We’re better
with pets
Pets at Home Group Plc
Annual Report and Accounts 2021
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.
Find out more:
To download our Annual Report, our full
social value report or to learn more about
Pets at Home, please visit our investor website.
https://investors.petsathome.com
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 25 March 2021
Consolidated statement of changes
in equity as at 26 March 2020
Consolidated statement of cashflows
Company balance sheet
Company statement of changes
in equity as at 25 March 2021
Company statement of changes
in equity as at 26 March 2020
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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Contents
Overview
The year in review
At a glance
Investment case
Chairman’s statement
COVID-19 response
Strategy
Chief Executive’s statement
Market overview
Strategy
Performance
Key performance indicators
Business model
Stakeholder engagement
Chief Financial Officer’s review
Operating review
Risk management
Risks and uncertainties
Social Value
Governance Report
Governance Report
Board of Directors
Directors’ Report
Statement of Directors’ Responsibilities
Audit and Risk Committee Report
Nomination and Corporate
Governance Committee Report
ESG Committee Report
Directors’ Remuneration Report
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4
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12
18
28
34
36
38
40
46
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56
64
90
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119
With 30 years of caring for pets and the
people who love them, we know our
purpose – we’re better with pets.
Our goal is to make pet care convenient,
affordable and rewarding for customers –
allowing them to spend more time
with their beloved pets.
1
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Financial and operational highlights
The year in review
Operational highlights
Our performance in the year reflects
the success of our pet care strategy
during a period of unprecedented
change. The pet care market remained
in structural growth, underpinned by
a rise in pet ownership, as well as the
ongoing trends of premiumisation
and humanisation, and we continued
to take share across all channels of our
pet care ecosystem.
Link 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
Our strategy, page 28
Financial highlights
Strong performance in a challenging year
Developing our pet care centres
Our next generation store format
has now been rolled out across
23 locations, featuring more space
allocated to services and an enhanced
customer experience, and two new
smaller format stores have been
successfully launched this year
within Greater London.
Progressing our data agenda
Our 45-strong data and analytics team
is now fully recruited, and we have
successfully completed the insourcing
of all our data operations onto a
cloud-based platform. This is enabling
us to more accurately understand
customer preferences and drive highly
targeted communications; our first VIP
reward mailer based on insights from
internally held data achieved our
highest level of redemptions to date.
Enhancing our omnichannel
proposition
We have seen strong growth in our
Retail business, particularly within
omnichannel, which now represents
15.8% of Retail revenues. A nationwide
rollout of a 1-hour Click & Collect
service in the year offers customers
an even more convenient way to
shop with us.
Driving maturity in our
First Opinion practices
Like-for-like1 customer sales generated
by all First Opinion vet practices grew
9.5%, supported by strong growth
in new client registrations. Our
acquisition of The Vet Connection
in the year broadens our digital
capabilities in providing trusted
advice and pet care solutions.
Revenue (£m)
2021
2020
2019
Underlying PBT 1 (£m)
2021
2020
Underlying free cashflow 1 (£m)
2021
2020
2019
2
£1,142.8
£1,058.8
£961.0
£1,142.8m
+7.9%
£87.5
£93.5
£87.5m
(6.4)%
£67.4
£63.6
£89.6
£67.4m
(24.8)%
Pets at Home Group PlcAnnual Report and Accounts 2021
61%
Increase in Puppy &
Kitten club members
£90m
Annual customer
revenue from
subscriptions
Growing our customer base
Our VIP loyalty club now has 6.2m
active members, having grown 9% in
the year. This has been in part driven
by the continued success of our Puppy
and Kitten clubs, which help introduce
customers to all parts of our pet care
ecosystem and foster long-term
customer relationships.
Expanding our
subscriptions platforms
We now have over 1 million customers
signed up to one of our subscription
plans, offering customers a convenient
way to shop with us, and increasing the
quality and visibility of our sales profile.
1
Alternative Performance Measures (APMs) are defined and reconciled to IFRS information, where
possible, on page 210. Customer sales include gross customer sales made by Joint Venture vet
practices, and therefore differs to the fee income recognised within Vet Group revenue.
Our Better World Pledge
Our social value strategy continues to guide everything that we do
£6.0m
Over £6.0 million raised
to support pet charities
84%
9.1%
84% colleague
engagement
9.1% reduction in CO2e
emissions vs. FY20
3
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 At a glance
Our pet care
ecosystem
A unique combination
of products and services
Although we report our Retail and Vet Group
businesses separately, the two sides of the Group
are highly complementary and allow us to provide
a complete pet care solution to customers.
Revenue and underlying EBIT1,2 contribution by segment
Retail
Vet Group
Revenue (£m)
Underlying
EBIT1,2 (£m)
1,018.9
123.2
79.5
36.0
1
Alternative Performance Measures (APMs) are defined
and reconciled to IFRS information, where possible, on page 210.
2 Central costs of £(9.6)m not shown above
£6.2bn
UK pet care market, which
is resilient and in growth
6.2m
Active VIP loyalty club members
c26%
Proportion of VIPs who shop
across more than one channel
>1m
Number of subscription
customers across the Group
4
Retail
A wide 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 a combination of our in-store
experience and services, knowledgeable colleagues and award
winning VIP loyalty club, we aim to make pet ownership
convenient, affordable and rewarding.
Operating review, page 46
Vet Group
We provide a comprehensive range of small animal
veterinary services through a network of First Opinion
practices which handle all aspects of general veterinary care,
as well as offering round-the-clock veterinary telehealth
advice and triage so clients can access all their pet healthcare
needs whenever they need to.
Operating review, page 50
Pets at Home Group PlcAnnual Report and Accounts 2021 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 grooming,
veterinary services, subscription packages,
educational workshops and events, as well as
access to expert pet knowledge and advice
through our experienced colleagues.
452
Stores
56%
Of stores have a vet practice and grooming salon
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,
provide the opportunity for entrepreneurial
vets to own their own business. This Joint
Venture arrangement offers clinical freedom
and operational independence 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.
395
Joint Venture First Opinion practices
46
Company managed First Opinion practices
Our locations
Our stores, Groom Room salons and
First Opinion vet practices are located
nationwide, allowing us to offer convenient
pet care to customers across the UK.
Omnichannel capabilities
Our extended range of food and accessories
is available for customers to shop online 24 / 7,
with convenient delivery options to choose
from, including 1-hour collection in-store.
Alternatively, colleagues can also place an
order from our extended range whilst the
customer is in-store using a dedicated PetPad
app. We also offer subscriptions across
monthly flea & worm treatments and regular
food deliveries, making pet care even more
convenient and affordable.
23%
Of omnichannel1 revenues
are collected in store
>10,500
Products in our extended online range
Digitally-led pet healthcare solutions
Our acquisition of The Vet Connection
broadens our digital capabilities in
providing trusted advice and pet care
solutions. It enables us to provide customers
with round-the-clock veterinary telehealth
advice, triage and ancillary services, meaning
pet owners can remotely access quality care
for their pet whenever they need to.
c90,000
Remote consultations each year
Stores with a vet and groomer
Standalone vets
5
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 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 c23% share of a pet care market worth £6.2bn,
providing significant opportunity to take further share
3 Trusted and well known brand —
making pet care convenient, affordable
and rewarding
– 30 years of serving the nation’s pet owners, with knowledgeable
– Growing pet population of c33m pets in the UK, underpinned
in-store colleagues offering expert advice
by increasing humanisation and premiumisation
– Competitive pricing across branded pet food and strong
– Taking share across all key categories and channels through
penetration of private label
our winning combination of complete pet care
– Convenient retail proposition of 452 experiential stores
and fast growing omnichannel business provide multiple
customer acquisition opportunities
2 A unique proposition of pet care
solutions — providing competitive
advantages
– Customers who transact across the full range of products
and services spend up to 9x more each year compared to
store-only shoppers
– Only c26% of all VIPs currently shop across more than
one channel – with considerable headroom for growth
– An expanding ecosystem of pet care, with multiple revenue
streams of non-discretionary and non-seasonal spend
6
4 Investment in data — to deliver
more personalised solutions to our
6.2m active VIP loyalty club members
– Unique VIP loyalty club, providing over eight years worth
of proprietary pet and customer data
– By leveraging our data insights, we can offer more
personalised, targeted solutions and drive customer loyalty,
retention and lifetime value
– Full benefits of recent investment in data capabilities still to flow
Pets at Home Group PlcAnnual Report and Accounts 2021
5 Unique 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 clinical freedom and
operational independence
– Practice maturity represents a significant future profit and free
cashflow opportunity, with further potential upside from rollout
of new practices
8 Growing numbers on
subscription platforms —
creating a high margin annuity-like
income stream
– Over 1 million customers currently on some form
of subscription package, up 21% year-on-year
– Existing platforms generate £90m of visible,
repeatable customer revenue per year
– Significant opportunity to personalise packages and
create unique bundles of products and services
9 Strong financial position —
and returns potential
– Growth in pet population and new customer acquisition
provide a strong foundation for future growth
– Robust balance sheet with good liquidity of £249m, low
leverage and significant headroom on banking covenants
– Highly cash generative with free cashflow conversion of 30%
and dividend per share increased to 8.0p in FY21
6 Scalable omnichannel platform —
underpinned by significant investment
in digital capabilities
– New state-of-the-art order management system provides real-time
intelligence and enables best-in-class fulfilment for our customers
– Creating a new proprietary digital interface where customers can
access their entire pet care needs in one place
– Acquisition of The Vet Connection enhances our digital capabilities,
providing trusted advice and even more convenient pet care services
7 Strong growth in customer
acquisition — through our
Puppy and Kitten clubs
– Membership of our Puppy and Kitten clubs has increased 61%
year on year, introducing customers to all parts of the business
– Members of the clubs typically spend c34% more than
non-members, and this premium continues into adulthood
– Acquiring customers at the very start their pet journey helps
create loyalty and increase the lifetime value opportunity
10 Strong governance —
and commitment to sustainability
– Experienced Executive Management Team with a track record
of taking decisive action
– Balanced Board of Directors with a broad range of skills
and experience
– Strong sense of social purpose focusing on our ESG agenda
and designed to balance the interests of all stakeholders
7
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021
Chairman’s statement
Ian Burke
Chairman
A strong
performance
within a
challenging
environment
Strong performance in a challenging
environment demonstrates the resilience
of our pet care strategy and how now, more
than ever, pets are playing an important role
in our daily lives. We have seen positive
revenue growth across the Group, testament
to the advantages of our omnichannel model
and strategy of providing all of our customers’
pet care needs in one place.
In FY21, our pet care ecosystem reached more customers than ever
before as we provided convenient, affordable and rewarding pet care
to pet owners. Overall, we generated revenue growth of 7.9%, to
£1,142.8m, within which like-for-like sales1 grew 8.7%. Our performance
is testament to the success of our strategy in aligning our Retail and
Veterinary operations more closely to provide customers everything
they need to look after their pet, setting us apart from our competitors.
Strategy
We have made good progress this year in our ambition to become
the best pet care business in the world. The Board has spent the past
year focusing on the Group’s key strategic areas, including improving
the quality of our data and our ability to leverage it to provide deeper
customer insight, enhancing our omnichannel proposition, and
deploying capital expenditure to further digitise the business and
commence early stage development of our new purpose-built
storage and distribution facility.
In the coming year, we plan to increase our investment in developing
further our digital capabilities, progressing our additional distribution
capacity and continuing to upgrade our pet care centres.
Performance
The performance in Retail has been strong. By offering customers
a compelling range of products and services and making their
experience as convenient and rewarding as possible, we have been
able to take market share across all key categories and channels. We
have seen growth in new customer acquisition, driven by the success
of our Puppy and Kitten clubs, as well as from customers signing up
to our subscription plans, where there is considerable headroom to
develop annuity-like revenue streams.
We have seen positive results in the Vet Group, as the underlying
health of the practice estate continues to improve. This year also saw
the acquisition of The Vet Connection, a long established veterinary
telehealth provider, and the disposal of our Specialist Referral hospitals,
as we continued to align our business with our strategic focuses.
Our underlying profit generation has been highly encouraging
within the context of an estimated £30m adverse financial impact
from COVID-19 in the year. We ended the year in a strong cash
position with good liquidity and low leverage, with our free cashflow
generation enabling us to invest in our business, reduce debt and
increase our dividend.
8
Pets at Home Group PlcAnnual Report and Accounts 2021 “ We have generated strong free cashflow1,
enabling us to invest in our business,
reduce debt and increase our dividend.”
Our Better World Pledge
Our purpose unifies us as a single entity and aligns all areas of the
business around a consistent vision of pet care for our customers; put
simply ”we’re better with pets”. During the past year we have been
developing our new social value strategy, which we refer to as Our Better
World Pledge. This pledge ensures we will run our business sustainably
and ethically whilst also applying high standards of governance.
Management
Our Executive Management Team has provided firm and effective
leadership to the business throughout this past year of unprecedented
challenges. They have ensured that all colleagues across the Group
have remained safe, informed, engaged and supported throughout
the COVID-19 crisis. Alongside these efforts, they have made good
progress in implementing key aspects of our strategy.
Colleagues
Our colleagues are, and have always been, the foundation of our
business. Our passionate and highly trained team of veterinarians,
vet nurses, grooming stylists, and store colleagues are on the front
line each and every day to share their knowledge, expertise and
enthusiasm with our customers. They have been well supported by
our colleagues in field operations, our Distribution Centres and our
Support Offices. I would like to express my sincere thanks to all our
colleagues for their ongoing commitment over the past year. I am
proud of the way in which every one of them has risen to the
challenges we have faced over the last 12 months and continued
to serve our customers and their pets in whatever way they can.
Dividend
The Board is pleased to recommend a final dividend of 5.5 pence per
share to be paid on 13 July 2021 to shareholders on the register at the
close of trading on 18 June 2021. This will take the full year dividend to
8.0 pence per share, up 6.7% on the previous year.
Current trading and outlook
The start of our current financial year has seen a continuation of the
strong momentum across our Retail and Veterinary operations.
While the emergence of new variants of the virus and the potential
for higher transmission levels as the UK continues to unlock mean
the external environment remains uncertain in the near term, our pet
care model remains robust, and the changes we have made to our
business enable us to continue providing pet care to our customers
with minimal disruption.
Ian Burke
Chairman
27 May 2021
1 Alternative Performance Measures (APMs) are defined and reconciled to IFRS information, where possible,
on page 210.
Our response to COVID-19
The COVID-19 pandemic has had a devastating impact on the
retail sector, and the wider economy. Our Executive Management
Team responded to the challenges quickly and decisively, taking
proactive measures to provide a safe shopping environment for
our customers, whilst ensuring the safety and wellbeing of all our
colleagues and Partners. We introduced convenient and safe ways
to engage, serve and fulfil our customers, whilst continuing to
meet our obligations as a responsible corporate citizen.
I am proud to say that throughout this most challenging of
years, our Executive Management Team have shown the strong
leadership required to enable the business to remain focused,
disciplined and agile. This, along with the hard work and
dedication of all our colleagues across the Group, has ensured
the business is emerging from the pandemic a stronger business,
well positioned for long term sustainable growth.
Read more about our response to COVID-19, page 10
Our approach to ESG
In recent times there has been increased interest in environmental,
social and governance matters, and the COVID-19 pandemic has
accelerated this interest in society generally, as well as within the
wider business community. Whilst many focus on the scale of the
challenges ahead of us, we believe the next 10-20 years present
a significant opportunity to rethink business practices and win
market share and, rather than considering it as a trade-off against
profitability, we see sustainability as being consistent with
long-term growth, profitability and value creation.
As such, we are committed to executing our pet care strategy
with ESG at the forefront, including aligning our reporting and
disclosure with best practice, delivering our goal of becoming
net zero, leading the way in sustainable pet care products,
ensuring fair and equal treatment of all our customers, colleagues
and communities, and continuing our support of pet charities,
whilst maintaining strong governance practices.
ESG strategy, page 64
9
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021
COVID-19 response
In-store safety measures
We deployed new signage to
encourage customers to shop
alone and remain 2 metres apart.
We also temporarily removed pets
from our stores to discourage
browsing, and limited the number
of customers who could be in
store at any one time.
Contactless collection service
In response to the pandemic,
we introduced a contactless
collection service, where
customers can remain in their
car within a designated parking
space, and colleagues will deliver
products directly to the boot of
their vehicle.
COVID-19
response
We responded quickly to the pandemic,
making significant changes to the way we
operate our business, and we remain agile
as we emerge from the pandemic.
We have introduced new, convenient ways
to engage, serve and fulfil our customers. We
have ensured the wellbeing of our colleagues
and Partners and we have maintained strong
corporate governance throughout the year.
10
For our customers…
Proactive measures taken to provide a safe shopping
environment for our customers
Our priority throughout the pandemic has been to ensure the
wellbeing and safety of our people; be that our colleagues, vet
Partners, or customers. In line with Government advice, we rapidly
implemented a number of protocols in this respect across our stores,
Distribution Centres and vet practices.
Across our stores, we temporarily introduced purchase limits,
restricted the number and type of products available for sale,
removed pets on sale and closed our Groom Room salons to
discourage non-essential customer visits. We implemented all
Government advice regarding social distancing by limiting the
number of customers in our stores at any one time and introducing
a clear queuing protocol for customers both inside and outside of
our stores. Within our vet business, we have adhered to RCVS
guidance on permitted procedures throughout the year, which
initially excluded all elective and routine procedures.
Enhanced omnichannel proposition
The role our stores play in the fulfilment and delivery process is
evolving. In the year we launched a contactless collection service,
where orders are delivered directly to the boot of a customer’s car,
using dedicated parking bays and QR code notifications. We also
launched a new 1-hour Click & Collect service across our store estate,
which significantly improves our customer proposition, and provides
an even more convenient way for customers to shop with us.
Operating review, page 46
Pets at Home Group PlcAnnual Report and Accounts 2021 Supporting our colleagues
Since the start of the pandemic,
we have paid a £2.9m
incremental bonus primarily to
our frontline colleagues outside
of our normal bonus cycle, and
continued to support shielding
and isolating colleagues.
Vets remain open
Designated as an essential
retailer, our stores remained open
throughout the year. The vast
majority of our vet practices also
chose to remain open throughout
the pandemic, providing much
needed care for the nation’s pets.
Colleague safety
We issued all colleagues with
PPE, installed protective screens
around all points of sale, and
implemented additional
training for colleagues on
the safe provision of products
and services.
Hardship fund
We created a £1.0m Colleague
Hardship Fund for colleagues,
vet Partners and their teams,
meaning any colleague across
the Group can access much
needed financial support in
these difficult times.
…our colleagues
Ensuring the safety and well-being of our colleagues
Caring for our hardworking colleagues has never been more
important and we ensured that those colleagues who needed to
self-isolate or shield continued to be supported throughout. 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
£2.9m bonus primarily to store and other frontline colleagues in
recognition of their tireless work in adverse circumstances.
To ensure our colleagues felt supported in store, we introduced
sneeze guards and contactless only payment across all of our points
of sale. We also provided 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.
Across our First Opinion practices, we offered training for our vet
Partners to help ensure the safe delivery of procedures, and introduced
a home delivery service of healthcare products, such as flea & worm
treatments. We trialled remote consults early on in the pandemic, and
given the success of this service, we then acquired The Vet Connection,
a long established veterinary telehealth provider.
ESG strategy, page 64
Remote Board meetings
The vast majority of our Support
Office colleagues began working
from home, adapting to new
remote ways of working, and using
technology to ensure all teams had
the capabilities to continue to work
and collaborate effectively.
…and governance
Continued effective business
governance and leadership
Given the rapidly changing landscape, we
ensured all colleagues across the Group were
kept abreast of developments through daily
briefing videos led by our CEO, and developed
and communicated a 5-stage response
strategy to the crisis, enabling the business
to adapt quickly to the changing environment.
Meeting our obligations as a responsible
corporate citizen
Throughout the pandemic, meeting our
obligations as a responsible corporate citizen
has remained paramount. We have continued
to pay our landlords and suppliers, allocated
£1.3m to nominated charities, and provided
a 10% discount scheme to NHS workers.
In addition, we chose not to participate in
the Government’s Job Retention Scheme
(JRS) or the Job Retention Bonus, and
voluntarily repaid £28.9m of the business
rates relief received across the business.
Governance report, page 90
11
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Chief Executive’s statement
A step change in our journey
to become the best pet care
business in the world
Peter Pritchard
Chief Executive Officer
We ended this unprecedented year a
far stronger pet care business. Despite
challenges to how we were able to do
business, we grew our market share across
all channels and our underlying growth
trajectory accelerated.
12
Our loyalty clubs saw record periods of new customer registration,
strong growth in subscription customers increased the visibility and
quality of our sales profile, whilst new clients across our veterinary
estate helped increase practice profitability and cash flow. We
achieved all of this while remaining mindful at all times of doing the
right thing for all our stakeholders. COVID-19 has structurally changed
the dynamics of the pet care market. We estimate that the rising level
of pet ownership, combined with structural demand drivers such as
premiumisation and humanisation, has increased the outlook for
growth across our addressable market, and in conjunction with our
expectations of continuing to take market share, provides a tailwind to
the £600m customer revenue opportunity we see across our business
over the medium term.
An extraordinary year in review
The start of our financial year coincided almost exactly with
implementation of the UK’s first national lockdown, marking what
would become the most extraordinary period across my thirty-five
years in industry.
Our immediate priorities were to ensure the safety and wellbeing of all
our colleagues, Partners, customers, and pets, and we rapidly adapted
our retail and veterinary operations to be able to continue providing
essential pet care to our customers in a safe and appropriate manner.
Recognising that COVID-19 would be a catalyst for change around
customer purchasing behaviour and pet ownership, we accelerated
investment into our loyalty clubs and subscription platforms, and
introduced new ways to engage, serve and fulfil our customers’ needs
across all channels, making pet care as convenient, engaging and
flexible as possible.
These measures, together with the inherent strength of our pet care
platform and the underlying pet care market, underpinned the strong
and sustained momentum witnessed in both our retail and veterinary
operations across the last three quarters of the year, notwithstanding
national or regional pandemic-related restrictions throughout much
of the period.
Pet care strategy driving growth
We continue to focus on customer acquisition, retention, and
increasing our share of wallet of our existing customer base.
6.2m
Number of VIPs increased 9% to 6.2m,
with the number shopping across
more than one channel +10% YoY
+60.9%
Members of our Puppy and Kitten
clubs grew +61% YoY
to its highest level on record
>1m
Number of subscription customers
now over 1 million, generating c£90m
in visible, recurring customer sales
Pets at Home Group PlcAnnual Report and Accounts 2021 “ The pet care market is in growth and we are
growing our share across all channels.”
Key performance indicators
Financial KPIs1
Customer sales#, 2 (£m)
Group underlying PBT# (£m)
Group underlying free cashflow# (£m)
Strategic KPIs
Measure
Bring the pet experience to life
50% of sales from pet care services
No. of customer transactions3 (m)
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)
FY21
1,437.1
87.5
67.4
FY21
60.0
32.8%
887.1
196.7
FY20
YoY change
1,334.7
93.5
89.6
FY20
63.1
34.1%
817.2
187.0
7.7%
(6.4)%
(24.8)%
YoY change
(4.9)%
(129)bps
8.6%
5.2%
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.
Customer sales include gross customer sales made by Joint Venture vet practices of £358.1m (FY20: £329.7m) (unaudited figures), and therefore differs to the fee income recognised within Vet Group revenue.
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.
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 210.
Strategic review of FY21
I.
The outlook for growth has strengthened across the UK
pet care market
We operate in a large, growing and robust market, which had an
estimated value pre-COVID of approximately £6.1bn across our segments.
Prior to the onset of the pandemic, the pet population of dogs
and cats in the UK had been in steady state, with pet humanisation,
premiumisation and healthcare and nutritional advancement being
the predominant drivers of average annual UK market growth of
approximately 3.5%.
COVID-19 has structurally altered the dynamics of the UK pet care
market, with changes to the way we work and spend our leisure time
removing an historical barrier to pet ownership and strengthening the
emotional bond with pets as they play a more significant role in our
daily lives. Anecdotal evidence over the past year, across animal
welfare charities, pet marketplaces and pet registration forums, points
to a significant increase in pet ownership, a good proxy for elevated
levels of future market growth.
Across our internal pet care indicators – growth in membership of
our VIP and Puppy and Kitten Clubs, new client registrations across
our First Opinion veterinary practices and growth in puppy and kitten
merchandise categories – we estimate that the overall number of pets
in the UK has grown by 8% over the past year, which, combined with
prevailing structural tailwinds, has increased the future annual underlying
growth rate of our addressable market by approximately 100bps.
II. We are growing our share of pet care
and see a £600m customer revenue opportunity
Our share of the pet care market pre-pandemic had grown to
approximately 20% across our segments, with our strategy to
reposition the business from a pet shop to an omnichannel pet care
provider underpinning a shift in revenue mix towards high growth
veterinary services, online and subscriptions, and delivering consistent
market share gains since 2016.
We continued to increase our share across all channels of this growing
market over the past year, with LFL revenue growth across our retail,
omnichannel and veterinary operations ahead of their respective
segments. Market supplier data implies an estimated 200bps increase,
in-store and online, in our share of trade of key branded dog and cat
food categories during calendar year 2020, with sequential growth over
the last three quarters and, combining our internal data with a range of
third-party UK market reports, we estimate that our share of the pet
care market across our segments increased to approximately 23%.
Looking ahead, we see a £600m customer revenue opportunity
across our business over the medium term, as we continue to take
share of a growing market, increase our revenue weighting in high
growth segments, and continue to repurpose our core customer
proposition from transactional and channel centric to one that is
solutions-based and channel-agnostic.
In this respect, our truly omnichannel backbone is one of our key
sustainable advantages.
13
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021
Chief Executive’s statement continued
III. The strategic advantages of our omnichannel
pet care model
We are the leading omnichannel pet care provider in the UK, with a
growing and scalable online platform complemented by a 452-strong
estate of well-invested, conveniently located stores across the UK,
many of which are playing an increasingly important role in our
omnichannel strategy.
The combination of our store, online, grooming, veterinary and digital
services gives us a presence across the full pet care market, allowing
us to meet pet owners’ needs across multiple touch points across the
lifetime of their pets, and drive engagement, loyalty and retention.
Our stores bring the pet experience to life
Our stores, combining a wide range of attractively priced and
predominantly UK-sourced branded and own label products with
veterinary and grooming services and expert advice, have been key in
acquiring new customers during the pandemic. Put simply, they allow
pet owners to meet all their product and service needs under one
roof in a safe, localised and experiential environment, and provide a
suitable alternative for grocery-led shoppers seeking either brand
continuity or a more tailored advanced nutrition approach through
our market-leading own label brands.
14
Our online operations integrate our physical
and digital channels to maximise convenience
We estimate that our share of the online pet care market increased by
approximately 200bps to 16.8% over the past year. Our omnichannel
participation of retail sales moved from approximately 10% pre
pandemic to an average of 15.8% in FY21, as investment in distribution
capacity over the past couple of years supported elevated levels of
online demand with minimal disruption.
During the year, we simplified the remote sign-up process to our
loyalty programmes and subscription plans, underpinning 34%
growth in annualised subscription sales, and enabled home
delivery of veterinary medicines, which grew 35% in the period.
We also extended choice and flexibility for customers, investing
in innovative ways to integrate our physical and digital channels,
including “Deliver to Car” across more than 150 stores and a one hour
Click and Collect service across the full estate, which has surpassed
initial expectations.
Towards the end of calendar 2020, recognising the growing
importance of telehealth through the pandemic, we broadened
our digital capabilities in the provision of trusted advice and pet
care solutions through the acquisition of The Vet Connection, an
established and successful provider of on demand, high quality,
round-the-clock veterinary telehealth advice, triage and ancillary
services, which is helping to differentiate our proposition and drive
customer acquisition and retention.
Pets at Home Group PlcAnnual Report and Accounts 2021
“ We continue to introduce new ways to
engage, serve and fulfil our customers,
making pet care as affordable, convenient,
engaging and flexible as possible.”
Our veterinary services are an integral part
of our pet care ecosystem
We also increased our share of the veterinary market during the year,
with new client registrations across our 441 practices comprising
approximately 9% of all veterinary visits in our second half, reflecting
an increase in pet ownership over the past year as well as a higher
number of existing pet owners choosing our veterinary services for
the first time.
This strong performance is a clear endorsement of our unique
veterinary joint venture model, where our Partners are incentivised,
economically and clinically, to drive practice maturity, with marketing
and support services provided at Group level. This model has worked
especially well through the pandemic where we were able to support
our Partners to remain open and accessible for the provision of pet
care. It is also one of the key reasons why even our mature practices
typically grow at a faster rate than the underlying market.
The health of our veterinary estate continued to improve, with
customer sales across our First Opinion practices of approximately
£384m over the past year, an increase of 21% on a two-year basis.
The number of loss-making practices more than halved year on year,
the number of profit-making practices has increased again this year,
and a step change in both the reduction of operating loans and cash
flow generation is demonstrating that remedial action previously
taken, as well as supportive measures implemented during the
pandemic, is helping to accelerate practice maturity and release
embedded value.
Our colleagues share an ambition to be the best pet care
business in the world
Having a best-in-class suite of assets is, however, only half the
solution, and many of our achievements this year would not have
been possible without the energy, passion and skill of all our
colleagues and Partners across the Group.
We have not been immune to the challenges that COVID-19 has
created and, while we were pleased to be able to implement a
number of measures to support their emotional and financial
wellbeing, including offering full pay to those that were shielding
and clinically vulnerable, additional support for those with caring
responsibilities, a £1.0m hardship fund, and an incremental Thank You
bonus totalling £2.9m to frontline colleagues, I would personally like to
take this opportunity, on behalf of our Executive Management Team,
to thank them all for their tireless work and dedication in serving our
customers’ needs during such challenging times.
IV. Accelerating investment to grow
the Pets at Home ecosystem
Three things are fundamental in supporting our ambition
to be the best pet care business in the world.
• Investing in our infrastructure to provide a best-in-class
customer experience;
• Further digitising our business to create a seamless pet care
experience;
• Leveraging our data to increase customer lifetime value and
annuity-like income
Investing in our infrastructure to provide
a best-in-class customer experience
It would be outdated to describe our next generation pet care centres
as stores. We see them as destinations to connect and engage with
local communities of pet owners and their pets, providing all their
product and healthcare needs in one location which brings the pet
experience to life through multi-use event space, pet care services,
training and socialising classes and nutritional consultations.
While we paused our regeneration programme during the pandemic,
we plan to restart the process this year, utilising the learnings from
our 23 transformations to date. We have also recently launched two
smaller, high street pet care centres inside the M25 London Orbital
Motorway, where we are currently underrepresented, but a
meaningful opportunity exists. The performance of these new
centres will help to inform our decision-making on wider rollout
within Greater London.
The role our stores play in accelerating our omnichannel strategy is
also becoming increasingly significant, with their wide geographical
footprint and proximity to our customers positioning them well as
localised distribution centres as part of our ambition of delivering
frictionless execution, convenience and speed. Our new Order
Management System, providing real-time intelligence on optimal
order management and routing across our nationwide estate, will
enable us, alongside our centralised distribution model, to offer
localised same day delivery from store to home, embedding
best-in-class fulfilment while generating operational efficiencies
across the Group.
We also have a clear ambition to transform the responsiveness of our
supply chain and during the year signed a lease agreement for a new
purpose-built, highly automated storage and distribution facility in
Stafford, which will come on-stream during 2023. Consolidating our
legacy infrastructure into a modern, well-located, and future focused
platform, that serves both our store and online operations, will give us
significant incremental capacity across our subscription platforms and
enable us to better serve our customers through maximum flexibility
in stock holding and order fulfilment capacity.
Across our veterinary operations, we will invest in infrastructure
and resource to enhance practice revenues through widening our
service offering and improved call handling efficiency, and our recent
acquisition of The Vet Connection will enable us to differentiate our
veterinary proposition to support new client acquisition and retention.
We also plan to re-start new practice rollout this year, targeting
between 5 and 10 new sites per annum.
15
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021
Chief Executive’s statement continued
Further digitising our business to create a seamless
pet care experience
At the heart of our pet care strategy lies a clear and unequivocal
customer first approach, offering everything pet owners need and
empowering them to search, shop for and receive their goods and
services however and whenever they choose.
Achieving this requires us to facilitate customer journeys across
our suite of products and services that are based on a deep
understanding of their pet care needs and are supported by
integrating our well-invested store estate, our fast-growing online
business and an efficient and responsive supply chain into a seamless
experience that really brings the customer pet care experience to life.
Over the past year, we have undertaken more joined-up TV and digital
marketing campaigns across our subscription platforms and Puppy
and Kitten Club and digitised the sign-up process, with approximately
80% of the record level of new puppy and kitten sign-ups coming
through our app. Our stores have also become more digitally enabled
through investment in IT solutions to simplify daily tasks and video
functionality to link instore colleagues to online customers.
This is, however, just the start of our journey to provide an enhanced,
joined-up digital experience.
We will, over the next 18 months, be investing over £20m in “Polestar”,
our transformational initiative to create a seamless pet care experience
for our customers through a differentiated digital interface offering
new features, functionality, and capability to integrate our offering
across retail, grooming and veterinary services into a single, customer-
managed dashboard.
This is one of our most significant investments to date and will, we
believe, be the first of its kind in the UK pet care market, offering us
significant competitive advantage.
8%
Increase in UK pet population
over the last 12 months
21%
Growth in number of
subscription customers
16
Customers will, for example, through a single, universal login, be
able to access all touchpoints across the Group, whether joining
our loyalty clubs, booking, and managing veterinary and grooming
appointments or paying for goods and services across our ecosystem.
Subscription customers will be able to manage their preferences
across all our plans through a single platform and will be given more
choice in tailoring plans to real-time needs, including a variety of
flexible payment and delivery options.
For new pet owners, we will make pet care easier, more convenient,
and emotionally rewarding by offering them the products, services
and expert advice they need through a personal shopping
appointment in-store or online, and our “first pet checklist” with
pet-specific, comprehensive pet care solutions tailored by pet type
and breed will, we believe, deliver a best-in-class first shop experience.
Leveraging our data to increase customer share of wallet and
annuity-like income
Our base of 6.2m active VIP customers, many of whom are multiple
pet owners, continues to grow strongly, increasing the breadth and
depth of our unique proprietary customer and pet dataset.
We have in-housed all our VIP customer data onto a cloud-based
platform and assembled a team of 45 data scientists and engineers
who are providing data insights across the business to inform decision-
making on pricing, range optimisation and logistical efficiencies.
We have also developed a single customer and household view of
pet ownership across all parts of our business, which will enable us to
more accurately predict customer preferences and responsiveness to
specific campaigns, personalise customer interaction through timely,
pet-specific and integrated solutions across the full lifecycle of the pet,
and predict which customers are most at risk of churn at both brand
and range level, allowing us to generate algorithmically-targeted and
relevant interventions.
While the benefits flowing from our data insights will only increase over
the coming year, early indications of the potential for higher levels of
engagement and spend are extremely encouraging.
Across four VIP reward mailers (using over 300 pieces of data at
an individual customer level to optimise the audience based on
probability of response) customers that were specifically targeted
spent at least a third more than those outside of the group, but within
the same segment, and our recent Grooming campaign generated a
c50% uplift in spend specific to a single mailer from customers that
were targeted compared to the control group.
Our initial test churn campaign, using an “always on” AI-based
predictive churn model, increased both VIP activity rate and value
during the campaign, the latter by one third. In a separate, more
recent churn campaign, over half of customers that initially responded
to the reactivation offer transacted with us again outside of the offer.
While many of our VIPs already shop a range of our products and
services, a significant opportunity remains to leverage our data to
i) drive customer acquisition through our Puppy and Kitten club and
ii) deepen new and existing customer relationships and improve our
earnings quality through broadening our offering of Pet Care Plans,
which span our full range of products and services and move the
customer relationship from single product or service to one that is
tailored and multi-faceted.
Pets at Home Group PlcAnnual Report and Accounts 2021 “ 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.”
Drive customer acquisition through our Puppy and Kitten club
Our free-to-join Puppy and Kitten Club, designed to attract pet
owners at the start of their journey and introduce them to all parts
of our ecosystem, has been particularly successful in acquiring new
customers over the past year.
We know that members of the club respond well to our tailored
CRM programme, typically spending 34% more in each year and
with less churn than inferred puppy and kitten owners not in the
club, and we can utilise our insights on existing members to identify
prospects amongst existing VIPs, attract new customers to the Group,
finesse our digital marketing campaigns and refine our in-store and
online proposition.
We will also leverage the important role our veterinary services play
for new pet owners, maximising the flow through of accelerated
Puppy and Kitten Club customer acquisition in our retail operations
to our veterinary practices through the introduction of a bespoke
subscription, “Complete Care Junior”, designed to offer a tailored and
continuous care plan journey for new puppies and kittens based on
their life stage needs, and the first to include access to our 24-hour
veterinary care helpline.
Pet Care Plans deepen the customer relationship and improve
our earnings quality
We know from our veterinary business that our Healthplan
subscriptions, designed to make pet care easy, convenient, and
affordable, increase customer loyalty and spend, and grow our mix of
annuity-like income. We also know that customers who shop across
our ecosystem of products and services spend on average 9x more
per annum than a store only shopper, and their use of services and
subscriptions increases their retention across the business.
We believe that COVID-19 is accelerating the already growing trend
of subscription models in the market, as consumers seek ways to
access goods and services conveniently at good value, and we are
well-placed to address this growing trend. We operate in market
segments that lend themselves to subscription packages and have
the unique ability to consolidate a broad range of pet care products
and physical and digital services into a single personalised plan to
optimise value and convenience for pet owners across all life stages
of pet ownership.
Utilising the data insights from our current database of over one
million subscription customers, we can identify customers with a
propensity to subscribe or become multi-service users across our 6.2m
VIP customers, accelerate the recruitment of new customers through
relevant, tailored propositions and, combining our omnichannel and
fulfilment capabilities, use our Pet Care Plans to create a point of
differentiation and retention that competitors cannot easily replicate.
V.
Responsible, quality, profitable growth
over the medium term
None of this would be possible without the ongoing support of our
colleagues and Partners across the Group. Colleague wellbeing has
long been an integral part of our culture, and we continually seek
new ways to invest in their learning and development and foster
an inclusive culture where everyone is welcome.
We are proud of the progress we have made, in an unprecedented
year, to narrow our mean gender pay gap and improve diversity across
our organisation, and I was pleased to note external recognition of this
in the Financial Times 2020 Diversity Leaders Report, where across the
Retail sector Pets at Home was ranked 7th, out of a total 85 constituents.
During the past year we were also delighted to join both the Business
Disability Forum and Disability Confident scheme and Stonewall, and
to become a signatory to the Valuable 500, British Retail Consortium
(BRC) diversity commitment and BITC Race at Work Charter.
Meeting our obligations as a responsible corporate citizen has
remained paramount throughout the pandemic. We continued to
pay our landlords and suppliers, allocated £1.3m to pet rescue centres,
£0.1m to CaRE20 and provided a 10% discount scheme to NHS workers.
We have also recently launched a new social value strategy, “Our
Better World Pledge”, centred on the three pillars of Pets, People and
Planet and underpinned by several specific goals, actions and targets.
Amongst our many pledges are commitments to a net zero carbon
value chain by 2040 and 100% packaging that is recyclable, recycled
or compostable by 2025.
We are already piloting in-store collection points for flexible plastics,
tackling the largest category of non-kerbside collected pet food
packaging, with a nationwide rollout planned from summer 2021,
and have become a signatory to the BRC climate roadmap, as part
of a world-leading industry ambition to reach net zero carbon
emissions by 2040.
We operate in a large, growing and robust market, with favourable
demographics and structural tailwinds. We have a unique combination
of assets, customer DNA and omnichannel pet care expertise which
can be leveraged through growing our data and digital capabilities to
drive share gains in high-growth market segments. We will continue to
make the right investments, organically and inorganically, across both
core and adjacent markets to responsibly deliver quality and profitable
growth over the medium term.
Peter Pritchard
Group Chief Executive Officer
27 May 2021
17
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021
Market overview
A growing pet
care market
The pet market remains resilient and
in growth with changes to the way
we work removing an historical
barrier to pet ownership.
18
Pets at Home Group PlcAnnual Report and Accounts 2021 Our adaptable pet care strategy is designed
to take share across all channels
Our unique proposition of products and services allows us to deliver
complete pet care to our customers and clients in a way competitors
cannot easily replicate, and enables us to continue to take share across
both our key markets of retail and veterinary.
The performance seen across the Group this year within such a
challenging external backdrop demonstrates that our pet care
strategy remains the right one.
Strategy and performance, page 28
Favourable market dynamics
We operate in a large, growing and resilient market with favourable
demographics and clear, long term demand drivers. Pets remain an
important part of our lives and the past year has strengthened the
emotional bond we have with them. Through our adaptable strategy
and unique business model we can continue to take market share
with significant opportunities in core areas such as nutrition, veterinary
services and subscriptions.
UK pet care market
By sector value 20201
Retail total 2
Food 3
Accessories 3
Veterinary 4
£4.1bn
£2.9bn
£0.9bn
£2.1bn
1 Source: Pets at Home data and UK market reports.
2 Includes pet products and grooming spend.
3 Includes online spend from pet products.
4 Veterinary includes First Opinion market.
£6.2bn
Addressable pet
care market
19
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Market overview continued
Market driver:
A growing UK
pet population
The UK is a nation of pet lovers,
with the pet population now at an
estimated 33m, having grown by
approximately 8% over the last year
as more people than ever before
have sought the companionship
and support a pet can offer.
Our approach:
We cater for a variety of pet types at
accessible locations nationwide and
online and offer a wide range of pet
products and pet care services. In
particular, we are increasingly focused
on welcoming new puppy and kitten
customers, introducing them to all
parts of our ecosystem, and nurturing
lifelong relationships with them.
c23%
Our share of our addressable
pet care market
c3%
Our growth in market share
year-on-year
20
Pets at Home Group PlcAnnual Report and Accounts 2021 Our market share in 20201 (%)
Accessories2
c45%
c19%
c18%
Food2
Veterinary3
Market growth during 20201
Retail total4
Food2
Accessories2
Veterinary3
1 Source: Pets at Home data and UK market reports.
2
Includes online spend from pet products.
3 Veterinary includes First Opinion market.
4
Includes pet products and grooming spend.
c2%
c4%
c4%
c(2)%
Sustainable market growth
We operate in a large, growing and robust market, which had
an estimated value pre-COVID of approximately £6.1bn across our
segments. Prior to the onset of the pandemic, the pet population
of dogs and cats in the UK had been in steady state, with pet
humanisation, premiumisation and healthcare and nutritional
advancement being the predominant drivers of average annual
market growth of approximately 3.5%.
COVID-19 has structurally altered the dynamics of the pet care
market, with changes to the way we work and spend our leisure time
removing an historical barrier to pet ownership and strengthening the
emotional bond with pets as they play a more significant role in our
daily lives. We estimate that the overall number of pets in the UK has
grown by 8% over the past year, which, combined with prevailing
structural tailwinds, has increased the future annual underlying
growth rate of our serviceable market by approximately 100bps.
21
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Market overview continued
Analysis of customer data allows us to predict preferences
and responsiveness to specific campaigns and messaging.
We can personalise customer interaction through informed,
pet-specific thinking on integrated pet care solutions across
our platform.
Market driver:
Continued channel
shift to online
Online penetration of the pet
products market increased again in
the year, and was c22% in 2020. Price
competitiveness and convenience
remain important to the online
shopping experience, driven by ease
of price comparison and the different
delivery options typically offered.
Our approach:
Recent investment in our
digital capabilities and fulfilment
automation, together with
competitive pricing, have enabled
us to take share of 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 increased
convenience for customers.
15.8%
Omnichannel now
represents 15.8%
of retail revenues
c22%
Online penetration of
pet products1 market
>1m
Number of subscription
customers2 across the Group
1
2
Includes food and accessories.
Defined as customers signed up to a
Vet Group health plan, or
omnichannel subscription platforms
Easy Repeat and Subscribe & Save
45Dedicated team of 45 data
scientists and engineers,
creating our single
customer and household
view of pet ownership
22
Pets at Home Group PlcAnnual Report and Accounts 2021 Market driver:
The move
towards
subscription
services
Subscription services offer
convenience and flexibility for
customers, allowing them to
receive the products and services
they use most often for a fixed
regular cost, making pet care
easier. Subscriptions also provide
the opportunity to build loyalty,
increase customer lifetime
value and create a predictable
annuity-like revenue stream.
Our approach:
We offer a range of subscription
based services across the
Group covering pet products,
flea & worm treatments, and
preventative healthcare. We now
have over 1 million customers
signed up to one of our plans,
generating £90m of repeatable
customer revenue per year. Our
recently recruited 11-strong
Propositions Team are working
across the Group to introduce new
and unique bundles of products
and services aimed at providing
complete pet care, with significant
opportunity to personalise and
tailor packages for customers.
Market driver:
Personalisation
driving the shopping experience
6.2m
6.2m active VIP loyalty
club members
Today’s customers expect a
personalised experience when
they are shopping. Whilst price
competitiveness and customer
convenience remain essential,
a key differentiator is rapidly
becoming the ability to create
unique experiences tailored
to individual customers. Such
experiences are not only difficult
for competitors to replicate, but
can also help drive customer
loyalty and engagement.
Our approach:
We now have 6.2 million active
VIP club members, accounting
for approximately 70% of retail
revenues. This provides us with
over 8 years of proprietary data,
and the type and quality of the
data we have such as breed,
age and medical history
helps differentiate us from
other operators in the Pet
space. We are proactively
segmenting our customer
data, enabling us to more
clearly understand customer
preferences and responsiveness
to pet care solutions, helping
increase customer loyalty
and engagement.
23
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Market overview continued
Our unique omnichannel
backbone maximises
convenience and flexibility
Market driver:
Humanisation of pets and an
increasing desire for higher
quality products and services
c4%
Year-on- year growth
in Advanced Nutrition
food in H2
Across both dog and cat owners, there
is a continued trend of selecting higher
quality diets driven by greater affordability
and awareness of the health benefits
this provides.
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
increasingly accessible. With many colleagues
pet owners themselves, they understand the
emotional bond between customers and
their pets.
24
Pets at Home Group PlcAnnual Report and Accounts 2021 Market driver:
An omnichannel approach puts the
customer in charge of their experience
Customers expect to be able
to research, order and receive
their products in a flexible and
convenient way. By integrating
and aligning all channels,
omnichannel retailing provides
a flexible and seamless shopping
experience to customers,
regardless of whether they walk
into a store, browse on a website
or order via a mobile phone.
Our approach:
We are actively investing in
our digital agenda to support
our goal of making pet care
as easy and convenient for
customers as possible, including
a new state-of-the-art order
management system, and
development of a new future-
focused distribution platform.
We are continuing to invest in
new fulfilment options, having
launched 1-hour Click & Collect as
well as a contactless deliver-to-car
service this year, with same day
ship to home from store coming
in the future. We are also creating
a proprietary digital interface
where customers can access all
their pet care needs in one place,
whenever they want.
c23%
23% of all omnichannel
sales are collected in store
25
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Market overview continued
+17%
3-year compound growth in
customer revenue from advanced
veterinary care1
Market driver:
Advances in veterinary care,
accessibility of which is
supported by increasing
levels of pet insurance
Growth in the global veterinary telehealth market ($m)
2020
2019
2018
$92.0m
$68.2m
$57.6m
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 partner with the very best veterinarians
and vet nurses across our network of Joint Venture
and company managed practices to deliver the best
possible care to clients. By locating First Opinion
practices across the UK, both inside Pets at Home
stores and in standalone locations, we make access
to this high quality care easy and convenient.
90,0002
The Vet Connection conducts approximately
90,000 remote consultations each year
Market driver:
The growth of
telehealth services
Supported by the rise of digital
communication technologies
and accelerated by the
pandemic, customers now want
to be able to access round-the-
clock healthcare for their pet,
wherever they are and through
a variety of mediums. Telehealth
is a growing area within human
medicine and, as pets are
increasingly being seen as part
of the family, owners naturally
want to access the same quality
of healthcare for their pets.
Our approach:
Veterinary clients now have
the choice to receive healthcare
subscription products, such as
flea & worm treatments, direct
to home, and in response to
the pandemic we facilitated
an arrangement with “Vet Help
Direct” to enable remote
consultations between our Joint
Venture Partners and their clients.
Recognising the success of this
service and the important role
it played for our clients, later in
the year we acquired The Vet
Connection, a long established
veterinary telehealth provider.
26
Pets at Home Group PlcAnnual Report and Accounts 2021 Market driver:
Reconnecting with nature
– wildlife on our doorsteps
With restrictions to travel
and a daily walk often the only
permitted form of exercise, the
pandemic has led to long
periods confined close to home,
which meant many have for the
first time properly experienced
the natural world in their gardens
and local areas. In a challenging
year, many have found their
enforced reconnection with
nature at home a support to
both their physical and mental
health. This has led to an
increased interest in pastimes
such as bird watching as people
find a new appreciation for their
local landscape and wildlife.
Our approach:
We provide a wide range of food
and accessories, including wild bird
food and feeders, to ensure all of our
customers’ pet care needs are met.
We experienced strong demand for
such products, particularly during
the first national lockdown, and we
worked tirelessly to ensure our stock
levels remained sufficient. Our
passionate and knowledgeable
colleagues are always on hand to
provide quality and trusted advice
on a wide range of products such
as bird stands, pond equipment
and chicken feed.
c116%
Year-on-year increase in new
online memberships to RSPB
30%
Year-on-year increase in wild
bird food sales during first
national lockdown
1 Advanced veterinary care includes laboratory work, diagnostic imaging, and radiology.
2
The Vet Connection was acquired by the Group on 30 November 2020. Number of remote
consultations quoted refer to a period prior to acquisition.
27
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Strategy
Our purpose – we’re better with pets
– is at the heart of everything we do
and supports our strategy of delivering
complete pet care to our customers.
Our adaptable
pet care strategy
28
Pets at Home Group PlcAnnual Report and Accounts 2021 Bring the pet
experience to life
Investing in the transformation
of our store estate and
digitising our business to
become the best omnichannel
pet care provider in the world.
Use our data to better
serve customers
Offering customers personalised
experiences and tailored offers,
and leveraging data across
the business to drive our
decision making.
Value cre a t o
E
n
a
bler
r
E
n
a
Vision
Be the best
Pet Care
business in
the world
V
b
l
e
r
alu e creator
Set our people
free to serve
Simplifying tasks in-store to give
colleagues more time to share
their expertise with customers
and ensuring all our teams have
the capacity and capabilities to
deliver our ambition.
50% of sales from pet
care services
Dedicating more in-store
space to services, extending
our subscription platforms, and
focusing on driving maturity in
our First Opinion vet business.
29
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Strategy continued
Bring the pet
experience to life
Progress in the year:
• Rolled out a further 5 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
• Rolled out 1-hour Click & Collect
service nationwide
• Launched project to develop
proprietary digital interface for
customers to interact with all parts of
the Group
Market drivers:
– Continued channel shift to online
– Flexibility and convenience at heart
of consumer choices
– Desire for experiential shopping
– Increase in price transparency
Metrics
Number of customer transactions#
60.0m
23
15.8%
Total number of pet care centres
Omnichannel participation of total Retail
sales
39%
Private label participation across food and
accessories
Strategic priorities:
Launch new formats and ensure
our store network remains fit
for purpose
• Evolve our store network with
new formats that bring more
pet care services and experiences
to customers.
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 even greater value for
our loyal customers
• Ensure a clear 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
30
Pets at Home Group PlcAnnual Report and Accounts 2021 Use data and VIP to
better serve customers
Strategic priorities:
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
Progress in the year:
• Finalised migration of VIP data from a
third party provider to an in-house
cloud based platform
• Completed recruitment of 45-strong
team consisting of data scientists,
cloud engineers and analysts
• Issued first customer mailer to our VIP
members based on internally-held
data, achieving highest ever
redemption rate
• Built AI-based churn model to
predict customers most at risk of
leaving the Group
• Grew membership of Puppy and
Kitten clubs, where incremental first
year spend vs non-members is
approximately 34%
Market drivers:
– Personalisation driving the
shopping experience
– Flexibility and convenience at heart
of consumer choices
– A growing UK pet population
– The move towards subscription
services
Metrics
VIP customer sales1, #
£887.1m
6.2m
c26%
Number of active VIP members
VIPs who shop across more than one
channel
70%
Retail revenues transacted by VIPs
1
#
Alternative Performance Measures (APMs) are defined and reconciled to IFRS information, where possible,
on page 210. 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 34.
31
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Strategy continued
Set our people
free to serve
• Launched use of Microsoft Teams to
ensure all teams have the capabilities
to continue to work and collaborate
effectively, as well as the second
phase of Success Factors, a cloud
based people management tool
• Completed recruitment of both our
data team and a newly created
Propositions Team, ensuring we have
the right capabilities to focus on the
Group’s strategic priorities
Market drivers:
– Personalisation driving the
shopping experience
– Flexibility and convenience at heart
of consumer choices
– Humanisation of pets and an
increasing desire for higher quality
products and services
– The move towards subscription
services
Metrics
£196.7k
2%
Customer sales1 per colleague#
Increase in store colleague time
efficiencies year on year
£2.9m
Additional bonus paid to colleagues in
recognition of their commitment to serving
customers through the COVID-19 pandemic
84%
Colleague engagement
Strategic priorities:
Give our highly trained
colleagues more time with
customers
• Simplify tasks to allow colleagues to
do what they do best – provide an
exceptional shopping experience to
the customer.
• Maintain high levels of customer
satisfaction with our highly trained
colleagues to ensure we remain 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.
Principal risks:
– Services and store expansion
– Our people
– Brand and reputation
– Business systems and information
security
– Regulatory and compliance
Progress in the year:
• Signed lease agreement for a new
purpose-built, highly automated
distribution platform, consolidating
our two existing legacy facilities
• Rapidly implemented a number of
new in-store protocols in response to
the pandemic to ensure colleagues
could continue to serve customers
safely
• Implemented a new state-of-the-art
order management system, providing
real-time intelligence and enabling
best-in-class fulfilment for customers
32
Pets at Home Group PlcAnnual Report and Accounts 2021 50% of sales
from pet services
Strategic priorities:
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.
Principal risks:
– Competition
– Services and store expansion
– Liquidity and credit
– Treasury and finance
– Regulatory and compliance
– Sustainability and climate change
Progress in the year:
• Launched two smaller next
generation stores in high-street
locations within Greater London
• Continued growth in subscription
customers, and recruitment of
11-strong dedicated Propositions
Team
• Like-for-like First Opinion customer
sales ahead of the underlying market
across all cohorts, including mature
practices
• Support measures provided across
our First Opinion vet business have
helped drive cash generation, with
year-on-year FCF growth of 129% in
our Vet Group
• Acquired The Vet Connection, a long
established veterinary telehealth
provider
Market drivers:
– Flexibility and convenience at heart
of consumer choices
– The move towards subscription
services
– Advances in veterinary care,
supported by increasing levels of
pet insurance
– The growth of telehealth services
Metrics
Customer sales1 from pet care services#
32.8%
316
441
Grooming salons
First Opinion vet practices, located both
in-store and in standalone locations
>1m
Subscription customers across the Group
1
#
Alternative Performance Measures (APMs) are defined and reconciled to IFRS information, where
possible, on page 210. 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 34.
33
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Key performance indicators
Progress across all pillars
of our pet care strategy
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 of our four strategic pillars
to ensure we can track delivery
against our key objectives.
We remain confident in our pet
care strategy, and the strength
of our performance in what has
been an extremely challenging
year demonstrates that our
strategy remains the right one.
Whilst we set out some of our
future strategic priorities, we
will continue to remain agile
and adaptable in how we
deliver pet care to customers.
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)
£1,437.1m +7.7%
Group underlying
profit before tax1 (£m)
£87.5m (6.4)%
Group underlying
free cashflow1 (£m)
£67.4m (24.8)%
2021
2020
2019
1,437.1
1,334.7
1,218.2
2021
2020
87.5
93.5
2021
2020
2019
67.4
63.6
89.6
Representing strong like-for-like1
growth, both in Retail and in First
Opinion vet practices.
Reflecting strong profit growth
in the Vet Group offset by
COVID-19 related revenue
restrictions and costs.
Reflecting reduced profit due to
COVID-19 restrictions and costs,
however strong liquidity has
enabled us to increase our dividend.
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 received
by 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.
Future plans
We expect our strategic initiatives
to deliver like-for-like1 growth
ahead of the market across both
the Retail and Veterinary segments.
What we are measuring
The underlying profitability of the
Group as a result of our strategic
progress. We have shown
underlying profit before tax1 on a
constant accounting basis
post-IFRS16, first adopted in FY20.
As such there is no 2019
comparator.
Why is it important?
By generating strong levels of
underlying profit, we are able to
demonstrate that our pet care
strategy remains the right one,
and that we are delivering against
our strategic objectives.
Future plans
Having navigated the business
through an extremely challenging
period, we now expect to return
the business to sustainable
underlying profit growth.
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.
Future plans
Releasing free cashflow from the
First Opinion vet business remains
a significant value creation
opportunity. The actions taken to
recalibrate the First Opinion
business alongside further profit
growth in Retail, will allow Group
underlying free cashflow to grow
sustainably in the medium to
long term.
1
Alternative Performance Measures (APMs) are
defined and reconciled to IFRS information,
where possible, on page 210.
34
Pets at Home Group PlcAnnual Report and Accounts 2021 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)
60.0m (4.9)%
Customer sales1 from
services (%)
32.8% (129)bps
VIP customer sales1
(£m)
£887.1m +8.6%
Customer sales1 per
colleague (£k)
£196.7k +5.2%
2021
2020
2019
60.0
63.1
59.2
2021
2020
2019
32.8%
34.1%
34.0%
2021
2020
2019
887.1
817.2
591.6
2021
2020
2019
196.7
187.0
174.1
Driven by decreased footfall
due to COVID-19 related
restrictions, however more
than offset by increased
Average Transaction Value.
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, and visits to all
First Opinion vet practices.
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
convenient and affordable for
customers to shop across our
brands. In addition, we will look to
expand our pet care ecosystem by
considering attractive adjacencies.
Reflecting the disposal of our
Specialist Referral hospitals and
the strong growth seen in pet
product sales.
Driven by a c9% increase in active
members, and an increase in
members shopping across more
than one channel.
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, 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
our First Opinion vet practices to
mature, whilst also growing the
number of customers signed
up to our subscription platforms.
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 the Retail
and Vet Group businesses.
Why is it important?
Our VIP loyalty club of 6.2m
active pet owners is a unique
asset providing data and insight
to help us increase share-of-wallet,
attract and retain new 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 are
developing 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.
Achieved through strong sales
growth and efficiency initiatives
in-store.
What we are measuring
Customer sales generated per
full-time-equivalent colleague
employed directly by the Group.
Why is it important?
By creating efficiencies 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.
35
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Business model
A unique combination of products,
services and expertise
Providing everything a pet owner needs to look after their pet.
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
Scalable omnichannel
platform providing
best-in-class fulfilment
Range of compelling
subscription plans
Social Value – delivering
our purpose
t H o m e G r o up Plc’s pet care ecosyste
m
e t s a
P
Pet-products
& advice
in-store
In-store vet
practices
Omnichannel
& subscriptions
VIP
Pet Care
loyalty c l
u
b
Pet-products
online
l
i
a
t
e
R
Digitally-led
pet healthcare
solutions
Standalone
vet practices
Grooming
salons
Other pet
care services
V
e
t
G
r
o
u
p
Underpinned by Our Bett e r W o r
l d P l e
e
g
d
Underpinned by our Social Value strategy
We care deeply about the role that we play in society and want to share the value we create.
During the past year we have been developing the articulation of a strategy that has always
been at the heart of our business, which we refer to as Our Better World Pledge, which will
help ensure our long-term sustainability.
Our competitive
advantage
We offer pet owners complete pet care
through our winning combination of pet
products and services, making pet care
convenient, affordable and rewarding.
Social Value, page 64
A pet care ecosystem
With 254 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 growing omnichannel business, expanding
subscription platforms and expert colleagues,
we are able to service the needs of pet owners
in a unique, seamless way.
Proprietary VIP loyalty club data
We currently have 6.2m active VIP members,
representing around one in four pets in the
UK. Having over 8 years of pet and customer
data, we are able to generate deep insights
into customer behaviour and preferences and
deliver an increasingly personalised journey.
36
Pets at Home Group PlcAnnual Report and Accounts 2021
Value created
For pets
Everything a pet needs to keep
them happy and healthy
Supported by our welfare and
care standards
£6.0m+
Raised in FY21
Social Value
Page 64
For customers
Everything pet owners need to
take the best care of their pets
254
Stores with a vet and groomer inside
For colleagues
Externally accredited
training schemes
Strategy
Page 28
84%
Colleague engagement
Social Value
Page 64
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 210.
£67.4m
Underlying free cashflow1
Key performance
indicators
Page 34
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 46
Vet Group
Our Vet Group has its core business in First
Opinion veterinary services and a growing
presence in the telehealth segment.
Operating review, page 50
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 choice 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 performance.
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.
37
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Stakeholder engagement
The value we create
for our stakeholders
Stakeholder group
Key metrics
Engagement method
Key messages
Our response
Colleagues
over
15,000
colleagues employed by the
Group (including colleagues
employed either directly or
indirectly via the vet practices)
Suppliers
400active suppliers
Charities and
community
groups
200animal rescues supported with
grant funding during the year
Industry bodies RCVS /
BVAAll vets are members of the
Royal College of Veterinary
Surgeons (RCVS) and the British
Veterinary Association (BVA)
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, Sharon Flood, was appointed as colleague representative in
July 2020, taking over from Paul Moody. In this capacity she has attended store listening sessions. In
addition, the Chairman has attended two listening sessions in September and October. Due to travel
restrictions during COVID there have been less opportunities in the year for visits. The Chairman was
able to make some visits during September when COVID restrictions allowed. A Joint Venture Council
comprising a representation of our Joint Venture Partners meet regularly to discuss strategic,
operational and clinical matters. This meeting is attended by members of the Vet Group Executive
Management Team. The ‘We C.A.R.E.’ survey took place during August and was focused on two areas
particularly important to our colleagues: diversity, and inclusion and wellbeing. The results of the
survey were reviewed locally by teams and by the Board. There are channels for colleagues to engage
directly with the Executive Management Team, for example the ’Tell David’ and ‘Tell Jane’ email
addresses. During the COVID crisis listening and communication have been increased considerably.
For example, every Store Manager was been paired with a member of the Executive Management
Team to enable regular calls to take place and daily video updates were given by the CEO or one of
the Executive Management Team every weekday from 17 March 2020 until 5th June 2020, when they
moved to weekly.
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 95% of food product purchases and over 50% of accessory
product purchases are from UK based suppliers, The sourcing office in Hong Kong manages the day
to day relationships with our supplier partners in this region. During the year our usual face to face
meetings and live conference events were all moved to virtual formats. We held virtual conferences in
October for our UK suppliers and in December for our suppliers in Asia. These conferences provide a
platform to share our key strategic messages and the suppliers have an opportunity to ask questions,
raise concerns and opportunity areas.
The Pets at Home Foundation engages with the animal rescue sector in the UK on a regular basis.
The team, which includes a veterinary nurse, have long term relationships with the sector and are
familiar with the issues that they face and help that they need which supports the community strategy.
A series of roundtable events were held in December 2020 to understand how the pandemic was
impacting small rescues and their perceptions on pet welfare issues that may present themselves
in the longer term One to one meetings have also been held with five large national charities to
understand their perspective on the COVID pandemic and the impact on pet welfare and pet
ownership. This ongoing engagement with the charity sector helps us to focus our efforts where
the impact on pet welfare will be greatest.
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. 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 are
active members of the British Retail Consortium (BRC) and have contributed to various initiatives and
working groups.
Customers
6.2m
active VIP members
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. We also conducted
regular pulse surveys, with both existing customers and non-shoppers, throughout the earlier stages
of the COVID pandemic to assess customers’ evolving behaviours and preferences.
Shareholders
and the investor
community
197Institutions met
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 86% to 100%. Investor tours were conducted at the flagship
Stockport store. An animal healthcare event was attended by the Financial Director of the Vet Group.
A number of ESG focused sessions have been held with the Chief People and Culture Officer and
Group Head of Social Value.
38
Due to the COVID crisis the need to listen to and communicate with all colleagues
Our focus is on creating a kind and caring company where colleagues feel welcomed
has never been more important whether they are working in stores, DCs or vets,
and valued and are able to make their best contribution. New software was launched
shielding or working from home. Across all the these groups there have been
in early FY21 across the business to enable virtual meetings and sharing of documents.
consistent messages around wellbeing and particularly mental health which
The COVID crisis accelerated the development of virtual communications, for example
were reinforced in the colleague survey The annual survey provides detailed
a virtual version of the weekly ‘Shoal’ began. An internal intranet platform called JAM
information but is part of a broad selection of engagement channels available to
was rolled out and widely used to provide a wealth of resources and information to
colleagues. As with any large survey, below the headline themes differences can
support colleague wellbeing. Using feedback in the colleague engagement survey,
appear at a local level so follow up sessions have been held at a department level
our diversity and inclusion strategy has been developed and four colleague diversity
across the Group. The survey told us that our colleague experience has continued
groups have been established as forces for change. A modern ways of working group
to exceed external benchmarks. We noted that compared to the prior year as a
was established and is working on developing our new normal ways of working which
consequence of COVID and remote working the sense of belonging had dipped
combines the flexibility and work life balance benefits of home working with the team
and workload was also an issue for some colleagues. This has provided invaluable
and collaboration benefits of working in the office.
insight that we have built into our project on modern ways of working.
In the early part of the year engagement with suppliers was focussed on
We are developing a cross functional balanced scorecard for assessing capability and
ensuring continuity of supply of products in the face of increased demand
establishing medium term (three to five year) supplier strategies. This will enable us
and the potential for disrupted supply chains due to the pandemic. As supply
to segment our supplier base to work efficiently and effectively with our suppliers to
and demand stabilised engagement could be re balanced to include strategic
deliver for our customers. A tiered plan for meeting and engagement will enable both
opportunities. Our suppliers have told us that understanding the long term
the transactional and strategic topics to be discussed across the year. During the year
strategy enables them to invest appropriately in their businesses, The conference
the Product and Supply Chain Management Committee has been focussing on the
in October enabled engagement on our product technical and responsible
development of the responsible sourcing strategy including our packaging and raw
sourcing strategy and our raw material and packaging targets. There has also
material approaches.
been a high level of focus on our differentiating own brand strategy.
Local and national rescues faced a significant challenge to maintain sufficient
We responded by changing our giving support from grants for capital projects to
income to meet the immediate veterinary and care needs of the pets in their
grants to help maintain basic operations during this difficult year. The Foundation,
care during FY21. Longer term capital projects were put on hold by rescues
made 200 grants totalling over £903,000,000. VIP Lifelines have additionally donated
during this time. The majority of Pets at Home stores partner with a local charity
vouchers to over 750 national and local charities. The Foundation awarded 278 store
to enable them to raise awareness and funds by fundraising in our stores over
charity partners with a grant of £2,000 each in February 2021 to make up for the lost
specific weekend events. During FY21 none of this activity was possible so these
income from the lack of fundraising opportunities during the year.
charities faced a deficit in their income projections.
Joint Venture Partners have the clinical freedom to interpret and follow RCVS
We have worked closely with all industry bodies during the COVID outbreak to
guidance. Engagement with industry bodies enables the Vet Group clinical
support our colleagues, customers and pets. During the year we have reviewed all
services team to provide informed support and advice to the partners. Of
guidance issued from the Government and professional bodies. Our role has been to
particular importance this year has been pro-active engagement to support
interpret this into clear actions for our pet care stores and to provide guidance for our
our pet care stores and vet practices being designated as “essential services”
partners on procedures that would align to the RCVS and Government requirements
and ongoing interpretation and support to ensure implementation of the
including remote consultations and prescribing.
Government guidance and professional guidance from the RCVS.
Customers are demanding a highly personalised shopping experience, and one
With trends such as online shopping and subscriptions becoming increasingly
that is seamless across channels. If we are not able to deliver this experience, then
prevalent, we are ensuring that we invest in these areas of the business. Insights
we risk losing both existing and potential new customers to competitors. During
gained throughout the year form an integral part of our annual five-year strategic
the COVID pandemic customers needed flexible ways to shop and look after
planning process, to ensure that we are building a business which remains relevant
their pets.
to today’s pet owners. During this year we rolled out click and collect to all stores and
enabled deliver to car in 157 of our stores. Our Groom rooms were able to provide
welfare grooms during lockdown 2 and 3 and we reduced the price of this service
by an average of £7 depending on dog size and breed.
As we continue to shift perception of Pets at Home from a retailer with services
We have positive, ongoing and transparent dialogue with our shareholder base and
to a complete pet care provider, it remains vitally important to engage with
we value feedback and insight which is considered by the Executive Management
shareholders and potential investors alike to explain our unique business model
Team. The investor website is kept updated with all of the latest announcements and
and articulate the future strategy. There has been engagement around specific
provides information about the Group and its activities.
topics over the course of the year including the update of the social value strategy,
capital allocation and recent M&A activity.
Pets at Home Group PlcAnnual Report and Accounts 2021 At Pets at Home our 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 continued to be
considered in the normal cycle of Board and executive meetings. During FY21 engaging with our
stakeholders in the context of the pandemic was one of our most important priorities. From the classification
as an essential business to feed the nation’s pets and provide essential veterinary services, ensuring our
colleagues were safe and supported, working with our suppliers to maintain continuity of supply and
supporting the rescue and charity sector were all enabled by the relationships and engagement methods
that have been developed over the long term.
Engagement method
Key messages
Our response
Due to the COVID crisis the need to listen to and communicate with all colleagues
has never been more important whether they are working in stores, DCs or vets,
shielding or working from home. Across all the these groups there have been
consistent messages around wellbeing and particularly mental health which
were reinforced in the colleague survey 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. The survey told us that our colleague experience has continued
to exceed external benchmarks. We noted that compared to the prior year as a
consequence of COVID and remote working the sense of belonging had dipped
and workload was also an issue for some colleagues. This has provided invaluable
insight that we have built into our project on modern ways of working.
Our focus is on creating a kind and caring company where colleagues feel welcomed
and valued and are able to make their best contribution. New software was launched
in early FY21 across the business to enable virtual meetings and sharing of documents.
The COVID crisis accelerated the development of virtual communications, for example
a virtual version of the weekly ‘Shoal’ began. An internal intranet platform called JAM
was rolled out and widely used to provide a wealth of resources and information to
support colleague wellbeing. Using feedback in the colleague engagement survey,
our diversity and inclusion strategy has been developed and four colleague diversity
groups have been established as forces for change. A modern ways of working group
was established and is working on developing our new normal ways of working which
combines the flexibility and work life balance benefits of home working with the team
and collaboration benefits of working in the office.
In the early part of the year engagement with suppliers was focussed on
ensuring continuity of supply of products in the face of increased demand
and the potential for disrupted supply chains due to the pandemic. As supply
and demand stabilised engagement could be re balanced to include strategic
opportunities. Our suppliers have told us that understanding the long term
strategy enables them to invest appropriately in their businesses, The conference
in October enabled engagement on our product technical and responsible
sourcing strategy and our raw material and packaging targets. There has also
been a high level of focus on our differentiating own brand strategy.
Local and national rescues faced a significant challenge to maintain sufficient
income to meet the immediate veterinary and care needs of the pets in their
care during FY21. Longer term capital projects were put on hold by rescues
during this time. The majority of 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. During FY21 none of this activity was possible so these
charities faced a deficit in their income projections.
We are developing a cross functional balanced scorecard for assessing capability and
establishing medium term (three to five year) supplier strategies. This will enable us
to segment our supplier base to work efficiently and effectively with our suppliers to
deliver for our customers. A tiered plan for meeting and engagement will enable both
the transactional and strategic topics to be discussed across the year. During the year
the Product and Supply Chain Management Committee has been focussing on the
development of the responsible sourcing strategy including our packaging and raw
material approaches.
We responded by changing our giving support from grants for capital projects to
grants to help maintain basic operations during this difficult year. The Foundation,
made 200 grants totalling over £903,000,000. VIP Lifelines have additionally donated
vouchers to over 750 national and local charities. The Foundation awarded 278 store
charity partners with a grant of £2,000 each in February 2021 to make up for the lost
income from the lack of fundraising opportunities during the year.
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 importance this year has been pro-active engagement to support
our pet care stores and vet practices being designated as “essential services”
and ongoing interpretation and support to ensure implementation of the
Government guidance and professional guidance from the RCVS.
We have worked closely with all industry bodies during the COVID outbreak to
support our colleagues, customers and pets. During the year we have reviewed all
guidance issued from the Government and professional bodies. Our role has been to
interpret this into clear actions for our pet care stores and to provide guidance for our
partners on procedures that would align to the RCVS and Government requirements
including remote consultations and prescribing.
Stakeholder group
Colleagues
Key metrics
over
15,000
colleagues employed by the
Group (including colleagues
employed either directly or
indirectly via the vet practices)
Suppliers
400active suppliers
Charities and
community
groups
200animal rescues supported with
grant funding during the year
Industry bodies RCVS /
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, Sharon Flood, was appointed as colleague representative in
July 2020, taking over from Paul Moody. In this capacity she has attended store listening sessions. In
addition, the Chairman has attended two listening sessions in September and October. Due to travel
restrictions during COVID there have been less opportunities in the year for visits. The Chairman was
able to make some visits during September when COVID restrictions allowed. A Joint Venture Council
comprising a representation of our Joint Venture Partners meet regularly to discuss strategic,
operational and clinical matters. This meeting is attended by members of the Vet Group Executive
Management Team. The ‘We C.A.R.E.’ survey took place during August and was focused on two areas
particularly important to our colleagues: diversity, and inclusion and wellbeing. The results of the
survey were reviewed locally by teams and by the Board. There are channels for colleagues to engage
directly with the Executive Management Team, for example the ’Tell David’ and ‘Tell Jane’ email
addresses. During the COVID crisis listening and communication have been increased considerably.
For example, every Store Manager was been paired with a member of the Executive Management
Team to enable regular calls to take place and daily video updates were given by the CEO or one of
the Executive Management Team every weekday from 17 March 2020 until 5th June 2020, when they
moved to weekly.
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 95% of food product purchases and over 50% of accessory
product purchases are from UK based suppliers, The sourcing office in Hong Kong manages the day
to day relationships with our supplier partners in this region. During the year our usual face to face
meetings and live conference events were all moved to virtual formats. We held virtual conferences in
October for our UK suppliers and in December for our suppliers in Asia. These conferences provide a
platform to share our key strategic messages and the suppliers have an opportunity to ask questions,
raise concerns and opportunity areas.
The Pets at Home Foundation engages with the animal rescue sector in the UK on a regular basis.
The team, which includes a veterinary nurse, have long term relationships with the sector and are
familiar with the issues that they face and help that they need which supports the community strategy.
A series of roundtable events were held in December 2020 to understand how the pandemic was
impacting small rescues and their perceptions on pet welfare issues that may present themselves
in the longer term One to one meetings have also been held with five large national charities to
understand their perspective on the COVID pandemic and the impact on pet welfare and pet
ownership. This ongoing engagement with the charity sector helps us to focus our efforts where
the impact on pet welfare will be greatest.
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. 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 are
active members of the British Retail Consortium (BRC) and have contributed to various initiatives and
BVAAll vets are members of the
Royal College of Veterinary
Surgeons (RCVS) and the British
working groups.
Veterinary Association (BVA)
Customers
6.2m
active VIP members
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. We also conducted
regular pulse surveys, with both existing customers and non-shoppers, throughout the earlier stages
of the COVID pandemic to assess customers’ evolving behaviours and preferences.
Customers are 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. During
the COVID pandemic customers needed flexible ways to shop and look after
their pets.
Shareholders
and the investor
community
197Institutions met
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 86% to 100%. Investor tours were conducted at the flagship
Stockport store. An animal healthcare event was attended by the Financial Director of the Vet Group.
A number of ESG focused sessions have been held with the Chief People and Culture Officer and
Group Head of Social Value.
As we continue to shift perception of Pets at Home from a retailer with services
to a complete pet care provider, it remains vitally important to engage with
shareholders and potential investors alike to explain our unique business model
and articulate the future strategy. There has been engagement around specific
topics over the course of the year including the update of the social value strategy,
capital allocation and recent M&A activity.
With trends such as online shopping and subscriptions becoming increasingly
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. During this year we rolled out click and collect to all stores and
enabled deliver to car in 157 of our stores. Our Groom rooms were able to provide
welfare grooms during lockdown 2 and 3 and we reduced the price of this service
by an average of £7 depending on dog size and breed.
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.
39
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Chief Financial Officer’s review
Acceleration in our underlying growth
demonstrates the strength of our
omnichannel pet care model
The investments we made pre-COVID
in both our online capacity and data
capability, together with the adaptability
of our operations during the pandemic,
have supported a step up in our
underlying growth.
Mike Iddon
Chief Financial Officer
Group like-for-like revenue growth#
Retail
Vet Group
Group revenue (£m)
Retail
Vet Group
Central
Group underlying gross margin1,#
Retail
Vet Group1
Group underlying EBIT2,3,# (£m)
Retail
Vet Group2,3
Central
Group underlying EBIT margin2,3,#
Retail
Vet Group2,3
Group underlying PBT# (£m)
Group statutory PBT (£m)
Underlying basic EPS1,2,3,# (p)
Statutory basic EPS (p)
Group statutory net income (£m)
Group non-underlying charges1,2,3 (£m)
Group non-underlying cash costs4 (£m)
Group underlying free cashflow# (£m)
Dividend (p)
40
FY21
8.7%
8.8%
7.9%
1,142.8
1,018.9
123.2
0.7
48.9%
49.2%
46.0%
105.9
79.5
36.0
(9.6)
9.3%
7.8%
29.2%
87.5
116.4
14.0
19.8
99.0
28.9
(5.5)
67.4
8.0
FY20
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
67.4
(7.6)
(16.4)
89.6
7.5
YoY change
7.9%
8.7%
1.6%
NM
(2) bps
(50) bps
334 bps
(4.8)%
(11.0)%
17.6%
(11.6)%
(124) bps
(172) bps
398 bps
(6.4)%
35.5%
(6.8)%
47.1%
47.1%
NM
(66.5)%
(24.8)%
6.7%
Pets at Home Group PlcAnnual Report and Accounts 2021
FY21 Financial highlights
Revenue (£m)
Underlying free cashflow 5 (£m)
£1,142.8m +7.9%
£67.4m
(24.8)%
Underlying PBT 5 (£m)
Statutory EPS (pence)
£87.5m
(6.4)%
19.8p
Statutory PBT (£m)
Dividend per share (pence)
£116.4m
+35.5%
8.0p
+47.1%
+6.7%
Retail revenue
£1,018.9m
Group revenue
Vet Group revenue
£1.1bn
£123.2m
1
2
3
4
FY21 non-underlying credit of £0.6m relates to the release of a provision in relation to property leases. FY20 non-underlying charges of £6.6m relate to costs incurred by the Group in buying out, and in some cases
closing, JV practices. Both items have been allocated against Vet Group, and Group, non-underlying gross margin.
FY21 non-underlying charges of £1.9m relate to an accounting charge for minority stakes owned by vet partners in the Specialist Group, prior to the disposal on 31 December 2020, which has been charged against
non-underlying operating costs (FY20: £1.0m).
FY21 non-underlying credit of £30.2m relating to the profit on disposal of the Specialist Group (FY20: £nil) has been allocated against non-underlying operating costs.
FY21 non-underlying cash costs include £nil (FY20: £10.0m) relating to practices that we have bought out, plus £5.5m (FY20: £6.4m) in relation to payments made to Shared Venture Partners in our Specialist Group to
acquire certain remaining minority stakes.
5 Alternative Performance Measures (APMs) are defined and reconciled to IFRS information, where possible, on page 210.
41
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Chief Financial Officer’s review continued
Impacts on the FY21 financial statements
Impact of COVID-19 on the FY21 financial statements
Throughout the year and particularly in the first quarter, COVID-19
impacted the Group by placing revenue restrictions on the
business and leading us to incur both one-off costs and ongoing,
additional operational costs.
We temporarily closed our grooming salons and stopped the sale
of pets, and our First Opinion practices and Specialist Referral
centres were subject to regulatory restrictions on permitted
procedures. We incurred additional costs through, inter alia, social
distancing measures across our stores and distribution centres, the
provision of personal protective equipment, cleaning and
sanitisation, and pet welfare, as well as through the payment of an
additional Thank You bonus to frontline colleagues and enhancing
our Colleague Hardship Fund.
This resulted in an estimated £30m adverse financial impact in the
year, all of which is included in our underlying results.
We took the decision across our Group-owned businesses not to
participate in any of the government’s support schemes including
the Job Retention Scheme (JRS), the Job Retention Bonus, and the
Coronavirus Large Business Interruption Loan Scheme (CLBILS), and
we voluntarily repaid £28.9m in business rates relief.
While the impact of COVID remains, we have planned for ongoing
additional operational costs across both our stores and distribution
centres of approximately £9m for the year ahead and will monitor
this closely as the year progresses.
Impact of IFRS16 on the FY21 financial statements
The financial information in pages 42 to 45, and associated
commentary, have been presented on a constant accounting
basis and reflect the impact of IFRS16, which was fully
implemented in the prior year. The impact of IFRS16
on the Group financial statements is shown on page 45.
Group revenue growth
7.9%
£87.5m
£67.4m
Group underlying# free cashflow
Group underlying# PBT
42
Financial review of FY21
The FY21 audited period represents the 52 weeks from 27 March 2020
to 25 March 2021. The comparative period represents the 52 weeks
from 29 March 2019 to 26 March 2020.
The Group’s results are shown as three 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), Vet Group (includes First
Opinion practices and Specialist Referral centres) and Central (includes
Group costs, finance expenses and the Group’s telehealth business).
The Group completed its disposal of its five Specialist Referral
centres (the “Specialist Group”) on 31 December 2020 and therefore
the financial information shown for FY21 includes an element of
discontinued operations, however given the immateriality of these
operations (revenue £33.9m, underlying EBIT £1.8m) to Group revenue
and profit they have not been disclosed separately.
Revenue
Group revenue in FY21 grew 7.9% to £1,142.8m (FY20: £1,058.8m)
and like-for-like (LFL) revenue grew 8.7%#. In H2 Group revenue grew
by 10.9%, with Group LFL revenue growth of 12.4%.
Retail revenue grew 8.7% to £1,018.9m (FY20: £937.6m), including
omnichannel revenue growth of 71.7% to £161.3m, representing 15.8%
of total Retail revenue (FY20: 10.0%). The LFL revenue growth in Retail
was 8.8%# for the period and 11.9% in H2. Retail LFL revenue grew by
17.3% on a 2-year basis.
Food revenue grew by 6.6% to £551.5m (FY20: £517.4m), reflecting our
success in recruiting new customers throughout the year, as more
people became pet owners for the first time.
Accessories revenue grew 15.0% to £431.4m (FY20: £375.3m),
with significant growth in categories such as leads and bedding as
humanisation continues to drive customer spend. Grooming revenues
declined by 29.2% in the year to £19.6m (FY20: £27.7m), reflecting
closure of all salons for the first 10 weeks of the year, with some
form of COVID-related restrictions in place for much of the year.
Vet Group revenues grew 1.6% to £123.2m (FY20: £121.2m), with LFL
growth of 7.9%#, despite varying degrees of restrictions on permitted
procedures throughout much of the year. In H2 Vet Group revenues
grew by 3.4%, with LFL growth of 17.2%, with the difference between
total and LFL revenue growth being driven by the disposal of the
Specialist Group on 31 December 2020. Customer sales made by all
First Opinion vet practices were up 9.2% to £383.6m# (FY20: £351.3m).
Total Joint Venture fee income increased by 6.0% to £57.0m (FY20:
£53.8m), with LFL fee income up 6.3%# (FY20: 2.1%). The growth in
fee income is lower than that seen in customer sales due to the
fee adjustments which have been in place for some JV practices
throughout the year. Our program of fee adjustments completed in
the year as planned and fully annualised in the second half of the year
such that, in H2, growth in First Opinion customer sales and JV fee
income was more closely aligned, at 19.4% and 17.9% respectively.
Consolidated customer revenues# from company managed First
Opinion practices increased by 17.7% to £25.5m (FY20: £21.7m).
Revenue of £0.7m was recognised within our Central division in
relation to The Vet Connection, the financial performance of which has
been fully consolidated since the acquisition on 30 November 2020.
Pets at Home Group PlcAnnual Report and Accounts 2021 LFL Sales Growth
Retail
Of which:
Stores1
Omnichannel2
Vet Group
Group
FY21
H1
5.8%
H2
Full Year
11.9%
8.8%
2-year
17.3%
0.7%
65.8%
1.2%
5.3%
4.9%
77.6%
17.2%
12.4%
2.7%
71.7%
7.9%
8.7%
9.0%
119.0%
13.2%
17.0%
1 Store sales includes live pet sales.
2
Defined as orders placed online at petsathome.com and in-store using our order-in-store service for
both delivery to home and collection in-store, plus subscriptions to monthly flea & worm treatments
via our ‘Subscribe & Save’ platform.
Gross margin
Underlying group gross margin remained broadly flat year-on-year,
declining by 2 bps to 48.9% (FY20: 48.9%), despite strong growth in
grocery food sales, which are at a lower percentage margin.
Gross margin within Retail was 49.2%, a reduction of 50 bps over the
prior period (FY20: 49.7%), albeit with a 70-bps improvement in H2.
This reflects four main impacts; the restrictions on grooming services
which had a dilutive impact on gross margin as we continued to
employ our grooming colleagues, whose costs are allocated to gross
margin, a mix benefit driven by strong growth within accessories,
beneficial terms with our suppliers partly driven by volume, as well as
the external factors of foreign exchange and increased freight costs.
In the year, we incurred a year-on-year foreign exchange impact of
29 bps as our average dollar hedged rate weakened from 1.33 to 1.28,
as well as a 26-bps impact from increased freight costs. In the current
financial year, 100% of our forecast USD spend is currently hedged at a
rate of 1.35 and we have planned for increased freight costs for at least
the first half of the financial year.
Underlying gross margin# within the Vet Group increased by 334 bps
to 46.0% (FY20: 42.7%). This increase reflects the strong sales growth
across both our Joint Venture and company managed estate driving
fee income growth of 6.0% with the cost base to support those
practices remaining largely fixed. Gross margin also includes the
impact of planned fee adjustments, which have suppressed Joint
Venture fee income in the year, but which are now fully completed
with no further fee adjustments planned.
Operating profit and operating costs
Underlying Group EBIT was £105.9m# (FY20: £113.3m), with an
operating margin of 9.3%# (FY20: 10.5%). Group underlying operating
costs of £342.1m (FY20: £297.2m) grew at 15.1% or 10.6% on a
pre-COVID basis. Before investment in fulfilment, customer acquisition,
and our support office capabilities underlying cost growth was 1.3%.
Retail EBIT was £79.5m# (FY20: £89.3m) with an operating margin
of 7.8%# (FY20: 9.5%). Whilst we saw sustained strong trading in our
second half across both stores and online this has been offset by the
revenue and cost implications of COVID-19. Operating cost growth,
excluding depreciation and amortisation, was 16.2% to £316.8m (FY20:
£272.5m). We have continued to pay all our rents throughout the year,
and our program of rent negotiations continues.
Underlying Vet Group EBIT was £36.0m# (FY20: £30.6m) with an
operating margin of 29.2%# (FY20: 25.2%). Operating costs in the
Vet Group, excluding depreciation and amortisation, were £15.1m
“ Our decision to increase our final dividend
by 10% in the year, reflects our confidence
in the long-term business performance.”
(FY20: £16.1m), a decrease of 5.8% on the prior year. The year-on-year
change in operating costs reflects achieved cost efficiencies across
several areas, as well as the disposal of the Specialist Group part way
through the year.
Within Vet Group non-underlying items, we recognised £30.2m in
relation to the profit on disposal of the Specialist Group (FY20: £nil)
on 31 December 2020, as well as non-underlying operating costs of
£1.9m in relation to the accounting treatment of the ownership
structure of the Specialist Group (FY20: £1.0m), consistent with our
accounting practices since acquisition.
Central costs, including Group overheads and colleagues, increased
to £9.6m (FY20: £8.6m), partly driven by investment in our Group
capability and the small amount of costs associated with The Vet
Connection, acquired on 30 November 2020.
Finance expense
The net finance expense for the period increased to £18.4m (FY20:
£17.8m) with the increase driven by fees relating to the £100m credit
facility arranged in May 2020 as part of our COVID-19 response. This
facility remained unutilised for the entire term and, post year end, has
been allowed to expire without seeking renewal.
Profit before tax
Underlying pre-tax profit was £87.5m# (FY20: £93.5m) and statutory
pre-tax profit, including all non-underlying items was £116.4m (FY20:
£85.9m). Underlying pre-tax profit declined 6.4% in the period.
Taxation, net income & EPS
Underlying total tax expense for the period was £17.3m#, a rate
of 19.8% on underlying pre-tax profit.
Underlying net income for the year, after tax, decreased by 6.3% to
£70.2m# (FY20: £74.9m), whilst statutory net income for the year, after
tax, increased by 47.1% to £99.0m (FY20: £67.4m), driven by the £30.2m
profit on disposal of the Specialist Group. Underlying basic earnings
per share were 14.0 pence# (FY20: 15.0 pence) and statutory basic
earnings per share were 19.8 pence (FY20: 13.5 pence).
Cash working capital
The cash movement in trading working capital for FY21 was an
outflow of £16.5m#. This was predominantly driven by a £22.1m
increase in inventory, reflecting the rebuild of stock levels throughout
the period following the customer stockpiling seen towards the end
of FY20.
The strong financial performance across our Joint Venture First Opinion
vet practices, as well as the 6-month loan holiday we agreed with third
party banks as part of the COVID-19 response, led to the gross value of
operating loans reducing by £10.8m to £26.7m (FY20: £37.5m). This
decreased the overall Group cash working capital outflow to £5.7m
(FY20: £28.2m inflow), and supported the solid cash generation of the
Vet Group.
The provision held against the gross value of operating loans was £6.2m
(FY20: £8.0m) representing 23% of the gross value of the loans.
#
Alternative Performance Measures (APMs) are defined and reconciled to IFRS information,
where possible, on page 210.
43
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021
Chief Financial Officer’s review continued
Capital investment
Capital investment was £44.4m (FY20: £38.3m) and was focused on three strategic growth areas; a £5.6m (FY20: £3.5m) investment to increase
capacity within our distribution network, £4.8m (FY20: £11.1m) to rollout our next generation store format, and investment in data analytics and
business systems totalling £22.9m (FY20: £14.9m), as we continue to progress our data and digital agenda. The balance of capital spend
supported the ongoing maintenance of our asset base. Cash capital expenditure was £34.9m (FY20: £39.6m).
Group underlying free cashflow
Group underlying free cashflow after interest and tax, but before acquisitions and disposals decreased to £67.4m# (FY20: £89.6m), representing a
cash conversion rate of 30.4%# (FY20: 39.8%). The decrease in free cashflow compared with the prior year is largely driven by the working capital
movements described above offset by a year-on-year benefit relating to a change in timing of Corporation Tax payments in the prior year.
Group underlying free cashflow# (£m)
Operating cashflow#
Tax and interest
Debt issue costs
Net capex
Purchase of own shares to satisfy colleague options
Group underlying free cashflow#
FY21 Group underlying free cashflow#
Retail
Vet Group
Central1
Group underlying free cashflow#
FY21
133.2
(21.9)
(0.2)
(35.0)
(8.7)
67.4
FY20
165.8
(34.0)
–
(39.4)
(2.8)
89.6
Underlying FCF
(£m)
FCF conversion2
44.6
38.1
(15.4)
67.4
23.8%
89.8%
NM
30.4%
Includes central costs of £9.5m plus interest paid of £5.3m, purchase of own shares of £8.7m, £0.2m of debt issue costs, a WCAP inflow of £4.3m a tax credit of £3.3m and a credit relating to IFRS2 of £0.8m.
1
2 Calculated as underlying free cashflow as a percentage of underlying EBITDA.
As a result of strong cash generation and £80m of initial proceeds from the disposal of the Specialist Group, the Group’s net cash position at the
end of the period was £1.4m, or net debt of £408.3m on a post-IFRS16 basis. This represents a leverage ratio of 0.0x underlying EBITDA# on a
pre-IFRS16 basis or 1.9x on a post-IFRS16 basis.
Group net cash/(debt) (£m)
Opening net cash/(debt) (pre-IFRS16)
Underlying free cashflow#
Ordinary dividends paid
Acquisitions3
Disposals4
Non-underlying cash outflow5
Closing net cash/(debt)
Pre-IFRS16 leverage (Net cash/(debt) / underlying EBITDA#)
Post-IFRS16 leverage (Net cash/(debt) / underlying EBITDA#)5
FY21
(85.9)
67.4
(37.1)
(16.8)
79.4
(5.5)
1.4
0.0x
1.9x
FY20
(120.5)
89.6
(37.1)
(1.5)
–
(16.4)
(85.9)
0.6x
2.5x
3
4
5
In FY21 includes acquisition of The Vet Connection and investment in certain company managed practices. In FY20, includes an investment in Tailster and in certain company managed practices.
In FY21 includes the £80m cash proceeds in relation to the disposal of the Specialist Group in the year net of fees and cash held upon disposal (FY20: £nil).
FY21 includes £nil (FY20: £10.0m) relating to practices bought out during the year, plus £5.5m (FY20: £6.4m) in relation to payments made to certain Shared Venture Partners in our Specialist Referral centres to acquire
remaining minority stakes.
6 Underlying EBITDA for FY21 is £216.7m.
The Group’s cash return on invested capital in the period declined to 22.5% (FY20: 23.3%).
Capital allocation
Following the successful reset of our Retail business and restructuring of the Vet Group over the past few years, we have taken the opportunity
to formally revisit our capital allocation policy. Our refreshed policy prioritises investing our cash generation in areas that will expand the Group
and deliver attractive returns. This includes organic investment into our digital capability and our infrastructure, including our store regeneration
program. Our next priority is to provide a progressive ordinary dividend to shareholders which approximates to 50% of earnings per share. We
will consider value-accretive opportunities, including M&A, which are strategically aligned to expanding our ecosystem in core and adjacent
markets and where we consider the potential opportunity to drive incremental value as attractive. Finally, post all other identified and
anticipated uses for capital, including the ordinary dividend, we would expect to return surplus free cashflow to shareholders through a special
dividend or share buyback.
44
Pets at Home Group PlcAnnual Report and Accounts 2021 Dividend
The Board has recommended a final dividend of 5.5 pence per share, an increase of 10% on the prior year. This takes the total dividend for the
year to 8.0 pence per share (FY20: 7.5p per share), reflecting our strong cash performance and balance sheet. The final dividend will be payable
on 13 July 2021 to shareholders on the register at the close of trading on 18 June 2021.
Application of IFRS16
The financial statements for FY21, and the prior period comparatives, have been prepared under the requirements of IFRS16. Implementation of
IFRS16 has had no effect on how the business is run, nor 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.
In order to clearly show the impact of IFRS16, we show a reconciliation for Group underlying profit before tax and cashflow as follows.
£m
Revenue
Operating lease rentals
Depreciation & amortisation
Underlying operating profit#
Finance income
Finance expense
Underlying PBT#
£m
Operating cashflow#
Tax
Interest
Debt issue costs
Capex
Purchase of own shares
Group underlying free cashflow#
Pre IFRS16
Exclude rent
Include
depreciation
Include interest
Post IFRS16
1,142.8
(78.1)
(40.5)
98.1
0.3
(5.9)
92.5
–
78.1
–
78.1
–
–
78.1
–
–
(70.3)
(70.3)
–
–
(70.3)
–
–
–
–
–
(12.8)
(12.8)
1,142.8
–
(110.8)
105.9
0.3
(18.7)
87.5
Pre IFRS16
Add back rent
Capital lease
payments
Lease interest
payments
Costs to acquire
ROU assets
Post IFRS16
133.2
79.6
(66.4)
(12.8)
(0.4)
133.2
(17.5)
(4.4)
(0.2)
(35.0)
(8.7)
67.4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
79.6
(66.4)
(12.8)
(0.4)
(17.5)
(4.4)
(0.2)
(35.0)
(8.7)
67.4
Impact of the UK’s exit process from the European Union
Following the United Kingdom’s exit from the European Union (EU) and the end of the transition period on 31 December 2020, we continue
to take actions across the Group to mitigate any related impact on tariffs, logistics, vet availability and currency .
We are also evaluating the potential regulatory implications for our operations in Northern Ireland, specifically concerning Export Health
Certificates. We continue to work with the relevant professional bodies to assess the protocols involved in bringing products into Northern
Ireland, and our plans for the coming year include an increase in associated logistics costs.
5. 6.
Mike Iddon
Chief Financial Officer
27 May 2021
#
Alternative Performance Measures (APMs) are defined and reconciled to IFRS information, where possible, on page 210.
45
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021
Operating review
Strategic differentiators
Locations nationwide and
knowledgeable colleagues
• 452 stores
• 316 grooming salons
Fast growing omnichannel business
• Omnichannel1 revenue growth of 71.7%
• 15.8% participation of Retail revenue
• Increasing traffic and conversion across both
• Over 7,200 Retail colleagues with expert pet
mobile and desktop
knowledge
VIP loyalty club
• 6.2m active members
• 70% of retail revenues transacted by VIPs
• Growing numbers signed up to
subscription services
Strong penetration of private label
• c30% participation of Food revenue
• 8 years of proprietary pet and customer data
• Even higher within Advanced Nutrition
category
• c50% participation of Accessories revenue
Market overview
The retail segment of the UK pet market grew
an estimated 2% in 2020. With Retail revenue
growth of 8.7% including 71.7% growth in
omnichannel revenues, we made strong
share gains across key categories, both online
and offline.
Retail
Our Retail segment includes pet products purchased
in-store and online, grooming services, pet sales and
pet insurance commissions.
Retail – FY21 financial metrics
£1,018.9m
Retail revenue
46
Like-for-like1 revenue growth
8.8%
£79.5m
£44.6m
Retail underlying EBIT1
Retail underlying free cashflow1
Pets at Home Group PlcAnnual Report and Accounts 2021
Our Retail brands
Food
Dog and cat food
Pet care services
Grooming salons
Dog and cat treats
Pet sales
Other pet food for fish, small
animals and birds
Pet insurance
Accessories
Pet homes and habitats
Toys, collars, leads, clothing
and other accessories
Health & hygiene products
Cat litter
1
Alternative Performance Measures
(APMs) are defined and reconciled to
IFRS information, where possible, on
page 210.
Annual Report and Accounts 2021
47
Strategic reportGovernance reportFinancial statementsPets at Home Group Plc Operating review continued
Food
We provide a wide range of pet foods for dogs, cats, small animals,
fish, reptiles and birds. With revenues of £551.5m, pet food is the
largest part of our business and represents approximately 55% of all
Retail revenue, having grown strongly in the year at 6.6%. This reflects
our success in acquiring new customers, particularly puppy and kitten
owners, and growing our active VIP loyalty club members by 9% in
the year.
We aim to provide customers with the 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 more advanced 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
close to a third of all food sales but an even 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.
Accessories
Accessories revenues increased to £431.4m in FY21 and accounted
for over 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 compare
and contrast accessories before purchasing, this category contributes
more to store sales than to those made online.
Omnichannel1 now represents 15.8%
of all Retail revenues.
48
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.
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 10,500 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 450 locations nationwide in as little as 1 hour, demonstrating
the convenience we offer. We see many of our online orders
collected in this way, particularly when they include a large bag
of pet food.
Pets at Home Group PlcAnnual Report and Accounts 2021 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 while the customer is still
present – meaning our stores can satisfy all of our customers’ needs.
Finally, our flea & worm subscription 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 15.8% of all Retail
revenues. Around 23% of all omnichannel revenues are now
collected in-store; highlighting the importance of our store
network within Group operations. Supported by recent capital
investment at our Northampton Distribution Centre to automate
the picking and packing process, as well as the development of
our new future-focused distribution facility in Stafford, 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.
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 one provider of pet insurance products, across our
Group to introduce customers to their products, from which we
earn certain commissions.
1
Alternative Performance Measures (APMs) are defined and reconciled to IFRS information, where
possible, on page 210.
49
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Operating review continued
Our Vet Group brands
50
Annual Report and Accounts 2021
Pets at Home Group Plc Strategic differentiators
Market overview
Partnership model which incentivises
growth
• 395 practices operated by entrepreneurial
Providing clients with a wide spectrum
of veterinary care
• Convenient access to First Opinion care
Joint Venture Partners
and advice
In 2020, the veterinary segment of the UK
pet care market reduced by c2% whilst in
FY21 total customer sales across all of our
First Opinion vet practices grew 9.2%.
• Joint Venture model unique in the market
• 303 practices inside Pets at Home stores
Unified brand driving customer
recognition
• Largest branded veterinary business
in the UK
• Centrally co-ordinated national
and local marketing
and 138 in standalone locations
• 24/7 access to trusted pet healthcare advice
through telehealth service
Unique benefits from being part
of Pets at Home Group
• Cross-sell opportunities with Pets at Home
VIP loyalty club
• Introductions made by store colleagues
Vet Group
Our Vet Group segment includes First Opinion veterinary
practices and provision of 24/7 pet healthcare advice
through our veterinary telehealth service.
Vet Group – FY21 financial metrics
£123.2m
Vet Group revenue
Like-for-like1 revenue growth
7.9%
£36.0m
£38.1m
Vet Group underlying EBIT1
Vet Group underlying free cashflow1
1
Alternative Performance Measures (APMs) are defined and reconciled
to IFRS information, where possible, on page 210.
51
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021
Operating review continued
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. Approximately two thirds of those
practices are situated in one of our Retail stores with the remainder
operating from standalone locations. Following our acquisition of
The Vet Connection in the year, a long established veterinary
telehealth provider, we can now offer customers round-the-clock
access to veterinary telehealth advice, triage and ancillary services,
meaning pet owners can remotely access quality care for their pet
whenever they need to.
52
Pets at Home Group PlcAnnual Report and Accounts 2021 Our performance in the year reflects
the advantages of our unique joint
venture model, strength in new client
registrations, as well as the hard work
and commitment of all our colleagues
and Partners.
First Opinion vet business
Our preferred model has always been to build value through shared
ownership. We operate a total of 395 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 to 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 the performance of their practice. They are
entitled to withdraw all the business profits once loans are repaid,
given sufficient cash reserves, with these dividends being in addition
to any market rate salary taken. The Partner also receives 100% of the
capital value of the business should it be sold in the future once debt
free, providing a clear route to exit.
In addition to our Joint Venture practices, we also operate 46 practices
under a company managed model. In these practices, the vet and all
other practice colleagues are employed directly by the Vet Group and
rather than receive fee for services provided 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 gives 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.
The Vet Connection
In the year, we acquired The Vet Connection (‘TVC‘), a long established
veterinary telehealth provider, marking an important step in the
development of our digital capabilities, providing trusted advice and
even more convenient pet care services. TVC provides on demand,
high quality, round-the-clock veterinary telehealth advice, triage and
ancillary services to a wide range of customers and their pets utilising
an experienced in-house veterinary team, extensive proprietary clinical
protocols and a robust and scalable infrastructure. By leveraging these
assets, we will look to incorporate their capabilities into our existing
customer offer – across product, services and subscriptions – to
enhance the overall customer experience, and help drive customer
acquisition, retention and lifetime value.
395
Joint Venture practices
303
First Opinion practices inside Pets
at Home stores
53
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Risk management
Principal risks and uncertainties
Our risk management framework
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 emerging risks and those that
would threaten our reputation, business model, future performance, solvency,
or liquidity.
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.
Risk management framework
The responsibility for risk management operates at all levels
throughout the Group, the foundation being our culture, values,
and behaviours
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
identify their most significant
risks considering their strategic
plan, objectives, and external
environments.
• Horizon scanning exercises
are conducted with senior
management teams and
independent experts as part of
both the strategic planning and
risk management processes. Key
emerging trends, developments
and opportunities are identified.
Assess
• The risk appetite is set by the
Board for all principal risks.
• A standardised scoring
methodology is 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, legal,
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
impact and proximity.
• Assurance is 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 and
the watch list four times a year. Risks
are considered both independently
and collectively to fully understand
their dependencies and potential
impact on the business.
• Risks, together with emerging or
developing threats are reviewed
as part of the annual strategy
planning cycle.
• The Group’s principal and strategic
risks are reviewed and agreed by
the Board.
Please see the risk management
section on pages 56 to 63 and our
response to COVID-19 on pages 10
and 11 for further detail.
COVID-19 pandemic and Brexit
The Board has reviewed the risks
and opportunities presented by
COVID-19 and the UK’s exit from
the European Union.
In response to these challenges, we
have clearly set out our priorities and
have appropriate, balanced, and
calibrated mitigation plans in place
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 their pets, and suppliers as well as
ensuring the continuity of customer
service in our stores and practices.
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 our
risk profiles of which eight remain
stable. Liquidity and credit risk has
reduced (high to low), sustainability
and climate change has increased
(low to medium).
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 and culture
• Supply chain and sourcing
• Services and stores expansion
• Liquidity and credit
• Treasury and finance
• Regulatory and compliance
54
Pets at Home Group PlcAnnual Report and Accounts 2021 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 64.
h
g
H
i
y
t
i
l
i
b
a
b
o
r
P
2
3
4
5
1
10
8
7
6
9
w
o
L
Low
Impact
High
Risks are categorised into four main areas
Strategic
Financial
Risk
Operational
Legal & Compliance
Profile Change
Executive
responsibility
1. Brand and reputation
High
Chief Executive Officer
2. Competition
Medium
Retail Chief Operating Officer
and Vet Group Chief Operating
Officer
3. Services and store expansion Medium
Chief Executive Officer
4. Our people
Medium
Chief People & Culture Officer
5. Information security and
Medium
Chief Information Officer
business systems
6. Supply chain and sourcing
Low
Retail Chief Operating Officer and
Vet Group Chief Operating Officer
7. Liquidity and credit
Low
Chief Financial Officer
8. Treasury and finance
Medium
Chief Financial Officer
9. Regulatory and compliance
Low
Group Legal Director
10. Sustainability and
climate change
Medium
Chief People & Culture Officer
n
w
o
d
p
o
T
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 in fulfilling its corporate governance
responsibilities and oversees responsibilities in relation
to financial reporting, and related internal controls, ethics,
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 and watch list –
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 with risk owners, including
actions and progress made, and assesses the risk ratings and
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 the reporting process
to the senior management team.
p
u
m
o
t
t
o
B
For further details about key roles and responsibilities within our
governance structure, please see the Governance report on
page 90.
Stable
Up
Down
The principal risks do not include all the risks associated with our business. Further risks deemed to be
less material or yet unidentified may also have an impact on the achievement of our strategic
objectives. Less material risks may appear on a business or functional risk register and are managed at
that level.
55
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021
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’. We
believe that ‘Pets come 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 not attracting
new customers and a loss of trust
and confidence in the Group and
its brands by customers,
colleagues, shareholders, and other
stakeholders.
Outlook
As we continue to increase the size and
scale of our pet care service offering, we
must ensure that pet welfare and clinical
standards continue to be maintained at
the mandated high level across the
Group.
We continually monitor and improve
our standards to ensure they remain
robust and best in class.
Following Government requirements for
COVID-19 and RCVS guidance, our First
Opinion practices remain open to
deliver essential care. We trust our
veterinary surgeons as professionals to
take each case on its own merit and
continue to undertake what is essential
for the pet’s health and welfare needs.
Risk profile
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
50% of sales from pet services
Mitigation
Advancing pet welfare will always be a priority in line with our number one value ‘Pets come
first.’ As a retailer of small pets and Veterinary group the highest possible welfare and clinical
standards must always be maintained.
The Group’s pet welfare and clinical standards are overseen by the ESG Committee
(environment, social and governance), whose remit includes maintaining and improving
our high standards.
Reporting into this committee is the newly established Pet Welfare Committee, which
oversees the assurance and governance of pet welfare (including breeders and our supply
chain), quality and welfare considerations of products, services and events, and the Group’s
position on pet welfare and pets in society. Regular meetings with stakeholders from across
the Group allow us to be quicker and more agile with communications and improving
procedures where needed.
We have rigorous processes in place to ensure welfare standards across our stores, in-store
adoption centres, grooming salons and our breeders. All are regularly assessed 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. Despite the ongoing challenges due to
COVID-19 we have maintained our pet welfare audit programme with a mixture of virtual
and on-site assessments carried out by our independent assessors.
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 also operate a confidential ‘Pet Promise Line’ where colleagues can 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.
We have started to change how we talk about and sell rabbits which is part of a wider
project to further improve rabbit welfare. We know that, despite our best efforts, customers
often do not understand the complexity or commitment of pet ownership. Rabbits are now
only sold in half our stores which all have an in-store veterinary practice. We have also
increased the price of rabbits to make them more of a considered purchase.
The Group also interacts with customers’ pets daily through its First Opinion veterinary
practices. All veterinary surgeons and nurses are subject to the Royal College of Veterinary
Surgeons’ (RCVS) Code of Conduct.
293 practices are accredited under the RCVS Practice Standards Scheme (PSS), with a further
57 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. The accreditation process has
been suspended for much of the financial year due to the pandemic, but we will continue to
drive and support PSS accreditation when it has fully resumed. To support our colleagues
further our clinical development team, who are all veterinary surgeons, audit to our internally
developed ’Aspiring to Clinical Excellence’ (ACE) audit programme which has helped
improve clinical standards and processes across the Group. The support has been further
enhanced by our quality improvement programme which has provided granular detail, as
well as clear direction and prioritisation for our future support activities.
The Group has, in conjunction with the VetCompass research team at the Royal Veterinary
College, secured a research grant from PetPlan UK. This will facilitate research into antibiotic
prescribing behaviours which will advance the profession’s knowledge of this critical subject
that has implications for both human and animal health.
We have strong relationships with the large animal and pet rescue charities in the UK and
engage with them regularly on pet ownership and welfare issues. We are the biggest grant
giver to the rescue sector in the UK through the Pets at Home Foundation and our VIP
Lifelines scheme. This year we have supported the rescue sector with an emergency grant
scheme to help them to cover essential costs during the pandemic. We have held sessions
specifically focussing on the impact of the pandemic on pet ownership and pet welfare with
the large rescue charities. We also held two roundtable events for over 20 small and medium
sized local pet rescues in December 2020. The rescue sector has not seen an increase in
relinquishment of pets as of April 2021. We will be monitoring the situation closely with the
sector and ensuring that our help is placed where it will have most impact. We are also
aware that as restrictions ease more support may be needed to help pets and owners adapt
to changing lifestyles and we will work to ensure our pet care ecosystem is here to support
our customers during their pet ownership journey.
56
Pets at Home Group PlcAnnual Report and Accounts 2021 Competition
Description and impact
The Group competes with a wide
variety of retailers, including other
pet specialists, pure play online
competitors, supermarkets,
discounters, online pet healthcare
platforms, veterinary groups, and
independent practices.
There is increased online
competition as large well-known
internet businesses expand into
pet products and established pet
product sites improve and expand
their offer. There is also a high level
of new start-ups into the
subscription market.
Not offering 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 a 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 can differentiate ourselves and take share across all channels
and key categories of our pet care ecosystem.
As a specialist retailer, the delivery of friendly expertise through our highly engaged and
trained colleagues and partners 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 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 pet care ecosystem.
We maintain competitive prices across Advanced Nutrition own label foods as well as
branded food lines and pet essentials. While we know that our customers are typically loyal,
we are conscious of price investment activity seen across the grocers, who are continuing to
respond with price cuts and price matching. Rather than responding in turn with deep price
cuts and an everyday low-price approach, we are further honing our price and promotions
strategy, to ensure that we will be targeting price investment across product areas that
customers will really notice and care about, supported by compelling promotional activity
to ensure that our value message really resonates with our customers.
We continue to evolve our proposition through the addition of vets and groomers into our
existing store estate whilst continuing to innovate our pet care centre 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. We are also undertaking some ‘test and learn’ pilots to innovate
the format of our veterinary practices, enhancing and modernising the customer’s
experience in receiving pet healthcare.
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 use these competitive advantages during the past year to drive above market
customer sales growth. We are also delivering on the important work of improving the
profitability in each of our First Opinion veterinary businesses for the benefit of our Joint
Venture Partners and the Group.
Our omnichannel participation of retail sales is increasing. More customers are using online
as part of their shopping repertoire as it has been the lifeline for many pet owners over the
past year. Customer buying behaviour was already rapidly changing in an increasingly
challenging and competitive retail landscape, with greater demands around price,
convenience, service, and experience. Investments in our omnichannel and distribution
capability have enabled us to meet increased customer expectations this year. To help our
customers shop even more safely we have extended our delivery choice and flexibility
through the launch of two new services, a one-hour Click & Collect service across all our
stores and the contactless Deliver to Car service across more than 150 stores.
We have also introduced a deliver to home service for our veterinary customers for the supply
of preventive and therapeutic veterinary medicines. This has been well received by customers
as a convenient solution where travel restrictions have been in place.
As part of our continued investment in our digital experience we have launched a
transformational programme to join up our online experience for our customers. To achieve
this, we are embarking on a ground-up greenfield, re-imagining of our entire digital
eco-system to create our pet care platform of the future.
There has been continued growth in our membership across our VIP, and Puppy and Kitten
clubs with increasing spend across our pet care platform. The clubs help introduce customers
to all parts of the business and members typically spend more than non-members. Acquiring
customers at the very start of their pet journey helps create loyalty and lock in lifetime value. We
are also uniquely positioned with our VIP data. Having over eight years of pet and customer data,
means we can generate deep insights and deliver an increasingly personalised customer journey.
Our strategy is to embed an analytic culture throughout the Group which underpins our
capability framework, to use our insights to drive strategic decision making, and to optimise
the working life of our colleagues and partners. To maximise this opportunity, we have
recruited a 45-strong team consisting of data scientists, cloud engineers and analysts.
The analytical platform, including the single customer/pet view, was delivered in January
2021. This will optimise our strategy to provide an increasingly personalised customer
experience. We have also launched our campaign management through Salesforce and since
the half year we have delivered over 80 new campaigns and have been able to use insight
and data science algorithms to optimise audience selection. In particular, the reward mailer
and churn tests have proven successful in driving incremental revenue and retention.
We are now focusing on how we deliver benefit from our analytics investment, especially
in driving prioritisation and value enablement, and in the growth of our subscription offers,
improving customer retention and implementing segmental customer lifetime value to
monitor long term value of propositions and VIP.
Outlook
We are in a strong position in a large,
resilient market that has seen structural
growth over the past 12 months due to
an unprecedented increase in pet
ownership.
We rapidly adapted our operations to
be able to continue as an ‘essential’
retailer and to keep our veterinary
practices open. Working strictly within
the guidelines from the Government
and the RCVS, the professional body
governing veterinary practitioners, our
priority has always been the safety and
wellbeing of all our stakeholders, whilst
meeting the needs of the nation’s pets
in exceptional circumstances.
Due to COVID-19 we have seen a
significant shift to online, as well as
economic uncertainty driving an
increased customer focus on value
and convenience.
We expect to see continued strong
growth in our Puppy and Kitten clubs by
driving awareness through enhanced
marketing campaigns and underpinned
by a growing pet population.
Circa 67% 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 Joint
Venture 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
Medium
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
57
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Risks and uncertainties continued
Supply chain and sourcing
Description and impact
As we source our products and raw
materials globally, we are exposed
to the risks associated with
international trade, such as
inflation, changing regulatory
frameworks and currency
exposure.
We must ensure that our suppliers
share and uphold our approach to
business ethics, human rights
(including safety, modern slavery)
and the environment.
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 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 many stores and
in the fulfilment of internet orders.
A failure to manage this risk could
lead to significant reputational
damage.
Mitigation
During such a challenging year, the strength of our long-standing relationships with key
suppliers was crucial to preserving our supply chain. Across third party brands, private label
food manufacturers in the UK and accessory suppliers in Asia, we were able to minimise
disruption to customers and continue meeting their pet care needs. Our earlier 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 Asia supply
stabilising relatively quickly, our product availability held up well.
The Product and Supply Chain Committee is responsible for developing the Responsible
Sourcing strategy. Its scope 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 this year, the committee has developed a
roadmap to deliver the relevant targets for our Better World Pledge. More details can be
found on page 64. An independent human rights risk assessment has been conducted
during Q4 FY21. The recommendations will be implemented from FY22, under the direction
of an ethical manager joining the business during Q1 FY22.
Having Pets at Home colleagues on the ground in Asia working collaboratively with
suppliers enables us to closely monitor 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 and control processes and to ensure the
effectiveness of our Far East sourcing office in mitigating our sourcing risks in the region.
For our own label and private label food products we have identified alternative suppliers
where appropriate and have developed contingency plans.
This year we have substantially mitigated the quality and safety risks in our range
development. All testing protocols have been interrogated and strengthened where
necessary. We continue to mitigate the risks associated with existing products through
ongoing monitoring and surveillance.
In the Vet Group we have worked closely with all suppliers to understand and mitigate any
potential risks to manufacture and supply of critical pharmaceutical and consumable clinical
products. We have continued with our intended programme of contract renewals during
the year despite the interruption due to COVID-19. Provisions made for ring-fenced stock
holdings with both wholesaler and manufacturers have proved successful in maintaining
security of supply.
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 have also opened a second site in Stoke which supports our Business Continuity
plans as well as increasing our storage capacity to support business growth.
Exposure to foreign currency movements and freight rate increases is a risk that is mitigated
through our hedging strategy; see the Treasury and finance risk.
Outlook
We will continue to actively monitor
developments due to COVID-19 and the
UK’s exit from the European Union.
Our preparations to mitigate the impact
from tariffs, logistics and foreign
currency movements were in place well
ahead of the transition deadline. We
continue to monitor the situation in
Northern Ireland to ensure continuity of
supply and the smooth running of our
operations locally.
However, we do recognise that
exposure to foreign currency
movements and freight market
fluctuations will be a heightened risk.
During 2022, we aim to up weight our
product quality and safety compliance
monitoring with the recruitment of
added in-house auditing personnel.
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 bring sustainability into our
innovation plans and range architecture
going forward.
Risk profile
Low
Change on prior year
Stable
Links to strategy
Bring the pet experience to life
58
Pets at Home Group PlcAnnual Report and Accounts 2021 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.
Outlook
Despite the near term uncertainties
posed by COVID-19 and the UK’s exit
from the European Union, we remain
confident in our long term strategic plan
to deliver 50% of sales from pet care
services. The Group is in a strong
competitive position which allows us to
capture this opportunity through our
differentiated pet care offering.
We expect to see participation in
subscriptions and services continue to
grow led by our ability to extend, and
increasingly personalise our offering
whilst taking advantage of the
significant increase in pet ownership.
While positive progress around
vaccinations for COVID-19 reduces the
level of uncertainty ahead, our priority
remains safeguarding the health, safety,
and wellbeing of all our colleagues,
partners, and customers. We have
ceased any operation where the health
and safety of our colleagues and
customers may be compromised.
We continue to monitor all developments
and to re-evaluate our strategic plans we
progress through the year.
Risk profile
Medium
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
Mitigation
Our business model has pet care at its heart and our core focus is providing our customers
with affordable, convenient, and flexible pet care solutions through our growing online
platform and estate of 440 First Opinion veterinary practices and 452 stores.
We continue to invest across all channels to make pet care as engaging as possible.
The acquisition of The Vet Connection (‘TVC’) a long established veterinary telehealth
provider in November 2020, marks an important development in our digital capabilities
providing trusted advice and even more convenient pet care services. The opportunities
arising from the scalability of the clinical protocols and proprietary telehealth platform and
incorporating their capabilities into our existing customer offer, across product, services and
subscriptions, will enhance the overall customer experience, help drive customer acquisition,
retention and lifetime value as well as increasing the flexibility around our veterinary
partners work-life balance.
On 31st December 2020, the Group also completed the sale of the five Specialist referral
practices (the ‘Specialist Group’) to Linnaeus Group. The sale was part of the continuing
focus on customer-facing activities across our omnichannel retailing and First Opinion
veterinary operations.
There has been continued growth in our pet care subscription customers. We have over
1 million customers across the Group on our subscription platform, from which we build
loyalty, increase customer lifetime value, and generate a predictable annuity revenue stream.
In addition, new client registrations across our First Opinion veterinary practices have
increased. We welcomed over 465,000 new clients this year.
To take advantage of this opportunity we have recruited an 11-strong dedicated
Propositions Team, who are working across the Group to introduce new and unique bundles
of products and services aimed at providing complete pet care, with significant potential to
personalise and tailor packages to customers.
Due to COVID-19 restrictions our expansion and refurbishment programme has been largely
put on hold this year, which has given us time to re-evaluate our offer, store proposition and
our physical retail strategy as we respond to continued change in customer buying
behaviours, the channel shift to online and our customers’ need for even greater value
and convenience.
We will remain agile so that we can quickly respond, adapt, and innovate our formats to
maximise the potential from our estate and ensure that we have the right number of stores
and practices in the appropriate format and location. Delivering the best of our pet care
centre proposition across all formats will help drive experience, acquisition and fulfilment
capability and will reflect the evolving requirements of our customer’s pet care journeys,
both in the short and long term.
This year we have launched one new pet care centre taking us to 19 stores in this format,
with two smaller next generation stores in Camden and Putney, the performance of which
will inform our decision-making on a wider rollout inside the M25. We have also opened a
new in-store practice in Bracknell and re-opened our Perth store and practice which was
destroyed by fire in August 2019, whist completing five conversions of company owned First
Opinion practices to Joint Venture partnerships.
Further capacity will be added when our new Distribution Hub comes online from 2023.
This facility has been scoped to support the business growth both in-store and on-line until
the early 2030’s.
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 benefited from Government support regarding business rates
applicable to the retail sector, which we also applied to the in-store vet practices. In
December 2020, the Group repaid £28.9m of business rates relief received across the
business. This decision reflects the Company’s guiding principle of treating all stakeholders
fairly and is supported by the continuing strong performance of the business.
59
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Risks and uncertainties continued
Our people and culture
Description and impact
Our People strategy recognises
that our colleagues and partners
are fundamental to the success of
our business and key to us
achieving our aim of becoming
‘The Best Pet Care Business in the
World’.
We must keep our unique culture
alive through our shared values
and behaviours to safeguard the
long term sustainability of our
business.
We must also attract, develop, and
retain talented, engaged
colleagues and partners that will
deliver quality service and clinical
care to our customers and their
pets and achieve our strategic
ambitions.
Outlook
We continue to make great progress
with our People strategy across the
Group 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
Medium
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
Mitigation
This has been a year like no other and our priority has been keeping our people safe and
well to be able to continue to provide essential veterinary care and feed the nations pets
through the pandemic. Various sections of this report cover this response in more detail.
Please refer to pages 10 and 11 for an overview of how we enabled our colleagues to
continue to work safely.
The strength of our culture and values has never been more important and they supplied
the anchor from which every decision was made during this time of crisis. Our focus has
been both on the physical safety and the emotional wellbeing of colleagues whether they
have been working in stores, vet practices or at home, shielding or on Company paid
furlough. We have recognised everyone’s individual circumstances and challenges and have
looked to provide support and guidance to cover these different circumstances.
This year we took the opportunity of our annual colleague survey to focus on two specific
areas that our colleagues told us were particularly important to them: wellbeing, and
diversity and inclusion. We also know that these topics are closely connected with attracting,
engaging, and retaining great talent. Using insight from the survey and other listening
mechanisms we have developed our diversity and inclusion strategy which has included the
launch of four colleague networks since January 2021 and celebrating key diversity events.
From a wellbeing perspective we have been focussing on maintaining the sense of
belonging that could have been challenged by remote working. Weekly communications
from the CEO have continued throughout the year (communication was more frequent
during the first lockdown). We have also provided more support to colleagues and partners
who have been dealing with challenging situations with customers. We have taken
opportunities across the year to thank our colleagues such as the thank you payments made
in April 2020, issuing free shares to all colleagues in July, and the Christmas lunch Thank You.
We have set up a working group called ‘modern ways of working’. This is exploring how we
support our colleagues, and attract new talent, as we transition out of the restrictions that
we have been living and working under over the last 12 months and establish a new normal
which supports our colleagues to work in a way that enables them to be productive,
collaborate with others, and balance their home, and work lives.
Despite the pandemic we have been able to progress our talent strategy. We launched our
capability framework which articulates what great looks like for all colleagues. This framework
has been used to create the development programmes that have started during the year
such as the ‘Fearless’ store manager’s training programme. Our training and development
programmes support the development of pet care expertise in our ecosystem which in turn
creates a competitive differentiator and enables us to attract and retain great talent. Our
grooming training provides industry leading skills in our salons with colleagues undergoing
over 1400 hours of training to be able to pass our nine stage assessment process. Many of our
groomers also go on to complete our City and Guilds accredited level 1 and 2 stage training.
During the year we have continued to complete grooming training investing in 3,500 hours
of virtual training with a particular focus on first aid and animal behaviour training.
Regarding our veterinary graduates, we are pleased that during FY21, we delivered our CPD
programme by successfully transitioning programmes to virtual formats so that graduates
continued with their development.
Availability of vet talent remains a key risk across the sector. The change to UK immigration
policy, the COVID-19 pandemic and changes to the vet locum market because of IR35 have
added to the workforce challenges the sector faces within the context of a constrained
global supply of vet talent.
We continue to evolve our vet workforce strategy to address these concerns and to mitigate
the risks. Our leading vet graduate programme recruits 80 newly qualified vets per annum
and was recognised by the Institute of Student Employers in December 2020 for its
innovation in preparing new graduates for working life. We have launched new flexible
contracts in March 2021 to provide vets with greater choice and flexibility and are partnering
with Timewise to review our flexible working practises. We have a targeted international
recruitment strategy which focuses on key markets where clinical education meets UK
standards. We have delivered impressive results through targeted social media recruitment
campaigns and have increased our presence on social media channels. We restructured our
recruitment team during 2021 and now have an in-house headhunting team who focus on
building a talent pipeline for current and future vacancies.
We have invested in training and support for colleague wellbeing. We have developed an
online training programme – Thriving at Work – with the Veterinary Defence Society and will
be introducing Mental Health First Aiders in practices over the course of the next 12 months.
As we enter a new normal with the roll out of the vaccination programme and the relaxation
of restrictions, we will continue to monitor all Government guidelines to keep our colleagues
and customers safe. We will also continue to listen and support our colleagues, invest in their
training and development, and focus on how we can support their overall wellbeing.
60
Pets at Home Group PlcAnnual Report and Accounts 2021 Information security and business systems
Description and impact
Mitigating information security
related risks whilst implementing
new ways of working due to
COVID-19 was paramount
throughout the year. Protecting
customer and colleague data
against increasingly sophisticated
attacks comes with added cost
linked to the remediation of
associated risk (people, process,
technology, and data). Our ability
to adapt to these challenging
demands is vital to delivering our
strategy, maintaining target growth
levels and be secure from data
security breaches and legal
challenges.
Mitigation
In response to the challenges raised by COVID-19 our information security policies covering
people, process, technology, and data have been continuously reviewed, adapted, followed,
and monitored. Risks have been assessed and managed as business processes evolved.
Home working and social isolating ensured we had sufficient resources to maintain our core
information security functions and management system, whilst continuing to identify
opportunities for improvement.
Our risk-based information security management system, designed to protect
confidentiality, integrity, and availability of business-critical information is a strategic project.
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.
To better protect our business from outages caused by changes, we have implemented a
revised change management process which is risk based to accurately impact assess
changes and ensure that greater focus is placed on high-risk changes. We use our weekly
Change Approval Board meetings to discuss these changes in more detail and minimise any
impact on service.
We have embarked on a significant risk reduction programme this year, replacing many
of our legacy back-up and disaster recovery (DR) solutions by investing in a new managed
third party Data Centre which acts as our DR site for most of our internally hosted key tier 1
and 2 systems.
In response to COVID-19 we have implemented remote working across all our key teams,
including the expansion of our telephony system for use at home and the implementation
of Microsoft Teams meaning our colleagues can work from any location.
Our established information security training, awareness and testing programme ensures
colleagues understand the risks and threats associated with protecting data.
We remain committed to delivering secure high-performance systems that underpin our
strategic plan. Scalable, secure, cloud-based solutions are adopted where they support
our strategy.
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 risks versus
investment and ensure appropriate
controls are implemented. In-house
expertise will be supplemented with
external support to review and validate
existing controls, recommend
opportunities for improvement, and
provide executive level assurance of the
current control level.
Awareness, training, and testing
campaigns will continue, educating
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.
We will continue to invest in our risk
reduction programme and adopt a
continuous service improvement cycle
around this.
Risk profile
Medium
Change on prior year
Stable
Links to strategy
Use data and VIP to better serve
customers
Set our people free to serve
61
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 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 core financing facilities 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
considering evolving macro and micro-economic factors. As a result, the Group is confident
that it has adequate facilities in place, with a broad syndicate of banks.
The Group’s growth plans in respect of Joint Venture veterinary practices are 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 from time to time
bought out and consolidated a number of Joint Venture veterinary practices. As part of
these acquisitions, the Group settles 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.
Treasury and finance
Description and impact
The Group has an exposure to
exchange rate risk in respect of the
US dollar, which is the principal
purchase currency for goods
sourced from Asia. 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 manage this exposure
there could be an impact on the
Group’s financial performance with
a consequential impact on
operational and growth plans.
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 the
replacement of LIBOR by the FCA as the interest rate benchmark by the end of 2021, and the
consequential impact on interest cost. To manage this risk the Group has interest rate swaps
in place that fix the interest rate on a considerable proportion of the Group borrowings and
continues to monitor and engage in preparing for the transition to the alternative
benchmark to LIBOR. Further details can be found on page 183. 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, which states
that all hedging activities are undertaken in the context of known and forecast cash flows,
with speculative transactions specifically prohibited.
Outlook
The evolving position in relation to
COVID-19 and the ongoing economic
impact of the pandemic 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
resilience evidenced within the sector
throughout the last financial year.
We do not expect any other significant
macro-economic changes in the short
to medium term that may affect this risk
area although the continued
development of the UK’s relationship
with the EU may have some bearing.
The increase in the Group’s liquidity
headroom in the financial year,
supported by the strength of trading
throughout the period, has led to the
liquidity risk profile reducing.
Risk profile
Low
Change on prior year
Down
Links to strategy
Bring the pet experience to life
50% of sales from pet services
Outlook
On-going currency movements between
the US dollar and GBP may result in
further exchange risk, particularly
considering the evolving position in
relation to COVID-19, and the UK’s
developing relationship with the EU. We
will continue to monitor this and adjust
our approach to hedging where
necessary.
Risk profile
Medium
Change on prior year
Stable
Links to strategy
Bring the pet experience to life
50% of sales from pet services
62
Pets at Home Group PlcAnnual Report and Accounts 2021 Regulatory and compliance
Description and impact
Many of the Group’s activities are
regulated by national and
international legislation, applicable
industry regulations and standards
including, but not limited to, trading,
advertising, packaging, product
quality, health and safety, pet shop
licensing, National Minimum Wage
and National Living Wage, Equality
Act, modern slavery, bribery, data
protection, environment, the RCVS
Code of Professional Conduct for
Veterinary Surgeons, and the
implementation of the off-payroll
regulations (IR35). Failure to comply
with the obligations set out in this
and other applicable legislation may
lead to financial penalties and
reputational damage.
Mitigation
We actively monitor regulatory developments in the UK and Europe (as applicable) and our
existing obligations where we have internal policies and standards to ensure compliance
where appropriate. We also provide training for colleagues where needed and operate a
confidential whistleblowing hotline for colleagues, partners, customers, and clients 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 relating to personal data, ensuring relevant
policies are up to date and works with our Information Security Steering Committee which
monitors data security.
We have also refreshed all relevant agreements in readiness for the changes to HMRC’s
off-payroll regulations (IR35) which came into force in 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
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
50% of sales from pet services
Sustainability and climate change
Mitigation
The ESG Committee meets at least three times a year to approve and review the
implementation of the approved social value strategy, Our Better World Pledge. The Group
executive board reports to the ESG committee and is supported by management committees
that oversee different areas of the agenda. The Climate Change and Waste committee and the
Product and Supply Chain Committee, both established in 2019, continue to implement our
strategy and actions regarding the sustainability of our operations and our supply chains.
During the year we conducted a climate change risk assessment as part of our commitment
to align our reporting and disclosures to the TCFD (Task Force on Climate-related Financial
Disclosures) framework and this can be found on page 69 of this report. We have also
concluded an assessment of our scope 3 carbon and developed a reduction target aligned
to the Paris agreement which we have committed to submit to the Science-based Target
Initiative (SBTi) for approval.
For extreme weather we actively monitor and forecast demand and, should this risk occur,
we would review planned and tactical promotional activity to decide whether
strengthening this would drive sales.
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.
Outlook
The social value strategy, Our Better
World Pledge, can be found on page 64,
and in our separate social value report.
This includes a summary of our targets
relating to sustainability and climate
change and our performance over the
last year. 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
Medium
Change on prior year
Increasing
Links to strategy
Bring the pet experience to life
50% of sales from pet services
63
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Social Value Summary
Our Better
World Pledge
— creating a better world for pets
and the people who love them
£6m+
Over £6m raised for pet charities
84%
Colleague engagement
-9.1%
Reduction in CO2e carbon
emissions vs FY20
64
Pets at Home Group PlcAnnual Report and Accounts 2021 “ Our strategy has been named Our Better World
Pledge, quite simply as we believe that through the
decisions we make and the action we take now, we
can make a real difference to further improve the lives
of pets across the UK; enhance the experience of our
talented colleagues, the customers that we serve and
the communities we operate in; and protect the world
for our shared benefit in the years to come.”
Over the past twelve months we have drawn together our experts from
across the business, together with input from our external partners, to
develop our new social value strategy which was formally approved
and adopted by the business in October 2020. We are proud of the
achievements we have made, but our new strategy will accelerate
and focus our efforts in the three areas that mean the most to us:
our pets, our people and our planet.
Each of the three pillars – pets, people and planet – has an ambitious, long
term goal. These goals are supported by 10 discrete targets that will drive
our performance forward over the next few years, along with 20 clearly
defined and agreed actions. We will add to these over time as we develop
more initiatives and work towards our ultimate aims. We are proud of the
progress we have already made, which is summarised on page 72 and 73.
3 goals
By 2030 positively impact the life of every pet in the UK
Page 74
By 2030 enhance the lives of one million people through our
shared love of pets
Page 78
By 2040 become net zero
Page 82
20 actions
10 initial targets
Details on where to find more information about
our Social Value strategy and performance
Social value report
Our latest Social Value
report is available on our
corporate website with
more information about
our Social Value strategy
and performance
S172
See page 38 and 39
for a summary of how
we have engaged with
our stakeholders during
the year
ESG committee report
See page 117 and 118 for
our ESG Committee report
Policies
Our corporate website
contains our policies
65
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Social Value Summary continued
Creating our
Better World Pledge
Our strategy has been developed for the long term, the process that we followed
was thorough and inclusive. It took a year to complete and included how we would
ensure its ongoing success by embedding it into our business and enabling regular
reviews and updates.
Developing our strategy, guided by our purpose
The strategy has been built on strong foundations of putting pets first, giving
back to the communities in which we operate, investing in our colleagues and
respecting our environment. While the strategy was developed we continued
to identify quick wins and launch new initiatives that would form part of our
new strategic framework.
Specialist
appointed
to run the strategy
development
project
Listened to
our colleagues
through groups,
surveys and emails
Conducted a detailed
materiality assessment
and tested it with external
stakeholders including
shareholders, environmental
experts, charities and NGOs
through roundtable events
Project teams
became
management
committees with
refreshed terms of
reference and
ongoing Group
executive sponsorship
Sep
2019
Nov
2019
Jan
2020
Mar
2020
May
2020
September
2020
Strategic
ambition agreed
at board level
Established
project teams
sponsored by Group
management team
members to scope
different strategic
areas of focus
New board position
created
“Chief People and
Culture Officer”
The strategic framework
was finalised
to include 3 high level
ambitious goals, a detailed
list of 20 actions and 10
initial targets
66
Pets at Home Group PlcAnnual Report and Accounts 2021 The ambition agreed by the Executive Management Team in
September 2019 has provided a point of reference during the strategy
creation and enabled disruptive and long term thinking.
“ We care deeply about the role that we play
in society and we want to share the value
that we create as a business. Therefore, the
Executive Management Team, in consultation
with key stakeholders, will write and
embed into the way we operate a 10 year
promise that makes at least 10 quantifiable
commitments across the three pillars of pet,
people and planet.”
We have continued to be recognised
externally during the year
Retail Week 2020 winner: store
of the year and speciality retailer
of the year
Marie curie fundraising excellence
awards: cause related marketing
partner of the year
Institute of student employers (ISE) 2020
awards winner best graduate onboarding
and induction activities programme
Financial Times 2020 diversity leaders
special report ranked 51 out of 850
European companies (from 101 in 2019)
Data IQ awards, Vlad Jiman from Pets at
Home winner of the new talent award
Transformation of the year award
at the plc awards
World Retail Awards winner 2020 retail
employer initiative of the year for our
mental health focus
Retail Week 2021 finalist for 7 categories
67
Board level approval of
strategy and governance
Launch of strategy to
colleagues at virtual
conferences
Upweighting of internal
expert resource
ESG committee
meets
under updated
terms of reference
and name
Oct
2020
Dec
2020
Feb
2021
See page 68 for details of our Governance
and Materiality Assessment
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Social Value Summary continued
Acting responsibly
and sustainably
is at the heart
of our business
ESG Governance strengthened in line with the ambition of our strategy
Plc Board of Directors
ESG Committee
Group Executive Committee
JV Council
Vet Better World
Pledge committee
Vet Exec
Retail Exec
ESG Management Committees and associated groups
Climate Change & Waste
People Committee
Product & Supply Chain
• Approves strategy & reviews progress
• Focus on topics that feature on the
principal risk register
• Receives an update from each management
committee annually
• Approves policies & external disclosure
• Defines strategy
• Reviews progress
• Agrees large projects and costs
• Business integration
• Operational delivery when business
input is required
• Agrees internal resources and mobilisation
• Idea generation
• Operational delivery
• Project management
• KPI development
• Progress tracking
• Chaired by Group Executive member
Pet Welfare & Societal Topics
Pets at Home Foundation
or Director
Diversity and Inclusion Forum
68
Pets at Home Group PlcAnnual Report and Accounts 2021 Materiality
Initial assessment
A detailed materiality assessment was conducted as part of
the development of Our Better World Pledge strategy. This
was an inclusive process involving engagement with our
colleagues and with external stakeholders, including our
shareholders. Through this consultation 20 high level topics
were identified that the strategy went on to address.
These have been mapped against the ten principal risks
and reviewed using the company wide risk and assurance
approach to ensure clarity on governance and consistent
scoring assessment
April 2021 update
As part of the governance review of Our Better World
Pledge strategy a high level plan has been developed for
the four ESG committee meetings that are diarised to take
place across the year. In the meeting that takes place in
spring a review of the materiality assessment is planned on
an annual basis, this then enables the results of this review to
be fed into the annual strategy review cycle in the autumn.
As a result of the review in April 2021, the ranking of a
number of the topics was increased as a consequence of
an overall increase in ESG focus during the pandemic and
due to other external events. In particular climate action,
diversity and inclusion and data privacy, security and
ethics have been increased in terms of their overall
ranking. The topic of “biodiversity” has been expanded to
“nature based impacts” to ensure that it captures the full
extent of environmental issues that we need to consider
such as clean air, soil health and ocean pollution.
Governance
Part of the strategy development involved an in depth
review of ESG governance. The project groups that were
established as interim governance, to input into the
development of the strategy, were renamed as
management committees and have been meeting on a
regular basis since September 2020 with refreshed terms
of reference. Each of these is chaired by a Group executive
team member or Director. The mobilisation of the strategy
into the Vet Group is being managed by the Vet Group
Better World Pledge committee. This has been meeting
on a monthly basis since November 2020 and is chaired
by one of the Regional Directors. A Diversity and Inclusion
Forum has been established during the year. It is chaired by
Peter Pritchard, CEO and membership includes four other
Group executive members. From May 2021 it has also been
attended by Sharon Flood, non executive Director, in her
capacity as colleague representative on the board.
The Group executive committee and ESG committee
receive a progress update from each committee at every
meeting and there is an in depth “deep dive” scheduled
from each committee across the year to enable more
detailed review.
See page 117 for ESG committee report
Materiality review
Company
Supply chain
Pet, customer & community
4
4 4
1
1
1
3
3 3
2
2
8 8 8
9
9
9
13
17 17
5 5
16
7
7 7
10
6
6 6
11 11
18 18
15 15 15
12 12 12
14
19
20
l
s
r
e
d
o
h
e
k
a
t
s
o
t
e
c
n
a
t
r
o
p
m
i
g
n
i
s
a
e
r
c
n
I
Increasing importance to Pets at Home
Alignment of sustainability material topics to principal risks
Principal
Sustainability Material Topic
Pets’ physical and emotional health
Risk Main Governance Forum
1
ESG Committee
Pets’ role in society
ESG
Pet welfare Committee
1
2
Change
yr / yr
3 Health and wellbeing
4
5
Climate action
Social mobility and inequality
6 Diversity and inclusion
7 Nature based impacts
8 Waste
9
Resource consumption & circularity
10 Sustainability of product packaging
11 Data privacy, security and ethics
12 Purpose led business & careers
13 Supply chain transparency
14 Community contribution
15 Ethical business practices
16 Sustainable product raw materials
4
10
4
4
ESG
ESG
ESG
6
5
4
6
ESG
6,8,9
ESG
People Committee
Climate change & waste Committee
Diversity and Inclusion Forum
Diversity and inclusion Forum
Climate change & waste Committee
Climate change & waste Committee
Product & supply chain Committee
Product & supply chain Committee
Data Committee
People Committee
Product & supply chain Committee
Pets at Home Foundation
Group Executive Committee
Product & supply chain Committee
17 Labour practices and Human Rights
6,9
Product & supply chain Committee
18 Sustainability of pet ownership
ESG
Product & supply chain Committee
19
20
Environmental impacts
of product production
Animal welfare impacts
of product production
10
Product & supply chain Committee
6
Product & supply chain Committee
Read more in our Governance report,
page 90 in our Annual Report and Accounts
69
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021
Social Value Summary continued
Our Better World Pledge
strategy in summary
Our purpose:
For a better life together: Creating a better
world for pets and the people who love them
Our vision:
To become the most responsible pet care
business in the world
Our business strategy:
Our 3 Social Value pillars and goals:
Bring the pet
experience to life
Use our data to better
serve customers
Pets
By 2030 positively impact
the life of every pet in the UK
People
By 2030 enhance the lives of
one million people through
our shared love of pets
Planet
By 2040 become net zero
r
Value cre a t o
E
n
a
bler
E
n
a
b
l
e
r
alu e creator
V
Set our people
free to serve
50% of sales from
pet care services
70
Pets at Home Group PlcAnnual Report and Accounts 2021 Our 10 initial targets:
UN SDGs
Links to business strategy
– By 2025 set the standards for the safety
and quality of pet care products
– By 2030 increase the impact of grants,
donations and skill sharing to the rescue sector
– By 2030 educate 2m children in responsible
pet ownership
– By 2030 improve the health of the nation’s pets
by focussing on nutrition and health plans
Bring the pet experience to life
Use our data to better
serve customers
50% of sales from
pet care services
Read more
Page 74
– By 2025 be the leading employer of pet care experts
– By 2025 create opportunities for 5000 people who face
barriers to employment to experience work with us
– By 2030 increase the number and diversity of
people who can benefit from time with pets
Set our people free to serve
Bring the pet experience to life
Read more
Page 78
Use our data to better
serve customers
– By 2025 be leading the way in sustainable
pet care products
– By 2030 maximise the value of our waste
by adopting circular economy principles
– By 2030 become net zero carbon operationally
(scope 1 & 2) and by 2040 aim to have a net zero
carbon value chain (scope 3) using a science based
initiative approved methodology
Bring the pet
experience to life
Use our data to better
serve customers
Read more
Page 82
71
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Social Value Summary continued
Our performance
highlights
Our performance in the first year
of Our Better World Pledge strategy
demonstrates the success of our
sustainable pet care ecosystem that
creates value for pets, people and planet.
We are particularly proud to be able to
continue to grow our business while
reducing our operational carbon, to raise
money for pets when they need us most
and to invest in our people.
Link to ESG strategic pillars:
Pets
People
Planet
Our Better World Pledge strategy, page 70
-39%
Reduction in absolute CO2e
emissions ( scope 1 &2) vs FY16
-58.6%
In market based scope 1 and
scope 2 CO2e emissions vs FY16
Decoupling growth from
carbon impact
FY21 24,953 tonnes CO2e vs
41,178 in FY16, while increasing
sales turnover by 47%
And delivering a -9.1% reduction
in CO2e FY21 vs FY20 while
growing sales by 7.9%
Reducing our net operational
CO2e emissions
FY21 17,064 tonnes CO2e
market-based vs FY16 41,178.
Additionally FY21 2,600 tonnes
of carbon mitigation purchased
to enable buildings to be carbon
neutral in relation to energy use
100%
Renewable electricity sourced for
the main Group electricity contract
Committing to renewables
96% of our Group electricity use
is from renewable sources
79%
Of own brand packaging
is recyclable, recycled or
compostable
98.3%
Of waste diverted
from landfill
Helping our customers
be sustainable
And we are rolling out the
pet pouch recycling scheme
launched in November 2020
to more stores in FY22
Minimise operational waste
And all of our animal bedding
is backhauled for recycling
72
Pets at Home Group PlcAnnual Report and Accounts 2021
84%
Colleague engagement score
in FY21 We C.A.R.E. colleague
engagement survey
£15.8
Colleague bonus in
recognition of their tireless
efforts throughout the year
178
Promoted to grooming
stylist in FY21
5,000+
Colleagues became new
shareholders or had their
shareholding enhanced in
July 2020
Colleague engagement
85% retail, 82% Vet Group
Reward strategy engaging
colleagues in the long term
success of our business
Colleagues were recognised
for their efforts throughout
the year with a record £15.8m
bonus, which includes a one-off
£1.9m “Thank you” bonus for
frontline colleagues
Building pet care expertise
1400 hours of training required
to become a fully trained stylist,
covering 9 modules of learning
and skills
Reward strategy engaging
colleagues in the long term
success of our business
Restricted stock plan granted
since 2017. In June 2020 we
granted an additional 2.1m
shares to 9,300 colleagues
over £6m
Raised by VIP Lifelines and
the Pets at Home Foundation
Being there for pets when
they need our help
And over £50m raised
since 2006
over 1m
Subscription customer across
the Group
Making pet care accessible
and convenient
An increase of over 20% yr / yr
over 57k
Downloads of our Virtual Pet
Pals Easter 2021 resources
Educating the pet owners of
the future about responsible
pet ownership
Over 400k children have
attended our educational
Pet Pals sessions since 2015
73
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Social Value Summary continued
Goal: By 2030 positively impact
the life of every pet in the UK
Our goals and approach
Our stores and vet practices remained open throughout the
three lockdowns to feed the nation’s pets and provide essential
veterinary care. We have created new ways to serve our customers
while keeping everyone safe such as click and collect nationwide,
deliver to car, remote consulting and socially distanced welfare
grooms. We have also supported the rescue sector who have
been dramatically impacted with plummeting income with an
emergency grant programme. Pets come first is our number one
value at Pets at Home. Every colleague in the Group has a part to
play to ensure that we deliver on this value every day. Our love and
understanding of pets has lead us to develop our long term goal
to positively impact the life of every pet in the UK by 2030 which
covers not only the pets in our care, the pets of owners that use
our products and services but also the pets that we can help
through our charity work and through leading change in society
and the wider pet care and veterinary industry.
Our focus areas
Pets in our care ensuring the health and
welfare of pets in our care on their journey to
a new home
Read more
Page 76
Pet care expertise the level of pet care
expertise and experience we leverage across
the Group
A unique proposition of products and
services we provide in our pet care ecosystem
Pet Charity the charity work that we support
for pets when they need our help
Read more
Social Value
Report, page 20
Read more
Social Value
Report, page 22
Read more
Social Value
Report, page 24
Performance highlights
140+
vet graduates, 83 joining
this year, continued their
training modules many
utilising virtual webinars
over 1,450
physical pet welfare audits
conducted in our stores in FY21
57k
downlaods of virtual Easter Pet
Pals, educating children about
responsible pet ownership
160k+
welfare grooms given, with
the price reduced by an
average of £7, depending
on size and breed of dog
£6m+
raised for pet charities
through the Pets at Home
Foundation and VIP Lifelines
bringing the total to over
£50m since 2006
750+
local and national pet rescues
supported in FY21 through
VIP lifelines
200
animal rescues supported
with emergency grants
totalling over £900k
278
rescues received a “share
the love” award of £2k
on Valentine’s day 2021
1000+
pallets of pet food and
bedding donated
449
rehoming and adoption
centres. The majority of
Pets at Home stores have a
small animal rehoming and
adoption centre funded by
the Pets at Home Foundation
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Pets at Home Group PlcAnnual Report and Accounts 2021 Pets
The value that pets bring to our lives has never been
more apparent. Many people have become new pet
owners during the pandemic and have spent more
time at home and with their pets. During the last year
we have remained as focused as ever on looking after
the pets in our care to the very highest standards.
Looking ahead
Pets in our care
We have reviewed our store and Groom Room pet welfare audits this
year and made updates to reflect the latest welfare knowledge. The audit
reporting has also changed to better reflect improvement opportunities for
stores, highlighting where support is needed while at the same time raising
the bar and rewarding good performance.
Expertise
During FY22 all of our colleague pet training will be updated including dog
and cat nutrition. The training content has been written and approved by
a panel of vets and vet nutritionists to ensure pet welfare is at the heart.
This training continues to strengthen our store colleagues knowledge to offer
the best and most up-to-date dog and cat nutritional advice. Our nutrition
consults are designed to suit each pet and owner’s individual circumstances.
Charities
The SAFP foundation will be re branding
to the Pets at Home foundation and extending it’s grant giving criteria to
include charities that help people through the relationship with pets. This
builds on the support that we have been giving to charities like Dogs 4 Good
and Pets as Therapy over the last few years.
Our actions
We have a series of actions that we have committed to as part
of Our Better World Pledge to deliver this goal:
1
2
3
4
5
Empowering all of our people to be advocates and ambassadors for
pets everyday.
Adopting and contributing to the development of the latest clinical
guidance on veterinary matters within our framework of clinical freedom.
Promote the quality and safety of pet care products.
Supporting people to be the best pet owners that they can be through
our products, services and advice and educate children and young people.
Help provide a network of support for pets through our adoption
centres and the wider rescue sector.
Work to ensure access to veterinary care for every pet.
6
Our key performance metrics, see the Social Value Report, page 44
75
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021
Social Value Summary continued
Pets in our care
We have an experienced veterinary surgeon as our “Head of Pets”
in the retail business. She leads our Pet Team who are responsible
for setting the standards and auditing against them quarterly at our
stores and breeders. Additionally our breeders receive annual audits
by two independent vets and “mystery shops” are conducted by an
ex-RSPCA officer across our stores.
We only work with breeders who fulfil the five freedoms laid down
in the Animal Welfare Act of 2006 and our code of practice. We
continually challenge and revise the codes of practice that we have
in place for all of our pet breeders to ensure that they reflect the very
highest standards. This year we have updated the code of practice for
our fish suppliers and reptile breeder.
Pets come first – a safe and healthy journey to a happy home
Breeders
We work with carefully selected
breeders. All of our small animal and
reptile breeders are based in the UK
which minimises travel time. They are
audited on a quarterly basis by our
“pet team” to ensure compliance to
our strict code of conduct. They also
receive an annual independent
3rd party audit. They also receive
at least one annual audit by an
independent vet.
Health check
Every single pet is checked
by our own team of Pet
Health Checkers before
they are transported from
the breeders to our stores.
Transport
We have our own dedicated
fleet of climate controlled
vehicles which are fitted out
specifically for the transport of
pets. Drivers of these vehicles
receive specific training.
Quiet room
There is a purpose built quiet room
in every store where pets settle in
to their new surroundings for a
specified time. Quiet rooms are
linked to our Building Energy
Management Systems to maintain
a suitable temperature range.
Health check
Minimum twice daily
welfare checks are carried
out on reptiles and small
animals. Fish are checked
every two hours in the day.
Sales floor
Our pets are provided with the fresh water, food and
enrichment they need to keep them fit and healthy.
Colleagues follow carefully specified cleaning and care
routines every day, including Christmas Day. We provide
a full range of RSPCA developed care leaflets for every
pet type free of charge in our stores in England and
Wales. All of our stores are licensed to sell pets and are
audited on pet welfare on a quarterly basis.
Health check
A health check is carried
out on every pet on
arrival to store and
throughout their time
with us. If we ever have
any concerns, we always
seek veterinary advice.
Pet sale
We aim to find the right pet for every customer
and the right home for every pet. PetPads provide
reference welfare guidance for our colleagues and
record the details of every sale. Colleagues are all
empowered to refuse a sale if they cannot be certain
a pet’s welfare needs will be met fully. Our stores are
“mystery shopped” across the year by an independent
ex-RSPCA officer who ensures our pet purchase process
is being followed.
Aftercare
Every pet sale is followed up
with a telephone call within 5
days of purchase and care
videos for small animals
Here to help
We are here for our customers
for every step of the pet
ownership journey. We have
the advice, products and
services for a happy and
healthy life together.
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Pets at Home Group PlcAnnual Report and Accounts 2021 Keeping pets healthy
and safe
Our pet experts
We have a dedicated team of
experts, led by an experienced
veterinary surgeon, who ensure
that we adopt the highest possible
welfare standards and that these
are implemented consistently at
our breeders and in every store.
Products & services
We provide everything our
customers are likely to need to
ensure their pets remain happy,
healthy and safe through their life.
Pet charity
For pets that cannot stay with
their owner for whatever reason,
we aim to provide a second chance
of happiness. 449 of our stores
have an adoption centre, accepting
small animals. Our charities have
raised over £50m since 2006 for
pet charities.
Case study: Rabbits
This year, recognising the complexities
of rabbit ownership, we have reduced
the number of stores that sell rabbits to
the 267 that have a veterinary practice in
the same location. This builds on earlier
decisions that we made to not sell rabbits
over Easter and to only sell rabbit food in
nuggets rather than muesli to prevent
nutritionally damaging self selection.
Case study: Fish
During transport to our stores we choose
to have less fish per volume of water than
allowed to improve the environment and
reduce stress levels for the fish despite the
extra cost involved. In store, the health of
our fish is checked every 2 hours during
trading times. Our customers must have
a tank ready and set up for at least
24 hours before introducing fish to it.
We provide free unlimited water testing
to any fish owner which isn’t tied to a sale.
Case study: Reptiles
All of our reptiles are UK captive bred
by one expert breeder we have been
working with for over 10 years. We focus
our expertise in 66 stores to provide the
best possible advice and service to
customers considering owning a reptile.
The temperature and feeding records are
maintained to monitor the environment
and welfare in store and also help to
ensure consistent welfare routines
can be maintained in a new home.
Our customers must have a vivarium
set up which has been stabilised at least
overnight before introducing a new reptile.
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Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Social Value Summary continued
Goal: By 2030 enhance the lives
of 1 million people through
our shared love of pets
Performance highlights
Our goals and approach
People sit at the heart of our better world pledge strategy,
whether that is people that work for the Group; our customers or
the communities that we operate in across the UK. It is the
relationship of people with pets that creates the unique bond
that unites us all. Our ambitious goal is to positively impact the
lives of 1 million people by 2030 through our shared love of pets.
We believe that pets bring such joy to our lives that this is
possible. We are committed to bring the joy of pets to more
people and to use the opportunities that we have to reach more
people through being part of our pet ecosystem.
Our focus areas
Our values and culture Our unique
culture differentiates our colleague and
customer experience
Wellbeing Advocating and supporting
emotional and physical wellbeing
Diversity and inclusion Everyone to be
welcome and feel part of the group
Read more
Social Value
Report, page 28
Read more
Page 80
Read more
Page 81
Learning & development Building pet
expertise to empower our people to be
ambassadors for pets everyday
Read more
Social Value
Report, page 34
In this unprecedented year the safety and wellbeing or our
colleagues and customers came first while we continued to
invest in the development and reward of our colleagues.
Read more, our COVID response, page 10
Daily COVID Briefings
Daily briefings were led by
the CEO or member of the
Executive Management team
were held from 17th March
to 5th June 2020
£1m
top up payment for our
Colleague Hardship fund
2,500
members of the Pets at Home
well being social media group
4
colleague networks launched
as part of the new diversity
and inclusion strategy
Prince’s Trust partnership
launched to support “Kick
Start” work placement
programme
84%
overall engagement in the
annual colleague “We
C.A.R.E.” survey which
focused on diversity and
inclusion and wellbeing
9,300
colleagues received a free stock
award in June 2020 when 2.1m
shares were granted
8
action areas contained in our
new colleague and leadership
capability framework
£15.8m
Bonus for colleagues,
including a £1.9m
“Thank you” payment for
frontline colleagues
£50 voucher
For every retail, distribution
and support office colleague
at Christmas and Easter to
pay for the family meal,
totaling £800k
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Pets at Home Group PlcAnnual Report and Accounts 2021 Looking ahead
Wellbeing
We have committed to fund the training
of 500 vet colleagues to become mental
health first aiders in FY22. This means that
every practice will have someone with the
skills to support and signpost colleagues
who are dealing with mental health issues.
Mental health is a significant issue in the
veterinary profession so we want to
support our group owned and joint
venture practices. The mental health first
aider training programme will run from
March 2021 to November 2021.
Diversity and inclusion
We are looking forward to rolling out our
diversity and inclusion e learning and the
implementation of Success Factors which
will enable us to collect diversity data and
build our understanding of diversity
amongst our colleagues.
Volunteering
We will be relaunching our volunteering
programme as ”Our Better World Pledge
Days”. These days will enable our colleagues
to support pets, people or environmental
activity in their local communities.
People
After 30 years of caring for pets and the people who
love them we know that our people are the foundation
of our business. Our passionate and highly trained
colleagues in our vet practices, groom rooms and stores
are at the front line every day sharing their knowledge,
experience and kindness with our customers.
Our actions
We have a series of actions that we have committed to as part
of Our Better World Pledge to deliver this goal:
7
8
Create sustainable and fulfilling careers throughout our pet care ecosystem.
Promote diversity and inclusion, including social mobility.
Advocating and supporting emotional and physical wellbeing.
9
10
11
12
Understand the diversity of pet ownership and barriers and opportunities
this presents.
Promote the health and wellbeing benefits of spending time with pets.
Help people to enjoy their pets in their local communities, leveraging our
volunteering programmes.
For our key performance metrics, refer to the Social Value Report, page 46
79
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021
Social Value Summary 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.
In April 2020 we established a wellbeing social media group that
now has over 2,500 members. 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 has been updated throughout the year.
over 2,500
members of our Pets at Home
wellbeing social media group
£30k
donated to Vetlife as part of
our 30th Birthday celebrations
May 2021
Our Wellbeing Commitments
Wellbeing matters – and we all have a role to play
in taking care of our own wellbeing – and the
wellbeing of others
Our wellbeing
commitments celebrate:
• Our focus as an employer on embedding
a culture where wellbeing matters
Wellbeing has always been at the core of our business.
• Our expectations of our managers in
That’s why we’re introducing our Wellbeing
Commitments. Rather than something new, they
simply describe us at our best! They are a reminder
of what we’re all about and the part we all play in
creating a culture with wellbeing at its heart.
leading their teams
• Our challenge to each and every colleague
to own their own wellbeing and support
the wellbeing of others
As an employer, we commit to:
• Providing access to confidential expert
wellbeing support and advice if you need it
• Offering training and development to
encourage you to develop positive
wellbeing habits
• Developing policies which enable you to
balance your own wellbeing with the needs
of the business
• Nurturing a culture where wellbeing can
thrive and discrimination, bullying and
harassment in all its forms is never tolerated
• Celebrating a culture where you can bring
your true self to work
As a manager, I commit to:
• Agreeing ways of working and ground rules
which balance wellbeing with performance
• Prioritising time for regular catch ups with
you which extend beyond work priorities
and include supporting your wellbeing,
career and personal development
• Creating a sense of purpose, belonging and
fun through my everyday actions
As a colleague, I commit to:
• Having the courage to speak up about how
I’m feeling
• Owning my wellbeing, and showing up with
a positive mind-set
• Owning my development: actively
participating in the training and
development opportunities available to me
that can support my wellbeing
• Treating you as an individual and never one
• Keeping up to date with wellbeing
of the crowd
• Fostering a positive inclusive team culture,
and creating a safe space where colleagues
are encouraged to speak up about how
they are feeling
communications and initiatives and what’s
happening across the group
80
Pets at Home Group PlcAnnual Report and Accounts 2021 Diversity and inclusion
This year we have built upon our commitment to developing an
inclusive culture with the creation of a new strategy and vision
supported by our new CEO-led Diversity and Inclusion leadership
forum. Diversity and inclusion was the focus of our We C.A.R.E survey
strategy in 2020 and alongside a number of listening groups held with
colleagues we identified that overwhelmingly our colleagues care
deeply about it, and are keen to take an active role as we progress
further. Through the questions asked we created an inclusion index,
scoring 83% which will be our benchmark for our activities as we
move forwards.
The views of our colleagues have and will continue to inform our
objectives and approach. Our vision is that everyone is welcome
and feels part of our group and our strategy is deliberately broad
encompassing all our colleagues, our JVPs and our customers. We aim
to be thought leaders who use our insight to bring the pet experience
to life for everyone. We focus on breaking down barriers to attract and
develop diverse talent and creating a culture that enables our people
to be the best that they can be. Our approach is made up of three
actions; increasing awareness and education, inspiring engagement
and enhancing our policies and data.
This year we have launched four new colleague network groups, each
with an executive sponsor. These networks cover gender, disability,
LGBTQ+ and multi-cultural (covering race and ethnicity). Our colleague
groups play an active part in informing and contributing to our
activities, strengthening the voice of our colleagues, and collaborating
together to inspire engagement from people across our business.
We have developed a new e-learning diversity and inclusion training
which we began rolling out to all our colleagues in summer 2021.
Diversity and inclusion has already been embedded into our
capability framework and we will be looking to build on this over
the coming year with a more detailed education programme.
Diversity and inclusion now features more frequently in both
our internal and public communications, helping to increase our
colleagues’ awareness of what we are doing and why. We also aim
to demonstrate that diversity and inclusion is an everyday part of
what we do and encourage all our colleagues to contribute.
We are delighted to have formed a partnership with the Prince’s Trust
during the year. The charity will be supporting us to welcome colleagues
into the Group on work placements as part of the Government’s
Kickstart scheme. Our first Kickstart colleagues joined our support office
in March 2021. We have plans in place to offer placements in our stores
and our grooming salons starting in the summer.
We have made a number of external commitments, including
to the Race at Work Charter, the Valuable 500 and the British Retail
Consortium’s Diversity and Inclusion Charter. These frameworks
help to focus what we do and provide access to a network of other
signatories. Sharing experience and knowledge around diversity and
inclusion within the retail sector and beyond is a key part of our
approach. We are developing networks through our membership
of the Business Disability Forum, and Stonewall and we also regularly
participate in Retail Week’s diversity and inclusion steering group,
sharing experience and knowledge with other retailers.
We have once again partnered with Retail Week’s Be Inspired
campaign and 6 colleagues have joined their Senior Leadership
Academy this year.
For our key performance metrics,
refer to the Social Value report, page 33
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Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Social Value Summary continued
Goal: By 2040
become net zero
Performance highlights
Our goals and approach
Our approach is to set the bar high. We have environmental goals
that we know are challenging and that will require us to change
the way we work, as well as the way we think about the impacts
of products and services that we offer to our customers. We will
use less energy and resources, generate less waste and packaging,
while offering more sustainable ways to care for our pets.
This year has marked a key step in our journey, as we have made
some substantial and ambitious commitments to improve our
environmental sustainability. This brings together and builds on the
good work we have been doing for years, taking our approach to
the next level. This is a commitment to which we expect and
encourage our stakeholders to hold us to account.
Most significantly, we are taking steps to transition our business
to embrace a low carbon future and decouple our future growth
from climate impacts. Our main Group electricity contract is 100%
renewable. By 2030, we will be net-zero emissions across our own
operations and will have made significant efforts to reduce the
emissions across our value chain, in those areas that we believe
we can make the most difference. By 2040 we have committed
to be net zero across our value chain too.
To achieve this, we must recognise the importance of partnership
and collaboration. We will achieve progress faster if we can learn
from each other, and together influence change where we need it to
happen. We have committed to the Science Based Target Initiative’s
‘Race to Zero’ and the British Retail Consortium’s net-zero roadmap.
In other areas, we are working with the Woodland Trust to
promote biodiversity through the protection, creation and
restoration of 20,000 acres of British woodland, and we are
working with our veterinary partners to develop a framework
that will enable them to be more sustainable. We will also
partner with our suppliers to create better, more sustainable
products, using raw materials from sustainable sources, and all
our customer packaging will be 100% recyclable, recycled or
compostable by 2025.
Our focus areas
Our business impacts The operational
environmental impact of our stores, groom rooms,
vet practices and logistics operations
Our value chain impacts The environmental
impacts of our full value chain products being
made, used and disposed of
Read more
Page 84
Read more
Page 88
Signatories and active
members
Science Based Targets
initiative committed
BEMs
Building energy management
systems installed at Support
Offices in FY21
added to the United Nations
Framework Convention on
Climate Change Race to Zero
campaign
-9.1%
reduction in CO2e yr / yr,
while growing sales by 7.9%
Recycling
Pet pouch recycling piloted
in 20 stores, rolling out from
June 2021
79%
of our own brand packaging
is recyclable
100%
animal bedding backhauled
to our distribution centres for
recycling
98.3%
Operational Waste diverted
from landfill
100%
Main group renewable
contract since 2017 96%
renewable use in FY21
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Pets at Home Group PlcAnnual Report and Accounts 2021
Planet
Our world faces an environmental crisis. The climate
emergency, rising biodiversity loss, and the ongoing
degradation of our natural environment are negatively
impacting the sustainability of our planet’s ecosystem.
Growing our business at their expense is unacceptable,
so we are working hard to increase our efforts to
prevent this.
Looking ahead
Our actions
Our business impacts
• We will continue to look for ways to
reduce our environmental impact and
will be conducting a sustainability review
to identify our next opportunities across
our buildings estate. This will include the
installation of electric vehicle chargers at
our support offices as we decarbonise
our fleet and more of our colleagues
choose lower carbon cars.
Our value chain impacts
• We will develop a long term climate action
plan that creates short term milestones to
achieve our net zero targets. Part of this will
involve how we work with our suppliers
to reduce their scope 1 and 2 emissions
and how we reduce the embedded
carbon within our products that we have
identified in our scope 3 assessment.
We have a series of actions that we have committed to as part
of Our Better World Pledge to deliver this goal:
13
14
15
Innovate to provide sustainable product choices encompassing raw
materials and packaging.
Identify opportunities to enhance biodiversity, for example by supporting
woodland programmes.
Further reduce our direct environmental impact, continuing to purchase
renewables, adopting low carbon and clean air transportation and
reducing our waste and water use.
Uphold Human Rights.
16
17
18
19
Develop a science based carbon target and work across our supply chain
to achieve it.
Innovate to support circular economy principles and minimise waste
in our value chain.
Understanding and pioneering lower carbon pet diets, including
consideration of alternative proteins.
20
Develop a framework for a sustainable vet practice (environmentally
and societally).
For our key performance metrics, refer to the Social Value Report, page 48
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Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021
Social Value Summary continued
Our business impacts
Our day to day operations use energy and
generate waste. We are introducing new
programmes and ways of working that
improve our efficiency and reduce our
use of precious resources.
Using less energy
We use energy across our business to heat, light and power our stores,
distribution centres and offices, as well as fuel our distribution and car
fleets. For many years, we have had programmes in place to improve
our electricity and fuel efficiency, and we have continued to invest
during this year.
During FY21 we have removed 11 gas metres from our estate and
installed a Building Energy Management System in our 3 support
offices in Handforth. As a result of this and our previous BEMs and LED
installation programmes we have reduced electricity use by -1.4% and
our use of natural gas by -10.0% compared to the previous year.
Driving fewer kilometres, more efficiently
Our distribution network has become more efficient too, as we
invest in more newer vehicles and use better planning tools to
schedule and map our routes. In 2021, we have travelled 113.7km
per 1,000 cases, compared to 123.4km in the previous years.
This is an improvement of 4%.
The improvement in efficiency has meant that we have travelled
2.96km per litre compared to 2.83km in the previous year. This
performance also includes our backhauling operations where
we collect goods from our suppliers on the way back from store
deliveries, to save suppliers then making the delivery journeys
themselves. While we know this adds to the distance that we drive,
we also know that by doing this we will be reducing the overall
distance that one of our products travels before it reaches our stores.
Reducing our greenhouse gas emissions
During 2021, we have continued to reduce our carbon footprint while
increasing our sales.
Our absolute operational greenhouse gas emissions have reduced by
-9.1% to 29,651 thousand tonnes, compared to 32,612 in 2019/20. This
is a particularly good result given that we have grown our Group
revenue by 7.9%.
Since 2017 we have purchased renewable electricity through our
main Group contracts to power the majority of our stores, veterinary
practices, distribution centres and support offices. As electricity
accounts for 45.9% of our overall energy use, this continued investment
enables us to operate in a very low carbon way already and means
that our net scope 2 carbon emissions are small at 1,030 thousand
tonnes. We are firmly committed to maintaining this approach, while
also driving down energy use to ensure we manage any risk of not
being able to fulfil our demand. We also make checks to ensure that
the electricity we buy is from a certified and verifiable source.
Decoupling carbon emissions from business growth
We have been reducing our carbon emissions while continuing
to grow our business. In the last 6 years since 2015/16 we have
grown our sales by 47% while reducing our scope 1 and 2
emissions by 39%. This means that our scope 1 and 2 carbon
intensity has more than halved. The investment in an LED
lighting installation programme, BEMS, fuel and driver
efficiency programmes have driven this reduction.
Scope 1 and 2 carbon emissions 6 year performance
This year we have included anaesthetic gas and fugitive emissions
in our scope 1 reporting and we have re stated FY20. Since 2017 our
main Group electricity contracts have been renewable and we have
mitigated residual buildings carbon to ensure that our buildings have
been carbon neutral in relation to energy use.
Emissions
Scope 1
Scope 2 (location based)
Total
% change
Group revenue
£‘000,000
% change
Normalisation/Intensity
% change
FY16
9,498
31,680
41,178
779
52.9
FY17
9,619
28,840
38,459
-7%
834
7.1%
46.1
-13%
Tonnes CO2e emissions
FY19
FY18
FY20
FY21 FY21 vs FY16
9,649
21,584
31,233
-19%
899
7.8%
34.7
-25%
8,431
17,066
25,497
-18%
961
6.9%
26.5
-24%
12,085
15,133
27,218
7%
1,059
10.2%
25.7
-3%
11,337
13,616
24,953
-8%
1143
7.9%
21.8
-15%
19%
-57%
-39%
47%
-59%
Normalisation: Intensity has been calculated using Group revenue and location based scope 1 and 2 emissions. It will differ to the intensity calculation in the carbon emissions by Scope 2020/21 table
which includes our reported scope 3 emissions.
Exclusions: Anaesthetics and Fugitive emissions are included in years FY20 and FY21 only.
84
Pets at Home Group PlcAnnual Report and Accounts 2021 Our scope 1 emissions were 11,337 and have reduced by 6.2%
compared to the previous year. These emissions include a small
amount of natural gas used to heat our business, but is dominated
by the fuel used to run our distribution fleet and company cars.
Diesel used by our haulage fleet which represents 54% of Scope 1
emissions and 20.6% of total emissions.
Eliminating these scope 1 emissions remains the most significant
challenge we face in terms of achieving our aim of becoming a net
zero emissions business by 2030. For that reason, we are closely
monitoring the development of new technologies that will reduce
the emissions associated with distributing our products. During the
year we have moved our company car fleet list to hybrid and
electric options.
Due to more robust data collection, this year we have included
anaesthetic gas and fugitive emissions in our scope 1 reporting for
the first time. To enable a year on year comparison, we have also
included anaesthetic gas and fugitive gas emissions in Scope 1 for
FY20. We are unable to source accurate data earlier than this point,
hence the increase in emissions between FY19 and FY20 in the
6 year performance table. Anaesthetic gas will be a significant
emission source at 26% of scope 1 emissions.
As part of our carbon footprint, we also report on emissions from our
use of third party logistics, personal travel and electricity distribution
and transmission losses. In total our reported scope 3 emissions have
reduced by 697 tonnes or 12.9% compared to last year.
Carbon emissions summary by Scope 2020/21
Scope 1
Scope 2
Scope 3
Total
Inclusion of 2,600 tonnes of carbon mitigation
Scope 1 and Scope 2 kWh
Normalisation of CO2e to £m revenue
Carbon emissions breakdown by source 2020/21
Electricity
Diesel (core fleet)
Diesel (3rd party)
Anaesthetic gas
Electricity T&D losses
Fugitive gas
Gas
Business Travel (3rd party)
Business Travel (company fleet)
Red Diesel
Tonnes CO2e
13,616
6,096
3,022
2,985
1,170
831
665
505
456
304
%
Scope
45.9%
20.6%
10.2%
10.1%
3.9%
2.8%
2.2%
1.7%
1.5%
1.0%
2
1
3
1
3
1
1
3
1
1
2019/20(scope 2
location-based)
Tonnes CO2e emissions
2020/21 (scope 2
location-based)
2020/21 (scope 2
market-based)
12,085
15,133
5,394
32,612
94,638,109
30.82
11,337
13,616
4,697
29,651
27,051
90,422,984
25.96
11,337
1,030
4,697
17,064
14,464
• Methodology: We have applied UK SECR and WBCSD/WRI Greenhouse Gas Protocol Corporate Standard as our methodology. We have used emission factors from UK Government Conversion Factors and
IEA for international sites.
• Methodology: An operational control approach has been used for the organisational boundary. This is the same as last year 2019/20.
• Additional inclusions: We have included the emissions from our stand-alone vet practices and referral centres. The impact of these is de minimis.
• Exclusions: Only anaesthetics sourced from preferred Pets at Home suppliers has been included in the calculation.
• Exclusions: A small number of train and air journeys were not reported, as no carbon intensity data was available, this is de minimis.
• Estimation: Where this year’s data was not available 1.8% of sites used last year’s consumption data.
• Independent verification: Our 2020/21 Scope 1,2 and 3 emissions are verified to a limited level of assurance by Ernst and Young LLP using the ISAE3000(revised) and ISAE3410 standards, Please refer to page 52 of the
social value report for their assurance statement.
• 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 £65,000 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 2,600 tonnes of carbon dioxide (equivalent to our use of fugitive gas, natural gas in our buildings
and electricity procured outside of the Group renewable contract), through the planting of 11,093 trees, helping with our strategy to reduce our business carbon footprint.
• UK proportions: Pets at Home operations are UK based except for a small office in Hong Kong. Therefore less than 0.1% of total scope 1 and 2 emissions and kWh usage was from outside of the UK.
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Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Social Value Summary continued
Our business impacts continued
Managing our climate risks
Over the past twelve months, we have been working with our
functional teams to strengthen the process of risk identification and
evaluation relating to climate change. These have involved detailed
discussions and workshops with our risk management teams, as well
as those within finance, legal, HR and commercial functions.
We have committed to implementing the recommendations of
the Task Force on Climate-related Financial Disclosures (TCFD) and
continue to integrate them into our reporting. This is summarised
in the table below:
Thematic area
Governance
Page 68
Key metrics
Disclosure
Net Zero Carbon value chain
by 2040 target agreed
• The Board has full responsibility for climate-related issues, which it manages
through universal attendance at our ESG committee.
• The ESG Committee meets at least three times a year and is supported by
management committees that oversee different areas of the agenda, such
as energy, climate, waste, products and supply chain.
• This year the Board reviewed our Scope 3 carbon emissions footprint and
following that, as part of Our Better World Pledge, approved a target which
commits Pets at Home to be Net-Zero across our value chain by 2040.
• For the year ahead, the Group executive management team will participate in
one of our regular ‘Teach Ins’ on the topic of ‘climate and the environment’ which
will focus on the inter-related impacts of climate, biodiversity and pollution.
• The Board assesses climate-related risks and opportunities on our strategy
and business model over short, medium and long-term time horizons.
• The business has prioritised eight key strategic initiatives and climate action,
as part of Our Better World Pledge, is one of these.
• Our key climate risk relates to assessing and reducing the environmental
impact across our direct operations and value chain. Failure to do so could
negatively impact the Group’s reputation and strategic plan.
• Physical risks include extreme weather events affecting demand, sales, our
operations and supply chains. Beyond these, our exposure to transition risks
relate to potential market shifts and more stringent environmental regulation
affecting the cost of production and operational flexibility. These same market
shifts also bring potential opportunities for new products and services.
• For the year ahead, we will conduct and report on potential future climate
scenarios and their likely impact on our business.
• The identification and management of climate-related risks and opportunities
are included within our established risk management process, as described on
page 54 of our Annual Report.
• Sustainability and Climate Change forms one of our principal risks. Each
principal risk is owned by a member of the Executive Management Team.
• In addition, principal and strategic risks are reviewed by the Board. Internal
Audit informs the Board, the Executive Management Team and the Audit
and Risk Committee on how effectively risks are being managed.
• During the year we updated our climate change risk assessment as part of our
commitment to align our reporting and disclosures to both TCFD and CDP.
• We are taking steps to transition our business to embrace a low carbon future
and decouple our future growth from climate impacts.
• Our main Group electricity contract is 100% renewable and our electricity use
was 96% renewable in FY21.
• This year we have committed that by 2030 we will achieve net-zero emissions
operationally (scope 1 & 2) and by 2040 achieve net-zero emissions across our
value chain (scope 3), using a science based initiative approved methodology.
• We are signatories to the BRC Climate Action Roadmap committing to working
with other retailers, their suppliers, government, and other stakeholders, and to
support customers to collectively deliver the industry’s net-zero ambition.
• Our climate change metrics and targets are disclosed in page 48 of our Social
Value report and are available on our website.
Strategy
Page 70
Climate action, as part of Our
Better World Pledge, is one of
eight priority strategic initiatives
Risk management
Page 69
Sustainability and climate
change are classified as a
principal risk
Metrics and targets
See our Social Value report
Letter of commitment sent
to Science based target
initiative (sbti)
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Pets at Home Group PlcAnnual Report and Accounts 2021 Our business impacts continued
Generating less waste, and recycling more
This year we have mapped all our waste streams across the Group
to enable us to optimise the reduction and treatment of our waste
materials. This has enabled us to disclose our total waste tonnage for
the first time and to provide a baseline from which we can target
future reductions.
We have recorded 11,758 tonnes of waste. 98.3% of this is diverted
from landfill and 73% is recycled or recovered.
While some waste from stores is recycled through local waste
management contractors, there are three key waste streams that we
consider either to be significant in terms of volumes generated or
particularly unique for the business. These are animal bedding, plastic
shrink wraps and cardboard packaging used to protect and transport
our products.
For plastic and cardboard, we have implemented processes that
collect this waste from our stores and then backhaul it to our
distribution centres for central processing. This enables us to have a
more controlled and coordinated approach. This centralisation also
means that we can focus our investment on equipment to sort and
bulk together waste sent for recycling, giving it the best chance to
come back as something new.
Waste tonnage reporting FY21
Waste Type
Cardboard & paper
General waste
Animal bedding & wood
Clinical & related wastes
Mixed recycling
Plastics
Construction & projects
Other
Total
Tonnage
Proportion of
total waste
4,346
3,509
1,299
1,257
569
552
182
44
11,758
37.0%
29.8%
11.0%
10.7%
4.8%
4.7%
1.5%
0.4%
Exclusions: Some small waste areas have been excludes due to data availability. These include
the small number of practices utilising waste providers outside of group waste contracts and
2 landlord-managed sites.
98.3%
of waste diverted
from landfill
100%
animal bedding from
our stores is recycled
Case study: Woodland Trust partnership
The Woodland Trust are the UKs largest
woodland conservation charity.
We began working with the Woodland
Trust in FY20 when we joined the
Forest Carbon scheme to mitigate
our residual buildings energy carbon.
During the year we have extended
our partnership with two exciting
new initiatives.
To celebrate our 30th birthday we will
be dedicating a tree for every colleague
working in the Group today. That will
be over 15,000 trees planted in
woodlands across the UK in all four
countries. Each of the 21 groves will
have a beautiful bench installed for
colleagues and walkers to enjoy the
woodlands for many years to come.
Secondly, we have developed and
launched our Pet Memory Scheme.
The scheme enables our vet practices
to make a donation to celebrate the life
of the loved pets that they have the
pleasure to look after. The vets are able
to extend their sympathy at the time
of bereavement with a beautiful in
sympathy card in partnership with the
Woodland Trust.
“ The Woodland Trust is delighted to have developed this
scheme, which is the first one of its kind for the Trust. It will be
really important as it will have a positive impact supporting
our work to create, protect and restore woodland right across
the UK. We are looking forward to working together with the
Vet Group to make a difference to our woodland and the
wildlife that they support.”
David Moorcroft CEO Woodland Trust
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Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Social Value Summary continued
Our value chain impacts
805k tonnes
CO2e
Food and accessory products
Goods not for resale
Veterinary products
Other
700
51
38
16
We realise that the reach of our business
extends far beyond our store fronts and
receptions of our vet practices. The products
we sell and the services we provide have an
impact that we must consider and manage.
This year we have started to extend our
approach to move beyond our business
boundaries to consider the environmental
impact across the full value chain.
Prioritising emissions reduction in our value chain
This year we have undertaken some significant work to fully map and
quantify our scope 3 emissions, well beyond the extent of our previously
reported emissions. We did this so that we could fully understand how
the manufacture, use and disposal of our products contributes to
climate change, and more importantly to help us pinpoint where our
intervention can make the most difference. Like other leading retail
business, these emissions accounts for over 90% of our footprint, so
understating these hotspots and taking action is very important if we
are serious in our commitment to tackle climate change.
Our scope 3 assessment has given us the insight to prepare a target
aligned to our operational focused net zero target for the business.
To that end we have committed to the science based target initiative
to achieve net zero carbon emissions across our value chain by 2040,
in order to limit global warming to 1.5c above pre-industrial times
by 2050.
Collaborating on climate action
We are currently developing plans to work in partnership with key
own brand suppliers to reduce emissions. One particular area of focus
will be on developing more sustainable pet food products, looking at
for example, how these products are formulated, manufactured and
packaged. We look forward to reporting in more detail on these
projects next year.
We will also be exploring targeted opportunities to work with other
suppliers to increase their awareness of climate change and to
encourage them to be more energy efficient.
Aligned to our new target, and the broader approach we have
introduced this year, we have also become signatories to the BRC
Climate roadmap. This commits Pets at Home to work with other
retailers, their suppliers, government, and other stakeholders, and
to support customers to collectively deliver the industry’s net zero
ambition. This is something we are proud to be part of and we are
looking forward to taking an active role in this initiative.
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Pets at Home Group PlcAnnual Report and Accounts 2021 Generating less customer packaging
Packaging on our products provides a vital function in terms of
protection and providing information to our customers, but we
acknowledge that in most instances when packaging is removed it
simply becomes waste. For many years, we have encouraged customers
to recycle packaging where they can, for example through kerbside
collection, and to make sure the materials we use are recyclable.
Last year the proportion of recycled materials used was just under
80%. This is good, but we want to go further and so have set ourselves
a new target to ensure that 100% of our packaging will be recyclable,
contain recycled content, re-useable or compostable by 2025.
To help us do this we have appointed a dedicated Packaging
Technologist and partnered with a specialist packaging technology
company who is helping us to implement a dynamic database to
accurately report on our packaging materials and performance
against our targets and pledges. We have made a start and it’s already
beginning to highlight opportunities, meaning that some previously
un-recyclable packaging items have been changed to be fully
recyclable at the kerbside.
79%
of own brand product
packaging is recyclable
Recycling
Pet pouch recycling piloted
in 20 stores rolling out from
June 2021
Ensuring sustainable raw materials
We know that it is becoming increasingly important for our customers
to know where the products they buy come from and how they are
sourced. This year we have strengthened our existing approach to
introduce a range or new policies to broaden our already high
standards in this area. This includes materials like timber, palm oil
and soya.
As a result, we have made a commitment that all priority raw materials
will be from sustainable sources by 2025. From this we will also develop
and publish a Responsible Sourcing handbook for our suppliers,
detailing our policies and guidelines relating to environmental and
social impacts. This will include all of our existing policies in addition
to our new polices on human rights, raw materials and packaging.
We have developed detailed raw material guidance which we will
launch to our buying and technical teams and our suppliers during FY21.
Case study: Tackling troublesome packaging
We think innovation is key and we are creating strong strategic
links both with our existing supply base and external market
leaders to collaborate and drive new packaging solutions into
the business.
This year we have piloted a project in over 20 of our stores and
vet practices to offer our customers the opportunity to recycle
flexible plastics – including our popular pet food pouches, which
are not normally part of kerbside recycling collections. To date,
the pilot scheme has proved a success with our customers, as
a result we will be starting the national roll out in the summer
of 2021.
Further information
You can find our Assurance Statement and SASB table
in the Social Value report, page 52
Policies and procedures
Read more in the policies and procedures
section of our website
Find out more:
https://investors.petsathome.com
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Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021
Governance Report
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.
With the increased interest on environmental, social and governance
matters in business and society generally at present, the Board is
committed to supporting and developing the Group’s social value
strategy. This year has seen a number of key changes in this respect,
including the change in focus of one of the Group’s key committees.
The Corporate Social Responsibility and Pets Come First Committee
was renamed the ESG Committee during the year, with a widened
remit to cover ESG more broadly and the development of the Group’s
social value strategy, Our Better World Pledge. Our social value strategy
ensures the sustainability of our business through encouraging
innovation, mitigating risk, creating lifetime loyalty and creating value
for stakeholders. We were delighted to present Our Better World
Pledge to investors during the year and will continue to develop our
ESG reporting and disclosures during the new financial year.
Principal governance activities during the financial year
Board and Executive Management Team changes
Last year, I joined the Group as Chairman Designate on 27 March 2020,
succeeding Tony DeNunzio as Chairman who stepped down on
21 May 2020.
Paul Moody, Independent Non-Executive Director, stepped down
from the Board at the conclusion of the AGM on 9 July 2020. Sharon
Flood, Independent Non-Executive Director, succeeded Paul as Chair
of the Remuneration Committee. Sharon was Chair of the Audit and
Risk Committee and a member of the Nomination and Corporate
Governance, Remuneration, Corporate Social Responsibility and
Pets Come First Committees. Karen Whitworth was appointed as
Independent Non-Executive Director with effect from 9 July 2020
and also as Chair of the Audit and Risk Committee and member
of the Nomination and Corporate Governance Committee.
Karen notified the Board of her intention to accept a non-executive
director role with Tesco Plc and would therefore be stepping down
from the Board on 20 May 2021.
We commenced our search for a new Chair of the Audit and Risk
Committee and were delighted to announce on 22 December 2020
that Zarin Patel would be appointed as Independent Non-Executive
Director with effect from 14 April 2021. Zarin succeeds Karen as Chair
of the Audit and Risk Committee on 20 May 2021 and will also be a
member of the Nomination and Corporate Governance Committee
and the Remuneration Committee.
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. The Committees detailed on pages 92 and 97 were
considered effective however the Corporate Social Responsibility
and Pets Come First Committee was renamed as the ESG Committee
during the year to ensure greater focus on and development of the
Group’s social value strategy, Our Better World Pledge.
“Setting the overall strategic direction of the
business to ensure the long term success of
the Group.”
Ian Burke
Chairman
Chairman’s introduction
On behalf of the Board, I am delighted to present our Corporate
Governance Report for the financial year ended 25 March 2021 and
my first as Chairman for the Group. The Governance Report sets out
Pets at Home’s governance framework and the approach the Board
has taken during FY21 to promoting high standards of corporate
governance that are rightly expected by our stakeholders and to
ensure continued compliance with the 2018 Code.
As a Board we are responsible for leading and setting the overall
strategic direction of the business to ensure the long term success of
the Group, 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 and aim to
ensure that the Group’s strategy, purpose, culture and engagement
with key stakeholders are at the heart of the governance framework.
Further details on our key stakeholders and how we have engaged
with them is set out on pages 38 and 39.
As Chairman, my role is to lead the Board, ensuring it operates
effectively and contains the right balance of skills, diversity and
experience to execute the Group’s long term strategy successfully.
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 the Board has complied with and
intends to continue to comply with the requirements of the
UK Corporate Governance Code.
90
Pets at Home Group PlcAnnual Report and Accounts 2021 The terms of reference for the ESG Committee were updated
accordingly during the year to improve alignment with Our Better
World Pledge and ensure appropriate monitoring and reporting on
key areas such as Pet Welfare, People and Culture, Climate Change
and Waste Management and Product and Supply Chain Management.
References to best practice reporting on ESG related matters were
also included in the ESG Committee terms of reference amendments
this year – for example the Task Force on Climate-related Financial
Disclosures and the Sustainability Accounting Standards Board (SASB)
Framework (and all other applicable rules and regulations), to ensure
appropriate consideration is given to the requirements.
The terms of reference for the Nomination and Corporate Governance
Committee, Remuneration Committee and Matters Reserved for the
Board were also reviewed and updated during the course of the year.
The amendments included minor changes to bring the terms of
reference in line with industry best practice and to improve overall
operational efficiency, for example, an increase in the value of
contracts requiring Board approval.
Board evaluation
We progressed the actions that were highlighted from the 2020
internal Board evaluation which emphasised the need to: focus
on Board composition, particularly diversity and the mix between
Non-Executive and Executive Directors, increase focus on the Group’s
strategy rather than operational matters, refine KPIs and improve the
Board’s understanding of competitors, customers and the wider
community. The last external Board evaluation was undertaken by
Lintstock in 2019. 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 again carried out to identify
areas where the performance and procedures of the Board might be
further improved by building on the actions identified last year 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 99 of this report.
Group culture
The Group’s culture continues to be a 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 November 2020 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.
The We C.A.R.E. survey results indicated that colleague engagement
remained high. The Group continues to refine and enhance its colleague
engagement processes. The strength of the Group’s culture drove
the Group’s response to the pandemic. As a result of the actions and
responses taken, colleagues indicated that they felt more connected to
the business. A buddy scheme was established during the year between
members of the Retail and Group Executive Management Teams and
each store manager, to highlight issues and ensure a more proactive
approach was taken to listening to all frontline colleagues during the
crisis. The Joint Venture Council was also relaunched during the year
to ensure that our Joint Venture Partners had a voice around the table.
New Group, Retail and Vet Executive Management Team development
programmes have been introduced to drive a focus on performance,
results and activity within the Group’s culture. The ‘Great Conversations’
performance management activity was also relaunched to focus on
openness and two way conversations with colleagues.
The Executive Management Team listening forums ‘Tuned In’ have
provided useful insight this year and external vehicles (such as Glass
Door and Indeed) will form part of future plans to enhance our
understanding of Group culture. The ‘Tell David’ and ‘Tell Jane’ email
addresses have proven a useful channel for colleagues to provide
feedback direct to David Robinson and Jane Balmain.
The colleague engagement and listening tools allow the Board to
ensure our leaders are managing the business in line with our values
and behaviours, preserving our culture in the long term. Group
Executive listening sessions have been attended by Sharon Flood
and I during the year to ensure the Board is actively listening to, and
aligning with, the wider colleague population and business culture
as we consider decisions impacting the Group.
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 pages 119 and 120 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. Increased focus and
time has been given to Group strategy during meetings of the Board
this year, as recommended in the previous year’s Board evaluation.
AGM
Our next Annual General Meeting will be held on 8 July 2021 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.
Ian Burke
Chairman, Pets at Home Group Plc
27 May 2021
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Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 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 96 to 97.
Board Committees
Audit and Risk
Committee
Nomination and Corporate
Governance Committee
Remuneration
Committee
Environmental, Social and
Governance (ESG) 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
Health and Safety Committee
Pension Committee
People Committee
Data Committee
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.
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.
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Pets at Home Group PlcAnnual Report and Accounts 2021 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. The Board
considers that 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 100 to 101. 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
are considered to be independent in accordance with the 2018 Code.
Board responsibilities
Role
Main responsibilities
Chairman of
the Board
• Provides leadership to, and manages, the Board of Directors;
• Acts as a direct liaison between the Board and the
Group Chief
Executive
Officer
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.
Role
Main responsibilities
Senior
Independent
Director
• An Independent Non-Executive Director;
• Provides a sounding board for the Chairman;
• Serves as an intermediary for the other Directors when
necessary; and
• Is available to shareholders if they have concerns, which contact
through the normal channels of the Chief Executive Officer has
failed to resolve, or for which such contact is inappropriate.
Non-Executive
Directors
• Provide constructive challenge to the Executive
Management Team;
• Help develop proposals on strategy;
• Scrutinise management’s performance in meeting
agreed goals and objectives;
• Monitor performance reports;
• 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.
Group Chief
Financial
Officer
Company
Secretary
• Provides administrative support to the Board;
• Ensures that Board procedures are followed;
• Oversees governance matters; and
• Ensures that information flows between the Board and its
Committees and with the Executive Management Team.
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 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. Unfortunately, due
to the pandemic, Karen Whitworth’s induction did not include visits
to the business. 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
Having been appointed as Chairman Designate with effect from the
start of the financial year, Ian Burke took over as Chairman on 21 May
2020 when Tony DeNunzio stepped down.
Paul Moody, Independent Non-Executive Director, stepped down from
the Board on 9 July 2020 and Sharon Flood, Independent Non-Executive
Director, replaced him as Chair of the Audit and Risk Committee.
Karen Whitworth was appointed as Independent Non-Executive
Director on 9 July 2020 and as Chair of the Audit and Risk Committee
and member of the Nomination and Corporate Governance
Committee. Karen steps down from the Board on 20 May 2021.
Zarin Patel was appointed as Independent Non-Executive Director with
effect from 14 April 2021 and succeeds Karen as Chair of the Audit and Risk
Committee on 20 May 2021. Zarin is also a member of the Nomination and
Corporate Governance Committee and the Remuneration Committee.
93
Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Governance Report continued
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 128. 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 liaise with Non-Executive Directors to assess and review
individual contribution to the Board and performance over the financial
period, which will continue during the year. The skills and experience
which each Non-Executive Director brings to the Board are detailed on
pages 100 to 101 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, ethnicity and experience. Board
composition was reviewed by the Board this year to ensure that the
requirements of the Code are met. No changes were recommended,
however, the Nomination and Corporate Governance Committee
will continue to regularly review the diversity of the Board and the
Group Executive Committee on an ongoing basis. The Board was
considered to have an appropriate mix of tenure, skills and experience.
The Board believes that appointments should be made solely on
merit. We continue 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 and
experience already on the Board. Notably, three of the five
Independent Non-Executive Directors, Sharon Flood, Susan Dawson
and Zarin Patel (succeeding Karen Whitworth), are female together
with the Chief Operating Officer of the Vet Group, Jane Balmain, Chief
People and Culture Officer, Louise Stonier, and Group Legal Director
and Company Secretary, Lucy Williams. The Board also meets the
Parker Review targets on ethnic diversity. Appointments are made
entirely on merit, and not on the basis of gender or ethnicity, 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.
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.
63%
37%
70%
30%
70%
30%
69%
31%
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 Group Chief
Executive Officer and the Chief Financial Officer, 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.
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.
Gender diversity
Board
Male
Female
Group Executive Management Team
Male
Female
Retail Executive Management Team
Male
Female
Vet Group Executive Management Team
Male
Female
94
Pets at Home Group PlcAnnual Report and Accounts 2021 2021 Board considerations
During the year the Board spent its time considering a wide range
of matters. These included:
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:
• Development of the Group’s strategic plan;
• Performance overall of individual businesses and functions in the
Group;
• COVID crisis management and related matters;
• Brexit;
• 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;
• Competitor and customer updates;
• Talent, capability and succession planning matters;
• Reviewing reports from the Committees;
• Approving significant items of capital expenditure and contracts,
investments, treasury and dividend policy;
• Group culture, behaviours and results from colleague listening
surveys;
• Considering key strategic projects and priorities across the Group;
• Shareholder feedback and reports from brokers and analysts;
• Regulatory updates; and
• Delegated authorities and Plc contract approval levels.
Financial performance / reporting
Governance inc. shareholder engagement
20%
20%
Risk management and internal controls
Project approvals
10%
5%
Leadership, culture and people
development inc. succession
15%
Strategic matters
30%
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
Ian Burke (Chairman)
Tony DeNunzio (Chairman)
Dennis Millard (Deputy Chairman)
Peter Pritchard 2
Mike Iddon 2
Paul Moody
Sharon Flood
Stanislas Laurent
Susan Dawson
Karen Whitworth
Board
9
Remuneration
Committee
4
Audit and Risk
Committee
4
Nomination
and Corporate
Governance
Committee
1
ESG Committee
3
9 / 9
2 / 2
9 / 9
9 / 9
9 / 9
2 / 2
9 / 9
9 / 9
9 / 9
7 / 7
–
4 / 4
–
–
2 / 2
4 / 4
–
4 / 4
–
4 / 4
–
–
2 / 2
4 / 4
4 / 4
3 / 3
1 / 1
–
1 / 1
–
–
–
1 / 1
1 / 1
1 / 1
1 / 1
1 Excludes the strategy day which all Directors attended.
2
Although not formally appointed as a member of the Audit and Risk and Remuneration Committees, Peter Pritchard attended meetings of those Committee as an observer at the invitation of the Chairman. In
addition, Mike Iddon also attended meetings of the Audit and Risk, Remuneration and ESG Committees as an observer, despite not being formally appointed as a member of those Committees.
3 / 3
1 / 1
3 / 3
3 / 3
–
1 / 1
3 / 3
3 / 3
3 / 3
–
95
Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Governance Report continued
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 (renamed
the ESG Committee during the year) 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 in fulfilling
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 advise on adequacy and effectiveness of the Company’s internal financial and regulatory
Remuneration
Committee
To assist the Board in
determining its responsibilities
in relation to Directors’
remuneration.
Nomination and
Corporate
Governance
Committee
To assist the Board in
considering the structure, size
and composition of the Board
whilst advising on succession
planning.
ESG Committee To oversee and monitor the
Group’s social value strategy,
Our Better World Pledge
controls;
• Give due consideration to all rules and regulations on corporate governance as required;
• 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, Sharon Flood, as Board representative for wider
colleague engagement.
• 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;
• Assisting the Board in the consideration and development of appropriate corporate governance principles;
• Conducting Board performance evaluation process; and
• Reviewing all conflicts of interest.
• Ensuring that the Group has an appropriate ESG/social value strategy, consistent with the Group’s purpose,
culture and values whilst supporting the Group’s long term sustainable success;
• Monitoring and reviewing Our Better World Pledge, within the specific areas of Pet Welfare, People and
Culture, Climate Change and Waste Management and Product and Supply Chain Management;
• Approval of projects developed in response to implementation of Our Better World Pledge;
• Receives regular reports from the chair of each management team tasked with implementing Our Better
World Pledge within the areas outlined in bullet two above;
• Ensures that all related codes of practice and policies are regularly reviewed and updated and remain in
compliance with any relevant national and international laws and regulations;
• Monitors, reviews and considers all recommendations in response to ESG issues raised and reviews the
execution and implementation of plans previously approved by the Committee;
• Monitors, reviews and considers stakeholder engagement in ESG activities and reviews key external
disclosures; and
• Approves all ESG reporting.
96
Pets at Home Group PlcAnnual Report and Accounts 2021 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
and veterinary surgery 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, 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, with additional regular updates.
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 health and safety assessors.
Further details of the work of the Health and Safety Committee are
contained in our separate Social Value 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. 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.
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 56 to 57. 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 113 of the Audit and
Risk Committee Report.
97
Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Governance Report continued
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 2020 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 25 March 2021.
• 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.
• 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 113.
• A clearly articulated delegated authority framework in respect
of all purchasing activity is in place across the Group. This is
complemented by systemic controls including a contract approval
policy that reflects the agreed authority framework and clear
segregation of duties between relevant functions and departments.
• A schedule of matters reserved for the Board is in place for approving
significant transactions and strategic and organisational change.
• Board discussion of the key risks and uncertainties facing the Group
and the risk management system. Further details are contained in
the Audit and Risk Committee Report on page 111.
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.
98
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. 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.
As noted on page 38, we were delighted to hold a number of ESG
focused sessions for investors during the year, relating to Our Better
World Pledge.
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 38 and 39.
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.
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.
Pets at Home Group PlcAnnual Report and Accounts 2021 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.
Outputs of the evaluation
The findings from the internal evaluation were considered by the
Board, recommendations discussed and specific areas of focus were
agreed for this financial year. 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:
• building Board relationships and business networking with the
return of face-to-face meetings and visits when permitted; and
• an increased focus on certain strategic initiatives to ensure flexibility,
innovation and understanding of competitors.
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
assessed the individual contribution to the Board of the Non-
Executive Directors and their performance over the financial period.
The Senior Independent Director and the Non-Executive Directors
also liaised on 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.
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 2020 evaluation and
other areas which the Board wanted to assess including 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.
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Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Board of Directors
A Board balanced
with skills and expertise
Chairman
Non-Executive Directors
Ian Burke
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
Committees
Appointment to the Board
2014
Committees
Appointment to the Board
2017
Committees
Appointment to the Board
2017
Committees
N
E
N
A
R
E
N
A
R
E
N
A
E
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.
Current roles
• Non-Executive Chairman of Studio
Past roles
• Non-Executive Chairman of Watches
Retail Group plc
• Member of the Board of Governors
of Birmingham City University
Past roles
• Non-Executive Senior Independent
Director of intu properties plc
of Switzerland Group plc
• Chairman of Halfords Plc
• Senior Independent Director
of Debenhams Plc
• Chairman of Connect Group Plc
• Senior Independent Director
• Chairman and Chief Executive Officer
of Premier Farnell Plc
Current roles
• Chair of Seraphine Limited
• Chair of Audit at Cityfibre
• Board member at Getlink SE
• Chair of Audit Committee
at Crest Nicholson Plc
• Chair of Finance at Science
Museum Group
• External member of the University
of Rank Group plc
• Senior Independent Director
of Cambridge council
• Chief Executive Officer of Holmes
of Xchanging Plc
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.
• 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.
Past roles
• Chair of Audit Committee at
Network Rail
• 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
Management Accountant.
100
Pets at Home Group PlcAnnual Report and Accounts 2021 Committees
Board tenure
N
A
R
E
Nomination and Corporate Governance
Audit and Risk
Remuneration
ESG (Environmental, Social
and Governance)
Chair of Committee
12.5%
37.5%
12.5%
12.5%
12.5%
12.5%
7 years +
4 years
3 years
2 year
1 year
New
Non-Executive Directors
Executive Directors
Zarin Patel
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
2021 – New appointment
Committees
Appointment to the Board
2018
Committees
A
N
R
N R
E
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.
Current roles
• Non-Executive director and Chair
of the Audit and Risk Committee of
Anglian Water Services Limited
• Non-Executive director
of Post Office Limited and member
of the Audit and Risk Committee
• Independent member of the Audit
and Risk Committee of HM Treasury
• Trustee of National Trust and
Chair of its Audit Committee
Past roles
• Independent member of the
Audit and Risk Committee
of John Lewis Partnership plc
• Chief Financial Officer of the BBC
• Chief Operating Officer
of The Grass Roots Group plc
Contribution to the Board
Wide ranging financial and
commercial expertise. Zarin
is also a Chartered Accountant.
Appointment to the Board
2018
Appointment to the Board
2016
Committees
E
Current role
• Group Chief Executive 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.
Current role
• Chief Financial Officer
• Non Executive Director
Wickes Group Plc
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.
101
Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 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.
Statutory information
Amendment of the Articles
Appointment and Removal of
Directors
Section heading
Directors’ Report
Directors’ Report
Board of Directors
Branches outside of the UK
Change of Control
Colleague Engagement
Colleague Diversity and
Disabilities
Colleague Share Ownership
and Plans
Community
Directors’ Report
Board of Directors
Directors’ Report
Directors’ Report
Strategic Report – Corporate
Social Value
Directors’ Report
Directors’ Report
Directors’ Remuneration Report
Strategic Report – Corporate
Social Value
Directors’ Report
Compensation for loss of office Directors’ Report
Directors’ Biographies
Board of Directors
Directors’ information to
Auditors
Directors’ Insurance and
Indemnities
Directors’ Interests
Directors’ Responsibility
Statement
Executive Share Plans
Directors’ Report
Directors’ Report
Directors’ Report
Page number
106
104
104
100-101
107
108
38-39
120-121
103
121
38-39
127
100-101
104
105
104
109
125
183
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
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
Directors’ Remuneration Report
Note 23 to the consolidated
financial statements
Strategic Report
28-37
Chief Financial Officer’s review
40-45
Strategic Report –
Corporate Social Value
Directors’ Report
Governance Report
Directors’ Report
82-85
106
97
107
Governance Report
Governance Report
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
Strategic Report
Treasury and Risk Management Strategic Report
Directors’ Report
Viability Statement
Directors’ Report
Voting Rights
Governance Report
Governance Report
Governance 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
102
Page number
108
114
97
106
106
106
105
104
103
103
105
38-39
105
182
106
198
106
199-209
90
110-114
90-99
119-138
115-116
1-89
62
106
105
Pets at Home Group PlcAnnual Report and Accounts 2021
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 125
108
Significant contracts
Note 9 to the consolidated financial statements
Dividend waivers
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 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 46-53 the innovation carried
out by the Group in relation to product and service development. In
addition, the Group has continued to contribute to research through
established partnerships with Mars Fishcare and the University of West
Scotland as well as projects with Cardiff University. Previous research
has concentrated on reducing stress during transport which identified
that our current processes already result in high fish welfare. New
research will be looking at fish stress in-store, improving treatment
efficacy and disease prevention. Due to the pandemic, researchers
were not able to access our stores or university premises consistently
over the last year and the work will restart throughout FY22. These
partnerships 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.
Vets4Pets has for many years been contributing to the VetCompass
research function at The Royal Veterinary College. This relationship
has been taken to another level following the successful joint
acquisition of a research grant from PetPlan UK, to support a
two-year epidemiological study of interventions to improve
antibiotic stewardship in veterinary practice. The research is
due to begin in mid-late 2021.
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 second Group
wide listening survey. This survey focused on wellbeing and diversity
as these were the topics that colleagues told us were particularly
important to them. When Sharon Flood took over as our Chair
of the Remuneration Committee, she was also appointed as Board
representative for wider colleague engagement to ensure our
colleagues are heard by the Board. ‘Tuned in’ listening sessions were
held in September, October and March and these were attended
either by our Chairman, Ian Burke or Sharon Flood.
Colleague listening and engagement has never been more important
as it has been this year during the pandemic and communications to
colleagues received unprecedented attention from the Board and
Group Executive Management Team. Daily CEO lead video
communication took place during the first lockdown and since then
weekly video updates have continued. This is in addition to written
updates to our colleagues on our COVID protocols and procedures
to keep them safe and engaged.
Further information on colleague engagement is included in the
Corporate Social Value section of this report on pages 78-81 and
in our separate social value report held on our website.
Colleague share ownership and plans
This pillar of our engagement strategy started to come to fruition last
year with the maturity of the first RSP which is offered to all eligible
salaried and hourly colleagues at all levels.
• Our first RSP vested in July 2020, which resulted in enhancing or
creating new shareholders in over 5,000 of our colleagues.
• The next RSP awards will vest at the end of May 2021 which
will further enhance or create new shareholdings for over 4,700
colleagues.
• We also granted a further 2.1m shares to 9,361 colleagues via the RSP
in June 2020.
• All eligible colleagues will receive an award again in May/June 2021.
• We had a further offering of the sharesave scheme in September
2020, with our highest take up (excluding the year of IPO) of 17.2%,
as a result of our strong business performance combined with the
first maturity of the RSP earlier in that year which encouraged further
share save interest in FY21.
Further details of the Group’s colleague share plans are contained in
the Directors’ Remuneration Report on pages 120-122.
Colleague diversity and disabled persons
Our diversity and inclusion vision is that ‘Everyone is welcome and
feels part of our Group’. The Group’s policy for all colleagues and
applicants is to remove barriers to ensure equality of opportunity
regardless of sex, race, ethnic origin or nationality, pregnancy or
maternity, age, disability, religious or other philosophical belief, marital
status, sexual orientation, gender or gender reassignment. Our culture
of inclusivity ensures colleagues with different backgrounds, interests,
appearances, perspectives and working styles feel welcome.
Applications for employment from candidates who have a disability
are given full and fair consideration, and candidates are assessed in
accordance with their particular skills and abilities. The Group takes
all reasonable steps to meet its responsibilities towards the training
and employment of people with a disability, and to ensure that
appropriate training, career development and promotion
opportunities are available to all colleagues, irrespective of disability.
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. This year we have become
members of the Business Disability Forum and made commitments
on disability progress as part of our membership of the Valuable 500.
Further information can be found in the Corporate Social Value report
on page 81.
We have once again published a combined Group figure for gender
pay, excluding the Joint Venture Partners. This year we have reported
two sets of data because the actions we took to support our
colleagues at the start of the COVID pandemic impacted our pay data
and reporting using normalised pay data rather than actual pay data
more accurately reflects our Group position.
103
Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Directors’ Report continued
Even when adjusted to take account of normalised pay data our mean
pay gap overall has narrowed this year to 16.99%. 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 136. Our Gender Pay Gap Report can be found at https://
investors.petsathome.com/responsibility/policies-and-procedures/
This year we have built upon our commitment to developing an
inclusive culture with the creation of a new strategy and vision
supported by our new CEO-led Diversity and Inclusion leadership
forum. The views of our colleagues have and will continue to inform
our objectives and approach and we have launched four new
colleague network groups, each sponsored by a member of our
Executive Management Team.
We have developed a new e-learning diversity and inclusion training
which will be rolled out to colleagues in June 2021. Diversity and
inclusion has already been embedded into our capability framework
and we will be looking to build on this over the coming year with a
more detailed education programme.
We have made a number of external commitments, including
to the Race at Work Charter, the Valuable 500 and the British Retail
Consortium’s Diversity and Inclusion Charter. These frameworks
help to focus what we do and provide access to a network of other
signatories. Sharing experience and knowledge around diversity
and inclusion within the retail sector and beyond is a key part of our
approach. We are developing networks through our membership of
the Business Disability Forum, and Stonewall and we also regularly
participate in Retail Week’s diversity and inclusion steering group,
sharing experience and knowledge with other retailers.
We have once again partnered with Retail Week’s Be Inspired
campaign and six colleagues have joined their Senior Leadership
Academy this year.
Directors
The names of the persons who, at any time during the financial year,
were Directors of the Company are:
Name
Tony DeNunzio
Dennis Millard
Paul Moody
Mike Iddon
Sharon Flood
Stanislas Laurent
Peter Pritchard
Susan Dawson
Ian Burke
Karen Whitworth
Date of appointment
18 February 2014
18 February 2014(re-appointed)
25 March 2014
17 October 2016 (re-appointed)
25 May 2017 (re-appointed)
25 May 2017 (re-appointed)
27 April 2018 (re-appointed)
12 July 2018 (re-appointed)
27 March 2020
9 July 2020
Date of resignation
21 May 2020
n / a
9 July 2020
n / a
n / a
n / a
n / a
n / a
n / a
20 May 2021
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 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 succeeded Tony as
Chairman on 21 May 2020.
104
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, succeeded Paul as
Chair of the Remuneration Committee. Karen Whitworth, Independent
Non-Executive Director, was appointed to the Board on 9 July 2020
and succeeded Sharon as Chair of the Audit and Risk Committee.
Karen Whitworth advised in December 2020 that she would be
stepping down from the Board with effect from 20 May 2021. Zarin
Patel, Independent Non-Executive Director, was appointed to the
Board on 14 April 2021 and will succeed Karen as 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.
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 133.
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 27 May 2021 (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.
Pets at Home Group PlcAnnual Report and Accounts 2021 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 128.
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 25 March 2021 was
500,000,000 Ordinary Shares of 1 pence each. As at 26 May 2021,
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 182 of the Group’s financial statements.
There have been no movements in the Company’s issued share
capital in the 2021 financial period.
Details of colleague share schemes are provided in note 24 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 9 July 2020 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 8 July 2021 (or, if earlier, until the close of business on
8 October 2021). 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 9 July 2020 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 2020 Annual General Meeting,
seek to renew these powers at the 2021 Annual General Meeting.
Powers for the Company to buy back its shares: The Company
was authorised by its shareholders on 9 July 2020, at the 2020 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 2021 Annual General Meeting to be held on 8 July
2021. The Directors did not exercise their authority to buy back any
shares during the financial period.
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.
105
Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Directors’ Report continued
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 25 March
2021, 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
Jupiter Fund Management Plc
Blackrock Inc
JPMorgan Asset Management
Holdings Inc
Norges Bank
Meridian Global Investors (UK) Limited
Number of
Ordinary
Shares as
at 25 March
2021
53,090,352
49,270,707
25,473,509
Percentage
of issued
share
capital (%)
10.618%
9.85%
5.09%
Nature of
holding
(direct /
indirect)
Indirect
Indirect
Indirect
24,964,429
4.99%
Indirect
–
–
Below 3%
Below 3%
–
–
No changes have been disclosed in accordance with Disclosure
Guidance and Transparency Rule 5.1.2R in the period between
26 March 2021 and 21 May 2021 (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
JP Morgan Asset Management
Holdings Inc.
Number of
Ordinary
Shares as
at 21 May
2021
52,801,317
Percentage
of issued
share
capital (%)
10.56%
Nature of
holding
(direct /
indirect)
Indirect
24,737,799
4.95%
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.
Profits and dividend
The consolidated profit for the year after taxation and all non-
underlying items was £99.0m (FY20: £67.4m). The results are discussed
in greater detail in the Chief Financial Officer’s review on pages 40-45.
A final dividend of 5.5 pence per ordinary share (FY20: 5 pence per
ordinary share) will be recommended to the Company’s shareholders
in respect of the 2021 financial year. The final dividend will be
proposed by the Directors at the 2021 Annual General Meeting on
8 July 2021 in respect of the financial year ended 25 March 2021 to
add to an interim dividend of 2.5 pence per ordinary share paid on
8 January 2021 (FY20: 2.5 pence per ordinary share).
The Directors’ proposed final dividend of 5.5 pence per ordinary share
takes the total dividend payable in respect of the 2021 financial year to
8 pence per ordinary share. The ex-dividend date will be 17 June 2021
and, subject to shareholder approval being obtained at the 2021
Annual General Meeting, the final dividend of 5.5 pence per ordinary
share will be payable on 13 July 2021 to shareholders on the register
at the close of business on 18 June 2021.
Political donations
The Group made no political donations and incurred no political
expenditure during the year (FY20: 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 FY21 were 50 days (FY20: 50 days).
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 12-17 and 10-11.
The basis of preparation and going concern assessment can be found
within note 1 to the financial statements.
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.
106
Pets at Home Group PlcAnnual Report and Accounts 2021 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 54-63 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
its 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 452 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.
Our vision is to be the best pet care business in the world and the
vision of our social value strategy, ‘Our Better World Pledge’ is to
become the most responsible 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.
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 reviewed on an annual basis. This year we will again
review and update this policy to further promote increased awareness of
modern slavery and compliance with the Modern Slavery Act 2015 (‘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 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.
In June 2020 we updated our Group Whistleblowing policy to
promote increased vigilance amongst colleagues as to any instances
of modern slavery, and encourage central reporting of concerns about
any issue or suspicion of modern slavery in any parts of our business
or supply chain.
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 the Act and our Ethical Trading policy.
Due diligence and supplier adherence
At our Hong Kong sourcing office, we require independent ethical
audits of suppliers 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. Our
priority is to support factories to resolve issues, but we will not
continue to work with them if there is no willingness to improve.
The Group’s internal audit team undertook an audit of the sourcing
operation of the Hong Kong office which reported in May 2020. This
reviewed the Group’s policies and controls around the supplier on
boarding process and routine quality assessments. The report was
issued and reviewed by the Group’s Audit and Risk Committee and
recommendations are being acted on accordingly.
During the year an independent assessment of our salient human
rights risks was conducted. A human rights expert has been
appointed and will be joining the business during FY22 to enable
dedicated skilled resource to be in place to review and implement
as required the recommendations from this review.
Training
Training continues to be a key focus of the business and we continue
to train colleagues and suppliers.
All colleagues are required to complete our bespoke online training
course on modern slavery and from April 2020, completion of
mandatory training, which includes this module, formed part of all
colleagues’ personal objectives.
Audit and assurance
This year the Group’s internal audit team have undertaken a remote
desktop review with the objective of assessing the adequacy of the
controls and processes at the Hong Kong office surrounding Far East
suppliers. The review considered the processes and checks are
designed and operated to ensure that regulatory and ethical
requirements are met in line with the Company’s terms and
conditions (including anti-bribery and corruption and modern
slavery). Work undertaken to update Group policies which inform
the Far East supplier management processes and appropriate
training has taken place.
Branches outside of the UK
The Company has no branches outside of the UK.
107
Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 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 100-101 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 2021 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 pages 113-114 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 20 May 2021.
This Directors’ Report was approved by the Board on 20 May 2021
and signed on its behalf by:
Lucy Williams
Group Legal Director and Company Secretary
27 May 2021
Directors’ Report continued
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 contained 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 facility expired on 12 May 2021 and the Group
chose not to seek extension or renewal.
• In November 2020 the Company’s subsidiary, Companion Care
(Services) Ltd (CCSL), signed a facility agreement with Santander for
a £20m reducing basis (non-revolving) loan facility with a three year
availability period. In addition to the Santander facility agreement,
CCSL has also entered into an agreement with Lloyds for a £25.5m
facility on the signing date and, along with Vet4Pets Limited (V4P), a
further £10m facility with HSBC, on the signing date. Both HSBC and
Lloyds facilities are capable of being re-borrowed. The HSBC facility
agreement was completed on 14 April 2021 and the Lloyds facility
agreement was completed on 5 May 2021, both have a two year
availability period with a possible one year extension. Taken together
these facilities will provide funding for the Group’s Joint Venture First
Opinion practices over the next two to three years.
• Alongside these new facilities, the portfolio of Joint Venture
companies also have existing loans in place with NatWest (RBS),
Lloyds, HSBC and Santander under historic agreements. These
agreements are no longer active, however the loans drawn
down under them are still amortising.
• Pursuant to the terms of these facility agreements entered into
in November 2020, April and May 2021, CCSL and V4P provide
guarantees in respect of a certain fixed proportion of the
outstanding facility loans provided to the Joint Venture practices
which borrow under the facility. The facility agreements contain
customary prepayment, cancellation and default provisions which
include the event of a change of control (direct or indirect) of CCSL
or V4P. For these purposes ‘control’ means the power (whether by
way of ownership of shares, proxy, contract, agency or otherwise) to:
(a) cast or control more than 90% of the votes that may be cast at a
general meeting of CCSL or V4P (as relevant); (b) appoint or remove
all or a majority of the Directors of CCSL or V4P (as relevant); (c) give
directions with respect to the operating and financial policies of
CCSL or V4P (as relevant) with which the Directors are obliged to
comply; and/or (d) hold beneficially (directly or indirectly) at least
90% of the issued share capital of CCSL or V4P (as relevant). The
historic agreements contain similar clauses and guarantees.
108
Pets at Home Group PlcAnnual Report and Accounts 2021 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:
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 UK-adopted international accounting standards
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 the
Group’s profit or loss in the 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
• 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.
and reliable;
Approved by the Board and signed on its behalf by:
• state whether they have been prepared in accordance with UK-
adopted international accounting standards;
• 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
Peter Pritchard
Group Chief Executive Officer
to liquidate the Group or the parent Company or to cease operations,
or have no realistic alternative but to do so.
27 May 2021
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.
109
Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Introduction
This is my first report as Chair of the Audit and Risk Committee
(the Committee), having joined the Board in July 2020. 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, for both present
and emerging risks.
Zarin Patel succeeds me as Chair of the Audit and Risk Committee
on 20 May 2021.
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 100 to 101.
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 members
also meet in private prior to each Committee meeting and also hold
separate private sessions with the Head of Audit and Risk Officer and
the external auditor, in order to provide additional opportunity for open
dialogue and feedback without management present.
Committee activities
The Committee’s role primarily covers the following areas:
• Financial reporting;
• Ongoing viability;
• Risk management systems;
• Internal controls;
• Internal audit; and
• External audit.
Audit and Risk Committee Report
Karen Whitworth
Chair of the Audit and Risk
Committee
Who is on the Audit and Risk Committee?
Member
Karen Whitworth (Chair)
Sharon Flood
Dennis Millard
Stanislas Laurent
Susan Dawson
Paul Moody
What we did in 2021
No. of meetings
3/3
4/4
4/4
4/4
3/3
2/2
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.
Reviewed and challenged the Longer Term Viability Statement (LTVS) and
going concern basis of preparation in advance of its approval by the Board,
particularly considering the impact of the COVID-19 outbreak. As part of
this work, the carrying value of the goodwill balance has been reviewed.
Monitored the control environment of the Group including our general risk
management processes, and including emerging risks in light of the COVID-19
situation, 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 ongoing appropriateness of the judgements made in applying
existing accounting standards.
Continued to monitor the process and controls around extending financial
support to 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.
Reviewed the goodwill disposed of as a consequence of the disposal of the
Specialist Division.
What we will do in 2022
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.
Identify and monitor emerging risks, as well as re-assess the landscape of risks
identified presently.
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.
Continue to monitor the effectiveness of the Group’s Internal Audit function
and whistleblowing procedures. We will agree an Internal Audit strategy for
2022 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.
110
Pets at Home Group PlcAnnual Report and Accounts 2021 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:
Meeting
May
September
Financial reporting
• Review of the Annual Report and
Accounts for year ended 26 March
2020
• 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 progress of subsidiary
financial statements for the year
ended 26 March 2020
Risk management / internal control
• Review of development of the
Corporate Risk Register
• Review of Code of Ethics and
Whistleblowing policy
• Review of Health and Safety reports
• Review of Tax policy
• Review of Treasury policy
• Update on information security and
GDPR
• Review development of the Corporate
Risk Register
• Review of Treasury policy
• Review update on UK corporate
governance
• Review of Code of Ethics and
Whistleblowing policy
November
• Review of the Interim Financial
• Review development of the Corporate
Statements
Risk Register
Internal audit
• Review reports on
progress of Internal
Audit Plan
External audit
• Report on Annual Financial
Statements and external audit
• Review of policy on non-audit
fees
• Review reports on
progress of Internal
Audit Plan
• Process to assess external
auditor
• Review reports on
progress of Internal
Audit Plan
• Report on Review of Interim
Financial Statements
• Review of external audit strategy
for the year ended 25 March
2021
• Review of goodwill impairment
• Review of considerations of the
Group’s longer term viability and
going concern
• Review of operating loan
provisioning policy
• Review of consolidation
consideration for JVCos
January
• Review of development of the
Corporate Risk Register
• Review of Health and Safety reports
• Review of progress on the finance
transformation plan (Vet Group)
• Review reports on
progress of Internal
Audit Plan
• Process to assess external
auditor
• Approval of external audit fees
111
Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 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 parent Company’s investment in subsidiaries, the level of First Opinion Joint Venture
indebtedness and its impact on the assessment of the practical ability to exert control, and accounting for consolidation of Joint Venture
veterinary practices.
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.
Level of First
Opinion
Joint Venture
indebtedness and
its impact on the
assessment of the
practical ability to
exert control
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
First Opinion Joint
Venture veterinary
practices
The business has from time to time bought out the ‘A’ shares in
certain First Opinion 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’.
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, allocation of goodwill
upon disposal of part of a CGU, 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 considered the potential
on-going 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, 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 actual and 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 veterinary
practices should not currently be consolidated, and that the
accounting disclosure for such buy outs is appropriate.
112
Pets at Home Group PlcAnnual Report and Accounts 2021 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
54 to 63. The review includes the consideration of the potential
on-going impact of COVID-19 and further operational disruption 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 106 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 (based on the Board’s risk appetite). The
Committee provides oversight and challenge to the assessment of
principal risks as set out on page 54. The Group’s key risks and
uncertainties are set out on pages 54 to 63.
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
and any emerging risks.
Internal Audit
The Internal Audit function has a direct line of report into the
Committee and is an important part of the assurance processes
within the business. The Committee reviews and approves the Internal
Audit Plan for the year which is developed to address key risks across
the business as well as reviewing core governance, financial and
commercial processes.
The Head of Internal Audit and Risk attends each Committee meeting,
updating on progress against the audit plan throughout the year,
reporting on any key control weaknesses identified and progress
against mitigating actions.
Specific work performed during the year in our key risk areas included:
Risk area
Strategic
Work undertaken
Project Spice, capital project assurance (Group)
Success Factors, capital project review (Group)
Operational Management of operating loans (Vet Group)
Large capital projects review (Vet Group)
Far East sourcing (Retail)
Clinical governance follow up (Vet Group – Specialist Division)
Food quality processes (Retail)
Success Factors pre-implementation review of ‘Employee
Central’ processes and controls (Group)
IT general controls, principal systems (Group)
Management and governance of personal data by contracted
third parties (Group)
Cloud strategy and management review (Group)
Analytics and data strategy review (Group)
Transport and logistics review (Retail)
COVID-19 defence: Key controls – ongoing compliance with
Company procedures: friends and family recruitment,
Colleague Hardship Fund grants, information security, and pet
welfare (Retail and Vet Group)
COVID-19 defence: Key financial controls – ongoing compliance
with Company procedures: accounts payable, accounts receivable,
cash and banking, period end, reporting. (Retail and Vet Group)
Compliance with Right to Work legislation – follow up (Group)
Financial
Legal and
regulatory
compliance
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, Brexit uncertainty, and judgements upon adopting the
going concern basis of preparation. 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 (for the March 2026 year end), 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 9 July 2020. 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 2021 Financial Reporting Council
During the year, the Financial Reporting Council’s (‘FRC’s’) Audit
Quality Review (‘AQR’) team completed a review of the external audit
of the financial statements of Pets at Home Group Plc for the period
ended 26 March 2020, as undertaken by KPMG. The review assessed
the audit only, and was not an assessment of the adequacy of the
entity’s financial controls or financial reporting.
The review scope included ‘Key Audit Matters’ (going concern
including the impact of COVID-19, IFRS 16 – lease arrangements
(transition), carrying value of the Group goodwill, carrying value of
inventory, and operating loans to Joint Venture veterinary practices),
and ‘Other Audit Areas’ (revenue recognition (including supplier
income), and fraud risk assessment including journal entry testing).
The review scope also covered the quality of communication with the
Audit and Risk Committee, and certain matters relating to planning,
completion, ethics and quality control. We have discussed the review
and findings with KPMG and are satisfied with the improvements
proposed and noted the ‘Good Practice’ in relation to the audit
procedures over going concern.
Karen Whitworth
Chair Audit and Risk Committee
27 May 2021
Audit and Risk Committee Report continued
External auditor’s 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 26 March 2020.
Audit and non-audit fees paid to KPMG in the year were £984,000
and an analysis is presented in note 3 to the consolidated financial
statements. Non-audit fees represent 7% of the audit fee. Non-audit
services provided by the external auditors during the 2021 financial
year comprised audit related assurance services, in the form of an
independent review of the half-yearly statements, and a financial
covenant compliance certificate. The Committee concluded that
the provision of such services was appropriate given that they were
closely related to the work performed in the external audit process
and, for reason of effectiveness and efficiency, it was considered
advantageous to engage the external auditors due to their
knowledge and expertise.
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 8 July 2021.
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Pets at Home Group PlcAnnual Report and Accounts 2021 Nomination and Corporate Governance Committee Report
Ian Burke
Chair of the Nomination and
Corporate Governance Committee
Who is on the Nomination and Corporate Governance
Committee?
Member
Ian Burke (Chair)
Dennis Millard
Karen Whitworth
Sharon Flood
Stanislas Laurent
Susan Dawson
What we did in 2021
No. of meetings
1 / 1
1 / 1
1 / 1
1 / 1
1 / 1
1 / 1
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, including issues
relating to new Non-Executive director roles which current Directors wished
to pursue.
Reviewed the time commitment and length of service of the Non-Executive
Directors.
Recommended the appointment of Karen Whitworth as Independent
Non-Executive Director and Chair of the Audit and Risk Committee.
Commenced the search for a new Chair of the Audit and Risk Committee
and recommended that Zarin Patel be appointed as Independent
Non-Executive Director.
Reviewed and considered executive succession plans.
What we will do in 2022
Continue to assess Board composition and how it may be enhanced.
Implement further reviews and assessment of succession planning, talent
mapping and development plans.
Review the Board’s diversity policy and recommend any changes in that
policy to the Board.
Introduction
The Nomination and Corporate Governance Committee is a key
committee of the Board whose role is to keep the composition
and structure of the Board and its Committees under review and
has responsibility for nominating candidates for appointment as
Directors to the Board having regards to its structure, size and
composition (including the skills, knowledge, experience and
diversity of its members).
We are also tasked with ensuring that succession plans are in place
for the Directors, the Executive Management Team and the Retail and
Vet Group Executive Management Teams, taking into consideration the
current Board structure, the leadership requirements of the Group and
the wider commercial and market environment within which the Group
operates. The full terms of reference for the Nomination and Corporate
Governance Committee can be found on the Company’s website.
Committee membership
The UK Corporate Governance Code recommends that a majority
of the members of a nomination committee should be independent
non-executive directors. The Nomination and Corporate Governance
Committee is chaired by myself, and its other members are Dennis
Millard, Sharon Flood, Susan Dawson, Stanislas Laurent and Karen
Whitworth (who will be succeeded by Zarin Patel when Karen steps
down on 20 May 2021) (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
Ian Burke (Chair)
Tony DeNunzio (Chair)
Dennis Millard
Paul Moody
Sharon Flood
Stanislas Laurent
Susan Dawson
Karen Whitworth
Period from:
21 May 2020
18 February 2014
18 February 2014
25 March 2014
25 May 2017
25 May 2017
12 July 2018
9 July 2020
To:
To date
21 May 2020
To date
9 July 2020
To date
To date
To date
20 May 2021
There was one formal Committee meeting held in the financial year
and members’ attendance was as shown in the table above.
How the Nomination and Corporate Governance Committee
discharged its responsibilities in FY21
Board appointments and resignations
On 21 May 2020, I succeeded Tony DeNunzio as Chairman, after Tony
agreed a slightly extended transition period to that originally planned,
due to COVID-19 and the unprecedented environment.
At the conclusion of the AGM on 9 July 2020, Paul Moody,
Independent Non-Executive Director, stepped down from the Board.
Sharon Flood, Independent Non-Executive Director, succeeded Paul
as Chair of the Remuneration Committee. Sharon was Chair of the
Audit and Risk Committee and member of the Nomination and
Corporate Governance, Remuneration, Corporate Social Responsibility
and Pets Come First Committees (now the ESG Committee). We
commenced our search for a new Chair of the Audit and Risk
Committee and Karen Whitworth was appointed as Independent
Non-Executive Director with effect from 9 July 2020. Karen was also
appointed as Chair of the Audit and Risk Committee and was a
member of the Nomination and Corporate Governance Committee.
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Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Nomination and Corporate Governance Committee Report continued
Karen qualified as a Chartered Accountant at Coopers & Lybrand (now
PwC) and has 18 years’ experience operating at board level in a variety
of commercial, operational and governance roles across several
private and publicly listed organisations. More recently, Karen spent
10 years at J Sainsbury plc, the last three of which as a Member of
the Commercial Board and Director of Non-Food Grocery and New
Business, and prior to that as Supply Chain Director and Director of
Group Internal Audit. Until 2018, she was a Supervisory Board
member and member of the Audit Committee at GS1 UK Limited.
Karen is currently a Non-Executive Director of Tritax Big Box REIT plc
and a Non-Executive Director and Chair of the Audit Committee at
The Rank Group plc.
Karen notified the Board of her intention to accept a non-executive
director role with Tesco Plc and would therefore be stepping down
from the Board on 20 May 2021. We thank Karen for her valuable
contribution to Board and Audit and Risk Committee discussions
this year.
We commenced our search for a new Chair of the Audit and Risk
Committee and were delighted to announce on 22 December 2020
that Zarin Patel would be appointed as Independent Non-Executive
Director with effect from 14 April 2021 and would succeed Karen as
Chair of the Audit and Risk Committee on 20 May 2021. Zarin will
also be a member of the Nomination and Corporate Governance
Committee and the Remuneration Committee. Zarin is a chartered
accountant who spent 16 years at KPMG followed by a nine year
period as Chief Financial Officer of the BBC and latterly was the
Chief Operating Officer of The Grass Roots Group plc, a customer
and employee engagement specialist. Zarin was also previously an
independent member of the Audit and Risk Committee of John Lewis
Partnership Plc. Zarin is currently a Non-Executive Director and Chair
of the Audit and Risk Committee of Anglian Water Services Limited,
a Non-Executive Director of Post Office Limited and member of the
Audit and Risk Committee and an independent member of the Audit
and Risk Committee of HM Treasury. Zarin is a Trustee of National Trust
and Chair of its Audit Committee. Zarin brings a wealth of experience
and will add value to the Board’s commercial discussions as a
result. We are delighted to welcome Zarin to the Board and look
forward to working with her this year.
Succession planning and Group talent development
The Committee is responsible for reviewing talent, capability and
succession at the most senior levels of the business, however, in
the last four 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 the Committee on leadership capability.
This year the Board has also focused on succession and development
plans at Board level.
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.
116
During the year, the Group has been pleased to appoint, at Executive
Management Team level, its first Director of Propositions, which will
add increased focus to the Group’s subscription propositions and also
a Trading Director, to further complement the commercial team.
Board evaluation and effectiveness
Last year, we carried out an internal Board evaluation that included the
completion of an online questionnaire that considered topics covered
by the 2019 independent external evaluation carried out by Lintstock
Limited and other areas which the Board wanted to assess. This year,
we have again undertaken an internal Board evaluation by way of
completion of an online questionnaire which covered topics such as:
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 and provided performance feedback. The Board
considered the output from the review in March 2021 and concluded
that the performance of the Board, its Committees and individual
Directors was effective. The overall performance of the Board was
rated highly, as were the relationships between the individual Board
members. Any areas for improvement have been agreed by the Board
and are detailed on page 99 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. We will monitor the Group’s approach to people development
to ensure that it continues to enable talented individuals to enjoy
career progression with the Group. Further details on Board diversity
can be found on page 94-95 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, however any potential conflicts of
interest were considered during Board meetings as they arose during
the course of this 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 93 of the Governance Report.
For further information on Board composition, diversity and
independence, see the Governance Report on pages 93 to 95.
Ian Burke
Chair Nomination and Corporate Governance Committee
27 May 2021
Pets at Home Group PlcAnnual Report and Accounts 2021 ESG Committee Report
Susan Dawson
Chair of the ESG
Committee
Who is on the ESG Committee?
Member
Susan Dawson (Chair)
Ian Burke
Tony DeNunzio
Dennis Millard
Paul Moody
Sharon Flood
Stan Laurent
Peter Pritchard
What we did in FY21
No. of meetings
3/3
3/3
1/1 (resigned 21 May 2020)
3/3
1/1 (resigned 9 July 2020)
3/3
3/3
3/3
Continued to focus on the monitoring and delivery of our high standards of
pet welfare across the Group in the context of the pandemic
Developed and approved the social value strategy “Our Better World Pledge”,
the actions and long term targets including our Net Zero 2040 commitment
Reviewed our Human Rights approach
What we will do in FY22
Across the year four “deep dives” are scheduled to enable more detailed
discussion around our material impacts. These will cover people, pet welfare,
climate action and our products and supply chains
Review and approve a milestone plan to deliver our Net Zero commitments
Review and approve an updated version of our Human Rights strategy
Introduction and strategic approach
The Committee oversees the governance of becoming the most
responsible pet care business in the world. In my third year as Chair
I am delighted to see the progress that we have made in creating a
new social value strategy, Our Better World Pledge, which builds on
the strong foundations that have been built over many years of hard
work across the business.
Our strategic approach to ESG 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 and the social value
vision to become the most responsible pet care business in the world.
Recognising that the Group participates in a broad range of activities
and services involving pets, their welfare remains a central part of the
Committee’s focus and a standing item on every Committee meeting
agenda. The Committee maintains a regular and detailed review of
pet welfare. 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’s focus on people has included an update on our
human rights approach and the initiation of an independent review
into our salient human rights risk across the Group. This important
piece of work will enable an updated strategy to be developed in FY22.
This year has seen the Committee increase its focus on our
environmental impact. The Group has always had strong governance
over our direct operational impacts, introducing a 100% renewable
electricity purchasing commitment for our main Group contracts from
2017, achieving very low levels of waste to landfill and reducing our
location based scope 1 and 2 carbon emissions by 39% since 2015/16
while growing our sales by 47%. During the year the Committee’s
focus has moved to our long term targets and the development of
our net zero scope 1 and 2 by 2030 commitment and our net zero
2040 commitment for all scopes.
During the year the management committees established in FY20
to support the Better World Pledge strategy, have continued to meet
on a regular basis. Each of them is sponsored by a Group Executive
Team member and are developing programmes to deliver the long
term targets.
Committee membership
The ESG Committee, which meets at least three times a year, is chaired
by Susan Dawson. Acknowledging the importance of ESG to the
Group, four additional Board members have selected to attend the
meetings. Peter Pritchard is the Executive member of the Committee
and Louise Stonier, Chief People and Culture Officer, Amy Whidburn,
Group Head of Social Value and Karlien Heryrman, Head of Pets,
attend each Committee meeting.
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Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 A review of clinical governance in the Vet Group was presented in
the February 2021 Committee meeting. The Royal College suspended
the auditing aspect of the RCVS Practice Standards because of the
pandemic and the difficulty in conducting physical visits. The excellent
progress made until this point will not have been lost and the First
Opinion veterinary business will be able to continue to make progress
with over three quarters of practices now enrolled in the scheme. The
internally developed ‘Aspiring to Clinical Excellence’ audit programme
was suspended in terms of inspections with only a third of the
forecasted number being completed during the year as the priority
for practices in the year was to engage with the new ways of working
required under the pandemic and the new guidelines issued by the
Royal college on remote consultations and prescribing. The results of
antibiotic usage auditing were shared and demonstrate a continued
positive reduction in antibiotic use across the Group over time.
The Committee received an update on the sustainability approach to
the new Distribution centre including consultancy support to review
the options for energy generation, water harvesting, biodiversity and
low carbon heating and cooling.
An annual plan of topics to be discussed at the four ESG Committee
meetings scheduled during the year has been agreed at the February
Committee meeting.
The Terms of Reference (ToR) for the ESG Committee were reviewed
in the February 2021 meeting and the changes approved at the March
2021 Board meeting to reflect the new strategy and new focus areas
described above. The ToR can be found on the Pets at Home Group
plc Investor Website.
Susan Dawson
Chair of the ESG Committee
27 May 2021
ESG Committee Report continued
Highlights
When the Committee met in April 2020 the focus of the meeting was
the health and welfare of pets in our care and at our breeders during
the first lockdown. We had stopped selling pets on 22 March, the day
before the first national lockdown started and our breeders stopped
breeding pets during this period. The welfare of pets was put first
at all stages and a colleague adoption scheme was successful in
rehoming pets into forever homes and preventing the number of pets
in our care rising above the levels that met our strict requirements. As
the lockdown progressed and our social distancing measures were
put in place we were able to gradually reintroduce pet sales safely.
The Committee meeting in October 2020 reviewed and approved
the new Social Value strategy called “Our Better World Pledge“. In
the October 2019 and February 2020 meetings, the Committee had
already discussed and approved the materiality assessment and the
areas of focus for the strategy. The October update included the full
strategic framework with the vision and purpose of the strategy, the
long term actions that the Group would commit to and 10 initial
ambitious targets including a commitment to achieve net zero
carbon emissions in the operations and value chain by 2040.
Key discussions at strategy approval included the sustainability impact
of pet ownership particularly through pet food and its ingredients and
manufacturing processes. This will need to be further understood in
light of the benefits that the pet food market brings in terms of full
animal utilisation. This discussion was in the context of the assessment
of scope 3 emissions that had been conducted.
Human rights was a focus on the October Committee meeting when
the annual update to the modern slavery act statement was reviewed
and approved. The Committee approved recommendations to
increase internal human rights capability and to proceed with an
independent assessment of the Group’s salient human rights issues.
This was completed during FY21 and the results presented to the
Committee in April 2021.
Pet Welfare is a standing agenda item at every ESG Committee
meeting and the Head of Pets attends every ESG Committee meeting.
In addition to managing pet welfare during the pandemic, the
Committee received an update regarding the “rabbit pledge” that the
Group has developed to ensure the continued focus on improving
the welfare of rabbits. This has included reducing the number of
stores that sell rabbits to those that also have a veterinary practice
on site and increasing the price.
The dashboard used to report on pet welfare has been updated and
was presented to the Committee for the first time in the February
Committee meeting.
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Pets at Home Group PlcAnnual Report and Accounts 2021
Directors’ Remuneration Report
Sharon Flood
Chair of the Remuneration
Committee
Who is on the Remuneration Committee?
Member
Sharon Flood (Chair)
Dennis Millard
Susan Dawson
Paul Moody
No. of meetings
4/4
4/4
4/4
3/3 (resigned 9th July)
Introduction
On behalf of the Remuneration Committee (Committee), I am pleased
to present our Directors’ Remuneration Report (DRR) for FY21 and my
first Report as Committee Chair.
FY21 was a challenging year for the Group, however, I am extremely
proud of our leadership team, in particular, for how they naturally
responded to, and prioritised the care of our colleagues, our Partners,
our customers and their pets and the value that they have created for
all of our stakeholders resulting in a step change in our journey to
becoming the best pet care business in the world. Our hardworking
passionate and skilled colleagues and Partners across the Group,
have demonstrated remarkable resilience by working tirelessly in
adverse circumstances over the past year. I am incredibly grateful
for their tireless efforts and proud of their collective achievements.
At various points throughout FY21 the Group was impacted by the
trading restrictions placed on our Vets and grooming business due
to national or local lockdowns. We also incurred substantial costs in
keeping our colleagues, pets and customers safe during the global
pandemic. Despite these challenges, the business has reported strong
results for FY21. These results reflect the execution of our four-pillar,
pet care ecosystem strategy combined with growth in the pet care
market. Our strategy and strong execution allowed us to take full
advantage of this growth. These results were achieved without taking
any Government job retention support and without making any
colleague redundancies or pay cuts other than the voluntary pay cuts
taken by the Executive Management Team and the Non-Executive
Directors as detailed below. The Committee is keenly aware of the
impact of the pandemic on our colleagues and on broader society
and has carefully considered the fairness of Director pay decisions and
overall pay levels in this context. The Committee is comfortable that
the outcomes documented below are fair given wider stakeholder
experience and reflect the strong performance of the business
during the year.
Remuneration in context
As noted above, the Committee took care to reflect on the
experiences of key stakeholders during the year, as well as overall
Group performance when making Director remuneration decisions in
respect of FY21 and for implementation of policy for FY22. We have
outlined the key factors that were considered in our decision-making
process below:
Business Performance
As outlined in the Chairman and CEO statements, the business
performance has been strong in a continually challenging market.
The Group has seen the results of investments made in our online
distribution capability, with LFL multichannel revenue growth of
71.7%, and the successful launch of our Click & Collect service. Our
investments in data and digitisation have provided the platform to
deliver the strong customer proposition which has underpinned
our sales and profit performance. In the Vet Group the underlying
performance of the Joint Venture First Opinion practices
demonstrated strength and resilience across a range of metrics
including customer sales, profitability and indebtedness.
1.
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
elected to participate in the JRS.
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Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Directors’ Remuneration Report continued
Financial highlights include:
• Group total revenue growth of 7.9% to £1,142.8m; with Retail LFL
revenue up 8.8% reaching £1.0bn for the first time despite COVID-19
related restrictions during the year.
• Vet Group revenue and LFL revenue growth of 1.6%1 and 7.9%
respectively, with LFL customer sales growth across all First Opinion
practices of 9.5% and LFL Joint Venture fee income up 6.3%.
• Omnichannel revenue growth of 71.7%, or 119.0% on a two-
year basis, with previous investment in distribution capacity and
fulfilment capacity supporting participation of Retail revenue of
15.8% in the year, up from 10.0% in the prior year.
• Group underlying PBT of £87.5m, ahead of guidance, represents a
decline of just 6.4% YoY and is post an adverse COVID-19 related impact
on profit of approximately £30m and the repayment of £28.9m of
business rates relief.
Strategic highlights include:
• The number of VIPs increased 9% YoY to 6.2m, +41% on a two-year
basis, with those shopping across more than one channel up 10%
YoY, and representing 26% of VIPs.
• The number of Puppy and Kitten club members grew 60.9% YoY
with sign-ups in H2 double that of the prior year. Puppy and Kitten
club members typically spend 34% per annum more than non-
members across the Group.
• The number of subscription customers across the Group grew 21%
YoY to over 1.0m, generating over £90m in annualised recurring
customer sales.
• Our share of the pet care market pre-pandemic had grown to
approximately 20% across our segments. We continued to increase
our share across all channels of this growing market over the past
year and saw growth over the last three quarters and, combining
our internal data with a range of third-party UK market reports, we
estimate that our share of the pet care market across our segments
increased to approximately 23%
Impact of COVID-19 on the FY21 results
Despite strong results, the financial performance of the Group was
impacted by the following:
• We temporarily closed our grooming salons and stopped the sale of
pets, and our First Opinion practices and Specialist Referral centres
were subject to regulatory restrictions on permitted procedures.
• We incurred additional costs through, inter alia, social distancing
measures across our stores and Distribution Centres, the provision
of personal protective equipment, cleaning and sanitisation, pet
welfare as well as the payment of an additional Thank You bonus to
frontline colleagues and the creation of a Colleague Hardship Fund.
• This resulted in an estimated £30m adverse financial impact in the
year, all of which is included in our underlying results.
No Government support:
As noted above, the Group did not benefit from any support from the
Government.
• The Group funded furlough for its directly employed colleagues who
wanted to take part in the scheme and topped up the payments
for those colleagues who were shielding (as detailed below under
Supporting our colleagues).
• Business rates were repaid totalling £28.9m.
• No other Government loans or support were received.
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
elected to participate in the JRS.
Shareholder experience
Overall, the shareholder experience in FY21 was positive:
• We have continued to pay our usual dividend throughout the
year. The final dividend per share of 5.5p is an increase of 10%
YoY, reflecting the strong performance in our second half, strong
liquidity with a FCF position of £67.4m and a robust balance sheet,
giving a total dividend of 8.0p for the year, up 7% YoY. It will be
recommended by the Board at the AGM on 8th July 2021.
• We have not raised any equity during the year.
• Share price and TSR performance have been strong with an increase
of 65% and 109% respectively to the end of the financial year.
Colleague, customer and community experience
Throughout the pandemic our colleagues have been on the
frontline supporting the health and wellbeing of the nation’s
pets. Our colleague contributions have been pivotal in helping to
deliver consistently strong results throughout the year. We have also
sought to play a key role in supporting our customers and their
local communities. You can read the full details of the Group’s actions
on pages 10 and 11, however, some of the highlights include:
Supporting our colleagues
• Shielding colleagues: We funded full pay for the first 12 weeks
of shielding and 80% thereafter and extended the Government
category guidelines to include our clinically vulnerable colleagues,
our pregnant colleagues and those colleagues over 70 years of age.
• Those with caring responsibilities: We funded voluntary ‘caring
support furlough’. We also provided all colleagues with an additional
bank of five family support days that they could use throughout
the year.
• Frontline colleague bonus: All colleagues will receive their usual
annual bonus in respect of FY21 in line with the usual timeline. The
frontline colleague bonus pot for FY21 will exceed the amount
awarded in FY20 (£4.2m FY20 vs £5.8m FY21). The bonus pot of
£6.3m includes an enhancement of £1m for our frontline colleagues
to recognise the extra lengths that they have gone to this year. It also
includes Xmas and Easter vouchers given to all frontline colleagues
of £0.8m and the additional £1.9m Thank You bonus given to our
frontline colleagues in April 2020.
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Pets at Home Group PlcAnnual Report and Accounts 2021 Annual bonus (more information on page 131):
As in prior years, the Executive Directors were assessed against Group
Profit Before Tax (PBT) (75%) and Group Free Cash Flow (FCF) (25%).
Targets were set in July against a budget that was agreed to be
ambitious and stretching. At the time the targets were set, the
maximum PBT target was well ahead of the range of analyst forecasts
and FCF targets were within the wide range of analyst forecasts.
Targets were set assuming that the business would benefit from
business rates relief during the period (whereas in fact business rates
of £28.9m were repaid) and did not factor in an extended lockdown
period. In the light of the business and stakeholder context set out
above, the Committee was comfortable that the formulaic outcome
was fair and appropriate. No adjustments were therefore made to
the bonus targets and no discretion was exercised in relation to the
outcome. As disclosed in last year’s report, the bonus for FY21 will
be delivered in cash.
The underlying PBT target range was set between £74.8m and
£83.8m. Actual PBT of £87.5m was in excess of the maximum target.
The Group Free Cash Flow target range was set between £35.6m and
£41.6m. Actual Free Cash Flow of £67.4m was also in excess of the
maximum target.
Given the uncertain economic environment and ongoing impact
of the pandemic on the business, it was decided that the bonus
opportunity for the Executive Directors for FY21 would not be
increased in line with the new policy. Therefore, the formulaic
outcome was equal to £526,285/100% of salary for the CEO and
£365,235/100% of salary for the CFO (rather than 170% and 150%,
respectively, as permitted in the policy).
In the light of the business and stakeholder context set out above, the
Committee was comfortable that the formulaic outcome was fair and
appropriate. No adjustments were therefore made to the bonus targets
and no discretion was exercised in relation to the outcome. As disclosed
in last year’s report, the bonus for FY21 will be delivered in cash.
Restricted Stock Plan (more information on page 132):
The 2018 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% in 2021, 25% in 2022 and the
remaining 25% in 2023 provided they remain in the employment of
the Group at each of these dates. The annual RSP awards were
granted in May 2020. The Committee agreed that no windfall gain
could be made. The Executive Directors awards granted in May 2020
remain subject to the absolute TSR financial underpin and will vest
100% in 2023 subject to a 2 year post vest holding period.
• National Living Wage (NLW): In March 2021, we increased our
entry level rates by nearly 4% to a minimum of £9.06, 15p ahead of
the current NLW (£8.91). Our hourly paid retail store and grooming
colleagues now have the opportunity to reach the Real Living Wage
on completion of the first stage of our training programme, which is
reached within the first 6 months of employment, representing our
highest increase of 8.3% at some of our skilled hourly paid levels.
• Colleague share ownership: Our first RSP vested in July 2020,
which resulted in enhancing or creating new shareholders in over
5,000 of our colleagues. We also granted a further 2.1m shares to
over 9,300 colleagues via the RSP in June 2020.
• Caring4colleagues: We donated £1m to our Colleague Hardship
Fund to support any colleagues or Partners across the Group who
find themselves in hardship as a result of the pandemic. We also
developed comprehensive award-winning wellbeing resources and
support tools for our colleagues. We shut our stores on Boxing Day
to give all our retail store and grooming colleagues an invaluable
two-day break.
Supporting our Customers
Our immediate priorities were to ensure the safety and wellbeing of all
our colleagues, customers, and pets, and we rapidly adapted our retail
and veterinary operations to be able to continue providing essential
pet care to our customers in a safe and appropriate manner.
• We launched Click & collect.
• Safe distance markers, masks, sanitisers, control of numbers and
Perspex screens were installed across our Group.
• Deliver to car zero contact service was launched.
• Home delivery was extended.
Supporting our communities
• We have raised over £6m for pet rescue charities through our charity,
The Pets at Home Foundation, (which was previously called Support
Adoption For Pets), and through VIP lifelines that are donated when
customers swipe their VIP cards.
• We made a £100k donation to CaRE20 (The British Retail Consortium,
Retail Week and the Retail Trust campaign to support retail
colleagues in hardship).
• 10% discount was implemented for NHS workers.
Directors’ Remuneration in respect of FY21
FY21 was the first year of our new Remuneration Policy, approved
by shareholders in 2020.
Salary and Non-Executive fee forfeiture (more information on
page 131-132):
There was unanimous agreement that the entire Executive
Management Team, Executive Directors, Senior Leadership Team and
the Non-Executive Directors would take a voluntary 20% pay cut
effective from 20 April 2021 to the end of May 2021. This was in line
with the timing of our Company funded voluntary furlough option
we offered to some of our colleagues.
Salary increases in respect of FY21 were disclosed in last year’s report.
Implementation of the increases was delayed to coincide with all
salaried colleagues’ increase in October. They will continue to be
awarded in October going forward.
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Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Restricted stock awards
No changes are being proposed to the operation of the plan for FY22.
Awards granted during FY22 will continue to be set at a face value of
75% of salary and vest subject to an absolute TSR underpin with a
three-year vesting schedule and two-year post vesting holding period
as set out in the Remuneration Policy. The Committee is still 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 as previously agreed when
awarding the 2020 grant in FY20.
Closing remarks
We hope that you find this report helpful and look forward to your
support of the resolution for approval of the Annual Report on
Remuneration by advisory vote at the Company’s AGM on 8 July 2021.
As the current Directors’ Remuneration Policy was approved by
shareholders at the 2020 AGM, no further changes to the policy are
being proposed this year.
As ever, we would welcome any feedback or comments from
shareholders on this report.
Sharon Flood
Chair of the Remuneration Committee
27 May 2021
Directors’ Remuneration Report continued
Directors’ remuneration in respect of FY22
Base salary
The pay review date for the Executive Management Team will now
align to the wider management and salaried colleague population
and will take place in October rather than March resulting in an
18-month gap since the previous pay review in March 2019.
When reviewing the Executive Team’s base pay, the Committee will
continue to benchmark against relative market comparisons to ensure
that the package is considered competitive and does not pose a risk
to retention and succession planning whilst at the same time taking
into consideration the salary increase to the broader colleague
population and the impact of COVID-19 on the business. The
Committee may over time approve salary increases that are
broader than the wider colleague population.
The Committee will also carry out an annual benchmarking review
of the Non-Executive Directors’ fees in October to ensure they remain
in line with the market since these have not changed since 2014.
Pension
Pension contributions for new Executive Directors are now 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%).
For incumbent Executive Directors, pensions will be reduced to 6.5%
of salary by the end of FY22.
Annual bonus
FY22 will be the first year in which the bonus opportunity increases
and bonus deferral introduction approved in 2020 are implemented.
As disclosed in last year’s report, the maximum bonus opportunity
increases from 100% to 170% of salary for the CEO and from 100% to
150% of salary for the CFO. In addition, one-third of any bonus paid
will be deferred for two years.
Bonus measures for FY22 have been updated to reflect our evolving
strategy. Alongside the existing PBT and FCF measures we are
introducing a third Pet Care Plans subscriptions metric. Pet Care Plans
are a key driver of future growth, they create predictability through
repeat orders and provide high margin revenue. In addition they
promote the health and wellbeing of pets through the provision of
healthcare insurance and monthly flea, tick and worm treatments and
are convenient for our customers. Targets will be based on growth in
the number of plans sold in line with our strategy. This metric will also
be filtered down to colleague bonuses. The Committee has carefully
considered the implications of a metric aligned to product sales and
has taken measures to ensure that customers are provided with
all of the necessary information needed to pause or discontinue
subscriptions and that colleagues are guided by the best interests
of pets and their owners. The Committee will review the application
of these measures on a regular basis throughout the year. The
weightings for FY22 will be PBT (60%), FCF (20%) and Pet Care Plans
(20%). We are also introducing a requirement for all colleagues,
including the Executive Directors, to complete one Better World
Pledge day during the year which will provide significant non-financial
support to a range of different organisations, in addition to the
financial support we already provide. Colleagues can support a range
of people, pet or climate focussed organisations and charities. For
Executive Directors, personal and overall colleague attendance of
Better World Pledge days will be considered when the Committee
reviews the bonus outturn for the other metrics, and low attendance
may result in a reduced pay-out (note no upwards adjustment would
be considered in relation to this metric).
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Pets at Home Group PlcAnnual Report and Accounts 2021 (a) Introduction
The Committee presents our Directors’ Remuneration Policy (the
Policy) which applies 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). The
Policy was approved by shareholders at the Annual General Meeting
on 9 July 2020 and became effective on the date it was 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.
Our Directors’ Remuneration Policy
The Committee considered a range of materials when they undertook
the policy review in FY20 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 130 and 135;
• 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;
• We have continued to engage with our shareholders on executive
remuneration following the policy review throughout FY21 during
our consultations regarding our environment, social and governance
(ESG) strategy.
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
Underpin
Share price
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.
• 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
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.
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.
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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.
Pension
Purpose and link to
strategy
To provide colleagues
with an allowance for
retirement planning.
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
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.
• 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.
Operation
• Pension contributions are made to either the Group Pension Plan, or to personal
pension schemes, or cash allowances in lieu of contributions are paid.
Maximum opportunity
• The employer contribution level for any new
executive appointments to the Board post 26
March 2020 is capped at the rate provided to the
majority of salaried colleagues from time to time
(currently 6.5%).
• The maximum for incumbent Executive Directors
was 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. It should be
noted that Executive Directors have never
received the maximum of 15%.
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 128 of the Policy.
• Change of control provisions apply as set out on
page 128 of the Policy.
• Leaver provisions apply as set out on page 128 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.
• The Committee has discretion 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. Where discretion is
applied this will be summarised within the Annual
Report.
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Pets at Home Group PlcAnnual Report and Accounts 2021 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.
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.
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.
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).
• To support our principle
of embedding share
ownership across the
organisation.
• To assist with succession
planning.
• No award will vest under the RSP unless the TSR
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 128 of the policy.
• Change of control provisions apply as set out on
page 128 of the policy.
• Leaver provisions apply as set out on page 128
of the policy.
SAYE1
Purpose and link to
strategy
• An all-colleague plan,
which encourages long
term shareholding and
aligns the interests of
UK colleagues with
shareholders.
• Executive Directors are
eligible to participate.
Operation
• SAYE is a HMRC-approved scheme where eligible
colleagues are granted savings-related share options
to subscribe for 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.
Chair and Non-Executive Directors’ Remuneration Policy
Operation
Purpose and link to
strategy
• Non-Executive Directors receive a basic fee in respect
To attract and retain high
calibre individuals by
offering market
competitive fee
arrangements.
respect of Deputy Chair of the Board and/or chairship
of Board Committees.
• Further fees are paid to Non-Executive Directors in
of their Board duties.
• The Non-Executive Chair receives an all-inclusive fee
for the role.
• The remuneration of the Non-Executive Chair 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.
Maximum
opportunity
• Current fee levels can
be found on page 137.
• 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
Chair 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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Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Our Directors’ Remuneration Policy continued
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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Pets at Home Group PlcAnnual Report and Accounts 2021 (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
Fixed elements (base
salary, pension and
other benefits)
Short term incentives
Long term incentives
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.
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 123-124.
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).
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 126.
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 126.
• 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 128. 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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Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Annual Report on Remuneration
The key employment terms and conditions of the current Executive Directors, as stipulated in their service contracts, are set out below:
Area
Notice period
Policy and operation
• The service contract for Peter Pritchard provides for a
notice period of 12 months from the Company and six
months from the individual.
• New Executive Directors will be appointed on service contracts that have
a notice period of not more than 12 months for both the Company and
the individual.
• The service contract for Mike Iddon provides for a notice
• The Committee considers this policy provides an appropriate balance
period from both the Company and the individual
of six months.
between the need to retain the services of key individuals for the benefit
of the business and the need to limit the potential liabilities of the
Company in the event of termination.
Contractual payments
• Executive Directors’ service contracts allow for
• Payment in lieu of notice will be limited to base salary and contractual
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.
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.
Short term incentives
• The Committee’s policy is not to award an annual
incentive for any portion of the notice period not served.
• Where an Executive Director leaves office after the end of
a performance year but before the payment is made, the
executive will remain eligible for an annual bonus for that
performance year, subject to the normal assessment of
performance achieved over the period.
• Where an Executive Director leaves office during a performance year, any
bonus would be at the Committee’s absolute discretion and would take
into account performance and the time served during the period.
• No bonus will be paid in the event of gross misconduct.
• 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).
Long term incentives
• The treatment of unvested long term incentive awards is
• Alternatively, the Committee may, at its discretion, allow unvested awards
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.
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
• Under the RSP, any holding periods applicable to vested awards
not provide for additional compensation on severance as
a result of a change in control.
(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.
• Annual bonus payments and long term incentive awards
(but not including SAYE awards) are subject to malus and
clawback for a period beginning on the date of award
and ending two years following vesting in the event of:
– A material misstatement of audited results;
– Serious financial irregularity;
– Any circumstances justifying summary dismissal of a
participant from his office or employment with any
Group company including, but not limited to,
dishonesty, fraud, misrepresentation or breach of trust;
• 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.
• Any material breach of a participant’s terms and conditions of
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.
Malus and clawback
128
Pets at Home Group PlcAnnual Report and Accounts 2021 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.
Chair and Non-Executive Directors
The Non-Executive Directors, including the Chair 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 Chair of the Board are not entitled to compensation on leaving the Board.
• As set out on page 137.
• See page 104 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 below provide illustrative values of the remuneration package for Executive Directors
in FY21, prior to any salary increase not yet awarded, under three assumed performance scenarios and including an example of the impact on
RSP should the share price increase by 50%.
2021
50% RSP3
RSP2
Bonus
Fixed Pay1
Total
Minimum
Meeting expectations
Maximum
Maximum + 50% RSP(3)
Peter Pritchard
Mike Iddon
Peter Pritchard
Mike Iddon
Peter Pritchard
Mike Iddon
Peter Pritchard
Mike Iddon
£608,132
£608,132
£413,853
£413,853
£412,500
£467,500
£608,132
£1,488,132
£277,500
£277,500
£413,853
£968,853
£412,500
£935,000
£608,132
£277,500
£555,000
£413,853
£1,955,632
£1,246,353
£206,250
£412,500
£935,000
£608,132
£2,161,882
£138,650
£277,500
£555,000
£413,853
£1,385,103
These charts are for illustrative purposes only and actual outcomes may differ from those shown.
1 Fixed pay includes car allowance, pension earned, current salary and private health insurance. This does not reflect the 20% pay cut the Executives actually took during FY21.
2 RSP is 75% of salary and is illustrated above as 75% of current salaries (excluding the 20% pay cut).
3 50% RSP has been calculated using the closing share price of £3.862 on 25 March 2021 plus 50%, resulting in a share price of £5.79.
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. 85% of salary for the CEO and 75% 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. 170% of salary for the CEO and 150% for the CFO)
• 100% vesting under the RSP (i.e. 75% of salary)
• Based on the share price on 25 March 2021 (£3.862), the last day of the financial year FY21 plus 50%
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.
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Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021
Annual Report on Remuneration continued
(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 together with the additional thank you
payments that have been made throughout the year to our front line colleagues. 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. In FY21, this included the decision to increase our entry level rates by
nearly 4% to a minimum of £9.06 per hour, 15p ahead of the current NLW (£8.91). Our hourly paid retail store and grooming colleagues also now
have the opportunity to reach the Real Living Wage on completion of the first stage of our training programme, which is reached within the
first 6 months of employment representing our highest increase of 8.3% at some of our skilled hourly paid levels. 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 Sharon Flood, replacing 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 Committee and gives them direct access to the Committee
Chair via our regular listening sessions. 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, CFO and CPCO in raising concerns and feeding into solutions to address issues including
remuneration matters. Further details on this are outlined in the Chairman’s statement in this report on page 91.
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. Our first RSP vested in June 2020, which resulted in enhancing or creating new shareholders in over 5,000 of our colleagues. The
next RSP awards will vest at the end of May 2021 which will further enhance or create new shareholdings for over 4,700 colleagues. We also
granted a further 2.1m shares to 9,300 colleagues via the RSP in June 2020.
(f) Consideration of shareholder views
The Committee has always been committed to dialogue with the Company’s shareholder base; we actively consulted with shareholders during
the formulation of our 2017 and 2020 Policy, and we have continued to do so during the year when consulting on our ESG strategy.
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.
Our new Remuneration Policy was presented and approved at the July 2020 AGM receiving 85.98% votes for (Votes ‘for’ include discretionary votes.).
(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.
130
Pets at Home Group PlcAnnual Report and Accounts 2021 2. Annual Report on Remuneration
a) Directors’ remuneration – report on implementation for the year ended 25 March 2021
This section of the report sets out how the Policy, approved by shareholders at the Company’s Annual General Meeting (AGM) on 9 July 2020
(2020 Policy), has been applied in the financial year being reported on.
The information presented from this section up until the relevant note on page 133 represents the audited section of this report.
(b) Single total figure of remuneration for Executive Directors for the year ended 25 March 2021
The following table sets out the total remuneration for Executive Directors for the year ended 25 March 2021. All payments are in line with the
Policy and base pay includes the voluntary 20% pay cut effective from 20 April 2020 to the end of May 2020 which was in line with the timing of
our company funded voluntary furlough option we offered to some of our colleagues.
Director
FY21
Peter Pritchard
Mike Iddon
FY20
Peter Pritchard
Mike Iddon
Base
salary
(£)
514,7031
356,9201
504,084
360,774
Benefits
(£)
Pension
(£)
Total fixed pay
Annual
bonus
(£)
Long term
incentives
(£)
Total variable
pay
11,921
11,921
11,846
11,846
46,197
31,918
45,368
32,470
572,821
400,756
561,298
405,090
526,285
365,235
504,084
360,774
1,041,8092
745,6252
534,328 3
445,275 3
1,568,094
1,110,860
1,038,412
806,019
Total
(£)
2,140,916
1,511,619
1,599,710
1,211,109
1.
2.
3.
Base salaries include the voluntary 20% pay cut effective from 20 April 2020 to the end of May 2020 which was in line with the timing of our company funded voluntary furlough option we offered to some of our colleagues.
The 2018 RSP will vest in full on 23 May 2021 since the absolute TSR underpin which is calculated as at the end of FY21 had been achieved. The value has been calculated using 386.2p being the closing share price on
25 March 2021, the financial year end which corresponds to the end of the performance period. The figure reflects 100% of the 2018 RSP award, however the true value will vary due to the phased release over the
three years: 50% in FY21, 25% in FY22 and 25% in FY23, and will be subject to the share price at the time.
The 2017 RSP vested in full on 25 July 2020 since the absolute TSR underpin which is calculated as at the end of FY20 had been achieved. The value has been calculated using 271p being the closing share price on 26
March 2020, the financial year end which corresponds to the end of the performance period. The figure reflects 100% of the 2017 RSP award, however the true value will vary due to the phased release over the three
years: 50% in FY20, 25% in FY21 and 25% in FY22, and will be subject to the share price at the time.
Base salary – corresponds to the amount received during the relevant financial year and includes the voluntary 20% pay cut.
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 in the footnotes above.
Annual bonus
The Executive Directors were assessed against stretching PBT and FCF targets. Underlying PBT, on a like for like basis was £87.5m, which was
ahead of guidance. This represents a decline of just 6.4% YoY and is post adverse COVID-19 related impact on profit of approximately £30m and
the repayment of £28.9m of business rates relief. FCF after interest, tax and before acquisitions was £76.1m before purchase of own shares, and
£67.4m after purchase of own shares which also exceeded the maximum target.
• Given the uncertain economic environment and ongoing impact of the pandemic on the business, it was decided that the bonus opportunity
for the Executive Directors for FY21 would not be increased in line with the new Policy. Therefore, the maximum annual bonus opportunity for
Executive Directors in respect of FY21 was 100% of base salary.
• As in prior years, for FY21, Executive Directors have an annual bonus based on Group PBT (75%) and Group FCF (25%).
• FCF 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 IFRS 16)
Group free cash flow
Total
% Base salary
75%
25%
100%
Target
Minimum
£74.8m
£35.6m
Maximum
£83.8m
£41.6m
£m
£87.5m
£67.4m
Achieved
%
100%
100%
100%
Total
%
75%
25%
100%
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Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Our Directors’ Remuneration Policy continued
In order to achieve full pay-out, the Committee had set ambitious and stretching targets which required the individuals to deliver performance
which significantly exceeded business expectations. Targets were set assuming that the business would benefit from business rates relief during
the period (whereas in fact business rates of £28.9m were repaid) and did not factor in an extended lockdown period. The targets were not
subsequently adjusted to reflect the payment of business rates and none of the COVID-19 related costs were added back.
The Committee has reviewed whether the payments achieved reflect the wider business performance and the experience of shareholders
during the year.
The Committee carefully considered whether the bonus outcome should be adjusted. However after significant assessment and in the light
of the business and stakeholder context set out above in the Chair’s letter on page 121, the Committee was comfortable that the formulaic
outcome was fair and appropriate. No adjustments were therefore made to the bonus targets and no discretion was exercised in relation to
the outcome. As disclosed in last year’s report, the bonus for FY21 will be delivered in cash.
Long term incentives
Awards granted under the RSP for 2017 vested in July 2020, including awards for the Executive under the RSP which were subject to the agreed
performance metrics of an absolute TSR underpin.
The absolute TSR underpin was met, therefore awards vested 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 a 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.
Awards granted to the Executive under the RSP in 2018 will vest in May 2021 as a result of the absolute TSR underpin having been met. For the
Executive Directors, awards will vest 50% in 2021, 25% in 2022 and 25% in 2023.
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
2017 RSP
TSR performance positive 58.7%
Underpin met and award vesting will be 50% in 2020,
25% in 2021, 25% in 2022.
2018 RSP
TSR performance positive 166.7%
Underpin met and award vesting will be 50% in 2021,
25% in 2022, 25% in 2023.
(c) Single total figure of remuneration for Non-Executive Directors for the year ended 25 March 2021
The following table sets out the total remuneration for Non-Executive Directors and the Chair of the Board for the year ended 25 March 2021. The
below table reflects the unanimous agreement that the entire Executive Management Team and the Non-Executive Directors would take a
voluntary 20% pay cut effective from 20 April 2020 to the end of May 2020.
Basic
fees
(£)
200,000
50,000
50,000
50,000
50,000
50,000
200,000
50,000
Additional
fees
(£)
n/a
20,0002
n/a
n/a
n/a
n/a
n/a
n/a
Remuneration
Committee
Chair
(£)
n/a
n/a
10,000
n/a
10,000
n/a
n/a
n/a
Audit & Risk
Committee
Chair
(£)
n/a
n/a
n/a
n/a
10,000
n/a
n/a
10,000
Nomination
& Corporate
Governance
Committee
Chair
(£)
n/a
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
10,000
n/a
n/a
Total single
figure 2021
(£)
27,2531
68,385
15,7583
48,846
58,6154
58,615
195,3855
42,8576
Total single
figure 2020
(£)
200,000
70,000
60,000
50,000
60,000
60,000
0
0
Director
Tony DeNunzio
Dennis Millard
Paul Moody
Stanislas Laurent
Sharon Flood
Prof Susan Dawson
Ian Burke
Karen Whitworth
1 Tony stepped down from his position on 21 May 2020 after an extended handover period due to the impact of COVID-19. Tony’s fees have been pro-rated to reflect this.
2 The additional fee paid to Dennis Millard is in respect of his position as Deputy Chair of the Board and Senior Independent Director.
3 Paul Moody stepped down as a Non-Executive Director on 9 July 2020. Paul Moody’s fees have been pro-rated to reflect this.
4 On 9 July 2020 Sharon stepped down as the Audit and Risk Committee Chair and was appointed as the Remuneration Committee Chair. Sharon’s fees have been pro-rated to reflect this.
5
6 Karen Whitworth joined part way through the year on 9 July 2020 as a Non-Executive Director and Chair of the Audit and Risk Committee. Karen’s fees have been pro-rated to reflect this.
Ian Burke joined as a Non-Executive Director, and Chair Designate on 26 March 2020 and was appoint as Chairman on 21 May 2020. Ian’s fees have been pro-rated to reflect this.
132
Pets at Home Group PlcAnnual Report and Accounts 2021 (d) Scheme interests awarded during the financial year
In FY21 Executive Directors received RSP awards in line with the Policy as follows:
Executive Director
Peter Pritchard
Mike Iddon
Date of award
29 May 2020
29 May 2020
Number of shares
awarded under the RSP
156,872
112,274
Grant price of
RSP awards
Nil cost awards
Nil cost awards
% of salary for
total awards
75%
75%
Performance
period end date
29 May 2023
29 May 2023
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 241.0p.
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 (FY21-FY23). 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 2020 award. In accordance with the Policy, 100% of the award will vest on the third anniversary of grant, subject to the achievement of
the TSR underpin and continued employment at that date, followed by a two-year post vest 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 and transaction fees have been
settled) must continue to be held (and cannot be sold) until the fifth anniversary of grant.
(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 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.
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
Ian Burke
Karen Whitworth
Shareholding as a % of
salary
1,031%
180%
–
–
–
–
–
–
–
–
Shares owned
outright at
25 March 2021
1,467,917
172,485
3,713,026
30,000
27,470
30,000
60,088
4,195
47,900
–
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
26 March 2020
2,664,214
129,855
3,713,026
30,000
27,470
30,000
60,088
0
n/a
n/a
This represents the end of the audited section of the report.
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Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Our Directors’ Remuneration Policy continued
(h) TSR performance chart
The Company’s shares were admitted to the premium listing segment of the Official List maintained by the UK Financial Conduct Authority and
to trading on the London Stock Exchange plc’s main market for listed securities on 17 March 2014. The chart below shows performance from
that date until the end of FY21. This disclosure will be expanded in subsequent years in line with the regulations.
260
200
160
120
80
40
Mar
2014
CEO
Mar
2015
Mar
2016
Mar
2017
Pets at Home
FTSE 350
FTSE 350 Gen Retailers
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
FY15
–
–
790,461
–
–
75%
–
–
n/a
Mar
2018
FY16
–
–
962,2244
–
–
60%
–
–
96%4
Mar
2019
Mar
2020
Mar
2021
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
1,599,7108
n/a
n/a
100%
n/a
n/a
100%
n/a
n/a
FY21
2,140,916
n/a
n/a
n/a
n/a
n/a
n/a
In FY14, the single figure of remuneration relates to the period 17 March 2014 to 27 March 2014.
1.
2. Ian Kellett was appointed on 4 April 2016 and stepped down from his role on 27 April 2018 before leaving the Group effective 31 May 2018.
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.
5. Ian Kellett waived his bonus for FY18.
6. 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. Peter’s FY21 single figure includes the full value of his total 2018 RSP award which will vest on a phased basis, 50% May 2021, 15% May 2022 and 25% May 2023.
The FY20 single figure has been adjusted since the FY20 Annual Report was issued to include the 2017 RSP award which vested based on the performance period of FY20 as opposed to the grant awarded in FY20 as
previously disclosed.
7.
8.
(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 FY21:
Chief Executive
All colleagues 1
% Change in
base salary
FY20 to FY21
9.1%
4.83%
% Change in
bonus earned
FY20 to FY21
4.4%
4.7%
% Change in
benefits
FY20 to FY21
no change
no change
1.
All colleague information is presented by comparing the average colleague information used in FY20 to the equivalent average colleague population in FY21 and includes colleagues who started on or at the
beginning of FY21 who had the potential to each a full year’s bonus.
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%
% Change in
base salary
FY21
9.1%
4.83%
The 2017 CEO change reflects the appointment and promotion of Ian Kellett into the role of CEO replacing Nick Wood.
134
Pets at Home Group PlcAnnual Report and Accounts 2021 (j) Relative importance of the spend on pay
The following table shows the relationship between the Group’s PBT, distributions to shareholders and the total remuneration paid to all colleagues.
Underlying PBT1
Returned to shareholders:
Dividend
Payments to colleagues:
Wages and salaries
FY21 £m
87.5
FY20 £m
93.5
FY19 £m
89.7
FY18 £m
84.5
FY17 £m
96.5
37.1
227.6
37.1
203.1
37.2
187.8
37.3
181.0
39.9
162.9
1. FY21 and FY20 results are presented post-IFRS16. All results up to and including FY19 are presented on a pre-IFRS16 basis.
(k) Our CEO pay ratio FY21
This is our second year reporting our CEO ratio in line with the 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 is 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.
FY21
FY20
Base Pay (FTE)
Single figure remuneration
Base Pay (FTE)
Single figure remuneration
Note: Ratio’s rounded to the nearest whole number.
CEO
£514,703
£2,140,916
£504,084
£1,599,710
25th%tile
26:1
106:1
30:1
90:1
Median
22:1
88:1
27:1
78:1
Ratio
75th%tile
17:1
69:1
23:1
59:1
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. The single figure remuneration numbers above for FY20 and FY21 include 100%
of the RSP awards which have vested based on the financial year which the performance measurement period was measured over, whereas
these awards vest over 3 years, 50% in year one and 25% in year two and three. It should also be noted that the share price has increased
between FY21 and FY22. The LTIPs in FY20 were calculated based on the closing share price on 26 March 2020 (financial year end) of £2.710 and
the FY21 LTIPs have been calculated based on the closing share price on 25 March 2021 (financial year end) of £3.862. We therefore believe that
at the base pay level our CEO ratio compares favourably with the wider retail sector and comparable FTSE companies.
(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 groups in all our divisions combined with our annual engagement survey and regular pulse surveys ensure that our
colleagues have a voice. Sharon Flood, in her role as Committee Executive for wider colleague engagement, has attended colleague and Joint Venture
Partner listening sessions this year called our ‘Tuned In’ sessions, where she was able to gauge the wider colleague and veterinary Joint Venture Partner
population in their views on the senior leadership and management of the business, wellbeing and diversity and inclusion as well as seeing first-hand
how our pet care strategy is coming to fruition. These were also attended by our Chairman of the Board, Ian Burke. Our chair of our ESG Committee,
Professor Susan Dawson, who is a qualified veterinary surgeon, has also attended specific listening sessions with our Veterinary Joint Venture Partners.
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 Partners are heard and considered as part of our decision making. Further steps on the measures
we have taken throughout the pandemic are contained on page 91 of the Chairman’s letter.
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 the CEO, CFO and CPCO has ensured that our colleagues have been engaged in 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 started to come to fruition in July last year, with the maturity of the first RSP plan which
was offered to both salaried and hourly colleagues at all levels which resulted in enhancing or creating new shareholders in over 5,000 of our
colleagues. We also granted a further 2.1m shares to 9,300 colleagues via the RSP in June 2020. The next RSP awards will vest at the end of May
2021 which will further enhance or create new shareholdings for over 4,700 colleagues.
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 2020 with a take up of 17.2%,
our highest take up rate since our first issue in 2014, which we believe is as a result of the favourable business performance combined with the
first maturity of the RSP which encouraged further Sharesave interest last year.
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Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Our Directors’ Remuneration Policy continued
Gender Pay Gap report
We published our Gender Pay Gap report on 5 March of this year. To aid transparency, we have reported our gender pay gap both in line with
the Government standard requirements and separately shown our underlying position without the impact of COVID-19. It is pleasing to see that,
even after adjusting for pandemic-related factors, our median gender pay gap has reduced. This does not include figures for our Joint Venture,
veterinary partnerships since these are all individual businesses owned by the veterinary partner(s).
We were pleased to note the external recognition of our progress made on diversity and inclusion and, in addition, are pleased to confirm that
we have met the Hampton Alexander target of 33% female board membership by the end of 2020 and, that across our organisation 55% of our
management population are female. 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 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 16.9% on an underlying basis 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), and our Vet division (Companion Care Services Limited, of which
is our Vet Group Support Office). However, with the sale of our Specialist Hospitals we are no longer including their information within our numbers.
In our Retail Division, we continue to see progress in our mean position with a drop on an underlying basis from 17.2% to 16.3%. 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 our Vet division our mean position on an underlying basis remained stable at 29%. Over the course of the year the Vet division did see
an increase in the pay levels of female colleagues in the quartile 3 population, due to a number of internal promotions and some restructuring.
However, the same changes delivered a shift in the population in quartile 4, which resulted in a higher proportion of male colleagues in that
category. We were pleased to report that we have more female colleagues developing in the talent pipeline, which is clearly shown when
comparing our year-on-year progress in quartiles 2 and 3. We do however recognise that we need to make further progress here.
Our actions in supporting internal development through our leadership programmes and our commitment to the ‘Be Inspired’ programme, as
outlined on page 104 of the Corporate Social Responsibility report, combined with our wider work within our diversity and inclusion strategy as
outlined within our Gender Pay Report will all help address the current imbalance over the forthcoming years. A full copy of the Gender Pay Gap
report can be found here: https://investors.petsathome.com/responsibility/policies-and-procedures/gender-pay-gap-report/.
(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 2021, the Company’s dilution position was 2.8% for all plans
and 1.6% 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, Mike Iddon, the Chief Financial Officer, is appointed to the Board of Wickes Group plc as
a non-executive director (appointed 28 April 2021). The Chief Executive Director holds no 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 104 of the report.
136
Pets at Home Group PlcAnnual Report and Accounts 2021 3. Statement of implementation for FY22
This section provides an overview of how the Committee is proposing to implemented our Policy in FY22
Base salary
The date for the pay review for the Executive Team will now align to the wider management and salaried colleague population and will take
place in October rather than March each year.
When reviewing the Executive Team’s base pay, the Committee will continue to benchmark against relative market comparisons to ensure that
the package is considered competitive and does not pose a risk to retention and succession planning, whilst at the same time taking into
consideration the salary increase to the broader colleague population and the impact of COVID-19 on the business. The Committee may over
time approve salary increases that are ahead of the wider colleague population if this is indicated by a significant gap in market benchmark.
Benefits
The Committee sets benefits in line with the Policy set out on page 124 of the report. There are no proposed changes in the benefits policy for
FY22 other than anticipated standard inflationary increases on premiums.
Pensions
Pension for incumbent Directors will remain at the current level of 9% of salary until the end of FY22, when it will be reduced to 6.5%.
Annual bonus
The maximum annual bonus opportunity for Executive Directors in respect of FY22 will increase to 170% for the CEO and to 150% for the CFO.
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 124. As detailed on page 122 the target metrics
include FCF, PBT and strategic measures linked to subscriptions with an ESG moderator.
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 FY22 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 three-year vesting schedule and two-year post-vest holding
period will apply to these awards. However, the Committee remains 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.
Sharesave
The Company intends to operate the Sharesave scheme again for FY22. 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 will be reviewed in October and benchmarked against relative market comparisons to see whether
there has been any changes in the market since the fees were set in 2014. The table below shows the Non-Executive Director fee structure for
FY22 that will be reviewed in October:
Chair of the Board (all-inclusive fee)
Basic Non-Executive Director fee
Board Committee Chair fee
Deputy Chair and Senior Independent Director
There are no fees paid for membership of Board Committees.
FY22
£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 FY21
amounted to £57,030 (FY20: £79,149) based on the required time commitment.
During FY21 the Committee also received support from Travers Smith LLP on the terms of the discretionary and all-colleague share plans.
137
Governance reportStrategic reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Our Directors’ Remuneration Policy continued
Committee membership and meetings
The Directors listed below in the table served on the Committee during the year. The Committee met four times during FY21 and the
Committee members’ attendance is also shown in the table below:
Member
Paul Moody
Dennis Millard
Sharon Flood (Chair)
Prof Susan Dawson
Period from
27 March 2020
27 March 2020
27 March 2020
27 March 2020
To
9 July 2021
25 March 2021
25 March 2021
25 March 2021
Meetings
attended
3/3
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
Karen Whitworth
Ian Burke
Nick Rumble
Amy Smith
Lucy Williams
Position
Former Chair of the Board
Chief People and Culture Officer
CEO
CFO
Non-Executive Director
Non-Executive Director
Current Chairman of the Board
Group Head of Reward
Group Reward Partner
Group Legal Director and Company Secretary
None of the individuals were involved in making decisions at meetings regarding their own compensation.
Governance
The Board and the Committee consider that, throughout FY21 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 9 July 2020, the total number of shares in issue with voting rights was 500,000,000. Our new Remuneration
Policy was presented and approved at the July 2020 AGM, receiving 85.98% votes for1. 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 26 March 2020
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.
3
Issued share capital at meeting date: 500,000,000.
4 A vote withheld is not a vote in law and is not counted in the calculation of the proportion of votes ‘for’ and ‘against’ a resolution.
394,663,577
98.31
6,781,731
1.69
401,445,308
80.29
82,667
Annual General Meeting
As set out in my statement on page 122, our Directors’ Remuneration Report will be subject to an advisory vote at our AGM to be held
on 8 July 2021.
On behalf of the Board
Sharon Flood
Chair of the Remuneration Committee
27 May 2021
138
Pets at Home Group PlcAnnual Report and Accounts 2021 Financial statements
Independent Auditor’s Report
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
140
146
146
147
Consolidated statement of changes in equity as at 25 March 2021 148
Consolidated statement of changes in equity as at 26 March 2020 148
Consolidated statement of cash flows
Company balance sheet
Company statement of changes in equity as at 25 March 2021
Company statement of changes in equity as at 26 March 2020
Company income statement
Company statement of cash flows
Notes (forming part of the financial statements)
Glossary – Alternative Performance Measures
Advisors and contacts
149
150
151
151
151
152
153
210
214
139
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Independent Auditor’s Report to the Members of Pets at Home Group Plc only
1. Our opinion is unmodified
We have audited the financial statements of Pets at Home Group Plc
(“the Company”) for the 52 weeks ended 25 March 2021 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 25 March 2021
and of the Group’s profit for the year then ended;
• the Group financial statements have been properly prepared in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006;
• the parent Company financial statements have been properly
prepared in accordance with international accounting standards in
conformity with the requirements of, 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 to the
extent applicable.
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
8 financial years ended 25 March 2021. 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
Key audit matters
Recurring
risks
Company key
audit matter
£3.75m (2020:£3.75m)
4.3% (2020: 4.0%) of Normalised
Group profit before tax
93% (2020:95%) of Normalised Group profit before
tax
Carrying value of Vets Goodwill
Operating loans to joint venture practices
Carrying value of Parent Company’s
investment in subsidiaries
vs 2020
< >
< >
< >
2.
Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements and include
the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest
effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. We summarise below
the key audit matters, in decreasing order of audit significance, in arriving at our audit opinion above, together with our key audit procedures to
address those matters and, as required for public interest entities, our results from those procedures. These matters were addressed, and our results
are based on procedures undertaken, in the context of, and solely for the purpose of, our audit of the financial statements as a whole, and in forming
our opinion thereon, and consequently are incidental to that opinion, and we do not provide a separate opinion on these matters.
The risk
Forecast based valuation:
Goodwill in the Vet Group CGU is significant. The
estimated recoverable amount of this balance is
subjective due to the inherent uncertainty involved
in forecasting and discounting future cashflows,
which form the basis of the value in use.
In addition, in the current year the Group has
disposed of the Specialist Referral Group which
formed part of the Vet Group CGU. The relative
amount of goodwill allocated to the disposal is
highly judgemental and impacts both the remaining
carrying value of the Vet Group CGU goodwill and
the profit recognised on the sale of the specialist
Referral group.
The effect of these matters is that, as part of our
risk assessment for audit planning purposes, we
determined that the carrying value of the Vet Group
CGU goodwill 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.
Our response
We performed the detailed tests below rather than seeking to rely
on any of the Group’s controls because our knowledge of the design
of these controls indicated that we would not be able to obtain the
required evidence to support reliance on controls.
Our procedures included:
• Historical comparison: Assessing the reasonableness of the Vet Group’s
budgets by considering the historical accuracy of previous forecasts;
• Benchmarking assumptions: Using our own valuation specialist to
assess the reasonableness of Vet 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, reflect our knowledge of the business
and industry, including known or probable changes in the business
environment;
• Accounting analysis: We assessed whether the methodology used for
the allocation of the goodwill between the disposed Specialist division
and the remaining Vet CGU, based on the relative estimated recoverable
amounts, was in line with the applicable accounting standards;
• Sensitivity analysis: Performing sensitivity analysis on the key
assumptions and ensuring management have identified plausible
• worst case scenarios in their own sensitivity analysis; and
• Assessing transparency: Assessing whether the disclosures about
the impairment test appropriately reflect the risks inherent in the
valuation of Vet Group goodwill.
Our results:
• We found the Group’s assessment of the carrying value of the Vet
Group CGU goodwill to be acceptable. (2020: acceptable).
Carrying value of Vet
Group CGU Goodwill
(£360.9m;
2020: £395.1m)
Refer to page 110
(Audit and Risk
Committee Report),
page 161 (accounting
policy) and page 172
(financial disclosures).
140
Pets at Home Group PlcAnnual Report and Accounts 2021 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.
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
expected loss provision are not appropriate, and as
a result there is a risk that this provision is materially
under or over stated.
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
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.
Low risk, high value
The carrying amount of the parent company’s
investments in subsidiaries represents 61.3% (2020:
61.8%) of the parent company’s total assets. Their
recoverability is not at a high risk of significant
misstatement or subject to significant judgement.
However, due to their materiality in the context of
the parent company financial statements, this is
considered to be the area that had the greatest effect
on our overall parent company audit.
Operating loans
to joint venture
practices
£20.5m; 2020: £29.5m
Refer to page 110
(Audit and Risk
Committee Report),
page 161 (accounting
policy) and page 178
(financial disclosures).
Carrying value of the
parent Company’s
investments in
Subsidiaries
£936.2m; 2020:
£936.2m
Refer to page 110
(Audit and Risk
Committee Report),
page 161 (accounting
policy) and page 199
(financial disclosures).
Our response
We performed the detailed tests below rather than seeking to rely
on any of the Group’s controls because our knowledge of the design
of these controls indicated that we would not be able to obtain the
required evidence to support reliance on controls.
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
assumptions above;
• Assessing transparency: Assessing whether the Group’s disclosures
about the estimate appropriately reflect the risks inherent in the
expected loss 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 (2020:
acceptable).
• We found the non- consolidation of the joint venture veterinary
practices to be acceptable (2020: acceptable).
We performed the detailed tests below rather than seeking to rely
on any of the Group’s controls because our knowledge of the design
of these controls indicated that we would not be able to obtain the
required evidence to support reliance on controls.
Our procedures included:
• Tests of detail: comparing the value of investments to the market
capitalisation as at the period end date and post year end. Obtain
management’s view on impairment of investments and ensure this
is consistent with our audit testing.
• Comparing valuations: for the investments where the carrying
amount exceeded the net asset value, comparing to the VIU
calculation prepared by management in relation to the goodwill
impairment; and assessing the accuracy of the key inputs into the
VIU calculations;
• Sensitivity analysis; Performing sensitivity analysis on the key
assumptions and ensuring management have identified plausible
worst case scenarios in their own sensitivity analysis.
Our results
• We found the carrying value of the parent Company’s investments
in subsidiaries to be acceptable (2020 result: acceptable).
We continue to perform procedures over the uncertainties due to the exiting of UK from the European Union, Going Concern, Accounting for
Vets restructuring and IFRS16 (2020: transition to IFRS16). However, these risks were considered to be event driven in 2020 and therefore we have
not assessed them as one of the most significant risks in our current year audit.
We also continue to perform procedures over the valuation of inventory. We have downgraded our risk assessment of the valuation of inventory
on the basis of no historical audit misstatements; historical experience of low levels of loss making, obsolete or expired stock; and based on the
size of inventory provisions relative to Group materiality. Therefore, we have not assessed this as one of the most significant risks in our current
year audit and, therefore, it is not separately identified in our report this year. We continue to perform procedures over the carrying value of the
Retail CGU goodwill but have downgraded our risk assessment on the basis that the headroom between the estimated recoverable amount
and the carrying value is significant and management assumptions are not subject to significant estimate uncertainty. Therefore, we have not
assessed this as one of the most significant risks in the current year.
141
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Independent Auditor’s Report to the Members of Pets at Home Group Plc only
continued
3.
Our application of materiality and an overview
of the scope of our audit
Normalised Group profit before tax
£87.5m (2020: £93.5m)
Group Materiality
£3.75m (2020: £3.75m)
£3.75m
Whole financial
statements materiality
(2020: £3.75m)
£2.8m
Whole financial statements
performance materiality
(2020: £2.8m)
£3.5m
Range of materiality
at 3 components
(£1.3m-£3.5m)
(2020: £1.3m to £3.5m)
£0.18m
Misstatements reported
to the audit committee
(2020 £0.18m)
Normalised Group profit before tax
Group materiality
Group revenue
Group profit before tax
97%
(2020: 96%)
96
97
93%
(2020: 95%)
95
93
Group total assets
Normalised group profit before tax
99%
(2020: 99%)
99
99
93%
(2020: 96%)
96
93
Full scope for group audit purposes 2021
Full scope for group audit purposes 2020
Residual components
Materiality for the Group financial statements as a whole was set at
£3.75m (2020: £3.75m), determined with reference to a benchmark
of normalised Group profit before tax (PBT) of £87.5m (2020: £93.5m)
of which it represents 4.3% (2020: 4.0%).
We normalised PBT by excluding non-underlying items disclosed
in note 3.
Materiality for the parent Company financial statements as a whole
was set at £1.9m (2020: £3.0m), determined with reference to a
benchmark of Company total assets, of which it represents 0.12%
(2020: 0.2%). This is lower than the materiality we would otherwise
have determined by reference to total assets, and represents 18%
of the Company’s loss before tax (2020:37%).
In line with our audit methodology, our procedures on individual
account balances and disclosures were performed to a lower
threshold, performance materiality, so as to reduce to an acceptable
level the risk that individually immaterial misstatements in individual
account balances add up to a material amount across the financial
statements as a whole.
Performance materiality was set at 75% (2020:75%) of materiality
for the financial statements as a whole, which equates to £2.8m
(2020: £2.8m) for the group and £1.4m (2020: £2.25m) for the parent
company. We applied this percentage in our determination of
performance materiality because we did not identify any factors
indicating an elevated level of risk.
We agreed to report to the Audit Committee any corrected or
uncorrected identified misstatements exceeding £0.18m (2020:
£0.18m), in addition to other identified misstatements that warranted
reporting on qualitative grounds.
Of the Group’s 8 (2020: 9) reporting components, we subjected 4
(2020: 3) to full scope audits for Group purposes. For the residual 4
components, we performed analysis at an aggregated group level
to re-examine our assessment that there were no significant risks
of material misstatement within these.
The Group team performed procedures on the items excluded from
normalised group profit before tax.
The Group team instructed component auditors as to the significant
areas to be covered, including the relevant risks detailed above
and the information to be reported back. The work on 1 of the
8 components (2020: 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 approved the component materialities, which ranged
from £1.3m to £3.5 (2020: £1.3m to £3.5m), having regard to the mix of
size and risk profile of the Group across the components.
The Group team held video and telephone conference meetings
with the component auditors. 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.
The components within the scope of our work accounted for the
percentages illustrated opposite.
142
Pets at Home Group PlcAnnual Report and Accounts 2021 4. Going concern
The Directors have prepared the financial statements on the going
concern basis as they do not intend to liquidate the Group or the
Company or to cease their operations, and as they have concluded
that the Group’s and the Company’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”).
In our evaluation of the Directors’ conclusions, we considered the
inherent risks to the Group’s and Company’s business model and
analysed how those risks might affect the Group’s and Company’s
financial resources or ability to continue operations over the going
concern period.
The risks that we considered most likely to adversely affect the
Group’s and Company’s available financial resources over this
period were:
• The impact of Covid-19 on the Group’s cost base and growth;
•
Increased pressure from competitors
We considered whether these risks could plausibly affect liquidity or
covenant compliance in the going concern period by assessing the
degree of downside assumptions that, individually and collectively,
could result in a liquidity issue, taking into account the Group’s current
and projected cash and facilities (a reverse stress test). We assessed the
completeness and adequacy of the going concern disclosure.
Our conclusions based on this work:
• we consider that the directors’ use of the going concern basis
of accounting in the preparation of the financial statements is
appropriate;
• we have not identified, and concur with the directors’ assessment
that there is not, a material uncertainty related to events or
conditions that, individually or collectively, may cast significant
doubt on the Group’s or Company’s ability to continue as a going
concern for the going concern period; and
• we have nothing material to add or draw attention to in relation to
the directors’ statement in note 1.3 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 the going concern period, and we
found the going concern disclosure in note 1.3 to be acceptable; and
• the related statement under the Listing Rules set out on page 106
is materially consistent with the financial statements and our audit
knowledge.
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
above conclusions are not a guarantee that the Group or the
Company will continue in operation.
5
Fraud and breaches of laws and regulations –
ability to detect
Identifying and responding to risks of material misstatement
due to fraud
To identify risks of material misstatement due to fraud (“fraud risks”)
we assessed events or conditions that could indicate an incentive or
pressure to commit fraud or provide an opportunity to commit fraud.
Our risk assessment procedures included:
• Enquiring of directors as to the Group’s policies and procedures to
prevent and detect fraud, as well as whether they have knowledge
of any actual, suspected or alleged fraud.
Review of board meeting minutes.
Considering remuneration incentive schemes and performance
targets for Directors and key management personnel.
•
•
• Using analytical procedures to identify any unusual or unexpected
relationships.
We communicated identified fraud risks throughout the audit team
and remained alert to any indications of fraud throughout the audit.
As required by auditing standards, and taking into account possible
pressures to meet profit targets, we perform procedures to address
the risk of management override of controls and the risk of fraudulent
revenue recognition.
We did not identify any additional fraud risks.
We performed procedures including:
•
Identifying journal entries to test based on risk criteria and
comparing the identified entries to supporting documentation.
These included unexpected journal entries to cash, revenue and
supplier income.
• Substantive sample testing of revenue, specifically online,
recognised in the period, agreeing items back to supporting
documentation.
Identifying and responding to risks of material misstatement
due to non-compliance with laws and regulations
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 and other management (as required by
the auditing standards), and discussed with the Directors and other
management the policies and procedures regarding compliance with
laws and regulations.
As the Group is regulated our assessment of risks involved gaining
an understating of the control environment including the entity’s
procedures for complying with regulatory requirements.
We communicated identified laws and regulations throughout our
team and remained alert to any indications of non-compliance
throughout the audit. 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.
143
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Independent Auditor’s Report to the Members of Pets at Home Group Plc only
continued
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: sale
of goods and consumer rights legislation, animal welfare legislation;
health and safety, anti-bribery, employment law, regulatory capital and
liquidity and certain aspects of company legislation recognising the
nature of the Group’s activities. Auditing standards limit the required
audit procedures to identify non-compliance with these laws and
regulations to enquiry of the Directors and other management and
inspection of regulatory and legal correspondence, if any. Therefore
if a breach of operational regulations is not disclosed to us or evident
from relevant correspondence, an audit will not detect that breach.
Context of the ability of the audit to detect fraud or breaches
of law or regulation
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 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 fraud, as these may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal
controls. Our audit procedures are designed to detect material
misstatement. We are not responsible for preventing non-compliance
or fraud and cannot be expected to detect non-compliance with all
laws and regulations.
6.
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.
Disclosures of emerging and principal risks and longer-term
viability
We are required to perform procedures to identify whether there is
a material inconsistency between the directors’ disclosures in respect
of emerging and principal risks and the viability statement, and the
financial statements and our audit knowledge.
Based on those procedures, we have nothing material to add or draw
attention to in relation to:
• the directors’ confirmation within the viability statement on page 106
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 how
emerging risks are identified, 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.
We are also required to review the viability statement, set out on page
106 under the Listing Rules. Based on the above procedures, we have
concluded that the above disclosures are materially consistent with
the financial statements and our audit knowledge.
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 judgements
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.
144
Pets at Home Group PlcAnnual Report and Accounts 2021 Corporate governance disclosures
We are required to perform procedures to identify whether there is a
material inconsistency between the directors’ corporate governance
disclosures and the financial statements and our audit knowledge.
Based on those procedures, we have concluded that each of the
following is materially consistent with the financial statements and
our audit knowledge:
• 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;
• the section of the annual report describing the work of the Audit
Committee, including the significant issues that the audit committee
considered in relation to the financial statements, and how these
issues were addressed; and
• the section of the annual report that describes the review of
the effectiveness of the Group’s risk management and internal
control systems.
We are required to review the part of the Corporate Governance
Statement relating to the Group’s compliance with the provisions
of the UK Corporate Governance Code specified by the Listing Rules
for our review. We have nothing to report in this respect.
8. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 109, 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 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 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.
7.
We have nothing to report on the other matters
on which we are required to report by exception
A fuller description of our responsibilities is provided on the FRC’s
website at www.frc.org.uk/auditorsresponsibilities.
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.
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
27 May 2021
145
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Consolidated income statement
Revenue
Cost of sales
Impairment gains/(losses) on receivables
Gross profit
Selling and distribution expenses
Administrative expenses
Profit on disposal of subsidiary
Operating profit
Financial income
Financial expense
Net financing expense
Profit before tax
Taxation
Profit for the period
52 week period ended 25 March 2021
52 week period ended 26 March 2020
Note
2
3,16,17
3
3
2,3
6
7
8
Underlying
trading
£m
1,142.8
(583.2)
(0.8)
558.8
(321.0)
(131.9)
–
105.9
0.3
(18.7)
(18.4)
87.5
(17.3)
70.2
Non-
underlying
items (note
3) £m
–
0.6
–
0.6
–
(1.9)
30.2
28.9
–
–
–
28.9
(0.1)
28.8
Total
£m
1,142.8
(582.6)
(0.8)
559.4
(321.0)
(133.8)
30.2
134.8
0.3
(18.7)
(18.4)
116.4
(17.4)
99.0
Underlying
trading
£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
Non-
underlying
items (note
3) £m
–
(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
(313.8)
(93.8)
–
103.7
0.5
(18.3)
(17.8)
85.9
(18.5)
67.4
Basic and diluted earnings per share attributable to equity shareholders of the Company:
Equity holders of the parent – basic
Equity holders of the parent– diluted
Dividends paid and proposed are disclosed in note 9.
The notes on pages 153 to 209 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 cash flow hedges
Other comprehensive income for the period, before income tax
Income tax on other comprehensive income
Other comprehensive income for the period, net of income tax
Total comprehensive income for the period
The notes on pages 153 to 209 form an integral part of these financial statements.
52 week period
ended 25 March
2021
19.8p
19.4p
52 week period
ended 26 March
2020
13.5p
13.2p
Note
5
5
Note
22
22
15,22
52 week period
ended 25 March
2021
£m
99.0
52 week period
ended 26 March
2020
£m
67.4
0.1
5.0
5.1
(0.3)
4.8
103.8
(0.1)
(5.5)
(5.6)
0.9
(4.7)
62.7
146
Pets at Home Group PlcAnnual Report and Accounts 2021 Consolidated balance sheet
Non-current assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Other non-current assets
Current assets
Inventories
Deferred tax asset
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
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
Cash flow hedging reserve
Retained earnings
Total equity
On behalf of the Board:
Mike Iddon
Group Chief Financial Officer
27 May 2021
Company number: 08885072
The notes on pages 153 to 209 form an integral part of these financial statements.
Note
At 25 March 2021
£m
At 26 March 2020
£m
11
12
13
16
14
15
16
17
18
20
12
21
16
19
12
21
16
15
22
99.6
368.7
1,000.2
16.7
1,485.2
83.7
2.9
1.5
49.3
101.4
238.8
1,724.0
(211.1)
(78.4)
(1.5)
(4.3)
(1.3)
(296.6)
(98.7)
(331.3)
(2.1)
(1.6)
–
(433.7)
(730.3)
993.7
5.0
(372.0)
113.3
(0.0)
(1.5)
1,248.9
993.7
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
147
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021
Consolidated statement of changes in equity
as at 25 March 2021
Balance at 26 March 2020
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
Deferred tax movement on IFRS 2 reserve
Purchase of own shares
Total contributions by and distributions to owners
Balance at 25 March 2021
Share capital
£m
5.0
Consolidation
reserve
£m
(372.0)
Merger
reserve
£m
113.3
Cash flow
hedging
reserve
£m
(2.8)
Translation
reserve
£m
(0.1)
Retained
earnings
£m
1,187.6
Total equity
£m
931.0
–
–
–
–
–
–
–
–
–
–
5.0
–
–
–
–
–
–
–
–
–
–
(372.0)
–
–
–
–
–
–
–
–
–
–
113.3
–
4.7
4.7
(3.4)
(3.4)
–
–
–
–
–
(1.5)
–
0.1
0.1
–
–
–
–
–
–
–
(0.0)
99.0
–
99.0
–
–
(37.1)
4.7
3.4
(8.7)
(37.7)
1,248.9
99.0
4.8
103.8
(3.4)
(3.4)
(37.1)
4.7
3.4
(8.7)
(37.7)
993.7
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
Balance at 26 March 2020
Share capital
£m
5.0
Consolidation
reserve
£m
(372.0)
Merger
reserve
£m
113.3
Cash flow
hedging
reserve
£m
0.8
Translation
reserve
£m
(0.0)
Retained
earnings
£m
1,155.9
Total equity
£m
903.0
–
–
–
–
–
–
–
–
–
5.0
–
–
–
–
–
–
–
–
–
(372.0)
–
–
–
–
–
–
–
–
–
113.3
–
(4.6)
(4.6)
1.0
1.0
–
–
–
–
(2.8)
–
(0.1)
(0.1)
–
–
–
–
–
–
(0.1)
67.4
–
67.4
–
–
(37.1)
4.2
(2.8)
(35.7)
1,187.6
67.4
(4.7)
62.7
1.0
1.0
(37.1)
4.2
(2.8)
(35.7)
931.0
148
Pets at Home Group PlcAnnual Report and Accounts 2021 Consolidated statement of cash flows
Cash flows from operating activities
Profit for the period
Adjustments for:
Depreciation and amortisation
Non-underlying impairment
Profit on disposal
Financial income
Financial expense
Settlement of ‘put & call’ liabilities (growth element)
Share based payment charges
Taxation
Decrease in trade and other receivables
(Increase)/decrease in inventories
Increase in trade and other payables
Increase/(decrease) in provisions
Increase/(decrease) in working capital relating to non-underlying items
Tax paid
Net cash flow from operating activities
Cash flows from investing activities
Proceeds from the sale of property, plant and equipment
Interest received
Investment in other financial assets
Costs to acquire right-of-use assets
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)
Disposal of subsidiaries, net of cash disposed (non-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
Cash flows 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
The notes on pages 153 to 209 form an integral part of these financial statements.
52 week period
ended
25 March 2021
£m
52 week period
ended
26 March 2020
£m
99.0
110.8
–
(30.2)
(0.3)
18.7
–
4.7
17.4
220.1
3.1
(22.1)
10.2
1.3
–
212.6
(17.5)
195.1
0.3
0.4
–
(0.4)
(16.9)
–
–
79.4
–
(34.9)
27.9
(37.1)
60.0
(125.0)
(0.2)
(66.6)
(5.5)
(8.7)
(0.0)
(4.8)
(12.8)
(200.7)
22.3
79.1
101.4
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
149
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 At 25 March 2021
£m
At 26 March 2020
£m
Note
28
16
17
18
15
20
16
19
16
22
936.2
936.2
0.2
587.9
–
3.7
591.8
1,528.0
(509.7)
(0.1)
(509.8)
(98.7)
(1.6)
(100.3)
(610.1)
917.9
5.0
113.3
(1.2)
800.8
917.9
936.2
936.2
0.3
579.2
–
0.4
579.9
1,516.1
(387.8)
(0.0)
(387.8)
(163.3)
(2.3)
(165.6)
(553.4)
962.7
5.0
113.3
(1.6)
846.0
962.7
Company balance sheet
Non-current assets
Investments in subsidiaries
Current assets
Other financial assets
Trade and other receivables (due in greater than 1 year)
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
Cash flow hedging reserve
Retained earnings
Total equity
On behalf of the Board:
Mike Iddon
Group Chief Financial Officer
27 May 2021
Company number: 08885072
The notes on pages 153 to 209 form an integral part of these financial statements.
150
Pets at Home Group PlcAnnual Report and Accounts 2021 Company statement of changes in equity
as at 25 March 2021
Balance at 26 March 2020
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
Deferred tax movement on IFRS 2 reserve
Purchase of own shares
Total contributions by and distributions to owners
Balance at 25 March 2021
Share capital
£m
5.0
Merger reserve
£m
113.3
Cash flow
hedging reserve
£m
(1.6)
Retained
earnings
£m
846.0
Total equity
£m
962.7
–
–
–
–
–
–
–
–
5.0
–
–
–
–
–
–
–
–
113.3
–
0.4
0.4
–
–
–
–
–
(1.2)
(7.5)
–
(7.5)
(37.1)
4.7
3.4
(8.7)
(37.7)
800.8
(7.5)
0.4
(7.1)
(37.1)
4.7
3.4
(8.7)
(37.7)
917.9
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 payments charge
Purchase of own shares
Total contributions by and distributions to owners
Balance at 26 March 2020
Company income statement
Share capital
£m
5.0
Merger reserve
£m
113.3
Cash flow
hedging reserve
£m
(0.1)
Retained
earnings
£m
887.3
Total equity
£m
1,005.5
–
–
–
–
–
–
–
5.0
–
–
–
–
–
–
–
113.3
–
(1.5)
(1.5)
–
–
–
–
(1.6)
(5.6)
–
(5.6)
(37.1)
4.2
(2.8)
(35.7)
846.0
(5.6)
(1.5)
(7.1)
(37.1)
4.2
(2.8)
(35.7)
962.7
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 25 March 2021 was £7.5m (loss for the 52 week period ended 26 March 2020 was £5.6m).
151
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Company statement of cash flows
Cash flows 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 cash flow from operating activities
Cash flows 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
52 week period
ended 25 March
2021
£m
52 week period
ended 26 March
2020
£m
(7.5)
5.9
4.7
(3.1)
0.0
(8.7)
121.5
3.5
116.3
(37.1)
60.0
(125.0)
(0.2)
(5.3)
(8.7)
(116.3)
–
–
–
(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)
–
–
–
152
Pets at Home Group PlcAnnual Report and Accounts 2021 Notes (forming part of the financial statements)
Pets at Home Group Plc (the Company) is a company incorporated in the United Kingdom and its registered office is Epsom Avenue,
Stanley Green, Handforth, Cheshire, SK9 3RN.
1
Significant accounting policies
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these consolidated
financial statements.
1.1 Basis of preparation
The consolidated financial statements were prepared in accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006. The Company’s financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006. The
Company has taken advantage of the exemption provided under section 408 of the Companies Act 2006 not to publish its individual income
statement and related notes.
The financial statements are prepared under the historical cost convention, as modified by the revaluation of derivative financial instruments
to fair value, and in accordance with those parts of the Companies Act 2006 applicable to companies reporting under IFRS as adopted by the
European Union. New standards and interpretations issued by the International Accounting Standards Board (IASB) and the International
Financial Reporting Interpretations Committee (IFRIC) becoming effective during the 52 week period ended 25 March 2021 have not had
a material impact on the Group’s financial statements.
1.2 Measurement convention
The consolidated financial statements are prepared on the historical cost basis except that the following assets and liabilities are stated at their
fair value: derivative financial instruments, financial instruments classified as fair value through the profit or loss. Non-current assets held for sale
are stated at the lower of previous carrying amount and fair value less costs to sell.
1.3 Going concern
The Company’s business activities, together with the factors likely to affect its future development, performance and position, are set out in the
Strategic Report, including a detailed COVID-19 assessment within the Chief Executive’s statement. The financial position of the Company, its
cash flows, liquidity position and borrowing facilities are described in the Chief Financial Officer’s review. In addition, note 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.
The Directors of the Group have prepared cash flow forecasts for a period of at least 12 months from the date of the approval of these financial
statements which indicate that, taking account of reasonably possible downsides, the Group will have sufficient funds, through its revolving
credit facility, to meet its liabilities as they fall due for that period.
In preparing the forecasts for the Group, 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 and higher levels of online orders have continued to be fulfilled from Distribution Centres.
The Group has access to a revolving credit facility of £248m, which expires in September 2023, with £100.0m drawn down at 25 March 2021 and
cash balances of £101.4m. The lowest level of headroom forecast over the next 12 months from the date of signing of the financial statements is
in excess of £254.7m in the base case scenario. On a sensitised basis, the headroom forecast over the next 12 months from the date of
approving of the financial statements is £215.0m. 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. A number of
severe but plausible downside scenarios were calculated compared to the base case forecast of profit and cash flow to assess headroom against
facilities for the next 12 months. These scenarios included:
Scenario 1: Reduction on Group like-for-like assumption of 1% in each year throughout the forecast period, with ordinary dividends continuing
Scenario 2: Using scenario 1 outcomes and further impacted by a conflated risk impact of £22.5m on sales and £11.25m on PBT, with dividends
held at 7.5p per share
Scenario 3: Group like-for-like sales declines to 0% over the next year and a conflated risk impact of £74.5m on sales and £37.25m on PBT is used,
with dividends cut to nil to conserve cash
Against these negative scenarios, adjusted projections showed no breach of covenants with the lowest level of headroom in the strategic
planning horizon being £183.6m. Further mitigating actions could also be taken in such scenarios should it be required, including reducing
capital expenditure.
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 a period of at least 12 months from the date of approval of these financial statements 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 25 March 2021.
153
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 1
Significant accounting policies (continued)
1.4 Basis of consolidation
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns through its power over the entity. In assessing control, the Group takes
into consideration potential voting rights that are currently exercisable. The acquisition date is the date on which control is transferred to the
acquirer. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences
until the date that control ceases. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests
even if doing so causes the non-controlling interests to have a deficit balance.
The Group 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 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.
1.5 Foreign currency
Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the foreign exchange rate ruling at
the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated to the
functional currency at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the
income statement, except for differences arising on the retranslation of a financial liability designated as a hedge of the net investment in a
foreign operation that is effective, or qualifying cash flow hedges, which are recognised directly in other comprehensive income. Non-monetary
assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the
transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are retranslated to the functional
currency at foreign exchange rates ruling at the dates the fair value was determined.
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to the
Group’s presentational currency, sterling, at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign
operations are translated at an average rate for the period where this rate approximates to the foreign exchange rates ruling at the dates of the
transactions. Exchange differences arising from this translation of foreign operations are reported as an item of other comprehensive income
and accumulated in the translation reserve or non-controlling interest, as the case may be.
Functional currency
The consolidated financial statements are presented in sterling which is the Group and Company’s functional currency and have been rounded
to the nearest million.
1.6 Classification of financial instruments issued by the Group
Following the adoption of IAS 32, financial instruments issued by the Group are treated as equity only to the extent that they meet the following
two conditions:
(a)
they include no contractual obligations upon the Company (or Group as the case may be) to deliver cash or other financial assets or to
exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the Company (or
Group); and
(b) where the instrument will or may be settled in the Company’s own equity instruments, it is either a non-derivative that includes no
obligation to deliver a variable number of the Company’s own equity instruments or is a derivative that will be settled by the Company
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.
1.7 Non-derivative financial instruments
Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash equivalents,
loans and borrowings, and trade and other payables.
Trade and other receivables
Trade and other receivables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the
effective interest method, less any expected credit loss.
154
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2021 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.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part
of the Group’s cash management are included as a component of cash and cash equivalents for the purpose only of the cash flow statement.
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value, net of attributable transaction costs. Subsequent to initial recognition, interest-
bearing borrowings are stated at amortised cost using the effective interest method.
Contingent consideration
Contingent consideration on acquisition or disposal of a subsidiary is valued at fair value at the time of acquisition or disposal. Any subsequent
change in fair value is recognised in profit or loss (see 1.12).
1.8 Derivative financial instruments and hedging
Derivative financial instruments
Derivative financial instruments are recognised at fair value. The gain or loss on re-measurement to fair value is recognised immediately in profit
or loss. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item
being hedged (see below).
Cash flow hedges
Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, or a highly
probable forecast transaction, the effective part of any gain or loss on the derivative financial instrument is recognised directly in the hedging
reserve. Any ineffective portion of the hedge is recognised immediately in the income statement.
If a hedge of a forecast transaction subsequently results in the recognition of a financial asset or a financial liability, the associated gains and
losses that were recognised directly in equity are reclassified into profit or loss in the same period or periods during which the asset acquired
or liability assumed affects profit or loss, i.e. when interest income or expense is recognised.
When the hedged forecast transaction subsequently results in the recognition of a non-financial item such as inventory, the amount
accumulated in the hedging reserve and the cost of hedging is included directly in the initial cost of the non-financial item when it is
recognised. For all other hedging forecast transactions, the amount accumulated in the hedging reserve and the cost of hedging is reclassified
to profit or loss in the same period or periods during which the hedged expected future cash flows affect the profit or loss.
For cash flow hedges, other than those covered by the preceding two policy statements, the associated cumulative gain or loss is removed
from equity and recognised in the income statement in the same period or periods during which the hedged forecast transaction affects profit
or loss.
When a hedging instrument expires or is sold, terminated or exercised, or the entity revokes designation of the hedge relationship but the
hedged forecast transaction is still expected to occur, the cumulative gain or loss at that point remains in equity and is recognised in accordance
with the above policy when the transaction occurs. If the hedged transaction is no longer expected to take place, the cumulative unrealised
gain or loss recognised in equity is recognised in the income statement immediately.
Intra-group financial instruments
1.9
Financial guarantee contracts to guarantee the indebtedness of companies within the Group are considered to be insurance arrangements and
accounted for as such. In this respect, the Group treats the guarantee contract as a contingent liability until such time as it becomes probable
that a payment will be required under the guarantee.
1.10 Property, plant and equipment
Property, plant and equipment 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.
155
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 1
Significant accounting policies (continued)
1.11 Intangible assets
Intangible assets acquired in a business combination
Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the
acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and
accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
Customer lists are valued based on the forecast net present value of the future economic relationship with those customers, adjusted for forecast
retention rates. Technology based ‘know how’ assets are valued based on the expected cost to reproduce or replace the asset, adjusted for the
physical deterioration and functional or economic obsolescence, if present and measurable. Software is stated at cost less accumulated amortisation.
Amortisation is charged to the income statement on a straight-line basis over the estimated useful life of an asset. The estimated useful lives are
as follows:
Software
Customer lists
Technology based know how
– 2 to 7 years
– 10 years
– 10 years
Amortisation methods, useful lives and residual values are reviewed at each balance sheet date.
1.12 Business combinations
Business combinations are accounted for by applying the acquisition method as at the acquisition date, which is the date on which control is
transferred to the Group.
Acquisitions on or after 26 March 2010
For acquisitions on or after 26 March 2010, the Group measures goodwill at the acquisition date as:
• the fair value of the consideration transferred; plus
• the recognised amount of any non-controlling interests in the acquiree; plus
• the fair value of the existing equity interest in the acquiree; less
• the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.
When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.
Costs related to the acquisition, other than those associated with the issue of debt or equity securities, are expensed as incurred.
Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is
not re-measured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration
are recognised in profit or loss. If contingent consideration is payable and is dependent on future employment, it is recognised as an expense
over the relevant period as a cost of continuing employment.
Any contingent deferred consideration receivable is recognised at fair value.
A combined put and call option over non-controlling interests is recognised at fair value at the acquisition date and included within the
valuation of goodwill. Subsequent changes to fair value are recognised in profit or loss.
Where a combined written put and call option exists over a non-controlling interest, and the conditions of the agreement provide the Group
with present access to the benefits of the ownership of the non-controlling interest, then the acquisition is deemed to reflect 100% ownership
and no non-controlling interest is recognised. A liability is recorded for the expected future acquisition of the non-controlling interest, and is
recognised as part of the fair value of the consideration. Where the written put and call option has an embedded valuation mechanism to
reward and retain key individuals employed by the acquired business, who are also non-controlling shareholders, then the expected increase in
the financial liability is charged to the income statement as employment costs evenly over the option period within non-underlying items. See
note 1.21 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.
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Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2021 1.13 Acquisitions and disposals of non-controlling interests
Acquisitions and disposals of non-controlling interests that do not result in a change of control are accounted for as transactions with owners in
their capacity as owners and therefore no goodwill is recognised as a result of such transactions. The adjustments to non-controlling interests
are based on a proportionate amount of the net assets of the subsidiary. Any difference between the price paid or received and the amount by
which non-controlling interests are adjusted is recognised directly in equity and attributed to the owners of the parent.
1.14 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is based on the weighted average cost principle and includes
expenditure incurred in acquiring the inventories, production or conversion costs and other costs in bringing them to their existing location
and condition, less rebates and discounts.
Provision is made against specific inventory lines where market conditions identify an issue in recovering the full cost of that SKU (Stock Keeping
Unit). The provision focuses on the age of inventory and 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 1.21.
1.15 Impairment excluding inventories and deferred tax assets
Financial assets (including receivables)
Measurement of Expected Credit Losses (‘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 cash flows due to the Group in accordance with the contract and the cash flows that the Group 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 Group considers Joint
Venture loans and receivables to be in default when the underlying veterinary practice is significantly under-performing against its business
plan, assessed based on its performance against a scorecard of qualitative and quantitative metrics. Each practice is reviewed against this set of
criteria and their appropriate risk weightings on an ongoing basis by management. Those within the low credit risk category are not deemed
to be in default. Practices categorised within the high and medium credit risk categories are those considered to be in default based on their
scorecard performance. Loss given default is determined based on forecast future cash flows. The Group 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 Group 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 cash flows of the financial
asset have occurred.
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 1.21 and in note 16.
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 as defined by IAS 36 is the greater of its value in use and its fair value less costs to
sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a post-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.
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Significant accounting policies (continued)
1.16 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.
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.
1.17 Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, that can
be reliably measured and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined
by discounting the expected future cash flows at a pre-tax rate that reflects risks specific to the liability.
1.18 Revenue and cost of sales
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, and substantially all of the Group’s performance obligations have been fulfilled. 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 in time
the customer obtains control of the goods and substantially all of the Group’s performance obligations have been fulfilled, 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.
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Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2021 Gift vouchers and cards
Revenue from the sale of gift vouchers and cards is deferred until the voucher is redeemed, at which point performance obligations have been
fulfilled. 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, at which
point performance obligations have been fulfilled. 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 at which point performance
obligations have been fulfilled. Subscription services primarily relate to the repeat order of flea and worm products sold online and in-store.
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 at the point at which the Group has substantially fulfilled its performance obligations.
Veterinary Group income
i)
Veterinary Group income represents revenue from the provision of veterinary services (from Specialist Referral Centres up until 31 December
2020 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.
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.
Grooming revenue
ii)
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.
Insurance commissions
iii)
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
up until 31 December 2020, 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 210.
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Significant accounting policies (continued)
1.18 Revenue and cost of sales (continued)
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.
1.19 Expenses
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.
1.20 Taxation
Tax on the profit or loss for the period comprises current and deferred tax. Tax is recognised in the income statement except to the extent that
it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable or receivable on the taxable income or loss for the period, using tax rates enacted or substantively
enacted at the balance sheet date, and any adjustment to tax payable in respect of previous periods.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial
recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination; and differences relating
to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is
based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or
substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary
difference can be utilised.
160
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2021 1.21 Accounting estimates and judgements
The preparation of consolidated financial statements in conformity with IFRS requires management to make judgements, estimates and
assumptions concerning the future that affect the application of accounting policies and the reported amounts of assets, liabilities, income and
expenses. These judgements are based on historical experience and management’s best knowledge at the time and the actual results may
ultimately differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis and revisions to accounting
estimates are recognised in the period in which the estimates are revised and in any future periods affected.
The estimates and assumptions that have significant risk of causing a material adjustment to the carrying value of assets and liabilities are
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 cash flows expected
to arise from the cash-generating unit (CGU) and a suitable discount rate in order to calculate present value. Details of CGUs as well as further
information about the assumptions made are disclosed in note 13.
Operating and other loans (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 operating 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 loans, the qualitative and quantitative risk-related criteria used to assess default and therefore also the probability of default (as defined
in note 1.15), and in estimating an appropriate ‘loss given default’ to apply to each loan based on forecast future cash flows. 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 cash flow 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 operating loans and other loans and expected credit loss made against these loans is disclosed in notes 16, 17 and 27.
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 25 March 2021.
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 25 March 2021 the inventory provision amounted to £3.9m (26 March 2020: £3.2m). Of this, £2.5m of the provision relates to a
provision against ageing inventory. The value of inventory against which an ageing provision is held is £8.9m (26 March 2020: £7.1m). The
remaining £1.4m of the provision relates to specific inventory provisioning relating to factors other than ageing. 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.
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Significant accounting policies (continued)
1.22 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.
2
Segmental Reporting
The Group has three reportable segments, Retail, Vet Group and Central, 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 three reportable segments, Retail, Vet Group and Central, which are the Group’s strategic
business units. 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 up until 31 December 2020. Central includes veterinary telehealth business, 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
underlying 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
Net financing expense
Profit before tax
52 week period ended 25 March 2021
Retail
£m
1,018.9
501.6
79.5
–
79.5
(12.0)
67.5
Vet Group
£m
123.2
56.7
36.0
28.9
64.9
(0.5)
64.4
Central
£m
0.7
0.5
(9.6)
–
(9.6)
(5.9)
(15.5)
Total
£m
1,142.8
558.8
105.9
28.9
134.8
(18.4)
116.4
Non-underlying operating expenses in the periods ended 25 March 2021 and 26 March 2020 are explained in note 3.
52 week period ended 26 March 2020
Retail
£m
937.6
466.2
89.3
–
89.3
(13.3)
76.0
Vet Group
£m
121.2
51.7
30.6
(7.6)
23.0
(0.3)
22.7
Central
£m
–
–
(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
Income statement
Revenue
Gross profit
Underlying operating profit/(loss)
Non-underlying items
Segment operating profit/(loss)
Net financing expense
Profit/(loss) before tax
162
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2021 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 210.
Segmental revenue analysis by revenue stream
Retail – Food
Retail – Accessories
Retail – Services
Vet Group – First Opinion fee income
Vet Group – Company managed practices
Vet Group – Other income
Vet Group – Specialist
Central – Veterinary telehealth services
Total
Segmental revenue analysis by revenue stream
Retail – Food
Retail – Accessories
Retail – Services
Vet Group – First Opinion fee income
Vet Group – Company managed practices
Vet Group – Other income
Vet Group – Specialist
Total
52 week period ended 25 March 2021
Vet Group
£m
36.0
2.1
2.1
1.4
41.6
Central
£m
(9.6)
–
–
–
(9.6)
Total
£m
105.9
26.9
70.3
13.6
216.7
52 week period ended 26 March 2020
Vet Group
£m
30.6
2.5
2.1
0.5
35.7
Central
£m
(8.6)
–
–
–
(8.6)
Total
£m
111.3
28.3
71.1
10.0
220.7
52 week period ended 25 March 2021
Vet Group
£m
–
–
–
57.0
25.5
6.8
33.9
–
123.2
Central
£m
–
–
–
–
–
–
–
0.7
0.7
Total
£m
551.5
431.4
36.0
57.0
25.5
6.8
33.9
0.7
1,142.8
52 week period ended 26 March 2020
Vet Group
£m
–
–
–
53.8
21.6
6.2
39.6
121.2
Central
£m
–
–
–
–
–
–
–
–
Total
£m
517.4
375.3
44.9
53.8
21.6
6.2
39.6
1,058.8
Retail
£m
79.5
24.8
68.2
12.2
184.7
Retail
£m
89.3
25.8
69.0
9.5
193.6
Retail
£m
551.5
431.4
36.0
–
–
–
–
–
1,018.9
Retail
£m
517.4
375.3
44.9
–
–
–
–
937.6
163
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 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
Profit on disposal of subsidiary
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
Rentals under operating leases:
Expenses relating to short term leases
Other income
Rental income from sub-leasing right-of-use assets to third parties1
Rental income from related parties1
Share based payment charges
1 This other income is presented within selling and distribution expenses.
52 week period
ended 25 March
2021
£m
52 week period
ended 26 March
2020
£m
–
(0.6)
–
–
1.9
(30.2)
(28.9)
0.8
26.9
13.6
70.3
0.1
(0.3)
(7.3)
4.7
(0.3)
3.5
1.6
1.8
1.0
–
7.6
0.9
28.3
10.0
71.1
0.1
(0.3)
(7.4)
4.2
During the 52 week period ended 25 March 2021, the Group disposed of its 100% shareholding in the subsidiary Pets at Home Veterinary
Specialist Group Limited, and its subsidiaries Northwest Veterinary Specialists Limited, Anderson Moores Veterinary Specialists Limited, Eye-Vet
Limited, Dick White Referrals Limited and Veterinary Specialists (Scotland) Limited. The profit on disposal reported in the non-underlying items
above represents consideration received and costs incurred by the Group in relation to the disposal, as follows:
Cash consideration received
Net assets disposed of
Profit on disposal of net assets
Costs borne by the Group
Profit on disposal
£m
80.0
(48.5)
31.5
(1.3)
30.2
Further deferred contingent consideration of £20.0m may become payable at a future date, subject to the Specialist Referral Centres achieving
certain financial KPIs. The fair value of the deferred consideration is immaterial due to the substantial uncertainty regarding the timing and
achievement of the financial KPIs, which are not within the control of the Group.
The remaining non-underlying operating expenses in the period ended 25 March 2021 of £1.3m relate to:
• £1.9m of non-underlying operating expenses relate 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, prior to the disposal of the Specialist Referral Centres. 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. As a result of the disposal of the Specialist Referral Centres, the put and call options were settled in the period and
as at 25 March 2021, the financial liability held on the consolidated balance sheet was £nil.
• (£0.6m) of non-underlying operating expenses relate to the release of provisions for exit and closure costs provided for under IAS 37 in relation
to Joint Venture veterinary practices provided for in the 52 week period ended 26 March 2020.
The non-underlying operating expenses in the period ended 26 March 2020 of £7.6m related to:
• (£0.3m) related 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.
• £3.5m related to exit and closure costs (provided for under IAS 37) payable in relation to Joint Venture veterinary practices which the Group has acquired.
• £1.6m related to the write down of right-of-use assets to their expected recoverable amount, relating to First Opinion veterinary practices
acquired with the intention of being closed.
• £1.8m related to the impairment of property, plant and equipment and intangible assets relating to the review and recalibration exercise of the
First Opinion veterinary practices.
• £1.0m of non-underlying operating expenses related 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.
164
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2021 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 non-underlying costs to be those that are not generated from ordinary business operations,
infrequent in nature and unlikely to reoccur in the foreseeable future. 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.
Underlying items
The rentals under short term leases disclosed in relation to the 52 week period ended 25 March 2021 and the 52 week period ended 26 March
2020 relate to leases under short term agreements. These fall under the short term exemption so are excluded from the requirements of IFRS 16
on the basis that the lease terms are 12 months or less.
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 legislation1
Review of interim financial statements
All other services
1 The comparative auditor’s remuneration has been restated to enhance comparability.
4
Colleague numbers and costs
52 week period
ended 25 March
2021
£m
0.0
52 week period
ended 26 March
2020
£m
0.0
0.9
0.1
0.0
1.0
0.7
0.1
0.0
0.8
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 options1
Executive Directors’ pension contributions
Total Directors’ remuneration
Executive Management Team emoluments including social security costs1
Executive Management Team amounts receivable under share options1
Executive Management Team pension contributions1
Total Executive Management Team remuneration
52 week period
ended 25 March
2021
Number
6,538
732
7,270
52 week period
ended 26 March
2020
Number
6,432
707
7,139
8,904
1,100
10,004
8,506
1,055
9,561
52 week period
ended 25 March
2021
£m
227.6
19.2
7.6
254.4
52 week period
ended 26 March
2020
£m
203.1
17.5
6.9
227.5
52 week period
ended 25 March
2021
£m
2.1
0.5
1.8
0.1
4.5
5.5
2.2
0.2
7.9
52 week period
ended 26 March
2020
£m
1.8
0.5
1.0
0.1
3.4
3.9
1.4
0.2
5.5
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.
1 The comparative numbers in the 52 week period ended 26 March 2020 have been restated to be comparable with the numbers presented in the 52 week period ended 25 March 2021.
165
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 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
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 25 March
2021
52 week period ended 26 March
2020
Underlying
trading
70.2
500.0
11.6
511.6
14.0p
13.7p
After non-
underlying
items
99.0
500.0
11.6
511.6
19.8p
19.4p
Underlying
trading
74.9
500.0
9.6
509.6
15.0p
14.7p
After non-
underlying
items
67.4
500.0
9.6
509.6
13.5p
13.2p
52 week period
ended 25 March
2021
£m
0.3
0.0
0.3
52 week period
ended 26 March
2020
£m
0.4
0.1
0.5
52 week period
ended 25 March
2021
£m
6.0
12.8
(0.1)
18.7
52 week period
ended 26 March
2020
£m
4.4
14.0
(0.1)
18.3
52 week period
ended 25 March
2021
£m
52 week period
ended 26 March
2020
£m
20.2
(1.8)
18.4
(2.2)
–
1.2
(1.0)
17.4
22.0
(0.8)
21.2
(3.4)
0.2
0.5
(2.7)
18.5
The UK corporation tax standard rate for the period is 19% (2020: 19%). The deferred tax liability at 25 March 2021 has been calculated at 19% (2020:
19%). In the 3 March 2021 budget it was announced that the UK tax rate would increase to 25% from 1 April 2023. This will have a consequential
effect on the Group’s future tax charge. If this rate change had been substantively enacted at the current balance sheet date, the impact on the
deferred tax position would not have been material as a significant proportion of the deferred tax assets and liabilities unwind at 19%.
166
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2021 Deferred tax recognised in comprehensive income
Effective portion of changes in fair value of cash flow hedges (note 22)
Reconciliation of effective tax rate
52 week period
ended 25 March
2021
£m
0.3
52 week period
ended 26 March
2020
£m
(0.9)
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 26 March 2020: 19%)
Impact of difference between deferred and current tax rates
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 25 March 2021
52 week period ended 26 March 2020
Underlying
trading
£m
70.2
17.3
87.5
16.6
Non-
underlying
items
£m
28.8
0.1
28.9
5.5
–
0.6
0.6
(0.5)
17.3
–
–
(5.4)
–
0.1
Underlying
trading
£m
74.9
18.6
93.5
17.8
Non-
underlying
items
£m
(7.5)
(0.1)
(7.6)
(1.5)
0.2
0.9
0.1
(0.4)
18.6
–
–
1.4
–
(0.1)
Total
£m
99.0
17.4
116.4
22.1
–
0.6
(4.8)
(0.5)
17.4
Total
£m
67.4
18.5
85.9
16.3
0.2
0.9
1.5
(0.4)
18.5
The UK corporation tax standard rate for the 52 week period ended 25 March 2021 was 19% (52 week period ended 26 March 2020: 19%). The
effective tax rate before non-underlying items for the 52 week period ended 25 March 2021 was 19.7%.
9 Dividends paid and proposed
Declared and paid during the period
Final dividend of 5.0p per share (2020: 5.0p per share)
Interim dividend of 2.5p per share (2020: 2.5p per share)
Proposed for approval by shareholders at the AGM
Final dividend of 5.5p per share (2020: 5.0p per share)
Group and Company
52 week period
ended
25 March 2021
£m
52 week period
ended
26 March 2020
£m
24.7
12.4
27.2
24.8
12.3
24.7
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 25 March 2021 and 26 March 2020 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 25 March 2021: 5,958,116 shares; holding at 26 March 2020: 5,749,377 shares).
167
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 10 Business combinations
Subsidiaries acquired
On 27 November 2020, the Group acquired 100% of the total share capital of Pet Advisory Services Limited and its subsidiary VetsDirect Limited
in exchange for cash consideration. Pet Advisory Services Limited and Vets Direct Limited are a veterinary telehealth service. The Group expects
to realise both revenue and cost synergies from the acquisition, which will allow the Group to better support its customers by providing out of
hours veterinary services.
Pet Advisory Services Limited
VetsDirect Limited
Principal activity
Veterinary telehealth services
Veterinary telehealth services
Date of acquisition
27 November 2020
27 November 2020
Proportion of
voting equity
instruments
acquired
100%
100%
Cash
consideration
transferred
£m
16.5
–
Assets acquired and liabilities recognised at the date of acquisition
The provisional amounts recognised in respect of identifiable assets and liabilities relating to the acquisition are as follows:
Current assets
Cash and cash equivalents
Trade and other receivables
Non-current assets
Intangible assets
Tangible fixed assets
Current liabilities
Trade and other payables
Non-current liabilities
Deferred tax liability
Net assets
Goodwill arising on acquisition
Consideration
Less: Fair value of assets acquired
Goodwill arising on acquisition
Book value of
assets and
liabilities
acquired
£m
Adjustments on
acquisition
£m
Fair value of
assets and
liabilities
acquired
£m
0.7
1.0
0.2
0.0
(0.5)
–
1.4
–
–
4.5
–
–
(0.8)
3.7
0.7
1.0
4.7
0.0
(0.5)
(0.8)
5.1
£m
16.5
(5.1)
11.4
Consideration has been given to other intangibles that are recognisable under IFRS 3 Business Combinations. No favourable leases were owned
by the company at the time of acquisition. A customer list intangible asset of £1.9m and an intangible asset of £2.6m relating to call script know
how have been identified and recognised separately from goodwill at fair value. None of the goodwill identified on this acquisition is expected
to be deductible for tax purposes.
The intangible asset recognised on acquisition relates to:
• Customer contracts of £1.9m have been recognised and valued using the excess earnings method, and will be amortised over 10 years
• Call scripts know how of £2.6m have been recognised and valued using the replacement cost method, and will be amortised over 10 years
All other assets and liabilities have been valued at fair value on acquisition.
Acquisition of Joint Venture veterinary practices
In the 52 week period ended 25 March 2021, the Group has acquired 100% of the ‘A’ shares of 6 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 25 March 2021, £1.4m of operating loans relating to these practices were written off in advances of the acquisitions.
Up to the date of acquisition and in the comparative period being the 52 week period ending 26 March 2020, these 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. Acquisition of the ‘A’
shares has led to the control and consolidation of these practices on the dates below, leading to control from the date of acquisition and
consolidation from that date forward.
168
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2021 Subsidiaries acquired
Sidcup Vets4Pets Limited
Sydenham Vets4Pets Limited
Grantham Vets4Pets Limited
Rawtenstall Vets4Pets Limited
Wallasey Bidston Moss Vets4Pets Limited
Companion Care (Farnborough) Limited
Principal activity
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
Date of acquisition
1 July 2020
1 July 2020
20 October 2020
28 October 2020
18 December 2020
18 March 2021
Proportion of
voting equity
instruments
acquired
50%
50%
50%
50%
50%
50%
Total proportion
of voting equity
instruments owned
following the
acquisition
100%
100%
100%
100%
100%
100%
Cash consideration
transferred
£m
0.9
0.7
0.0
0.0
0.0
0.0
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.
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Non-current assets
Tangible fixed assets
Right-of-use assets
Intangible 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
Goodwill arising on acquisition
Impairment of goodwill
Carrying value of goodwill
Book value of
assets and
liabilities
acquired
£m
Adjustments on
acquisition
£m
Fair value of
assets and
liabilities
acquired
£m
0.7
0.2
0.1
0.4
0.4
–
(0.4)
(0.7)
(0.7)
0.0
–
–
–
–
–
0.7
–
–
–
0.7
0.7
0.2
0.1
0.4
0.4
0.7
(0.4)
(0.7)
(0.7)
0.7
£m
1.7
(0.7)
1.0
(0.6)
0.4
The consideration shown within the table above relates to both consideration for the purchase of A-shares and cash settlement of ‘A’
shareholder Joint Venture Partner loans, which were repaid to the ‘A’ shareholder at the point of acquisition. The impairment of goodwill relates
to loss making practices.
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.
169
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Freehold
property
£m
Leasehold
improvements
£m
Fixtures, fittings,
tools and
equipment
£m
2.4
–
–
–
2.4
0.3
–
–
0.3
2.1
2.1
63.9
6.4
–
(7.9)
62.4
26.8
4.0
(1.4)
29.4
37.1
33.0
239.9
12.5
0.4
(7.5)
245.3
162.0
22.9
(4.1)
180.8
77.9
64.5
Freehold
property
£m
Leasehold
improvements
£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
Total
£m
306.2
18.9
0.4
(15.4)
310.1
189.1
26.9
(5.5)
210.5
117.1
99.6
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
11 Property, plant and equipment
Cost
Balance at 26 March 2020
Additions
On acquisition (note 10)
Disposals
Balance at 25 March 2021
Depreciation
Balance at 26 March 2020
Depreciation charge for the period
Disposals
Balance at 25 March 2021
Net book value
At 26 March 2020
At 25 March 2021
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
170
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2021 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, Distribution Centres and Support Offices are leased under operating
leases, with remaining lease terms of between 1 and 20 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.
Right-of-use assets
Cost
Balance at 26 March 2020
Additions
On acquisition (note 10)
Disposals
Balance at 25 March 2021
Depreciation
Balance at 26 March 2020
Depreciation charge for the period
Disposals
Balance at 25 March 2021
Net book value
At 26 March 2020
At 25 March 2021
Property
£m
Equipment
£m
486.3
34.8
0.4
(28.0)
493.5
69.1
67.0
(3.3)
132.8
417.2
360.7
11.6
3.3
–
(0.2)
14.7
3.6
3.3
(0.2)
6.7
8.0
8.0
Total
£m
497.9
38.1
0.4
(28.2)
508.2
72.7
70.3
(3.5)
139.5
425.2
368.7
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 25 March 2021.
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 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 cash flows
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 25 March 2021
£m
78.4
241.9
131.9
452.2
409.7
78.4
331.3
At 26 March 2020
£m
82.2
258.0
182.6
522.8
463.9
83.7
380.2
For the lease liabilities at 25 March 2021 a 0.1% change in the discount rate used would have increased the carrying value of lease liabilities by £1.5m.
171
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 12 Leases (continued)
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.
Short term 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.
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 sublease likely.
13
Intangible assets
Cost
Balance at 26 March 2020
Additions
On acquisition
Disposals
Balance at 25 March 2021
Amortisation
Balance at 26 March 2020
Amortisation charge for the period
Disposals
Balance at 25 March 2021
Net book value
At 26 March 2020
At 25 March 2021
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
Goodwill
£m
Customer lists
and ‘know how’
£m
Software
£m
981.3
–
11.8
(34.6)
958.5
0.1
–
–
0.1
981.2
958.4
1.9
–
5.1
(0.8)
6.2
0.5
0.2
(0.3)
0.4
1.4
5.8
63.1
25.5
0.2
(0.1)
88.7
39.3
13.4
–
52.7
23.8
36.0
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
Total
£m
1,046.3
25.5
17.1
(35.5)
1,053.4
39.9
13.6
(0.3)
53.2
1,006.4
1,000.2
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
The goodwill impairment in the 52 week period ended 26 March 2020 relates to goodwill acquired as part of the buyout of Bicester Vets4Pets
Limited in the 52 week period ended 28 March 2019.
Impairment testing
Cash generating units (‘CGUs’), as defined by IAS 36, within the Group are considered to be aligned to three operating segments as shown in
the table below. 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 included Specialist
Referral Centres up until 31 December 2020. Central includes veterinary telehealth business, group costs and finance expenses. Revenue and
costs are allocated to a segment and CGU where reasonably possible.
172
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2021 As at 25 March 2021 and 26 March 2020, the Group is deemed to have CGUs as follows:
Retail
Central
Vet Group
Total
Goodwill
At 25 March 2021
£m
586.1
11.4
360.9
958.4
At 26 March 2020
£m
586.1
–
395.1
981.2
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
25 March 2021
52 week period ended
26 March 2020
Retail
5
2.0%
10%
8%
48%
Vet Group
5
3.5%
10%
10%
58%
Retail
5
2.0%
10%
4%
48%
Vet Group
5
3.5%
10%
11%
49%
The goodwill is considered to have an indefinite useful economic life and the recoverable amount is determined based on ‘value-in-use’
calculations. These calculations use a post-tax cash flow projection based on a five-year plan approved by the Board. For the purposes of
intangible asset impairment testing, the model removes all cash flows 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 cash flows used in modelling for impairment exclude any cash flows 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 cash flows. 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 2020 financial statements.
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. No impairment review has been carried out on the Central CGU
due to the acquisition being completed on 27 November 2020 and subsequent trading being in line with financial forecasts.
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. The long term growth rate in the Vets CGU
exceeds the long term average for the UK but is an appropriate rate for the industry.
The Group disposed of £34.6m of goodwill in the 52 week period ended 25 March 2021 in relation to the disposal of the Specialist Referral
Centres. The goodwill was previously held in the Vet Group CGU. In line with IAS 36 and in the absence of a market valuation, the Group applied
the value in use method to value the total Vet Group CGU using the value of discounted future cash flows. Given the sale of the Specialist
Referral Centres, the value in use method cannot be used to value the element of the Vet Group CGU relating to the Specialist Referral Centres,
and instead the value of the disposal proceeds has been used for this element. On the basis of the £80.0m of sales proceeds, the Group
disposed of 9.0% of the Vet Group CGU which equated to £34.6m of goodwill disposed of.
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).
173
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 13
Intangible assets (continued)
Within the Retail CGU, a number of sensitivities have been applied to the assumptions in reaching this conclusion including:
• Reduction in growth rate applied beyond forecast period by 100 bps
•
• Reduction in gross margin percentage of 100 bps
Increasing the discount rate by 100 bps
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:
• Reduction in growth rate applied beyond forecast period by 100 bps
•
• Reduction in gross margin percentage of 100 bps
Increasing the discount rate by 100 bps
None of the above, considered reasonably possible changes in assumptions, would result in impairment when applied either individually or
collectively. The same sensitivities were applied to both the Retail CGU and Vet Group CGU in the 52 week period ended 26 March 2020. In
addition, further sensitivities were applied in the 52 week period ended 26 March 2020 to reflect the risk of COVID-19. These were:
- Reduction in FY21 H1 Retail sales by 30% as a COVID-19 sensitivity
- Reduction in FY21 H1 Vet Group sales by 50% as a COVID-19 sensitivity
Neither of the above, considered reasonably possible changes in assumptions when applied, resulted 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 25 March 2021
£m
83.7
At 26 March 2020
£m
62.8
The cost of inventories recognised as an expense and included in ‘cost of sales’ is £487.6m (period ended 26 March 2020: £438.3m).
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 25 March 2021 the inventory provision amounted to £3.9m (26 March 2020: £3.2m). 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 £8.9m (2020: £7.1m).
In the 52 week period ended 25 March 2021, the value of inventory written off to the income statement amounted to £9.3m (52 week period
ended 26 March 2020: £8.7m).
174
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2021 15 Deferred tax assets and liabilities
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
At 25 March 2021
At 26 March 2020
Property, plant and equipment
Financial assets
Financial liabilities
Other short term timing differences
Arising on acquisition of intangible assets
SBP reserve
Net deferred tax assets/(liabilities)
Movement in deferred tax during the period
Property, plant and equipment
Net financial assets/(liabilities)
Other short term timing differences
Arising on acquisition of intangible assets
SBP reserve
Assets
£m
2.6
0.6
–
2.4
–
3.4
9.0
Liabilities
£m
–
–
(0.2)
(5.0)
(0.9)
–
(6.1)
Total
£m
2.6
0.6
(0.2)
(2.6)
(0.9)
3.4
2.9
Assets
£m
2.4
0.9
–
2.2
–
–
5.5
Liabilities
£m
–
–
(0.2)
(5.7)
–
–
(5.9)
26 March
2020
£m
2.4
0.7
(3.5)
–
–
(0.4)
Recognised in
income
£m
0.2
–
0.9
–
–
1.1
Recognised in
equity
£m
–
(0.3)
–
–
3.4
3.1
Recognised on
acquisition
£m
–
–
–
(0.9)
–
(0.9)
Other short term timing differences primarily relate to share based payment schemes and inventory provisions.
Movement in deferred tax during the prior period
Property, plant and equipment
Net financial assets/ (liabilities)
Other short term timing differences
Company
Movement in deferred tax during the period
Net financial assets
SBP reserve
28 March
2019
£m
0.2
(0.2)
(4.0)
(4.0)
Recognised in
income
£m
2.2
–
0.5
2.7
Recognised in
equity
£m
–
0.9
–
0.9
26 March
2020
£m
0.4
–
0.4
Recognised in
income
£m
0.0
–
0.0
Recognised in
equity
£m
(0.1)
3.4
3.3
The rate used to calculate deferred tax assets and liabilities is 19% in line with the corporation tax rate.
Total
£m
2.4
0.9
(0.2)
(3.5)
–
–
(0.4)
25 March
2021
£m
2.6
0.4
(2.6)
(0.9)
3.4
2.9
26 March
2020
£m
2.4
0.7
(3.5)
(0.4)
25 March
2021
£m
0.3
3.4
3.7
175
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 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
Group
Company
At 25 March 2021
£m
At 26 March 2020
£m
At 25 March 2021
£m
At 26 March 2020
£m
0.2
11.3
3.3
1.1
0.6
0.2
16.7
0.4
13.3
4.0
1.1
1.8
0.3
20.9
–
–
–
–
–
0.2
0.2
–
–
–
–
–
0.3
0.3
Investments in Joint Venture veterinary practices
Investments represent £0.2m (2020: £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 cash flows 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 it is 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 £11.3m (2020: £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 cash flows 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 are shown net of an expected credit loss (‘ECL’) of £1.2m (2020: £nil). An ECL has been recognised during the period in relation to
loans with Joint Venture veterinary practices where the Group considers the loan to be in default and credit impaired based on the criteria set
out in note 1.15.
As at 26 March 2020
Net repayment and further advances
Provisions made during the period
As at 25 March 2021
Closing position
Gross loan value
£m
13.3
(0.8)
–
12.5
12.5
Expected credit
loss
£m
–
–
(1.2)
(1.2)
(1.2)
Carrying value
of loan
£m
13.3
(0.8)
(1.2)
11.3
11.3
Analysis of expected credit loss by risk category
The following table presents an analysis of the credit risk and credit impairment of initial set up loans held at amortised cost. 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 1.15, depending on the credit risk of each loan and the Group’s expectations of future cash flow recoverability.
Credit risk
Low
Medium
High
Gross carrying amount
Loss allowance
Net carrying amount
176
At 25 March 2021
£m
10.5
1.2
0.8
12.5
(1.2)
11.3
At 26 March 2020
£m
13.3
–
–
13.3
–
13.3
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2021 Loans to Joint Venture veterinary practices – other loans
Loans to Joint Venture veterinary practices – other loans of £3.3m (2020: £4.0m) represent loan balances to Joint Venture veterinary practices.
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 cash flows at a market rate of
interest has been assessed as not material. The loans are typically to support capacity expansion. The balances have been assessed under the
criteria set out in note 1.15 as fully performing, and any expected credit losses are immaterial (2020: £nil).
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 cash flows has been assessed as not material and the
investment is non-participatory.
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
Finance lease liabilities
Non-current liabilities
Interest rate swaps
Put and call liability
Finance lease liabilities
Group
Company
At 25 March 2021
£m
At 26 March 2020
£m
At 25 March 2021
£m
At 26 March 2020
£m
0.1
0.8
0.6
1.5
–
0.8
0.7
1.5
–
–
–
–
–
–
–
–
Group
Company
At 25 March 2021
£m
At 26 March 2020
£m
At 25 March 2021
£m
At 26 March 2020
£m
(0.0)
(1.2)
(0.1)
–
(1.3)
(0.4)
(1.7)
–
(0.1)
(2.2)
–
–
(0.1)
–
(0.1)
–
–
(0.0)
–
(0.0)
Group
Company
At 25 March 2021
£m
At 26 March 2020
£m
At 25 March 2021
£m
At 26 March 2020
£m
(1.6)
–
–
(1.6)
(2.3)
(3.4)
(0.1)
(5.8)
(1.6)
–
–
(1.6)
(2.3)
–
–
(2.3)
177
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 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 25 March 2021
£m
11.4
0.3
20.5
9.0
–
0.5
7.6
49.3
At 26 March 2020
£m
17.4
1.6
29.5
2.2
–
1.5
3.7
55.9
At 25 March 2021
£m
–
–
–
–
587.9
–
–
587.9
At 26 March 2020
£m
–
–
–
–
579.2
–
–
579.2
Trade and other receivables
The impairment of trade and other receivables is assessed in line with IFRS 9. As at 25 March 2021 and 26 March 2020 the impact of expected
credit loss on these balances was deemed to be immaterial and as such no provision has been made.
The Group apply the simplified approach under IFRS 9 and default to lifetime expected credit loss. The ECL is immaterial on the trade
receivables balance for the 52 week period ended 25 March 2021.
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 requires
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 cash flow
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, and they are initially recognised
under IFRS 9 at their nominal value as the effect of discounting the expected cash flows 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 in accordance with the policy set out in note 1.15.
For those practices in default, a credit impairment charge is recognised under IFRS 9 taking into account the Group’s expectations of future cash
flow recoverability. 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 £6.2m (2020: £8.0m). The basis for this
allowance and the movement in the period is set out below and further detail is provided in note 1.21.
Group
As at 26 March 2020
Loans written off
Net repayment and further advances
Release of impairment recognised during the period
As at 25 March 2021
Closing position
Gross loan value
£m
37.5
(1.4)
(9.4)
–
Expected credit
loss
£m
(8.0)
1.4
–
0.4
Carrying value
of loan
£m
29.5
–
(9.4)
0.4
26.7
(6.2)
20.5
178
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2021 During the period ended 25 March 2021, £1.4m of operating loans which were deemed to be in default were written off in advance of the
acquisition of the ‘A’ shares which led to the control and consolidation of these practices. Further details of these acquisitions are provided in
note 10.
The Group holds expected credit losses of £6.2m against operating loans of £26.7m (26 March 2020: ECLs of £8.0m against operating loans
of £37.5m). The movements are shown in the table above. The Group continues to work with a number of Joint Venture Partners, where the
partners choose to follow the Group’s recommendations on remediation plans aimed at improving practice performance. Further details
regarding credit risk are provided in note 1.15.
The following table presents an analysis of the credit risk and credit impairment of operating loans held at amortised cost. 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 1.15, depending on the credit risk of each loan.
Credit risk
Low
Medium
High
Gross carrying amount
Loss allowance
Net carrying amount
At 25 March 2021
£m
15.9
5.4
5.4
26.7
(6.2)
20.5
At 26 March 2020
£m
26.6
6.7
4.2
37.5
(8.0)
29.5
Should each operating loan risk, as defined by the risk criteria in note 1.15, increase by 10%, this would lead to an increase in the required
provision for operating loans of £0.4m (26 March 2020: £1.9m). 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
up until 31 December 2020, 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 1.18, 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 1.18.
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 25
March 2021 and 26 March 2020 the impact of expected credit loss on these balances was deemed to be immaterial and as such no provision
has been made.
18 Cash and cash equivalents
Cash and cash equivalents
Group
Company
At 25 March 2021
£m
101.4
At 26 March 2020
£m
79.1
At 25 March 2021
£m
–
At 26 March 2020
£m
–
179
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 19 Other interest-bearing loans and borrowings
Non-current liabilities
Unsecured bank loans
Terms and debt repayment schedule
Group
Company
At 25 March 2021
£m
At 26 March
2020 £m
At 25 March 2021
£m
At 26 March 2020
£m
98.7
163.3
98.7
163.3
Revolving credit facility
Nominal interest
Currency
GBP
LIBOR +1.15%
rate Year of maturity
2023
Face value
at 25 March
2021
£m
100.0
Carrying amount
at 25 March
2021
£m
98.7
Face value
at 26 March
2020
£m
165.0
Carrying amount
at 26 March
2020
£m
163.3
The Group has a revolving credit facility of £248.0m which expires on 25 September 2023 and a further facility of £100.0m which expired on
12 May 2021.
The drawn amount on the £248.0m facility was £100.0m at 25 March 2021 (£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. In addition to this, the Group held a further £100.0m 364 day liquidity facility which commenced
on 13 May 2020 and expired on 12 May 2021. The drawn amount on the £100.0m facility at 25 March 2021 was £nil (26 March 2020: £nil).
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 25 March 2021
£m
–
–
100.0
100.0
At 26 March 2020
£m
–
–
165.0
165.0
The loans at 25 March 2021 and 26 March 2020 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 £100.0m of the senior facility borrowings at the balance sheet
date at a fixed rate of 0.918% which 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 commence on 31 March 2021 and expire on
25 September 2023.
The hedges are structured to hedge at least 70% of the forecast outstanding debt for the next 12 months.
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
At
26 March 2020
£m
79.1
–
(165.0)
(85.9)
Cash flow
£m
22.3
–
65.0
87.3
Non-cash
movement
£m
–
–
–
–
At
25 March 2021
£m
101.4
–
(100.0)
1.4
180
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2021 20 Trade and other payables
Current
Trade payables
Accruals
Amounts owed to Joint Venture veterinary practices
Other payables including tax and social security
Amounts owed to Group undertakings
Group
Company
At 25 March 2021
£m
At 26 March 2020
£m
At 25 March 2021
£m
At 26 March 2020
£m
107.1
57.9
17.6
28.5
–
211.1
110.8
45.1
6.7
34.0
–
196.6
–
0.4
–
–
509.3
509.7
–
0.1
–
–
387.7
387.8
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 £0.8m (2020: £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 £0.4m (2020: £3.2m) 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 from the balance sheet date.
21 Provisions
Balance at 26 March 2020
Provisions made during the period
Provisions utilised during the period
Provisions released during the period
Balance at 25 March 2021
Current
Non-current
Dilapidation
provision
£m
1.9
2.1
(0.4)
(0.2)
3.4
Closed stores
provision
£m
1.1
0.4
(0.8)
–
0.7
Provisions for exit and
closure costs relating to
Joint Venture veterinary
practices
£m
2.2
2.7
(2.3)
(0.3)
2.3
Total
£m
5.2
5.2
(3.5)
(0.5)
6.4
At 25 March 2021
£m
4.3
2.1
6.4
At 26 March 2020
£m
3.9
1.3
5.2
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 4 years. Market
conditions have a significant impact and hence the assumptions on future cash flows are reviewed regularly and revisions to the provision made
where necessary.
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 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 or has offered to buy 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 17 years. Market conditions have a significant impact and hence the assumptions on future cash flows are reviewed regularly
and revisions to the provision made where necessary.
181
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 22 Capital and reserves
Share capital
Group
At 28 March 2019
At 26 March 2020
At 25 March 2021
Company
At beginning of period
On issue at period end
At beginning of period
On issue at period end
Share capital
Number
500,000,000
500,000,000
500,000,000
Share capital
£m
5.0
5.0
5.0
Share capital
25 March 2021
£m
5.0
5.0
Share capital
26 March 2020
£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.
Consolidation and Merger reserves
The consolidation reserve and the merger reserve arose as a result of the creation of Pets at Home Group Plc and its purchase of the existing
group of companies as part of the Initial Public Offering in 2014. As part of the IPO, a number of shares in Plc were issued in exchange for various
instruments or cash. The premium arising on the issue was allocated between the share premium and merger reserve. A consolidation reserve
was also created which reflected the difference between Plc reserves and the consolidated equity of PAH Lux S.a.r.l at the start of the
comparative period.
Translation reserve
The translation reserve comprises all foreign exchange differences arising since 21 November 2011, the date of incorporation of Pets at Home
Asia Ltd where the functional currency differs from that of the rest of the Group.
Cash flow hedging reserve
The cash flow hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments
related to hedged transactions that have not yet occurred.
Retained earnings
Included within the Group is Pets at Home Employee Benefit Trust (EBT). The EBT purchases shares to fund the share option schemes. As at
25 March 2021, the EBT held 5,958,116 ordinary shares (26 March 2020: 5,749,377) with a cost of £18,501,342 (2020: £11,805,745). The market value
of these shares as at 25 March 2021 was 386.20 pence per share (26 March 2020: 268.80).
Other comprehensive income
25 March 2021
Other comprehensive income
Effective portion of changes in fair value of cash flow hedges
Deferred tax on changes in fair value of cash flow hedges
Total other comprehensive income
26 March 2020
Other comprehensive income
Effective portion of changes in fair value of cash flow hedges
Deferred tax on changes in fair value of cash flow hedges
Total other comprehensive income
182
Translation
reserve
£m
0.1
–
–
0.1
Cash flow
hedging reserve
£m
–
5.0
(0.3)
4.7
Total other
comprehensive
income
£m
0.1
5.0
(0.3)
4.8
Translation
reserve
£m
(0.1)
–
–
(0.1)
Cash flow
hedging reserve
£m
–
(5.5)
0.9
(4.6)
Total other
comprehensive
income
£m
(0.1)
(5.5)
0.9
(4.7)
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2021 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 cash flow interest
rate risk), credit risk and liquidity risk.
Risk management framework
Risk management in respect of financial risk is carried out by the Group Treasury function under policies approved by the Board of Directors.
The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Board
provides written principles through its Group Treasury Policy for overall risk management, as well as written policies covering specific areas,
such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and
investment of excess liquidity.
The main objectives of the Group Treasury function are:
• To ensure shareholder and management expectations are managed on cash flow and earnings volatility resulting from financial market
movements;
• To protect the expected cash flow and earnings from interest rate and foreign exchange fluctuations to within parameters acceptable to the
Board and shareholders; and
• To control banking costs and service levels.
Market risk
Foreign currency risk
The Group sources a significant level of purchases in foreign currency, in the region of US$100 million each financial year, and monitors its
foreign currency requirements through short, medium and long term cash flow forecasting. The value of purchases in US dollars continues
to increase each year and the risk management policy has evolved with this increased risk.
At 25 March 2021, 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:
25 March 2021
Cash and cash equivalents
Trade payables
Forward exchange contracts
Balance sheet exposure
26 March 2020
Cash and cash equivalents
Trade payables
Forward exchange contracts
Balance sheet exposure
Euro
£m
0.5
(0.9)
–
(0.4)
Euro
£m
0.8
(1.1)
(0.0)
(0.3)
US Dollar
£m
0.3
(5.9)
(0.4)
(6.0)
US Dollar
£m
0.4
(6.5)
(1.0)
(7.1)
HKD
£m
0.0
–
–
0.0
HKD
£m
0.0
–
–
0.0
Total
£m
0.8
(6.8)
(0.4)
(6.4)
Total
£m
1.2
(7.6)
(1.0)
(7.4)
Sensitivity analysis
A 5% weakening of the following currencies against the pound sterling at the period end date in both years would have increased 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
25 March
2021
£m
–
–
Equity
26 March
2020
£m
–
–
25 March
2021
£m
0.3
–
Profit or loss
26 March
2020
£m
0.3
–
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.
183
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 23 Financial instruments (continued)
Managing interest rate benchmark reform and associated risks
A fundamental reform of major interest rate benchmarks is being undertaken globally, including the replacement of some interbank offered
rates (IBORs) with alternative nearly risk-free rates (referred to as ‘IBOR reform’). The Group has exposures to IBORs on its financial instruments
that will be replaced or reformed as part of these market-wide initiatives. There is uncertainty over the timing and the methods of transition in
some jurisdictions that the Group operates in. The Group anticipates that IBOR reform will impact its risk management and hedge accounting.
The Group’s exposure to sterling LIBOR designated in hedging relationships is £100.0m at 25 March 2021 representing both the nominal amount
of the hedging interest rate swap and the principal amount of the hedged sterling-denominated revolving credit facility. The Group is working
with its banking syndicate and hedging partners to document a transition from LIBOR to a SONIA benchmark rate by the end of calendar year
2021, for both the revolving credit facility and interest rate swap hedging products. The effect of the transition on the Group and Company’s
financial statements for the periods ending 31 March 2022 and 30 March 2023, which represents the remaining term of these facilities and
products, is expected to be less than £0.1m.
(ii) Interest rate risk
Cash flow and fair value interest rate risk
The Group’s interest rate risk arises from long term borrowings. As at 25 March 2021, the Group had a revolving credit facility with a face value
totalling £100.0m. The Group’s borrowings as at 25 March 2021 incur interest at a rate of 1.15% plus LIBOR at the leverage prevalent in the period,
which exposes the Group to cash flow 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 £100.0m of the senior facility borrowings at the balance sheet date at a fixed
rate of 0.918% which 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 commence on 31 March 2021 and expire 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 25 March 2021
£m
Book value
At 26 March 2020
£m
Book value
At 25 March 2021
£m
Book value
At 26 March 2020
£m
100.0
–
100.0
162.4
0.9
163.3
100.0
–
100.0
162.4
0.9
163.3
All borrowings bear a variable rate of interest based on LIBOR. Group policy is to hedge at least 70% of the loan to ensure a fixed rate of interest.
Therefore, designated above is the portion of the loan hedged by a fixed rate interest rate swap and the remaining un-hedged portion is
designated as variable rate.
Sensitivity analysis
A change of 50 basis points in interest rates at the period end date would have increased/ (decreased) equity and profit or loss by the amounts
shown below. This calculation assumes that the change occurred at the balance sheet date and had been applied to risk exposures existing at
that date.
This analysis assumes that all other variables, in particular foreign currency rates, remain constant and considers the effect of financial
instruments with variable interest rates, financial instruments at fair value through profit or loss or available for sale with fixed interest rates
and the fixed rate element of interest rate swaps. The analysis is performed on the same basis for the comparative period.
Equity
Increase
Decrease
Profit or loss
Increase
Decrease
184
At 25 March 2021
£m
At 26 March 2020
£m
0.5
(0.5)
–
–
0.8
(0.8)
–
–
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2021 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 cash flows to ensure, as far as possible,
that it will have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions without risking damage to the
Group’s reputation. Covenants are monitored on a regular basis to ensure there is no risk or breach which would lead to an ‘Event of Default’
and compliance certificates are issued as required to the syndicate agent.
The following are the contractual maturities of financial liabilities, including estimated interest payments:
Group
25 March 2021
Non-derivative financial liabilities
Bank loans (note 19)
Trade payables (note 20)
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)
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 cash
flows £m 1 year or less £m
1 to <2 years
£m
2 to <5 years
£m
5 years and over
£m
98.7
107.1
1.7
1.2
0.0
208.7
100.0
107.1
1.7
1.2
0.0
210.0
–
107.1
0.1
1.2
0.0
108.4
–
–
0.8
–
–
0.8
100.0
–
0.8
–
–
100.8
–
–
–
–
–
–
Carrying amount
£m
Contractual cash
flows £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
282.1
165.0
110.8
0.2
3.4
2.3
1.7
0.4
283.8
–
110.8
0.1
–
0.0
1.7
0.4
113.0
–
–
0.1
3.0
1.0
–
0.0
4.1
165.0
–
–
0.2
1.3
–
–
166.5
–
–
–
0.2
–
–
–
0.2
185
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 23 Financial instruments (continued)
Company
25 March 2021
Non-derivative financial liabilities
Bank loans (note 19)
26 March 2020
Non-derivative financial liabilities
Bank loans (note 19)
Carrying amount
£m
Contractual cash
flows £m 1 year or less £m
1 to <2 years
£m
2 to <5 years
£m
5 years and over
£m
98.7
98.7
100.0
100.0
–
–
–
–
100.0
100.0
–
–
Carrying amount
£m
Contractual cash
flows £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
–
–
Liquidity risk and cash flow hedges
Cash flow hedges
The following table indicates the periods in which the cash flows associated with cash flow hedging instruments are expected to occur and to
affect profit or loss:
Carrying amount
£m
Expected cash
flows
£m
1 year or less
£m
1 to <2 years
£m
2 to <5 years
£m
5 years and over
£m
0.2
(1.7)
0.8
(1.2)
0.1
(0.0)
(1.8)
0.2
(1.7)
0.8
(1.2)
0.1
(0.0)
(1.8)
–
(0.1)
0.8
(1.2)
0.1
(0.0)
(0.4)
–
(0.8)
–
–
–
–
(0.8)
0.2
(0.8)
–
–
–
–
(0.6)
–
–
–
–
–
–
–
Carrying amount
£m
Expected cash
flows
£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)
–
–
–
–
–
–
Group
25 March 2021
Interest rate swaps:
Assets (note 16)
Liabilities (note 16)
Forward exchange contracts:
Assets (note 16)
Liabilities (note 16)
Fuel forward contracts:
Assets (note 16)
Liabilities (note 16)
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)
186
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2021 Company
25 March 2021
Interest rate swaps:
Assets (note 16)
Liabilities (note 16)
26 March 2020
Interest rate swaps:
Assets (note 16)
Liabilities (note 16)
Carrying amount
£m
Expected cash
flows
£m
1 year or less
£m
1 to <2 years
£m
2 to <5 years
£m
5 years and over
£m
0.2
(1.7)
(1.5)
0.2
(1.7)
(1.5)
–
(0.1)
(0.1)
–
(0.8)
(0.8)
0.2
(0.8)
(0.6)
–
–
–
Carrying amount
£m
Expected cash
flows
£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)
–
–
–
–
(1.0)
(1.0)
0.3
(1.3)
(1.0)
–
–
–
Fair values of financial instruments
Investments
The fair values of investments are considered to be their carrying value as the impact of discounting future cash flows has been assessed
as not material and the investment is non-participatory.
Trade and other payables and receivables
The fair values of these items are considered to be their carrying value as the impact of discounting future cash flows has been assessed
as not material.
Cash and cash equivalents
The fair value of cash and cash equivalents is estimated as its carrying amount where the cash is repayable on demand. Where it is not
repayable on demand (such as term deposits), then the fair value is estimated at the present value of future cash flows, discounted at the market
rate of interest at the balance sheet date.
Long term and short term borrowings
The fair value of bank loans and other loans approximates their carrying value as they have interest rates 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 or disposal of a subsidiary is valued at fair value at the time of acquisition or disposal. Any subsequent
changes in fair values are recognised in profit or loss.
Put and call options over non-controlling interests
Put and call options over non-controlling interests are recognised at fair value at the acquisition date and included within the valuation
of goodwill. Subsequent changes to fair value are recognised in profit or loss.
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)
187
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Fair value
– hedging
instruments
£m
FVOCI – equity
instruments
£m
Financial assets
at amortised cost
£m
Total carrying
amount
£m
–
–
0.8
0.1
0.2
1.1
–
–
–
–
–
–
–
(0.0)
(1.2)
(1.7)
(2.9)
–
–
–
–
–
–
0.2
1.1
–
–
–
1.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(78.4)
(331.3)
(107.1)
(17.6)
(98.7)
(633.1)
0.2
1.1
0.8
0.1
0.2
2.4
20.4
20.8
101.4
11.3
3.3
1.2
158.4
(0.0)
(1.2)
(1.7)
(2.9)
(78.4)
(331.3)
(107.1)
(17.6)
(98.7)
(633.1)
Level 2
£m
–
–
–
–
(100.0)
23 Financial instruments (continued)
25 March 2021
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)
Fuel forward 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
Current lease liabilities (note 12)
Non-current lease liabilities (note 12)
Trade payables (note 20)
Amounts owed to Joint Venture veterinary practices (note 20)
Other interest-bearing loans and borrowings (note 19)
25 March 2021
Fair value
Financial assets measured at fair value
Investments in Joint Venture veterinary practices (note 16)
Other investments (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 not measured at fair value
Other interest-bearing loans and borrowings (note 19)
188
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2021
Fair value
– hedging
instruments
£m
Financial assets
at amortised cost
£m
Total carrying
amount
£m
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)
–
–
0.8
0.3
1.1
–
–
–
–
–
–
–
(0.4)
(1.7)
(2.3)
(4.4)
–
–
–
–
–
–
–
–
–
–
–
–
–
19.6
31.1
79.1
13.3
4.0
2.5
149.6
–
–
–
–
–
–
–
–
–
–
–
–
26 March 2020
Fair value
Financial assets measured at fair value
Investments in Joint Venture veterinary practices (note 16)
Other investments (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 not measured at fair value
Put & call liability
Other interest-bearing loans and borrowings (note 19)
Level 1
£m
Level 3
£m
–
–
31.1
13.3
4.0
2.5
–
(165.0)
0.4
1.1
–
–
–
–
(3.4)
–
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)
Total
£m
0.4
1.1
31.1
13.3
4.0
2.5
(3.4)
(165.0)
189
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021
23 Financial instruments (continued)
Changes in liabilities arising from financing activities
Balance at 26 March 2020
Changes from financing cash flows
Proceeds from loans and borrowings
Repayment of borrowings
Payment of lease liabilities
Total changes from financing cash flows
Other changes
Interest expense on lease liabilities
Additions to lease liabilities
Disposal of lease liabilities
Amortisation of debt issue costs
Total other changes
Balance at 25 March 2021
Loans and
borrowings
£m
163.3
Lease liabilities
£m
463.9
–
(65.0)
–
98.3
–
–
–
0.4
0.4
98.7
–
–
(79.2)
384.7
12.8
38.5
(26.3)
–
25.0
409.7
Total
£m
627.2
–
(65.0)
(79.2)
483.0
12.8
38.5
(26.3)
0.4
25.4
508.4
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
Investment in equity
securities
Forward exchange
contracts and interest
rate swaps
Other financial
liabilities
Valuation technique
The fair values of investments in unlisted equity
securities are considered to be their carrying value
as the impact of discounting future cash flows has
been assessed as not material and the investment
is non-participatory.
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.
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.
Significant unobservable inputs
Not applicable
Inter-relationship between significant
unobservable inputs and fair value measurement
Not applicable
Not applicable
Not applicable
Future earnings
performance
Fair value linked to increase or decrease
in the best estimate of the future earnings
performance
Hedge accounting
Cash flow hedges
At 25 March 2021 and 26 March 2020, the Group held the following instruments to hedge exposures to changes in foreign currency and interest
rates.
1-6 months
6-12 months More than 1 year
1-6 months
6-12 months More than 1 year
2021
2021
2021
2020
2020
2020
Maturity
42.4
1.32
1.11
100.0
0.918%
18.0
1.36
1.15
–
–
–
–
36.6
1.27
1.14
100.0
0.811%
162.4
0.814%
15.0
1.31
1.19
–
–
–
–
–
100.0
0.865%
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
190
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2021 Company
The Company held interest rate swaps as at 25 March 2021 and 26 March 2020 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.
24 Share based payments
At 25 March 2021 and 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.
(b) Type of awards
Colleagues were invited to participate in the CIP by making an ‘investment’ or ‘pledge’ of their own shares (the ‘Co-Invest Shares’), which could
include existing, locked-in shares or new shares acquired with cash, in return for a nil cost-matching award over shares (the ‘Matching Award’).
Matching Awards 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.
(d) Performance, vesting and performance adjustment
The Matching Awards granted on 17 March 2014 vested subject to the satisfaction of the performance conditions outlined below. To the extent
that any future awards are granted, different conditions may apply (in the absolute discretion of the Remuneration Committee).
The performance conditions 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.
191
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 24 Share based payments (continued)
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.
(b) Grant of options
No options may be granted more than ten years after the adoption of the CSOP. Options under the CSOP will not form part of a colleague’s
pensionable earnings.
(c) Vesting and performance
Colleagues who receive options under the CSOP and under the PSP in connection with Admission will be subject to the same performance
conditions described in Section 1 (d) above in respect of both grants. Colleagues who only receive options under the CSOP in connection with
Admission will not be subject to performance conditions.
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.
(b) Grant of awards
Awards under the PSP will not form part of a colleague’s pensionable earnings. Awards are not transferable (other than on death) without the
consent of the Remuneration Committee.
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.
(d) Scheme limits
The number of newly issued shares over which (or in respect of which) awards may be granted under the PSP on any date shall be limited so
that: (i) the total number of shares issued and issuable in respect of options or awards granted in any ten year period under the PSP and any
other discretionary share option scheme of the Company (including the CIP, RSA and the CSOP but other than to satisfy dividend equivalent
payments) is restricted to 5% of the Company’s issued shares calculated at the relevant time; and (ii) the total number of shares issued and
issuable pursuant to options or awards granted in any ten year period under the PSP and any other employee share scheme operated by the
Company (including the CIP, CSOP, SAYE and RSA but other than to satisfy dividend equivalent payments) is restricted to 10% of the Company’s
issued shares calculated at the relevant time.
For the purposes of these limits, no account will be taken of options or awards granted before, on or in connection with Admission and no
account will be taken of options or awards which have lapsed, been surrendered or otherwise become incapable of exercise or vesting. Shares
held in treasury will be treated as newly issued shares for the purposes of these limits (as long as this is required by institutional investor
guidelines), but (for the avoidance of doubt) shares acquired in the market will not.
192
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2021 Individual limits
(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 17.2% 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.
(d) Savings contract
Options may be granted by the Board or the trustee of an employee benefit trust. Upon applying for an option, the colleague will be required
to enter into an approved savings contract with a savings institution nominated by the Company which lasts for three years. The maximum
amount which an employee is permitted to contribute under SAYE contracts is £500 per month. The Board may set lower savings limits than
this for different colleagues by reference to objective criteria such as levels of salary or length of service. The minimum contribution is £5 per
month (or such greater amount as the Board may specify, not to exceed £10). The total exercise price of the shares over which the option is
granted may not exceed the aggregate of the monthly contributions and bonus payable at the end of the colleague’s related SAYE contract.
Scheme limits
(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.
193
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 24 Share based payments (continued)
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 are 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.
(b) Grant of awards
Awards under the RSA will not form part of a colleague’s pensionable earnings. Awards are not transferable (other than on death) without
the consent of the Remuneration Committee.
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.
(d) Scheme limits
The number of newly issued shares over which (or in respect of which) awards may be granted under the RSA on any date shall be limited so
that: (i) the total number of shares issued and issuable in respect of options or awards granted in any ten year period under the RSA and any
other discretionary share option scheme of the Company (including the CIP, PSP and the CSOP but other than to satisfy dividend equivalent
payments) is restricted to 5% of the Company’s issued shares calculated at the relevant time; and (ii) the total number of shares issued and
issuable pursuant to options or awards granted in any ten year period under the RSA and any other employee share scheme operated by the
Company (including the CIP, CSOP, SAYE and PSP but other than to satisfy dividend equivalent payments) is restricted to 10% of the Company’s
issued shares calculated at the relevant time.
For the purposes of these limits, no account will be taken of options or awards granted before, on or in connection with Admission and no
account will be taken of options or awards which have lapsed, been surrendered or otherwise become incapable of exercise or vesting. Shares
held in treasury will be treated as newly issued shares for the purposes of these limits (as long as this is required by institutional investor
guidelines), but (for the avoidance of doubt) shares acquired in the market will not.
Individual limits
(e)
The aggregate market value of shares comprised in awards granted to a colleague under the RSA, PSP and the CSOP in any financial year shall
not exceed 150% of their annual salary for that year. Market value for these purposes will be calculated by reference to the market value of the
shares on the relevant date of grant as determined by the Board (following consultation with the Remuneration Committee) in its absolute
discretion.
Fair value of share awards
The expected volatility is based on historical volatility of a peer group of companies over a relevant period prior to award. The expected life
is the average expected period to exercise, which has been taken as three years. The risk free rate of return is the yield on zero-coupon UK
government bonds with a life equal to this expected life.
Options are valued using a Black-Scholes option-pricing model for the non-market based (EPS element) performance conditions and a
Monte-Carlo simulation for the market-based (TSR element) performance conditions.
Special provisions allow early exercise in the case of death, injury, disability, redundancy, retirement or because the Company which employs
the option holder ceases to be part of the Group or in the event of a change in control, reconstruction or winding up of the Company.
194
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2021 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
2020
£2.28
£0.00
32%
10
2.00%
n/a
£2.28
2017
£2.59
£2.59
32%
10
2.00%
0.50%
£0.65
RSA
2019
£1.87
£0.00
32%
10
2.00%
n/a
£1.87
2018
£1.37
£0.00
32%
10
2.00%
n/a
£1.37
CIP
2015
£2.45
£0.00
30%
3
2.00%
n/a
£2.06
2017
£2.59
£0.00
32%
10
2.00%
0.50%
£2.06
CSOP
2016
£2.75
£2.75
32%
10
2.00%
2.25%
£0.89
2015
2020
£2.31
£2.31
37%
10
2.00%
2.25%
£0.75
£2.87
£2.29
32%
3
2.00%
0.20%
£0.95
PSP
2016
£2.75
£0.00
30%
10
2.00%
1.07%
£2.06
SAYE
2019
£2.37
£1.98
32%
3
2.00%
0.20%
£0.78
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
51
–
(47)
–
(4)
–
–
PSP
000
8
–
–
(6)
–
2
–
CSOP
000
2,196
–
(129)
(1,025)
–
1,042
2.44
SAYE
000
5,001
2,069
(419)
(526)
(111)
6,014
1.47
RSA
000
7,300
2,264
(860)
(1,596)
(11)
7,097
–
2015
£2.45
£0.00
30%
10
2.00%
1.07%
£2.06
2018
£1.17
£0.94
32%
3
2.00%
0.20%
£0.39
Total
000
14,556
4,333
(1,455)
(3,153)
(126)
14,155
NA
The Group income statement charge recognised in respect of share based payments for the 52 week period ended 25 March 2021 is £4.7m (52
week period ended 26 March 2020: £4.2m).
25 Commitments
Capital commitments
At 25 March 2021, the Group is committed to incur capital expenditure of £6.1m (26 March 2020: £3.7m). Capital commitments predominantly
relate to the cost of investment in new IT systems and refurbishment of Pets at Home stores.
At 25 March 2021, the Group has a commitment to increase the loan funding to Joint Venture companies of £0.8m (26 March 2020: £0.8m), this
increase in funding is written into the Joint Venture agreements and becomes payable when certain criteria are met.
195
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 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 £12.8m (26 March 2020: £10.9m).
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
Companion Care (Farnborough) Limited
Grantham Vets4Pets Limited
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
196
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
07673889
08361049
09485504
11056047
08850288
07680864
10291543
09881176
09966547
06959208
07149744
08285995
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2021 Company
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
Prescot Vets4Pets Limited
Redditch Vets4Pets Limited
Sheffield Drakehouse Vets4Pets Limited
Sheldon Vets4Pets Limited
Sidcup Vets4Pets Limited
Companion Care (Slough) Limited
St Neots Vets4Pets Limited
Companion Care (Stevenage) Limited
Companion Care (Stratford-upon-Avon) Limited
Sudbury Vets4Pets Limited
Sydenham Vets4Pets Limited
Thamesmead Vets4Pets Limited
Tiverton Vets4Pets Limited
Uttoxeter Vets4Pets Limited
Wallasey Bidston Moss Vets4Pets Limited
Wellingborough Vets4Pets Limited
Wokingham Vets4Pets Limited
Wrexham Vets4Pets Limited
Companion Care Management Services Limited
Pet Investments Limited
Vets4Pets (Services) Limited
Vets4Pets Services Limited
Vets4Pets UK Limited
Vets4Pets Veterinary Group Limited
Registered number
05094399
05171954
10516552
10602806
09869384
10756991
10425760
08425358
07957431
09360949
08878815
05612150
08790953
08822150
08187232
07427613
09811640
08282080
07329166
09916308
08802574
09881179
11023079
11145982
09190138
07620413
09869355
07103838
08878037
04428715
04317414
05055601
03940967
04263054
197
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 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 £12.8m (26 March 2020: £10.9m).
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
25 March 2021
£m
26 March 2020
£m
57.0
8.2
65.2
54.7
12.2
66.9
Acquisitions
– Consideration for Joint Venture veterinary practices acquired (note 10)
1.6
1.3
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)
0.3
26.7
(6.2)
20.5
12.5
(1.2)
11.3
3.3
–
3.3
(17.6)
25.2
1.6
37.5
(8.0)
29.5
13.3
–
13.3
4.0
–
4.0
(6.7)
49.7
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 25 March 2021 and the 52 week period ended 26 March 2020 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.
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 cash flow 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 £6.2m (26 March 2020: £8.0m).
198
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2021 Loans to Joint Venture veterinary practices 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 balances above are shown net of allowances
for expected credit losses held for operating loans of £1.2m (26 March 2020: £nil).
In the 52 week period ended 25 March 2021, the value of loans written off recognised in the income statement amounted to £1.4m which
relates to operating loans. 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.
At 25 March 2021, the Group had a commitment to increase the loan funding to Joint Venture companies of £0.8m (26 March 2020: £0.8m); 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.
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 2021 and 25 March 2021
Investments in
subsidiaries
£m
936.2
Impairment testing
Management have conducted a 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 £958.4m at 25 March 2021 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
Pure Pet Food Limited: Unit 6, Brookmills, Saddleworth Road, Greetland, Halifax, West Yorkshire, England, HX4 8LZ
Dog Stay Limited: 305 Regents Park Road, Finchley, London, England, N3 1DP
VetsDirect Limited: Dickson Minto, 16 Charlotte Square, Edinburgh, Scotland, EH2 4DF
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, England SK9 3RN.
Group
Details of the subsidiary undertakings are as follows:
In the 52 week period ended 25 March 2021, the Group has acquired 100% of the share capital in Pet Advisory Services Limited and its subsidiary
VetsDirect Limited.
In the 52 week period ended 25 March 2021, the Group has also acquired 100% of the ‘A’ shares of 6 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 these 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 Advisory Services Limited
Pet Investments Limited
Pets at Home (Asia) Limited
Holding
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
United Kingdom
Hong Kong
Class of shares
held
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
At 25 March
2021 %
–
–
–
100
100
100
100
–
100
100
100
100
At 26 March
2020 %
91
100
100
100
100
100
100
100
100
–
100
100
199
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 28
Investments in subsidiaries (continued)
Company
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
VetsDirect 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
Bearsden Vets4Pets Limited
Bedminster Vets4Pets Limited
Belfast Stormont Vets4Pets Limited
Bicester Vets4Pets Limited
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
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 (Farnborough) Limited
Companion Care (Kendal) Limited
Companion Care (Kirkcaldy) Limited
Companion Care (Macclesfield) Limited
Companion Care (Maidstone) Limited
200
Holding
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
Indirect
Indirect
Indirect
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
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
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
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
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
At 25 March
2021 %
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
100
100
At 26 March
2020 %
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
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
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2021 Company
Companion Care (Newport) Limited
Companion Care (Nottingham) 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
Gillingham Vets4Pets Limited
Grantham Vets4Pets Limited
Great Yarmouth Vets4Pets Limited
Haverfordwest Vets4Pets Limited
Heanor Vets4Pets Limited
Hemsworth Vets4Pets Limited
Hexham Vets4Pets Limited
Horden 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
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
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
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Class of shares
held
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
At 25 March
2021 %
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
100
100
100
100
100
100
At 26 March
2020 %
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
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
201
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 28
Investments in subsidiaries (continued)
Company
Rawtenstall 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
Sidcup Vets4Pets Limited
St Austell Vets4Pets Limited
St Neots Vets4Pets Limited
Stocksbridge Vets4Pets Limited
Stoke-On-Trent Vets4Pets Limited
Sudbury Vets4Pets Limited
Sydenham 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
Wallasey Bidston Moss Vets4Pets Limited
Warrington Winnick Vets4Pets Limited
Wellingborough Vets4Pets Limited
West Drayton Vets4Pets Limited
Wokingham Vets4Pets Limited
Wrexham 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
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
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
Barnwood 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
202
Holding
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
Class of shares
held
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Class of shares
held
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
At 25 March
2021 %
100
100
100
100
100
100
100
100
100
100
100
95
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
At 25 March
2021 %
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
At 26 March
2020 %
50
100
100
100
100
100
100
100
100
100
50
95
100
100
100
100
50
100
100
100
100
100
100
100
50
100
100
100
100
100
At 26 March
2020 %
50
50
50
50
50
50
50
50
50
50
50
50
100
50
50
50
50
50
50
50
50
50
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2021 Company
Bitterne Vets4Pets Limited
Blackburn Vets4Pets Limited
Blackheath Vets4Pets Limited
Blackpool Warbreck Vets4Pets Limited
Blackwood Vets4Pets Limited
Bolton Vets4Pets Limited
Bracknell Vets4Pets Limited
Bradford Idle Vets4Pets Limited
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
Companion Care (Bishopbriggs) Limited
Companion Care (Bletchley) 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
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
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Class of shares
held
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
At 25 March
2021 %
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
At 26 March
2020 %
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
50
50
50
50
50
203
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 28
Investments in subsidiaries (continued)
Company
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 (Farnham) Limited
Companion Care (Folkestone) Limited
Companion Care (Fort Kinnaird) Limited
Companion Care (Friern Barnet) Limited
Companion Care (Gloucester) Limited
Companion Care (Harlow) Limited
Companion Care (Hatfield) Limited
Companion Care (Hemel Hempstead) Limited
Companion Care (High Wycombe) Limited
Companion Care (Hove) Limited
Companion Care (Huddersfield) Limited
Companion Care (Huntingdon) Limited
Companion Care (Ilford) Limited
Companion Care (Ipswich Martlesham) Limited
Companion Care (Keighley) Limited
Companion Care (Kidderminster) Limited
Companion Care (Kings Lynn) Limited
204
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
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
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Class of shares
held
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
At 25 March
2021 %
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
At 26 March
2020 %
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2021 Company
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 (Perth) 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
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
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
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
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Class of shares
held
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
At 25 March
2021 %
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
At 26 March
2020 %
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
205
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 28
Investments in subsidiaries (continued)
Company
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
Falkirk Vets4Pets Limited
Feltham 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
Gravesend Vets4Pets Limited
Greasby Vets4Pets Limited
Greenford Vets4Pets Limited
Grimsby Vets4Pets Limited
Guernsey Vets4Pets Limited
Halesowen Vets4Pets Limited
Halifax Vets4Pets Limited
Hamilton Vets4Pets Limited
Harrogate New Park Vets4Pets Limited
Harrogate Vets4Pets Limited
Hartlepool Vets4Pets Limited
Hastings Vets4Pets Limited
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
Hucknall Vets4Pets Limited
Huddersfield Vets4Pets Limited
Hull Anlaby Vets4Pets Limited
Hull Stoneferry Vets4Pets Limited
Hull 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
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
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Class of shares
held
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
At 25 March
2021 %
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
50
50
50
At 26 March
2020 %
50
50
50
50
50
50
50
50
12
50
50
50
50
50
50
50
50
50
50
50
50
100
100
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
100
50
50
50
50
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2021 Company
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
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
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
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
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Class of shares
held
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
At 25 March
2021 %
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
At 26 March
2020 %
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
207
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 28
Investments in subsidiaries (continued)
Company
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
Rayleigh Vets4Pets Limited
Rhyl Vets4Pets Limited
Richmond Vets4Pets Limited
Rochdale Vets4Pets Limited
Rotherham Vets4Pets Limited
Rugby Vets4Pets Limited
Rugby Central Vets4Pets Limited
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
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
Telford Madeley Vets4Pets Limited
Thurrock Vets4Pets Limited
Tilehurst Vets4Pets Limited
Torquay Vets4Pets Limited
Totton Vets4Pets Limited
Trafford Park 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
Indirect
Indirect
Indirect
Indirect
Indirect
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
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Class of shares
held
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
At 25 March
2021 %
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
50
50
At 26 March
2020 %
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
Notes (forming part of the financial statements) continuedPets at Home Group PlcAnnual Report and Accounts 2021 Company
Trowbridge Vets4Pets Limited
Wakefield Vets4Pets Limited
Walkden 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
Warrington Vets4Pets Limited
Washington Vets4Pets Limited
Waterlooville Vets4Pets Limited
Watford Vets4Pets Limited
West Bromwich Vets4Pets Limited
Weymouth Vets4Pets Limited
Whitstable 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
Yeovil 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
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
Class of shares
held
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
At 25 March
2021 %
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
At 26 March
2020 %
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
100
50
50
50
50
50
50
50
50
100
50
50
During the 52 week period ended 25 March 2021, 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 7 entities listed above to 50% investment.
209
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021 Glossary – Alternative Performance Measures
Guidelines on Alternative Performance Measures (APMs) issued by the European Securities and Markets Authority came into effect for all
communications released on or after 3 July 2016 for issuers of securities on a regulated market.
In the reporting of financial information, the Directors have adopted various APMs of historical or future financial performance, position or cash
flows other than those defined or specified under International Financial Reporting Standards (IFRS).
The Directors measure the performance of the Group based on the following financial measures which are not recognised under EU-adopted
IFRS, and consider these to be important measures in evaluating the Group’s strategic and financial performance. The Directors believe that
these APMs assist in providing additional useful information on the underlying trends, performance and position of the Group.
APMs are also used to enhance the comparability of information between reporting periods by adjusting for non-underlying items, to aid the
user in understanding the Group’s performance.
Consequently, APMs are used by the Directors and management for performance analysis, planning, reporting and incentive setting purposes
and have remained consistent with the prior year.
All APMs relate to the current period’s results and comparative periods where provided. 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 13 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
Omnichannel revenue: Revenue net of discounts and VAT from core online sales, subscriptions and order to store
Underlying EBITDA: Earnings before interest, tax, depreciation and amortisation before the effect of non-underlying items in the period
Underlying free cash flow: 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.
APM
Cash EBITDA
Definition
Underlying EBITDA (see below) adjusted for share
based payment charges.
Reconciliation
Cash EBITDA (£m)
Underlying EBITDA
Share based payment charge
Cash EBITDA
Underlying EBITDA Earnings before interest, tax, depreciation and
Underlying EBITDA (£m)
amortisation before the effect of non-underlying
items in the period.
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
FY21
216.7
4.7
221.4
FY21
134.8
26.9
13.6
(28.9)
146.4
70.3
216.7
FY20
220.7
4.2
224.9
FY20
103.7
28.3
10.0
7.6
149.6
71.1
220.7
Note
2
3
Note
2
3
3
3
3
210
Pets at Home Group PlcAnnual Report and Accounts 2021
APM
Underlying CROIC Cash return on invested capital, represents cash
Definition
returns divided by the average of gross capital
invested (GCI) for the last 12 months. Cash returns
represent underlying operating profit before
share based payments subject to tax, and then
adjusted for depreciation on property, plant and
equipment, depreciation on right-of-use assets and
amortisation on intangible assets. GCI represents
gross property, plant and equipment and right-
of-use assets, plus software and other intangibles
excluding the goodwill created on the acquisition
of the Group by KKR (£906,445,000) plus net
working capital.
Underlying free
cash flow
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.
Reconciliation
CROIC
Cash returns:
Underlying operating profit
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
Gross right-of-use assets
Intangibles
Less KKR goodwill
Investments
Net working capital
GCI
Underlying CROIC
Underlying free cash flow (£m)
Underlying free cash flow
Non-underlying working capital
Free cash flow
Underlying cash flow
Dividends
Investments
Acquisition of subsidiary
Proceeds from new loan
Repayment of borrowings
Non-underlying cash flow
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
Disposal of subsidiaries
Net increase in cash
CFS = Consolidated statement of cash flows
Not applicable.
FY21
FY20
Note
105.9
4.7
110.6
19%
(21.0)
89.6
110.8
200.4
111.3
4.2
115.5
20%
(23.1)
92.4
109.4
201.8
2
3
2
310.1
508.2
1,053.4
(906.5)
12.6
(87.3)
890.5
22.5%
11
12
13
306.2
497.9
1,046.3
(906.5)
14.8
16
(91.1) see definition
867.6
23.3%
FY21
67.4
–
67.4
(37.1)
–
(16.9)
–
(65.0)
–
–
–
(5.5)
–
–
–
–
79.4
22.3
FY20
89.6
1.2
90.8
(37.1)
(1.0)
(0.5)
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
Not applicable.
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 104 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.
211
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021
Glossary – Alternative Performance Measures continued
APM
Underlying basic
EPS
Definition
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.
Reconciliation
Underlying basic EPS (p)
Underlying basic EPS
Non-underlying items
Basic earnings per share
Underlying
operating profit
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 operating profit (£m)
Underlying operating profit
Non-underlying items
Operating profit
Underlying profit
before tax
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 PBT (£m)
Underlying PBT
Non-underlying items
PBT
CIS = Consolidated income statement
Underlying profit
after tax
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 PAT (£m)
Underlying PAT
Non-underlying items
PAT
CIS = Consolidated income statement
Underlying total
tax expense
Underlying net
working
capital
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.
Underlying 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 cash flow measure of the
Group.
Underlying cash
working capital
Working capital before increase/decrease in gross
operating loans to Joint Venture practices
212
Underlying total tax expense (£m)
Underlying tax expense
Non-underlying items
Tax expense
Underlying net working capital movement (£m)
Net working capital per cash flow 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
Net working capital movement
CFS = Consolidated statement of cash flows
(£m)
Receivables
Inventory
Trade and other payables
Provisions
Non-current provisions
Net working capital
Underlying cash working capital (£m)
Net working capital (above)
Net loans and borrowings
Underlying cash working capital
FY21
14.0
5.8
19.8
FY21
105.9
28.9
134.8
FY21
87.5
28.9
116.4
FY21
70.2
28.8
99.0
FY21
(17.3)
(0.1)
(17.4)
FY21
(7.5)
(5.9)
(22.1)
10.2
1.3
(16.5)
10.8
(5.7)
(1.8)
FY20
15.0
(1.5)
13.5
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
5
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
Note
17
14
21
21
Note
27
(7.5)
27.3
FY21
49.3
83.7
(213.9)
(4.3)
(2.1)
(87.3)
FY21
(7.5)
(9.0)
(16.5)
FY20
55.9
62.8
(204.6)
(3.9)
(1.3)
(91.1)
FY20
27.3
1.6
28.9
Pets at Home Group PlcAnnual Report and Accounts 2021
APM
Operating cash
flow
Definition
Net cash flow from operating activities per the cash
flow statement, before the effects of corporation
tax payments, non-underlying elements, and IFRS
16
Reconciliation
Operating free cash flow(£m)
Net cash flow from operating activities (per
cash flow statement)
Add back:
Tax paid
Settlement of put & call liabilities (growth
element)
Pre-tax underlying operating cash flow
Capital lease payments
Interest paid on lease obligations
Operating cash flow
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)
Costs to acquire ROU assets
Underlying free cash flow
CFS = Consolidated statement of cash flows
Omnichannel
revenue
Revenue net of discounts and VAT from core online
sales, subscriptions and order to store.
Omnichannel revenue (£m)
Omnichannel revenue
Underlying EBIT
Earnings before interest and tax agreed to
operating profit relating to underlying trading.
Underlying EBIT (£m)
Operating profit relating to underlying
trading (EBIT)
FY21
195.1
FY20
215.2
Note
CFS
17.5
–
212.6
(66.6)
(12.8)
133.2
(17.5)
(4.8)
0.4
(0.2)
(8.7)
(34.9)
0.3
–
(0.4)
67.4
FY21
161.3
FY21
105.9
30.8
0.8
246.8
(67.0)
(14.0)
165.8
(30.8)
(3.7)
0.5
–
(2.8)
(39.6)
0.4
(0.2)
–
89.6
FY20
93.9
FY20
111.3
CFS
CFS
CFS
CFS
CFS
CFS
CFS
CFS
CFS
CFS
CFS
CFS
CFS
Note
Note
2
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)
FY21
79.5
FY20
89.3
Note
2
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)
FY21
36.0
FY20
30.6
Note
2
Net cash/(debt)
Cash and cash equivalents less loans and
borrowings.
Total indebtedness Cash and cash equivalents less loans and
borrowings plus lease liabilities.
Net cash/(debt) (£m)
Cash and cash equivalents
Loans and borrowings
Net cash/(debt)
Total indebtedness (£m)
Cash and cash equivalents
Loans and borrowings
Net cash/(debt)
Lease liabilities
Total indebtedness
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).
Customer sales (£m)
Statutory Group revenue
Fee income
Sales by Joint Venture veterinary practices
Customer sales
IS = Consolidated income statement
FY21
101.4
(100.0)
1.4
FY21
101.4
(100.0)
1.4
(409.7)
(408.3)
FY20
79.1
(165.0)
(85.9)
FY20
79.1
(165.0)
(85.9)
(463.9)
(549.8)
FY21
1,142.8
(57.0)
351.3
1,437.1
FY20
1,058.8
(53.8)
329.7
1,334.7
Note
18
19
Note
18
19
12
Note
CIS
2
213
Strategic reportGovernance reportFinancial statementsPets at Home Group PlcAnnual Report and Accounts 2021
Corporate Brokers
HSBC
8 Canada Square
London
E14 5HQ
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
Travers Smith LLP
10 Snow Hill
London
EC1A 2AL
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
214
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Pets at Home Group Plc
Epsom Avenue
Stanley Green Trading Estate
Handforth
Cheshire
SK9 3RN
United Kingdom