Taking the lead
in total pet care
Pets at Home Group Plc
Annual Report and Accounts 2020
Overview
The year in review
At a glance
Investment case
Chairman’s statement
Market overview
Strategy
Chief Executive’s statement
Strategy
Pet care in action
Performance
Key performance indicators
Business model
Stakeholder engagement
Chief Financial Officer’s review
Operating review
Risk management
Risks and uncertainties
Corporate Social Responsibility
Governance report
Governance report
Board of Directors
Directors’ Report
Statement of Directors’ Responsibilities
Audit and Risk Committee Report
Nomination and Corporate
Governance Committee Report
Corporate Social Responsibility
and Pets Come First Committee
Directors’ Remuneration Report
Financial statements
Independent Auditor’s report
Consolidated income statement
Consolidated statement of
comprehensive income
Consolidated balance sheet
Consolidated statement of changes
in equity as at 26 March 2020
Consolidated statement of changes
in equity as at 28 March 2019
Consolidated statement of cashflows
Company balance sheet
Company statement of changes
in equity as at 26 March 2020
Company statement of changes
in equity as at 28 March 2019
Company income statement
Company statement of cashflows
Notes (forming part of the
financial statements)
Glossary – Alternative
Performance Measures
Advisors and contacts
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Our vision is to become the best
pet care business in the world.
We provide customers with
everything they need to be the
best pet owner they can be.
Financial and operational highlights
The year in review
Operational highlights
Growing our pet care ecosystem
The first full year of our pet care strategy has delivered
strong results and we have made excellent progress
across all four pillars. In doing so, we have taken market
share across our chosen segments, and at the same
time expanded in to attractive adjacencies.
Link to strategy:
Becoming the best pet care business in the world
Exceptional performance in Retail
Like-for-like1 revenue growth in Retail of 9.4%, or 15%
on a two-year basis, represents sustained momentum.
In particular, previous investment in our online platform
and automation enabled us to meet the exceptional
demand seen in the closing weeks of the year due to the
coronavirus outbreak. Together with sustainable pricing
and tight cost control, we grew both underlying profit
and free cashflow.
Link to strategy:
Bring the pet experience to life
Set our people free to serve
Our performance in the year reflects
the success of our pet care strategy.
The pet care market remained in
structural growth, and we continue to
take share across all channels and key
categories of our pet care ecosystem.
Our Retail business has traded
particularly well and delivered
underlying profit1 growth, whilst
the actions taken in our First Opinion
vet business were delivered exactly
as planned.
In the closing weeks of FY20 we
experienced exceptional levels of
demand, both in-store and online,
as the COVID-19 crisis developed;
leading to incremental sales and
profit. Whilst previous investments in
omnichannel capacity meant we were
well equipped to meet this demand,
the subsequent lockdown in the UK
meant we had to take decisive action
to navigate the business through a
period of unprecedented uncertainty.
For a detailed review of our response,
refer to page 16.
1
Alternative Performance Measures (APMs) are defined and reconciled to IFRS
information, where possible, on page 220.
4
Pets at Home Group PlcAnnual Report and Accounts 2020 Focus on recruitment of puppies and kittens
Our active VIP loyalty club member base is now
5.6m, having grown 31% in the year. This has been
driven by a focus on signing up even more of
the UK’s puppy and kitten owners to our tailored
programme of rewards and benefits in the Puppy
and Kitten Clubs, and introducing them to all parts
of our pet care ecosystem.
Link to strategy:
Use data and VIP to better serve customers
Bring the pet experience to life
First Opinion customer sales growing
ahead of the market
Like-for-like1 customer sales generated by all
First Opinion vet practices grew 13.5%. Even those
Joint Venture practices which are mature continue
to grow ahead of the market, proving the value
of our unique shared ownership model.
Link to strategy:
50% of sales from pet services
Recalibration of First Opinion vet
business complete
Our plans to buy out and in some cases close a
small number of Joint Venture practices, whilst
at the same time making adjustments to the fee
arrangements for ongoing Joint Ventures, are now
complete and will provide a strong foundation to
deliver sustainable profit and free cashflow growth
over the longer term.
Link to strategy:
50% of sales from pet services
Financial highlights
Revenue (£m)
£1,058.8m +10.2%
Underlying PBT 1 (£m) (pre-IFRS162)
+11.0%
+73.3%
+40.7%
+121.0%
£99.5m
Statutory PBT (£m)
£85.9m
Underlying free cashflow 1 (£m)
£89.6m
Statutory basic EPS (pence)
13.5p
Dividend per share (pence)
7.5p
2
The impact of IFRS16 on the Group financial statements
has been to decrease underlying PBT by £6.0m.
5
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 At a glance
Our pet care
ecosystem
Retail
A unique combination
of products and services
Although we report our Retail and Vet Group businesses
separately, in the eyes of our customers they are highly
complementary to each other. This allows us to provide
complete pet care to customers in a way competitors
cannot replicate.
Revenue and underlying EBIT1,2 contribution by segment
Retail
Vet Group
Revenue (£m)
937.6
121.2
Underlying
EBIT1,2 (£m)
81.7
30.2
A range of pet products is available both online and in our stores,
which offer far more to the pet owner than just a place to buy food
and accessories. Through our in-store experience and services,
knowledgeable colleagues and award winning VIP loyalty club, we
aim to make pet ownership affordable, convenient and rewarding.
Operating review, Page 44
Vet Group
1
Alternative Performance Measures (APMs) are defined
and reconciled to IFRS information, where possible, on page 220.
2 Central costs of £(8.6)m not shown above
£6.5bn
UK pet care market, which
is resilient and in growth
>5.6m
Active VIP loyalty club members
c16%
>8x
Proportion of VIPs who purchase
both products and services
from us
Annual spend by VIPs who shop
across our ecosystem vs those
who shop only in-store
We provide the full spectrum of veterinary services through
a network of First Opinion practices which handle all aspects
of general veterinary care, and Specialist Referral centres
which provide highly specialist services to pets referred from
across the entire First Opinion market.
Operating review, Page 48
6
Pets at Home Group Plc
Annual Report and Accounts 2020
Retail
Vet Group
A pet care destination
In addition to pet products, our stores also
allow customers to benefit from a range
of pet care services such as dog and cat
grooming, subscription packages, educational
workshops, events and access to expert
pet knowledge and advice through our
well-trained colleagues.
453
Stores
56%
Omnichannel capabilities
Our extended range of food and accessories
is available for customers to shop online 24 / 7,
with multiple convenient delivery options
to choose from, including collection in-store.
Alternatively, colleagues can also place a
customer order from our extended range
whilst in-store using a dedicated PetPad app.
We also offer subscription platforms for
monthly flea & worm treatments and regular
food deliveries, making pet care even more
convenient and affordable.
55%
Of omnichannel1 revenues
are assisted by a colleague
>9,600
Of stores have a vet practice and grooming salon
Products in our extended online range
First Opinion practices
Our nationwide network of First Opinion
small animal veterinary practices mostly
operate under the Vets4Pets brand and in
conjunction with our Joint Venture Partners,
providing the opportunity for entrepreneurial
vets to own their own business. This Joint
Venture arrangement offers clinical and
operational freedom to veterinary surgeons,
supported by our business expertise. We
also operate a number of company managed
First Opinion practices, which are owned in
full by us.
Specialist Referral centres
Our Specialist Referral 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.
396
4
Joint Venture First Opinion practices
Specialist Referral centres
45
Company managed First Opinion practices
c17,000
Cases treated by our specialists
Our locations
Our stores, Groom Room salons, First Opinion
vet practices and Specialist Referral centres
are located nationwide, allowing us to offer
convenient pet care to customers across
the UK.
• Stores with a vet and groomer
• Standalone vets
• Specialist Referral centres
7
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Investment case
The central tenets of a
compelling business model
1
Strong position in a large, resilient
market that is in structural growth
– We have c19% share of a pet care market worth £6.5bn
– Steady pet population of c18m dogs and cats, where there
is increasing humanisation and premiumisation
– Taking share across all key categories and channels through
our winning combination of complete pet care
2
A unique proposition of products and services
providing competitive advantages
– Shoppers who transact across the full range of products and services
3
Trusted and well known brand making pet
care affordable, convenient and rewarding
– Over 28 years of serving the nations’ pet owners, with
spend >8x more each year compared to store-only shoppers
knowledgeable in-store colleagues offering expert advice
– Only c16% of all VIPs current shop across both product and
services – leaving considerable headroom for growth
– An expanding ecosystem of pet care, with multiple revenue streams
of non-discretionary, non-seasonal and small ticket spend
– Competitive pricing across branded pet food and strong
penetration of private label
– Convenient retail proposition of 453 experiential stores and
fast growing omnichannel business provide multiple customer
acquisition opportunities
4
Investment in data to increase the lifetime
value of 5.6m highly engaged VIP loyalty
club members
– 75% of all store revenues are spent by VIPs, with over seven years’
worth of proprietary transactional data
– By leveraging our data, we aim to introduce customers to all parts
of our ecosystem which are relevant to them, and capture more of
their overall pet care spend
– Benefits of recent investment in data capabilities still to flow
8
Pets at Home Group PlcAnnual Report and Accounts 2020
5
Unique owner-operator Joint Venture
model in First Opinion vets
– Largest branded veterinary business in the UK, with practices
located in two-thirds of stores plus a number of standalone
locations
– Provides entrepreneurial vets the opportunity to run their own
business and operate with complete clinical and operational
freedom
– Once debt-free, Partners are entitled to all practice profits as
a dividend and also realise the capital value of the practice
when exiting
6
Significant profit and free cashflow growth
opportunity from First Opinion vet
practice maturity
– 31% of all First Opinion practices are four years old or less,
with all cohorts growing customer sales ahead of the market,
even in mature practices
– Up to £40m incremental cash flow opportunity once all existing
practices mature
– Further upside opportunity from rollout of new practices,
with potential for up to 700 locations
7
Capability and capacity expansion
in Specialist Referrals
– Fastest growing part of the pet care market, with large transaction
values underpinned by pet insurance
– Complementary adjacency to First Opinion, serving referrals
from both our own practices and competitors
8
Growing numbers on subscription
platforms, creating a high margin
annuity income stream
– Over 865,000 customers currently on some form
of subscription package, up 23% year-on-year
– Significant potential to personalise packages and reach
– Four acquired centres plus a greenfield site scheduled to
more of the c18m dogs and cats in the UK
open in 2020
– Creates loyalty across both Retail and Vet segments
9
Strong financial position
and returns potential
10
Strong governance and
commitment to sustainability
– Recent actions in both Retail and the First Opinion vet business
– Executive Management Team with a combination of long
provide a strong foundation for future growth
– Resilient balance sheet with good liquidity of £162m, low leverage
and significant headroom on banking covenants
tenures and recent new recruits aligned to strategic priorities,
with a track record of taking decisive action
– Balanced Board of Directors with a broad range of skills
– Highly cash generative with free cashflow conversion of 63%
and experience
and a 7.5p dividend per share maintained in FY20
– Strong sense of social purpose focusing on our CSR agenda
and designed to deliver returns for all stakeholders
9
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020
Chairman’s statement
A year of
progress
“ The Group has had a successful year and
made excellent progress across all pillars
of our pet care strategy. Our Retail business
delivered sustained revenue growth that
converted strongly to profit, and we delivered
our recalibration of the First Opinion vet
business. Although the final weeks of the
year were extraordinary given the impact of
the coronavirus pandemic, and the outlook
remains uncertain, we believe that now
more than ever pets have a crucial role
to play in their owners’ everyday lives.”
Tony DeNunzio
Non-Executive Chairman
In FY20, our pet care ecosystem reached more customers than ever
before as we provided convenient, affordable and rewarding pet care
to UK pet owners. Overall, we generated revenue growth of 10.2%, to
£1,058.8m, within which like-for-like sales1 grew 9.0%. Underlying profit
before tax1 grew by 11.0% to £99.5m on a comparable pre-IFRS16
basis, and the Board proposes to maintain the ordinary dividend at
7.5 pence per share. This ordinary dividend reflects the strong cash
position at year end and our forecast future liquidity. Our overall
performance confirms the success of our strategy in bringing our
Retail and Vet Group businesses closer together to deliver a winning
combination of products and services for customers, setting us apart
from our competitors.
We are particularly pleased with this outcome considering the
backdrop against which it has been achieved. The general uncertainty
created by a Brexit process that impacted both consumer and
business behaviour, the well documented challenging retail landscape
and, towards the end of the year, the impact of the coronavirus
pandemic all posed challenges which we had to overcome.
Despite these unprecedented times, one thing has remained true
– the UK is a nation of pet lovers. We have always believed that during
times of uncertainty, pets remain ‘one of the family’ and continue to
receive the very best care from their owners.
Strategy
We have made excellent progress in becoming the best pet care
business in the world. In particular, I would like to bring the following
achievements to shareholders’ attention this year.
The performance in Retail has been outstanding. By offering
customers great products at competitive prices, and making their
experience convenient and rewarding, we have been able to take
market share across all key categories. We have seen strong growth in
customer transactions, driven by a focus on new customer acquisition,
as well as in customers signing up to our subscription plans, where
there is considerable headroom to develop an annuity revenue stream.
10
Pets at Home Group PlcAnnual Report and Accounts 2020 S
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In the Vet Group, the changes we have made to the First Opinion
business have been exactly as we planned. The improved underlying
performance of the vet practice estate demonstrates that our Joint
Venture model works, and that by taking this decisive action we have
positioned the business well for future growth.
In addition to the strategic execution that contributed directly
to the financial performance in the year, we have also made
considerable progress in laying strong foundations for future growth.
In particular, investment in our data capabilities and automation for
our omnichannel business will be key to unlocking our growing pet
care ecosystem.
Management
After welcoming a number of new members to the Executive
Management Team last year as we aligned our structure and
capability to the new pet care strategy, I am pleased that there have
been no further changes. This demonstrates stability and confidence
that we have the right leadership to deliver our pet care strategy and
generate long term shareholder returns.
The focus this year has been on ensuring that we have the right
people and infrastructure in place to support the Executive
Management Team in their objectives, and to that end we have
sought to align our internal ways of working across all parts of the
Group to ensure we operate efficiently and deliver the best possible
service to our customers, Partners and colleagues.
Colleagues
Our people remain the foundation of our business. We provide a
number of highly specialised services to customers through our
trained veterinarians, vet nurses and grooming colleagues, as well as
our knowledgeable store teams – all of whom share the joy of pet
ownership with customers every single day. This year, more than ever
before, I would like to thank them for their dedication to our business
– not least over the past three months when colleagues throughout
the entire business have worked tirelessly to overcome the adversity
presented by the coronavirus outbreak and serve our customers.
Outlook
We have finished the year in a good position, with a strong balance
sheet and having delivered underlying profit1 and free cashflow1
growth. However, like all businesses, the future remains uncertain
given the ongoing coronavirus pandemic. That said, having taken
decisive action across both our Retail and Vet Group divisions in
recent years, the Board has every confidence that we have a strong
foundation from which to continue serving UK pet owners, and is
determined that we emerge an even stronger business.
Finally, it is time to me to sign off after 10 years as Chairman of Pets
at Home. It has been a pleasure and privilege to lead such a special
business with such an extraordinary group of colleagues. I believe
the Company is more strongly positioned now than ever before.
The ongoing resilience and growth of the UK pet market, coupled
with our adaptable pet care strategy and talented leadership team,
mean that I leave as Chairman confident that, despite short term
uncertainties, the business has a strong long term future.
Our response to COVID-19
As we approached the end of the financial year, our focus and
attention turned to the far-reaching and devastating effects of
COVID-19. Our Executive Management Team responded to the
immediate challenges quickly and decisively, implementing
protocols to safeguard the wellbeing and safety of colleagues,
Partners and customers. These actions enabled the safe continuity
of customer service across our Retail and Vet Group operations
and had the full support and appreciation of the Board. I would
like to thank each member of the management team for their
resilience and adaptability as we navigate the business through
these unprecedented times.
Amidst this period of uncertainty, it has become clear that Pets at
Home, like most businesses across all sectors of the economy, will
not be immune to the challenges faced from COVID-19. However,
in times of extreme difficulty strong management teams build
stronger businesses. I have every confidence that our current
management has the requisite skill and energy to ensure that
Pets at Home can emerge a stronger business in a post-pandemic
world, and means that I hand over my role as Chairman to Ian
Burke confident in the long term sustainability of our business.
Read more about our response to COVID-19
in the Chief Executive’s statement Page 16
Welcoming our new Chairman
I am delighted that following an extensive search process,
Ian Burke will succeed me as Non-Executive Chairman.
Ian has been Chair of Studio Retail Group plc since 2017 and is also
a Non-Executive Senior Independent Director of intu properties
plc, where he has been a member of various Board committees
since 2018. Ian has extensive Board experience, where past
positions include CEO of Thistle Hotels, Chair of the privately
owned veterinary group Vet Partners, and a long tenure on the
Board at Rank Group plc as Non-Executive Chair, Executive Chair
and Chief Executive Officer.
Since announcing Ian’s appointment in February, the business has
faced extraordinary times and significant uncertainly created by
the coronavirus pandemic. Whilst Pets at Home is a high quality
and resilient business, it was necessary to take action to protect
colleague welfare, strengthen our liquidity position and ensure the
long term viability of the business. As such, it was appropriate to
have an extended transition period to ensure an orderly handover
and I now wish Ian every success in leading Pets at Home.
Tony DeNunzio
Non-Executive Chairman
21 May 2020
1
Alternative Performance Measures (APMs) are defined and reconciled to IFRS information, where
possible, on page 220.
Annual Report and Accounts 2020
Pets at Home Group Plc
11
Market overview
The UK pet care
market remains large,
resilient and in growth
UK pet care market
By sector value 20191 (£)
Our market share in 20191 (%)
i n a r y Food
t e r
e
V
2 . 5 bn
2.8bn
Grooming
Veterinary
Food
Accessories
c10%
c15%
c17%
c42%
0.3
bn
G
r
o
o
0 . 9 b n
ming Acce s s o r
s
i e
Retail total
Food 2
Accessories 2
Grooming
Veterinary 3
Estimated UK pet care market value
£6.5bn
c16%
Online penetration of pet products4 market
12
Market growth during 20191
£4.0bn
£2.8bn
£0.9bn
£0.3bn
£2.5bn
Retail total
Food2
Accessories2
Grooming
Veterinary3
c4%
Estimated growth of UK pet care market in 2019
c3%
c3%
c4%
c4%
c5%
Includes online spend from pet products.
1 Source: Pets at Home data, UK market reports, OC&C 2017.
2
3 Veterinary includes First Opinion and Specialist Referrals market.
4
Includes food and accessories.
Pets at Home Group PlcAnnual Report and Accounts 2020 Our adaptable pet care strategy is designed
to take share across all sectors
Our unique combination of products and services allows us to deliver
complete pet care to our customers and clients in a way competitors
cannot replicate. By meeting the needs of pet owners through our
winning combination of competitive pricing, convenient shopping,
and talented colleagues who deliver pet care services, we are taking
share across both our key markets of retail and veterinary. Despite the
uncertainty created by the coronavirus pandemic, we are confident
our pet care strategy remains the right one. However, we will adapt
how we deliver it to ensure it remains appropriate to the changing
needs of pet owners.
Strategy and performance
Page 20
Market drivers and our responses
Market driver 2:
Humanisation of pets and
an increasing desire for
higher quality products
and services.
Across both dog and cat
owners, there is a continued
trend of stepping up to
higher quality diets driven
by greater affordability and
awareness of the health
benefits this provides. Now
more than ever before, pets
are playing an increasingly
important role in their
owners’ lives.
Our approach:
Through our in-store
colleagues and online
content, we are able to
explain the health benefits
of feeding your pet a better
quality diet, whilst
competitive pricing makes
higher quality Advanced
Nutrition pet food affordable.
With many colleagues pet
owners themselves, they
understand the emotional
bond between customers
and their pet.
Market driver 3:
Advances in veterinary care,
accessibility of which is
supported by increasing
levels of pet insurance.
The veterinary care market
continues to advance through
scientific research, and the
range of healthcare options
available to pet owners is
increasing. Together with
a growing awareness and
affordability of pet insurance,
more pet owners are able to
do what is best for their pet
throughout their lifetime.
Our approach:
We aim to recruit the very
best veterinarians across our
network of Joint Venture
Partners and team of leading
specialists, to deliver the
best possible care to clients.
By locating First Opinion
practices across the country,
both inside Pets at Home
stores and in standalone
locations, we make access
to this high quality care easy
and convenient.
Market driver 1:
A stable UK dog
and cat population.
The UK is a nation of pet
lovers, with the population
of dogs and cats remaining
stable at an estimated 18m,
and around 12m (40% of)
households are now believed
to own a pet.
Our approach:
We cater for all pet types
at accessible locations
nationwide and online,
whilst offering a range of
pet products and pet care
services. In particular, we
are increasingly focused on
acquiring new puppy and
kitten customers, introducing
them to all parts of our
ecosystem, and nurturing
lifelong relationships
with them.
Operating review
Pages 44 to 51
Market driver 4:
Continued channel shift
to online.
Online penetration of the pet
products market increased
again in 2019, and is now
c16%. Price competitiveness
and convenience remain
essential factors in the online
shopping journey, driven by
ease of price comparison and
the different delivery options
typically offered.
Our approach:
Recent investment in our
online capabilities such as
digital platforms and
fulfilment automation,
together with competitive
and sustainable pricing, have
enabled us to make strong
share gains in the online
market. However our
approach extends beyond
just traditional online
shopping, with a multi-
faceted omnichannel
proposition encompassing
collect in-store, order in-store
and subscription platforms,
all of which offer maximum
convenience.
13
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Chief Executive’s statement
Significant progress across
our pet care strategy
We are uniquely positioned in the £6.5bn
UK pet care market, which continued to
demonstrate resilience and growth in 2019.
We estimate that the overall size of the market increased by c4%,
with the retail segment growing at c3% and the veterinary segment
at c5%. With the population of cats and dogs in the UK remaining
broadly stable at c18million, this growth has been predominantly
driven by continued humanisation and premiumisation – highlighting
that pets are very much regarded as “one of the family”.
Our pet care strategy delivered market share gains across all key areas,
across our core product categories of food and accessories (both
online and offline) as well as our services offering, which extends from
the provision of pet grooming and First Opinion veterinary visits to
our Specialist Referral centres.
Peter Pritchard
Group Chief Executive Officer
Key performance indicators
Financial KPIs1
Customer sales#, 2 (£m)
Group underlying PBT (excluding IFRS16)# (£m)
Group underlying free cashflow# (£m)
Strategic KPIs
Measure
Bring the pet experience to life
No. of customer transactions3 (m)
50% of sales from pet care services
Customer sales#, 2 from services
Use our data to better serve customers
VIP customer sales#, 2, 4 (£m)
Set our people free to serve
Customer sales#, 2 per colleague (£k)
FY20
1,334.7
99.5
89.6
FY20
63.1
34.1%
817.2
187.0
FY19
1,218.2
89.7
63.6
FY19
59.2
34.0%
591.6
174.1
YoY change
9.6%
11.0%
40.7%
YoY change
6.6%
9 bps
38.1%
7.4%
1.
Financial KPIs shown above represent those used by the business to monitor performance. Management recognise that as Alternative Performance Measures they differ to statutory metrics,
but believe they represent the most appropriate KPIs.
Includes customer transactions in-store, online, in First Opinion vet practices, cases treated in Specialist Referral centres plus pets groomed in Groom Room salons
2. Customer sales include gross customer sales made by Joint Venture vet practices of £329.7m (FY19: £309.8m) (unaudited figures), and therefore differs to the fee income recognised within Vet Group revenue
3.
4. VIP customer sales are shown on a rolling 12 month basis and include gross spend at First Opinion vet practices
# Alternative Performance Measures (APMs) are defined and reconciled to IFRS information, where possible, on page 220
14
Pets at Home Group PlcAnnual Report and Accounts 2020 Strategic review of FY20
Strategic pillar:
Bring the pet experience to life
We had another strong year in Retail, manifested in a two-year
LFL growth rate of 15%. This performance reflects the success
of maintaining our competitive price position, investing in our
omnichannel proposition and focusing on new customer acquisition
in our Puppy and Kitten Club.
The rollout of a further 16 pet care centre formats during the year,
bringing the total to 18 so far, is a good example of how we “bring
the pet experience to life”. These centres create a destination for pet
owners and pets alike, with dedicated multi-use event space, greater
space allocated to pet care services, wider ranges of own brand
Advanced Nutrition products and an emphasis on immersive,
digital experiences.
While our focus for the immediate future will be on ensuring we are
well-placed for a recovery in demand, we will continue to evolve the
way in which we serve customers over the longer term, to continue
winning market share.
Strategic pillar:
Deliver 50% of sales from pet care services
During FY20 34.1% of customer sales came from pet care services1.
By providing a variety of services to our customers, we are able
to cater for their pet care needs in ways that the majority of our
competitors cannot.
The greatest contributor by far was customer sales through First
Opinion veterinary practices, which grew 10.4% despite ending the
year with 29 fewer practices, largely due to our planned programme
to buy out, or in some cases close, specific Joint Venture (JV) practices.
Like-for-like customer sales delivered by our JV practices increased
13.2%, reflecting two key drivers: the immaturity of the estate
(with 31% of all practices four years old or less) and the value of
our unique JV model in incentivising practice growth, even when
it reaches maturity.
I am particularly pleased at the way in which we delivered the
recalibration of our First Opinion veterinary business over the past
18 months. The decision to buy out 57 JV practices, and subsequently
close 36 of them, was made in the best interests of all the Partners
involved and the longer term health of the Group. The fee
adjustments we have implemented across the remaining JV estate
throughout FY20 should allow those practices to mature more swiftly,
therefore improving practice cash flow.
The underlying performance of our First Opinion estate improved in
FY20. We have fewer loss-making practices, more debt-free practices,
and the combined profit of the estate increased significantly. This
gives us confidence that our actions will help to release free cash flow
as existing practices mature.
Performance across our Specialist Referral centres matched growth
in the underlying market, which is the fastest growing segment of
pet healthcare. Our capacity extension at Dick White Referrals in
Cambridge is advancing, and we remain on track to open our first
greenfield site in Scotland later this calendar year. These investments,
in an attractive adjacent market to our First Opinion practices,
will enable us to provide specialist treatment to even more of the
nation’s pets in future years.
Our various subscription services represent another key element
of our offering, across which we now provide products or services
to over 865,000 customers. Our monthly flea & worm service was
successfully extended to cat wormers during the year, and subscribers
to our flagship veterinary healthcare plan ‘Complete Care’ grew
significantly in the period, while considerable headroom for longer
term growth remains.
Strategic pillar:
Use our data to better serve customers
We ended the year with a record 5.6m active VIP loyalty club
members comprising 75% of all store revenue. We have seen notable
success in new customer acquisition, where new pet owners can
benefit from membership of our Puppy and Kitten Clubs. By making
the customer central to all aspects of our pet care ecosystem,
supported by a structured and highly-engaging CRM experience, we
have been able to increase spend per Puppy and Kitten Club member
by up to 23%, improving the lifetime value of our members.
A key focus over the past year has been migrating the day-to-day
management and analytics of our VIP database in-house, whilst
building a team of data scientists and the necessary infrastructure to
optimise its output. While the financial results delivered in FY20 were
largely achieved without any benefits flowing from this investment,
we are increasingly well-placed to increase our share of VIP customer
wallet in future years.
Strategic pillar:
Set our people free to serve
Across our Retail estate, we reduced colleague hours by 3% year-on
year, whilst delivering strong like-for-like sales growth and higher
customer satisfaction scores. These savings were achieved by
reducing non-customer facing tasks, thereby affording colleagues
more time to share their expertise with customers.
We recently invested almost £5m in automation at our Northampton
Distribution Centre to support the continued growth in omnichannel
retailing, in particular across our subscription platform. This investment
in capacity and efficiency enabled us to meet exceptional levels of
demand in Q4 of FY20, as customers brought forward purchases and
shopped more frequently online.
We remain focused on providing greater operational support across
our First Opinion veterinary practices, recognising that each practice
is unique. This has been particularly important during the uncertainty
related to COVID-19, and our unwavering support will remain well
beyond these challenging times.
Finally, in recognition of all our colleagues’ commitment and
determination through the recent crisis, we paid an additional
colleague bonus amounting to £1.9m. I remain extremely grateful
for their continued support.
1
Including gross customer sales made by Joint Venture vet practices, revenue from our Specialist
Referral centres and company managed vet practices, grooming services, subscriptions, pet sales
and pet insurance commissions.
15
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020
Chief Executive’s statement continued
Our considered
business response
to COVID-19
Most, if not all of us, have no prior experience
of dealing with a pandemic, despite it having
wide-ranging consequences on all of our daily
lives. We have had to respond quickly, making
significant changes to the way we operate
our business, and will undoubtedly need to
remain focused, disciplined and agile over
the coming months.
I. Pre-lockdown
When the pandemic first appeared in China, we assumed that
the main threat was to our supply chain. We engaged quickly and
effectively with our Far East suppliers and colleagues to ensure
continuity of supply and, as a result, were able to meet exceptional
levels of pulled forward demand in the closing weeks of the financial
year, both in-store and online, as existing customers increased average
basket size ahead of an anticipated lockdown. We also experienced a
higher than usual number of new customers shopping across our pet
ecosystem, particularly consumables such as pet food and litter as
supermarket availability declined, and healthcare services as veterinary
peers closed practices. During this period, we were ranked #1 by
market share of grocery dog food as consumers turned to our trusted
brands and advice.
As the virus started to spread beyond Chinese borders, however, it
soon became clear that the risk to demand would be a far greater
challenge. Our planning moved to ensuring the wellbeing and safety
of our colleagues, vet Partners, customers, suppliers and pets; the safe
continuity of customer service across our operations; support for our
most vulnerable colleagues and communities; and increased vigilance
over cash preservation and allocation of capital.
Broadly speaking, in response to this crisis, our planning and actions
have focused on preparing the business for five distinct phases,
remaining mindful of the need within each phase to ensure readiness
for both the next phase and potential reversion to the previous one.
We have categorised these five phases as follows:
II. Lockdown
Recognising the need to continue providing the nation’s pets with food
products and healthcare services, the UK Government deemed Pets at
Home an “essential retailer”. At the same time, clear public guidance
was issued on COVID-19 preventative measures and social distancing.
We have categorised
these five phases as
follows:
I
II
Pre-lockdown
Lockdown
III
IV V
Preparing to emerge
Post lockdown
A new normal
16
In seeking to strike a balance between providing those essential
products and services alongside safeguarding the health and
wellbeing of our stakeholders, we implemented a number of
protocols across our Retail and Vet Group operations and provided
clear advice and support to our vulnerable colleagues and the
communities that rely on us. In view of uncertainty around the
duration of lockdown, we also implemented specific measures
internally to preserve near-term cash flow.
Retail
Across our stores, we introduced temporary purchase limits, restricted
the number and type of products available for sale, removed pets
on sale and closed all our Groom Room salons to discourage
non-essential customer visits. We implemented all Government advice
regarding social distancing by limiting the number of customers
allowed in our stores at any one time and introducing a clear queuing
protocol for customers both inside and outside of our stores. We also
introduced sneeze guards and contactless only payment across all of
our points of sale.
Across our two Distribution Centres, we increased the number
of shifts and changed shift start times to reduce the number of
colleagues on any one shift. We introduced social distancing measures
into our centres and recruited around 250 temporary workers to
ensure safe continuity of operations during a period of heightened
online demand. The measures we implemented to protect our
Support Office colleagues included removing all but essential travel
and the adoption of alternative working arrangements.
Vet Group
While nearly all of our First Opinion veterinary practices, and all of our
Specialist Referral centres, have remained open, albeit on reduced
hours, we have strictly adhered to Government guidelines on social
distancing and RCVS guidance on permitted procedures, which
initially excluded elective and routine work broadly equivalent to half
Pets at Home Group PlcAnnual Report and Accounts 2020 the services offered across our practices. In recent weeks, in line with
updated RCVS guidance widening the range of permitted procedures,
we have seen a positive response from customers and a partial
recovery in practice revenues. We remain in close contact with all of
our Joint Venture Partners, to assist them in navigating the current
crisis, and have ensured that they are beneficiaries of any relevant
Group-wide reliefs relating to COVID-19.
Colleagues and communities
We recognised that being an essential retailer comes with a responsibility
to ensure that we can serve all of our pet owner customers through
these uncertain times. In support of our truly heroic National Health
Service we dedicated the first hour of trading on Tuesdays, Thursdays
and Saturdays exclusively to NHS workers. Outside of these hours, across
our stores, we implemented a fast track entrance, a dedicated checkout
lane and a 10% discount scheme off their shopping and vet costs.
We also recognised that vulnerable groups needed specific help and,
therefore, opened all our stores exclusively on Mondays, Wednesdays
and Fridays between 08.00am and 09.00am to enable our more
vulnerable customers to shop in comfort and safety.
The crisis is also having a devastating effect on pet charities with
many seeing their fundraising diminish while not being able to
rehome pets. These charities need our support more than ever, and
in recent weeks we allocated £1.1m to specific charities, comprising
£0.4m of emergency grants from our charity, Support Adoption for
Pets, and £0.7m of funding thanks to our VIP loyalty programme.
Caring for our hardworking colleagues has never been more
important and we ensured that those colleagues who needed to
self-isolate for several weeks continued to receive full pay. We also
created a Colleague Hardship Fund of £1.0m for colleagues, our vet
Partners and their teams should their families experience financial
difficulties, and, outside of our normal bonus cycle, paid an additional
£1.9m bonus primarily to store and other frontline colleagues in
April in recognition of their tireless work in adverse circumstances.
Cash preservation and allocation of capital
Our strong performance during FY20 meant that we entered the new
financial year with a resilient balance sheet, low financial leverage,
significant headroom on our banking covenants, and total liquidity
including cash balances of approximately £162m.
As anticipated, nearly all of the exceptional demand witnessed in
the closing weeks of Q4 has unwound during Q1 of the current
year which, combined with our adherence to guidelines on social
distancing across our operations and restrictions on the sale of
pet products and health care services deemed non-essential, has
temporarily depressed normal levels of Group turnover. While online
sales have remained at materially elevated levels, matched by
improved capacity and good product availability, they are, in isolation,
unable to mitigate the reduced level of in-store sales, and their
weighting towards food, together with an additional £5m of costs
relating to our initial response to COVID-19, has had an adverse effect
on profits, margins and cash flow in the financial year to date.
We welcomed the government’s business rates relief, providing us
with approximately £33m for FY21, to partially mitigate the estimated
financial impact of COVID-19 this year, as well as specific measures
regarding the payment of VAT. At the same time we have taken the
decision across our business not to participate in the government’s
Job Retention Scheme (JRS). We continue to review the position
regarding a small proportion of those colleagues for whom a
prolonged period of shielding may be necessary – predominantly
those who are either highly or extremely vulnerable or are carers -
and, dependent upon government guidance, may participate in the
JRS for these colleagues in future. Across our Vet Group, our Joint Venture
Partners operate independent businesses and are solely responsible
for the decisions made in respect of their colleagues, and a number
of our Joint Venture Partners have chosen to participate in the JRS.
We also implemented measures internally to preserve near-term
cash flow, including, but not limited to, moving to monthly payment
of store rents, deferring capital and marketing spend, agreeing a
six-month loan repayment holiday with our Vet Group banking
partners for all Joint Venture Partners who are not currently debt free,
and passing a portion of any rent and rates benefit on to those
practices situated in-store. We also ensured that all of our suppliers
were paid in full on time.
In view of uncertainty over the duration of lockdown, we arranged a
new credit facility of £100m with support from our banking syndicate, to
provide sufficient liquidity for the foreseeable future, and our Executive
Management Team, Non-Executive Directors and senior leadership team
voluntarily implemented a temporary 20% reduction in salary.
III. Preparing to emerge
It remains difficult to make precise judgements about how consumers
will react as we emerge from lockdown. Over and above managing
the business through the pandemic, however, we must endeavour to
continue creating value for our shareholders by being well-placed for
a recovery in demand.
Importantly, all of our stores and nearly all our First Opinion practices
have remained open through the crisis, providing some insight into
likely future trends. Early indications are that some of the shopping
habits that consumers have displayed during lockdown, notably social
distancing, channel shift and the preference to purchase goods and
services safely and conveniently, may persist post lockdown, thereby
impacting the volume of customers we can serve in-store.
Preparing for this has meant adapting our working practices and
learning new ways to serve our customers across all channels, all the
while remaining vigilant across our funding requirements, ongoing
measures for cash preservation and prudent allocation of capital.
Retail
Our stores remain open and can respond quickly to changes in footfall.
We maintain good availability across all of our product lines, branded
and private label, and have extended the number of items we can
sell across our full range of consumable and discretionary products.
We have introduced further precautionary measures to enhance safe
interaction with our customers, including protective masks for all our
store colleagues, and implemented training for specific colleagues on
the safe delivery of grooming services and contactless sale of pets.
Recognising that we may need to maintain some form of social
distancing post lockdown, we have successfully piloted a “Call and
Deliver-to-Car” service, increased the contactless payment limit from
£30 to £45, and made it easier for existing and new customers to
sign up to our subscription services online as opposed to in-store.
Importantly, the vast majority of our stores are situated on retail parks
and, with an average trading space of approximately 6,400 sq ft., are
more adaptable to social distancing than smaller, high street formats.
Our previous investment in automation, fulfilment and digital
capability has given us capacity to process double the pre-COVID-19
level of online orders, both across our UK-wide network of stores,
which can be leveraged to meet omni-channel demand, and delivery
direct to home. Mindful of the prevailing channel shift to online,
which we expect COVID-19 to accelerate, we have been assessing
options across our logistics network to ensure that we have a
well-invested, fit-for-purpose platform that is capable of managing
future growth and driving efficiency benefits.
17
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Chief Executive’s statement continued
Vet Group
Across our First Opinion practices, we have implemented training
for our vet colleagues to ensure the safe delivery of non-urgent
procedures, vaccinations and health checks. Healthcare subscription
products, such as flea and worm treatments, can now be delivered
direct to home, as well as collected in-practice, and we have
accelerated plans to enable remote contact and the performance
of remote consults between our Joint Venture Partners and their
veterinary customers through an arrangement with “Vet Help Direct”.
IV. Post lockdown
It is challenging to forecast the level and shape of demand post
lockdown. The speed of the economic downturn has been
unprecedented, making comparisons on demand recovery with
periods like the global financial crisis unhelpful, in our view. Moreover,
while the duration of the recovery will in part depend on a number
of variables that we can interpret over time, including levels of
employment and consumer confidence, we cannot accurately predict
how consumers will react and interact until either herd immunity is
achieved or a vaccine has been developed.
While some market commentators have noted the rebound of
economic activity in China, extrapolating China’s experience into the
outlook for developed markets is also unhelpful, in our view, given
China’s faster and more stringent virus containment measures and its
predominance of manufacturing relative to our more consumer-facing
services based economy.
We can, however, attempt to provide some sufficiently broad and
caveated assumptions on what post lockdown demand might look
like across the different areas of our business.
Retail
We expect food demand to remain inelastic given pets need to be fed
through all economic cycles. It is, however, possible that consumers’
purchasing intent may change during lockdown, potentially switching
brands based on either availability, unit size or pricing, and we continue
to offer a market leading range of branded and own label products
across all price points, both in-store and online.
While accessories undoubtedly have greater demand elasticity, they
comprise approximately one third of our retail sales, excluding cat
litter and bedding. We have, in recent weeks, restored the full range
of accessories on offer in-store, ahead of a potential increase in the
attachment rate post lockdown reflecting pent up demand, higher
capacity for discretionary spend across specific demographics, and
the possibility that lockdown may have accelerated the perception
of pets as a key part of the family.
We closed all of our Groom Room salons during lockdown, reflecting
Government guidance on social distancing. Subject to consumers’
attitude towards social distancing post lockdown, we anticipate a
relatively quick resumption of grooming visits, given the procedures
we have implemented for safe delivery of the service, a “feel good
factor” post lockdown which could extend to pets, and an increasing
awareness of the health benefits for pets. Prior to lockdown, grooming
and pet sale revenues in FY20 averaged £3.3m per four-weekly period
and we do, therefore, anticipate a period of recovery in building to
historic levels.
Vet Group
Across our First Opinion practices, we have already seen a positive
customer response to the adaptation of RCVS guidelines around
permitted procedures, and would expect any further relaxation of
guidelines to have a stimulatory effect on this economically-insensitive
part of our business. We do, however, anticipate that it will take time
post lockdown for our practices to reach normal levels of activity, with
aggregate 4-weekly revenues averaging £27.0m for the first 48 weeks
of FY20 prior to restrictions being imposed. Nevertheless, with
practice recalibration now complete, third party debt and business
rate payment holidays in effect, and the clear benefits of our unique
owner-managed model still in place, our Vet Group is well-positioned
for a recovery.
Mindful of prevailing circumstances, we recognise the potential need
to support some of our First Opinion JV practices with additional
operating loan funding during the year ahead. Such funding will be
available for those businesses that remain viable over the longer term,
taking into account the near term benefit of the third party loan
repayment holiday.
COVID-19: Pets at Home response timeline
Colleague
Community
Customer
Distribution Centres
social distancing
measures put in place;
67 individual actions taken
£1m donated
to colleague
hardship fund
£1.1m donated to support
UK animal rescues
First VIP communication
to customers from CEO
Announced all
shielded colleagues
to be paid full
12 weeks salary
26
16
17
18
19
20
21
23
25
February
March
First written colleague
guidance issued
Daily videos
from CEO and Chief People Officer began
Homeworkers group
launched on internal social
media site, SAP Jam
Government announce lockdown
Store social distancing
protocols began
All grooming salons
closed
RCVS guidelines
to focus on emergency care only
followed by all practices
18
Pets at Home Group PlcAnnual Report and Accounts 2020 V. A new normal
There is no precedent of similar pandemics in the UK, making it
difficult, therefore, to assess the medium to long term effect on
consumer behaviour or when we might see normalisation in
shopping habits. This crisis has, however, encouraged us to critique
our business model and how we operate. While some things have
changed, and will continue to do so in a post-pandemic world, we
remain confident in the long term sustainability of our business for
a number of reasons:
Favourable market dynamics
We operate in a large, growing market with favourable demographics
and clear, long term demand drivers. Pets remain an important part of
our lives – possibly even more so as a result of our present circumstances
– and still need to be fed, loved and cared for. We believe that we can
continue to take share of this market over the longer term given the
significant headroom in core areas such as nutrition, veterinary services
and food and healthcare subscriptions, as well as an increasing
willingness among consumers to spend on convenience.
A sustainable retail offering
In Retail, the majority of our inventory is small-ticket, non-seasonal
and non-discretionary, and sourced across relatively short supply
chains. Our nationwide store estate brings scale advantages, and the
combination of our wide range of retail products and price points, as
well as our service offering, positions us well across all demand cycles
and against all manner of competition. The overwhelming majority of
our stores are structurally profitable, and our longer term programme
of conversion to new pet care formats, with a greater space weighting
towards services, will help in moving the customer relationship from
transactional to experiential, resulting in a more rewarding and
convenient customer journey.
A scalable multichannel platform
We have a growing multichannel business, which allows customers
to shop with us however they choose. Our recent investment in
automation and fulfilment has given us the capacity to process a
significantly higher volume of online sales than in prior years. This
brings a number of opportunities, not least around subscription
services where we see considerable scope for expansion. Unlike
many multichannel retailers, our unique solutions-based customer
proposition allows us, in normal cycles, to grow all channels to
market, simultaneously and profitably.
Directors volunteer to
temporary 20% salary
reduction
£100k donation
to Retail Trust
coronavirus appeal
26
27
01
April
13
Pets
taken off sale in stores
Additional £1.9m
recognition payment
for colleagues
Priority hour for NHS
and vulnerable customers
launched, with 10%
discount for NHS workers
While some things have changed,
and will continue to do so in a
post-pandemic world, we remain
confident in the long term
sustainability of our business.
A large and growing loyal customer base
We have a large and growing base of 5.6m VIP customers, many of
whom already shop across our ecosystem of products, services and
trusted advice. We have invested considerably over the past year in
our data and analytics capability to drive customer insights that will
enable us to offer more personalised, curated and rewarding solutions,
both online and in-store, thereby deepening our customer
relationships and increasing customer lifetime value. The benefits of
this remain ahead of us over the longer term.
A scalable position in a growing veterinary market
Across our First Opinion veterinary business, the recalibration of viable
and closure of specific non-viable practices has been completed.
Our First Opinion practices benefit from a unique owner-manager
structure and typically achieve industry leading operating metrics.
Approximately, two thirds of these practices are located in-store, and
can benefit from retail referrals, and approximately one third of these
practices have been in existence for four years or less, with practice
maturity representing a significant future cash flow opportunity.
Attractive financial dynamics
Across normal cycles, our operations generate stable margins and
good cash flow returns, and we have a growing stream of predictable
annuity income. Our balance sheet is resilient, our leverage is low and
we have various levers we can utilise, if required, to further control
costs and conserve cash within the business. Over 50% of our store
estate, for example, is scheduled to enter lease renewal negotiations
over the next five years. Where rent reductions have historically been
achieved with landlords, these have typically averaged 23%, even in a
more benign rental environment.
Doing good as part of our purpose
We have raised over £5m for charities across our charitable foundation
Support Adoption for Pets and our VIP loyalty programme. We have
continued to reduce our environmental impact during our phase of
growth through, for example, lowering our carbon footprint, using
100% renewable electricity, and recycling our pet bedding, cardboard
and plastic waste.
These are clearly unprecedented times and Pets at Home will not be
immune to the challenges that we collectively face. We have had to
respond quickly and make significant changes to the way we operate
our business, and will undoubtedly need to remain focused yet agile
as we respond to pandemic-driven issues and opportunities alike.
I am proud to be surrounded by an experienced and adaptable
management team, who with the support of our fantastic colleagues
and customers, are determined to create a stronger pet care business
in a post-pandemic future.
Peter Pritchard
Group Chief Executive Officer
21 May 2020
19
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Strategy
Bring the pet
experience to life
r
Value cre a t o
Set our people
free to serve
E
n
a
bler
Use data and VIP to
better serve customers
E
n
a
b
l
e
r
alu e creator
V
50% of sales
from pet services
Value Creator
Bring the pet
experience to life
Strategic priorities
Progress in the year
Metrics
Launch new formats and right size
our store network
• Evolve our store network with new formats that
bring more pet care services and experiences
to customers.
• Ensure we have the right number of stores as
we respond to continued channel shift to online.
Put our pets centre stage in-store
• Use dedicated areas in-store to host engaging
pet events, classes and workshops.
• Excite and inspire the pet owners of today
and tomorrow.
Digitise our business and become the
specialist market leader for online
pet care
• Stay relevant to customers’ evolving shopping
habits with convenient delivery and collection
options.
• Grow online share of market through an improved
experience across all platforms.
Keep prices competitive every day, with
cheaper prices for our loyal customers
• Ensure a tight focus on delivering value for
customers through competitive everyday pricing.
• Reward loyalty by giving our best customers the
best prices.
Grow private labels to 50% of our sales
• Expand and grow our private label brands in
food and accessories, which are only stocked
in Pets at Home.
Principal risks:
– Competition
– Services and store
expansion
– Our people
– Supply chain
and sourcing
– Liquidity and credit
– Treasury and finance
– Regulatory and
compliance
– Sustainability and
climate change
Read more
Page 14
20
• Rolled out a further 16 pet care
centre formats throughout the year
at new, existing and re-located stores
• Invested further in our online
shopping experience by upgrading
our website functionality and
content
• Maintained price competitiveness
vs online pureplays
• Launched a new digital subscription
sign-up process in-store
• Published the first in a series of
pet-related podcasts across Apple,
Google and Spotify platforms
63.1m
+6.6%
Number of customer transactions#
18
Total number of pet care centres
10.0%
Omnichannel participation
of total Retail sales
40%
Private label participation across food
and accessories
#
For an explanation as to what we are measuring
and why it is important, please see our key
performance indicators on page 30
Pets at Home Group PlcAnnual Report and Accounts 2020 “ Despite the unprecedented uncertainty caused by the coronavirus
pandemic in the UK, our strategic pillars remain the same.
We will adapt how and when we progress certain areas in response
to the changing environment, but at a time when pets are playing
an increasingly important role in their owners’ lives, we remain
determined to provide them with complete pet care.”
Peter Pritchard
Group Chief Executive Officer
Enabler
Use data and VIP to
better serve customers
Strategic priorities
Progress in the year
Metrics
Connect our data across the Retail
and Vet Group businesses
• Use all our Group data to develop a complete
picture of our customers and their pets.
• Invest in the appropriate expertise and system
capabilities to unlock the potential of this
unique asset.
Personalise customer experience
and offers
• Provide customers with more relevant
and engaging content and incentives.
• Increase our share of VIP customers’ spend.
Give colleagues information to better
serve customers at the point of sale
• Enable our colleagues to make every customer
feel special, driving customer satisfaction,
loyalty and spend.
• Integrate systems to allow colleagues easy
access to customer insight.
Utilise data across the business
to drive strategic decision making
and automation
• Use data and analytics to drive decision
making across the Group.
• Make processes smarter, quicker and
more efficient.
Principal risks:
– Competition
– Business systems and
information security
– Regulatory and
compliance
– Brand and reputation
– Liquidity and credit
Read more
Page 14
• Significant progress in migrating VIP
data from a third party provider to
an in-house cloud based platform
• Built a team of 42 data scientists and
analysts through a combination of
existing colleagues and high calibre
external recruits
• Launched internal ‘Petcare Analytics
Group’ aimed at giving colleagues
the information they need in an
automated way
• Introduced a new complementary
CRM system to facilitate increasingly
personalised communication to VIPs
• Grew membership of Puppy and
Kitten Clubs, where incremental
spend vs non-members can be
up to 23%
£817.2m
+38.1%
VIP customer sales1, #
5.6m
Number of active VIP members
c16%
VIPs who purchase both products
and services
75%
Store revenues transacted by VIPs
1
#
Alternative Performance Measures (APMs) are
defined and reconciled to IFRS information,
where possible, on page 220. Management
recognise that as Alternative Performance
Measures they differ to statutory metrics,
but believe they represent the most
appropriate KPIs.
For an explanation as to what we are
measuring and why it is important, please see
our key performance indicators on page 30.
21
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Strategy continued
We were able to reduce store
colleague hours by 3% year on year
due to a number of efficiency
initiatives, without reducing the time
available to spend with customers.
Enabler
Set our people free
to serve
Principal risks
– Services and store
expansion
– Our people
– Brand and reputation
– Business systems and
information security
– Regulatory and
compliance
Strategic priorities
Progress in the year
Metrics
Give our highly trained colleagues
more time with customers
• Remove tasks to allow colleagues to do what
they do best – provide an exceptional shopping
experience to the customer.
• Maintain leading levels of customer satisfaction
with our highly trained colleagues to ensure we
are the trusted pet experts.
Build the systems to enable our strategy
and reduce overheads across
the business
• Establish the infrastructure to seamlessly support
operations across the business.
• Increase automation and simplify processes
to maintain an optimal cost base.
Ensure we are building the right teams
with the capability and skills to
deliver our plan
• Recruit high calibre colleagues across all levels and
allow them to operate with freedom and ambition.
• Adapt to the changing market by introducing
new talent, ideas and expertise.
• Invested in automation at our
Northampton Distribution Centre
to double online order capacity
• Taken non-customer facing tasks
out of stores through a series
of efficiency initiatives, enabling
colleagues to spend more time
with customers
• Simplified the Joint Venture fee
arrangements in First Opinion vet
practices, creating efficiencies at
our Support Office
• Launched first phase of Success
Factors, a cloud based people
management tool, across
Support Office
• Transitioned a number of teams to
become Group functions rather than
operating separately across Retail
and Vet Group, as both businesses
work closer together
£187.0k
+7.4%
Customer sales1 per colleague#
3%
Reduction in store colleague
hours year on year
£1.9m
Additional bonus paid to store
colleagues in recognition of their
commitment to serving customers
through the coronavirus crisis
Read more
Page 14
22
1
#
Alternative Performance Measures (APMs) are
defined and reconciled to IFRS information,
where possible, on page 220. Management
recognise that as Alternative Performance
Measures they differ to statutory metrics,
but believe they represent the most
appropriate KPIs.
For an explanation as to what we are
measuring and why it is important, please see
our key performance indicators on page 30.
Pets at Home Group PlcAnnual Report and Accounts 2020 Our expansion of Dick White Referrals
in Cambridge will more than double
the number of cases our specialists
can treat, allowing us to meet
local demand.
Value Creator
50% of sales
from pet services
Strategic priorities
Progress in the year
Metrics
Develop our stores of tomorrow,
with more space dedicated to pet
care and services
• Meet the evolving expectations of the customer
with a more digital experience.
• Launch new formats that bring more pet care
services and experiences to customers.
Extend our subscription expertise
into pet care plans
• Grow customer numbers on existing
subscription platforms.
• Work across the Group to introduce new packages
aimed at providing complete pet care.
Recalibrate our First Opinion vet
business and realise free cashflow
growth
• Simplify the fees in our Joint Venture agreement
to help practices mature more swiftly.
• Generate returns for both Partners and
Pets at Home.
Grow our Specialist Referral business
through existing and new hospitals
• Support further clinical development with our
existing specialists.
• Look for further growth opportunities through
organic growth or bolt-on acquisitions.
Principal risks:
– Competition
– Services and store
expansion
– Liquidity
and credit
– Treasury
and finance
– Regulatory and
compliance
– Sustainability and
climate change
Read more
Page 14
• Completed the one-off programme
of First Opinion vet practice buy outs
and closures, whilst making all fee
adjustments for the remaining Joint
Venture estate
34.1%
+9 bps
• Like-for-like First Opinion customer
sales ahead of the underlying
market across all cohorts, including
mature practices
• Continued growth in subscription
customers, with our monthly flea
& worm platform extended to
include cat treatments and further
penetration of First Opinion
healthplans
• Began expansion of Dick White
Referrals to more than double
capacity, and also announced plans
for a fifth Specialist Referral centre
at a greenfield location in Scotland
• Formed a strategic partnership
with Tailster.com, a leading online
marketplace for pet walking, sitting
and boarding services
Customer sales1 from pet care services#
316
Grooming salons
441
First Opinion vet practices, located both
in-store and in standalone locations
865,000
Subscription customers across the Group
1
#
Alternative Performance Measures (APMs) are
defined and reconciled to IFRS information,
where possible, on page 220. Management
recognise that as Alternative Performance
Measures they differ to statutory metrics,
but believe they represent the most
appropriate KPIs.
For an explanation as to what we are
measuring and why it is important, please see
our key performance indicators on page 30.
23
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Pet care in action
Strategic links:
— Use data and VIP to
better serve customers
— Bring the pet experience
to life
VIP Puppy and
Kitten Clubs
Helping owners care for their pet
from the very beginning
24
Annual Report and Accounts 2020
Pets at Home Group Plc >210,000
Current Puppy Club members
We launched the VIP Puppy Club in 2017 and
currently have c20% of the total UK puppy
population signed up.
>237,000
Graduates of Puppy Club
>80,000
Current Kitten Club members
Alongside the kitten equivalent, these free to join clubs provide
a programme of expert advice and exclusive offers designed to
introduce pet owners to all parts of our pet care ecosystem in an
engaging way. By capturing pet specific data such as name, age
and breed, we are able to personalise the customer journey to the
individual pet in follow up communications via both email and
direct mail.
Customers benefit from an attractive suite of special offers for
signing up, including 10% off their first shop in-store, a free bag
of private label Advanced Nutrition food, their first month of flea
& worm treatments for free, £50 off a Complete Care healthplan
at a Vets4Pets practice and 50% off a full puppy groom.
We have seen customers who join the Puppy Club spend up to
23% more in their first year with us when compared to those
puppies not in the club, with that spend uplift continuing even
after they become a junior dog (i.e. >12 months old).
With the puppy and kitten population in the UK remaining broadly
flat at c2m each year, we are becoming increasingly focused on
acquiring these customers as soon as possible and then nurturing
lifelong relationships with them.
Scan the QR code
to trigger the video.
25
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Pet care in action
A range of pet
care subscription
platforms
Making pet care affordable
and convenient
The number of subscription customers
increased 23% in FY20, and now totals
over 865,000 across the Group.
We offer three main subscription packages, all with growing
numbers signed up, as subscription becomes a popular trend
among consumers. By signing customers and clients up to
these schemes, we are able to increase loyalty and generate
a predictable revenue stream.
In Retail, our “VIP Subscribe & Save” monthly flea, worm and tick
treatments for dogs and cats start from just £4 per month
and are delivered direct to the customers’ home, providing a
convenient and affordable way to maintain the health of their
pet. There are an estimated 18m dogs and cats in the UK, each
one of which should be treated monthly – representing a
considerable opportunity to grow the number of pet owners
we have using this service.
Also in Retail, our “Easy Repeat” food subscription service allows
customers to completely customise home delivery of their
chosen pet food. Subscribers are rewarded with our best prices,
typically 2% cheaper than our closest competitor, and have
total flexibility over what and when they get delivered.
Preventative healthcare plans in First Opinion vets are designed
to provide peace of mind for the predictable elements of pet
care, and can represent savings of over 20%. Our flagship
package “Complete Care” has a monthly fee from only £12
for a dog, helping to spread the cost of routine care such as
monthly treatments, annual booster vaccinations and
regular consultations.
Looking ahead, we have aspirations to create increasingly
personalised subscription bundles to make complete pet care
even more convenient for our customers.
26
Pets at Home Group PlcAnnual Report and Accounts 2020 >865,000
Subscription customers across the Group
Strategic links:
— 50% of sales from
pet services
— Bring the pet
experience to life
Scan the QR code
to trigger the video.
c18m
Dogs and cats in the UK
Pets at Home Group Plc
Pets at Home Group Plc
27
27
Strategic reportGovernance reportFinancial statementsAnnual Report and Accounts 2020 Pet care in action
28
Pets at Home Group PlcAnnual Report and Accounts 2020 Shopping across our
pet care ecosystem
Our most valuable customers purchase
both products and services
£1,000
e
m
o
H
£800
Annual spend is >8x more
than a store-only customer
t
a
s
t
e
P
h
t
i
w
d
n
e
p
s
l
a
u
n
n
A
£600
£400
£200
0
Store
customer
Omnichannel
customer
(store + online)
Omnichannel
+ vet
customer
Omnichannel
+ vet
+ grooming
customer
Increasing spend and shopping frequency
Retail spend
Vet spend
Grooming spend
>£950
Annual spend of an omnichannel
shopper who also uses the Groom Room
and Vets4Pets
C16%
Of all VIPs currently shop across
both products and services
24%
Growth in number of VIPs shopping
both products and services
Scan the QR code
to trigger the video.
Strategic links:
— 50% of sales from
pet services
— Use data and VIP to
better serve customers
Introducing VIPs to all parts of our ecosystem
is central to our strategy.
We know from analysing our VIP database of 5.6m active members
that not only does a retail shopper spend more overall when they
also shop online, but if they also use our grooming and First Opinion
vet services their total annual spend with us is over 8x more than a
store-only customer.
Over the lifetime of a pet, which can typically be more than 13 years
for dogs and cats, this represents a considerable opportunity for us to
capture incremental pet care spend. With only c16% of VIPs currently
shopping across both products and services, recent investment
in our data capabilities, both in terms of people and infrastructure,
will underpin our strategic progress over the coming years.
29
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020
Key performance indicators
Progress across all pillars
of our pet care strategy
Financial performance
Financial KPIs shown below represent those used by the business to monitor performance.
Management recognise that as Alternative Performance Measures they differ to statutory metrics,
but believe they represent the most appropriate KPIs.
Customer sales1
(£m)
Group underlying
profit before tax1 (£m)
Group underlying
free cashflow1 (£m)
£1,334.7m +9.6%
£99.5m +11.0%
£89.6m +40.7%
2020
2019
2018
1,334.7
1,218.2
1,122.4
2020
2019
2018
99.5
89.7
84.5
2020
2019
2018
89.6
63.6
55.8
Representing excellent like-for-like1
growth, both in Retail and in First
Opinion vet practices.
Reflecting strong profit growth
in Retail and the actions we have
taken in the Vet Group.
Delivered through strong profit
conversion in Retail and the positive
impact of our Vet Group actions.
What we are measuring
The cash available for return to
shareholders after investing in
the needs of the business.
Why is it important?
Delivering free cashflow allows
us to make strategic investments in
the business to fuel further growth,
whilst providing an appropriate
return to shareholders.
What we are measuring
The growth in customer sales
generated across the Group year
on year. This includes spend across
all brands and includes the gross
customer sales made by Joint
Venture vet practices (rather
than the fee income paid to
Pets at Home).
Why is it important?
By growing customer sales across
all parts of our business ahead of
the market, we are able to gain
market share. In particular, this
means focusing on the sales made
by First Opinion vet practices,
whether they be under the Joint
Venture or company managed
model.
What we are measuring
The underlying profitability
of the Group as a result of our
strategic progress.
To ensure a meaningful year on
year comparison, we have shown
underlying profit before tax1
on a constant accounting basis
pre-IFRS16. The impact of IFRS16
in FY20 was to decrease Group
underlying profit before tax1
by £6.0m.
Why is it important?
By generating underlying
profit growth, we are able to
demonstrate that our pet care
strategy is the right one, and
that we are delivering against
those strategic objectives.
The unprecedented uncertainty created by the coronavirus pandemic and its effects, both in terms of
extent and duration, make it impossible to predict how the business will be impacted in the year ahead.
As such, it is not possible or appropriate to provide financial guidance for FY21 at the date of this report.
To support delivery of
our strategy, we have
a clearly defined set
of key performance
indicators.
We are committed to generating
shareholder value and financial
returns, and therefore focus on
three financial metrics we believe
are the best measure of our
performance. Alongside financial
KPIs, we also have KPIs specific
to each strategic pillar to ensure
we can track the impact of
our actions.
We remain confident in our
pet care strategy. However, we
recognise that the timing and
execution of delivering that
strategy will change as we
respond to the unique set of
circumstances created by the
coronavirus pandemic. Whilst
we set out some of our future
strategic priorities, we will remain
agile and adaptable in how we
deliver pet care to customers.
1
Alternative Performance Measures (APMs)
are defined and reconciled to IFRS information,
where possible, on page 220.
30
Pets at Home Group PlcAnnual Report and Accounts 2020 Strategic performance
Bring the pet
experience to life
50% of sales from
pet services
Use data and VIP to
better serve customers
Set our people
free to serve
Number of customer
transactions (m)
Customer sales1
from services (%)
VIP customer sales1
(£m)
Customer sales1
per colleague (£k)
63.1 +6.6%
34.1% +9 bps
£817.2m +38.1%
£187.0k +7.4%
2020
2019
2018
63.1
59.2
56.2
2020
2019
2018
34.1%
34.0%
32.2%
2020
2019
2018
817.2
591.6
502.6
2020
2019
2018
187.0
174.1
167.5
Driven by increasing footfall to
all locations, particularly stores,
plus strong growth online.
Reflecting a maturing First Opinion
vet business and strong growth
across our subscription platforms.
Driven by a 31% increase in active
members, in particular new puppy
and kitten owners.
Achieved through excellent sales
growth and a reduction in store
hours through efficiency initiatives.
What we are measuring
Growth in the number of
customer transactions across the
Group year on year. This includes
transactions in-store, online, in
our grooming salons, visits to all
First Opinion vet practices and
cases treated at our Specialist
Referral centres.
Why is it important?
By providing complete pet care,
more customers will visit our
locations more frequently and
transact more often.
Future plans
We will continue bringing our
Retail and Vet Group businesses
closer together, making it easy
and affordable for customers
to shop across our brands. In
addition, we will look to expand
our pet care ecosystem further
still by considering attractive
adjacencies.
What we are measuring
The proportion of total customer
sales contributed by our various
pet care services. This is defined
as gross customer sales made by
both Joint Venture and company
managed First Opinion vet
practices, revenue from our
Specialist Referral centres,
grooming salons, omnichannel
subscriptions, pet sales and pet
insurance commissions.
Why is it important?
The ability to offer customers pet
care services in addition to pet
products is a key competitive
differentiator for the Group.
Future plans
Generating sales from services
is an essential part of being a
pet care business and not just a
retailer. We will continue to focus
on helping First Opinion vet
practices to mature, whilst also
growing the number of customers
signed up to our subscription
packages.
What we are measuring
The increase in spend from VIP
loyalty club members across the
Group year on year. This includes
all spend across both Retail and
Vet Group businesses.
Why is it important?
Our VIP loyalty club of 5.6m active
pet owners is a unique asset
providing data and insight to
help us increase share of wallet,
attract and retain customers, and
encourage further spend across
our ecosystem of products
and services.
Future plans
Continued investment in our
data capabilities is a key underpin
of our future growth plans.
We intend to develop deep
actionable insights so we can
better serve the needs of pet
owners and deliver more
personalised content and offers
relevant to each individual pet.
What we are measuring
Customer sales generated per
full-time-equivalent colleague
employed directly by the Group.
Why is it important?
By creating efficiencies and
removing task, we allow
colleagues across the Group
to focus on sales generating
activities and delivering
exceptional service to our
customers, Partners and clients.
Future plans
Our focus is on operating
efficiently across all parts of the
Group, ensuring we can remain
agile in how we deliver our
strategic priorities whilst
maintaining an appropriate
cost base.
Our pet care ecosystem
Ecosystem metrics, page 32
31
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Additional performance metrics
Having made strong progress
across our pet care strategy,
we have become increasingly
focused on metrics which relate
not just to individual pillars, but
our entire pet care ecosystem.
By looking at our business in this
way, just as our customers do, we
are confident we will create even
more value for all stakeholders.
Our pet care ecosystem
Proportion of VIPs
shopping across
both products
and services
c16%
By introducing VIPs to all parts of
our pet care ecosystem, we are
able to increase customer loyalty
and capture a greater share of
their total pet care spend. In FY20,
only around 16% of our 5.6m
active members shopped with us
across both products and services
– representing considerable
headroom. As we look to leverage
our data to understand customer
shopping behaviour more deeply,
we expect this measure to
increase, with the potential to
generate considerable returns
for the Group both in terms of
revenue and profit growth.
Number of
subscription
customers
Members of the
VIP Puppy and
Kitten Clubs
865,000
296,000
Subscriptions are a popular
consumer trend, and the pet care
market is no different. We see
considerable potential to create
predictable, repeatable and high
margin revenue streams from a
variety of platforms, whether that
is preventative healthplans with
First Opinion vets, monthly flea &
worm treatments or online food
subscriptions. We currently have
865,000 customers signed up to
these platforms across the Group,
having grown 23% in the year,
and expect to see further growth
in FY21.
The success of our Puppy
and Kitten Clubs has been
instrumental in driving the
growth of VIP customer revenues.
We currently have around 20% of
the puppy and 10% of the kitten
population in the UK signed up
to the respective clubs, which
aim to bring our pet care
ecosystem to life in an engaging
and rewarding way. With club
members spending more than
their non-club counterparts by
up to 23%, both in the first year
and on an ongoing basis, we are
focused on using these clubs to
help acquire new customers and
develop lifelong relationships
with them.
Bring the pet
experience to life
t H o m e G r o up Plc’s pet care ecosyste
m
e t s a
P
Pet products
in-store
In-store vet
practices
Use data and VIP
to better serve
customers
Omnichannel
VIP
V
e
t
G
r
o
u
p
Specialist
Referral vet
hospitals
Pet Care
loyalty c l
u
b
Standalone
vet practices
Pet products
online
l
i
a
t
e
R
Grooming
salons
Other pet
care services
50% of sales
from pet services
Set our people
free to serve
32
Pets at Home Group PlcAnnual Report and Accounts 2020
50% of sales
from pet services
33
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Business model
A unique combination of
products, services and expertise
Our business model has pet care at its heart, and allows us to be adaptable.
Differentiators
Business activities
Trusted and well
known brand
Passionate and expert
colleagues, groomers
and veterinarians
Customer insights from
VIP loyalty club and
vet practice data
Strong and stable
management team
Corporate Social
Responsibility - delivering
our purpose
Our competitive
advantage
We offer pet owners complete pet care
through our winning combination of pet
products and services, all made affordable
and convenient.
34
t H o m e G r o up Plc’s pet care ecosyste
m
e t s a
P
Pet products
in-store
In-store vet
practices
Omnichannel
VIP
V
e
t
G
r
o
u
p
Specialist
Referral vet
hospitals
Pet Care
loyalty c l
u
b
Standalone
vet practices
Pet products
online
l
i
a
t
e
R
Grooming
salons
Other pet
care services
Underpinned by CSR activities
We care deeply about the role that we play in society and want to share the value we create
as a business. We are committed to developing a long term approach to Pets, People and
the Planet, recognising the need to reflect the importance of these areas within our strategy.
Corporate Social Responsibility,
Page 62
A pet care ecosystem
With 255 locations offering a retail store,
Groom Room salon and First Opinion
vet practice all in one place, we are the
clear market leader in terms of scale and
convenience. Together with a multi-faceted
omnichannel business, Specialist Referral
centres and expert colleagues, we are able
to service the needs of pet owners in one
joined-up experience.
Proprietary VIP loyalty club data
We currently have 5.6m active VIP members,
including around one in two dogs and one
in three cats in the UK. Having over 7 years of
pet-specific transaction history, we are able
to generate deep insights and deliver an
increasingly personalised customer journey.
Pets at Home Group PlcAnnual Report and Accounts 2020
Value created
For pets
Everything a pet needs to keep
them happy and healthy
Supported by our welfare and
care standards
£5m+
Raised in FY20
Corporate Social
Responsibility
Page 62
For customers
Everything pet owners need to
take the best care of their pets
255
Stores with a vet and groomer inside
For colleagues
Sector leading reward,
benefits and wellbeing
Externally accredited
training schemes
Pet care in action
Pages 24 to 29
76%
Retention of colleagues
Corporate Social
Responsibility
Page 62
For the Group
Generate value for shareholders
through free cashflow growth
1
Alternative Performance Measures (APMs) are
defined and reconciled to IFRS information,
where possible, on page 220.
£89.6m
Underlying free cashflow1
Key performance
indicators
Page 30
Retail
Through the Pets at Home Retail business,
we are able to offer pet owners a range of
products and services both in-store and online.
Operating review, page 44
Vet Group
Our Vet Group has its core business in First
Opinion veterinary practices and a presence
in the Specialist Referral segment.
Operating review, page 48
Extensive ranges and strong
penetration of private label brands
Our product ranges are curated yet extensive.
Within both food and accessories, we benefit
from a high penetration of private labels –
helping to increase customer loyalty whilst
also providing a margin benefit to us.
Unified brand and unique operating
model in First Opinion vets
Vets4Pets is the largest branded veterinary
business in the UK, helping to drive customer
recognition. Furthermore, our Joint Venture
model is unique in the market and is proven
to incentivise practice growth.
Passionate and knowledgeable people
Right across our business, our colleagues
share a passion for pets and are experts in
their respective fields, making them a trusted
source of help and advice for pet owners
throughout the lifetime of their pet.
35
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Stakeholder engagement
The value we create
for our stakeholders
At Pets at Home our vision, strategy, culture, values and behaviours underpin
everything we do and help us to strengthen the relationship of the business to
key stakeholders. The views of stakeholders have been considered in the normal
cycle of Board and executive meetings. This has been supplemented with other
stakeholder engagement opportunities on an increasing basis.
Key metrics
Engagement method
Key messages
Our response
Stakeholder group
Colleagues
14,988
colleagues employed by the Group
(including colleagues employed
either directly or indirectly via the
JVCos and Specialist Division)
Suppliers
>390
active suppliers
Charities and
community groups 480
animal rescues visited by
Pets at Home colleagues in 2019/20
Industry bodies
RCVS / BVA
All vets are members of the
Royal College of Veterinary
Surgeons (RCVS) and the British
Veterinary Association (BVA)
Customers
5.6m
active VIP members
Shareholders and the
investor community 103
Institutions met
36
Pets at Home is committed to creating a great place to work and listening to colleagues is a key
part of this. The Remuneration Committee chair, Paul Moody, has been appointed as colleague
representative. In this capacity he has attended executive and store listening sessions. In
addition, the Chairman has attended two listening sessions in April and November as well as
regular store and vet practise visits. A Joint Venture Council comprising a representation of our
JVCo partners meet every two to three months to discuss strategic, operational and clinical
matters. This meeting is attended by members of the Vet Group executive. For the first time
the “We C.A.R.E.” survey was extended to include employees of the Vet Group, this included
employees of JVCos in addition to directly employed colleagues. The results of the survey were
reviewed locally by teams and by the board. This annual survey is supplemented by pulse
surveys and listening groups, held across the year in all areas of the business. There are channels
for colleagues to engage directly with the Executive Management Team, for example “Tell
David” and “Email Louise and Peter”. During the Covid19 crisis listening and communication
have been increased considerably. For example, every Store Manager has been paired with a
Director to enable a weekly call to take place, daily video updates have been given by the CEO
or one of the Executive Management Team every weekday since 17 March.
Pets at Home has a relatively stable supplier base. Strong relationships have been built over
a number of years and the buying, technical and innovation teams work closely together to
create unique products for pets and their owners. Over 90% of food product purchases and
over 50% of accessory product purchases are from UK based suppliers, which means that the
teams are able to meet suppliers on a regular basis, in addition to an annual conference. The
sourcing office in Hong Kong manages the day to day relationships with our supplier partners in
this region. An annual autumn conference is held in this region where key messages are shared
and the suppliers have an opportunity to ask questions, raise concerns and opportunity areas.
The Pets at Home charitable foundation, Support Adoption for Pets (SAFP), engages
with the animal rescue sector in the UK on a regular basis. The team, which includes a
veterinary nurse visited 90 rescues to gain a good understanding of the issues that they
face and help that they need which supports the decisions on which grant applications
are funded. Additionally 390 stores visited a local rescue as part of the charity of the year
selection and engagement process.
The Vet Group maintains close working relationships with key industry bodies such as
the RCVS and the BVA through membership of the Major Employers Group. All of our
JVPs are members of the RCVS and BVA. We have vet and nurse colleagues in both our
Support Office and our practices who are senior officers in some of the main veterinary
organisations and we are well represented on key policy committees as well. These
include the Society of Practising Veterinary Surgeons (SPVA) and the British Veterinary
Nursing Association (BVNA). The Group also participates in industry activity such as the
RCVS Knowledge Quality Improvement Advisory Board and Veterinary Defence Society
Vetsafe initiative, which is an industry-wide significant event reporting system which
enables learnings and improvements to be made across the industry. Pets at Home
became a member of the British Retail Consortium (BRC) during FY19/20 and have been
actively involved particularly during the Coronavirus outbreak.
We regularly communicate with our VIP community through a variety of mediums such
as email, direct mail and the VIP App. Communications are designed not only to provide
discounts and benefits, but also to share helpful pet care content and encourage
feedback. In addition to our structured VIP campaigns, we also perform an annual survey
of both existing and non-shoppers to get deep understanding of how their shopping
behaviours are changing and how we can best meet their needs. We also host regular
small listening groups throughout the year, providing detailed direct feedback.
The CEO, CFO and Investor Relations team are involved in ongoing interaction throughout
the year via conference calls, meetings and small roundtable events. At the AGM 100%
of resolutions were passed and votes in favour ranged from 93% to 100%. Investor tours
were conducted at the flagship Stockport store. A roundtable event was hosted by the
Chief Operating Officer of the Vet Group and three Joint Venture Partners who stand on
the Joint Venture Council.
The annual survey provides detailed information but is part of a broad selection of
Our focus is on creating a kind and caring company where colleagues feel
engagement channels available to colleagues. As with any large survey, below the
welcomed and valued and are able to make their best contribution. Digital and
headline themes differences can appear at a local level so follow up sessions have been
flexible working have been prioritised and William Hewish is leading a project to
held at a department level across the Group. These were developed into action plans.
accelerate this at our office locations. New software has been launched across the
At a Group level there were clear messages about career pathways, managing change
business to enable virtual meetings and sharing of documents. The coronavirus
and opportunities to promote flexible working at our office locations. Recently during
crisis has accelerated the development of virtual communications, for example
the coronavirus crisis the need to engage with all colleagues has been important
a virtual version of the weekly “Shoal” has begun. A social media platform called
whether they are working in stores, DCs or vets, shielding or working from home and
JAM has been rolled and out and widely used to provide a wealth of resources
across all the these groups wellbeing has become an even more important focus
and information to support colleague wellbeing.
for colleagues.
Engagement with suppliers has identified an opportunity to develop more strategic
We are currently reviewing our end to end processes to further improve our ways
medium term plans to enable investment and financial planning. This will in turn
of working with suppliers. This will include a new IT based process management
create an even more innovative, efficient and responsive supply chain. The review
system, a cross functional balanced scorecard for assessing capability and
of the Corporate Responsibility strategy has identified opportunities to strengthen
establishing medium term (three to five year) supplier strategies. This will enable us
the raw material and packaging sustainability of products.
to work efficiently and effectively with our suppliers to deliver for our customers.
During the year a Product and Supply Chain management team has been
established to further develop the Responsible Sourcing Strategy.
Local and national rescues face a constant challenge to maintain sufficient income
SAFP made 78 grants totalling over £1.5m; 70% of these contributed to capital
to meet the immediate veterinary and shelter needs of the pets in their care while also
projects. 85% Pets at Home stores partner with a local charity to enable them
investing in infrastructural improvements. There are particular concerns about the
to raise awareness and funds by fundraising in our stores over specific weekend
impact of coronavirus on the ability of charities to raise sufficient money to maintain
events. This raised over £1.2m in the last year. The SAFP foundation and VIP Lifelines
their basic operations.
have donated £1.1m to support local rescues impacted by the coronavirus.
Joint Venture Partners have the clinical freedom to interpret and follow RCVS guidance.
The Vet Group launched QI2020, a quality improvement initiative, to bring
Engagement with industry bodies enables the Vet Group clinical services team to
the latest clinical guidance from the industry into one easy to access location
provide informed support and advice to the partners. Of particular note in the year
for our JVPs. We continue to work closely with all industry bodies during
was our work with the BVA to lobby the Government to add veterinary surgeons to
the coronavirus outbreak to support our colleagues, customers and pets.
the Shortage Occupation List, plus pro-active engagement to support pet shops and
vet practices being designated as “essential services” amidst the coronavirus outbreak
in March.
Customers are increasingly demanding a highly personalised shopping experience,
With an increasing proportion of our customers being from younger generations,
and one that is seamless across channels. If we are not able to deliver this experience,
where trends such as online shopping and subscriptions are more prevalent,
then we risk losing both existing and potential new customers to competitors.
we are ensuring that we invest in these areas of the business. Insights gained
throughout the year form an integral part of our annual five-year strategic planning
process, to ensure that we are building a business which remains relevant to today’s
pet owners.
Having made significant changes to both the Retail and Vet Group parts of the business
We have positive, ongoing and transparent dialogue with our shareholder
in recent years, our investment case has evolved. As such, it has become increasingly
base and we value feedback and insight which is considered by the Executive
important to spend time with investors to explain the reasons for these changes,
Management Team. The investor website is kept updated with all of the latest
the impact on the business, and articulate its future prospects. There has been
announcements and provides information about the Group and its activities.
engagement around specific topics over the course of the year including the update
of the CSR strategy, Chairman succession, Director remuneration and capital allocation.
Pets at Home Group PlcAnnual Report and Accounts 2020 How we engage
By understanding our stakeholders, we can factor into Boardroom
discussions the potential impact of our decisions on each stakeholder
group and consider their needs and concerns, in accordance with
section 172 of the Companies Act 2006.
Key metrics
Engagement method
Key messages
Our response
The annual survey provides detailed information but is part of a broad selection of
engagement channels available to colleagues. As with any large survey, below the
headline themes differences can appear at a local level so follow up sessions have been
held at a department level across the Group. These were developed into action plans.
At a Group level there were clear messages about career pathways, managing change
and opportunities to promote flexible working at our office locations. Recently during
the coronavirus crisis the need to engage with all colleagues has been important
whether they are working in stores, DCs or vets, shielding or working from home and
across all the these groups wellbeing has become an even more important focus
for colleagues.
Our focus is on creating a kind and caring company where colleagues feel
welcomed and valued and are able to make their best contribution. Digital and
flexible working have been prioritised and William Hewish is leading a project to
accelerate this at our office locations. New software has been launched across the
business to enable virtual meetings and sharing of documents. The coronavirus
crisis has accelerated the development of virtual communications, for example
a virtual version of the weekly “Shoal” has begun. A social media platform called
JAM has been rolled and out and widely used to provide a wealth of resources
and information to support colleague wellbeing.
Engagement with suppliers has identified an opportunity to develop more strategic
medium term plans to enable investment and financial planning. This will in turn
create an even more innovative, efficient and responsive supply chain. The review
of the Corporate Responsibility strategy has identified opportunities to strengthen
the raw material and packaging sustainability of products.
We are currently reviewing our end to end processes to further improve our ways
of working with suppliers. This will include a new IT based process management
system, a cross functional balanced scorecard for assessing capability and
establishing medium term (three to five year) supplier strategies. This will enable us
to work efficiently and effectively with our suppliers to deliver for our customers.
During the year a Product and Supply Chain management team has been
established to further develop the Responsible Sourcing Strategy.
Local and national rescues face a constant challenge to maintain sufficient income
to meet the immediate veterinary and shelter needs of the pets in their care while also
investing in infrastructural improvements. There are particular concerns about the
impact of coronavirus on the ability of charities to raise sufficient money to maintain
their basic operations.
SAFP made 78 grants totalling over £1.5m; 70% of these contributed to capital
projects. 85% Pets at Home stores partner with a local charity to enable them
to raise awareness and funds by fundraising in our stores over specific weekend
events. This raised over £1.2m in the last year. The SAFP foundation and VIP Lifelines
have donated £1.1m to support local rescues impacted by the coronavirus.
Joint Venture Partners have the clinical freedom to interpret and follow RCVS guidance.
Engagement with industry bodies enables the Vet Group clinical services team to
provide informed support and advice to the partners. Of particular note in the year
was our work with the BVA to lobby the Government to add veterinary surgeons to
the Shortage Occupation List, plus pro-active engagement to support pet shops and
vet practices being designated as “essential services” amidst the coronavirus outbreak
in March.
The Vet Group launched QI2020, a quality improvement initiative, to bring
the latest clinical guidance from the industry into one easy to access location
for our JVPs. We continue to work closely with all industry bodies during
the coronavirus outbreak to support our colleagues, customers and pets.
Customers are increasingly demanding a highly personalised shopping experience,
and one that is seamless across channels. If we are not able to deliver this experience,
then we risk losing both existing and potential new customers to competitors.
With an increasing proportion of our customers being from younger generations,
where trends such as online shopping and subscriptions are more prevalent,
we are ensuring that we invest in these areas of the business. Insights gained
throughout the year form an integral part of our annual five-year strategic planning
process, to ensure that we are building a business which remains relevant to today’s
pet owners.
Having made significant changes to both the Retail and Vet Group parts of the business
in recent years, our investment case has evolved. As such, it has become increasingly
important to spend time with investors to explain the reasons for these changes,
the impact on the business, and articulate its future prospects. There has been
engagement around specific topics over the course of the year including the update
of the CSR strategy, Chairman succession, Director remuneration and capital allocation.
We have positive, ongoing and transparent dialogue with our shareholder
base and we value feedback and insight which is considered by the Executive
Management Team. The investor website is kept updated with all of the latest
announcements and provides information about the Group and its activities.
37
Stakeholder group
Colleagues
14,988
colleagues employed by the Group
(including colleagues employed
either directly or indirectly via the
JVCos and Specialist Division)
Suppliers
>390
active suppliers
Pets at Home is committed to creating a great place to work and listening to colleagues is a key
part of this. The Remuneration Committee chair, Paul Moody, has been appointed as colleague
representative. In this capacity he has attended executive and store listening sessions. In
addition, the Chairman has attended two listening sessions in April and November as well as
regular store and vet practise visits. A Joint Venture Council comprising a representation of our
JVCo partners meet every two to three months to discuss strategic, operational and clinical
matters. This meeting is attended by members of the Vet Group executive. For the first time
the “We C.A.R.E.” survey was extended to include employees of the Vet Group, this included
employees of JVCos in addition to directly employed colleagues. The results of the survey were
reviewed locally by teams and by the board. This annual survey is supplemented by pulse
surveys and listening groups, held across the year in all areas of the business. There are channels
for colleagues to engage directly with the Executive Management Team, for example “Tell
David” and “Email Louise and Peter”. During the Covid19 crisis listening and communication
have been increased considerably. For example, every Store Manager has been paired with a
Director to enable a weekly call to take place, daily video updates have been given by the CEO
or one of the Executive Management Team every weekday since 17 March.
Pets at Home has a relatively stable supplier base. Strong relationships have been built over
a number of years and the buying, technical and innovation teams work closely together to
create unique products for pets and their owners. Over 90% of food product purchases and
over 50% of accessory product purchases are from UK based suppliers, which means that the
teams are able to meet suppliers on a regular basis, in addition to an annual conference. The
sourcing office in Hong Kong manages the day to day relationships with our supplier partners in
this region. An annual autumn conference is held in this region where key messages are shared
and the suppliers have an opportunity to ask questions, raise concerns and opportunity areas.
Charities and
community groups 480
animal rescues visited by
The Pets at Home charitable foundation, Support Adoption for Pets (SAFP), engages
with the animal rescue sector in the UK on a regular basis. The team, which includes a
veterinary nurse visited 90 rescues to gain a good understanding of the issues that they
face and help that they need which supports the decisions on which grant applications
are funded. Additionally 390 stores visited a local rescue as part of the charity of the year
Pets at Home colleagues in 2019/20
selection and engagement process.
Industry bodies
RCVS / BVA
All vets are members of the
Royal College of Veterinary
Surgeons (RCVS) and the British
Veterinary Association (BVA)
Customers
5.6m
active VIP members
Shareholders and the
investor community 103
Institutions met
The Vet Group maintains close working relationships with key industry bodies such as
the RCVS and the BVA through membership of the Major Employers Group. All of our
JVPs are members of the RCVS and BVA. We have vet and nurse colleagues in both our
Support Office and our practices who are senior officers in some of the main veterinary
organisations and we are well represented on key policy committees as well. These
include the Society of Practising Veterinary Surgeons (SPVA) and the British Veterinary
Nursing Association (BVNA). The Group also participates in industry activity such as the
RCVS Knowledge Quality Improvement Advisory Board and Veterinary Defence Society
Vetsafe initiative, which is an industry-wide significant event reporting system which
enables learnings and improvements to be made across the industry. Pets at Home
became a member of the British Retail Consortium (BRC) during FY19/20 and have been
actively involved particularly during the Coronavirus outbreak.
We regularly communicate with our VIP community through a variety of mediums such
as email, direct mail and the VIP App. Communications are designed not only to provide
discounts and benefits, but also to share helpful pet care content and encourage
feedback. In addition to our structured VIP campaigns, we also perform an annual survey
of both existing and non-shoppers to get deep understanding of how their shopping
behaviours are changing and how we can best meet their needs. We also host regular
small listening groups throughout the year, providing detailed direct feedback.
The CEO, CFO and Investor Relations team are involved in ongoing interaction throughout
the year via conference calls, meetings and small roundtable events. At the AGM 100%
of resolutions were passed and votes in favour ranged from 93% to 100%. Investor tours
were conducted at the flagship Stockport store. A roundtable event was hosted by the
Chief Operating Officer of the Vet Group and three Joint Venture Partners who stand on
the Joint Venture Council.
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Chief Financial Officer’s review
A record financial performance in FY20
demonstrates the progress we have made
“ Customer sales across the Group grew
strongly throughout the year, driving
underlying profit growth, whilst the impact
of coronavirus related purchases in March
provided an additional in-year benefit.”
Mike Iddon
Chief Financial Officer
Group like-for-like revenue growth #
Retail
Vet Group
Group revenue (£m)
Retail
Vet Group
Group underlying gross margin1
Retail
Vet Group1
Group underlying EBIT 2, 3, # (£m)
Retail
Vet Group 2
Central
Group underlying EBIT margin 2, 3, #
Retail
Vet Group 2
Group underlying PBT 3, # (£m)
Group statutory PBT 3 (£m)
Underlying basic EPS 1, 2,3, # (p)
Statutory basic EPS 3 (p)
Group non-underlying charges1,2 (£m)
Group non-underlying cash costs4 (£m)
Group underlying free cashflow # (£m)
Dividend (p)
38
FY20
(post IFRS16)
FY20
(pre IFRS16)
FY19
(pre IFRS16)
YoY change
(pre IFRS16)
9.0%
9.4%
5.6%
1,058.8
937.6
121.2
48.9%
49.7%
42.7%
111.3
89.3
30.6
(8.6)
10.5%
9.5%
25.2%
93.5
85.9
15.0
13.5
(7.6)
(16.4)
89.6
7.5
9.0%
9.4%
5.6%
1,058.8
937.6
121.2
48.9%
49.7%
42.7%
103.3
81.7
30.2
(8.6)
9.8%
8.7%
24.9%
99.5
91.9
16.0
14.4
(7.6)
(16.4)
89.6
7.5
5.7%
5.1%
11.2%
961.0
854.6
106.4
50.7%
51.0%
48.0%
93.2
67.2
32.1
(6.1)
9.7%
7.9%
30.1%
89.7
49.6
14.1
6.1
(40.1)
(8.9)
63.6
7.5
10.2%
9.7%
13.9%
(174) bps
(127) bps
(531) bps
10.9%
21.6%
(5.9)%
41.1%
6 bps
85 bps
(526) bps
11.0%
85.4%
13.3%
136.8%
(81.1)%
83.6%
40.7%
–
Pets at Home Group PlcAnnual Report and Accounts 2020 1 . 2 m
2
1
p £
u
Retail £937.6m
V et G r o
Group revenue
>£1bn
for the first time
7.5p
Full year dividend
maintained in FY20
Dividend per share
2020
2019
2018
FY20 financial highlights
Revenue (£m)
£1,058.8m +10.2%
Underlying PBT 1 (£m) (pre-IFRS16)
£99.5m
+11.0%
Statutory PBT (£m)
£85.9m
+73.3%
Underlying free cashflow 1 (£m)
£89.6m
+40.7%
7.5p
7.5p
7.5p
Statutory basic EPS (pence)
13.5p
+121.0%
1
2
3
4
#
FY20 non-underlying charges relating to costs incurred by the Group in buying out,
and in some cases closing, certain JV practices include £6.6m charged against Vet Group,
and Group, non-underlying gross margin (FY19: £40.4m).
FY20 non-underlying charges also include £1.0m relating to an accounting charge for
the potential future acquisition of minority stakes owned by vet Partners in the Specialist
Referral centres, which has been charged against non-underlying operating costs (FY19:
£0.4m).
Adjusted financial metrics for FY20, which exclude the impact of the transition of IFRS16,
have been provided to aid comparability with the prior period. For further information on
the impact of IFRS16, see page 216.
FY20 non-underlying cash costs include £10.0m relating to Joint Venture practices that
we have bought out (FY19: £8.8m), plus £6.4m in relation to payments made to Shared
Venture Partners in our Specialist Referral centres to acquire certain remaining minority
stakes (FY19: £0.1m).
Alternative Performance Measures (APMs) are defined and reconciled to IFRS information,
where possible, on page 220.
Pets at Home Group Plc
39
Strategic reportGovernance reportFinancial statementsAnnual Report and Accounts 2020 Chief Financial Officer’s review continued
Impacts on the FY20 financial statements
Financial review of FY20
Impact of COVID-19 on the FY20 financial statements
As we approached the end of our financial year, the impact of
COVID-19 in the UK meant that we experienced exceptionally high
levels of demand, notably across food products, both in-store
and online. This was characterised by existing customers pulling
forward purchases, as well as new customers accessing specific
pet products and healthcare services, and delivered an uplift in
revenue and profit for the year versus our previous expectations.
Impact of Vet Group recalibration on the FY20
financial statements
As part of the recalibration of our First Opinion veterinary
business, a total non-underlying charge of £6.6m (FY19: £40.4m)
has been recognised against both Vet Group, and Group, gross
profit. This accounts for all costs incurred by the Group relating
to practices that have been bought out and/or closed during
the year. In addition to this income statement charge, an existing
balance sheet provision of £9.3m brought forward from FY19
has been utilised.
Total cumulative non-underlying costs related to buying out a
total of 57 Joint Venture practices, and subsequently closing 36
of them, since the beginning of FY19 have been £47.0m. With
this one-off recalibration now complete, there will be no further
non-underlying charges relating to the actions we have taken,
and any further related cash outflow will be recognised within
underlying free cashflow.
Impact of IFRS16 on the FY20 financial statements
To aid comparability, the financial information in pages 40 to 43
and associated commentary have been presented on a constant
accounting basis and do not reflect the impact of IFRS16. The
impact of IFRS16 on the Group financial statements has been
to reduce Group underlying profit before tax by £6.0m, and is
shown in further detail on page 43.
Following the transition to reporting under IFRS16 in FY20,
we will report on a post-IFRS16 basis from FY21 onwards.
10.2%
Group revenue growth
48.9%
Group underlying gross margin1
£85.9m
Group statutory PBT
40
The FY20 audited period represents the 52 weeks from 29 March 2019
to 26 March 2020. The comparative period represents the 52 weeks
from 30 March 2018 to 28 March 2019.
The Group’s results are shown as two segments that represent the
size of the respective businesses and our internal reporting structures:
Retail (includes products purchased online and in-store, pet sales,
grooming services and insurance products) and Vet Group (includes
First Opinion practices and Specialist Referral centres).
The financial statements for FY20 have been prepared under the
requirements of IFRS16 for the first time. To aid comparability with the
prior period, adjusted financial information shown pre the impact of
IFRS16 is also shown in the table below. The impact of IFRS16 on the
Group financial statements has been to reduce Group underlying
profit before tax by £6.0m, and is shown in further detail on page 43.
Revenue
Group revenue exceeded £1bn for the first time in FY20, growing
10.2% to £1,058.8m (FY19: £961.0m) with like-for-like (LFL) revenue
growth of 9.0%#.
Retail revenue grew 9.7% to £937.6m (FY19: £854.6m), with LFL revenue
growth of 9.4%#. Strong growth in transaction volumes helped deliver
a store LFL of 7.7%, whilst omnichannel revenue, including that
generated by our subscription platforms, grew 27.8% to £93.9m.
We made particularly strong share gains in Food, where revenues
grew by 13.6% to £517.4m (FY19: £455.4m). Within the Advanced
Nutrition category, the ongoing trend of premiumisation enabled us
to deliver revenue growth of 15.2% to £242.1m (FY19: £210.1m) and
grow category market share. The strong growth in Food revenue
reflects not only our success in recruiting new customers throughout
the year, particularly puppy and kitten owners, but also the
exceptional level of sales seen in the closing weeks of the year as
noted above. Accessories revenue grew 5.1% to £375.3m (FY19:
£357.0m), with categories such as cat litter, dog toys and Health
& Hygiene performing particularly well throughout the year.
Vet Group revenue grew 13.9% to £121.2m (FY19: £106.4m), with
LFL growth of 5.6%#. Customer sales made by all First Opinion vet
practices were up by 10.4% to £351.3m# (FY19: £318.2m), whilst those
made in Joint Venture veterinary practices were up 6.4% to £329.7m#
(FY19: £309.8m), all unaudited figures, despite ending the year with
24 fewer JV practices.
Total Joint Venture fee income increased by 2.1% to £53.8m (FY19:
£52.6m), whilst LFL fee income growth was also 2.1%# (FY19: 12.2%).
This LFL growth in JV fee income was lower than the prior year due
to adjustments made throughout FY20 to the fee arrangements for
ongoing Joint Venture practices, but which have helped contribute
to an improvement in the underlying performance of the estate.
From the point at which any practice buy out was completed, the
financial performance of that practice has been consolidated - please
refer to note 1 in the financial statements for more detail. This has
led to consolidated customer revenue from company managed
First Opinion practices increasing significantly to £21.7m (FY19: £8.1m),
as we ended the year with 45 practices under our ownership.
Elsewhere in the Vet Group, we also saw steady performance in
our Specialist Referral division, where revenue grew 7.0% to £39.6m
(FY19: £37.0m).
Pets at Home Group PlcAnnual Report and Accounts 2020 Gross margin
Group underlying gross margin declined by 174 bps to 48.9%
(FY19: 50.7%), whilst Group statutory gross margin increased to 48.3%
(FY19: 46.5%).
Underlying (and statutory) gross margin within Retail was 49.7%, a
reduction of 127 bps over the prior year (FY19: 51.0%). This was driven
by strong performance in Food, as noted above, which delivered
an adverse mix effect on margin. In addition, while the growth in
participation of Retail revenues from our omnichannel business to
10.0% (FY19: 8.6%) contributed to an overall increase in revenues, its
greater mix of food product versus higher margin accessories had a
dilutive impact on gross margin.
This combined mix impact of Food and omnichannel sales
participation was particularly relevant during the final four weeks
of the year when we saw exceptional demand due to COVID-19.
Prior to that period, Retail gross margin for FY20 had been 50.4%.
Underlying gross margin within the Vet Group decreased by 531 bps
to 42.7% (FY19: 48.0%). This decrease largely reflects the impact of fee
adjustments implemented for JV practices throughout the year, which
have suppressed JV fee income, while the costs incurred in generating
this fee income and charged against gross profit have remained
relatively flat. Consolidation of the former JV practices which have
been retained under a company managed model also had a dilutive
impact on Vet Group gross margin, with the margin profile of an
individual practice being significantly lower than that generated on
JV fee income.
Finally, we saw a positive impact on Vet Group gross margin resulting
from a lower charge of £0.9m (FY19: £2.9m) being made to the
underlying provision held against operating loan funding provided
to First Opinion veterinary practices, which we expect to continue
operating as Joint Ventures. This underlying provision represents c21%
of the operating loan gross balance (FY19: c20%). While the year on
year provision as a percentage of the gross balance has marginally
increased, we believe this is appropriately prudent given we have
only recently completed our recalibration actions and still have a
Joint Venture estate of which a significant proportion is immature.
Statutory Vet Group gross margin, after all non-underlying charges,
increased significantly to 37.2% (FY19: 10.1%). This reflects a reduced
charge of £6.6m (FY19: £40.4m) relating to costs incurred by the
Group completing the Vet Group recalibration.
Operating profit and operating costs
Underlying Group EBIT was £103.3m# (FY19: £93.2m), with a margin
of 9.8%# (FY19: 9.7%).
Underlying Retail EBIT was £81.7m# (FY19: £67.2m) with a margin of
8.7%# (FY19: 7.9%), with operating cost growth, excluding depreciation
and amortisation, of 4.5% to £349.2m (FY19: £334.3m). This operating
margin expansion was achieved despite the lower gross margin noted
above, and represents careful management of operating costs.
Occupation costs (rent, service charges and other property costs)
declined as a percentage of Retail sales to 13.7% (FY19: 14.9%) due
to rent reductions achieved across a number of lease renewal
negotiations. Colleague costs also decreased as a percentage of
Retail sales to 16.9% (FY19: 17.8%), driven by efficiency initiatives
in-store. Excluding IFRS16 right-of-use assets, depreciation and
amortisation in Retail increased slightly to £35.3m (FY19: £34.3m).
Underlying Vet Group EBIT was £30.2m# (FY19: £32.1m) with a margin
of 24.9%# (FY19: 30.1%). Operating costs in the Vet Group, excluding
depreciation and amortisation, were £18.5m (FY19: £16.5m), growth
#
Alternative Performance Measures (APMs) are defined and reconciled to IFRS information,
where possible, on page 220.
“ We are confident in the resilience
of our business, enabling the final
dividend to be paid.”
of 12.5% on the prior year. This was largely due to consolidation of
overhead costs relating to those JV practices which have been bought
out, plus various pre-opening costs associated with expansion in
our Specialist Referral division. Excluding IFRS16 right-of-use assets,
depreciation and amortisation in the Vet Group increased to £3.0m
(FY19: £2.5m).
In the Vet Group, non-underlying operating costs totalling £1.0m
(FY19: £0.4m) were recognised in relation to the Shared Venture
ownership model in our Specialist Referral division, where the option
Pets at Home has to buy shares held by Shared Venture Partners in
the future is accounted for as a forward contract. During the year, we
exercised options to purchase shareholdings from certain Partners
at a total cash cost of £6.4m, such that three centres are now
wholly owned.
Central costs, including Group overheads and colleagues, increased to
£8.6m (FY19: £6.1m).
Finance expense
Excluding IFRS16 interest charges, the net finance expense for the year
was £3.8m, a slight increase from the prior year (FY19: £3.5m).
Profit before tax
Excluding the impact of IFRS16, underlying pre-tax profit was £99.5m#
(FY19: £89.7m) and pre-tax profit after charging for all non-underlying
items increased significantly to £91.9m (FY19: £49.6m). This increase in
pre-tax profit reflects the strength of underlying trading in Retail, plus
a reduced non-underlying charge of £7.6m (FY19: £40.1m), largely
relating to the recalibration of the First Opinion veterinary business.
Statutory pre-tax profit, including the impact of IFRS16, was £85.9m
(FY19: £49.6m).
Taxation, net income & EPS
After removing the impact of IFRS16, the underlying tax expense for
the period was £19.8m#, a rate of 19.9% on underlying pre-tax profit.
Excluding the impact of IFRS16, underlying net income for the year,
after tax, increased by 13.3% to £79.7m# (FY19: £70.4m) and underlying
basic earnings per share were 16.0 pence# (FY19: 14.1 pence).
Statutory basic earnings per share, including the impact of IFRS16,
were 13.5 pence (FY19: 6.1 pence).
Cash working capital
The cash movement in trading working capital for FY20 was an
inflow of £30.7m# (FY19: inflow of £17.9m). This comprised a £5.7m
decrease in inventory, a £16.2m increase in payables and a £8.8m
decrease in receivables.
We also provided support to some ongoing Joint Venture First
Opinion veterinary practices in the form of £2.5m of cash operating
loans in the year (FY19: £9.6m). This reduced the overall Group cash
working capital inflow to £28.2m.
The gross value of operating loans at the end of the year was £37.5m
(FY19: £42.2m). Following the completion of our buy out programme
during the first half of FY20, operating loans totalling £7.2m relating
to these practices were written off in full by utilising the 100%
non-underlying provision established in FY19. As such, the total
provision of £8.0m (FY19: £14.3m) now held against the gross value
of operating loans is entirely an underlying provision held against the
balance of operating loans for practices which we expect to continue
operating as Joint Ventures, at an average of c21%.
41
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Chief Financial Officer’s review continued
Capital investment
Excluding IFRS16 right-of-use asset additions, capital investment was
£38.3m (FY19: £34.5m), and was fully aligned to our strategic priorities.
The ongoing refurbishment and maintenance of our existing store
estate, including rollout of our pet care centre format across a further
16 stores during FY20, totalled £11.1m (FY19: £8.8m), and represented
just 1.2% of Retail sales. Investment in omnichannel and business
systems totalled £14.9m (FY19: £10.8m) as we continue to invest in our
digital and data capabilities to support future growth, and a further
and £4.8m was invested in the organic growth of our Specialist
Referrals division. Cash capital expenditure was £39.6m (FY19: £37.9m),
and CROIC# was 19.7% (FY19:18.9%).
Group underlying free cashflow
Group underlying free cashflow (FCF) after interest, tax and before
acquisitions increased to £89.6m# (FY19: £63.6m), representing a cash
conversion rate of 63%# (FY19: 49%). The increase in FCF compared
with the prior year was achieved despite a one-off additional payment
of £10.7m relating to a change in timing of Corporation Tax payments,
which meant we paid a total of £30.8m during FY20.
Group underlying free cashflow #
(pre-IFRS16)
Group operating cashflow#
Tax
Net interest
Debt issue costs
Net capex
Purchase of own shares to satisfy colleague options
Group underlying free cashflow #
FY20
(£m)
165.8
(30.8)
(3.2)
–
(39.4)
(2.8)
89.6
FY19
(£m)
126.5
(18.6)
(2.8)
(2.5)
(37.2)
(1.8)
63.6
FY20 Group underlying free cashflow #
Underlying
FCF (£m)
FCF
conversion2
Retail
Vet Group
Central1
Group underlying free cashflow #
84.8
16.7
(11.9)
89.6
72.5%
50.2%
NM
63.2%
1
Includes central costs of £8.6m plus interest paid of £3.8m, purchase of own shares of £2.8m and a
Corporation Tax credit off £3.0m.
2 Calculated as underlying free cashflow as a percentage of underlying EBITDA.
The Group’s net debt position at the end of the year was £85.9m,
which represents a leverage ratio of 0.6x underlying EBITDA# on a
pre-IFRS16 basis or 2.5x on a post-IFRS16 basis.
Group net debt
Opening net debt (pre-IFRS16)
Underlying free cashflow #
Ordinary dividends paid
Acquisitions 3
Non-underlying cash outflow 4
Closing net debt (pre-IFRS16)
Pre-IFRS16 leverage
(Net debt / underlying EBITDA #)
Post-IFR16 leverage
(Net debt / underlying EBITDA #)
FY20
(£m)
(120.5)
89.6
(37.1)
(1.5)
(16.4)
(85.9)
0.6x
2.5x
FY19
(£m)
(135.2)
63.6
(37.2)
(2.8)
(8.9)
(120.5)
0.9x
3.0x
42
Dividend
The Board has recommended a final dividend of 5.0 pence per share,
reflecting the strength of our performance last year and our robust
liquidity and balance sheet. This takes the total dividend for the year
to 7.5 pence per share, equal with the prior year. The final dividend will
be payable on 14 July 2020 to shareholders on the register at the close
of trading on 19 June 2020.
Transition to IFRS16
The financial statements for FY20 have been prepared under the
requirements of IFRS16 for the first time. Implementation of IFRS16 has
had no effect on how the business is run, or on cash flows generated.
It has, however, had an impact on the assets, liabilities and income
statement of the Group, as well as the classification of cash flows
relating to lease contracts.
IFRS16 seeks to align the presentation of leased assets more closely
to owned assets. In doing so, a right-of-use asset and lease liability are
brought onto the balance sheet, with the lease liability recognised
at the present value of future lease payments. Whilst the right-of-use
asset is matched in value to the lease liability at inception, it differs in
value through the life of the lease. The total value of the discounted
lease liability under IFRS16 on the Group’s Balance Sheet at the end
of FY20 is £463.9m.
IFRS16 permits a choice on the method of implementation and
after careful consideration the Group has applied the modified
retrospective approach. Under this method, all prior year comparative
balances have not been restated, but the cumulative effect of
adopting IFRS16 has been recognised as an adjustment to the
opening balance sheet for FY20. Both the right-of-use asset and lease
liability are recognised as the present value of future lease payments
as of the date of transition, with the right-of-use asset adjusted for
any remaining deferred income relating to landlord incentives
and rent free periods, outstanding prepayments or provisions for
onerous leases.
In Retail, the application of IFRS16 results in all store and distribution
centre rents no longer being included within operating costs but
replaced instead by an additional depreciation charge. On a post-
IFRS16 basis, Retail operating costs excluding depreciation and
amortisation were £272.5m. Including all IFRS16 right-of-use assets,
total depreciation and amortisation was £104.3m, leading to an
operating margin of 9.5%.
In the Vet Group, right-of-use assets relate predominantly to our
Specialist Referral centres. On a post-IFRS16 basis, Vet Group operating
costs excluding depreciation were £16.1m. Including all IFRS16
right-of-use assets, total depreciation and amortisation was £5.1m,
leading to an operating margin of 25.2%.
Including all IFRS16 interest charges, the net finance expense for
the period was £17.8m.
The net impact of IFRS16 in the year was to reduce Group
underlying and statutory profit before tax by £6.0m to £93.5m
and £85.9m respectively.
3.
4.
#
FY20 includes an investment in Tailster.com and in certain company managed practices. FY19 includes
the purchase of two mature JV practices from Joint Venture Partners for £2.1m, which are now operated
as company managed practices, £(0.3)m of net cash acquired by purchasing three other existing JV
practices, and deferred consideration of £1.0m relating to one of our Specialist Referral centres.
FY20 includes £10.0m relating to practices bought out during the year (FY19: £8.8m), plus £6.4m in
relation to payments made to certain Shared Venture Partners in our Specialist Referral centres to
acquire remaining minority stakes (FY19: £0.1m)
Alternative Performance Measures (APMs) are defined and reconciled to IFRS information, where
possible, on page 220.
Pets at Home Group PlcAnnual Report and Accounts 2020 In order to clearly show the impact of transitioning to IFRS16, we show
a reconciliation of Group underlying profit before tax and cashflow
as follows.
3) We do not currently expect to see a material tariff impact, as
the majority of our imported products are sourced from outside
the EU.
£m (unaudited)
Pre
IFRS16
Exclude
rent
Include
depreciation
Include
interest
Post
IFRS16
Revenue
1,058.8
–
–
–
(79.1)
79.1
(38.3)
–
(71.1)
103.3
79.1
(71.1)
– 1,058.8
–
–
–
–
(109.4)
111.3
Operating lease
rentals
Depreciation &
amortisation
Underlying
operating profit#
Finance income
Finance expense
Group underlying
PBT#
0.4
(4.2)
–
–
–
–
0.1
(14.1)
0.5
(18.3)
99.5
79.1
(71.1)
(14.0)
93.5
£m (unaudited)
Group operating
cashflow#
Tax
Interest
Repayment of lease
obligations
Net capex
Purchase of own shares
Other cashflow items
Group underlying
free cashflow
Pre
IFRS16
Add
back
rent
165.8
79.1
(30.8)
(3.2)
–
(39.4)
(2.8)
–
–
–
–
–
–
–
Replace
with interest
& capital
repayment
Post
IFRS16
–
–
(14.0)
244.9
(30.8)
(17.2)
(67.0)
(67.0)
–
–
1.9
(39.4)
(2.8)
1.9
89.6
79.1
(79.1)
89.6
Impact of the UK’s exit process from the EU
We continue our work to assess and mitigate the likely impact of the
United Kingdom’s exit from the European Union (EU). With the UK
currently working towards 31 December as the date we will exit the
EU, we are keeping the following areas under review:
1) Consumer demand – although we expect the UK pet care market
to remain resilient, we will be vigilant to signs that consumer
demand is being adversely affected, so that we may respond
appropriately and expediently.
2) Although pet products are unlikely to ‘spoil’ as a result of any
border delays, there is a risk that our supply chain becomes
disrupted. In such circumstances, we may consider increasing
our inventory holding to mitigate the potential impact on our
Retail division.
4) Exchange rates – the exit process may prompt movements in
the USD/GBP exchange rate. In FY20, the Group purchased
products from Asia to a value of around US$85m, although we
expect to purchase slightly less than that in FY21. Our policy is
to use a mix of foreign exchange forward contracts to hedge our
USD requirement to cover the next 18 months. 83% of our FY21
forecast USD spend is currently hedged at an average rate of 1.28
USD:GBP, and we will monitor exchange rates closely as we look to
mitigate any pressure on Retail gross margin.
5) A significant number of colleagues, particularly within our Vet
Group and Distribution Centres, are non-UK EU nationals. While
Brexit may result in changes to UK immigration policy which
could increase the risk around the availability, recruitment and
retention of these individuals, it may also make it easier to recruit
highly skilled workers. Although it is a positive step that the
Government has accepted the Migration Advisory Committee’s
recommendation that veterinary surgeons be restored to the
shortage occupation list, we will continue to work closely with
professional bodies including the Royal College of Veterinary
Surgeons and the British Veterinary Association to assess the
potential impact of restrictions on free movement for EU nationals.
Mike Iddon
Chief Financial Officer
21 May 2020
43
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020
Operating review
Retail
Our Retail segment includes pet products
purchased in-store and online, grooming
services, pet sales and pet insurance
commissions.
Food
We provide a wide range of pet foods for dogs, cats, small animals,
fish, reptiles and birds. With revenues of £517.4m, pet food is the
largest part of our business and represents 55% of all Retail revenue,
having grown very strongly in the year at 13.6%. This represents our
success in acquiring new customers, particularly puppy and kitten
owners, and growing our active VIP loyalty club members by 31%
in the year.
We aim to provide customers with a full spectrum of dietary choices;
from grocery brands through 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,
can help customers make a step up to a better diet for their pets in
an affordable way, and these ranges continue to grow in popularity.
We always look to offer competitive prices, particularly on those
products we know matter most to our customers. Across both
branded products and our range of private labels, which represent
around a third of all food sales but a much higher proportion of the
Advanced Nutrition category, we help pet owners feed their pet the
best possible diet for their budget. Our online Easy Repeat food
subscription service, where customers can customise regular delivery
of pet food across a selection of brands, maximises convenience
and rewards our most loyal customers with even better prices.
Our Retail brands
44
Food
Dog and cat food
Dog and cat treats
Other pet food for fish,
small animals and birds
Accessories
Pet homes and habitats
Toys, collars, leads, clothing
and other accessories
Health & hygiene products
Cat litter
Pet care services
Grooming salons
Pet sales
Pet insurance
Market overview
Retail
The UK pet market grew an estimated 3%
in 2019. With total revenue growth of 9.7%
including 27.8% growth in omnichannel
revenues, we made strong share gains
across key categories, both online and offline.
Pets at Home Group Plc 453
Stores
316
Grooming salons
5.6m
VIP loyalty club
active members
Strategic differentiators
Locations nationwide and
knowledgeable colleagues
• 453 stores
• 316 grooming salons
• Over 6,900 Retail colleagues
with expert pet knowledge
Fast growing omnichannel business
• Omnichannel1 revenue growth of 27.8%
• 10.0% participation of Retail revenue
• Increasing traffic and conversion across both
mobile and desktop
• Growing numbers signed up to
subscription services
VIP loyalty club
• 5.6m active members
• 75% of store revenues transacted by VIPs
Strong penetration of private label
• c33% participation of Food revenue
• Even higher within Advanced Nutrition
• >£12.6m raised for charities since launch
category
• c50% participation of Accessories revenue
45
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Operating review continued
Retail – FY20 financial metrics
9.4%
Like-for-like1 revenue growth
£937.6mRetail revenue
£81.7m
Retail underlying EBIT 1 (pre-IFRS16)
£89.3m
Retail statutory EBIT (post-IFRS16)
Accessories
Accessories revenues increased to £375.3m in FY20 and account
for 40% of Retail revenues in the year. Our accessory ranges are
signposted by pet type both in-store and online, and include cat litter,
collars, leads and harnesses, bedding, housing, feeding, health &
hygiene, travel, training and enrichment – all of which are important
for pets to lead a happy and healthy life.
Due to the more discretionary nature of accessory purchases,
innovation remains critical to growth in this category. Customer
trends are constantly changing and our dedicated team responsible
for product innovation take inspiration from pet markets in other
countries to ensure our ranges are always new and exciting –
particularly across our private label brands, which represent around
half of all accessory sales. Since customers often prefer to touch and
feel accessories before purchasing, this category contributes more
to store sales than to those made online.
1
Alternative Performance Measures (APMs) are defined and reconciled to IFRS information,
where possible, on page 220.
46
Impact of COVID-19 in FY20
In the closing weeks of the financial year we experienced
exceptional levels of demand, both in-store and online, as the
COVID-19 crisis developed. We saw existing customers increase
average basket size by pulling forward purchases, as well as new
customers shopping with us, leading to a significant increase in
food purchases and online transactions. Our previous investments
in omnichannel capacity, new customer acquisition and
subscription services equipped us to meet these above-trend
levels of demand, and lead to incremental sales and profit.
Omnichannel
We aim to maximise convenience for customers so they can shop
with us however and whenever they want. The flexibility of our
omnichannel approach means that customers are always able to
get the products they need in a way that suits them, and each
component of our omnichannel proposition has grown strongly
in the year.
Pets at Home Group PlcAnnual Report and Accounts 2020
Omnichannel1 now represents
10.0% of all Retail revenues.
Our in-store ranges are carefully curated and kept relevant to the
buying habits of the local customer. Online however, customers
have access to our extended range of over 9,600 products. Customers
can choose to have their online order delivered to home, or take
advantage of being able to collect it for free from over 500 locations
nationwide – whether that be their local store or a nearby standalone
vet practice, demonstrating the convenience we offer. We see a large
proportion of online orders collected in this way, particularly when
they include a large bag of pet food.
If a particular flavour or size is not stocked in-store, then our
Order-in-Store facility allows colleagues to place orders from our
extended online range quickly and easily whilst the customer is
still present – meaning the store never needs to miss out on a
potential sale.
Finally, our VIP Subscribe & Save service, which allows customers to
receive monthly delivery of preventative flea and worm treatments for
their dogs and cats, is now well established and has grown strongly in
the year as customers value the affordability and convenience it offers.
In total, omnichannel revenues represent 10.0% of all Retail revenues,
and around 55% is colleague assisted in some way; proving that our
stores are a strategic asset. Supported by recent capital investment
at our Northampton Distribution Centre to automate the picking
and packing process, allowing us to double capacity, we are well
positioned to meet the continued growth we expect to see in our
omnichannel business.
Other Retail revenue
Within our Retail segment, we also generate revenue from other pet
care services.
The Groom Room is the largest branded chain of pet grooming
salons in the UK. With fully glazed partition walls creating a focal
point in-store, our highly trained stylists perform the full range
of pet grooming services including a full groom, bath and brush,
microchipping and nail clipping. Grooming revenue grew strongly
in the year, driven by more repeat visits from existing customers and
introducing new customers to the services we offer, for example
through our VIP Puppy Club.
The welfare of our pets in-store will always be of the utmost
importance to us, and we invest considerably in a dedicated team
of pet experts to fully provide for their needs. Our in-store colleagues
are empowered to politely decline a sale if they are not satisfied that
the pet’s welfare needs will be met in its new home.
We also recognise the importance of pet insurance as a key element
of responsible pet ownership, and continue to work with Petplan,
the UK’s number 1 provider of pet insurance products, across our
Group to introduce customers to their products, from which we
earn certain commissions.
47
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Operating review continued
Vet Group
Our Vet Group segment includes First Opinion
veterinary practices and world class Specialist
Referral centres covering a range of disciplines.
Our Vet Group
We operate the largest branded network of First Opinion veterinary
practices in the UK, with a total of 441 practices operating mainly
under the Vets4Pets brand name. We also currently operate four
Specialist Referral centres around the UK, with a fifth location at a
greenfield site in Scotland scheduled to open in the coming year.
First Opinion division
Our preferred model has always been to build value through shared
ownership. We operate a total of 396 Joint Venture practices which
are all established as individual small businesses, funded by a small
investment from a vet Partner and Pets at Home to create the Joint
Venture. We then help arrange a larger third party bank loan to
provide for the fit-out and initial working capital requirements of the
practice, with further funding provided by Pets at Home over time if
needed. Pets at Home receives a percentage of the practice customer
sales as fee income from day one, in return for the business support
services we provide. Rent and other occupancy costs are also charged
to practices located inside a Pets at Home store based on the space
that they occupy.
By being business owners, Joint Venture Partners are strongly
incentivised to drive performance of their practice. They are entitled
to withdraw all the business profits once loans are repaid, with these
dividends being in addition to any market rate salary they often
choose to take along the way. The Partner also receives 100% of the
capital value of the business should it be sold in the future, providing
a clear route to exit at a time of their choosing.
During the year, we finalised a number of recalibration actions in our
First Opinion business. Firstly, we completed a programme of buying
out, and in some cases closing, certain Joint Venture practices; in total
we bought out 57 Joint Venture practices, subsequently closing 36.
Secondly, we implemented a series of fee adjustments for the
remaining estate in order to rebalance the economics of the Joint
Venture model. Such adjustments are designed to help practices
mature more swiftly and to generate improved returns for both
Joint Venture Partners and Pets at Home.
In addition to our Joint Venture practices, we also operate 45 practices
under a company managed model, including the 21 former Joint
Venture practices that were not closed as part of the recalibration
actions noted above. In these practices, the vet and all other practice
colleagues are employed directly by the Vet Group and rather than
take a fee income as under the Joint Venture arrangement, the
financial results of these practices are consolidated in the Group
financial statements. By operating company managed practices, it
allows prospective Joint Venture Partners the opportunity to work
with us before committing to a Joint Venture agreement, acting
as a valuable stepping stone for entrepreneurial vets who hold an
ambition to own their own business.
48
Market overview
Vet Group
In 2019, the veterinary segment of the UK
pet care market grew at c5% whilst in FY20
total customer sales across all of our
First Opinion vet practices and Specialist
Referral centres grew 10.2%.
Pets at Home Group Plc 396
Joint Venture practices
301
First Opinion practices
inside Pets at Home stores
Strategic differentiators
Partnership model which
incentivises growth
• 510 entrepreneurial Joint Venture Partners
who own their own business
Provide clients full spectrum
of veterinary care
• Convenient access to First Opinion care
and advice
• 301 practices inside Pets at Home stores
• Joint Venture model unique in the market
and 140 in standalone locations
• Referral centres structured as partial
• World class specialist clinicians able to treat
ownership Shared Ventures
pets with specific requirements at our
Referral centres
Unified brand driving customer
recognition
• Largest branded veterinary business
in the UK
Unique benefits from being part
of Pets at Home Group
• Cross-sell opportunities with Pets at Home
VIP loyalty club
• Centrally co-ordinated national
• Introductions made by store colleagues
and local marketing
• Increased footfall for practices located
in-store
49
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020
Operating review continued
Completing the recalibration of
our First Opinion vet business
In November 2018, our review of the First Opinion vet
business identified four areas of action with regards to Joint
Venture (JV) vet practices. During the second half of FY19
and throughout FY20 we have delivered against each one
of those areas such that our Joint Venture estate is now well
positioned for sustainable growth.
Simplify the Joint Venture fee structure
Throughout FY20 we implemented a series of adjustments to
the Joint Venture fee structure, the size and phasing of which
was exactly in line with our original plans. Such adjustments
are designed to rebalance the economics of the JV model
and although they initially suppress JV fee income to Pets at
Home, they should allow those practices to mature more
swiftly, thereby creating cash flow benefits for both the
individual practices and Pets at Home over the longer term.
Operate some practices under a company
managed model
We ended the year with 45 company managed practices,
which included 21 former JV practices which we bought out
as part of our recalibration, but did not subsequently close.
We are currently operating these practices ourselves and
regard them as having a viable future, potentially with a
new Joint Venture Partner.
Consider some practice closures
We bought out a total of 57 Joint Ventures between
November 2018 and November 2019. The decision to
subsequently close 36 of these practices was made in the
best interests of all Partners involved and the longer
term health of the Pets at Home Group. All costs associated
with this one-off programme have been recognised as
a non-underlying charge in either FY19 or FY20, and no
further charges are expected.
Slow rollout to focus on existing portfolio
In FY20, we opened just six new vet practices. This was
significantly fewer than our historical run rate, but represents
a deliberate decision to focus our attention on nurturing our
existing practice estate through to maturity.
50
Pets at Home Group PlcAnnual Report and Accounts 2020 Specialist Referral centres
Specialist Referral centres are considerably larger than First Opinion
practices, and handle the most complex veterinary cases that must
be referred by a First Opinion vet – be that one of our practices
or from elsewhere in the market. The Specialist Referral segment
is characterised by low volume but high value procedures, due to
their specialised nature. As such, a large majority of the cases treated
are underwritten by pet insurance, supporting the robust growth of
the segment.
Recognising the benefits of shared ownership, our Shared Venture
model allows the centre’s vets or Directors to retain up to a 25%
ownership stake in the business for a period of time, whilst we
retain the experience of the talented individuals who have been
instrumental in establishing and developing these centres
of excellence.
In these centres, Pets at Home has an option to buy the shares
owned by those individuals in the future. The price payable to acquire
those shares is related to profit performance targets, and as such
the accounting treatment of such an option is structured as a forward
contract. Within the Group income statement, the discounted future
value of the shares is recognised as an expense over the period
to which the option can be exercised, and recognised as a
non-underlying expense.
By significantly extending the site at Dick White Referrals and
opening our fifth centre in Scotland later this year, we recognise
the attractiveness of this adjacency to our core First Opinion business,
as we look to grow our market share in the segment.
£121.2m
Vet Group revenue
51
Vet Group– FY20 financial metrics
Like-for-like1 revenue growth
5.6%
£30.2m
£23.0m
Vet Group underlying EBIT1 (pre-IFRS16)
Vet Group statutory EBIT (post-IFRS16)
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Risk management
Principal risks and uncertainties
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
strategic risks due to execution of our strategy; operational risks in our
day-to-day operations; and external risks emerging from our sector,
the competitive market, the environment, and any change in political
or regulatory frameworks. The Board is responsible for the nature and
level 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 reputation, business model, future performance, solvency
or liquidity see pages 54 to 61.
We have a risk management framework that helps us identify, assess
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.
We will remain vigilant, continue to
plan, stay agile, and communicate
with our colleagues and stakeholders
accordingly to put our business in
the strongest position possible for
the future.
Both have the potential to affect
the following principal risks:
• Competition
• Our people
• Supply chain and sourcing
• Services and stores expansion
• Liquidity and credit
• Treasury and finance
• Regulatory and compliance
Please see the risk management
section on pages 54 to 61 and our
response to the COVID-19 crisis on
pages 16-19 for further detail.
COVID-19 pandemic and Brexit
The Board has reviewed the risks
and opportunities that may arise
as a result of both the COVID-19
pandemic and Brexit.
Uncertainty around Brexit remains,
therefore we are preparing for a
scenario that has the most potential
for disruption.
In response to the unprecedented
challenges presented by COVID-19,
we have clearly set out our priorities
and have appropriate, balanced and
calibrated mitigation plans for our
people, our customers and their pets,
supply chain, operating model
and liquidity.
Our priorities are first and foremost to
safeguard the wellbeing and safety of
our colleagues, Partners, customers
and pets, and suppliers as well as
ensuring the continuity of customer
service in our stores.
Whilst the longer term effects remain
unclear, we continue to monitor the
risks and the ongoing impacts closely.
Based on our scenario planning and
latest view from government we have
assessed that our risk profiles, other
than liquidity, remain stable.
52
Risk management framework
The responsibility for risk management operates
at all levels throughout the Group
Identify
1
Report
5
Management
information
Governance
2
Assess
Key controls
Culture, values
& behaviours
Policies &
procedures
Monitor
4
3
Manage
Identify
• Each business and function
identifies their most significant risks
taking into account their strategic
plan, objectives and external
environments.
• Principal and strategic risks are
reviewed by the Board.
• Horizon scanning exercises with
senior management teams and
independent experts as part of both
the strategic planning and risk
management processes. Identify
key emerging trends and
developments and opportunities
for innovation.
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
into a Group wide view.
• Senior management teams add
their view on strategic, financial,
operational and emerging risks.
• In addition to the risk register we
hold a “Watch List” of emerging
or developing threats, where
the timeline, impact or potential
mitigation is not clear.
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.
Monitor
• Each risk register is reviewed by the
senior management team in each
business and function at least four
times a year.
• Threats on the watch list are
reviewed alongside the risk registers
to monitor any changes to the likely
impact and proximity.
• Assurance gathered from across the
three lines of defence to assess the
effectiveness of risk management
and system of internal control.
• Internal Audit informs the Board, the
Executive Management Team and the
Audit and Risk Committee on how
effectively risks are being managed.
Report
• The Audit and Risk Committee,
the Board and the Executive
Management Team review risks four
times per year. In addition risks are
reviewed as part of the annual
strategy planning cycle.
• The Group’s principal risks are
reviewed and agreed by the Board.
Pets at Home Group PlcAnnual Report and Accounts 2020 n
w
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Board of Directors
Overall responsibility for the Group’s risk and internal
control frameworks.
Determines the nature and level of principal risks and sets
risk appetite.
Undertakes a robust assessment of the Group’s principal risks.
Audit and Risk Committee
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.
Executive Management Team
Collectively responsible for managing risk.
Key risks are allocated to an Executive Management Team
member for oversight and ultimate ownership.
Receives regular risk updates and reports from Board
committees, internal audit, assurance teams and
external advisors.
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.
Recommends improvements and corrective actions.
Operational Management
Own and manage operational and project risks.
Ensure Group policies and procedures are implemented
and complied with and implement mitigating actions.
Communicate significant risks via reporting processes
to the senior management team.
p
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Principal risk rating matrix
Principal risk status
The heat map shows our principal risks which have a higher probability
and significant impact on our strategy, reputation, operations or finance.
The principal risks also relate to the material issues considered in the
Sustainability section on page 63.
h
g
H
i
y
t
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l
i
b
a
b
o
r
P
10
2
3
4
5
8
1
7
9
6
w
o
L
Low
Impact
High
Risks are categorised into four main areas
Strategic
Financial
Operational
Legal & Compliance
Profile Change
Executive
responsibility
Brand and reputation
High
Chief Executive Officer
Competition
Medium
Chief Executive Officer
Services and store expansion Medium
Chief Executive Officer
Risk
1.
2.
3.
4. Our people
5.
Information security and
business systems
Medium
Medium
Chief People & Culture Officer
Chief Information Officer
6.
Supply chain and sourcing
Low
Retail Chief Operating Officer and
Vet Group Chief Operating Officer
7.
8.
9.
10.
Liquidity and credit
High
Chief Financial Officer
Treasury and finance
Medium
Chief Financial Officer
Regulatory and compliance
Low
Group Legal Director
Sustainability and
climate change
Low
Chief Executive Officer
Stable
Up
Down
For further details about key roles and responsibilities within
our governance structure, please see the Governance report
on page 82.
The principal risks do not include all of the risks associated with our business. Further risks deemed to
be less material or as yet unidentified may also have an impact on the achievement of our strategic
objectives.
Risks rated as “low” are not considered principal risks, although they may appear on a business or
functional risk register and are managed at that level.
53
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020
Risks and uncertainties
The assessment of our principal risks, their link to our strategic
initiatives, movement in the year and how we mitigate them
are described in the table below.
Brand and reputation
Description and impact
Our vision is to be the best pet
care business in the world. Our
number one value is “We put pets
first” and pet welfare remains our
highest priority.
Protecting our strong brand,
reputation and customer loyalty is
essential to our business. Failure to
do so could result in loss of trust
and confidence in the Group
brands by customers, colleagues
and other stakeholders.
Outlook
As we continue to increase the size and
scale of our pet care services offering, 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, taking
appropriate steps where required to
maintain them whilst continually looking
for ways to improve.
Following Government requirements for
COVID-19 and RCVS guidance our First
Opinion practices and Specialist Referral
centres remain open to deliver
emergency care. As professionals we are
taking each case on its own merit and
continue to undertake what is essential
for the pet’s health and welfare needs.
Risk profile
Low
Medium High
Change on prior year
Stable
Links to strategy
Bring the pet experience to life
Use data and VIP to better serve
customers
Set our people free to serve
Mitigation
Advancing pet welfare continues to be a priority. Pet welfare across the Group is overseen by
the Corporate Social Responsibility and Pets Come First Committee. Its remit is to review pet
welfare and clinical standards, and check that appropriate processes are in place to ensure
we maintain our high welfare standards.
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 breeders. All are assessed regularly against a
comprehensive set of welfare standards both by internal and external independent
assessors. We also have a highly visible field operations team that are focused on
maintaining the highest pet welfare standards in stores and grooming salons.
Every store colleague is also empowered to refuse to sell a pet if they have any doubts
about the suitability of its forever home.
We operate a confidential ‘Pet Promise Line’ where colleagues are able to raise
concerns about pet care directly with our Head of Pets, who is a qualified veterinary
surgeon. Any call to this line results in appropriate action to address the concerns raised.
Examples of where we prioritise pet welfare include our decision to suspend the sale
and adoption of rabbits at Easter and instead provide workshops to educate about the
responsibilities of pet ownership. Over Christmas we encourage customers to buy the
relevant housing, accessories and food and to take gift vouchers home 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.
The Group also interacts with customers’ pets on a daily basis through its First Opinion
veterinary practices and Specialist Referral centres. All veterinary surgeons and nurses are
subject to the Royal College of Veterinary Surgeons’ (RCVS) Code of Conduct.
283 practices are accredited under the RCVS Practice Standards Scheme (PSS), with a further
66 currently enrolled to become accredited. This is a voluntary scheme, which through
setting standards and carrying out regular assessments, aims to promote and maintain the
highest standards of veterinary care. To become accredited, practices volunteer for rigorous
assessment every four years and will have met a range of standards. Practices are also
subject to independent spot-checks between assessments. We will continue to drive and
support PSS accreditation. To support our colleagues further our clinical development team,
who are all veterinary surgeons, audit to our internally developed “Aspiring to Clinical
Excellence” audit programme which has helped improve clinical standards and processes
across the Group. We are also leading the way in First Opinion clinical practice with
ground-breaking initiatives. A new quality improvement system (Q12020) has been launched
which gathers granular detail about practice clinical standards to enable clinical services
support to be tailored and targeted to provide maximum benefits.
Our STAR (Stop and Think, are Antibiotics Required?) programme has been developed with
extensive input from our practice teams, and includes unique and innovative assets to
educate clients, challenge and change established prescribing behaviours, and encourage
the responsible use of antibiotics. The result of antibiotic usage auditing was shared and
demonstrate a positive reduction in antibiotic use across the Group, over time.
54
Pets at Home Group PlcAnnual Report and Accounts 2020 Competition
Description and impact
The Group competes with a wide
variety of retailers, including other
pet specialists, pure play online
competitors, supermarkets,
discounters, veterinary groups and
independent practices. 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 offer an attractive model
to our future Joint Venture Partners
whilst keeping abreast of, and
responding to, developments by
all our competition in the areas of
price, range, quality, clinical care
and customer service could have
an adverse impact on the Group’s
financial performance and impact
opportunities for growth.
Mitigation
We offer pet owners the complete pet care experience, something our competitors cannot.
Through our combination of pet products and related services, which we make affordable,
convenient and rewarding, we are able to differentiate ourselves and take share across all
market segments.
As a specialist retailer, the delivery of friendly expertise through our highly engaged and
trained colleagues is a key element of our proposition and we continue to invest to ensure
our service standards are continually improved.
Market research is carried out to review the pet market to understand what our competitors
are doing worldwide. This helps identify further changes or initiatives that can be
implemented to help keep Pets at Home a leader in the UK market. In addition we are
constantly reviewing expansion opportunities into new adjacencies that would contribute
to our ecosystem.
We have a competitive pricing strategy across private label Advanced Nutrition foods,
branded food lines and pet essentials. We are executing the plan to keep our prices
competitive, and to deliver everyday low prices for our most loyal customers. Overall, we
have seen strong results, particularly in food and Advanced Nutrition, where increased sales
volumes offset the price reductions, leading to overall revenue growth in those categories
and have maintained competitiveness against pure online competitors.
We will continue to target price investment into product areas that we believe drive shopper
frequency and loyalty, not simply reducing prices across the entire range.
We continue to evolve our proposition through the addition of vets and groomers into our
existing store estate whilst continuing to innovate our superstore format – with the intention
of making our stores more experiential destinations for our current and prospective
customers with the regular introduction of new and exclusive products into our food and
accessory ranges.
COVID-19 has created a significant shift towards online, home delivery and contactless
delivery options with our omnichannel participation of Retail sales almost doubling. We are
expecting more customers to use online as part of their new shopping repertoire as it has
been the life line for many pet owners over the past few weeks. Customer buying behaviour
was already rapidly changing in an increasingly challenging and competitive retail
landscape. Consumers have greater demands around price, convenience, service and
experience. In response our online range of food and accessories has been extended
and online shopping is available 24/7 for our customers, whilst offering a choice of
delivery options.
As part of our continued investment in the digital shopping experience we have upgraded
our website functionality and content to bring together our unique combination of
products and services. The recent capital investment in automating the picking and packing
process at our Northampton Distribution Centre means we are well positioned to meet the
continued growth we expect to see in our omnichannel business.
We are attracting and retaining even more of the UK’s pet lovers, building lifetime
relationships with over 5.6m VIP (Very Important Pet) club members whose purchases
of products and services has grown 24% year-on-year.
We are uniquely positioned with our VIP data; it is the key driver for one of our strategic
pillars’ “using data to better serve customers”. Our strategy is to establish “Pet Care Analytics
for All” where analytics will become the lifeblood of our pet care ambitions across the Group.
We are focusing on creating an internal analytics capability that will drive strategic decision
making, enables an increasingly personalised customer experience and optimises the
working life of our colleagues and partners.
Our veterinary business is the largest branded veterinary business in the UK and continues to
have a differentiated strategy versus its scale UK competitors, which all employ variations of
a ‘buy and build’ model. The relationship with our Retail stores and VIP club, Joint Venture
model, and ability to advertise at national scale under a single brand are key aspects of a
strategy that remain difficult for any competitor to replicate – in part or in whole. We
continued to leverage these competitive advantages during the past year to drive above
market customer sales growth across our estate, and also took important action to
recalibrate our First Opinion veterinary business to create a foundation to return a
sustainable profit and cash return profile for our Group and our Joint Venture Partners.
Outlook
We are in a strong position in a large,
resilient market that is both in structural
growth and largely defensive.
However, the impact of COVID-19
response both in terms of society and
consumer behaviour means the outlook
for next year is inherently uncertain, with
the longer term effects largely unknown.
Our designation by the UK Government
as an “essential retailer” means we
continue to trade and provide pet
products and health care services that
are deemed essential to the nation’s
pet owners.
We are expecting to see a different
competitive landscape due to COVID-19
driving shifts in customer behaviours to
online, which is expected to continue,
and some bricks and mortar retailers
not surviving an extended period of
reduced trading.
As the flow of goods from the Far East
was not severely impacted we are
expecting to see over availability of
goods, which may increase the levels of
deals for customers when unrestricted
trading commences.
We will use our unique strengths to
attract new pet owners, through our
brand, cross-Group offers, and our VIP
club and will keep our prices competitive
for our most loyal customers. We
continue to invest in our online
capabilities to maximise this route
to market.
Circa 75% of the small animal veterinary
market in the UK is corporately owned.
We can benefit from our strong strategic
footing as the only corporate vet
business in the UK that provides an
owner-operator model that gives
entrepreneurial First Opinion vets the
ability to own their own business and
operate with complete clinical freedom.
Risk profile
Low
Medium High
Change on prior year
Stable
Links to strategy
Bring the pet experience to life
Use data and VIP to better serve
customers
50% of sales from pet services
55
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Risks and uncertainties continued
Services and stores expansion
Description and impact
A key part of the Group’s growth
strategy is to deliver 50% of sales
from pet care services, by having a
complete pet care strategy aligned
across the Group. If we are unable
to deliver the initiatives laid out in
our strategy our expected financial
performance could be adversely
impacted.
Mitigation
We regularly review our offer, store proposition and portfolio to maximise the potential
from our retail estate and are continuing to evolve our network with our stores of tomorrow
format that bring pet care services and experiences to customers. We have launched 18 pet
care centre format stores, including the in-store Groom Rooms and First Opinion veterinary
practices, and one standalone First Opinion veterinary practice.
As we move through the roll out programme, our customers’ experience and store
performance is monitored, and where required we are refining the concept and design.
Our colleagues remain our biggest asset and are fundamental to the success of the new
store concept.
We also 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 services 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. We will ensure we have the right number of stores as we
respond to continued channel shift to online.
Our store estate is also 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, to close or relocate a unit. We continue to monitor and plan to
mitigate the risk of landlords redeveloping sites for alternative uses at lease expiry.
In response to COVID-19 all our stores will be subject to a 12 months business rates holiday,
which will also apply to the in-store vet practices. For those stores where we still pay rents
quarterly, we are in the process of negotiating a temporary move from quarterly to monthly
rent payments which may affect circa 250 stores.
Outlook
In light of the unprecedented
uncertainty shaped by the on going
pandemic, we remain confident in our
long term strategic plan to deliver 50%
of sales from pet care services, given
the strong competitive position of our
Group to capture this opportunity
through our differentiated pet care
offering and plan to further develop our
services offering over the coming years.
We expect to see services and
subscription participation to increase,
especially as customers take advantage
of our subscription packages.
As we continue to monitor
developments, there is a high likelihood
however that our strategic plans are
re-evaluated as we progress through
the year.
Risk profile
Low
Medium High
There has been continued growth in subscription customers across our three subscription
schemes. There are now over 850k subscription customers across the Group from which we
build loyalty and a predictable revenue stream.
Change on prior year
Stable
Links to strategy
Bring the pet experience to life
Set our people free to serve
50% of sales from pet services
Our VIP Subscribe and Save monthly flea and worm offering has been extended to include
cat treatments. Our food subscription service “Easy Repeat” allows customers to customise
their home delivery of their pet food, rewarded with our best prices. Whilst our First Opinion
healthcare plans are designed to provide peace of mind for the predictable elements of
pet care. Our flagship healthcare plan “Complete Care” helps to spread the cost of routine
treatments.
The continued growth of our veterinary business, both First Opinion and Specialist Referrals,
is a key building block for achieving our growth strategy. We made meaningful progress to
increase the long term sustainability and competitive position of both of these businesses in
FY20. In our First Opinion vet business, we completed a recalibration, to realise free cashflow
growth by accelerating maturity in existing practices. The plan remains on-track and
throughout the process we have worked closely with our Joint Venture Partners to reach
decisions about their businesses in a collaborative manner.
A key priority for our specialist division is to expand our capabilities and capacity and to
achieve national coverage of Specialist Referral centres. We are completing an extensive
expansion programme at one of our existing sites, plus opening a new Specialist Hospital
in Scotland, with state-of-the-art facilities and a highly-experienced team which will come
on stream later in the year. We remain active in looking for opportunities for growth.
Following Government requirements for COVID-19 we are maintaining social distancing
protocols in our stores, Distribution Centres and practices. We have ceased any operation
where the health and safety of our colleagues and customers may be compromised,
meaning we have temporarily closed our grooming salons. Furthermore, to comply with
requirements and RCVS guidance our First Opinion practices and Specialist Referral centres
remain open to deliver emergency care.
56
Pets at Home Group PlcAnnual Report and Accounts 2020 Our people
Description and impact
Our People Strategy recognises
that our colleagues are
fundamental to the success of our
business and key to us achieving
our objective of becoming ‘The
Best Pet Care Business in the
World’. We must attract, develop
and retain talented, engaged
colleagues that will deliver quality
service and clinical care to our
customers and their pets if we are
to achieve our Group strategic
ambitions.
Mitigation
This year we have taken the opportunity to focus on the alignment of key people activities
across the Group. We are currently shaping our colleague and leadership capability framework
which will clearly articulate our expectations of what great looks like for colleagues and leaders.
Our reward and grading schemes will be embedded within this framework which will also
support career pathways and all future learning and development programmes.
Outlook
We continue to make great progress
with our People Strategy across the
Group this year and remain in a strong
position to attract, retain and develop
our colleagues.
We continue to seek new opportunities
to further enhance our colleague
experience; however uncertainties
associated with CoVID-19 will need
a careful and considered approach.
Risk profile
Low
Medium High
Change on prior year
Stable
Links to strategy
Bring the pet experience to life
Set our people free to serve
All our learning and development programmes will be underpinned by our new capability
framework. Our leader programmes are under review and will focus on leading and
mobilising our business strategy, and strengthening our change leadership. We will also be
reviewing our colleague development programmes at store level to ensure our colleagues
are able to bring the pet experience to life and supporting our customers with regards to
their pet care needs. We will continue to map more training programmes to apprenticeships
over the coming year, focusing on the development of critical clinical, customer facing and
leadership talent groups to shape the future of the Group by attracting, growing and
retaining best in class next generation talent that inspires us to discover new ways of
wowing our pet care customers.
This year will also see us launch programmes targeted at those who face barriers to
employment to ensure we are utilising all available talent pools whilst also enabling
better social mobility and creating a lasting impact on people and society.
We continue to develop a healthy pipeline of talented veterinary graduates through our
Graduate Programme and in the last three years we have recruited over 300 graduates.
This year we will be launching our Graduate Next Steps Alumni fund to support long term
professional and personal development and increase retention of our graduates once they
have completed the programme.
We have run our first Group wide listening survey and we have robust action plans to
support the importance of improving our colleague experience, differentiating our culture,
and our people proposition. We recognise the importance of articulating our people
proposition internally and externally and work is now underway to develop our story and
find effective ways to communicate our unique culture.
We continue to review the impact of Brexit and any future changes to UK immigration policy
which may impact the availability, recruitment and retention of talented colleagues across
the Group. We have employed long term strategies to mitigate the expected impact,
including operating flexible recruitment and retention initiatives, launching graduate
recruitment programmes for veterinary surgeons, whilst reviewing opportunities in non-EU
vet recruitment markets and identifying key targets.
We are working closely with professional bodies including the Royal College of Veterinary
Surgeons and the British Veterinary Association to continue to ensure the veterinary voice
is heard during the transition period as the draft immigration bill evolves. Now the ‘settled
status’ process for EU citizens’ right of settlement ‘indefinite leave to remain’ is known, we
have an on going communication strategy with our Joint Venture Partners and all affected
colleagues to clarify an EU citizen’s right of settlement and to provide support to all our EU
colleagues.
We are committed to developing a culture of inclusivity across the Group. We are at the start
of our journey, and with the implementation of Success Factors this year, we will capture the
data to provide us with our starting position. This will help set out our ambition, starting
with our policy and process reviews, to shaping an inclusive leadership approach. Diversity
and inclusion is already called out as significant within our values and behaviours which
run through our Group. This will be embedded further within our leadership capability
framework which launches later this year.
We continue to monitor and review Government advice with regards to the COVID-19, to
ensure the safety and wellbeing of all our colleagues and customers at this difficult time. We
have provided detailed protocols; daily podcasts followed by written communications with
commonly asked Q&As’ to ensure our colleagues are kept fully informed and reassured by
the measures we have taken to safeguard our business.
57
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Risks and uncertainties continued
Information security and business systems
Description and impact
The need to maintain core
business systems and mitigate
security risks whilst supporting
our strategy remain paramount
again this year.
Protecting customer and colleague
data against increasingly
sophisticated attacks comes with
additional cost linked to the
remediation of associated risks
(data, people, and infrastructure).
Our ability to balance these
challenging demands is vital
to delivering our strategy,
maintaining target growth levels
and be secure from data security
breaches and legal challenges.
Mitigation
We remain committed to delivering secure high-performance systems that underpin our
strategic plan. We continue to move to scalable, secure, cloud-based solutions where they
support our strategy.
We maintain a risk-based information security management system, designed to protect the
confidentiality, integrity, and availability of business-critical information. The management
system ensures that information security controls are reviewed and improved on a continual
basis. A risk-based methodology allows us to identify, assess and react to the ever-changing
threat landscape, including vulnerabilities exploited at other organisations.
Our established information security training and awareness programme ensures colleagues
understand the risks and threats associated with protecting data.
In response to the challenges raised by COVID-19 our Information Security Policies covering
people, process and technology continue to be followed and monitored. Risks are being
continually assessed and managed as business processes evolve. Home working and social
isolating ensures we have sufficient resource to maintain our core functions and information
security management system, whilst continuing to identify opportunities for improvement.
Outlook
To deliver our vision to become the
best pet care business in the world
we will continue to monitor the threat
landscape, utilise a risk management
methodology that will allow us to
balance risk versus investment and
ensure appropriate controls are
implemented.
We continue awareness campaigns
to educate colleagues about the risks
associated with data and physical
security.
Cloud-based solutions will continue
to be our go-to platform where the
technology aligns to our security,
strategic and operational goals.
Risk profile
Low
Medium High
Change on prior year
Stable
Links to strategy
Use data and VIP to better serve
customers
Set our people free to serve
58
Pets at Home Group PlcAnnual Report and Accounts 2020 Mitigation
During such a challenging period, the strength of our long-standing relationships with key
suppliers is crucial to preserving our supply chain. Across third party brands, private label
food manufacturers in the UK and accessory suppliers in the Far East, we were able to
minimise disruption to customers and continue meeting their pet care needs. Our previous
investments in omnichannel capacity, new customer acquisition channels and subscription
services had equipped us to meet above-trend levels of demand and, with disruption in
Far East supply stabilising relatively quickly, our product availability held up well.
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 visits to further monitor compliance with Group policies.
We continue to invest in our quality assurance processes and to ensure the effectiveness of
our Far East sourcing office in mitigating our sourcing risks in the region.
In the Vet Group we continue to work closely with all suppliers. Key contract renewals will be
due during the financial year which may be postponed due to COVID-19. However contract
extensions are in place to ensure supply and other contractual obligations are met. We are
also working closely with the NHS in the requisition of ventilators and personal protective
equipment from our Specialist Hospitals.
Five management teams have been established to develop and deliver our CSR strategy.
One of these, the Product and Supply Chain Management team, is responsible for
developing the Responsible Sourcing strategy in relation to all products sourced for the
Group. The scope of this covers the full value chain impact of products including packaging,
raw materials, and the environmental impacts of manufacture, Human Rights and product
sustainability innovation. During the year the team has focused on evaluating all own brand
product packaging to establish the recyclability of materials and creating plans to change
packaging where necessary.
Exposure to foreign currency movements is an increased risk that is mitigated through our
hedging strategy; see the Treasury and finance risk.
Business continuity plans are in place for the Distribution Centres. 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 actively monitor COVID-19 and Brexit developments and will respond to
any impact on our supply chain proportionately. We have performed a detailed operational
risk assessment of our supply chain. For our own label and private label food products we
have identified alternative suppliers where appropriate and have developed contingency
plans. The Vet Group has also secured the provision of critical stock lines, including
medicines, by contractually ring fencing stock with our wholesaler and suppliers and
has built relationships with manufacturers should we encounter any difficulties in our
supply chain.
Outlook
The longer term effects of COVID-19
are still largely unknown, however we
have plans in place and continue to
monitor daily.
Exposure to foreign currency
movements will be a heightened risk.
By bringing forward stock orders
scheduled for later in the year, we were
also able to send a confident signal to
our suppliers that we expect the pet care
market to remain resilient.
We are aligning our 2030 strategy to the
UN Sustainable Goals, recognising that
our actions can impact issues globally
and locally and both are important.
There is a real consciousness and
accelerating trend for ecologically
sustainable products. We have ambitions
across our key brand strategies to be a
fully British brand whilst bringing
sustainability into our innovation plans
and range architecture going forward.
For the Vet Group, we are expecting to
see an impact in the availability of a few
critical supply lines in the near future
as priority is given to NHS rather than
veterinary channels.
We continue to monitor the Brexit
transition and manage our mitigation
plan accordingly.
Risk profile
Low
Medium High
Change on prior year
Stable
Links to strategy
Bring the pet experience to life
Supply chain and sourcing
Description and impact
During the financial year,
approximately US$85m of the
Group’s merchandise cost of
goods and £110m of the Vet Group
pharmaceutical purchases 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 are also exposed to the risks
associated with the quality and
safety of products produced
locally and globally on behalf of
the Group, many of which are own
brand or exclusive private labels.
We must also ensure that our
suppliers share and uphold our
approach to business ethics,
human rights (including safety
and modern slavery) and the
environment.
A failure to manage this risk
adequately could lead to
significant reputational damage.
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.
As the Brexit transition starts,
the impact to our domestic and
overseas supply chains may still
be significant, particularly in view
of probable changes to the UK’s
trading terms with the EU and the
rest of the world.
The impact of COVID-19 is
dependent on the supply chain
and the risk to overseas
manufacturing and shipping plus
the priority of the vet channel
versus the NHS.
59
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Risks and uncertainties continued
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 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.
Mitigation
The Group’s finances are continually monitored in the context of its growth plans and of the
wider economic landscape. The Group’s financing facilities were reviewed in September
2018 and are in place until September 2023. The Group maintains close working relationships
with its banking partners to ensure sufficient liquidity and credit is available. The Group
monitors a range of potential cash flow sensitivities to ensure the banking facilities in place
remain sufficient and adequate in light of evolving macro and micro-economic factors. As a
result, the Group is confident that it has adequate revolving facilities in place, with a broad
syndicate of seven 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 underpin 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. The Group has completed a project to
buy out and consolidate a number of Joint Venture veterinary practices, as part of which, the
Group settled any liabilities for third party bank loans and leases within these practices on
behalf of the Joint Venture Partner, with all such liabilities being written off. For the practices
which the Group continues to operate under a Joint Venture Agreement, the Group has
established a credit impairment provision to reflect the assessment of extended loans and
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 recognised 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 exchange rate 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
uncertainty regarding the expected cessation of LIBOR by the FCA as the interest rate
benchmark by the end of 2021, 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, and continues to monitor and engage in the
determinant of an alternative benchmark to LIBOR. Further details can be found on page 187.
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.
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.
60
Outlook
The evolving position in relation to
COVID-19 has created increased
uncertainty in relation to forecast cash
flows, liquidity and credit requirements.
We continue to monitor our finances
and build relationships with our finance
providers to ensure that the business is
well positioned to manage its cash flows
effectively and ensure sufficient liquidity
is available.
Mindful of these prevailing
circumstances, we recognise the
potential need to support some of our
Joint Venture veterinary practices with
additional funding during the year
ahead. Such funding will be available for
those businesses that remain viable over
the longer term, taking into account the
near term benefit of the third party loan
repayments secured.
We do not anticipate any other
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 profile
Low
Medium High
Change on prior year
Increase
Links to strategy
Bring the pet experience to life
50% of sales from pet services
Use data and VIP to better serve
customers
Outlook
On-going currency movements
between the US dollar and GBP
may result in further exchange risk,
particularly in light of the evolving
position in relation to coronavirus, and
the Brexit process. We will continue to
monitor this and adjust our approach
to hedging where necessary.
Risk profile
Low
Medium High
Change on prior year
Stable
Links to strategy
Bring the pet experience to life
50% of sales from pet services
Pets at Home Group PlcAnnual Report and Accounts 2020
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,
packaging, product quality, health
and safety, pet shop licensing,
National Minimum Wage, National
Living Wage, Equality Act, modern
slavery, bribery, data protection,
environment, the RCVS Code of
Professional Conduct for Veterinary
Surgeons and what will be the
implementation of the off-payroll
regulations (IR35). Failure to
comply with these obligations may
result in financial or reputational
damage.
Sustainability and climate change
Description and impact
The success of our business over
the long term will depend on
the social and environmental
sustainability of our operations, the
resilience of our supply chain and
our ability to manage the impact
of any potential climate change
on our business model and
performance. The key risk to the
Group relates to assessing and
reducing the environmental
impact of the direct operations
and across the value chain. This
could result in an impact to the
Group’s reputation and strategic
plan. Examples of risk include
extreme weather events affecting
demand, sales, our operations and
supply chains and more stringent
environmental regulation could
affect the cost of production and
operational flexibility.
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 whistleblowing hotline for colleagues to raise concerns regarding
any potential breach of legal or regulatory obligations in confidence.
Our suppliers commit to and are audited against adhering to relevant regulations, such
as the Modern Slavery Act 2015, the Bribery Act 2010 and the General Data Protection
Regulation (implemented in the UK by means of the Data Protection Act 2018) (GDPR). The
Group’s Data Protection Officer, and executive sponsored steering committee, monitors
Group compliance with legal requirements, ensuring relevant policies are up to date and
works with our Information Security Steering Committee which monitors data security.
The Animal Welfare (Licensing of Activities Involving Animals) (England) Regulations 2018 was
implemented in October 2018. The licensing process across the Group was dealt with as a
priority but has been delayed by Councils. It is therefore ongoing and will continue into 2020,
with all stores expecting to receiving a licence. DEFRA (the Department for Environment, Food
and Rural Affairs) is planning to review the regulations again and as a key stakeholder we will
actively engage in the consultation process to ensure the licensing requirements are clear and
consistent, driving an update if required to the statutory guidance.
The Group continues to monitor any potential changes to law and regulations which could
be brought about by, for example, the withdrawal from the EU and any longer term
implications of COVID-19. We have already seen the introduction of the Coronavirus Act 2020
and the Job Retention Scheme by the UK Government and we continue to assess their
impact on the Group.
We have also refreshed all relevant agreements in light of the HMRC’s off-payroll regulations
(IR35) in readiness for the changes which will come into force from April 2021. The Group will
continue to monitor any impact on the regulatory and compliance landscape that this and
other issues bring.
Outlook
We continue to monitor legal and
regulatory developments across the UK
and Europe and will plan accordingly.
Risk profile
Low
Medium High
Change on prior year
Stable
Links to strategy
Bring the pet experience to life
Use data and VIP to better serve
customers
50% of sales from pet services
Set our people free to serve
Mitigation
The Corporate Social Responsibility and Pets Come First Committee meet three times a
year to approve and review the impact of CSR strategy. During the year the new role of
Group Chief People and Culture Officer was created to take overall responsibility for the
agenda. As part of the process a detailed materiality assessment was carried out see page 63
and five management groups, each sponsored by a member of the Executive Management
Team, were established to develop and deliver the strategy for: Climate Change & Waste;
Product & Supply Chain; People; Charity & Community; and Pet Welfare.
Outlook
The updated 2030 environment
and sustainability strategy, outlined
in pages 64-81, will be finalised and
launched during FY 2020/21. This will
include an assessment of scope 3 carbon
impact and the development of a long
term carbon reduction target.
For extreme weather 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.
Further improvements to our
subscription and omnichannel services
offering will continue to improve our
resilience to reduced store footfall
during periods of extreme weather.
Risk profile
Low
Medium High
Change on prior year
Stable
Links to strategy
Bring the pet experience to life
50% of sales from pet services
61
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Corporate Social Responsibility
Context
During FY2019/20 we have begun a process to create and embed
into our vision a social purpose strategy which will describe the
role that we play in society, and include our people culture and
our environmental and community activities. The importance of
this strategy has been reflected in the creation of two new roles.
Firstly, a new Group Executive position of Chief People and
Culture Officer, which Louise Stonier has been appointed to,
demonstrating that culture is being put into the heart of decision
making. Secondly, supporting Louise, a new position of Group
Head of Social Value, responsible for the creation and delivery
of the strategy and its integration into the business plan. Under
Louise’s guidance the Executive Management Team developed
a set of words to encapsulate their intent.
“ We care deeply about the role that we play
in society and we want to share the value we
create as a business. Therefore, the Executive
Management Team, in consultation with key
stakeholders, will write and then embed into the
way we operate a 10 year promise that makes
at least 10 quantified commitments across the
three pillars of: Pets, People and Planet.“
Demonstrating our social value
The strategy will build on the strong foundations and current
value that the Group is creating but not necessarily communicating
effectively to all stakeholders.
This report includes more data and information about our work in
communities and our people and culture and how this aligns to the
United Nations Sustainable Development Goals (UN SDGs)
Acting responsibly
and sustainably
is at the heart
of our business
62
Pets at Home Group PlcAnnual Report and Accounts 2020 Interim governance
An interim governance approach has been established
during the year with an Executive Management
Team member taking sponsorship of one of five
Management Teams covering Climate Change &
Waste; Product & Supply chain; Pet Welfare; People;
and Charity & Community.
Materiality review
A materiality review has been developed to help
identify what matters most. To inform this work we
used international frameworks such as the UN SDGs.
The process has been inclusive. We have engaged with
our colleagues and our external stakeholders through
listening groups, emails and roundtable events.
Through this consultation the materiality review
identified 20 high level topics that the strategy
will address.
These have been mapped against the ten principal
risks within the company wide risk and assurance
approach to ensure clarity on governance.
Initial progress
Work has begun straight away to accelerate
opportunity areas such as packaging, phasing out our
single use carrier bags and partnerships that will help
us to support more people from vulnerable groups
through employment and mentoring opportunities.
The Group is also considering how to approach longer
term sustainability risks and opportunities which will
require collaboration and partnerships. We have begun
work to establish a Net Zero Carbon target for our
scope 1 and 2 emissions. In parallel, the process is
underway to assess our scope 3 emissions which will
enable a carbon emissions target to be set in line with
limiting global temperature rises to below 1.5c.
Next steps
High level targets have been developed, along with
supporting milestones, and these will be published
during FY20/21 on the Investor Website. We are
taking the time to develop what will be a multi year
social purpose plan that will reflect the changing
environmental and social risks and opportunities
that arise.
Materiality review
Company
Supply chain
Pet, customer & community
4
4 4
5 5
10
11 11
6
6 6
16
1
1
3
3 3
2 2
2
7
7 7
15 15 15
12 12 12
14
20
8 8 8
9
9
9
13
17 17
18 18
19
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Increasing importance to Pets at Home
Alignment of sustainability material topics to principal risks
Sustainability Material Topic
1 Pets’ physical and emotional health
Risk Main Governance Forum
1
CSR & PCF Committee
Principal
2 Pets’ role in society
3 Health and wellbeing
4 Climate change risk assessment & action
5 Social mobility and inequality
6 Diversity and inclusion
7 Biodiversity
8 Waste
9 Resource consumption & circularity*
10 Sustainability of product packaging
11 Data ethics
12 Purpose led business & careers
13 Supply chain transparency
14 Community contribution
15 Ethical business practices
16 Sustainable product raw materials
17 Labour practices and Human Rights
18 Sustainability of pet ownership*
19 Environmental impacts of product production
20 Animal welfare impacts of product production
* Emerging topic
CSR
Pet welfare
4
10
4
4
CSR
CSR
CSR
6
5
4
6
CSR
6,8,9
CSR
6,9
CSR
10
6
People
Climate change & waste
People
People
Climate change & waste
Climate change & waste
Product & supply chain
Product & supply chain
People
Product & supply chain
Charity
Product & supply chain
Product & supply chain
Product & supply chain
Product & supply chain
Product & supply chain
63
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020
Corporate Social Responsibility
Delivering
our purpose
We are a business built on strong values that guide everything that we do every day.
Our aim is to create a better world for pets and the people who love them
and so we organise our activity into the three areas where we have a material impact
and create value.
Pets
Our charitable foundation Support Adoption for Pets (SAFP) is the
number one financial supporter of pet rescues in the U.K. and this
year it raised over £3m. The VIP club, our customer loyalty scheme,
runs a unique point system called Lifelines which enables every
customer swipe to be converted into support for a charity. This
year over £2.1m was raised through customers shopping on line,
in the Groom Room, Vets4Pets or Companion Care or swiping their
card when they shop in store.
Read more
Page 66
People
For the first time the colleague engagement survey
“We C.A.R.E.” was extended to all colleagues including
the JVCo colleagues. 75% of colleagues completed
the survey and the engagement rate was 83%.
Read more
Page 72
Planet
At Pets at Home we have had another year of strong
environmental performance, delivering a 7% reduction in
carbon emissions while growing Group revenue by 10.2%.
Read more
Page 78
64
Pets at Home Group PlcAnnual Report and Accounts 2020 S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
G
o
v
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n
a
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t
Our big 3 highlights of the year:
Over £5m raised
to support over
800 charities
83% colleague
engagement
7% reduction in CO2e
emissions vs. 2018/19
65
Financial statementsPets at Home Group PlcAnnual Report and Accounts 2020
Corporate Social Responsibility continued
Pets
Pets are at the heart of everything we do and everyone who is a part of our Group has
a special responsibility to help keep pets happy, healthy and safe. Each one of our First
Opinion practices is owned and run by a member of the Royal College of Veterinary
Surgeons and our Specialist Hospitals are run by some of the leading veterinary specialists
in the world. Our retail and grooming colleagues are trained for many hours in order to
provide the best welfare possible for the pets in our care.
Acting responsibly
Page 62
Putting pets first
Looking after the pets in our care
Stores and grooming salons
It is very important to us that the pets in our stores are well looked
after, happy and healthy. We invest heavily in colleague training to
ensure they receive the best care during their time with us.
We continue to review the standards of pet care and welfare across
the Group, and specifically within our stores and grooming salons.
The results of all our internal audits were very high and in line with
our expectations. The business retained the services of two third party
auditors to review standards and processes at our pet suppliers and
this has generated feedback and ideas to improve suppliers’ welfare
standards even further.
In October 2018, updates to the Animal Welfare Act (Licensing of
Activities Involving Animals) (England) Regulations came into force.
Our stores have been assessed by local councils and this will
continue on an ongoing basis.
All our grooming salon colleagues undergo extensive training, aligned
to the City and Guilds levels, before they are able to fully groom a dog
and our specific grooming training covers almost all types of dog
breeds so that each pet is groomed specifically to any requirements
that breed may have. Grooming colleagues learn how to handle dogs
sensitively during their groom, minimising any anxiety, and colleagues
also take time to inspect coat and skin health, recording any concerns
they may have and drawing the owner’s attention to them. We
encourage all our salon colleagues to use their full discretion to seek
treatment from a vet if they believe it is the right thing to do.
66
Vet practices
We are incredibly proud of our Joint Venture vet businesses, Vets4Pets
and Companion Care, and the talented vets and veterinary nurses
who own and run these practices. All our Joint Venture Partners run
their practices with complete clinical freedom which means they have
total discretion to treat all the pets in their care in the way that they, as
a professional, deem most appropriate. Overlaid upon this, our clinical
services team of veterinary surgeons provide support to help our Joint
Venture Partners improve clinical standards and services to clients.
Excellent progress has been made in the First Opinion veterinary
business, with over three quarters of practices now enrolled with
the Royal College of Veterinary Surgeons’ Practice Standards Scheme
and an increasing number of practices achieving further awards
within the scheme.
We are also leading the way in First Opinion clinical practice with
ground breaking initiatives such as our quality improvement
programme called QI2020. QI2020 provides granular detail about
practice clinical standards, enabling clinical services support to be
tailored and targeted to provide maximum benefits.
Pets at Home Group PlcAnnual Report and Accounts 2020 Supporting pets in our communities
We are proud to operate at the heart of communities across the UK, supporting pets
and the people who love them. Our support for our pet communities is organised
around three main programmes: our charitable foundation, Support Adoption for
Pets, our customer loyalty community programme, VIP Lifelines, and our programme
of fun educational workshops for children.
Support Adoption for Pets
Support Adoption for Pets (SAFP) is an animal rescue and pet
adoption charitable foundation which has raised over £35m since it
was established in 2006. The foundation is run by a small team of
experts including a registered veterinary nurse, a fundraising manager
and a number of colleagues with expertise in assessing and
supporting the small rescues that we work with.
How SAFP raises money
390 of the Pets at Home stores selected a local animal rescue charity
to support this year and hold regular fundraising events, including
supporting the national events like the “Santa Paws” Christmas appeal
where we collect donations in our stores and vet practices to help a
pet in need at Christmas.
At the end of the year the local charities receive 50% of the funds
raised in that store which reached £1.2m last year, the remaining
50% is invested in the SAFP grant programme.
How this money is spent
The money raised is used to issue grants on a quarterly basis to animal
rescue charities across the UK. Last year 78 grants with a value of over
£1.5m were issued. In addition at the end of the year an emergency
fund of £400k was allocated to support rescues impacted by the
coronavirus crisis.
The charity also runs a network of animal adoption centres in most
of our Pets at Home stores. The adoption centres accept rabbits,
guinea pigs, gerbils and other similar small pets. All animals are given
a thorough health assessment and any required veterinary treatment.
The adoption centres received additional financial support from
Pets at Home through the provision of free bedding, estimated at
£325k at retail selling prices, and colleague time to provide care
to the animals estimated at over £800k per annum.
We are proud that this activity makes SAFP the number one financial
supporter of pet rescues in the U.K.
The impact of the money spent
The grants awarded cover a wide variety of requests from immediate
veterinary bills, through to infrastructural investments like buildings
and vehicles. Each grant request is individually considered by the
Trustee board of the charity. Over 70% of the grant value awarded
went to capital related projects that create a sustainable improvement
to the rescue, enabling it to have a bigger impact on the pets in their
care. The grants impacted rescues whose reach extended to over
19,000 animals in the last year.
£1.5missued in grants to rescues £1.2m
78Grants awarded to rescue centres
Raised for local charities through
the charity of the year programme
who, in the last year helped:
10,034 Cats
6,459 Dogs
197 Horses
2,573 Rabbits
and small animals
67
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Corporate Social Responsibility continued
Case study
Woodlands Animal Sanctuary
SAFP funded the sanctuary (and four other
animal rescue charities) to attend the two day
Association of Dogs and Cats Homes (ADCH)
conference. This enabled the rescue to review
their strategy and to consider how they could
reach more animals in need and have an even
bigger impact. SAFP went on to grant their
biggest ever grant of £176k which was used
to build a new cattery at the sanctuary.
The Cat Watch project helps the cats in our
society that may not otherwise be reached
by working with communities and offering
support in unique ways. The interventions
in place mean that cat caretakers have the
opportunity and capability to improve the
welfare of these cats. The grant received
from Support Adoption for Pets has been
so valuable in enabling this work to develop
and recognises the impact it has had,
for which we are very grateful.”
Jane Clements, Head of Neutering, Cats Protection
68
The new cattery will give us first class facilities
for our cats with much better infection control
and ease of cleaning than our current cattery.
We will have proper isolation and maternity
facilities completely separate from our cats for
rehoming which is a huge improvement on
what we currently have.
We can’t thank Support Adoption for Pets
enough for helping us turn our dream of a
purpose built, state of the art cattery into reality.”
Liz Gould, Trustee, Woodlands Animal Sanctuary
£176,422
Grant awarded to Woodlands Animal Sanctuary
Case study
Cats Protection
Cats Protection was awarded a grant of
£100,000 in 2019 from Support Adoption for
Pets towards the development of the Cat
Watch project in Nottingham and Liverpool.
Cat Watch aims to improve our understanding
of the unowned cat population in urban areas
and to work with, and alongside, communities
to improve cat welfare. Its long term aim is a
citywide welfare approach to the community
cats in our society.
£100,000
Grant awarded to Cats Protection
Pets at Home Group PlcAnnual Report and Accounts 2020 VIP Lifelines
How VIP Lifelines supports charities
When VIP loyalty club members spend in a store, Groom Room or
Vets4Pets practice they earn Lifelines, a unique type of loyalty point.
Each quarter we convert Lifelines into vouchers for animal charities
which they can spend in our stores or grooming salons.
Customers can choose their favourite charity to support with their Lifelines
from ten national charities or a charity registered locally to them. Every
point earned has an impact - unredeemed points or those accrued
without a chosen beneficiary charity are then used for further good causes
where specific donations can be made that are important to our
customers. This year, £2.1m has been raised by VIP members which makes
a total of over £12.6m since the VIP club launched in November 2012.
The impact of Lifelines
This year 782 local charities across the country have received funds
that have helped charities buy essentials from our stores to feed their
pets and keep them healthy and comfortable whilst they await their
forever home.
Case study
UK floods
During February 2020, the UK experienced the wettest
February since records began in 1766 with record levels
of rainfall after three weekends of successive storms
battered communities across the UK. The subsequent
flooding devastated many communities. Lifelines were
used to support various communities in need including
in Telford where, with the local store, Joe Whitaker
travelled to Ironbridge to donate bedding and food to
help the pets who had been evacuated from their homes
due to the terrible flooding.
10National charities supported
with vouchers worth £909k
vouchers worth £716k
782Local charities supported with
15,000
All dogs being cared for by the
Dogs Trust fed with Pets at Home
dog food
£100k
Amount donated to the
Worldwide Fund for Nature,
thanks to our VIP club members
Case study
Australian Bush Fires Appeal
As animal lovers it was heart
breaking for us to see the news
coverage of the bush fires
burning across Australia and the
impact on thousands of families
and millions of animals. The
loyalty of our customers enabled
a donation of £100,000 to be
made to the WWF, to contribute
towards restoring habitats,
emergency animal care and
helping to protect the existing
wildlife.
69
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Corporate Social Responsibility continued
over £400k
of dog food donated between December 2018 to December 2019
Case study
Dogs Trust
Dogs Trust cares for around 15,000 dogs each year at its 20 rehoming
centres located across the UK. Our customers’ VIP Lifelines have been
used to provide Wainwright’s dry dog food for the dogs being cared
for while they await their their forever homes, and ensures that they
have a bag of their favourite food to help them settle into their new
home. The food provided equates to over £400k if the charity had
purchased Wainwright’s from our stores, meaning they can free up
funds to help fund the rest of their vital works.
Every one of our incredible dogs has a special
someone out there just waiting to give them
a loving home. Until they find that perfect
person, we’re there to give them all the
support they need. It takes a lot of love, a lot
of walks, and several tonnes of dog food to
keep our 15,000 dogs going every year, and
we couldn’t do it without the vital support
of Pets at Home.”
Nick Daniel, Director of Fundraising at Dogs Trust
Animal Partnership Award
Case study
Soldiering On Awards
We understand the amazing impact animals can have on people,
and that’s why we also used VIP Lifelines to sponsor the Animal
Partnership Award category of the Soldiering on Awards 2020. The
special Award honours the unique relationships and companionship
provided by animals, and/or the achievements of individuals or
organisations engaged with animals that support or empower
members of the Armed Forces community. The amazing stories
of the finalists were featured on the Pets at Home social media
pages during March so that our customers could then cast their
vote for the winner. Over 6,500 votes were received for the four
finalists; the winner will be announced later in 2020.
>6,500
Votes received for the four finalists; the
winner will be announced later in 2020
70
Pets at Home Group PlcAnnual Report and Accounts 2020 Education
At Pets at Home we bring animal welfare to life by using our store
network, at the heart of communities, to engage with children
(and their parents and carers) about how to look after pets through
knowledge, empathy and kindness.
Supporting the Scout Association
We are really proud to work with the Scout Association, a national
charity helping 400,000 young people across the UK to build skills for
life. Our partnership involves sponsoring the “Animal Friend” Beaver
activity badge and the “Animal Carer” Cub Scouts activity badge.
Beaver colonies and Cub packs are able to register to join a session
at one of our stores to help build their understanding of how to be
a responsible pet owner and care for pets to work towards these
badges. Last year we ran 797 of these sessions across the year in our
stores with 14,000 children registering to attend.
Pet Pals workshops
During the school holidays we
invite children and their parents
and carers to join us for some
fun and educational My Pet Pals
workshops. During the last year
we were delighted to register
over 124,000 children to over
50,000 workshops.
Pet Pal and Scouting workshops 138,000
51,000
Children registered to attend
”At Scouts we are both delighted and grateful
to be celebrating 10 years of partnership with
Pets at Home.
Thank you for all you do to promote a key Scout value – caring for
others and the world we live in, in this case animals in our care.
Your partnership with us helps Scouts sustain our support for young
people and help them to find their place in the world, especially
when times are tough. We look forward to working with you for a
long time to come. Once again, thank you”
Kathy O’Brien, Partnerships Manager, Scouts
In addition there are other partnerships and activities across the
Group that align with our aim to create a better world for pets
and the people who love them.
– All of our vet practices are aligned to administer the Blue Cross
Emergency Fund which enables vets to provide free veterinary care
to those who may face financial barriers to paying for it themselves.
– We partner with Battersea Dogs and Cats home and offer all dogs
rehomed through them free vaccinations for the life of each pet
adopted through our Vets4Pets “Vac4Life” care plan.
– We currently partner with two animal charities, Pets as Therapy
and Dogs4Good, and split all proceeds from carrier bag sales in
our stores equally between those charities.
– Since 2018 we have been partnering with Street Vet, a new charity
where veterinary professionals come together in key UK cities
to volunteer, providing essential veterinary care for the pets of
homeless people. Four of our practices have volunteered their
veterinary premises to be the Street Vet base within the town they
operate in and many of our vets and nurses across the country
volunteer with this charity, giving their veterinary skills for free. We
are the main supporters of their National Volunteer Conference
which is now going into its third year and this year we provided
media training for all lead Street Vet volunteers across the country.
– During 2019 the Vet Group selected Vetlife as its charity of the year.
Vetlife provides mental health support to the veterinary industry
through education, a 24/7 helpline, benevolent fund and online
resources for industry members to name just some of the support
available. Supporting the mental health of all our colleagues and
our JVPs is of paramount importance and this is especially true in
the veterinary industry where the incidence of mental health issues
is reported to be higher than the general population.
– We have donated £185k to the Royal British Legion and £34k
to Marie Curie from our Poppy and Daffodil appeals.
– Our colleagues are able to take a charity day every year for
volunteering purposes. For example, during 2019 the Vet Group
support office ran a third community day in Swindon where
colleagues supported over 8 local community outreach projects and
charities. Over 60 colleagues participated with over 500 volunteer
hours being completed in one day.
Coronavirus
Our most pressing priority is to support the pet rescue sector who
are facing financial uncertainty due to the impact of the coronavirus
on fundraising and their ability to run their operations. At the end of
March as a response to the impact of coronavirus on local rescues and
animal charities we allocated £1.1m, comprising £400k from SAFP and
£700k funding thanks to VIP Lifelines. We will continue to work closely
with the rescue sector and support them in any way that we are able
to over the coming months. See pages 16 to 19 for a complete
summary of our coronavirus response.
71
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Corporate Social Responsibility continued
People
As we look to progress on our journey to achieve our vision of becoming ‘the best pet care
business in the world’, our culture is the enabler to delivering our strategy. Focusing on our
colleagues and our culture has never been more critical as we continue on our transformation
journey. For us it is all about kindness: to each other, our Partners, communities, the
environment, customers and pets. Kindness builds trust and creates an emotional connection
to who we are and what we do. This year we have focused on reviewing and aligning the
key people activities across the Group and creating our overall People Strategy for the next
five years.
Acting responsibly
Page 62
Our values and culture
72
Pets at Home Group PlcAnnual Report and Accounts 2020 Our values and culture
I love the people I work with
– we’re like one big family.”
“The culture is friendly, everyone is
approachable and every day is different.
Our values
Our values are what make us different from other organisations.
They are unique to us and they reflect our very special culture.
They give us clarity about what we do here.
We recognised that although our values have been tweaked over
the years, they have fundamentally remained the same and as a
Group we still passionately believe that our values reflect our business.
Our behaviours
Our behaviours underpin and bring to life our values. They run
throughout our business from recruitment, through to on-boarding,
through our learning and development programmes, our
performance management and reward frameworks and
our talent and succession.
Colleague and leadership
capability
We are currently shaping our colleague and leadership capability
framework which will clearly articulate our expectations of what
great looks like for colleagues and leaders. Our reward and grading
schemes will be embedded within this framework which will
also support career pathways and all future learning and
development programmes.
All our learning and development programmes will be underpinned
by our new capability framework, our leadership programmes are
under review and will focus on leading and mobilising our business
strategy and strengthening our change leadership.
Training and development
We are reviewing our colleague development programmes at store
level to ensure our colleagues are able to bring the pet experience to
life and thereby support our customers and their pet care needs. We
will continue to map more training programmes to apprenticeships
over the coming year, focusing on the development of critical clinical,
customer facing and leadership talent groups to shape the future
of the Group by attracting growing and retaining best in class next
generation talent that inspires us to discover new ways of wowing
our pet care customers. In England, on average we had 71 colleagues
actively engaged in a dog grooming apprenticeship. Each month of
the year we recruit new colleagues into the business, and take them
through the animal care apprenticeship combined with our own
industry leading training to become competent grooming stylists. We
have other apprenticeship programmes in other areas of the business
including our Support Offices, specialist division and distribution.
We continue to develop a healthy pipeline of talented veterinary
graduates through our Graduate Programme and in the last three
years we have recruited over 300 graduates. This year we will be
launching our Graduate Next Steps Alumni fund to support long term
professional and personal development and increase retention of our
graduates once they have completed the programme. We have an in
house Learning Academy the aim is to support development, learning
and to gain experience in any area that is relevant to an individual role
or of great personal interest to a colleague.
Our aim is to provide the Continuing Professional Development (CPD)
support required whether this is Clinical CPD, such as Emergency
Surgery and Soft Tissue courses or non-clinical CPD such as
Leadership Courses and Bereavement courses. We create learning
and development opportunities as we develop and grow our
business. For example the Discovery Project created cross functional
teams who work together over a short timescale of a few months to
find creative solutions to real business challenges, many of which will
now be taken forward. The Store and Support Office Appreciation
Days are another example of an opportunity for teams to learn from
each other.
4,087
Number of grooming
development and expertise
training courses completed by
colleagues across the Group
247Average number of
apprenticeships across
the Group
73
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Corporate Social Responsibility continued
Listening to colleagues
Listening is very much part of our DNA and we adopt an “always
listening” approach, it is a very important part of our culture that
everyone’s contribution is important and valued. There are many
mechanisms available to colleagues to ensure that there is an
accessible route for any idea or concern.
We have run our first Group Wide Listening Survey which we call
“We C.A.R.E.” and we have action plans to support the key themes of
flexible working, managing change and career pathways. The Annual
Survey is supplemented throughout the year by Pulse Surveys and
Listening Groups. The Remuneration committee chair, Paul Moody,
has been appointed as colleague representative. In this capacity he
has attended executive and store listening sessions. In addition, the
Chairman has attended two listening sessions in April and November
as well as regular store and vet practice visits.
Diversity and inclusion
We are committed to developing a culture of inclusivity across the
Group and we are at the start of our journey. We aim to create a
culture where everyone is able to come to work, be themselves and
make their best contribution. We believe that by focusing on creating
an inclusive culture that welcomes everyone irrespective of what
makes us each unique and different the benefits of diversity will
be realised.
We were delighted that in the ‘We C.A.R.E’ colleague engagement
survey 88% of colleagues agreed with the statement that “colleague
individual differences are respected here (e.g. cultures, working styles,
backgrounds, ideas)”.
The ‘We C.A.R.E’ survey highlighted that for some colleagues a more
flexible and agile workplace was important. This has continued to be
a focus for this year and in addition to our flexible working policies
more digital platforms have been launched to make this possible.
This year we have also partnered with the Retail Week Be Inspired
campaign for future female leaders and four of our colleagues have
benefited from participating in the Senior Leadership Academy
element of the programme. They have been bringing back their
learnings to support our internal programmes. Information has been
cascaded and accessible for all regardless of gender via our new
collaborative working and social media tool, SAP Jam. Our CEO, Peter
Pritchard, our Chief People and Culture Officer, Louise Stonier, and our
COO for Retail, David Robinson, have all signed up to be ambassadors
in supporting and promoting the programme both internally and
externally. Although it began as a gender focused programme, we
have recognised that the content and themes are applicable and
valuable to all of our colleagues so we have made the content of
The Be Inspired virtual conference in June 2020 available to all
colleagues from across the business.
74
Our response to the coronavirus crisis demonstrates our commitment
to listening and communicating to our colleagues. Daily weekday video
updates from the CEO or a member of the Executive Management Team
started on 17th March to supplement the written protocols; Directors
have buddied with an Area to ensure that every Store Manager received
a weekly call; the social network platform SAP JAM was used to create
networks of colleagues such as homeworkers; a wellbeing survey was
sent to colleagues at the beginning of May to understand colleague
concerns and how we can provide further support.
Gender pay gap report 2019
We have reported our gender pay information for the third year and
we have reported for the second time this year on two parts of our
Vet Group, in addition to information on colleagues in our Retail
business. These are our First Opinion veterinary Support Office
(Companion Care Services Limited) and one of our Specialist Referral
centres, Dick White Referrals, which have both exceeded the reporting
threshold of 250 colleagues. In the report we have included the
comparisons across the years that we have published data. Overall
we are pleased with our numbers and the progress we have made,
however, there is still an imbalance. Whilst we are delighted we
have over 50% female representation in management and senior
management levels, our gender pay gap is caused by the factors
we outlined last year; we have more men than women in the higher
paying STEM careers across both Support Office and the veterinary
Specialist Hospitals and more women than men in our hourly paid
roles. The full report can be found on our investor site.
With the implementation of Success Factors in 2020, we will capture
the data to provide us with a more detailed understanding of the
diversity of our colleague base in addition to gender and age. This
will help set out our ambition, starting with our policy and process
reviews, to shaping an inclusive leadership approach. Diversity and
inclusion will be embedded further within our leadership capability
framework which launches in 2020. Our existing data enables us
to view diversity through the lens of gender, age and tenure and
and the table on page 75 illustrates the position for 2019/20.
Pets at Home Group PlcAnnual Report and Accounts 2020 People data
Age
1%
16%
25%
Experience
53%
Pets at Home store managers
have over 10 years’ experience
Retention
76%colleague retention
58%
Colleagues aged under 25 years old
Colleagues aged 25 to 44 years old
Colleagues aged 45 to 64 years old
Colleagues aged 65 and over
25%
58%
16%
1%
Gender diversity all colleagues
Male
Female
Colleague engagement
Overall
engagement level
Survey
completion rate
Diversity data
Gender
% of women on plc board
% of women on Executive Management Team
% of roles held by women total business
% of senior management roles held by women
% of store managers women
% of JVP women
Age
% Colleagues aged under 25 years old
% Colleagues aged 25 to 34 years old
% Colleagues aged 35 to 44 years old
% Colleagues aged 45 to 54 years old
% Colleagues aged 55 to 64 years old
% Colleagues aged 65 and over
Experience
% Colleagues with under 2 years’ service
% Colleagues between 2 and 5 years’ service
% Colleagues between 5 and 10 years’ service
% Colleagues over 10 years’ service
% of store managers over 10 years’ service
% of JVPs over 10 years’ service
Engagement
% engaged
% completed
Training
Average number of apprenticeships across the Group
Number of grooming development and expertise training courses completed by colleagues
Turnover data
Total turnover %
Unplanned turnover %
Combined Group Pets at Home retail
n/a
n/a
67%
38%
41%
n/a
25%
30%
76%
39%
n/a
n/a
Combined Group Pets at Home retail
33%
36%
15%
10%
5%
1%
25%
39%
19%
11%
5%
1%
Combined Group Pets at Home retail
38%
27%
19%
16%
53%
n/a
41%
29%
19%
11%
n/a
n/a
Combined Group Pets at Home retail
83%
90%
83%
75%
Combined Group Pets at Home retail
178
4,087
247
4,087
24%
20%
22%
19%
24%
76%
83%
75%
Vet Group
n/a
n/a
88%
42%
n/a
54%
Vet Group
15%
42%
24%
13%
5%
1%
Vet Group
43%
33%
19%
5%
n/a
17%
Vet Group
76%
54%
Vet Group
69
n/a
27%
22%
75
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020
Corporate Social Responsibility continued
Colleague wellbeing
During the year we have developed our colleague wellbeing strategy.
The strategy builds on the strong foundations from the last few years,
when the Group began its wellbeing journey with an initial focus
on mental health. The new strategy covers all the components of
our wellbeing: emotional wellbeing, physical wellbeing, financial
wellbeing and nutritional wellbeing. It also recognises that wellbeing
is one element of the overall colleague experience and there is a high
level of interdependency between wellbeing, our culture, listening to
our colleagues and engagement.
Pets at Home became signatories to the “Time to Change” pledge
in 2019 and committed to deliver the six standards of mental health
at work, building on our successful partnership with the charity Mind.
The resources and support that Mind have given us have been
invaluable in supporting our colleagues and building our strategy.
In FY20, the Vet Group has selected Vet Life as their charity of the year.
Vet Life is a charity that provides emotional, financial and mental
health support to those that work in the veterinary profession.
We have wellbeing ambassadors in place across our stores,
Distribution centres and Support Offices. These ambassadors provide
someone else to talk to instead of a line manager if that is what the
colleague would prefer, and can also signpost the colleague to
appropriate additional support.
Our colleague hardship fund has been in existence for a number of
years. During FY19/20 we granted £30k in awards through this fund.
It complements the support that colleagues can reach through our
Retail Trust membership and enables colleagues to apply for grants to
help them in times of financial hardship. The fund was topped up by
£1m in March 2020 as a consequence of the coronavirus crisis and the
impact that this may have on our colleagues and their families.
In April 2020 we established
a wellbeing social media
group that had over 1,000
members in the first few days
of establishment. Our internal
platforms include specific
wellbeing pages where we
are providing colleagues with
resources to support their
wellbeing, focusing on different
topics across the year. Our new
social media and collaborative
working tool, SAP Jam, contains
a wealth of information and
resources across all of our
wellbeing focus areas and will be
updated throughout the year.
Coronavirus
We continue to monitor and review Government advice with regards
to the coronavirus, to ensure the safety and wellbeing of all our
colleagues and customers at this difficult time.
To ensure that colleagues have been kept fully informed and
reassured by the measures taken to safeguard them and our business
a selection of communication channels have been used. Detailed
written protocols have been provided for colleagues, the first was
published on 26th February and there have been 19 subsequent
updates until 5th May. Daily weekday video briefings have been lead
by the CEO or one of the Executive Management Team. Additional
briefing sessions have taken place for specific parts of the business to
provide an opportunity for questions to be asked. See pages 16 to 19
for a complete summary of our coronavirus response.
Looking ahead
Developing our future talent pipeline
We will focus on generating talent and skills to meet the needs
for critical roles in the future and supporting those that face
barriers to employment where we have opportunities.
Diversity and inclusion
We will create our strategy, supporting policies
and measurement framework.
Wellbeing
We will be supporting our colleagues’ wellbeing throughout the
year and delivering support across our four wellbeing focus areas:
emotional, physical, financial and nutritional.
76
Pets at Home Group PlcAnnual Report and Accounts 2020 Health and safety
We are committed to providing a safe and healthy environment
for all of our colleagues, customers and third party contractors.
The management team recognises its responsibility for Health
and Safety and we have robust control measures in place.
Along with the management team we have a dedicated health
and safety function which oversees compliance across the Group.
In our stores and practices our colleagues are responsible for the
implementation of the policies and procedures. We continue to
promote health and safety through the Group to all of our colleagues.
Lucy Williams, our Group Legal Director and Company Secretary,
chairs the Group Health and Safety Committee with representatives
from each business unit. The Group Health and Safety Committee
meets four times per year and discusses various health and safety
issues as well as undertaking deep dive projects. Throughout the
year, the Distribution Centres also host their own Health and
Safety Committees.
There have been no Health and Safety Enforcement Notices served
on any part of the Group.
We continue to benchmark Group accident rates. 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 record all incidents where
we are aware the customer intends to go to hospital as RIDDOR
reportable. This does result in some over reporting of RIDDORs.
The number of RIDDOR accidents decreased 0.26 to 0.19 in our stores,
practices and Specialist Referral centres. In our Distribution Centres,
there was an increase of 0.17 accidents per 100,000 hours worked,
and RIDDOR accidents decreased by 0.09 per 100,000 hours worked.
During the financial year, we have continued to focus on colleagues
reporting all accidents, no matter how small, and we believe that this
focus has resulted in the total number of reported accidents across
the Group increasing; there was an increase in the colleague accident
rate by 1.13 from 9.16 to 10.29 accidents per 1,000 colleagues and
there was an increase in customer accidents from 1.20 to 1.30 per
100,000 transactions.
Our goal is to make the Pets at Home Group a healthier and safer
place for everyone. We therefore expect our colleagues to manage
all aspects of our business safely. We continue to promote health
and safety, and a “Stay Safe” culture throughout the Group to
all colleagues. Please see page 16 to 19 for an overview of our
comprehensive response to the coronavirus crisis from a colleague
and customer perspective.
100%All our retail area managers
completed 100% of the health
and safety audits required of
them during the year 19/20
100%Vet practices have a valid audit
and during the year 75%
received an audit renewal
Distribution accident rates
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2017/18
2018/19
2019/20
Accident causations
9
10 11
8
6
5
4
3
7
2
1
1. Animal bite
2. Animal scratch
55%
13%
3. Injured while using knives, scissors, needles or surgical equipment 6%
4. Cut or scratch due to sharp object
5. Other
6. Hit by moving, flying or falling object
7. Slipped, tripped or fell on the same level
8. Hit something fixed or stationary
9. Exposed to or in contact with a harmful substance
10. Fell from a height
11. Injured due to handling, lifting or carrying
4%
3%
5%
6%
3%
1%
1%
3%
77
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020
Corporate Social Responsibility continued
Planet
It is important that we minimise the environmental impact
of our business and focus on the material impacts across the
value chain. We have made significant progress on our direct
operational impact and we are now focusing on our supply
chains, particularly products, which are complex and diverse.
Acting responsibly
Page 62
Product packaging
During the year we have completed a large project to review the
primary packaging across all of our own brand and exclusive branded
products. We have identified that over 75% of our packaging, by
weight, is currently recyclable as defined by the OPRL guidelines.
We have identified opportunities to progressively move existing
packaging to improved materials and we have set a target to
ensure that 100% of our packaging will be recyclable, recycled
or compostable by 2025.
Waste and recycling processes
During the year we have focused on building a full and detailed
picture of all of our waste streams across the Group to enable us to
optimise the reduction and treatment of our waste materials. Our
Distribution Centres currently handle key waste streams backhauled
from our stores. Our three main volume backhauled waste streams
all have solutions to avoid landfill:
All of the used animal bedding from
the pets in our stores is returned to our
Distribution Centres where it is composted,
ensuring that none goes to landfill.
All of the plastic shrink wrap used in
our stores is returned to our Distribution
Centres. Once at the centres it is graded
and bulked together and sent for recycling,
giving it the best chance to come back
as something new.
We ensure all cardboard is returned
to our Distribution Centres for full
central recycling.
Animal bedding
Plastic shrink wrap
Cardboard
packaging
78
Case study
Wainwright’s moves into recyclable packs
Wainwright’s, one of our flagship dog food brands, has moved the
entire core range of dry dog foods from multilayer laminated plastic
polymer bags to a combination of paper bags for the smaller bag
formats and a single polymer PE bag format, that is fully recyclable
in the carrier bag recycling recovery system, for the much larger
volume sacks.
In volume terms this is a significant shift from previously
non-recyclable materials to simpler to recover products that
continue to offer the strength and shelf-life required for heavy, bulky
products whilst reducing their long term environmental impact.
As new ranges are introduced and our packaging is updated we
will continue to review the use of un-recyclable material and remove
it at every opportunity in line with our 2025 target.
Pets at Home Group PlcAnnual Report and Accounts 2020 Minimising our direct operational carbon footprint
Becoming carbon neutral in gas and electricity use
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. We source green
renewable electricity and we have moved our carbon mitigation
scheme to a new partnership with the Woodland Trust to absorb
1,500 tonnes of carbon dioxide, equivalent to our use of natural gas in
our buildings, through the planting of 6,000 trees, helping our strategy
to reduce our business carbon footprint while helping to support the
other benefits that our woodlands give us such as biodiversity and
a sense of wellbeing.
We continue to reduce our carbon footprint. Electricity has the
biggest environmental impact but we are buying renewable
electricity. We continue to target other areas to reduce emissions,
particularly our logistics fleet. We include electric and hybrid vehicles
in our car fleet options for colleagues and the number of these
vehicles in our fleet has increased by 32% in a year.
1,500
tonnes carbon mitigation purchased
The Woodland Trust is a charity registered
in England and Wales (No. 294344)
and in Scotland (No. SC038885)
Our energy reduction
programme
How our building energy
management system works
Pets need to be kept at the appropriate temperature for their welfare
and our BEMS helps us to achieve this. Temperatures are constantly
monitored via up to eight sensors which are placed in key areas of our
buildings. The temperatures are recorded every ten seconds which
means live temperatures are recorded 8,640 times every day for each
sensor. The BEMS ensures that these temperatures are within the
welfare ranges set by the Head of Pets. In the unlikely event of a fault,
additional manual reads are used, in combination with the system
reads until this is rectified, to ensure the correct temperatures are
maintained for the pets in our care.
We have installed Building Energy Management System (BEMS) in all
our stores. These systems monitor and control the temperature and
lighting in our stores, delivering two key benefits in line with our Pets
and Planet Corporate Social Responsibility approaches – the pets in
our stores benefit from temperature ranges which have been set by
our Head of Pets, to ensure that we continue to provide the absolute
best standards of pet care, and the energy savings that we achieve
as a result of the management system save on energy consumption
across our estate.
We continue to look for ways in which we can save energy and
improve our operating environment for colleagues. LED lights
are installed in all our in-store vet practices.
-1.9%Reduction in electricity consumption during
FY19/20 vs the previous year, through installing
LED lighting and BEMS across our store estate
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Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Corporate Social Responsibility continued
Our carbon emissions in detail
Summary
We are pleased that our absolute CO2e emissions have reduced by
7% vs 18/19. This is a particularly good result given that we have
grown our Group revenue by 10.2% vs 18/19.
Our 19/20 performance has continued to benefit from the previous
investments made in LED lighting and BEMS management systems
in stores and in-store vet practices. We have included our 158 stand
alone Joint Venture vet partners’ carbon emissions in our 19/20
and 18/19 disclosure, although we are not required to do so by the
Streamlined Energy and Carbon Reporting (SECR) requirements,
in the spirit of transparency and increased value chain reporting.
Scope 1 emissions
Scope 1 emissions remained broadly flat. The biggest contributor
to our Scope 1 emissions is diesel used by our haulage fleet which
represents 74% of Scope 1 emissions and 22% of total emissions, and
they have been broadly flat year on year. Our distribution network has
become more efficient; we have travelled 123.4 km per 1,000 cases
delivered in 2019/20 vs 119.4 km in 2018/19, an improvement of
3.2%. We have maintained our fuel efficiency at 2.89 km per litre.
This performance also includes our backhauling operations where
we collect goods from our suppliers on the way back from store
deliveries. We made 4,468 collections during the year which is 3.6%
growth vs 18/19 and represents 20% of our domestic intake. This adds
to our km driven but will contribute to an overall societal carbon
benefit compared to unique journeys taking place by our suppliers to
make these deliveries. Natural gas usage in buildings has fallen by 3%
vs 18/19 yr/yr and by 58% vs 17/18. The remaining 739 tonnes of CO2e
derived from natural gas use in buildings is driven by existing gas
systems in leased buildings, including two office locations, one
Distribution Centres and Retail Stores. We continue to offset this gas
use and have moved our carbon mitigation to the Woodland Trust’s
scheme detailed on page 79.
80
Scope 2 emissions
Our electricity consumption decreased by 1.9% during the year.
We continue to benefit from the investments made in LED lighting
and BEMS. All of our Retail Stores and In-store Vet Practices now
have LED lighting in place. Because of favourable carbon emissions
conversion factors the 1.9% reduction delivered a carbon
improvement of 11%. Since 2017 we have purchased renewable
electricity and we continue to do so. The Asia office represents a very
small proportion of our total energy use at 0.04% or 25,576 kWh in the
year so we include this consumption in our total emissions table.
Scope 3 emissions
There has been a 2.6% reduction on our reported Scope 3 emissions.
The majority of this reduction is due to the reduced electricity
transmission and distribution losses that flow through from the
reduced carbons emissions for our electricity use. Diesel use from our
third party hauliers is included in this Scope 3 calculation and there
has been a 4.3% reduction in CO2e emissions in relation to this vs last
year driven by a 3.4% reduction in km travelled. Personal business
travel is included in Scope 3. It is a relatively small proportion of the
overall carbon emissions at 3.7%. The number of hybrid or electric cars
chosen by colleagues who qualify for a company car has increased by
32% from 38 to 50 during the year and they now represent 17% of the
fleet. We expect this trend to continue at the point of lease renewal.
Looking ahead
ESOS phase 2 recommendations
Our priorities over the next year are to continue to reduce our
direct operational carbon impact by implementing the ESOS
phase 2 recommendations that remain viable and operationally
feasible following the coronavirus crisis.
Gas removals – We will review the feasibility of removing a further
12 gas meters from our portfolio.
BEMS system – We plan to install the BEMS into our three buildings
at the Pets at Home Support Offices in Handforth, to help with
colleague comfort and to reduce energy consumption during both
working hours and out of hours. This will ensure that essential
heating is set to pre-determined temperatures and is switched off
during closed office hours.
Long term Carbon Target
As part of our strategic review, we have begun the work to
establish a net zero carbon target for our scope 1 and 2 emissions,
In parallel, the process is underway to assess our scope 3 emissions
across our value chain. This is an important but complex piece of
work which will enable us to create an emissions reduction target
in line with limiting global temperature rises to below 1.5c.
Pets at Home Group PlcAnnual Report and Accounts 2020 Our carbon emissions in detail
Carbon emissions breakdown by source 2019/20
Electricity
Diesel (Core Fleet)
Diesel (3rd Party)
Electricity T&D losses
Business Travel (Company Fleet)
Business Travel (Third Party)
Gas
Red Diesel
Tonnes CO2e
15,133
6,279
3,039
1,284
1,082
1,071
739
345
%
52.2
21.7
10.5
4.4
3.7
3.7
2.6
1.2
Carbon emissions summary by Scope 2019/20
Scope 1
Scope 2
Scope 3
Total
Inclusion of 1,500 tonnes of carbon mitigation
Scope 1 and Scope 2 kWh
Normalisation of CO2e to £m revenue
Tonnes CO2e emissions
2019-20 (Scope 2
location-based)
2018 / 19
2019-20 (Scope 2
market-based)
8431
17066
5,538
31,035
66,359,660
32.29
8,445
15,133
5,394
28,972
27,472
65,069,778
27.38
8,445
677
4,110
13,232
11,733
• Methodology: We have applied the UK Government’s 2019 Conversion Factors for Company Reporting and GHG standards and the Streamlined Energy and Carbon Reporting guidance to quantify
and report our greenhouse gas emissions.
• Methodology: An operational control approach has been used to define the reporting process. This is the same approach as last year 2018/19.
• Additional inclusions: 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.
• Exclusions: A small number of train and air journeys were not reported, as no carbon intensity data was available, this is de minimis.
• Estimation: Forecasted energy consumption used for budgeting purposes has been applied in the occasional instance where estimation was required.
• Independent verification: Our 2019 Scope 1, 2 and 3 emissions are verified to a limited level of assurance by Ramboll UK 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, 2 and 3 emissions tonnes 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.
A small amount of electricity has been purchased outside of the Group renewable energy contract and this is included in the market based calculation.
• Carbon mitigation: Pets at Home Ltd is donating £22,500 to the Woodland Trust (a company limited by guarantee (Company Number: 1982873 and a registered charity, Charity Number England and Wales: No.
294344, Scotland No. SC038885 whose registered office is at Kempton Way, Grantham, Lincolnshire NG31 6LL) to absorb 1,500 tonnes of carbon dioxide (equivalent to our use of natural gas in our buildings and
electricity procured outside of the Group renewable contract), through the planting of 6,000 trees, helping with our strategy to reduce our business carbon footprint.
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Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Governance Report
Enhancing our
governance framework
As a Board we are responsible for leading and setting the overall
strategic direction of the business in addition to playing a
fundamental role in shaping our corporate culture defined by our
values and purpose. We understand the importance of stakeholder
trust and engagement. It is of significant value to our decision making
and strategic planning processes and ultimately, the long-term
success of the business. As Chairman, my role is to lead 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.
Further detail on our key stakeholders, how we have engaged with
them and our responses to the insights gained is set out on pages 36
and 37.
The Group is committed to promoting high standards of corporate
governance. As a Board we believe that in order to have a sustainable
business over the long term and safeguard stakeholders’ interests, it
is vital to operate in an open and transparent manner, supported by
a strong and accountable Executive Management Team with a clear
approach to governance throughout the business. This has been
reflected in the activities that the Board has undertaken throughout
the year.
Principal governance activities during the financial year
Board and Executive Management Team changes
On 26 November 2019, we announced that after over nine years as
Chairman and in accordance with the 2018 Code, I had advised the
Board that I considered it an appropriate time to step down as
Chairman. Following a thorough recruitment process, the Board made
a formal recommendation to appoint Ian Burke as Chairman with
effect from the start of the new financial year.
Ian has a wealth of experience in retail and leisure (as further detailed
on pages 92 and 108) and joined as Chairman Designate on 27 March
2020. Ian will succeed me as Chairman on 21 May 2020.
More recently, Paul Moody, Independent Non-Executive Director,
advised that he would be stepping down from the Board at the
conclusion of the AGM on 9 July 2020. Sharon Flood, Independent
Non-Executive Director, will succeed Paul as Chair of the
Remuneration Committee. Sharon is currently Chair of the Audit and
Risk Committee and member of the Nomination and Corporate
Governance, Remuneration, Corporate Social Responsibility and Pets
Come First Committees. We have commenced our search for a new
Chair of the Audit and Risk Committee.
A new Group Executive role of Chief People and Culture Officer was
created this year to which Louise Stonier was appointed. The creation
of this role further highlights the Board's intention to place culture at
the heart of decision making. Louise Stonier stepped down as
Company Secretary on 1 January 2020, handing responsibility for
company secretarial matters to Lucy Williams, Group Legal Director.
"A governance framework that aims to place
key stakeholder engagement, company
purpose, culture and strategy at its heart."
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 26 March 2020
which sets out Pets at Home’s governance framework and the
approach the Board has taken over the last 12 months to promote
the standards of good corporate governance that are rightly
expected by our stakeholders.
This year has seen a number of key changes to the corporate
governance landscape, with the updated UK Code of Corporate
Governance applying to the Company for the first time this year.
The Governance Report sets out how we have enhanced the
Company's governance framework in order to comply with the 2018
Code's principles and ensure that engagement with key stakeholders,
company purpose, culture and strategy are at its heart.
Statement of Compliance with UK Corporate
Governance Code
The following Governance Report outlines how the Board has
applied the main principles of good governance as required by the
UK Corporate Governance Code issued by the Financial Reporting
Council in July 2018 (“2018 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 UK
Corporate Governance Code.
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Pets at Home Group PlcAnnual Report and Accounts 2020 Non-Executive Director representative for wider colleague
engagement. This helps ensure the Board is actively listening to, and
aligning with, the wider colleague population and business culture as
we consider decisions impacting the Group. This year we extended
our listening forums across the Group to help ensure that views,
thoughts and opinions are directly heard by the Board on a regular
basis. The results of these surveys are shared with the Board as part
of developing our wider understanding of how our colleagues view
certain topics. The evolving methods of listening to our colleagues
more widely and deeply is providing the Board with even greater
reassurance that our policies, practices and behaviours throughout
the Group are aligned with our purpose, values and strategy.
Group culture will continue to be a focus of the Board and,
consequently, we will allocate Board time to the assessment and
monitoring of the Group’s culture to ensure that it remains aligned
with the Group’s purpose, values and strategy. Further details are
contained on page 114 of the Directors’ Remuneration Report.
Oversight of development and implementation
of revised strategy
The Board continues to oversee and support the transformation
and development of the strategic vision for the Group.
AGM
Our next Annual General Meeting will be held on 9 July 2020 at
11.00 a.m. at the Pets at Home Group Plc Support Office at Stanley
Green Trading Estate, Epsom Avenue, Handforth, Cheshire, SK9 3RN.
The following Governance Report provides an additional overview of
the work of the Board during the year, our governance framework and
the key controls we have in place together with details of how we
have complied with the 2018 Code.
Tony DeNunzio
Chairman, Pets at Home Group Plc
21 May 2020
Governance framework
During the financial year, the Group’s governance framework was
reviewed to ensure it remained fit for purpose and aligned with our
strategy, following the changes last year. The Committees detailed on
pages 84 and 89 were considered effective with no further changes
deemed necessary to structure or terms of reference.
Board evaluation
We progressed the actions that were highlighted from the 2019
external Board evaluation undertaken by Lintstock which emphasised
the need to further strengthen the relationship between the Board
and the Executive Management Team following a period of change
and for the Board to have better visibility and depth of understanding
of the Group people strategy and Group culture. 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. This year an internal Board evaluation
was carried out to identify areas where the performance and
procedures of the Board might be further improved by building on
the actions identified by the Lintstock report and a number of other
key themes. A summary of the outcomes of the Board’s discussion
and consideration of the results of the evaluation are set out in more
detail on page 91 of this report.
Group culture
We consider that our culture is our unique identifier and one of
our most cherished assets. It defines how we do business, how
we interact with one another and how our teams interact with
the outside world, specifically our customers, colleagues, Partners,
suppliers and shareholders. During the financial year, the Board
reflected on the importance of the Group’s culture, the degree to
which it is aligned with the Group’s purpose, values and strategy
and the role of the Board and the Executive Management Team in
promoting the desired culture across the Group. A specific Board
session took place in September 2019 where the Board assessed the
Group’s culture and reviewed the results and trends arising out of
the Group colleague “We C.A.R.E.” listening surveys.
We continue to refine and enhance our colleague engagement
processes across the Group and, in particular, we have introduced
regular pulse surveys in addition to our annual survey in Retail.
We have also introduced a leadership engagement index into the
survey report which ensures colleagues are given the opportunity to
feedback anonymously on both immediate line management and
wider Group senior leadership performance. This allows the Board to
ensure our leaders are managing the business in line with our values
and behaviours, preserving our culture in the long term. We have
also expanded our Group Executive Listening sessions to include
Non-Executive Directors and Paul Moody was appointed as the
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Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Governance Report continued
Governance structure
Pets at Home Group Plc Board of Directors
The Board is collectively responsible for the long term success of the Company. The business of the Company is managed by
the Board which may exercise all of the powers of the Company. The Board delegates certain matters to Board Committees,
and delegates the detailed implementation of matters approved by the Board and the day-to-day operational management
of the business to the Group Chief Executive Officer. Further details can be found on pages 92 to 93.
Board Committees
Audit and Risk
Committee
Nomination and Corporate
Governance Committee
Remuneration
Committee
Corporate Social
Responsibility and Pets
Come First Committee
Chief Executive Officer
Leads the Executive Management Team and represents
management on the Board in conjunction with the
Group Chief Financial Officer
Executive Management Team
The Executive Management Team supports the
Chief Executive Officer with the day to day management of
the Group’s operations and executes the Group’s strategy once
agreed by the Board
Retail Executive
Management Team
Vet Group Executive
Management Team
Investment Committee
Corporate Social Responsibility
Committee
Health and Safety Committee
Pension Committee
People Committee
Data Committee
Opex SteerCo
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Pets at Home Group PlcAnnual Report and Accounts 2020 Leadership
Matters reserved for Board approval
A formal schedule of matters is reserved for 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.
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.
Culture and people
•
Assessing and monitoring Group culture and the alignment
of values and behaviours across the Group.
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/governance/our-committees.
The 2018 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 2018 Code. At the time of the
Company’s IPO in 2014, Tony DeNunzio was a senior adviser to the
Company’s then principal shareholder, KKR My Best Friend Limited
(an affiliate of Kohlberg Kravis Roberts & Co. L.P.) and accordingly was
deemed not to meet the independence criteria set out in the UK
Corporate Governance Code on his being appointed Chairman.
Notwithstanding that Tony DeNunzio did not meet the independence
criteria set out in the UK Corporate Governance Code, the Board
believed, and continues to believe, that Tony DeNunzio should remain
as Non-Executive Chairman of the Group (for the remaining period
of his office) since he brings vast retail and financial experience and
knowledge to the Pets at Home Group which allows him to make
a significant contribution to the long term sustainable success of
the Company. The Directors consider that he exercises his role as
Chairman independently of management and exercises his
judgement in the interests of all shareholders.
The Board further considers that on his appointment as Chairman,
Ian Burke meets the independence criteria set out in the 2018 Code.
Board composition
Board balance and independence
The 2018 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.
The Board currently consists of five Independent Non-Executive
Directors and one Non-Executive Chairman. The Directors’
biographies are contained on pages 92 to 93. 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 (Tony DeNunzio) are considered to be
independent in accordance with the 2018 Code.
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Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Governance Report continued
Board responsibilities
Role
Chairman of
the Board
Group Chief
Executive
Officer
Senior
Independent
Director
Non-
Executive
Directors
Group Chief
Financial
Officer
Company
Secretary
Main responsibilities
• Provides leadership to, and manages, the Board
of Directors;
• Acts as a direct liaison between the Board and the
management of the Company, through the 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.
• 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 Chief
Executive Officer has failed to resolve, or for which such
contact is inappropriate.
• 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;
• Satisfy themselves on the integrity of financial information
and that controls and risk management systems are robust
and defensible; and
• Determine 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.
• Provides administrative support to the Board;
• Ensures that Board procedures are followed;
• Oversee governance matters; and
• Ensures that information flows between the Board and its
Committees and with the Executive Management Team.
Chief People
and Culture
Officer
• The Chief People and Culture Officer is a Board Observer
and provides regular updates to the Board on People and
Legal matters affecting the Group;
• 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.
86
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 advisers. 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
its culture, environmental, social and governance issues as well as
behaviours that are in place to support the Group’s values. 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
On 26 November 2019, we announced that after over nine years as
Chairman and in accordance with the 2018 Code, I had advised the
Board that I considered it an appropriate time to commence a
succession plan. The Board recommended Ian Burke be appointed as
Chairman Designate with effect from the start of the new financial year
and Ian takes over as Chairman on 21 May 2020. Paul Moody,
Independent Non-Executive Director, steps down from the Board at the
close of this year's AGM and Sharon Flood, Independent Non-Executive
Director, replaces him as Chair of the Audit and Risk Committee.
A new Group Executive role of Chief People and Culture Officer was
created this financial year, to which Louise Stonier was appointed.
The creation of this role further highlights the Board's intention to place
culture at the heart of decision making. Louise Stonier stepped down
as Company Secretary, handing responsibility for company secretarial
matters to Lucy Williams, Group Legal Director, on 1 January 2020.
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 page 122. 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 2018 Code. Each financial
year the Chairman will meet with Non-Executive Directors individually
to assess and review individual contribution to the Board and
performance over the financial period. The skills and experience which
each Non-Executive Director brings to the Board are detailed on
pages 92 to 93 and why their contribution is, and continues to be,
important to the Company’s long term sustainable success.
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 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, Sharon Flood and Susan
Dawson, are female together with the Chief Operating Officer of the Vet
Group, Jane Balmain, and Chief People and Culture Officer, 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 Group.
Pets at Home Group PlcAnnual Report and Accounts 2020 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.
Gender diversity
Group
Male
Female
Board
Male
Female
24%
76%
Total colleagues 14,988
75%
25%
70%
30%
67%
33%
57%
43%
Group Executive Management Team
Male
Female
Retail Executive Management Team
Male
Female
Vet Group Executive Management Team
Male
Female
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 regularly.
Members of the Retail 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 and
Corporate Affairs covering broker reports and the output of meetings
with significant shareholders.
2020 Board considerations
During the year the Board spent its time considering a wide range
of matters. These included:
• Development of the Group’s
• Approving significant items of
capital expenditure and contracts,
investments, treasury and dividend
policy;
• Group people strategy including
talent mapping and framework
development and Group culture,
retention, values and behaviours;
• Colleague listening surveys;
• Considering key strategic projects
across the Group;
• Shareholder feedback and reports
from brokers and analysts;
• Regulatory updates; and
• Delegated authorities.
strategic plan;
• Performance overall of individual
businesses and functions in
the Group;
• Budgets and long term plans for
the Group;
• Risk management and controls in
the Group including reputational
risks and corporate governance;
• Financial statements,
announcements and financial
reporting matters;
• Succession planning and talent
framework;
• 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 Come First is maintained as
the Company’s number one value;
How the Board is spending its time through the year
During the year the Board spent its time considering a wide range
of matters. These included:
Financial performance / reporting
20%
Governance inc. shareholder engagement
20%
Risk management and internal controls
15%
Project approvals
10%
Leadership, culture and people
development inc. succession
15%
Strategic matters
20%
87
Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Governance Report continued
Number of meetings attended
Attendance for all scheduled Board and Board Committee meetings in the financial period is given in the table below.
Number of meetings 1
Director
Tony DeNunzio (Chairman)
Dennis Millard (Deputy Chairman)
Peter Pritchard 2
Mike Iddon 2
Paul Moody
Sharon Flood
Stanislas Laurent
Susan Dawson
Board
9
Remuneration
Committee
4
Audit and Risk
Committee
4
Nomination
and Corporate
Governance
Committee
3
Corporate Social
Responsibility and
Pets Come First
Committee
3
9 / 9
9 / 9
9 / 9
9 / 9
9 / 9
9 / 9
9 / 9
9 /9
–
4 / 4
–
–
4 / 4
4 / 4
–
4 / 4
–
4 /4
–
–
4 / 4
4 / 4
4 / 4
–
3 / 3
1 / 33
–
–
2 / 33
1 / 33
3 / 3
3 /3
3 / 3
3 / 3
–
–
3 / 3
3 / 3
3 / 3
3 / 3
1 Excludes the strategy day which all Directors attended.
2
Although not formally appointed as members of the Audit and Risk and CSR and Pets Come First Committee, Peter Pritchard and Mike Iddon attended meetings of those Committee as observers.
Peter Pritchard has also attended two meetings of the Nomination and Corporate Governance Committee at the invitation of the Chairman.
3 Dennis Millard, Paul Moody and Sharon Flood were unable to attend certain Nomination and Corporate Governance Committee meetings during the year. They were appropriately briefed following such meetings.
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 also established the Corporate Social Responsibility and Pets Come First Committee
which comprised both Non-Executive Directors, Executive Directors and colleagues.
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
• 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.
Main responsibilities / duties
• Monitor the integrity of Group financial statements;
• Review and challenge accounting policies and 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 financial
Remuneration
Committee
• To assist the Board
in determining its
responsibilities in relation to
Directors’ remuneration.
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 UK Corporate Governance Code and Listing Rules);
• Responsible for selection and appointment of remuneration consultants;
• Review, design and assessment of share incentive plans;
• Review of Director pension arrangements;
• Approval of Director service contracts and severance; and
• Appointment of the Chair of the Remuneration Committee, Paul Moody, as Board
representative for wider colleague engagement.
Nomination and
Corporate
Governance
Committee
• To assist the Board in
considering the structure,
size and composition of the
Board whilst advising on
succession planning.
Corporate Social
Responsibility
and Pets Come
First Committee
• To oversee the Group’s pet
welfare, clinical excellence,
community, environmental
and charitable initiatives.
• 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;
• Monitoring pet processes, including audits and vet clinical standards; and
• Reviewing Group CSR policy and strategy, and monitoring implementation of CSR activity.
88
Pets at Home Group PlcAnnual Report and Accounts 2020 Management committees
Details of our management committees are set out below:
Executive Management Team, Retail and Vet Group Executive
Management Teams
In addition to the Board, the Group has the Executive Management
Team which includes: the Group Chief Executive Officer, Chief
Financial Officer, Retail Chief Operating Officer (David Robinson),
Vet Group Chief Operating Officer (Jane Balmain), Chief Data Officer
(Robert Kent), Chief People and Culture Officer (Louise Stonier),
Chief Information Officer (William Hewish), Group Legal Director
and Company Secretary (Lucy Williams), Head of Group Strategy &
Transformation (Matthew Diffey) and Group Productivity Director
(Nigel Fletcher). Supporting the Executive Management Team is an
appointed divisional executive management team for both the Retail
and the Vet Group for which roles are clearly defined. The Retail
Executive Management Team and the Vet Group Executive
Management Team support the Executive Management Team in the
implementation of strategy and risk and governance oversight across
their respective divisions.
Investment Committee
The Investment Committee assists the Board with the Group’s store,
veterinary surgery and specialist centre rollout and development
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 is also attended by Peter
Pritchard, Group Chief Executive Officer. A number of the Group’s
colleagues are entitled to attend meetings of the Investment
Committee as observers including the Group Director of Property
and the Group Development 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 leases 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.
Health and safety
Health and safety is a key priority for the Board and senior
management. The Board has established a Health and Safety
Committee that meets at least on a quarterly basis and is chaired by
the Group Legal Director and Company Secretary with the agenda led
by the Group Head of Health and Safety. The Committee is attended
by key individuals in the business who 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 Vet Group 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 page 77 of the Corporate Social Responsibility Report.
Other management committees
Established last financial year, the People Committee, Pension
Committee and Data Committee continue to provide governance and
oversight of projects and strategic initiatives relevant to their areas of
remit. This financial year, the Opex SteerCo was also established to
provide governance and oversight to the Group's opex programme.
These Committees are chaired by members of the Group Executive
Management Team or senior managers within our business.
Data Committee:
Led by the Chief Data Officer, the Data Committee oversees the
Group’s data initiatives and supports and drives and information
security governance.
People Committee:
Led by the Chief People and Culture Officer, the People Committee
oversees the Group’s people practices and policies (including in respect
of colleague welfare) and promotes the alignment of the Group’s
culture with the Group’s purpose, values and commercial strategy.
Pension Committee:
Led by the Chief People and Culture Officer, the Pension Committee
oversees the management and operation of the Retail and Vet Group
pension plans (not in the capacity as a trustee) which have been
established for the benefit of colleagues.
Corporate Social Responsibility Committee:
Led by the Chief People and Culture Officer, the Corporate Social
Responsibility Committee is responsible for working with the Board’s
Corporate Social Responsibility and Pets Come First Committee in
developing the strategic direction and then implementation of the
Group’s community and stakeholder initiatives centred around doing
the right thing for pets, people and the planet.
Opex SteerCo
Led by the Group's Chief Data Officer, the Opex SteerCo is responsible
for providing governance for and overseeing the Group's opex
programme including tracking project work, following Group
initiatives, reviewing deep dives on project opex spend and reporting
to the Group Executive Management team on such matters.
89
Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Governance Report continued
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 52 to 53. The Board delegates to the Group
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 page 105 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:
• The annual Group-wide strategic review of the existing five-year
strategic plan took place in November 2019 and 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 March 2020.
• 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 105.
• 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.
90
• The Opex SteerCo has provided oversight and governance to the
Group's opex programme. This has included tracking project work,
following Group initiatives, reviewing deep dives on project opex
spend and reporting to the Group Executive Management Team
on such matters.
• Board discussion of the key risks and uncertainties facing the Group
and the risk management system. Further details are contained in
the Audit and Risk Committee Report on page 103.
Shareholder relations
The Board’s primary role is to promote the success of the Company
and the interests of all stakeholders. 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 and Corporate Affairs 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. 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. During the financial year, the
Chair of the Remuneration Committee consulted with major
shareholders on the proposed new remuneration Policy; further
details on the consultation are contained on page 115 of the
Remuneration Report.
In accordance with s172 of the Companies Act 2006 we can factor
into Boardroom discussions the potential impact of our decisions
on each stakeholder group and consider their needs and concerns,
as discussed further on pages 36 and 37.
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 maintained by the Company Secretary
and reviewed by the Board at least annually. The Board has complied
with these procedures during the year.
Pets at Home Group PlcAnnual Report and Accounts 2020 Outputs of the evaluation
At a dedicated Board meeting, the findings from the internal
evaluation were presented to the Board, recommendations discussed
and specific areas of focus were agreed for this financial year. Overall,
most areas saw an improvement in scoring. The overall performance
of the Board was rated highly, as were relationships between
individual Board members. Areas highlighted as requiring additional
focus during the new financial year included:
• Board composition, particularly diversity and the mix between
Non-Executive and Executive Directors;
• an increased focus on the Group's strategy rather than
operational matters; Further refinement of the KPIs; and
improvement of the Board's understanding of competitors,
customers and the wider community.
•
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 Chairman
met with each Non-Executive Director individually to assess and
review individual contribution to the Board and performance over
the financial period. 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.
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. The Group has a whistleblowing policy 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 carried out an internal evaluation of Board and Board
Committee performance which also sought to identify areas where
the performance and procedures of the Board might be further
improved. The assessment included the completion of an online
survey that considered topics covered in the 2019 evaluation and
other areas which the Board wanted to assess in the following areas:
• Board size, composition and performance;
• Stakeholder oversight;
• Board dynamics;
• Management of meetings;
• The Chairman;
• Board support;
• Board Committees;
• Strategic and operational oversight;
• Risk management and internal controls;
• Succession planning and people management
(including oversight of the Group's people strategy);
• Priorities for change;
• Effectiveness of monitoring culture and behaviours;
• Effectiveness of the Board in ensuring market leading welfare to
customers and pets;
• Understanding of improvements in pet welfare;
• Board understanding of performance against competitors and the
pet care market; and
• Board understanding of stakeholder views.
The anonymity of all respondents was ensured throughout the
process in order to promote the open and frank exchange of views.
91
Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Board of Directors
A Board balanced
with skills and expertise
Chairman
Non-Executive Directors
Ian Burke
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
Appointment to the Board
2020 – new appointment
Committees
Appointment to the Board
2014
Committees
Appointment to the Board
2017
Committees
Appointment to the Board
2017
Committees
N
C
N
A
R
C
N
A
R
C
N
A
C
Current roles
• Non-Executive Chairman
of Studio Retail Group plc
Current roles
• Non-Executive Chairman of
Current roles
• Chair of Audit Committee
Watches of Switzerland Group plc
at Network Rail
• Non-Executive Senior Independent
Director of intu properties plc
Past roles
• Chairman of Halfords Plc
• Chair of Audit Committee
at Crest Nicholson
• Member of the Board of Governors
• Senior Independent Director
• Chair of Finance at Science Museum
of Birmingham City University
of Debenhams Plc
Group
Past roles
• Chairman and Chief Executive
Officer of Rank Group plc
• Chief Executive Officer of Holmes
Place Health Clubs
• Chief Executive Officer of Thistle
Hotels plc
• Chairman of Vet Partners
Holdings Ltd
Contribution to the Board
Wealth of experience from the leisure
and retail sectors. Ian has significant
prior experience of participation in
audit and remuneration committees.
• Chairman of Connect Group Plc
• External member of the University
• Senior Independent Director
of Premier Farnell Plc
• Senior Independent Director
of Xchanging Plc
• Non-Executive Director of Exel plc
• Senior Independent Director
of Superdry Plc
Contribution to the Board
Wide ranging public company
experience with retail, strategic and
financial expertise. Dennis is also a
Chartered Accountant and holds
an MBA.
of Cambridge council
Past roles
• Chair of ST Dupont S.A.
• Group Chief Financial Officer
at Sun European
• Finance Director at John Lewis
Department Stores
• Chair of Audit at Shelter
Contribution to the Board
Retail, finance and public company
experience. Sharon is also a Chartered
Accountant.
Current roles
• Partner at Highland Europe
(Growth equity) and
Non-Executive Director at
various portfolio companies
Past roles
• President and CEO
of Photobox Group
• COO of AOL Europe
Contribution to the Board
Entrepreneurial background with
digital and technology experience.
92
Pets at Home Group PlcAnnual Report and Accounts 2020 Committees
Board tenure
N
A
R
C
Nomination and Corporate Governance
Audit and Risk
Remuneration
Corporate Social Responsibility
and Pets Come First
Chair of committee
25%
12.5%
37.5%
12.5%
12.5%
6 years +
3 years
2 years
1 year
New
Non-Executive Directors
Executive Directors
Paul Moody
Independent Non-Executive Director
Susan Dawson
Independent Non-Executive Director
Peter Pritchard
Group Chief Executive Officer
Mike Iddon
Chief Financial Officer
Appointment to the Board
2014
Committees
Appointment to the Board
2018
Committees
N
A
R
C
N
R
C
Current roles
• Non-Executive Chairman
of Card Factory Plc
• Non-Executive Chairman
of 4imprint Group Plc
Past roles
• Chief Executive Officer of Food
Freshness Technology
• Over 17 years at Britvic Plc, with the
last eight years as Chief Executive
Officer
Contribution to the Board
Deep consumer goods and public
company experience.
Current roles
• Dean of the Institute of Veterinary
Science at the University of
Liverpool
• Council member of the Royal
College of Veterinary Surgeons
(RCVS)
Past roles
• Member of the Veterinary Products
Committee
• Adviser to the Antimicrobial
Resistance and Healthcare
Associated Infections Committee
for the Department of Health
Contribution to the Board
Considerable veterinary experience
and expertise on the training and
wellbeing of vets.
Appointment to the Board
2018
Current role
• Group Chief Executive Officer
Appointment to the Board
2016
Current role
• Chief Financial Officer
Past roles
• Joined Pets at Home as Commercial
Director in 2011 and became Chief
Executive Officer of the Retail
business in 2016
• Senior commercial and
management roles at Asda,
J Sainsbury plc, Iceland Food,
Marks and Spencer Plc and
Wilkinson Hardware Stores
Contribution to the Board
Significant retail background and long
term operational experience across
Pets at Home.
Past roles
• Chief Financial Officer of New Look
from 2014-2016
• Held a number of senior finance
roles over 13 years working for Tesco
Plc both in the UK and overseas.
These included Group Planning, Tax
and Treasury Director, UK Finance
Director and Chief Financial Officer
of Tesco Homeplus (South Korea).
• Number of senior roles with
Kingfisher Plc and Whitbread Plc
Contribution to the Board
Financial knowledge and retail
industry expertise.
93
Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 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 2018
(“2018 Code”), the Disclosure Guidance and
Transparency Rules and the Listing Rules of
the Financial Conduct Authority.
Pets at Home Group Plc
Registered Number:
Registered Office:
Telephone Number:
Date of Incorporation:
Country of Incorporation:
Type:
8885072
Epsom Avenue, Stanley Green Trading Estate,
Handforth, Cheshire, SK9 3RN
+44 161 486 6688
10 February 2014
England and Wales
Public Limited Company
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.
Page
number
98
96
96
92-93
100
100
62-81
95
96
129
62-81
97
92-93
100
97
97
101
119-123
185
20-35
Statutory information
Amendment of the Articles
Appointment and Removal of
Directors
Board of Directors
Branches outside of the UK
Change of Control
Colleague Engagement
Section heading
Directors’ Report
Directors’ Report
Directors’ Report
Board of Directors
Directors’ Report
Directors’ Report
Strategic Report – Corporate
Social Responsibility
Directors’ Report
Directors’ Report
Colleague Diversity and
Disabilities
Colleague Share Ownership and
Plans
Community
Directors’ Remuneration
Report
Strategic Report – Corporate
Social Responsibility
Directors’ Report
Compensation for loss of office
Directors’ Biographies
Board of Directors
Directors’ information to Auditors Directors’ Report
Directors’ Report
Directors’ Insurance and
Indemnities
Directors’ Interests
Directors’ Responsibility
Statement
Executive Share Plans
Directors’ Report
Directors’ Report
Financial Instruments
Future Developments of the
Business
Financial position of the Group, its
cash flows, liquidity position and
borrowing facilities
Greenhouse Gas Emissions
Going Concern
Health and Safety
Human Rights and Modern
Slavery Statement
Directors’ Remuneration
Report
Note 23 to the consolidated
financial statements
Strategic Report
Chief Financial Officer’s review
38-43
Corporate Social Responsibility
Directors’ Report
Strategic Report – Corporate
Social Responsibility
Directors’ Report
79-81
99
77
99
Statutory information
Independent Auditors
Internal Controls and Risk
Management
Political Donations
Profits and Dividend
Post Balance Sheet Events
Powers for the Company to issue
or buy back its shares
Powers of the Directors
Principal Activities
Research and Development
Restrictions on transfer of
securities
Stakeholder Engagement
Share capital
Significant related party
transactions
Significant Shareholders
Subsidiary and Associated
Undertakings
Statement of Corporate
Governance
The Audit and Risk Committee
Report
The Governance Report
The Directors’ Remuneration
Report
The Nomination and Corporate
Governance Committee Report
Strategic Report
Treasury and Risk Management
Viability Statement
Voting Rights
Section heading
Directors’ Report
Audit and Risk Committee
Report
Governance Report
Directors’ Report
Directors’ Report
Directors’ Report
Directors’ Report
Directors’ Report
Directors’ Report
Directors’ Report
Directors’ Report
Strategic Report – Stakeholder
engagement
Directors’ Report
Note 22 to the consolidated
statements
Directors’ Report
Note 27 to the consolidated
statements
Directors’ Report
Note 28 to the consolidated
statements
Governance Report
Governance Report
Governance Report
Governance Report
Governance Report
Strategic Report
Strategic Report
Directors’ Report
Directors’ Report
Page
number
100
102-106
90]
98
98
99
97
97
95
95
98
36-37
98
203
98
203
98
204-216
82-83
102-106
82-91
114-116
107-109
1-81
60
99
97
94
Pets at Home Group Plc
Annual Report and Accounts 2020
Colleague engagement
We know that our high levels of colleague engagement and unique
culture continue to be recognised externally as a key differentiator and
we have continued deepening this by running our first Group wide
listening survey in addition to regular pulse surveys. Listening Groups
also take place across the business and Paul Moody, our Chair of the
Remuneration Committee's appointment as Board Representative
for wider colleague engagement ensures our colleagues are heard
by the Board.
Further information on colleague engagement is included in the
Corporate Social Responsibility Report on pages 72 to 75.
Colleague share ownership and plans
This pillar of our engagement strategy will start to come to fruition
this year with the maturity of the first RSP plan which is offered
to both salaried and hourly colleagues at all levels. We will have
enhanced the holdings or created new shareholders amongst over
5,000 of our colleagues and are starting to achieve our aim of
widespread share ownership. All eligible colleagues received an award
again last year and will do so again in 2020. We had a further offering
of the share save scheme in September 2019, with a take up of 11%,
and we believe the favourable business performance combined with
the first maturity of the RSP will encourage further share save interest
this year. Colleagues with non performance related CSOP that vested
in June 2019 saw the share price rise above the grant price and a
significant number remain in the scheme. We also saw colleagues
who still have options from previous years' CSOP benefit from the
share improvement over the year with a number choosing to exercise
options as the share price rose above water.
Further details of the Group’s colleague share plans are contained in
the Directors’ Remuneration Report on page 112.
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:
Page number
Disclosure
Long term incentive schemes 121
100
Significant contracts
Note 9 to the consolidated financial
Dividend waivers
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 a service provider to small animal veterinary businesses
and an operator of 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 pages 44 to 51 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 continued working on a combined PhD
in partnership with Mars Fishcare and the University of West Scotland,
looking at stress caused during transportation of fish from source right
through into the Group's stores.
We are also continuing our 'working together' relationship with the
University of Wales Cardiff where we are collaborating on various
projects and smaller studies around fish diseases, improving the
treatment efficacy and disease prevention in the fish species we sell.
This partnership is with a number of under and post graduate
students and it has no funding cost other than making our stores and
colleagues available to take part in various trials. This partnership will
continue to provide us with a deeper insight and understanding of
what impacts fish health and provide us with ways to improve our fish
health and welfare even further.
Our specialist veterinary partners and clinician colleagues at our
Specialist Referral centres, Dick White Referrals, Anderson Moores,
Eye Vet and Northwest Veterinary Specialists, are regularly involved in
clinical research and trials in furtherance of the veterinary profession.
95
Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 On 26 November 2019, we announced that after nine years as
Chairman and in accordance with the 2018 Code, Tony DeNunzio
advised the Board that he considered it an appropriate time to
commence a succession plan for a new Chair of the Board and the
Board made a formal recommendation to appoint Ian Burke as
Chairman with effect from the start of FY21. Given the current
unprecedented environment due to COVID-19, the Board agreed to
extend the transition period between Tony and Ian by eight weeks,
to ensure an orderly handover at a challenging time. Ian joined the
Board on 27 March 2020 as Chairman Designate and succeeds Tony
as Chairman on 21 May 2020.
Paul Moody, Independent Non-Executive Director, advised that he
would be stepping down at the conclusion of the AGM on 9 July
2020. Sharon Flood, independent Non-Executive Director, will
succeed Paul as Chair of the Remuneration Committee. Sharon
is currently Chair of the Audit and Risk Committee and member
of the Nomination and Corporate Governance, Remuneration,
Corporate Social Responsibility and Pets Come First Committees.
We have commenced our search for a new Chair of the Audit and
Risk Committee.
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 2018 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.
Directors’ Report continued
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.
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. Further information can be
found in the Corporate Social Responsibility Report on page 74.
The Group is now into the third year of reporting our gender pay
information. This year we decided to publish a combined Group figure,
excluding the Joint Venture Partners; this showed a mean gap of
17.9% with the gap being driven by the lower percentage of female
colleagues in the upper quartile roles. This is despite the Group
having over 50% female representation in management and senior
management levels. Further information on our Gender Pay Gap Report
is contained in the Directors' Remuneration Report on page 129.
Our Gender Pay Gap Report can be found at https://investors.
petsathome.com/responsibility.
Directors
The names of the persons who, at any time during the financial year,
were Directors of the Company are:
n / a
n / a
n / a
Date of appointment Date of resignation
24 May 2017
(re-appointed)
24 May 2017
(re-appointed)
24 May 2017
(re-appointed)
17 October 2017
(re-appointed)
11 July 2017
(re-appointed)
11 July 2017
(re-appointed)
27 April 2018
(re-appointed)
12 July 2018
(re-appointed)
n / a
n / a
n / a
n / a
n / a
Name
Tony DeNunzio
Dennis Millard
Paul Moody
Mike Iddon
Sharon Flood
Stanislas Laurent
Peter Pritchard
Susan Dawson
96
Pets at Home Group PlcAnnual Report and Accounts 2020 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 statutes and regulations, the business of the
Company will be managed by the Board which 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 127.
In accordance with Disclosure Guidance and Transparency Rule
9.8.6R(1)(a) and (b), in the period between the end of the financial
year and 20 May 2020 (being not more than one month prior to the
date of the Notice of Annual General Meeting), there have been no
changes to such interests.
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 121.
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.
No amount was paid under any of these indemnities or insurances
during the financial year other than the applicable insurance premiums.
Share capital
The issued share capital of the Company as at 26 March 2020 was
500,000,000 Ordinary Shares of 1 pence each. As at 20 May 2020,
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 185 of the Group’s financial statements.
There have been no movements in the Company’s issued share
capital in the 2020 financial period.
Details of colleague share schemes are provided in note 23 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
2019 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 9 July 2020 (or, if earlier, until the close
of business on 09 October 2020). 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 2019 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.
The Company will, consistent with the 2019 Annual General Meeting,
seek to renew these powers at the 2020 Annual General Meeting.
Powers for the Company to buy back its shares: The Company
was authorised by its shareholders on 11 July 2019, at the 2019 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 2020 Annual General Meeting to be held on
9 July 2020. The Directors did not exercise their authority to buy back
any shares during the financial period.
97
Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 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 26 March
2020, 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
Merian Global Investors
(UK) Limited
Blackrock Inc
Nordea 1 SICAV
Norges Bank
Morgan Stanley
Portland Hill Asset
Management Ltd
Number of
Ordinary
Shares as at
26 March 2020
68,041,706
55,374,121
Percentage
of issued
share capital
(%)
13.608%
11.07%
26,901,837
24,816,413
22,565,545
-
-
5.91%
4.96%
4.51%
Below 3%
Below 3%
Nature
of holding
(direct /
indirect)
Indirect
Indirect
Indirect
Direct
Direct
-
-
No changes have been disclosed in accordance with Disclosure
Guidance and Transparency Rule 5.1.2R in the period between
27 March 2020 and 20 May 2020 (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
Schroders plc
Merian Global Investors
(U) Limited
Number of
Ordinary
Shares as at
20 May 2020
64,880,378
60,652,432
Percentage
of issued
share capital
(%)
12.976%
12.13%
Nature
of holding
(direct /
indirect)
Indirect
Indirect
Significant related party transactions
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.
The Company is taking the opportunity at the 2020 Annual General
Meeting to propose certain amendments to the Company's Articles,
principally in order to reflect developments in technology and
practice and to provide clarification and additional flexibility. In
particular, the proposed new Articles shall include provisions enabling
the Company to provide additional opportunities for shareholders to
participate in general meetings electronically. A copy of the proposed
new Articles and a copy marked to show the changes from the
current Articles will be available for inspection at the 2020 Annual
General Meeting, and on the Company's website.
Profits and dividend
The consolidated profit for the year after taxation and all non-
underlying items was £67,375,000 (FY19: £30,492,000). The results are
discussed in greater detail in the Chief Financial Officer’s review on
pages 38 to 43.
A final dividend of 5 pence per ordinary share (FY19: 5 pence per
ordinary share) will be recommended to the Company’s shareholders
in respect of the 2020 financial year. The final dividend will be
proposed by the Directors at the 2020 Annual General Meeting on
9 July 2020 in respect of the financial year ended 26 March 2020 to
add to an interim dividend of 2.5 pence per ordinary share paid on
10 January 2020 (FY19: 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 2020 financial year
to 7.5 pence per ordinary share. The ex-dividend date will be 18 June
2020 and, subject to shareholder approval being obtained at the 2020
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 19 June 2020.
Political donations
The Group made no political donations and incurred no political
expenditure during the year (FY19: 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.
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 FY20 were 50 days (FY19: 49 days).
98
Pets at Home Group PlcAnnual Report and Accounts 2020 Post balance sheet events
There are no post balance sheet events.
Going concern
The unprecedented uncertainty created by COVID-19 and its effects,
both in terms of extent and duration, make it impossible to predict
how the business will be impacted in the year ahead, but 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.
The considered business response to COVID-19 is discussed in detail in
the Chief Executive Officer's statement on pages 16 to 19.
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 five-year period. The five-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 and the potential impact of COVID-19 on future
cash flows and liquidity. The Directors have considered a combination
of risks and uncertainties and the mitigating controls operated by the
Group as detailed on pages 52 to 61 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 five financial years used for
their assessment. In making this assessment, the Board has 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 pet care business; our commitment is
to make sure pets and their owners get the very best advice, products
and care. Pet products are available online or from our 453 stores,
many of which also have vet practices and grooming salons. Pets at
Home also operates a UK-leading small animal veterinary business,
supporting 441 First Opinion practices located both in our stores and
in standalone locations, as well as four Specialist Referral centres.
Our vision is to be the best pet care business 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 and monitor our suppliers and monitor production and
supply standards.
Our policies and contractual controls
We are committed to ensuring there is transparency in our business
and in our approach to tackling modern slavery throughout our
supply chain. Our Code of Ethics and Business Conduct Policy reflects
our commitment to acting ethically and with integrity in all our
business dealings and relationships and we expect full compliance
with it by colleagues, suppliers and business partners. Our policy is
updated annually. This year we will again review and update this
policy to further promote increased awareness of modern slavery and
compliance with the Act.
Our suppliers are also required to comply with our Ethical Trading
Policy which sets out the minimum standards that they are required
to adhere to wherever they procure materials, manufacture or perform
services for, or supply products to, our business. We also contractually
require suppliers to comply with the Pets at Home Group’s Code of
Ethics and Business Conduct Policy.
Our supplier standard general terms and conditions require
compliance with the Act and include a right for Pets at Home to
conduct audits on supplier compliance.
We undertake ethical audits which cover: hours of work, labour
practices, working conditions, onsite accommodation, health & safety,
environment, supply chain management and wages. Should any
instances of non-compliance with the Act or our policies arise in
relation to any of our suppliers then this will be reviewed and
appropriate action taken. Our standard general terms and conditions
with suppliers also include the right for Pets at Home to terminate
the agreement in the event of supplier non-compliance with the Act.
This year we have launched LMS training modules on Anti-Bribery,
Modern Slavery, the Ethical Trading Policy and the Code of Ethics and
Business Conduct to colleagues.
Due diligence and supplier adherence
We annually review and where appropriate update our procurement
processes in respect of modern slavery. We include specific questions
in our tender documentation on the Act to ensure that our suppliers
are compliant with it along with our Ethical Trading Policy.
Training
We have previously highlighted the importance of training in raising
awareness on modern slavery and assisting our colleagues and
suppliers gain a better understanding on the issue of modern slavery
and requirements set out in the Act. Training continues to be a key
focus of the business and we continue to train colleagues and
suppliers. This year we will repeat our UK colleague training
programme and continue to deliver our newly launched LMS training
modules on Anti-Bribery, Modern Slavery, the Ethical Trading Policy
and the Code of Ethics and Business Conduct to colleagues.
99
Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 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 92 to 93) 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.
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 2018 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 2020 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 105 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 2020.
This Directors’ Report was approved by the Board on 21 May 2020
and signed on its behalf by:
Lucy Williams
Group Legal Director and Company Secretary
21 May 2020
Directors’ Report continued
Audit and assurance
This year the Group’s internal audit team will again undertake an
operational effectiveness review of the Group’s policies and controls
around compliance with the Act. The report will be issued to and
reviewed by the Board and recommendations acted on accordingly.
The Pets at Home Group Plc Board of Directors approved this
statement at a meeting of the Board on 12 September 2019.
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 6 September 2018, the Group entered into a senior facilities
agreement with a total facility amount of £248m. This senior facilities
agreement expires on 24 September 2023 (unless extended in
accordance with its terms), and 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.
• On 13 May 2020, the Group entered into a 364 day senior facilities
agreement with a total facility amount of £100m. This 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.
100
Pets at Home Group PlcAnnual Report and Accounts 2020 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 includes a fair review of the development and
performance of the business and the position of the issuer 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 information necessary
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 2020
Company law requires the Directors to prepare Group and parent
Company financial statements for each financial year. Under that
law they are required to prepare the Group financial statements
in accordance with International Financial Reporting Standards as
adopted by the European Union (IFRSs as adopted by the EU) and
applicable law and 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 parent Company and of their
profit or loss for that period. In preparing each of the Group and
parent Company financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable, relevant
and reliable;
• state whether they have been prepared in accordance with IFRSs
as adopted by the EU;
• assess the Group and parent Company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern; and
• use 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.
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 2006.
They are responsible for 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, and
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
website. Legislation in the UK governing the preparation and
dissemination of financial statements may differ from legislation in
other jurisdictions.
101
Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Audit and Risk Committee Report
Sharon Flood
Chair of the Audit
and Risk Committee
Who is on the Audit and Risk Committee?
Member
Sharon Flood (Chair)
Dennis Millard
Paul Moody
Stanislas Laurent
What we did in 2020
No. of meetings
4 / 4
4 / 4
4 / 4
4 / 4
Carried out our responsibilities as set out in the terms of reference, including
monitoring the integrity, challenging the judgemental areas, and advising the Board
on whether external reporting is fair, balanced and reasonable.
Engaged with the Financial Reporting Council’s Corporate Review Team following their
review of our Annual Report and Accounts to 29 March 2018, which has now
concluded. We have improved our disclosure in relation to accounting for Joint Venture
veterinary practices, with respect to judgements and estimates surrounding operating
loans, and our assessment of control, along with impairment testing of goodwill and
investments in subsidiaries.
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. Further
review and challenge was undertaken in light of the recent COVID-19 outbreak.
Monitored the control environment of the Group, including pet welfare protocols, and
the controls and processes relating to the release of key IT projects.
Reviewed and challenged the effectiveness of the Group’s whistleblowing procedures,
and Internal Audit function to meet the requirements of the Internal Audit Plan.
Reviewed the judgements made in applying the newly adopted accounting standard,
IFRS16 ‘Leases’, and the ongoing appropriateness of the judgements made in applying
existing accounting standards.
Continued to monitor the process and controls around extending financial
support to First Opinion Joint Venture veterinary practices, and the recoverability of
those loans. We have also continued to review whether the level of practice
indebtedness infers additional control to the Group of a practice, and whether
this challenges the existing accounting for a practice.
Reviewed the accounting treatment for Joint Venture veterinary practices where the ‘A’
shares have been bought out by the Group.
What we will do in 2021
Continue to carry out our responsibilities as set out in the terms of reference, including
monitoring the integrity, challenging the judgemental areas, 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 and the controls and processes relating to the release of key IT
projects. Further reviews will be undertaken of our general risk management processes
in light of the COVID-19 situation.
Continue to monitor the effectiveness of the Group’s Internal Audit function and
whistleblowing procedures. We will agree an Internal Audit strategy for 2021 and
beyond, defining ways of working as well as specific projects.
Review the approach and judgements made in applying forthcoming financial
reporting standards, and the ongoing appropriateness of the judgements made
in applying existing accounting standards.
Continue to monitor the level of financial support provided to our Joint Venture
veterinary practices and keep under review any activity that might change existing
accounting practices.
Continue to monitor the accounting treatment for Joint Venture veterinary practices
which have been bought out by the Group, and those which are indebted to the Group.
102
Introduction
This is my third report as Chair of the Audit and Risk Committee
(the Committee), having joined the Board in July 2017. I am pleased
to report that the Committee has been highly engaged in 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 internal controls and risk management
systems, and the effectiveness of both the Internal Audit function and
external audit relationship.
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 reviewed and updated
the Group risk register regularly throughout the year, maintaining
alignment of our internal audit risk review efforts with the Group’s
strategic priorities.
In addition to our regular agenda, this year we have considered the
accounting for recently adopted changes in accounting standards,
notably IFRS16 Leasing.
We have reviewed the Joint Venture accounting treatment of First
Opinion veterinary practices with specific reference to the Group’s
strategy of buying out certain practices and the level of indebtedness
of certain practices, and whether this might lead to the Group having
practical ability to exercise control over the Joint Venture. We have
also reviewed the correspondence between the Group and the
Financial Reporting Council’s Corporate Review Team with reference
to the Annual Report and Accounts to 29 March 2018, which is now
concluded. We have taken the opportunity to enhance our disclosure
in relation to accounting for Joint Venture veterinary practices, with
respect to judgements and estimates surrounding operating loans,
and our assessment of control, along with impairment testing of
goodwill and investments in subsidiaries.
Committee membership
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 92 to 93.
The Chairman of the Company’s Board, Executive Management
Team 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;
•
•
• External audit.
Internal controls;
Internal audit; and
Pets at Home Group PlcAnnual Report and Accounts 2020 Audit and Risk Committee meetings
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 agenda 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:
Risk management /
internal control
• Review of development of the
Internal audit
• Review and approval of Internal
External audit
• Report on Annual Financial
Corporate Risk Register
Audit Plan for the year
Statements and external audit
• Review of Code of Ethics and
Whistleblowing policy
• Review of Tax policy
• Review of Treasury policy
• Review of Brexit readiness
• Evaluation of internal audit
• Review reports on progress
of Internal Audit Plan
• Process to assess external
auditor
• Review development of the
• Internal audit engagement
• Process to assess external
Corporate Risk Register
renewal
auditor
• Loss prevention plan and fraud
• Review reports on progress
risk update
of Internal Audit Plan
• Review development of the
Corporate Risk Register
• Review of Treasury policy
• Review of Code of Ethics and
Whistleblowing policy
• Review reports on progress
• Report on Review of Interim
of Internal Audit Plan
Financial Statements
• Review of external audit
strategy for the year ended
26 March 2020
Meeting
May
September
November
Financial reporting
• Review of the Annual Report
and Accounts for year ended
28 March 2019
• Review of goodwill impairment
• Review of supplier income
recognition policy
• Review of operating loan
provisioning policy
• Review of consolidation
consideration for JVCos
• Review of considerations of the
Group’s longer term viability
and going concern
• Review of correspondence with
the Financial Reporting Council
• Review of correspondence with
the Financial Reporting Council
• Review of progress of subsidiary
financial statements for the year
ended 28 March 2019
• Review of correspondence with
the Financial Reporting Council
• Review of the Interim Financial
Statements
• Review of goodwill impairment
• Review of considerations of the
Group’s longer term viability
and going concern
• Review of reporting under new
standard on Leases (IFRS16)
• Review of operating loan
provisioning policy
• Review of consolidation
consideration for JVCos
January
• Review of correspondence with
the Financial Reporting Council
• Review of development of the
• Review reports on progress of
• Process to assess external
Corporate Risk Register
• Review of progress on the
finance transformation plan
(Vet Group)
Internal Audit Plan
auditor
• Consideration of Internal
Audit Plan for the year ended
25 March 2021
• Process to assess internal auditor
103
Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 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 has made an assessment of the key risks and emerging risks, and considers the key risks within the
financial statements to be the carrying value of goodwill and investments, the carrying value of inventory, the carrying value of operating
loans, the accounting treatment for consolidation of Joint Venture veterinary practices and accounting for the adoption of IFRS16 'Leases'.
The Committee considered the following in making its assessment of the reporting in the financial statements.
Issue
Carrying value
of goodwill
and parent
company’s
investment in
subsidiaries
Nature of the risk
The Group holds a significant goodwill balance and the Company holds
significant investments in subsidiary companies. There are a number of
factors that could impact on the future profitability and cash flows of
the business (e.g. the near and long term impact of COVID-19, threat of
competition, changes in market behaviour, and 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 Group and Company’s intangible assets.
Carrying value
of inventory
Carrying value
of operating
loans
The business carries a wide range of Stock Keeping Units (SKUs) 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.
The business provides financial support to First Opinion Joint Venture
veterinary practices depending on the circumstance of each practice.
This includes 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 over-performance from
stronger units compensates any under-performance. In making this
investment the Group does so after consideration of its total returns
across all practices on a portfolio basis.
The return of these loans can be over an extended period.
The business has undertaken a strategy whereby the Group has bought
out certain practices, as part of which the Group wrote off operating
loans due from the practice on consolidation. These loans were fully
provided against from the point at which the decision was made to offer
to buy out the practices.
Management have established a policy in order to ensure that the initial
fair value and subsequent carrying value of operating loans is in
accordance with all relevant accounting standards, including IFRS 9,
IFRS 15 and IFRS 13.
Accounting for
consolidation
of Joint
Venture
veterinary
practices
The business announced during the previous year its intention to offer to
buy out the ‘A’ shares in certain Joint Venture veterinary practice
companies from the Joint Venture Partners.
There is a risk that the accounting for these acquisitions is inappropriate
with regard to consideration of control and consolidation of Joint Venture
entities, and recognition of items within the income statement deemed
to be ‘non-underlying items’.
Accounting for
the adoption of
IFRS16 'Leases'
The Group has applied IFRS16 'Leases' with effect from 29 March 2019, using
the modified retrospective approach. A process has been undertaken to
collect the relevant data, implement a new property and lease accounting
system, and agree the appropriate accounting policies and disclosures.
104
How the risk was addressed by the Committee
The Committee reviewed and challenged management’s process
for testing goodwill for potential impairment, allocation of
goodwill across cash generating units, and ensuring appropriate
sensitivity analysis and 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. This review was enhanced to consider
the potential impact of COVID-19 on the Group's financial
performance and future cash flows and therefore the carrying
value of the Group and Company's intangible assets.
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
Group’s goodwill balance or the Company’s investment in
subsidiaries and that there is appropriate disclosure in the
financial statements.
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 are appropriate.
The Committee reviewed management’s judgement, as
informed by independent analysis and review, in assessing the
initial recognition and subsequent measurement of operating
loans in accordance with relevant accounting standards.
The Committee is satisfied that the initial recognition and
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. This review was conducted with cognisance of the
potential impact of the COVID-19 outbreak on Joint Venture
veterinary practice performance and indebtedness. 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 either contractually or practically.
The Committee reviewed management’s policy and process
for determining the appropriateness of not consolidating
Joint Venture entities until the point at which the ‘A’ shares
were acquired, and subsequent consolidation thereafter.
The Committee reviewed the items deemed to be
‘non-underlying’ within the income statement.
The Committee is satisfied that the Joint Venture practices
should not currently be consolidated, and that the accounting
disclosure for such buy outs is appropriate.
The Committee reviewed all aspects of management's policy
and process for IFRS16 adoption, and is satisfied that the
methodology used and the judgements and assumptions
applied are reasonable.
Pets at Home Group PlcAnnual Report and Accounts 2020 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, cost growth and our cash flow management. 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
52 to 61. The review was enhanced to include a sensitivity based on
the potential impact of COVID-19 on future cash flows.
Following a review of the detailed considerations set out above by
the Committee and Executive Management Team, 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 99 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 52.
The Group’s key risks and uncertainties are set out on pages 52 to 61.
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
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. To strengthen our assurance framework,
internal capabilities and connectivity between internal audit and the
business, we have recruited an experienced internal audit manager
to partner with the Vet Group. This gives the internal audit team the
opportunity to be more agile, and to better support the business.
Specific work performed during the year in our key risk areas included:
Risk area
Strategic
Operational
Financial
Legal and
regulatory
compliance
Work undertaken
Finance Transformation Project – pre-implementation
(Vet Group)
Accounting for Joint Venture veterinary practices bought
out (Vet Group)
Pet welfare processes (Retail)
Cyber scenarios and controls (Group)
Goods not for resale processes (Group)
Insurance management (Group)
SAP Success Factors pre-implementation – key process
design (Group)
Rx Works – post implementation follow up (Vet Group)
Key financial processes: balance sheet reconciliation,
payroll controls and reconciliation, brand development
fees, cash transfer, sales negotiation fees, management
fees, cash and banking, bad debt and provisions,
management to statutory accounts, rebates (Vet Group)
Key financial controls – Anderson Moores and Dick White
Referrals (Specialist Hospitals)
Colleague expenses – follow up (Group)
Treasury processes (Group)
SAP user access management – role design (Group & Retail)
Health and Safety management (Group)
Compliance with Right to Work legislation (Group)
Compliance with National Living and working wage
obligations (Retail).
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. These risks were considered to be the
carrying value of goodwill and parent company’s investment in
subsidiaries, recoverability of operating loans to Joint Venture
veterinary practices, accounting for the Vet Group restructuring, the
carrying value of inventory, and IFRS16 lease arrangements. 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 Statutory Audit Services for Large
Companies Market Investigation (Mandatory Use of Competitive
Tender Processes and Audit Committee Responsibilities) Order 2014
and performed a tender process which concluded in January 2015.
We will undertake and conclude our next tender process by no later
than January 2025, and will undertake and conclude this process
earlier if it is deemed in the best interest of shareholders to do so, by
reference to our annual programme of reviewing the effectiveness of
the external audit process. KPMG, who have audited the Group since
2000, were reappointed at the AGM on 11 July 2019. Stuart Burdass has
been the audit partner since January 2019.
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Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 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. We conducted an
audit effectiveness review through a questionnaire to Committee
members, management and members of the finance team. This
questionnaire continued from the process in the previous year,
delivering focused insight into KPMG’s effectiveness through
questions for both the Committee members, management and
members of the Finance team.
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 £468,000
and an analysis is presented in note 3 to the consolidated financial
statements. 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 9 July 2020.
Financial Reporting Council
During the year, the Financial Reporting Council (“FRC”) Corporate
Review team concluded its review of our Annual Report and Accounts
for the year to March 2018. All correspondence received during the
review and our responses were discussed with the Committee. As a
result of the FRC’s review, we have improved the clarity of disclosure
in relation to:
• Accounting for investment in Joint Venture veterinary practices,
with reference to judgements and estimates surrounding operating
loans to Joint Venture veterinary practices, and the Group’s
inability to exercise control. Enhancements to disclosure in these
areas have been made, specifically in notes 1, 16, 17 and 27 to the
financial statements;
•
Impairment testing, including goodwill and investments in
subsidiaries. Enhancements to disclosure in these areas have been
made, specifically in notes 13 and 28 to the financial statements; and
• Both accounting for investments in Joint Venture veterinary practices
and impairment testing have been specific areas of focus for the
Audit Committee and KPMG during 2018, 2019 and 2020, and these
areas have warranted enhanced audit focus as a result.
Sharon Flood
Chair Audit and Risk Committee
21 May 2020
106
Pets at Home Group PlcAnnual Report and Accounts 2020 Nomination and Corporate Governance Committee Report
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 Paul Moody, Dennis Millard, Sharon Flood, Susan
Dawson 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
Tony DeNunzio (Chair)
Dennis Millard
Paul Moody
Sharon Flood
Stanislas Laurent
Susan Dawson
Period from:
18 February 2014
18 February 2014
25 March 2014
25 May 2017
25 May 2017
12 July 2018
To:
To date
To date
To date
To date
To date
To date
There were three formal Committee meetings held in the financial
year and members’ attendance was as shown in the table above.
Tony DeNunzio
Chair of the Nomination
and Corporate Governance
Committee
Who is on the Nomination and Corporate Governance
Committee?
Member
Tony DeNunzio (Chair)
Dennis Millard
Paul Moody
Sharon Flood
Stanislas Laurent
Susan Dawson
What we did in 2020
No. of meetings
3 / 3
1 / 3
2 / 3
1 / 3
3 / 3
3 / 3
Undertook the search for and identification of a suitable new Chairman,
being Ian Burke, for the Group.
Recommended that Sharon Flood succeed Paul Moody as Chair of the
Remuneration Committee when he steps down from the Board at the
conclusion of the Company's AGM on 9 July 2020.
Reviewed the talent and succession plans for the Group 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.
Reviewed the skills and capabilities of the Group’s Executive Management
Team to ensure members had the requisite skills, experience and knowledge
to execute the Group’s strategy.
Commenced the search for a new Chair of the Audit and Risk Committee.
Reviewed and approved the appointment of Lucy Williams
as Company Secretary.
What we will do in 2021
Support the new Group Chairman in his new role and integration into the
business.
Support in the search for a new Chair of the Audit and Risk Committee
to replace Sharon Flood when she succeeds Paul Moody as Chair of the
Remuneration Committee.
Continue to assess Board composition and how it may be enhanced.
Implement further reviews and assessment of succession planning, talent
mapping and development plans particularly in relation to the Group
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.
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Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Nomination and Corporate Governance Committee Report continued
Recently, Paul Moody, Independent Non-Executive Director, advised
that he would be stepping down from the Board at the conclusion
of the AGM on 9 July 2020. Paul was appointed to the Board in
2014 and has been a member of the Audit and Risk, Remuneration
(currently appointed), Nomination and Corporate Governance,
Corporate Social Responsibility and Pets Come First Committees.
Sharon Flood, Independent Non-Executive Director, will succeed Paul
as Chair of the Remuneration Committee. Sharon is currently Chair of
the Audit and Risk Committee and member of the Nomination and
Corporate Governance, Remuneration, Corporate Social Responsibility
and Pets Come First Committees. We have commenced our search for
a new Chair of the Audit and Risk Committee. We thank Paul for his
valuable contribution and convey the Group’s best wishes to him
going forward.
A new Group Executive role of Chief People and Culture Officer was
created this financial year, to which Louise Stonier was appointed.
The creation of this role further highlights the Board's intention to
place culture at the heart of decision making. Louise Stonier stepped
down as Company Secretary, handing responsibility for company
secretarial matters to Lucy Williams, Group Legal Director.
Succession planning and Group talent development
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 three 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 and the development of a talent
framework whereby colleagues are assessed against the Group’s
core competencies and development plans put in place to support
colleagues in reaching their full potential. 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. The Group’s Talent Strategy is
continuing to evolve and the Group’s Talent Director is working with
us on leadership capability, talent mapping and succession planning,
having presented a detailed mapping and talent identification
review to the Board.
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.
How the Nomination and Corporate Governance Committee
discharged its responsibilities in FY20
Board appointments and resignations
This year one of the key areas of focus for the Nomination Committee
has been on the search for my successor and this year’s report on
behalf of the Nomination and Corporate Governance Committee will
therefore be my last.
This process was led by Stanislas Laurent, Independent Non-Executive
Director, due to the involvement in the process of internal candidates.
Stanislas Laurent
Independent Non-Executive Director
On 26 November 2019, we announced that after over nine years as
Chairman and in accordance with the 2018 Code, Tony had advised
the Board that he considered it an appropriate time to commence
a succession plan for a new Chair of the Board. The Board
appointed recruitment consultants and considered both external
candidates as well as existing Non-Executive Board members,
before making a formal recommendation to appoint Ian Burke as
Chairman with effect from the start of the new financial year.
Over the last 10 years, Tony has overseen the Company’s transition
from a private business to a listed company. More recently he
supported the business in implementing the strategic plan to
become "The World's Best Pet Care Business", bringing everything
together for the pet owner, driven by data and insight. Our recent
performance is reflective of the progress we are making by
focusing on our core capabilities and differences.
The Board would like to thank Tony for his contribution over the
years and wish him every success for the future.
Ian has been chair of Studio Retail Group plc since 2017 and is also
a non executive senior independent director of intu properties plc,
where he has been a member of various board committees since
2018. Ian has extensive board experience; past board positions
include CEO of Thistle Hotels, Chair of the privately owned
veterinary group Vet Partners, and a long tenure on the board at
Rank Group plc. as non executive chair, executive chair and CEO.
We initially planned that Tony would stay in his current role in
order to ensure an orderly handover to Ian who would assume
his position at the start of the new financial year. Given the
unprecedented environment due to COVID-19, the Board agreed
to extend the transition period between Tony and Ian by eight
weeks, to ensure an orderly handover at this challenging time.
Ian joined the Board on 27 March 2020 as Chairman Designate
and succeeds Tony as Chairman on 21 May 2020.
We are delighted to welcome Ian as new Chairman, and the Board
looks forward to working alongside him to continue to deliver the
Group’s exciting strategy.
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Pets at Home Group PlcAnnual Report and Accounts 2020
Board evaluation and effectiveness
Last year, the Board engaged Lintstock Limited to undertake an
independent external evaluation of Board and Board Committee
performance and to identify areas where the performance and
procedures of the Board might be further improved. This year, we
carried out an internal Board evaluation that included the completion
of an online questionnaire that considered topics covered in the 2019
evaluation and other areas which the Board wanted to assess. Other
areas which the Board wished to focus on since the last evaluation
included: effectiveness of monitoring culture and behaviours,
understanding of pet and customer welfare, understanding of
performance against competitors and the pet care market and
understanding of key stakeholder views. As part of the evaluation,
I also held discussions with each Board member. The Board
considered the output from the review in March 2020 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 page 91 of the Governance Report.
Diversity
The Board is committed to supporting work initiatives that promote
a culture of inclusion and diversity. The Committee recognises the
importance of diversity and inclusion both in the Boardroom and
throughout the organisation and understands that a diverse Board
will offer wider perspectives which lead to better decision making,
enabling it to meet its responsibilities. 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
86 and 87 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 85 of the Governance Report.
For further information on Board composition, diversity and
independence, see the Governance Report on pages 85 to 87.
.
Tony DeNunzio
Chair Nomination and Corporate Governance Committee
21 May 2020
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Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Corporate Social Responsibility and Pets Come First Committee Report
Introduction
Recognising that the Group participates in a broad range of activities
and services involving pets, the Board maintains a regular and detailed
review of pet welfare in addition to Corporate Social Responsibility
(CSR). It achieves this by having both a CSR Committee and a Pets
Come First Committee which, together, help manage the Group’s
most important ethical, social and environmental impacts.
The Committee regularly reviews 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 Committee also reviews all other
elements of the Group’s CSR strategy, including energy and
climate change, waste, natural resources and its policies in relation
to colleagues.
During the year five new management committees were
established, each sponsored by a Group executive member to
support the development of the 2030 Pledge strategy and manage
the delivery of our CSR commitments. These are in addition to the
existing Director lead governance to monitor and continuously
improve pet welfare standards.
Committee membership
The CSR and PCF Committee, which meets three times a year,
is chaired by Susan Dawson. Its other members are Tony DeNunzio,
Dennis Millard, Paul Moody, Sharon Flood and Stan Laurent.
Acknowledging the importance of pet welfare and CSR to the
Group, all other Board members are required to attend the meetings.
Strategic approach
Our strategic approach to CSR and Pets Come First is organised
around three pillars of Pets, People and Planet where the Group
has material impact and creates value. We believe these pillars are
the right way through which to approach our responsibilities and
align with our Group vision, to become the best pet care business
in the world.
Susan Dawson
Chair of the Corporate
Social Responsibility
and Pets Come First
Committee Report
Who is on the Corporate Social Responsibility
and Pets Come First Committee?
Member
Susan Dawson (Chair)
Tony De Nunzio
Dennis Millard
Paul Moody
Sharon Flood
Stan Laurent
What we did in 2019
No. of meetings
3/3
3/3
3/3
3/3
3/3
3/3
Reviewed clinical governance standards and policies across the
Vet Group.
Reviewed the outcome of pet welfare audits and procedures in our stores
and grooming salons.
Supporting our stores in the licensing application process in relation to the
Licensing of Activities Involving Animals (England) Regulations 2018.
Reviewed the Support Adoption for Pets (SAFP) charitable foundation
development plans and approved an expansion of objectives to enable
more of the Group’s charitable activities to be including and the continued
development of a rebranding of the foundation.
Reviewed the objectives and approach to the development of a new Social
Purpose strategy (with a working title of the “2030 Pledge”).
What we will do in 2020
Continue to focus on the monitoring and delivery of the best pet
welfare standards across the Group.
Continue to ensure the highest standards are maintained in relation
to licensing activities in England.
Continue to engage with the Scottish Parliament and their proposal
to update pet shop licensing regulations.
Develop and approve the “2030 Pledge” strategy including the expansion
of objectives and rebranding of the SAFP charitable foundation.
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Pets at Home Group PlcAnnual Report and Accounts 2020 Highlights
• The Committee focused upon and progressed with a number of
key areas during the year. For more detail on a number of these
initiatives, as well as a wider review of our strategy, please refer to the
CSR strategic report on pages 62 to 81.
• We continued to review the standards of pet care and welfare across
the Group, and specifically within our stores and grooming salons.
The results of all our internal audits were very high and inline with
our expectations.
• The business retained the services of two third party auditors
to review standards and processes at our pet suppliers. This has
generated feedback and ideas to further improve suppliers’ welfare
standards which are reviewed.
• The two academic projects that the Group sponsored and
supported were completed and the Committee received an update
on the results of these projects and recommendations. The projects
were relating to understanding stress that fish may experience
from transportation and tank conditions and catching techniques.
The findings of both research projects were published.
In October 2018, updates to The Animal Welfare (Licensing of
Activities Involving Animals) (England) Regulations came into force.
Our stores have had an initial assessment by local councils and these
are renewed on an ongoing basis. All stores that are required to
hold a valid licence.
•
• Excellent progress continues to be made in the First Opinion
veterinary business, with over three quarters of practices now
enrolled with the Royal College of Veterinary Surgeons Practice
Standards Scheme, and the internally developed ‘Aspiring to
Clinical Excellence’ audit programme continued to help to improve
clinical standards and processes across the Group. A new quality
improvement system called QI2020 has been launched, which
gathers granular detail about practice clinical standards to enable
clinical services support to be tailored and targeted to provide
maximum benefits. The results of antibiotic usage auditing were
shared and demonstrate a positive reduction in antibiotic use across
the Group over time.
• The current charity work across the Group was discussed in the
context of extending the objectives of the Group’s charitable
foundation SAFP to cover more of the Group community activity.
• Our business raised over £5m for charities that support the
rehoming of pets, or bringing the health and therapeutic benefits
of pets to people in need.
• The “2030 Pledge” strategy development has been reviewed and
discussed. The materiality review and establishment of supporting
management teams reviewing different areas of the ESG agenda
were reviewed. The emerging areas of focus for the strategy were
shared and debated.
Susan Dawson
Chair of the Corporate Social Responsibility
and Pets Come First Committee
21 May 2020
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Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020
Directors’ Remuneration Report
Paul Moody
Chair of the Remuneration
Committee
Who is on the Remuneration Committee?
Member
Paul Moody (Chair)
Dennis Millard
Sharon Flood
Susan Dawson
What we did in FY20
No. of meetings
4/4
4/4
4/4
4/4
Agreed the annual bonus targets for the Executive Management Team for
FY20 and measured performance against them.
Approved awards to all eligible colleagues in the Group under the Long
Term Incentive Plans (LTIP).
Reviewed the wider colleague population remuneration and benefits structures.
Engaged with the wider colleague population on remuneration as well
as a range of other issues.
Reviewed the processes in place for the Group pension schemes.
Reviewed the gender pay reporting information for the Group.
Agreed the method for calculation and reporting of the Chief Executive
Officer (CEO) pay ratio.
Reviewed and agreed the Directors' Remuneration Report (DRR) for FY20.
Reviewed and agreed the proposed changes to the remuneration Policy
for approval at the 2020 Annual General Meeting (AGM) of the company.
Consulted extensively with shareholders and proxy advisors throughout
the remuneration policy review.
Discussed and reviewed attainment against the performance conditions
of the Group’s LTIPs due to vest during the period.
Considered and recommended the remuneration package for the
new Chairman.
Reviewed the terms of reference of the Remuneration Committee.
What we are going to do in FY21
Approve share awards under the LTIP to all eligible colleagues in the Group.
Agree the annual bonus targets for the Executive Management Team
for FY21 and measure performance against them.
Continue to engage with shareholders on the new remuneration policy.
Review the votes received for the DRR and the new remuneration Policy
at the 2020 AGM.
Review the remuneration structure of the wider colleague population.
Review the longterm plans for the structure of the Group pension scheme.
Review the Group’s longterm reward strategy.
Continue to assess the impact of COVID-19 on the business to ensure
the appropriate executive remuneration response.
112
Introduction
On behalf of the Remuneration Committee (Committee), I am pleased
to present our Directors' Remuneration Report (DRR) for FY20.
FY20 has been a unique year for Pets at Home, and would have been
so even without the events of the final quarter that occurred across
the globe. As outlined in the Chairman’s statement, and reflected in
the trading updates through the year, FY20 was the year in which
the implementation of our integrated pet care strategy and the
investments we have made across the Group to support it, helped to
deliver results ahead of market expectations and saw a return to profit
growth. Our colleagues have helped deliver consistently strong results
throughout the year and this has been reflected in the increase in our
share price.
Our colleagues are an extremely important stakeholder group; we are
pleased with the progress in reward levels that we have made over
the year, increasing our average hourly rate across our stores and
grooming business by 6.29% to £9.10 and paying a bonus to the
majority of our colleagues, recognising and rewarding their hard work
and dedication over the course of FY20. The first awards made under
our Restricted Share Plan (RSP) will vest in June 2020. As a result of
these awards, we will have enhanced the holdings of existing, or
created new, shareholders in over 5,000 of our colleagues and are
starting to achieve our aim of widespread share ownership. We have
also taken steps to provide enhanced protection for our colleagues
considering the impact of COVID-19 see below.
Impact of COVID-19 on pay decisions
The Committee has been mindful of the impact of COVID-19 on our
FY20 results and the consequential influence that it will have on our
business plans and, probably, performance in FY21 in reaching the
following decisions:
Executive Management Team
The Committee and the Executive Management Team have agreed:
•
• to delay the annual pay review until at least 1 October 2020 in line
with wider management but potentially for the entirety of the
financial year;
for the entire Executive Management Team and the Non-Executive
Directors to take a 20% pay cut effective from 20 April to the end of
May. This is in line with the timing of the voluntary furlough option
we offered to some of our colleagues; and
that whilst RSP awards will be made in FY21 in line with the usual
timeline and at the levels outlined, those awards will be subject to
an explicit commitment from the Committee that it will use its
discretion, as required, to prevent any windfall benefit arising in
the future.
•
These measures were proposed by the Executive Management Team
and agreed by the Committee.
Our colleagues
We provide an essential role in keeping the nation’s pets happy and
healthy, but we have taken significant steps to ensure that this is
appropriately balanced with the need to focus on our colleagues’
health and wellbeing.
You can read the full details of the Group's actions in the CEO
statement on page 16, but the pay-related actions taken to
date include:
• Paying those colleagues undertaking 12 weeks of self-isolation 100%
of their average earnings throughout this period.
• Furloughing colleagues on a voluntary and non-mandatory basis,
and paying them 80% of their normal earnings.
Pets at Home Group PlcAnnual Report and Accounts 2020 • We have taken the decision across the Group not to participate
in the Government’s Job Retention Scheme (JRS) for any of these
colleagues. However, we continue to review the position regarding
a small proportion of colleagues for whom a prolonged period of
shielding may be necessary; predominantly those who are either
highly or extremely vulnerable or are carers - and, dependent
upon government guidance, may participate in the JRS for these
colleagues in future.
• Across our Vet Group, our Joint Venture Partners operate
independent businesses and are solely responsible for the decisions
made in respect of their colleagues. A number of Joint Venture
Partners have elected to participate in the JRS.
• Paying an additional recognition payment which in total exceeded
£1.9m to all those colleagues in our stores whose outstanding
commitment meant we could continue to supply the nations'
essential pet care needs.
• Ensuring all eligible colleagues will still receive their bonuses in
respect of FY20 in line with the usual timeline.
• Whilst not directly pay related, to further support our colleagues’
financial wellbeing through this period, we have added £1m to our
colleague hardship fund and relaxed the application criteria
to make it possible for colleagues to access these funds should
they be experiencing significant financial hardship as a result of
the COVID-19 crisis.
Review of our remuneration policy
FY20 is the final year of our current remuneration policy and we have
therefore spent significant time reviewing our policy in order to assess
whether it remains fit for purpose in light of our new strategy, the
wider economic environment in which we operate and the
developing legislative guidance on executive remuneration.
I was delighted to be able to speak with shareholders as we reviewed
the policy and was encouraged by the constructive discussions and
the support given to the principles and detail of our proposed
changes. We consulted in particular on the need to ensure that total
remuneration is at an appropriate level to retain and attract executive
talent relative to the wider marketplace. As part of this we considered
whether the weighting between short and longterm incentives within
the current remuneration package was appropriate and whether the
existing LTIP (RSP) was suitable in driving behaviours in the longterm
interests of shareholders. The majority of shareholders who
participated in the consultation process:
• Supported amendments that would ensure our remuneration policy
remained competitive;
• Acknowledged that our proposals regarding pensions were
extremely positive;
• Supported the introduction of an element of bonus deferral in order
to switch the focus towards longer term business performance;
• Recognised that the CEO pay levels needed to be market
competitive and reflect the performance of the business;
• Supported the proposal for an amended vesting / post vest
holding period and for the introduction of post-cessation
shareholding guidelines.
Following review and shareholder feedback, the Committee
concluded that for the most part our existing policy remains
appropriate. However, there were some key areas where changes are
required to ensure competitiveness and to reflect changing market
practice and good governance. As such the following changes are
being proposed and will, unless indicated otherwise, be effective
following approval of the new policy at the 2020 AGM:
1) Pension contributions for new Executive Directors will be set in line
with the rate provided to the majority of our salaried colleagues,
which is currently 6.5% of salary (a reduction from the current policy
maximum of 15%). Pension contributions for incumbent Executive
Directors will be reduced to 6.5% by the end of FY22 at the latest
in order to ensure compliance with the UK Corporate Governance
Code 2018 and the guidance published by the Investment
Association on this matter.
2) Annual bonus maximum will be increased from 100% to 170% of
salary for the CEO and from 100% to 150% of salary for the CFO.
3) One-third of any bonus paid to the Executive Directors will be
deferred into shares and released after a two-year holding period.
However, in the light of the current economic climate, whilst we hope
our shareholders will approve these proposals at the 2020 AGM such
that the policy will provide the capacity to increase bonus and apply
deferral, the implementation of Policy in FY21 will not include those
features and bonus opportunity levels will remain at 100% for both
Executive Directors regardless of any revised policy maxima.
4) The Committee will have the ability to exercise appropriate
discretion if required in line with the new policy.
5) There will be no change to annual levels of Restricted Share Plan
awards (RSA) for incumbent executive Directors, which will remain
75% of salary. However, we are proposing the introduction of additional
headroom of 25% of salary for use only when / if required for new
executive director hires (a total RSA maximum for new hires of 100%
of salary per annum). The RSA absolute TSR underpin will remain.
6) Subject to the achievement of the absolute TSR underpin, new
Restricted Share Plan awards for Executive Directors will vest 100%
on the third anniversary of grant and will be followed by a two-year
holding period, making a total restricted period of five years. The
current policy is for 50% of shares to vest after three years and 25%
after each of years four and five with no subsequent holding period
in any year. RSAs granted under the current policy will continue to
vest in this way.
7) The holding period for any deferred bonus shares and the holding
period for new RSAs will continue to apply post-cessation
of employment.
8) In addition, a post-cessation shareholding policy will be introduced
at 2 x salary for the first year and 1 x salary for the second year
post-cessation of employment. Deferred bonus shares and RSAs
that have vested, will count towards these limits (even if they are
being held subject to a holding period).
Our remuneration principles which apply across all levels of our
organisation are simplicity, alignment and longterm share ownership.
We believe the new policy helps us to achieve each of these.
How we have rewarded performance and
strategic progress in FY20.
Results for FY20
FY20 saw an exceptional performance in a challenged retail market,
with consistent revenue growth across the Group and excellent
progress across all pillars of our pet care strategy resulting in
underlying profit exceeding market expectations. Highlights include:
• Group total revenue growth of 10.2%, with Retail revenue up 9.4%
like for like and Vet Group LFL revenue up 5.6%;
• Vet Group LFL customer sales growth across all First Opinion
practices of 13.5% and Joint Venture practices of 13.2%.
• The completion of our Vet Group recalibration;
• Year-on-year VIP membership growth of 24% to 5.6 million
• Subscription customers increasing to over 865,000;
• Total dividend payable of 7.5 pence per share.
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Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Directors’ Remuneration Report continued
We have continued our transition in increasing the percentage of our
total revenue from pets services, with now 16 stores refitted into our
new format, and record sales from grooming services (see page 15
for more details). In the Vet Group the underlying performance of the
Joint Venture First Opinion practices continued to improve across a
range of metrics (see page 15 for further details). Overall as outlined
in the Chairman and CEO statements the business performance has
been very strong in a continually challenging market.
Remuneration for FY20
-
Annual bonus (detailed information on page 125): The Executive
Directors were assessed against stretching PBT and cash flow
targets. Underlying PBT, on a like for like basis excluding the impact
of IFRS16, was £99.5m, representing an increase of £9.8m on FY19,
which was above the maximum target. Free cash flow after interest,
tax and before acquisitions was £92.4m before purchase of own
shares, and £89.6m after purchase of own shares (FY19: £65.5m
before purchase of own shares, and £63.6m after purchase of own
shares) which also exceeded the maximum target. As a result, the
annual bonus paid out at 100% of potential. It is important to note
that with respect to both metrics, the bonus outcome would have
been the same even with a normalised final period i.e. excluding
the spike in trading caused by COVID-19 in the last three weeks of
the trading year.
- COVID-19: The Committee carefully considered whether the
bonus outcome should be adjusted or payment deferred due to
the uncertainty caused by COVID-19. However after significant
assessment and in the light of the Company’s ability to continue
to pay its final dividend to shareholders and in recognition of the
pay decisions that have been made in respect of all colleagues,
the Committee has decided that the fairest outcome for all
colleagues, including the Executive Management Team, is to pay
bonus on the usual payment date as planned without adjustment
given the hard work and dedication of all colleagues over FY20.
-
Restricted Stock Plan (more information on page 125): The 2017
awards were subject to an absolute TSR underpin which was met,
therefore awards will vest according to the relevant timetable. For
Executive Directors this means 50% immediately, 25% in 2021 and
the remaining 25% in 2022.
The Committee has reviewed the outcomes of the variable incentive
plans as well as the overall levels of remuneration to ensure that,
notwithstanding the impact of COVID-19, they remain consistent with
the underlying performance of the business and are in line with both
colleague and shareholder experience. On this basis, we are satisfied
that this is the case.
Remuneration for FY21
-
Salary review (more information on page 130): The Committee
concluded that having taken stakeholder feedback and considered
the relative market comparisons the CEO’s base pay has fallen
behind the general market level for equivalent roles and as such
that the package is considered uncompetitive and therefore poses
a risk both to retention and succession planning. We therefore
propose a salary increase of 9%. We also propose an increase of
2.5% for the CFO, slightly less than the pay review budget for the
wider workforce.
- COVID-19: We have delayed the effective date of these changes
until later in the year when we hope to have more certainty about
the impact of COVID-19 on our business. Therefore, these increases
will be effective at the earliest from 1 October 2020 but may be
deferred for the entire financial year at the Committee’s discretion.
114
- Annual bonus (more information on page 130): The annual bonus
will be structured in accordance with the same parameters set out in
the Policy with no more than 25% of the annual bonus based on
performance against non-financial measures. Bonus maxima for FY21
will be unchanged at 100% of salary for both the CEO and CFO, even
though new policy limits are being submitted for approval at the
2020 AGM. One third of any bonus paid will be deferred into shares
for two years when the new policy limit is implemented.
- COVID-19: Given the uncertain trading environment, setting
stretching, meaningful performance measures and targets that will
be accurate is currently impossible. We will continue to monitor the
situation and set robust performance measures and targets as soon
as is reasonable, which we anticipate being soon after the first
quarter. These targets will then be disclosed retrospectively at the
end of the performance year as usual.
- Restricted stock awards (more information on page 130):
2020 awards will be made in June and subject to the absolute
TSR underpin. The new three-year vesting schedule and two year
post-vest holding period as outlined above will apply to these
awards subject to approval at the 2020 AGM. However, the
Committee is mindful of the current COVID-19 potential impact
on share prices and has indicated that if necessary, it will use its
discretion to prevent any windfall benefit arising in the future.
Closing remarks
As ever, we would welcome any feedback or comments on this
report. We have already actively consulted with many of our
shareholders during the formulation of our new proposed policy and
as always we remain committed to considering all our shareholders'
views. We believe that the new remuneration policy ensures that the
interests of the Executive Directors are aligned with those of our
shareholders, our colleagues and our wider stakeholders.
At our AGM on 9 July 2020 we will be asking shareholders to pass
resolutions on:
• Our new Directors' remuneration policy.
• Our Directors’ Remuneration Report which sets out how we have
applied our existing policy during FY20.
I would like to thank the shareholders who took part in the
consultations on our new remuneration policy and we hope that all
our shareholders will support these resolutions.
Finally, I would like to highlight that this will be my last report as
Chairman of the Committee. Having served in the role since 2015,
I will be resigning from the role and stepping down from the Board
following our AGM on 9 July. Sharon Flood will be succeeding me in
the role and I would like to wish Sharon every success in the future in
her new role.
Paul Moody
Chair of the Remuneration Committee
21 May 2020
Pets at Home Group PlcAnnual Report and Accounts 2020
Our Directors’ remuneration Policy
Directors’ remuneration policy
The Committee considered a range of materials when undertaking the policy review including:
• Feedback following interviews with 12 key internal stakeholders (including Executive and Non-Executive Directors,
HR and Reward and other management team members) as well as feedback obtained from our colleague listening
programme further details on which can be found at page 113;
• Consultations with investors received prior to the 2019 AGM;
• Proxy agency reports on our FY19 DRR;
• The feedback received from Director engagement with our largest shareholders and their proxy advisors undertaken
between December and January on the potential changes in our policy;
• Company performance over the policy review period;
• Recent governance updates, including the 2018 UK Corporate Governance Code;
• The total pay opportunity in comparison to highly relevant external market benchmarks;
• The experience of our colleagues, shareholders and wider stakeholders.
(a) Introduction
The Committee presents our Directors’ remuneration policy (the Policy) which will apply to all of the Executive Directors and the Non-Executive
Directors (as well as any individuals who may become Directors or cease to be Directors whilst this Policy is in effect). This will be put to the
shareholders for binding vote at the Annual General Meeting on 9 July 2020 and become effective on the date it is approved.
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.
The charts below show how each Executive Directors' remuneration under the new Policy when fully implemented is weighted between fixed
and performance elements and how different performance scenarios influence total remuneration.
G
o
v
e
r
n
a
n
c
e
r
e
p
o
r
t
Pay and performance
analysis
Chief Executive Officer
Peter Pritchard
Chief Financial Officer
Mike Iddon
Base Pay, Benefits & Pensions
Bonus
Long-term incentive
Maximum
Target
Minimum
Maximum
Target
Minimum
48%
21%
32%
28%
31%
40%
100%
£500,000.00
£1,000,000.00
£1,500,000.00
£2,000,000.00
33%
42%
100%
45%
22%
25%
29%
£250,000.00
£500,000.00
£750,000.00
£1,000,000.00
£1,250,000.00
A significant portion of the package is performance related via the annual bonus plan and total remuneration is reviewed annually
considering business performance and prevailing conditions. We routinely benchmark our total remuneration against similar positions
within comparable companies.
Annual Report and Accounts 2020
Pets at Home Group Plc
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Strategic reportFinancial statements
Our Directors’ Remuneration Policy continued
Remuneration principles
The objectives of our Directors’ remuneration policy are:
Strategy
Culture
Retention
Shareholders
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 reward in ways that support delivery of our integrated pet care strategy.
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.
To simplify and therefore enhance perceived value of awards and thereby reduce flight risk.
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 and any bonus achieved is paid 2/3rd cash
and 1/3rd shares with a two-year deferral period to ensure a link with longer term performance and shareholder experience.
• Full disclosure of bonus – commitment to disclosing all target ranges on a retrospective basis at the end of the financial
year in question.
Underpin
Share price
• 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 inherently links pay to performance.
• Build-up of shareholding, long term vesting and holding horizon and post-cessation shareholding guidelines incentivise
Executive Directors to increase focus on long term, sustainable performance and value creation.
Pay element – Fixed pay
Operation
• Base salaries are paid in cash and are pensionable.
• Base salaries will be reviewed annually by the Remuneration
Committee. Any changes will usually take effect from 1 October
in line with the wider management and salaried colleague
group. The Committee takes into consideration a number of
factors when setting salaries, including (but not limited to):
– Size and scope of the individual’s responsibilities;
– The individual’s skills, experience and performance;
– Typical salary levels for comparable roles within appropriate
pay comparators, including practice for retail companies and
the broader FTSE 250; and
– Pay and conditions elsewhere in the Group.
Maximum opportunity
• Whilst there is no maximum salary level, 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 individual’s
role; and
– Development of the individual within the role.
Changes
Annual review date moved to 1 October to align with wider
colleague salaried groups.
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.
Changes
No change
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 any reasonable home working
and/or certain mobility costs, such as relocation support,
expatriate allowances, temporary living and transportation
expenses in line with the prevailing home working and/or
mobility policies 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.
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.
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Pets at Home Group PlcAnnual Report and Accounts 2020 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
Maximum opportunity
• The employer contribution level for any new executive
Plan, or to personal pension schemes or cash allowances in lieu
of contributions are paid.
appointments to the Board post 26 March 2020 will be capped at
the rate provided to the majority of salaried colleagues from time
to time (currently 6.5%).
• The employer contribution level for any new executive
appointments to the Board post 26 March 2020 are capped at
the rate provided to the majority of salaried colleagues from time
to time (currently 6.5%).
Changes
• For new hires, the pension policy maximum has been reduced
from 15% to the rate provided to the majority of salaried colleagues
(currently 6.5%).
• The maximum for incumbent Executive Directors is reduced from
15% to their current level of 9%, and will be aligned to the same
maximum rate as for new hires by the end of FY22.
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.
Maximum opportunity
The maximum bonus
opportunity shall be 170%
of base salary for the CEO
and 150% of base salary for
the CFO provided 1/3 of
any bonus achieved will be
paid in shares (or share
awards) and subject to a
two year holding period.
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.
• The Committee may amend the performance targets
and measures during the relevant financial year
if events occur which result in the original targets
and measures no longer being a fair measure of
performance.
• The Committee may amend formulaic bonus
outcomes if they do not reflect the wider shareholder
experience over the period or the performance of the
Executive Director in delivery of the business strategy
and results.
• Malus and clawback provisions apply to these awards
in circumstances as set out on page 121 of the policy.
• Change of control provisions apply as set out on
page 121 of the policy.
• Leaver provisions apply as set out on page 121
of the policy.
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 performance metrics for the annual
bonus for the Executive Directors are set out
retrospectively within the Annual Report.
Changes
• The policy maximum bonus opportunity
available has increased from 100% to 170% for
the CEO and 150% for the CFO.
• A new bonus deferral mechanism has been
added to coincide with the increase in bonus
opportunity with 1/3 of any achieved bonus
paid in shares and subject to a 2 year holding
period.
• Wider discretion has been granted to the
Committee to amend formulaic bonus
outcomes if they do not reflect the wider
shareholder experience over the period or
the performance of the Executive Director in
delivery of the business strategy and results.
Previously discretion only applied to amend
performance targets and measures. In both
cases, where discretion is applied this will be
summarised within the Annual Report.
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Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Our Directors’ Remuneration Policy continued
Maximum opportunity
The maximum value of
restricted shares that may
be awarded in respect of
any financial year for new
hires effective 27 March
2020 may be up to 100% of
salary. Existing Executives
may only be awarded a
maximum of 75% of salary.
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.
Changes
• Awards have to be held for a total of five years
before they can be sold.
• The Committee may now award up to 100%
RSP to new hires only, which is an increase on
the current maximum of 75%.
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
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. (other than partially, to facilitate the net-
settlement of an award).
• No award will vest under the RSP unless the TSR
principle of embedding
share ownership across
the organisation.
• To assist with
succession planning.
underpin has been achieved.
• 100% of the award will vest on the third anniversary of
grant, subject to the achievement of the TSR underpin
and continued employment.
• Following vesting, the award will vest after three years
followed by a two-year holding period until the fifth
anniversary of grant. If the vested award is exercised
during this two-year period, the net number of
shares acquired (after taxes have been settled) must
continue to be held (and cannot be sold) until the fifth
anniversary of grant.
• 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 and, in the
case of a vested but unexercised awards, the holding
period.
• Malus and clawback provisions apply to these awards
in circumstances as set out on page 121 of the policy.
• Change of control provisions apply as set out on page
120 of the policy.
• Leaver provisions apply as set out on page 121 of the
policy.
SAYE 1
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 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 out of taxed income).
• Options are normally granted at a discount to market
price at the time of invitation, as per HMRC regulations
(currently a maximum of 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.
Performance measures
• There are no performance measures attached
to awards under the SAYE.
Changes
No change
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.
Performance measures
n / a.
Changes
No change
Maximum opportunity
• Current fee levels can be
found on page 126.
• 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.
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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 July 2017.
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 CSOP,
PSP and RSP, the terms of which are detailed in the previous policy that was approved by shareholders at the Company’s AGM in July 2017.
Remuneration Committee discretion
As described elsewhere in this Policy, the Committee may exercise its discretion to (i) determine the size of the annual bonus and restricted
share plan awards granted to Executive Directors; (ii) set the performance measures and targets attaching to the annual bonus and restricted
share plan awards granted to Executive Directors; (iii) amend such performance measures and targets if events occur which result in the original
measures and targets no longer being a fair measure of performance; (iv) override the formulaic outcomes of such performance measures and
targets to ensure that payments under the annual bonus plan and restricted stock plan reflect the underlying performance of the business or
of the Executive Director concerned; (v) decide whether and to what extend dividend equivalents should apply to awards under the deferred
share bonus arrangements and/or the restricted stock plan; (vi) apply malus and clawback; (vii) adjust the shares subject to the deferred share
bonus arrangements, the SAYE options and the restricted stock plan awards in the event of a variation of the Company's share capital (or similar
corporate event); (viii) apply the holding period; (ix) apply the leaver provisions; and (x) apply the change of control provisions.
In addition, the Committee may exercise its discretion in order to make such other non-material decisions affecting the Executive Directors'
awards in order to facilitate the administration of the annual bonus plan, RSP and SAYE respectively. Any and all decisions will be made within
policy maxima and in accordance with the applicable plan rules. Use of discretion will be disclosed in the relevant Directors’ Remuneration Report.
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.
• Transparency – our Policy seeks to reflect our culture and values in being open and transparent about our reward offering at all levels in our
organisation, from how we operate reward in our supply chain and stores, right through to our Support Offices.
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(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.
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 maximum level of opportunity will be no greater than that set out in the Policy
Table above i.e. in line with the rate provided to the majority of our salaried colleagues,
unless the Executive Director is appointed from within the business, in which case the
rate will be as set out for incumbent Executive Directors in the policy table on page 116.
Short term
incentives
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. 170% of base salary for the CEO and 150% for the CFO).
Long term
incentives
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.
Buy-out awards
• 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.
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 as
set out under legacy matters on page 119.
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 maximum level of opportunity will be no
greater than that set out in the Policy Table
above (i.e. 75% of base salary for current
Executive Directors and up to 100% of salary
for new hires effective 27 March 2020 onwards).
• 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 as set out under legacy matters
on page 119.
• 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.
(c) Service contracts and loss of office arrangements
The Committee’s policy on service contracts and termination arrangements for Executive Directors is on page 121. 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. For the avoidance of doubt, Non-Executive
Directors will not receive compensation for loss of office.
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The key employment terms and conditions of the current Executive Directors, as stipulated in their service contracts, are set out below:
• The Committee’s policy is not to award an annual incentive for any
• Where an Executive Director leaves office during a performance year,
Area
Policy and operation
Notice period
• The service contract for Peter Pritchard provides for a notice period of
12 months from the Company and six months from the individual.
• The service contract for Mike Iddon provides for a notice period from
both the Company and the individual of six months.
Contractual
payments
Short term
incentives
• Executive Directors’ service contracts allow for termination 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
misconduct.
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.
Long term
incentives
• The treatment of unvested long term incentive awards is governed by
the rules of the relevant incentive plan, which are summarised below:
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.
• Under the RSP, the default position is for vested awards to be
exercisable on the usual date 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
continue to subsist until the relevant vesting date(s), subject to
satisfaction of the performance conditions/financial underpin and
pro-rated for time served.
• 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 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.
• Payment in lieu of notice will be limited to base salary and 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.
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.
• Where an Executive Director holds shares pursuant to a deferred share
bonus arrangement, the shares will be retained upon a loss of office
event but the holding period will continue to apply (unless the
Committee determines otherwise in its absolute discretion).
• Deferred shares that are subject to a holding period will still count
towards the Company's post-cessation shareholding policy (in force
from time to time).
• 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.
• Either way, vested RSP awards (or the shares acquired upon the
exercise of vested RSP awards) will continue to be subject to a
two-year holding period upon a loss of office event (unless the
Committee determines otherwise in its absolute discretion).
• 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).
• Vested (but unexercised) awards under the CSOP, PSP, RSP and SAYE
will count towards the Company's post-cessation shareholding policy
(in force from time to time), including vested RSP awards (or shares
acquired upon the exercise of vested RSP awards) that are subject to a
holding period.
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 RSP, any holding periods applicable to vested awards
(including awards that vest early because of the change of control) will
fall away on/immediately prior to the change of control.
• Under the CSOP, the PSP 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.
• Under any deferred share bonus arrangements, any holding periods
applicable to deferred shares will fall away on/immediately prior to a
change of 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.
Malus and
clawback
• Annual bonus payments and long term incentive awards (but not
• Any material breach of a participant’s terms and conditions of
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;
employment; and/or any material violation of Company policy, rules of
regulation.
• Serious reputational damage or material loss caused by the participant’s
actions; and
• Material contravention by the participant of the Company’s ethics and
values.
• Malus and clawback will continue to apply to any bonus payments or
awards retained by leavers and/or on a change of control.
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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
Fees
Expiry of
current term
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.
• As set out on page 126.
• See page 96 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.
(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 below provide illustrative values of the remuneration package for Executive Directors in FY21, prior to any salary increase not
yet awarded and after deferral of any policy changes until FY22, under three assumed performance scenarios and including an example of the
impact on RSP should the share price increase by 50%.
Illustrative example under the RSP
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
£1,377,367
£564,3731
£989,006
£252,042
£403,9232
£560,952
£180,372
£404,711
£1,629,409
£564,373
£1,169,378
£504,084
£560,952
£403,923
£360,744
£404,711
£560,952
100%
£404,711
100%
Minimum
Meeting expectations
Maximum
£1,914,572
£285,163
£564,373
£1,373,470
£204,092
£504,084
£560,952
£403,923
£360,744
£404,711
Maximum
+ 50% Share Price Increase
Group Chief Executive Officer
Group Chief Financial Officer
Fixed pay
Annual bonus
RSP
50% Share Price Increase in RSP value3
Fixed pay
Annual bonus
RSP
50% Share Price Increase in RSP value3
These charts are for illustrative purposes only and actual outcomes may differ from those shown.
1 207,157 options granted 2019, closing share price £2.724 March 26
2 148,263 options granted 2019, closing share price £2.724 March 26
3 Based on 3 month average share price up to financial year end
122
Pets at Home Group PlcAnnual Report and Accounts 2020 Scenario
Fixed pay
All performance scenarios
Variable pay
Minimum Performance
On-target performance
Maximum performance
Impact of 50% share
price increase over the period.
Assumptions
• Consists of total fixed pay, including base salary, benefits and pension
• Base salary – excludes any potential salary increase not yet awarded.
• Benefits – amount estimated to be received by each Executive Director in FY21
• Pension – based on existing 9% contribution levels.
• 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 for the CEO and 50% for the CFO)
• 100% vesting under the RSP (i.e. 75% of salary)1
• 100% of the maximum pay-out under the annual bonus (i.e. 100% of salary for the CEO and 100% for the CFO)
• 100% vesting under the RSP (i.e. 75% of salary)
• Based on the 3 month average share price up to the end of the financial year FY202
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. Any legacy awards made in accordance with the policy for 2014 which Executive Directors hold have been excluded.
Table showing fixed and variable pay components:
Base salary
Benefits
Pension
Total fixed pay
Bonus maximum
RSP value at grant
Total variable pay
Total
Chief Executive Officer
£504,084
£11,500
£45,368
£560,952
£504,084
£378,063
£882,147
£1,443.099
Chief Financial Officer
£360,744
£11,500
£32,467
£404,711
£360,744
£270,581
£631,302
£1,036,036
(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 any proposed salary increases
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 including any pulse surveys specifically dedicated
to pay and benefits. The appointment of Paul Moody as the Non-Executive with responsibility for consultation with the wider colleague
population also ensures that our colleagues’ voice is heard by the Remuneration Committee and gives them direct access to the Remuneration
Committee Chair via our listening sessions. This will continue under our new incoming Remuneration Committee Chair Sharon Flood. In
addition, during the COVID-19 crisis the buddy programme has given colleagues across the Group the chance to directly engage with both
the CEO and CPCO in raising concerns and feeding into solutions to address issues including remuneration matters. Further details on this are
outlined in the Chief Executive’s statement in this report on page 16.
A significant number of our colleagues are also shareholders and so are able to express their views on remuneration in the same way as
other shareholders.
123
Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Annual Report on Remuneration continued
(f) Consideration of shareholder views
The Committee has always been committed to dialogue with the Company’s shareholder base; we consulted actively with shareholders during
the formulation of our 2017 policy, and in the creation of our RSP made changes to the scheme including the introduction of an absolute TSR
underpin following shareholder feedback. Which is why prior to finalising our new Policy for FY21 onward we consulted directly with our major
shareholders and their proxies to gather opinion on thoughts and direction in amending our Policy to both comply with the new regulations
and in order to be fit in supporting our strategic direction.
Our major shareholders were written to outlining the approach we took to our review and the conclusions that came out of it, including a high
level overview of our potential policy changes, and the supporting rationale for our decisions. These shareholders and their proxies were then
given the opportunity to feedback their views and opinions to the Committee Chair before a final decision on the Policy was taken. Clarification
was sought on a number of points by these shareholders but the overall response was supportive with recognition of the performance of both
the Company and the CEO over the last two years.
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.
Having concluded our consultation on the design of the new remuneration Policy we are pleased to be presenting it to the AGM and firmly
believe it ensures that the interests of the Executive Directors are aligned with those of our shareholders.
(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.
2. Annual Report on Remuneration
a) Directors’ remuneration – report on implementation for the year ended 26 March 2020
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
(2017 Policy), has been applied in the financial year being reported on. The new Policy proposed for adoption for the next financial year will be
voted on at the AGM. A copy of the 2017 Policy can be found on the Group’s website https://investors.petsathome.com/ar2017/ within our
Corporate Governance report.
The information presented from this section up until the relevant note on page 127 represents the audited section of this report.
(b) Single total figure of remuneration for Executive Directors for the year ended 26 March 2020
The following table sets out the total remuneration for Executive Directors for the year ended 26 March 2020. All payments are in line with the Policy.
Director
FY20
Peter Pritchard
Mike Iddon
FY19
Peter Pritchard1
Ian Kellett2
Mike Iddon
Base
salary
(£)
504,084
360,774
465,308
83,856
353,700
Benefits
(£)
Pension
(£)
11,500
11,500
10,615
2,038
11,500
45,368
32,470
41,878
10,063
31,833
Annual
bonus
(£)
504,084
360,774
374,604
Nil2
300,645
Long term
incentives
(£)
564,3735
403,9235
37,8934
Nil
Nil3
Total
(£)
1,601,691
1,212,732
930,298
95,957
697,678
Ian Kellett stepped down from his role as CEO effective 26 April 2018 and his remuneration reflects his leaving the business on 31 May 2019; he was not entitled to any bonus for FY19.
1. Peter Pritchard was appointed on 27 April 2018 as Group CEO, therefore his base pay and benefits are included from this date and are not shown for the full year.
2.
3. Mike Iddon did not receive a Co-Investment Plan Award in 2014 as this was prior to his joining the Company.
4.
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 in 2017 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 were 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 were 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. The final third tranche of shares vested on 17 March and were made available on the first working day being 18 March 2019. The value is based on the share price of 160p being the
share price on 15 March 2019, being the last working day before the shares were released.
The performance conditions of the CSP and PSP plan were not met and therefore lapsed in their entirety in 2019. The 2017 RSP will vest in full on 25 July 2020 since the absolute TSR underpin which is calculated as at
the end of FY20 has been achieved. The value has been calculated using 272p being the three month average share price prior to the financial year end which corresponds to the end of the performance period.
The true value will vary due to the phased release over the three years: 50% in FY21, 25% FY22 and 25% FY23, and will be subject to the share price at the time.
5.
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.
124
Pets at Home Group PlcAnnual Report and Accounts 2020 Annual bonus
The Executive Directors were assessed against stretching PBT and cash flow targets. Underlying PBT, on a like for like basis excluding the impact
of IFRS16, was £99.5m (£93.5m post IFRS16), representing an increase of £9.8m on FY19, which was above the maximum target. Free cash flow
after interest, tax and before acquisitions was £92.4m before purchase of own shares, and £89.6m after purchase of own shares (FY19: £65.5m
before purchase of own shares, and £63.6m after purchase of own shares) which also exceeded the maximum target. It is important to note that
with respect to both metrics, the bonus outcome would have been the same even with a normalised final i.e. excluding the spike in trading
caused by COVID-19 in the last three weeks of the trading year.
• The maximum annual bonus opportunity for Executive Directors in respect of FY20 was 100% of base salary.
• For FY20, Executive Directors have an annual bonus based on Group PBT (75%) and Group FCF (25%).
• Free cashflow was set at Group level 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.
The table below shows the targets set on a post IFRS basis, and the achieved pay out levels for Executive Directors:
Performance measures
Group PBT (post IFRS16)
Group free cashflow
Total
% Base salary
75%
25%
100%
Target
Minimum
£77m
£51.3m
Maximum
£86m
£57.3m
£m
£93.5m
£92.4m1
Achieved
%
100%
100%
100%
Total
%
75%
25%
100%
1
As we approached the end of our financial year, the impact of COVID-19 in the UK meant that we experienced exceptionally high levels of demand, notably across food products, both in-store and online. This
translated in part to the over-delivery against our free cash flow target. It is noted that even without the exceptional demand driven by COVID-19, the Group was still on track to deliver in excess of the maximum free
cash flow target of £57.3m.
In order to achieve full pay-out the Committee had set stretching targets which required the individuals to deliver performance which
significantly exceeded business expectations. The Committee has reviewed whether the payments achieved do reflect the wider business
performance and the experience of shareholders during the year.
The Committee carefully considered whether the bonus outcome should be adjusted or payment deferred due to the uncertainty caused by
COVID-19. However after significant assessment and in the light of the Company’s ability to continue to pay its final dividend to shareholders and
in recognition of the pay decisions that have been made in respect of all colleagues, the Committee has decided that the fairest outcome for all
colleagues, including the Executive Directors, is to pay bonus on the usual payment date as planned without adjustment given the hard work
and dedication of all colleagues over FY20.
Long term incentives
Awards granted under the CSOP and PSP for 2016 vested in June 2019 subject to the performance metrics as agreed at the time and
outlined in the table below:
Performance metric
Earnings Per Share
TSR relative to the FTSE 350
Targets
EPS CAGR
<10% = No pay out
10% = 10%
10% -17.5% = Pro rata between 10% and 75%
75% = 75%
Below Median = no pay out
Median = 6.25%
Median to UQ = 25%
Performance achieved
EEPS CAGR FY16 – FY19 2.4%.
Nil vesting.
TSR performance negative 34% (FTSE 350 UK General Retail
Index: negative 18%).
Nil vesting.
Awards for the Executive under the RSP granted in 2017 with the agreed TSR underpin will vest in July 2020. The 2017 awards were subject to
an absolute TSR underpin which was met, therefore awards will vest according to the relevant timetable. For Executive Directors, this means
50% immediately, 25% in 2021 and the remaining 25% in 2022. The absolute TSR was calculated using a standard methodology that calculates
returns to shareholders based on change in share price and dividends paid to shareholders, assuming that those dividends are reinvested into
Pets at Home shares. The averaging period for TSR and share price was 3 months prior to the start and end of the performance period for the
2017 award.
The Committee has reviewed the outcomes of the variable incentive plans as well as the overall levels of remuneration to ensure that,
notwithstanding the impact of COVID-19, they remain consistent with the underlying performance of the business and are in line with both
colleague and shareholder experience. On this basis, we are satisfied that this is the case. In light of this, the Committee decided not to make
any adjustments.
Performance metric
TSR
Targets
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.
Performance achieved
TSR performance positive 58.7%
Underpin met and award vesting will be 50% in 2020,
25% 2021, 25% 2022.
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Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Annual Report on Remuneration continued
(c) Single total figure of remuneration for Non-Executive Directors for the year ended 26 March 2020
The following table sets out the total remuneration for Non-Executive Directors and the Chairman of the Board for the year ended 26 March 2020.
Basic
fees
(£)
200,000
50,000
n/a
50,000
50,000
50,000
50,000
Additional
fees
(£)
n/a
20,0001
n/a
n/a
n/a
n/a
n/a
Remuneration
Committee
Chair
(£)
n/a
n/a
n/a
10,000
n/a
n/a
n/a
Audit & Risk
Committee
Chair
(£)
n/a
n/a
n/a
n/a
n/a
10,000
n/a
Nomination
& Corporate
Governance
Committee
Chairman
(£)
n/a
n/a
n/a
n/a
n/a
n/a
n/a
CSR and Pets
Come First
Committee
Chair
(£)
n/a
n/a
n/a
n/a
n/a
n/a
10,000
Total single
figure 2020
(£)
200,000
70,000
n/a
60,000
50,000
60,000
60,000
Total single
figure 2019
(£)
200,000
70,000
18,642
60,000
50,000
60,000
46,154
Director
Tony DeNunzio
Dennis Millard 1
Tessa Green 2
Paul Moody
Stanislas Laurent
Sharon Flood
Prof Susan Dawson 2
1 The additional fee paid to Dennis Millard is in respect of his position as Deputy Chairman of the Board and Senior Independent Director.
2 Tessa Green resigned from the Board on 12 July 2018 and Prof Susan Dawson was appointed to the Board on 12 July 2018.
(d) Scheme interests awarded during the financial year
In FY20 Executive Directors received RSP awards in line with the Policy as follows:
Executive Director
Peter Pritchard
Mike Iddon
Date of award
30 May 2019
30 May 2019
Number of shares
awarded under the RSP
207,157
148,263
Grant price of
RSP awards
Nil cost awards
Nil cost awards
% of salary for
total awards
75%
75%
Performance
period end date
24 March 2022
24 March 2022
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 182.5p.
The awards were made subject to the satisfaction of the achievement of the absolute TSR underpin at the end of the performance period of
the three financial years (FY20-FY22). A positive absolute TSR using a standard methodology that calculates returns to shareholders based on
change in share price and dividends paid to shareholders, assuming that those dividends are reinvested into Pets at Home shares, is required in
order for the awards to vest. The averaging period for TSR and share price was 3 months prior to the start and end of the performance period
for the 2019 award. 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.
(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.
Under the new remuneration Policy applicable from FY21 onwards it is proposed that Executive Directors will also be subject to a post cessation
shareholding requirement of 200% of salary for 1 year and 100% of salary for two years.
The Committee reviews share ownership levels annually.
126
Pets at Home Group PlcAnnual Report and Accounts 2020 Current shareholding levels for Directors are set out in the table below:
Director
Peter Pritchard
Mike Iddon
Tony DeNunzio
Dennis Millard
Paul Moody
Stanislas Laurent
Sharon Flood
Prof Susan Dawson
Shareholding
requirement
as a % of salary
(target – % achieved)1
1432.3.%
97.5%
–
–
–
–
–
–
Interests in share
incentive schemes,
awarded without
performance
conditions at
26 March 2020
19,116
19,116
–
–
–
–
–
–
Number of shares
Interests in share
incentive schemes,
awarded subject
to performance
conditions at
26 March 2020
674,085
505,638
–
–
–
–
–
–
Shares owned
outright at
28 March 2020
2,664,214
129,855
3,713,026
30,000
27,470
30,000
60,088
0
Shares owned
outright at
28 March 2019
3,024,214
129,855
3,713,026
30,000
27,470
30,000
60,088
0
1 For the purposes of determining the target shareholding achieved, we have used the individual’s salary and the closing share price (£2.71 pence) as at 26 March 2020 and the shares owned outright at the same date.
This represents the end of the audited section of the report.
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 FY20. This disclosure will be expanded in subsequent years in line with the regulations.
160
140
120
100
80
60
40
Mar
2014
Mar
2015
Mar
2016
Pets at Home
FTSE 350
FTSE 350 Gen Retailers
CEO
CEO single figure of remuneration
Annual bonus pay-out
(as % of maximum opportunity)
Long term incentive vesting
(as % of maximum opportunity)
Peter Pritchard 7
Ian Kellett 2
Nick Wood 3
Peter Pritchard
Ian Kellett
Nick Wood
Peter Pritchard
Ian Kellett
Nick Wood
FY141
–
–
19,460
–
–
73%
–
–
n/a
Mar
2017
FY15
–
–
790,461
–
–
75%
–
–
n/a
Mar
2018
Mar
2019
Mar
2020
FY16
–
–
962,2244
–
–
60%
–
–
96%4
FY17
–
662,087
129,696
–
20.4%
–
–
16.8%6
–
FY18
–
575,953
n/a
–
n/a5
n/a
–
n/a
n/a
FY19
930,298
122,037
n/a
75.8%
n/a
n/a
16.8%
n/a
n/a
FY20
1,601,691
n/a
n/a
100%
n/a
n/a
100%
n/a
n/a
In FY14, the single figure of remuneration relates to the period 17 March 2014 to 27 March 2014.
Ian Kellett was appointed on 4 April 2016 and stepped down from his role on 27 April 2018 before leaving the Group effective 31 May 2018.
1
2
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.
4
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.
Ian Kellett waived his bonus for FY18.
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 in 2017 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 were 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 were 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. The final third tranche of shares vested 17th March and were made available on the first working day being the 18th March 2019. The value is based on the share price of 160p
being the share price on 15 March 2019, being the last working day before the shares were released.
Peter Pritchard was appointed on 27 April 2018 therefore his single figure remuneration as CEO for 2018/19 reflects this partial year of service in role. His FY20 single figure includes the full value of his total 2017 RSP
award which will vest on a phased basis in line with the Policy, 50% in July 2020 and 25% of the award will vest in each of years four and five. The true value will vary due to the phased release over the three years and
will be subject to the share price at the time.
5
6.
7
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Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Our Directors’ Remuneration Policy continued
(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 for FY20:
Chief Executive2
All colleagues 1
% Change in
base salary
FY19 to FY20
2.0%
2.78%
% Change in
bonus earned
FY19 to FY20
24.2%
27.38%
% Change in
benefits
FY19 to FY20
No change
No change
1 All colleague information is presented by comparing the average colleague information used in FY19 to the equivalent average colleague population in FY20.
2 The CEO information excludes the approved increase of 9% to base salary which has been deferred until later in FY21 at the earliest, which will not be back dated.
The table below sets out the historical changes in CEO annual increase compared to those granted to all colleagues as previously reported:
Chief Executive
All colleagues
% Change in
base salary
FY16
3%
3%
% Change in
base salary
FY17
6.4%
2%
% Change in
base salary
FY18
2%
2%
% Change in
base salary
FY19
2%
2.51%
% Change in
base salary
FY20
0%
2.78%
The 2017 CEO change reflects the appointment and promotion of Ian Kellett into the role of CEO replacing Nick Wood.
(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.
EBITDA 1
Returned to shareholders:
Dividend
Payments to colleagues:
Wages and salaries
FY20 £m
141.6
FY19 £m
130.0
FY18 £m
123.3
FY17 £m
130.5
37.1
213.1
37.2
187.8
37.3
181.0
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) Our CEO pay ratio FY20
This year for the first time we will be reporting our CEO ratio for the first time in line with the new Code requirements.
The table below sets out the single figure total remuneration of the CEO compared to the median, lower quartile and upper quartile of the
colleague population remuneration calculated on the same basis under methodology A of The Companies (Miscellaneous Reporting)
Regulations 2018. The ratio when calculated as required by the regulations can vary substantially from year to year as the CEO total remuneration
is more heavily weighted towards variable pay elements. For this reason, we have also included a base pay comparison which we believe will be
a more consistent method of comparison between each reporting year.
Base Pay (FTE)
Single figure remuneration
Ratio
CEO
£504,084
£1,601,691
25th%tile
29.7.1:1
89.6:1
Median
26.82:1
77.5:1
75th%tile
23:1
59.1:1
We expect to see substantial variations in our ratio as long term incentive plans and deferred bonus schemes mature creating substantial
variation in the ratio when compared at the single figure level. However, at the base pay level we believe our CEO ratio compares favourably
with the wider retail sector and comparable FTSE companies.
128
Pets at Home Group PlcAnnual Report and Accounts 2020 (l) Consideration of wider colleague pay
Our culture and colleague engagement
Pets at Home’s unique culture and high levels of colleague engagement continue to be a key differentiator in attracting talent to our Group.
Our regular colleague listening in all our divisions combined with our annual engagement survey and regular pulse surveys ensure that our
colleagues have a voice. Paul Moody in his role as Committee Executive for wider colleague engagement has attended executive and store
listening sessions this year where he was able to gauge the wider colleague population in their views on the senior leadership and management
of the business as well as seeing first-hand how our pet care strategy is coming to fruition.
The Committee also receives feedback on the results from the engagement and pulse surveys to ensure the colleague voice and opinions
from across the Group as well as our joint venture veterinary partners are heard and considered as part of our decision making.
The decision this year to appoint Louise Stonier to the new role of Chief People and Culture Officer, is designed to ensure that our unique
culture continues to thrive and is at the heart of all we do. I have enjoyed working closely with Louise on ensuring that our Committee delivers
an executive and wider workforce remuneration strategy that nurtures and reflects our culture. I am sure my successor will take as much
pleasure in engaging with our colleagues as I have.
During the current COVID-19 crisis the value we place on listening within our culture has been reflected in our response and the new buddy
programme involving both the CEO and CCPO has ensured that our colleagues have been engaged in the developing our response to the key
issues and challenges we have faced.
Colleague share ownership
It is pleasing that this pillar of our engagement strategy will start to come to fruition this year with the maturity of the first RSP plan which is
offered to both salaried and hourly colleagues at all levels. We will have enhanced the holdings or created new shareholders amongst over
5,000 of our colleagues and are starting to achieve our aim of widespread share ownership. All eligible colleagues received an award last year
and will do so again in 2020.
The Executive Management Team and Board will continue to actively encourage this process and we see it as a key differentiator in both
attracting talent and aiding colleague retention. We had a further offering of the Sharesave scheme in September 2019, with a take up
of 11%, and we believe the favourable business performance combined with the first maturity of the RSP will encourage further Sharesave
interest this year.
Colleagues with non performance related CSOP that vested in June 2019 saw the share price rise above the grant price and a significant number
remain in the scheme. We also saw colleagues who still have options from previous years' CSOP benefit from the share improvement over the
year with a number choosing to exercise options as the share price rose above water.
Gender Pay Gap report
We published our Gender Pay Gap report on 27 March this year and we decided this year to publish a combined Group figure. This does not
include figures for our Joint Venture, veterinary partnerships since these are all individual businesses owned by the veterinary partner(s).
Overall we are pleased with our numbers and the progress we made, however, there is still an imbalance. Whilst we are delighted we have over
50% female representation in management and senior management levels, our gender pay gap is caused by the factors we outlined last year;
we have more men than women in the higher paying STEM careers across both support offices and the veterinary specialist hospitals and more
women than men in our hourly paid roles.
At Group level, our quartile position is really positive with the three bottom quartiles having gaps of around 1% or less, continuing to give us
certainty on the fairness of our pay systems. Overall we have a mean gap of 17.9% with the gap being driven by the lower percentage of female
colleagues in the upper quartile roles.
We continued to publish reports for our Retail Division (Pets at Home Limited), our Vet Division (Companion Care Services Limited only which
is our Vet Group Support Office) and our Specialist Hospital, Dick White Referrals as those entities that require individual publication under the
gender pay reporting regulations.
In our Retail Division, we continue to see progress in our mean position with a drop of 0.5% to 17.2%. We can also see that within the bottom
three quartiles the gender pay gap is either around 1% or less or in some cases favours female colleagues. Our improvement is again driven by
our lowest earning colleagues receiving on average the highest percentage increases.
Within both our Vet Division and Dick White Referrals our mean position worsened to 29% and 63.3% respectively with pay inflation in
the higher level Specialist functions driving the Dick White Referral change in particular. Whilst the results for these two companies are
disappointing they are reflective of this sector and STEM sectors in general. We remain confident that with a greater proportion of female
talent in the development pipelines within these businesses that the positions will change in the medium to long term.
Our actions in supporting internal development through our leadership programmes and our commitment to the Be Inspired programme, as
outlined on page 74 of the Corporate Social Responsibility report, combined with our work on promoting dynamic working as outlined within
our gender pay report will all help address the current imbalance over the forthcoming years. A full copy of the full Gender Pay Gap report can
be found here https://investors.petsathome.com/responsibility/policies-and-procedures/gender-pay-gap-report/.
129
Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Our Directors’ Remuneration Policy continued
(m) 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 26 March 2020, the Company’s dilution position was 2.8% for all plans
and 1.8% for the Executive plans.
(n) 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.
(o) Non-Executive Directors – letters of appointment
A summary of the Non-Executive Directors’ letters of appointment is contained on page 122 of the report.
3. Statement of implementation for FY21
This section provides an overview of how the Committee is proposing to implement our Policy in FY21.
Base salary
The proposed increase for the CEO is 9%. The increase for the CFO is 2.5% which is slightly less than the average increase of 2.78% awarded
to colleagues across the Group. We have delayed the effective date of the salary changes until later in the year when we hope to have more
certainty about the impact of COVID-19 on our business. Therefore, these increases will be effective at the earliest from 1 October 2020 but
may be deferred for the entire financial year at the Remuneration Committee’s discretion. We have therefore shown two figures.
Executive Director
Chief Executive Officer
Chief Financial Officer
Base Salary until 1
October 2020
£504, 084
£360,744
Base salary post 1st
October 2020 if
implement pay review
£550,000
£370,000
Benefits
The Committee sets benefits in line with the Policy set out on page 116 of the report. There are no proposed changes in the benefits
Policy for FY21.
Pensions
Pension for incumbent Directors will be remain at the current level of 9% of salary.
Annual bonus
The maximum annual bonus opportunity for Executive Directors in respect of FY21 will remain at 100% for both the CEO and CFO regardless of
any newly approved policy maxima. Subject to shareholder approval, the Board has also agreed to introduce a 1/3 bonus deferral policy where
1/3 of bonus will be awarded in shares and not released until a two year holding period is complete. We believe this will support in maintaining
the alignment of Executive and shareholder interests.
The annual bonus framework will be in line with that presented in the Policy table on page 117. Given the uncertain trading environment setting
stretching, meaningful performance measures and targets that will be accurate is currently impossible. We will continue to monitor the situation
and set robust performance measures and targets as soon as is reasonable, which we anticipate being soon after our first quarter. These targets
will then be disclosed retrospectively at the end of the performance year as usual.
As with previous years, 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.
Long Term Incentive Awards
It is proposed that awards under the RSP will be made in FY21 following the preliminary results announcement at 75% of salary for Executive
Directors in line with the Policy and subject to the absolute TSR underpin. The new three-year vesting schedule and two year post-vest holding
period as outlined above will apply to these awards subject to approval at the 2020 AGM. However, the Committee is mindful of the current
COVID-19 potential impact on share prices and has indicated that if necessary, it will use its discretion to prevent any windfall benefit arising in
the future.
130
Pets at Home Group PlcAnnual Report and Accounts 2020 Sharesave
The Company intends to operate the Sharesave scheme again for FY21. 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 FY21. The table below shows the
Non-Executive Director fee structure for FY21:
Chairman of the Board (all-inclusive fee)
Basic Non-Executive Director fee
Board Committee Chair fee
Deputy Chairman and Senior Independent Director
There are no fees paid for membership of Board Committees.
FY20
£200,000
£50,000
£10,000
£20,000
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 operates 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 FY20
amounted to £79,149 (FY19: £64,694) based on the required time commitment.
During FY20 the Committee also received support from Travers Smith LLP on the terms of the discretionary and all-colleague share plans.
Committee membership and meetings
The Directors listed below in the table served on the Committee during the year. The Committee met four times during FY20 and the
Committee members’ attendance is also shown in the table below:
Member
Paul Moody (Chairman)
Dennis Millard
Sharon Flood
Prof Susan Dawson
Period from To
28 March 2019
28 March 2019
28 March 2019
28 March 2019
26 March 2020
26 March 2020
26 March 2020
26 March 2020
Meetings
attended
4/4
4/4
4/4
4/4
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
Tony DeNunzio
Louise Stonier
Peter Pritchard
Mike Iddon
Stanislas Laurent
Nick Rumble
Lucy Williams
Position
Chairman of the Board
Chief People and Culture Officer
CEO
CFO
Non-Executive Director
Group Head of Reward
Group Legal Director and Company Secretary
None of the individuals were involved in making decisions at meetings regarding their own compensation.
131
Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2020 Our Directors’ Remuneration Policy continued
Governance
The Board and the Committee consider that, throughout FY20 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.
Shareholder voting
At the Annual General Meeting on 11 July 2019, 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
To approve the Directors’ Remuneration Report for the year ended 28 March 2019
Votes for 1
% 2
Votes against
%
Votes total
% of isc 3
Votes withheld 4
1 Votes “for” include discretionary votes.
2 Percentages above are rounded to two decimal places.
Issued share capital at meeting date: 500,000,000.
3
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.
4
362,089,073
98.59
5,179,674
1.41
367,268,747
73.45
9,514,475
Annual General Meeting
As set out in my statement on page 112, our Directors’ Remuneration Report will be subject to an advisory vote at our AGM to be held
on 9 July 2020.
On behalf of the Board
Paul Moody
Chair of the Remuneration Committee
21 May 2020
132
Pets at Home Group PlcAnnual Report and Accounts 2020 Financial statements
Independent Auditor’s Report
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
134
142
142
143
Consolidated statement of changes in equity as at 26 March 2020 144
Consolidated statement of changes in equity as at 28 March 2019 144
Consolidated statement of cashflows
Company balance sheet
Company statement of changes in equity as at 26 March 2020
Company statement of changes in equity as at 28 March 2019
Company income statement
Company statement of cashflows
Notes (forming part of the financial statements)
Glossary – Alternative Performance Measures
Advisors and contacts
145
146
147
147
147
148
149
220
226
133
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020 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 year ended 26 March 2020 which comprise
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 cashflows, and the related notes, including the
accounting policies in note 1.
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 26 March 2020
and of the Group’s profit for the year 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 first appointed as auditor by the shareholders on 10 February
2014. The period of total uninterrupted engagement is for the 7
financial years ended 26 March 2020. 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.
Overview
Materiality:
group financial
statements as
a whole
Coverage
Risks of material
misstatement
£3.75m (2019:£3.75m)
4.0% (2019: 4.2%) of Normalised
Group profit before tax
95% (2019: 95%) of Group profit before tax
vs 2019
Recurring
risks
Carrying value of Group goodwill and parent
Company's investments in subsidiaries
Operating loans to joint venture practices
Carrying value of inventory
Accounting for Vets restructuring
Event
driven risks
The impact of uncertainties due to the UK
exiting the European Union.
Going concern
IFRS 16 lease arrangements (transition)
<
^
< >
^
< >
^
New
2. Key audit matters: including 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 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.
134
Pets at Home Group PlcAnnual Report and Accounts 2020 The impact of
uncertainties due to
the UK exiting the
European Union on
our audit.
Refer to page 104
(Audit and Risk
Committee Report),
page 149 (accounting
policy) and page 149
(financial disclosures)
Going Concern
including the impact
of COVID-19
Refer to page 105
(Audit and Risk
Committee Report),
page 149 (accounting
policy) and page 149
(financial disclosures).
The risk
Brexit uncertainty:
All audits assess and challenge the reasonableness
of estimates, in particular in relation to the
carrying value of the Group goodwill and the
parent Company’s investments in subsidiaries,
operating loans to joint venture practices and
related disclosures and the appropriateness of the
going concern basis of preparation of the financial
statements. All of these depend on assessments of
the future economic environment and the group’s
future prospects and performance.
In addition, we are required to consider the other
information presented in the Annual Report,
including the principal risks disclosure and the
viability statement, and to consider the Directors’
statement 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.
Brexit is one of the most significant economic
events for the UK and its effects are subject
to unprecedented levels of uncertainty of
consequences, with the full range of possible
effects unknown.
Disclosure quality:
The financial statements explain how the Board has
formed a judgement that it is appropriate to adopt
the going concern basis of preparation for the Group
and parent Company.
That judgement is based on an evaluation of the
inherent risks to the Group's and Company's business
model and how those risks might affect the Group's
and Company's financial resources or ability to
continue operations over a period of at least a year
from the date of approval of the financial statements.
The risks most likely to adversely affect the Group
and Company's available financial resources over this
period were:
• The uncertainty of the impact of COVID-19, with
the future range of possible effects currently
unknown to performance, given the rapidly
evolving nature.
• Market demand resulting from Brexit;
•
• Adverse fluctuations in foreign exchange rates.
Increased pressure from competitors; and
The risk for our audit was whether or not those
risks were such that they amounted to a material
uncertainty that may have cast significant doubt
about the ability to continue as a going concern.
Had they been such, then that fact would have been
required to have been disclosed.
Our response
We developed a standardised firm-wide approach to the consideration
of the uncertainties arising from Brexit in planning and performing our
audits. Our procedures included:
• Our Brexit knowledge: We considered the Directors’ assessment of
Brexit-related sources of risk for the Group’s business and financial
resources compared with our own understanding of the risks. We
considered the Directors’ plans to take action to mitigate the risks.
• Sensitivity analysis: When addressing the carrying value of Group
goodwill and the parent Company's investments in subsidiaries,
provisions to operating loans to joint venture practices and other
areas that depend on forecasts, we compared the Directors' analysis
to our assessment of the full range of reasonably possible scenarios
resulting from Brexit uncertainty and, where forecast cashflows are
required to be discounted, considered adjustments to discount rates
for the level of remaining uncertainty.
• Assessing transparency: As well as assessing individual disclosures
as part of our procedures on carrying value of Group goodwill and
the parent Company's investments in subsidiaries and provisions for
operating loans to joint venture practices we considered all of the
Brexit related disclosures together, including those in the strategic
report, comparing the overall picture against our understanding of
the risks.
Our results:
• As reported under the key audit matters ‘Carrying value of the Group
goodwill and the parent Company’s investments in subsidiaries’ and
‘Operating loans to joint venture practices’, we found the resulting
estimates and related disclosures, and disclosures in relation to going
concern, to be acceptable. However, no audit should be expected to
predict the unknowable factors or all possible future implications for
a company and this is particularly the case in relation to Brexit.
Our procedures included:
• Sensitivity analysis: Considering sensitivities over the Group’s future
cashflows and the level of available financial resources indicated
by the financial forecasts, including the Group’s COVID-19 adjusted
cashflows forecasts, taking account of reasonably possible (but not
unrealistic) adverse effects that could arise as a result of the forecast
decrease in sales post year end due to COVID-19;
• Historical comparisons: Evaluating the precision of previous financial
period's forecasts against actual results to assess historical accuracy;
• Assessing transparency: Evaluating management’s assessment of
the impact of COVID-19 and the adequacy of disclosures in relation
to the specific risks these pose. Considering throughout the audit
any contradictory information to management’s confirmation that
the company is a going concern, including evaluating whether the
assumptions are realistic and achievable and consistent with the
external and internal environment.
Our results:
• We found the going concern disclosure without any material
uncertainty to be acceptable (2019:acceptable). However, no audit
should be expected to predict the unknown factors or all possible
future implications for a company and this is particularly the case in
relation to COVID-19.
135
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020 Independent Auditor’s Report to the Members of Pets at Home Group Plc only
continued
The risk
Subjective estimate:
The Group has over 450 stores, the majority of which
are leased and the impact to the financial statements
this year of adopting IFRS 16 is therefore significant.
The calculation of lease liabilities involves assumptions
of the lease term and the discount rate, each of which
can have a material impact on the value of lease
liabilities recognised.
Judgement arises in determining the lease term as
this relies on assessing the likelihood of continued
use of the leased asset after the contractually
committed period.
Estimation uncertainty arises in respect of the
discount rate where the implicit rate in the lease is
not available, as is typical in the Group’s leases. In
those circumstances the Group use their incremental
borrowing rate as the basis for the discount rate. The
incremental borrowing rate is an unobservable input
based on assumptions of the Group’s credit risk and
specific risks of leased assets.
Small changes in either of these assumptions across
a number of leases could lead to a material change in
the valuation of lease liabilities.
The effect of these matters is that, as part of our
risk assessment for audit planning purposes, we
determined that the valuation of lease liabilities
had a high degree of estimation uncertainty, with a
potential range of reasonable outcomes greater than
our materiality for the financial statements as a whole.
In conducting our final audit work, we reassessed the
degree of estimation uncertainty to be less
than materiality.
The financial statements (note 12) disclose the
sensitivity estimate by the Group
Forecast based valuation:
Goodwill in the Group and parent's investments in
subsidiaries are significant.
The estimated recoverable amount of these balances
is subjective due to the inherent uncertainty involved
in forecasting and discounting future cashflows,
which form the basis of the Group's value in use
calculation and assessment of the recoverability of
the parent Company's investments in subsidiaries.
The effect of these matters is that, as part of our
risk assessment for audit planning purposes, we
determined that the carrying value of goodwill
and the carrying value of the parent Company's
investments in subsidiaries had a high degree of
estimation uncertainty, with a potential range of
reasonable outcomes greater than our materiality for
the financial statements as a whole. In conducting
our final audit work, we reassessed the degree of
estimation uncertainty to be less than materiality.
The financial statements (note 13) disclose the
sensitivities estimated by the Group
IFRS 16 – Lease
arrangements
(Transition)
Right of use liability
£463.9 million
Refer to page 104
(Audit and Risk
Committee Report),
page 149 (accounting
policy) and page 174
(financial disclosures).
Carrying value
of the Group
goodwill and the
parent Company’s
investments in
subsidiaries
£981.2 million;
2019: £981.3m
Investments:
£936.2 million;
2019: £936.2m
Refer to page 104
(Audit and Risk
Committee Report),
page 159 (accounting
policy) and page 176
(financial disclosures).
136
Our response
Our procedures included:
• Accounting analysis: assessing the calculation methodology driving
the lease liability and right-of-use asset against the requirements of
the accounting standard;
• Our sector experience: evaluating assumed lease terms with
reference to contracts and legal rights, as well as our understanding
of the facts and circumstances surrounding the practices trade;
• Test of detail: evaluated the completeness, accuracy and relevance
of data used in preparing the transition adjustments by comparing
the stores included in the calculation of the liability and asset with the
lease data accumulated from our prior year audits and lease changes
in the current year;
• Benchmarking assumptions: comparing the incremental borrowing
rate to the Group’s cost of borrowing; and
• Assessing transparency: Assessing the adequacy of the group’s
disclosures about the sensitivity of the valuation of lease liabilities to
changes in the discount rate.
Our results
• We found the resulting estimate of the lease term assumed and
discount rate used to be acceptable.
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 to
assess the reasonableness of Group's discount rate by comparing the
Group's assumptions to externally derived data;
• 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. Additionally, assessing the reasonableness
of the group's explanations for the difference between its market
capitalisation and the estimated recoverable amount;
• Our sector experience; Challenging the rationale behind the
allocation of the goodwill in the Group to cash generating units to
assess whether this is reasonable;
• Sensitivity analysis; Performing sensitivity analysis on the key
assumptions and ensuring management have identified realistic
worst case scenarios in their own sensitivity analysis; and
• Assessing transparency: Assessing whether the Group's disclosures
about the impairment test appropriately reflect 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.
(2019: acceptable).
Pets at Home Group PlcAnnual Report and Accounts 2020
Operating loans
to joint venture
practices
£37.5 million;
2019: £42.2m
Refer to page 104
(Audit and Risk
Committee Report),
page 154 (accounting
policy) and page 180
(financial disclosures).
Carrying value
of inventory
£62.8 million;
2019: £68.2m
Refer to page 104
(Audit and Risk
Committee Report),
page 154 (accounting
policy) and page 177
(financial disclosures).
The risk
Subjective estimate:
A proportion of Group's joint venture veterinary
practices have not performed in line with
expectations, which results in a risk of recoverability
of the associated operating loan.
Our response
Our procedures included:
• Benchmarking assumptions: Challenging key assumptions used, in
particular the triggers used to identify default and those to calculate
the loss given default for those in default;
• Sensitivity analysis: Performing sensitivity analysis on the key
Assessing the recoverability of operating loans
involves judgement over a number of assumptions
in the triggers used to identify default and the
percentage of loss given default, both of which are
used in calculating the expected credit loss. There
is a risk that the assumptions used in calculating the
provision are not appropriate, and as a result there
is a risk that the provision is materially under or
over stated.
The level of risk has decreased in the year as a result
of restructuring of the joint venture model, resulting
in the quantum of loans decreasing. However, the
risk is still considered to be significant.
The effect of these matters is that, as part of our
risk assessment for audit planning purposes,
we determined that the operating loans to joint
venture practices have a high degree of estimation
uncertainty, with a potential range of reasonable
outcomes greater than our materiality for the
financial statements as a whole. In conducting
our final audit work, we reassessed the degree of
estimation uncertainty to be less than materiality.
The financial statements (note 17) disclose the
range/sensitivity estimated by the Group.
Accounting treatment
At some practices the increased financial reliance on,
for example, indebtedness to the Group might, in
practice, alter the otherwise balance of 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, particularly in light of COVID-19, which are
primarily driven by wider trends in the pet product
industry as well as seasonality.
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, the carrying value of inventory is
considered to be a key audit risk.
The effect of these matters is that, as part of our
risk assessment for audit planning purposes, we
determined that carrying value of inventory had
a high degree of estimation uncertainty, with a
potential range of reasonable outcomes greater
than our materiality for the financial statements
as a whole. In conducting our final audit work, we
reassessed the degree of estimation uncertainty to
be less than that materiality.
assumptions above;
• Assessing transparency: Assessing whether the Group's disclosures
about the estimate appropriately reflect the risks inherent in the
operating loan provision.
• Accounting analysis: Assessing, with reference to accounting
standards, evidence of the exercise of the powers of the Group
and the Vets at certain indebted practices to consider whether, on
balance, the level of indebtedness was a barrier to the vets exercising
their formal powers; and
• Assessing transparency: Assessing whether the Group's disclosures
appropriately reflect the judgements relating to non consolidation
of indebted practices.
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 (2019:
acceptable).
• We found the non- consolidation of the joint venture veterinary
practices to be acceptable (2019: 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 period leading up to the year end 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 i.e. post year end,
for a sample of inventory lines to assess whether 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 period leading up to the
yearend to assess whether slow moving and obsolete inventories,
with a focus on those with a limited shelf life, 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 (2019: acceptable).
137
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020
Independent Auditor’s Report to the Members of Pets at Home Group Plc only
continued
Our response
Our procedures included:
• Benchmarking assumptions: Challenging key assumptions used by
the Group in utilising joint venture restructuring provisions relating
to exit and closure costs, using our knowledge of the business and
understanding of the overall project;
• Personnel interviews: Assessing any change in the status and
outcome of the restructuring project, through inquiry with the
management team and Board of Directors, to challenge whether
the costs incurred and provisions created have been recognised and
presented in line with accounting standards; and
• Assessing transparency: Assessing whether the Group's
disclosures about the restructuring appropriately present costs as
non-underlying.
Our results
• We found the accounting treatment and the presentation of costs
as non-underlying related to the Vets restructuring to be acceptable
(2019: acceptable).
Accounting for vets
restructuring
Non-underlying items
associated with the
purchase of joint
venture veterinary
practices: £6.6million
(2019: £40.4m).
Refer to page 104
(Audit and Risk
Committee Report),
page 151 (accounting
policy) and page 169
(financial disclosures).
The risk
Subjective estimate and presentation:
The restructuring project to purchase and
subsequently consolidate veterinary practices, which
had previously been accounted for as joint ventures
by the Group, began during FY19.
The restructuring of the veterinary practices is
significant to the financial statements due to
the utilisation in the year of material provisions
created in FY19, and the presentation of costs as
non- underlying has potential implications for the
accounting of joint venture practices.
The level of risk associated with the accounting for
restructuring has decreased in the year as a result of
the restructure completing, resulting in the quantum of
costs and remaining provisions decreasing. However,
the risk is still considered to be significant with regard to
the utilisation of provisions for costs incurred in the year
and presentation of those costs as non-underlying.
The effect of these matters is that, as part of our
risk assessment for audit planning purposes, we
determined that the costs associated with the
Vets restructuring project have a high degree of
estimation uncertainty, with a potential range of
reasonable outcomes greater than our materiality for
the financial statements as a whole. In conducting
our final audit work, we reassessed the degree of
estimation uncertainty to be less than materiality.
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 (2019: £3.75m), determined with reference to a benchmark of
Group profit before tax normalised to exclude this year's non-
underlying items as disclosed in note 3, of £93.5m of which it
represents 4.0% (2019: 4.2%). We consider normalised Group profit
before tax to be the most appropriate benchmark as it provides a
more stable measure year on year than Group profit before tax.
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 £1.3m to
£3.5m (2019: £2.5m to £3.0m), having regard to the mix of size and risk
profile of the businesses within the Group.
Materiality for the parent Company financial statements as a whole
was set at £3.0m (2019: £3.0m), determined with reference to a
benchmark of Company total assets, of which it represents 0.2%
(2019: 0.2%).
We report to the Audit Committee any corrected or uncorrected
identified misstatements exceeding £180,000 (2019: £180,000), in
addition to other identified misstatements that warranted reporting
on qualitative grounds.
The work on 1 of the 9 components (2019: 1 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 (2019: 9) reporting components, we subjected 3
(2019: 3) to full scope audits for Group purposes and 0 (2019: 0) to
specified risk focused audit procedures.
The components within the scope of our work accounted for the
percentages illustrated opposite.
138
Telephone conferences and meetings were held with component
auditors and the component site was 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
£93.5m (2019: £89.7m)
Normalised Group profit before tax
Group materiality
Group Materiality
£3.75m (2019: £3.75m)
£3.75m
Whole financial
statements materiality
(2019: £3.75m)
£3.5m
Range of materiality
at 3 components
(£1.3m-£3.5m)
(2019: £2.5m to £3m)
£180k
Misstatements reported
to the audit committee
(2019: £180k)
Pets at Home Group PlcAnnual Report and Accounts 2020 Group revenue
Group profit before tax
96%
(2019: 96%)
96
96
95%
(2019: 95%)
95
95
Group total assets
Normalised group profit before tax
99%
(2019: 98%)
98
99
96%
(2019: 96%)
96
96
Full scope for Group audit purposes 2020
Full scope for Group audit purposes 2019
Specified risk-focused audit procedures 2019
Residual components
4. We have nothing to report on going concern
The Directors have prepared the financial statements on the going
concern basis as they do not intend to liquidate the Company or
the Group or to cease their operations, and as they have concluded
that the Company’s and the Group’s financial position means that
this is realistic. They have also concluded that there are no material
uncertainties that could have cast significant doubt over their ability
to continue as a going concern for at least a year from the date of
approval of the financial statements (“the going concern period”).
Our responsibility is to conclude on the appropriateness of the
Directors’ conclusions and, had there been a material uncertainty
related to going concern, to make reference to that in this audit report.
However, as we cannot predict all future events or conditions and as
subsequent events may result in outcomes that are inconsistent with
judgements that were reasonable at the time they were made, the
absence of reference to a material uncertainty in this auditor's report
is not a guarantee that the Group and the Company will continue
in operation.
We identified going concern as a key audit matter (see section 2 of this
report). Based on the work described in our response to that key audit
matter, 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 82
is materially inconsistent with our audit knowledge.
We have nothing to report in these respects.
5
We have nothing to report on the other information
in the Annual Report
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.
139
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020 Independent Auditor’s Report to the Members of Pets at Home Group Plc only
continued
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 page 99
that they have carried out a robust assessment of the emerging and
principal risks facing the Group, including those that would threaten
its business model, future performance, solvency and liquidity;
• 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.
Our work is limited to assessing these matters in the context of only
the knowledge acquired during our financial statements audit. As we
cannot predict all future events or conditions and as subsequent
events may result in outcomes that are inconsistent with judgments
that were reasonable at the time they were made, the absence of
anything to report on these statements is not a guarantee as to the
Group’s and Company’s longer-term viability.
Corporate governance disclosures
We are required to report to you if:
• 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 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.
7. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 140, 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.
140
Pets at Home Group PlcAnnual Report and Accounts 2020 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.
Stuart Burdass (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
1 St Peter’s Square
Manchester
M2 3AE
21 May 2020
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 general commercial and sector experience and through
discussion with the Directors (as required by auditing standards), and
from inspection of the group’s regulatory and legal correspondence.
We discussed with the Directors the policies and procedures
regarding compliance with laws and regulations. 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.
The potential effect of these laws and regulations on the financial
statements varies considerably.
Firstly, the group is subject to laws and regulations that directly affect
the financial statements including financial reporting legislation
(including related companies legislation), distributable profits
legislation and taxation legislation and we assessed the extent of
compliance with these laws and regulations as part of our procedures
on the related financial statement items.
Secondly, the group is subject to many other laws and regulations
where the consequences of non-compliance could have a material
effect on amounts or disclosures in the financial statements, for
instance through the imposition of fines or litigation. We identified the
following areas as those most likely to have such an effect: national
minimum wage legislation, health and safety and employment law.
Auditing standards limit the required audit procedures to identify
non-compliance with these laws and regulations to enquiry of the
Directors and inspection of regulatory and legal correspondence, if any.
Through these procedures, we became aware of actual or suspected
non-compliance and considered the effect as part of our procedures
on the related financial statement items. The identified actual or
suspected non-compliance was not sufficiently significant to our
audit to result in our response being identified as a key audit matter.
Owing to the inherent limitations of an audit, there is an unavoidable
risk that we may not have detected some material misstatements in
the financial statements, even though we have properly planned
and performed our audit in accordance with auditing standards.
For example, the further removed non-compliance with laws and
regulations (irregularities) is from the events and transactions reflected
in the financial statements, the less likely the inherently limited
procedures required by auditing standards would identify it. In addition,
as with any audit, there remained a higher risk of non-detection of
irregularities, as these may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal controls.
We are not responsible for preventing non-compliance and cannot
be expected to detect non-compliance with all laws and regulations.
141
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020 Consolidated income statement
Revenue
Cost of sales
Impairment losses on receivables
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 26 March 2020
52 week period ended 28 March 2019
Underlying
trading
£m
Non-
underlying
items (note 3)
£m
1,058.8
(540.0)
(0.9)
517.9
(313.8)
(92.8)
111.3
0.5
(18.3)
(17.8)
93.5
(18.6)
74.9
–
(6.9)
0.3
(6.6)
–
(1.0)
(7.6)
–
–
–
(7.6)
0.1
(7.5)
Note
2
3,17
3
2, 3
6
7
8
Underlying
trading
£m
Non-
underlying
items (note 3)
£m
961.0
(471.2)
(2.9)
486.9
(314.5)
(79.2)
93.2
0.6
(4.1)
(3.5)
89.7
(19.3)
70.4
–
(22.5)
(17.9)
(40.4)
–
0.3
(40.1)
–
–
–
(40.1)
0.2
(39.9)
Total
£m
1,058.8
(546.9)
(0.6)
511.3
(313.8)
(93.8)
103.7
0.5
(18.3)
(17.8)
85.9
(18.5)
67.4
Total
£m
961.0
(493.7)
(20.8)
446.5
(314.5)
(78.9)
53.1
0.6
(4.1)
(3.5)
49.6
(19.1)
30.5
All activities relate to continuing operations.
Basic and diluted earnings per share attributable to equity shareholders of the Company
52 week
period ended
26 March 2020
52 week
period ended
28 March 2019
13.5p
13.2p
6.1p
6.0p
Note
5
5
Note
22
22
15, 22
52 week
period ended
26 March 2020
£m
52 week
period ended
28 March 2019
£m
67.4
30.5
(0.1)
(5.5)
(5.6)
0.9
(4.7)
62.7
(0.1)
1.0
0.9
(0.4)
0.5
31.0
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 149 to 219 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
Effective portion of changes in fair value of cashflow 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 149 to 219 form an integral part of these financial statements.
142
Pets at Home Group PlcAnnual Report and Accounts 2020 Consolidated balance sheet
Non-current assets
Property, plant and equipment
Right-of-use assets
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
Lease liabilities
Corporation tax
Provisions
Other financial liabilities
Non-current liabilities
Other interest-bearing loans and borrowings
Other payables
Lease liabilities
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
Cashflow hedging reserve
Retained earnings
Total equity
On behalf of the Board:
Mike Iddon
Group Chief Financial Officer
Company number: 08885072
The notes on pages 149 to 219 form an integral part of these financial statements.
At
26 March 2020
£m
At
28 March 2019
£m
Note
11
12
13
16
14
16
17
18
20
12
21
16
19
20
12
21
16
15
22
117.1
425.2
1,006.4
20.9
1,569.6
62.8
1.5
55.9
79.1
199.3
1,768.9
(196.6)
(83.7)
(0.5)
(3.9)
(2.2)
(286.9)
(163.3)
–
(380.2)
(1.3)
(5.8)
(0.4)
(551.0)
(837.9)
931.0
5.0
(372.0)
113.3
(0.1)
(2.8)
1,187.6
931.0
123.7
–
1,000.7
18.7
1,143.1
68.2
1.6
68.9
60.5
199.2
1,342.3
(185.8)
–
(10.2)
(15.4)
(7.3)
(218.7)
(178.8)
(33.6)
–
(1.7)
(2.5)
(4.0)
(220.6)
(439.3)
903.0
5.0
(372.0)
113.3
(0.0)
0.8
1,155.9
903.0
143
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020 Consolidated statement of changes in equity
As at 26 March 2020
Balance at 28 March 2019
Total comprehensive income for the period
Profit for the period
Other comprehensive income (note 22)
Total comprehensive income for the period
Hedging gains & losses reclassified to inventory
Total hedging gains & losses reclassified to inventory
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
£m
Consolidation
reserve
£m
5.0
(372.0)
Merger
reserve
£m
113.3
Cashflow
hedging
reserve
£m
Translation
reserve
£m
Retained
earnings
£m
Total equity
£m
0.8
(0.0)
1,155.9
903.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(4.6)
(4.6)
1.0
1.0
–
–
–
–
–
(0.1)
(0.1)
–
–
–
–
–
–
67.4
–
67.4
–
–
(37.1)
4.2
(2.8)
(35.7)
Balance at 26 March 2020
5.0
(372.0)
113.3
(2.8)
(0.1)
1,187.6
Consolidated statement of changes in equity
as at 28 March 2019
Balance at 29 March 2018
Total comprehensive income for the period
Profit for the period
Other comprehensive income (note 22)
Total comprehensive income for the period
Hedging gains & losses reclassified to inventory1
Total hedging gains & losses reclassified to inventory
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
£m
Consolidation
reserve
£m
5.0
(372.0)
Merger
reserve
£m
113.3
Cashflow
hedging
reserve
£m
Translation
reserve
£m
Retained
earnings
£m
(1.0)
0.1
1,160.9
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.6
0.6
1.2
1.2
–
–
–
–
–
(0.1)
(0.1)
–
–
–
–
–
–
30.5
–
30.5
–
–
(37.2)
3.5
(1.8)
(35.5)
Balance at 28 March 2019
5.0
(372.0)
113.3
0.8
(0.0)
1,155.9
1 The comparative consolidated statement of changes in equity has been restated to show hedging gains & losses reclassified to inventory to enhance comparability.
144
67.4
(4.7)
62.7
1.0
1.0
(37.1)
4.2
(2.8)
(35.7)
931.0
Total
equity
£m
906.3
30.5
0.5
31.0
1.2
1.2
(37.2)
3.5
(1.8)
(35.5)
903.0
Pets at Home Group PlcAnnual Report and Accounts 2020 Consolidated statement of cashflows
Cashflows from operating activities
Profit for the period
Adjustments for:
Depreciation and amortisation
Non-underlying impairment
Financial income
Financial expense
Settlement of ‘put & call’ liabilities (growth element)
Share based payment charges
Taxation
Decrease/(increase) in trade and other receivables
Decrease/(increase) in inventories
Increase in trade and other payables
(Decrease)/increase in provisions
(Decrease)/increase in working capital relating to non-underlying items
Tax paid
Net cashflow from operating activities
Cashflows from investing activities
Proceeds from the sale of property, plant and equipment
Interest received
Investment in other financial assets
Loans issued
Acquisition of subsidiaries, net of cash acquired (underlying)
Acquisition of subsidiaries, net of cash acquired (non-underlying)
Other costs associated with acquisition of subsidiaries (non-underlying)
Repayment of borrowings owed by JV practices in advance of acquisition of subsidiaries (underlying)
Repayment of borrowings owed by JV practices in advance of acquisition of subsidiaries (non-underlying)
Acquisition of property, plant and equipment and other intangible assets
Net cash used in investing activities
Cashflows from financing activities
Equity dividends paid
Proceeds from new loan
Repayment of borrowings
Debt issue costs
Capital lease payments
Settlement of ‘put and call’ liabilities (minimum amount)
Purchase of own shares
Finance lease obligations
Interest paid
Interest paid on lease obligations
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
1 The comparative cashflow statement has been restated to enhance comparability.
The notes on pages 149 to 219 form an integral part of these financial statements.
52 week
period ended
26 March 2020
£m
52 week
period ended
28 March 2019
£m1
67.4
109.4
3.4
(0.5)
18.3
(0.8)
4.2
18.5
219.9
5.4
5.7
16.9
(0.7)
(1.2)
246.0
(30.8)
215.2
0.4
0.5
(1.0)
–
(0.5)
(0.5)
(3.7)
–
(5.9)
(39.6)
(50.3)
(37.1)
61.0
(77.0)
–
(67.0)
(5.6)
(2.8)
(0.1)
(3.7)
(14.0)
(146.3)
18.6
60.5
79.1
30.5
36.8
–
(0.6)
4.1
(0.1)
3.5
19.1
93.3
(1.8)
(7.3)
12.6
1.9
27.7
126.4
(18.6)
107.8
0.6
0.6
–
(0.2)
(1.1)
(0.7)
(2.4)
(0.7)
(5.7)
(37.4)
(47.0)
(37.2)
181.0
(195.0)
(2.5)
–
(1.0)
(1.8)
(0.2)
(3.4)
–
(60.1)
0.7
59.8
60.5
145
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020 At
26 March 2020
£m
At
28 March 2019
£m
Note
28
16
17
18
15
20
16
19
16
22
936.2
936.2
0.3
579.2
–
0.4
579.9
936.2
936.2
–
578.3
–
0.0
578.3
1,516.1
1,514.5
(387.8)
–
(387.8)
(163.3)
(2.3)
(165.6)
(553.4)
962.7
5.0
113.3
(1.6)
846.0
962.7
(330.1)
(0.1)
(330.2)
(178.8)
–
(178.8)
(509.0)
1,005.5
5.0
113.3
(0.1)
887.3
1,005.5
Company balance sheet
Non-current assets
Investments in subsidiaries
Current assets
Other financial assets
Trade and other receivables
Cash and cash equivalents
Deferred tax assets
Total assets
Current liabilities
Trade and other payables
Other financial liabilities
Non-current liabilities
Other interest-bearing loans and borrowings
Other financial liabilities
Total liabilities
Net assets
Equity attributable to equity holders of the parent
Ordinary share capital
Merger reserve
Cashflow hedging reserve
Retained earnings
Total equity
On behalf of the Board:
Mike Iddon
Group Chief Financial Officer
Company number: 08885072
The notes on pages 149 to 219 form an integral part of these financial statements.
146
Pets at Home Group PlcAnnual Report and Accounts 2020 Company statement of changes in equity
As at 26 March 2020
Balance at 28 March 2019
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
Purchase of own shares
Total contributions by and distributions to owners
Share
capital
£m
5.0
Merger
reserve
£m
113.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Cashflow
hedging
reserve
£m
(0.1)
–
(1.5)
(1.5)
–
–
–
–
Balance at 26 March 2020
5.0
113.3
(1.6)
Company statement of changes in equity
As at 28 March 2019
Balance at 29 March 2018
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 payments charge
Purchase of own shares
Total contributions by and distributions to owners
Share
capital
£m
5.0
Merger
reserve
£m
113.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Cashflow
hedging
reserve
£m
0.8
–
(0.9)
(0.9)
–
–
–
–
Balance at 28 March 2019
5.0
113.3
(0.1)
Retained
earnings
£m
887.3
Total
equity
£m
1,005.5
(5.6)
–
(5.6)
(37.1)
4.2
(2.8)
(35.7)
846.0
Retained
earnings
£m
932.8
(6.9)
–
(6.9)
(37.2)
0.4
(1.8)
(38.6)
887.3
(5.6)
(1.5)
(7.1)
(37.1)
4.2
(2.8)
(35.7)
962.7
Total
equity
£m
1,051.9
(6.9)
(0.9)
(7.8)
(37.2)
0.4
(1.8)
(38.6)
1,005.5
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 26 March 2020 was £5.6m (loss for the 52 week period ended 28 March 2019 was £6.9m).
147
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020 52 week
period ended
26 March 2020
£m
52 week
period ended
28 March 2019
£m
(5.6)
4.2
4.2
(2.6)
0.2
(1.3)
57.7
3.0
59.6
(37.1)
61.0
(77.0)
–
(3.7)
(2.8)
(59.6)
–
–
–
(6.9)
4.1
0.4
–
(2.4)
(1.5)
61.1
–
57.2
(37.2)
181.0
(195.0)
(2.5)
(3.4)
(1.8)
(58.9)
(1.7)
1.7
–
Company statement of cashflows
Cashflows from operating activities
Loss for the period
Financial expense
Share based payment charges
Tax
Increase in trade and other receivables
Increase in trade and other payables
Tax paid
Net cashflow from operating activities
Cashflows from financing activities
Equity dividends paid
Proceeds from new loan
Repayment of borrowings
Debt issue costs
Interest paid
Purchase of own shares
Net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
148
Pets at Home Group PlcAnnual Report and Accounts 2020
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.
Basis of preparation
1.1
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.
The Group has initially adopted the following new standards from 29 March 2019 and these have been applied in these financial statements.
IFRS 16 Leases (effective date 1 January 2019)
IFRS 16 Leases is effective for the Group from 29 March 2019 and replaces existing lease guidance under IAS 17 Leases. IFRS 16 sets out the
principles for the recognition, measurement, presentation and disclosure of leases and lessees to account for all leases under a single on-balance
sheet model similar to the accounting for finance leases under IAS 17.
Leases in which the Group is a lessee
The majority of the Group’s trading stores, standalone veterinary practices, Specialist Referral centres, Distribution Centres and Support Offices
are leased. The Group also has a number of non-property leases relating to vehicles, equipment and material handling equipment.
Under IFRS 16, the Group recognises a right-of-use asset representing its right to use the underlying asset and a lease liability representing its
obligation to make lease payments. The lease liability is initially measured at the present value of the remaining lease payments, discounted
using the interest rate implicit in the lease, or if that rate cannot be readily determined, the Group’s incremental borrowing rate. The rate implicit
in the lease cannot be readily determined and therefore a rate based on the Group’s incremental borrowing rate is used. This rate is adjusted to
take into account the risk associated with the length of the lease. A higher discount rate is applied to a longer lease. Lease payments will include
any fixed payments, including as a result of stepped rent increases.
The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made
at or before the lease commencement date and any lease incentives received or premiums paid.
Under IAS 17, the Group recognised operating lease expenses on a straight-line basis over the term of the lease, and recognised assets and
liabilities only to the extent that there was a timing difference between actual lease payments and the expense recognised. Lease incentives
received or paid were recognised as an integral part of the total lease expense over the term of the lease. Rent prepayments were disclosed
within prepayments, and deferred income in respect of landlord incentives on property leases was disclosed within trade and other payables.
Under IFRS 16, the rent charge is replaced by a depreciation charge for the right-of-use asset and an interest expense on the lease liability.
After the commencement date, the lease liability will be increased as interest is charged and reduced as lease payments are made. The carrying
value of the lease liability will be reassessed on agreement of a lease modification event, such as a change in the fixed amount payable or a
change in the lease term. The discount rate used will be reassessed if the length of the lease is extended.
There are recognition exemptions for low-value assets and short-term leases with a lease term of 12 months or less. Any leases under a short
term licence agreement are excluded as they fall into the lease term of 12 months or less. The Group recognises the lease payments associated
with these leases as an expense on a straight-line basis over the term of the lease. The total value of leases where the Group has taken a
recognition exemption is disclosed in note 12.
Leases in which the Group is a lessor
Lessor accounting remains similar to current accounting under IAS 17. At lease inception, lessors will determine whether each lease is a finance
lease or an operating lease. To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all of the
risks and rewards incidental to ownership of the underlying asset. If this is considered to be the case, then the lease is recognised as a finance
lease, if not then it is recognised as an operating lease. As part of this assessment, the Group considers certain factors such as whether the lease
is for the majority of the economic life of the asset.
The Group has a small number of leases where it is an intermediate lessor. For these leases, it accounts for the interest in the head lease and
sub-lease separately. It assesses the lease classification of the sub-lease with reference to the right-of-use asset arising from the head lease, not
with reference to the underlying asset.
149
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020 Notes (forming part of the financial statements) continued
1 Significant accounting policies (continued)
Basis of preparation (continued)
1.1
The Group has reassessed the classification of sub-leases in which the Group is a lessor. Under IAS 17, the sub-leases were classified with
reference to the underlying asset which resulted in all sub-leases being classified as operating leases. The Group will reclassify a small number
of sub-leases as a finance lease, resulting in recognition of a finance lease receivable of £2.4m as at 29 March 2019. Under IFRS 16, the finance
lease is assessed by reference to the right-of-use asset under the head lease rather than the underlying asset. There will be no change to the
accounting for the remaining sub-leases which continue to be accounted for as an operating lease, and income from these leases will continue
to be recognised on a straight-line basis over the term of the lease, as disclosed in note 3.
The Group currently receives rental income from related Joint Venture veterinary practices which are located within the Group’s retail stores.
These rental incomes are disclosed in note 3. Under IFRS 16, the lease classification of sub-leases is assessed by reference to the right-of-use asset
under the head lease rather than the underlying asset. Therefore there will be no change in accounting for this rental income, which will
continue to be presented as other income within operating expenses.
Transition
The Group has adopted IFRS 16 on 29 March 2019 using the modified retrospective approach. The cumulative effect of adopting IFRS 16
has been recognised as an adjustment to the opening balance sheet as at 29 March 2019 with no restatement of comparable information.
There is no impact to the statement of changes in equity. Further details and the impact of changes are disclosed in note 29.
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. Non-current assets held for sale
are stated at the lower of previous carrying amount and fair value less costs to sell.
Going concern
1.3
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, including a detailed COVID-19 assessment within the Chief Executive’s Statement. The financial position of the Company, its
cashflows, liquidity position and borrowing facilities are described in the Chief Financial Officer’s review. In addition, note 23 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.
In assessing the Group’s continued adoption of the going concern basis of preparation, the Directors have carefully considered the impact of
COVID-19 on the Group’s financial position, liquidity and future performance. The Group is deemed an ‘essential retailer’ by the Government and
as such stores and veterinary practices have continued to trade throughout, albeit at restricted levels, and higher levels of online orders have
continued to be fulfilled from distribution centres. In forecasting cashflows over 12 months from the date of signing of the financial statements,
the Directors have adjusted the Board approved business plan to reflect continued reduced sales in Retail and Vets within the first half of 2021
financial year – (COVID-19 adjusted forecast), with a return to our original business plan thereafter. In the period post year end, online sales have
remained at materially elevated levels compared to business plan, and in-store sales have outperformed the depressed level included within the
COVID-19 adjusted forecast.
Strong performance during the financial year ended 26 March 2020 has meant that the Group has entered the next financial year with total
liquidity including cash balances of £162m. The Group has access to a revolving facility of £248m, which expires in September 2023, with £165m
drawn down at 26 March 2020. The lowest level of headroom forecast over the next 12 months from the date of signing of the financial
statements under COVID-19 adjusted forecast referred to above is in excess of £80m; this is before the additional £100m facility discussed below.
The Group has been in compliance with all covenants applicable to this facility within the financial year, and is forecast to continue to be in
compliance for 12 months from the date of signing of the financial statements, including under the COVID-19 downside sensitivity discussed
above. Given current uncertainty over the duration of lockdown/social distancing measures, post year end the Group have arranged for an
additional credit facility of £100m to provide further certainty over liquidity, should it be required.
The Directors of Pets at Home Group Plc, having made appropriate enquiries, consider that adequate resources exist for the Group to continue
in operational existence for the foreseeable future and that, therefore, it is appropriate to adopt the going concern basis in preparing the
consolidated financial statements as at and for the period ended 26 March 2020.
150
Pets at Home Group PlcAnnual Report and Accounts 2020 Basis of consolidation
1.4
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 and Company operate 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 and Company as Pets at Home Group Plc is considered to be the ultimate
controlling party for accounting purposes. The assets and liabilities of this trust have been included in the consolidated financial information.
The cost of purchasing own shares held by the EBT is 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 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 Joint Venture veterinary practices, and as such no participatory interest is recognised. The Group’s category of
shareholding in the Joint Venture veterinary practices entitles the Group to charge management fees for support services provided. For further
details see notes 16, 17 and 27.
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 less impairment, which is deemed to be their carrying value as explained further in note 16.
Foreign currency
1.5
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 cashflow 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 Group and Company’s functional currency and have been rounded
to the nearest million.
Classification of financial instruments issued by the Group
1.6
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
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.
151
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020 Notes (forming part of the financial statements) continued
1 Significant accounting policies (continued)
Non-derivative financial instruments
1.7
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 expected credit loss.
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 are explained in note 1.12.
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 cashflow 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.
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 1.13).
Derivative financial instruments and hedging
1.8
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).
Cashflow hedges
Where a derivative financial instrument is designated as a hedge of the variability in cashflows 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 cashflow 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.
152
Pets at Home Group PlcAnnual Report and Accounts 2020 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.
Property, plant and equipment
1.10
Property, plant and equipment is 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
– 50 years
Fixtures, fittings, tools and equipment
– 3-10 years
Leasehold improvements
– the term of the lease
Depreciation methods, useful lives and residual values are reviewed at each balance sheet date.
Intangible assets
1.11
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 valued based on the
forecast net present value of the future economic relationship with those customers, adjusted for forecast retention rates. Customer lists are
amortised on a straight-line basis over 10 years. Software is stated at cost less accumulated amortisation and is amortised on a straight-line basis
between two and seven years.
Investments in debt and equity securities
1.12
Other investments in debt and equity securities held by the Group are classified at fair value, with any resultant gain or loss being recognised
through other comprehensive income (‘FVOCI’) in the case of monetary items such as debt securities, foreign exchange gains and losses. Where
these investments are interest-bearing, interest calculated using the effective interest method is recognised in profit or loss.
Business combinations
1.13
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.
153
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020 Notes (forming part of the financial statements) continued
1 Significant accounting policies (continued)
Business combinations (continued)
1.13
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. See
note 1.22 for further details.
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 its fair value or at its 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.
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.
Inventories
1.15
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 the length of time it is expected to take to sell, and applies a progressive provision
against the gross inventory based on the numbers of days stock on hand. Where necessary, further specific provision is made against inventory
lines, where the calculated 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 1.22.
Impairment excluding inventories and deferred tax assets
1.16
Financial assets (including receivables)
Measurement of ECLs and definition of default
ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference
between the cashflows due to the entity in accordance with the contract and the cashflows that the Company expects to receive). ECLs are
discounted at the effective interest rate of the financial asset.
The definition of default is applicable to intercompany and related party receivables, but not relevant to trade receivables where the lifetime
expected credit loss is considered. The Group defines default based on both qualitative and quantitative risk criteria. The Company considers a
Joint Venture operating loan asset to be in default when the underlying veterinary practice is significantly under-performing against its business
plan. Each practice is reviewed against this set of criteria and their appropriate risk weightings on an ongoing basis by management. Practices
categorised within the high and medium credit risk categories are those considered to be in default, with the former category including those
that have the highest loss given default due to their score card performance. Those within the low credit risk category are not deemed to be in
default. The Company considers other intercompany and related party assets to be in default when the entity does not have the forecasted
future funds available to repay the balance, if recalled.
Credit-impaired financial assets
At each reporting date, the Company assesses whether financial assets carried at amortised cost and debt securities at FVOCI are credit-
impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cashflows
of the financial asset have occurred.
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Pets at Home Group PlcAnnual Report and Accounts 2020 Impairment excluding inventories and deferred tax assets (continued)
1.16
Financial assets (including receivables)
Write-offs
The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery.
Details of these provisions are explained in note 1.22 and in note 17.
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 cashflows 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.
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 in Pets at Home Group Plc 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.
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1 Significant accounting policies (continued)
Employee benefits (continued)
1.17
Share based payments
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 and Company 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 diluted earnings per share. The trustees of the holdings of Pets at Home
Group Plc shares under the Pets at Home Group Employee Benefit Trust have waived or otherwise foregone any and all dividends paid.
Provisions
1.18
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 cashflows at a pre-tax rate that reflects risks specific to the liability.
Revenue and cost of sales
1.19
Revenue represents the total amount receivable for goods and services, net of discounts, 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 the Group transfers control of goods or services to a customer at the amount to which the Group expects to be
entitled. Depending on whether certain criteria are met, revenue is recognised either over time, in a manner that best reflects the Group's
performance, or at a point in time, when control of the goods or services is transferred to the customer.
Sale of goods in-store and online
Retail revenue from the sale of goods is recorded net of value added tax, colleague discounts, coupons, vouchers, returns and the free element
of multi-save transactions. Sale of goods represents food and accessories sold in-store and online, with revenue recognised at the point the
customer obtains control of the goods, which is when the transaction is completed in-store and at point of delivery to the customer for online
orders. Revenue is adjusted to account for estimates for anticipated returns and a provision is recognised within trade and other payables.
Estimates for anticipated returns are calculated using past data for both in-store and online transactions. No separate asset has been recognised
(with no corresponding adjustment to cost of sales) in relation to the value of products to be recovered from the customer as the products are
not always in a resaleable condition.
Gift vouchers and cards
Revenue from the sale of gift vouchers and cards is deferred until the voucher is redeemed. In line with IFRS 15 the value of revenue deferred is
based on expected redemption rates. The Group continues to assess the appropriateness of the expected redemption rates against actual
redemptions.
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
do not expire and have no value to the customer.
Subscription orders
Revenue for subscription orders is recognised at the point of delivery of each incremental order to the customer. Subscription services primarily
relate to the repeat order of flea and worm products sold online and in-store.
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Pets at Home Group PlcAnnual Report and Accounts 2020 Revenue and cost of sales (continued)
1.19
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 to
the customer.
i) Veterinary group income
Veterinary group income represents revenue from the provision of veterinary services (from Specialist Referral centres and managed First
Opinion veterinary practices) and income from the provision of administrative support services to Joint Venture veterinary practices. 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.
In accordance with IFRS 15, revenue for the period ended 26 March 2020 excludes certain fee income, on the basis of increased uncertainty of
recoverability. This relates to fee income from Joint Venture veterinary practices in which the Group had announced the intention to buy out the
‘A’ shares from the Joint Venture Partners, or where the Group has recognised an operating loan as being in default (as explained in note 1.16).
This is recognised from the point at which the default event was recognised until the point at which the buy out was completed (at which point
the practice was consolidated, see note 1.4). Further details in relation to the income received from Joint Venture veterinary practices are
disclosed in note 27.
Revenue derived from care plans is recognised on an apportioned basis relative to delivery of the service. Revenue on annual ‘Complete Care’
plans is deferred and recognised at the point at which treatment and/or services are provided against the plan at an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those goods or services. Once the plan has expired, any un-utilised
deferred revenue will be recognised as revenue. Revenue from ‘Vac4Life’ plans is deferred when payment is received and then recognised in
reducing proportions over the first three years of the plan when vaccinations/boosters are provided.
Rental income received from in-store Joint Venture veterinary practices is disclosed within note 3 and is categorised as a credit within selling and
distribution expenses.
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 to
the customer. Deposits received are deferred until the grooming service has been performed.
iii) Insurance commissions
Insurance commissions are recognised on a pro-rated basis over the period the insurance policy relates to.
Accrued income
Accrued income relates to income in relation to fees to Joint Venture veterinary practices, revenues generated through Specialist Referral centres,
and overrider and promotional income from suppliers which has not yet been invoiced. Accrued income has been classified as current as it is
expected to be invoiced and received within 12 months of the period end. 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.
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.
Non-underlying items
Income or costs considered by the Directors to be non-underlying are disclosed separately to facilitate year on year comparison of the
underlying trade of the business. The Directors consider that changes to the fair value of the put and call liabilities warrant separate disclosure
due to the nature of these arrangements as they do not relate to the underlying trade of the business.
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 page 220.
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1 Significant accounting policies (continued)
Revenue and cost of sales (continued)
1.19
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, which is explained below. The supplier
income arrangements are typically 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.
2.
3.
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.
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 such as the promotion being run or marketing in store.
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 its 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.
Expenses
1.20
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, unwinding of the discount on provisions, interest on lease liabilities 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.
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Pets at Home Group PlcAnnual Report and Accounts 2020 Taxation
1.21
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 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 on-going 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
explained below.
Impairment of goodwill and other intangibles (significant estimate)
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 cashflows 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 13. The Group considers that no reasonably possible change in assumptions
underlying the carrying value of the goodwill and intangibles would result in an impairment within the next 12 months. Therefore, the carrying
value of goodwill and intangibles is not considered a significant estimate as at 26 March 2020.
Joint Venture receivables (significant estimate)
The Group provides longer term operating loans and other loans to a number of Joint Venture veterinary practices as detailed in notes 16, 17
and 27 to support their working capital requirements. The loans advanced to the practices are interest free and either repayable on demand or
repayable within 90 days of demand. As detailed in these notes, provisions for expected credit losses are held in respect of operating and other
loans to Joint Venture veterinary practices. In line with IFRS 9, judgement is applied in determining expected credit losses on these receivables,
the qualitative and quantitative risk-related criteria used to assess default and therefore also the probability of default (as defined in note 1.16),
and in estimating an appropriate ‘loss given default’ percentage to apply to each loan. In assessing the qualitative and quantitative information,
the Group takes into account factors including current performance against business plan, availability of suitable personnel to operate
effectively, and level of indebtedness. The revenue, profit, and cashflow expectations of the practices are taken into account in determining the
length of time that the practice is expected to take in order to repay the loans. This is also the period over which losses are estimated should
default occur within the contractual period. The provision for expected credit loss is based on forward-looking information, taking into account
expected credit losses giving due consideration to the Joint Venture’s business plan, as well as macro-economic factors such as growth in the
size of the veterinary market, availability of veterinary practitioners and cost inflation within the industry. The quantum of Joint Venture
receivables and provision made against these receivables is disclosed in notes 16, 17 and 27.
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1 Significant accounting policies (continued)
1.22 Accounting estimates and judgements (continued)
Assessment of control with regard to Joint Ventures (significant judgement)
The Group has assessed, and continually assesses whether the level of an individual Joint Venture veterinary 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. In making this judgement, the Group reviewed the terms of the Joint Venture agreement and
the question of practical ability, as a provider of working capital to control the activities of the practice. This included consideration of barriers to
the Group’s ability to exercise such practical or other control which include difficulty in replacing Joint Venture Partners due to the shortage of
veterinarians in the UK and reputational damage within the veterinary network should the Group attempt to exercise control, as well as potential
barriers to the Joint Venture Partner exercising their own power over the activities of the practice. We note that under the terms of the Joint
Venture agreement, the partners run their practices with complete operational and clinical freedom. The Group is satisfied that on the balance
of evidence from the Group’s experience as shareholder and provider of working capital support to the practices, it does not have the current
ability to exercise control over those practices to which operating loans are advanced, and therefore non consolidation is appropriate.
Put and call options (significant estimate)
The Group recognises put and call options over non-controlling interests (NCI) 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 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 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 over the financial years before the
put and call can be exercised for the first time.
The Group considers that no reasonably possible change in assumptions underlying the carrying value of the put and call options would result
in a material range of estimation uncertainty in the next 12 months. Therefore, the carrying value of the options is not considered a significant
estimate as at 26 March 2020.
Carrying value of inventory (significant estimate)
A provision is made for those items of inventory where the net realisable value is estimated to be lower than cost. Net realisable value is based
on both historical experience and assumptions regarding future selling values and disposal channels, and is consequently a source of estimation
uncertainty. At 26 March 2020 the inventory provision amounted to £3.2m (28 March 2019: £2.6m). The value of inventory against which an
ageing provision is held is £7.1m (28 March 2019: £7.1m). Management consider the range of reasonably possible estimation uncertainty to be
immaterial given the value of the provision, the value of inventory against which the provision is held, and the degree of historical accuracy in
the provisioning policy. Therefore, the carrying value of inventory is not considered a significant estimate as at 26 March 2020.
IFRS 16 Leases (significant judgement)
Under IFRS 16, the Group recognises a right-of-use asset representing its right to use the underlying asset and a lease liability representing its
obligation to make lease payments. The lease liability is initially measured at the present value of the remaining lease payments, discounted
using the Group’s incremental borrowing rate, adjusted to take into account the risk associated with the length of the lease which ranges
between 1 and 27 years and the location of the lease. The Group has therefore made a judgement to determine the incremental borrowing rate
used. As a result of the significant impact the transition to IFRS 16 has had on the Group’s opening balance sheet (£473.1m right-of-use asset and
£506.2m lease liability recognised as at 29 March 2019), the discount rate is considered to be a significant judgement. The discount rate applied
ranges between 2.3% and 3.3% dependent on the length of the lease term. The length of the lease term is based on the contractual right to
utilise the asset and is not considered to involve a significant level of judgement because the Group has not taken into account break clauses
unless they have been approved.
1.23 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.
160
Pets at Home Group PlcAnnual Report and Accounts 2020 2 Segmental reporting
The Group has two reportable segments, Retail and Vet Group, which are the Group’s strategic business units. The Group’s operating segments
are based on the internal management structure and internal management reports, which are reviewed by the Executive Directors on a
periodic basis. The Executive Directors are considered to be the Chief Operating Decision Makers.
The Group is a pet care business with the strategic advantage of being able to provide products, services and advice, addressing all pet owners’
needs. Within this strategic umbrella, the Group has two reportable segments, Retail and Vet Group, which are the Group’s strategic business
units, and a central support function. The strategic business units offer different products and services, are managed separately and require
different operational and marketing strategies.
The operations of the Retail reporting segment comprise the retailing of pet products purchased online and in-store, pet sales, grooming
services and insurance products. The operations of the Vet Group reporting segment comprise First Opinion practices and Specialist Referral
centres. Central includes Group costs and finance expenses. Revenue and costs are allocated to a segment where reasonably possible.
The following summary describes the operations in each of the Group’s reportable segments. Performance is measured based on segment
operating profit as included in the management reports that are reviewed by the Executive Directors. These internal reports are prepared in
accordance with IFRS accounting policies consistent with these financial statements. All material operations of the reportable segments are
carried out in the UK and all revenue is from external customers.
Income statement
Revenue
Gross profit
Underlying operating profit / (loss)
Non-underlying items
Segment operating profit / (loss)
Net financing (expense)
Profit / (loss) before tax
52 week period ended 26 March 2020
Retail
£m
937.6
466.2
89.3
–
89.3
(13.3)
76.0
Vet Group
£m
Central
£m
121.2
51.7
30.6
(7.6)
23.0
(0.3)
22.7
–
–
(8.6)
–
(8.6)
(4.2)
(12.8)
Total
£m
1,058.8
517.9
111.3
(7.6)
103.7
(17.8)
85.9
IFRS 16 has been adopted during the period ended 26 March 2020 and has had a significant impact on the Group’s income statement. Further
details of the impact of transition to IFRS 16 have been disclosed in notes 12 and 29.
The share based payment charge recognised in the statement of changes in equity is split across the 3 segments listed in the above table.
Non-underlying operating expenses in the periods ended 26 March 2020 and 28 March 2019 are explained in note 3.
52 week period ended 28 March 2019
Income statement
Revenue
Gross profit
Underlying operating profit / (loss)
Non-underlying items
Segment operating profit / (loss)
Net financing expense
Profit / (loss) before tax
Retail
£m
854.6
435.8
67.2
0.5
67.7
0.3
68.0
Vet Group
£m
Central
£m
106.4
51.1
32.1
(40.6)
(8.5)
0.3
(8.2)
–
–
(6.1)
–
(6.1)
(4.1)
(10.2)
Total
£m
961.0
486.9
93.2
(40.1)
53.1
(3.5)
49.6
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2 Segmental reporting (continued)
Reconciliation of EBITDA before non-underlying items
Underlying operating profit/(loss)
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation of intangible assets
Underlying EBITDA
Reconciliation of EBITDA before non-underlying items
Underlying operating profit/(loss)
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation of intangible assets
Underlying EBITDA
EBITDA before non-underlying items is defined on page 221.
Segmental revenue analysis by revenue stream
Retail – Food
Retail – Accessories
Retail – Services
Vet – First Opinion fee income
Vet – Company managed practices
Vet – Other income
Vet – Specialist
Total
Segmental revenue analysis by revenue stream
Retail – Food
Retail – Accessories
Retail – Services
Vet – First Opinion fee income
Vet – Company managed practices
Vet – Other income
Vet – Specialist
Total
162
52 week period ended 26 March 2020
Vet Group
£m
Central
£m
30.6
2.5
2.1
0.5
35.7
(8.6)
–
–
–
(8.6)
Total
£m
111.3
28.3
71.1
10.0
220.7
52 week period ended 28 March 2019
Vet Group
£m
Central
£m
32.1
1.8
–
0.7
34.6
(6.1)
–
–
–
(6.1)
Total
£m
93.2
28.5
–
8.3
130.0
52 week period ended 26 March 2020
Vet Group
£m
Central
£m
–
–
–
53.8
21.6
6.2
39.6
121.2
–
–
–
–
–
–
–
–
Total
£m
517.4
375.3
44.9
53.8
21.6
6.2
39.6
1,058.8
52 week period ended 28 March 2019
Vet Group
£m
Central
£m
–
–
–
52.6
8.1
8.7
37.0
106.4
–
–
–
–
–
–
–
–
Total
£m
455.4
357.0
42.2
52.6
8.1
8.7
37.0
961.0
Retail
£m
89.3
25.8
69.0
9.5
193.6
Retail
£m
67.2
26.7
–
7.6
101.5
Retail
£m
517.4
375.3
44.9
–
–
–
–
937.6
Retail
£m
455.4
357.0
42.2
–
–
–
–
854.6
Pets at Home Group PlcAnnual Report and Accounts 2020 3 Expenses and auditor’s remuneration
Included in operating profit are the following:
Non-underlying items
Write off and provisions for operating loans, initial set-up loans, and trading balances with
Joint Venture veterinary practices
Other costs associated with the purchase of Joint Venture veterinary practices
Impairment of right-of-use assets following acquisition of Joint Venture veterinary practices
Impairment of property, plant & equipment and intangible assets following acquisition
of Joint Venture veterinary practices
Increase in fair value of put and call liability
Closure of Barkers stores
Aborted property and acquisition costs
Total non-underlying items
Underlying items
Impairment losses on receivables
Depreciation of property, plant and equipment
Amortisation of intangible assets
Depreciation of right-of-use assets
Interest on lease liabilities
Rentals under operating leases:
Hire of plant and machinery
Property
Expenses relating to short-term leases1
Other income:
Rental income from sub-leasing right-of-use assets to third parties2
Rental income from related parties2
Share based payment charges
1 The comparative numbers have been restated to enhance comparability.
2 This other income is presented within selling and distribution expenses.
52 week
period ended
26 March 2020
£m
52 week
period ended
28 March 2019
£m
(0.3)
3.5
1.6
1.8
1.0
–
–
7.6
0.9
28.3
10.0
71.1
14.0
–
–
0.1
(0.3)
(7.4)
4.2
17.9
22.5
–
–
0.4
(0.5)
(0.2)
40.1
2.9
28.5
8.3
–
–
5.0
76.9
0.1
(1.0)
(7.9)
3.5
During the periods ended 26 March 2020 and 28 March 2019, the Group completed a review and recalibration exercise of the First Opinion
veterinary practices. As part of this review, the Group has completed a buy out of the ‘A’ shares from the Joint Venture Partners in a total of 51
Joint Venture veterinary practices; with 24 of these occurring in the 52 week period ended 26 March 2020. In addition, the Group acquired a total
of 9 further practices which did not form part of this review, with 4 of these occurring in the period ended 26 March 2020.
The non-underlying operating expenses in the period ended 26 March 2020 of £7.6m relate to:
• (£0.3m) in relation to the release of allowances for expected credit losses for operating loans, initial set-up loans, and trading balances to Joint
Venture veterinary practices which were provided for under IFRS 9 by the Group in the period ended 28 March 2019. At 26 March 2020, all of the
outstanding loans with these practices have been written off resulting in a balance of £nil on the balance sheet.
• £3.5m in relation to exit and closure costs (provided for under IAS 37) payable in relation to Joint Venture veterinary practices which the Group
has acquired. The release of negative goodwill and impairment of goodwill arising on the acquisition of the Joint Venture veterinary practices,
as detailed in note 10, has been included within these costs. This balance includes £0.2m in relation to the profit from the disposal of assets
acquired in the 52 week period ended 28 March 2019.
• £1.6m in relation to the write down of right-of-use assets to their expected recoverable amount, relating to First Opinion veterinary practices
acquired in the period with the intention of being closed. Further details are disclosed in note 12.
• £1.8m relating to the impairment of property, plant and equipment and intangible assets relating to the review and recalibration exercise of the
First Opinion veterinary practices. Further details are disclosed in notes 11 and 13.
• £1.0m of non-underlying operating expenses relating to an increase in the financial liability for put and call options over shares held by clinicians
in Dick White Referrals Limited and Veterinary Specialists (Scotland) Limited. The charge represents an increase in the equity ‘option’ value held
by those clinicians based on the Directors‘ best estimate of the future settlement on exercise of the put and call. The charge is classified within
operating expenses as a clinician is required to remain an employee of the Group in order to access the full equity value of the option at the
time of the exercise.
163
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020 Notes (forming part of the financial statements) continued
3 Expenses and auditor’s remuneration (continued)
•
Income or costs considered by the Directors to be non-underlying are disclosed separately to facilitate year on year comparison of the
underlying trade of the business. The Directors consider that changes to the fair value of the put and call liabilities warrant separate disclosure
due to the nature of these arrangements as they do not relate to the underlying trade of the business.
The non-underlying operating expenses in the period ended 28 March 2019 of £40.1m related to:
• £17.9m in relation to the write off and provision for operating loans, initial set-up loans, and trading balances (made by the Group) to Joint
Venture veterinary practices, which are no longer expected to be recoverable, and therefore which were provided for under IFRS 9. In total
£12.7m of loans and receivables were written off in the year in relation to Joint Venture veterinary practices that have been acquired by the
Group. The balance of £5.2m was held within provisions against receivables.
• £22.5m in relation to provisions against payments to third parties for bank loans, overdrafts and lease obligations (provided for under IFRS 9)
and associated exit and closure costs (provided for under IAS 37) payable in relation to Joint Venture veterinary practices which the Group
acquired. The release of negative goodwill and impairment of goodwill arising on the acquisition of the Joint Venture veterinary practices, as
detailed in note 10, was included within these costs. At 28 March 2019, £8.6m had been incurred, and £5.4m was included within provisions in
note 21 under IFRS 9, whilst £8.5m was included within provisions in note 21 under IAS 37.
• £0.4m of non-underlying operating expenses relating to an increase in the financial liability for put and call options over shares held by
clinicians in Dick White Referrals Limited and Anderson Moores Veterinary Specialists Limited. The charge represented an increase in the equity
‘option’ value held by those clinicians based on the Board’s best estimate of the future settlement on exercise of the put and call.
• Release of £0.5m in relation to a provision which was created in the period ended 29 March 2018 associated with the closure of seven trial
Barkers stores.
• Release of £0.2m of provisions which were created in the period ended 29 March 2018 associated with aborted property and acquisition costs.
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
26 March 2020
£m
52 week
period ended
28 March 2019
£m
0.0
0.4
0.1
0.0
0.5
0.0
0.4
0.1
0.0
0.5
164
Pets at Home Group PlcAnnual Report and Accounts 2020 4 Colleague numbers and costs
The average number of persons employed by the Group (including Directors) during the period, analysed by category, was as follows:
Sales and distribution – FTE
Administration – FTE
Sales and distribution – total
Administration – total
The aggregate payroll costs of these persons were as follows:
Wages and salaries
Social security costs
Contributions to defined pension contribution plans
Remuneration of Executive 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 Management Team amounts receivable under share options
Executive Management Team pension contributions
Total Executive Management Team remuneration
52 week
period ended
26 March 2020
Number
52 week
period ended
28 March 2019
Number
6,432
707
7,139
8,506
1,055
9,561
6,400
597
6,997
8,447
614
9,061
52 week
period ended
26 March 2020
£m
52 week
period ended
28 March 2019
£m
203.1
17.5
6.9
227.5
187.8
16.1
6.2
210.1
52 week
period ended
26 March 2020
£m
52 week
period ended
28 March 2019
£m
1.8
0.5
0.0
0.1
2.4
2.6
0.1
0.1
2.8
1.9
0.5
0.0
0.1
2.5
2.7
0.0
0.1
2.8
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.
165
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020 Notes (forming part of the financial statements) continued
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 (£m)
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 on loans to Joint Venture veterinary practices
Other interest receivable
Total finance income
7 Finance expense
Bank loans at effective interest rate
Interest expense on lease liability
Other interest expense
Total finance expense
52 week period ended
26 March 2020
52 week period ended
28 March 2019
Underlying
trading
After non-
underlying
items
Underlying
trading
After non-
underlying
items
74.9
500.0
9.6
509.6
15.0p
14.7p
67.4
500.0
9.6
509.6
13.5p
13.2p
70.4
500.0
5.1
505.1
14.1p
13.9p
30.5
500.0
5.1
505.1
6.1p
6.0p
52 week
period ended
26 March 2020
£m
52 week
period ended
28 March 2019
£m
0.4
0.1
0.5
0.5
0.1
0.6
52 week
period ended
26 March 2020
£m
52 week
period ended
28 March 2019
£m
4.4
14.0
(0.1)
18.3
4.1
–
0.0
4.1
166
Pets at Home Group PlcAnnual Report and Accounts 2020 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
26 March 2020
£m
52 week
period ended
28 March 2019
£m
22.0
(0.8)
21.2
(3.4)
0.2
0.5
(2.7)
18.5
20.6
(0.7)
19.9
(1.9)
0.1
1.0
(0.8)
19.1
The UK corporation tax standard rate for the period is 19% (2019: 19%). A UK corporation tax rate of 19% (effective 1 April 2020) was substantively
enacted on 17 March 2020, reversing the previously enacted reduction in the rate from 19% to 17%. This will increase the Company's future
current tax charge accordingly. The deferred tax liability at 26 March 2020 has been calculated at 19% (2019: 17%).
Deferred tax recognised in comprehensive income
Effective portion of changes in fair value of cashflow hedges (note 22)
Reconciliation of effective tax rate
52 week
period ended
26 March 2020
£m
52 week
period ended
28 March 2019
£m
(0.9)
0.4
Profit for the period
Total tax expense
Profit excluding taxation
Tax using the UK corporation tax rate for the period of 19%
(52 week period ended 28 March 2019: 19%)
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
Total tax expense
52 week period ended 26 March 2020
52 week period ended 28 March 2019
Underlying
trading
£m
Non-
underlying
items
£m
74.9
18.6
93.5
17.8
0.2
0.9
0.1
(0.4)
18.6
(7.5)
(0.1)
(7.6)
(1.5)
–
–
1.4
–
(0.1)
Underlying
trading
£m
Non-
underlying
items
£m
70.4
19.3
89.7
17.0
0.1
0.6
1.3
0.3
19.3
(39.9)
(0.2)
(40.1)
(7.6)
–
–
7.4
–
(0.2)
Total
£m
67.4
18.5
85.9
16.3
0.2
0.9
1.5
(0.4)
18.5
Total
£m
30.5
19.1
49.6
9.4
0.1
0.6
8.7
0.3
19.1
The UK corporation tax standard rate for the 52 week period ended 26 March 2020 was 19% (52 week period ended 28 March 2019: 19%). The
effective tax rate before non-underlying items for the 52 week period ended 26 March 2020 was 20%.
167
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020 Notes (forming part of the financial statements) continued
9 Dividends paid and proposed
Declared and paid during the period
Final dividend of 5.0p per share (2019: 5.0p per share)
Interim dividend of 2.5p per share (2019: 2.5p per share)
Proposed for approval by shareholders at the AGM
Final dividend of 5.0p per share (2019: 5.0p per share)
Group and Company
52 week
period ended
26 March 2020
£m
52 week
period ended
28 March 2019
£m
24.8
12.3
24.7
24.8
12.4
24.8
The trustees of the following holdings of Pets at Home Group plc shares under the Pets at Home Group Employee Benefit Trust have waived
or otherwise foregone any and all dividends paid in relation to the periods ended 26 March 2020 and 28 March 2019 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 26 March 2020: 5,749,377 shares, holding at 28 March 2019: 4,596,471 shares).
10 Business combinations
Acquisition of Joint Venture veterinary practices
In the 52 week period ended 26 March 2020, the Group has acquired 100% of the ‘A’ shares of 28 veterinary practices, which were previously
accounted for as Joint Venture veterinary practices. These practices were previously accounted for as Joint Venture veterinary practices as the
Group only held 100% of the non-participatory ‘B’ ordinary shares, equating to 50% of the total shares. Acquisition of the ‘A’ shares has led to the
control and consolidation of these practices. A detailed explanation for the basis of consolidation can be found in note 1.4.
In the 52 week period ended 26 March 2020, £7.1m operating loans, £1.1m initial loans and £0.7m other loans relating to these practices were
written off in advance of the acquisitions. In addition £5.9m of bank loans owed by these Joint Venture veterinary practices were repaid by the
Group under the terms of the bank guarantee in advance of the acquisitions. Further details of the amounts written off and the utilisation of the
provisions are detailed in notes 16, 17 and 27.
The practices have been categorised into the following groups:
• Joint Venture veterinary practices acquired with the exchange of significant cash consideration, with the intention of trading as a going concern
• Joint Venture veterinary practices acquired without the exchange of significant cash consideration, with the intention of trading as a going
concern
• Joint Venture veterinary practices acquired without the exchange of significant cash consideration, with the intention of being closed
168
Pets at Home Group PlcAnnual Report and Accounts 2020 10 Business combinations (continued)
Joint Venture veterinary practices acquired with the exchange of significant cash consideration, with the intention of
trading as a going concern
In the 52 week period ended 28 March 2019, the entities listed below were all accounted for as a Joint Venture veterinary practice where the
Group held 100% of the non-participatory ‘B’ ordinary shares. A detailed explanation for the basis of consolidation can be found in note 1.4. On
the dates listed below, the Group acquired 100% of the ‘A’ shares of the practices, leading to control and consolidation.
Subsidiaries acquired
Market Harborough Vets4Pets Limited
Leicester St Georges Vets4Pets Limited
Doncaster Vets4Pets Limited
Companion Care (Maidstone) Limited
Principal activity
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
Date of acquisition
14 August 2019
14 August 2019
5 September 2019
17 January 2020
Proportion of
voting equity
instruments
acquired
Total proportion
of voting equity
instruments owned
following the
acquisition
Cash
consideration
transferred
£m
50%
50%
50%
50%
100%
100%
100%
100%
0.0
0.0
0.2
0.4
Assets acquired and liabilities recognised at the date of acquisition
The amounts recognised in respect of identifiable assets and liabilities relating to the acquisitions are as follows.
The acquisition disclosures have been combined as each acquisition is considered to be individually immaterial to the Group.
Book value of
assets and
liabilities
acquired
£m
Adjustments
on acquisition
£m
Fair value of
assets and
liabilities
acquired
£m
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Non-current assets
Intangible assets
Tangible fixed assets
Current liabilities
Bank loans and overdrafts
Trade and other payables
Net assets
Goodwill arising on acquisition
Consideration
Less: Fair value of assets acquired
Negative goodwill arising on acquisition
Release of negative goodwill
Carrying value of goodwill
0.2
0.4
0.1
0.2
0.6
(0.1)
(0.3)
1.1
–
–
–
–
(0.3)
–
–
(0.3)
0.2
0.4
0.1
0.2
0.3
(0.1)
(0.3)
0.8
£m
0.6
(0.8)
(0.2)
0.2
–
169
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020 Notes (forming part of the financial statements) continued
10 Business combinations (continued)
Joint Venture veterinary practices acquired without the exchange of significant cash consideration,
with the intention of trading as a going concern
In the 52 week period ended 26 March 2020 the Group has acquired the following veterinary practices, which were previously accounted for as
Joint Venture veterinary practices, with the intention of trading as company managed practices.
Subsidiaries acquired
Companion Care (Perth) Limited
Companion Care (Stevenage) Limited
Barnwood Vets4Pets Limited
Pentland Vets4Pets Limited
Prescot Vets4Pets Limited
Leeds Kirkstall Vets4Pets Limited
Bearsden Vets4Pets Limited
Principal activity
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
Date of acquisition
15 April 2019
15 April 2019
23 April 2019
24 April 2019
2 September 2019
4 October 2019
9 October 2019
Proportion of
voting equity
instruments
acquired
Total proportion
of voting equity
instruments owned
following the
acquisition
Cash
consideration
transferred
for shares
£m
50%
50%
50%
50%
50%
50%
50%
100%
100%
100%
100%
100%
100%
100%
–
–
–
–
–
–
–
Assets acquired and liabilities recognised at the date of acquisition
The amounts recognised in respect of identifiable assets and liabilities relating to the acquisition are as follows. The acquisition disclosures have
been combined as each acquisition is considered to be individually immaterial to the Group.
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Non-current assets
Tangible fixed assets
Right-of-use assets
Non-current liabilities
Lease liabilities
Current liabilities
Bank loans and overdrafts
Trade and other payables
Net assets
Goodwill arising on acquisition
Consideration
Less: Fair value of assets acquired
Negative goodwill arising on acquisition
Release of negative goodwill against non-underlying provisions
Carrying value of goodwill
Book value of
assets and
liabilities
acquired
£m
Adjustments
on acquisition
£m
Fair value of
assets and
liabilities
acquired
£m
0.0
0.3
0.1
0.6
0.5
(0.5)
(0.4)
(0.4)
0.2
–
–
–
(0.1)
–
–
–
–
(0.1)
0.0
0.3
0.1
0.5
0.5
(0.5)
(0.4)
(0.4)
0.1
£m
0.1
(0.1)
0.0
(0.0)
–
The consideration shown within the table above relates to the cash settlement of ‘A’ shareholder Joint Venture Partner loans, which were repaid
to the ‘A’ shareholder at the point of acquisition.
170
Pets at Home Group PlcAnnual Report and Accounts 2020 10 Business combinations (continued)
Joint Venture veterinary practices acquired without the exchange of significant cash consideration, with the intention
of being closed
In the 52 week period ended 26 March 2020 the Group has acquired the following veterinary practices, which were previously accounted for as
Joint Venture veterinary practices. The Group’s intention is to close these practices.
Subsidiaries acquired
Companion Care (Newport) Limited
Davidsons Mains Vets4Pets Limited
Marlborough Vets4Pets Limited
Sheldon Vets4Pets Limited
Thamesmead Vets4Pets Limited
Wokingham Vets4Pets Limited
Wellingborough Vets4Pets Limited
Andover Vets4Pets Limited
Bonnyrigg Vets4Pets Limited
Musselburgh Vets4Pets Limited
Haverfordwest Vets4Pets Limited
Linlithgow Vets4Pets Limited
East Kilbride (South) Vets4Pets Limited
Clitheroe Vets4Pets Limited
Carmarthen Vets4Pets Limited
Inverurie Vets4Pets Limited
Uttoxeter Vets4Pets Limited
Principal activity
Date of acquisition
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
15 April 2019
15 April 2019
15 April 2019
15 April 2019
15 April 2019
15 April 2019
17 April 2019
23 April 2019
24 April 2019
24 April 2019
29 April 2019
28 May 2019
24 June 2019
11 July 2019
15 July 2019
24 July 2019
19 August 2019
Proportion of
voting equity
instruments
acquired
Total proportion
of voting equity
instruments owned
following the
acquisition
Cash
consideration
transferred
for shares
£m
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Assets acquired and liabilities recognised at the date of acquisition
The amounts recognised in respect of identifiable assets and liabilities relating to the acquisition are as follows. The acquisition disclosures have
been combined as each acquisition is considered to be individually immaterial to the Group.
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Non-current assets
Tangible fixed assets
Right-of-use assets
Non-current liabilities
Lease liabilities
Current liabilities
Bank overdrafts
Trade and other payables
Net assets / (liabilities)
Book value of
assets and
liabilities
acquired
£m
Adjustments
on acquisition
£m
Fair value of
assets and
liabilities
acquired
£m
0.0
0.4
0.2
2.6
2.2
(2.2)
(0.3)
(0.7)
2.2
–
–
–
(2.6)
–
–
–
–
(2.6)
0.0
0.4
0.2
–
2.2
(2.2)
(0.3)
(0.7)
(0.4)
171
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020 Notes (forming part of the financial statements) continued
10 Business combinations (continued)
Joint Venture veterinary practices acquired without the exchange of significant cash consideration, with the intention
of being closed (continued)
Goodwill arising on acquisition
Consideration
Less: Fair value of liabilities acquired
Goodwill arising on acquisition
Impairment of goodwill
Carrying value of goodwill
£m
0.4
0.4
0.8
(0.8)
–
The tangible assets have been written down to their expected recoverable amount.
The consideration shown within the table above relates to the cash settlement of ‘A’ shareholder Joint Venture Partner loans, which were repaid
to the ‘A’ shareholder at the point of acquisition.
In line with IFRS 3, the right-of-use asset has been brought on at value equal to the lease liability, adjusted for any unfavourable market
conditions. These leases relate to standalone veterinary practices. Subsequent to the acquisition, the right-of-use assets have been fully impaired
as the Group does not expect to receive any benefit for these assets. This is disclosed in note 12.
Other acquisitions
On 26 July 2019, the Group acquired the 25% minority interest in Anderson Moores Veterinary Specialists Limited for a consideration of £4.0m,
leading to 100% of the share capital being owned.
On 10 September 2019, the Group also acquired a further 15% minority interest in Dick White Referrals Limited for a consideration of £2.4m,
leading to 91% of the share capital now being owned.
These acquisitions have had no impact on goodwill.
Other investments
On 26 June 2019, the Group acquired a 12% minority interest in Tailster.com (Dog Stay Limited) for a consideration of £1.0m. This has been
accounted for as an investment, measured at fair value through other comprehensive income.
172
Pets at Home Group PlcAnnual Report and Accounts 2020 11 Property, plant and equipment
Cost
Balance at 28 March 2019
Additions
On acquisition (note 10)
Disposals
Balance at 26 March 2020
Depreciation
Balance at 28 March 2019
Depreciation charge for the period
Impairment of assets (non-underlying)
Disposals
Balance at 26 March 2020
Net book value
At 28 March 2019
At 26 March 2020
Cost
Balance at 29 March 2018
Additions
On acquisition (note 10)
Disposals
Balance at 28 March 2019
Depreciation
Balance at 29 March 2018
Depreciation charge for the period
Disposals
Balance at 28 March 2019
Net book value
At 29 March 2018
At 28 March 2019
Freehold
property
£m
Short
leasehold
property
£m
Fixtures,
fittings, tools
and equipment
£m
2.5
–
–
(0.1)
2.4
0.3
0.0
–
(0.0)
0.3
2.2
2.1
59.4
5.4
0.5
(1.4)
63.9
22.5
4.3
1.3
(1.3)
26.8
36.9
37.1
222.9
17.6
0.3
(0.9)
239.9
138.3
24.0
0.4
(0.7)
162.0
84.6
77.9
Freehold
property
£m
Short
leasehold
property
£m
Fixtures,
fittings, tools
and equipment
£m
2.5
–
–
–
2.5
0.3
0.0
–
0.3
2.2
2.2
53.7
4.7
1.6
(0.6)
59.4
18.7
4.0
(0.2)
22.5
35.0
36.9
206.9
16.0
0.6
(0.6)
222.9
114.2
24.5
(0.4)
138.3
92.7
84.6
Total
£m
284.8
23.0
0.8
(2.4)
306.2
161.1
28.3
1.7
(2.0)
189.1
123.7
117.1
Total
£m
263.1
20.7
2.2
(1.2)
284.8
133.2
28.5
(0.6)
161.1
129.9
123.7
173
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020 Notes (forming part of the financial statements) continued
12 Leases
As lessee
Property, plant and equipment comprise owned and leased assets that do not meet the definition of investment property.
The majority of the Group’s trading stores, standalone veterinary practices, Specialist Referral centres, Distribution Centres and Support Offices
are leased under operating leases, with remaining lease terms of between 1 and 27 years. The Group also has a number of non-property
operating leases relating to vehicle, equipment and material handling equipment, with remaining lease terms of between 1 and 6 years.
Information about leases for which the Group is a lessee is presented below.
Right-of-use assets
Cost
Balance at 29 March 2019
Additions
On acquisition (note 10)
Balance at 26 March 2020
Depreciation
Balance at 29 March 2019
Depreciation charge for the period
Impairment (non-underlying)
Balance at 26 March 2020
Net book value
At 29 March 2019
At 26 March 2020
Property
£m
Equipment
£m
463.0
20.6
2.7
486.3
–
67.5
1.6
69.1
463.0
417.2
10.1
1.5
–
11.6
–
3.6
–
3.6
10.1
8.0
Total
£m
473.1
22.1
2.7
497.9
–
71.1
1.6
72.7
473.1
425.2
The costs relating to leases for which the Group applied the practical expedient described in paragraph 5a of IFRS 16 (leases with a contract
term of less than 12 months) amounted to £0.1m in the 52 week period ended 26 March 2020.
The following table sets out the maturity analysis of lease payments, showing the undiscounted lease payments to be received after the
reporting date:
Maturity analysis – contractual undiscounted cashflows
Less than one year
Between one and five years
More than 5 years
Total undiscounted lease liabilities
Carrying value of lease liabilities included in the statement of financial position
Current
Non-current
At
26 March 2020
£m
At
29 March 2019
£m
82.2
258.0
182.6
522.8
463.9
83.7
380.2
82.6
282.6
208.3
573.5
506.2
82.7
423.5
For the lease liabilities at 26 March 2020, a 0.1% change in the discount rate used would have increased the carrying value of lease liabilities
by £2.2m.
Surplus leases
The Group has a small number of leases on properties from which it no longer trades. A small number of these properties are currently vacant
or the sublet is not for the full term of the lease and there is deemed to be a risk on the sublet.
On transition to IFRS 16, the Group has elected to apply the relief option which allows it to adjust the right-of-use asset by the amount of any
provision for an onerous lease. £2.7m of the onerous lease provision has been offset against the opening right-of-use asset as at 29 March 2019.
The remaining onerous lease provision relates to rates, service charge and other costs and will remain classified within provisions. In the 52 week
period ended 26 March 2020, the Group has charged a further £1.6m within non-underlying costs in relation to expected lease obligations
(under IFRS 16). This provision has been offset against the right-of-use assets.
174
Pets at Home Group PlcAnnual Report and Accounts 2020 12 Leases (continued)
The non-underlying impairment loss recognised in the period relates to the veterinary practices acquired in the period with the intention of
being closed. In line with IAS 36, the carrying value of these right-of-use assets was assessed for indicators of impairment and the planned
closure was considered to be an indicator of impairment. The right-of-use asset has been written down to its expected recoverable value and
costs of £1.6m have been charged in the year within non-underlying costs.
Operating leases
The Group has a small number of leases on properties from which it no longer trades, or a subsection of a trading retail store. These properties
are sublet to third parties at contracted rates. The Group has classified these leases as operating leases, because they do not transfer substantially
all the risks and rewards incidental to ownership of the right-of-use asset.
In line with IAS 36, the carrying value of the right-of-use asset will be assessed for indicators of impairment and an impairment charge will be
recognised if necessary. Under IAS 17, an onerous lease provision was recognised where management believed there was a risk of default or
where the property remained vacant for a period of time. As part of this review the Group has assessed the ability to sub-lease the property and
the right-of-use asset has been written down to £nil where the Group does not consider a sub-lease likely.
13 Intangible assets
Cost
Balance at 28 March 2019
Additions
Balance at 26 March 2020
Amortisation
Balance at 28 March 2019
Amortisation charge for the period
Impairment of assets (non-underlying)
Impairment of goodwill (underlying)
Balance at 26 March 2020
Net book value
At 28 March 2019
At 26 March 2020
Cost
Balance at 29 March 2018
Additions
Disposals
Balance at 28 March 2019
Amortisation
Balance at 29 March 2018
Amortisation charge for the period
Disposals
Balance at 28 March 2019
Net book value
At 29 March 2018
At 28 March 2019
Goodwill
£m
Customer list
£m
Software
£m
981.3
–
981.3
–
–
0.0
0.1
0.1
981.3
981.2
1.7
0.2
1.9
0.3
0.1
0.1
–
0.5
1.4
1.4
47.5
15.6
63.1
29.5
9.8
–
–
39.3
18.0
23.8
Goodwill
£m
Customer list
£m
Software
£m
979.8
1.5
–
981.3
–
–
–
–
979.8
981.3
0.8
0.9
–
1.7
0.2
0.1
–
0.3
0.6
1.4
33.8
13.7
–
47.5
21.3
8.2
–
29.5
12.5
18.0
Total
£m
1,030.5
15.8
1,046.3
29.8
9.9
0.1
0.1
39.9
1,000.7
1,006.4
Total
£m
1,014.4
16.1
–
1,030.5
21.5
8.3
–
29.8
992.9
1,000.7
The goodwill impairment in the 52 week period ended 26 March 2020 relates to goodwill acquired as part of the buy out of Bicester Vets4Pets
Limited in the 52 week period ended 28 March 2019.
175
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020 Notes (forming part of the financial statements) continued
13 Intangible assets (continued)
Impairment testing
Cash-generating units (‘CGUs’) within the Group are considered to be aligned to the two operating segments as disclosed in note 2. Within the
Retail operating segment, the CGU comprises the body of stores, online operations, grooming operations and insurance operations. Within the
Vet Group operating segment, the CGU comprises the First Opinion veterinary practices and Specialist Referral centres.
As at 26 March 2020 and 28 March 2019, the Group is deemed to have CGUs as follows:
Retail
Vet Group
Total
Goodwill
At
26 March 2020
£m
At
28 March 2019
£m
586.1
395.1
981.2
586.1
395.2
981.3
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)
Like-for-like sales growth
Gross profit margin
52 week period ended
26 March 2020
52 week period ended
28 March 2019
Retail
Vet Group
Retail
Vet Group
5
2.0%
10%
4%
48%
5
3.5%
11%
11%
49%
5
2.0%
12%
4%
49%
5
3.5%
11%
9%
51%
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 cashflow projection based on a five-year plan approved by the Board. For the purposes of
intangible asset impairment testing, the model removes all cashflows associated with business units (for example stores or practices yet to open,
but within the planning horizon) which the Group has a strategic intention to invest capital in, but has not yet done so, thus ensuring that the
future cashflows used in modelling for impairment exclude any cashflows where the investment is yet to take place, in accordance with the
requirements of IAS 36 to exclude capital expenditure to improve asset performance. Contributions from and costs associated with new stores
and veterinary practices which are already operational at the impairment test date are included in the cashflows. The Group reviews
components within CGUs such as stores and veterinary practices for indicators of impairment. This approach is consistent with impairment
reviews carried out in the 2019 financial statements. Following the adoption of IFRS 16, the goodwill impairment model now includes right-of-
use assets in the asset base and cashflows have been adjusted to reflect this.
The key assumptions in the business plans for both the Retail and Vet Group CGUs are like-for-like sales growth and gross profit margin. The
Retail forecast assumptions reflect continual innovation and our deep understanding of our customers, incorporating assumptions based on
past experience of the industry, products and markets in which the CGU operates, in order to generate the detailed assumptions used in the
annual budget setting process, and five-year strategic planning process. The Vet Group forecast assumptions are based on a deep
understanding of the maturity profile of the practices and their performance, incorporating assumptions based on past experience of the
industry, services and markets in which the CGU operates in order to generate the detailed assumptions used in the annual budget setting
process, and five-year strategic planning process. The projections are based on all available information and growth rates do not exceed growth
rates experienced in prior periods. A different set of assumptions may be more appropriate in future years depending on changes in the
macro-economic environment and the industry in which each CGU operates.
The discount rate was estimated based on past experience and a market participant weighted average cost of capital. A post tax discount rate
was used within the value in use calculation. The pre-tax discount rate is disclosed above in line with IAS 36 requirements.
The Directors have assumed a growth rate projection beyond the five-year period based on market growth rates based on past experience
within the Group taking into account the economic growth forecasts within the relevant industries.
176
Pets at Home Group PlcAnnual Report and Accounts 2020 13 Intangible assets (continued)
Impairment testing (continued)
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, with the exception of the goodwill impaired
immediately following the acquisition of certain First Opinion veterinary practices as part of the review and recalibration exercise (see note 10).
Within the Retail CGU, a number of sensitivities have been applied to the assumptions in reaching this conclusion including:
Increasing the discount rate by 100 bps
• Reduction in growth rate applied beyond forecast period by 100 bps
•
• Reduction in gross margin percentage of 100 bps
• Reduction in FY21 H1 Retail sales by 30% as a COVID-19 sensitivity
None of the above, considered reasonably possible changes in assumptions, would result in impairment when applied either individually
or collectively.
Within the Vet Group CGU, a number of sensitivities have been applied to the assumptions in reaching this conclusion including:
Increasing the discount rate by 100 bps
• Reduction in growth rate applied beyond forecast period by 100 bps
•
• Reduction in gross margin percentage of 100 bps
• Reduction in FY21 H1 Vet Group sales by 50% as a COVID-19 sensitivity
None of the above, considered reasonably possible changes in assumptions, would result in impairment when applied either individually
or collectively.
The Directors consider that it is not reasonably possible for the assumptions to change so significantly as to eliminate the excess of the
recoverable amount over the carrying value.
14 Inventories
Finished goods
At
26 March 2020
£m
At
28 March 2019
£m
62.8
68.2
The cost of inventories recognised as an expense and included in ‘cost of sales’ is £438.3m (period ended 28 March 2019: £388.1m).
Inventory expensed to cost of sales includes the cost of the Stock Keeping Units (SKUs) sold, supplier income, stock wastage and foreign
exchange variances.
At 26 March 2020 the inventory provision amounted to £3.2m (28 March 2019: £2.6m). The inventory provision is calculated by reference to the
age of the SKU and the length of time it is expected to take to sell. 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 £7.1m (2019: £7.1m).
In the 52 week period ended 26 March 2020, the value of inventory written off to the income statement amounted to £8.7m (52 week period
ended 28 March 2019: £8.1m).
177
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020 Notes (forming part of the financial statements) continued
15 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 deferred tax assets / (liabilities)
Movement in deferred tax during the period
Property, plant and equipment
Net financial (liabilities) / assets
Other short term timing differences
At 26 March 2020
At 28 March 2019
Assets
£m
Liabilities
£m
2.4
0.9
–
2.2
5.5
–
–
(0.2)
(5.7)
(5.9)
Total
£m
2.4
0.9
(0.2)
(3.5)
(0.4)
Assets
£m
Liabilities
£m
0.2
0.1
–
1.5
1.8
–
–
(0.3)
(5.5)
(5.8)
Total
£m
0.2
0.1
(0.3)
(4.0)
(4.0)
28 March
2019
£m
Recognised
in income
£m
Recognised
in equity
£m
26 March
2020
£m
0.2
(0.2)
(4.0)
(4.0)
2.2
–
0.5
2.7
–
0.9
–
0.9
2.4
0.7
(3.5)
(0.4)
Other short term timing differences primarily relate to share based payment schemes and inventory provisions.
Movement in deferred tax during the period
Property, plant and equipment
Net financial (liabilities) / assets
Other short term timing differences
Company
Movement in deferred tax during the period
Net financial assets
29 March
2018
£m
Recognised
in income
£m
Recognised
in equity
£m
28 March
2019
£m
(0.8)
0.2
(3.8)
(4.4)
1.0
–
(0.2)
0.8
–
(0.4)
–
(0.4)
0.2
(0.2)
(4.0)
(4.0)
28 March
2019
£m
0.0
Recognised
in income
£m
Recognised
in equity
£m
–
0.4
26 March
2020
£m
0.4
The rate used to calculate deferred tax assets and liabilities is 19% in line with the corporation tax rate.
16 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
178
Group
Company
At
26 March 2020
£m
At
28 March 2019
£m
At
26 March 2020
£m
At
28 March 2019
£m
0.4
13.3
4.0
1.1
1.8
0.3
20.9
0.4
13.3
3.9
0.1
1.0
–
18.7
–
–
–
–
–
0.3
0.3
–
–
–
–
–
–
–
Pets at Home Group PlcAnnual Report and Accounts 2020 Investments in Joint Venture veterinary practices
Investments represent £0.4m (2019: £0.4m) of the ‘B’ share capital in Joint Venture veterinary practice companies. These investments are held
at cost less impairment. The fair values of investments in unlisted equity securities are considered to be their carrying value as the impact of
discounting future cashflows has been assessed as not material and the investment is non-participatory. 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 – initial set up loans
Loans to Joint Venture veterinary practices of £13.3m (2019: £13.3m) are 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 amortised cost under IFRS 9. The carrying
value is cost as the impact of discounting future cashflows at a market rate of interest has been assessed as not material. 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 balances above are shown net of provisions of £nil (2019: £1.1m). The provision was in relation to loans with Joint Venture veterinary
practices which the Group was in the process of offering to buy out and had therefore provided in full for the remaining loans on these
practices, which were considered to be in default and credit impaired. These costs were charged to non-underlying operating cost of sales. The
movement on the loans is detailed below.
As at 28 March 2019
Net repayment and further advances
Provisions utilised during the period (non- underlying)
As at 26 March 2020
Closing position (underlying)
Closing position (non-underlying)
Gross
loan value
£m
Provision
£m
Carrying
value of loan
£m
14.4
0.0
(1.1)
13.3
13.3
–
(1.1)
–
1.1
–
–
–
13.3
0.0
–
13.3
13.3
–
£1.1m of loans (2019: £1.5m) have been written off in the year in advance of the acquisition of 28 Joint Venture veterinary practices in the period.
Further details of these acquisitions are provided in note 10.
Loans to Joint Venture veterinary practices – other loans
Loans to Joint Venture veterinary practices – other loans of £4.0m (2019: £3.9m) represent loan balances to Joint Venture veterinary practices 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 at amortised cost under IFRS 9. The carrying value is considered to be cost as the impact of discounting future cashflows at a
market rate of interest has been assessed as not material. The loans are typically to support capacity expansion. The balances above are shown
net of provisions held of £nil (2019: £1.1m). The movement on the loans is detailed below.
£0.7m (2019: £0.4m) of these loans have been written off in the year in advance of the acquisition of 28 Joint Venture veterinary practices in the
period, with the remaining provision released through non-underlying costs in the income statement. Further details of this are provided in note 3.
As at 28 March 2019
Net repayment and further advances
Provisions utilised during the period (non-underlying)
Provisions released during the period (non- underlying)
As at 26 March 2020
Closing position (underlying)
Closing position (non-underlying)
Gross
loan value
£m
Provision
£m
Carrying
value of loan
£m
5.0
(0.3)
(0.7)
–
4.0
4.0
–
(1.1)
–
0.7
0.4
–
–
–
3.9
(0.3)
–
0.4
4.0
4.0
–
179
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020 Notes (forming part of the financial statements) continued
16 Other financial assets and liabilities (continued)
Other investments
Other investments are held at fair value through other comprehensive income (‘FVOCI’). The fair values of investments in unlisted equity
securities are considered to be their carrying value as the impact of discounting future cashflows has been assessed as not material and the
investment is non-participatory.
Group
Company
At
26 March 2020
£m
At
28 March 2019
£m
At
26 March 2020
£m
At
28 March 2019
£m
–
0.8
0.7
1.5
0.0
1.6
–
1.6
–
–
–
–
–
–
–
–
Group
Company
At
26 March 2020
£m
At
28 March 2019
£m
At
26 March 2020
£m
At
28 March 2019
£m
(0.4)
(1.7)
(0.0)
–
(0.1)
(2.2)
–
(0.5)
(0.1)
(6.6)
(0.1)
(7.3)
–
–
(0.0)
–
–
(0.0)
–
(0.1)
–
–
(0.1)
Group
Company
At
26 March 2020
£m
At
28 March 2019
£m
At
26 March 2020
£m
At
28 March 2019
£m
(2.3)
(3.4)
(0.1)
(5.8)
–
(2.3)
(0.2)
(2.5)
(2.3)
–
–
(2.3)
–
–
–
–
Other financial assets
Current assets
Fuel forward contracts
Forward exchange contracts
Other receivables
Other financial liabilities
Current liabilities
Fuel forward contracts
Forward exchange contracts
Interest rate swaps
Put and call liability
Finance lease liabilities
Non-current liabilities
Interest rate swaps
Put and call liability
Finance lease liabilities
180
Pets at Home Group PlcAnnual Report and Accounts 2020 17 Trade and other receivables
Trade receivables
Amounts owed by Joint Venture veterinary practices – funding for new practices
Amounts owed by Joint Venture veterinary practices – operating loans
Other receivables
Amounts owed by Group undertakings
Prepayments
Accrued income
Group
Company
At
26 March 2020
£m
At
28 March 2019
£m
At
26 March 2020
£m
At
28 March 2019
£m
17.4
1.6
29.5
2.2
–
1.5
3.7
55.9
15.8
0.3
27.9
7.1
–
12.4
5.4
68.9
–
–
–
–
579.2
–
–
579.2
–
–
–
–
578.3
–
–
578.3
Trade and other receivables
The impairment of trade and other receivables is assessed in line with IFRS 9. As at 26 March 2020 and 28 March 2019 the impact of expected
credit loss on these balances was deemed to be immaterial and as such no provision has been made.
Amounts owed by Joint Venture veterinary practices
Amounts owed by Joint Venture veterinary practices represent funding for new practices, trading balances and operating loans owed by Joint
Venture veterinary practices to the Group. Operating loans are provided on a short term monthly cycle to the extent that a practice needs
additional funding above their external bank loan. Practices generate cash on a monthly basis which is applied to the repayment of brought
forward operating loans. For immature practices, loan balances may increase due to operating requirements. Based on a projected cashflow
forecast on a practice by practice basis, the funding is expected to be required for a number of years, however as cash is applied against
opening loan balances, the Group’s expectation is that the brought forward balance will be repaid in cash within 12 months. The loans have
been classified as current on this basis and the Group has chosen not to charge interest on these balances, which are repayable on demand,
and they are initially recognised under IFRS 9 at their nominal value as the effect of discounting the expected cashflows based on the effective
interest rate at the market rate of interest is not material. The loans advanced to the practices are interest free and either repayable on demand
or repayable within 90 days of demand. No facility exists and the levels of loans are monitored in relation to review of the practices performance
against business plan and a number of financial and non-financial KPIs.
For those practices in default, a credit impairment charge is recognised under IFRS 9, taking into account the expected cash shortfall over the
workout period. For other practices, a credit impairment charge is recognised under IFRS 9, taking into account both the probability of loss and
the loss proportion given default.
The balances above are shown net of allowances for expected credit losses held for operating loans of £8.0m (2019: £14.3m). The basis for this
allowance and the movement in the period is set out below and further detail is provided in note 1.22.
Group
Gross value of operating loans
As at 28 March 2019
Loans written off
Net repayment and further advances
Gross value of operating loans as at 26 March 2020
Provision against operating loans
As at 28 March 2019
Utilisation of provision against loans written off
Provisions made during the period
Provision against operating loans as at 26 March 2020
Carrying value of loan at 28 March 2019
% provision as at 28 March 2019
Carrying value of loan at 26 March 2020
% provision as at 26 March 2020
Underlying
£m
Non-
underlying
£m
35.0
–
2.5
37.5
7.1
–
0.9
8.0
27.9
20.3%
29.5
21.3%
7.2
(7.2)
–
–
7.2
(7.2)
–
–
–
100%
–
–
Total
£m
42.2
(7.2)
2.5
37.5
14.3
(7.2)
0.9
8.0
27.9
33.9%
29.5
21.3%
181
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020 Notes (forming part of the financial statements) continued
17 Trade and other receivables (continued)
Group (continued)
During the period ended 26 March 2020, £7.2m of operating loans, which were deemed to be in default due to the significant
underperformance of the practices, were written off as part of the review and recalibration exercise on Joint Venture veterinary practices.
This balance had been provided for in full at 28 March 2019.
The Group holds an underlying provision of £8.0m against the remaining operating loans of £37.5m. The underlying provision has increased by
£0.9m in the year (£2.9m as at 28 March 2019) as management have updated their expectation of the credit risk associated with the practices to
reflect their latest view of performance and the level of risk in the market. The Group is working with a number of Joint Venture Partners, where
the Partners choose to follow Pets at Home’s recommendations, on remediation plans aimed at improving practice performance. Further details
regarding credit risk are provided in note 1.16.
The following table presents an analysis of the credit risk of debt securities, held at amortised cost, and indicates whether they were credit impaired.
Based on their score card performance, loans are categorised as high, medium or low credit risk. The loss allowance is calculated in accordance
with the policy set out in note 1.16, depending on the credit risk of each loan.
Credit grade
Low
Medium
High
Gross carrying amount
Loss allowance
Net carrying amount
Not credit
impaired
Credit
impaired
Not credit
impaired
Credit
impaired
At
26 March 2020
£m
At
26 March 2020
£m
At
28 March 2019
£m
At
28 March 2019
£m
26.6
6.7
4.2
37.5
(8.0)
29.5
–
–
–
–
–
–
4.5
30.5
–
35.0
(7.1)
27.9
–
–
7.2
7.2
(7.2)
–
Practices categorised as high risk, and credit impaired, in the prior year related to those practices the Group had identified to buy out as part of
the review and recalibration exercise of the First Opinion veterinary practices.
Should each operating loan risk, as defined by the risk criteria in note 1.16, increase by 10%, this would lead to an increase in the required
provision for operating loans of £1.9m (28 March 2019: £3.5m). This sensitivity is considered by management to represent a reasonably possible
range of estimation uncertainty, based on the variance in current trading performance within these Joint Venture veterinary practices. The
factors which give rise to the estimation uncertainty include macro-economic and industry specific factors, including the level of industry
growth, as well as gross margin percentages achieved within the industry, which contain a number of factors including the availability of
suitably qualified veterinary personnel. Further details are provided in note 27.
Accrued income
Accrued income relates to income in relation to fees to Joint Venture veterinary practices, revenues generated through Specialist Referral centres,
and overrider and promotional income from suppliers which have not yet been invoiced. Accrued income is classified as current as it is expected
to be invoiced and received within 12 months of the period end date. 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. As detailed in note 1.19, supplier income is
recognised as a credit within gross margin to cost of sales and is outside of the scope of IFRS 15 and therefore a contract asset has not been
separately recognised. Further detail of the Group’s revenue recognition policy is provided in note 1.19.
Company
Amounts owed by Group undertakings
Amounts owed by Group undertakings have been assessed in line with IFRS 9 and an assessment is made of the expected credit loss.
As at 26 March 2020 and 28 March 2019 the impact of expected credit loss on these balances was deemed to be immaterial and as such
no provision has been made.
182
Pets at Home Group PlcAnnual Report and Accounts 2020 18 Cash and cash equivalents
Cash and cash equivalents
19 Other interest-bearing loans and borrowings
Group
Company
At
26 March 2020
£m
At
28 March 2019
£m
At
26 March 2020
£m
At
28 March 2019
£m
79.1
60.5
–
–
Group
Company
At
26 March 2020
£m
At
28 March 2019
£m
At
26 March 2020
£m
At
28 March 2019
£m
163.3
178.8
163.3
178.8
Non-current liabilities
Unsecured bank loans
Terms and debt repayment schedule
Revolving credit facility
Currency
Nominal
interest rate
GBP LIBOR +1.15%
Year of
maturity
2023
Face value at
26 March
2020
£m
Carrying
amount at
26 March
2020
£m
Face value at
28 March
2019
£m
165.0
163.3
181.0
Carrying
amount at
28 March
2019
£m
178.8
The Group has a revolving credit facility of £248.0m which expires in 2023.
The drawn amount was £165.0m at 26 March 2020 and this amount is reviewed each month. Interest is charged at LIBOR plus a margin
based on leverage on a pre-IFRS 16 basis (net debt: EBITDA). Face value represents the principal value of the revolving credit facility. The facility
is unsecured.
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.
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
At
26 March 2020
£m
At
28 March 2019
£m
–
–
165.0
165.0
–
–
181.0
181.0
The loans at 26 March 2020 and 28 March 2019 are held by the Company.
The 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 entered into one fixed rate interest rate swap agreement over a total of £162.4m of the senior facility borrowings at the balance
sheet date at a fixed rate of 0.814%, which expires on 30 March 2020. The Group has a further fixed interest rate swap agreement over a total of
£137.6m of the senior facility borrowings at the balance sheet date at a fixed rate of 0.918% which commences on 31 March 2020 and expires on
31 March 2021. The Group has further fixed interest rate swap agreements over a total of £100.0m of the senior facility borrowings at the balance
sheet date at a blended fixed rate of 0.811% which commences on 31 March 2021 and expires on 25 September 2023.
The hedges are structured to hedge at least 70% of the forecast outstanding debt for the next 12 months.
183
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020 Notes (forming part of the financial statements) continued
19 Other interest-bearing loans and borrowings (continued)
Analysis of changes in net debt
Cash and cash equivalents
Debt due within one year at face value
Debt due after one year at face value
Net debt
20 Trade and other payables
Current
Trade payables
Accruals
Amounts owed to Joint Venture veterinary practices
Deferred income in relation to lease incentives
Other payables including tax and social security
Amounts owed to Group undertakings
Non-current
At
28 March 2019
£m
Cashflow
£m
Non-cash
movement
£m
At
26 March 2020
£m
60.5
–
(181.0)
(120.5)
18.6
–
16.0
34.6
–
–
–
–
79.1
–
(165.0)
(85.9)
Group
Company
At
26 March 2020
£m
At
28 March 2019
£m
At
26 March 2020
£m
At
28 March 2019
£m
110.8
45.1
6.7
–
34.0
–
196.6
108.8
43.5
4.0
5.1
24.4
–
185.8
–
0.1
–
–
–
387.7
387.8
–
0.6
–
–
–
329.5
330.1
Deferred income in relation to lease incentives
–
33.6
–
–
The current and non-current deferred income in the period ended 28 March 2019 represents deferred income in respect of store leases where
incentives are spread over the life of the lease. This has been adjusted against the right-of-use assets as part of the transition to IFRS 16 in the 52
week period ended 26 March 2020.
Amounts owed to Joint Venture veterinary practices that relate to trading balances are interest free and repayable on demand.
Within accruals above, contract liabilities under IFRS 15 of £0.7m (2019: £0.7m) relate to advanced consideration received from customers in
relation to gift vouchers, cards and points redeemable by charities. This revenue will be recognised as the vouchers, cards and points are
redeemed, which is expected to be over the next two years.
Within accruals above, contract liabilities under IFRS 15 of £3.2m (2019: £0.2m) relate to advanced consideration received from customers in
relation to online orders which have not yet been delivered. This revenue will be recognised as the online orders are delivered to customers,
which is expected to be in less than one week.
184
Pets at Home Group PlcAnnual Report and Accounts 2020 21 Provisions
Dilapidation
provision
£m
Closed stores
provision
£m
Provisions for guarantees
and lease obligations
relating to Joint Venture
veterinary practices
£m
Provisions for exit
and closure costs
relating to Joint Venture
veterinary practices
£m
Balance at 28 March 2019
Provisions made during the period
Provisions utilised during the period
Provisions reclassified against right-of-use assets
Balance at 26 March 2020
0.7
1.3
(0.1)
–
1.9
2.3
1.2
(1.6)
(0.8)
1.1
5.4
0.9
(6.3)
–
–
8.6
5.2
(9.7)
(1.9)
2.2
Total
£m
17.0
8.6
(17.7)
(2.7)
5.2
Current
Non-current
At
26 March 2020
£m
At
28 March 2019
£m
3.9
1.3
5.2
15.4
1.7
17.1
The closed stores provision relates to the rates, service charge and utilities payable on sublet or vacant stores. The timing of the utilisation of
these provisions is variable dependent upon the lease expiry dates of the properties concerned, which vary between 1 and 5 years. Market
conditions have a significant impact and hence the assumptions on future cashflows are reviewed regularly and revisions to the provision made
where necessary.
The provision is discounted in line with the discount rates used to calculate the value of a right-of-use asset. A decrease in this rate of 100 bps
would increase the provision by £0.0m.
The provisions for guarantees and lease obligations relating to Joint Venture veterinary practices includes guarantees to third parties for bank
loans, overdrafts and lease obligations payable by Joint Venture veterinary practices which the Group has bought out from Joint Venture
Partners and therefore which have been provided for under IFRS 9.
The provisions for exit and closure costs relating to Joint Venture veterinary practices relate to expenses for any Joint Venture veterinary practices
that the Group has bought out from Joint Venture Partners, and therefore which have been provided for under IAS 37. The timing of the
utilisation of these provisions is variable dependent upon the lease expiry dates of the properties concerned, which vary between 1 and
14 years. Market conditions have a significant impact and hence the assumptions on future cashflows are reviewed regularly and revisions to the
provision made where necessary.
22 Capital and reserves
Share capital
Group
At 29 March 2018
At 28 March 2019
At 26 March 2020
Company
At beginning of period
On issue at period end
Share capital
Number
Share capital
£m
500,000,000
500,000,000
500,000,000
5.0
5.0
5.0
Share capital
26 March 2020
£m
5.0
5.0
185
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020 Notes (forming part of the financial statements) continued
22 Capital and reserves (continued)
Company (continued)
At beginning of period
On issue at period end
Share capital
28 March 2019
£m
5.0
5.0
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.
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.
Cashflow hedging reserve
The cashflow hedging reserve comprises the effective portion of the cumulative net change in the fair value of cashflow 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 26
March 2020, the EBT held 5,749,377 ordinary shares (28 March 2019: 4,596,471) with a cost of £11,805,745 (2019: £7,905,930). The market value of
these shares as at 26 March 2020 was 268.80 pence per share (26 March 2019: 160.50).
Other comprehensive income
26 March 2020
Other comprehensive income
Effective portion of changes in fair value of cashflow hedges
Deferred tax on changes in fair value of cashflow hedges
Total other comprehensive income
28 March 2019
Other comprehensive income
Effective portion of changes in fair value of cashflow hedges
Deferred tax on changes in fair value of cashflow hedges
Total other comprehensive income
Translation
reserve
£m
Cashflow
hedging
reserve
£m
Total other
comprehensive
income
£m
(0.1)
–
–
(0.1)
–
(5.5)
0.9
(4.6)
(0.1)
(5.5)
0.9
(4.7)
Translation
reserve
£m
Cashflow
hedging
reserve
£m
Total other
comprehensive
income
£m
(0.1)
–
–
(0.1)
–
1.0
(0.4)
0.6
(0.1)
1.0
(0.4)
0.5
186
Pets at Home Group PlcAnnual Report and Accounts 2020 23 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 cashflow 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 cashflow and earnings volatility resulting from financial market movements;
• To protect the expected cashflow and earnings from interest rate and foreign exchange fluctuations to within parameters acceptable to the
Board and shareholders; and
• To control banking costs and service levels.
Market risk
(i) Foreign currency risk
The Group sources a significant level of purchases in foreign currency, in excess of US$70 million each financial year, and monitors its foreign
currency requirements through short, medium and long term cashflow 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 26 March 2020, the Group’s policy is to hedge up to 95% of the next 12 months and additionally up to 60% 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:
26 March 2020
Cash and cash equivalents
Trade payables
Forward exchange contracts
Balance sheet exposure
28 March 2019
Cash and cash equivalents
Trade payables
Forward exchange contracts
Balance sheet exposure
Euro
£m
0.8
(1.1)
(0.0)
(0.3)
Euro
£m
0.5
–
(0.2)
0.3
US Dollar
£m
0.4
(6.5)
(1.0)
(7.1)
US Dollar
£m
–
(7.7)
1.4
(6.3)
HKD
£m
0.0
–
–
0.0
HKD
£m
0.0
–
–
0.0
Total
£m
1.2
(7.6)
(1.0)
(7.4)
Total
£m
0.5
(7.7)
1.2
(6.0)
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
26 March 2020
£m
28 March 2019
£m
26 March 2020
£m
28 March 2019
£m
0.0
–
(0.1)
0.0
0.3
0.0
0.4
(0.0)
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.
187
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020 Notes (forming part of the financial statements) continued
23 Financial instruments (continued)
Market risk (continued)
(ii) Interest rate risk
Cashflow and fair value interest rate risk
The Group’s interest rate risk arises from long term borrowings. As at 26 March 2020, the Group had a revolving credit facility with a face value
totalling £165.0m. The Group’s borrowings as at 26 March 2020 incur interest at a rate of 1.15% plus LIBOR at the leverage prevalent in the period,
which exposes the Group to cashflow interest rate risk. The analysis of loan repayments is detailed in note 19.
The 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 agreement over a total of £162.4m of the revolving credit facility borrowings at the balance sheet date
at a fixed rate of 0.814%, which expires on 30 March 2020. The Group has a further fixed interest rate swap agreement over a total of £137.6m of
the senior facility borrowings at the balance sheet date at a fixed rate of 0.918% which commences on 31 March 2020 and expires on 31 March
2021. The Group has further fixed interest rate swap agreements over a total of £100.0m of the senior facility borrowings at the balance sheet
date at a blended fixed rate of 0.811% which commences on 31 March 2021 and expires on 25 September 2023. The hedge is structured to
hedge at least 70% of the forecast outstanding debt for the next year.
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
Company
Book value
At 26 March 2020
£m
Book value
At 28 March 2019
£m
Book value
At 26 March 2020
£m
Book value
At 28 March 2019
£m
162.4
0.9
163.3
142.1
36.7
178.8
163.3
–
163.3
142.1
36.7
178.8
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.
At 26 March 2020
£m
At 28 March 2019
£m
0.8
(0.8)
–
–
0.7
(0.7)
0.2
(0.2)
Equity
Increase
Decrease
Profit or loss
Increase
Decrease
188
Pets at Home Group PlcAnnual Report and Accounts 2020 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, investment securities and operating loans to Joint Venture veterinary
practices.
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 revolving credit 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 Joint Venture veterinary practice companies in which it
holds an investment. Further details of these guarantees are disclosed in note 27. The performance of the Joint Venture 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 below.
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 cashflows 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:
Group
26 March 2020
Non-derivative financial liabilities
Bank loans (note 19)
Trade payables (note 20)
Finance lease liabilities (note 16)
Put and call liability (note 16)
Derivative financial liabilities
Interest rate swaps used for hedging:
Outflow (note 16)
Forward exchange contracts used for hedging:
Outflow (note 16)
Fuel forward contracts used for hedging:
Outflow (note 16)
Carrying
amount
£m
Contractual
cashflows
£m
1 year
or less
£m
1 to
<2 years
£m
2 to
<5 years
£m
5 years
and over
£m
163.3
110.8
0.2
3.4
2.3
1.7
0.4
165.0
110.8
0.2
3.4
2.3
1.7
0.4
–
110.8
0.1
–
0.0
1.7
0.4
282.1
283.8
113.0
–
–
0.1
3.0
1.0
–
0.0
4.1
165.0
–
–
0.2
1.3
–
–
–
–
–
0.2
–
–
–
166.5
0.2
189
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020 Notes (forming part of the financial statements) continued
23 Financial instruments (continued)
Group (continued)
28 March 2019
Non-derivative financial liabilities
Bank loans (note 19)
Trade payables (note 20)
Finance lease liabilities (note 16)
Put and call liability (note 16)
Derivative financial liabilities
Interest rate swaps used for hedging:
Outflow (note 16)
Forward exchange contracts used for hedging:
Outflow (note 16)
Company
26 March 2020
Non-derivative financial liabilities
Bank loans (note 19)
28 March 2019
Non-derivative financial liabilities
Bank loans (note 19)
Carrying
amount
£m
Contractual
cashflows
£m
1 year
or less
£m
1 to
<2 years
£m
2 to
<5 years
£m
5 years
and over
£m
178.8
108.8
0.3
8.9
0.1
0.5
181.0
108.8
0.3
8.9
0.1
0.5
–
108.8
0.1
6.6
0.1
0.5
297.4
299.6
116.1
–
–
0.1
–
–
–
0.1
181.0
–
0.1
2.3
–
–
183.4
–
–
–
–
–
–
–
Carrying
amount
£m
Contractual
cashflows
£m
1 year
or less
£m
1 to
<2 years
£m
2 to
<5 years
£m
5 years
and over
£m
163.3
163.3
165.0
165.0
–
–
–
–
165.0
165.0
–
–
Carrying
amount
£m
Contractual
cashflows
£m
1 year
or less
£m
1 to
<2 years
£m
2 to
<5 years
£m
5 years
and over
£m
178.8
178.8
181.0
181.0
–
–
–
–
181.0
181.0
–
–
Liquidity risk and cashflow hedges
Cashflow hedges
The following table indicates the periods in which the cashflows associated with cashflow hedging instruments are expected to occur and to
affect profit or loss:
Group
26 March 2020
Interest rate swaps:
Assets (note 16)
Liabilities (note 16)
Forward exchange contracts:
Assets (note 16)
Liabilities (note 16)
Fuel forward contracts:
Liabilities (note 16)
190
Carrying
amount
£m
Expected
cashflows
£m
1 year
or less
£m
1 to
<2 years
£m
2 to
<5 years
£m
5 years
and over
£m
0.3
(2.3)
0.8
(1.7)
(0.4)
(3.3)
0.3
(2.3)
0.8
(1.7)
(0.4)
(3.3)
–
0.0
0.8
(1.7)
(0.4)
(1.3)
–
(1.0)
–
–
(0.0)
(1.0)
0.3
(1.3)
–
–
–
(1.0)
–
–
–
–
–
–
Pets at Home Group PlcAnnual Report and Accounts 2020 Group (continued)
28 March 2019
Interest rate swaps:
Liabilities (note 16)
Forward exchange contracts:
Assets (note 16)
Liabilities (note 16)
Fuel forward contracts:
Assets (note 16)
Company
26 March 2020
Interest rate swaps:
Assets (note 16)
Liabilities (note 16)
28 March 2019
Interest rate swaps:
Liabilities (note 16)
Carrying
amount
£m
Expected
cashflows
£m
1 year
or less
£m
1 to
<2 years
£m
2 to
<5 years
£m
5 years
and over
£m
(0.1)
1.6
(0.5)
0.0
1.0
(0.1)
1.6
(0.5)
0.0
1.0
(0.1)
1.6
(0.5)
0.0
1.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Carrying
amount
£m
Expected
cashflows
£m
1 year
or less
£m
1 to
<2 years
£m
2 to
<5 years
£m
5 years
and over
£m
0.3
(2.3)
(2.0)
0.3
(2.3)
(2.0)
Carrying
amount
£m
Expected
cashflows
£m
(0.1)
(0.1)
(0.1)
(0.1)
–
–
–
1 year
or less
£m
(0.1)
(0.1)
–
(1.0)
(1.0)
0.3
(1.3)
(1.0)
–
–
–
1 to
<2 years
£m
2 to
<5 years
£m
5 years
and over
£m
–
–
–
–
–
–
Fair values of financial instruments
Investments
The fair values of investments are considered to be their carrying value as the impact of discounting future cashflows has been assessed
as not material and the investment is non-participatory.
Trade and other payables and receivables
The fair values of these items are considered to be their carrying value as the impact of discounting future cashflows 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 cashflows, 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 values of forward exchange contracts and interest rate swap 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.
191
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23 Financial instruments (continued)
Fair values of financial instruments (continued)
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
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:
Fair value hierarchy
The table below shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair
value hierarchy.
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)
26 March 2020
Carrying amount
Financial assets measured at fair value
Investments in Joint Venture veterinary practices (note 16)
Other investments (note 16)
Forward exchange contracts used for hedging (note 16)
Interest rate swaps used for hedging (note 16)
Financial assets not measured at fair value
Current trade and other receivables (note 17)
Amounts owed by Joint Venture veterinary practices – funding, trading and
operating loans (note 17)
Cash and cash equivalents (note 18)
Loans to Joint Venture veterinary practices – initial set up loans (note 16)
Loans to Joint Venture veterinary practices – other loans (note 16)
Other receivables (note 16)
Financial liabilities measured at fair value
Fuel forward contracts used for hedging (note 16)
Forward exchange contracts used for hedging (note 16)
Interest rate swaps used for hedging (note 16)
Financial liabilities not measured at fair value
Finance lease liabilities (note 16)
Current lease liabilities (note 12)
Non-current lease liabilities (note 12)
Trade payables (note 20)
Amounts owed to Joint Venture veterinary practices (note 20)
Put & call liability (note 16)
Other interest-bearing loans and borrowings (note 19)
Fair value
– hedging
instruments
£m
FVOCI
– equity
instruments
£m
Financial
assets at
amortised cost
£m
Other
financial
liabilities
£m
Total
carrying
amount
£m
–
–
0.8
0.3
1.1
–
–
–
–
–
–
–
(0.4)
(1.7)
(2.3)
(4.4)
–
–
–
–
–
–
–
–
0.4
1.1
–
–
1.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
19.6
31.1
79.1
13.3
4.0
2.5
149.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(0.2)
(83.7)
(380.2)
(110.8)
(6.7)
(3.4)
(163.3)
(748.3)
0.4
1.1
0.8
0.3
2.6
19.6
31.1
79.1
13.3
4.0
2.5
149.6
(0.4)
(1.7)
(2.3)
(4.4)
(0.2)
(83.7)
(380.2)
(110.8)
(6.7)
(3.4)
(163.3)
(748.3)
192
Pets at Home Group PlcAnnual Report and Accounts 2020 26 March 2020
Fair value
Financial assets measured at fair value
Investments in Joint Venture veterinary practices (note 16)
Other investments (note 16)
Forward exchange contracts used for hedging (note 16)
Interest rate swaps used for hedging (note 16)
Financial assets not measured at fair value
Amounts owed by Joint Venture veterinary practices –
Funding and operating loans (note 17)
Loans to Joint Venture veterinary practices – initial set up loans (note 16)
Loans to Joint Venture veterinary practices – other loans (note 16)
Other receivables (note 16)
Financial liabilities measured at fair value
Fuel forward contracts used for hedging (note 16)
Forward exchange contracts used for hedging (note 16)
Interest rate swaps used for hedging (note 16)
Financial liabilities not measured at fair value
Put & call liability
Other interest-bearing loans and borrowings (note 19)
28 March 2019
Carrying amount
Financial assets measured at fair value
Investments in Joint Venture veterinary practices (note 16)
Other investments (note 16)
Fuel forward contracts used for hedging (note 16)
Forward exchange contracts used for hedging (note 16)
Financial assets not measured at fair value
Current trade and other receivables (note 17)
Amounts owed by Joint Venture veterinary practices
– funding and operating loans (note 17)
Cash and cash equivalents (note 18)
Loans to Joint Venture veterinary practices – initial set up loans (note 16)
Loans to Joint Venture veterinary practices – other loans (note 16)
Other receivables (note 16)
Financial liabilities measured at fair value
Forward exchange contracts used for hedging (note 16)
Interest rate swaps used for hedging (note 16)
Financial liabilities not measured at fair value
Put and call liability (note 16)
Finance lease liabilities (note 16)
Trade payables (note 20)
Amounts owed to Joint Venture veterinary practices (note 20)
Other interest-bearing loans and borrowings (note 19)
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
0.4
1.1
0.8
0.3
31.1
13.3
4.0
2.5
(0.4)
(1.7)
(2.3)
0.4
1.1
–
–
31.1
13.3
4.0
2.5
–
–
–
(3.4)
–
(3.4)
(165.0)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.8
0.3
–
–
–
–
(0.4)
(1.7)
(2.3)
–
(165.0)
Fair value
– hedging
instruments
£m
FVOCI
– equity
instruments
£m
Financial
assets at
amortised
cost
£m
Other
financial
liabilities
£m
Total
carrying
amount
£m
–
–
0.0
1.6
1.6
–
–
–
–
–
–
–
(0.5)
(0.1)
(0.6)
–
–
–
–
–
–
0.4
0.1
–
–
0.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
22.9
28.2
60.5
13.3
3.9
1.0
129.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(8.9)
(0.3)
(108.8)
(4.0)
(178.8)
(300.8)
0.4
0.1
0.0
1.6
2.1
22.9
28.2
60.5
13.3
3.9
1.0
129.8
(0.5)
(0.1)
(0.6)
(8.9)
(0.3)
(108.8)
(4.0)
(178.8)
(300.8)
193
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020 Notes (forming part of the financial statements) continued
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.0
1.6
–
–
–
–
(0.5)
(0.1)
–
(181.0)
0.4
0.1
–
–
28.2
13.3
3.9
1.0
–
–
0.4
0.1
0.0
1.6
28.2
13.3
3.9
1.0
(0.5)
(0.1)
(8.9)
–
(8.9)
(181.0)
Loans and
borrowings
£m
178.8
Lease
liabilities
£m
506.2
61.0
(77.0)
–
162.8
–
–
0.5
0.5
–
–
(81.0)
425.2
14.0
24.7
–
38.7
Total
£m
685.0
61.0
(77.0)
(81.0)
588.0
14.0
24.7
0.5
39.2
163.3
463.9
627.2
23 Financial instruments (continued)
Fair values of financial instruments (continued)
28 March 2019
Fair value
Financial assets measured at fair value
Investments in Joint Venture veterinary practices (note 16)
Other investments (note 16)
Fuel forward contract used for hedging (note 16)
Forward exchange contracts used for hedging (note 16)
Financial assets not measured at fair value
Amounts owed by Joint Venture veterinary practices – funding, trading
and operating loans (note 17)
Loans to Joint Venture veterinary practices – initial set up loans (note 16)
Loans to Joint Venture veterinary practices – other loans (note 16)
Other receivables (note 16)
Financial liabilities measured at fair value
Forward exchange contracts used for hedging (note 16)
Interest rate swaps used for hedging (note 16)
Financial liabilities not measured at fair value
Put & call liability (note 16)
Other interest-bearing loans and borrowings (note 19)
Changes in liabilities arising from financing activities
Balance at 29 March 2019
Changes from financing cashflows
Proceeds from loans and borrowings
Repayment of borrowings
Payment of lease liabilities
Total changes from financing cashflows
Other changes
Interest expense on lease liabilities
Additions to lease liabilities
Amortisation of debt issue costs
Total other changes
Balance at 26 March 2020
194
Pets at Home Group PlcAnnual Report and Accounts 2020 Measurement of fair values
The following table shows the valuation techniques used in measuring Level 2 and Level 3 fair values at the balance sheet dates, as well as the
significant unobservable inputs used.
Type
Valuation technique
Investment in equity
securities
The fair values of investments in unlisted equity securities are considered to
be their carrying value as the impact of discounting future cashflows has been
assessed as not material and the investment is non-participatory.
Forward exchange
contracts and interest
rate swaps
Market comparison technique – the fair values are based on broker quotes.
Similar contracts are traded in an active market and the quotes reflect the
actual transactions on similar instruments.
Significant
unobservable
inputs
Inter-relationship
between significant
unobservable inputs and
fair value measurement
Not applicable
Not applicable
Not applicable
Not applicable
Other financial
liabilities
Other financial liabilities include the fair values of the put and call options
over the non-controlling interests of subsidiary undertakings. The fair values
represent the best estimate of amounts payable based on future earnings
performance discounted to present value.
Future earnings
performance
Fair value linked to
increase or decrease
in the best estimate
of the future earnings
performance
Hedging accounts
Cashflow hedges
At 26 March 2020 and 28 March 2019, the Group held the following instruments to hedge exposures to changes in foreign currency and interest rates.
Foreign currency risk
Forward exchange contracts
Net exposure (£m)
Average GBP-USD forward contract rate
Average GBP-EUR forward contract rate
Interest rate risk
Interest rate swaps
Net exposure (£m)
Average fixed interest rate
Maturity
1-6 months
6-12 months
More than
1 year
1-6 months
6-12 months
More than
1 year
2020
2020
2020
2019
2019
2019
36.6
1.27
1.14
15.0
1.31
1.19
–
–
–
29.2
1.38
1.13
28.8
1.32
1.11
–
–
–
162.4
0.814%
–
–
237.6
0.865%
142.1
0.183%
–
–
167.5
0.814%
Company
The Company held interest rate swaps as at 26 March 2020 and 28 March 2019 which are valued as above.
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 19.
A key objective of the Group’s capital management is to maintain compliance with the covenants set out in the revolving credit facility 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.
195
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24 Share based payments
At 26 March 2020, 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 became 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.
Eligibility
(a)
Only the Executive Directors, the Senior Executives and certain other senior colleagues were selected to participate in the CIP.
Type of awards
(b)
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 were granted by reference to a ratio not exceeding one matched share for every Co-Invest Share ‘pledged’. Matching Awards
under the CIP did not form part of a participant’s pensionable earnings and are not transferable other than on death.
Individual limits
(c)
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.
Performance, vesting and performance adjustment
(d)
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 were 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 was on a straight-line basis between these two points. For the avoidance of doubt, if the CAGR in the
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).
Eligibility
(a)
All colleagues, including the Executive Directors and Senior Executives, are eligible to participate in the CSOP, at the discretion of the
Remuneration Committee.
Grant of options
(b)
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.
196
Pets at Home Group PlcAnnual Report and Accounts 2020 CSOP (continued)
Vesting and performance
2
(c)
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.
Exercise price
(d)
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.
Individual limits
(e)
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.
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 the grant date, subject to
continued employment with the Group and the satisfaction of performance conditions. These awards were granted at nil cost.
Eligibility
(a)
Only the Executive Directors, Senior Executives and certain other senior colleagues were selected to participate in the PSP.
Grant of awards
(b)
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.
Exercise price
(c)
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.
Scheme limits
(d)
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.
197
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24 Share based payments (continued)
PSP (continued)
Individual limits
3
(e)
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.
Performance
(f)
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 SAYE, along with 15.2% of eligible colleagues.
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.
Eligibility
(a)
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.
Issue of invitations
(b)
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.
Exercise price
(c)
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.
Savings contract
(d)
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.
198
Pets at Home Group PlcAnnual Report and Accounts 2020 SAYE (continued)
Scheme limits
4
(e)
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 RSA 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.
Exercisability
(f)
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.
RSA
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.
Eligibility
(a)
All colleagues, including the Executive Directors and Senior Executives, are eligible to participate in the RSA, at the discretion of the
Remuneration Committee.
Grant of awards
(b)
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.
Exercise price
(c)
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.
Scheme limits
(d)
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.
199
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020 Notes (forming part of the financial statements) continued
24 Share based payments (continued)
RSA (continued)
5
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.
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
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
RSA
CIP
PSP
2019
2018
2017
2015
2017
2016
2015
£1.87
£0.0
32%
10
2.00%
n/a
£1.87
£1.37
£0.00
32%
10
2.00%
n/a
£1.37
£1.58
£0.00
32%
10
2.00%
n/a
£1.58
CSOP
£2.45
£0.00
30%
3
2.00%
n/a
£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
SAYE
£2.45
£0.00
30%
10
2.00%
1.07%
£2.06
2017
2016
2015
2019
2018
2017
£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
£2.37
£1.98
30%
3
2.00%
0.20%
£0.78
£1.17
£0.94
32%
3
2.00%
0.20%
£0.39
As both the RSA 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
86
–
–
(35)
–
51
–
PSP
000
1,835
–
(1,827)
–
–
8
–
CSOP
000
4,132
–
(762)
(1,174)
–
2,196
2.59
SAYE
000
5,446
604
(941)
(108)
–
5,001
1.12
RSA
000
6,411
2,835
(1,944)
(2)
–
7,300
–
The Group income statement charge recognised in respect of share based payments for the current period is £4.2m (2019: £3.5m).
200
£1.97
£1.57
32%
3
2.00%
0.20%
£0.61
Total
000
17,910
3,439
(5,474)
(1,319)
–
14,556
NA
Pets at Home Group PlcAnnual Report and Accounts 2020 25 Commitments
Capital commitments
At 26 March 2020, the Group is committed to incur capital expenditure of £3.7m (28 March 2019: £5.0m). Capital commitments predominantly
relate to the cost of investment in new IT systems and refurbishment of Pets at Home stores.
At 26 March 2020, the Group has committed to provide funding to related party Joint Venture companies of £nil (28 March 2019: nil) which
remains undrawn.
At 26 March 2020, the Group has a commitment to increase the loan funding to Joint Venture companies of £0.8m (28 March 2019: £1.4m);
this increase in funding is written into the Joint Venture agreements and becomes payable when certain criteria are met.
26 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 £10.9m (28 March 2019: £10.8m).
The Group is a guarantor for the lease for veterinary practices that are not located within Pets at Home stores. The Group is also a guarantor to a
small number of third parties where the lease has been reassigned.
Exemption from audit by parent guarantee
The following wholly owned subsidiaries of the Company are covered by a guarantee provided by Pets at Home Group Plc and are consequently
entitled to an exemption under s479A from the requirement of the Act relating to the audit of individual accounts. Under this guarantee, the
Group will guarantee all outstanding liabilities of these entities. No liability is expected to arise under the guarantee. The entities covered by this
guarantee are disclosed below.
Company
Aberdeen Vets4Pets Limited
Aberdeen North Vets4Pets Limited
Alton Vets4Pets Limited
Andover Vets4Pets Limited
Companion Care (Ballymena) Limited
Bearsden Vets4Pets Limited
Bedminster Vets4Pets Limited
Belfast Stormont Vets4Pets Limited
Bicester Vets4Pets Limited
Blackpool Squires Gate Vets4Pets Limited
Bonnyrigg Vets4Pets Limited
Borehamwood Vets4Pets Limited
Bourne Vets4Pets Limited
Bracknell Vets4Pets Limited
Bramley Vets4Pets Limited
Carmarthen Vets4Pets Limited
Clitheroe Vets4Pets Limited
Corby Vets4Pets Limited
Craigavon Vets4Pets Limited
Davidsons Mains Vets4Pets Limited
Doncaster Vets4Pets Limited
Dorchester Vets4Pets Limited
East Kilbride Vets4Pets Limited
Ellesmere Port Vets4Pets Limited
Evesham Vets4Pets Limited
Companion Care (Exeter) Limited
Companion Care (Exeter Marsh) Limited
Barnwood Vets4Pets Limited
Registered number
09393267
11024679
09639868
08132407
08294444
07780175
09267870
09022077
10285804
09578581
10757330
09319066
10200670
10605544
04238788
09498169
09878308
08163294
08846831
07726992
04335358
08708025
09628917
09725644
09269582
04930076
08314727
08562941
201
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020 Notes (forming part of the financial statements) continued
26 Contingencies (continued)
Exemption from audit by parent guarantee (continued)
Company
Haverfordwest Vets4Pets Limited
Inverurie Vets4Pets Limited
Kilmarnock Vets4Pets Limited
Companion Care (Kirkcaldy) Limited
Leeds Kirkstall Vets4Pets Limited
Leicester St Georges Vets4Pets Limited
Linlithgow Vets4Pets Limited
Liverpool OS Vets4Pets Limited
Companion Care (Speke) Limited
Companion Care (Macclesfield) Limited
Companion Care (Maidstone) Limited
Maidstone Vets4Pets Limited
Malvern Vets4Pets Limited
Market Harborough Vets4Pets Limited
Marlborough Vets4Pets Limited
Monmouth Vets4Pets Limited
Musselburgh Vets4Pets Limited
Companion Care (Newport) Limited
Newton Mearns Vets4Pets Limited
Pentland Vets4Pets Limited
Companion Care (Perth) Limited
Prescot Vets4Pets Limited
Redditch Vets4Pets Limited
Sheffield Drakehouse Vets4Pets Limited
Sheldon Vets4Pets Limited
Companion Care (Slough) Limited
St Neots Vets4Pets Limited
Companion Care (Stevenage) Limited
Companion Care (Stratford-upon-Avon) Limited
Sudbury Vets4Pets Limited
Thamesmead Vets4Pets Limited
Tiverton Vets4Pets Limited
Uttoxeter Vets4Pets Limited
Wellingborough Vets4Pets Limited
Wokingham Vets4Pets Limited
Wrexham Vets4Pets Limited
Yeovil Vets4Pets Limited
Vets4Pets Services Limited
Vets4Pets Veterinary Group Limited
202
Registered number
09485504
11056047
08850288
07680864
10291543
09881176
09966547
06959208
07149744
08285995
05094399
05171954
10516552
10602806
09869384
10756991
10425760
08425358
07957431
09360949
08285928
08878815
05612150
08790953
08822150
07427613
09811640
08282080
07329166
09916308
09881179
11023079
11145982
07620413
09869355
07103838
08080466
05055601
04263054
Pets at Home Group PlcAnnual Report and Accounts 2020 27 Related parties
Joint Venture 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 25.
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 £10.9m (28 March 2019: £10.8m).
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 Joint Venture veterinary practices
– Rental and other occupancy charges to Joint Venture veterinary practices
Total income from Joint Venture veterinary practices
Acquisitions
– Consideration for Joint Venture veterinary practices acquired (note 10)
Balances
Included within trade and other receivables (note 17):
– Funding for new practices
– Operating loans
– Gross value of operating loans
– Allowance for expected credit losses held for operating loans
– Net operating loans
Included within other financial assets and liabilities (note 16):
– Loans to Joint Venture veterinary practices – initial set up loans
– Gross value of initial set up loans
– Allowance for expected credit losses held for initial set up loans
– Net initial set up loans
– Loans to other related parties – other loans
– Gross value of other loans
– Allowance for expected credit losses held for other loans
– Net other loans
Included within trade and other payables (note 20):
– Trading balances
Total amounts receivable from veterinary practices (before provisions)
26 March 2020
£m
28 March 2019
£m
54.7
12.2
66.9
1.3
1.6
37.5
(8.0)
29.5
13.3
–
13.3
4.0
–
4.0
(6.7)
49.7
55.0
12.7
67.7
3.1
0.3
42.2
(14.3)
27.9
14.4
(1.1)
13.3
5.0
(1.1)
3.9
(4.0)
57.9
Fees for services provided to related party veterinary practices are included within revenue and 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.
In accordance with IFRS 15, revenue in the 52 week period ended 26 March 2020 and the 52 week period ended 28 March 2019 excludes
irrecoverable fee income from Joint Venture veterinary practices.
Funding for new practices represents the amounts advanced by the Group to support veterinary practice opening costs. The funding is short
term and the related party Joint Venture veterinary practice draws down their own bank funding to settle these amounts outstanding with the
Group shortly after opening.
Trading balances represent costs incurred and income received by the Group in relation to the services provided to the Joint Venture veterinary
practices that have yet to be recharged.
203
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020 Notes (forming part of the financial statements) continued
27 Related parties (continued)
Joint Venture veterinary practice transactions (continued)
Operating loans represent amounts advanced to related party Joint Venture veterinary practices to support their working capital requirements
and longer term growth. The loans advanced to the practices are interest free and either repayable on demand or repayable within 90 days of
demand. No facility exists and the levels of loans are monitored in relation to review of the practices’ performance against business plan. Based
on the projected cashflow forecast on a practice by practice basis, the funding is often expected to be required for a number of years. As
practices generate cash on a monthly basis it is applied to the repayment of brought forward operating loans. For immature practices, loan
balances may increase due to operating requirements. The balances above are shown net of allowances for expected credit losses held for
operating loans of £8.0m (28 March 2019: £14.3m).
In the 52 week period ended 26 March 2020, the value of loans written off recognised in the income statement amounted to £9.0m, which
relates to operating loans (£7.2m), initial set up loans (£1.1m) and other loans (£0.7m). In the 52 week period ended 28 March 2019 the value of
loans written off recognised in the income statement amounted to £12.6m, which relates to operating loans (£10.7m), initial set up loans (£1.5m)
and other loans (£0.4m).
At 26 March 2020, the Group has committed to provide funding to related party Joint Venture companies of £nil (28 March 2019: nil) which
remains undrawn.
At 26 March 2020, the Group had a commitment to increase the loan funding to Joint Venture companies of £0.8m (28 March 2019: £1.4m);
this increase in funding is written into the Joint Venture agreements and becomes payable when certain criteria are met.
The Group is a guarantor for the lease for veterinary practices that are not located within Pets at Home stores.
Other related party loans
Included within trade and other receivables (note 17) is a loan to Pure Pet Food Ltd of £40,000 which has been provided to support working
capital requirements. The loan incurs interest at LIBOR + 3.2% and is repayable within the next 12 months.
Key management personnel
Details of remuneration paid to key management personnel are set out in note 4.
28 Investments in subsidiaries
Company
At 26 March 2020
Investments in
subsidiaries
£m
936.2
Impairment testing
The market capitalisation of the Company as at 26 March 2020 is lower than the carrying value of net assets, which is considered to be an
indicator of impairment. Management have considered this, in conjunction with the full impairment review which has been undertaken on the
Group’s cash-generating units of which the Company’s investments form part. The results of this review are disclosed in note 13, including a
sensitivity analysis. In this review, the goodwill on consolidation balance of £981.2m at 26 March 2020 exceeds the investments held in subsidiary
undertakings of £936.2m, and therefore management have concluded that under IAS 36, no impairment has been identified with regard to the
Company’s investments in subsidiaries.
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 and Rundle, Level 21, 385 Bourke Street, Melbourne, VIC 3000, Australia.
Dog Stay Limited: 305 Regents Park Road, Finchley, London, United Kingdom, N3 1DP.
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.
204
Pets at Home Group PlcAnnual Report and Accounts 2020 28 Investments in subsidiaries (continued)
Group (continued)
Details of the subsidiary undertakings are as follows:
In the 52 week period ended 26 March 2020, the Group has acquired 100% of the ‘A’ shares of 28 companies. These practices were previously
accounted for as Joint Venture veterinary practices as the Group held 100% of the non-participatory ‘B’ ordinary shares. Acquisition of the ‘A’
shares has led to the control and consolidation of these companies. A detailed explanation for the basis of consolidation can be found in note 1.
Further details of the acquisitions can be found in note 10.
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 Veterinary Specialists Limited
PAH Pty Limited
Pet Investments Limited
Pets at Home (Asia) Limited
PAH 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
Pets at Home (ESOT) Limited
Pet City Holdings Limited
Pet City Limited
Pet City Resources Limited
Vets4Pets (Services) Limited
Vets4Pets Holdings Limited
Vets4Pets I.P. Limited
Vets4Pets Services Limited
Vets4Pets UK Limited
Vets4Pets Limited
Vets4Pets Veterinary Group Limited
Veterinary Specialists (Scotland) Limited
Aberdeen North Vets4Pets Limited
Aberdeen Vets4Pets Limited
Addlestone Vets4Pets Limited
Alton Vets4Pets Limited
Andover Vets4Pets Limited
Aylesbury Berryfields Vets4Pets Limited
Barnwood Vets4Pets Limited
Bearsden Vets4Pets Limited
Bedminster Vets4Pets Limited
Belfast Stormont Vets4Pets Limited
Bicester Vets4Pets Limited
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
Indirect
Indirect
Indirect
Indirect
Indirect
Country of
incorporation
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
Guernsey
Guernsey
United Kingdom
United Kingdom
Guernsey
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Class of
shares held
At 26 March
2020 %
At 28 March
2019 %
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
91
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
94
100
100
100
100
100
100
100
100
100
100
100
76
100
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
100
50
100
50
50
100
100
100
205
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020 Notes (forming part of the financial statements) continued
28 Investments in subsidiaries (continued)
Group (continued)
Company
Bishop Auckland Vets4Pets Limited
Blackpool Squires Gate Vets4Pets Limited
Bodmin Vets4Pets Limited
Bolton Central Vets4Pets Limited
Bonnyrigg Vets4Pets Limited
Borehamwood Vets4Pets Limited
Bourne Vets4Pets Limited
Bracknell Vets4Pets Limited
Bradford Vets4Pets Limited
Bramley Vets4Pets Limited
Bramley Vets4Pets (Newco) Limited
Bridlington Vets4Pets Limited
Bromborough Vets4Pets Limited
Cambridge Perne Road Vets4Pets Limited
Canvey Vets4Pets Limited
Carmarthen Vets4Pets Limited
Chorley Vets4Pets Limited
Clitheroe Vets4Pets Limited
Coalville Vets4Pets Limited
Colchester Layer Road Vets4Pets Limited
Companion Care (Ballymena) Limited
Companion Care (Exeter Marsh) Limited
Companion Care (Exeter) Limited
Companion Care (Kendal) Limited
Companion Care (Kirkcaldy) Limited
Companion Care (Macclesfield) Limited
Companion Care (Maidstone) Limited
Companion Care (Newport) Limited
Companion Care (Nottingham) Limited
Companion Care (Perth) Limited
Companion Care (Slough) Limited
Companion Care (Speke) Limited
Companion Care (Stevenage) Limited
Companion Care (Stratford-Upon-Avon) Limited
Corby Vets4Pets Limited
Coventry Canley Vets4Pets Limited
Craigavon Vets4Pets Limited
Crosby Vets4Pets Limited
Cumbernauld Vets4Pets Limited
Davidsons Mains Vets4Pets Limited
Doncaster Vets4Pets Limited
Dorchester Vets4Pets Limited
Dundee Vets4Pets Limited
East Grinstead Vets4Pets Limited
East Kilbride South Vets4Pets Limited
Ellesmere Port Vets4Pets Limited
Evesham Vets4Pets Limited
Falkirk Vets4Pets Limited
Feltham Vets4Pets Limited
206
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
Country of
incorporation
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Class of
shares held
At 26 March
2020 %
At 28 March
2019 %
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
100
100
50
100
100
100
100
100
100
100
100
100
100
50
100
50
100
100
100
100
100
100
100
100
50
50
100
50
100
100
50
100
100
100
100
100
–
50
60
100
100
100
50
100
100
100
100
Pets at Home Group PlcAnnual Report and Accounts 2020 Company
Gillingham Vets4Pets Limited
Great Yarmouth Vets4Pets Limited
Haverfordwest Vets4Pets Limited
Heanor Vets4Pets Limited
Hemsworth Vets4Pets Limited
Hexham Vets4Pets Limited
Horden Vets4Pets Limited
Hucknall Vets4Pets Limited
Inverness Vets4Pets Limited
Inverurie Vets4Pets Limited
Kilmarnock Vets4Pets Limited
Kingswood Vets4Pets Limited
Leamington Spa Vets4Pets Limited
Leeds Kirkstall Vets4Pets Limited
Leicester St Georges Vets4Pets Limited
Leven Vets4Pets Limited
Linlithgow Vets4Pets Limited
Littleover Vets4Pets Limited
Liverpool OS Vets4Pets Limited
Long Eaton Vets4Pets Limited
Maidstone Vets4Pets Limited
Malvern Vets4Pets Limited
Market Harborough Vets4Pets Limited
Marlborough Vets4Pets Limited
Melton Mowbray Vets4Pets Limited
Mexborough Vets4Pets Limited
Milton Keynes Broughton Vets4Pets Limited
Monmouth Vets4Pets Limited
Musselburgh Vet4sPets Limited
Newark Vets4Pets Limited
Newbury Vets4Pets Limited
Newhaven Vets4Pets Limited
Newton Mearns Vets4Pets Limited
Norwich Vets4Pets Limited
Nottingham Castle Marina Vets4Pets Limited
Pentland Vets4Pets Limited
Perth Vets4Pets Limited
Peterlee Vets4Pets Limited
Poynton Vets4Pets Limited
Prescot Vets4Pets Limited
Redditch Vets4Pets Limited
Ripon Vets4Pets Limited
Salford Vets4Pets Limited
Scunthorpe Vets4Pets Limited
Selby Vets4Pets Limited
Sheffield Drakehouse Vets4Pets Limited
Sheffield Heeley Vets4Pets Limited
Sheldon Vets4Pets Limited
Shepton Mallet Vets4Pets Limited
St Austell Vets4Pets Limited
St Neots Vets4Pets Limited
Stocksbridge 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
Indirect
Country of
incorporation
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Class of
shares held
At 26 March
2020 %
At 28 March
2019 %
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
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
95
100
100
100
100
50
100
100
100
100
100
100
50
100
100
100
50
50
100
50
100
100
100
100
100
50
50
100
100
100
100
50
100
100
100
100
100
100
50
–
100
100
50
100
100
100
100
100
100
100
50
100
95
100
100
207
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020 Notes (forming part of the financial statements) continued
28 Investments in subsidiaries (continued)
Group (continued)
Company
Stoke-On-Trent Vets4Pets Limited
Sudbury Vets4Pets Limited
Teesside Vets4Pets Limited
Thamesmead Vets4Pets Limited
The Heart of Dulwich Veterinary Care Limited
Thornbury Vets4Pets Limited
Tiverton Vets4Pets Limited
Uckfield Vets4Pets Limited
Uttoxeter Vets4Pets Limited
Warrington Winnick Vets4Pets Limited
Wellingborough Vets4Pets Limited
West Drayton Vets4Pets Limited
Whitstable Vets4Pets Limited
Wokingham Vets4Pets Limited
Wrexham Vets4Pets Limited
Yeovil Vets4Pets Limited
Holding
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Country of
incorporation
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Investments in Joint Venture practices and other investments
The Group holds an indirect interest in the share capital of the following companies:
Company
Abingdon Vets4Pets Limited
ABTW Limited
Accrington Vets4Pets Limited
Airdrie Vets4Pets Limited
Alsager Vets4Pets Limited
Altrincham Vets4Pets Limited
Amesbury Vets4Pets Limited
Bagshot Vets4Pets Limited
Bangor Vets4Pets Limited
Bangor Wales Vets4Pets Limited
Barnsley Vets4Pets Limited
Barnstaple Vets4Pets Limited
Barry Vets4Pets Limited
Bath Vets4Pets Limited
Bedford Vets4Pets Limited
Bedlington Vets4Pets Limited
Beeston Vets4Pets Limited
Beverley Vets4Pets Limited
Biggleswade Vets4Pets Limited
Bishops Stortford Vets4Pets Limited
Bishopston Vets4Pets Limited
Bitterne Vets4Pets Limited
Blackburn Vets4Pets Limited
Blackheath Vets4Pets Limited
Blackpool Warbreck Vets4Pets Limited
Blackwood Vets4Pets Limited
Bolton Vets4Pets Limited
Bradford Idle Vets4Pets Limited
208
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
Country of
incorporation
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Class of
shares held
At 26 March
2020 %
At 28 March
2019 %
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
50
100
100
100
100
50
100
50
100
–
50
100
100
Class of
shares held
At 26 March
2020 %
At 28 March
2019 %
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
Pets at Home Group PlcAnnual Report and Accounts 2020 Company
Brighouse Vets4Pets Limited
Bristol Emerson Green Vets4Pets Limited
Bristol Imperial Vets4Pets Limited
Bristol Kingswood Vets4Pets Limited
Bristol Longwell Green 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 Newport Road Vets4Pets Limited
Carlisle Vets4Pets Limited
Carrickfergus Vets4Pets Limited
Castleford Vets4Pets Limited
Catterick Vets4Pets Limited
Cc (Rustington) Newco 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
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
Companion Care (Ayr) 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
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
Country of
incorporation
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Class of
shares held
At 26 March
2020 %
At 28 March
2019 %
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
90
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
–
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
209
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020 Notes (forming part of the financial statements) continued
28 Investments in subsidiaries (continued)
Investments in Joint Venture practices and other investments (continued)
Company
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 (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
210
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
Country of
incorporation
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Class of
shares held
At 26 March
2020 %
At 28 March
2019 %
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
50
50
50
50
50
50
50
50
50
50
50
50
50
50
Pets at Home Group PlcAnnual Report and Accounts 2020 Company
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 (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 (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 (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 (Peterborough Bretton) Limited
Companion Care (Peterborough) Limited
Companion Care (Plymouth) Limited
Companion Care (Poole) Limited
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 (Stirling) Limited
Companion Care (Stockport) Limited
Companion Care (Stoke Festival Park) 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
Indirect
Country of
incorporation
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Class of
shares held
At 26 March
2020 %
At 28 March
2019 %
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
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
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
211
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020 Notes (forming part of the financial statements) continued
28 Investments in subsidiaries (continued)
Investments in Joint Venture practices and other investments (continued)
Company
Companion Care (Swansea) Limited
Companion Care (Swindon) Limited
Companion Care (Tamworth) Limited
Companion Care (Taunton) Limited
Companion Care (Telford) 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
Craigleith Vets4Pets Limited
Crescent Link Vets4Pets Limited
Crewe Vets4Pets Limited
Cross Hands Vets4Pets Limited
Dagenham Vets4Pets Limited
Darlington Vets4Pets Limited
Daventry Vets4Pets Limited
Denbigh Vets4Pets Limited
Denton Vets4Pets Limited
Dewsbury Vets4Pets Limited
Dog Stay Limited
Dover Vets4Pets Limited
Droitwich Vets4Pets Limited
Drumchapel Vets4Pets Limited
Dudley Vets4Pets Limited
Dumbarton Vets4Pets Limited
Dunfermline Vets4Pets Limited
Durham Vets4Pets Limited
East Kilbride Vets4Pets Limited
Eastleigh Vets4Pets Limited
Eastwood Vets4Pets Limited
Eccleshill Vets4Pets Limited
Epsom Vets4Pets Limited
Filton Vets4Pets Limited
Gamston Vets4Pets Limited
Gateshead Vets4Pets Limited
Glasgow Forge Vets4Pets Limited
Glasgow Pollokshaws Vets4Pets Limited
Goldenhill Vets4Pets Limited
Gosport Vets4Pets Limited
Grantham Vets4Pets Limited
Gravesend Vets4Pets Limited
Greasby Vets4Pets Limited
Greenford Vets4Pets Limited
212
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
Country of
incorporation
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Class of
shares held
At 26 March
2020 %
At 28 March
2019 %
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
12
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
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
100
50
50
50
50
50
50
Pets at Home Group PlcAnnual Report and Accounts 2020 Company
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
Havant 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
Ipswich Vets4Pets Limited
Irvine Vets4Pets Limited
Kendal Vets4Pets Limited
Kettering Vets4Pets Limited
Kidderminster Vets4Pets Limited
Kirkby in Ashfield Vets4Pets Limited
Lancaster Vets4Pets Limited
Larne Vets4Pets Limited
Launceston Vets4Pets Limited
Leeds Birstall Vets4Pets Limited
Leeds Colton Vets4Pets Limited
Leeds Vets4Pets Limited
Leigh Vets4Pets Limited
Leigh-On-Sea Vets4Pets Limited
Letchworth Vets4Pets Limited
Leyland Vets4Pets Limited
Lichfield Vets4Pets Limited
Lincoln South Vets4Pets Limited
Lisburn Longstone Vets4Pets Limited
Llandudno Vets4Pets Limited
Llanelli Vets4Pets Limited
Llanrumney Vets4Pets Limited
Longton Vets4Pets Limited
Loughborough Vets4Pets Limited
Loughton Vets4Pets Limited
Luton Gipsy Lane Vets4Pets Limited
Luton Vets4Pets Limited
Lytham 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
Indirect
Country of
incorporation
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Class of
shares held
At 26 March
2020 %
At 28 March
2019 %
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
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
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
213
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020 Notes (forming part of the financial statements) continued
28 Investments in subsidiaries (continued)
Investments in Joint Venture practices and other investments (continued)
Company
Maidenhead Vets4Pets Limited
Maldon Vets4Pets Limited
Mansfield Vets4Pets Limited
Mapperley Vets4Pets Limited
Merthyr Tydfil Vets4Pets Limited
Middlesbrough Cleveland Park Vets4Pets Limited
Middlesbrough Vets4Pets Limited
Middleton Vets4Pets Limited
Millhouses Vets4Pets Limited
Morpeth Vets4Pets Limited
New Milton Vets4pets Limited
Newcastle-Upon-Tyne Vets4Pets Limited
Newmarket Vets4Pets Limited
Newport Vets4Pets Limited
Newton Abbot Vets4Pets Limited
Newtownabbey Vets4Pets Limited
Newtownards Vets4Pets Limited
North Tyneside Vets4Pets Limited
Northallerton Vets4Pets Limited
Northampton Riverside Vets4Pets Limited
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
Penzance Vets4Pets Limited
Peterborough Vets4Pets Limited
Pontypridd Vets4Pets Limited
Poole Vets4Pets Limited
Portishead Vets4Pets Limited
Portsmouth Vets4Pets Limited
Prenton Vets4Pets Limited
Preston Vets4Pets Limited
Prestwich Vets4Pets Limited
Pure Pet Food Ltd
Quinton Vets4Pets Limited
Rawtenstall Vets4Pets Limited
Rayleigh Vets4Pets Limited
Rhyl Vets4Pets Limited
Richmond Vets4Pets Limited
Rochdale Vets4Pets Limited
Rotherham Vets4Pets Limited
Rugby Vets4Pets Limited
Rugby Central Vets4Pets Limited
214
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
Country of
incorporation
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Class of
shares held
At 26 March
2020 %
At 28 March
2019 %
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
19
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
–
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
19
50
50
50
50
50
50
50
50
50
Pets at Home Group PlcAnnual Report and Accounts 2020 Company
Ruislip Vets4Pets Limited
Runcorn Vets4Pets Limited
Rushden Vets4Pets Limited
Saffron Walden Vets4Pets Limited
Selly Oak Vets4Pets Limited
Sevenoaks Vets4Pets Limited
Sheffield Vets4Pets Limited
Sheffield Wadsley Bridge 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
Southport Vets4Pets Limited
St Albans Vets4Pets Limited
St Helens Vets4Pets Limited
Stafford Vets4Pets Limited
Stechford Vets4Pets Limited
Stockton Vets4Pets Limited
Stourbridge Vets4Pets Limited
Street 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
Telford Madeley Vets4Pets Limited
Thurrock Vets4Pets Limited
Tilehurst Vets4Pets Limited
Torquay Vets4Pets Limited
Totton 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
Warminster Vets4Pets Limited
Warrington Riverside 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
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Class of
shares held
At 26 March
2020 %
At 28 March
2019 %
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
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
50
50
50
50
50
50
50
50
215
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020 Notes (forming part of the financial statements) continued
28 Investments in subsidiaries (continued)
Investments in Joint Venture practices and other investments (continued)
Company
Warrington Vets4Pets Limited
Washington Vets4Pets Limited
Waterlooville Vets4Pets Limited
Watford Vets4Pets Limited
West Bromwich Vets4Pets Limited
Weymouth Vets4Pets Limited
Widnes Vets4Pets Limited
Wigan Vets4Pets Limited
Wimbledon Vets4Pets Limited
Wolverhampton Vets4Pets Limited
Worksop Vets4Pets Limited
Worthing Vets4Pets Limited
WSM Vets4Pets Limited
Yate Vets4Pets Limited
York Clifton Moor Vets4Pets Limited
York Vets4Pets Limited
Holding
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Country of
incorporation
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Class of
shares held
At 26 March
2020 %
At 28 March
2019 %
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
During the 52 week period ended 26 March 2020, the Group has sold 100% of the ‘A’ shares in a number of companies which were previously
classified as subsidiaries, and subsequent to sale of the ‘A’ shares, have been accounted for as Joint Venture veterinary practices, which has led to
the reduction in the holding in 4 entities listed above to 50% investment. The ‘A’ shares in these entities were sold for consideration equal to the
net book value of the assets and liabilities, and therefore there was no profit or loss on disposal.
29 IFRS 16 transition note
The Group has adopted IFRS 16 Leases on 29 March 2019 using the modified retrospective approach. The cumulative effect of adopting IFRS 16
has been recognised as an adjustment to the opening balance sheet as at 29 March 2019, with no restatement of comparable information and
no impact on retained earnings.
Under the modified retrospective approach the opening right-of-use asset can be measured one of two ways:
a) as if the Group had applied IFRS 16 since the commencement date using its incremental borrowing rate at the date of initial application
b) measured at an amount equal to the lease liability at the date of initial application
The Group elects to measure the right-of-use asset at an amount equal to the lease liability at the date of initial application. The opening
right-of-use asset is adjusted for remaining deferred income relating to landlord incentives and rent free periods, in addition to any outstanding
prepayments in relation to the leases.
As part of the initial transition, the Group has elected to apply the relief option which allows it to adjust the right-of-use asset by the amount of
any provision for onerous leases recognised in the balance sheet, immediately before the date of initial application.
The Group applies the practical expedient, not to reassess whether a contract is or contains a lease at the date of initial application. This means
the Group applies IFRS 16 to all contracts entered into before 29 March 2019 and identified as leases in accordance with IAS 17 and IFRIC 4.
The Group has elected to use the exemptions proposed by the standard on lease contracts for which the lease term ends within 12 months as
of the date of initial application, except for leases which are expected to be renewed or replaced by a lease with a term greater than 12 months.
These leases are accounted for as short-term leases and the lease payments associated with them are recognised as an expense.
216
Pets at Home Group PlcAnnual Report and Accounts 2020 29 IFRS 16 transition note (continued)
The impact on the consolidated income statement in the 52 week period ended 26 March 2020 is as follows:
52 week period ended 26 March 2020
(excluding IFRS 16 adjustments)
52 week period ended 26 March 2020
(including IFRS 16 adjustments)
Underlying
trading
£m
Non-
underlying
items
(note 3)
£m
1,058.8
(540.0)
(0.9)
517.9
(321.8)
(92.8)
103.3
0.4
(4.2)
(3.8)
99.5
(19.8)
79.7
–
(6.9)
0.3
(6.6)
–
(1.0)
(7.6)
–
–
–
(7.6)
0.1
(7.5)
Note
2
3,17
3
2,3
6
7
8
(i)
IFRS 16
adjustment
£m
Underlying
trading
£m
Non-
underlying
items
(note 3)
£m
–
–
–
–
8.0
–
8.0
0.1
(14.1)
(14.0)
(6.0)
1.2
(4.8)
1,058.8
(540.0)
(0.9)
517.9
(313.8)
(92.8)
111.3
0.5
(18.3)
(17.8)
93.5
(18.6)
74.9
–
(6.9)
0.3
(6.6)
–
(1.0)
(7.6)
–
–
–
(7.6)
0.1
(7.5)
Total
£m
1,058.8
(546.9)
(0.6)
511.3
(321.8)
(93.8)
95.7
0.4
(4.2)
(3.8)
91.9
(19.7)
72.2
Total
£m
1,058.8
(546.9)
(0.6)
511.3
(313.8)
(93.8)
103.7
0.5
(18.3)
(17.8)
85.9
(18.5)
67.4
Revenue
Cost of sales
Impairment losses on
receivables
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
217
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020 Notes (forming part of the financial statements) continued
29 IFRS 16 transition note (continued)
The impact on the statement of financial position as at 29 March 2019 is as follows:
Non-current assets
Property, plant and equipment
Right-of-use assets
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
Lease liabilities
Provisions
Other financial liabilities
Non-current liabilities
Other interest-bearing loans and borrowings
Other payables
Lease liabilities
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
Cashflow hedging reserve
Retained earnings
Total equity
218
(ii)
(iii)
(iii)
(v)
(v)
(iv)
(v)
(v)
(iv)
(v)
At
28 March 2019
£m
IFRS 16
adjustment
At
29 March 2019
£m
123.7
–
1,000.7
18.7
1,143.1
68.2
1.6
68.9
60.5
199.2
1,342.3
(185.8)
(10.2)
–
(15.4)
(7.3)
(218.7)
(178.8)
(33.6)
–
(1.7)
(2.5)
(4.0)
(220.6)
(439.3)
903.0
5.0
(372.0)
113.3
(0.0)
0.8
1,155.9
903.0
–
473.1
–
1.7
474.8
–
0.7
(9.4)
–
(8.7)
466.1
5.0
–
(82.7)
1.9
–
(75.8)
–
32.4
(423.5)
0.8
–
–
(390.3)
(466.1)
–
–
–
–
–
–
–
–
123.7
473.1
1,000.7
20.4
1,617.9
68.2
2.3
59.5
60.5
190.5
1,808.4
(180.8)
(10.2)
(82.7)
(13.5)
(7.3)
(294.5)
(178.8)
(1.2)
(423.5)
(0.9)
(2.5)
(4.0)
(610.9)
(905.4)
903.0
5.0
(372.0)
113.3
(0.0)
0.8
1,155.9
903.0
Pets at Home Group PlcAnnual Report and Accounts 2020 29 IFRS 16 transition note (continued)
Income statement
(i)
Under previous lease accounting standards (IAS 17), lease costs were recognised on a straight-line basis over the term of the lease.
The Group recognised these costs within operating expenses, and costs of £79.1m would have been recognised in the 52 week period
ended 26 March 2020 if IAS 17 had still been applied. Under IFRS 16 these costs have been removed and replaced with depreciation of the
right-of-use assets, which has resulted in a depreciation charge of £71.1m and a net impact to profit before tax of £6.0m for the 52 week
period ended 26 March 2020.
The impact on net financing expense in the 52 week period ended 26 March 2020 was £14.0m.
The net impact of applying IFRS 16 to the profit for the period in the 52 week period ended 26 March 2020 was a reduction of £4.8m after tax.
This difference to profit for the period represents a timing difference in the recognition of costs under IFRS 16 compared to IAS 17. IAS 17
recognises costs on a straight-line basis, whereas under IFRS 16 finance charges are recognised in relation to the value of the lease liability and
costs will therefore reduce as the liability reduces.
Right-of-use assets
(ii)
A right-of-use asset is recognised under IFRS 16, representing the Group’s contractual right to access an identified asset under the terms of the
lease contract.
Other non-current assets
(iii)
Sublease assets have been recognised in respect of finance leases under IFRS 16 for a number of the properties which are subleased to third
parties. The finance lease is assessed by reference to the right-of-use asset under the head lease rather than the underlying asset. A number of
subleases continue to be accounted for as operating leases which has resulted in no change to their accounting treatment under IFRS 16.
Lease liabilities
(iv)
A lease liability is recognised under IFRS 16, representing the Group’s contractual obligation to minimum lease payments during the lease term.
The lease liability is initially measured at the present value of the remaining lease payments, discounted using the rates based on the Group’s
incremental borrowing rate. The weighted average discount rate used to discount the lease liability as at 26 March 2020 was 2.8%. The element
of the liability payable in the next 12 months is shown within current liabilities, with the balance shown in non-current liabilities.
Working capital
(v)
Under IAS 17, balances relating to lease incentives, rent prepayments, accruals, onerous leases and similar balances were held within other
receivables, other payables and provisions. Under IFRS 16 these balances are reflected in either the right-of-use asset or the lease liability. On
transition to IFRS 16, the Group has elected to apply the relief option which allows it to adjust the right-of-use asset by the amount of any
provisions for onerous leases. At 29 March 2019, £2.7m of the onerous lease provision has been offset against the opening right-of-use asset. The
Group has used the C10(b) practical expedient for onerous leases.
The following table details the reconciliation between the operating lease obligations as at 28 March 2019 and the opening lease liability
balance at 29 March 2019:
Maturity analysis – contractual undiscounted cashflows
Operating lease obligations as at 28 March 2019
Working capital movements
Relief option for leases of low value
Other
Gross lease liabilities at 29 March 2019
Discounting
Total lease liabilities at 29 March 2019
Land and
buildings
£m
571.9
(9.0)
–
–
562.9
(66.7)
496.2
Other
£m
9.9
–
–
0.7
10.6
(0.7)
9.9
Total
£m
581.8
(9.0)
–
0.7
573.5
(67.4)
506.1
The working capital movements of £9.0m relate to the lease prepayments on the balance sheet as at 28 March 2019 which were not reflected in
the operating lease disclosure made at 28 March 2019. Under IFRS 16, this prepayment amount has been included in the right-of-use asset but
not the lease liability as the amounts have already been paid.
219
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020 29 IFRS 16 transition note
(continued)
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
cashflows 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 the prior year.
All APMs relate to the current period’s results and comparative periods where provided. Due to the Group adopting the modified retrospective
approach to IFRS 16, all prior year numbers have not been restated. Where the current APM has been amended to exclude the impact of
transition to IFRS 16, this has been set out in the definition below.
APMs considered by the business to be a key performance indicator are explained in more detail on page 14 of the Annual Report.
The key APMs used by the Group are:
‘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, veterinary practices and Specialist Referral centres that have been trading for 52 weeks or more, excluding fee
income from Joint Venture veterinary practices where the Group has bought out the Joint Venture Partners or will offer to buy out the Joint
Venture Partners in the future
Omni-channel revenue: Revenue net of discounts and VAT from core online sales, subscriptions and orders to store
Underlying EBITDA: Earnings before interest, tax, depreciation and amortisation before the effect of non-underlying items in the period
Underlying free cashflow: Net cash from operating activities, after tax, less net cash used in investing activities (excluding acquisitions), less
interest paid and debt issue costs before the effect of non-underlying items in the period
Underlying CROIC: Cash return on invested capital, represents cash returns divided by the average of gross capital invested (GCI) 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, before the effect of non-underlying items in the period
Non-underlying items: 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
References to Underlying GAAP measures and Underlying APMs throughout the financial statements are measured before the effect of
non-underlying items.
220
Pets at Home Group PlcAnnual Report and Accounts 2020 29 IFRS 16 transition note
(continued)
APM
Definition
Cash EBITDA
Underlying EBITDA (see below) adjusted for IFRS 16
transactions and share based payment charges.
Underlying
EBITDA
Earnings before interest, tax, depreciation and
amortisation before the effect of non-underlying
items in the period.
Underlying CROIC 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. CROIC is stated before
the impact of IFRS 16 as it is based on a 12 month
rolling average.
Reconciliation
Cash EBITDA (£m)
Underlying EBITDA
Effect of IFRS 16 on EBITDA
EBITDA before IFRS 16
Share based payment charge
Cash EBITDA
Underlying EBITDA (£m)
Statutory operating profit
Depreciation on tangible fixed
assets
Amortisation of intangible assets
Non-underlying items
Underlying EBITDA before IFRS 16
Depreciation on right-of-use assets
Underlying EBITDA
FY19
130.0
–
130.0
3.5
133.5
FY19
53.1
28.5
8.3
40.1
130.0
–
130.0
FY20
220.7
(79.1)
141.6
4.2
145.8
FY20
103.7
28.3
10.0
7.6
149.6
71.1
220.7
Note
2
3
Note
2
3
3
3
3
CROIC
FY19
FY20
Note
Cash returns:
Underlying operating profit (pre
IFRS 16)
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 (pre IFRS 16)
Capitalised operating leases
GCI
Average
Underlying CROIC
93.2
77.0
3.5
173.7
21%
(37.0)
136.7
36.8
173.5
103.3
76.1
4.2
183.6
20%
(36.7)
146.9
38.3
185.2
284.8
306.2
1,046.3
(906.5)
1,030.5
(906.5)
13.8
(103.7)
615.8
934.7
919.1
18.9%
29
3
3
11
13
14.8
16
(125.2) see definition
8x
608.8
944.4
939.6
19.7%
221
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020
Glossary – Alternative Performance Measures continued
APM
Definition
Reconciliation
Underlying free
cashflow
Net cash from operating activities, after tax, less
net cash used in investing activities (excluding
acquisitions), less interest paid and debt issue costs
before the effect of non-underlying items in the
period.
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, veterinary practices and
Specialist Referral centres that have been trading
for 52 weeks or more, excluding fee income from
Joint Venture veterinary practices where the
Group has bought out the Joint Venture Partners
or will offer to buy out the Joint Venture Partners
in the future.
Underlying free cashflow (£m)
Underlying free cashflow
Non-underlying working capital
Free cashflow
Underlying cashflow
Dividends
Investments
Acquisition of subsidiary
Repayment of borrowings on
acquisition
Proceeds from new loan
Repayment of borrowings
Non-underlying cashflow
Proceeds from sale of PPE
Proceeds from sale of PPE relating
to GVs
Payment of deferred consideration
Settlement of put & call
Acquisition of subsidiary
Costs associated with acquisitions
Repayment of borrowings on
acquisition
Non-underlying working capital
Net increase/(decrease) in cash
CFS = Consolidated statement of cashflows
Not applicable.
FY19
63.6
(27.7)
35.9
(37.2)
–
(0.7)
(0.7)
181.0
(195.0)
–
–
(1.0)
(0.1)
(0.7)
(2.4)
(5.7)
27.7
0.7
FY20
89.6
1.2
90.8
(37.1)
(1.0)
(3.7)
–
61.0
(77.0)
0.4
(0.3)
–
(6.4)
(0.5)
(3.7)
(5.9)
(1.2)
18.6
Note
CFS
CFS
CFS
CFS
CFS
CFS
CFS
CFS
CFS
CFS
CFS
CFS
CFS
2-year like-for-like 2-year like-for-like sales growth comprises total
Not applicable.
Underlying basic
EPS
revenue in a financial period compared to revenue
achieved in the financial period before the prior
period for stores, online operations, and grooming
salons that have been trading for 104 weeks or more.
Underlying basic earnings per share (EPS) is based
on earnings per share after the impact of IFRS 16,
but 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 basic EPS (p)
Underlying basic EPS
Non-underlying items
Basic earnings per share
FY19
14.1
(8.0)
6.1
FY20
15.0
(1.5)
13.5
Note
5
5
222
Pets at Home Group PlcAnnual Report and Accounts 2020
APM
Definition
Reconciliation
Underlying
operating profit
Underlying profit
before tax
Underlying profit
after tax
Underlying total
tax expense
Underlying net
working
capital
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.
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.
Net 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 net working capital is a key component
of the free cashflow measure of the Group.
Underlying operating profit (£m)
Underlying operating profit
Non-underlying items
Operating profit
Underlying PAT (£m)
Underlying PBT
Non-underlying items
PBT
CIS = Consolidated income statement
Underlying PAT (£m)
Underlying PAT
Non-underlying items
PAT
CIS = Consolidated income statement
Underlying total tax expense (£m)
Underlying tax expense
Non-underlying items
Tax expense
Underlying net working capital
movement (£m)
Net working capital per cashflow
statement
Being:
Movement in trade and other
receivables
Movement in inventories
Movement in trade and
other payables
Movement in provisions
Trading working capital movement
Movement in gross operating loans
Cash working capital movement
Underlying allowance for expected
credit losses against operating
loans
FY19
93.2
(40.1)
53.1
FY19
89.7
(40.1)
49.6
FY19
70.4
(39.9)
30.5
FY19
(19.3)
0.2
(19.1)
FY19
5.4
10.7
(7.3)
12.6
1.9
17.9
(9.6)
8.3
(2.9)
Net working capital movement
5.4
27.3
CFS = Consolidated statement of cashflows
Receivables
Inventory
Trade and other payables
Provisions
Non-current provisions
Net working capital
68.9
68.2
(223.7)
(15.4)
(1.7)
(103.7)
55.9
62.8
(204.6)
(3.9)
(1.3)
(91.1)
FY20
111.3
(7.6)
103.7
FY20
93.5
(7.6)
85.9
FY20
74.9
(7.5)
67.4
FY20
(18.6)
0.1
(18.5)
Note
2
3
Note
CIS
3
Note
CIS
CIS
Note
8
8
FY20
27.3
Note
CFS
8.8
5.7
16.9
(0.7)
30.7
(2.5)
28.2
(0.9)
CFS
CFS
CFS
CFS
CFS
CFS
17
14
21
21
223
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020
Glossary – Alternative Performance Measures continued
APM
Definition
Reconciliation
Underlying cash
working capital
Working capital before increase in underlying
operating loans to Joint Venture veterinary
practices.
Operating
cashflow
Net cashflow from operating activities per the
cashflow statement, before the effects of corporation
tax payments, non-underlying elements, and IFRS 16
Cash working capital (£m)
Net working capital (above)
Net loans and borrowings
Underlying cash working capital
Operating free cashflow (£m)
Net cashflow from operating
activities (per cashflow statement)
Add back:
Tax paid
Settlement of put & call liabilities
(growth element)
Pre-tax underlying operating
cashflow
Capital lease payments
Interest paid on lease obligations
Operating cashflow
Tax paid
Interest paid
Interest received
Debt issue costs
Purchase of own shares
Acquisition of PPE and intangible
assets
Proceeds from sale of PPE
Proceeds from sale of PPE
(non-underlying)
FY19
5.4
(1.8)
3.6
FY19
107.8
18.6
0.1
FY20
27.3
1.6
28.9
FY20
215.2
30.8
0.8
126.5
246.8
–
–
126.5
(18.6)
(3.4)
0.6
(2.5)
(1.8)
(37.4)
0.6
(0.4)
(67.0)
(14.0)
165.8
(30.8)
(3.7)
0.5
–
(2.8)
(39.6)
0.4
(0.2)
Underlying free cashflow
63.6
89.6
CFS – Consolidated statement of cashflows
Omni-channel
revenue
Revenue net of discounts and VAT from core online
sales, subscriptions and orders to store.
Underlying EBIT
Earnings before interest and tax agreed to operating
profit relating to underlying trading.
Omni-channel revenue (£m)
Omni-channel revenue
Underlying EBIT (£m)
Operating profit relating to
underlying trading (EBIT)
Retail underlying
EBIT
Earnings before interest and tax agreed to operating
profit relating to underlying trading for the Retail
division.
Retail underlying EBIT (£m)
Retail operating profit relating to
underlying trading (EBIT)
FY19
73.5
FY19
93.2
FY19
67.2
FY20
93.9
FY20
111.3
FY20
89.3
Note
27
Note
CFS
CFS
CFS
CFS
CFS
CFS
CFS
CFS
CFS
CFS
CFS
CFS
CFS
Note
Note
2
Note
2
224
Pets at Home Group PlcAnnual Report and Accounts 2020
APM
Definition
Reconciliation
Vet Group
underlying EBIT
Earnings before interest and tax agreed to operating
profit relating to underlying trading for the Vet Group
division.
Vet Group underlying EBIT (£m)
Vet Group operating profit relating
to underlying trading (EBIT)
FY19
32.1
FY20
30.6
Net debt
Cash and cash equivalents less loans and borrowings.
Customer sales
Customer sales being statutory Group revenue, less
Joint Venture veterinary practice fee income (which
forms part of statutory revenue within the Vet Group),
plus gross customer sales made by Joint Venture
veterinary practices (unaudited).
Net debt (£m)
Cash and cash equivalents
Loans and borrowings
Net debt
Customer sales (£m)
Statutory Group revenue
Fee income
Sales by Joint Venture veterinary
practices
FY19
60.5
(181.0)
(120.5)
FY19
961.0
(52.6)
309.8
FY20
79.1
(165.0)
(85.9)
FY20
1,058.8
(53.8)
329.7
Customer sales
1,218.2
1,334.7
CIS = Consolidated income statement
Note
2
Note
18
19
Note
CIS
2
225
Financial statementsStrategic reportGovernance reportPets at Home Group PlcAnnual Report and Accounts 2020
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
1 St Peter’s Square
Manchester
M2 3AE
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS99 6ZZ
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
irelations@petsathome.co.uk
+44 (0)161 486 6688
226
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Cheshire
SK9 3RN
United Kingdom