated
Undertakings
Note 27 to the
consolidated
statements
Statement of Corporate Governance
Governance Report
The Audit and Risk Committee Report Governance Report
The Governance Report
Governance Report
The Directors’ Remuneration Report
Governance Report
The Nomination and Corporate
Governance Committee Report
Governance Report
Strategic Report
Governance Report
Treasury and Risk Management
Strategic Report
Viability Statement
Voting Rights
Directors’ Report
Directors’ Report
65
64
63
70
63
5
65
65
140
66
156
66
158
49
72–76
48–61
82–101
77–79
1–47
37
67
65
Disclosures required under Listing Rule 9.8.4R
In accordance with Listing Rule 9.8.4C, the information
required to be disclosed in the Annual Report under Listing
Rule 9.8.4R is disclosed on the following pages of this
Annual Report:
Disclosure
Long term incentive schemes
Significant contracts
Dividend Waivers
Page
number
92
69
Note 9 to the consolidated
financial statements
Principal activities
The principal activity of the Group is that of a specialist
omnichannel retailer of pet food, pet related products and pet
accessories. The Group is also the operator of a small animal
veterinary business, specialist veterinary referral centres and
pet grooming salons. The principal activity of the Company
is that of a holding company. The Company’s registrar is
Computershare Investor Services Plc situated at The Pavilions,
Bridgwater Road, Bristol, BS99 6ZZ.
Research and development
The Strategic Report sets out on page 5 the innovation carried
out by the Group in relation to product and service
development. In addition, the Group also funds a number
of research projects and during this financial year we have
continued to co-fund a Doctor of Philosophy (PhD) at Exeter
University which is looking at how to identify and reduce
the stress factors in ornamental aquarium fish. The PhD was
co-funded with an executive agency called CEFAS (Centre
for Environment Fisheries and Aquaculture Science) which
is sponsored by DEFRA (Department for Environment, Food
& Rural Affairs) and advises DEFRA, as well as other public
and private sector customers on issues connected to the
aquatic environment. The Group is also, in partnership with
Mars Fishcare and the University of West Scotland, working
together on a combined PhD looking at stress caused during
transportation of fish from source right through into the
Group’s stores. This project complements and builds on the
Group’s first PhD project with Exeter University, and combined
with the Exeter University project will give the Group an
in-depth knowledge and understanding which can be used
to further increase the welfare of fish in the Group’s stores.
Colleague involvement
The Group places significant emphasis on colleague
engagement at all levels, in particular through its regular
listening surveys. Colleagues are kept informed of issues
affecting the Group through formal and informal meetings
and through the Group’s internal written communications.
Further information on colleague engagement is included
in the Corporate Social Responsibility Report on page 45.
Details of the Group’s colleague share plans are contained
in the Directors’ Remuneration Report on page 84.
Colleague diversity and disabled persons
The Group’s policy for colleagues and all applicants for
employment is to match the capabilities and talents of each
individual to the appropriate role. We are committed to
ensuring equality of opportunity for all colleagues. We aim to
ensure that no colleague, potential colleague, customer, visitor
or contractor will receive less favourable treatment on the
grounds of:
• Sex
• Race
• Pregnancy and maternity
• Ethnic origin
• Nationality
• Disability
• Age
• Religious beliefs
• Sexual orientation or
following gender
reassignment
• Marital status
• Colour
Applications for employment by disabled persons are given
full and fair consideration for all vacancies, and are assessed in
accordance with their particular skills and abilities. The Group
does all that is practicable to meet its responsibilities towards
the training and employment of disabled people, and to
ensure that training, career development and promotion
opportunities are available to all colleagues.
63
Pets at Home Group PlcAnnual Report and Accounts 2018 Governance report Directors’ Report continued
The Group makes every effort to provide continuity of
employment in the event that any colleague becomes
disabled. Attempts are made in every circumstance to provide
employment, whether this involves adapting the current
job role and remaining in the same job, or moving to a more
appropriate job role.
In common with many retailers, this year we published our
Gender Pay Gap report for our Retail Group on 28 March 2018.
Further information on our Gender Pay Gap report is
contained in the Directors’ Remuneration Report on page 84.
Our Gender Pay Gap report can be found at https://investors.
petsathome.com/responsibility/policies-and-procedures/
gender-pay-gap-report.
Directors
The names of the persons who, at any time during the
financial year, were Directors of the Company are:
Name
Tony DeNunzio
Dennis Millard
Tessa Green
Paul Moody
Mike Iddon
Sharon Flood
Date of
appointment
24 May 2017
(re-appointed)
24 May 2017
(re-appointed)
24 May 2017
(re-appointed)
24 May 2017
(re-appointed)
17 October 2017
11 July 2017
Stanislas Laurent
11 July 2017
Date of
resignation
n/a
n/a
Resigned on 22 May 2018
but was a director during
the financial period
n/a
n/a
n/a
n/a
Ian Kellett
11 February 2014
27 April 2018
Nicolas Gheysens
2 December 2016
28 November 2018
Paul Coby
Amy Sterling
18 February 2014
11 July 2017
18 February 2014
11 July 2017
Ian Kellett resigned from his position as Group Chief Executive
Officer on 28 November 2017 although his resignation did not
take effect until after the end of the financial year on 27 April
2018. Ian’s employment with the Group will terminate on
31 May 2018. Ian was succeeded by Peter Pritchard.
On 28 November 2018, Nicolas Gheysens also resigned from
the Board. Nicolas had been appointed to the Board as the
nominated representative of the Company’s then Principal
Shareholder, KKR My Best Friend Limited, an affiliate of
Kohlberg Kravis Roberts & Co. L.P.. KKR My Best Friend Limited
determined at that time not to exercise its rights under the
relationship agreement entered into with the Company to
replace Nicolas’ position on the Board.
During the financial period Amy Stirling and Paul Coby
stepped down from the Board with effect from the close of
the Annual General Meeting on 11 July 2017 in order to fulfil
commitments in their full time roles. Amy was succeeded by
Sharon Flood and Paul was replaced by Stanislas Laurent.
64
On 21 May 2018, after the end of the financial period,
Tessa Green notified the Board of her intention to resign
from the Board with effect from 12 July 2018. Tessa Green
will be replaced by Professor Susan Dawson.
Appointment and removal of Directors
The appointment and replacement of Directors of the
Company is governed by the Articles.
Appointment of Directors: A Director may be appointed by
the Company by an ordinary resolution of the Company’s
shareholders or by the Board. The Board or any Committee
authorised by the Board may from time to time appoint one
or more Directors to hold any employment or executive office
for such period and on such terms as they may determine
and may also revoke or terminate any such appointment.
A Director appointed by the Board holds office only until the
next Annual General Meeting of the Company and is then
eligible for re-appointment.
Annual re-election of Directors: All Directors stand
for re-election on an annual basis in line with the
recommendations of the Code.
Removal of Directors: A Director may be removed by the
Company in certain circumstances set out in the Articles
or by a special resolution of the Company’s shareholders.
Vacation of office: The office of a Director shall be vacated if
(amongst other circumstances): (i) he is prohibited by law from
being a Director; (ii) he resigns; (iii) his resignation is requested
by all of the other Directors; (iv) he is or has been suffering
from mental or physical ill health and the Board resolves that
his office be vacated; (v) he is absent without the permission
of the Board from meetings of the Board (whether or not an
alternate Director appointed by him attends) for six
consecutive months and the Board resolves that his office
is vacated; (vi) he becomes bankrupt; (vii) he ceases to be a
Director by virtue of the Companies Act; or (viii) he is removed
from office pursuant to the Articles.
Powers of the Directors
Subject to the Articles, the Companies Act, any directions
given by the Company by special resolution of the Company’s
shareholders and any relevant statues and regulations, the
business of the Company will be managed by the Board who
may exercise all the powers of the Company.
Directors’ interests
Information relating to the Directors’ interests in, and options
over, Ordinary Shares in the capital of the Company are shown
in the Directors’ Remuneration Report on page 97. Since the
end of the financial year and the date of this Directors’ Report,
following the termination of Ian Kellett’s employment with
the Company on 31 May 2018, options in respect of a total
aggregate number of 476,461 ordinary shares will lapse. In
addition, Mike Iddon received an award of 193,067 share options
under the Pets at Home Group plc Restriction Stock Plan.
Pets at Home Group PlcAnnual Report and Accounts 2018 In line with the requirements of the Companies Act, each
Director has notified the Company of any situation in which
he or she has, or could have, a direct or indirect interest that
conflicts, or possibly may conflict, with the interests of the
Company (a situational conflict). These were considered and
approved by the Board in accordance with the Articles and
each Director informed of the authorisation and any terms on
which it was given. The Board has formal procedures to deal
with Directors’ conflicts of interest as and when they arise.
The Board reviews and, where considered appropriate,
approves situational conflicts of interest that were reported
to it by Directors and a register of those situational conflicts
is maintained by the Company. The register is reviewed by
the Board on an ongoing basis.
Compensation for loss of office
The Company does not have any agreements with any
Director or colleague that would provide compensation for
loss of office or employment (whether through resignation,
redundancy or otherwise) resulting from a takeover bid except
that it should be noted that provisions of the Company’s share
schemes may cause options and awards granted to Directors
or colleagues under such schemes to vest on a takeover.
For further information on the change of control provisions
in the Company’s share schemes refer to the Directors’
Remuneration Report on page 92.
Directors’ insurance and indemnities
The Company maintains directors’ and officers’ liability
insurance cover for its Directors and officers (and those of
other Group companies) as permitted under the Articles and
the Companies Act. Such insurance policies were renewed
during the period and remain in force as at the date of this
Annual Report. Each Director and officer of the Company also
has the benefit of a qualifying indemnity, as defined by section
236 of the Companies Act, and as permitted by the Articles. An
indemnity deed is entered into by a Director at the time of his
or her appointment to the Board. Prospectus liability insurance
remains in force which provides cover for liabilities incurred
by certain Directors in the performance of their duties in
connection with the issue of the Company’s prospectus dated
28 February 2014 in relation to the Company’s Initial Public
Offering and Listing.
There have been no movements in the Company’s issued
share capital in the 2018 financial period.
Details of colleague share schemes are provided in note 22
to the Group’s financial statements.
Voting rights
All members who hold Ordinary Shares are entitled to attend
and vote at the Annual General Meeting. On a show of hands at
a general meeting every member present in person shall have
one vote and on a poll, every member present in person or by
proxy shall have one vote for every Ordinary Share held. No
shareholder holds Ordinary Shares carrying special rights
relating to the control of the Company and the Directors are not
aware of any agreements between holders of the Company’s
shares that may result in restrictions on voting rights.
Powers for the Company to issue or buy back its shares
Powers for the Company to issue shares: The Directors were
granted authority at the previous Annual General Meeting on
11 July 2017, to allot shares in the Company under two
separate resolutions: (i) up to one-third of the Company’s
issued share capital; and (ii) up to two-thirds of the Company’s
issued share capital in connection with a rights issue. These
authorities apply until the end of the Annual General Meeting
to be held on 12 July 2018 (or, if earlier, until the close of
business on 11 October 2018). During the period, the Directors
did not use their power to issue shares under the authorities,
but did satisfy options and awards under the Company’s
option and incentive schemes.
The Directors were also granted authority at the previous
Annual General Meeting on 11 July 2017 to disapply pre-
emption rights. This resolution (which is in accordance with
the guidance issued by the Pre-Emption Group (the “PEG
Principles”)) sought the authority to disapply pre-emption
rights over 5% of the Company’s issued ordinary share capital.
A further authority was also granted to disapply pre-emption
rights in respect of an additional 5% for financing a transaction
which the Directors determine to be an acquisition or other
capital investment as allowed by the PEG Principles. During
the period, the Directors did not use their power to issue
shares under the authorities, but did satisfy options and
awards under the Company’s option and incentive schemes.
No amount was paid under any of these indemnities or
insurances during the financial year other than the applicable
insurance premiums.
The Company will, consistent with the 2017 Annual General
Meeting, seek to renew these powers at the 2018 Annual
General Meeting.
Share capital
The issued share capital of the Company as at 29 March 2018
was 500,000,000 Ordinary Shares of 1 pence each. As at
21 May 2018, being the latest practicable date prior to the
date of this Annual Report, the issued share capital of the
Company remained 500,000,000 Ordinary Shares of 1 pence
each. Further information regarding the Company’s issued
share capital can be found on page 140 of the Group’s
financial statements.
Powers for the Company to buy back its shares: The
Company was authorised by its shareholders on 11 July 2017,
at the 2017 Annual General Meeting, to purchase in the market
up to 10% of its issued Ordinary Shares (excluding any treasury
shares), subject to certain conditions laid out in the authorising
resolution. This standard authority is renewable annually
and the Directors will seek to renew this authority at the 2018
Annual General Meeting to be held on 12 July 2018. The
Directors did not exercise their authority to buy back any
shares during the financial period.
65
Pets at Home Group PlcAnnual Report and Accounts 2018 Governance report Directors’ Report continued
Restrictions on transfer of Ordinary Shares
The Company’s shares are freely transferable, save as set
out below.
The transferor of a share is deemed to remain the holder
until the transferee’s name is entered in the register. The Board
can decline to register any transfer of any share which is not
a fully paid share. The Company does not currently have any
partially paid shares. The Board may also decline to register
a transfer of a certificated share unless the instrument of
transfer: (A) is duly stamped or certified or otherwise shown
to be exempt from stamp duty and is accompanied by the
relevant share certificate; (B) is in respect of only one class of
share; and (C) if to joint transferees, is in favour of not more
than four such transferees. Registration of a transfer of an
uncertificated share may be refused in the circumstances set
out in the CREST Regulations (as defined in the Articles) and
where, in the case of a transfer to joint holders, the number
of joint holders to whom the uncertificated share is to be
transferred exceeds four.
Certain restrictions are also imposed by laws and regulations
(such as the Market Abuse Regulation) and pursuant to the
Company’s share dealing code whereby certain Directors
and Persons Discharging Managerial Responsibility and
restricted colleagues require clearance to deal in the
Company’s securities.
Significant shareholdings
Information provided to the Company pursuant to the
Disclosure Guidance and Transparency Rules is published
on a Regulatory Information Service and on the Company’s
website. As at 29 March 2018, the following information had
been received, in accordance with DTR5.1.2R, from holders
of notifiable interests in the Company’s issued share capital.
These figures represent the number of shares and percentages
held as at the date of notification to the Company. It should
be noted that these holdings may have changed since notified
to the Company however, notification of any change is not
required until the next applicable threshold is crossed.
Name of
shareholder
Schroders plc
Old Mutual
Canada Pension Plan
Investment
Nordea 1 SICAV
Norges Bank
Portland Hill Asset
Management
Limited
Number of
Ordinary
Shares as at
29.03.18
Percentage
of issued
share
capital (%)
78,010,918
75,162,963
50,095,670
24,816,413
19,904,631
15.60
15.03
10.02
4.96
3.98
Nature of
holding
(direct/
indirect)
Indirect
Indirect
Direct
Direct
Direct
15,059,316
3.01
Indirect
No changes have been disclosed in accordance with Disclosure
Guidance and Transparency Rule 5.1.2R in the period between
29 March 2018 and 21 May 2018 (being not more than one
month prior to the date of the Notice of Annual General
Meeting), except as set out in the table below:
Name of
shareholder
Number of
Ordinary
Shares as at
29.03.18
Percentage
of issued
share
capital (%)
Nature of
holding
(direct/
indirect)
Morgan Stanley
16,071,814
Norges Bank
Schroders plc
20,579,420
64,234,925
3.21
4.12
12.85
Direct/
Indirect
Direct
Indirect
Significant related party transactions
Save for the Relationship Agreement further described on
page 70 of this Directors’ Report, there are no contracts of
significance during the financial period between the Company
or any Group company and: (1) a Director of the Company;
(2) a close member of a Director’s family; or (3) a controlling
shareholder of the Company.
Amendment of the Articles
The Articles may only be amended by a special resolution
of the Company’s shareholders in a general meeting, in
accordance with the Companies Act.
Profits and dividend
The consolidated profit for the year after taxation and
excluding non-underlying items was £67,542,000 (FY17:
£75,364,000). The results are discussed in greater detail
in the financial review on pages 24 to 27.
A final dividend of 5 pence per ordinary share (FY17: 5 pence
per ordinary share) will be recommended to the Company’s
shareholders in respect of the 2018 financial year. The final
dividend will be proposed by the Directors at the 2018 Annual
General Meeting on 12 July 2018 in respect of the financial
year ended 29 March 2018 to add to an interim dividend of
2.5 pence per ordinary share paid on 12 January 2018 (FY17:
2.5 pence per ordinary share).
The Directors’ proposed final dividend of 5 pence per ordinary
share takes the total dividend payable in respect of the 2018
financial year to 7.5 pence per ordinary share. The ex-dividend
date will be 14 June 2018 and, subject to shareholder approval
being obtained at the 2018 Annual General Meeting, the final
dividend of 5 pence per ordinary share will be paid to
shareholders on the register at the close of business on
15 June 2018.
Political donations
The Group made no political donations and incurred no
political expenditure during the year (FY17: Nil). It remains the
Company’s policy not to make political donations or to incur
political expenditure, however the application of the relevant
provisions of the Companies Act is potentially very broad in
nature and, as with last year, the Board is seeking shareholder
authority to ensure that the Group does not inadvertently
breach these provisions as a result of the breadth of its
business activities. The Board has no intention of using
this authority.
66
Pets at Home Group PlcAnnual Report and Accounts 2018 Suppliers
The Group understands the importance of maintaining good
relationships with suppliers and it is Group policy to agree
appropriate terms and conditions for its transactions with
suppliers (ranging from standard written terms to individually
negotiated contracts) and for payment to be made in
accordance with these terms, provided the supplier has
complied with its obligations. Average trade creditors of the
Group’s operations for FY18 were 48 days (FY17: 47 days).
Post balance sheet events
On 27 April 2018, Peter Pritchard was appointed Group Chief
Executive Officer, succeeding Ian Kellett who notified the
Board of his intention to resign in November 2017. Peter joined
Pets at Home in 2011 as Commercial Director and moved to
the CEO of Retail in 2015. Ian Kellett will remain employed
with the Group until 31 May 2018, following which his
employment will terminate.
On 22 May 2018, Tessa Green confirmed that she will step
down from the Board with effect from the close of the Annual
General Meeting on 12 July 2018. Tessa has been a Director of
Pets at Home since 2014 and during that time has been Chair
of the Corporate Social Responsibility Committee and the Pets
Before Profit Committee. Tessa will be succeeded by Professor
Susan Dawson, Dean of the Institute of Veterinary Science at
the University of Liverpool and council member of the Royal
College of Veterinary Surgeons. Professor Dawson will Chair
the Pets Before Profit and Corporate Social Responsibility
Committees.
Going concern
On the basis of current financial projections and facilities
available, the Directors are satisfied that the Group is well
placed to manage its business risks successfully and therefore
have a reasonable expectation that the Group has adequate
resources to continue in operational existence for a period
of 12 months from the date of approval of the financial
statements. Accordingly, the financial statements continue
to be prepared on a going concern basis.
Viability statement
The Group has developed a detailed strategic and business
planning (SBP) process, which comprises a strategic plan
(Strategic Plan) containing financial projections and a business
plan which forms a detailed near term one-year plan for the
upcoming financial year. The SBP process produces standard
outputs in respect of the key financial performance metrics
of the Group which deliver consolidated financial plans at both
Group level and at a number of levels within the Group. The
Strategic Plan is reviewed each year by the Board as part of
the strategy review process. Once approved by the Board,
the Strategic Plan is cascaded across the Group and provides
the basis for setting all detailed financial budgets and strategic
actions that are subsequently used by the Board to monitor
performance.
The SBP process covers a three-year period. The three-year
plan provides a robust planning tool against which strategic
decisions can be made. In making their viability assessment,
the Board has taken into consideration that financing
facilities are maintained for the duration of the Strategic Plan.
The Directors have considered a combination of risks and
uncertainties and the mitigating controls operated by the
Group as detailed on pages 32 to 37 that may impact on the
Group’s reputation and its ability to trade. These risks include
issues on pet welfare, competitor activity and broader
macro-economic risks and their impact on the Strategic Plan
on an individual and combined level.
On this basis and in conjunction with other matters considered
and reviewed by the Board during the year, the Board has
reasonable expectations that the Group will be able to
continue in operation and meet its liabilities as they fall due
over the three financial years used for their assessment. In
making this assessment, the Group has assumed that it is able
to refinance the existing Senior Finance Bank Loans at a similar
level to the existing facilities which expire in April 2020. Further
to this, the Board have assumed that there is no material
change in the legislative environment in relation to the sale of
small animals and the practice of veterinary medicine. It is
recognised that such future assessments are subject to a level
of uncertainty that increases with time and, therefore future
outcomes cannot be guaranteed or predicted with certainty.
Human rights and modern slavery statement
Pets at Home is the UK’s leading specialist retailer of pets, pet
related products and services. We run the UK’s largest small
animal veterinary and grooming businesses through our vets
and services brands. Our mission is to be the best pet shop
in the world. We therefore take great care in operating our
business and in selecting our business partners and suppliers.
The products we sell are sourced from a broad range of
suppliers – both national and international. We are the only UK
pet retailer to have a dedicated sourcing office in the Far East.
From our regional base in Hong Kong, which opened in 2012,
we have a team of product technologists who support our
buyers, oversee our suppliers and monitor production.
Our suppliers are required to comply with our Ethical
Trading Policy and we undertake ethical audits which cover:
hours of work, labour practices, working conditions, onsite
accommodation, health and safety, environment, supply
chain management and wages. We also require compliance
with the Pets at Home Group’s Code of Business Ethics
and Conduct.
In our modern slavery statement published in April 2016, we
highlighted a number of areas where we wished to strengthen
our processes to protect against the risk of modern slavery,
following a Group wide risk assessment. These areas included:
reviewing supplier due diligence and audit processes to
ensure compliance with the Modern Slavery Act 2015 (Act),
updating supplier trading terms and the Code of Business
Ethics and Conduct in relation to the Act.
67
Pets at Home Group PlcAnnual Report and Accounts 2018 Governance report Directors’ Report continued
During the last financial year, we reviewed our procurement
processes in respect of modern slavery and have included
appropriate questions in our tender documentation in relation
to supplier compliance with the Act. In addition, we reviewed
our audit processes and looked in detail at the questions asked
during audits and the checks carried out. On review, our
audits already include checks on working conditions, pay and
other appropriate areas in sufficient detail to highlight any
instances of modern slavery.
We have updated our supplier general terms and conditions
to further drive compliance with the Act. We have included
a warranty from suppliers requiring compliance with the Act,
the right to audit in respect of the Act and also the right for
Pets at Home to terminate in the event of supplier non-
compliance with the Act.
In addition, we updated our Code of Business Ethics and
Conduct to specifically cover the Act.
We consider that training is also key to raising awareness on
modern slavery and will assist our colleagues and suppliers
gain a better understanding on the issue of modern slavery
and requirements set out in the Act. In November 2016,
we delivered a workshop on this subject to all 45 suppliers
attending our Asia supplier conference (being an area where
we considered a greater potential risk of modern slavery
was prevalent).
We have also delivered training to colleagues in our UK
support office where relevant.
To ensure we continue to drive compliance with the Act,
during this financial year we intend to review the previously
undertaken risk assessment to ensure it remains up to date
and will assess any new risk areas or actions. We will continue
to train colleagues and suppliers as appropriate.
As set out in last year’s modern slavery statement, should any
instances of non-compliance with the Act arise in relation to
any of our suppliers then this will be reviewed and appropriate
action taken.
The Pets at Home Group Plc Board of Directors approved this
statement at a meeting of the Board on 11 July 2017.
Health and Safety
We are committed to providing a safe and healthy environment
for all of our colleagues, customers, third party contractors and
pets. We actively encourage a positive Health and Safety culture
throughout our stores, distribution centres, First Opinion
practices, Specialist Referral Centres and support offices.
The Group recognises its responsibility for Health and Safety
and we have robust control measures in place to minimise the
risk of incidents. Each year we host a Health and Safety week
in October with the aim of promoting good Health and Safety
practice across the Group. The Group re-launches its Health
and Safety Policy Statement during Health and Safety week
and the policy is reviewed and signed off by the Group Chief
Executive Officer.
68
The Group has incorporated a Health and Safety Committee
which is chaired by the Chief People and Legal Officer and is
attended by representatives of each business unit. The Health
and Safety Committee meets four times a year and discusses
various Health and Safety related issues as well as undertaking
deep dive projects throughout the year. The Group’s
distribution centres also host their own Health and Safety
Committee meetings seven times per year.
There have been no Health and Safety Enforcement Notices
served on the Group.
We continue to benchmark Group Accident Rates which
also includes accidents which have taken place in our Joint
Venture First Opinion veterinary practices and Specialist
Referral Centres. We record all incidents (including non-work
related injuries) and report all accidents in accordance with
the Reporting of Injuries, Diseases and Dangerous Occurrence
Regulations (RIDDOR). We also classify all incidents where we
are aware the customer intends to go to hospital as RIDDOR
reportable. This does result in some over reporting by the
Group under RIDDOR.
During the financial year, total accidents across the
Group increased proportionate to our store, practice and
colleague growth. There was a decrease of 0.03 in the
Colleague Accident Rate from 9.37 per 1,000 colleagues
to 9.34 accidents per 1,000 colleagues, and an increase in
Customer Accidents from 1.06 per 100,000 transactions
to 1.22 per 100,000 transactions. The number of RIDDOR
reportable accidents decreased from 0.33 to 0.26 in our
stores, First Opinion practices and Specialist Referral Centres.
In our distribution centres, there was a decrease of 0.08
accidents per 100,000 hours worked, and a 0.18 decrease
in RIDDOR reportable accidents.
Accident rates – stores/practices
Distribution accident rates
9.37
9.34
7.48
0.43
0.39
0.31
0.32
0.28
1.1
1.06
1.22
0.1
Retail colleague
accident rates
per 1,000 colleagues
Customer accident
rates per 100,000
transactions
Colleague accidents
per 100,000
hours worked
RIDDOR accident
rates per 100,000
hours worked
2015/16
2016/17
2017/18
2015/16
2016/17
2017/18
Group RIDDOR rates
0.34
0.33
0.26
0.02
0.02
0.02
Customer RIDDOR
accident rates per
100,000 transactions
Colleague RIDDOR
accident rate per
1,000 colleagues
2015/16
2016/17
2017/18
Pets at Home Group PlcAnnual Report and Accounts 2018 For the third year running, our two distribution centres applied
for the British Safety Council’s International Safety Award, both
achieving Merits.
We achieved 100% completion of First Opinion practice annual
audits within the Vet Group, and 100% compliance for Area
Manager audits within the Retail Group.
We continue to promote Health and Safety through the Group
to all of our colleagues and promote a “Stay Safe” culture.
Target FY17/18
Achievements
Target FY18/19
Achieve a 5%
reduction in colleague
accident rates per
1,000 colleagues and
a reduction in RIDDOR
reportable accidents.
Achieved reduction
in RIDDOR rates,
colleague accident
rate per 1,000
colleagues decreased
by 0.34.
Achieve a 5%
reduction in colleague
accident rates per
1,000 colleagues and
a reduction in RIDDOR
reportable accidents.
Re-apply for the Safety
awards and aim to
achieve a merit or
distinction for both
distribution centres.
Awarded Merit for
both distribution
centres.
Review and improve
Risk Assessment key
areas throughout
year in retail and our
distribution centres
and launch annual
review during Health
and Safety week.
Achieved. Risk
Assessments are
reviewed annually
for launch during
Health and Safety
week to target key risk
areas and raise Safety
awareness.
Improve support and
assistance to Area and
Store Managers by
introducing specific
Health and Safety
checks, undertaking
store visits and
targeting Health and
Safety to simplify
paperwork and
processes so that they
add value to our safety
management systems.
Undertake review
of Material Handling
Equipment operations
and training.
Implemented
safety checks and
simplification of
paperwork and
processes launched
into business during
Health and Safety
week.
Reviewed and
developed Material
Handling Equipment
management safety
systems/policies and
Risk Assessments.
Re-apply for the Safety
awards and aim to
achieve a merits or
distinctions for both
distribution centres.
Improve how we
recognise and reduce
risk and improve the
working environment
for all colleagues
by providing safe
equipment, storage
and premises and
relaunch our clean
as you go policy in
relation to storage and
slips and trips risk.
Review and improve
involvement in Safety
at all levels, improving
communications and
colleague awareness
and promote and
encourage personal
ownership of Safety
with colleagues taking
ownership of our
policies.
Material Handling
Equipment
management training
to be completed
and daily Material
Handling Equipment
observations
and coaching to
be introduced.
Branches outside of the UK
The Company has no branches outside of the UK.
Change of control
The only significant agreements to which the Company is
a party that take effect, alter or terminate upon a change of
control of the Company following a takeover bid, and the
effect thereof, are as follows:
• On 14 April 2015, the Group entered into an Amendment
and Restatement Agreement relating to a senior facilities
agreement dated 18 February 2014 with a total facility
amount of £260m (Senior Facilities Agreement). The Senior
Facilities Agreement expires in 2020. The Senior Facilities
Agreement contains customary prepayment, cancellation
and default provisions including, if required by a lender,
mandatory prepayment of all utilisations provided by that
lender upon the sale of all or substantially all of the business
and assets of the Group or a change of control.
• The Company’s subsidiary, Companion Care (Services) Ltd
(CCSL), is a party to a facilities agreement dated 21 March
2018 for total commitments of £42m (Lloyds Facility). The
Lloyds Facility provides funding for the Group’s Joint Venture
First Opinion practices. Pursuant to the terms of the Lloyds
Facility, CCSL provides a guarantee in respect of a certain
fixed proportion of the outstanding facility loans provided
to the Joint Venture practices which borrow under the
facility. The Lloyds Facility contains customary prepayment,
cancellation and default provisions including in the event
of a change of control (direct or indirect) of CCSL.
• The Company’s subsidiary, Companion Care (Services) Ltd
(CCSL), is a party to a facilities agreement dated 21 March
2018 for total commitments of £20,000,000 (HSBC Facility).
The HSBC Facility provides funding for the Group’s Joint
Venture First Opinion practices. Pursuant to the terms of the
HSBC Facility, CCSL provides a guarantee in respect of a
certain fixed proportion of the outstanding facility loans
provided to the Joint Venture practices. The HSBC Facility
contains customary prepayment, cancellation and default
provisions including in the event of a change of control
(direct or indirect) of CCSL. For these purposes “control”
means the power to: (a) cast or control more than 90% of the
votes that may be cast at a general meeting of CCSL; (b)
appoint or remove all or a majority of the directors of CCSL;
(c) give directions with respect to the operating and financial
policies of CCSL with which the directors are obliged to
comply; or (d) hold beneficially (directly or indirectly) at least
90% of the issued share capital of CCSL.
69
Pets at Home Group PlcAnnual Report and Accounts 2018 Governance report Directors’ Report continued
Independent auditors
During the 2016 financial year, a competitive tender
process of audit services was completed in accordance
with the requirements of The Statutory Audit Services for
Large Companies Market Investigation (Mandatory Use
of Competitive Tender Processes and Audit Committee
Responsibilities) Order 2014 (the Order). KPMG LLP was
re-appointed as auditor of the Company at the 2017 Annual
General Meeting.
The Company’s auditor, KPMG LLP, has indicated their
willingness to continue their role as the Company’s auditor.
Resolutions concerning the re-appointment of KPMG LLP
as auditor of the Company and to authorise the Directors to
determine their remuneration will be proposed at the 2018
Annual General Meeting as set out in the Notice of Annual
General Meeting. For further information on the re-
appointment of the auditors, refer to page 75 of the Audit
and Risk Committee Report.
Approval of Annual Report
The Strategic Report, Corporate Governance Statement
and the Governance Report were approved by the Board
on 21 May 2018.
This Directors’ Report was approved by the Board on
21 May 2018 and signed on its behalf by:
Louise Stonier
Chief People and Legal Officer
and Company Secretary
21 May 2018
Compliance with the terms of the Relationship Agreement
(including any Independence Provisions)
On 28 February 2014, and in connection with its Listing, the
Company entered into the Relationship Agreement with
KKR My Best Friend Limited (Principal Shareholder). The
Relationship Agreement regulated the relationship between
the Company and the Principal Shareholder. Pursuant to
the terms of the Relationship Agreement, the Principal
Shareholder had certain rights (amongst others) to: (A)
representation on the Board and Nomination and Corporate
Governance Committee; (B) appoint observers to the
Remuneration, Audit and Risk and the Pets Before Profit and
CSR Committees; and (C) certain anti-dilution rights. Such
rights were subject to the Principal Shareholder maintaining a
certain minimum level of shareholding. On 29 January 2018,
the Principal Shareholder divested of its remaining stake in the
Company and reduced its shareholding in the Company to nil.
The Relationship Agreement has accordingly terminated.
Whilst in effect, the Relationship Agreement complied with
the requirements of the Listing Rules, including Listing Rule
9.2.2AR(2)(a) and Listing Rule 6.1.4DR.
In accordance with the requirements of LR 9.8.4(14), the Board
confirms that the Company complied with its obligations
under the Relationship Agreement, including in respect of the
independence provisions set out in such agreement at all
times since it was entered into, including during the financial
period under review, and, so far as the Company is aware, KKR
My Best Friend Limited and its associates complied with the
provisions of the Relationship Agreement, including the
independence provisions set out in such agreement), at all
times since it was entered into, including during the financial
period under review.
Directors’ information to auditors
In accordance with section 418 of the Companies Act, each
Director who held office at the date of the approval of this
Directors’ Report (whose names and functions are listed in the
Board of Directors on pages 60–61) confirms that, so far as he
or she is aware, there is no relevant audit information of which
the Group’s auditor is unaware, and that each Director has
taken all of the steps that he or she ought to have taken as a
Director in order to make himself or herself aware of any
relevant audit information and to establish that the Group’s
auditor is aware of that information.
70
Pets at Home Group PlcAnnual Report and Accounts 2018 Statement of Directors’ Responsibilities in respect
of the Annual Report and the Financial Statements
The Directors are responsible for preparing the Annual Report,
and the Group and parent company financial statements in
accordance with applicable law and regulations.
Responsibility statement of the Directors in respect
of the annual financial report
We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair
view of the assets, liabilities, financial position and profit or
loss of the Company and the undertakings included in the
consolidation taken as a whole; and
• the Strategic Report/Directors’ Report includes a fair review
of the development and performance of the business and
the position of the Company and the undertakings included
in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that
they face.
We consider the Annual Report and Accounts, taken as a
whole, is fair, balanced and understandable and provides the
necessary information for shareholders to assess the Group’s
position and performance, business model and strategy.
Approved by the Board and signed on its behalf by:
Peter Pritchard
Group Chief Executive Officer
21 May 2018
Company law requires the Directors to prepare the Group and
parent company financial statements for each financial year.
Under that law they are required to prepare the Group’s
financial statements in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union
(EU) and applicable law and they have elected to prepare
the parent company financial statements on the same basis.
Under company law the Directors must not approve the
financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Group and the
parent company and of the profit or loss of the Group for that
period. In preparing each of the Group and parent company
financial statements for each financial year, the Directors are
required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and accounting estimates that are
reasonable and prudent;
• state whether they have been prepared in accordance with
IFRSs as adopted by the EU; and
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain the
parent company’s transactions and disclose with reasonable
accuracy at any time the financial position of the parent
company and enable them to ensure that its financial
statements comply with the Companies Act. They have
general responsibility for taking such steps as are reasonably
open to them to safeguard the assets of the Group and to
prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, Directors’ Report,
Directors’ Remuneration Report and Corporate Governance
Statement that complies with that law and those regulations.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the Company’s Group website. Legislation in the UK
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
71
Pets at Home Group PlcAnnual Report and Accounts 2018 Governance report Audit and Risk Committee Report
Sharon Flood
Chair of the
Audit and Risk Committee
Who is on the Audit and Risk Committee?
Member
No. of meetings
Sharon Flood (Chair) (appointed 11 July 2017)
Amy Stirling (former Chair) (resigned 11 July 2017)
Dennis Millard
Paul Coby (resigned 11 July 2017)
Paul Moody
Stanislas Laurent (appointed 11 July 2017)
What we did in 2018
3/4
1/4
4/4
1/4
4/4
3/4
Reviewed key financial reporting matters and considered how
these are presented in the Financial Statements.
Reviewed and challenged the Longer Term Viability Statement
(LTVS) and going concern basis of preparation in advance of its
approval by the Board. As part of this work, the carrying value
of the goodwill balance has been reviewed.
Continued to broaden our focus on the Group’s control
environment including the consideration of the adequacy
of controls to support our high growth Vet Group.
Reviewed and challenged the Group’s preparation for
compliance with forthcoming General Data Protection
Regulation (GDPR) legislation.
Reviewed and challenged the effectiveness of the Group’s
Internal Audit function including appointing an in-house
internal auditor to work alongside our co-source model to
meet the requirements of the Internal Audit Plan.
Reviewed the processes in relation to providing extended
financial support to First Opinion practices and the recoverability
of those loans. We have also considered whether the level of
practice indebtedness infers additional control to the Group
of a First Opinion vet practice and whether this challenges the
existing accounting for a practice.
What we will do in 2019
Continue to carry out our responsibilities as set out in the terms of
reference, including monitoring the integrity of the Group’s Financial
Statements, challenging the judgemental areas contained within the
Financial Statements and advising the Board on whether external
reporting is fair, balanced and reasonable.
Continue to focus on the control environment of the Group, including
pet welfare across our operations (Retail, Grooming, Vet including
Specialist Division and our breeding partners) and the controls and
processes relating to the management and release of key IT projects.
We will continue to monitor the effectiveness of the Group’s Internal
Audit function and whistleblowing procedures. We will agree an Internal
Audit strategy for 2019 and beyond, defining ways of working as well as
specific projects.
We will review the approach and judgements made in applying
forthcoming financial reporting standards, including Revenue Recognition
and Leases.
We will continue to monitor the level of financial support provided to our
First Opinion vet practices and keep under review any activity that might
change existing accounting practices.
72
Introduction
This is my first report as Chair of the Audit and Risk Committee,
having joined the Board in July 2017. I am pleased to report
that the Committee has had a very busy year assisting the
Board in fulfilling its responsibilities to protect the interests of
shareholders with regard to the integrity of the financial
reporting, the adequacy and effectiveness of the risk
management systems and internal controls, the effectiveness
of the Internal Audit function and the relationship with the
external auditors.
During the year the Committee met four times, with our
agenda covering financial reporting, progress against the
Internal Audit Plan and the external audit process. We have
considered risk regularly throughout the year, reviewing
updates to the Group risk register, tailoring our internal audit
and risk review efforts towards the Group’s strategic priorities.
In addition to our regular agenda, this year we have considered
accounting for forthcoming changes in accounting standards
(notably Leasing and Revenue Recognition), proposed
amendments to the Group’s Treasury policy in relation to
foreign exchange and have also monitored the Group’s
compliance levels with forthcoming General Data Protection
Regulation (GDPR) legislation.
Committee membership
The Audit and Risk Committee (the Committee) members
have been selected to provide a wide range of financial and
commercial experience necessary to fulfil the duties and
responsibilities of the Committee. Each member of the
Committee is an independent Non-Executive Director and has,
through their other business activities, significant experience
in financial matters. Further details of the Committee members
and their experience can be found on pages 60 and 61.
The Chairman of the Company’s Board, Executive Management
and senior managers within the business are invited to attend
meetings as appropriate to ensure that the Committee maintains
a current and well-informed view of events within the business,
and to reinforce a strong risk management culture. The Group
Company Secretary acts as secretary to the Committee.
The Committee meets according to the requirements of the
Company’s financial calendar. The meetings of the Committee
also provide the opportunity for the Independent Non-
Executive Directors to meet without the Executive Directors
present and to raise any issues of concern with the internal
and external auditors.
Committee activities
The Committee’s role primarily covers the following areas:
• Financial reporting;
• Ongoing viability;
• Risk management systems;
• Internal controls;
• Internal audit; and
• External audit.
Pets at Home Group PlcAnnual Report and Accounts 2018 Audit and Risk Committee meetings
Meetings 2017/18
J
M
S
F
J
O
M
J
N
A
A
D
The Committee met on four occasions during the financial year with each
meeting having a distinct agenda to reflect the annual reporting cycle of
the Group. The planner is regularly reviewed and developed to meet the
changing needs of the Group.
A summary of the key matters considered at each meeting is as follows:
Meeting
Financial reporting
Risk management/
internal control
Internal Audit
External audit
May
2017
Sept
2017
Nov
2017
Jan
2018
• Review of the Annual Report
• Review development of the
and Accounts for year
ended 30 March 2017
• Review of Goodwill
impairment review
• Review of recognition of
supplier income
• Consideration of the
Group’s longer term viability
and going concern
Corporate Risk Register
• Review of risk register
specific to Joint Venture
companies
• Review of IT controls
• Review of Information
Security
• Review and approval of
Internal Audit Plan for
the year
• Review reports on:
– Overrider payments
– Customer data security
– Joint Venture company
support
• Report on Annual Financial
Statements and external
audit
• Final evaluation of external
auditor for year ended 30
March 2017
• Planning for new standards
on Revenue Recognition
and Lease accounting
• Review development of the
• Review reports on progress
Corporate Risk Register
• Review of the Retail Loss
of Internal Audit Plan
• Review reports on:
• Planning for Reporting on
Prevention plan
Payment practices
• Review of emerging tax
reporting requirements
– Retail VAT processes
– GDPR preparation
– Processing colleagues’
expenses
– Vet Group clinical
governance processes
– Financial System access
controls
• Process to assess
external auditor
• Review feedback from
Executive Management
on external auditor
effectiveness from the
prior year
• Review of the Interim
Financial Statements
• Review development of the
• Review reports on progress
• Report on Review of Interim
Corporate Risk Register
• Review of Information
Security
of Internal Audit Plan
• Review reports on:
– Transport office
– GDPR preparation
Financial Statements
• Planning for new standards
on Revenue Recognition
and Lease accounting
• Planning for Reporting on
Payment practices
• Review development of the
• Review reports on progress
• Review of external audit
Corporate Risk Register
• Review of Treasury policy
• GDPR preparation
of Internal Audit Plan
• Review reports on:
– Cash and Banking
processes
– Joint Venture Partner
selection/recruitment and
support
• Consideration of FY19
Internal Audit Plan
strategy for the year ended
29 March 2018.
• Process to assess external
auditor – issue of
questionnaire
73
Pets at Home Group PlcAnnual Report and Accounts 2018 Governance report Audit and Risk Committee Report continued
Financial statement reporting issues
The Committee considered a number of significant issues in the year, taking into account in all instances the views of the
Company’s external auditor. The Committee consider the key risks within the Financial Statements to be the carrying value
of goodwill and the carrying value of inventory.
The Committee considered the following in making their assessment of the reporting in the financial statements.
Issue
Nature of the risk
How the risk was addressed by the Committee
Carrying
value of
goodwill
The Group holds a significant goodwill balance. There are a
number of factors that could impact on the future profitability
of the business (e.g. threat of competition, changes in
market behaviour, changes in the broader macro-economic
environment) and there is a risk that the business will not meet
the required financial performance to support the carrying value
of the intangible asset.
Inventory
valuation
The business carries a wide range of Stock Keeping Units (SKUs)
and with a variety of expiry dates on most food lines. Changes
in customer demand may mean that some lines cannot be sold,
or will be sold below carrying value. Whilst provisions are made
to reflect this, there is a risk that the provisions are inadequate.
Management have established a detailed range review process
to identify action to be taken against inventory lines and assess
the required inventory provision.
Carrying
value of
operating
loans
The business provides additional financial support to First
Opinion practices depending on the circumstance of each
practice. This may include more recent openings to underpin
their growth and support their working capital requirements and
growth in clinical capacity.
This investment is a particular feature of the JV operating model
in comparison to an “owned” network where overperformance
from stronger units compensates any underperformance. In
making this investment the Group does so after consideration
of its total returns across all practices on a portfolio basis.
The return of this additional investment can be over an extended
period due to each individual circumstance.
Management have established clear Joint Venture partner
selection criteria and provide a range of commercial support
and advice to enable practices to grow their revenues, maximise
margin, reduce costs and generate cash.
Management have established a provision across all practices
which reflects, on a portfolio basis, an assessment of extended
investments being repaid over different lengths of time with
different risks of return against these time periods and provides
for potential shortfalls.
The Committee reviewed and challenged management’s
process for testing goodwill for potential impairment and
ensuring appropriate sensitivity disclosure. This included
challenging the key assumptions: principally cash flow forecasts,
growth rates and discount rates and comparing the Group’s
value in use to its market capitalisation.
The Committee also reviewed KPMG’s work and conclusions
on this risk and the key assumptions they tested in reaching
their conclusions.
The Committee is satisfied that there is no impairment to the
goodwill balance and that there is appropriate disclosure in
the financial statements.
See note 11 of the financial statements for details on the
impairment testing.
The Committee reviewed management’s judgement in
assessing the required level of inventory provisioning and
concluded that the method of estimating the carrying value
of inventory and that the level of provisioning is appropriate.
The Committee reviewed internal audit reports on partner
selection and support provided to Joint Venture companies.
The Committee reviewed management’s judgement, as
informed by independent analysis and review, in assessing
the required level of provisioning applied to practices and the
forecast recovery of operating loans provided.
The Committee is satisfied that the carrying values of operating
loan balances are appropriate.
The Committee reviewed management’s assessment of whether
the level of an individual practice’s indebtedness to the Group,
particularly those with high levels of indebtedness, implies that
the Group has the practical ability to control the Joint Venture,
which would result in the requirement to consolidate. The
Committee reviewed management’s judgement over the terms
of the Joint Venture agreement and management’s practical
ability to control the activities of the practice, including barriers
to the Group’s ability to exercise this practical control and
potential barriers to the Joint Venture Partner exercising their
own control over the activities of the practice. The Committee
is satisfied that on the balance of evidence from the Group’s
experience as shareholder and lender to the practices, it does
not currently have the ability to exercise control over those
practices to which operating loans are advanced.
74
Pets at Home Group PlcAnnual Report and Accounts 2018 Ongoing viability
In considering viability overall, the Committee reviewed the
Group’s strategic plan with particular focus on the key
assumptions in relation to revenue and our store and service
expansion plans. Sensitivities to these key assumptions were
also reviewed based on the impact of the Group’s key risks,
individually and conflated, as set out on pages 34 to 37.
Following a review of the detailed considerations set out
above by the Committee and Executive Management, the
Committee is satisfied that it is appropriate for the Group to
continue to adopt the going concern basis in preparing the
Annual Report and Accounts of the Group and, further, that
the Longer Term Viability Statement on page 67 is appropriate.
Risk management and internal controls
Risk management and the system of internal control are the
responsibility of the Board. It ensures that there is a process in
place to identify, assess and manage significant risks that may
affect achievement of the Group’s objectives and that the level
and profile of such risks is acceptable. The Committee provides
oversight and challenge to the assessment of principal risks as
set out on page 32. The Group’s key risks and uncertainties are
set out on pages 34 to 37.
The Committee explores specific key risks of the Group in
detail, inviting the management team to discuss the issues
and mitigations and further proposed actions. During the year,
the Committee reviewed the Group’s approach to the
protection of confidential and personal data and considered
risks specific to the Retail and Vet Group operations.
Internal Audit
The Internal Audit function has a direct line of report into
the Committee and is an important part of the assurance
processes within the business. The Committee reviews
and approves the Internal Audit Plan for the year which
is developed to address key risks across the business as
well as reviewing core governance, financial and
commercial processes.
The Head of Internal Audit and Risk attends each Committee
meeting, updating on progress against the audit plan
throughout the year, reporting on any key control weaknesses
identified and progress against mitigating actions.
Specific work performed during the year in our key risk
areas included:
Risk area
Work undertaken
Brand and reputation
• Review of Vet Group clinical
governance policies and processes
• Review of selection process
for Joint Venture partners
• Overrider payments
Regulatory and compliance • VAT compliance processes
• Review of expenses policy
and processing
Liquidity and credit risk
• Cash settlement processes
Business systems and
information security
Treasury and financial risk
for retail operation
• Review of Financial System
access controls
• Review of GDPR readiness
• Customer data security at
third parties
• Joint Venture partner support
and business development
All reports, related findings and recommended actions have
been discussed by the Committee and are tracked to
completion.
External audit
KPMG presents their audit plan, risk assessment and audit
findings to the Committee, identifying their consideration of
the key audit risks for the year and the scope of their work.
These reports are discussed throughout the audit cycle. As in
the prior year, these risks were considered to be the carrying
value of goodwill and the carrying value of inventory. In their
reports presented to the Committee at both the half year and
full year, the auditors considered these risks to be
appropriately addressed and raised no significant areas of
concern in these or any other areas of their review.
KPMG also attend the Committee meetings and meet
separately, without management present, to discuss any
issues in detail.
We are in compliance with the Order and performed a tender
process which concluded in January 2015. KPMG, who have
audited the Group since 2000, were reappointed at the AGM
in September 2016. Nicola Quayle has been the audit partner
since 2016.
75
Pets at Home Group PlcAnnual Report and Accounts 2018 Governance report Audit and Risk Committee Report continued
External auditors’ effectiveness
The Committee considered the effectiveness, independence
and objectivity of the external auditors through the review of
all reports provided, regular contact and dialogue both during
Committee meetings and separately without management.
Following the conclusion of the prior year audit, we
conducted an audit effectiveness review through a
questionnaire to Committee members, management and
member of the Finance team. This questionnaire expanded on
the process in the previous year, providing more focused
insight into KPMG’s effectiveness. The results were discussed
with KPMG and specific actions were agreed.
Auditor independence
Maintaining the objectivity and independence of the external
auditors is essential. The Committee has taken appropriate
steps to ensure that the Company’s external auditors are
independent of the Company and obtained written
confirmation from them that they comply with guidelines
on independence issued by the relevant accountancy and
auditing bodies.
Additional non-audit services provided by the auditors may
impair their independence or give rise to a perception that
their independence may be impaired. The Group has a policy
in relation to the provision on non-audit services that is
aligned with the EU Regulation and Statutory Audit Directive
to provide further clarity over the type of work that is
acceptable for the external auditors to carry out. The policy
sets out the process required for approval and a cap to the
total non-audit fees for permitted services (at 70% of the
audit fee) – the policy was last reviewed in the year ended
30 March 2017.
Audit and non-audit fees paid to KPMG in the year were
£271,000 and an analysis is presented in note 3 to the
consolidated financial statements on page 127. Non-audit
fees represent 15% of the audit fee.
Resolutions to re-appoint KPMG as auditors and to authorise
the Directors to agree their remuneration will be put to
shareholders at the Annual General Meeting that will take
place on 12 July 2018.
Sharon Flood
Chairman
Audit and Risk Committee
21 May 2018
76
Pets at Home Group PlcAnnual Report and Accounts 2018 Nomination and Corporate Governance Committee Report
Tony DeNunzio
Chairman of the
Nomination and Corporate
Governance Committee
Who is on the Nomination and Corporate
Governance Committee?
There were two formal Committee meetings held in the
financial year and members’ attendance was as shown in
the table below. The Company Secretary acts as secretary
to the Nomination and Corporate Governance Committee.
Member
Tony DeNunzio (Chair)
Dennis Millard
Paul Moody
Tessa Green
Sharon Flood
Stanislas Laurent
Amy Stirling (resigned 11 July 2017)
Paul Coby (resigned 11 July 2017)
What we did in 2018
No. of meetings
2/2
2/2
2/2
2/2
2/2
2/2
0/2
0/2
Recommended that Peter Pritchard be appointed as Group Chief
Executive Officer following Ian Kellett’s resignation from the Board.
Recommended that Andrei Balta be appointed as CEO
of the Vet Group.
Reviewed the talent and succession plans for the Executive
Management Team and the Retail and Vet Group Executive
Management Teams.
Assessed Board composition and how it may be enhanced.
Conducted and reviewed the Board evaluation and
effectiveness survey.
Reviewed the independence of the Non-Executive Directors.
Reviewed and considered Directors’ conflicts of interest.
Reviewed the time commitment and length of service of the
Non-Executive Directors.
What we will do in 2019
Support Peter Pritchard in his transition to the role as Group Chief
Executive Officer and in establishing a strong Executive Management
Team around him.
Continue to assess Board composition and how it may be enhanced.
Implement further reviews and assessment of succession planning and
development plans particularly in relation to the Executive Management
Team and the Retail and Vet Group Executive Management Teams.
Review the Board’s diversity policy and recommend any changes in that
policy to the Board.
Introduction
The Nomination and Corporate Governance Committee
is a key committee of the Board whose role is to keep the
composition and structure of the Board and its Committees
under review and has responsibility for nominating candidates
for appointment as Directors to the Board having regards to
its structure, size and composition (including the skills,
knowledge, experience and diversity of its members).
We are also tasked with ensuring that succession plans are
in place for the Directors, the Executive Management Team
and the Retail and Vet Group Executive Management Teams,
taking into consideration the current Board structure, the
leadership requirements of the Group and the wider
commercial and market environment within which the Group
operates. The full terms of reference for the Nomination and
Corporate Governance Committee can be found on the
Company’s website.
Committee membership
The UK Corporate Governance Code recommends that a
majority of the members of a nomination committee should
be Independent Non-Executive Directors. The Nomination
and Corporate Governance Committee is chaired by myself,
Tony DeNunzio, and its other members are Dennis Millard,
Paul Moody, Tessa Green, Sharon Flood and Stanislas Laurent
(each of whom is an Independent Non-Executive Director).
The Nomination and Corporate Governance Committee
meets not less than once a year.
The following Directors served on the Nomination and
Corporate Governance Committee during the financial year:
Member
Period from:
To:
Tony DeNunzio (Chair)
18 February 2014
To date
Dennis Millard
Paul Moody
Tessa Green
Sharon Flood
Stanislas Laurent
Amy Stirling
Paul Coby
18 February 2014
To date
25 March 2014
To date
18 February 2014
To date
25 May 2017
25 May 2017
To date
To date
18 February 2014
11 July 2017
18 February 2014
11 July 2017
There were two formal Committee meetings held in the
financial year and members’ attendance was as shown in
the table above.
77
Pets at Home Group PlcAnnual Report and Accounts 2018 Governance report Nomination and Corporate Governance Committee Report continued
of the Royal College of Veterinary Surgeons. Professor
Dawson will Chair the Pets Before Profit and Corporate
Social Responsibility Committees and brings valuable
veterinary services sector expertise to the Board.
Succession planning
A principal risk to the business is the inability to attract, retain
and incentivise talented individuals to deliver our strategy.
The Committee is responsible for reviewing talent, capability
and succession at the most senior levels of the business,
however, in the last two financial years, the Committee has
increased its focus on talent development, retention and
succession below Board and Executive Management Team
level. This work has involved considering skills and capability
gaps along with succession planning immediately below the
Executive Management Team. Considerable progress has
been made in identifying gaps in the talent pool in addition
to mitigating the risks associated with unforeseen events such
as key individuals leaving the business.
As a result of this work, I was delighted to see that the
Committee was able to recommend to the Board that Andrei
Balta be promoted into the role of CEO of the Vet Group
following Sally Hopson’s resignation on 23 March 2018. Andrei
joined Pets at Home in 2011 as Director of Group Strategy and
moved to the Vet Group in 2013, firstly as Commercial Director
and subsequently as Chief Operating Officer. Prior to Pets at
Home, Andrei was a management consultant at Bain &
Company for seven years.
Despite the progress that has been made on succession
planning, the Board recognises that more work is required
in order to ensure that a clear development framework is in
place for identified successors and this will continue to be
a focus of the Committee for the next financial year.
Job levelling and banding
To support the work which the Committee is undertaking on
talent development, retention and succession below Board
and Executive Management Team level, the Board engaged
Willis Towers Watson to undertake a review of the Group’s
banding structure. The work has involved reviewing the
Group’s colleague banding structure across the organisation
in order to determine changes which will create clearer career
and development paths for all colleagues. The Board under
the guidance of the Remuneration Committee will oversee
the implementation of these changes over the current
financial year.
How the Nomination and Corporate Governance
Committee discharged its responsibilities in FY18
Board appointments and resignations
In November 2017, Ian Kellett notified me of his intention to
step down as Chief Executive Officer. Ian’s resignation took
effect on 27 April 2018. Ian joined Pets at Home in April 2006
as Chief Financial Officer and moved to the role of Group
Chief Executive Officer in April 2016. Ian’s resignation required
the Group to implement its succession plan and Peter
Pritchard, CEO of the Retail Group, succeeded Ian as Group
Chief Executive Officer with effect from 27 April 2018. Peter
joined Pets at Home in 2011 as Commercial Director and
moved to the role of CEO of Retail in 2015. During his time
with the Group, Peter has overseen the establishment
of our sourcing office in China, the launch of the VIP club,
the development of our omnichannel strategy, and more
recently, the repositioning of our Merchandise business. The
Committee will do all it can to support Peter in his new role.
In November 2017, I also accepted Nicolas Gheysens
resignation from the Board. Nicolas had been appointed to the
Board as the nominated representative of the Company’s then
principal shareholder, KKR My Best Friend Limited, an affiliate
of Kohlberg Kravis Roberts & Co. L.P.. KKR My Best Friend
Limited determined at that time not to replace Nicolas on the
Board as it was otherwise entitled to do under the terms of
the Relationship Agreement entered into with the Company.
As indicated in my report last year, during the financial period
Amy Stirling and Paul Coby stepped down from the Board
with effect from the close of the Annual General Meeting on
11 July 2017 in order to fulfil commitments in their full time
roles. Amy was succeeded by Sharon Flood, Chair of ST Du
Pont S.A, the Paris based luxury goods company and Audit
Chair at Crest Nicholson plc and Network Rail. Paul was
replaced by Stanislas Laurent who was appointed on 25 May
2017. Stanislas was formerly President and CEO of Photobox
and COO of AOL Europe.
Sharon has been appointed as Chair of the Audit and Risk
Committee and is a member of the Remuneration Committee
and the Nomination and Governance Committee. Stanislas is
a member of the Audit and Risk Committee, Nomination and
Governance Committee, Corporate Social Responsibility
Committee and Pets Before Profit Committee.
More recently Tessa Green confirmed that she will step down
from the Board with effect from close of the Annual General
Meeting on 12 July 2018. Tessa has been a Director of Pets at
Home since 2014 and during that time has been Chair of the
Corporate Social Responsibility Committee and the Pets
Before Profit Committee. I would like to thank Tessa for her
valuable contribution to the business and convey the Group’s
best wishes to her going forward. Tessa will be succeeded by
Professor Susan Dawson, Dean of the Institute of Veterinary
Science at the University of Liverpool and council member
78
Pets at Home Group PlcAnnual Report and Accounts 2018 Board evaluation and effectiveness
As with the Board evaluation for FY17, this year, we carried out
an internal Board evaluation that included the completion of
a focused online questionnaire that re-considered the priority
areas highlighted in the FY17 external evaluation in order to
determine progress made. In light of changes to the Board
since the Company’s previous evaluation process, Board
composition and expertise and Board dynamics were also an
area of focus. As part of the evaluation, I also held discussions
with each Board member. The Board considered the output
from the review in April 2018 and concluded that the
performance of the Board, its Committees and individual
Directors was effective. Any areas for improvement have been
agreed by the Board and are detailed on pages 58 to 59 of the
Governance Report.
Diversity
We take into account a variety of factors before
recommending any new appointment to the Board, including
relevant skills to perform the role, experience, knowledge,
ethnicity and gender. The most important priority of the
Committee, however, is ensuring that the best candidate is
selected to join the Board. However, we will monitor the
Group’s approach to people development to ensure that it
continues to enable talented individuals, both male and
female, to enjoy career progression with the Group. Further
details on Board diversity can be found on pages 52 and 53
of the Governance Report.
Conflicts of interest and independence of the
Non-Executive Directors
The Board has delegated authority to the Committee
to consider, and where necessary authorise, any actual
or potential conflicts of interest arising in respect of the
Directors. We considered potential conflicts of interest
as they arose during the course of the year.
We also support the Board in its annual consideration
of the Conflicts of Interest Register, which is carried out prior
to the publication of the Annual Report, and consider the
independence of the Non-Executive Directors, in the context
of the criteria set out in the Corporate Governance Code.
The Board’s view on independence is contained on page 50
of the Governance Report.
For further information on Board composition, diversity and
independence, see the Governance Report on pages 50 to 51.
I will be available at the Annual General Meeting to answer
any questions on the work of the Nomination and Corporate
Governance Committee.
Tony DeNunzio
Chairman
Nomination and Corporate Governance Committee
21 May 2018
79
Pets at Home Group PlcAnnual Report and Accounts 2018 Governance report Corporate Social Responsibility and Pets Before Profit Committees Report
Introduction
Recognising the Group encompasses a broad range of
activities which are all focused around pets, the Board
maintains a regular and detailed review of pet welfare in
addition to Corporate Social Responsibility (CSR) more
widely. It achieves this by having both a CSR Committee
and a Pets Before Profit Committee which, together, help
manage the Group’s most important ethical, social and
environmental impacts.
The Committees regularly review the Group’s policies and
procedures in relation to pet welfare in its retail business
and supply chain, and the development of its clinical
governance framework in the veterinary services business.
The Committees also review all other elements of the
Group’s CSR strategy, including energy and climate change,
waste, natural resources and its policies in relation to people.
A group of senior managers from across the business have
specific responsibility to ensure the delivery of our CSR
commitments and to further improve standards of pet welfare.
Committee membership
The CSR Committee, which meets twice a year, is chaired
by Tessa Green and its other members are Tony DeNunzio,
Dennis Millard and Stanislas Laurent. The Pets Before Profit
Committee, which meets three times a year, is also chaired
by Tessa Green with Tony DeNunzio, Dennis Millard and
Stanislas Laurent as its members, however, acknowledging
the importance of pets to the Group, all Board members are
required to attend Pets Before Profit Committee meetings,
along with Board observers.
Focus and approach
As our veterinary services business has continued to grow
rapidly, it is no longer appropriate to think about our wider
responsibilities in retail-centric terms such as ‘sourcing’
and ‘supply chains’. So we have reviewed and updated how
we address corporate social responsibility based around the
concept of ‘doing the right thing’. Doing the right thing for
pets, for people and for the planet will form the basis of how
we approach our responsibilities holistically and how we
report our impacts and progress. This change has resonated
well with colleagues across the business as it also reflects
many of our values.
Tessa Green
Chair of the Corporate Social
Responsibility and Pets
Before Profit Committees
Who is on the Corporate Social Responsibility
and Pets Before Profit Committees?
Member
Tessa Green (Chair)
Dennis Millard
Paul Coby (resigned 11 July 2017)
Stanislas Laurent (appointed 25 May 2017)
Tony DeNunzio
No. of meetings
5/5
5/5
1/5
4/5
5/5
What we did in 2018 – Corporate Social
Responsibility
Reviewed progress of energy saving initiatives ahead of
completing store rollout of LED lighting/BEMS technology.
Reviewed the Group’s technical capabilities and quality
assurance process in relation to pet food.
Reviewed and challenged the Group’s plans to provide veterinary
outreach to people living with pets in insecure accommodation.
Continued to keep the reporting of CSR activity and progress under
review in both the Annual Report and online.
What we did in 2018 – Pets Before Profit
Reviewed in-store daily pet care routines, including provision
of fresh fruit and vegetables and bottled spring water.
Reviewed the spread of RHD2 virus and the Company’s response
to the care of its rabbits and its breeders.
Reviewed the outcome of pet audits in stores.
Reviewed the Vet Group’s plans in relation to clinical governance
in both First Opinion and specialist veterinary practices.
Reviewed impact assessments in relation to DEFRA’s proposed
legislation and guidance for animal activities licensing.
What we will do in 2019
Continue to ensure delivery of the best possible pet welfare standards
across the Group.
Continue to review the Group’s sustainability strategies, with a particular
focus on energy and climate change, waste reduction and consumption
of natural resources.
Monitor the Group’s progress in relation to mental health.
Review the Group’s sourcing policies.
80
Pets at Home Group PlcAnnual Report and Accounts 2018 Highlights
I am particularly pleased with the progress that has been
made in a number of key areas over the past year:
• We continue to improve the welfare of our pets. This year
we have made significant improvements to our aquatics
sections and to the supply of fish. We have also improved
the fruit and vegetables and the fresh water we provide to
our small mammals (see page 40).
• Over Easter we again suspended the sale and adoption of
rabbits to reduce the pressure for impulse purchasing and
offered rabbit workshops instead. These are fun and engaging
and play an important educational role, emphasising the
responsibilities that come with pet ownership (see page 42).
• Our people teams have developed wellbeing programmes
that are relevant to both our retail colleagues and our
veterinary professionals. In the current year there will be a
particular emphasis on mental health and wellbeing across
the Group (see page 44).
• We welcomed the Parliamentary Under Secretary of State
for Rural Affairs and Biosecurity to one of our stores to share
the progress we have made to educate customers about
their responsibilities in relation to invasive non-native species
(see page 46).
• Colleagues in our Vet Group have made excellent progress
in the development of programmes that help our veterinary
colleagues develop their clinical skills and practice to a
consistent standard across all our practices (see page 45).
• Our store colleagues helped to raise £4.3m to support the
rehoming of pets. In the month of December alone, they
raised a staggering £1.4m in conjunction with the charity
Support Adoption For Pets, to help with this vital work. This
facilitated a transformational grant of £100,000 from Support
Adoption For Pets, its largest ever single award, to Hope
Rescue in South Wales (see page 43).
Some of the charities receiving grants from
Support Adoption For Pets this year
RSPCA Northamptonshire – £15,000
This donation funded the purchase of a new animal
ambulance. It is one of 17 vehicles Support Adoption
For Pets has funded during the year, from small animal
ambulances like this one, to a 3.5 tonne horse transporter.
Horse Sense Wirral – £10,000
To help with vet bills and to fund the purchase of a paddock
sweeper and an industrial washing machine. Twelve
rescues have received grants to purchase equipment from
washing machines right through to tractors.
Animal Care Lancaster – £45,000
Having received a grant, this charity was able to upgrade
their dog isolation block and outside pens. Over the year
eight rescues have been able to improve their dog
accommodation.
Maesteg Animal Welfare Society, Bridgend – £6,450
This grant helped with the building of a cat pen and
contributed towards the cost of a neutering programme
for unowned cats.
Cats Protection – £60,000
Having received this grant Cats Protection was able to
extend their work on a national cat census to an additional
four regions. This funding is specifically for neutering and
vet-related costs and making a positive contribution to cat
welfare. Stray cats that are ‘friendly’ will be neutered and
vet checked in readiness for rehoming. Those which are
unlikely to make good pets will be neutered, vaccinated,
treated for fleas and worms, and returned. Over the year
47 rescues were supported with vet bills, trap neuter release
schemes and public neutering programmes.
Tessa Green
Chair
Corporate Social Responsibility
and Pets Before Profit Committees
21 May 2018
81
Pets at Home Group PlcAnnual Report and Accounts 2018 Governance report Directors’ Remuneration Report
Paul Moody
Chairman of the
Remuneration Committee
Who is on the Remuneration Committee?
Member
Paul Moody (Chairman)
Dennis Millard
Amy Stirling
Tessa Green
Sharon Flood
What we did in 2018
No. of meetings
2/3
3/3
1/1
3/3
2/2
Approved share awards under the new LTIP to all colleagues;
Agreed the annual bonus targets for the Group Executive
Management Team for FY18 and measured performance
against them;
Reviewed the gender pay gap analysis results and agreed the
actions for starting to address the issues identified;
Considered and recommended the remuneration package
for the new Group Chief Executive Officer;
Discussed and reviewed attainment against the performance
conditions for the Group’s LTIPs due to vest during the period;
Reviewed the wider remuneration structure for all colleagues; and
Reviewed the terms of reference of the Committee.
What we will do in 2019
Approve share awards under the LTIP to all eligible colleagues;
Agree the annual bonus targets for the Executive Management Team
for FY19 and measure performance against them;
Continue to engage with shareholders on our Remuneration Policy;
Implement the revised remuneration structure for the wider colleague
population; and
Continue to monitor changes in corporate governance and respond
accordingly.
82
Introduction
On behalf of the Remuneration Committee (Committee),
I am pleased to present our Directors’ Remuneration Report for
FY18. The Annual Report on Remuneration will be subject to
an advisory vote at our 2018 Annual General Meeting (AGM).
Policy review and ongoing shareholder consultation
At the AGM in July last year we were delighted that our
shareholders approved both our new Remuneration Policy
(Policy) and our new Long Term Incentive Plan (LTIP),
with 85.16% and 84.42% of votes in favour, respectively.
We recognise the importance of the consultation we had
with shareholders and the valuable feedback we received
from them, as we shaped our proposals. As a consequence,
and especially given there has been some change to our
shareholder base since last year, we have proactively reached
out to all new shareholders to explain the rationale behind our
approach to executive remuneration. We are committed to
ongoing dialogue with all our shareholders and we will always
listen actively to their thoughts and share any feedback and
subsequent Committee response where appropriate.
Remuneration in respect of FY18
Results for FY18
At the end of FY17, as detailed on page 14 in the Chairman’s
Statement, we repositioned the Merchandise business by
investing in value for the customer, so giving ourselves a
stronger platform from which to deliver sustainable, profitable
growth in future years. We are seeing the benefits of this
repositioning coming through in the exceptionally strong
performance in our retail division for FY18, with more
customers coming back to shop with us and the development
of our subscription service bringing in some excellent results.
Our veterinary business is already a profitable business,
delivering strong returns. We have chosen to slow our practice
rollout, but this is to ensure that we open practices in the right
locations with the right vet partners and, in parallel, we can
focus on accelerating growth in our existing practices.
FY18 saw:
• The £13m price investment in Merchandise remaining on
track and delivering positive results faster than expected,
with FY18 like-for-like growth of 5.0% and market share
gains in food and accessories.
• Omnichannel revenues of £51.4m grew at 75.1%, ahead
of the online pet market and key competitors.
• Total incomes from the First Opinion Joint Venture vet
practices up 16.1% to £53.1m and double digit revenue
growth in Specialist Referral Centres.
• Net openings completed: 13 superstores, 25 vet practices
and 27 grooming salons. Closed seven Barkers stores.
• Total dividend payable of 7.5 pence per share, maintained
at the prior year level.
Pets at Home Group PlcAnnual Report and Accounts 2018 Remuneration in respect of FY19
FY19 salary review
The Committee reviewed the salary level of Mike Iddon and
concluded that he would receive an increase of 2% in line with
increases made to other colleagues. This increase took effect
from 30 March 2018. Ian Kellett received no increase to his
base salary as he had resigned.
FY19 bonus targets
The Committee has been reviewing the performance
measures for the annual bonus plan and agreed to replace
the profit measure, previously EBITDA, with PBT. PBT has
become a key externally reported business measure for us,
and its use as a bonus measure will enable management’s
control and use of capital to be reflected in any bonus
payment and will be very transparent for our shareholders.
PBT will still make up 75% of the bonus (as EBITDA did),
recognising the importance of profit delivery, with free cash
flow remaining as the other performance measure at 25%.
The Committee has adopted a rigorous approach to setting
bonus targets for FY19, calibrating proposals against a range
of data points, and feels confident that these targets are
appropriately stretching. Further details of this approach
can be found on page 99 of our Annual Report on
Remuneration. Full details of the targets for FY19 and
outcomes against them will be reported in the FY19
Annual Report on Remuneration.
Peter Pritchard’s remuneration
As previously disclosed, when Peter took up the position of
CEO on 27 April 2018, he received a base salary of £494,200.
His maximum bonus opportunity for FY19 will be 100% of
base salary and he will be eligible to receive an award under
the RSP of 75% of base salary. Under the Policy Peter is
required to build up his shareholding in the Group to 200% of
his base salary. However, as at 29 March 2018, he already had
a shareholding of 1039% of his then base salary at a share price
of 169p, so comfortably exceeding the requirement.
Annual bonus outcomes
Targets for the annual bonus for FY18 were set by the
Committee to reflect the repositioning of the business
and were based on EBITDA (75%) and free cash flow (25%).
In determining the payouts under the annual bonus plan for
the Executive Directors, the Committee has been mindful
not only of the formulaic outcome against the targets set,
but also of the overall performance of the business, how
management have delivered against the change in strategy
and our shareholders’, experience over the period.
• The EBITDA outcome at £123.3m resulted in that portion
of the annual bonus paying out at 49.8% of base salary
versus a maximum of 75%. This shortfall against the
maximum reflected the performance of the veterinary
business in FY18.
• The business delivered well against the stretching free
cash flow targets, with a cash conversion rate of 48%.
The free cash flow portion of the bonus therefore paid
out at maximum (equal to 25% of base salary).
• In total, the overall bonus payout was 74.8% of base salary,
versus a maximum opportunity of 100% of base salary.
Full details can be found on page 96 of our Annual Report
on Remuneration.
• Whilst under the terms of the approved Policy,
notwithstanding his resignation, Ian remained eligible
for an annual bonus for the performance year. However,
in view of the shareholder experience throughout the
performance period and to ensure consistency of treatment
with other colleagues who resigned during the financial
year but received no bonus, Ian Kellett agreed that it was
appropriate to waive his bonus.
Share incentive plans
Restricted Stock Plan (RSP)
• The first awards under our newly approved RSP were made
in July 2017, the first tranche of which will not vest until 2020.
• We intend to make a further grant of awards after our
preliminary results in June 2018, with the same vesting
schedule and underpin as last year.
• Full details of the awards made in 2017 are contained in
the Remuneration Report on page 97.
Co investment Plan
• The second tranche of Matching Shares under the 2014
Co-Investment plan were released in March 2018
• Further details can be found on page 97 of the Annual Report
on Remuneration.
83
Pets at Home Group PlcAnnual Report and Accounts 2018 Governance report Directors’ Remuneration Report continued
Board changes
Following Ian Kellett’s resignation as CEO, the Board was
delighted to be able to appoint Peter Pritchard to succeed
Ian. The ability to appoint an internal successor to ensure
a smooth transition recognises the strength of our talent
development and succession planning.
Lastly I would like to thank Amy Stirling for her service to the
Committee and as a Non-Executive Director. Sharon Flood
joined the Committee on her appointment to the Board at the
AGM last year.
As ever, we would welcome any feedback or comments on
this report. The Committee remains committed to paying for
performance and ensuring that the interests of the Executive
Directors are aligned with those of our shareholders.
Yours faithfully
Paul Moody
Chairman of the Remuneration Committee
21 May 2018
Our colleagues
During this year, we have revitalised our approach to listening
and engaging with our colleagues. We have set up new direct
listening sessions with our Group Executive Management
Team and have changed our colleague engagement survey
so we can improve the feedback from our colleagues on what
they feel about our business. We were delighted to hear that
we had been ranked 5th in the UK’s Best Workplaces, large
company category, and the only retailer to make it into the top
10. This is a great tribute to the hard work and dedication of all
our colleagues.
Widespread share ownership is a key part of our engagement
and culture and the majority of our colleagues hold shares
either through our Sharesave plan, our previous share plans
or the new RSP. All eligible colleagues received an award
under the new RSP in July last year and they will do so again
at the time of the next award. We also had a further offering
of the Company’s Sharesave plan in September 2017 and our
first Sharesave award, made in 2014, vested in December 2017.
In June, this year, colleagues’ (excluding the Executive
Directors) second discretionary awards under the CSOP/PSP
Plans will also vest.
We published our Gender Pay Gap report on 28 March this
year. In common with many retailers, women make up the
majority of our colleagues. Across our stores we were
encouraged to see that our average gender pay gap is less
than 0.5%, however, we do have an overall gender pay gap
of 17.9% for which there are three main reasons:
• a higher proportion of women in our lower paid roles;
• the large number of women we have in part time roles; and
• fewer women in senior leadership positions.
One of our core values is that we “get better everyday”; we
are committed to making the changes necessary to ensure
that we develop the skills and experience in our already very
talented female colleagues so that more women have the
potential to occupy senior leadership positions. Our Gender
Pay Gap report can be found at https://investors.petsathome.
com/responsibility/policies-and-procedures/gender-pay-
gap-report, where we detail the initiatives and plans that we
have committed to.
84
Pets at Home Group PlcAnnual Report and Accounts 2018 Our Directors’ Remuneration Policy
Remuneration principles
The objectives of our Directors’ Remuneration Policy are:
Strategy
• To align with our programme of Group
wide simplification.
Culture
• To have incentives that are appropriate for
our business for the next three years as we
focus on delivering long term, sustainable
returns to investors.
• To adopt a ‘bottom-up’ approach to
remuneration – a policy that works for
our colleagues and can be applied to
our executives.
• To support our ongoing desire to embed
share ownership across the organisation.
• To assist with succession planning.
Retention
• To simplify and therefore enhance
perceived value of awards and thereby
reduce flight risk.
Shareholders • To deliver better value to shareholders
for their reward spend by:
– Improving perceived value;
– Creating stronger alignment with
shareholders; and
– Increasing focus on long term
sustainable value creation.
How we ensure pay for performance linkage
Annual bonus
• Pay-out linked to achievement of robust and
challenging annual performance targets.
• Full disclosure of bonus – commitment to
disclosing all target ranges on a retrospective
basis at the end of the financial year in question.
Underpin
• The absolute TSR underpin guarantees baseline
performances below which awards will not vest.
• Serves as a security mechanism to prevent
pay-outs for poor performance.
Share price
• Share price inherently links pay to performance.
• Build up of shareholding and long term vesting
horizon incentivises senior colleagues to
increase focus on long term, sustainable
performance.
1. Directors’ Remuneration Policy
a) Policy report
The following section on pages 86 to 88 sets out our Directors’
Policy for all of the Executive Directors and the Non-Executive
Directors (as well as any individuals who may become
Directors whilst this Policy is in effect), which was approved by
shareholders at the Company’s AGM in July 2017. The Policy is
intended to remain in force for up to three years.
The Policy explains the purpose and principles underlying the
structure of remuneration packages and how the Policy links
remuneration to the achievement of sustained high
performance and long term value creation.
Overall remuneration is structured and set at levels to enable
us to recruit and retain high calibre colleagues necessary for
business success, whilst ensuring that our reward structure
and performance measures are aligned to the strategy and
are simple to communicate to participants and shareholders.
A significant portion of the package is performance related
via the annual bonus plan and the LTIP, which requires
achievement of a TSR underpin before it vests. Remuneration
has been set taking into account practice within the FTSE 250
and practice at other retail companies.
85
Pets at Home Group PlcAnnual Report and Accounts 2018 Governance report Our Directors’ Remuneration Policy continued
Pay element – Fixed pay
Base salary
Purpose and
link to strategy
The Company
provides competitive
salaries suitable to
attract and retain
individuals of the right
calibre to develop
and execute the
business strategy.
Benefits
Purpose and link
to strategy
The Company
provides colleagues
with market
competitive benefits
suitable to attract and
retain individuals of
the right calibre to
develop and execute
the business strategy.
Operation
• Base salaries are paid in cash and are pensionable.
Maximum opportunity
• Whilst there is no maximum salary level,
• Base salaries are reviewed annually, typically at the
March Remuneration Committee meeting. Any
changes are usually with effect from the start of
the next financial year. The Committee takes into
consideration a number of factors when setting salaries,
including (but not limited to):
any increases will normally be broadly in line with
the wider colleague population.
• Higher increases may be made under certain
circumstances, at the Committee’s discretion.
For example, this may include:
– Increase in the scope and/or responsibility of the
– Size and scope of the individual’s responsibilities;
individual’s role; and
– The individual’s skills, experience and performance;
– Development of the individual within
– Typical salary levels for comparable roles within
the role.
appropriate pay comparators, including practice for
retail companies and the broader FTSE 250; and
Annual base salaries for the Executive Directors are set out
on page 95 of this report.
Maximum opportunity
• The cost to the Company of providing other benefits
may vary depending on, for example, market practice
and the cost of insuring certain benefits.
The Committee keeps the level of benefit provision under
regular review.
Details of the current benefit provision for the Executive
Directors is set out on pages 99 and 100 of this report.
– Pay and conditions elsewhere in the Group.
Operation
• The Company provides a range of benefits,
which may include:
– a company car (or cash equivalent)
– life assurance
– permanent health insurance
– private medical insurance
• These benefits are not pensionable.
Other benefits may be offered from time to time, if
considered appropriate by the Committee and consistent
with the Company’s overriding purpose for offering
such benefits.
The Company may also meet certain mobility costs,
such as relocation support, expatriate allowances,
temporary living and transportation expenses, in line
with the prevailing mobility policy and practice for other
senior executives.
Executive Directors are eligible to participate in any
tax-approved all-colleague share plans operated by the
Company on the same basis as other eligible colleagues
such as the SAYE scheme (set out below on page 88).
Pensions
Purpose and link
to strategy
To provide colleagues
with an allowance for
retirement planning.
Operation
Pension contributions are made to either the Group
Pension Plan, or to personal pension schemes or cash
allowances in lieu of contributions are paid.
Maximum opportunity
The contribution level for an individual Executive Director
is capped at 15% of base salary per annum for employer
contributions. Details of current pension provision for the
Executive Directors are set out on page 88 of this report.
86
Pets at Home Group PlcAnnual Report and Accounts 2018 Maximum
opportunity
The maximum
bonus
opportunity
is 100% of
base salary.
Pay element – Variable pay
Annual bonus
Purpose and
link to strategy
To incentivise the
delivery of our
business plan on
an annual basis.
To reward
performance
against key
performance
indicators which
are critical to the
delivery of our
business strategy.
Operation
• Delivery will normally be in cash and is not
pensionable.
• Performance measures are set annually
and pay-out levels are determined by the
Committee after the year-end, based on
performance against those targets during
the relevant financial year.
• Awards are subject to malus and clawback
provisions where there has been a material
misstatement of audited results; serious financial
irregularity; any circumstances justifying
summary dismissal of a participant from his
office or employment with any Group Company
including, but not limited to, dishonesty, fraud,
misrepresentation or breach of trust; any
material breach of a participant’s terms and
conditions of employment; and/or any material
violation of Company policy, rules or regulations.
Maximum
opportunity
The maximum
value of restricted
shares that may
be awarded in
respect of any
financial year is
75% of salary.
Long Term Incentive Plan1
Purpose and
link to strategy
• To promote
continued
alignment
between
Executive
Directors and
shareholders,
increasing
focus on
long term
sustainable
value creation
• To support our
principle of
embedding
share
ownership
across the
organisation
• To assist with
succession
planning
Operation
• Awards will be made under the RSP annually.
• Share awards are normally made in the form of
nil cost options but may be awarded in other
forms if appropriate (such as conditional share
awards). The plan rules specify that awards may
also be satisfied in cash although this is unlikely
to apply to Executive Directors.
• No award will vest under the RSP unless the TSR
underpin has been achieved.
• Subject to the achievement of the TSR underpin
at year three and continued employment:
– 50% of the award will vest after three years.
– 25% of the award will vest in each of years
four and five.
• Additional shares (or cash) may be awarded in
lieu of dividends on any shares which vest,
which would have been paid during the vesting
period.
• Malus and clawback provisions apply to these
awards in circumstances as set out
on page 92 of this report.
• Change of control provisions apply as set out
on page 92 of this report.
• Leaver provisions apply as set out on page 92
of this report.
Performance measures
• Each year, the Committee determines
the measures and weightings within the
following parameters:
– At least 75% of the annual bonus will be based
on financial performance measures; and
– No more than 25% of the annual bonus will
be based on performance against non-
financial measures, including for example,
individual and strategic objectives.
• The Committee ensures that targets are
appropriately stretching in the context of
the business plan and that there is an
appropriate balance between incentivising
Executive Directors to meet financial targets for
the year and to deliver specific non-financial
goals. This balance allows the Committee to
effectively reward performance against the key
elements of our strategy.
• The Company may, in the context of the
underlying business strategy, amend the
performance measures or targets.
The performance metrics for the annual bonus
for the Executive Directors are set out on page 99
of this report.
Performance measures
• There are no performance targets attached to
the awards.
• A baseline performance underpin applies, which
requires absolute TSR performance to be
positive over the first three years of the vesting
period. If the underpin is not achieved, the
awards lapse in full.
• The plan rules stipulate that the Committee may
amend the performance measures or underpin
in exceptional circumstances where it considers
that they are no longer appropriate. If this
discretion was used, we would consult with
shareholders and the rationale would be clearly
explained in the remuneration report.
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Pets at Home Group PlcAnnual Report and Accounts 2018 Governance report Our Directors’ Remuneration Policy continued
Performance measures
There are no performance measures attached to
awards under the SAYE.
Performance measures
N/A.
SAYE1
Purpose and
link to strategy
• An all-colleague
plan, which
encourages
long term
shareholding
and aligns the
interests of UK
colleagues with
shareholders
• Executive
Directors are
eligible to
participate
Operation
• SAYE is a HMRC-approved scheme where
eligible colleagues are granted savings-related
share options to subscribe for Ordinary Shares
in the Company.
• Options are granted to be exercisable in
conjunction with either a three-year or five-year
savings contract with a monthly savings limit set
according to HMRC limits (currently £500 per
month).
• Options are normally granted at a discount to
market price at the time of invitation, as per
HMRC regulations (currently 20%).
Maximum
opportunity
The market value
of the shares
under option
at the date of
maturity of the
Sharesave savings
contract, less the
grant price of
the option at the
contract start date.
Chairman and Non-Executive Directors’ Remuneration Policy
Purpose and
link to strategy
To attract and
retain high calibre
individuals by
offering market
competitive fee
arrangements.
Operation
• Non-Executive Directors receive a basic fee in
respect of their Board duties.
• Further fees are paid to Non-Executive Directors
in respect of Deputy Chairman of the Board
and/or chairmanship of Board Committees.
• The Non-Executive Chairman receives an
all-inclusive fee for the role.
• The remuneration of the Non-Executive
Chairman is set by the Remuneration
Committee, whilst the Board as a whole is
responsible for determining Non-Executive
Director fees. These fees are the sole element
of Non-Executive remuneration and they are
not eligible for incentive awards, pensions or
other benefits.
Fees are typically reviewed annually.
Expenses incurred in the performance of
Non-Executive duties for the Company may be
reimbursed or paid for directly by the Company, as
appropriate, including any tax due on the benefits.
Maximum
opportunity
Current fee levels
can be found on
page 100.
Fees are set at
a level which
is considered
appropriate to
attract and retain
the calibre of
individual required
by the Company.
The Company’s
Articles of
Association
provide that the
total aggregate
remuneration
paid to the
Non-Executive
Chairman and
the NEDs will
be within the
limits set by
shareholders.
1
The Committee may in the event of any variation of the Company’s share capital demerger, delisting, or other event which may affect the value of awards, adjust or amend the terms of
awards in accordance with the rules of the relevant share plan. In the case of the SAYE, any changes may be subject to HMRC approval if required.
88
Pets at Home Group PlcAnnual Report and Accounts 2018 Legacy matters
The Committee will honour remuneration related
commitments to former, current and future Executive and
Non-Executive Directors (including the exercise of any
discretions available to the Committee in relation to such
commitments) where the terms were agreed prior to them
becoming a Director (provided that, in the opinion of the
Committee, the payment was not in consideration for the
individual becoming an Executive Director or Non-Executive
Director of the Company) and/or where the terms were
agreed and commitments made in accordance with the
previous remuneration policy approved by the Company’s
shareholders in September 2014.
For these purposes, payments include the Committee
satisfying awards of variable remuneration and, in relation to
an award over shares, the terms of the payment are agreed at
the time the award is granted. This includes allowing the
vesting of outstanding awards under the Co-Investment Plan,
CSOP and PSP, the terms of which are detailed in the previous
policy that was approved by shareholders at the Company’s
AGM in September 2014.
Remuneration arrangements throughout the Company
The Policy for our Executive Directors is designed in line with
the remuneration philosophy and principles that underpin
remuneration for the wider Company. The Company believes
in having a consistent approach to remuneration rather than
designing alternative plans for our Executive Directors.
All our reward arrangements are built around the common
objectives and principles outlined below:
• Aligned incentives – A meaningful proportion of
remuneration is based on performance. Individuals are
incentivised towards consistent financial and non-financial
business goals and objectives, in addition to appropriate
individual goals.
• Colleagues as shareholders – Our culture is built on a
cohesive team approach and widespread shareholding
amongst colleagues which we believe enhances our long
term sustainable success by promoting stewardship and
alignment amongst a wide colleague participation group
• Simplification – our Policy aligns with a much wider
programme of simplification across the Group as a whole,
from how we operate our supply chain and stores, right
through to our Support Offices.
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Pets at Home Group PlcAnnual Report and Accounts 2018 Governance report Our Directors’ Remuneration Policy continued
(b) Recruitment policy
The following table sets out the various components which would be considered for inclusion in the remuneration package for
the appointment of an Executive Director and the approach to be adopted by the Committee in respect of each component and
which remain unchanged from the previous Policy.
Element
Overall
Policy and operation
• The Committee’s approach when considering the
overall remuneration arrangements in the recruitment
of a member of the Board from an external party is to
take account of the Executive Director’s remuneration
package in their prior role, the market positioning of the
remuneration package, and not to pay more than
necessary to facilitate the recruitment of the individual.
Fixed elements
(Base salary,
pension and other
benefits)
• We recognise that salary levels drive other elements of
the package and would therefore seek to pay a salary
which is competitive, but no more than necessary to
secure the individual.
• Where an Executive Director is appointed from within
the business, in addition to considering the matters
detailed for external candidates, the normal policy of the
Company is that any legacy arrangements would be
honoured in line with the original terms and conditions.
• The Company may meet certain mobility costs,
including relocation support, expatriate allowances,
temporary living and transportation expenses in line
with the prevailing mobility policy and practice for
senior executives.
• The Executive Director would be eligible to participate in
our benefit and pension plans, including coverage under
all Executive Director and colleague pension and benefit
programmes in accordance with the terms and
conditions of such plans, as may be amended by the
Company from time to time.
• The individual will be eligible to participate in the annual
bonus plan, in accordance with the rules and terms of
the plan in operation at the time.
• The maximum level of opportunity will be no greater
than that set out in the Policy Table above (i.e. 100% of
base salary).
• The individual will be eligible to participate in the RSP,
in accordance with the rules and terms of the plan in
operation at the time.
• The maximum level of opportunity will be no greater
than that set out in the Policy Table above (i.e. 75% of
base salary).
• The Committee will consider what buy-out awards
(if any) are reasonably necessary to facilitate the
recruitment of a new Executive Director in all
circumstances. This includes an assessment of the
awards which would be forfeited on leaving their
current employer.
• The Committee will seek to structure any buy-out
awards such that overall they are no more generous in
terms of quantum or vesting period than the awards
due to be forfeited.
• In determining the quantum and structure of these
commitments, the Committee will seek to provide
broadly equivalent value and replicate, as far as
practicable, the timing and performance requirements
of the awards forfeited.
• Buy-out awards, if used, will be granted using the
Company’s existing Long Term Incentive Plans to the
extent possible, although awards may also be granted
outside of these plans if necessary and as permitted
under the Listing Rules.
• In the case of an internal hire, any outstanding awards
made in relation to the previous role will be allowed to
pay out according to their original terms.
• If promotion is part way through the year, an additional
top-up award may be made to bring the Executive
Director’s opportunity to a level that is appropriate in
the circumstances.
Short term
incentives
Long term
incentives
Buy-out awards
90
Pets at Home Group PlcAnnual Report and Accounts 2018 (c) Service contracts and loss of office arrangements
The Committee’s policy on service contracts and termination arrangements for Executive Directors is set out below.
In principle, it is the Committee’s policy that there should be no element of reward for failure. The Committee’s approach
when considering payments in the event of a loss of office is to take account of the individual circumstances, including the
reason for the loss of office, Company and individual performance, contractual obligations of both parties as well as share
plan and pension scheme rules.
The key employment terms and conditions of the current Executive Directors, as stipulated in their service contracts, are set
out below:
Area
Notice
period
Policy and operation
• The service contract for Ian Kellett provides for a notice
period of 12 months from the Company and six months
from the individual.
• New Executive Directors will be appointed on service
contracts that have a notice period of not more than
12 months for both the Company and the individual.
• The service contract for Mike Iddon provides for a notice
period from both the Company and the individual of six
months.
• The service contract for Peter Pritchard provides for a notice
period of 12 months from the Company and six months
from the individual.
• The Committee considers this policy provides an
appropriate balance between the need to retain the services
of key individuals for the benefit of the business and the
need to limit the potential liabilities of the Company in the
event of termination.
Contractual
payments
• Executive Directors’ service contracts allow for termination
• Payment in lieu of notice will be limited to base salary and
with contractual notice from the Company or termination by
way of payment in lieu of notice (PILON), at the Company’s
discretion. Payment in lieu of notice would be made where
circumstances dictate that the Executive Directors’ services
are not required for their full notice period.
• Neither notice nor PILON will be given in the event of gross
contractual benefits for the relevant notice period.
• There is no contractual entitlement to a payment under the
annual bonus in respect of the notice period.
• Service contracts allow for mitigation if the individual finds
alternative employment.
misconduct.
Short term
incentives
• The Committee’s policy is not to award an annual incentive
• Where an Executive Director leaves office during a
for any portion of the notice period not served.
• Where an Executive Director leaves office after the end of
a performance year but before the payment is made, the
executive will remain eligible for an annual bonus for that
performance year, subject to the normal assessment of
performance achieved over the period.
performance year, any bonus would be at the Committee’s
absolute discretion and would take into account
performance and the time served during the period.
• No bonus will be paid in the event of gross misconduct.
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Pets at Home Group PlcAnnual Report and Accounts 2018 Governance report Our Directors’ Remuneration Policy continued
Area
Policy and operation
Long term
incentives
• The treatment of unvested long term incentive awards is
governed by the rules of the relevant incentive plan.
CIP
• Treatment under the CIP is dependent on the period elapsed
since the IPO.
a) Within the first 24 months following Admission
• Where an individual with a six month notice period
voluntarily resigns less than 18 months following the date
of Admission, they will forfeit their Invested Shares and their
Matching Awards. This period ended on 17 March 2016.
b) Between 24 months and 36 months following Admission
• Where an individual with a six month notice period
voluntarily resigns between 18 months and 30 months
following the date of Admission (and completes at least two
years’ service by working his notice period or being put on
garden leave, or would have done so but is given PILON),
they will retain their Invested Shares and may retain a portion
of their Matching Award subject to achievement of
performance targets measured over the first two years of the
performance period. This period ended on 17 March 2017.
c) On or after 36 months following Admission
• Where an individual with a six month notice period
voluntarily resigns on or after 30 months following the date
of Admission (and completes at least three years’ service
by working his notice period or being put on garden leave,
or would have done so but is given PILON), they will retain
their Invested Shares and, if a good leaver (as defined under
the PSP), also their vested Matching Award, unless the
Committee determines otherwise. Matching Awards vest
after three, four and five years, subject to achievement of
performance conditions at year three.
• Any participant who is dismissed for reasons of fraud or
negligence will forfeit their Invested Shares and Matching
Awards in full.
CSOP, PSP, RSP and SAYE
• Under the CSOP, PSP and RSP, the default position is for both
vested (to the extent not yet exercised) and unvested awards
to lapse upon a loss of office event.
• Where an individual is determined to be a “good leaver”
(which includes for reasons of death, illness, injury, disability,
retirement, sale or transfer out of the Group or any other
reason at the discretion of the Committee) the Committee
may allow vested awards (to the extent not yet exercised) to
be retained and unvested awards to subsist until the relevant
vesting date, subject to satisfaction of the performance
conditions/financial underpin and pro-rated for time served.
• Alternatively, the Committee may, at its discretion, allow
unvested awards to vest at an earlier date, having regard
to the achievement of performance conditions/financial
underpin to that date and the period of time that has passed
since the date of grant. The Committee may choose to
apply no reduction in the amount vesting if it is considered
appropriate given the particular circumstances.
• Under the SAYE, the default position is for unvested awards
to lapse upon a loss of office event.
• Where an individual is determined to be a “good leaver”
in accordance with HMRC regulations (which include for
reasons of death) unvested awards may vest pro-rata by
reference to the period of time that has elapsed since the
date of the grant and up to six months following the leaver
event (12 months in the case of death).
Change in
control
• The Committee’s policy is that service contracts should not
provide for additional compensation on severance as a
result of a change in control.
• Under the SAYE, awards shall vest pro-rata by reference to
the period of time that has elapsed since the date of grant
and up to six months following the change of control.
• Under the CSOP, the PSP, the Co-Investment Plan and the
RSP, the Committee will determine whether and to what
extent awards shall vest, taking into account all relevant
factors including Company performance, the period of time
elapsed since the date of grant and the interests of our
shareholders.
Malus and
clawback
Annual bonus payments and long term incentive awards (but
not including SAYE awards) are subject to malus and clawback
for a period beginning on the date of award and ending two
years following vesting in the event of:
• a material misstatement of audited results;
• serious financial irregularity;
• any circumstances justifying summary dismissal of a
participant from his office or employment with any Group
Company including, but not limited to, dishonesty, fraud,
misrepresentation or breach of trust;
92
• any material breach of a participant’s terms and conditions
of employment; and/or any material violation of Company
policy, rules of regulation.
• Malus and clawback will continue to apply to any bonus
payments or awards retained by leavers and/or on a change
of control.
Pets at Home Group PlcAnnual Report and Accounts 2018 External appointments
Executive Directors are permitted to hold an external
appointment with the prior consent of the Board. Any fees
may be retained by the individual.
Chairman and Non-Executive Directors
The Non-Executive Directors, including the Chairman of the
Board, have letters of appointment which set out their duties
and responsibilities. They do not have service contracts.
The key terms of the appointments are set out in the
table below:
Provision
Period
Appointment
terms
Policy
• Initially appointed for a period of three years,
subject to annual review and notice.
• In line with the UK Code, all Directors will seek
annual re-appointment by shareholders at the
AGM.
• Three months’ notice by either the Company
or the Non-Executive Director.
• Non-Executive Directors and the Chairman
of the Board are not entitled to compensation
on leaving the Board.
Fees
Expiry of
current term
• As set out on page 100.
• See page 64 for details of the expiry of the
current term of Non-Executive Directors’
letters of appointment.
Availability of documentation
Service contracts and letters of appointment for all Directors
are available for inspection by any person at our registered
office in Handforth, Cheshire. They will also be available for
inspection during the 30 minutes prior to the start of our AGM
to be held in Handforth on 12 July 2018.
(d) Illustration of the Remuneration Policy
Our remuneration arrangements have been designed to
ensure that a significant proportion of pay is dependent
on the delivery of stretching short term and long term
performance targets, aligned with the creation of sustainable
shareholder value. The Committee considers the level
of remuneration that may be received under different
performance outcomes to ensure that this is appropriate
in the context of the performance delivered and the value
added for shareholders.
The charts on the right provide illustrative values of the
remuneration package for Executive Directors under three
assumed performance scenarios.
These charts are for illustrative purposes only and actual
outcomes may differ from those shown.
Scenario
Assumptions
Fixed pay
All performance
scenarios
Variable pay
Minimum
performance
On-target
performance
• Consists of total fixed pay, including base
salary, benefits and pension
– Base salary – salary effective as at
30 March 2018
– Benefits – amount estimated to be received
by each Executive Director in FY19
– Pension – salary supplement effective as at
30 March 2018.
• No pay-out under the annual bonus
• No vesting under the RSP
• 50% of the maximum pay-out under the
annual bonus (i.e. 50% of salary)
• 100% vesting under the RSP (i.e. 75% of salary)
Maximum
performance
• 100% of the maximum pay-out under the
annual bonus (i.e. 100% of salary)
• 100% vesting under the RSP (i.e. 75% of salary)
1 Under the RSP, the normal maximum limit of 75% of salary has been shown.
2 All-colleague share plans (i.e. the SAYE) have been excluded.
3
Any legacy awards made in accordance with the policy for 2014 which Executive
Directors hold have been excluded.
Group Chief Executive Officer –
Illustrative example under the RSP
1,600,000
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
£550,000
100%
Minimum
£1,415,000
£1,168,000
19%
25%
56%
26%
35%
39%
Meeting
expectation
Maximum
Group Chief Financial Officer –
Illustrative example under the RSP
1,200,000
1,000,000
800,000
600,000
400,000
£397,000
200,000
0
100%
Minimum
£839,000
19%
25%
56%
£1,016,000
26%
35%
39%
Meeting
expectation
Maximum
Fixed pay
Annual bonus
RSP
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Pets at Home Group PlcAnnual Report and Accounts 2018 Governance report Our Directors’ Remuneration Policy continued
(f) Consideration of shareholder views
The Committee consulted extensively with the Company’s
largest shareholders on the proposed changes to the Directors’
Remuneration Policy last year and we were pleased that all of
our majority shareholders were very supportive of our
remuneration principles and the proposed design.
The Committee remains committed to ongoing dialogue
with the Company’s shareholder base and has offered the
opportunity for dialogue with the major new shareholders
who have joined the Company’s shareholder base in the last
12 months.
We will continue to monitor shareholder views when
evaluating and setting ongoing remuneration strategy, and
we are committed to consulting with shareholders prior to
any significant changes to our Policy.
(g) Minor amendments
The Committee may make minor amendments to the
Policy set out above (for regulatory, exchange control, tax
or administrative purposes or to take account of a change
in legislation) without obtaining shareholder approval for
that amendment.
Chief Executive
Chief Financial Officer
Base salary
Benefits
Pension
Total fixed pay
£494,200
£11,500
£44,478
£550,178
£353,700
£11,500
£31,833
£397,033
(e) Consideration of conditions elsewhere in the Company
As per the Committee’s terms of reference, we also review
the pay and conditions of colleagues at levels below the
Executive Directors. This includes approving the design
of and determining targets for the principal performance
related pay schemes, such as the bonus scheme operated
by the Company, and approving the total annual payments
made under such schemes. The Committee is also consulted
concerning any major changes in colleague benefit and
pay structures throughout the Group.
The remuneration package for all colleagues (including the
Executive Directors) is reviewed on an annual basis and a
consistent approach is applied at all levels. As part of the
annual salary and benefits review, the Company takes into
account industry standards, future legislative framework
(including the national minimum wage, the national living
wage, the Apprenticeship levy and the gender pay gap
reporting requirements) and the financial and economic
environment of the Group both internally and externally.
The annual salary and benefits review is presented to the
Committee with recommendations on remuneration
throughout the colleague base, including a proposed salary
increase to be applied to all colleagues’ wages, including
the Executive Directors. As such, the Committee has regard
to this Group-wide annual review process when setting its
remuneration policy for Executive Directors.
Whilst our colleagues are not directly consulted as part of the
process of determining pay, the output from our colleague
listening groups and engagement surveys is considered when
carrying out the annual salary and benefits review.
A significant number of our colleagues are also shareholders
and so are able to express their views in the same way as
other shareholders.
94
Pets at Home Group PlcAnnual Report and Accounts 2018 Annual Report on Remuneration
2. Annual Report on Remuneration
(a) Directors’ remuneration – report on implementation for the year ended 29 March 2018
This section of the report sets out how the Policy, approved by shareholders at the Company’s Annual General Meeting (AGM)
on 11 July 2017, has been applied in the financial year being reported on, and how it will be applied in the coming year.
A copy of this current Policy can be found on the Group’s website investors.petsathome.com
The information presented from this section up until the relevant note on page 97 represents the audited section of this report.
(b) Single total figure of remuneration for Executive Directors for the year ended 29 March 2018
The following table sets out the total remuneration for Executive Directors for the year ended 29 March 2018. All payments are
in line with the Policy.
Director
FY18
Ian Kellett
Mike Iddon
FY17
Ian Kellett
Mike Iddon
Nick Wood 5
Base salary
(£)
Benefits
(£)
Pension
(£)
Annual bonus
(£)
484,500
346,800
474,712
155,615
111,121
11,500
11,500
11,500
5,263
2,919
43,605
31,212
42,724
14,123
15,656
Nil2
259,330
96,947
31,456
Nil
Long term
incentives1
(£)
36,348
Nil3
36,239
Nil4
Nil
Total
(£)
575,953
648,842
662,087
206,457
129,696
1
Shares were awarded on 17 March 2014 under the Co-Investment Plan. Based on performance in the period March 2014 to March 2017 the performance conditions for these shares were
measured and the Committee determined that 16.8% of the awards would vest. The vested award becomes exercisable in equal tranches, subject to continued employment, between
May 2017 and March 2019. The first tranche of shares was released when the award vested in March 2017. The value for FY17 is based on the share price of 198.19p, being the average share
price over the last three months of the performance period, being the period from 1 January to 30 March 2017. The second tranche of shares was released on 17 March 2018. The value is
based on the share price of 178.3p being the share price on 16 March 2018, being the last working day before the shares were released.
Mike Iddon did not receive a Co-Investment Plan Award in 2014 as this was prior to his joining the Company.
2 Ian Kellett waived his bonus for FY18.
3
4 Mike Iddon was appointed on 17 October 2016 and his remuneration has been pro-rated from 17 October 2016 to 30 March 2017 including his annual bonus payment.
5
Nick Wood resigned as a Director on 4 April 2016; however, he remained with the Group in an advisory role until 1 July 2016. The remuneration shown for FY17 includes payments
up to 1 July 2016.
Base salary – corresponds to the amount received during the relevant financial year.
Benefits – corresponds to the taxable value of benefits received during the relevant financial year and principally includes
company car (or cash equivalent), life assurance and permanent health insurance.
Pension – corresponds to either the amount contributed to personal pension plans or the cash value of the salary supplement
received during the relevant financial year. Executive Directors receive a Company pension contribution worth 9% of their salary
or a cash allowance where the annual allowance has been reached.
Annual bonus – corresponds to the amount earned in respect of the relevant financial year. Details of how this was calculated
are set out below.
Long term incentives – corresponds to the amount earned by the Executive Directors in respect of the relevant financial year.
Details of how this was calculated are set out below.
Annual bonus
Whilst Peter Pritchard was not an Executive Director for FY18, his bonus payout for the last financial year is included
for completeness.
• The maximum annual bonus opportunity for Executive Directors and Peter Pritchard in respect of FY18 was 100%
of base salary.
• For FY18, the annual bonus was based on EBITDA (75%) and free cash flow (25%):
– the EBITDA performance measure was set at a Group level for Ian Kellett and Mike Iddon and at a retail level for
Peter Pritchard.
– the free cash flow measure was set at a Group level for all three and is defined as net cash from operating activities,
less net cash used in investing activities, interest paid and finance lease commitments and is stated before loans issued,
non-underlying costs and acquisitions of subsidiaries.
• Measurement was over a 52 week period.
95
Pets at Home Group PlcAnnual Report and Accounts 2018 Governance report Annual Report on Remuneration continued
The tables below show the targets and achieved payout levels:
Peter Pritchard
Performance measures
% Base salary
Minimum
Maximum
Retail EBITDA
Group free cash flow
Ian Kellett and Mike Iddon
75%
25%
£81.5m
£53.0m
£87.5m
£57.0m
Performance measures
% Base salary
Minimum
Maximum
Group EBITDA
Group free cash flow
75%
25%
£120.7m
£53.0m
£129.4m
£57.0m
Achieved
£m
£87.47m
£59.8m
Achieved
£m
£123.3m
£59.8m
%
74.7%
25.0%
%
49.8%
25.0%
Following a rigorous target setting process the Committee was confident that the targets stated above were stretching and
required individuals to deliver performance which significantly exceeded business expectations in order to achieve full pay-out.
This is evident in the bonus payout for Peter Pritchard, where Retail EBITDA achievement was just short of the maximum stretch
level of performance. For Ian Kellett and Mike Iddon, the shortfall in the payout against the Group EBITDA performance measure
reflects the performance of the veterinary business in FY18.
Notwithstanding the formulaic outturn of his bonus, in view of shareholder experience throughout the performance period and
to ensure consistency of treatment with other colleagues who resigned during the financial year but received no bonus, Ian
Kellett agreed that it was appropriate to waive his bonus.
Long term incentives
The Committee determined in May 2017, and reported in the last Remuneration Report, the vesting level of the performance
conditions attached to the Matching Awards granted under the March 2014 Co-Investment Plan for which the final year of
performance was FY17. The Committee determined that 16.8% of the total awards had vested. The second tranche of Matching
Shares was released on 17 March 2018.
(c) Single total figure of remuneration for Non-Executive Directors for the year ended 29 March 2018
The following table sets out the total remuneration for Non-Executive Directors and the Chairman of the Board for the year
ended 29 March 2018.
Director
Basic fees
(£)
Additional
fees
(£)
Remuneration
Committee
Chairman
(£)
Audit & Risk
Committee
Chair
(£)
Tony DeNunzio
200,000
Dennis Millard
Paul Coby 2
Tessa Green
Amy Stirling 3
Paul Moody
Nicolas Gheysens 4
Stanislas Laurent 5
Sharon Flood 6
50,000
13,846
50,000
14,038
50,000
Nil
41,651
42,500
n/a
20,0001
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
10,000
n/a
n/a
n/a
n/a
n/a
n/a
n/a
1,462
n/a
n/a
n/a
5,424
Nomination
& Corporate
Governance
Committee
Chairman
(£)
Pets Before
Profit/CSR
Committee
Chair
(£)
Total single
figure 2018
(£)
Total single
figure 2017
(£)
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
10,000
n/a
n/a
n/a
n/a
n/a
200,000
70,000
13,846
60,000
15,500
60,000
Nil
41,651
47,924
200,000
70,0000
50,000
61,154
61,154
60,000
n/a
n/a
n/a
1 The additional fee paid to Dennis Millard is in respect of his position as Deputy Chairman of the Board.
2 Paul Coby resigned from the Board on 10 July 2017.
3 Amy Stirling stepped down as Chair of the Audit Committee on 23 May 2017 and resigned from the Board on 11 July 2017.
4
Nicolas Gheysen was appointed to the Board on 2 December 2016 as KKR’s nominated director on the Board. As Nicolas was representing KKR, it was agreed that he would not receive any
Directors’ fees in respect of his appointment. He resigned from the Board on 28 November 2017.
5 Stanislas Laurent was appointed to the Board on 25 May 2017.
6 Sharon Flood was appointed to the Board on 25 May 2017 and took over as Chair of the Audit Committee on 11 July 2017.
96
Pets at Home Group PlcAnnual Report and Accounts 2018 (d) Scheme interests awarded during the financial year
In 2017, Executive Directors received RSP awards in line with the Policy as follows:
Executive
Director
Ian Kellett
Mike Iddon
Date of award
25 July 2017
25 July 2017
Number of
shares awarded
under the RSP
229,548
164,308
Grant price of
RSP awards
Nil cost awards
Nil cost awards
% of salary for
total awards
Performance
period end date
75%
75%
27 March 2020
27 March 2020
All awards are made as performance shares based on a percentage of salary and the value is divided by the closing share price
the day before the grants, being 158.3p.
The awards were made subject to the satisfaction of the achievement of the TSR underpin at the end of the performance period
of the three financial years (FY18-FY20). An absolute TSR greater than the average TSR measured over the three months before
the start of the performance period must be achieved for the awards to vest. In accordance with the Policy, 50% of the awards
will vest after three years and 25% of the award will vest in each of years four and five.
(e) Payments for loss of office
No payments for loss of office were made during the financial year.
Leaving arrangements for Ian Kellett
Ian Kellett resigned from the Board with effect from 26 April 2018. To ensure a smooth transition and provide support to the
new CEO, he has worked his notice period and will leave the Group on 31 May 2018. Ian will not receive a termination payment,
as he has resigned. During the period of his notice, Ian will receive his salary and contractual benefits up to his date of
termination on 31 May 2018. Notwithstanding the formulaic outturn of his bonus, in view of shareholder experience throughout
the performance period and to ensure consistency of treatment with other colleagues who resigned during the financial year
but received no bonus, Ian Kellett agreed that it was appropriate to waive his bonus.
Ian’s third tranche of Matching Award under the Co-Investment Plan will lapse in line with the early leaver provisions of the plan
rules. His 2016 PSP and CSOP awards and 2017 RSP awards will also lapse in line with the early leaver provisions.
(f) Payments to past Directors
No payments were made to past Directors during the year.
(g) Statement of Directors’ shareholding and share interests
The Committee believes that colleague share ownership is an important means to support long term commitment to the
Company and the alignment of colleague interests with those of shareholders.
Executive Directors are subject to a shareholding requirement of 200% of base salary, which should be built up over a period of
five years. A similar policy applies to the Executive Management Team. The Committee reviews share ownership levels annually.
Current shareholding levels for Directors are set out in the table below:
Director
Ian Kellett
Mike Iddon
Tony DeNunzio
Dennis Millard
Tessa Green
Paul Moody
Stanislas Laurent
Sharon Flood
Shareholding
requirement
as a % of salary
(target – % achieved)1
Shares owned
outright at
29 March 2018
1,414%
37%
–
–
–
–
4,053,484
76,329
3,313,026
30,000
40,816
27,470
30,000
60,088
Number of shares
Interests in share
incentive schemes,
awarded without
performance
conditions at
29 March 2018
Interests in share
incentive schemes,
awarded subject
to performance
conditions at
29 March 2018
0
0
–
–
–
–
496,8472
364,025
–
–
–
–
Shares owned
outright at
31 March 2017
4,047,056
45,996
3,158,026
30,000
40,816
27,470
1
For the purposes of determining the target shareholding achieved, we have used the individual’s salary and the closing share price (169 pence) as at 29 March 2018 and the shares owned
outright at the same date.
2 The figure includes all the second and third tranche of Matching Awards that vested at the end of the vesting period on 30 March 2017. 18,285 are exercisable in the second tranche.
This represents the end of the audited section of the report.
97
Pets at Home Group PlcAnnual Report and Accounts 2018 Governance report Annual Report on Remuneration continued
(h) TSR performance chart
The Company’s shares were admitted to the premium listing segment of the Official List maintained by the UK Financial
Conduct Authority and to trading on the London Stock Exchange plc’s main market for listed securities on 17 March 2014.
The chart below shows performance from that date until the end of FY18. This disclosure will be expanded in subsequent
years in line with the regulations.
130
120
110
100
90
80
70
Mar 2014
Mar 2015
Mar 2016
Mar 2017
Mar 2018
Pets at Home
FTSE 350
CEO
CEO single figure of remuneration
Annual bonus pay-out
(as % of maximum opportunity)
Long term incentive vesting
(as % of maximum opportunity)
Ian Kellett2
Nick Wood3
Ian Kellett
Nick Wood
Ian Kellett
Nick Wood
2013/20141
2014/2015
2015/2016
2016/2017
2017/2018
–
–
19,460
790,461
–
73%
–
n/a
–
75%
–
n/a
–
962,2244
–
60%
–
96%4
662,087
129,696
20.4%
–
16.8%
–
575,953
n/a
n/a5
n/a
n/a6
n/a
In FY14, the single figure of remuneration relates to the period 17 March 2014 to 27 March 2014.
1
2 Ian Kellett was appointed on 4 April 2016.
3
Nick Wood resigned as an Executive Director on 4 April 2016, however, he continued in the business until 1 July 2016. His payment in FY17 relates to the period from 1 April 2016 to
1 July 2016.
Under the early leaver provisions of the plan rules, Nick Wood received 19.2% of his total Matching Award under the Co-Investment Plan, as shown in the single figure table. Given that this
included time pro rating, with performance against the performance conditions being at 96% of maximum, the latter is shown here and the value of £198,168 of the Matching Awards.
4
5 Ian Kellett waived his bonus for FY18.
(i) Percentage change in remuneration of the Group CEO
The table below sets out the increase in total remuneration of the CEO and that of all colleagues:
Chief Executive
All colleagues 2
% change in base salary
FY17 to FY18
% change in bonus earned
FY17 to FY18
% change in benefits
FY17 to FY18
2.0%
2.0%
n/a1
56.7%
No change
No change
Ian Kellett waived his bonus for FY18.
1
2 All colleague information is presented by comparing the average colleague information in FY17 to the average colleague information in FY18.
98
Pets at Home Group PlcAnnual Report and Accounts 2018 (j) Relative importance of the spend on pay
The following table shows the relationship between the
Group’s EBITDA, distributions to shareholders and the total
remuneration paid to all colleagues.
Benefits
The Committee sets benefits in line with the policy set out
on page 86 of the Appendix. There are no changes proposed
to the benefit framework in FY19.
EBITDA 1
Returned to shareholders:
Dividend
Payments to colleagues:
Wages and salaries
FY18
£m
123.3
37.3
181.0
FY17
£m
130.5
39.9
161.1
1
The Committee considers that EBITDA is an important KPI for the Company and provides
shareholders with additional context as to how the business has performed financially in
the last two years.
(k) Dilution limits
In accordance with the IA Guidelines, the Company can satisfy
awards under its colleague share plans with new issue shares
up to maximum of 10% of its issued share capital in a rolling
ten-year period and within this 10% limit, the Company can
only issue 5% of its issued share capital to satisfy awards under
discretionary plans (i.e. the CSOP, PSP and RSP). As at 29 March
2018, the Company’s dilution position was 2.6% for all plans
and 1.9% for the executive plans.
(l) External appointments
Executive Directors are entitled to accept one external
appointment outside the Company with the consent of the
Board. Any fees received may be retained by the Director.
As at the date of this report, neither of the Executive Directors
held an external appointment for which they receive a fee.
(m) Non-Executive Directors – letters of appointment
A summary of the Non-Executive Directors’ letters of
appointment is contained on page 93 of the Policy.
3. Statement of implementation for FY19
This section provides an overview of how the Committee
is proposing to implement our Policy in FY19.
Base salary
Base salaries were reviewed with effect from 30 March 2018
and the salary of the Group CFO was increased by 2% which
mirrors the increase generally awarded to colleagues in the
Group. The Group CEO’s salary was not increased as he had
resigned.
Executive Director
Chief Executive Officer
Chief Financial Officer
Base salary
£484,500
£353,700
Pensions
Despite the ability in the policy to permit contributions up
to 15% of base salary, there is no increase proposed to salary
supplement levels for the Executive Directors in FY19. The
table below shows salary supplements for FY19.
Executive Director
Ian Kellett
Mike Iddon
% of salary
9%
9%
Annual bonus
The maximum annual bonus opportunity for Executive
Directors in respect of FY19 will remain at 100% of base salary.
The annual bonus framework will be in line with that
presented in the policy table on page 87. As highlighted in the
Chairman’s letter, during the year the Committee reviewed the
annual bonus framework for FY19, with a view to ensuring
that it remains appropriate for the business. It was decided,
following this review, to replace EBITDA with PBT as the profit
measure within the annual bonus plan. Historically EBITDA
has been used as the profit measure for bonus purposes,
reflecting the focus on EBITDA in our internal business unit
reporting and as a key external measure. The change to PBT
will enable closer scrutiny of management’s control and use
of capex. PBT will make up 75% of the annual bonus (the same
as for EBITDA), with free cash flow the remaining 25%. The
Committee adopted a rigorous approach to setting the bonus
targets for FY19, discussing the targets at two Committee
meetings. In order to satisfy itself that the targets were
stretching, the Committee looked at a range of internal and
external data points, including historical targets and
performance against them, strategic plan targets, analyst
consensus and TSR forecast growth for both the FTSE 250
and a select group of retailers.
Although the targets remain commercially sensitive at this
time, we will provide shareholders with full disclosure of the
PBT and free cash flow targets in next year’s report.
As for FY18, the annual bonus will be subject to malus and
clawback provisions. This provides the Committee with the
ability to take back amounts previously paid out for a period
of up to two years under certain circumstances, including
misstatement and misconduct.
99
Pets at Home Group PlcAnnual Report and Accounts 2018 Governance report Annual Report on Remuneration continued
Long term incentive awards
It is proposed that awards under the RSP will be made in FY19
shortly after the preliminary results announcement at 75% of
salary for Executive Directors in line with the Policy.
Sharesave
The Company intends to operate the Sharesave scheme again
for FY19. The maximum monthly savings will be retained at
£500 per month. Executive Directors are eligible to participate.
Non-Executive Director remuneration
The fees paid to the Non-Executive Directors have been
reviewed and they will remain at the same level for FY19.
The table below shows the Non-Executive Director fee
structure for FY19:
Chairman of the Board (all-inclusive fee)
Basic Non-Executive Director fee
Board Committee Chairman fee
Deputy Chairman
FY19
£200,000
£50,000
£10,000
£20,000
Committee membership and meetings
The Directors listed below in the table served on the
Committee during the year. The Committee met three times
during FY18 and the Committee members’ attendance is also
shown in the table below.
Member
Period from To
Meetings
attended
Paul Moody (Chairman) 1 April 2017
Dennis Millard
Tessa Green
Amy Stirling
Sharon Flood
1 April 2017
1 April 2017
To date
To date
To date
1 April 2017
11 July 2017
11 July 2017
To date
2
3
3
1
2
The individuals listed in the table below, none of whom were
Committee members, attended at least part of a meeting by
invitation during the year.
Attendee
Position
Tony DeNunzio
Chairman of the Board
Ian Kellett
Group CEO
There are no fees paid for membership of Board Committees.
Louise Stonier
Chief People and Legal Officer and Group
Company Secretary
Peter Pritchard
CEO of Retail
Stanislas Laurent
Non-Executive Director
None of the individuals attended part of any meeting in which
their own compensation was discussed.
Governance
The Board and the Committee consider that, throughout FY18
and up to the date of this report, the Company has complied
with the provisions of the UK Corporate Governance Code
relating to Directors’ remuneration.
Peter Pritchard’s remuneration as CEO
Peter Pritchard took over as CEO from Ian Kellett on 27 April
2018. His base salary on appointment is £494,200. This base
salary is below other typical salaries for comparable roles and
the Committee may over time approve salary increases higher
than the broader colleague population, subject to Peter’s
performance in the role and in order to ensure that Peter’s
base salary is competitive. Peter, as CEO, will have a maximum
bonus opportunity of 100% of base salary and an RSP award
of 75% of base salary. His pension and other benefits on
appointment are in line with the Policy.
The Remuneration Committee
Shareholder context for the Committee’s activities
During the year, the Committee received independent advice
on executive remuneration matters from Willis Towers Watson
(WTW).
WTW is a member of the Remuneration Consultants Group
and, as such, voluntarily operate under the code of conduct in
relation to executive remuneration consulting in the UK. The
Committee has reviewed the advice provided by WTW during
the year and is comfortable that it has been objective and
independent. Total fees received by WTW in relation to the
remuneration advice provided to the Committee during FY18
amounted to £38,200 (£58,034 FY17) based on the required
time commitment.
During FY18 the Committee also received support from
Travers Smith LLP on the terms of the discretionary and
all-colleague share plans.
100
Pets at Home Group PlcAnnual Report and Accounts 2018 Shareholder voting
At the Annual General Meeting on 11 July 2017, the total number of shares in issue with voting rights was 500,000,000.
The resolution to approve the Directors’ Remuneration Report received the following votes from shareholders:
Ordinary resolutions
2 To approve the Directors’
382,375,480
98.87
4,350,053
1.12
386,725,533
77.35
3,266,171
Votes for1
%2 Votes against
%
Votes total
% of isc3
Votes withheld4
Remuneration Report for the
year ended 30 March 2017
3 To approve the Directors’
329,361,414
85.16
57,363,515
14.83
386,724,929
77.34
3,266,775
Remuneration Policy
4 To approve the Pets at Home
Group Plc Restricted Stock
Plan (the “RSP”)
328,903,767
84.42
60,679,437
15.58
389,583,204
77.92
26,057
1 Votes “for” include discretionary votes.
2 Percentages above are rounded to two decimal places.
3
Issued share capital at meeting date: 500,000,000.
4 A vote withheld is not a vote in law and is not counted in the calculation of the proportion of votes “for” and “against” a resolution.
Annual General Meeting
As set out in my statement on page 82, our Directors’ Remuneration Report will be subject to an advisory vote at our AGM
to be held on 12 July 2018.
On behalf of the Board
Paul Moody
Chairman of the Remuneration Committee
21 May 2018
101
Pets at Home Group PlcAnnual Report and Accounts 2018 Governance report Independent Auditor’s Report
Consolidated income statement
Consolidated statement of
comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
as at 29 March 2018
Consolidated statement of changes in equity
as at 30 March 2017
Consolidated statement of cash flows
Company balance sheet
Company statement of changes in equity
as at 29 March 2018
Company statement of changes in equity
as at 30 March 2017
Company income statement
Company statement of cash flows
Notes (forming part of the financial statements)
Glossary – Alternative Performance Measures
Advisors and contacts
103
108
108
109
110
110
111
112
113
113
113
114
115
169
172
Financial statements
102 Pets at Home Group Plc
Annual Report and Accounts 2018
Independent Auditor’s Report
to the Members of Pets at Home Group Plc
1. Our opinion is unmodified
We have audited the financial statements of Pets at Home
Group plc (“the Company”) for the period ended 29 March
2018 which comprise the Consolidated income statement,
the Consolidated statement of comprehensive income,
the Consolidated and Company balance sheet, the
Consolidated and Company statement of changes in equity,
the Consolidated and Company statement of cash flows, and
the related notes, including the accounting policies in note 1.
Overview
Materiality:
Group financial
statements as
a whole
Coverage
Risks of material
misstatement
Recurring risks
In our opinion:
• the financial statements give a true and fair view of the state
of the Group’s and of the parent Company’s affairs as at
29 March 2018 and of the Group’s profit for the period
then ended;
• the Group financial statements have been properly
prepared in accordance with International Financial
Reporting Standards as adopted by the European Union
(IFRSs as adopted by the EU);
• the parent Company financial statements have been
properly prepared in accordance with IFRSs as adopted
by the EU and as applied in accordance with the provisions
of the Companies Act 2006; and
• the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006 and, as
regards the Group financial statements, Article 4 of the
IAS Regulation.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities are described below. We believe that
the audit evidence we have obtained is a sufficient and
appropriate basis for our opinion. Our audit opinion is
consistent with our report to the audit committee.
We were appointed as auditor by the shareholders on
10 February 2014. The period of total uninterrupted
engagement is for the 5 financial years ended 29 March
2018. Prior to that we were also auditor to the group’s
previous parent company, but which, being unlisted,
was not a public-interest entity. We have fulfilled our ethical
responsibilities under, and we remain independent of the
Group in accordance with, UK ethical requirements including
the FRC Ethical Standard as applied to listed public interest
entities. No non-audit services prohibited by that standard
were provided.
£3.75m (2017:£3.75m)
4.4% (2017: 3.9%) of normalised
Group profit before tax
99% (2017: 99%) of Group profit before tax
Recurring risk:
Carrying value of Group
goodwill and parent Company’s
investments in subsidiaries
New: Provision for operating
loans to joint venture practices
Recurring risk:
Carrying value of inventory
vs 2017
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^
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2. Key audit matters: our assessment of risks
of material misstatement
Key audit matters are those matters that, in our professional
judgment, were of most significance in the audit of the
financial statements and include the most significant assessed
risks of material misstatement (whether or not due to fraud)
identified by us, including those which had the greatest effect
on: the overall audit strategy; the allocation of resources in
the audit; and directing the efforts of the engagement team.
We summarise below the key audit matters, in decreasing
order of audit significance, in arriving at our audit opinion
above, together with our key audit procedures to address
those matters and, as required for public interest entities, our
results from those procedures. These matters were addressed,
and our results are based on procedures undertaken, in the
context of, and solely for the purpose of, our audit of the
financial statements as a whole, and in forming our opinion
thereon, and consequently are incidental to that opinion,
and we do not provide a separate opinion on these matters.
103
Pets at Home Group PlcAnnual Report and Accounts 2018 Financial statements Independent Auditor’s Report
to the Members of Pets at Home Group Plc only continued
The risk
Forecast based valuation
Goodwill in the Group and parent’s investments in
subsidiaries are significant and have indicators of
impairment due to the decrease in market
capitalisation during the year.
The estimated recoverable amount of these
balances is subjective due to the inherent
uncertainty involved in forecasting and discounting
future cash flows, which form the basis of the
Group’s value in use calculation.
Subjective estimate
The level of operating loans extended to the Group’s
joint venture vet practices has increased during the
year, partly as a result of new openings but also as a
result of increased loan amounts to existing practices.
A significant proportion of these loans are not forecast
to be recouped for a number of years which results in a
risk over recoverability of the balances.
The level of provision regarding the operating loans
involves judgement over a number of assumptions
around the allocation of practices to risk bands upon
which the provision is based and appropriate level of
provision within each risk band. There is a risk that
the assumptions and judgements underpinning the
provision are not appropriate, and as a result risk
that the provision is materially under or over stated.
Accounting treatment
At some practices the increased financial reliance on,
for example, indebtedness to the Group might, in
practice, alter the otherwise balanced power of the
Group and the joint venture partner vets. A practical
shift of balance in favour of the Group would make
the practice in question a subsidiary and hence
require consolidation.
Subjective estimate
The Group has significant levels of inventory and
estimates are made in the valuation of slow moving
and obsolete inventories, some of which have a limited
shelf life. Furthermore there is uncertainty over
changes in consumer preferences and spending
patterns, which are primarily driven by wider trends in
the pet product industry as well as seasonality, which
could impact the saleability of inventory.
There is a recoverability risk associated with new
product launches and judgement required in
forecasting demand which can lead to obsolete
inventory.
Given the level of judgement and estimation
involved, carrying value of inventory is considered
to be a key audit risk.
Our response
Our procedures included:
• Historical comparison: Assessing the reasonableness of the Group’s
budgets by considering the historical accuracy of previous forecasts;
• Benchmarking assumptions: Using our own valuation specialist,
comparing the Group’s assumptions to externally derived data in
relation to discount rate;
• Our sector experience: Assessing whether key assumptions
such as projected economic growth and cost inflation reflect our
knowledge of the business and industry, including known or
probable changes in the business environment;
• Sensitivity analysis: Performing break-even analysis on the key
assumptions above;
• Assessing transparency: Assessing whether the Group’s disclosures
about the impairment test appropriately reflected the risks inherent
in the valuation of goodwill and investments in subsidiaries.
Our results
• We found the Group’s assessment of the carrying value of
goodwill and the Company’s investments in subsidiaries
to be acceptable. (2017: acceptable).
Our procedures included:
• Control design: Evaluating the controls in place over the
provision evaluation and calculation;
• Benchmarking assumptions: Challenging key assumptions used,
in particular the basis of the categories practices are allocated to,
the proportion of loan value recoverable, recovery probability, and
change in maturity profile based on our knowledge of the business;
• Sensitivity analysis: Performing sensitivity analysis on the key
assumptions above;
• Accounting analysis: We assessed, with reference to accounting
standards, evidence of the exercise of the powers of the Group
and the vets in practice at certain indebted practices to consider
whether, on balance, the level of indebtedness was a barrier to
the vets exercising their formal powers.
Our results
• We found the Group’s assessment of the level of loss provision
and the carrying value of the operating loans to be acceptable.
• We found the accounting treatment for the practices to be
acceptable.
Our procedures included:
• Our sector experience: Assessing the appropriateness of
the Group’s inventory provisioning policies based on our
understanding of the business, the industry and the accuracy
of previous provisioning estimates;
• Tests of detail: Comparing the cost of inventory lines and average
sales price in the six weeks to 29 March 2018 to highlight negative
margin lines and assess whether the Group’s provision at the
year-end date in relation to low and negative margin inventories
includes these lines, and is therefore appropriate;
• Tests of detail: Examining current selling prices for a sample
of inventory lines to assess negative margin lines have been
appropriately identified and included in the Group’s provision
at the year end; and
• Tests of detail: Comparing, by product, for a sample of inventory
lines, inventory levels to sales data in the twelve weeks to
29 March 2018 to assess whether slow moving and obsolete
inventories had been appropriately identified and provided for
by the Group based on the provisioning policy.
Our results
• We found the Group’s assessment of the carrying value
of inventory to be acceptable (2017: acceptable).
Carrying value
of the Group
goodwill and the
parent Company’s
investments in
subsidiaries
Goodwill: £979.8m;
2017: £979.8m
Investments:
£936.2m; 2017:
£936.2m
Refer to page 74
(Audit Committee
Report), page 118
(accounting policy)
and pages 132 to
134 (financial
disclosures).
Operating loans
to joint venture
practices
£38.0m; 2017:
£23.2m
Refer to page 74
(Audit Committee
Report), page 120
(accounting policy)
and page 134
(financial
disclosures).
Carrying value
of inventory
£60.9m; 2017:
£56.4m
Refer to page 74
(Audit Committee
Report), page 125
(accounting policy)
and page 157
(financial
disclosures).
104
Pets at Home Group PlcAnnual Report and Accounts 2018 3. Our application of materiality and an overview
of the scope of our audit
Materiality for the Group financial statements as a whole was
set at £3.75m (2017: £3.75m), determined with reference to a
benchmark of Group profit before tax normalised for items
relating to store closures, aborted acquisitions and an increase
in the fair value of put and call options over non-controlling
interests of three subsidiaries, of which it represents 4.4% (2017:
Group profit before tax normalised for costs incurred in relation
to the disposal of a subsidiary; of which it represented 3.9%).
Materiality for the parent Company financial statements
as a whole was set at £3.0m (2017: £3.0m), determined with
reference to a benchmark of Company total assets, of which
it represents 0.2% (2017: 0.2%).
We report to the Audit Committee any corrected or
uncorrected identified misstatements exceeding £180,000
(2017: £180,000), in addition to other identified misstatements
that warranted reporting on qualitative grounds.
The work on 1 of the 9 components (2017: 2 of the
9 components) was performed by component auditors
and the rest, including the audit of the parent Company,
was performed by the Group team. The Group team
performed procedures on the items excluded from group
profit before tax.
Of the Group’s 9 (2017: 9) reporting components, we subjected
3 (2017: 3) to full scope audits for Group purposes and 0 (2017:
1) to specified risk-focused audit procedures. In the prior year,
the latter was not individually financially significant enough to
require a full scope audit for Group purposes, but did present
specific individual risks that needed to be addressed in the
prior year.
The components within the scope of our work accounted for
the percentages illustrated opposite.
The Group team instructed the component auditors as to the
significant areas to be covered, which included the relevant
risks of material misstatement detailed above, and set out the
information required to be reported back to the Group audit
team. The Group audit team approved the component
materiality range of £2.5m to £3.0m (2017: £2.5m to £3.0m),
having regard to the mix of size and risk profile of the
businesses within the Group.
Telephone conferences and meetings were held with
component auditors that were not physically visited in order
to assess the audit risk and strategy. At these meetings, the
findings reported to the Group team were discussed in more
detail, and any further work required by the Group team was
then performed by the component auditor.
Normalised Group profit before tax
£84.5m (2017: £96.4m)
Normalised Group profit before tax
Group materiality
Group Materiality
£3.75m (2017: £3.75m)
£3.75m
Whole financial
statements materiality
(2017: £3.75m)
£3.0m
Range of materiality
at three components
(£2.5m to £3.0m)
(2017: £2.5m to £3.0m)
£180k
Misstatements reported
to the Audit and Risk
Committee (2017: £180k)
Group revenue
Group profit before tax
3
96%
(2017: 99%)
96
96
99%
(2017: 99%)
99
99
Group total assets
Group profit tax, excluding
non-underlying items
1
99%
(2017: 98%)
98
99
99%
(2017: 99%)
99
99
Full scope for Group audit purposes 2018
Full scope for Group audit purposes 2017
Specified risk-focused audit procedures 2017
Residual components
105
Pets at Home Group PlcAnnual Report and Accounts 2018 Financial statements Independent Auditor’s Report
to the Members of Pets at Home Group Plc only continued
4. We have nothing to report on going concern
We are required to report to you if:
• we have anything material to add or draw attention to in
relation to the directors’ statement in note 1 to the financial
statements on the use of the going concern basis of
accounting with no material uncertainties that may cast
significant doubt over the Group and Company’s use of that
basis for a period of at least twelve months from the date of
approval of the financial statements; or
• the related statement under the Listing Rules set out on page
63 is materially inconsistent with our audit knowledge.
We have nothing to report in these respects.
• the Principal Risks disclosures describing these risks and
explaining how they are being managed and mitigated; and
• the directors’ explanation in the viability statement of how
they have assessed the prospects of the Group, over what
period they have done so and why they considered that
period to be appropriate, and their statement as to whether
they have a reasonable expectation that the Group will be
able to continue in operation and meet its liabilities as they
fall due over the period of their assessment, including any
related disclosures drawing attention to any necessary
qualifications or assumptions.
Under the Listing Rules we are required to review the viability
statement. We have nothing to report in this respect.
5. We have nothing to report on the other
information in the Annual Report
Corporate governance disclosures
We are required to report to you if:
The directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does not
cover the other information and, accordingly, we do not
express an audit opinion or, except as explicitly stated below,
any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether, based on our financial statements
audit work, the information therein is materially misstated or
inconsistent with the financial statements or our audit
knowledge. Based solely on that work we have not identified
material misstatements in the other information.
Strategic Report and Directors’ Report
Based solely on our work on the other information:
• we have not identified material misstatements in the
strategic report and the directors’ report;
• in our opinion the information given in those reports for the
financial year is consistent with the financial statements; and
• in our opinion those reports have been prepared in
accordance with the Companies Act 2006.
Directors’ remuneration report
In our opinion the part of the Directors’ Remuneration Report
to be audited has been properly prepared in accordance with
the Companies Act 2006.
Disclosures of principal risks and longer term viability
Based on the knowledge we acquired during our financial
statements audit, we have nothing material to add or draw
attention to in relation to:
• the directors’ confirmation within the viability statement on
page 67 that they have carried out a robust assessment of
the principal risks facing the Group, including those that
would threaten its business model, future performance,
solvency and liquidity;
• we have identified material inconsistencies between the
knowledge we acquired during our financial statements
audit and the directors’ statement that they consider that
the annual report and financial statements taken as a whole
is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Group’s
position and performance, business model and strategy; or
• the section of the annual report describing the work of the
Audit Committee does not appropriately address matters
communicated by us to the Audit Committee.
We are required to report to you if the Corporate Governance
Statement does not properly disclose a departure from the
eleven provisions of the UK Corporate Governance Code
specified by the Listing Rules for our review.
We have nothing to report in these respects.
6. We have nothing to report on the other matters
on which we are required to report by exception
Under the Companies Act 2006, we are required to report to
you if, in our opinion:
• adequate accounting records have not been kept by the
parent Company, or returns adequate for our audit have not
been received from branches not visited by us; or
• the parent Company financial statements and the part of the
Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by
law are not made; or
• we have not received all the information and explanations
we require for our audit.
We have nothing to report in these respects.
106
Pets at Home Group PlcAnnual Report and Accounts 2018 We communicated identified laws and regulations
throughout our team and remained alert to any indications
of non-compliance throughout the audit. This included
communication from the group to component audit teams of
relevant laws and regulations identified at group level, with a
request to report on any indications of non- compliance with
relevant laws and regulations (irregularities) in these areas, or
other areas directly identified by the component team.
As with any audit, there remained a higher risk of non-
detection of non-compliance with relevant laws and
regulations (irregularities), as these may involve collusion,
forgery, intentional omissions, misrepresentations, or the
override of internal controls.
8. The purpose of our audit work and to whom
we owe our responsibilities
This report is made solely to the Company’s members,
as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so
that we might state to the Company’s members those matters
we are required to state to them in an auditor’s report and for
no other purpose. To the fullest extent permitted by law, we
do not accept or assume responsibility to anyone other than
the Company and the Company’s members, as a body, for our
audit work, for this report, or for the opinions we have formed.
Nicola Quayle (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
1 St Peter’s Square
Manchester
M2 3AE
22 May 2018
7. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 71,
the directors are responsible for: the preparation of the
financial statements including being satisfied that they give a
true and fair view; such internal control as they determine is
necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to fraud
or error; assessing the Group and parent Company’s ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern; and using the going concern basis
of accounting unless they either intend to liquidate the Group
or the parent Company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or other
irregularities (see below), or error, and to issue our opinion
in an auditor’s report. Reasonable assurance is a high level
of assurance, but does not guarantee that an audit conducted
in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from
fraud, other irregularities or error and are considered material
if, individually or in aggregate, they could reasonably be
expected to influence the economic decisions of users
taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.
Irregularities – ability to detect
We identified areas of laws and regulations that could
reasonably be expected to have a material effect on the
financial statements from our sector experience and through
discussion with the directors and other management (as
required by auditing standards).
We had regard to laws and regulations in areas that directly
affect the financial statements including financial reporting
(including related company legislation) and taxation
legislation. We considered the extent of compliance with
those laws and regulations as part of our procedures on the
related financial statement items.
In addition we considered the impact of laws and regulations
in the specific area of the national minimum wage legislation.
With the exception of any known or possible non-compliance,
and as required by auditing standards, our work in respect
of these was limited to enquiry of the directors and other
management and inspection of regulatory and legal
correspondence. We considered the effect of any known
or possible non-compliance in these areas as part of our
procedures on the related financial statements items.
107
Pets at Home Group PlcAnnual Report and Accounts 2018 Financial statements Consolidated income statement
Revenue
Cost of sales
Gross profit
Selling and distribution
expenses
Administrative expenses
Operating profit
Financial income
Financial expense
Net financing expense
Profit before tax
Taxation
Profit for the period
52 week period ended 29 March 2018
52 week period ended 30 March 2017
Note
2
Underlying
trading £000
898,924
(434,316)
464,608
Non-underlying
items (note 3)
£000
–
–
Total £000
898,924
(434,316)
Underlying
trading £000
834,169
(382,287)
Non-underlying
items (note 3)
£000
–
–
Total £000
834,169
(382,287)
–
464,608
451,882
–
451,882
3
2,3
6
7
8
(309,482)
(66,323)
88,803
685
(4,963)
(4,278)
84,525
(16,983)
67,542
–
(4,929)
(4,929)
–
–
–
(4,929)
201
(4,728)
(309,482)
(71,252)
83,874
685
(4,963)
(4,278)
79,596
(16,782)
62,814
(296,012)
(54,950)
100,920
760
(5,300)
(4,540)
96,380
(20,061)
76,319
–
(996)
(996)
–
–
–
(996)
41
(955)
(296,012)
(55,946)
99,924
760
(5,300)
(4,540)
95,384
(20,020)
75,364
All activities relate to continuing operations.
Basic and diluted earnings per share attributable to equity shareholders of the Company:
Equity holders of the parent – basic
Equity holders of the parent– diluted
Dividends paid and proposed are disclosed in note 9.
The notes on pages 115 to 168 form an integral part of these financial statements.
Consolidated statement of comprehensive income
Profit for the period
Other comprehensive income
Items that are or may be recycled subsequently into profit or loss:
Foreign exchange translation differences
Cash flow hedges – reclassified to profit and loss
Effective portion of changes in fair value of cash flow hedges
Other comprehensive income for the period, before income tax
Income tax on other comprehensive income
Other comprehensive income for the period, net of income tax
Total comprehensive income for the period
The notes on pages 115 to 168 form an integral part of these financial statements.
52 week period
ended
29 March 2018
52 week period
ended
30 March 2017
12.6p
12.5p
15.1p
15.0p
Note
5
5
52 week period
ended
29 March 2018
£000
52 week period
ended
30 March 2017
£000
Note
62,814
75,364
20
20
20
13,20
71
(473)
(1,695)
(2,097)
412
(1,685)
61,129
(26)
(330)
1,862
1,506
(297)
1,209
76,573
108
Pets at Home Group PlcAnnual Report and Accounts 2018 Consolidated balance sheet
Non-current assets
Property, plant and equipment
Intangible assets
Other non-current assets
Current assets
Inventories
Other financial assets
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Corporation tax
Provisions
Other financial liabilities
Non-current liabilities
Other interest-bearing loans and borrowings
Other payables
Provisions
Other financial liabilities
Deferred tax liabilities
Total liabilities
Net assets
Equity attributable to equity holders of the parent
Ordinary share capital
Consolidation reserve
Merger reserve
Translation reserve
Cash flow hedging reserve
Retained earnings
Total equity
On behalf of the Board:
Mike Iddon
Group Chief Financial Officer
Company number: 08885072
The notes on pages 115 to 168 form an integral part of these financial statements.
At 29 March
2018
£000
At 31 March
2017
£000
Note
10
11
14
12
14
15
16
18
19
14
17
18
19
14
13
20
129,904
992,929
20,182
128,835
990,266
16,990
1,143,015
1,136,091
60,529
1,160
74,848
59,824
56,420
1,863
69,567
56,345
196,361
184,195
1,339,376
1,320,286
(173,856)
(8,881)
(835)
(3,392)
(186,964)
(194,519)
(36,200)
(2,200)
(8,693)
(4,448)
(246,060)
(433,024)
906,352
5,000
(372,026)
113,321
40
(950)
1,160,967
906,352
(165,887)
(10,609)
(492)
(1,509)
(178,497)
(209,296)
(35,028)
(1,394)
(8,023)
(5,404)
(259,145)
(437,642)
882,644
5,000
(372,026)
113,321
(31)
806
1,135,574
882,644
109
Pets at Home Group PlcAnnual Report and Accounts 2018 Financial statements
Consolidated statement of changes in equity
as at 29 March 2018
Balance at 30 March 2017
Total comprehensive income for the period
Profit for the period
Other comprehensive income (note 20)
Total comprehensive income for the period
Transactions with owners, recorded directly
in equity
Equity dividends paid
Share based payment charge
Purchase of own shares
Total contributions by and distributions to owners
Share
capital
£000
Consolidation
reserve
£000
Merger
reserve
£000
Cash flow
hedging
reserve
£000
Translation
reserve
£000
Retained
earnings
£000
Total
equity
£000
5,000
(372,026)
113,321
806
(31)
1,135,574
882,644
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,756)
(1,756)
–
–
–
–
71
71
–
–
–
62,814
–
62,814
62,814
(1,685)
61,129
(37,341)
3,936
(4,016)
(37,341)
3,936
(4,016)
(37,421)
(37,421)
Balance at 29 March 2018
5,000
(372,026)
113,321
(950)
40
1,160,967
906,352
Consolidated statement of changes in equity
as at 30 March 2017
Balance at 31 March 2016
Total comprehensive income for the period
Profit for the period
Other comprehensive income (note 20)
Total comprehensive income for the period
Transactions with owners, recorded directly in
equity
Equity dividends paid
Share based payment charge
Total contributions by and distributions to owners
Share
capital
£000
Consolidation
reserve
£000
Merger
reserve
£000
Cash flow
hedging
reserve
£000
Translation
reserve
£000
Retained
earnings
£000
Total
equity
£000
5,000
(372,026)
113,321
(429)
(5)
1,097,623
843,484
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,235
1,235
–
–
–
–
(26)
(26)
–
–
–
75,364
–
75,364
75,364
1,209
76,573
(39,850)
2,437
(39,850)
2,437
(37,413)
(37,413)
Balance at 30 March 2017
5,000
(372,026)
113,321
806
(31)
1,135,574
882,644
110
Pets at Home Group PlcAnnual Report and Accounts 2018 Consolidated statement of cash flows
Cash flows from operating activities
Profit for the period
Adjustments for:
Depreciation and amortisation
Financial income
Financial expense
Loss on disposal of subsidiary
Loss/(profit) on disposal of property, plant and equipment
Share based payment charges
Taxation
Increase in trade and other receivables
Increase in inventories
Increase in trade and other payables
Increase in provisions
Tax paid
Net cash flow from operating activities
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Disposal of subsidiary, net of cash disposed
Interest received
Investment in other financial assets
Loans issued
Loans repaid
Acquisition of subsidiary, net of cash acquired
Acquisition of property, plant and equipment and other intangible assets
Net cash used in investing activities
Cash flows from financing activities
Equity dividends paid
Proceeds from new loan
Repayment of borrowings
Purchase of own shares
Finance lease obligations
Interest paid
Net cash used in financing activities
Net Increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
The notes on pages 115 to 168 form an integral part of these financial statements.
52 week period
ended
29 March 2018
£000
52 week period
ended
30 March 2017
£000
62,814
75,364
34,483
(685)
4,963
–
1,628
3,936
16,782
123,921
(5,976)
(4,109)
11,794
1,149
126,779
(19,054)
107,725
814
–
685
(2,146)
(872)
–
–
(41,613)
(43,132)
(37,341)
–
(15,000)
(4,016)
(181)
(4,576)
(61,114)
3,479
56,345
59,824
29,621
(760)
5,300
690
(176)
2,437
20,020
132,496
(8,863)
(4,979)
11,469
63
130,186
(19,299)
110,887
1,830
677
722
(3,420)
(2,247)
500
(14,831)
(40,896)
(57,665)
(39,850)
8,000
–
–
(109)
(4,916)
(36,875)
16,347
39,998
56,345
111
Pets at Home Group PlcAnnual Report and Accounts 2018 Financial statements At 29 March
2018
£000
At 30 March
2017
£000
Note
27
14
14
15
16
13
18
14
17
13
20
936,179
–
936,179
926
576,795
1,717
–
579,438
936,179
521
936,700
–
576,795
1
112
576,908
1,515,617
1,513,608
(269,011)
–
(207,887)
(1,112)
(269,011)
(208,999)
(194,519)
(176)
(209,296)
–
(463,706)
(418,295)
1,051,911
1,095,313
5,000
113,321
750
932,840
5,000
113,321
(479)
977,471
1,051,911
1,095,313
Company balance sheet
Non-current assets
Investments in subsidiaries
Other non-current
Current assets
Other financial assets
Trade and other receivables
Cash and cash equivalents
Deferred tax asset
Total assets
Current liabilities
Trade and other payables
Other financial liabilities
Non-current liabilities
Other interest-bearing loans and borrowings
Deferred tax liability
Total liabilities
Net assets
Equity attributable to equity holders of the parent
Ordinary share capital
Merger reserve
Cash flow hedging reserve
Retained earnings
Total equity
On behalf of the Board:
Mike Iddon
Group Chief Financial Officer
112
Pets at Home Group PlcAnnual Report and Accounts 2018 Company statement of changes in equity
as at 29 March 2018
Balance at 30 March 2017
Total comprehensive income for the period
Loss for the period
Other comprehensive income
Total comprehensive income for the period
Transactions with owners, recorded directly in equity
Equity dividends paid
Share based payment charge
Share based payments
Total contributions by and distributions to owners
Share
capital
£000
5,000
Merger
reserve
£000
113,321
Cash flow
hedging
reserve
£000
Retained
earnings
£000
Total
equity
£000
(479)
977,471
1,095,313
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,229
1,229
–
–
–
–
(3,988)
–
(3,988)
(37,341)
714
(4,016)
(40,643)
(3,988)
1,229
(2,759)
(37,341)
714
(4,016)
(40,643)
Balance at 29 March 2018
5,000
113,321
750
932,840
1,051,911
Company statement of changes in equity
as at 30 March 2017
Balance at 31 March 2016
Total comprehensive income for the period
Loss for the period
Other comprehensive income
Total comprehensive income for the period
Transactions with owners, recorded directly in equity
Equity dividends paid
Share based payment transactions
Share
capital
£000
5,000
Merger
reserve
£000
113,321
Cash flow
hedging
reserve
£000
Retained
earnings
£000
Total
equity
£000
(1,368)
1,021,524
1,138,477
–
–
–
–
–
–
–
–
–
–
–
889
889
–
–
(6,640)
–
(6,640)
(6,640)
889
(5,751)
(39,850)
2,437
(39,850)
2,437
Balance at 30 March 2017
5,000
113,321
(479)
977,471
1,095,313
Company income statement
As permitted by section 408 of the Companies Act 2006, the Company’s income statement has not been included in these
financial statements. The Company’s loss for the 52 week period ended 29 March 2018 was £4.0m (loss for the 52 week period
ended 30 March 2017 was £6.6m).
113
Pets at Home Group PlcAnnual Report and Accounts 2018 Financial statements 52 week period
ended
29 March 2018
£000
52 week period
ended
30 March 2017
£000
(3,988)
4,773
714
1,499
–
61,279
62,778
(37,341)
–
(15,000)
(4,705)
(4,016)
(61,062)
1,716
1
1,717
(6,640)
5,113
2,437
910
3,699
32,354
36,963
(39,850)
8,000
–
(5,113)
–
(36,963)
–
1
1
Company statement of cash flows
Cash flows from operating activities
Loss for the period
Financial expense
Share based payment charges
Decrease in trade and other receivables
Increase in trade and other payables
Net cash flow from operating activities
Cash flows from financing activities
Equity dividends paid
Proceeds from new loan
Repayment of borrowings
Interest paid
Issue costs
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
114
Pets at Home Group PlcAnnual Report and Accounts 2018 Notes (forming part of the financial statements)
Pets at Home Group Plc (the Company) is a company incorporated in the United Kingdom and its registered office is Epsom
Avenue, Stanley Green, Handforth, Cheshire, SK9 3RN.
1 Significant accounting policies
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these
consolidated financial statements.
1.1 Basis of preparation
The consolidated financial statements presented in this document have been prepared in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European Union. The Company’s financial statements have been
prepared in accordance with IFRS as adopted by the European Union and as applied in accordance with the provisions of the
Companies Act 2006. The Company has taken advantage of the exemption provided under section 408 of the Companies Act
2006 not to publish its individual income statement and related notes.
The financial statements are prepared under the historical cost convention, as modified by the revaluation of derivative financial
instruments to fair value, and in accordance with those parts of the Companies Act 2006 applicable to companies reporting
under IFRS as adopted by the European Union. New standards and interpretations issued by the International Accounting
Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) becoming effective during
the year have not had a material impact on the Group’s financial statements.
1.2 Measurement convention
The consolidated financial statements are prepared on the historical cost basis except that the following assets and liabilities
are stated at their fair value: derivative financial instruments, financial instruments classified as fair value through the profit or
loss or as available-for-sale. Non-current assets held for sale are stated at the lower of previous carrying amount and fair value
less costs to sell.
1.3 Going concern
The Company’s business activities, together with the factors likely to affect its future development, performance and position,
are set out in the Strategic Report. The financial position of the Company, its cash flows, liquidity position and borrowing
facilities are described in the Chief Financial Officer’s Review. In addition, note 21 to the financial statements includes the
Company’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of
its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk.
The Company has considerable financial resources and financing facilities and prepares detailed business plans that model
headroom on financial covenants for the next three years.
The Directors believe the Company is well placed to manage its business risks successfully and therefore have a reasonable
expectation that the Company has adequate resources to continue in operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in preparing the consolidated financial statements.
115
Pets at Home Group PlcAnnual Report and Accounts 2018 Financial statements 1 Significant accounting policies (continued)
1.4 Basis of consolidation
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. In
assessing control, the Group takes into consideration potential voting rights that are currently exercisable. The acquisition
date is the date on which control is transferred to the acquirer. The financial statements of subsidiaries are included in the
consolidated financial statements from the date that control commences until the date that control ceases. Losses applicable
to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-
controlling interests to have a deficit balance.
The Group operates an Employee Benefit Trust (EBT) for the purposes of acquiring shares to fund share awards made to
employees. The EBT is deemed to be a subsidiary of the Group as Pets at Home Group Plc is considered to be the ultimate
controlling party for accounting purposes. The assets and liabilities of these trusts have been included in the consolidated
financial information. The cost of purchasing own shares held by the EBT are accounted for in retained earnings.
Investment in Joint Venture veterinary practices
The Group has a number of non-participatory shareholdings in veterinary practice companies, which are accounted for as Joint
Venture arrangements. The veterinary practices were established under terms that require mutual agreement between the
Group and the Joint Venture partner, and that do not give the Group power over decision making to affect its exposure to, or the
extent of, the returns from its involvement with the practices and therefore are not consolidated in these financial statements.
Further, the Group is not entitled to profits, losses, or any surplus on winding up or disposal of the veterinary practices, and as
such no participatory interest is recognised.
The investments have been equity accounted for in the Group’s financial statements in accordance with IAS 28.10. As the
Group’s shares are non-participatory, and therefore the Group does not share in any profits, losses or other distribution of
value from the Joint Venture company, the investments are held at cost, subject to impairment.
The Group’s category of shareholding in the veterinary practices entitle the Group to charge management fees for support
services provided. For further details see notes 14, 15 and 26.
1.5 Foreign currency
Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the foreign
exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the
balance sheet date are retranslated to the functional currency at the foreign exchange rate ruling at that date. Foreign exchange
differences arising on translation are recognised in the income statement, except for differences arising on the retranslation of
a financial liability designated as a hedge of the net investment in a foreign operation that is effective, or qualifying cash flow
hedges, which are recognised directly in other comprehensive income. Non-monetary assets and liabilities that are measured
in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-
monetary assets and liabilities denominated in foreign currencies that are stated at fair value are retranslated to the functional
currency at foreign exchange rates ruling at the dates the fair value was determined.
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are
translated to the Group’s presentational currency, sterling, at foreign exchange rates ruling at the balance sheet date. The
revenues and expenses of foreign operations are translated at an average rate for the period where this rate approximates to
the foreign exchange rates ruling at the dates of the transactions. Exchange differences arising from this translation of foreign
operations are reported as an item of other comprehensive income and accumulated in the translation reserve or non-
controlling interest, as the case may be.
Functional currency
The consolidated financial statements are presented in sterling, which is the Company’s functional currency, and have been
rounded to the nearest thousand.
116
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2018 1.6 Classification of financial instruments issued by the Group
Following the adoption of IAS 32, financial instruments issued by the Group are treated as equity only to the extent that they
meet the following two conditions:
(a) they include no contractual obligations upon the Company (or Group as the case may be) to deliver cash or other financial
assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially
unfavourable to the Company (or Group); and
(b) where the instrument will or may be settled in the Company’s own equity instruments, it is either a non-derivative that
includes no obligation to deliver a variable number of the Company’s own equity instruments or is a derivative that will
be settled by the Company’s exchanging a fixed amount of cash or other financial assets for a fixed number of its own
equity instruments.
To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument
so classified takes the legal form of the Company’s own shares, the amounts presented in these financial statements for called
up share capital exclude amounts in relation to those shares.
1.7 Non-derivative financial instruments
Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and
cash equivalents, loans and borrowings, and trade and other payables.
Trade and other receivables
Trade and other receivables are recognised initially at fair value. Subsequent to initial recognition they are measured at
amortised cost using the effective interest method, less any impairment losses.
Trade and other payables
Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised
cost using the effective interest method.
Investments in debt and equity securities
Other investments in debt and equity securities held by the Group are classified as being available-for-sale and are stated at fair
value, with any resultant gain or loss being recognised directly in equity (in the fair value reserve), except for impairment losses
and, in the case of monetary items such as debt securities, foreign exchange gains and losses. When these investments are
derecognised, the cumulative gain or loss previously recognised directly in equity is recognised in profit or loss. Where these
investments are interest-bearing, interest calculated using the effective interest method is recognised in profit or loss.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form
an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose
only of the cash flow statement.
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value, net of attributable transaction costs. Subsequent to
initial recognition, interest-bearing borrowings are stated at amortised cost using the effective interest method, less any
impairment losses.
Contingent consideration
Contingent consideration on acquisition of a subsidiary is valued at fair value at the time of acquisition. Any subsequent change
in fair value is recognised in profit or loss (see 1.12).
117
Pets at Home Group PlcAnnual Report and Accounts 2018 Financial statements 1 Significant accounting policies (continued)
1.8 Derivative financial instruments and hedging
Derivative financial instruments
Derivative financial instruments are recognised at fair value. The gain or loss on re-measurement to fair value is recognised
immediately in profit or loss. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or
loss depends on the nature of the item being hedged (see below).
Cash flow hedges
Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability,
or a highly probable forecast transaction, the effective part of any gain or loss on the derivative financial instrument is
recognised directly in the hedging reserve. Any ineffective portion of the hedge is recognised immediately in the income
statement.
If a hedge of a forecast transaction subsequently results in the recognition of a financial asset or a financial liability, the
associated gains and losses that were recognised directly in equity are reclassified into profit or loss in the same period or
periods during which the asset acquired or liability assumed affects profit or loss, i.e. when interest income or expense is
recognised.
For cash flow hedges, other than those covered by the preceding two policy statements, the associated cumulative gain or
loss is removed from equity and recognised in the income statement in the same period or periods during which the hedged
forecast transaction affects profit or loss.
When a hedging instrument expires or is sold, terminated or exercised, or the entity revokes designation of the hedge
relationship but the hedged forecast transaction is still expected to occur, the cumulative gain or loss at that point remains
in equity and is recognised in accordance with the above policy when the transaction occurs. If the hedged transaction is
no longer expected to take place, the cumulative unrealised gain or loss recognised in equity is recognised in the income
statement immediately.
Intra-group financial instruments
1.9
Financial guarantee contracts to guarantee the indebtedness of companies within the Group are considered to be insurance
arrangements and accounted for as such. In this respect, the Group treats the guarantee contract as a contingent liability until
such time as it becomes probable that a payment will be required under the guarantee.
1.10 Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.
Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items
of property, plant and equipment.
Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each part of an item
of property, plant and equipment. Land is not depreciated. The estimated useful lives are as follows:
Freehold property
Fixtures, fittings, tools and equipment
Leasehold improvements
– 50 years
– 3-10 years
– the term of the lease
Depreciation methods, useful lives and residual values are reviewed at each balance sheet date.
1.11 Intangible assets
Intangible assets acquired in a business combination
Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their
fair value at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated
amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
Customer lists are amortised on a straight-line basis over ten years.
Software
Software is stated at cost less accumulated amortisation.
Amortisation is charged to the income statement on a straight-line basis between two and seven years.
118
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2018
1.12 Investments held at cost
The Company’s investments in subsidiaries are held at cost, less impairment. The carrying amounts are reviewed at each
reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s
recoverable amount is estimated. The recoverable amount is the greater of its value in use and its fair value less costs to sell.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and the risks specific to the asset.
1.13 Business combinations
Business combinations are accounted for by applying the acquisition method as at the acquisition date, which is the date on
which control is transferred to the Group.
Acquisitions on or after 26 March 2010
For acquisitions on or after 26 March 2010, the Group measures goodwill at the acquisition date as:
• the fair value of the consideration transferred; plus
• the recognised amount of any non-controlling interests in the acquiree; plus
• the fair value of the existing equity interest in the acquiree; less
• the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.
When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.
Costs related to the acquisition, other than those associated with the issue of debt or equity securities, are expensed as incurred.
Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is
classified as equity, it is not re-measured and settlement is accounted for within equity. Otherwise, subsequent changes to
the fair value of the contingent consideration are recognised in profit or loss. If contingent consideration is payable and is
dependent on future employment, it is recognised as an expense over the relevant period as a cost of continuing employment.
A combined put and call option over non-controlling interests is recognised at fair value at the acquisition date and included
within the valuation of goodwill. Subsequent changes to fair value are recognised in profit or loss.
Where a combined written put and call option exists over a non-controlling interest, and the conditions of the agreement
provide the Group with present access to the benefits of the ownership of the non-controlling interest, then the acquisition is
deemed to reflect 100% ownership and no non-controlling interest is recognised. A liability is recorded for the expected future
acquisition of the non-controlling interest, and is recognised as part of the fair value of the consideration.
Where the written put and call option has an embedded valuation mechanism to reward and retain key individuals employed
by the acquired business, who are also non-controlling shareholders, then the expected increase in the financial liability is
charged to the income statement as employment costs evenly over the option period within Non-underlying items.
On a transaction-by-transaction basis, the Group elects to measure non-controlling interests, which have both present
ownership interests and are entitled to a proportionate share of net assets of the acquiree in the event of liquidation, either
at their fair value or at their proportionate interest in the recognised amount of the identifiable net assets of the acquiree at
the acquisition date. All other non-controlling interests are measured at their fair value at the acquisition date.
Acquisitions prior to 26 March 2010 (date of adoption of IFRS)
IFRS 1 grants certain exemptions from the full requirements of Adopted IFRS for first time adopters. In respect of acquisitions
prior to 26 March 2010, goodwill is included on the basis of its deemed cost.
119
Pets at Home Group PlcAnnual Report and Accounts 2018 Financial statements 1 Significant accounting policies (continued)
1.14 Acquisitions and disposals of non-controlling interests
Acquisitions and disposals of non-controlling interests that do not result in a change of control are accounted for as
transactions with owners in their capacity as owners and therefore no goodwill is recognised as a result of such transactions.
The adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. Any
difference between the price paid or received and the amount by which non-controlling interests are adjusted is recognised
directly in equity and attributed to the owners of the parent.
1.15 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is based on the weighted average cost principle and
includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs in bringing them
to their existing location and condition, less rebates and discounts.
Provision is made against specific inventory lines where market conditions identify an issue in recovering the full cost of that
SKU (Stock Keeping Unit). The provision focuses on the age of inventory and applies a progressive provision against the gross
inventory as the line continues to age. Where necessary further specific provision is made against inventory lines, when the
ageing of provision is not deemed sufficient to carry the inventory at net realisable value.
To the extent that the ageing profile of gross inventory as calculated by this provision methodology results in a material
provision, it will be disclosed as an estimate that may have an impact on subsequent periods. To the extent this is material,
it will be disclosed in note 1.23.
1.16 Impairment excluding inventories, and deferred tax assets
Financial assets (including receivables)
A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is
objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred
after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that
asset that can be estimated reliably.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its
carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest
rate. Interest on the impaired asset continues to be recognised through the unwinding of the discount. When a subsequent
event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.
Non-financial assets
The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each
reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s
recoverable amount is estimated. For goodwill, and intangible assets that have indefinite useful lives or that are not yet available
for use, the recoverable amount is estimated each period at the same time.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of
impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that
generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of
assets (the cash-generating unit). The goodwill acquired in a business combination, for the purpose of impairment testing,
is allocated to cash-generating units (CGUs). Subject to an operating segment ceiling test, for the purposes of goodwill
impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment is
tested reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business
combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination.
120
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2018 An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount.
Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce
the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the
unit (group of units) on a pro-rata basis.
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior
periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment
loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is
reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been
determined, net of depreciation or amortisation, if no impairment loss had been recognised.
1.17 Employee benefits
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which the Company pays fixed contributions into a
separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined
contribution pension plans are recognised as an expense in the income statement in the periods during which services are
rendered by employees.
Short term benefits
Short term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is
provided. A liability is recognised for the amount expected to be paid under short term cash bonus or profit-sharing plans if
the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee
and the obligation can be estimated reliably.
Share based payments
A number of employees of the Company’s subsidiaries (including Directors) receive an element of remuneration in the form
of share based payments, whereby employees render services in exchange for shares or rights over shares.
Share based payments are measured at fair value at the date of grant. The fair value of transactions involving the granting of
shares is determined by the share price at the date of grant. The fair value of transactions involving the granting of share options
is calculated by an external valuer based on a binomial model. In valuing share based payments, no account is taken of any
performance conditions, other than conditions linked to the price of the shares of Pets at Home Group Plc (market conditions).
The cost of share based payments is recognised, together with a corresponding increase in equity, on a straight-line basis over
the vesting period based on the Company’s estimate of how many of the awards will eventually vest. No expense is recognised
for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are
treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance conditions
are satisfied.
Where the terms of a share based payment award are modified, as a minimum, an expense is recognised as if the terms had not
been modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of the
modification, as measured at the date of the modification.
Where a share based payment award is cancelled, it is treated as if it had vested on the date of cancellation and any expense not
yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and
designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a
modification to the original award, as described in the previous paragraph. The dilutive effect of outstanding options is reflected
as additional share dilution in the computation of diluted earnings per share.
Employee Benefit Trust
The assets and liabilities of the Employee Benefit Trust (EBT) have been included in the Group accounts. The assets of the EBT
are held separately from those of the Company. Neither the purchase nor sale of own shares leads to a gain or loss being
recognised in the Group consolidated statement of comprehensive income.
Investments in the Company’s own shares held by the EBT are presented as a deduction from reserves and the number of such
shares is deducted from the number of shares in issue when calculating the earnings per share. The trustees of the holdings of
Pets at Home Group Plc shares under the Pets at Home Group Employee Benefit Trusts have waived or otherwise foregone any
and all dividends paid.
121
Pets at Home Group PlcAnnual Report and Accounts 2018 Financial statements 1 Significant accounting policies (continued)
1.18 Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a
past event, that can be reliably measured and it is probable that an outflow of economic benefits will be required to settle the
obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects risks specific
to the liability.
1.19 Revenue and cost of sales
Revenue represents the total amount receivable for goods and services, net of discounts, brand match vouchers, coupons,
returns and excluding value added tax, sold in the ordinary course of business, and arises from activities in the United Kingdom.
Revenue is recognised when significant risks and rewards of ownership have been transferred to the buyer, there is reasonable
certainty over recovery of the consideration and the amount of revenue, associated costs and possible return of goods can be
estimated reliably. Revenue is recognised when transactions are completed in store or online.
Sale of goods in store and online
Retail revenue from the sale of goods is recorded net of value added tax, colleague discounts, coupons and vouchers. Sale of
goods represents food and accessories sold in store and online, with revenue recognised at the point of sale for store sales and
at point of despatch for online orders.
Gift vouchers and cards
Revenue from the sale of gift vouchers and cards is recognised at the time the voucher is redeemed.
VIP loyalty scheme
Under the VIP loyalty scheme, points are earned by customers upon the purchase of goods and services. These points can be
converted by nominated charities into gift cards for redemption against goods and services in store and online. The sales value
of the points earned under the VIP scheme are treated as deferred income; the sales are only recognised once the points have
been redeemed by the charities. The points have no value to the customer.
Subscription services
Revenue for subscription services is recognised at the point of despatch of each incremental order.
Provision of services
Revenue from the provision of services is recorded net of value added tax, colleague discounts, coupons and vouchers.
Provision of services represents veterinary group income, grooming revenue and insurance commissions, with revenue
recognised upon provision of the service.
i) Veterinary group income
Veterinary group income represents revenue from the provision of veterinary services and income from the provision of
veterinary administrative support services. Revenue received for the provision of veterinary services is recognised at the point
of provision of the service and is recognised net of value added tax, colleague discounts, coupons and vouchers. Fee income
received from the Joint Venture veterinary practice companies for administrative support services is recognised in the period
the services relate to and recorded net of value added tax. Rental income received from in-store Joint Venture veterinary
practices is netted off against the operating lease rental expenses on those stores.
ii) Grooming revenue
Grooming revenue is recognised net of value added tax, colleague discounts, coupons and vouchers, at the point of provision
of the service.
Cost of sales
Cost of sales includes costs of goods sold and other directly attributable costs, promotional income and rebate income received
from suppliers, including costs to deliver administrative support services to Joint Venture veterinary practices and costs to
deliver grooming services.
122
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2018 Non-underlying items
Income or costs are considered by the Directors to be non-underlying as they relate to either an event that is not expected to
re-occur in future periods, or the increase in the fair value of put/call liabilities which the Directors consider warrant separate
disclosure due to the nature of these arrangements.
Alternative Performance Measures
The Directors measure the performance of the Group based on a range of financial measures, including measures not
recognised by EU-adopted IFRS. These alternative performance measures may not be directly comparable with other
companies’ alternative performance measures and the Directors do not intend these to be a substitute for, or superior to,
IFRS measures. Further information can be found in the Glossary on pages 169 to 171.
Supplier income
A number of different types of supplier income are negotiated with suppliers via the joint business planning process, in
connection with the purchase of goods for resale, the largest of which being overrider income and promotional income
discussed below. The supplier income arrangements typically are not co-terminus with the Group’s financial period, instead
running alongside the calendar year. Such income is only recognised when there is reasonable certainty that the conditions
for recognition have been met by the Group, and the income can be measured reliably based on the terms of the contract.
This income is recognised as a credit within gross margin to cost of sales and, to the extent that the rebate relates to unsold
stock purchases, as a reduction in the cost of inventory.
Supplier income is recognised on an accruals basis, based on the expected entitlement that has been earned up to the balance
sheet date for each relevant supplier contract. The accrued incentives, rebates and discounts receivable at year end are included
within trade and other receivables.
Given the presence of the joint business plans, on the basis of the historic recoverability of accrued balances, and as amounts
are typically agreed with suppliers prior to recognition, supplier income is not considered to be an area of significant estimation
that could impact on the following financial year.
Supplier income comprises:
Overrider income
Overrider income comprises three main elements:
1. Fixed percentage based income: These relate largely to volumetric rebates based on the joint business plan agreements
with suppliers. The income accrued is based on the Group’s latest forecast volumes and the latest contract agreed with
the supplier. Income is not recognised until the Group has reasonable certainty that the joint business agreement will be
fulfilled, with the amount of income accrued regularly re-assessed and re-measured throughout the contractual period,
based on actual performance against the joint business plan.
2. Fixed lump sum income: These are typically guaranteed lump sum payments made by the supplier and are not based
on volume. Fixed lump sum income is usually predicated on confirmation of a supplier contract and typically includes
performance conditions upon the Group, such as marketing and promotional campaigns. These amounts are recognised
periodically when contractual milestones have been met.
3. Growth income: These are tiered volumetric rebates relating to growth targets agreed with the supplier in the joint business
planning process. These are retrospective rebates based on sales volumes or purchased volumes. Income is recognised to
the extent that it is reasonably certain that the conditions will be achieved, with such certainty increasing in the latter part
of the calendar year.
Promotional income
Promotional income relates to supplier funded rebates specific to promotional activity run in agreement between the Group
and our suppliers. Rebates are agreed at an individual inventory article level for agreed periods of time and are systemically
calculated based on article sales information. No estimation is applied in calculating the promotional income receivable.
Supplier income is recognised on an accruals basis, based on the expected entitlement that has been earned up to the balance
sheet date for each relevant supplier contract. The accrued incentives, rebates and discounts receivable at year end are included
within trade and other receivables.
123
Pets at Home Group PlcAnnual Report and Accounts 2018 Financial statements 1 Significant accounting policies (continued)
1.20 Expenses
Operating lease payments
Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the
lease. Lease incentives received are recognised in the income statement over the term of the lease as an integral part of the
total lease expense.
Financing income and expenses
Financing expenses comprise interest payable under the effective interest rate method, incorporating amortisation of loan
arrangement fees, finance charges on shares classified as liabilities and finance leases recognised in profit or loss using the
effective interest method, unwinding of the discount on provisions and net foreign exchange losses that are recognised in the
income statement (see foreign currency accounting policy). Borrowing costs that are directly attributable to the acquisition,
construction or production of an asset that takes a substantial time to be prepared for use, are capitalised as part of the cost of
that asset. Financing income comprises interest receivable on funds invested, dividend income, and net foreign exchange gains.
Interest income and interest payable is recognised in profit or loss as it accrues, using the effective interest method. Dividend
income is recognised in the income statement on the date the entity’s right to receive payment is established. Foreign currency
gains and losses are reported on a net basis.
Other payables
Lease incentives are received in the form of cash contributions and rent free periods. Cash contributions from landlords for
store fit-outs are initially recognised as a liability in the balance sheet at the point the recognition criteria in the lease is met and
credited to selling and distribution expenses in the consolidated income statement on a straight-line basis over the term of the
lease commencing from access date. Cash contributions are not discounted.
Rent free periods received from landlords are initially recognised as a liability on the balance sheet, which is then credited to
the selling and distribution expenses in the consolidated income statement over the life of the lease. The effect is to recognise
a reduction in selling and distribution expenses on a straight-line basis from property access date to the end of the lease.
Rent-free periods are not discounted.
1.21 Taxation
Tax on the profit or loss for the period comprises current and deferred tax. Tax is recognised in the income statement except
to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable or receivable on the taxable income or loss for the period, using tax rates enacted or
substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous periods.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial
recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than
in a business combination; and differences relating to investments in subsidiaries to the extent that they will probably not
reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or
settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet
date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which
the temporary difference can be utilised.
1.22 Adopted IFRS not yet applied
The following Adopted IFRSs have been issued but have not been applied by the Group in these financial statements.
Their adoption is not expected to have a material effect on the financial statements unless otherwise indicated:
• IFRS 15 Revenue from Contract with Customers (effective date 1 January 2018). IFRS 15 will be effective for the Group for the
year ending March 2019, and is not expected to have a significant impact on the Group’s revenues. The majority of the Group’s
sales are for standalone products made direct to customers at standard prices either in store or through the website. Estimates
are already made of anticipated returns and sales awaiting delivery to the customer.
• IFRS 9 Financial Instruments (effective date 1 January 2018). Provisions held in respect of Joint Venture operating loans will
need to be assessed in relation to the ‘expected credit loss’ rather than the ‘incurred loss’ mechanism under IAS 39, which is
expected to result in an increase to the level of provision required. The change in standard is likely to impact earnings on a non
cash basis, the quantum of which is yet to be determined but could be material.
124
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2018 • IFRS 16 Leases (effective date 1 January 2019). IFRS 16 will be effective for the Group for the year ending March 2020 onwards
and will significantly affect the presentation of the Group financial statements. All leases with the exception of short term leases
will be recognised within the balance sheet with a corresponding liability being the present value of lease payments. IFRS 16
is also expected to have a material impact on key components within the consolidated income statement as operating lease
rental charges will be replaced by depreciation and finance costs. At the reporting date, the Group has operating lease
commitments of £588m (as disclosed in note 23) on an undiscounted basis. The Group has not yet decided which transition
approach to apply.
1.23 Accounting estimates and judgements
The preparation of consolidated financial statements in conformity with IFRS requires management to make judgements,
estimates and assumptions concerning the future that affect the application of accounting policies and the reported amounts
of assets, liabilities, income and expenses. These judgements are based on historical experience and management’s best
knowledge at the time and the actual results may ultimately differ from these estimates. Estimates and underlying assumptions
are reviewed on an ongoing basis and revisions to accounting estimates are recognised in the period in which the estimates
are revised and in any future periods affected.
The estimates and assumptions that have significant risk of causing a material adjustment to the carrying value of assets and
liabilities are discussed below.
Impairment of goodwill and other intangibles
Determining whether goodwill and other intangibles are impaired requires an estimation of the value in use of the cash-
generating units to which goodwill and other intangible assets have been allocated. The value in use calculation requires
estimation of future cash flows expected to arise from the cash-generating unit (CGU) and a suitable discount rate in order to
calculate present value. Details of CGUs as well as further information about the assumptions made are disclosed in note 11.
Joint Venture receivables
The Group provides operating loans and other loans to a number of Joint Venture veterinary practices as detailed in note 26
to cover their cashflow requirements and support their longer term growth. As referred to in note 26, provisions are held in
respect of operating loans to Joint Venture practices. Judgement is applied in determining the risk-related criteria to allocate
practices into bands, and in estimating an appropriate provision percentage to apply to each band. These judgements are made
by management based on their experience and knowledge of the practices. Future financial performance will be affected if
actual experience differs to the estimates and assumptions made in determining the provision. The quantum of Joint Venture
receivables and provision made against these receivables is included in note 26.
The Group has assessed whether the level of an individual practices’ indebtedness to the Group, particularly those with high
levels of indebtedness, implies that the Group has the practical ability to control the Joint Venture, which would result in the
requirement to consolidate. In making this judgement, the Group reviewed the terms of the Joint Venture agreement and
management’s practical ability to control the activities of the practice, including barriers to the Group’s ability to exercise this
practical control and potential barriers to the Joint Venture Partner exercising their own power over the activities of the practice.
The Group is satisfied that on the balance of evidence from the Group’s experience as shareholder and lender to the practices,
it does not currently have the ability to exercise control over those practices to which operating loans are advanced.
Put/call options
The Group recognises put and call options over non-controlling interests in its subsidiary undertakings as a liability in the
consolidated balance sheet. The nature of the Group’s option agreements are such that there is an element that is a minimum
amount, and a growth element to reward and retain key individuals employed by the acquired business, who are also non-
controlling shareholders, and which is linked to improvements in the results of the acquired business. The growth element
would be forfeited under certain conditions by the NCI, including if they ceased to be employed by the Group.
Upon initial recognition, the minimum amount is recognised as a liability at fair value, which is estimated as the present value
of the future exercise price based upon the fair value of the business at acquisition. For the growth element, the expected
amount is charged to the income statement as employment costs evenly over the option period within Non-underlying items.
The financial liability is valued based on management’s best estimate of the future pay out, which is based on the estimated
future earnings. The charge is spread evenly over the financial years before the put/call can be exercised for the first time.
1.24 Dividends
Final dividends are recognised in the Group’s financial statements as a liability in the period in which the dividends are approved
by shareholders such that the Company is obliged to pay the dividend. Interim equity dividends are recognised in the period in
which they are paid.
125
Pets at Home Group PlcAnnual Report and Accounts 2018 Financial statements 2 Segmental reporting
The Directors consider there to be one operating and reportable segment, being that of the sale of pet products and services
through retail outlets, specialist vet referral services and the Group’s websites.
The Group’s Board receives monthly financial information at this level and uses this information to monitor the performance of
the store portfolio, allocate resources and make operational decisions. The internal reporting received focuses on the Group as
a whole and does not identify other individual segments. To increase transparency, the Group has decided to include an
additional voluntary disclosure analysing revenue within the reportable segment.
Revenue
Food
Accessories
Services and Other
52 week period
ended
29 March 2018
£000
52 week period
ended
30 March 2017
£000
421,894
343,508
133,522
898,924
395,121
321,550
117,498
834,169
The ‘Services and Other’ category includes revenue from management fees for First Opinion veterinary surgeries, veterinary
services, grooming services, insurance commissions and the sale of pets.
The performance of the operating segment is primarily based on a measure of earnings before interest, tax, depreciation,
and amortisation (EBITDA) before Non-underlying items. This can be reconciled to statutory operating profit as follows:
Operating profit
Non-underlying items
Underlying operating profit before Non-underlying items
Depreciation and amortisation
Underlying EBITDA
52 week period
ended
29 March 2018
£000
52 week period
ended
30 March 2017
£000
83,874
4,929
88,803
34,483
123,286
99,924
996
100,920
29,621
130,541
126
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2018 3 Expenses and auditor’s remuneration
Included in operating profit are the following:
Non-underlying operating expenses (see below)
Depreciation of tangible fixed assets
Amortisation of intangible assets
Rentals under operating leases:
Hire of plant and machinery
Property
Rental income from third party sublets
Rental income from related parties
Profit on disposal of fixed assets
Share based payment charges
52 week period
ended
29 March 2018
£000
52 week period
ended
30 March 2017
£000
4,929
28,280
6,203
4,387
75,922
(1,041)
(7,138)
–
3,936
996
25,690
3,931
4,484
73,002
(828)
(6,277)
(176)
2,437
Non-underlying items in operating profit in the 52 week period ended 29 March 2018 totalled £4,929,000 (52 week period
ended 30 March 2017: £996,000). Of this, £2,685,000 relates to the closure of our seven trial Barkers stores and the associated
lease commitments including disposal of fixed assets (£1,628,000). Non-underlying operating expenses also includes £1,625,000
in relation to the increase in the fair value of the put and call option over the non-controlling interests in Dick White Referrals
Limited, Eye-Vet Limited and Anderson Moores Veterinary Specialists Limited and £619,000 in relation to aborted property
and acquisition costs.
Non-underlying items in operating profit in the period ended 30 March 2017 of £966,000 represent costs incurred in relation
to the disposal of the Group’s 100% holding in Farm-Away Ltd. The costs include legal and professional fees, redundancy costs
and property costs.
The costs noted above are considered by the Directors to be non-underlying as they relate to either an event that is not expected
to re-occur in future periods (as is the case with the closure of Barkers and disposal of Farm-Away), or the increase in the fair
value of put/call liabilities which the Directors consider warrant separate disclosure due to the nature of these arrangements.
Auditor’s remuneration
Audit of the parent company financial statements
Amounts receivable by the Company’s auditor and its associates in respect of:
Audit of financial statements of subsidiaries pursuant to legislation
Review of interim financial statements
All other services
52 week period
ended
29 March 2018
£000
52 week period
ended
30 March 2017
£000
10
219
32
10
271
10
200
31
5
246
127
Pets at Home Group PlcAnnual Report and Accounts 2018 Financial statements 4 Colleague numbers and costs
The average number of persons employed (full time equivalents) by the Group (including Directors) during the period, analysed
by category, was as follows:
Sales and distribution
Administration
The aggregate payroll costs of these persons were as follows:
Wages and salaries
Social security costs
Contributions to defined pension contribution plans
Remuneration of Directors and Executive Management Team
Executive Directors’ emoluments including social security costs
Non-Executive Directors’ emoluments including social security costs
Executive Directors’ amounts receivable under share options
Executive Directors’ pension contributions
Total Directors’ remuneration
Executive Management Team emoluments including social security costs
Executive Directors’ Team amounts receivable under share options
Executive Management Team pension contributions
Total Executive Management Team remuneration
52 week period
ended
29 March 2018
Number
52 week period
ended
30 March 2017
Number
6,142
559
6,701
6,152
659
6,811
52 week period
ended
29 March 2018
£000
52 week period
ended
30 March 2017
£000
180,952
15,233
5,725
201,910
162,936
13,337
5,251
181,524
52 week period
ended
29 March 2018
£000
52 week period
ended
30 March 2017
£000
1,135
495
31
75
1,736
2,583
64
167
2,814
1,411
534
–
73
2,018
3,165
–
161
3,326
In the opinion of the Board the key management, as defined under revised IAS 24 ‘Related Party Disclosures’, are the Executive
Directors and the Executive Management Team. Executive Directors’ emoluments are also included within the Executive
Management Team emoluments disclosed above.
128
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2018 5 Earnings per share
Basic earnings per share is calculated by dividing the net profit for the period attributable to ordinary shareholders by the
weighted average number of Ordinary Shares outstanding during the period.
Diluted earnings per share is calculated by dividing the net profit for the period attributable to ordinary shareholders by the
weighted average number of Ordinary Shares outstanding during the period plus the weighted average number of Ordinary
Shares that would be issued on the conversion of all dilutive potential ordinary shares into Ordinary Shares.
Profit attributable to equity shareholders of the parent (£000s)
Basic weighted average number of shares
Dilutive potential ordinary shares
Diluted weighted average number of shares
Basic earnings per share
Diluted earnings per share
6 Finance income
Interest receivable
Total finance income
7 Finance expense
Bank loans at effective interest rate
Other interest expense
Total finance expense
52 week period ended
29 March 2018
52 week period ended
30 March 2017
Underlying
trading
67,542
After Non-
underlying
items
62,814
Underlying
trading
76,319
After Non-
underlying
items
75,364
500,000,000
3,119,537
500,000,000
3,119,537
500,000,000
4,032,406
500,000,000
4,032,406
503,119,537
503,119,537
504,032,406
504,032,406
13.5p
13.4p
12.6p
12.5p
15.3p
15.1p
15.1p
15.0p
52 week period
ended
29 March 2018
£000
52 week period
ended
30 March 2017
£000
685
685
760
760
52 week period
ended
29 March 2018
£000
52 week period
ended
30 March 2017
£000
4,773
190
4,963
5,113
187
5,300
129
Pets at Home Group PlcAnnual Report and Accounts 2018 Financial statements 8 Taxation
Recognised in the income statement
Current tax expense
Current period
Adjustments in respect of prior periods
Current tax expense
Deferred tax expense
Origination and reversal of temporary differences
Impact of difference between deferred and current tax rates
Adjustments in respect of prior periods
Deferred tax expense
Total tax expense
52 week period
ended
29 March 2018
£000
52 week period
ended
30 March 2017
£000
17,837
(511)
17,326
(669)
(260)
385
(544)
20,953
(964)
19,989
(907)
45
893
31
16,782
20,020
The UK corporation tax standard rate for the period was 19% (2017: 20%). The March 2016 budget announced a further reduction
in the corporation tax rate to 17% from 1 April 2020. The deferred tax liability has been calculated based on the rate of 18% which
is the blended rate at which items are expected to reverse.
Deferred tax recognised in comprehensive income
Effective portion of changes in fair value of cash flow hedges (note 20)
Reconciliation of effective tax rate
52 week period
ended
29 March 2018
£000
52 week period
ended
30 March 2017
£000
(412)
297
52 week period ended 29 March 2018
52 week period ended 30 March 2017
Profit for the period
Total tax expense
Underlying
trading
£000
67,542
16,983
Non-
underlying
items
£000
(4,728)
(201)
Profit excluding taxation
84,525
(4,929)
Total
£000
62,814
16,782
79,596
Underlying
trading
£000
76,319
20,061
Non-underlying
items
£000
(955)
(41)
96,380
(996)
Total
£000
75,364
20,020
95,384
Tax using the UK corporation tax rate
for the period of 19% (52 week period
ended 30 March 2017: 20%)
Impact of change in tax rate on deferred
tax balances
Depreciation on expenditure not eligible
for tax relief
Expenditure not eligible for tax relief
Adjustments in respect of prior periods
16,060
(937)
15,123
19,276
(199)
19,077
(260)
588
721
(126)
–
–
736
–
(260)
588
1,457
(126)
45
706
105
(71)
–
–
158
–
(41)
45
706
263
(71)
20,020
Total tax expense
16,983
(201)
16,782
20,061
The UK corporation tax standard rate for the 52 week period ended 29 March 2018 was 19% (52 week period ended
30 March 2017: 20%). The effective tax rate before Non-underlying items for the 52 week period ended 29 March 2018
was 20%. The principal reason for the difference in rate relates to the non-deductibility of depreciation charged on certain
items of capital expenditure.
130
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2018 9 Dividends paid and proposed
Declared and paid during the period
Final dividend of 5.5p per share (2017: 5.5p per share)
Interim dividend of 2.5p per share (2017: 2.5p per share)
Proposed for approval by shareholders at the AGM
Final dividend of 5.0p per share (2017: 5.0p per share)
Group and Company
52 week period
ended
29 March 2018
£000
52 week period
ended
30 March 2017
£000
24,912
12,429
27,396
12,454
24,836
24,912
The trustees of the following holdings of Pets at Home Group Plc shares under the Pets at Home Group Employee Benefit Trusts
have waived or otherwise foregone any and all dividends paid in relation to the period ended 29 March 2018 and 30 March 2017
and to be paid at any time in the future (subject to the exceptions in the relevant trust deed) on its respective shares for the time
being comprised in the Trust Funds: Computershare Nominees (Channel Islands) Limited (holding at 29 March 2018: 3,271,102
shares, holding at 30 March 2017: 1,319,091 shares) and Wealth Nominees Limited (holding at 29 March 2018: nil shares, holding
at 30 March 2017: 434,056 shares).
10 Property, plant and equipment
Freehold
property
£000
Short
leasehold
property
£000
Fixtures,
fittings, tools
and equipment
£000
Cost
Balance at 30 March 2017
Additions
Disposals
Balance at 29 March 2018
Depreciation
Balance at 30 March 2017
Depreciation charge for the period
Disposals
Balance at 29 March 2018
Net book value
At 30 March 2017
At 29 March 2018
2,517
–
–
2,517
198
40
–
238
2,319
2,279
48,720
6,326
(1,331)
53,715
15,469
3,447
(199)
18,717
33,251
34,998
Total
£000
234,862
31,785
(3,547)
183,625
25,459
(2,216)
206,868
263,100
90,360
24,793
(912)
114,241
106,027
28,280
(1,111)
133,196
93,265
92,627
128,835
129,904
131
Pets at Home Group PlcAnnual Report and Accounts 2018 Financial statements 10 Property, plant and equipment (continued)
Freehold
property
£000
Short
leasehold
property
£000
Fixtures,
fittings, tools
and equipment
£000
41,174
5,645
1,991
(90)
48,720
12,608
2,938
(77)
15,469
28,566
33,251
155,235
32,898
1,062
(5,570)
183,625
71,414
22,712
(3,766)
90,360
83,821
93,265
Total
£000
198,926
38,543
3,053
(5,660)
234,862
84,180
25,690
(3,843)
106,027
114,746
128,835
Customer
list
£000
Software
£000
Total
£000
771
–
–
771
71
77
–
148
700
623
24,916
8,872
(22)
1,005,532
8,872
(22)
33,766
1,014,382
15,195
6,126
(16)
21,305
9,721
12,461
15,266
6,203
(16)
21,453
990,266
992,929
2,517
–
–
–
2,517
158
40
–
198
2,359
2,319
Goodwill
£000
979,845
–
–
979,845
–
–
–
–
979,845
979,845
Cost
Balance at 31 March 2016
Additions
Assets acquired on acquisition
Disposals
Balance at 30 March 2017
Depreciation
Balance at 31 March 2016
Depreciation charge for the period
Disposals
Balance at 30 March 2017
Net book value
At 31 March 2016
At 30 March 2017
11 Intangible assets
Cost
Balance at 30 March 2017
Additions
Disposals
Balance at 29 March 2018
Amortisation
Balance at 30 March 2017
Amortisation charge for the period
Disposals
Balance at 29 March 2018
Net book value
At 30 March 2017
At 29 March 2018
132
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2018 Cost
Balance at 31 March 2016
Additions
Assets acquired on acquisition
Disposals
Balance at 30 March 2017
Amortisation
Balance at 31 March 2016
Amortisation charge for the period
Disposals
Balance at 30 March 2017
Net book value
At 31 March 2016
At 30 March 2017
Goodwill
£000
Customer list
£000
Software
£000
Total
£000
965,925
–
13,920
–
979,845
–
–
–
–
965,925
979,845
–
–
771
–
771
–
71
–
71
–
700
19,133
5,957
–
(174)
985,058
5,957
14,691
(174)
24,916
1,005,532
11,509
3,860
(174)
15,195
11,509
3,931
(174)
15,266
7,624
9,721
973,549
990,266
Amortisation and impairment charge
The amortisation charge is recognised in total in operating expenses within the income statement.
Impairment testing
Cash-generating units (CGUs) within the Group are considered to be the body of stores including vets’ practices, Specialist
Referral Centres and the Group’s websites as disclosed in note 2. The Group is deemed to have one overall group of CGUs
as follows:
Pets at Home Group
Goodwill
At 29 March
2018
£000
979,845
At 30 March
2017
£000
979,845
The recoverable amount of the CGU group has been calculated with reference to its value in use. The key assumptions of this
calculation are shown below:
Period on which management approved forecasts are based (years)
Growth rate applied beyond approved forecast period
Discount rate (pre-tax)
At 29 March
2018
At 30 March
2017
3
2%
11%
3
2%
10%
The goodwill is considered to have an indefinite useful economic life and the recoverable amount is determined based on
‘value-in-use’ calculations. These calculations use a post-tax cash flow projection based on a three-year plan approved by the
Board. The plan is adjusted to remove the contribution from and costs associated with new stores and veterinary practices.
133
Pets at Home Group PlcAnnual Report and Accounts 2018 Financial statements 11 Intangible assets (continued)
The key assumptions in the business plan are like-for-like sales growth, gross and operating profit margins. The forecast
assumptions reflect continual innovation and our deep understanding of our customers. The projections are based on all
available information and growth rates do not exceed growth rates achieved in prior periods. A different set of assumptions
may be more appropriate in future years depending on changes in the macro-economic environment.
The discount rate was estimated based on past experience and industry average weighted average cost of capital. The
Directors have assumed a growth rate projection beyond the three-year period based on inflationary increases.
The total recoverable amount in respect of goodwill for the CGU group as assessed by the Directors using the above
assumptions is greater than the carrying amount and therefore no impairment charge has been recorded in each period.
A number of sensitivities have been applied to the assumptions in reaching this conclusion including:
• Reduction in growth rate applied beyond forecast period by 100 bps
• Increasing the discount rate by 100 bps
• Decreasing the sales growth assumptions in the forecast period in combination with a reduction in gross margin percentage
of 50bps.
None of the above would result in an impairment.
12 Inventories
Finished goods
At 29 March
2018
£000
At 30 March
2017
£000
60,529
56,420
The cost of inventories recognised as an expense and included in ‘cost of sales’ in the 52 week period ended 29 March 2018 is
£355,651,000 (52 week period ended 30 March 2017: £315,002,000).
Inventory expensed to cost of sales includes the cost of the SKUs (Stock Keeping Units) sold, supplier income, stock wastage and
foreign exchange variances.
At 29 March 2018 the inventory provision amounted to £2.3m (30 March 2017: £1.9m). The inventory provision is calculated by
reference to the age of the SKU. The provision percentages applied in calculating the provision are as follows:
• Discontinued stock greater than 365 days: 100%
• Current stock greater than 365 days with a use by date: 50%
• Current stock within 180 and 365 days with a use by date: 25%
• Greater than 180 days with no use by date: 25%
In addition, a provision is held to account for store stock losses during the period since which the SKU was last counted.
The value of inventory against which an ageing provision is held is £4.8m (30 March 2017: £4.6m).
In the 52 week period ended 29 March 2018, the value of inventory written off to the income statement amounted to £8.1m
(52 week period ended 30 March 2017: £7.8m).
134
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2018 13 Deferred tax assets and liabilities
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Property, plant and equipment
Financial assets
Financial liabilities
Other short term timing differences
Net tax assets/(liabilities)
Movement in deferred tax during the period
Property, plant and equipment
Net financial assets
Other short term timing differences
Movement in deferred tax during the period
Property, plant and equipment
Net financial assets
Other short term timing differences
Company
Movement in deferred tax during the period
Net financial assets
At 29 March 2018
At 30 March 2017
Assets
£000
–
–
443
1,861
2,304
Liabilities
£000
(849)
(221)
–
(5,682)
(6,752)
Total
£000
(849)
(221)
443
(3,821)
(4,448)
Assets
£000
–
–
211
1,990
2,201
Liabilities
£000
(1,684)
(400)
–
(5,521)
(7,605)
Total
£000
(1,684)
(400)
211
(3,531)
(5,404)
30 March
2017
£000
Recognised
in income
£000
Recognised
in equity
£000
29 March
2018
£000
(1,684)
(190)
(3,530)
(5,404)
835
–
(291)
544
–
412
–
412
(849)
222
(3,821)
(4,448)
31 March
2016
£000
(1,203)
107
(3,789)
(4,885)
Liability
acquired on
acquisition
£000
(181)
–
(10)
(191)
Recognised
in income
£000
Recognised
in equity
£000
(300)
–
269
(31)
–
(297)
–
(297)
30 March
2017
£000
(1,684)
(190)
(3,530)
(5,404)
30 March
2017
£000
Recognised in
income
£000
Recognised in
equity
£000
112
–
(288)
29 March
2018
£000
(176)
The rate used to calculate deferred tax assets and liabilities has been disclosed in note 8.
135
Pets at Home Group PlcAnnual Report and Accounts 2018 Financial statements 14 Other financial assets and liabilities
Non-current assets
Investments in Joint Venture veterinary practices
Loans to Joint Venture veterinary practices – initial set up loans
Loans to Joint Venture veterinary practices – other loans
Other investments
Other receivables
Interest rate swaps
Group
Company
At 29 March
2018
£000
At 30 March
2017
£000
At 29 March
2018
£000
At 30 March
2017
£000
403
14,194
4,539
112
934
–
20,182
397
12,054
3,416
112
490
521
16,990
–
–
–
–
–
–
–
–
–
–
–
–
521
521
Investments in Joint Venture veterinary practices – initial set up loans
Investments represent £403,000 (30 March 2017: £397,000) of the “B” share capital in joint veterinary practice companies. These
investments are accounted for at cost, subject to impairment. The share capital of the veterinary practice companies is split
equally into ‘A’ Ordinary Shares (held by Joint Venture Partners) and ‘B’ Ordinary Shares (held by the Group). Any operational
decisions require the agreement of the Joint Venture Partner.
Under the terms of the agreements the Group, (‘B’ shareholder) is not entitled to any profits, losses or dividends, or any surplus
on winding up or disposal, although they are entitled to appoint Directors to the Board and carry the same shareholder voting
rights as ‘A’ ordinary shareholders.
The agreements entitle the Group to receive income in relation to support services offered in such areas as clinical
development, promotion and methods of operation as well as service activities including accountancy, legal and property.
Loans to Joint Venture veterinary practices
Loans to Joint Venture veterinary practices include £14,194,000 (30 March 2017: £12,054,000) loans provided to Joint Venture
veterinary practice companies trading under the Companion Care and Vets4Pets brands, in which the Group’s share interest is
non-participatory. These loans represent a long term investment in the Joint Venture, supporting their initial set up and working
capital, and are held at fair value and classified as an available for sale financial asset. Under the terms of the loans provided to
veterinary companies trading under the Companion Care and Vets4Pets brands, the loans attract varying interest rates between
2% and 3%. There is no set date for repayment of the loans due to the Group. The loans are held at fair value. The fair value is
calculated by discounting the future cash flows associated with the loan including interest cash flows.
136
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2018 Loans to Joint Venture veterinary practices – other loans
Loans to related parties of £4,539,000 (30 March 2017: £3,416,000) represent loan balances to Joint Venture partnership
businesses and shared venture partners. These loans are unsecured, typically for five to seven years and attract an interest rate
of LIBOR plus 2.8%. The loans are accounted for as loans and receivables and as such are recognised at amortised cost. The
loans are typically to support capacity expansion.
Current assets
Fuel forward contracts
Forward exchange contracts
Interest rate swaps
Current liabilities
Fuel forward contracts
Other financial liability
Forward exchange contracts
Interest rate swaps
Other financial liability
Finance lease liability
Non-current liabilities
Other financial liability
Finance lease liability
Group
Company
At 29 March
2018
£000
At 30 March
2017
£000
At 29 March
2018
£000
At 30 March
2017
£000
78
156
926
1,160
106
1,757
–
1,863
–
–
926
926
–
–
–
–
Group
Company
At 29 March
2018
£000
At 30 March
2017
£000
At 29 March
2018
£000
At 30 March
2017
£000
–
–
(2,333)
–
(1,000)
(59)
(3,392)
–
–
(278)
(1,112)
–
(119)
(1,509)
–
–
–
–
–
–
–
–
–
–
(1,112)
–
–
(1,112)
Group
Company
At 29 March
2018
£000
At 30 March
2017
£000
At 29 March
2018
£000
At 30 March
2017
£000
(8,675)
(18)
(8,693)
(7,885)
(138)
(8,023)
–
–
–
–
–
–
The current and non-current other financial liabilities include the fair value of the put and call option over the non-controlling
interests in subsidiary undertakings and contingent consideration in relation to the acquisitions of Dick White Referrals Limited,
Eye-Vet Limited and Anderson Moores Veterinary Specialists Limited and in the 52 week period ended 30 March 2017. The
financial liabilities comprise a minimum amount and a growth element based on estimated future earnings.
137
Pets at Home Group PlcAnnual Report and Accounts 2018 Financial statements 15 Trade and other receivables
Trade receivables
Amounts owed by Joint Venture veterinary practices – funding, trading and
operating loans
Other receivables
Amounts owed by Group undertakings
Prepayments
Accrued income
Group
Company
At 29 March
2018
£000
14,609
At 30 March
2017
£000
13,975
At 29 March
2018
£000
–
At 30 March
2017
£000
–
31,298
7,653
–
15,860
5,428
74,848
24,273
7,617
–
17,111
6,591
69,567
–
–
576,795
–
–
576,795
–
–
576,795
–
–
576,795
All balances are included within current assets.
Amounts owed by Joint Venture veterinary practices
These represent funding for new practices, trading balances and operating loans owed by Joint Venture veterinary practices
to the Group. The balances above are shown net of provisions held for operating loans of £8,308,000 (2017: £3,336,000).
The basis for this provision is discussed in note 1.23. A 10% increase in the estimate of loss in the operating loans would lead
to an increase in the required provision for operating loans of £3.9m. Whilst these loans are repayable on demand, they are not
expected to be recovered in full for a number of years, based on the projected cashflow forecast on a practice by practice basis.
Further details are provided in note 26.
Accrued income
Accrued income represents fees to Joint Venture veterinary practices, referral centre fees and income from suppliers that has
not yet been invoiced.
16 Cash and cash equivalents
Cash and cash equivalents
17 Other interest-bearing loans and borrowings
Non-current liabilities
Secured bank loans
Total liabilities
Secured bank loans
Terms and debt repayment schedule
Group
Company
At 29 March
2018
£000
59,824
At 30 March
2017
£000
56,345
At 29 March
2018
£000
1,717
At 30 March
2017
£000
1
Group
Company
At 29 March
2018
£000
At 30 March
2017
£000
At 29 March
2018
£000
At 30 March
2017
£000
194,519
209,296
194,519
209,296
194,519
209,296
194,519
209,296
Senior Finance Bank Loans
GBP LIBOR +1.25%
Currency
Nominal
interest rate
Face value at
29 March
2018
£000
Carrying
amount at
29 March
2018
£000
Face value at
30 March
2017
£000
195,000
194,519
210,000
Carrying
amount at
30 March
2017
£000
209,296
Year of
maturity
2020
138
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2018 The Group’s Senior Financing Facilities (as amended in April 2015) include a revolving credit facility (RCF) of £260m. The RCF
expires in April 2020 and is reviewed each period. Interest is charged at LIBOR plus a margin based on leverage (net debt: EBITDA).
Face value represents the principal value of the Senior Finance Bank Loans. The bank loan is secured against the various tangible,
intangible and monetary assets of the Group (excluding investments in Joint Ventures and hedging agreements).
Interest-bearing borrowings are recognised initially at fair value, being the principal value of the loan net of attributable
transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at a carrying value, which represents
the amortised cost of the loans using the effective interest method less any impairment losses.
At 29 March 2018 the Group had a revolving credit facility of £260m with a drawn amount of £195m.
The analysis of repayments on the loans is as follows:
Within one year or repayable on demand
Between one and two years
Between two and five years
The combined loans at 29 March 2018 and 30 March 2017 are held by the Company.
Analysis of changes in net debt
At 29 March
2018
£000
At 30 March
2017
£000
–
–
195,000
195,000
–
–
210,000
210,000
Cash and cash equivalents
Debt due within one year at face value
Debt due after one year at face value
Net debt
18 Trade and other payables
Current
Trade payables
Accruals
Amounts owed to Joint Venture veterinary practices
Deferred income
Other payables including tax & social security
Amounts owed to Group undertakings
Non-current
Deferred income
At 30 March
2017
£000
56,345
–
(210,000)
(153,655)
Cash flow
£000
3,479
–
15,000
18,479
Non-cash
movement
£000
At 29 March
2018
£000
–
–
–
–
59,824
–
(195,000)
(135,176)
Group
Company
At 29 March
2018
£000
At 30 March
2017
£000
At 29 March
2018
£000
At 30 March
2017
£000
106,709
46,638
2,951
4,063
13,495
–
173,856
98,680
44,115
1,427
4,186
17,479
–
165,887
–
305
–
–
–
268,706
269,011
–
275
–
–
–
207,612
207,887
36,200
35,028
–
–
The non-current payables represent deferred income in respect of store leases where incentives are spread over the life of the lease.
139
Pets at Home Group PlcAnnual Report and Accounts 2018 Financial statements 19 Provisions
Balance at 30 March 2017
Provisions made during the period
Provisions used during the period
Balance at 29 March 2018
Current
Non-current
Dilapidation
provision
£000
Closed stores
provision
£000
643
87
(63)
667
1,243
1,234
(109)
2,368
Total
£000
1,886
1,321
(172)
3,035
At 29 March
2018
£000
At 30 March
2017
£000
835
2,200
3,035
492
1,394
1,886
The closed stores provision relates to the rent and rates payable on sublet or vacant stores. A provision is made where the
rent receivable on the properties is less than the rent payable, or where management consider there to be a risk on the sublet.
The timing of the utilisation of these provisions is variable dependent upon the lease expiry dates of the properties concerned,
which vary between one and ten years. Market conditions have a significant impact and hence the assumptions on future cash
flows are reviewed regularly and revisions to the provision made where necessary.
In estimating the required provision an assumption is made on the average length to provide for. In the event that this
assumption was to increase by one year, then the provision would increase by £136,000 (30 March 2017: £230,000). The
provision is discounted at a rate of 8%, being the estimated average implicit lease rate. A decrease in this rate of 100 bps
would increase the provision by £64,000 (30 March 2017: £33,000).
The Company did not hold any provisions at 29 March 2018 or 30 March 2017.
20 Capital and reserves
Share capital
Group
At 31 March 2016
At 30 March 2017
At 29 March 2018
Company
At beginning of period
On issue at period end
At beginning of period
On issue at period end
Share capital
Number
Share capital
£000
500,000,000
500,000,000
500,000,000
5,000
5,000
5,000
Share capital
29 March
2018
£000
5,000
5,000
Share capital
30 March
2017
£000
5,000
5,000
The holders of Ordinary Shares are entitled to receive dividends as declared from time to time and are entitled to one vote per
share at meetings of the Company.
140
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2018 Translation reserve
The translation reserve comprises all foreign exchange differences arising since 21 November 2011, the date of incorporation
of Pets at Home Asia Ltd where the functional currency differs from that of the rest of the Group.
Cash flow hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging
instruments related to hedged transactions that have not yet occurred.
Retained earnings
Included within the Group is Pets at Home Employee Benefit Trust (EBT). The EBT purchases shares to fund the share
option schemes. As at 29 March 2018, the Trust held 3,271,102 Ordinary Shares (30 March 2017: 1,319,091) with a cost of
£3,587,000 (30 March 2017: £13,260). The market value of these shares as at 29 March 2018 was 169.00 pence per share
(30 March 2017: 180.90).
Other comprehensive income
29 March 2018
Other comprehensive income
Cash flow hedges – reclassified to profit and loss
Effective portion of changes in fair value of cash flow hedges
Deferred tax on changes in fair value of cash flow hedges
Total other comprehensive income
30 March 2017
Other comprehensive income
Cash flow hedges – reclassified to profit and loss
Effective portion of changes in fair value of cash flow hedges
Deferred tax on changes in fair value of cash flow hedges
Total other comprehensive income
Translation
reserve
£000
Cash flow
hedging
reserve
£000
Total other
comprehensive
income
£000
71
–
–
–
71
–
(473)
(1,695)
412
(1,756)
71
(473)
(1,695)
412
(1,685)
Translation
reserve
£000
Cash flow
hedging
reserve
£000
Total other
comprehensive
income
£000
(26)
–
–
–
(26)
–
(330)
1,862
(297)
1,235
(26)
(330)
1,862
(297)
1,209
21 Financial instruments
Financial risk management
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk and
cash flow interest rate risk), credit risk and liquidity risk.
Risk management framework
Risk management in respect of financial risk is carried out by the Group Treasury function under policies approved by the
Board of Directors. The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk
management framework. The Board provides written principles, through its Group Treasury policy, for overall risk management,
as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative
financial instruments and non-derivative financial instruments and investment of excess liquidity.
The main objectives of the Group Treasury function are:
• To ensure shareholder and management expectations are managed on cash flow and earnings volatility resulting from
financial market movements
• To protect the expected cash flow and earnings from interest rate and foreign exchange fluctuations to within parameters
acceptable to the Board and shareholders
• To control banking costs and service levels
141
Pets at Home Group PlcAnnual Report and Accounts 2018 Financial statements 21 Financial instruments (continued)
Market risk
(i) Foreign currency risk
The Group sources a significant level of purchases in foreign currency, in excess of US$50m each financial year, and monitors
its foreign currency requirements through short, medium and long term cash flow forecasting. The value of purchases in US
dollars continues to increase each year and the risk management policy has evolved with this increased risk.
At 29 March 2018, the Group’s policy is to hedge up to 95% of the next 12 months and additionally up to 50% of the following six
months out to 18 months forecast foreign exchange transactions, using foreign currency bank accounts and forward foreign
exchange contracts. The transactions are deemed to be ‘highly probable’ and are based on historical knowledge and forecast
purchase and sales projections.
The Group’s exposure to foreign currency risk is as follows. This is based on the carrying amount for monetary financial
instruments, except for derivatives which are based on notional amounts:
29 March 2018
Cash and cash equivalents
Trade payables
Forward exchange contracts
Balance sheet exposure
30 March 2017
Cash and cash equivalents
Trade payables
Forward exchange contracts
Balance sheet exposure
Euro
£000
160
(994)
(24)
(858)
Euro
£000
6
(576)
31
(539)
US Dollar
£000
1,347
(7,247)
(2,153)
(8,053)
US Dollar
£000
567
(4,930)
1,448
(2,915)
HKD
£000
2
–
–
2
HKD
£000
2
–
–
2
Total
£000
1,509
(8,241)
(2,177)
(8,909)
Total
£000
575
(5,506)
1,479
(3,452)
Sensitivity analysis
A 5% weakening of the following currencies against the pound sterling at the period end date in both years would have
increased/(decreased) profit or loss or equity by the amounts shown below. This calculation assumes that the change occurred
at the balance sheet date and had been applied to risk exposures existing at that date.
This analysis assumes that all other variables, in particular other exchange rates and interest rates, remain constant.
US Dollar
Euro
Equity
Profit or loss
29 March
2018
£000
108
1
30 March
2017
£000
(72)
(2)
29 March
2018
£000
295
42
30 March
2017
£000
218
28
A 5% strengthening of the above currencies against the pound sterling in any period would have had the equal but opposite
effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.
(ii) Interest rate risk
Cash flow and fair value interest rate risk
The Group’s interest rate risk arises from long term borrowings. As at 29 March 2018 the Group had a senior facility with a face
value totalling £195.0m. The Group’s borrowings as at 29 March 2018 incur interest at a rate of 1.25% plus LIBOR at current
leverage, which exposes the Group to cash flow interest rate risk. The analysis of loan repayments is detailed in note 17.
The Pets at Home Group’s policy with regard to interest rate risk is to hedge the appropriate level of borrowings by entering
into fixed rate agreements. The Group has a fixed rate interest rate swap agreements over a total of £142.1m of the senior facility
borrowings at the balance sheet date at a fixed rate of 0.183%, which expires on 30 March 2019. The hedge is structured to
hedge at least 70% of the forecast outstanding debt for the next year.
142
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2018 Profile
At the balance sheet date the interest rate profile of the Group’s interest-bearing financial instruments was:
Fixed rate instruments
Financial liabilities
Variable rate instruments
Financial liabilities
Total financial liabilities
Group
Book value
At 29 March
2018
£000
Book value
At 30 March
2017
£000
Company
Book value
At 29 March
2018
£000
Book value
At 30 March
2017
£000
142,100
152,096
142,100
152,096
52,419
194,519
57,200
209,296
52,419
194,519
57,200
209,296
All borrowings bear a variable rate of interest based on LIBOR. Group policy is to hedge at least 70% of the loan to ensure a fixed
rate of interest. Therefore, designated above is the portion of the loan hedged by a fixed rate interest rate swap and the
remaining un-hedged portion is designated as variable rate.
Sensitivity analysis
A change of 50 basis points in interest rates at the period end date would have increased/(decreased) equity and profit or loss by
the amounts shown below. This calculation assumes that the change occurred at the balance sheet date and had been applied
to risk exposures existing at that date.
This analysis assumes that all other variables, in particular foreign currency rates, remain constant and considers the effect of
financial instruments with variable interest rates, financial instruments at fair value through profit or loss or available for sale
with fixed interest rates and the fixed rate element of interest rate swaps. The analysis is performed on the same basis for the
comparative period.
Equity
Increase
Decrease
Profit or loss
Increase
Decrease
At 29 March
2018
£000
At 30 March
2017
£000
711
(711)
262
(262)
761
(761)
286
(286)
Credit risk
Financial risk management
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its
contractual obligations and arises principally from the Group’s receivables from customers and investment securities.
Credit risk also arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial
institutions. The Group ensures that the banks used for the financing of the loan facilities and interest rate swap agreements
hold an acceptable risk rating by independent parties.
The Group has in place certain guarantees over the bank loans taken out by a number of veterinary practice companies in
which it holds an investment. Further details of these guarantees are disclosed in note 25. The performance of the veterinary
practice companies is reviewed on an ongoing basis.
Exposure to credit risk
The Group’s maximum exposure to credit risk, being the carrying amount of financial assets, is summarised in the table within
the fair values section overleaf.
143
Pets at Home Group PlcAnnual Report and Accounts 2018 Financial statements 21 Financial instruments (continued)
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.
Management prepares and monitors rolling forecasts of the Group’s cash balances based on expected cash flows to ensure,
as far as possible, that it will have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions
without risking damage to the Group’s reputation. Covenants are monitored on a regular basis to ensure there is no risk or
breach which would lead to an ‘Event of Default’ and compliance certificates are issued as required to the syndicate agent.
The following are the contractual maturities of financial liabilities, including estimated interest payments:
Carrying
amount
£000
Contractual
cash flows
£000
1 year or less
£000
1 to <2 years
£000
2 to <5 years
£000
5 years
and over
£000
194,519
106,709
77
9,675
195,000
106,709
77
10,038
–
106,709
59
1,000
2,333
313,313
2,333
314,157
2,333
110,101
–
–
18
–
–
18
195,000
–
–
9,038
–
204,038
–
–
–
–
–
–
Carrying
amount
£000
Contractual
cash flows
£000
209,296
98,680
258
7,885
210,000
98,680
258
7,885
278
1,112
–
278
1,112
–
1 year or less
£000
1 to <2 years
£000
2 to <5 years
£000
5 years
and over
£000
–
98,680
119
–
278
–
–
–
–
119
–
–
1,112
–
1,231
210,000
–
20
7,885
–
–
–
217,905
–
–
–
–
–
–
–
–
317,509
318,213
99,077
Group
29 March 2018
Non-derivative financial liabilities
Bank loans (note 17)
Trade payables (note 18)
Finance lease liabilities
Other financial liabilities
Derivative financial liabilities
Forward exchange contracts used for hedging:
Outflow (note 14)
30 March 2017
Non-derivative financial liabilities
Bank loans (note 17)
Trade payables (note 18)
Finance lease liabilities
Other financial liabilities
Derivative financial liabilities
Forward exchange contracts used for hedging:
Outflow (note 14)
Interest rate swaps used for hedging:
Outflow (note 14)
Fuel forward contracts:
Outflow (note 14)
144
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2018 Company
29 March 2018
Non-derivative financial liabilities
Bank loans (note 17)
30 March 2017
Non-derivative financial liabilities
Bank loans (note 17)
Derivative financial liabilities
Interest rate swaps (note 14)
Carrying
amount
£000
Contractual
cash flows
£000
1 year or less
£000
1 to <2 years
£000
2 to <5 years
£000
5 years
and over
£000
194,519
194,519
195,000
195,000
–
–
–
–
195,000
195,000
–
–
Carrying
amount
£000
Contractual
cash flows
£000
209,296
210,000
1,112
210,408
1,112
211,112
1 year or less
£000
1 to <2 years
£000
2 to <5 years
£000
–
–
–
–
210,000
1,112
1,112
–
210,000
5 years
and over
£000
–
–
–
Liquidity risk and cash flow hedges
Cash flow hedges
The following table indicates the periods in which the cash flows associated with cash flow hedging instruments are expected
to occur and to affect profit or loss:
Group
29 March 2018
Interest rate swaps:
Assets (note 14)
Forward exchange contracts:
Assets (note 14)
Liabilities (note 14)
Fuel forward contracts:
Assets (note 14)
30 March 2017
Interest rate swaps:
Assets (note 14)
Liabilities (note 14)
Forward exchange contracts:
Assets (note 14)
Liabilities (note 14)
Fuel forward contracts:
Assets (note 14)
Carrying
amount
£000
Expected
cash flows
£000
1 year or less
£000
1 to <2 years
£000
2 to <5 years
£000
5 years
and over
£000
926
926
926
156
(2,333)
78
(1,173)
156
(2,333)
78
(1,173)
156
(2,333)
78
(1,173)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Carrying
amount
£000
Expected
cash flows
£000
1 year or less
£000
1 to <2 years
£000
2 to <5 years
£000
5 years
and over
£000
521
(1,112)
1,757
(278)
106
994
521
(1,112)
1,757
(278)
106
994
–
(1,112)
1,757
(278)
106
473
521
–
–
–
–
521
–
–
–
–
–
–
–
–
–
–
–
–
145
Pets at Home Group PlcAnnual Report and Accounts 2018 Financial statements 21 Financial instruments (continued)
Company
29 March 2018
Interest rate swaps:
Assets (note 14)
30 March 2017
Interest rate swaps:
Assets (note 14)
Liabilities (note 14)
Carrying
amount
£000
Expected
cash flows
£000
1 year or less
£000
1 to <2 years
£000
2 to <5 years
£000
5 years
and over
£000
926
926
926
926
926
926
–
–
–
–
–
–
Carrying
amount
£000
Expected
cash flows
£000
1 year or less
£000
1 to <2 years
£000
2 to <5 years
£000
521
(1,112)
(591)
521
(1,112)
(591)
–
(1,112)
(1,112)
521
–
521
–
–
–
5 years
and over
£000
–
–
–
Fair values of financial instruments
Investments
The fair value of investments are considered to be their carrying value as the impact of discounting future cash flows has been
assessed as not material and the investment is non-participatory.
Trade and other payables and receivables
The fair value of these items are considered to be their carrying value as the impact of discounting future cash flows has been
assessed as not material.
Cash and cash equivalents
The fair value of cash and cash equivalents is estimated as its carrying amount where the cash is repayable on demand. Where
it is not repayable on demand (such as term deposits), then the fair value is estimated at the present value of future cash flows,
discounted at the market rate of interest at the balance sheet date.
Long term and short term borrowings
The fair value of bank loans and other loans approximates its carrying value as it has an interest rate based on LIBOR.
Short term deposits
The fair value of short term deposits is considered to be their carrying value as the balances are held in floating rate accounts
where the interest rate is reset to market rates.
Derivative financial instruments
The fair value of interest rate swap contracts and forward exchange contracts are calculated by management based on external
valuations received from the Group’s bankers and are based on forward exchange rates and anticipated future interest yield
respectively.
Contingent consideration
Contingent consideration on acquisition of a subsidiary is valued at fair value at the time of acquisition. Any subsequent
changes in fair values are recognised in profit or loss.
Put and call options over non-controlling interests
Put and call options over non-controlling interests are recognised at fair value at the acquisition date and included within the
valuation of goodwill. Subsequent changes to fair value are recognised in profit or loss.
146
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2018 Fair values
The fair values of all financial assets and financial liabilities by class together with their carrying amounts shown in the balance
sheet are as follows:
29 March 2018
30 March 2017
Carrying
amount
£000
Fair value
£000
Carrying
amount
£000
Fair value
£000
Financial assets held for trading (including all derivatives)
Forward exchange contracts (note 14)
Interest rate swaps (note 14)
Fuel forward contracts (note 14)
Available for sale financial assets
Investment in non-equity share capital and loans (note 14)
Total financial assets at fair value through profit or loss
Loans and receivables
Cash and cash equivalents (note 16)
Trade and other receivables (note 15)
Loans to related parties (note 14)
Total loans and receivables
Total financial assets
Financial liabilities (including all derivatives)
Interest rate swaps (note 14)
Forward exchange contracts (note 14)
Fuel forward contracts (note 14)
Finance lease liabilities
Other financial liabilities
156
926
78
14,709
15,869
59,824
53,560
4,539
117,923
133,792
–
(2,333)
–
(77)
(9,675)
156
926
78
14,709
15,869
59,824
45,064
4,539
109,427
125,296
–
(2,333)
–
(77)
(9,675)
Total financial liabilities at fair value through profit or loss
(12,085)
(12,085)
Financial liabilities measured at amortised cost
Other interest-bearing loans and borrowings (note 17)
Trade payables (note 18)
Total financial liabilities measured at amortised cost
Total financial liabilities
Total financial instruments
(194,519)
(106,709)
(194,519)
(106,709)
(301,228)
(301,228)
(313,313)
(179,521)
(313,313)
(188,017)
1,757
521
106
12,563
14,947
56,345
45,865
3,416
105,626
120,573
(1,112)
(278)
–
(258)
(7,884)
(9,532)
(209,296)
(98,680)
(307,976)
(317,508)
(196,935)
1,757
521
106
12,563
14,947
56,345
45,865
3,416
105,626
120,573
(1,112)
(278)
–
(258)
(7,884)
(9,532)
(209,296)
(98,680)
(307,976)
(317,508)
(196,935)
147
Pets at Home Group PlcAnnual Report and Accounts 2018 Financial statements 21 Financial instruments (continued)
Company
Loans and receivables
Cash and cash equivalents (note 16)
Trade and other receivables (note 15)
Total loans and receivables
Total financial assets
Financial liabilities held for trading (including all derivatives)
Interest rate swaps (note 14)
Total financial assets at fair value through profit or loss
Financial liabilities measured at amortised cost
Other interest-bearing loans and borrowings (note 17)
Trade and other payables (note 18)
Total financial liabilities
Total financial instruments
29 March 2018
30 March 2017
Carrying
amount
£000
1,717
576,795
578,512
578,512
Fair value
£000
1,717
576,795
578,512
578,512
–
–
–
–
(194,519)
(268,706)
(194,519)
(268,706)
(463,225)
(463,225)
(463,225)
(463,225)
115,287
115,287
Carrying
amount
£000
1
576,795
576,796
576,796
(591)
(591)
(209,296)
(207,612)
(416,908)
(417,499)
159,297
Fair value
£000
1
576,795
576,796
576,796
(591)
(591)
(209,296)
(207,612)
(416,908)
(417,499)
159,297
Fair value hierarchy
The table below analyses financial instruments measured at fair value into a fair value hierarchy based on the valuation
technique used to determine fair value.
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Level 1
£000
Level 2
£000
Level 3
£000
Total
£000
–
–
–
–
–
–
–
–
14,709
14,709
926
78
–
–
(2,333)
–
–
–
–
–
–
(9,675)
926
78
–
–
(2,333)
(9,675)
Group
29 March 2018
Available for sale financial assets
Investments
Derivative financial assets
Interest rate swaps
Fuel forward contracts
Forward rate contracts
Derivative financial liabilities
Interest rate swaps
Forward rate contracts
Other financial liabilities
148
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2018 30 March 2017
Available for sale financial assets
Investments
Derivative financial assets
Interest rate swaps
Fuel forward contracts
Forward rate contracts
Derivative financial liabilities
Interest rate swaps
Forward rate contracts
Other financial liabilities
Level 1
£000
Level 2
£000
Level 3
£000
Total
£000
–
–
–
–
–
–
–
–
12,563
12,563
521
106
1,757
(1,112)
(278)
–
–
–
–
–
–
(7,854)
521
106
1,757
(1,112)
(278)
(7,854)
Financial instruments that are within level 3 of the hierarchy are investments and other financial liabilities. Valuation techniques
for the investments are disclosed within note 14. The other financial liability includes the fair values of the put and call options
over the non-controlling interests of subsidiary undertakings and contingent consideration in relation to acquisitions. The fair
values represent the best estimate of amounts payable under an agreed valuation model, based on future earnings performance
discounted to present value.
A reconciliation of the level 3 hierarchy of financial instruments has been provided below:
Balance at 30 March 2017
Additions
Charged to Non-underlying
Unwinding of discount
Balance at 29 March 2018
Balance at 31 March 2016
Additions
Arising on acquisition
Balance at 30 March 2017
Other financial
liabilities
£000
Investments
£000
(7,885)
–
(1,625)
(165)
(9,675)
12,563
2,146
–
–
14,709
Other financial
liabilities
£000
Investments
£000
(5,413)
–
(2,472)
(7,885)
9,143
3,420
–
12,563
Total
£000
4,678
2,146
(1,625)
(165)
5,034
Total
£000
3,730
3,420
(2,472)
4,678
Company
The Company had no derivative financial liabilities as at 29 March 2018
30 March 2017
Derivative financial liabilities
Interest rate swaps
Level 1
£000
Level 2
£000
Level 3
£000
Total
£000
–
(591)
–
(591)
149
Pets at Home Group PlcAnnual Report and Accounts 2018 Financial statements 21 Financial instruments (continued)
Capital management
The Group’s objectives when managing capital, which is deemed to be total equity plus total debt, are to safeguard the Group’s
ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders, through
the optimisation of the debt and equity balance, and to maintain a strong credit rating and headroom on financial covenants.
The Group manages its capital structure and makes appropriate decisions in light of the current economic conditions and
strategic objectives of the Group.
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain
future development of the Group.
The funding requirements of the Group are met by the utilisation of external borrowings together with available cash, as
detailed in note 17.
A key objective of the Group’s capital management is to maintain compliance with the covenants set out in the Senior Financing
Facilities and to maintain a comfortable level of headroom over and above these requirements.
Management have continued to measure and monitor covenant compliance throughout the period and the Group has
complied with the requirements set.
22 Share based payments
At 29 March 2018, the Group has five share award plans all of which are equity settled schemes.
The Co-Invest Plan (CIP)
1
On 25 February 2014 the Company adopted the Co-Invest Plan (CIP). Matching awards under the CIP (as described in section
1(b) below) were made on 17 March 2014 to Executive Directors and the Senior Executives by reference to corresponding
investment pledges by those colleagues.
These matching awards vested over a period of three years subject to the satisfaction of performance conditions and, once
vested as to performance, will become exercisable in equal one-third tranches in years three, four and five subject to continued
employment with the Group. These awards were granted at nil cost.
(a) Eligibility
Only the Executive Directors, the Senior Executives and certain other senior colleagues were selected to participate in the CIP.
(b) Type of awards
Colleagues were invited to participate in the CIP by making an ‘investment’ or ‘pledge’ of their own shares (the “Co-Invest
Shares”), which could include existing, locked-in shares or new shares acquired with cash, in return for a nil cost-matching
award over shares (the “Matching Award”).
Matching Awards will be granted by reference to a ratio not exceeding one matched share for every Co-Invest Share ‘pledged’.
Matching Awards under the CIP will not form part of a participant’s pensionable earnings and are not transferable other than
on death.
(c) Individual limits
The Executive Directors and the Senior Executives pledged Co-Invest Shares with a market value equal to 2.5 times their annual
salary. Other senior colleagues who elected to participate in the CIP pledged Co-Invest Shares with a market value equal to a
limit specified by the Remuneration Committee, but not exceeding 1 times their annual salary.
150
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2018 (d) Performance, vesting and performance adjustment
The Matching Awards granted on 17 March 2014 vested subject to the satisfaction of the performance conditions outlined
below. To the extent that any future awards are granted, different conditions may apply (in the absolute discretion of the
Remuneration Committee).
The performance conditions are as follows:
• 75% of the Matching Award was subject to the CAGR in the Company’s earnings per share (EPS) over three financial years,
namely FY15, FY16 and FY17 (together the “Performance Period”) (which, for the avoidance of doubt, ended on 30 March 2017).
If the CAGR in the Company’s EPS was 10%, then 10% of the total Matching Award would vest. If the CAGR in the Company’s EPS
was 17.5% or more, then 75% of the total Matching Award would vest. Vesting is on a straight-line basis between these two
points. For the avoidance of doubt, if the CAGR in EPS was less than 10% over the Performance Period then the amount of the
Matching Award which would vest under this EPS performance condition would be nil.
• 25% of the total Matching Award was subject to the Company’s total shareholder return (TSR) as compared to a comparator
group made up of a selected group of retail companies over the Performance Period. Vesting of 6.25% of the total Matching
Award would occur for median performance. Vesting of the maximum 25% of the total Matching Award would occur for upper
quartile performance or above. Vesting would occur on a straight-line basis between these two points. If the Company’s TSR
performance over the Performance Period was below median, then the amount of the Matching Award which would vest
under this TSR performance condition would be nil.
• To the extent vested as to performance, Matching Awards became exercisable in three equal amounts on the third, fourth and
fifth anniversary of 17 March 2014, but subject to continued employment with the Group.
CSOP
2
On 25 February 2014 the Company adopted the CSOP. Part I of the CSOP is tax approved under Schedule 4 to the Income Tax
(Earnings and Pensions) Act 2003 and provides for the grant of tax approved options. Part II of the CSOP provides for the grant
of unapproved options.
The tax approved options under Part I of the CSOP will be exercisable between the third and tenth anniversary of the date of
grant, subject to continued employment with the Group. These awards will be granted with an exercise price equal to the
market value of the shares at the grant date (as agreed with HMRC).
(a) Eligibility
All colleagues, including the Executive Directors and Senior Executives, are eligible to participate in the CSOP, at the discretion
of the Remuneration Committee.
(b) Grant of options
No options may be granted more than ten years after the adoption of the CSOP. Options under the CSOP will not form part
of a colleague’s pensionable earnings.
(c) Vesting and performance
Colleagues who receive options under the CSOP and under the PSP in connection with Admission will be subject to the same
performance conditions described in section 1 (d) above in respect of both grants. Colleagues who only receive options under
the CSOP in connection with Admission will not be subject to performance conditions.
(d) Exercise price
The price at which an option holder may acquire shares on the exercise of an option shall be determined by the Board but shall
not be less than the greater of market value of a share at the time of grant and its nominal value. The exercise price is therefore
fixed at grant date.
(e) Individual limits
No option may be granted to an eligible colleague under Part I of the CSOP which would result in the aggregate exercise prices
of shares comprised in all outstanding options granted to him/her under Part I, when aggregated with outstanding options held
under any other tax approved executive share option scheme established by the Company, exceeding the tax approved limit
(currently £30,000).
In addition, (both under Part I and II of the CSOP) the aggregate exercise price of shares comprised in options granted to a
colleague under the CSOP and the PSP in any financial year shall not exceed 150% of his/her annual salary for that year.
For the purposes of these limits, market value will be calculated by reference to the market value of the shares on or prior to
the relevant date of grant as determined by the Board (following consultation with the Remuneration Committee) and subject
to HMRC approval if applicable.
151
Pets at Home Group PlcAnnual Report and Accounts 2018 Financial statements 22 Share based payments (continued)
Part II of the CSOP provides for the grant of unapproved options. This enables options to be granted under the same terms as
Part I of the CSOP but without complying with the particular requirements of the legislation applicable to tax approved CSOP
Schemes. The provisions of the CSOP that do not apply under Part II include the £30,000 limit and the need to seek HMRC
approval for the scheme and subsequent amendments (as applicable).
PSP
3
On 25 February 2014 the Company adopted the PSP. Awards under the PSP were made on 17 March 2014 and annually
thereafter up until 2017 after which no further awards were granted. The awards will be exercisable between the third and tenth
anniversary of this date, subject to continued employment with the Group and the satisfaction of performance conditions.
These awards were granted at nil cost.
(a) Eligibility
Only the Executive Directors, the Senior Executives and certain other senior colleagues were selected to participate in the PSP.
(b) Grant of awards
Awards under the PSP will not form part of a colleague’s pensionable earnings. Awards are not transferable (other than on
death) without the consent of the Remuneration Committee.
(c) Exercise price
The price at which a colleague may acquire shares on the exercise or vesting of an award under the PSP shall be determined
by the Remuneration Committee on the date of grant, and may, if the Remuneration Committee determines, be nil or nominal
value only.
(d) Scheme limits
The number of newly issued shares over which (or in respect of which) awards may be granted under the PSP on any date shall
be limited so that: (i) the total number of shares issued and issuable in respect of options or awards granted in any ten-year
period under the PSP and any other discretionary share option scheme of the Company (including the CIP, RSA and the CSOP
but other than to satisfy dividend equivalent payments) is restricted to 5% of the Company’s issued shares calculated at the
relevant time; and (ii) the total number of shares issued and issuable pursuant to options or awards granted in any ten-year
period under the PSP and any other employee share scheme operated by the Company (including the CIP, CSOP, SAYE and RSA
but other than to satisfy dividend equivalent payments) is restricted to 10% of the Company’s issued shares calculated at the
relevant time.
For the purposes of these limits, no account will be taken of options or awards granted before, on or in connection with
Admission and no account will be taken of options or awards which have lapsed, been surrendered or otherwise become
incapable of exercise or vesting. Shares held in treasury will be treated as newly issued shares for the purposes of these limits (as
long as this is required by institutional investor guidelines), but (for the avoidance of doubt) shares acquired in the market will not.
(e) Individual limits
The aggregate market value of shares comprised in awards granted to a colleague under the PSP, RSA and the CSOP in any
financial year shall not exceed 150% of their annual salary for that year.
For the purposes of awards granted on (or before) Admission, market value for these purposes was calculated by reference to
the Offer Price. For the purposes of awards granted following Admission, market value for these purposes will be calculated by
reference to the market value of the shares on the relevant date of grant as determined by the Board (following consultation
with the Remuneration Committee) in its absolute discretion.
(f) Performance
For awards granted on, or in connection with, Admission, the performance conditions are the same as for the CIP outlined in
Section 1(d) above.
SAYE
4
On 25 February 2014, the Company adopted the SAYE (which was registered with and self-certified with HMRC on 4 April 2015).
The rules of the SAYE were adopted pursuant to Schedule 3 of the Income Tax (Earnings and Pensions) Act 2003 and provide
for the grant of tax approved options. In September each year, the Company issues invitations under the rules of the SAYE which
provides eligible colleagues with an opportunity to receive share options at a 20% discount to the market price. The maximum
monthly savings is £500 per month. The Executive Directors have elected to participate in the Sharesave, along with 30% of
eligible colleagues.
152
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2018 The options are granted once a year, and in normal circumstances they are not exercisable until completion of a three-year
savings period, beginning on 1 December each year, and will then be exercisable for a period of six months following
completion of the relevant savings period.
(a) Eligibility
All colleagues and full-time Directors of the Group, who have been in continuous service for such period of time (not exceeding
five years) as may be determined by the Board prior to the relevant date of grant of an option and who are liable to UK income
tax, are eligible to participate in the SAYE.
Participation may also be offered, at the discretion of the Board (taking account of the recommendations of the Remuneration
Committee), to other Directors or employees who otherwise do not satisfy all of the above criteria, although Non-Executive
Directors are not eligible to participate in the SAYE.
(b) Issue of invitations
Invitations to participate in the SAYE may be made during each 42 day period from (and including) (i) the date on which any
amendment to the SAYE is approved or adopted by the Company’s shareholders (ii) the announcement of the Company’s final
or interim results for any financial period, (iii) the occurrence of an event which the Remuneration Committee considers to be
an Non-underlying event concerning the Group or (iv) changes to the legislation affecting tax approved SAYE option schemes
coming into effect. If any of the above periods is a ‘close period’ as a result of the application of the Model Code for Securities
Transactions by Directors of Listed Companies (or as a result of the Company’s equivalent internal share dealing rules) and the
Company is prohibited from issuing invitations and/or granting options as a result, then invitations may be made within 42 days
of the end of the close period.
Invitations may be issued by the trustee of an employee benefit trust. No invitations may be issued or options granted more
than ten years after the adoption of the SAYE.
(c) Exercise price
The price at which an option holder may acquire shares on the exercise of an option shall be determined by the Board but shall
not be less than the greater of 80% of the market value of a share at the time of grant and its nominal value.
(d) Savings contract
Options may be granted by the Board or the trustee of an employee benefit trust. Upon applying for an option, the colleague
will be required to enter into an approved savings contract with a savings institution nominated by the Company which lasts for
three years. The maximum amount which an employee is permitted to contribute under SAYE contracts is £500 per month. The
Board may set lower savings limits than this for different colleagues by reference to objective criteria such as levels of salary or
length of service. The minimum contribution is £5 per month (or such greater amount as the Board may specify, not to exceed
£10). The total exercise price of the shares over which the option is granted may not exceed the aggregate of the monthly
contributions and bonus payable at the end of the colleague’s related SAYE contract.
(e) Scheme limits
The number of newly issued shares over which (or in respect of which) options may be granted under the SAYE on any date
of grant shall be limited so that the total number of shares issued or capable of being issued in any ten-year period under all
the Company’s employee share schemes (including the CIP, CSOP, PSP and SIP but other than to satisfy dividend equivalent
payments) is restricted to 10% of the Company’s issued shares calculated at the relevant time. Any options or rights to acquire
shares granted before, on or in connection with Admission will be excluded from this limit, and no account will be taken of
options or awards which have lapsed, been surrendered or otherwise become incapable of exercise or vesting.
(f) Exercisability
Options will normally be exercisable during a period of six months following the allocation of a bonus under the related SAYE
contract and will normally lapse upon cessation of employment. Earlier exercise is, however, permitted if the colleague dies or
leaves employment through injury, disability, redundancy or retirement or where a colleague leaves employment of the Group
by reason of his employing company ceasing to be a member of the Group, or if the undertaking in which he is employed is
sold outside the Group. Early exercise will also be permitted in the event of a takeover, reconstructions or voluntary winding
up of the Company.
153
Pets at Home Group PlcAnnual Report and Accounts 2018 Financial statements RSA
22 Share based payments (continued)
5
On 20 July 2017 the Company adopted the RSA. Awards under the RSA were made on 20 July 2017 and annually thereafter
and will be exercisable between the third and tenth anniversary of this date, subject to continued employment with the Group
and the satisfaction of performance conditions. These awards were granted at nil cost.
(a) Eligibility
All colleagues, including the Executive Directors and Senior Executives, are eligible to participate in the RSA, at the discretion
of the Remuneration Committee.
(b) Grant of awards
Awards under the RSA will not form part of a colleague’s pensionable earnings. Awards are not transferable (other than on
death) without the consent of the Remuneration Committee.
(c) Exercise price
The price at which a colleague may acquire shares on the exercise or vesting of an award under the RSA shall be determined
by the Remuneration Committee on the date of grant, and may, if the Remuneration Committee determines, be nil or nominal
value only.
(d) Scheme limits
The number of newly issued shares over which (or in respect of which) awards may be granted under the RSA on any date
shall be limited so that: (i) the total number of shares issued and issuable in respect of options or awards granted in any ten-year
period under the RSA and any other discretionary share option scheme of the Company (including the CIP, PSP and the CSOP
but other than to satisfy dividend equivalent payments) is restricted to 5% of the Company’s issued shares calculated at the
relevant time; and (ii) the total number of shares issued and issuable pursuant to options or awards granted in any ten-year
period under the RSA and any other employee share scheme operated by the Company (including the CIP, CSOP, SAYE and PSP
but other than to satisfy dividend equivalent payments) is restricted to 10% of the Company’s issued shares calculated at the
relevant time.
For the purposes of these limits, no account will be taken of options or awards granted before, on or in connection with
Admission and no account will be taken of options or awards which have lapsed, been surrendered or otherwise become
incapable of exercise or vesting. Shares held in treasury will be treated as newly issued shares for the purposes of these limits
(as long as this is required by institutional investor guidelines), but (for the avoidance of doubt) shares acquired in the market
will not.
(e) Individual limits
The aggregate market value of shares comprised in awards granted to a colleague under the RSA, PSP and the CSOP in any
financial year shall not exceed 150% of their annual salary for that year. Market value for these purposes will be calculated by
reference to the market value of the shares on the relevant date of grant as determined by the Board (following consultation
with the Remuneration Committee) in its absolute discretion.
Fair value of share awards
The expected volatility is based on historical volatility of a peer group of companies over a relevant period prior to award.
The expected life is the average expected period to exercise, which has been taken as three years. The risk free rate of return
is the yield on zero-coupon UK government bonds with a life equal to this expected life.
Options are valued using a Black-Scholes option-pricing model for the non-market based (EPS element) performance
conditions and a Monte-Carlo simulation for the market-based (TSR element) performance conditions.
Special provisions allow early exercise in the case of death, injury, disability, redundancy, retirement or because the Company
which employs the option holder ceases to be part of the Group, or in the event of a change in control, reconstruction or
winding up of the Company.
154
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2018 The key assumptions used in the fair value of the awards were as follows:
At grant date
Share price
Exercise price
Expected volatility
Option life (years)
Expected dividend yield
Risk free interest rate
Weighted average fair value of options granted
CIP
2015
PSP
2017
PSP
2016
PSP
2015
£2.45
£0.00
30%
3
2.00%
1.07%
£2.06
£2.59
£0.00
32%
10
2.00%
0.50%
£2.06
£2.75
£0.00
30%
10
2.00%
1.07%
£2.06
£2.45
£0.00
30%
10
2.00%
1.07%
£2.06
At grant date
Share price
Exercise price
Expected volatility
Option life (years)
Expected dividend yield
Risk free interest rate
Weighted average fair value of options granted
CSOP
SAYE
2017
2016
2015
2018
2017
2016
2015
£2.59
£2.59
32%
10
2.00
0.50%
£0.65
£2.75
£2.75
32%
10
2.00%
2.25%
£0.89
£2.31
£2.31
37%
10
2.00%
2.25%
£0.75
£1.97
£1.57
32%
3
2.00%
0.20%
£0.61
£2.46
£1.97
32%
3
2.00%
0.20%
£0.70
£2.88
£2.30
30%
3
2.00%
1.07%
£0.75
£1.75
£1.40
30%
3
2.00%
1.07%
£0.47
As both the CIP and PSP awards have a nil exercise price the risk free rate of return does not have any effect on the estimated
fair value.
Movements in awards under share based payment schemes:
Outstanding at start of year
Granted
Forfeited
Exercised
Lapsed
Outstanding at end of year
Weighted average exercise price
CIP
000
1,649
–
(736)
(86)
–
827
£0.00
PSP
000
3,406
–
(933)
(25)
–
2,448
£0.00
CSOP
000
6,331
–
(1,016)
(27)
–
5,288
£2.58
SAYE
000
6,880
2,901
(4,370)
(1,484)
–
3,927
£1.65
RSA
000
–
3,209
(475)
–
–
2,734
£0.00
Total
000
18,266
6,110
(7,530)
(1,622)
–
15,224
The Group income statement charge recognised in respect of share based payments for the current period is £3,936,000
(2017: £2,437,000).
23 Operating leases
Non-cancellable operating lease rentals are payable as follows:
Less than one year
Between one and five years
More than five years
Land and buildings
Other
At 29 March
2018
£000
77,808
281,088
228,955
At 30 March
2017
£000
76,738
284,115
244,079
At 29 March
2018
£000
3,380
5,883
795
At 30 March
2017
£000
3,607
4,881
263
587,851
604,932
10,058
8,751
Land and buildings relate to the hire of stores and other trading properties under operating leases. No lease is considered individually
significant and therefore there are no material contingent rents, renewal or purchase options or lease restrictions within the portfolio.
155
Pets at Home Group PlcAnnual Report and Accounts 2018 Financial statements 23 Operating leases (continued)
During the period ended 29 March 2018 £80,309,000 was recognised as an expense in the income statement in respect
of operating leases (period ended 30 March 2017: £77,486,000).
The Company does not have any operating leases.
Sublease income
The Group has a number of leases on properties from which it no longer trades. These properties are often sublet to third
parties at contracted rates. The income is recognised within selling and distribution expenses in line with the rents payable
as set out in the rental agreements. See note 3.
Less than one year
Between one and five years
More than five years
At 29 March
2018
£000
At 30 March
2017
£000
877
2,879
216
3,972
877
3,405
563
4,845
24 Commitments
Capital commitments
At 29 March 2018, the Group is committed to incur capital expenditure of £3,561,000 (30 March 2017: £1,387,000). Capital
commitments predominantly relate to the cost of investment in new IT systems and to fit out new Pets at Home stores.
At 29 March 2018, the Group has committed to provide funding to related party Joint Venture companies of £360,000
(30 March 2017: £615,000) which remains undrawn.
At 29 March 2018, the Group had a commitment to increase the loan funding to Joint Venture companies of £870,000
(30 March 2017: £1,080,000), this increase in funding is written into the Joint Venture agreements and become payable
when certain criteria are met.
25 Contingencies
Veterinary practices
Provisions are maintained by the Group, where necessary, against certain balances held with the veterinary practices. During
the period, the Group also had in place certain guarantees over the bank loans taken out by a number of veterinary practice
companies in which it holds an investment in non-participatory share capital. At the end of the period, the total amount of
bank overdrafts and loans guaranteed by the Group amounted to £9,490,000 (30 March 2017: £9,850,000).
The Group is also a guarantor for the lease for veterinary practices that are not located within Pets at Home stores.
26 Related parties
Veterinary practice transactions
The Group has entered into a number of arrangements with third parties in respect of veterinary practices. These veterinary
practices are deemed to be related parties due to the factors explained in note 1.4.
Financial commitments provided to related party veterinary practices for funding are set out in note 24.
During the period, the Group had in place certain guarantees over the bank loans taken out by a number of veterinary practice
companies in which it holds an investment in non-participatory share capital. At the end of the period, the total amount of bank
overdrafts and loans guaranteed by the Group amounted to £9,490,000 (30 March 2017: £9,850,000).
156
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2018 The transactions entered into during the period and the balances outstanding at the end of the period are as follows:
Transactions
• Fees for services provided to veterinary practices1
• Rental and other occupancy charges to veterinary practices
Total income from veterinary practices
Balances
Included within Trade and other receivables (note 15):
• Funding for new practices
• Trading balances
• Operating loans
• Gross value of operating loans
• Provision held for operating loans
• Net operating loans
Included within Other financial assets and liabilities (note 14):
• Loans to Joint Venture practices – initial set up loans
• Loans to other related parties (non-current) – other loans
• Loans to other related parties (current)
Included within Trade and other payables (note 18):
• Trading balances
Total amounts receivable from veterinary practices (before provisions)
29 March 2018
£000
30 March 2017
£000
53,112
11,653
64,765
1,595
–
38,011
(8,308)
29,703
14,194
4,539
–
(2,951)
55,388
45,754
10,686
56,440
2,435
1,998
23,176
(3,336)
19,840
12,054
3,416
–
(1,427)
41,652
1 The prior year fees for services provided to veterinary practices has been restated to reflect only income directly attributed to services provided to Joint Venture veterinary practices.
Fees for services provided to related party veterinary practices relate to charges for support services offered in such areas as
clinical development, promotion and methods of operation as well as service activities including accountancy, legal and property.
Funding for new practices represents the amounts advanced by the Group to support with surgery opening costs. The funding
is short term and the related party Joint Venture company draws down their own bank funding to settle these amounts
outstanding with the Group shortly after opening.
Trading balances represent costs incurred/income received by the Group in relation to the services provided to the veterinary
practices that have yet to be recharged.
Operating loans represent amounts advanced to related party veterinary practices to cover working capital requirements
and support their longer term growth. The loans do not attract interest and are repayable on demand, although they are
expected to be repaid over a number of years based on the projected cashflow forecast on a practice by practice basis, some
over an extended period of years. The balances above are shown net of provisions held for operating loans of £8,308,000
(2017: 3,336,000). The basis for this provision is discussed in note 1.23. In the 52 week period ended 29 March 2018, the value
of balances written off to the income statement amounted to £701,000 (period ended 30 March 2017: £1,221,000).
At 29 March 2018, the Group has committed to provide funding to related party Joint Venture companies of £360,000
(30 March 2017: £615,000) which remains undrawn.
At 29 March 2018, the Group had a commitment to increase the loan funding to Joint Venture companies of £870,000
(30 March 2017: £1,080,000); this increase in funding is written into the Joint Venture agreements and becomes payable
when certain criteria are met.
The Group is also a guarantor for the lease for veterinary practices that are not located within Pets at Home stores.
Key management personnel
Details of remuneration paid to key management personnel are set out in note 4.
157
Pets at Home Group PlcAnnual Report and Accounts 2018 Financial statements
27 Investments in subsidiaries
Company
At 29 March 2018 and 30 March 2017
Investments in
subsidiaries
£000
936,179
Registered office address
Pets at Home (Asia) Limited: Units 704 5A, 7/F, Tower B, Manulife Financial Centre, 223-231 Wai Yip Street, Kwun Tong, Kowloon, Hong Kong.
PAH Pty Limited: Herbert Greer & Rundle, Level 21, 385 Bourke Street, Melbourne, VIC 3000, Australia.
Pure Pet Food Ltd: Unit 6, Brookmills Saddleworth Road, Greetland, Halifax, West Yorkshire, England, HX4 8LZ.
The registered office of all the remaining companies in which the Group has an interest in the share capital is Epsom Avenue,
Stanley Green, Handforth, Cheshire, SK9 3RN.
Group
Details of the subsidiary undertakings are as follows:
Company
Dick White Referrals Limited
Eye-Vet Limited
Anderson Moores Veterinary Specialists Ltd
Brand Development Limited
Companion Care (Services) Limited
Companion Care Management Services Limited
Les Boues Limited
Northwest Surgeons Limited
PAH Pty Limited
Pet Investments Limited
Pets at Home (Asia) Limited
Pets at Home Financial Services Limited
Pets at Home Holdings Limited
Pets at Home Limited
Pets at Home No.1 Limited
Pets at Home Superstores Limited
Pets at Home Veterinary Specialist Group Limited
Pets at Home Vets Group Limited
Vets for Pets Limited
Vets4Pets GB Limited
Kestrel Debt Recovery Limited
Pets at Home (ESOT) Limited
Pet City Holdings Limited
Pet City Limited
Pet City Resources Limited
Vets 4 Pets Limited
Vets4Pets (Services) Limited
Vets4Pets Holdings Limited
Vets4Pets I.P. Limited
Vets4Pets Services Limited
Vets4Pets UK Limited
Vets4Pets Limited
Vets4Pets Veterinary Group Limited
Sombrero Holdings Limited
Sombrero Intl Holdings Limited
Caledonian Veterinary Specialists Limited
158
Holding
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Direct
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Country of
incorporation
Class of
shares held
At 29 March
2018 %
At 30 March
2017 %
United Kingdom
United Kingdom
United Kingdom
Guernsey
United Kingdom
United Kingdom
Jersey
United Kingdom
Australia
United Kingdom
Hong Kong
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Guernsey
Guernsey
United Kingdom
United Kingdom
Guernsey
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
76
90
75
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
100
100
100
100
100
100
100
100
100
100
76
90
75
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
0
0
0
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2018 Company
Addlestone Vets4Pets Limited
Barnstaple Vets4Pets Limited
Bedlington Vets4Pets Limited
Bishop Auckland Vets4Pets Limited
Blackburn Vets4Pets Limited
Bodmin Vets4Pets Limited
Bolton Central Vets4Pets Limited
Bracknell Vets4Pets Limited
Bradford Vets4Pets Limited
Bridlington Vets4Pets Limited
Bristol Longwell Green Vets4Pets Limited
Bromborough Vets4Pets Limited
Caledonian Veterinary Specialists Limited
Cambridge Perne Road Vets4Pets Limited
Canvey Vets4Pets Limited
Chorley Vets4Pets Limited
Coalville Vets4Pets Limited
Colchester Layer Road Vets4Pets Limited
Companion Care (Kendal) Limited
Companion Care (Nottingham) Limited
Companion Care (Slough) Limited
Coventry Canley Vets4Pets Limited
Craigleith Vets4Pets Limited
Crosby Vets4Pets Limited
Cross Hands Vets4Pets Limited
Croydon Vets4Pets Limited
Denbigh Vets4Pets Limited
Dundee Vets4Pets Limited
East Grinstead Vets4Pets Limited
Ellesmere Port Vets4Pets Limited
Falkirk Vets4Pets Limited
Feltham Vets4Pets Limited
Gillingham Vets4Pets Limited
Great Yarmouth Vets4Pets Limited
Havant Vets4Pets Limited
Hemsworth Vets4Pets Limited
Hexham Vets4Pets Limited
Hucknall Vets4Pets Limited
Inverness Vets4Pets Limited
Kingswood Vets4Pets Limited
Leamington Spa Vets4Pets Limited
Leven Vets4Pets Limited
Lichfield Vets4Pets Limited
Littleover Vets4Pets Limited
Long Eaton Vets4Pets Limited
Loughton Vets4Pets Limited
Melton Mowbray Vets4Pets Limited
Mexborough Vets4Pets Limited
Newark Vets4Pets Limited
Newbury Vets4Pets Limited
Newhaven Vets4Pets Limited
Holding
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Country of
incorporation
Class of
shares held
At 29 March
2018 %
At 30 March
2017 %
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
0
0
100
100
100
100
0
100
100
0
0
100
0
100
100
100
0
100
100
100
50
0
0
100
0
50
0
0
0
100
100
100
0
100
0
100
0
0
100
100
0
0
0
100
100
0
100
100
0
50
0
159
Pets at Home Group PlcAnnual Report and Accounts 2018 Financial statements 27 Investments in subsidiaries (continued)
Company
Norwich Vets4Pets Limited
Nottingham Castle Marina Vets4Pets Limited
Poynton Vets4Pets Limited
Ripon Vets4Pets Limited
Salford Vets4Pets Limited
Scunthorpe Vets4Pets Limited
Selby Vets4Pets Limited
Sheffield Heeley Vets4Pets Limited
Stocksbridge Vets4Pets Limited
Stoke-On-Trent Vets4Pets Limited
Street Vets4Pets Limited
Teesside Vets4Pets Limited
Telford Madeley Vets4Pets Limited
The Heart Of Dulwich Veterinary Care Limited
Tiverton Vets4Pets Limited
Totton Vets4Pets Limited
Uttoxeter Vets4Pets Limited
Warminster Vets4Pets Limited
Warrington Winnick Vets4Pets Limited
West Drayton Vets4Pets Limited
Yeovil Vets4Pets Limited
Holding
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Country of
incorporation
Class of
shares held
At 29 March
2018 %
At 30 March
2017 %
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
0
0
100
100
100
0
100
100
100
0
100
100
0
0
0
0
100
100
100
50
The Group holds an indirect interest in the share capital of the following companies:
Company
Aberdeen Vets4Pets Limited
Abingdon Vets4Pets Limited
Abtw Limited
Accrington Vets4Pets Limited
Airdrie Vets4Pets Limited
Alsager Vets4Pets Limited
Alton Vets4Pets Limited
Altrincham Vets4Pets Limited
Amesbury Vets4Pets Limited
Andover Vets4Pets Limited
Bagshot Vets4Pets Limited
Bangor Vets4Pets Limited
Bangor Wales Vets4Pets Limited
Barnsley Vets4Pets Limited
Barnwood Vets4Pets Limited
Barry Vets4Pets Limited
Bath Vets4Pets Limited
Bearsden Vets4Pets Limited
Bedford Vets4Pets Limited
Bedminster Vets4Pets Limited
Beeston Vets4Pets Limited
Belfast Stormont Vets4Pets Limited
Beverley Vets4Pets Limited
Bicester Vets4Pets Limited
Biggleswade Vets4Pets Limited
Bishops Stortford Vets4Pets Limited
160
Holding
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Country of
incorporation
Class of
shares held
At 29 March
2018 %
At 30 March
2017 %
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
100
50
50
50
50
50
100
50
50
50
50
50
50
100
50
50
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2018 Company
Bishopston Vets4Pets Limited
Bitterne Vets4Pets Limited
Blackheath Vets4Pets Limited
Blackpool Squires Gate Vets4Pets Limited
Blackpool Warbreck Vets4Pets Limited
Blackwood Vets4Pets Limited
Bolton Vets4Pets Limited
Bonnyrigg Vets4Pets Limited
Borehamwood Vets4Pets Limited
Bourne Vets4Pets Limited
Bramley Vets4Pets Limited
Brighouse Vets4Pets Limited
Bristol Emerson Green Vets4Pets Limited
Bristol Imperial Vets4Pets Limited
Bristol Kingswood Vets4Pets Limited
Bromsgrove Vets4Pets Limited
Buckingham Vets4Pets Limited
Bulwell Vets4Pets Limited
Burscough Vets4Pets Limited
Burton-On-Trent Vets4Pets Limited
Bury St Edmunds Vets4Pets Limited
Bury Vets4Pets Limited
Byfleet Vets4Pets Limited
Caerphilly Vets4Pets Limited
Camborne Vets4Pets Limited
Cannock Vets4Pets Limited
Canterbury Sturry Vets4Pets Limited
Cardiff Ely Vets4Pets Limited
Cardiff Road Vets4Pets Limited
Carlisle Vets4Pets Limited
Carmarthen Vets4Pets Limited
Carrickfergus Vets4Pets Limited
Castleford Vets4Pets Limited
Catterick Vets4Pets Limited
Chadwell Heath Vets4Pets Limited
Cheadle Hulme Vets4Pets Limited
Chester Caldy Vets4Pets Limited
Chester Vets4Pets Limited
Chesterfield Vets4Pets Limited
Cirencester Vets4Pets Limited
Clevedon Vets4Pets Limited
Cleveleys Vets4Pets Limited
Clifton Vets4Pets Limited
Clitheroe Vets4Pets Limited
Clowne Vets4Pets Limited
Colne Vets4Pets Limited
Companion Care (Aintree) Limited
Companion Care (Andover) Limited
Companion Care (Ashford) Limited
Companion Care (Ashton) Limited
Companion Care (Aylesbury) Limited
Holding
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Country of
incorporation
Class of
shares held
At 29 March
2018 %
At 30 March
2017 %
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
0
50
50
50
50
50
50
50
50
50
50
50
100
50
50
50
50
50
50
50
50
50
50
100
50
50
50
50
50
100
50
50
50
50
50
50
50
100
50
50
50
50
50
50
161
Pets at Home Group PlcAnnual Report and Accounts 2018 Financial statements 27 Investments in subsidiaries (continued)
Company
Companion Care (Ayr) Limited
Companion Care (Ballymena) Limited
Companion Care (Banbury) Limited
Companion Care (Barnsley Cortonwood) Limited
Companion Care (Basildon Pipps Hill) Limited
Companion Care (Basildon) Limited
Companion Care (Basingstoke) Limited
Companion Care (Beckton) Limited
Companion Care (Bedford) Limited
Companion Care (Belfast) Limited
Companion Care (Bishopbriggs) Limited
Companion Care (Bletchley) Limited
Companion Care (Bolton) Limited
Companion Care (Bournemouth) Limited
Companion Care (Braintree) Limited
Companion Care (Brentford) Limited
Companion Care (Bridgend) Limited
Companion Care (Bridgwater) Limited
Companion Care (Brislington) Limited
Companion Care (Bristol Filton) Limited
Companion Care (Broadstairs) Limited
Companion Care (Burgess Hill) Limited
Companion Care (Cambridge Beehive) Limited
Companion Care (Cambridge) Limited
Companion Care (Cannock) Limited
Companion Care (Canterbury) Limited
Companion Care (Cardiff) Limited
Companion Care (Charlton) Limited
Companion Care (Chatham) Limited
Companion Care (Chelmsford) Limited
Companion Care (Cheltenham) Limited
Companion Care (Chesterfield) Limited
Companion Care (Chichester) Limited
Companion Care (Chingford) Limited
Companion Care (Chippenham) Limited
Companion Care (Christchurch) Limited
Companion Care (Colchester) Limited
Companion Care (Corstorphine) Limited
Companion Care (Coventry Walsgrave) Limited
Companion Care (Cramlington) Limited
Companion Care (Crawley) Limited
Companion Care (Crayford) Limited
Companion Care (Croydon) Limited
Companion Care (Derby Kingsway) Limited
Companion Care (Derby) Limited
Companion Care (Dunstable) Limited
Companion Care (Eastbourne) Limited
Companion Care (Ely) Limited
Companion Care (Enfield) Limited
Companion Care (Exeter Marsh) Limited
Companion Care (Exeter) Limited
162
Holding
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Country of
incorporation
Class of
shares held
At 29 March
2018 %
At 30 March
2017 %
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
30
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2018 Company
Companion Care (Falmouth) Limited
Companion Care (Fareham Collingwood) Limited
Companion Care (Fareham) Limited
Companion Care (Farnborough) Limited
Companion Care (Farnham) Limited
Companion Care (Folkestone) Limited
Companion Care (Fort Kinnaird) Limited
Companion Care (Friern Barnet) Limited
Companion Care (Gloucester) Limited
Companion Care (Harlow) Limited
Companion Care (Hatfield) Limited
Companion Care (Hemel Hempstead) Limited
Companion Care (High Wycombe) Limited
Companion Care (Hove) Limited
Companion Care (Huddersfield) Limited
Companion Care (Huntingdon) Limited
Companion Care (Ilford) Limited
Companion Care (Ipswich Martlesham) Limited
Companion Care (Keighley) Limited
Companion Care (Kidderminster) Limited
Companion Care (Kings Lynn) Limited
Companion Care (Kirkcaldy) Limited
Companion Care (Leicester Beaumont Leys) Limited
Companion Care (Leicester Fosse Park) Limited
Companion Care (Leighton Buzzard) Limited
Companion Care (Linwood) Limited
Companion Care (Lisburn) Limited
Companion Care (Liverpool Penny Lane) Limited
Companion Care (Livingston) Limited
Companion Care (Llantrisant) Limited
Companion Care (Macclesfield) Limited
Companion Care (Maidstone) Limited
Companion Care (Merry Hill) Limited
Companion Care (Milton Keynes) Limited
Companion Care (New Malden) Limited
Companion Care (Newbury) Limited
Companion Care (Newcastle Kingston Park) Limited
Companion Care (Newport) Limited
Companion Care (Northampton Nene Valley) Limited
Companion Care (Norwich Hall Road) Limited
Companion Care (Norwich Longwater) Limited
Companion Care (Norwich) Limited
Companion Care (Oldbury) Limited
Companion Care (Oldham) Limited
Companion Care (Orpington) Limited
Companion Care (Oxford) Limited
Companion Care (Perth) Limited
Companion Care (Peterborough Bretton) Limited
Companion Care (Peterborough) Limited
Companion Care (Plymouth) Limited
Companion Care (Poole) Limited
Holding
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Country of
incorporation
Class of
shares held
At 29 March
2018 %
At 30 March
2017 %
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
100
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
163
Pets at Home Group PlcAnnual Report and Accounts 2018 Financial statements 27 Investments in subsidiaries (continued)
Company
Companion Care (Portsmouth) Limited
Companion Care (Preston Capitol) Limited
Companion Care (Pudsey) Limited
Companion Care (Reading) Limited
Companion Care (Redditch) Limited
Companion Care (Redhill) Limited
Companion Care (Romford) Limited
Companion Care (Rotherham) Limited
Companion Care (Rustington) Limited
Companion Care (Salisbury) Limited
Companion Care (Scarborough) Limited
Companion Care (Southampton) Limited
Companion Care (Southend-On-Sea) Limited
Companion Care (Speke) Limited
Companion Care (Stevenage) Limited
Companion Care (Stirling) Limited
Companion Care (Stockport) Limited
Companion Care (Stoke Festival Park) Limited
Companion Care (Stratford-Upon-Avon) Limited
Companion Care (Swansea) Limited
Companion Care (Swindon) Limited
Companion Care (Tamworth) Limited
Companion Care (Taunton) Limited
Companion Care (Telford) Limited
Companion Care (Thamesmead) Limited
Companion Care (Truro) Limited
Companion Care (Tunbridge Wells) Limited
Companion Care (Wakefield) Limited
Companion Care (Weston-Super-Mare) Limited
Companion Care (Winchester) Limited
Companion Care (Winnersh) Limited
Companion Care (Woking) Limited
Companion Care (Woolwell) Limited
Companion Care (Worcester) Limited
Companion Care (Wrexham Holt Road) Limited
Corby Vets4Pets Limited
Craigavon Vets4Pets Limited
Crescent Link Vets4Pets Limited
Crewe Vets4Pets Limited
Dagenham Vets4Pets Limited
Darlington Vets4Pets Limited
Daventry Vets4Pets Limited
Davidsons Mains Vets4Pets Limited
Denton Vets4Pets Limited
Dewsbury Vets4Pets Limited
Doncaster Vets4Pets Limited
Dorchester Vets4Pets Limited
Dover Vets4Pets Limited
Droitwich Vets4Pets Limited
Drumchapel Vets4Pets Limited
Dudley Vets4Pets Limited
164
Holding
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Country of
incorporation
Class of
shares held
At 29 March
2018 %
At 30 March
2017 %
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
98
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
60
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
100
50
50
50
50
50
50
50
50
50
50
50
50
100
50
50
50
100
50
50
50
60
50
50
50
50
50
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2018 Company
Dumbarton Vets4Pets Limited
Dunfermline Vets4Pets Limited
Durham Vets4Pets Limited
East Kilbride South Vets4Pets Limited
Eastleigh Vets4Pets Limited
Eastwood Vets4Pets Limited
Eccleshill Vets4Pets Limited
Epsom Vets4Pets Limited
Evesham Vets4Pets Limited
Filton Vets4Pets Limited
Gamston Vets4Pets Limited
Gateshead Vets4Pets Limited
Glasgow Forge Vets4Pets Limited
Goldenhill Vets4Pets Limited
Gosport Vets4Pets Limited
Grantham Vets4Pets Limited
Gravesend Vets4Pets Limited
Greasby Vets4Pets Limited
Greenford Vets4Pets Limited
Grimsby Vets4Pets Limited
Guernsey Vets4Pets Limited
Halesowen Vets4Pets Limited
Halifax Vets4Pets Limited
Hamilton Vets4Pets Limited
Harrogate New Park Vets4Pets Limited
Harrogate Vets4Pets Limited
Hartlepool Vets4Pets Limited
Hastings Vets4Pets Limited
Haverfordwest Vets4Pets Limited
Haverhill Vets4Pets Limited
Hayling Island Vets4Pets Limited
Hedge End Vets4Pets Limited
Hemel Hempstead Vets4Pets Limited
Hendon Vets4Pets Limited
Hereford Vets4Pets Limited
Hertford Vets4Pets Limited
High Wycombe Vets4Pets Limited
Hinckley Vets4Pets Limited
Huddersfield Vets4Pets Limited
Hull Anlaby Vets4Pets Limited
Hull Stoneferry Vets4Pets Limited
Hull Vets4Pets Limited
Ilkeston Vets4Pets Limited
Inverurie Vets4Pets Limited
Ipswich Vets4Pets Limited
Irvine Vets4Pets Limited
Kendal Vets4Pets Limited
Kettering Vets4Pets Limited
Kidderminster Vets4Pets Limited
Kilmarnock Vets4Pets Limited
Kirkby in Ashfield Vets4Pets Limited
Holding
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Country of
incorporation
Class of
shares held
At 29 March
2018 %
At 30 March
2017 %
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
100
50
50
50
50
100
100
50
0
50
50
50
50
50
50
50
50
50
50
50
0
50
100
50
50
50
50
50
165
Pets at Home Group PlcAnnual Report and Accounts 2018 Financial statements 27 Investments in subsidiaries (continued)
Company
Lancaster Vets4Pets Limited
Larne Vets4Pets Limited
Launceston Vets4Pets Limited
Leeds Birstall Vets4Pets Limited
Leeds Colton Vets4Pets Limited
Leeds Kirkstall Vets4Pets Limited
Leeds Vets4Pets Limited
Leicester St Georges Vets4Pets Limited
Leigh Vets4Pets Limited
Leigh-On-Sea Vets4Pets Limited
Letchworth Vets4Pets Limited
Leyland Vets4Pets Limited
Lincoln South Vets4Pets Limited
Linlithgow Vets4Pets Limited
Lisburn Longstone Vets4Pets Limited
Liverpool OS Vets4Pets Limited
Llandudno Vets4Pets Limited
Llanelli Vets4Pets Limited
Llanrumney Vets4Pets Limited
Longton Vets4Pets Limited
Loughborough Vets4Pets Limited
Luton Gipsy Lane Vets4Pets Limited
Luton Vets4Pets Limited
Lytham Vets4Pets Limited
Maidenhead Vets4Pets Limited
Maidstone Vets4Pets Limited
Maldon Vets4Pets Limited
Malvern Vets4Pets Limited
Mansfield Vets4Pets Limited
Mapperley Vets4Pets Limited
Market Harborough Vets4Pets Limited
Marlborough Vets4Pets Limited
Merthyr Tydfil Vets4Pets Limited
Middlesbrough Cleveland Park Vets4Pets Limited
Middlesbrough Vets4Pets Limited
Middleton Vets4Pets Limited
Millhouses Vets4Pets Limited
Monmouth Vets4Pets Limited
Morpeth Vets4Pets Limited
Musselburgh Vets4Pets Limited
New Milton Vets4pets Limited
Newcastle-Upon-Tyne Vets4Pets Limited
Newmarket Vets4Pets Limited
Newport Vets4Pets Limited
Newton Abbot Vets4Pets Limited
Newton Mearns Vets4Pets Limited
Newtownabbey Vets4Pets Limited
Newtownards Vets4Pets Limited
North Tyneside Vets4Pets Limited
Northallerton Vets4Pets Limited
Northampton Riverside Vets4Pets Limited
166
Holding
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Country of
incorporation
Class of
shares held
At 29 March
2018 %
At 30 March
2017 %
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
0
50
50
0
100
50
100
100
50
50
0
50
100
50
50
50
50
50
50
50
50
50
50
50
50
50
100
50
50
100
50
50
50
50
50
50
0
50
100
50
50
50
50
50
50
50
100
50
0
50
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2018 Company
Northampton Vets4Pets Limited
Northwich Vets4Pets Limited
Nottingham Chilwell Vets4Pets Limited
Nottingham Netherfield Vets4Pets Limited
Nuneaton Vets4Pets Limited
Oadby Vets4Pets Limited
Old Kent Road Vets4Pets Limited
Oxford Cowley Vets4Pets Limited
Paisley Vets4Pets Limited
Penrith Vets4Pets Limited
Pentland Vets4Pets Limited
Peterborough Vets4Pets Limited
Pontypridd Vets4Pets Limited
Poole Vets4Pets Limited
Portishead Vets4Pets Limited
Portsmouth Vets4Pets Limited
Prenton Vets4Pets Limited
Prescot Vets4Pets Limited
Preston Vets4Pets Limited
Prestwich Vets4Pets Limited
Pure Pet Food Ltd
Quinton Vets4Pets Limited
Rawtenstall Vets4Pets Limited
Rayleigh Vets4Pets Limited
Redditch Vets4Pets Limited
Rhyl Vets4Pets Limited
Richmond Vets4Pets Limited
Rochdale Vets4Pets Limited
Rotherham Vets4Pets Limited
Rugby Vets4Pets Limited
Rugby Central Vets4Pets Limited
Ruislip Vets4Pets Limited
Rushden Vets4Pets Limited
Selly Oak Vets4Pets Limited
Sevenoaks Vets4Pets Limited
Sheffield Drakehouse Vets4Pets Limited
Sheffield Vets4Pets Limited
Sheffield Wadsley Bridge Vets4Pets Limited
Sheldon Vets4Pets Limited
Shelfield Vets4Pets Limited
Shrewsbury Meole Brace Vets4Pets Limited
Shrewsbury Vets4Pets Limited
Sidcup Vets4Pets Limited
Sittingbourne Vets4Pets Limited
Solihull Vets4Pets Limited
Somercotes Vets4Pets Limited
South Shields Quays Vets4Pets Limited
South Shields Vets4Pets Limited
Southampton Vets4Pets Limited
Southend Airport Vets4Pets Limited
Southend-On-Sea Vets4Pets Limited
Holding
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Country of
incorporation
Class of
shares held
At 29 March
2018 %
At 30 March
2017 %
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
33
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
0
50
100
0
50
50
50
50
50
50
50
50
50
0
50
50
50
50
100
33
50
50
50
50
100
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
167
Pets at Home Group PlcAnnual Report and Accounts 2018 Financial statements 27 Investments in subsidiaries (continued)
Company
Southport Vets4Pets Limited
St Albans Vets4Pets Limited
St Austell Vets4Pets Limited
St Helens Vets4Pets Limited
St Neots Vets4Pets Limited
Stafford Vets4Pets Limited
Stechford Vets4Pets Limited
Stockton Vets4Pets Limited
Stourbridge Vets4Pets Limited
Sudbury Vets4Pets Limited
Sunderland South Vets4Pets Limited
Sunderland Vets4Pets Limited
Sutton Coldfield Vets4Pets Limited
Sutton In Ashfield Vets4Pets Limited
Swindon Bridgemead Vets4Pets Limited
Swinton Vets4Pets Limited
Sydenham Vets4Pets Limited
Thamesmead Vets4Pets Limited
Thurrock Vets4Pets Limited
Tilehurst Vets4Pets Limited
Torquay Vets4Pets Limited
Trafford Park Vets4Pets Limited
Trowbridge Vets4Pets Limited
Wakefield Vets4Pets Limited
Walkden Vets4Pets Limited
Wallasey Bidston Moss Vets4Pets Limited
Walsall Reedswood Vets4Pets Limited
Waltham Abbey Vets4Pets Limited
Walton on Thames Vets4Pets Limited
Walton Vale Vets4Pets Limited
Warrington Riverside Vets4Pets Limited
Warrington Vets4Pets Limited
Washington Vets4Pets Limited
Waterlooville Vets4Pets Limited
Watford Vets4Pets Limited
Wellingborough Vets4Pets Limited
West Bromwich Vets4Pets Limited
Weymouth Vets4Pets Limited
Widnes Vets4Pets Limited
Wigan Vets4Pets Limited
Wimbledon Vets4Pets Limited
Wokingham Vets4Pets Limited
Wolverhampton Vets4Pets Limited
Worksop Vets4Pets Limited
Worthing Vets4Pets Limited
Wrexham Vets4Pets Limited
Wsm Vets4Pets Limited
Yate Vets4Pets Limited
York Clifton Moor Vets4Pets Limited
York Vets4Pets Limited
168
Holding
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Country of
incorporation
Class of
shares held
At 29 March
2018 %
At 30 March
2017 %
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
50
50
95
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
95
50
50
50
50
50
50
100
100
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2018 Glossary – Alternative Performance Measures
Guidelines on Alternative Performance Measures (APMs) issued by the European Securities and Markets Authority came into
effect for all communications released on or after 3 July 2016 for issuers of securities on a regulated market.
In the reporting of financial information, the Directors have adopted various APMs of historical or future financial performance,
position or cash flows other than those defined or specified under International Financial Reporting Standards (IFRS).
The Directors measure the performance of the Group based on the following financial measures which are not recognised
under EU-adopted IFRS, and consider these to be important measures in evaluating the Group’s strategic and financial
performance. The Directors believe that these APMs assist in providing additional useful information on the underlying trends,
performance and position of the Group.
APMs are also used to enhance the comparability of information between reporting periods, by adjusting for non-underlying
items, to aid the user in understanding the Group’s performance.
Consequently, APMs are used by the Directors and management for performance analysis, planning, reporting and incentive
setting purposes and have remained consistent with prior year.
All APMs relate to the current period’s results and comparative periods where provided.
APM
Cash
EBITDA
CROIC
Definition
Underlying EBITDA (see below) adjusted for share
based payment charge.
Cash return on invested capital, represents cash
returns divided by the average of gross capital
(GCI) invested for the last 12 months. Cash returns
represent underlying operating profit before
property rentals and share based payments
subject to tax then adjusted for depreciation and
amortisation. GCI represents gross property, plant
and equipment plus software and other intangibles
excluding the goodwill created on the acquisition
of the Group by KKR (£906,445,000) plus net
working capital, plus capitalised rent multiplied by
a factor of 8x.
Underlying
EBITDA
Earnings before interest, tax, depreciation and
amortisation before the effect of Non-underlying
items in the period.
This is a key management incentive metric.
Reconciliation
Cash EBITDA (£m)
Underlying EBITDA
Share based payment charge
Cash EBITDA
CROIC
Cash returns:
Underlying operating profit
Property rental costs
Share based payment charges
Effective tax rate
Tax charge on above
Depreciation and amortisation
Cash returns
Gross capital invested (GCI):
Gross property, plant and equipment
Intangibles
Less KKR goodwill
Investments
Net working capital
Capitalised operating leases
GCI
Average
Cash returns/average GCI
Underlying EBITDA (£m)
Statutory operating profit (audited)
Depreciation and amortisation
Non-underlying items
FY17
130.5
2.4
132.9
FY18
123.3
3.9
127.2
Note
3
FY17
FY18
Note
100.9
73.0
2.4
176.4
20%
(35.3)
141.1
29.6
170.7
88.8
75.9
3.9
168.6
20%
(33.7)
134.9
34.5
169.4
3
3
3
234.9
1,005.5
(906.5)
12.6
(87.4)
584.0
10
11
263.1
1,014.4
(906.5)
14.7
(89.8) see definition
8x
607.4
843.1
827.6
903.3
873.2
20.6%
19.4%
FY17
99.9
29.6
1.0
FY18
83.9
34.5
4.9
Note
3
3
Underlying EBITDA
130.5
123.3
169
Pets at Home Group PlcAnnual Report and Accounts 2018 Financial statements
Glossary – Alternative Performance Measures continued
APM
Definition
Free
cash flow
Free cash flow being net cash from operating
activities, after tax, less net cash used in investing
activities (excluding acquisitions), less interest paid,
debt issue costs, purchase of own shares and
finance lease obligations, and is stated before cash
flows for Non-underlying costs.
Reconciliation
Free cash flow (£m)
Free cash flow
Dividends
Acquisition of subsidiary
Disposal of subsidiary
Loans issued
Proceeds from new loan
Repayment of borrowings
FY17
64.6
(39.9)
(14.8)
0.7
(2.2)
8.0
–
Net increase in cash
CFS = Consolidated Statement of Cash Flows
16.3
Note
CFS
CFS
CFS
CFS
CFS
CFS
FY18
55.8
(37.3)
–
–
–
–
(15.0)
3.5
Gross profit
margin (%)
Gross profit divided by revenue expressed
as a percentage.
Information provided in the consolidated income statement
on page 108.
Like-for-like
‘Like-for-like’ sales growth comprises total revenue
in a financial period compared to revenue achieved
in a prior period, for stores, online operations,
grooming salons, vet practices and referral centres
that have been trading for 52 weeks or more.
Net debt
Cash and cash equivalents less loans and
borrowings.
Underlying
basic EPS
Underlying
operating
profit
Underlying
profit
before tax
Underlying
profit
after tax
Underlying basic earnings per share (EPS) is based
on earnings per share before the impact of certain
costs or incomes that derive from events or
transactions that fall outside the normal activities
of the Group, and are excluded by virtue of their
size and nature in order to reflect management’s
view of the performance of the Group.
Underlying operating profit is based on operating
profit before the impact of certain costs or incomes
that derive from events or transactions that fall
outside the normal activities of the Group, and are
excluded by virtue of their size and nature in order
to reflect management’s view of the performance
of the Group.
Underlying profit before tax (PBT) is based on
pre-tax profit before the impact of certain costs or
incomes that derive from events or transactions
that fall outside the normal activities of the Group,
and are excluded by virtue of their size and nature
in order to reflect management’s view of the
performance of the Group.
Underlying profit after tax (PAT) is based on post tax
profit before the impact of certain costs or incomes
that derive from events or transactions that fall
outside the normal activities of the Group, and are
excluded by virtue of their size and nature in order
to reflect management’s view of the performance
of the Group.
Not applicable.
A reconciliation of net debt is provided in note 17.
Underlying basic EPS (p)
Underlying basic EPS
Non-underlying items
Basic earnings per share
Underlying operating profit (£m)
Underlying operating profit
Non-underlying items
Operating profit
Underlying PBT (£m)
Underlying PBT
Non-underlying items
PBT
Underlying PAT (£m)
Underlying PAT
Non-underlying items
PAT
Note
5
Note
3
Note
3
Note
FY17
15.3
(0.2)
15.1
FY17
100.9
(1.0)
99.9
FY17
96.4
(1.0)
95.4
FY17
76.3
(1.0)
75.4
FY18
13.5
(0.9)
12.6
FY18
88.8
(4.9)
83.9
FY18
84.5
(4.9)
79.6
FY18
67.5
(4.9)
62.6
170
Pets at Home Group PlcAnnual Report and Accounts 2018
APM
Definition
Underlying
total tax
expense
Underlying total tax expense is based on the
statutory tax expense for the period (being the net
of current and deferred tax) before the impact of
certain costs of incomes that derive from events or
transactions that fall outside the normal activities of
the Group, and are excluded by virtue of their size
and nature in order to reflect management’s view
of the performance of the Group.
Working
capital
Working capital movement is a measure of the cash
required by the business to fund its inventory,
receivables and payables.
The change year on year reflects the cash in/
outflow in relation to changes in the working capital
cycle excluding Non-underlying items.
The change in working capital is a key component
of the free cash flow measure of the Group.
Omni-
channel
revenue
Revenue net of discounts and VAT from core online,
sales, subscriptions and order to store.
Underlying
EBIT
Earnings before interest and tax agreed to operating
profit relating to underlying trading.
Reconciliation
Underlying total tax expense (£m)
Underlying tax expense
Non-underlying items
Tax expense
FY17
(20.0)
–
FY18
(17.0)
0.2
(20.0)
(16.8)
Note
3,8
Net working capital (£m) movement
Net working capital
Being:
Increase in trade and other
receivables
Increase in inventories
Increase in trade and other payables
Excluding movement in payables
relating to Non-underlying items
Decrease in provisions
Excluding movement in provision
relating to Non-underlying items
Net movement in payables
FY17
(2.3)
FY18
(0.4)
Note
(8.9)
(5.0)
11.5
0.1
11.6
(6.0)
(4.1)
11.9
(2.4)
1.1
(0.9)
9.7
(0.4)
Net working capital
CFS = Consolidated Statement of Cash Flows
(2.3)
Net working capital
Receivables
Inventory
Trade and other receivables
(incl Corporation Tax)
Provisions
Non-current provisions
Net working capital
(£m)
Omnichannel revenue
FY17
69.7
56.4
FY18
74.8
60.5
(211.6)
(0.5)
(1.4)
(222.1)
(0.8)
(2.2)
(87.4)
(89.8)
FY17
51.4
FY18
29.4
CFS
CFS
CFS
CFS
Note
15
12
18
19
19
Note
(£m)
Operating profit relating to Underlying
trading (EBIT)
FY17
FY18
Note
100.9
88.8
171
Pets at Home Group PlcAnnual Report and Accounts 2018 Financial statements
Advisors and contacts
Registered Office
Pets at Home Group Plc
Epsom Avenue
Stanley Green Trading Estate
Handforth
Cheshire
SK9 3RN
United Kingdom
Registered Number
8885072
Investor Relations
investors.petsathome.com
investorrelations@petsathome.co.uk
+44 (0)161 486 6688
Corporate Brokers
Bank of America Merrill Lynch
2 King Edward Street
London
EC1A 1HQ
Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
London EC4M 7LT
Legal Advisors
Simpson Thacher & Bartlett LLP
CityPoint
One Ropemaker Street
London
EC2Y 9HU
Auditor
KPMG
St James Square
Manchester
M2 6DS
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS99 6ZZ
172
Pets at Home Group PlcAnnual Report and Accounts 2018 Printed by CPI Colour on Chorus Silk – an FSC® Mix certified grade and is produced at
a mill that is certified to the ISO14001 and EMAS environmental management standards.
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Telephone: 020 7403 4099
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Pets at Home Group Plc
Epsom Avenue
Stanley Green Trading Estate
Handforth
Cheshire
SK9 3RN
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Visit our online Annual Report 2018:
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