We’re better
with pets.
Pets at Home Group Plc
Annual Report & Accounts 2022
Acquire…
Welcoming a new pet into
the family can be a daunting
experience, but the colleagues
in my local Pets at Home
store helped me take
care of everything.
Jane and Archie
A new member of the family
We know getting a new pet can
sometimes feel overwhelming, so our
Puppy and Kitten clubs are designed to
make pet ownership as convenient and
affordable as possible. Our free-to-join
clubs provide a programme of expert
advice and exclusive offers designed to
introduce pet owners to all parts of our
ecosystem at the very start of their pet
care journey. Customers benefit from
an attractive suite of special offers for
signing up, including 10% off their
first shop, the first month of their
subscription for free, and a discount
on their first groom.
Helping owners care for their
pet from the very beginning
Our experienced and passionate
colleagues are trained to have
insightful conversations with our
customers. Many of our larger pet
care centres have dedicated consultation
areas where our colleagues can offer
advice and assess the customers’ pet
care needs. They can also discuss the
merits of joining our loyalty clubs and
subscription plans, and personally
introduce them to the grooming and
veterinary services located in-store.
In this way we are uniquely placed
to take care of all of our customers’
pet care needs under one roof.
Pets at Home Group Plc Annual Report & Accounts 2022
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01
Giving pets the
best start in life.
10%
First-shop discount
when joining Puppy
& Kitten club
48% 20%
Growth in Puppy
& Kitten club
sign‑ups YoY
Average spend uplift
of Puppy & Kitten
club members vs
non‑members
Pets at Home Group Plc Annual Report & Accounts 2022
02
Deepen…
Providing all of our
customers’ pet
care needs.
I use Pets at Home for
everything. It saves me loads
of time with everything being
under one roof, and I know
Bluebell is getting looked
after by a name I can trust.
mike and Bluebell
a unique pet care ecosystem
Introducing VIPs to all parts of our
ecosystem is central to our strategy.
We know from analysing our VIP
database of 7.3m active members
that customers who engage with
more of our products and services
shop with us more frequently and also
spend up to 9x more than a store-only
customer per year. With only 27%
of VIPs currently shopping in-store
and one other channel, this represents
a considerable opportunity for us to
capture incremental pet care spend
over the lifetime of a pet.
Pets at Home Group Plc Annual Report & Accounts 2022
the right conversation
at the right time
Our deep and actionable data insights
allow us to offer personalised solutions
and advice to our customers, tailored
by pet type, breed and lifestage, and by
having the right conversation at the right
time, we are successfully transitioning
customers across our pet care ecosystem.
Our colleagues also play a vital role
in deepening our relationships with
our customers, with in-store referrals
between our store colleagues, groomers,
and vet Partners being a key driver of
growth in the proportion of customers
shopping across multiple channels.
Strategic report
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03
27% 9x
Proportion of VIP
customers that shop
in‑store and at least
one other channel
Spend uplift of
customer shopping
all channels vs
store‑only customer
22%
Growth in VIPs shopping
multiple channels
Pets at Home Group Plc Annual Report & Accounts 2022
04
retain…
Relationships
that last a
lifetime.
Pets at Home Group Plc Annual Report & Accounts 2022
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05
I’ve had Cooper for
13 years and I’ve never
shopped anywhere else.
Why would I?
Susan and cooper
making pet care convenient
Our goal is to make pet care even more
convenient, affordable and rewarding for
customers, allowing them to spend more
time with their beloved pets. Our range
of subscriptions not only maximise
convenience for customers, they
also increase loyalty and generate
a predictable revenue stream. We
now have approximately 1.5m pet care
plans across our three main subscription
packages, all of which continue to grow,
and in total now generate over £120m
in annualised customer revenue. Looking
ahead, we have aspirations to create
increasingly personalised subscription
bundles for customers and see
significant growth potential
in this area.
Fostering lifelong relationships
We know there is significant value in
building long-term relationships with
our customers, and our grooming and
veterinary services play a key role in
this area. The nature of the vet-client
relationship means that customers very
rarely change vets, and with dogs for
example living on average 12-15 years,
this represents a considerable lifetime
value opportunity. By continuing
to provide relevant advice and solutions
throughout a pet’s life, we are becoming
increasingly sophisticated and successful
in the way we retain our customers.
1.7m
Active vet clients
1.5m
Pet care plan
subscriptions
£120m
Customer revenue
from subscriptions
Pets at Home Group Plc Annual Report & Accounts 2022
06
Who we are…
With 30 years of caring for
pets and the people who love
them, we know our purpose
– we’re better with pets.
Pets at Home Group Plc Annual Report & Accounts 2022
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Governance
Financial StatementS
07
p14-15
A compelling
investment case
p42-61
Our social value strategy
Investment case
Strategic report
08 Our approach
10 Our year in review
12 At a glance
14
16 Chair’s statement
18 Chief Executive’s statement
26 Market overview
30 Business model
32 Stakeholder engagement
35 Strategy
40 Key performance indicators
42 Social value review
62 Chief Financial Officer’s review
68 Operating review
72 Risk management
goVerNaNce
86 Chair’s Introduction
88 Board of Directors
90 Governance report
104 Nomination and Corporate Governance
Committee report
107 Audit and Risk Committee report
113 ESG Committee report
115 Directors’ Remuneration report
140 Directors’ report
151 Statement of Directors’ responsibilities
FiNaNciaL StateMeNtS
153 Independent Auditor’s report
160 Consolidated income statement
160 Consolidated statement of comprehensive income
161 Consolidated balance sheet
162 Consolidated statement of changes in equity
163 Consolidated statement of cash flows
164 Company balance sheet
165 Company statement of changes in equity
165 Company income statement
166 Company statement of cash flows
167 Notes (forming part of the financial statements)
232 Glossary – Alternative Performance Measures
For more information please visit:
https://investors.petsathome.com/
Pets at Home Group Plc Annual Report & Accounts 2022
08
our approach
Delivering complete
pet care to our
customers.
our purpose
We’re better with
pets – is at the heart
of everything we
do and supports
our strategy.
our vision
To become the
best pet care
business in
the world.
our business strategy
Bring the pet
experience
to life
alue cre a t o
v
Use our data to
better serve
customers
r
e
n
a
b
l
e
r
e
n
a
b
ler
Set our
people free
to serve
v a l u e creator
50% of
revenue from
pet care services
For more information:
see pages 35‑39
Pets at Home Group Plc Annual Report & Accounts 2022
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our Better World Pledge
Pets
By 2030
positively
impact the
life of every
pet in the UK
Links to business
strategy
n Bring the pet
experience to life
n Use data and VIP
to better serve
customers
n 50% of sales from
pet services
People
By 2030
enhance the
lives of one
million people
through our
shared love
of pets
Links to business
strategy
n Set our people
free to serve
n Bring the pet
experience to life
n Use data and VIP
to better serve
customers
Planet
By 2040
become
net zero
Links to business
strategy
n Bring the pet
experience to life
n Use data and VIP
to better serve
customers
For more information:
Social value review, pages 42‑61
Pets at Home Group Plc Annual Report & Accounts 2022
10
our year in review
operational highlights
Our performance in the year
reflects the success of our pet
care strategy and the strength
of the UK pet care market.
n n
leveraging our
data insights
We are integrating analytics into our
extensive pet dataset to generate
unparalleled insights, enabling us
to more accurately understand our
customers and their pets, and predict
their future pet care requirements.
Beyond our CRM activities, we are
increasingly using intelligent data
to optimise decision-making across
the wider business.
n n
Progressing our
digital agenda
We continue to build our digital
capability with the first elements of
‘Polestar’, our transformational digital
initiative, launched in the year and
the broadening of our pick from store
capability to enable home delivery
from store, embedding best-in-class
fulfilment for customers.
n n
expanding our
subscriptions platforms
We now have approximately 1.5m pet
care plans across the Group, offering
customers a convenient way to shop
with us, and increasing the quality
and visibility of our sales profile.
n n
Growing our
customer base
Our VIP loyalty club now has 7.3m
active members, having grown 18%
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.
48%
Growth in Puppy
and Kitten club
sign‑ups YoY
£120m
Annual customer
revenue from
subscriptions
link to strategy
n Bring the pet experience to life
n Use data and VIP to better serve customers
n 50% of sales from pet services
n Set our people free to serve
Pets at Home Group Plc Annual Report & Accounts 2022
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Financial highlights
Revenue (£m)
£1,317.8m +15.3%
2022
£1,317.8m
2021
2020
0.0
£1,142.8m
£1,058.8m
1317.8
Underlying proforma PBT1 (£m)
£144.7m +65.3%
2022
£144.7m
2021
2020
0.0
£87.5m
£93.5m
144.7
Underlying free cash flow1 (£m)
£95.0m
2022
£95.0m
2021
2020
0
£67.4m
£89.6m
100
+40.9%
1 Alternative Performance Measures (APMs) are defined and reconciled to IFRS
information, where possible, on page 232. Group underlying proforma PBT is stated
before the change in IAS38 accounting policy. Group underlying PBT is £130.1m having
taken account of this change. See CFO review for further detail.
our Better World Pledge
Our social value strategy continues
to guide everything that we do
£7.5m
Raised to support
pet charities
c10k
hours donated
to local
communities
39%
Reduction in
CO2e emissions
vs FY16
Pets at Home Group Plc Annual Report & Accounts 2022
12
at a glance
A unique combination of products, services and advice
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. We provide
customers with everything
they need to be the best
pet owner they can be.
Retail
A wide range of pet products
are 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.
For more information:
Operating review, page 68‑69
Revenue and underlying proforma PBT1,2 by segment
Revenue
Underlying PBT1,2
£1,206.9m £114.6m
£108.4m
£44.5m
● Retail ● Vet Group
● Retail ● Vet Group
1 Alternative Performance Measures (APMs) are defined and reconciled to IFRS information, where
possible, on page 232.
2 Central PBT of £(14.4)m not shown above.
a pet care destination
In addition to pet products, our
stores 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.
a true omnichannel model
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
and 2-hour home delivery. Alternatively,
colleagues can place an order from our
extended range whilst the customer
is in-store. We also offer subscriptions
across monthly flea and worm
treatments and regular food
deliveries, making pet care even
more convenient and affordable.
Stores
457
Omnichannel
41%
Of omnichannel1 revenues
involve a store colleague
Services
57%
Of stores have a vet practice
and grooming salon
Pets at Home Group Plc Annual Report & Accounts 2022
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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.
Customers
7.3m
Active VIP loyalty club members
Cross‑shopping
27%
Proportion of VIPs who shop
across more than one channel
Vet Group
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.
Digitally-led pet
healthcare solutions
Our telehealth business, 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.
Practices
388
Joint Venture
First Opinion practices
Practices
55
Company managed
First Opinion practices
Consultations
c95,000
Remote consultations each year
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.
For more information:
Operating review, page 70‑71
Pets at Home Group Plc Annual Report & Accounts 2022
14
investment case
A clear and
compelling
investment case
24%
market share
457
pet care centres
£20m
digital investment
Strong position – in a
growing, resilient market
– We have 24% share of a pet care
market worth £6.7bn, providing
significant opportunity to take
further share
a unique proposition –
of pet care solutions
– An expanding ecosystem of pet care,
combining product, services and
expert advice from a trusted,
well known brand
– Growing population of c35m pets in
the UK, underpinned by increasing
humanisation and premiumisation
– Customers who transact across all
channels spend up to 9x more each
year compared to store-only shoppers
Scalable – omnichannel
platform
– Creating a new proprietary digital
interface where customers can
access their entire pet care needs
– Our telehealth business enhances our
digital capabilities, providing trusted
advice and even more convenient
pet care services
443
veterinary practices
7.3m
VIP loyalty club members
1.5m
pet care plans
Unique – Joint Venture
veterinary model
–
Largest branded veterinary business
in the UK, with practices located in
two-thirds of stores plus a number
of standalone locations
Practice maturity represents
a significant future profit and
cash flow opportunity, with
further potential upside from
rollout of new practices
–
extensive – and growing
data capability
– Unique VIP loyalty club,
providing almost 10 years’ worth
of proprietary pet and customer data
– By leveraging our data insights, we
can offer more personalised, targeted
solutions, driving customer loyalty,
retention and lifetime value
Subscriptions – create
a predictable, visible
income stream
– Approximately 1.5m pet care plan
subscriptions across the Group,
up 23% year-on-year
Existing platforms generate £120m
of visible, repeatable customer
revenue per year
–
Pets at Home Group Plc Annual Report & Accounts 2022
+48%
increase in dividend
Strong financial position –
and returns potential
–
Robust balance sheet with good
liquidity, low leverage and significant
headroom on banking covenants
– Highly cash generative with free
cash flow conversion of 38%
and dividend per share increased
to 11.8p in FY22
£7.5m
raised for charities
Strong commitment –
to responsible business
–
Strong sense of social value focusing
on our ESG agenda and designed
to balance the interests of all
stakeholders
– Balanced Board of Directors with a
broad range of skills and experience
24%
market share
457
pet care centres
£20m
digital investment
Strong position – in a
growing, resilient market
a unique proposition –
of pet care solutions
Scalable – omnichannel
platform
– We have 24% share of a pet care
– An expanding ecosystem of pet care,
– Creating a new proprietary digital
market worth £6.7bn, providing
significant opportunity to take
further share
combining product, services and
expert advice from a trusted,
well known brand
– Growing population of c35m pets in
– Customers who transact across all
the UK, underpinned by increasing
humanisation and premiumisation
channels spend up to 9x more each
year compared to store-only shoppers
interface where customers can
access their entire pet care needs
– Our telehealth business enhances our
digital capabilities, providing trusted
advice and even more convenient
pet care services
443
veterinary practices
7.3m
VIP loyalty club members
1.5m
pet care plans
Unique – Joint Venture
extensive – and growing
veterinary model
data capability
–
Largest branded veterinary business
– Unique VIP loyalty club,
Subscriptions – create
a predictable, visible
income stream
in the UK, with practices located in
two-thirds of stores plus a number
of standalone locations
providing almost 10 years’ worth
of proprietary pet and customer data
– Approximately 1.5m pet care plan
subscriptions across the Group,
– By leveraging our data insights, we
up 23% year-on-year
can offer more personalised, targeted
solutions, driving customer loyalty,
retention and lifetime value
–
Existing platforms generate £120m
of visible, repeatable customer
revenue per year
–
Practice maturity represents
a significant future profit and
cash flow opportunity, with
further potential upside from
rollout of new practices
+48%
increase in dividend
Strong financial position –
and returns potential
–
Robust balance sheet with good
liquidity, low leverage and significant
headroom on banking covenants
– Highly cash generative with free
cash flow conversion of 38%
and dividend per share increased
to 11.8p in FY22
£7.5m
raised for charities
Strong commitment –
to responsible business
–
Strong sense of social value focusing
on our ESG agenda and designed
to balance the interests of all
stakeholders
– Balanced Board of Directors with a
broad range of skills and experience
Strategic report
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Financial StatementS
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Pets at Home Group Plc Annual Report & Accounts 2022
16
chair’s statement
A record year
of growth
We delivered a record year
of sales and profit growth
demonstrating the strength
of our pet care strategy
and the advantages of
our omnichannel model.
The UK remains a nation of
pet lovers, with more people
discovering the joys of pet
ownership than ever before.
In FY22, we welcomed over 1 million new
customers into our pet care ecosystem as
we continue to make pet care convenient,
affordable and rewarding for pet owners.
Overall, we generated revenue growth
of 15.3%, to £1,317.8m, within which
like-for-like sales1 grew 15.8%.
Underlying proforma profit before tax1
grew by 65.3% to £144.7m and our
balance sheet remains strong with a net
cash position of £66.0m. Our performance
is testament to the success of our strategy
in combining a unique proposition of
products, services, and advice to provide
customers with everything they need to
look after their pet.
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. We now have a record 7.3m VIP
loyalty club members and there remains
considerable headroom for us to deepen
our relationship with these customers
and grow our overall share of wallet.
Strategy
We have made excellent 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 initiatives, including leveraging
our data capabilities to provide deep and
actionable insights, enhancing our
omnichannel fulfilment proposition to
make pet care even more convenient for
customers, and driving our subscriptions
business to engage more customers with
our pet care plans. We have deployed our
capital to further digitise the business as
we progress Project Polestar, invest in
our stores and vet practices to provide
a best-in-class customer experience
and continue 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
transform our pet care centres. We remain
committed to running a good business,
as well as a successful one, and we
continue to make great progress
in our social value strategy.
Performance
The performance in Retail remains
strong. By offering customers a
compelling range of products and
services across both physical and
digital channels, we have been able
to consistently grow our market share
across all key categories and segments.
We have seen positive results in the
Vet Group, as the health of the practice
estate continues to go from strength to
strength. Driven by our unique Joint
Venture model, our practices continue to
outperform the market, supported by a
growing client base and increasing ATV.
The underlying maturity profile of the
estate provides considerable runway for
growth, and we see a significant profit
and cash flow opportunity ahead.
Our underlying profit and cash
generation across the Group has
been highly encouraging, enabling us
to invest in our business, reduce debt
and increase our dividend. We ended
the year with good liquidity, low leverage
and a strong cash position.
management
Our Executive Management Team has
provided stable and effective leadership
throughout the past two years of
unprecedented challenges, ensuring our
customers and colleagues have remained
safe, informed and supported, as well as
making solid progress in implementing
key aspects of our strategy.
After 11 years with Pets at Home we are
saying goodbye to Peter Pritchard as our
Group CEO. This follows the successful
turnaround of the business, in which he
developed and implemented the Group’s
pet care strategy, in support of its
ambition to become the best pet care
business in the world. On behalf of the
Board and colleagues across the Group,
Pets at Home Group Plc Annual Report & Accounts 2022
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17
The strong performance of
the business has enabled us
to invest more in our business
than ever before, and pay
a record dividend to our
shareholders.
I would like to thank Peter for his
significant contribution to Pets at Home
since becoming CEO in 2018. His tireless
work and dedication as leader of this
great business has given it a very firm
foundation for growth long into the
future, for which we are all very grateful.
I am pleased to welcome Lyssa
McGowan as our incoming CEO. Lyssa,
formerly the Chief Consumer Officer at
Sky UK, brings strong corporate, strategic
and operational expertise across a range
of consumer-facing businesses, and a
proven track record of growth, with
significant experience in customer and
digital-first initiatives across multiple
channels and sites. The Board is
confident that Lyssa has the requisite
skills and capabilities to lead Pets at
Home as it executes its future growth
strategy and I very much look forward
to working with her.
colleagues
Our colleagues are at the heart of our
business. Our passionate and skilled team
of veterinarians, vet nurses, grooming
stylists, and store colleagues share the
joy of pet ownership, as well as their
knowledge and expertise, with our
customers every single day. They continue
to be supported by our dedicated teams
in field operations, our Distribution
Centres and our Support Offices.
Our strategy of providing complete pet
care to customers, is underpinned by our
colleagues across the Group working
together to help owners provide the best
possible care to their pets. I would like to
thank them for their efforts in delivering
this result, and their ongoing dedication
to our business.
ian Burke, chair
Dividend
The Board is pleased to
recommend a final dividend of
7.5 pence per share to be paid on
12 July 2022 to shareholders on
the register at the close of trading
on 17 June 2022. This will take
the full year dividend to 11.8
pence per share, up 48% 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,
with new customer registrations
continuing well ahead of
pre-pandemic levels and
growth in customer spend
maintained across all
categories and channels.
Whilst the current geopolitical
tensions, and inflationary
pressures represent near-term
headwinds, the business is well
positioned to manage such
challenges and we have a clear
and well-invested plan ahead.
Our unique omnichannel model,
and the ongoing resilience of the
UK pet care market mean that we
are well positioned for long-term
sustainable growth.
ian Burke
chair
25 May 2022
our Better World Pledge
Our social value strategy continues
to guide everything that we do
a year of progress
Acting responsibly and sustainably is at the
heart of our business and last year we formally
launched our social value strategy, which we
refer to as Our Better World Pledge. This pledge
ensures we run our business sustainably and
ethically whilst also applying high standards of
governance, with the aim of creating a better
world for pets and the people that love them.
Our strategy is 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, and we have
fully embedded it into our business to ensure
its ongoing success.
We are proud of the progress we have made this
year, testament to 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 by 39% since
2016, raising over £7.5m for pets when they
need us most, and investing in our people.
Social Value strategy,
page 42
1 Alternative Performance Measures (APMs) are
defined and reconciled to IFRS information,
where possible, on page 232.
Pets at Home Group Plc Annual Report & Accounts 2022
18
chief executive’s statement
Record
customer
acquisition
to accelerate
future growth
in market
share
Loyalty clubs
7.3m
Number of VIPs increased
18% YoY to a record 7.3m
New customers
+48%
Sign-ups to our Puppy and
Kitten clubs grew +48% YoY
Cross‑shopping
Subscriptions
27%
The proportion of VIPs shopping across
more than one channel, +22% YoY
1.5m
Subscriptions now generate £120m
in visible, recurring customer sales
Pets at Home Group Plc Annual Report & Accounts 2022
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GOvErnanCE
FinanCial STaTEmEnTS
19
Our pet care strategy
continues to deliver,
highlighted by our ability
to take market share and
grow our customer share
of wallet.
Peter Pritchard, CEO
Despite another period characterised
by significant and evolving external
challenges, our performance this year
has been nothing short of outstanding,
delivering record sales, profit, and cash
flow. I would like to express my heartfelt
thanks to our truly inspiring colleagues
and Partners across the Group for their
continued adaptability and commitment
to making Pets at Home bigger, stronger,
and more efficient.
We have never been better placed to
accelerate our growth in market share.
The resilient backdrop of the UK pet care
market, coupled with our clear strategic
priorities, proven omnichannel model
and strong Executive Team, mean that
I hand over leadership of this great
business to Lyssa McGowan with the
utmost confidence that Pets at Home
will continue to create significant value
for all stakeholders in both the near
and longer term.
The year in review
Our business has never been stronger.
This past year alone we have welcomed
over 1.1 million new customers across the
Group, delivered record sales, profit and
cash flow, and accelerated investment
into analytics capability, digital innovation,
and our supply chain to join up our pet
ecosystem, enhance the customer
experience and entrench the competitive
advantages of our omnichannel model.
We are growing share across every part of
our business, achieving customer revenue1
of almost £1.7bn. In Retail, broad-based
growth across key categories, both
in-store and online, contributed to strong
like-for-like progression and good profit
conversion. In Veterinary, strong growth
in new client registrations has increased
average practice revenue beyond £1m,
with c90% of practices profitable,
strongly cash generative and more
balance sheet efficient.
We also continued to make excellent
progress in our social value strategy,
aligned across the three pillars of Planet,
People and Pets. I am incredibly proud
of all our colleagues and Partners across
the Group for their tireless efforts and
commitment to consistently doing the
right thing for our customers, supplier
partners and the communities we serve,
in what is an extremely challenging
external environment.
After 11 years in the business, I am
stepping down from my role as CEO at
the end of May and will be succeeded
by Lyssa McGowan who brings strong
strategic and operational expertise across
a range of consumer-facing businesses,
and significant experience in customer
and digital-first initiatives. I am confident
that this transition in leadership comes
at a time of great opportunity for
the business.
Pet care spend has proven resilient across
all economic cycles, and the significant
step-up in pet ownership over the past
two years, combined with continued
themes of pet humanisation and
premiumisation, is materially increasing
the size our addressable market. We see
a clear pathway to at least £2.3bn of
customer revenue over the medium
term, optimising wallet share across
our existing customer base alone.
Our omnichannel pet care strategy,
providing customers with everything they
need through the lifetime of their pets,
allows us to access all components of
spend within this growing market. Our
unique ability to combine a broad range
of products and services into
personalised, pet-specific solutions is a
key enabler of how we consistently take
share and grow faster than the market.
This strategy, centred on our unwavering
commitment to provide affordable,
convenient and best-in-class pet care and
customer experience, has served us well
over the past five years, with over 60%
of our growth coming from market
share gains.
In conjunction with our planned
investment into capacity and capability,
and programme of initiatives to drive
operational efficiencies and mitigate
inflationary pressures across the business,
it will enable us to responsibly deliver
even greater value for all stakeholders
in both the near and longer term.
Pets at Home Group Plc Annual Report & Accounts 2022
20
chief executive’s statement continued
Key Performance indicators
Financial Kpis
Customer revenue#1 (£m)
Group underlying proforma PBT# (£m)
Group underlying free cash flow# (£m)
Cash Return on Invested Capital (CROIC)2
Strategic Kpis
Measure
Bring the pet experience to life
Number of active VIPs3 (m)
50% of revenue from pet care services
Customer revenue#1 from services4 (£m)
Use our data to better serve customers
VIP customer revenue#1,5 (£m)
Set our people free to serve
Customer revenue#1 per FTE colleague (£k)
FY22
FY21
1,673.8
1,437.1
144.7
95.0
87.5
67.4
24.0%
21.7%
FY22
7.3
537.7
32.1%
1,107.1
201.8
FY21
6.2
470.8
32.8%
875.7
183.1
YoY
change
16.5%
65.3%
40.9%
231bps
YoY
change
17.9%
14.2%
(64)bps
26.4%
10.2%
1. Customer revenue includes total revenue across the Group including customer sales made by Joint Venture vet practices, and therefore differs to the fee income recognised
within Vet Group revenue.
2. 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 of PPE, right-of-use assets and amortisation. GCI
represents gross PPE, right-of-use assets and software, and other intangibles excluding the goodwill created on the acquisition of the Group by KKR (£906,445,000)
plus net working capital, before the effect of non-underlying items in the period, and incorporating the impact of the IFRIC clarification to IAS38 on capitalisation
of software costs.
3. Number of VIP loyalty club members who transacted across the Group in the last 52 weeks from end of the reporting period.
4. Defined as customer sales made by JV vet practices, revenue from our Specialist Referral centres (up until the date of disposal on 31 December 2020) and company managed
vet practices, grooming services, subscriptions, pet sales and pet insurance commissions.
5. VIP customer revenue includes customer sales at First Opinion vet practices.
# Alternative Performance Measures (APMs) are defined and reconciled to IFRS information, where possible, on page 232.
Pets at Home Group Plc Annual Report & Accounts 2022
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Financial StatementS
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Strategic review 2022
i. our business will continue to grow market share
The UK pet care market has grown
at an estimated CAGR of 4% over
the past five years. In comparison, by
leveraging our omnichannel positioning
and end-to-end pet ecosystem, we have
grown our customer revenue at 10%
CAGR over the same period and by
12% in each of the last two years.
a robust and growing market
–
product and service ecosystem
in a robust, growing market
i. an affordable, defensive
The continued resilience of the market
in which we operate, combined with
our breadth of affordable products and
services, and planned investment into
capacity and capability to make pet care
even more easy and convenient, give
us confidence in our ability to achieve
strong growth in market share in both
the near and long term.
The UK pet care market has proven
robust across all economic cycles,
growing consistently between 3%
and 4% each year prior to the
pandemic, with pet humanisation
and premiumisation driving higher
spend across a pet population
that was broadly stable, but
continually renewed.
– COVID-19 has been a clear catalyst
for a significant step-up in pet
ownership over the past two years,
the pace of which continues well
ahead of pre-pandemic levels, and
we estimate that the future annual
underlying growth rate of our
addressable market has increased
at least to between 4% and 5%.
This growth in new pets, combined
with the aforementioned demand
drivers that have increased spend
propensity and decreased how
discretionary that spend is perceived
to be, make pet care one of the more
defensive categories of consumption.
–
–
This is clearly evident across our most
recent customer cohort, where relative
affluence, engagement across multiple
channels and propensity to cross-shop
products and services is translating,
relative to previous cohorts, into a 24%
increase in average customer value in
year 1, a 7% increase in subscription
penetration and a 16% increase in
Advanced Nutrition participation.
– Anecdotal evidence also suggests
that over 90% of these customers
are not intending to reduce their
level of pet spend.
Notwithstanding the above, our aim
remains to make pet care as affordable
and convenient as possible, maximising
our market share opportunity.
an affordable, defensive product
and service ecosystem
The vast majority of spend across our
ecosystem is non-discretionary with food,
consumables and economically resilient
grooming and veterinary services accounting
for over 75% of customer revenue.
While average basket size in-store
is comparatively low (£15 over the
last 12 months), we are laser-focused
on maintaining great choice, quality,
and value for customers at a time when
they are facing increasing pressure on
household budgets:
– Our broad, compelling nutrition matrix
in food, from grocery brands through
to bridging and advanced nutrition,
enables our dedicated in-store
consultants to offer customers great
value at all price points. Our private
label brands account for approximately
one third of total food sales, with price
points typically 25-30% below the
branded equivalent.
The majority of our pet accessories
are non-seasonal with an average
selling price of £7. Approximately
50% are private label, with innovation
underpinning a high attachment rate.
–
– Our growing range of affordable
subscription plans, including flea
and worm treatments from £4 per
month, favourably priced food
auto-ship and comprehensive
veterinary health plans from £12
per month, offer customers essential
pet care at low, fixed monthly outlay.
Pets at Home Group Plc Annual Report & Accounts 2022
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chief executive’s statement continued
products and physical and digital services,
provide relevant, personalised and joined-
up pet care solutions through the full
lifetime of a pet.
Since in-housing our CRM data in 2020:
– Average customer spend has
sequentially increased with average
first and second year spend across
our two most recent cohorts
between 20% and 30% higher
than the respective average across
all previous cohorts.
– Utilising data insights from existing
subscribers to identify customers
most likely to take an additional
product or service has supported
70% growth in subscription plans
over the past two years.
– Development of our proprietary pet
lifetime value model, incorporating
retail and veterinary data specific
to over four million dogs to predict
lifetime spend across all major breeds
is providing invaluable intelligence
to support long-term value creation
across both sides of our business.
The strong growth in puppy and kitten
registrations over the past two years has
increased our lifetime value opportunity,
and we will continue to leverage these
unique insights to further optimise
share of wallet.
We are also increasingly using intelligent
data in our decision-making across the
wider business. In our retail operations,
for example, our cluster-based ranging
methodology is optimising inventory
availability and operating hours at
individual store level. Within veterinary,
our insights across treatments and
procedures are supporting our
best pet consult initiative, thereby
improving the planning of practice
revenues and resource.
our digital capability makes
pet care even easier and more
convenient
Investing in digital capability is key to
making pet care easy and convenient and
driving additional spend. Our strong store
LFL demonstrates that our digital growth
is incremental not substitutional.
– Project Polestar
– Project Polestar is a
transformational investment into
digital capability which will unlock
significant opportunities around
data, subscription, and loyalty by
marrying the insights we have on
Our
performance
this year has
been nothing
short of
outstanding,
delivering
record sales,
profit, and
cash flow.
Peter Pritchard, ceo
– Over 1.4m transactions each week
across our extensive VIP customer
base give us the insight to
understand and anticipate our
customers’ changing needs, including
the impact of targeted pricing
investments on customer behaviour.
ii. ongoing investment to make pet care
as easy and convenient as possible
We will continue to invest to make pet
care as easy and convenient as possible:
deepening our omnichannel advantages
through increasing our data and digital
capabilities, future-proofing our supply
chain, enhancing the client and vet
experience across practices, and
transforming more stores into
experiential pet care centres.
our growing data analytics
capability is driving share of wallet
Our growing, in-house data capability,
underpinned by a 70-strong team of
colleagues across a range of analytical
and CRM disciplines, provides deep,
actionable insights that support
investment decision-making to drive
long-term, high-quality growth.
At the household level, our holistic and
integrated view of pets and owners
across all parts of our business enables
us to communicate with customers
individually by relevant category, service,
or channel. At the individual customer
level, our ‘customer DNA’ profiling
dynamically segments pet owners
across more than 300 customer-specific
attributes, including lifestage, affluence,
transaction history and propensity
to engage with other pet products
and services.
In aggregate, this equates to over
150 billion customer data points on
our cloud-based platform and represents
a truly unparalleled view of the UK’s pet
owning population. This enables us to
predict our customers’ future pet care
requirements better than any other
provider and, combining our suite of
Pets at Home Group Plc Annual Report & Accounts 2022
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our customers’ pet care needs
with personalised journeys across
a unique, proprietary digital
interface that seamlessly connects
our ecosystem of products and
services across all channels.
– This clearly phased programme is
scheduled to deliver incremental
features and functionality over
the next 12 months, including a
new booking platform across our
veterinary and grooming services,
an integrated subscription
platform, and a personalised
customer-centric dashboard
incorporating pet-specific
guidance, support, and tailored
pet care recommendations.
– Stores and colleagues
– We plan to extend our ship
from store capability to close
to 200 stores by summer 2022,
reducing the variable costs
associated with centralised
fulfilment and delivery, and
giving more choice to customers.
– Colleagues across all our stores are
now digitally connected into our
ecosystem via a single handheld
device that will be integrated with
Polestar functionality and improve
our service proposition.
our infrastructure provides best-
in-class customer experience
– Our pet care centres remain central
to our customer proposition, playing
a pivotal role in connecting local
communities of pet owners and their
pets to all their pet care requirements
and knowledgeable colleagues in
one location. Returns generated
from recent store openings and
transformations are encouraging, and
we plan to open 5 new stores and
transform 40-50 stores each year over
the medium term to improve both the
physical shopping experience and the
integration with our digital platform.
– Development of our new storage and
distribution facility in Stafford remains
on track to become fully operational
by summer 2023. This purpose-built
and highly automated facility will
support our future growth ambitions
through improved capacity while
lowering our cost to sell through
better inventory management and
availability, and faster delivery.
– We will continue to invest in
infrastructure and resource across our
veterinary practices and plan to open
between 5 and 15 new practices
each year over the medium term.
Our Pathfinder initiative is proving
pivotal in improving practice revenues
and efficiencies, and is generating a
better client experience, and we plan
to extend this to all 55 company
managed and select Joint Venture
practices over the coming year.
ii. record levels
of customer
acquisition and
investment to
drive continuing
and profitable
growth
The strong momentum across both
parts of our business has accelerated
the progression of our medium-term
revenue plan, with good profit and cash
conversion underpinning a 48% increase
in our ordinary dividend and a record
level of investment into growing our
omnichannel capability.
This investment is strengthening our
competitive advantage of providing
customers with convenient, joined-up
pet care journeys across our omnichannel
product and service ecosystem. It enables
us to access all components of pet spend
through the full lifetime of a pet and put
simply, achieve sustainable, profitable
growth over the long term.
i. leveraging intelligent
data to grow our lifetime
value opportunity
We made excellent progress this year in
leveraging our in-house data capability,
integrating analytics into our unique,
extensive pet dataset of over eight
million pets and their owners to generate
unparalleled insights that underpinned
strong growth in both customer
acquisition and share of wallet.
record level of customer acquisition
Continued strong growth in new
pets, combined with our omnichannel
positioning and data-led customer
acquisition strategy, has enabled us to
welcome approximately 1.2m (estimated
40% market share) new puppy and
kitten owners over the past year.
Our Puppy and Kitten club is intuitively
designed to introduce new owners to
all parts of our ecosystem at the start of
their pet care journey and typically results
in a 20% spend premium, which
continues upon graduation of the pet
into our VIP club, compared to owners
outside the club. Our strong growth in
puppy and kitten registrations, therefore,
presents a multi-year growth opportunity
across the business.
Growing our share of wallet
Our data-led insights give us an
unrivalled understanding of pet owners’
current and future requirements, with
our unique ability to match this
knowledge to personalised, convenient
propositions across a broad range of
products and services through the
full lifetime of a pet supporting deep
relationships and high retention.
Pets at Home Group Plc Annual Report & Accounts 2022
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chief executive’s statement continued
– Our Contactless Collection service
has been extended to over 360 stores
and, in conjunction with Click and
Collect across the full estate,
is embedding industry-leading
fulfilment for customers while
generating clear operational and
cost efficiencies across the Group.
– Our Deliver from Store capability
is now available across more than
130 stores, c120 of which offer
same day and 2-hour home delivery.
Collectively, we are currently utilising
our store network to cost effectively
fulfil approximately one fifth of total
omnichannel revenue.
– Digital innovation is increasingly
pervasive across our store operations,
with our ‘Pet Expert Live’ video
functionality now actively connecting
online customers to expert colleagues
across a growing number of stores, and
our in-house developed handheld
device, ‘One Device’, simplifying
daily tasks and empowering store
colleagues to deliver a joined-up
pet care experience.
iii. investing in infrastructure
to provide a best-in-class
customer experience
retail
Our store transformation programme
continued across existing and seven new
stores this year, with 52 pet care centres
currently across the estate incorporating
our latest thinking on digital functionality,
multi-use event space and our services
proposition.
These next generation stores are
performing well ahead of plan across
key metrics, with transformations over
the past year achieving on average a
c45% increase in VIP and subscription
sign ups compared to legacy formats,
and vet-led and grooming sales
approximately one third higher.
veterinary
We continued to invest in infrastructure
and resource across our veterinary
practices to broaden our service
proposition, improve the client
experience and accelerate practice
maturity. Early results from practices
incorporating our ‘Pathfinder’ initiative,
which combines design innovation, the
latest client-facing technology and a new
‘Pet Care Advisor’ role, point to health
plan penetration approximately 15%
higher than the wider estate, and an
improved clinician experience.
Deep relationships: With an
approximate ninefold uplift in annual
spend from those customers who shop
across our full pet ecosystem, our focus
on using analytics to refine audience
selection by propensity to spend and
algorithmically generated campaigns to
improve marketing velocity and present
actionable, personalised offers to
customers is generating strong results:
– Across more than 600 targeted
campaigns over the past year,
our aggregate share of customer
wallet increased 600bps to 37%.
– Average annual spend across
our 7.3m active VIP members is
approximately 15% higher than
first year spend of our most
recent customer cohort.
– 2m of our active VIPs now shop
across more than one channel
across the Group, compared to
1.4m VIPs two years ago. While
these VIPs represent 27% of the
total, they contribute close to 60%
of total customer spend.
– High retention: Our traditionally high
level of customer retention is being
further strengthened by our ‘always
on’ predictive churn model, designed
to target customers most at risk of
lapsing with relevant interventions:
– Over 95% of first year spend is
typically retained across our active
customers in subsequent years.
– 90% of new Puppy and Kitten
customers over the past two years
remain active across the Group.
– Our predictive model has reduced
customer churn by a further
4% this year and doubled
the23response rate to our
flagship Reward Mailer.
ii. Digital innovation to
make pet care as easy
and convenient as possible
We made meaningful progress during the
year across our digital agenda, marrying
our in-house data and digital expertise to
create digital-first, customer-led pet care
journeys, as well as digitising the wider
business to improve our service proposition
and drive operational efficiencies.
Project Polestar
Development of our proprietary digital
interface to seamlessly connect our pet
ecosystem across all channels continues at
pace, with customers now able to access
all our products and services through a
frictionless single login. A new iteration
of our mobile app for a much-improved
shopping experience is scheduled for
launch later this year, giving customers
even more choice over how they
engage and shop with us.
Digitally enabling
stores and colleagues
Integrating our digital capabilities into our
nationwide store estate is key to improving
the customer and colleague experience,
enabling us to serve more customers
wherever, whenever, and however they wish:
– Our one-hour Click and Collect
service has continued to prove
popular and, currently accounting
for approximately 10% of total
online orders, is an important part
of our cross-channel experience with
many customers shopping in store
on the same trip.
Pets at Home Group Plc Annual Report & Accounts 2022
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– We recently pledged £100,000
to help pet care professionals, pet
owners and animals impacted by
the horrific events in Ukraine and
launched a fundraising appeal to
enable our customers to donate over
£100,000 to date across relevant
organisations.
– We completed the first year of our
partnership with the Woodland Trust
through our ‘pet memory scheme’
and donated over £250k to support
the creation, restoration, and
planting of 20,000 acres of
woodland by 2030, and the
opportunity to capture 5,000
tonnes of carbon annually.
v. Sustainable
and profitable
growth over
the longer term
Our business has never been more
robust and the demonstrable advantages
of our omnichannel model are clear.
We continue to take market share
and improve spend per customer. The
benefits of our ongoing investment in
capacity and capability are really starting
to deliver.
The continuing growth in the pet
population over the past two years,
combined with continued customer
themes of pet humanisation,
premiumisation and renewal, has
increased the size of our market and
scale of our opportunity. We are better
placed than ever to deliver value for
all stakeholders in both the near
and longer term.
Peter Pritchard
Group chief executive officer
25 May 2022
iii. many levers
to navigate
inflationary
pressures
We are not immune to current industry
wide inflationary pressures, in particular
energy and freight costs, and we have
clear plans in place to keep our pricing
competitive for customers, while doing
everything we can to reduce our
own costs.
– Over 80% of our cost of goods is
sourced domestically, limiting our
direct exposure to container rate
volatility. We continue to work closely
with our broad base of suppliers to
mitigate as much inflation as possible
across the supply chain to support
our competitive price index.
– We have a comprehensive
programme of live initiatives
across consumables, packaging,
store operations and availability
to reduce our overall cost to serve.
– We continue to make good progress
in our programme of rent reductions,
achieving average cash reductions
of c25% upon negotiation with
c300 lease events scheduled
over the next 5 years.
– Our financial position remains strong,
with our robust balance sheet and
good cash generation giving us
the flexibility both to invest in
strategically important initiatives
that support long-run growth,
and to pay a progressive dividend.
iv. maintaining
our strong
commitment to
a sustainable
future
We made good progress this year in our
social value strategy, aligned across the
three pillars of Planet, People and Pets.
Planet
– We have set our net zero carbon
reduction targets in line with the
science-based targets initiative (SBTi)
guidelines, and our near term 42%
scope 1, 2 and 3 reduction targets
and long term 2040 all scopes net
zero target are in the SBTi review
and approval process.
– As part of our commitment to 100%
recyclable packaging by 2025, we
have rolled out collection units for
the recycling of pet food packaging
to over 250 stores, with plans to
extend this further in the current
year. Approximately 80% of our
packaging is currently recyclable.
– We recently concluded an investment
with Project Blu, a leading UK-based
supplier of sustainable pet accessories.
Under the agreement, Pets at Home
will be the first UK retailer to offer
Project Blu’s full product range,
meeting a growing demand from pet
owners for planet first, mindful
consumption with a broad range of
environmentally friendly products.
Our collaboration with Blu will also
provide valuable insight to help
identify future opportunities for
sustainability initiatives in a rapidly
growing segment of the market.
Prior to the year end, we renewed
our revolving credit facility until 2027,
linking it to specific sustainability
targets, aligned to the three pillars
of our social value strategy: Planet,
People and Pets.
–
People
–
In partnership with the Prince’s
Trust, Pets at Home provided work
opportunities to over 170 young
people under the Government’s
Kickstart programme, many of
which have led to permanent
roles across the Group.
– As part of our contribution to the
wider community, all colleagues are
encouraged to take one paid day
each year to support a charity of their
choice. These ‘Better World Pledge’
days are integral to our annual bonus
scheme, with approximately 10,000
hours collectively volunteered to date.
– We continued to make progress
across our Diversity and Inclusion
agenda, and in the recent FTSE
Women Leaders report Pets at Home
ranked 22nd across the FTSE250 on
gender diversity and 5th within the
Retail sector overall, a significant
improvement year-on-year.
Pets
–
The Pets at Home Foundation is
the largest grant giver to rescue
centres in the UK and, during the
year, awarded grants and donations
worth over £3.5m (including £0.7m
pledged) to charitable organisations
supporting pets and the people who
love them, taking the cumulative
level of donations to date to
over £26m.
Pets at Home Group Plc Annual Report & Accounts 2022
26
market overview
A growing pet
care market
The pet market remains
resilient and in growth
and we continue
to take share.
For more information:
www.investors.petsathome.com
UK pet care market
Addressable
pet care market
£6.7bn
By sector value 20211
n Retail total2
n Food3
n Accessories3
n Veterinary4
£4.3bn
£3.1bn
£1.0bn
£2.4bn
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.
Pets at Home Group Plc Annual Report & Accounts 2022
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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 two years have 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.
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
over the past year within such an
unpredictable external environment
demonstrates that our pet care
strategy remains the right one.
For more information:
see page 35
Pets at Home Group Plc Annual Report & Accounts 2022
28
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
35m, having grown by approximately
10% 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 deepening engagement with our
customers, introducing them to all
parts of our ecosystem, and nurturing
lifelong relationships with them.
Our market share in 20211 (%)
market driver
Humanisation
of pets and an
increasing desire
for higher quality
products and
services
Across both dog and cat owners,
there is a continuing trend of selecting
higher quality diets driven by greater
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.
Market share
24%
Our share of the
UK pet care market
Taking share
c100bps
Our growth in market
share year-on-year
49%
21%
19%
market growth during 20211
n Retail total2
n Accessories2
n Food3
n Veterinary4
5%
6%
4%
14%
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.
Pets at Home Group Plc Annual Report & Accounts 2022
Strategic report
Governance
Financial StatementS
29
Market growth
Pet population
+10%
Estimated YoY growth
in the UK pet population
8%
Estimated total YoY growth
in UK pet care market
Omnichannel
16%
Omnichannel participation
of retail revenues
market driver
Continued channel
shift to online
Online penetration of the pet
products market increased again
in the year, and was 24% in 2021.
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, now estimated at 19%.
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.
market driver
Advances in
veterinary care
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, and offering 24/7
access to trusted advice through our
telehealth business, we make access
to this high quality care easy
and convenient.
Pets at Home Group Plc Annual Report & Accounts 2022
30
Business model
Creating value for
all stakeholders
Business activities
H o m e G r oup Plc’s pet care ecosyste
m
t
s a
t
e
P
Pet-products
& advice
in-store
in-store vet
practices
V
e
t
omnichannel
& subscriptions
viP
Petcare
G
r
o
u
p
Digitally-led
pet healthcare
solutions
Pet-products
online
loyalty c l
u
b
Standalone
vet practices
R
e
t
a
i
l
Grooming
salons
other pet
care services
Underpinned by Our Bette r W o r
l d P l e
e
g
d
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 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 two
years we have developed and put into
action 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.
For more information:
Social Value, page 42‑61
Differentiators
Trusted and
well known
brand
Passionate
and expert
advice
Extensive and
growing data
capability
Pets at Home Group Plc Annual Report & Accounts 2022
Strategic report
Governance
Financial StatementS
31
value created
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.
For more information:
Operating review, page 68‑69
vet Group
Our Vet Group has its core business
in First Opinion veterinary services
and a growing presence in the
telehealth segment.
For more information:
Operating review, page 70‑71
1 Alternative Performance Measures (APMs) are defined and
reconciled to IFRS information, where possible, on page 232.
Scalable
omnichannel
platform
Differentiated,
sector-leading
vet services
Unique
digital
experience
Pets at Home Group Plc Annual Report & Accounts 2022
For petsEverything a pet needs to keep them happy and healthy.£7.5mRaised to support pet charitiesFor our people Externally accredited training schemes.c10,000Hours donated to local communitiesFor the planetA responsible, sustainable business.39%Reduction in CO2e emissions vs FY16For the GroupGenerating value for shareholders through free cash flow growth.£95.0mUnderlying free cash flow1 32
Stakeholder engagement and s172 statement
Suppliers
c380 active suppliers
engagement method
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 we continued
with top-to-top business review meetings with our priority
strategic suppliers. We held a virtual conference in September
for our UK and Asia suppliers. These conferences provide a
platform to share our key strategic messages and the suppliers
have an opportunity to ask questions, raise concerns and
discuss opportunity areas.
Key messages
Global supply chain challenges continued to dominate
engagement with suppliers as we all focused on ensuring
continuity of supply of products for our customers and their
pets. This was balanced with discussions on longer-term
strategic developments and initiatives. Our suppliers have told
us that understanding the long-term strategy enables them
to invest appropriately in their businesses. The conference in
September enabled engagement on our products, capabilities
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.
our response
A tiered plan for meeting and engagement will enable both
the transactional and strategic topics to be discussed across
the year. Our category approach enables supplier engagement
in the approach and opportunities at a category level across the
short and long term. During the year the Product and Supply
Chain Management Committee has continued to be focused
on the development of the responsible sourcing strategy,
including our scope 3 packaging and raw material approaches.
Colleagues
Over 16,500 colleagues across the Group
(including colleagues employed either
directly or indirectly via our vet practices)
engagement method
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, is Board
colleague representative. In this capacity she has attended
a number of colleague listening sessions. In addition, the
Chair has attended 3 listening sessions in FY22. The
year has continued to be disrupted by COVID-19 with fewer
face-to-face opportunities, however the Chair was able to
complete 5 visits during FY22, visiting 15 stores. 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. A vet specific
listening campaign was run called Project Listen, which was
survey-based and open to the whole profession. We ran an
engagement pulse survey in the Autumn where we focused
predominantly on colleague wellbeing. There are channels for
colleagues to engage directly with the Executive Management
Team, for example the ’Tell David’ and ‘Tell Jane’ email addresses.
Key messages
During the second year of the COVID-19 crisis the need to
listen to and communicate with all colleagues continued to
be vitally important. The pulse survey told us we had high
levels of engagement and that our interventions to support
colleague wellbeing through COVID-19 were beneficial and
that they needed to be maintained. Particularly with changes
to ways of working as the work from home rules have
lifted, making the transition to a new normal is important
for our colleagues. The listening project with the vet
profession told us that wellbeing, work life balance and
challenges with resource were the key concerns.
our response
Our focus is on creating a kind and caring company where
colleagues feel welcomed and valued and are able to make
their best contribution. The virtual communications established
in the early days of the pandemic have been maintained.
The reward hub has been developed as a vehicle for
supporting colleague wellbeing and also enabling instant
reward and recognition of performance and our values and
behaviours. Diversity and inclusion is an important element
of our colleague wellbeing strategy and our colleague
networks have been developed in the year as forces for
change and providing inspiring engagement events for our
colleagues. Key to our wellbeing strategy has been the
introduction of our Mental Health First Aider programme
and a Line Manager mental health programme.
Pets at Home Group Plc Annual Report & Accounts 2022
Strategic report
Governance
Financial StatementS
33
Charity and Community
86 organisations supported with grant
funding during the year from the
Pets at Home Foundation
Industry
All vets are members of the Royal College
of Veterinary Surgeons (RCVS) and the
British Veterinary Association (BVA)
engagement method
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 the help that they need, which supports the
community strategy. The Foundation sends out a regular
survey to understand both how they are coping and also
what trends they are seeing in pet relinquishment. During
FY22 these surveys have been conducted in September
2021, December 2021 and March 2022. During the year
they had 200 responses to this survey. The Foundation also
joined the regular meetings held by the CEOs of some of
the large national pet rescue and animal welfare charities.
This ongoing engagement with the charity sector helps us
to focus our efforts where the impact on pet welfare will
be greatest.
Key messages
Local and national rescues continued to face a significant
challenge to maintain sufficient income to meet the
immediate veterinary and care needs of the pets in their
care during FY22. Although fundraising opportunities have
begun to recover, there are new issues around rising costs.
There are also more complex issues that pets are presenting
with when they are relinquished, such as behavioural issues.
our response
Our engagement with the charity sector enables us
to structure our programmes to optimise impact. This
includes both larger grants for specific change programmes
and regular support through vouchers from VIP lifelines
and support at a local level through our charity of the
year programme.
During the year the foundation returned to its grant
programme and has awarded 70 grants to pet rescue
charities, totalling £1.1m and 16 grants to pet people
charities, totalling £0.6m.
VIP Lifelines have additionally donated vouchers to over
800 national and local charities. Over 340 Pets at Home
stores partner with a local charity to enable them to raise
awareness and funds by fundraising in our stores over
specific in store events, which have now resumed
with restrictions having eased.
engagement method
Pets at Home are active members of the British Retail Consortium
and have contributed to various initiatives and working groups.
These include the BRC Climate Actions Net Zero 2040 Road
Map and their Diversity and Inclusion Charter. We have active
lead members in the respective working groups.
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 JVPs and vets are
members of the RCVS and BVA. We have Practice and Support
Office colleagues who are senior officers in some of the main
veterinary organisations. These include the British Veterinary
Nursing Association (BVNA), the Veterinary Management Group
(VMG) and the Society of Practising Veterinary Surgeon’s (SPVS)
Educational Trust. We have active senior members of profession
wide inclusion networks including the British Veterinary Ethnic
and Diversity Society (BVEDS), British Veterinary Lesbian, Gay,
Trans Society (BVLGT+) and British Veterinary Chronic Illness
Support Group (BCVIS).
Key messages
Participation in the BRC net-zero and Diversity and Inclusion
charters and groups mean we are playing our role in solving global
challenges which include and go beyond our own value chain.
Joint Venture Partners have the clinical freedom to interpret
and follow RCVS and BVA guidance. Engagement with industry
bodies enables the Vet Group Clinical Services and People Team
to provide informed support and advice to the partners as well
as actively participating in industry-wide discussion and creation
of solutions to systemic workforce challenges.
The Vet Safe initiative is an industry-wide significant event
reporting system which enables learnings and improvements
to be made across the industry.
our response
Continuing to work with industry bodies beyond the COVID-19
pandemic means we continue to do the best for our colleagues,
customers and pets. We actively review all guidance issued from
Government and professional bodies related to COVID-19 and
any other matter.
We continue to interpret this into clear guidance and actions for
our pet care stores and our partners to ensure they are providing
the safest shopping and clinical experiences possible for our
customers and their pets.
Pets at Home Group Plc Annual Report & Accounts 2022
34
Stakeholder engagement and S172 statement continued
Customers
7.3m active VIP members
engagement method
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 continue to
conduct regular pulse surveys, with both existing customers
and non-shoppers, to assess customers’ evolving behaviours
and preferences.
Key messages
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.
Customers continue to seek flexible and convenient ways
to shop and look after their pets.
our response
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 continued roll out of our
Contactless Collection service, and launched Deliver From
Store enabling same day and 2-hour home delivery in over
100 locations.
Shareholders and the
investor community
237 institutions met
engagement method
The CEO, CFO and Investor Relations team are involved in
ongoing interaction throughout the year via conference calls,
meetings and small round table events. At the AGM 100%
of resolutions were passed and votes in favour ranged from
87% to 100%. A capital markets day was hosted at our
Support Office, featuring a tour of our Handforth Pet Care
Centre and a range on presentations from senior management.
A number of ESG focused sessions have been held with the Chief
People and Culture Officer and Group Head of Social Value.
Key messages
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 our social value strategy, capital
allocation and management succession.
our response
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.
Pets at Home Group Plc Annual Report & Accounts 2022
Strategic report
Governance
Financial StatementS
Strategy
35
Our pet care strategy
Supporting our vision
of becoming the best pet
care business in the world.
our business strategy
Bring the pet
experience
to life
alue cre a t o
v
e
Use data and VIP
to better serve
customers
n
a
r
b
l
e
r
vision
Be the best
Pet Care business
in the world
e
n
a
b
ler
Set our
people free
to serve
For more information:
see pages 36‑39
v a l u e creator
50% of
revenue from
pet services
Pets at Home Group Plc Annual Report & Accounts 2022
36
Strategy continued
Bring the pet experience to life
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:
Number of active VIPs#
Services and store expansion
– Competition
–
– Our people
–
–
–
–
– Regulatory and compliance
Supply chain and sourcing
Sustainability and climate change
Liquidity and credit
Treasury and finance
Progress in the year:
– Rolled out a further 29 pet care
centre formats throughout the year
at new, existing and relocated stores
– Maintained price competitiveness
–
–
–
vs online pureplays
Extended our Contactless
Collection service to 360 stores
Launched 2-hour home delivery
using our pick from store capability
Launched the first elements of
Project Polestar, our transformational
digital platform to connect customers
to 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
–
7.3m
Number of pet care centres
457
Omnichannel participation
of total Retail sales
16%
Private label participation
across food and accessories
c40%
Pets at Home Group Plc Annual Report & Accounts 2022
Strategic report
Governance
Financial StatementS
37
Use our data 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 efficiencies
– Use data and analytics to
drive decision making
across the Group.
– Make processes smarter,
quicker and more efficient.
1 Alternative Performance Measures (APMs) are
defined and reconciled to IFRS information,
where possible, on page 232. 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 40.
Principal risks:
VIP customer revenue1 #
– Competition
– Business systems and information
security
– Regulatory and compliance
– Brand and reputation
Progress in the year:
–
Employed AI to calculate customers’
propensity to engage with additional
services, driving 22% growth in VIPs
who shop multiple channels
– Built pet lifetime value model to
predict the full lifetime of spend
and identify key junctures in
the pet care journey
– Developed basket profiling at
store level to optimise inventory
management and ranging
– Utilised analytics across veterinary
treatments and procedures
supporting the best pet consult
– Grew membership of Puppy
and Kitten clubs, increasing
the lifetime value opportunity
across our business
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
£1,107.1m
Growth in active
VIP members
18%
VIPs who shop across
more than one channel
27%
Group customer revenue
transacted by VIPs
66%
Pets at Home Group Plc Annual Report & Accounts 2022
38
Strategy continued
Set our people free to serve
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.
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.
Customer revenue1
per FTE colleague#
£201.8k
Increase in store
sales per hour
+9%
Colleague turnover
34%
Colleague engagement
76%
Principal risks:
Services and store expansion
–
– Our people
– Brand and reputation
– Business systems and
information security
– Regulatory and compliance
Progress in the year:
– Broke ground at our new purpose-
built, highly automated distribution
platform, consolidating our two
existing legacy facilities
Launched ‘Pet Expert Live’ service
linking online customers to
in-store colleagues
–
– Rolled out new intuitive in-store
–
–
device for colleagues, empowering
them to provide a joined-up
customer experience
Extended our in-store
development teams, where new
apps and technologies are co-created
directly with store colleagues
Significantly expanded our in-house
digital 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
–
Pets at Home Group Plc Annual Report & Accounts 2022
Strategic report
Governance
Financial StatementS
39
50% of revenue from pet care 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.
Drive maturity in our
First Opinion vet business
and realise free cash
flow 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:
Services and store expansion
– Competition
–
– Our people
– Regulatory and compliance
–
Sustainability and climate change
Progress in the year:
–
–
Launched three smaller next
generation stores in high-street
locations within Greater London
– Continued growth in pet care plan
subscriptions, now generating over
£120m in annualised recurring
customer revenue
Like-for-like1 First Opinion
customer sales ahead of the
underlying market across all
cohorts, including mature practices
Supported the maturity of our First
Opinion vet business helping drive
cash generation, with year-on-year
FCF growth of 34% in our Vet Group
Improved productivity within our
grooming business, with 24%
more dogs groomed year-on-year
–
–
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
–
1 Alternative Performance Measures (APMs) are
defined and reconciled to IFRS information,
where possible, on page 232. 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 40.
Customer revenue1
from pet care services#
+32.1%
Grooming salons
337
First Opinion vet practices,
located both in‑store and
in standalone locations
443
Pet care plans
across the Group
1.5m
Pets at Home Group Plc Annual Report & Accounts 2022
40
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
continued strength of our
performance 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.
1 Alternative Performance Measures
(APMs) are defined and reconciled
to IFRS information, where possible,
on page 232.
Financial performance
Strategic 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.
Group underlying
Customer
revenue1 (£m)
proforma profit
before tax1 (£m)
Group underlying
free cash flow1 (£m)
£1,673.8m
+16.5%
£144.7m
+65.3%
£95.0m
+40.9%
2022
2021
2020
0.0
£1,673.8m
£1,437.1m
£1,334.7m
2022
2021
2020
£144.7m
£87.5m
£93.5m
2022
2021
2020
1673.8
0.0
144.7
0
£95.0m
£67.4m
£89.6m
100
Representing strong
like-for-like1 growth
in both our Retail
and Vet businesses.
What we are measuring
The growth in customer
revenue generated across
the Group year on year.
This includes spend across
all brands and includes the
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 revenue
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.
Reflecting strong
conversion as profit
grows ahead of revenue.
Enabling us to invest in our
business, reduce debt and
increase our dividend.
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 cash flow
allows us to make strategic
investments in the business
to fuel further growth,
whilst providing an
appropriate return
to shareholders.
Future plans
Releasing free cash flow
from the First Opinion vet
business remains a significant
value creation opportunity.
This, alongside further profit
growth in Retail, will allow
Group underlying free cash
flow to grow sustainably
in the medium term.
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. All
results are shown before
the change in accounting
policy relating to IAS38
Intangible Assets.
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 this year annualised
against an extremely
challenging prior period, we
now expect the business to
sustain underlying profit
growth going forward.
Bring the pet
experience to life
50% of revenue from
Use our data to better
Set our people
pet care services
serve customers
free to serve
Number of
active VIPs (m)
Customer revenue1
from services (%)
VIP customer
revenue1 (£m)
Customer revenue1
per FTE colleague (£k)
7.3m
+18%
32.1%
(64)bps
£1,107.1m
+26.4%
£201.8k
+10.2%
Driven by the success of our
Reflecting the disposal of our
Puppy and Kitten clubs, increased
Specialist Referral hospitals in the
Driven by growth in active
members, and an increase
Achieved through strong
revenue growth as well as
marketing activity and supported
prior year and the strong growth
in members shopping across
efficiency initiatives in-store.
by a growing pet population.
seen in pet product sales.
more than one channel.
What we are measuring
What we are measuring
What we are measuring
What we are measuring
The proportion of total customer
The increase in spend from VIP
Customer revenue generated
revenue contributed by our
various pet care services. This is
defined as customer sales made
loyalty club members across the
per full-time-equivalent
Group year on year. This includes
colleague employed
all spend across both the Retail
directly by the Group.
Growth in the number
of active members of our
VIP loyalty club. An active
member is defined as a
with the Group in the last
52 weeks.
customer who has transacted
by both Joint Venture and
and Vet Group businesses.
company managed First Opinion
vet practices, grooming salons,
omnichannel subscriptions, pet
Why is it important?
Our VIP loyalty club of 7.3m
Why is it important?
By providing complete pet
sales, pet insurance commissions
active pet owners is a unique
and revenue generated through
asset providing data and
care through a trusted brand,
our telehealth business.
we will attract more pet
owners to engage with
the Group, increasing
our market share.
Future plans
We will continue to leverage
our omnichannel pet care
model to make it convenient,
affordable and rewarding for
insight to help us increase
share-of-wallet, attract and
retain new customers, and
Why is it important?
The ability to offer customers
encourage further spend
pet care services in addition to
across our ecosystem of
pet products is a key competitive
products and services.
differentiator for the Group.
Future plans
Generating sales from services
our data capabilities is a key
is an essential part of being a
underpin of our future growth
Future plans
Continuing to leverage
customers to engage with our
pet care business and not
suite of products and services.
solely a retailer. We will
In addition, we will continue
continue to focus on
to drive our Puppy and Kitten
supporting our First Opinion
clubs to attract customers
at the very start of their
pet care journey.
vet practices to mature, whilst
also growing the number of
customers signed up to our
subscription platforms.
plans. We are harnessing our
deep actionable insights to
better serve the needs of pet
owners and deliver more
personalised content and
offers relevant to each
individual pet.
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.
Pets at Home Group Plc Annual Report & Accounts 2022
Strategic report
Governance
Financial StatementS
41
Financial performance
Strategic 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
revenue1 (£m)
Group underlying
proforma profit
before tax1 (£m)
Group underlying
free cash flow1 (£m)
£1,673.8m
+16.5%
£144.7m
+65.3%
£95.0m
+40.9%
Bring the pet
experience to life
50% of revenue from
pet care services
Use our data to better
serve customers
Set our people
free to serve
Number of
active VIPs (m)
Customer revenue1
from services (%)
VIP customer
revenue1 (£m)
Customer revenue1
per FTE colleague (£k)
7.3m
+18%
2022
2021
2020
0.0
32.1%
(64)bps
£1,107.1m
+26.4%
£201.8k
+10.2%
7.3m
6.2m
5.6m
2022
2021
2020
32.1%
32.8%
34.1%
2022
2021
2020
£1,107.1m
£875.5m
£817.2m
2022
2021
2020
£201.8k
£183.1k
£187.0k
7.3
0.0
34.1
0.0
1107.1
0.0
201.8
Representing strong
like-for-like1 growth
in both our Retail
and Vet businesses.
Reflecting strong
conversion as profit
grows ahead of revenue.
Enabling us to invest in our
business, reduce debt and
increase our dividend.
Driven by the success of our
Puppy and Kitten clubs, increased
marketing activity and supported
by a growing pet population.
Reflecting the disposal of our
Specialist Referral hospitals in the
prior year and the strong growth
seen in pet product sales.
Driven by growth in active
members, and an increase
in members shopping across
more than one channel.
Achieved through strong
revenue growth as well as
efficiency initiatives in-store.
customer sales made by Joint
accounting basis post-IFRS16,
Delivering free cash flow
What we are measuring
The growth in customer
revenue generated across
the Group year on year.
This includes spend across
all brands and includes the
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
Venture vet practices, rather
than the fee income received
by Pets at Home.
Why is it important?
By growing customer revenue
first adopted in FY20. All
results are shown before
the change in accounting
policy relating to IAS38
Intangible Assets.
across all parts of our business
Why is it important?
ahead of the market, we are
able to gain market share.
In particular, this means
focusing on the sales made
By generating strong levels
of underlying profit, we are
able to demonstrate that our
pet care strategy remains the
by First Opinion vet practices,
right one, and that we are
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
delivering against our
strategic objectives.
Future plans
against an extremely
challenging prior period, we
now expect the business to
market across both the Retail
sustain underlying profit
and Veterinary segments.
growth going forward.
What we are measuring
The cash available for return
to shareholders after investing
in the needs of the business.
Why is it important?
allows us to make strategic
investments in the business
to fuel further growth,
whilst providing an
appropriate return
to shareholders.
Future plans
Releasing free cash flow
from the First Opinion vet
business remains a significant
value creation opportunity.
This, alongside further profit
growth in Retail, will allow
Group underlying free cash
flow to grow sustainably
Having this year annualised
in the medium term.
What we are measuring
Growth in the number
of active members of our
VIP loyalty club. An active
member is defined as a
customer who has transacted
with the Group in the last
52 weeks.
Why is it important?
By providing complete pet
care through a trusted brand,
we will attract more pet
owners to engage with
the Group, increasing
our market share.
Future plans
We will continue to leverage
our omnichannel pet care
model to make it convenient,
affordable and rewarding for
customers to engage with our
suite of products and services.
In addition, we will continue
to drive our Puppy and Kitten
clubs to attract customers
at the very start of their
pet care journey.
What we are measuring
The proportion of total customer
revenue contributed by our
various pet care services. This is
defined as customer sales made
by both Joint Venture and
company managed First Opinion
vet practices, grooming salons,
omnichannel subscriptions, pet
sales, pet insurance commissions
and revenue generated through
our telehealth business.
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
solely a retailer. We will
continue to focus on
supporting 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 7.3m
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
Continuing to leverage
our data capabilities is a key
underpin of our future growth
plans. We are harnessing our
deep actionable insights to
better serve the needs of pet
owners and deliver more
personalised content and
offers relevant to each
individual pet.
What we are measuring
Customer revenue 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.
Pets at Home Group Plc Annual Report & Accounts 2022
42
Social value review
Our Better World
Pledge strategy
in summary
our purpose
We’re better
with pets – is
at the heart of
everything we
do and supports
our strategy.
our vision
To become the
best pet care
business in
the world.
our business strategy
Bring the pet
experience
to life
alue cre a t o
v
Use our data to
better serve
customers
r
e
n
a
b
l
e
r
our 3 Social value pillars and goals:
our 10 initial targets:
Un SDGs
links to business strategy
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
– 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
– By 2030 educate 2m children in responsible
rescue sector
pet ownership
– By 2030 improve the health of the
nation’s pets by focusing on nutrition
and health plans
– 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
n Bring the pet experience to life
n Use data and VIP to better
serve customers
n 50% of sales from pet services
n Set our people free to serve
n Bring the pet experience to life
n Use data and VIP to better
serve customers
Read more
see pages
18 to 29
Read more
see pages
30 to 43
– By 2025 be leading the way in sustainable
n Bring the pet experience to life
n Use data and VIP to better
serve customers
Read more
see pages
44 to 59
pet care products
– By 2030 maximise the value of our waste
by adopting circular economy principles
– By 2040 become net zero across scopes
1, 2 and 3 using a science based initiative
approved methodology
e
n
a
b
ler
Set our
people free
to serve
v a l u e creator
50% of
revenue from
pet care services
Planet
By 2040 become
net zero
Pets at Home Group Plc Annual Report & Accounts 2022
Strategic report
Governance
Financial StatementS
43
our 3 Social value pillars and goals:
our 10 initial targets:
Un SDGs
links to business strategy
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
– 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 focusing on nutrition
and health plans
– 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
– 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 2040 become net zero across scopes
1, 2 and 3 using a science based initiative
approved methodology
n Bring the pet experience to life
n Use data and VIP to better
serve customers
n 50% of sales from pet services
n Set our people free to serve
n Bring the pet experience to life
n Use data and VIP to better
serve customers
Read more
see pages
18 to 29
Read more
see pages
30 to 43
n Bring the pet experience to life
n Use data and VIP to better
serve customers
Read more
see pages
44 to 59
Pets at Home Group Plc Annual Report & Accounts 2022
44
Performance Highlights
Key Achievements
3.
2.
1.
Contributing to
VIP
Pets at Home
our communities
Lifelines
Foundation
We have completed our first year with
the renaming of our charity as the Pets at
Home Foundation. During FY22 we have
raised £4.9m and since being formed in
2006 our charity has raised over £45m
to support pets and the people who
love them.
During FY22 we extended the type of
charities that we support to include
charities that support people through
pets and we awarded 16 grants totalling
£564k to charities like £564k to charities
like Dogs For Good. They were awarded
£99,296 with £199k also committed
over the next two years to expand their
services into Scotland with a focus
on their dementia dog project.
When VIP loyalty club members spend
in a store, Groom Room or Vets4Pets
practice they earn Lifelines.
Every quarter we convert Lifelines into
vouchers for animal charities which
they can spend in our stores or
grooming salons.
Every point earned has a direct impact –
this year as part of the changes to our
charity ‘The Pets at Home Foundation’
unredeemed and unallocated lifelines
vouchers are donated to the Pets at
Home Foundation meaning it can have
an even greater impact across the UK.
This year, £2.9m has been raised by
VIP members which makes a total of
over £17.9m since it was founded
in November 2012.
FY22 saw the launch of our volunteering
days which we call Our Better World
Pledge days. Our office based colleagues
were able to volunteer for a day in their
local communities to support pets,
people or our planet. The results have
been astonishing with 1,682 colleagues
donating 9,683 hours of time. This will
create a lasting legacy with new
community partnerships formed:
Out of 1,682 colleagues
– 98% would attend their day again
– 97% scored their day four or five
stars out of five
– 30% booked another day in
their own time or have started
volunteering long term for the
organisation
– 32% signposted other colleagues
and friends and family to volunteer
for the organisation
4.
Investing in
our colleagues
6.
Growing our business
Progressing our
while reducing our
operational carbon
long term carbon
reduction strategy
5.
impact
Our colleagues are at the heart of
everything we do. Our reward strategy
engages colleagues in the long term
During FY22 our carbon intensity
was 19.1 CO2e. This is our strongest
performance since our base year
success of our business. Colleagues were
of FY16 and represents a 12.5%
recognised for their efforts throughout
the year with a £12.7m bonus in June
2021. In June 2021 we granted an
additional 1.2m shares to over
improvement on FY21. We calculate
this by measuring our scope 1 and 2
location-based emissions relative
to our sales revenue.
9,200 colleagues.
Over 500 colleagues had invested
£2.96m in the 2018 scheme which
generated a potential value of £14.7m
based on the closing share price of
£4.69 on the maturity date.
We have continued to develop our
culture and focus on the wellbeing
Our absolute scope 1 and 2 emissions
grew by 3.3% vs FY21. This was driven
by our sales growth of 15.3% and in
some areas (such as colleague travel)
returning to pre COVID-19 activity levels.
We purchased renewable energy for
our main group contracts that represent
98% of our electricity use. This is the
of our colleagues with 624 colleagues
fifth year that we have purchased
completing mental health first aider training.
renewable energy.
Our four colleague diversity networks are
acting as agents of change across the
organisation and providing support and
challenge to the Diversity and Inclusion
Leadership Forum.
During FY22 we completed our first CDP
climate change programme submission,
obtaining an overall score of B. The CDP
questionnaire is a voluntary energy
and carbon rating exercise, requested by
investors and other financial stakeholders.
The B score indicates a strong performance
at the ‘management’ level – in line with
the average for the convenience
retail sector.
Responding to the urgency and scale
of the climate emergency, the SBTi
has ratcheted up its expectations for
businesses, releasing a new Net-Zero
Standard at the end of 2021. To be
confident our ambitions remain robust
and in line with the first global science-
based standard, we identified clear next
steps to adjust our previous near-term
commitments. Our long term 2040
target has not changed and remains
net zero across all scopes by 2040.
For more information on our
carbon reduction targets
see page 54
£4.9m
raised by the Pets at Home
Foundation in FY22
£2.9m
raised through VIP Lifelines
during FY22
9,683
of volunteering hours donated
to local communities
624
colleagues completed
mental health training
39%
reduction in absolute scope
1 and 2 emissions since 2016
‘B’
CDP score
Pets at Home Group Plc Annual Report & Accounts 2022
Strategic report
Governance
Financial StatementS
our Better World Pledge
45
Key Achievements
Pets
People
Planet
1.
Pets at Home
Foundation
2.
VIP
Lifelines
3.
Contributing to
our communities
4.
Investing in
our colleagues
pets and we awarded 16 grants totalling
charity ‘The Pets at Home Foundation’
Out of 1,682 colleagues
We have completed our first year with
When VIP loyalty club members spend
FY22 saw the launch of our volunteering
the renaming of our charity as the Pets at
in a store, Groom Room or Vets4Pets
days which we call Our Better World
Home Foundation. During FY22 we have
practice they earn Lifelines.
Every quarter we convert Lifelines into
local communities to support pets,
raised £4.9m and since being formed in
2006 our charity has raised over £45m
to support pets and the people who
love them.
During FY22 we extended the type of
charities that we support to include
charities that support people through
vouchers for animal charities which
they can spend in our stores or
grooming salons.
Every point earned has a direct impact –
this year as part of the changes to our
£564k to charities like £564k to charities
unredeemed and unallocated lifelines
like Dogs For Good. They were awarded
vouchers are donated to the Pets at
£99,296 with £199k also committed
over the next two years to expand their
Home Foundation meaning it can have
an even greater impact across the UK.
services into Scotland with a focus
on their dementia dog project.
This year, £2.9m has been raised by
VIP members which makes a total of
over £17.9m since it was founded
in November 2012.
Pledge days. Our office based colleagues
were able to volunteer for a day in their
people or our planet. The results have
been astonishing with 1,682 colleagues
donating 9,683 hours of time. This will
create a lasting legacy with new
community partnerships formed:
– 98% would attend their day again
– 97% scored their day four or five
stars out of five
– 30% booked another day in
their own time or have started
volunteering long term for the
organisation
– 32% signposted other colleagues
and friends and family to volunteer
for the organisation
Our colleagues are at the heart of
everything we do. Our reward strategy
engages colleagues in the long term
success of our business. Colleagues were
recognised for their efforts throughout
the year with a £12.7m bonus in June
2021. In June 2021 we granted an
additional 1.2m shares to over
9,200 colleagues.
Over 500 colleagues had invested
£2.96m in the 2018 scheme which
generated a potential value of £14.7m
based on the closing share price of
£4.69 on the maturity date.
We have continued to develop our
culture and focus on the wellbeing
of our colleagues with 624 colleagues
completing mental health first aider training.
Our four colleague diversity networks are
acting as agents of change across the
organisation and providing support and
challenge to the Diversity and Inclusion
Leadership Forum.
5.
Growing our business
while reducing our
operational carbon
impact
During FY22 our carbon intensity
was 19.1 CO2e. This is our strongest
performance since our base year
of FY16 and represents a 12.5%
improvement on FY21. We calculate
this by measuring our scope 1 and 2
location-based emissions relative
to our sales revenue.
Our absolute scope 1 and 2 emissions
grew by 3.3% vs FY21. This was driven
by our sales growth of 15.3% and in
some areas (such as colleague travel)
returning to pre COVID-19 activity levels.
We purchased renewable energy for
our main group contracts that represent
98% of our electricity use. This is the
fifth year that we have purchased
renewable energy.
6.
Progressing our
long term carbon
reduction strategy
During FY22 we completed our first CDP
climate change programme submission,
obtaining an overall score of B. The CDP
questionnaire is a voluntary energy
and carbon rating exercise, requested by
investors and other financial stakeholders.
The B score indicates a strong performance
at the ‘management’ level – in line with
the average for the convenience
retail sector.
Responding to the urgency and scale
of the climate emergency, the SBTi
has ratcheted up its expectations for
businesses, releasing a new Net-Zero
Standard at the end of 2021. To be
confident our ambitions remain robust
and in line with the first global science-
based standard, we identified clear next
steps to adjust our previous near-term
commitments. Our long term 2040
target has not changed and remains
net zero across all scopes by 2040.
For more information on our
carbon reduction targets
see page 54
£4.9m
raised by the Pets at Home
Foundation in FY22
£2.9m
raised through VIP Lifelines
during FY22
9,683
of volunteering hours donated
to local communities
624
colleagues completed
mental health training
39%
reduction in absolute scope
1 and 2 emissions since 2016
‘B’
CDP score
Pets at Home Group Plc Annual Report & Accounts 2022
46
Pets
Goal: By 2030
positively impact
the life of every
pet in the UK
Our goals and approach
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 led
us to develop our long term goal to
positively impact the life of every pet in
the UK by 2030. This 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
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 and the people who
love them 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
Read more
Social value
report
page 26
Pets at Home Group Plc Annual Report & Accounts 2022
Strategic report
GOvernance
Financial STaTemenTS
The value of the pet
people relationship has
been highlighted by the
pandemic, with two
million new pet owners,
33% of whom had not
owned an animal before.
During the last year we
have remained as focused
as ever on looking after
the nation’s pets to the
very highest standards
and sharing the benefit
that pets bring to all
our lives.
47
Performance highlights
152+
vet graduates, 92 joining this
year, continued their training
modules, many utilising
virtual webinars
1500+
physical pet welfare audits
conducted in our stores
in FY22
61k+
children booked onto face to
face PetPal sessions since they
relaunched in March, educating
children about responsible pet
ownership
454
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
£7.5m+
raised for pet charities through
the Pets at Home Foundation
and VIP Lifelines bringing the
total to over £56m since 2006
800+
local and national pet rescues
supported in FY21 through
vouchers from the VIP
lifeline scheme
70
animal rescues supported
with grants totalling
over £1.1m
16
charities helping people
through pets supported with
grants totalling over £565k
1000+
pallets of pet food
and bedding donated
928k
grooms given across
the year
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. Empowering all of our people to be advocates and ambassadors for pets every day.
2. Adopting and contributing to the development of the latest clinical guidance on
veterinary matters within our framework of clinical freedom.
3. Promote the quality and safety of pet care products.
4. Supporting people to be the best pet owners that they can be through our products,
services and advice and educate children and young people.
5. Help provide a network of support for pets through our adoption centres and the
wider rescue sector.
6. Work to ensure access to veterinary care for every pet.
See Social value report
page 60
Pets at Home Group Plc Annual Report & Accounts 2022
48
People
Goal: By 2030
enhance the
lives of one million
people through our
shared love of pets
our goals and approach
People sit at the heart of Our Better
World Pledge strategy, whether that
is our colleagues, our customers or
the communities we operate in across
the UK and in our Asian office in Hong
Kong. People are the beating heart of
our business, and it is their belief in us
doing the right thing by pets that creates
the unique bond that unites us all.
Last year we shared our ambitious goal
to positively impact the lives of one
million people by 2030 through our
shared love of pets. We believe that
pets bring such joy to our lives that this
is possible, and our plans continue to
take shape. We remain committed to
bringing the joy of pets to more people
and to use our unique position to reach
more people through our pet ecosystem.
Read more
Social value
report
page 32
Read more
Social value
report
page 38
Read more
Social value
report
page 34
Read more
Social value
report
page 40
Read more
Social value
report
page 42
our focus areas
our culture and values.
Our unique culture
differentiates our
colleague and
customer experience
Wellbeing. Leading
the way with workplace
emotional and
physical wellbeing
Diversity and inclusion.
Pets don’t discriminate
and neither should we.
We want everyone to
feel welcome and
part of our Group
learning and
Development -
Building pet expertise
to empower our people
to be ambassadors for
pets every day and to
be experts in their fields.
Health and Safety.
We are fully committed
to continuous health
and safety improvement
across all areas of the
Group and understand
that it is the way we work
and behave that protects
our colleagues,customers,
and other stakeholders
Pets at Home Group Plc Annual Report & Accounts 2022
Strategic report
Governance
Financial StatementS
People are the foundation
of our business and
central to our purpose.
Our passionate talented
colleagues are what
creates our special culture.
They, and we, care as
much about each other
as the communities we
impact and depend upon.
Together, our shared love
of pets and making a
difference unites us all.
‘We’re better with pets’ –
this unites us all
49
Performance highlights
3.8*
Glassdoor score moved
from 3.2 to 3.8* since FY21
1
Wellbeing handbook
launched for all colleagues
76%
colleague engagement
in our Pulse Survey
9,683
hours of volunteering donated to
community projects by colleagues
624
Mental Health First Aiders
trained across the Group
173
Kickstarter colleagues
welcomed
1st
Winner of Best Place to Work at
The Retail Week Awards 2021
1st
Winner of the Best Workplace
Wellbeing Strategy (large
company) at the Wellbeing in
the Workplace Awards 2022
+500
Over 500 colleagues had
invested £2.96m in the 2018
Sharesave which generated
a potential value of £14.7m
based on the closing share price
of £4.69 on the maturity date
+5,000
colleagues became new
shareholders or had their
shareholding enhanced in
the fifth year of our Colleague
RSP with £1.2M of shares
being gifted
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. Create sustainable and fulfilling careers throughout our pet care ecosystem.
8. Promote diversity and inclusion, including social mobility.
9. Advocating and supporting emotional and physical wellbeing.
10. Understand the diversity of pet ownership and the barriers and
opportunities this presents.
11. Promote the health and wellbeing benefits of spending time with pets.
12. Help people to enjoy their pets in their local communities, leveraging our
volunteering programmes.
See Social value report
page 63
Pets at Home Group Plc Annual Report & Accounts 2022
50
Planet
Goal: By 2040
become net zero
our goals and approach
When we developed our new strategy
we intentionally set the bar high. In the
first year of reporting our progress we
are really proud of our achievements
but very aware of how much still
needs to be done.
The environmental goals we have set
are challenging and 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. We have already done a lot
of work to minimise our operational
scope 1 and 2 emissions and we will
continue to work to decouple our
business growth from this operational
impact. By 2040 we have committed
to be net zero across our value chains.
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
Targets initiative methodology, the United
Nations ‘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 to support
our vet partners to be more sustainable
through our partnerships with Vet Sustain
and Investors in the Environment. We are
also partnering with our suppliers to create
better, more sustainable products, using raw
materials from sustainable sources, and to
create sustainable packaging.
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
tcFD Statement: Our
progress against the Task
Force on Climate-related
Financial Disclosures
Read more
Social value
report
page 52
Read more
Social value
report
page 54
Read more
Social value
report
page 56
Pets at Home Group Plc Annual Report & Accounts 2022
Strategic report
Governance
Financial StatementS
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
unsustainable, so we are
working hard to increase
our efforts to prevent this.
51
Performance highlights
ALL
main suppliers received a letter
from our CEO outlining our
carbon commitments and their
role in supporting this delivery
12.5%
improvement in scope 1 & 2
CO2e intensity relative to
£m revenue vs FY21
£257k
raised for the Woodland Trust
through the first year of our
Pet Memory Scheme
1st
Corporate supporters
of Vet Sustain
300
Pet Pouch recycling scheme
rolled out to over 300 stores
‘B’
Score of B in the first year of
completing the CDP climate
change programme submission
2030
2030 and 2040 carbon
reduction targets submitted
to the SBTi for approval
100%
main Group energy contract
renewable and 98% of
group energy use
80%
own brand
packaging recyclable
98%
operational waste
diverted from landfill
our actions
We have a series of actions that we have committed to as part of our Better
World Pledge to deliver this goal:
13. Innovate to provide sustainable product choices encompassing raw materials
and packaging.
14. Identify opportunities to enhance biodiversity, for example by supporting woodland
programmes.
15. Further reduce our direct environmental impact, continuing to purchase renewables,
adopting low carbon and clean air transportation and reducing our waste and
water use.
16. Uphold Human Rights.
17. Develop a science based carbon target and work across our supply chain to achieve it.
18. Innovate to support circular economy principles and minimise waste in our value chain.
19. Understanding and pioneering lower carbon pet diets, including consideration of
alternative proteins.
20. Develop a framework for a sustainable vet practice (environmentally and societally).
See Social value report
see page 66
Pets at Home Group Plc Annual Report & Accounts 2022
52
Planet 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 energy more efficiently
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.
FY22 we opened a new pet care centre
in Brighton where we trialled a number
of sustainability initiatives for the first
time. These included energy, waste and
water reduction measures. Two carbon
innovations delivered were air source
heat pumps for heating water and heat
recovery which ensures heat is not
wasted. Both of these will reduce our
scope 2 emissions. We are carefully
reviewing our energy usage and plan to
implement the most impactful initiatives
across our pet care ecosystem.
During FY22 we have removed two gas
meters from our store estate. As a result
of this and our previous gas removal we
have reduced building gas use by 12.4%.
Our electricity consumption increased
by 1.62% which was caused by our
consumption during FY21 being reduced
by COVID-19 related events including
the closure of our groom rooms for
ten weeks.
Driving more kilometres efficiently
Our distribution network has been
operating near full capacity as we serviced
the additional demands of our growing
business. We are pleased to have
maintained fuel efficiency at 2.96km
travelled per litre of diesel consumed
compared to 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 are conscious 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.
improving our carbon
intensity performance
During 2022, we have continued
to improve our scope 1 and 2 CO2e
intensity relative to revenue £m with
a performance of 19.1compared to
21.8 the previous year. Our absolute
operational greenhouse gas emissions
have increased by 3.3% to 30,621
tonnes compared to 29,651 tonnes in
FY21, this is a 6.1% reduction compared
to 32,612 in FY20. 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 41.2% of our overall energy use,
this continued investment enables us to
operate in a very low carbon way already
and means that our market based scope
2 emissions are low at 173 tCO2e. We
are firmly committed to maintaining
this approach, while also driving down
energy use. We also make checks to
ensure that the electricity we buy is
from a certified and verifiable source.
Scope 1 and 2 carbon emissions seven year performance tonnes co2 e emissions
tonnes co2e emissions
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
FY18
9,649
21,584
31,233
FY19
8,431
17,066
25,497
-7% -19% -18%
FY20
12,085
15,133
27,218
7%
FY21
11,337
13,616
24,953
-8%
FY22
12,558
12,610
25,168
1%
834
7.1%
899
7.8%
961
1,059
6.9% 10.2%
1,143
1,318
7.9% 15.3%
46.1
19.1
-13.0% -25.0% -24.0% -3.0% -15.0% -12.5%
35.1
21.8
25.7
26.5
FY22
vs FY16
32%
-60%
-39%
69%
-64%
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, FY21 and FY22 only. 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.
Our scope 1 emissions were 12,558 and have increased by 11% 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 57% of Scope 1 emissions and
23.3% of total emissions. Eliminating these scope 1 emissions remains the most significant challenge we face in terms of further reducing our operational impact. For that
reason, we are closely monitoring the development of new technologies that will reduce the emissions associated with distributing our products.
Pets at Home Group Plc Annual Report & Accounts 2022
Strategic report
Governance
Financial StatementS
carbon emissions (tco2e) breakdown by source 2021/22
53
1
3
2
1
Scope category
l Electricity
l Diesel (Core Fleet)
l Diesel (3rd Party)
l Anaesthetics
l Electricity T&D losses
l Business Travel (Third Party)
l Gas
l Business Travel (Company Fleet)
l Fugitive Gas Refrigerants
l Red Diesel
1
3
1
1
1
3
FY21
13,616
FY22
12,610
FY22
vs FY21
-7.4%
FY22 %
of total
41%
6,096
3,022
2,985
1,170
505
665
456
831
304
7,149
3,686
3,379
1,114
652
590
558
536
345
17.3%
22.0%
13.2%
-4.7%
29.1%
-11.4%
22.3%
-35.4%
13.6%
23%
12%
11%
4%
2%
2%
2%
2%
1%
Delivering long term
carbon reduction
In the last seven years since 2015/16 we
have grown our sales by 69% 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
and our low carbon company car
fleet have driven this reduction.
transforming our car fleet
In FY21 we overhauled our company
car fleet list to a low carbon car selection.
As cars have come up for lease renewal
they have moved to these lower carbon
options. By March 2022 over 170 cars
had moved onto the new list saving over
500 tonnes of carbon annually. FY22
company fleet CO2e increased 23% vs
FY21, which was a year when usage
significantly reduced due to COVID-19,
however its reduced 48.4% vs FY20.
our reporting boundaries
Fugitive gas and anaesthetic gas use has
been included from FY20, we are unable
to source accurate data earlier than this
point, hence the increase in emissions
between FY19 and FY20 in the seven
year performance table. Anaesthetic gas
is a significant emission source at 26.9%
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 increased by 16.1% which has
been mainly driven by third party
logistics servicing our growing business.
carbon emissions summary by Scope 2021/22
Scope 1
Scope 2
Scope 3
Total
tonnes co2e emissions
2020/21 (scope 2
location-based)
11,337
13,616
4,697
29,651
2021/22 (scope 2
location-based)
12,558
12,610
5,453
30,621
2021/22 (scope 2
market-based)
12,558
173
5,453
18,184
Inclusion of 2,000 tonnes of carbon mitigation
Scope 1 and Scope 2 kWh
Normalisation of CO2e to £m revenue
• methodology: We have applied UK SECR and WBCSD/WRI Greenhouse Gas Protocol Corporate Standard as our methodology. We have used emissions factors from UK
28,621
96,425,923
19.1
90,400,963
21.8
16,184
Government 2021 conversion factors, IEA 2019 for international sites and AIB residual mix from 2020.
• methodology: An operational control approach has been used for the organisational boundary. This is the same as last year 2020/21.
• additional inclusions: We have included the emissions from our stand-alone vet practices and referral centres.
• 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 2021/22 scope 1,2 and some scope 3 emissions (third party diesel, electricity t&d losses and third party business travel). Please refer to page
69 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 £50,000 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 2,000
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 8,533 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.
Pets at Home Group Plc Annual Report & Accounts 2022
54
Planet continued
Our value
chain impacts
We realise that the reach of our business extends far beyond our pet care
centres. The products we sell and the services we provide have an impact
that we must consider and manage. This year we have continued to develop
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 built on the FY20
scope 3 assessment that was conducted
last year by developing the pathways
that will help us to deliver our long term
carbon targets. We have submitted these
reduction assumptions and programme
plans with our three targets to the
Science Based Targets initiative for their
review and validation. The first target
is our near term 2030 42% reduction
in scope 3 and the second target is our
net zero 2040 target. Both of these
are in line with preventing global
temperatures to exceed 1.5°C
above pre industrial levels.
Our priority pathways to net zero are
focussed on raw material switches to
lower carbon options, working with
our suppliers on their scope 1 and 2
reductions, switches to renewable
electricity and a particular focus on
pet food both from an ingredients
and manufacturing perspective from
purchased goods and services, and
upstream transportation and distribution.
our Scope 1, 2 and 3 emissions
l Scope 1
l Scope 2
l Scope 3
12.56
12.61
885.00
We’ve worked to reduce our YOY scope 1 and 2
emissions as in the chart above. Scope 1 FY22,
scope 2 FY22 (location-based), scope 3 FY21
our scope 1/2/3 targets
Responding to the urgency and
scale of the climate emergency,
the SBTi has ratcheted up its
expectations for businesses,
releasing a new Net-Zero
Standard at the end of 2021.
To be confident our ambitions
remain robust and in line with
the first global science-based
standard, we identified clear
next steps to adjust our previous
near-term commitments. Our
long term 2040 target has not
changed and remains net zero
across all scopes by 2040.
Our updated targets
are as follows:
– Near-term: Pets at Home
commits to reduce absolute
scope 1 and 2 GHG emissions
42% by FY2030 from a
2020 base year.
– Near-term: Pets at Home
commits to reduce absolute
scope 3 GHG emissions 42% by
FY2030 from a 2020 base year.
– Long-term: Pets at Home
commits to reduce absolute
scope 1 and 2 GHG emissions
90% from a 2020 base year.
Pets at Home also commits to
reduce absolute scope 3 GHG
emissions 90% within the
same time frame.
Pets at Home Group Plc Annual Report & Accounts 2022
Strategic report
Governance
Financial StatementS
55
carbon emissions reduction pathways to 2040
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R
FY20 scope 3 baseline has been adjusted following a methodology review with the SBTi
external benchmarking
For the first time in 2021 we completed the CDP climate
assessment, obtaining an overall score of B. The CDP
questionnaire is a voluntary energy and carbon rating exercise,
requested by investors and other financial stakeholders. The B
score indicates a strong performance at the ‘management’ level
– in line with the average for the convenience retail sector. With
our increased focus on risk management around climate change,
commitments to SBTi and the steps we will be taking to Net Zero,
we anticipate that the Group climate change score will continue
to improve over the next few years from this very good start.
collaborating on climate action
We have continued to play an active role in the British Retail
Consortium (BRC) Climate roadmap and our Group Head
of Social Value is chair of pathway four, sustainable sourcing.
In partnership with the Pathway 4 Partner,IBM, the Pathway
launched a new guide: Monitor, Measure and Report Supply
Chain Scope 3 Emissions. During the year we became the first
corporate members of Vet Sustain, the sustainability non for
profit organisation for the vet profession. We have also become
official partners of Investors in the Environment (IIE) and are
supporting our vet practices, that want to do so, to become
accredited to the IIE accreditation scheme.
Pets at Home has been internationally and publicly recognised
by the Financial Times and Statista as one of Europe’s Climate
Leaders 2022.
Pets at Home Group Plc Annual Report & Accounts 2022
56
Planet continued
TCFD Statement
managing our climate risks
We recognise the climate emergency
poses both risks and opportunities to
our strategy and operations, to that end,
climate change is featured as a principal
risk within our Annual Report. In this
section we report our climate-related
disclosures, consistent with the TCFD
Recommendations and Supporting
Recommended Disclosures. This year
our focus has been on refining our
understanding of the climate-related
impacts and TCFD disclosures under
a range of climate scenarios.
Governance
Pets at Home is required to implement
the reporting recommendations of TCFD
(as set out in Listing Rule LR 9.8.6R) for
the accounting period starting on or
after the 1st January 2021.
We first reported earlier than required in
our FY22 Annual Report and Social Value
Report as part of the development of Our
Better World Pledge. Over the last year
we have further developed our approach,
most notably through our qualitative
scenario analysis.
In the table below, we have set out
details of our progress in implementing
the TCFD reporting recommendations
against the 11 disclosure requirements.
On page 60 we have provide more detail
about our qualitative scenario analysis
process that we have undertaken during
FY22. We plan to share more detail
on our TCFD work and in particular
the quantification of our risks and
opportunities in next year’s report.
Disclosure
requirement
Describe the Board's
oversight of
climate-related risks
and opportunities
Describe
Management’s
role in assessing/
managing climate-
related risks and
opportunities
Description/progress
The Board led by the Chair, Ian Burke, has ultimate responsibility for sustainability
and climate change and ensuring that the strategy creates value for the mutual
benefit of key stakeholder groups including colleagues, customers, shareholders
and society. Oversight of the sustainability strategy is a matter reserved for the
Board. The Board provides challenge to the Executive Management Team
on progress against the goals and targets of the sustainability strategy, and
ensures that the Group has an effective risk management system in place over
sustainability related matters. This is principally governed via two main committee
meetings: Audit and Risk Committee and the ESG Committee which meet at
least three times a year.
The Chief Executive has overall responsibility for climate change and other
environmental topics. The Chief Executive is supported by the Group Executive
team to develop and implement the strategy through a number of management
committees which are chaired by an Executive Management Team member
or Director. Our Better World Pledge is one of the Group's key programmes and
as such receives an overall update at the Executive Management Team member
meeting at the end of each four weekly financial period. In terms of the
management committees, climate change is considered across three principal
committees. The climate change and waste committee meets every four weeks
and is responsible for developing and implementing the Group's strategy relating
to operational environmental impact. This includes the scope 1 and 2 carbon
emissions, including buildings and logistics energy and waste management. The
product and supply chain committee which meets every six weeks is responsible
for developing the strategy for managing the value chain environmental and
ethical impacts of our products. This includes packaging, raw materials and
the scope 3 impact of products through ingredients, manufacturing, use and
disposal. The Vet Group OBWP committee which meets every four weeks
is responsible for interpreting the Group strategy within the Vet Group and
identifying vet specific climate related risks and opportunities such as
anaesthetic gas use.
read more
Annual Report
2021/22
ESG committee
report
see page 113
Annual Report
2021/22
Audit and Risk
Committee
see page 107
Annual Report
2021/22
Section 172
see page 32
Social Value Report
Governance
see page 10
Annual Report
2021/22
Our business
impacts
see page 52
Annual Report
2021/22
Our value chain
impacts
see page 54
Pets at Home Group Plc Annual Report & Accounts 2022
Strategic report
Governance
Financial StatementS
57
Strategy
Disclosure
requirement
Describe the
climate-related risks
and opportunities
identified over the
short, medium,
and long term.
Describe the impact
of climate-related
risks and
opportunities on
businesses, strategy,
and financial
planning.
Description/progress
During FY22 we have focused on conducting high quality qualitative scenario
analysis. Three scenarios were developed and a series of internal workshops
were conducted to answer the question ‘what would the potential implications
for our strategy be if these different scenarios came to pass?’ eight high level
risks/ opportunities were identified during this project. Of these, five are
particularly relevant to the nature of our business focusing on pets and pet
ownership, the remaining three are more broad risk areas that would be
expected for a retail based business with a network of stores and global supply
chains. These risks were categorised on an immediate, medium term (five years)
and longer term (ten years +) impact basis. Our initial assessment has identified
two as immediate, three as medium term and three as longer term. Of the eight
risks, five were identified as transition risks and three physical risks. These risks
have been included under the ‘emerging risks’ within our principal risks.
Climate risk is an input into our standard business processes such as business
planning and strategy planning. The strategic review process during FY22 was
kicked off with an immersion session for the Executive Management Team in
June 2021 on sustainability issues, this focused on climate and also included
connected issues such as biodiversity and resource scarcity. The strategy review in
the autumn of 2021 could then use this insight and as a consequence a number
of strategic opportunities are being progressed. The future pet food project was
initiated in FY22 based on the climate-related risk work that had already been
undertaken. The eight high level risk / opportunities identified in the qualitative
scenario analysis will be further analysed and developed as projects, where
they were not already underway, and they will be fed into the FY23 strategy
review process. This will include changes to ranges and services to reflect
the changing needs of pets and their owners in a warming climate.
read more
Annual Report
2021/22
TCFD scenario
anaylsis
see page 60
Annual Report
2021/22
risks and
uncertainties section
see page 72
Annual Report
2021/22
TCFD scenario
analysis
see page 60
Social Value Report
Our value chain
impacts section
on pet food
see page 53
Describe the
resilience of your
strategy, taking
into consideration
different climate-
related scenarios,
including a 2°C or
lower scenario.
When we developed Our Better World Pledge, we intentionally set the bar high.
Our environmental goals are challenging and require us to change the way we
work, as well as the way we think about the impacts of our products and
services. Our strategy is to use less energy and fewer resources, generate less
waste and packaging, while offering our customers more sustainable ways to
care for their pets. To achieve this we are commencing a programme of work
with our suppliers to reduce climate risks as much as possible, aiming to build
resilience to minimise the negative impacts of both physical and transition risks.
A key focus of our work is the development of an all scopes carbon reduction
pathway and establishing our product sustainability framework.
Annual Report
2021/22
TCFD scenario
analysis
see page 60
Social Value Report
Our value chain
impacts, Targets
and initiatives
to focus on product
sustainability
see page 52
Pets at Home Group Plc Annual Report & Accounts 2022
58
Planet continued
TCFD Statement continued
risk management
Disclosure
requirement
Describe the
processes for
identifying
and assessing
climate-related risks.
Describe
the processes
for managing
climate-related risks.
Description/progress
Climate change is included as a principal risk in the Group's Risk Register as
part of the risk we have identified relating to sustainability. Failure to comply
with TCFD reporting is identified as a reputational risk in addition to the need
to be meeting the requirements of TCFD in order to identify and act on climate
related risks to ensure the Group’s long term sustainability. The functional risk
approach also provides accountability for identifying relevant risks, three ESG
risks have been identified in this way which provide more detail around climate
related risks. The three ESG risks are integrated into our corporate risk
management approach.
Climate-related risks are managed using our risk management framework.
Climate change is a principal risk and as such is owned by a member of the
Executive Management Team. The Chief Executive has overall responsibility for
climate change and environmental topics. Three ESG risks are integrated into our
corporate risk management approach. Each risk is given a target score which is
based on an agreed risk appetite relating to climate-related issues. Owners are
identified for each action that has been identified to mitigate the risk and they
are responsible for managing the risk to achieve the agreed risk score over the
relevant timescale.
Describe how
processes for
identifying,
assessing,
and managing
climate-related risks
are integrated into
overall risk
management.
Climate-related risks are managed through our overall risk management
approach. The status of each risk is tracked on a regular basis by the relevant
business function. Threats on the watch list are reviewed alongside the risk
registers to monitor any changes to the impact and proximity. Internal Audit
informs the Board, the Executive Management Team and the Audit and Risk
Committee on how effectively risks are being managed. The Audit and Risk
Committee, the Board and the Group Executive review risks and the watch list
four times a year. Risks, together with emerging or developing threats are
reviewed as part of the annual strategy planning cycle.
read more
Annual Report
2021/22
Risk section
see page 72
Annual Report
2021/22
TCFD scenario
analysis
see page 60
Annual Report
2021/22
Risk section
see page 72
Annual Report
2021/22
Risk section
see page 72
Pets at Home Group Plc Annual Report & Accounts 2022
Strategic report
Governance
Financial StatementS
59
metrics and targets
Disclosure
requirement
Disclose the metrics
used to assess
climate-related risks
and opportunities in
line with its strategy
and risk management
process.
Disclose scope 1,
scope 2, and, if
appropriate, scope
3 greenhouse gas
(GHG) emissions,
and the related risks
Description/progress
This corporate risk approach is used to assess climate related risks. It scores each
of these risks on the basis of five different levels of likelihood and on the level of
potential impact, this is aligned to standard risk management principles. The
impact measure considers ten different dimensions of impact including financial,
impact on customers, impact on colleagues and impact on the environment.
There are five levels of severity of impact across each of these ten dimensions.
Pets at Home have been measuring and disclosing our scope 1 and 2 CO2e
emissions since FY14 and trend data from FY16 is updated and reported annually
in our Social value report. We conducted our first scope 3 assessment for FY20
and this has been updated to produce an FY21 estimate and to restate FY20 to
reflect improvements in assessment methodology.
Pets at Home reports using the SASB methodology Pets at Home completed the
CDP climate change disclosure for the first time in FY22 gaining a Score of ‘B’
and will repeat this on an annual basis.
Describe the targets
used to manage
climate-related risks
and opportunities
and performance
against targets.
At Pets at Home, we have taken the decision to set our carbon emissions target
using the guidance of the Science Based Targets initiative (SBTi). We have made
this decision because science-based targets provide companies with a clearly
defined path to reduce emissions in line with the Paris Agreement goals.
1. Near-term: Pets at Home commits to reduce absolute scope 1 and 2 GHG
emissions 42% by FY2030 from a 2020 base year.
2. Near-term: Pets at Home commits to reduce absolute scope 3 GHG emissions
from purchased goods and services, and upstream transportation and
distribution 42% by FY2030 from a 2020 base year.
3. Long-term: Pets at Home Group commits to reduce absolute scope 1 and 2
GHG emissions 90% by FY2040 from a 2020 base year. Pets at Home Group
also commits to reduce scope 3 GHG emissions 90% emissions within the
same time frame.
These targets are currently in the science based targets initiative approval process.
We also identify other opportunities to align our targets to climate reduction
goals. For example, our new revolving credit facility (RCF) with HSBC acting
as sustainability co ordinator, agreed in March 2022, is linked to sustainability
targets. We now have financial incentives (or penalties) to accelerate our work
on pet, people and planet through targets focused on carbon reduction,
supporting pets in need and community action.
read more
Annual Report
2021/22
Risk section
see page 72
Annual Report
2021/22
Our business
impacts
see pages 52
Annual Report
2021/22
Our value chain
impacts
see page 54
Social Value Report
Assurance statement
see page 69
Social Value Report
SASB table
see page 70
Annual Report
2021/22
Our business
impacts
see pages 52
Annual Report
2021/22
Our value chain
impacts
see page 54
Annual Report
2021/22
TCFD scenario
analysis
see page 60
Annual Report
2021/22
Director’s report
see page 140
Pets at Home Group Plc Annual Report & Accounts 2022
60
Planet continued
TCFD Statement continued
Developing the scenarios
Our qualitative scenario analysis was
conducted in a detailed, methodical
way over a period of three months.
The Executive Management Team and
the ESG Committee reviewed and
shaped the approach that we took
before the workshops took place.
After the workshops they were taken
through the outcomes to provide
additional insight, challenge and
to agree the next steps.
To answer the question of ‘what would
be the implications for our strategy if
different levels of global warming or
scenarios came to pass?‘, a cross section
of colleagues – from head office, retail
and vet operations – were asked to
consider three scenarios describing
changes that the planet and society
might experience because of
escalating temperatures.
These were rooted in prevailing scientific
evidence from the Intergovernmental
Panel on Climate Change (IPCC), the
International Energy Agency (IEA) and
Principles for Responsible Investment (PRI):
What would be
the implications
for our strategy
if different levels
of global warming
or scenarios
came to pass?
Short description of three scenarios based on different levels of temperature increase
Scenario name
Description
1.5°c
a better world
Action taken has achieved the aims set out in the 2015
Paris Agreement to limit climate change to below 1.5°C
of pre-industrial levels, but with significant shifts in policy,
cost and consumer behaviours.
2.0°c
an uncertain
and volatile
world
Not much has changed from today. Some action has been
taken, but it’s very much business as usual. Uncertainty
increases, and impacts of a changing climate manifest
themselves in vulnerable pasts of the world.
3.0°c
an irreversible
change
Economies around the world have continued to be powered
by fossil fuels. As a result, the planet is in crisis and well
past the point of no return by 2030. Global warming has
accelerated and changes in climate are all around, tangible
and, in some cases, catastrophic.
Pets at Home Group Plc Annual Report & Accounts 2022
Strategic report
GoveRnAnce
FinAnciAl StAteMentS
61
Making the scenarios relevant to our business
Workshop participants were asked to identify potential risks and opportunities, in the three temperature scenarios, through the
eyes of our key stakeholder groups: Pets, Vets, Store Managers, Customers and Suppliers. The aim was to pinpoint those risks
and opportunities considered to be ‘significant’ and which would warrant further investigation.
Pets at Home’s key stakeholders
A pet’s view:
Hamish is ten years old. His people
deeply care about his welfare, but
he’s getting on a little bit now. He loves
long walks and playing, but sometimes
he doesn’t feel as energetic as the
young puppy he used to be.
Thinking about Hamish, we considered
how he will be affected in terms of:
• Comfort
• Health
• Nutrition and food choices
A customer’s view:
Ben and Frankie (the dog) are
loyal customers of Pets at Home
and frequently visit their local store.
It’s a bit of a long drive out of town,
often through traffic, but Ben likes
speaking to colleagues in-store and
often asks for advice on what are the
best products for Frank, from food
to grooming and playthings.
Thinking about Ben, we considered
how he’ll be affected in terms of:
• Product choice and cost
• Visits to store
• Making climate-friendly decisions
A vet’s view:
Dave has been a vet for the past ten
years. His passion is for small animals,
so he’s found the ideal home working
with Pets at Home.
Thinking about Dave, we considered
how he will be affected in terms of:
• Changes in pet care trends
• Health and treatment options
• Nutrition and food choices
A supplier’s view:
Kai has worked with Pets at Home for
five years manufacturing and selling
cat toys and bedding. It’s been a good
relationship over the years, and he’s
always been able to meet the needs
of his customers. He takes pride in
his ability to adapt and flex as
order specifications change.
Thinking about Kai, we considered
how he will be affected in terms of:
• Sourcing raw materials
• Meeting customer demand
• Distributing goods
A store manager’s view:
Chloe has been Store Manager for the past three years, after working her way up through the business.
She’s passionate and committed to making sure her store is amongst the best performing in the Pets at
Home portfolio. Chloe’s approach is very hands-on – she cares about the detail and her store team.
Thinking about Chloe, we considered how she and business operations will be affected in terms of:
• Meeting customer expectations
• Operating efficiently
• Growing sales and managing costs
Results and next steps
The workshops identified a long list of risks and opportunities that we then prioritised into eight high level areas. These were then
classified based on the risk type (physical or transitional), significance (high or modest), exposure type (specific and unique to Pets
at Home or relevant to other retailers and business) and time horizon when we will begin to see any impact emerge. Finally ‘deep
dives’ or next steps were identified for each risk or opportunity area to build a greater understanding, During the course of FY23
these eight areas will be further explored to be able to provide more detailed analysis and next steps. This will include consideration
to the implications of climate change on our financial planning and capital allocation and on our business strategy.
Pets at Home Group Plc Annual Report & Accounts 2022
62
cFo’s review
Sustainable and
profitable growth
over the longer term
Group like-for-like revenue growth5
Retail
Vet Group
Group revenue (£m)
Retail
Vet Group
Central
Group underlying gross margin1,5
Retail
Vet Group1
Group underlying proforma PBt1,2,3,5 (£m)
Retail
Vet Group1
Central
Group underlying proforma PBt margin1,2,3,5
Retail
Vet Group1
Group statutory PBT (£m)
Underlying basic EPS1,2,3,5 (p)
Statutory basic EPS (p)
Group non-underlying items1,2,3 (£m)
Group non-underlying cash costs4 (£m)
Group underlying free cash flow (£m)
Dividend (p)
number of
Stores
Grooming salons
Joint Venture First Opinion vet practices
Company managed First Opinion vet practices
FY226
15.8%
15.8%
17.1%
1,317.8
1,206.9
108.4
2.5
49.2%
48.9%
52.1%
144.7
114.6
44.5
(14.4)
11.0%
9.5%
41.0%
148.7
21.2
24.9
18.6
–
95.0
11.8
457
337
388
55
FY21
8.7%
8.8%
7.9%
1,142.8
1,018.9
YoY
change
15.3%
18.5%
123.2
(12.0)%
0.7
NM
48.9%
27 bps
49.2%
(35) bps
46.0%
605 bps
87.5
67.5
35.5
(15.6)
7.7%
6.6%
65.3%
69.7%
25.3%
7.4%
332 bps
287 bps
28.8% 1,219 bps
106.3
12.3
18.1
28.9
(5.5)
67.4
8.0
452
316
395
46
39.8%
72.9%
37.6%
NM
NM
40.9%
47.5%
5
21
(7)
9
With the continued
growth and resilience
of the pet care
market, the strategic
investments we are
making, and our
unique omnichannel
model, our business
has never been in
a stronger position.
mike iddon,
chief Financial officer
Pets at Home Group Plc Annual Report & Accounts 2022
Strategic report
Governance
Financial StatementS
63
FY22 Financial highlights
Revenue (£m)
£1,317.8m
+15.3%
Statutory EPS (pence)
24.9p
+37.6%
Underlying proforma PBT5 (£m)
Dividend per share (pence)
£144.7m
+65.3%
11.8p
+47.5%
Underlying free cash flow5 (£m)
Group LFL revenue growth5
£95.0m
+40.9%
15.8%
1 FY22 non-underlying credit of £0.1m (FY21: £0.6m) relates to the release of a provision held against property leases allocated against Vet Group, and Group,
non-underlying gross margin.
2 FY22 non-underlying credit of £19.2m (FY21: £30.2m) relating to the profit on disposal of the Specialist Group. 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. Both items have been allocated against
non-underlying operating costs.
3 FY22 non-underlying cost of £0.7m relating to loan fees written off upon refinance of our revolving credit facility, allocated against non-underlying interest charge.
4 FY21 non-underlying cash costs include £5.5m 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 232.
6 All FY22 metrics presented are on a 53-week basis. Metrics presented as underlying proforma are stated before the change in IAS38 accounting, details of which are
summarised on the next page. Metrics presented as statutory take account of the IFRIC clarification relating to how companies should account for configuration and
customisation costs in cloud computing arrangements which has led to a change in accounting policy in the application of IAS38 Intangible Assets. FY21 metrics presented
as statutory have been restated to take into account this change in accounting policy.
Pets at Home Group Plc Annual Report & Accounts 2022
64
cFo’s review continued
Financial review of FY22
The FY22 audited period represents the 53 weeks from
26 March 2021 to 31 March 2022. The comparative
period represents the 52 weeks from 27 March 2020
to 25 March 2021.
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 Central
(includes Group costs, finance expenses and the Group’s
veterinary telehealth business).
The Group completed its disposal of its five Specialist Referral
centres (the ‘Specialist Group’) on 31 December 2020 and
therefore the Vet Group, and Group, financial information
shown for FY21, includes an element of discontinued
operations, however given the immateriality of these operations
(revenue £33.9m, underlying PBT £1.3m) to Group revenue and
profit they have not been disclosed separately.
impact of new iFric interpretation regarding iaS38
intangible assets
As a result of the IFRS Interpretations Committee’s (IFRIC) April
2021 clarification on ‘Configuration or Customisation Costs in a
Cloud Computing Arrangement (IAS38 Intangible Assets)’ we
have revised our Group policy and processes in accounting for
intangible assets.
As a result, a number of software and related implementation
costs that were previously capitalised, are now required to be
expensed through the income statement, and the associated
amortisation charge reversed.
This change in policy coincides with our peak level of
investment into such projects as we build our capabilities to
drive future growth, incorporating Project Polestar, investment
in how we manage our end-to-end supply chain, development
of our pick from store capability, delivery of a new warehouse
management system, and enhancing our in-house data
capabilities. As such, the resulting adjustment to profit and
capital expenditure is elevated in comparison to our historical
run rate.
Group underlying proforma PBT of £144.7m is stated on our
previous IAS38 accounting policy basis. The net FY22 impact
amounts to £14.6m such that Group underlying PBT stands at
£130.1m having taken account of the accounting policy change
in relation to IAS38 Intangible Assets.
There is no impact on the Group cash position or FCF and
overall there is a net nil income statement impact over the full
asset life. Our final dividend for FY22 has also been unaffected
by the change in accounting policy. The accounting change has
no impact on our planned investment schedule, future cash
generation or our ambitious growth plans.
iaS38 policy change impact (£m)
Group underlying profit before tax
Group capital expenditure
Pre-IAS38 policy change
Impact
Post-IAS38 policy change
Pre-IAS38 policy change
Impact
Pre-IAS38 policy change
FY22
144.7
(14.6)
130.1
73.1
(24.0)
49.1
FY21
87.5
(10.1)
77.4
44.4
(15.4)
29.0
Pets at Home Group Plc Annual Report & Accounts 2022
Strategic report
Governance
Financial StatementS
65
operating costs and profit before tax
Underlying Group profit before tax was £130.1m (FY21:
£77.4m), with a profit margin of 9.9% (FY21: 6.8%). Before
the change in IAS38 accounting policy, underlying Group
proforma2 profit before tax was £144.7m (FY21: £87.5m),
with a profit margin of 11.0%2 (FY21: 7.7%).
Group underlying operating costs before depreciation,
amortisation and the change in IAS38 accounting policy of
£375.5m (FY21: £342.1m) grew at 9.8% or 11.6% adjusting
for the disposal of the Specialist Group in the prior year and,
before investment in fulfilment, customer acquisition, and our
Support Office capabilities, underlying operating costs grew
at 4.0%.
While we are not immune to current industry-wide inflationary
pressures, in particular energy and freight costs, we are well
placed to manage them, and have clear plans in place to
drive efficiencies across the business to help offset these
cost headwinds.
Retail profit before tax was £101.4m (FY21: £59.7m) with a
profit margin of 8.4% (FY21: 5.9%) reflecting the sustained
strong trading across the year, and annualisation of the revenue
and cost implications of COVID-19 in the prior year. Before the
change in IAS38 accounting policy, Retail proforma2 profit
before tax was £114.6m (FY21: £67.5m) with a profit margin of
9.5% (FY21: 6.6%). Operating cost growth, before the change
in IAS38 accounting policy, was 11.9% to £354.6m (FY21:
£316.8m).
Underlying Vet Group profit before tax2 was £43.1m (FY21:
£33.3m) with a profit margin of 39.7% (FY21: 27.1%).
Underlying Vet Group proforma2 profit before tax was £44.5m
(FY21: £35.5m) with a profit margin of 41.0% (FY21: 28.8%).
Underlying operating costs in the Vet Group, before the change
in IAS38 accounting policy, were £8.7m (FY21: £15.1m), a
decrease of 42.4% on the prior year. The year-on-year change
in operating costs reflects the disposal of the Specialist Group
part way through the prior year, as well as achieved cost
efficiencies across several areas.
Net costs of £14.4m (FY21: £15.6m) in our Central division
reflects strong costs control and productivity gains, as well
as a reduced finance expense.
revenue
Group revenue in FY22 grew 15.3% to £1,317.8m (FY21:
£1,142.8m) and like-for-like (LFL) revenue2 grew 15.8%.
On a 2-year basis, Group LFL2 revenue grew 25.9%.
Retail revenue grew 18.5% to £1,206.9m (FY21: £1,018.9m),
including omnichannel revenue growth of 18.4% to £190.9m,
representing 15.8% of total Retail revenue (FY21: 15.8%).
The LFL revenue growth2 in Retail was 15.8% for the year
and 26.0% on a 2-year basis.
Food revenue grew by 21.3% to £668.8m (FY21: £551.5m),
reflecting our continued success in recruiting new customers
as well as an increase in Advanced Nutrition participation.
Accessories revenue grew 13.7% to £490.6m (FY21: £431.4m),
with strong growth in categories such as dog toys, consumables
and training accessories.
Grooming revenues increased by 54.5% in the year to £30.3m
(FY21: £19.6m), driven in part by annualising against the
closure of all salons for the first 10 weeks of the prior year.
Vet Group LFL revenue2 grew by 17.1% for the year, however
total revenue declined by 12.0% to £108.4m (FY21: £123.2m),
driven by the disposal of the Specialist Group on 31 December
2020. LFL revenue grew by 24.5% on a 2-year basis.
Total Joint Venture fee income increased by 22.6% to £69.9m
(FY21: £57.0m), with LFL2 fee income up 20.9% (26.6% 2-year
basis). LFL customer sales2,3 growth across all First Opinion
practices of 16.9% (28.1% 2-year basis).
Revenues from company managed practices increased by
22.6% to £31.2m (FY21: £25.5m).
Revenue of £2.5m (FY21: £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.
Gross margin
Underlying group gross margin2 increased year-on-year by
27 bps to 49.2% (FY21: 48.9%).
Gross margin within Retail was 48.9%, a reduction of 35 bps
over the prior year (FY21: 49.2%), with positive contributions
from increased grooming revenue and foreign exchange
benefits offset by a £6.6m (50bps) year-on-year increase
in freight costs.
Underlying gross margin2 within the Vet Group increased
by 605bps to 52.1% (FY21: 46.0%). This increase reflects
the strong sales growth across our Joint Venture estate driving
strong fee income growth with the cost base to support those
practices remaining largely fixed. The year-on-year movement
in gross margin also reflects the disposal of the Specialist
Group on 31 December 2020.
Pets at Home Group Plc Annual Report & Accounts 2022
66
cFo’s review continued
Finance expense
The net finance expense for the year decreased to £14.4m
(FY21: £18.4m) with the decrease driven by reduction in debt as
well as non-recurring fees incurred in the prior year relating to
an additional credit facility arranged as part of our COVID-19
response. This facility remained unutilised for the entire term
and has been allowed to expire without seeking renewal.
Prior to year end, we successfully completed our refinance
of the Group revolving credit facility at market leading pricing.
Our new £300m facility provides capacity and flexibility over the
medium term, running to March 2027 with an extension option
to September 2028. The facility is aligned to the three pillars of
our Better World Pledge: Planet, People and Pets.
Group profit before tax
Underlying profit before tax2 was £130.1m (FY21: £77.4m)
an increase of 67.9%. Statutory profit before tax, including
all non-underlying items was £148.7m (FY21: £106.4m).
taxation, profit after tax & ePS
Underlying total tax expense for the year2 was £24.3m,
a rate of 19% on underlying profit before tax. Underlying
profit after tax2 increased by 71.5% to £105.8m (FY21:
£61.6m). Underlying basic earnings per share2 were 21.2p
(FY21: 12.3p) and statutory basic earnings per share were
24.9p (FY21: 18.1p).
cash working capital
The cash movement in trading working capital for FY22 was an
inflow of £21.1m2, predominantly driven by the strong growth
in the business enabling us to turn inventory more efficiently
creating a working capital benefit within trade payables.
The strong financial performance across our Joint Venture
First Opinion vet practices, supported by favourable market
dynamics, contributed to the gross value of operating loans
reducing to £20.2m (FY21: £26.7m). The provision held against
the gross value of operating loans reduced to £5.0m (FY21:
£6.2m) representing 25% of the gross value of the loans.
This increased the overall Group cash working capital inflow
to £26.4m (FY21: £5.7m outflow) and helped support the
strong cash generation of the Vet Group.
capital investment
Capital investment was £49.1m (FY21: £29.0m) and £73.1m
before the impact of the IAS38 accounting policy change (FY21:
£44.4m). The policy change has no impact on our planned
investment schedule however reduces our capex spend.
Investment (pre IAS38 policy change) was focused on three
strategic growth areas; investment in data analytics and
business systems totalling £30.9m (FY21: £22.9m), as we
continue to progress our data and digital agenda, a £10.4m
(FY21: £5.6m) investment as we build capacity across our
distribution network, and £17.2m (FY21: £4.8m) to rollout
our next generation store format.
Group free cash flow
Group underlying free cash flow after interest and tax, but
before acquisitions and disposals increased to £95.0m2 (FY21:
£67.4m), representing a cash conversion rate1 of 37.5% (FY21:
32.7%). The increase in free cash flow compared with the prior
year is largely driven by the record year-on-year profit growth,
as well as disciplined capital investment, and the strong working
capital benefit described above.
group free cash flow (£m)
Operating cash flow
Tax and Interest
Debt issue costs
Net Capex
Purchase of own shares to satisfy colleague options
Group free cash flow
Divisional free cash flow
Retail
Vet Group
Central
Group free cash flow
FY22
200.3
(34.2)
(3.3)
(55.5)
(12.3)
95.0
FY21
119.5
(21.9)
(0.2)
(21.3)
(8.7)
67.4
FcF
(£m)
FcF
conversion1
63.4
50.9
(19.2)
95.0
29.8%
110.1%
NM
37.5%
1. Calculated as free cash flow as a percentage of underlying cash EBITDA.
2. Alternative Performance Measures (APMs) are defined and reconciled to IFRS information, where possible, on page 232.
3. Customer revenue includes customer sales made by Joint Venture vet practices and differs to the fee income recognised within Vet Group revenue.
As a result of strong cash generation and the proceeds from the disposal of the Specialist Group, the Group’s net cash position at
the end of the year was £66.0m, and net debt was £317.0m on a lease-adjusted basis. This represents a leverage ratio of -0.4x
underlying pre-IFRS16 EBITDA2 or 1.3x on a lease-adjusted basis.
Pets at Home Group Plc Annual Report & Accounts 2022
Strategic report
Governance
Financial StatementS
group net cash/(debt) (£m)
Opening net cash/(debt)
Free cash flow
Ordinary dividends paid
Acquisitions1
Disposals2
Non-underlying cash outflow3
Closing net cash/(debt)
Leverage (Net cash/(debt) / underlying pre-IFRS16 EBITDA)
lease-adjusted leverage (net cash/(debt) / underlying eBitDa)
67
FY22
1.4
95.0
(48.5)
(1.7)
19.8
–
66.0
(0.4)x
1.3x
FY21
(85.9)
67.4
(37.1)
(16.9)
79.4
(5.5)
1.4
0.0x
1.9x
1. FY22 includes investment in certain company managed practices. FY21 includes acquisition of The Vet Connection and investment in certain company managed practices.
2. FY22 and FY21 includes the cash proceeds in relation to the disposal of the Specialist Group net of fees and cash held upon disposal.
3. FY21 non-underlying cash costs of £5.5m relate to payments made to Shared Venture Partners in our Specialist Group to acquire certain remaining minority stakes.
4. Alternative Performance Measures (APMs) are defined and reconciled to IFRS information, where possible, on page 232.
The Group’s cash return on invested capital4 in the year increased to 24.0% (FY21: 21.7%).
capital allocation
At our preliminary results in May 2021, we communicated
an updated capital allocation policy which prioritises investing
cash in areas that will expand the Group and deliver attractive
returns. These areas include organic investment (into our
digital capability, our infrastructure, and our store regeneration
program), our progressive ordinary dividend policy (which
approximates to 50% of earnings per share) and value-accretive
opportunities including M&A (which are strategically
aligned to expanding our ecosystem in core and adjacent
markets). We will return to shareholders any surplus free
cash flow after these items, and it is the Board’s intention
to review this on an annual basis.
In line with our capital allocation policy, we will undertake
a 12 month on-market share buyback programme of up to
a maximum aggregate consideration of £50 million. It is the
current intention that the repurchased shares will be held in
Treasury.
Dividend
The Board has recommended a final dividend of 7.5 pence
per share, an increase of 36% on the prior year. This takes
the total dividend for the year to 11.8 pence per share, an
increase of 48% on the prior year, reflecting our strong cash
performance and balance sheet. The final dividend will be
payable on 12 July 2022 to shareholders on the register
at the close of trading on 17 June 2022.
impact of the UK’s exit 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 as necessary across the
Group to mitigate any related impact on tariffs, logistics,
vet availability and currency.
Our foreign exchange policy uses a mix of forward contracts to
hedge our USD requirement to cover the next 12-18 months.
The majority of our hedging requirements for FY23 are in place
at an average rate of 1.36 (FY22: 1.36) USD:GBP, and any
foreign exchange impact is included within guidance provided.
We continue to monitor the potential regulatory implications
for our operations in Northern Ireland, specifically concerning
the importing of goods, and welcomed the indefinite extension
of grace periods and easements, particularly the requirement
for Export Health Certificates and additional checks on animal
products, announced by the UK Government in September 2021.
mike iddon
chief Financial officer
25 May 2022
Pets at Home Group Plc Annual Report & Accounts 2022
68
operating review
Retail
Strategic differentiators
locations nationwide and
knowledgeable colleagues
– 457 stores
– 337 grooming salons
– Over 7,800 Retail colleagues
with expert pet knowledge
viP loyalty club
– 7.3m active members
– Almost 10 years of proprietary
pet and customer data
1 Alternative Performance Measures (APMs) are
defined and reconciled to IFRS information,
where possible, on page 232.
–
–
Fast growing
omnichannel business
– Omnichannel1 revenue
growth of 18.4%
– 16% participation of
Retail revenue
– Growing numbers signed
up to subscription services
Strong penetration
of private label
–
c30% participation
of Food revenue
Even higher within Advanced
Nutrition category
c50% participation of
Accessories revenue
Market overview
The retail segment of the UK pet
market grew an estimated 5% in
2021. With Retail revenue growth
of 18.5% including 18.4% growth
in omnichannel revenues, we made
strong share gains across key categories,
both online and offline.
Our Retail segment includes pet products
purchased in-store and online, grooming
services, pet sales and pet insurance
commissions.
Retail revenue
Retail underlying proforma PBT1
£1,206.9m £114.6m
Like‑for‑like1
revenue growth
Retail underlying
free cash flow1
+15.8% £63.4m
Pets at Home Group Plc Annual Report & Accounts 2022
Strategic report
Governance
Financial StatementS
Operating review
Food
We provide a wide range of pet foods
for dogs, cats, small animals, fish, reptiles
and birds. With revenues of £668.8m,
pet food is the largest part of our
business and represents approximately
55% of all Retail revenue, having
grown strongly in the year at 21.3%.
This reflects our success in acquiring
new customers, particularly puppy and
kitten owners, and growing our active
VIP loyalty club members by 18% 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
£490.6m in FY22 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 and 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
certain elements 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.
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, maximising choice
and convenience.
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 10,600 products.
Customers can choose to have their
online order delivered to home, or
take advantage of being able to collect
it for free from 457 locations nationwide
in as little as 1 hour, demonstrating the
convenience we offer. Our recent
investment in our pick from store
capabilities is now enabling us to
offer customers 2-hour home
delivery in select locations.
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.
69
In total, omnichannel revenues represent
15.8% of all Retail revenues. Around
40% of all omnichannel revenues are
either collected in or fulfilled from store;
highlighting the importance of our store
network within Group operations.
Supported by 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.
Stores
457
Grooming salons
337
1 Alternative Performance Measures (APMs) are
defined and reconciled to IFRS information,
where possible, on page 232.
Pets at Home Group Plc Annual Report & Accounts 2022
70
operating review
continued
Vet
Group
Strategic differentiators
Partnership model which
incentivises growth
– 388 practices operated by
–
entrepreneurial Joint Venture Partners
Joint Venture model unique
in the market
Unified brand driving
customer recognition
–
Largest branded veterinary
business in the UK
– Centrally coordinated national
and local marketing
Providing clients with a wide
spectrum of veterinary care
– Convenient access to First Opinion
care and advice
– 305 practices inside Pets at Home
stores 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
–
Market overview
In 2021, the veterinary segment of the
UK pet care market increased by 14%
whilst in FY22 total customer sales
across all of our First Opinion vet
practices grew 19.1%.
Our Vet Group segment includes
First Opinion veterinary practices and
provision of 24/7 pet healthcare advice
through our veterinary telehealth service.
Our Vet Group brands
Vet Group revenue
Vet Group underlying proforma PBT1
£108.4m £44.5m
Like‑for‑like1
revenue growth
Vet Group underlying
free cash flow1
+17.1% £50.9m
1 Alternative Performance
Measures (APMs) are defined
and reconciled to IFRS
information, where possible,
on page 232.
Pets at Home Group Plc Annual Report & Accounts 2022
Operating review
our vet Group
We operate the largest branded network
of First Opinion veterinary practices in
the UK, with a total of 443 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 last 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.
First opinion vet business
Our preferred model has always been
to build value through shared ownership.
We operate a total of 388 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.
Strategic report
Governance
Financial StatementS
71
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 55 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 a 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 manage their own business.
the vet connection
In the prior 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 continue 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.
Joint Venture practices
388
First Opinion practices
inside Pets at Home stores
305
Pets at Home Group Plc Annual Report & Accounts 2022
72
risk management
Principal risks
and uncertainties
our risk management framework
We recognise that effective risk management is an integral part of running our business and is fundamental to helping us achieve
our strategic objectives. Our Board is responsible for the nature and level of the principal risks that we are willing to take and have
overall responsibility for the Group’s risk and internal control frameworks.
Our ability to identify, assess and effectively manage current and emerging risks is critical in ensuring the continued success of our
business. It allows us to take advantage of appropriate opportunities whilst protecting long-term stakeholder value.
risk management framework
The responsibility for risk management operates at all
levels throughout the Group, the foundation being our
culture, values, and behaviours.
1 identify
Each business, function and strategic project identify their significant
current and emerging risks considering their strategic plan, objectives,
external environments and mitigations.
Horizon scanning exercises are conducted with senior management
teams as part of the annual strategy and business planning cycles
and risk management processes.
5 report
The Group risk register and watch
list is reported to the Audit and
Risk Committee, the Board and
the Executive Management
Team four times a year.
Risks are considered both
independently and collectively
to fully understand their
dependencies and potential
impact on the business.
Identify
1
Report
5
Management
information
Governance
2 Assess
Key controls
Culture, values
and behaviours
Policies and
procedures
4
Monitor
3
Manage
4 monitor
Each risk register is reviewed by the senior management team in each
business, function or project at least four times a year.
3 manage
2 assess
A standardised risk scoring
methodology is used across the
Group to analyse risks. This aids
the escalation and consolidation
of risks into a Group-wide view.
The Group’s principal and
emerging risks that have
the potential to threaten our
reputation, business model, future
performance, solvency, or liquidity
are assessed and agreed by the
Executive Management Team
and the Board.
Senior management and project
teams add their view on current
and emerging risks.
A watch list of emerging and
developing threats is maintained,
where the timeline, impact or
potential mitigation is not yet clear.
Threats on the watch list are reviewed alongside the risk registers to
monitor any changes to the impact and proximity.
Each principal and emerging risk is owned by a member of the
Executive Management Team.
The Gross, Net and Target risk scores are regularly reviewed to make sure
any changes have been reflected and to monitor the progress of
mitigation plans.
The executive risk owner is accountable for confirming that adequate
controls and necessary mitigation plans are in place to bring the risk
within an acceptable tolerance.
Assurance is gathered from across the three lines of defence to assess
the effectiveness of our risk management framework and system of
internal controls.
A range of risks are managed on an ongoing basis, which are not
currently considered significant enough to be included on the
Group risk register.
Pets at Home Group Plc Annual Report & Accounts 2022
Strategic report
Governance
Financial StatementS
73
n
w
o
d
p
o
t
Board oversight
Sets tone from the top.
Principal risk status
The heatmap shows the risk profile of our principal risks.
Has overall responsibility for the Group’s risk and internal
control frameworks.
The principal risks also relate to the material issues considered in the
Sustainability section on page 42.
Sets risk appetite and determines the nature and level of
principal risks.
Undertakes a robust assessment of the Group’s current and
emerging principal risks that have the potential to threaten
our reputation, business model, future performance,
solvency, or liquidity.
audit and risk committee
Assists the Board in fulfilling its corporate governance
responsibilities and oversees responsibilities in relation to
financial reporting, 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
material risks and advises the Executive Management
Team on risk appetite.
Reviews and oversees the Group risk register and watch list.
Reviews detailed risk reports and conducts regular deep dives
into key risk areas with relevant Directors to understand the
nature of the risks and adequacy of the controls and
mitigation plans to bring the risk within tolerance.
executive management team
Collectively responsible for identifying and managing risk.
Each principal and emerging risk is allocated to an Executive
Management Team member for oversight and ultimate
ownership.
Gathers assurance and risk updates from across the three
lines of defence.
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 and
implement mitigating actions.
p
u
m
o
t
t
o
B
Ensure Group policies and procedures are implemented and
complied with.
Communicate significant risks and threats via the reporting
process to the senior management team.
For further details about key roles and responsibilities
within our governance structure, please see the
Governance report on page 86.
h
g
H
i
y
t
i
l
i
b
a
b
o
r
P
w
o
L
5
1
2
3
6
10
4
8
9
7
Low
impact
High
risks are categorised into four main areas
Strategic
Financial
Operational
Legal & Compliance
risk
Profile
change
executive
responsibility
1. Brand and reputation
High
Chief Executive Officer
2. Competition
and customers
Medium
Retail Chief Operating
Officer and Vet Group
Chief Operating Officer
Medium
Chief Executive Officer
3. Services and
store expansion
4. Our people
and culture
Medium
5. Information security
and business systems
High
6. Supply chain
and sourcing
Medium
7. Liquidity and credit
8. Treasury and finance
9. Regulatory and
compliance
10. Sustainability and
climate change
Low
Low
Low
Medium
Stable
Up
Down
Chief People and
Culture Officer
Chief Information
Officer
Retail Chief Operating
Officer and Vet Group
Chief Operating Officer
Chief Finance Officer
Chief Finance Officer
Group Legal Director
Chief People and
Culture Officer
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.
Pets at Home Group Plc Annual Report & Accounts 2022
74
risk management continued
emerging risks
Emerging risks are those that can potentially have a significant
impact on the Group in the medium to long term, and for
which we may not currently have sufficient information about
the scale, impact, or likelihood to fully define a mitigation plan.
These risks are identified, assessed, and managed as part of the
ongoing risk management process. The Board and Executive
Management team have carried out a robust assessment of our
emerging risks. The risks considered a priority are summarised
in the risk management section on pages 75 to 85.
task Force on climate-related Financial
Disclosures (tcFD)
Climate change risks are managed within the Group’s
established risk management framework. As required any
actions identified as part of this year’s scenario analysis will
be captured on the Group’s risk register and will be monitored
by the ESG Committee (supported by the Audit Committee)
in line with the Group’s risk management processes.
Details of this and our overall approach to TCFD can be
found on page 42 of this report and in more detail in
our social value report.
Pets at Home Group Plc Annual Report & Accounts 2022
Strategic report
Governance
Financial StatementS
links to strategy
Bring the pet experience to life
Set our people free to serve
Use data and VIP to better serve customers
50% of sales from pet services
75
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
Protecting our strong brand and reputation
is essential and it is every colleague’s
responsibility to safeguard and indeed
enhance the reputation of the Group.
mitigation
Advancing pet welfare will always be a priority
in line with our purpose – We’re better with
pets. It is at the heart of everything we do
and supports our strategy. As a retailer of
small pets and as a 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
exacting standards.
Reporting into this committee is the Pet
Welfare Committee, which oversees the
assurance and governance of pet welfare
(including our breeders and supply chains),
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 agile with
communications and improvements
to procedures should they be 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 independent external
assessors. We also have a highly visible
field operations team that are focused on
maintaining the highest pet welfare standards.
We have recently implemented an improved
internal audit system that allows us to identify
areas where additional colleague training or
new procedures are required. And, despite
the challenges associated with COVID-19,
we have continued to implement our pet
welfare audit programme with virtual
assessments during the first quarter,
followed by a return to in-person
visits for the remainder of the year.
Pet welfare remains our highest priority.
Underpinning this is our vision is to become
the best pet care business in the world.
To attract new customers and build customer
loyalty we must maintain stakeholder trust
and confidence in the Group and its brands.
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 know that, despite our best efforts,
customers are often unaware of the
complexity or commitment required of pet
ownership. Every store colleague is
empowered to refuse to sell a pet if they have
any doubts about the suitability of its forever
home. In addition, as part of a wider project
to improve rabbit welfare, we constantly
evaluate how we talk about and sell pets, and
rabbits are now only sold in stores that have
veterinary practices on site. We continually
review the price of rabbits to make them
more of a considered purchase and we also
discontinue the sale and adoption of rabbits
over the Easter period. In addition, we have
recently completed a comprehensive review
of our small animal food and treat range with
the aim of improving the health and welfare
of both store and customer owned pets.
The Group also interacts with customers’ pets
through its First Opinion veterinary practices.
All our veterinary surgeons and nurses are
subject to the Royal College of Veterinary
Surgeons’ (RCVS) Code of Conduct. In
addition, 330 practices are accredited under
the RCVS Practice Standards Scheme (PSS),
with a further 19 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 must meet a range of standards.
Practices are also subject to independent
spot-checks between assessments. The
accreditation process has been suspended for
part of the financial year due to the pandemic,
but we will continue to drive and support PSS
accreditation when it has fully resumed.
links to strategy
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.
In conjunction with the VetCompass
research team at the Royal Veterinary College
we are conducting 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 several
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 UK rescue sector
through the Pets at Home Foundation and
our VIP Lifelines scheme. This year we have
supported both the UK and international
rescue sector with an emergency grant
scheme to help them to cover essential
costs during the pandemic or another crisis.
The rescue sector has not reported a
significant increase in relinquishment of
pets over the past year. However, 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 aware
that an overall increase in the pet population
may result in more pet relinquishments, but
not an overall percentage increase in the
total number of pets versus volume of
relinquishments. We are also aware that as
restrictions continue to 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.
Pets at Home Group Plc Annual Report & Accounts 2022
76
risk management continued
Brand and reputation continued
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 across the Group to ensure they
remain robust and best in class.
Throughout the pandemic our First Opinion
practices have followed both Government
and the RCVS guidance and remained 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.
Key emerging risks
• Disruption caused by material changes
in customer behaviour and needs, driven
by concerns around affordability,
sustainability, and the environment.
• New and emerging animal diseases.
• Climate change may have a significant
impact on pet welfare.
risk profile
High
risk appetite
Low
change on prior year
Stable
We place the care, health, and welfare of
pets at the front and centre of all we do. The
Group has no appetite for any risk that may
compromise animal welfare or breaches
product quality standards.
Competition and customers
Description and impact
The Group competes with a wide variety of
retailers, including other pet specialists, pure
play online competitors, direct to customer
businesses, supermarkets, discounters, online
pet healthcare platforms, veterinary groups,
and independent practices.
There is increased online competition as large
well-known internet businesses continue to
expand into pet products and established pet
product sites improve and expand their offer.
mitigation
We offer pet owners a complete pet care
experience, something our competitors
cannot. We differentiate ourselves through
our expanding pet care ecosystem, combining
product, services, and expert advice from
a trusted, well-known brand. In FY22, we
welcomed over 1m customers into
our pet care ecosystem.
Market research is carried out to review the
pet market worldwide to understand what our
competitors are doing. We also undertake an
annual survey with c5,000 UK pet owners,
both customers and non-customers. Both help
identify initiatives that we can implement to
help keep Pets at Home a leader in the UK
market. We also constantly review expansion
opportunities into new adjacencies that would
contribute to our pet care ecosystem.
Our people are at the heart of our business.
Our passionate and skilled team of
veterinarians, vet nurses, grooming stylists,
and store colleagues share their knowledge
and expertise with our customers every single
day. This a key element of our proposition and
we continue to invest to ensure our service
standards are continually improved.
There is also a high level of new start-ups into
the subscription market. We must continue to
offer an attractive model for our future Joint
Venture Partners while keeping ahead of, and
responding to, developments by our competitors
around price, range, quality, clinical care, and
customer service. Failing to do so could have
an adverse impact on the Group’s financial
performance and opportunities for growth.
Our stores play a strategic role in delivering
pet care to our customers as key points of
acquisition, fulfilment, and advice. We
introduce services within stores (Vets,
Grooming, Self-Wash etc.) where possible.
We are also leveraging our stores as mini
distribution centres which will allow us to
further improve our delivery options with the
introduction of same day delivery. All stores
are profit generating and as we open new
stores, we see a good return on investment
indicating that we have not yet reached
maturity on our store estate.
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
characteristically loyal, we are conscious of
increasing inflationary challenges and are
committed to affordable pet care for all. We
continue to hone our pricing and promotional
strategies, 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.
Pets at Home Group Plc Annual Report & Accounts 2022
links to strategy
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 where
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.
Our VIP loyalty club provides almost 10 years’
worth of proprietary pet and customer data.
We are integrating analytics into our extensive
pet dataset to generate unparalleled insights,
enabling us to understand more accurately
our customers and their pets, and predict
their future pet care requirements. Beyond
our CRM activities, we are increasingly using
intelligent data to optimise decision-making
across the wider business. By leveraging our
data insights, we can offer more personalised,
targeted solutions, driving customer loyalty,
retention, and lifetime value.
Strategic report
Governance
Financial StatementS
links to strategy
Bring the pet experience to life
Set our people free to serve
Use data and VIP to better serve customers
50% of sales from pet services
Competition and customers continued
77
mitigation continued
Our omnichannel participation of retail sales
continues to grow. Our approach extends
beyond traditional online shopping, with new
fulfilment options such as a one-hour Click &
Collect service across all our stores and the
contactless Deliver to Car service across much
of the estate. Subscription platforms allow us
to offer greater convenience, choice, and
flexibility to our customers. We have
continued to enhance and grow our deliver
to home service for the supply of preventive
and therapeutic veterinary medicines to our
veterinary customers. The Group now has
approximately 1.5m pet care plans across the
Group, offering customers a convenient way
to shop with us, and increasing the quality
and visibility of our sales profile.
We operate the largest branded veterinary
business in the UK, with practices located in
two-thirds of stores plus 138 standalone
locations and continue to have a differentiated
strategy versus our scale UK competitors,
which all employ variations of a ‘buy and
build’ model. The JV model, and the
relationship with our retail stores and VIP club,
plus our 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.
Practice maturity represents a significant
future profit and cash flow opportunity, with
further potential upside from rollout of new
practices. We are also continuing to introduce
an innovative format for our veterinary
practices, enhancing, and modernising the
customer’s experience through our
‘Pathfinder’ initiative which combines design
innovation, the latest client-facing technology
and our new ‘Pet Care Advisor’ role, to
optimise allocation of clinical resource,
enhance client engagement, and improve
practice economics.
Our telehealth business, 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.
We continue to build our digital capability
with the first elements of ‘Polestar,’ our
transformational digital initiative, launched in
the year, which will create a joined up and
personalised pet care experience across the
Group. Our vision is to make pet care easier
and even more convenient for our customers
from Day 1, however they wish to shop, with
our entire ecosystem of products and services
in one place. Single sign on was successfully
launched for PetsatHome.com customers in
February 2022 and we will have regular
launches of new digital products and
customer services through to the end of 2023.
outlook
Whilst the ongoing presence of COVID-19,
current geopolitical tensions, and inflationary
pressures represent near term headwinds, the
business is well positioned to manage such
challenges and we have a clear and well-
invested plan.
The wider economic challenges will remain
a key focus for next year. The Group is in
a strong position in a large, resilient market
which has seen continued structural growth
over the past 12 months with a second wave
of new pet ownership increasing our customer
base to over 7m VIPs.
We expect to see continued strong growth
both in our Puppy and Kitten clubs, online
and demand for digital services, which will
be supported through the new digital
platform and increased delivery choices.
Key investments across our digital platforms
and distribution centres keep us in a strong
position to offer these newly acquired
customers a complete pet care experience.
As we emerge out of COVID-19 we will also
start to reintroduce more experiential activities
to our stores with a focus on supporting newly
acquired Puppy and Kitten customers.
Over half 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
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.
Key emerging risks
• Disruption from new competitors taking
advantage of new market dynamics
• Continued macroeconomic uncertainty
post-pandemic and adjustment to new
processes set out in the EU-UK Trade
and Cooperation Agreement.
• Disruption caused by material changes
in customer behaviour and needs, driven
by concerns around affordability,
sustainability, and the environment.
• Sustainability and climate change
concerns make pet ownership
less attractive.
risk profile
Medium
risk appetite
change on prior year
Moderate to high
Stable
The Group recognises that to successfully
compete and grow the business. We need to
take an acceptable level of risk, whilst staying
within our overall Group risk appetite.
We have a higher appetite for risk in the
creation of long-term value, developing
our strategy and taking advantage of
opportunities. In the execution of our
strategic initiatives, where we need to
maximise benefits realisation, we will
only accept a moderate level of risk.
Pets at Home Group Plc Annual Report & Accounts 2022
78
risk management 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 supplier
failure or disruption, 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 and modern
slavery) and the environment.
We are also exposed to the risks associated
with the quality and safety of products
mitigation
The strength of our long-standing
relationships with key suppliers and freight
partners is crucial to preserving our supply
chain. Global supply chain challenges
continued to lead our engagement with
suppliers as we all focused on ensuring
continuity of supply of products for our
customers and their pets.
Availability remained a challenge across the
year with Asia supply impacted by further
challenges due to COVID-19 and the Suez
Canal shipment lanes blockage. We were able
to minimise disruption to customers through
forward buys supported by increased
distribution capacity.
The Product and Supply Chain Committee is
responsible for developing our 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 the year, the Committee
has developed a roadmap to deliver the
relevant targets for our Better World Pledge.
More details can be found on page 42.
Over 80% of our cost of goods sold is sourced
domestically, limiting our direct exposure to
container rate volatility. We continue to work
closely with our broad base of suppliers to
mitigate as much inflation as possible across
outlook
We recognise that exposure to inflationary
pressures, rising energy costs, foreign currency
movements and freight market fluctuations
will be a heightened risk. Freight market
impacts are expected to continue through to
2024 which we are mitigating through our
hedging strategy. We are in a positive position,
building in more flexibility and resilience.
Availability challenges have stabilised however,
we continue to actively monitor developments
due to COVID-19 especially in the Far East
where local policy is resulting in further
produced locally and globally on behalf of
the Group, many of which are own brand
or exclusive private labels.
We have three distribution centres covering
the UK. A disaster at one of these may result
in a significant disruption to the supply of
stock for many stores and in the fulfilment
of internet orders.
Failing to manage this risk could lead to
significant reputational damage.
the supply chain to support our competitive
price index. For our own label and private
label food products we have identified
alternative suppliers where appropriate and
have developed contingency plans.
We assessed the impact of the crisis in Ukraine
for the Group and our stakeholders. For our
supply chain the impact of any material
changes to the GBP/USD rate would have a
financial impact. For our product ranges the
main impact is the availability of sunflower
seeds. We have assurance from our
suppliers around the security of their supply,
and we have mitigated this further through
redevelopment of the few affected
products in our wild bird range.
Having Pets at Home colleagues in Asia and
the UK working collaboratively with suppliers
enables us to monitor compliance with the
Group’s Code of Ethics and Business Conduct
policy, and our Supplier Quality Manual.
We use a combination of independent
third-party ethical audits and audits completed
by our own colleagues to monitor supplier
compliance. Our Legal team ensure we have
the necessary contractual rights to carry out
these activities. Suppliers are then supported
to remediate any non-conformance. We
continue to invest in our quality assurance and
control processes and to ensure the
effectiveness of our Far East sourcing office in
links to strategy
mitigating our sourcing risks in the region.
We have recruited a Responsible Sourcing
Specialist who is embedded operationally
within our Technical Team while working
closely with the Group Head of Social Value
and the Company Secretary on our Group
wide human rights strategy and approach.
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 due to national or international
instability. We have continued with our
intended programme of contract renewals
during the year and have improved our
provision of ring-fenced stock holdings with
both wholesalers and manufacturers which
has proved successful in mitigating risk to
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 sufficient 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.
Key emerging risks
lockdowns and the new processes set out in
the EU-UK Trade and Cooperation Agreement.
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.
• Geopolitical uncertainty and disruption.
• Continued macroeconomic uncertainty
post-pandemic and adjustment to new
processes set out in the EU-UK Trade and
Cooperation Agreement.
• Changes in regulatory environment. –
including UK Government consideration
of wide-ranging changes to product
safety regulation.
• Increased recruitment competition
impacting UK manufacturing.
Pets at Home Group Plc Annual Report & Accounts 2022
Strategic report
Governance
Financial StatementS
links to strategy
Bring the pet experience to life
Set our people free to serve
Use data and VIP to better serve customers
50% of sales from pet services
79
Supply chain and sourcing continued
risk profile
risk appetite
change on prior year
Medium
Moderate
Up
The Group does not tolerate any breach of
company policies, local laws, or regulations
in our supply chain.
The Group is prepared to tolerate a level of
operational risk around product availability, taking
steps quickly to ensure we are resilient and are
operating within the approved thresholds set out
in our policies and mitigation plans.
Services and stores expansion
If we fail to deliver our strategic initiatives our
expected growth and financial performance
could be adversely impacted.
links to strategy
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.
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 443 First Opinion veterinary
practices, 337 Groom Rooms and 457 stores.
There has been continued growth in our pet care
subscription customers. We have approximately
1.5m 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 473,000 new clients this year.
To take advantage of this opportunity the
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 potential to personalise and
tailor packages to customers.
Our telehealth business, The Vet Connection,
broadens our digital capabilities in providing
trusted advice and pet care solutions. We will
continue 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.
Our store estate provides further operating
leverage versus online pure plays.
outlook
This year we have launched one new pet care
centre taking us to 19 stores in this format, in
addition to two smaller next generation stores.
The performance of these two stores will
inform our decision-making on a wider rollout.
We have also opened four in-stores practices
whilst completing four conversions of
company owned first opinion practices
to Joint Venture partnerships.
Returns generated from recent store openings
and transformations remain ahead of initial
expectations, and we plan to open five new
stores and transform 40-50 stores each year over
the medium term to improve both the physical
shopping experience and the integration with
our digital platform.
Having a range of store format models that
correlate with our customer and business needs
enables us to optimise returns, and by taking a
blended approach we will also be able to
refurbish more stores, faster.
We have taken learnings from the initial cohort
of pet care centres which will shape how we
develop the format going forwards, focusing
on range, store selection and disruption as
opportunities to improve. We remain agile so that
we can quickly adapt 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. We are
accelerating our refurbishment plan which allows
us to refurbish our oldest stores and by refining
the format models we will make our stores
more relevant to our customers through the
introduction of new elements whilst maintaining
our stores in a good state of repair from the
renewal capital.
We will continue to invest in infrastructure across
our veterinary practices and plan to open new
practices each year over the medium term. Our
Pathfinder initiative is proving pivotal in improving
practice revenues and efficiencies, and is
generating a better client experience, and we plan
to extend this to all company managed and select
Joint Venture practices over the coming year.
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.
Further capacity will be added when our new
distribution hub comes online from 2023. This
purpose-built and highly automated facility will
support our future growth ambitions through
improved capacity while lowering our cost to
sell through better inventory management and
availability, and faster delivery.
Key emerging risks
• Material changes in customer behaviour and
needs, driven by concerns around affordability,
sustainability, and the environment.
• Speed of change in innovation and
advances in pet care and clinical technology.
Pets at Home Group Plc Annual Report & Accounts 2022
The Group is in a strong competitive
position through our unique omnichannel
pet care model.
Whilst the ongoing presence of COVID-19,
current geopolitical tensions, and inflationary
pressures represent near term headwinds, we
remain confident in our long-term strategic
plan to deliver 50% of sales from pet
care services.
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.
80
risk management continued
Services and stores expansion continued
risk profile
risk appetite
change on prior year
Medium
Moderate to high
Stable
The Group recognises that to successfully
innovate and grow the business. We need to
take an acceptable level of risk, whilst staying
within our overall Group risk appetite.
We have a higher appetite for risk in the
creation of long-term value, developing
our strategy and taking advantage of
opportunities. In the execution of our
strategic initiatives, where we need to
maximise benefits realisation, we will
only accept a moderate level of risk.
Our people and culture
Description and impact
Our Group and People strategy recognises
that our 15,000+ colleagues and Partners
are fundamental to the success of our
business and key to us achieving our vision
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.
mitigation
During the last year, a primary focus was to
continue to keep our colleagues safe and
minimise the impact of the pandemic on them
and across our Group.
The strength of our culture and values has
never been more important. They are the
anchor from which every decision is made and
will continue to be made. As our business
evolves it was natural that our values need to
as well, and this year, we undertook a
cross-business approach to redefine our values
to better reflect our people and our vision.
This helps us to connect our colleagues to our
purpose and vision whilst doing all we can to
drive loyalty and trust.
We continue to listen closely to colleagues
and look for more ways to engage with them.
Our annual engagement survey had a specific
focus on wellbeing, as we know it is closely
connected with attracting, engaging, and
retaining great talent. Our listening groups
‘Tune In’ and COO email addresses ‘ask’ to
provide additional channels to tap into how
colleagues feel and what we can do to
support. Insights from all channels continually
shape our People strategy and associated
wellbeing, Learning and Development and
Inclusion, Diversity and Equity (IDE) strategies.
A loss of trust at any level will negatively
impact our culture and our ability to retain
and attract talent.
It is essential for the Group to attract,
develop, reward, and retain talented,
engaged colleagues and Partners who will
deliver quality service and clinical care to our
customers and their pets. If we are unable to
achieve this our ability to deliver our strategic
aims will be significantly impacted.
Our capability framework articulates
what great looks like for all colleagues.
This framework has been used to create
development programmes for all levels.
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 talent.
We continue to develop bespoke critical talent
group strategies and to invest in these (e.g.
data, IT, grooming) alongside developing
short, medium and long-term strategic
mitigations to the global veterinary workforce
shortage both internally and in partnership
with the wider industry. We have a targeted
international recruitment strategy for
veterinary talent which focuses on key markets
where clinical education meets UK standards.
We have invested in a head to continue to
work on our mitigations to the IR35 legislation
which impacted some locum vets and nurses.
We continue to invest in apprenticeships
and other employability programmes
across the Group (e.g., Kickstarter) to provide
opportunities to those who face barriers. We
have apprentices at all levels of our business,
and across critical talent areas in addition to
our colleague and leadership development
programmes, which both focus on ‘growing
our own’, building our own talent pipeline
as well as attracting new talent.
Pets at Home Group Plc Annual Report & Accounts 2022
links to strategy
We launched a profession wide listening
project to address the systemic issues within
the veterinary workforce. The insights led to
an evidence-based action plan which was
communicated to the profession. We have
committed to and invested in the BVA Good
place to Work Code and are rolling this out
to all our practices. Our leading vet graduate
programme recruits over 90 newly qualified
vets per annum and was a finalist in Personnel
Today awards. We continue with our EMS
bursaries, and we launched ten new vet school
scholarships in partnership with Nottingham
vet school. We are partnering with Timewise
to launch new flexible working practices.
To support our colleagues’ wellbeing, we
continued to focus on maintaining the sense
of belonging that was challenged by remote
working whilst at the same time developing
our wellbeing strategy to reflect life post-
pandemic. Our strategy received external
recognition when we won the best workplace
wellbeing strategy at the National Workplace
wellbeing awards.
Our ‘modern ways of working group’ is
focused on 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 past two years.
Strategic report
Governance
Financial StatementS
81
links to strategy
Bring the pet experience to life
Set our people free to serve
Use data and VIP to better serve customers
50% of sales from pet services
Our people and culture continued
mitigation continued
We launched a colleague wellbeing handbook
and invested in Mental Health First Aid
training. We have trained over 620 mental
health first aiders across the Group. All First
Opinion practices now have a trained Mental
Health First Aider (MHFA). By FY24 we will
train one colleague for every site in our Group,
and we are focused on developing our MHFA
alumni community. Enhanced counselling was
also launched to colleagues through the Retail
Trust, and this included up to six sessions for
colleague’s children. We continue to support
colleagues and Partners who have been
outlook
We continue to make great progress with our
People strategy across the Group and remain
in a strong position to attract, retain, reward,
and develop our colleagues.
We continue to seek new opportunities to
further enhance our colleague experience as
we emerge from COVID-19. This is especially
so for our critical talent groups. The current
headwinds facing the business from an
dealing with challenging situations with
customers through additional training and
mental health resources.
From a reward perspective, total reward
statements have been developed and will
launch in FY23 as we work to show colleagues
the overall value of their reward package. We
continue to review our remuneration and
benefits packages to remain competitive to
current and future colleagues. This year, for
example, we enhanced our maternity and
shared parental leave.
Free shares were issued to eligible colleagues
in summer again. Our second sharesave
scheme matured where colleague’s shares
gained over £11.8m in value from their initial
investment in 2018. We invested in formal
ways for colleagues to receive instant
recognition through our new reward platform.
Over £100,000 of awards were sent this year.
Colleague appreciation day was also
recognised with every colleague and team
sent tokens of gratitude from the Executive
Management team.
operational cost perspective will mean we
need to keep innovating in a heavily candidate
led market.
• Continuing restriction in critical
talent markets.
• Continued macroeconomic uncertainty
Key emerging risks
External awards recognising our wellbeing
strategies and as a place to work have
provided further external credibility to our
approach and will serve to build further
trust with colleagues.
post-pandemic.
• Adaptation to new technologies and
work environments.
risk profile
Medium
risk appetite
Low
change on prior year
Stable
As a Group we expect our colleagues and
Partners to act in line with our culture, values,
and behaviours.
The Group has no appetite for risk relating
to the health, safety, and wellbeing of
our colleagues.
We do however accept that there is an
inherent level of risk in attracting and
retaining critical talent across the Group.
Information security and business systems
Description and impact
links to strategy
Cyber-attacks continue to grow in frequency
and complexity, increasing the risk to Pets at
Home and our ability to continue to safely
operate and protect our customer and
colleague data. As we continue to adapt to
these new challenges there is an associated
increase in cost, resources, and time to
ensure we remain secure.
mitigation
Pets at Home are investing heavily in our cyber
security position both from a personnel and
technology standpoint, this includes engaging
industry leading specialist consultants to help
deliver our strategy based around the NIST
cyber security framework, an industry
standard for measuring technical and
organisational maturity.
We remain committed to delivering secure
high-performance resilient systems that
underpin our strategic plan. Scalable, secure,
cloud-based solutions are adopted where they
support our strategy.
Awareness, training, and testing campaigns
continue, educating colleagues about the
risks associated with protecting data and
physical security.
Pets at Home Group Plc Annual Report & Accounts 2022
82
risk management continued
Information security and business systems continued
outlook
Key emerging risks
To deliver our vision to become ‘The Best Pet
Care Business in the World’ we include the
need to protect our customers and colleagues
from the ever-increasing threat of cyber-
attacks, investing in both technology and our
people, to deliver our comprehensive risk
reduction programme and adopt a continuous
service improvement cycle to monitor and
adapt to the constantly evolving threat
landscape.
• Geopolitical uncertainty and disruption.
• The increasing technology capability and
complexity of organised cyber-crime gangs.
• Disruption through technology advances
and adoption.
risk profile
High
risk appetite
Low
change on prior year
Up
The Group has no appetite for cyber security
risk which may compromise our reputation,
our technology solutions, and the personal
data within them.
We endeavour to protect our data in line with
legislation and best practice.
The Group accepts a balanced level of
operational technology risk to protect and
enhance our operations. We work to minimise
the likelihood and impact of any business-
critical technology failure.
Liquidity and credit
Description and impact
links to strategy
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 March 2027. 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.
Pets at Home Group Plc Annual Report & Accounts 2022
Strategic report
Governance
Financial StatementS
links to strategy
Bring the pet experience to life
Set our people free to serve
Use data and VIP to better serve customers
50% of sales from pet services
Liquidity and credit continued
83
outlook
The increase in the Group’s liquidity headroom
in the financial year, and the amendment and
extension of the Group’s core financing
facilities, supported by the strength of trading
throughout the period, has led to the liquidity
risk profile remaining low.
The evolving political and macro-economic
situation 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
risk profile
Low
Key emerging risks
• The continued development of the UK’s
relationship with the EU.
• The evolving supply chain and
inflationary factors.
change on prior year
Stable
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, considering resilience evidenced within
the sector throughout the last financial year.
risk appetite
Low
The Group has a low appetite for funding,
liquidity, and credit risk. We apply a cautious
and balanced approach to these risks
to safeguard access to funding whilst
maintaining sufficient liquidity to meet
our current financial obligations and
future financial forecasts.
The Group does not tolerate any breach in
liquidity and credit contracts or Group
liquidity and credit financial policies.
Treasury and finance
Description and impact
links to strategy
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 SONIA, thereby
exposing the Group to fluctuations in SONIA
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
borrowing. Further details can be found on
page 171. 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
Ongoing currency movements between
the US dollar and GBP may result in further
exchange risk, particularly considering the
evolving position in relation to COVID-19,
the political and macro-economic
environment, and the UK’s developing
relationship with the EU.
We will continue to monitor this and adjust
our approach to hedging where necessary.
We do not expect any increased threat from
other significant macro-economic changes
in the short to medium term.
Key emerging risks
• Geopolitical uncertainty and disruption.
• Continued macroeconomic uncertainty
post-pandemic and adjustment to new
processes set out in the EU-UK Trade
and Cooperation Agreement.
Pets at Home Group Plc Annual Report & Accounts 2022
84
risk management continued
Treasury and finance continued
risk profile
Low
risk appetite
Low
change on prior year
Down
The Group has a low appetite for balance sheet
risk. We apply a cautious approach to safeguard
the strength and resilience of the balance sheet.
We also take an ethical and low risk approach
to tax.
The Group does not tolerate any breach in
key financial policies, such as the Group
Treasury Policy.
Regulatory and compliance
Description and impact
links to strategy
Many of the Group’s activities are regulated by
national and international legislation,
applicable industry regulations and standards
including, but not limited to, consumer and
competition laws, trading, advertising,
packaging, product quality, health and safety
legislation and guidance, pet shop licensing,
National Minimum Wage and National Living
Wage, Equality Act, modern slavery, Anti-
Bribery, data protection, environmental
regulations, the Corporate Governance Code,
the RCVS Code of Professional Conduct for
Veterinary Surgeons, and 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 and other consequences
for the business and its Directors.
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, suppliers, and people
working within our supply chain to raise
concerns regarding any potential breach of
legal or regulatory obligations in confidence.
Our suppliers commit to comply with all relevant
business regulations for the territories in which
they operate and to meet international labour
standards which are laid out in our Supplier
Code of Conduct. We reinforce this by placing
contractual obligations on our suppliers and
support where necessary.
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.
Health and safety is a key priority for the
Board and senior management. The Group
has a dedicated Health and Safety team
covering all areas of the business. The Health
and Safety Committee, chaired by the Group
Legal Director and Company Secretary, is
responsible for the Group health and safety
framework, policy, and performance. Health
and safety performance is also reviewed by
the Board and the Audit and Risk Committee
on a regular basis.
outlook
We continue to monitor legal and regulatory
developments across the UK and Europe and
will plan accordingly.
Key emerging risks
We anticipate regulatory changes following
Brexit to start to take shape within the next 12
months. FY23 will see an increased focus on
human rights and environmental standards in
our supply chain and international sanctions.
• New and amended regulations, including
further amendments to the law resulting
from Brexit, and significant strengthening
of UK consumer laws, and increasingly
stringent environmental regulation.
risk profile
Low
risk appetite
Low
change on prior year
Stable
The Group is committed to acting ethically,
lawfully, and always in the best interests of our
stakeholders and therefore has an extremely
low appetite for compliance breaches, either
regulatory or of our principal internal polices,
including for example, our Health and Safety
policy and our Code of Business Ethics
and Conduct.
Anyone who acts on our behalf, is expected to
act in line with our policies, values, and behaviours
and to take to take the necessary steps to
comply with applicable laws and regulations.
Pets at Home Group Plc Annual Report & Accounts 2022
Strategic report
Governance
Financial StatementS
links to strategy
Bring the pet experience to life
Set our people free to serve
Use data and VIP to better serve customers
50% of sales from pet services
85
Sustainability and climate change
Description and impact
links to strategy
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. Our
investors, colleagues and customers need to
be assured that we are acting responsibly
across our business and supply chains. If we
do not meet these expectations the Group’s
reputation and license to operate could be
threatened. More stringent environmental
regulation could affect the cost of production
and operational flexibility.
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.
deforestation and plastics use. The supplier
code of conduct has been updated and this
forms part of our terms and conditions
of trade. We have developed a product
sustainability framework to support the
implementation of our environmental
and social requirements across our
product developments and selections.
The climate change and waste committee
has been overseeing our operational climate
change strategy, particularly focusing on
opportunities to reduce carbon usage. An
environment policy has also been developed.
At the Product and Supply chain meeting,
during the year policies have been developed
on raw materials and packaging outlining
environmental considerations like
In line with the Task Force on Climate-related
Financial Disclosures (TCFD) requirements, we
conducted a climate change scenario analysis
that built on the previous year’s risk
assessment. Details of this and our overall
approach to TCFD can be found on page 42
of this report and in our social value report.
We have now submitted both our near term
2030, 42% scope 3 reduction target and our
2040 net zero target to the science-based
targets initiative (SBTi) for approval and work
is underway to develop the programmes that
support the delivery of these targets. Extreme
weather events form part of our TCFD
scenario analysis presenting both risks and
opportunities which we are actively
monitoring. In the short term we can adapt
our planned and tactical promotional activity
to decide whether strengthening this would
support pet welfare through sales of
appropriate products and providing advice.
outlook
The social value strategy, Our Better World
Pledge, can be found on page 42, 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 and our latest
TCFD disclosure. We are committed to
achieving these ambitions but recognise the
challenges and complexities involved with
tackling global issues, such as climate change.
Further improvements to our subscription and
omnichannel services offering will continue to
improve our resilience to reduced store footfall
during periods of extreme weather.
Key emerging risks
• Decarbonisation - inability to transition our
products and services to low carbon models.
• Physical risks of extreme weather events
affecting demand, sales, our operations,
and supply chains.
risk profile
Medium
risk appetite
Low
change on prior year
Stable
Pets at Home Group Plc Annual Report & Accounts 2022
86
chair’s introduction
High standards
of governance
at the heart of
our business
On behalf of the Board, I am pleased to
present our Corporate Governance Report
for the financial year ended 31 March 2022.
The Governance Report sets out Pets at Home’s
governance framework and the approach the
Board has taken during FY22 to maintaining
high standards of corporate governance that
are rightly expected by our stakeholders
and to ensure continued compliance
with the 2018 Code.
In accordance with the 2018 Code, my role, as Chair, 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.
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 year has been particularly active for the Board in the
areas of succession planning and Board evaluation.
Following Peter’s announcement in November 2021 of his
intention to step down as CEO, the Board commenced the
search process to appoint Peter’s successor. We wanted to
ensure that a CEO was appointed with the right skills and
experience to support the future direction and strategy of
the business. I am delighted to welcome Lyssa McGowan
to the Group as our new CEO. As noted previously, Lyssa
brings strong corporate, strategic and operational expertise
across a range of consumer-facing businesses, and a proven
track record of growth at Sky, with significant experience in
customer and digital-first initiatives across multiple channels
and sites.
Pets at Home Group Plc Annual Report & Accounts 2022
The Board believes that Lyssa has the requisite skills and
capabilities to lead the Group as it executes its future growth
strategy. Lyssa’s commercial and strategic experience will
undoubtedly be of great benefit to the Group and I very
much look forward to working with her. Further details of the
succession and appointment process are set out on page 105.
The Board has also focused on the external Board evaluation
this year, with our last external evaluation having taken place
in 2019. During the year, we continued to build on the outputs
from last year’s internal Board evaluation and appointed MWM
Consulting to work with us on our external evaluation. Further
detail on the Board evaluation process and outputs can be
found on pages 102 and 103.
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.
During the year the Board has continued to shape
the future strategic direction of the business, as well
as oversee key strategic projects. The strategy day, held
in November and attended by the Board and Executive
Management Team, is a key part of this process. Throughout
the year, the Board also received regular updates on key
strategic projects and any decisions regarding such projects
that required Board approval, have been carefully considered
and discussed at Board meetings. In addition, the Board was
pleased to attend ‘Welcome to our world’ days in Handforth
and Swindon, where we met colleagues and heard about the
day-to-day delivery of strategic projects. Further detail on the
governance for two of the Group’s key strategic initiatives
is set out on page 94.
Stakeholder trust and engagement continues to be of
significant importance to the Board. We aim to ensure that
the Group’s strategy, purpose, culture and engagement with
key stakeholders are at the heart of the governance framework.
More information on our key stakeholders and how we have
engaged with them is set out on pages 32 to 34.
StrateGic rePort
goVerNaNce
Financial StatementS
87
Sustainability remains a major focus for the Board and
the Group. The ESG Committee has considered key issues
throughout the year, with such matters being reported to the
Board at regular intervals. The Planet deep dive presented at
the ESG Committee in February considered issues such as the
disclosures and reporting standards, communicating with our
customers, colleagues and investors to raise ESG awareness and
the opportunities across the Group to improve sustainability. As
part of the Group’s store refurbishment programme, the Board
also considered the ESG impact of refurbishments, including
energy efficiency and build and space efficiency. The new
green initiative store has been opened in Brighton with trials
into various sustainable elements such as water conserving
bathrooms, recycled materials, low VOC (volatile organic
compounds) paint, worktops built from yoghurt pots and
a project to increase the thermal envelope of the building. The
ESG Committee also considered the TCFD reporting standards
and the Group’s new revolving credit facility is a sustainability
linked loan which includes ESG metrics.
We will continue to build on our already strong governance
framework with a number of projects planned for the coming
year including: a review and rationalisation of the Group’s
business policies and monitoring UK SOX developments.
I hope that this report provides a clear outline of the work the
Board has undertaken during the year and how our governance
and Board agendas are aligned with the Group’s strategy.
I look forward to welcoming shareholders to our AGM at the
Pets at Home Support Office on 7 July 2022 at 11am.
ian Burke
chair, Pets at Home Group Plc
25 May 2022
Pets at Home Group Plc Annual Report & Accounts 2022
Compliance with the 2018 UK Corporate Governance Code (the ‘2018 Code’)The 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, the Disclosure Guidance and Transparency Rules (‘DTRs’) and the Listing Rules (‘LRs’). The Board is responsible for ensuring that the Group has the necessary frameworks in place to ensure compliance with the Code. The Board believes that during this financial year, the Group was in full compliance with the Code, save that:Provision 38 – The pension contribution rate for the CFO and CEO was 9% of base salary during the year. The pension contribution rate for the CFO was reduced to 6.5% with effect from the start of the new financial year for 2022-23. The CEO’s pension contribution rate will continue at 9% until he leaves the business on 31 May 2022. The new CEO’s pension contribution rate is 6.5% from her start with the Group. The rate of 6.5% will apply to any new Executive Directors so that the rate is in line with the majority of our salaried colleagues therefore ensuring the business is fully aligned with the provisions of the Code. Board leadership and Company purpose Read moreLong-term value and sustainability 92, 93Culture 92Shareholder engagement 92, 34Other stakeholder engagement 92, 93, 32-34Conflicts of interest 93Division of responsibilitiesRole of the Chair 96Division of responsibilities 96Non-Executive Directors 96Independence 101Composition, succession and evaluationAppointments and succession planning 105, 106Skills, experience and knowledge 88, 89, 91Length of service 91Evaluation 102, 103Diversity 91, 101Audit, risk and internal controlCommittee 107Integrity of financial statements 109Fair, balanced and understandable 112Internal controls and risk management 110External auditor 112Principal and emerging risks 72 to 85RemunerationPolicies and practices 119 to 139Alignment with purpose, values and long-term strategy 119Independent judgement and discretion 123 88
Board of Directors
Chair
Non-Executive Directors
ian Burke
chair
Dennis Millard
Sharon Flood
Stanislas Laurent
Susan Dawson
peter pritchard
Mike iddon
Deputy Non-executive chair
and Senior independent
Non-executive Director
independent
Non-executive Director
independent
Non-executive Director
Zarin patel
independent
Non-executive Director
Non-executive Director
executive officer
independent
group chief
chief Financial officer
appointment to the Board
appointment to the Board
appointment to the Board
appointment to the Board
appointment to the Board
appointment to the Board
appointment to the Board
appointment to the Board
2020
2014
2017
2017
2021
2018
2018
2016
current roles
current roles
current roles
current roles
current roles
current roles
current role
current roles
Chair of Seraphine Group Plc
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 Cambridge Council
Fellow of Chapter Zero
past roles
past roles
past roles
Member of the Board of Governors
of Birmingham City University
Senior Independent Director
of Superdry Plc
Non-Executive Chair
of Studio Retail Group Plc
Non-Executive Chair of Watches
of Switzerland Group Plc
Non-Executive Senior Independent
Director of intu properties Plc
Chair and Chief Executive Officer
of Rank Group Plc
Chief Executive Officer
of Holmes Place Health Clubs
Chief Executive Officer of
Thistle Hotels Plc
Chair of Halfords Plc
Senior Independent Director
of Debenhams Plc
Chair of Connect Group Plc
Chair of Audit at Shelter
Senior Independent Director
of Premier Farnell Plc
Senior Independent Director
of Xchanging Plc
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
Partner at Highland Europe (Growth
equity) and Non-Executive Director
at various portfolio companies
of the Audit and Risk Committee
College of Veterinary Surgeons
of Anglian Water Services Limited
(RCVS)
Non-Executive director and Chair
Council member of the Royal
Group Chief Executive Officer
Chief Financial Officer
Non Executive Director and Audit
Committee Chair of Wickes Group
Plc
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
Member of Chapter Zero
Member of Women on Boards
past roles
President and CEO
of Photobox Group
COO of AOL Europe
past roles
past roles
past roles
past roles
Dean of the Institute of Veterinary
Joined Pets at Home as
Chief Financial Officer of New Look
Science at the University of
Commercial Director in 2011
from 2014-2016
Independent member of the
Audit and Risk Committee of
John Lewis Partnership Plc
Liverpool
Chief Financial Officer of the BBC
Member of the Veterinary
Chief Operating Officer of The
Grass Roots Group Plc
and became Chief Executive Officer
of the Retail business in 2016
Products Committee
Adviser to the Antimicrobial
Resistance and Healthcare
Associated Infections Committee
for the Department of Health
Senior commercial and
management roles at Asda,
J Sainsbury Plc, Iceland Food,
Marks & Spencer Plc and
Wilkinson Hardware Stores
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
Chair of Vet Partners Holdings Ltd
Non-Executive Director of Exel Plc
contribution to the Board
contribution to the Board
contribution to the Board
contribution to the Board
contribution to the Board
contribution to the Board
contribution to the Board
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.
Wide ranging public company
experience with retail, strategic
and financial expertise. Dennis
is also a Chartered Accountant
and holds an MBA.
Retail, finance and public
company experience. Sharon
is also a Chartered Management
Accountant.
Entrepreneurial background
with digital and technology
experience.
Wide ranging financial and
commercial expertise. Zarin is
also a Chartered Accountant.
Considerable veterinary experience
Significant retail background
and expertise on the training and
and long-term operational
wellbeing of vets.
experience across Pets at Home.
Financial knowledge and
retail industry expertise.
committees
N e
committees
N a r e
committees
N a r e
committees
N a e
committees
a r N e
committees
N r e
committees
e
committees – Key
N Nomination and Corporate Governance a Audit and Risk r Remuneration e ESG (Environmental, Social and Governance) Chair of Committee
Pets at Home Group Plc Annual Report & Accounts 2022
StrateGic rePort
goVerNaNce
Financial StatementS
89
Executive Directors
ian Burke
chair
Dennis Millard
Sharon Flood
Stanislas Laurent
Zarin patel
Susan Dawson
peter pritchard
Mike iddon
Deputy Non-executive chair
independent
independent
and Senior independent
Non-executive Director
Non-executive Director
independent
Non-executive Director
independent
Non-executive Director
group chief
executive officer
chief Financial officer
Non-executive Director
appointment to the Board
appointment to the Board
appointment to the Board
appointment to the Board
appointment to the Board
appointment to the Board
appointment to the Board
appointment to the Board
2020
2014
2017
2017
2021
2018
2018
2016
current roles
current roles
current roles
current roles
current roles
current roles
current role
current roles
Chair of Seraphine Group Plc
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 Cambridge Council
Fellow of Chapter Zero
Partner at Highland Europe (Growth
equity) and Non-Executive Director
at various portfolio companies
Non-Executive director and Chair
of the Audit and Risk Committee
of Anglian Water Services Limited
Council member of the Royal
College of Veterinary Surgeons
(RCVS)
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
Member of Chapter Zero
Member of Women on Boards
Group Chief Executive Officer
Chief Financial Officer
Non Executive Director and Audit
Committee Chair of Wickes Group
Plc
past roles
past roles
past roles
Member of the Board of Governors
Senior Independent Director
Chair of Audit Committee
of Birmingham City University
of Superdry Plc
at Network Rail
Non-Executive Chair
of Studio Retail Group Plc
Non-Executive Chair of Watches
Chair of ST Dupont S.A.
of Switzerland Group Plc
Group Chief Financial Officer
Non-Executive Senior Independent
Chair of Halfords Plc
Director of intu properties Plc
Senior Independent Director
at Sun European
Finance Director
Chair and Chief Executive Officer
of Debenhams Plc
at John Lewis Department Stores
Chair of Connect Group Plc
Chair of Audit at Shelter
of Rank Group Plc
Chief Executive Officer
of Holmes Place Health Clubs
Chief Executive Officer of
Thistle Hotels Plc
Senior Independent Director
of Premier Farnell Plc
Senior Independent Director
of Xchanging Plc
Chair of Vet Partners Holdings Ltd
Non-Executive Director of Exel Plc
past roles
President and CEO
of Photobox Group
COO of AOL Europe
past roles
past roles
past roles
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
Dean of the Institute of Veterinary
Science at the University of
Liverpool
Member of the Veterinary
Products Committee
Adviser to the Antimicrobial
Resistance and Healthcare
Associated Infections Committee
for the Department of Health
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 & Spencer Plc and
Wilkinson Hardware Stores
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
contribution to the Board
contribution to the Board
contribution to the Board
contribution to the Board
contribution to the Board
contribution to the Board
contribution to the Board
Wealth of experience from
the leisure and retail sectors.
Wide ranging public company
Retail, finance and public
experience with retail, strategic
company experience. Sharon
Entrepreneurial background
with digital and technology
Ian has significant prior experience
and financial expertise. Dennis
is also a Chartered Management
experience.
Wide ranging financial and
commercial expertise. Zarin is
also a Chartered Accountant.
Considerable veterinary experience
and expertise on the training and
wellbeing of vets.
Significant retail background
and long-term operational
experience across Pets at Home.
Financial knowledge and
retail industry expertise.
is also a Chartered Accountant
Accountant.
of participation in audit and
remuneration committees.
committees
N e
committees – Key
and holds an MBA.
committees
N a r e
N Nomination and Corporate Governance a Audit and Risk r Remuneration e ESG (Environmental, Social and Governance) Chair of Committee
committees
N a r e
committees
N a e
committees
a r N e
committees
N r e
committees
e
Pets at Home Group Plc Annual Report & Accounts 2022
90
Governance at a glance
Total Board
meetings
Total Committee
Meetings
Formal investor
updates
Final dividend
per share
8
13
6
7.5p
Board and governance
changes throughout
the year
– Appointment of Lyssa McGowan
as the new Group CEO with
effect from 1 June 2022;
Zarin Patel appointed as the
Chair of the Audit Committee
from May 2021;
The addition of Zarin Patel as a
member of the Remuneration
Committee and the ESG
Committee;
–
–
– Overhaul of the Group’s pet
audit system, which tracks
pet welfare and insider processes;
– Updates to the Group’s
–
–
Supplier Code of Conduct;
Introduction of a new Human
Rights Policy, new Diversity
and Inclusion Policy, new
Raw Materials Policy and
a new Environment Policy; and
Establishment of the Pet Care
Forum, a non-operational
committee to sit between the
Retail Executive Management
Team and the Vet Group
Executive Management
Team to aid the Group’s
strategic direction.
Key decisions
made throughout
the year
–
The selection and appointment
of the new Group CEO;
– Approval of the Group’s
Capital Allocation Policy;
– Approving CAPEX spend in
relation to key strategic projects
such as the warehouse system
for the new Distribution Centre
and for the end to end supply
chain transformation project;
– Approval of dividend payments
and RNS announcements;
– Consideration of the Group’s
strategy and approval of
recommendations in relation
thereto, for example the
Group’s approach to M&A; and
– Consideration and approval
of the Group’s financing
arrangements.
How the Board is spending
its time through the year*
n Financial reporting
and performance
n Governance, including
shareholder engagement
n Risk management
and internal controls
n Project approvals
n Leadership culture and
people development,
including succession
n Strategic matters
20%
20%
10%
5%
20%
25%
* Please note that the percentages above are based
on an estimate of Board time spent during the year.
Pets at Home Group Plc Annual Report & Accounts 2022
BoardTime StrateGic rePort
goVerNaNce
Financial StatementS
91
Pets at Home Group Plc – Board Skills matrix
Director
Pet Owner
expertise
Accounting, finance and audit
Risk Management
Regulatory
Governance
Corporate Transactions
International (running a non UK Business)
General Management (CEO)
People and culture
General Retailing Experience
Customer Service and
Communications Experience
On-line Retailing Experience
Marketing/Branding
General Services
Veterinary
Charity/Social Purpose
Data
IT and Technology
competencies
Strategic Leadership
Vision & Mission
Transformation Leadership
Chair of Plc Board
Chair of Plc Board Committee
e
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Board
by tenure
Board
by age
Board
by Gender
Balance of the Board
(exec/non-exec)
n under 1 year
n 1-3 years
n 3-8 years
n 8+ years
0%
25%
62.5%
12.5%
n 50-55
n 56-60
n 61-65
n +66
12.5%
50%
25%
12.5%
n 3 Females
n 5 Males
37.5%
62.5%
n 2 Executive
Directors
n 6 Non-Executive
Directors
25%
75%
Pets at Home Group Plc Annual Report & Accounts 2022
92
leadership and purpose
Principal governance
activities during the
financial year
2022 Board considerations
During the year the Board spent its time considering a wide
range of matters, including:
– Development of the Group’s strategic plan;
– Overall performance of individual business functions;
– COVID-19 matters, Brexit, the Ukraine conflict and the cost
of living crisis;
– Budgets and long-term plans for the Group;
– Risk management and controls, including reputation
–
risk and corporate governance;
Financial statements, announcements and financial
reporting matters;
Talent, capability and succession planning matters;
– Competitor and customer updates;
–
– Reviewing Committee reports;
– Approving significant items of capital expenditure
and contracts requiring Board approval under the
Board’s reserved matters;
– Group culture, behaviours and results from the
–
colleague listening surveys;
Shareholder feedback and reports from brokers
and analysts;
– Regulatory and corporate governance updates;
– Approval of the Group’s financing arrangements;
– CEO and Executive Management Team succession
and talent development;
– Board evaluation; and
– Key strategic projects and priorities across the Group.
Board evaluation and ceo succession
As noted earlier, the CEO succession planning and process
has been a critical activity this year, with further detail set out
on page 105. In addition, the Board has spent valuable time on
the external Board evaluation, full details on this are included
on pages 102 and 103.
engagement
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 2021
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.
Pets at Home Group Plc Annual Report & Accounts 2022
The We C.A.R.E. survey results indicated that colleague
engagement remained high. The Joint Venture Council
met on various occasions throughout the year to ensure that
our Joint Venture Partners continue to have a voice around
the table. The Joint Venture Council also met with the Board.
The Executive Management Team listening forums, ‘Tuned In’,
have again provided useful insight this year and external
vehicles (such as Glass Door and Indeed) 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.
Listening sessions, with a cross section of colleagues, have been
attended by Sharon Flood (designated Non-Executive Director
for colleague engagement), Dennis Millard 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 for the Board and,
consequently, we will allocate Board time to the assessment
and monitoring of the Group’s culture to ensure that it remains
aligned with the Group’s purpose, values and strategy. Further
details are contained on page 92 and page 135 of the Directors’
Remuneration Report.
Shareholder and stakeholder engagement
The Board’s primary role is to promote the success of the
Company and the interests of all stakeholders. The Board is
accountable to shareholders for the performance and activities
of the Group. The Board is responsible for ensuring the
Company maintains a satisfactory dialogue with shareholders.
The Board believes it is important to explain business
developments and financial results to the Company’s
shareholders and to understand any shareholder concerns.
We communicate with shareholders on a regular basis.
The Board communicates with its shareholders in respect
of the Group’s business activities through its Annual Report,
yearly and half yearly announcements and other regular trading
statements. This information is also made publicly available via
the Company’s website.
During the year, the Company met regularly with analysts
and institutional investors and such meetings will continue.
The Group Chief Executive Officer and Group Chief Financial
StrateGic rePort
goVerNaNce
Financial StatementS
93
Officer have lead responsibility for investor relations. The Chair
also met with shareholders during the year. 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.
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 32 to 34.
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, in line
with the Board’s aim to generate and preserve long-term value.
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. The Board has considered risks
and opportunities to the business throughout the year during
the course of Board meetings.
Ensuring that we have the correct governance framework
in place for key strategic projects is critical. Details of the
governance framework for two of the Group’s key strategic
projects is set out on page 94.
Board meetings and attendance
In this financial year, the Board met formally eight times and
attended an annual strategy day meeting. Ad hoc meetings
of both the Board and Committees were arranged to deal with
matters between scheduled Board meetings as appropriate.
Board meetings were preceded by Committee meetings with
the meetings lasting the majority of the day in most cases.
Topics for the Board meetings are determined at the beginning of
the year and new items are added to this as and when appropriate
in consultation with the Board and Executive Management Team.
Number of meetings1
Director
Ian Burke (Chair)
Dennis Millard (Deputy Chair)
Peter Pritchard2
Mike Iddon2
Sharon Flood
Stanislas Laurent
Susan Dawson
Zarin Patel
Karen Whitworth
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.
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.
Remuneration
Committee
Audit and Risk
Committee
Nomination
and Corporate
Governance
Committee
ESG
Committee
3
–
3/3
–
–
3/3
–
3/3
3/3
–
5
–
5/5
–
–
5/5
5/5
–
5/5
1/1
1
1/1
1/1
–
–
1/1
1/1
1/1
1/1
–
4
4/4
4/4
4/4
–
3/4
4/4
4/4
3/3
–
Board
8
8/8
8/8
8/8
8/8
8/8
8/8
8/8
8/8
2/2
1 Excludes the strategy day and ‘Welcome to our world’ days, 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 Chair. 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.
Pets at Home Group Plc Annual Report & Accounts 2022
94
leadership and purpose continued
case Study
Polestar
The Polestar portfolio (Portfolio) is a key strategic initiative
for the Group and will enable a joined up pet care
experience that is easy, convenient and removes friction for
customers using our pet care services. This will be achieved
by the delivery of a digital pet care platform that will enable
Group-wide strategy and benefits.
Governance for the Portfolio was established under the
guidance of Deloitte and is focused on delivering both the
new digital technology solutions but also building in-house
capability to ensure that the lifetime and benefits of the
pet care platform outruns the portfolio of works. The
team delivering the Portfolio regularly reports to a
steering committee of key individuals from the Executive
Management Team. The Board has received regular updates
as part of the ‘Transformation Programme’ time allocated
at Board meetings and time has also been allocated during
Board meetings to discuss specific issues, as required on
the Portfolio.
The Portfolio is building Agile capability in order to deliver
in a way that maximises the value to our customers and
colleagues. This is a distinct shift from more traditional
delivery methods and provides the opportunity for the
case Study
Project Spice
Project Spice is the project relating to the Group’s new
Distribution Centre in Stafford. A strong governance
structure was established for the project at the outset.
A steerco was set up with key colleagues to run and
manage the project. Detailed programme plans were
developed for all different aspects of the project. The plans
are reviewed, monitored and updated at regular intervals.
Group Internal Audit are embedded in the project and
undertook an initial governance review. All recommended
action was implemented. A later deep dive governance
review was also carried out by Group Internal Audit.
All outputs from the deep dive were built into
the programme structure.
Portfolio to test different approaches and improve our
performance over the lifecycle of the Portfolio, providing
the opportunity to scale this approach across the Group
or transfer it into other projects.
Group Internal Audit were embedded into the Portfolio
to provide project management, Board and Audit and
Risk Committee assurance over delivery. The Group has
a co-source agreement with PwC to ensure that project
assurance teams have the required skills and expertise
to undertake the audits. The Portfolio’s first audit was
undertaken by Group Internal Audit in Autumn 2021
and focussed on: 1) governance; and 2) Agile delivery.
Both reviews were scoped based on areas the Portfolio
wanted additional assurance and support on. The audit
was conducted within existing structures to enable Portfolio
work to continue alongside it. There were no significant
or high-risk findings from the audit and all actions were
completed within the tolerances of the agreed timescales.
Improvements that had been made since the Portfolio
was established were recognised. The openness and
collaboration shown by the Polestar team during the
review and their willingness to embrace continuous
improvement through impartial support were also noted.
The Executive Management Team and Board have been
updated at regular intervals on progress, including detailed
updates on the specific workstreams. Spend at the levels
required by the Board’s reserved matters and any changes
to budget have been approved by the Board (for example,
changes due to steel and raw material cost fluctuations).
The Executive Management Team also delegated its
authority to the project steerco to approve contracts of
a value up to £1m, to ensure that the steerco has the
required authority to make the decisions needed, when
they needed to. Contracts for key systems to be used in
the new Distribution Centre have been presented to the
Board for discussion and approval as needed.
Pets at Home Group Plc Annual Report & Accounts 2022
StrateGic rePort
goVerNaNce
Financial StatementS
Division of responsibilities
95
Governance Structure, Roles/Responsibilities,
Board Committees
Governance structure
The Group’s governance structure in respect of the Board and Committees is as detailed in the diagram below.
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 99.
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
Pet Care
Forum
Retail Executive
Management Team
Vet Group Executive
Management Team
Investment
Committee
Health and Safety
Committee
Pension
Committee
People
Committee
Pets at Home Group Plc Annual Report & Accounts 2022
96
Division of responsibilities continued
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 Chair 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/division-of-responsibilities-for-the-ceo-and-the-chairman/.
Board responsibilities
role
main responsibilities
chair of
the Board
Provides leadership to, and manages, the Board of Directors;
–
– Acts as a direct liaison between the Board and the management of the Company, through the Group
–
–
Chief Executive Officer;
Ensures that the Directors are properly informed and that sufficient information is provided to enable
the Directors to form appropriate judgements;
In conjunction with the Group Chief Executive Officer and Company Secretary, develops and sets the
agendas for meetings of the Board;
– Recommends an annual schedule of the date, time and location of Board and Committee meetings; and
–
Ensures effective communications with shareholders and other stakeholders.
Group chief
executive
officer
– Responsible for the day-to-day management of the Company;
–
Together with the Executive Management Team, is responsible for executing the strategy, once it has
been agreed by the Board;
– Creates a framework that optimises resource allocation to deliver the Group’s agreed strategic objectives
–
–
over varying timeframes;
Ensures the successful delivery against the financial business plan and other key business objectives,
allocating decision making and responsibilities accordingly;
Together with the Executive Management Team, identifies and executes new business opportunities and
potential acquisitions or disposals; and
– Manages the Group with reference to its risk profile in the context of the Board’s risk appetite.
Senior
independent
Director
– An Independent Non-Executive Director;
Provides a sounding board for the Chair;
–
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
Group chief
Financial
officer
company
Secretary
Provide constructive challenge to the Executive Management Team;
–
– Help develop proposals on strategy;
–
– Monitor performance reports;
–
Scrutinise management’s performance in meeting agreed goals and objectives;
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.
Ensures that Board procedures are followed;
–
– Oversees governance matters;
–
Ensures that information flows between the Board and its Committees and with the Executive
Management Team; and
Provides administrative support to the Board.
–
Pets at Home Group Plc Annual Report & Accounts 2022
StrateGic rePort
goVerNaNce
Financial StatementS
97
Board committees
The Board has established four Board Committees: an Audit and Risk Committee, a Nomination and Corporate Governance
Committee, a Remuneration Committee and an ESG Committee.
Each Committee has written terms of reference which are approved by the Board and subject to review each year. No changes
were deemed necessary to the terms of reference for the Committees this year.
The terms of reference 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
Key objectives
main responsibilities / duties
audit and risk
committee
To assist the Board in fulfilling
its corporate governance and
overseeing responsibilities in
relation to each Group entity’s
financial reporting, internal
control system, risk
management system and
internal and external
audit functions.
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.
– 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 understandable for shareholders;
– Assessment and advice on risk management system;
– Review and advise on adequacy and effectiveness of the
Company’s internal financial and regulatory 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 and 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.
Pets at Home Group Plc Annual Report & Accounts 2022
98
Division of responsibilities continued
Key objectives and responsibilities of the Board committees continued
Key objectives
main responsibilities / duties
eSG
committee
To oversee and monitor the
Group’s social value strategy,
Our Better World Pledge
–
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;
– Approving projects developed in response to implementation of
Our Better World Pledge;
– Receiving regular reports from the chair of each management
–
team tasked with implementing Our Better World Pledge within
the areas outlined in bullet two above;
Ensuring 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;
– Monitoring, reviewing and considering all recommendations in
response to ESG issues raised and reviewing the execution
and implementation of plans previously approved by
the Committee;
– Monitoring, reviewing and considering stakeholder engagement
in ESG activities and reviewing key external disclosures; and
– Approving all ESG reporting.
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), Director 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.
In addition, during the year, the Pet Care Forum was established
(to commence meetings in the new financial year) as a non-
operational committee to sit between the Retail Executive
Management Team and the Vet Group Executive Management
Team with the aim of enhancing the Group’s overarching
strategic vision.
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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, Jane Balmain and David Robinson. 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. The Group’s wellbeing and
engagement manager also attends the meetings. 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
The People Committee and Pension 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 Executive Management Team
or senior managers within our business.
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. The Board has carried
out a robust assessment of the Group’s emerging and principal
risks, including those that would threaten its business model,
future performance, solvency, liquidity or reputation as detailed
on pages 72 to 85. The Board delegates to the Executive
Management Team the responsibility for designing, operating
and monitoring these systems. The systems are based on a
process of identifying, evaluating and managing key and
emerging risks, and include the risk management processes
set out on page 110 of the Audit and Risk Committee Report.
The systems of internal control were in place throughout the
period and up to the date of approval of the Annual Report.
The systems of internal control are designed to manage rather
than eliminate the risk of failure to achieve business objectives.
They can only provide reasonable and not absolute assurance
against material errors, losses, fraud or breaches of law and
regulations. A number of internal controls operate across the
business. The key controls the business relied upon during
the year are set out below:
–
The annual Group-wide strategic review of the existing
five-year strategic plan took place in November 2021 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 24 March 2022.
– 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 finance team
and reviewed by the Group Chief Financial Officer.
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100
Division of responsibilities continued
– 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 111.
– 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 pages 107 to 109.
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. Following a review of modern
slavery issues across the Group this year, the whistleblowing
procedure was updated to cover the supply chain. This change
was implemented via the Supplier Code of Conduct.
A copy of the Group’s Code of Ethics and Business Conduct is
published on the Group’s website https://investors.petsathome.
com/responsibility/policies-and-procedures/code-of-ethics-and-
business-conduct. This policy and the procedures in place to
deal with concerns raised under the policy were reviewed by
the Audit and Risk Committee during the year.
Share dealing code
The Company has adopted a share dealing code in relation
to its shares. The share dealing code applies to the Directors, its
other Persons Discharging Managerial Responsibility and certain
colleague insiders of Group companies and they are responsible
for procuring the compliance of their respective connected
persons with the Company’s share dealing code.
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.
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composition, succession and evaluation
101
Board balance and independence
The 2018 Code recommends that at least half the board of
directors of a UK-listed company, excluding the chair, 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 Chair. The Directors’
biographies are contained on pages 88 and 89. 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. The skills matrix for the Board on page 91
demonstrates the Board’s breadth of experience.
More than half of the Directors are considered
to be independent in accordance with the 2018 Code.
In addition, the 2018 Code recommends that, on appointment,
the chair 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.
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. 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.
Board effectiveness
The time commitments of each of the Non-Executive Directors
is considered regularly and reviewed annually. The Board is
satisfied that the Chair and each of the Non-Executive Directors
are able to devote sufficient time to the Group’s business.
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 Executive Management Team
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,
an ethos which applies across the business. The Board continues
to ensure that it maintains an appropriate balance through a
diverse mix of experience, background, skill, knowledge and
insight, to further strengthen the diversity and experience
already on the Board. Significant work has been undertaken
by the Group this year on diversity and inclusion, as detailed
on page 106 and in the Social Value Report.
The Board was pleased to meet the Parker Review targets on
ethnic diversity again this year.
The Board was also pleased to see improvements in the Group’s
rankings in the FTSE Women Leaders Report on gender balance
this year. Overall, the Group ranked 22nd in the FTSE 250 group
which was an improvement from 83rd in 2021. In addition,
the Group ranked 5th in the Retail sector, which was an
improvement from 10th in 2021.
The Group is pleased to report the following female
representation at the levels noted below:
Executive Management Team
Directly reporting to the
Executive Management Team
appointment terms and election of Directors
All Directors have service agreements or letters of
appointment and the details of their terms are set out in
the Directors’ Remuneration Report on pages 125 to 126.
The service agreements and letters of appointment are available
for inspection at the Company’s registered office during normal
business hours.
Combined Executive
Management Team
and direct reports
Board representation
30%
41.3%
39.3%
37.5%
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 Chair will liaise with Non-Executive
Directors to assess and review individual contributions to the
Board and performance over the financial period. The skills
and experience which each Non-Executive Director brings to
the Board are detailed on pages 88, 89 and 91 and why
their contribution is, and continues to be, important to
the Company’s long-term sustainable success.
Lyssa McGowan’s appointment further enhances the above
improvements. The Group is well positioned to achieve the
new recommendations set by the FTSE Women Leaders Report
for 2025, including 40% female representation on the Board
and female representation in one of the most senior positions
in the Group.
Succession
The Board has continued to focus on succession planning and
Group talent development this year. Further detail of the work
undertaken by the Nomination and Corporate Governance
Committee in this area is included on page 106.
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102
Board evaluation
The 2018 Code requires the Board to undertake
‘a formal and rigorous annual evaluation of the
performance of the Board, its committees, the
chair and individual directors.’
In FTSE 350 companies, the chair should consider having an
externally facilitated board evaluation at least every three years.
With the Group’s last external evaluation taking place in 2019,
an external evaluation was due this year. MWM Consulting
(MWM) were appointed to undertake the review. A summary
of the process and their findings is set out below.
MWM were asked to undertake the review in spring 2022 at
an important time for the Group. Since the previous review, the
Group has seen substantial change to key Board roles, including
a change in chair, Peter’s CEO retirement being announced in
2021 and Lyssa joining as CEO Designate in April 2022. Zarin
also joined the Board as Audit Committee Chair and Sharon
had taken over chairing the Remuneration Committee. In
addition, there had also been the considerable impact of COVID
on both the way the Board has operated and the business itself.
The evaluation undertaken by MWM aimed to provide guidance
and potential areas for the Board to focus on.
Process
october–november 2021
January–march 2022
Questionnaire and individual Board member
discussions
All Board members completed a questionnaire and individual
discussions took place between each Board Member and MWM.
appointment
and briefing
The Nomination Committee
considered the appointment and
briefing for the external Board
Evaluation. MWM were appointed.
The Chair, Dennis Millard and Peter
Pritchard also met with MWM to
shape the evaluation, provide
background and ensure it was
tailored to the Board’s
requirements.
march 2022
evaluation
and report
Discussion with
the Board and
committee chairs
MWM’s report was discussed at
the March 2022 Board meeting.
MWM joined the Board meeting
to present their findings.
Discussion on the key conclusions
from the report took place with
appropriate individuals.
agreed action plans
for 2022/23
The key areas for improvement
were noted. Discussion on ideas
for implementing changes
to address the points raised
were held.
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issues considered
The discussions carried out by MWM explored the
effectiveness of the Board on a range of issues including:
– Alignment around business strategy;
– Clarity of the role of the Board in delivering against
that strategy;
– How effectively the Board provides stewardship and
adds value, in particular focusing on:
– How well the Board is led;
– How effectively it provides constructive challenge to
the Executive;
– How well it drives accountability around performance
and delivery;
– Effectiveness of the Committees; and
– Individual and collective capabilities of the Board,
including any potential gaps.
Summary of key conclusions
Overall, the Board was considered to be an aligned, well-
managed team with good dynamics, that provides effective
governance and strategic added value to the business. MWM
considered that there is a clear sense of a positive trajectory
with improvement in recent years across multiple dimensions.
At the heart of this are:
–
the Chair’s strong leadership which has reset the tone and
content of Board discussions, focusing more on strategic
issues and encouraging open debate and constructive
challenge;
Strong foundations of governance, reasonable sector
experience, financial acumen, and wider Board insights; and
–
– Collegiate, trust-based relationships between the Non-
Executive Directors and the Executive Directors and a high
level of engagement from the Non-Executive Directors.
The evaluation concluded that the Board fulfils its objectives
efficiently and effectively.
areas for improvement
The following areas were highlighted by MWM as areas
for improvement: 1) the Board could be less transactional, with
more visits, meetings, time together and off agenda discussions;
2) a more strategic agenda would be beneficial, with debate on
more radical and bolder issues, and more Vet Group discussion;
3) additional interaction with shareholders (ESG being a good
opportunity for this); 4) succession planning in relation to the
future needs of the business should be a focus for the
Nomination Committee, for example ensuring that next time
CEO succession is considered, that the Board has a strong slate
of internal options; and 5) the Committees are a work in
progress, as is common. The Nomination Committee is being
reset and a number of the Directors had noted that it would be
useful for the Chair to be a more active contributor in certain
committee meetings.
Action plans to address the above points are under way
following discussion of the issues at the Board meeting
in March 2022.
Pets at Home Group Plc Annual Report & Accounts 2022
104
nomination and corporate Governance
committee report
What we will do in 2023
n Continue to assess Board composition and how it may
be enhanced.
n Launch a review into the frequency and focus
of meetings of the Committee.
n Review the Committee’s corporate
governance obligations.
n Implement further reviews and assessment of succession
planning, talent mapping and development plans.
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 regard 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 Zarin Patel (who replaced Karen
Whitworth on 20 May 2021). Each member is an Independent
Non- Executive Director. The Nomination and Corporate
Governance Committee meets not less than once a year.
The following Directors served on the Nomination and
Corporate Governance Committee during the financial year:
Member
Period from:
To:
Ian Burke (Chair)
21 May 2020
To date
Dennis Millard
Sharon Flood
Stanislas Laurent
Susan Dawson
Karen Whitworth
Zarin Patel
18 February 2014
To date
25 May 2017
25 May 2017
12 July 2018
To date
To date
To date
9 July 2020
20 May 2021
20 May 2021
To date
There was one formal Committee meeting held in the financial
year and members’ attendance was as shown in the table above.
ian Burke
chair, nomination committee
Who is on the nomination and
corporate Governance committee?
Member
Ian Burke (Chair)
Dennis Millard
Sharon Flood
Stanislas Laurent
Susan Dawson
Zarin Patel
No. of
meetings
1/1
1/1
1/1
1/1
1/1
1/1
What we did in 2022
n Assessed Board composition and how it may
be enhanced.
n Conducted and reviewed the Board evaluation
and effectiveness survey.
n Reviewed the independence of the
Non-Executive Directors.
n Reviewed and considered Directors’ conflicts of interest,
including issues relating to new Non-Executive Director
roles which current Directors wished to pursue.
n Reviewed the time commitment and length of service
of the Non-Executive Directors.
n Recommended the appointment of Lyssa McGowan
as Group Chief Executive Officer.
n Reviewed and considered executive succession plans.
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How the
Nomination and
Corporate Governance
Committee discharged
its responsibilities
in FY22
Board appointments and resignations
On 3 November 2021, Peter Pritchard announced his intention
to retire from his role as Group Chief Executive Officer taking
effect on 31 May 2022. Peter joined the Group in 2011 as
Commercial Director and moved to the role of CEO of Retail
in 2015, before taking on the role of Group Chief Executive
Officer on 27 April 2018.
During his time with the Group, Peter has overseen the
development of our digital strategy and the launch and
development of our VIP club, along with the strategic review
and recalibration of the Vet Group. Peter also led us through
the COVID-19 pandemic and has overseen the establishment of
our sourcing office in Hong Kong. Having completed everything
that he set out to achieve in 2018, Peter believes this is the right
time to take a well-earned rest and to hand over the reins to a
new leader who will continue this journey. I would like to take
this opportunity to thank Peter for his valuable contribution to
Pets at Home during his time.
Following Peter’s announcement, we appointed an independent
executive search agency Spencer Stuart & Associates Ltd
(Spencer Stuart), to support in the search for a new Group Chief
Executive Officer. Spencer Stuart conducted a comprehensive
search and considered a number of external candidates along
with internal candidates. The list of candidates was shortlisted,
and the final two candidates presented to the Board addressing
their ideas for the business for the years ahead. We also
considered a detailed assessment report for each candidate
prepared by Spencer Stuart.
The Board had a thorough discussion about the merits of
both candidates relative to the challenges for the business
in the years ahead and Lyssa McGowan was selected to succeed
Peter as Group Chief Executive Officer with effect from 1 June
2022. Lyssa was appointed to the Board as CEO Designate on
25 April 2022, prior to her appointment as CEO on 1 June 2022.
Lyssa is the outgoing Chief Consumer Officer at Sky UK Limited,
with responsibility for the Consumer business serving more than
10 million customers and achieving over $10bn of revenue.
Over the last 11 years, Lyssa has led numerous business units
to growth within Sky, both organically and through M&A.
She has broad experience of managing product, service and
subscription-led businesses, leveraging deep capabilities in new
product and service innovation, omnichannel development,
marketing and customer experience excellence, and data and
digital transformation. Lyssa was a non-executive director of
the Board of Wm Morrison Supermarkets Plc until its recent
sale to CD&R.
In Lyssa’s role as Group CEO, she will be responsible for
delivering the Group’s strategic focus and a summary of
the parameters and expectations of Lyssa’s role are in the
table below.
ceo responsibilities to Deliver the Strategic Focus
Provide visible, accessible leadership, inspiring and
influencing followership and alignment down through the
organisation behind an ambitious vision without sacrificing
the core purpose and values.
Deliver the transformational programme that changes
mindsets and behaviours, embeds the integrated channels
to market and customised customer solutions, delivers
the management information, processes, systems and
governance for a complex business, pricing and
operational model.
Develop a more comprehensive pet ecosystem and generate
significant annual revenue growth and shareholder value.
Mature the integrated pet care services proposition to
maximise potential value in the business and combat
increasing competitor activity.
Jane Balmain, Vet Group COO, informed the Group of her
intention to retire from the business in the new financial year.
Jane led the successful turnaround of our veterinary operations
and, having achieved everything she set out to do, has decided
that the time is right to plan her retirement over the coming
months. Louise Stonier will be appointed as Jane’s successor
and will be appointed as Vet Group COO Designate from
30 May 2022, prior to her appointment as Vet Group COO
on 24 June 2022.
Louise is the longest serving director on the Executive
Management Team. She joined the business in 2004 as Legal
Director, before being appointed to Chief People and Legal
Officer in 2019, and to Chief People and Culture Officer in
2021. In her current role, Louise has been instrumental in
formulating Pets at Home’s values and behaviours, ensuring
its unique culture is embedded in decision making across the
Group, and also helped to launch the Group’s first social
value strategy, Our Better World Pledge. Louise has significant
experience across the Group, including an in-depth
understanding of our unique Joint Venture model. Her focus
on people and culture will provide a critical insight into the
opportunities and challenges facing our Partners and their
clinical teams. Jane will be supporting Louise over the coming
months to oversee a seamless transition.
In addition, as noted in last year’s Annual Report, Zarin Patel
joined the Board as Non-Executive Director on 14 April 2021.
Zarin was appointed as Chair of the Audit Committee on
20 May 2021, when Karen Whitworth stepped down. Zarin
is also a member of the Nomination Committee, Remuneration
Committee and the ESG Committee. Mike Iddon was appointed
as Audit Committee Chair and to the Board of Wickes Group
Plc as a Non-Executive Director on 28 April 2021. Louise Stonier,
Chief People & Culture Officer, was appointed as Non-Executive
Director and Chair of the Remuneration Committee of
Hostmore Plc on 16 September 2021.
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106
nomination and corporate Governance
committee report continued
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.
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 101 of the
Governance Report.
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.
Board evaluation and effectiveness
The Board engaged MWM to undertake an independent
external evaluation of the Board and Board committee
performance and to identify areas where the performance
and procedures of the Board might be further improved.
Further detail on the Board evaluation process and outcomes
is set out on pages 102 and 103.
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 101
of the Governance Report.
For further information on Board composition, diversity and
independence, please see the Governance Report on page 101.
I will be available at the Annual General Meeting to answer
any questions on the work of the Nomination and Corporate
Governance Committee and I look forward to reporting on
further progress as we continue our work next year.
ian Burke
chair, nomination and corporate
Governance committee
25 May 2022
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107
Continued to monitor the process and controls around extending
financial support to Joint Venture veterinary practices, and the
recoverability of those loans and investments. We have also
continued to review whether the level of practice indebtedness,
or any other factors, infers additional control to the Group
of a practice, and whether this challenges the existing
accounting practices.
Reviewed the accounting treatment for Joint Venture veterinary
practices where the ‘A’ shares have been bought out by the Group.
Reviewed the accounting policy change and narrative disclosure
in relation to ‘Configuration or Customisation Costs in a Cloud
Computing Arrangement’ (IAS38 Intangible Assets), with
reference to the IFRS Interpretations Committee’s (‘IFRIC’)
interpretation as published on 27 April 2021.
Working with the ESG Committee, supported the development
of the Group’s scenario planning and reporting in relation to
Task Force on Climate-Related Financial Disclosures (‘TCFD’)
and the related considerations in the Group’s going concern
and longer-term viability assessment, including reviewing
the commitments published by the Group.
Reviewed the Department for Business, Energy, and
Industrial Strategy (‘BEIS’) corporate governance reform
agenda and commenced a related project to enhance
internal financial controls.
What we will do in 2023
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 understandable.
Continue to monitor emerging risks, in particular risks from the
Ukraine crisis, in relation to supply chains, cyber security and
date privacy. 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 projects,
in what is a key year for the delivery of our IT, distribution
and internal financial controls projects.
Continue to monitor emerging risks, in particular risks from
the Ukraine crisis, in relation to supply chains, cyber security
and data privacy, whilst maintaining 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 projects, in what is a key year for the delivery
of our IT, distribution and internal financial controls 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.
Continue to monitor the Group’s reporting in relation to TCFD.
Pets at Home Group Plc Annual Report & Accounts 2022
Zarin Patel
chair of the audit and risk committee
Who is on the audit and risk committee?
Member
Zarin Patel (Chair)
Sharon Flood
Dennis Millard
Stanislas Laurent
Karen Whitworth
No. of
meetings
5/5
5/5
5/5
5/5
1/1
What we did in 2022
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 understandable.
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 presence
of key risk factors such as climate change, current geopolitical
tensions including the situation in Ukraine, the continuing
impact of the pandemic, and inflationary pressures. As part of
this work, the carrying value of the goodwill balance has been
reviewed, as has the distributable reserves position prior to the
declaration of dividends.
Monitored the control environment of the Group including our
general risk management processes, including emerging and
evolving risks considering the presence of key risk factors as
highlighted above, as well as ongoing focus around pet welfare
protocols, and the controls and processes relating to the release
of key IT and distribution projects.
Reviewed the effectiveness of the Group’s whistleblowing
procedures, health and safety plans, and activities and
effectiveness of the 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 and
updates on thematic reviews from the FRC.
108
audit and risk committee report continued
introduction
This is my first report as Chair of the Audit and Risk Committee
(the Committee), having joined the Board in April 2021. 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 regarding 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.
We considered the BEIS consultation on restoring trust in audit
and corporate governance and we welcome some of the
proposed changes. We have commenced our internal financial
controls development programme, and we intend to develop
and publish our audit and assurance policy within the 2023
annual report. Working with the ESG Committee, the
Committee overseas reporting on TCFD.
During the year, the Committee met five 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.
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, considerable
experience in financial matters. Further details of the Committee
members and their experience can be found on pages 88 to 89.
The Chair 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 hold separate private sessions with the
internal auditor and the external auditor, to provide additional
opportunity for open dialogue and feedback without
management present.
Financial reporting and narrative reporting;
committee activities
The Committee’s role primarily covers the following areas:
–
– Ongoing viability;
– Risk management systems;
–
–
–
Internal controls;
Internal audit; and
External audit.
audit and risk committee meetings
The Committee met on five 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
Financial reporting
Risk management / internal control
Internal audit
External audit
may
• Review of the Annual Report and
• Review of development of the
Accounts for year ended 25 March 2021
Corporate Risk Register
• Review of Whistleblowing policy
• Review of Health and Safety reports
• Review of Tax policy
• Review of Treasury policy
• Review of goodwill impairment
• Review of supplier income
recognition policy
• Review of operating loan
provisioning policy
• Review of consolidation consideration
for Joint Venture Companies
• Review of disclosures in relation to
acquisitions and disposals
• Review of considerations of the Group’s
longer-term viability and going concern
• Review of FY22
Internal Audit
plan
• Review reports
on progress of
the Internal
Audit Plan
• Report on
Annual Financial
Statements and
external audit
• Review of policy
on non-audit fees
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Meeting
Financial reporting
Risk management / internal control
Internal audit
External audit
• Review reports
on progress of
Internal Audit
Plan
• Review
programme on
implementation
of internal audit
actions
• Review of FY21
external
consultancy and
professional
services spend
• Process to assess
external auditor
effectiveness
• Review reports
on progress of
Internal Audit
Plan and update
actions
• Report on Review
of Interim
Financial
Statements
• Approval of
external audit
strategy for the
year ended 31
March 2022
• Approval of
external audit fees
• Reviewed key
considerations
from the FRC’s
thematic reviews
• Assessed external
auditor
effectiveness as
appropriate
September
• Review of progress of subsidiary financial
statements for the year ended 25 March
2021
• Review of principal risks and the
related mitigation plans
• Review of new Risk Management
Framework to bring into line with best
practice
• Review of distribution centre project
governance
• Review update on UK corporate
governance and approval of the
internal financial controls project plan
• Review of Whistleblowing policy
• Review of Health and Safety reports
• Review progress on implementation of
Vet Group finance transformation
programme
• Review of principal risks and the
related mitigation plans
• Risk management review
• Review of Treasury policy
• Review of Whistleblowing policy
• Review of Health and Safety reports
• Review of progress on Vet Group
finance transformation
• Review of UK Visas and Immigration
november
• Review of the Interim Financial Statements
• Review of appropriateness and quantum of
Alternative Performance Measures
(‘APM’s’)
• 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
audit
joint venture companies
February
• Review of progress toward accounting
• Review of completeness of emerging
policy change in relation to the
‘Configuration or Customisation Costs in
a Cloud Computing Arrangement’ (IAS38
Intangible Assets) with reference to the
IFRS Interpretations Committee’s (‘IFRIC’)
interpretation as published on 27 April
2021
risks
• Update on cyber security and IT
resilience
• Review progress on implementation of
Vet Group finance transformation
programme
• Review reports
on progress of
Internal Audit
Plan including
Polestar, accounts
payable,
information
security, and food
quality
march
• Reviewed the accounting policy change in
relation to ‘Configuration or Customisation
Costs in a Cloud Computing Arrangement’
(IAS38 Intangible Assets), with reference
to the IFRS Interpretations Committee’s
(‘IFRIC’) interpretation as published on
27 April 2021
Financial statement reporting issues
The Committee considered several significant issues in the year, considering in all instances the views of the Company’s external
auditor. The Committee has assessed 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, and the application of the accounting policy
change in relation to the Configuration or Customisation Costs in a Cloud Computing Arrangement (IAS38 Intangible Assets)
IFRIC interpretation.
The Committee oversaw the TCFD reporting together with the ESG Committee and considered the impact of climate change on
the Group’s longer-term viability and carrying values. The Committee considered the following in making its assessment of the
reporting in the financial statements.
Pets at Home Group Plc Annual Report & Accounts 2022
110
audit and risk committee report continued
Issue
Nature of the risk
How the risk was addressed by the Committee
accounting policy
change in relation
to the configuration
or customisation
costs in a cloud
computing
arrangement (iaS38
intangible assets)
iFric interpretation
During the financial year, the Group updated its policy on
IAS38 Intangible Assets following the IFRIC interpretation
on accounting for Configuration or Customisation Costs
in a Cloud Computing Arrangement. As a result of the
Group’s change in accounting policy, the prior period
comparatives have been restated to derecognise previously
capitalised Software as a Service (‘SaaS’) related costs.
Where current year expenditure does not meet the
requirements to capitalise under the interpretation it
has been expensed.
carrying value of
goodwill and parent
company’s
investment in
subsidiaries
The Group holds a significant goodwill balance, and the
Company holds significant investments in subsidiary
companies. There are several factors that could impact on
the future profitability and cash flows of the business (e.g.
the ongoing impact of COVID-19, threat of competition,
changes in market behaviour, and changes in the broader
macro-economic environment including inflationary
pressures) 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.
The Committee reviewed management’s policy and process
for determining the items which fall within the scope of the
IFRIC interpretation, and scrutinised management’s approach
to the change in accounting policy. The Committee reviewed
the proposed financial disclosures and is satisfied that the
accounting policy and disclosure for cloud computing
arrangements is appropriate.
The Committee reviewed and challenged management’s
process for testing goodwill for potential impairment,
allocation of goodwill across cash-generating units, and
ensuring appropriate sensitivity analysis and disclosure.
This included challenging the key assumptions: principally
cash flow forecasts, growth rates and discount rates
and comparing the Group’s value in use to its market
capitalisation. This review considered the current geopolitical
tensions including the situation in Ukraine, the continuing
impact of the pandemic, energy prices, supply chain security,
and inflationary pressures 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.
To further strengthen our risk management approach the
Committee commissioned an independent review of our risk
management framework and risk culture to ensure they drive
value and meet the future requirements of our stakeholders.
Throughout the year we have improved our processes for
identifying and assessing current and emerging risks, and
identifying and reporting against key risk indicators, building
on our strong culture and behaviours framework.
We continue to align with the TCFD requirements for climate
related risks and opportunities.
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 key IT and distribution projects, as well
as cyber security.
The Committee also considered the Group’s approach to
building its financial internal controls capability, as good practice
with reference to the Department for Business, Energy, and
Industrial Strategy (‘BEIS’) consultation on reforming the UK’s
corporate governance, audit and reporting regime.
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 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 72 to 85.
The review includes the consideration of the potential ongoing
impact of COVID-19, the impact of wider macro-economic
factors including inflationary pressures, supply chain stability,
energy prices and geopolitical instability, and further operational
disruption on future cash flows, as well as the potential impact
of climate change as set out in our TCFD scenario analysis.
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 147 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 72.
The Group’s key risks and uncertainties are set out on
pages 72 to 85.
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internal audit
The Internal Audit function has a direct line of report into
the Committee and is an important part of the independent
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
operational
Work undertaken
• Project Spice (distribution centre), capital project assurance (Group). See case study on page 94
• Project Polestar (digital capability), capital project assurance (Group). See case study on page 94
• Project Apollo (Vet Group finance transformation), capital project assurance (Vet Group)
• Risk management framework (Group)
• Product quality processes, food (Retail)
• Product quality processes – non-food (Retail)
• Information security management framework (Group)
• Disaster recovery plans for principal systems (Group)
• Cloud strategy and management (Group)
• Data governance – follow up (Group)
• Brand and reputation (Group)
• Goods not for resale procurement strategy & framework (Group)
• Management of controlled drugs (Vet Group)
• Pet welfare (Group)
• Colleague health and wellbeing (Group)
• Practice profitability (Vet Group)
Financial
• Cash and banking (Retail)
• Accounts payable (Retail)
• Internal controls over financial reporting – gap assessment (Group)
• COVID-19 defence key financial controls – ongoing compliance with Company procedures
legal and regulatory compliance
• Immigration legislation compliance (Group)
• IR35 compliance (Group)
All reports, related findings and recommended actions have been discussed by the Committee and are tracked to completion.
Pets at Home Group Plc Annual Report & Accounts 2022
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audit and risk committee report continued
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 the carrying value of goodwill (across the Group,
but with specific reference to Vet Group goodwill), the carrying
value of the parent Company’s investment in subsidiaries, and
the implementation of the accounting policy change in relation
to the Configuration or Customisation Costs in a Cloud
Computing Arrangement (IAS38 Intangible Assets) IFRIC
interpretation. In their reports presented to the Committee
at both the interim 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 8 July 2021. Stuart Burdass has
been the audit partner since January 2019 and for the financial
year ending 30 March 2023 will be replaced by Ailsa Griffin
as part of the planned cycle of audit partner rotation.
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 31 March 2022.
Audit and non-audit fees paid to KPMG in the year were
£1,289,000 and an analysis is presented in note 3 to the
consolidated financial statements. Non-audit fees represent 25%
of the audit fee. Non-audit services provided by the external
auditors during the 2022 financial year comprised audit related
assurance services, in the form of an independent review of the
half-yearly statements, a financial covenant compliance certificate,
and agreed upon procedures in relation to certain Joint Venture
company’s’ unaudited financial statements. 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 reappoint 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 7 July 2022.
audit committee effectiveness
During the year, a review was undertaken of the effectiveness
of the Audit and Risk Committee. The Committee was found
to be broadly effective and aims to mature its oversight of the
technology risks as the Group becomes more digitally focused.
Fair, balanced and understandable
The Committee considered the Annual Report and Financial
Statements for the financial year ended 31 March 2022, taken
as a whole, and concluded that the disclosures as well as
processes and controls underlying its production were appropriate,
and recommended to the Board that the Annual Report and
Financial Statements for the financial year ended 31 March 2022
are fair, balanced and understandable, while providing the
information necessary for shareholders to assess the Group’s
position and performance, business model and strategy.
Zarin Patel
chair, audit and risk committee
25 May 2022
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eSG committee
113
introduction and strategic approach
The Committee oversees the governance of becoming the most
responsible pet care business in the world. In my fourth year as
Chair I am delighted to see the progress that we have made in
embedding the Group’s social value strategy, Our Better World
Pledge, 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 further progress
in assessing salient human rights risks across the operations
and supply chains and in recognising the significant wellbeing
impact the pandemic has had on our colleagues and their
families and reviewing the Group’s comprehensive
and thoughtful response to this.
The year of COP26 was always going to be a significant
milestone for the future of our planet. At the Committee we
have prioritised the review of the Group’s plans in this area to
ensure that they are aligned with the level of response required
to meet the climate crisis and to ensure the governance and
processes are established to enable a smooth transition to
a low carbon future.
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 and
implementing programmes to deliver the long-term targets.
These committees present an update to the ESG Committee
on their progress at the ‘deep dive’ sessions.
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 been
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 Karen Heskin, Head of Pets, attend each Committee
meeting.
Pets at Home Group Plc Annual Report & Accounts 2022
Susan Dawson
chair of the eSG committee
Who is on the eSG committee?
Member
Susan Dawson (Chair)
Ian Burke
Dennis Millard
Sharon Flood
Stanislas Laurent
Zarin Patel
Peter Pritchard
No. of
meetings
4/4
4/4
4/4
3/4
4/4
3/3
4/4
What we did in FY22
n Continued to focus on the monitoring and delivery of
our high standards of pet welfare across the Group
and the impact of the pandemic on pet welfare
more broadly.
n Discussed and approved the submission of the Group’s
near-term 2030 42% scope 3 and long-term 2040 net
zero targets to the Science Based Targets initiative (SBTi).
n Agreed the Group’s approach to the Task Force on Climate
related financial disclosure (TCFD) scenario planning.
n Reviewed and approved five new ESG policies on
Human Rights, Diversity and Inclusion, Raw Materials,
Environment, and Packaging.
What we will do in FY23
n Develop and refine our qualitative and quantitative
analysis of climate related risks in line with the TCFD
requirements.
n Continue to provide rigour and challenge as we embed
Our Better World Pledge strategy into the customer and
colleague propositions.
114
eSG committee continued
Highlights
–
–
The first committee meeting of the year in April 2021
focused on understanding the impact of the pandemic on
pet welfare. The committee reviewed a paper, presented by
Louise Stonier, on the current trends and predictions on pet
ownership and pet relinquishment. The paper was written
following engagement with a number of the largest
national pet charities at their regular CEO meeting. The
perspectives of smaller rescues were also gained by hosting
two virtual round table events with a selection of smaller
sized charities that had been recruited via the Association
of Cats and Dogs Homes (ACDH), which the Pets at Home
Foundation supports. The paper highlighted that pet
welfare had been impacted by the pandemic through an
increase in pet theft, the criminalisation of pet breeding
and the impact of delayed neutering, particularly on cats.
In terms of relinquishment the sector had not seen a
significant increase at that point in time, although they
were noting an increase in behavioural concerns where
socialisation had been less possible during the lockdown
phases of the pandemic.
The April committee meeting also reviewed the materiality
assessment, an annual activity to ensure that the strategy
review that follows in the autumn addresses any shifts in
positioning or introduces new material issues. This review
confirmed that diversity and inclusion and climate change
had continue to grow in importance in the last year.
– Human Rights was an area previously discussed by the
Committee in October 2020. One of the next steps
following this was to conduct an independent review of
the Group’s salient Human Rights, from the perspective
of the rights holder, and make recommendations on
future actions. This review was presented with actions
proposed that have since been undertaken, including
the appointment of a permanent Human Rights specialist.
The Group’s updated modern slavery act statement was
approved at the September committee meeting.
The Committee meeting in July 2021 was the first of
the scheduled ‘deep dives’ for the year. The ‘People’
pillar was reviewed in detail and subject matter experts
on wellbeing, social mobility, diversity and inclusion
joined to present their areas and take questions.
The Committee approved a number of new ESG policies
covering Human Rights, Diversity and Inclusion, Environment
policy, Raw materials and an updated version of the Supplier
Code of Conduct.
–
–
–
–
The ‘Planet’ deep dive followed at the September 2021
meeting. This was a particularly important meeting as we
headed into COP26. The thorough work that has been
done to assess the Group’s scope 3 emissions and develop
the pathways to reduce them has enabled a submission to
the science-based targets initiative (SBTi) in the autumn of
2021 for the near term 2030 target and in January 2022
for the 2040 target. Once the TCFD guidance was updated
in the autumn of 2021 the Group has been able to conduct
a series of qualitative scenario planning exercises that will
feed into the strategic review in the autumn of 2022.
Pet welfare is a standing agenda item at every ESG
Committee meeting and the Head of Pets attends every
Committee meeting. In addition to managing pet welfare
during the pandemic, the Committee received an update
regarding the new audit programme for stores. The new
programme was introduced in February 2021 and included
a re-weighting of non conformances and a new scoring
system that enabled great performance to be recognised
and celebrated and to identify stores that may require
some more support and training.
– A review of clinical governance in the Vet Group was
presented in the February 2022 Committee meeting.
The Committee received an update across all the areas of
clinical governance and how these are now beginning to
return to more face to face activities now that restrictions
have eased. The Royal College suspended the auditing
aspect of the RCVS Practice Standards because of the
pandemic and the difficulty in conducting physical visits,
but this has now begun to return to physical audits. 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 78% of
practices now accredited or enrolled in the scheme. The
internally developed ‘Aspiring to Clinical Excellence’ audit
programme has been recalibrated to drive an ongoing
process of continual improvement and the physical audits
have been able to start again as restrictions eased with
over 85% of the 111 audits in the year being graded as
outstanding. The results of antibiotic usage auditing were
shared and demonstrate a continued positive reduction in
antibiotic use across the Group over time.
The Terms of Reference (ToR) for the ESG Committee were
reviewed in the April 2022 meeting. The ToR can be found
on the Pets at Home Group Plc investor website.
–
Susan Dawson
chair of the eSG committee
25 May 2022
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Directors’ remuneration report
115
Sharon Flood
chair of the remuneration committee
Who is on the remuneration committee?
Member
Sharon Flood (Chair)
Dennis Millard
Susan Dawson
Zarin Patel
No. of
meetings
3/3
3/3
3/3
3/3
introduction
On behalf of the Remuneration Committee (Committee), I am
pleased to present our Directors’ Remuneration Report (DRR)
for FY22.
FY22 was a challenging year both for the Group and wider UK
economy, as the impact of the COVID-19 pandemic remained,
and inflationary pressures increased. I am extremely proud of
our leadership team who continued to prioritise the care of our
colleagues, Joint Venture Partners, our customers and their pets
through these challenging times. I would also like to pay tribute
to our dedicated colleagues and Joint Venture Partners who
demonstrated remarkable resilience through a demanding year.
During FY22, we continued to incur substantial costs in keeping
our colleagues, pets and customers safe during the pandemic.
Despite this, our relentless focus on the four pillars of our pet
care ecosystem strategy combined with growth in the pet care
market have enabled us to deliver growth and strong results in
a demanding year. As in FY21, these results were delivered
without taking any Government support through the COVID-19
job retention scheme, and without making any redundancies or
imposing any pay cuts.
The Committee believe the business is in a strong position and
has demonstrated how resilient it can be in challenging times.
However, the Committee also recognises the impact the
pandemic has had on many of our colleagues, our customers
and wider society. Furthermore, we are acutely aware of the
challenges beyond the pandemic, including the uncertainties
associated with the conflict in Ukraine, global supply chain
issues and inflationary concerns. Within this broader context,
the Committee has carefully considered the fairness of Director
pay decisions and our overall pay levels across the organisation,
with a particular focus on pay rates for frontline colleagues. The
Committee is comfortable that our approach as detailed below
is fair and appropriate given wider stakeholder experience and
the strong performance of the business this 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 and the macro-economic
environment when making Director remuneration decisions
in respect of FY22 and for implementation of policy for FY23.
We have outlined the key factors that were considered in our
decision-making process below:
Business Performance
Over the last year we have welcomed over 1.1m new customers
across the Group, delivered record growth in key financial
metrics and accelerated investment into analytics capability,
digital innovation, and our supply chain to join up our pet care
ecosystem, enhance the customer experience and accelerate
the competitive advantages of our omnichannel model.
We have grown market share across every part of our business.
In Retail, broad-based growth across key categories, in-store
and online, contributed to strong like-for-like progression and
good profit conversion on both a one and two-year basis. In
Veterinary, strong growth in new client registrations has
increased average practice revenue beyond £1m, with c90%
of practices profitable, cash generative and with reducing
levels of debt.
Financial highlights include:
–
Total Group revenue growth of 15.3% to £1,317.8m
with a further 1.2m new puppy and kitten customers;
Growth in Group customer revenue of 16.5% to
£1,673.8m, reflecting market share gains across
all areas of the business;
– Growth in Group underlying proforma PBT of 65.3%
to £144.7m, ahead
of consensus expectations, with growth of 54.8% on
a 2-year basis;
– Growth in Group underlying PBT of 67.9% to £130.1m;
– Group free cash flow of £95.0m, up 40.9% YoY,
including strong cash generation across our
First Opinion veterinary practices.
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remuneration continued
Strategic highlights include:
– Continued demand with sustained growth across our pet
care ecosystem:
– The number of active VIPs stands at a record 7.3m
having increased by 1.1m (18%) YoY, or 29% on a
2-year basis
– 27% of all VIPs shopped across more than one channel
during the year, up 22% YoY
– The number of Puppy and Kitten Club members grew
36% YoY, with approximately 23,000 average weekly
registrations in the year, compared to approximately
7,000 two years ago, creating a significant lifetime
value opportunity
– New client registrations across our First Opinion
veterinary practices averaged approximately 9,000
per week, with an active client base of 1.7m
– The number of pet care plan subscriptions across the
Group grew 23% YoY to 1.48m, generating over
£120m in annualised recurring customer revenue1
Shareholder experience
Overall, the shareholder experience in FY22 was positive:
– We have continued to pay our dividend throughout the year
in line with policy, reflecting our robust balance sheet and
continued confidence in the near-term prospects of the
business, with a total dividend of 11.8p for the year,
up 48% YoY.
– Announced our intention to commence a share buy back
programme of up to £50m over the next three years.
– We have not raised any equity during the year.
–
Share price and TSR performance have been strong with
an increase of +12% and +14% 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 from page 113 under the ESG Committee
report, however, some of the highlights include:
Supporting our colleagues
– Supporting colleagues through the coviD-19
pandemic: We continued with the key support policies
initiated at the start of the pandemic, including full pay for
up to 2 periods of self-isolation. We provided colleagues
with caring responsibilities a bank of up to 5 days fully
paid caring leave to draw on if required. We increased the
wellbeing resources available for colleagues through our
online portal and through our third-party experts. We
published a wellbeing booklet towards the end of the year
which outlines all the resources available to colleagues in
one place. During the year we trained over 500 Mental
Health First Aiders to provide support and signposting to
colleagues locally.
Pets at Home Group Plc Annual Report & Accounts 2022
–
Frontline colleague bonus: All colleagues will be awarded
their usual annual bonus in respect of FY22 in line with the
usual timeline.
– national living Wage (nlW):
– In April 2022 we increased our entry level rates by 6%
to a minimum of £9.60
– We pay at least 10p ahead of the current NLW (£9.50)
– 68% of our retail store and grooming colleagues now
earn the same as or more than the Real Living Wage
(£9.90), an increase of 50% when compared to March
2020 (17% earning RLW)
– Our hourly paid retail store and grooming colleagues
now have the opportunity to earn 20p more than the
RLW on completion of the first stage of our training
programme, which is reached within the first 3 to 6
months of employment
– colleague share ownership:
– Our second RSP vested in May 2021, which resulted in
enhancing or creating new shareholders in over 4,700
of our colleagues.
– The next RSP awards will vest at the end of May 2022
which will further enhance or create new shareholders
for over 4,800 colleagues.
– We also granted a further 1.2m shares to 9,200
colleagues via the RSP in June 2021.
– Our 2018 Sharesave matured on 1 December 2021,
generating a potential value of £14.7m, and a potential
profit of £11.8m to over 500 colleagues based on the
closing share price on the maturity date of £4.69.
– We granted a further offering of the Sharesave scheme
in September 2021, with a take up of 17.55%, our
highest take up rate since our first issue in 2014.
– caring4colleagues:
– We donated an additional £0.5m to our Colleague
Hardship Fund, taking our total donation into this
fund to over £2m over the last two and a half years.
– In FY22, we have awarded over 420 Colleague Hardship
Fund grants to colleagues totalling over £474,000
– We shut our stores on Boxing Day to give all our
retail store and grooming colleagues an invaluable
two-day break.
Supporting our customers
We maintained and enhanced our retail and veterinary
operations to provide essential pet care to our customers
in a safe and appropriate manner.
– We maintained Click & Collect.
–
Safe distance markers, masks, sanitisers, control of numbers
and Perspex screens were maintained across our Group.
– Deliver to car zero contact service and home delivery
options were extended.
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Supporting our communities
– Over £5m has been donated from the Pets at Home Group’s
charitable activity, (including VIP lifelines) supporting over
750 charities/rescues.
– We have donated approximately 10,000 Better World
Pledge Day hours to local communities to provide significant
value and non-financial support to pets, people and our
planet. This was in addition to the financial support we
already provide as a business to various charitable
organisations.
Through the pet memory scheme, and the donations made
by our practices, £257k has been donated to the Woodland
Trust in FY22.
–
– 10% discount continued through FY22 for NHS workers.
–
–
–
–
The underlying proforma PBT target range was set between
£120.5m and £130.5m. Actual underlying proforma PBT
was £144.7m and was in excess of the maximum target.
The Group Free Cash Flow target range was set between
£61.2m and £69.2m and the actual Free Cash Flow was
£95.0m, also in excess of the maximum target.
The Pet Care Plans target range was set between 1.33m
and 1.60m net plans. The actual number of net Pet Care
Plans achieved, excluding any anomalies, paused or
cancelled plans was 1.48m representing 52% of the
bonus maximum target.
The bonus outcome was therefore £845k for the CEO
and £528k for the CFO, both of which represented
90.4% of the bonus maximum.
Directors’ remuneration in respect of FY22
FY22 was the second year of our current Remuneration Policy,
approved by shareholders in 2020. In light of the context set
out above, the Committee made the following decisions.
Base Salary:
The outgoing CEO did not receive a salary increase in FY22.
restricted Stock Plans (more information on page 130):
The 2019 awards were subject to an absolute TSR financial
underpin which was met, therefore awards will vest according
to the relevant timetable. For Executive Directors this means
50% in May 2022, 25% in 2023 and the remaining 25% in
2024 provided they remain in the employment of the Group
at each of these dates.
The CFO did not receive a salary increase in FY20 (as a result of a
delayed pay review during the COVID-19 pandemic) and received
an increase lower than the wider colleague population in FY21
(2.6% vs 4.83%). The Committee considered the relative market
comparisons for the CFO’s salary, including pay for CFO roles at
companies of a similar size in the FTSE 250, and similar sized
UK-listed retailers, and concluded that the CFO’s salary had
fallen behind the general market level for equivalent roles. The
Committee were concerned that maintaining the current salary
level posed a risk both to retention and succession planning. We
therefore proposed a salary increase for the CFO of 10.8% (FY22
wider workforce 7.3%), (from £370,000 to £410,000), to bring
his salary more in line with the external market.
Salary increases in respect of FY22 were effective from
1 October 2021.
annual bonus
The Executive Directors were assessed against Group Profit
Before Tax (PBT) (60%), Group Free Cash Flow (FCF) (20%), Pet
Care Plans (20%) and a mandatory ESG bonus underpin, which
required the senior leadership team, including the Executive
Directors to complete a Better World Pledge Day.
Targets were set in May 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. In light of business and stakeholder context set out
above, the Committee was comfortable that the formulaic
outcome was fair and appropriate therefore no adjustments
were made and no discretion was exercised in relation to the
outcome. As disclosed in last year’s report, the bonus for FY22
will be delivered two thirds in cash and a third will be awarded
in shares in line with the bonus deferral policy. The shares will
not be released until a two-year holding period is complete.
The annual RSP awards were granted to all eligible colleagues
in May 2021. The awards granted to Executive Directors remain
subject to the absolute TSR financial underpin and will vest
100% in 2024 and will then be subject to a 2 year post vest
holding period.
Directors’ remuneration in respect of FY23
Base Salary
Lyssa McGowan will succeed Peter Pritchard, who announced
his intention last November to step down from his role in
Summer 2022 and will remain with the business until 31 May
2022 to ensure a seamless transition. Lyssa was appointed to
the Board as CEO Designate on 25 April 2022 prior to her
appointment as CEO on 1 June 2022. The key elements of
Lyssa McGowan’s remuneration package were disclosed in
the announcement of her appointment and are as follows:
– Base salary of £580,000 which reflects the outgoing CEO’s
salary for FY21 of £550,000 with an increase of 5.5%,
applied. This is broadly in line with the wider workforce
which was higher at 7.3% in FY22.
Pension contribution of 6.5% of base salary in line with our
Remuneration Policy and the rate provided to the majority
of our salaried colleagues.
–
– An annual bonus maximum award of 170% of base salary,
in line with our Remuneration Policy and the outgoing
CEO’s remuneration package.
– A RSP maximum of 100% of base salary in line with our
Remuneration Policy.
– Benefits will also be in accordance with the Remuneration
Policy set out in the 2021 Annual Report and Accounts and
approved by shareholders at the 2020 AGM.
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118
remuneration continued
Peter Pritchard, our exiting CEO’s, compensation arrangements
for his departure were set out in the announcement on 7
February 2022. The details of which can also be found in
section (e) Payments for loss of office in the Directors’
Remuneration Report on page 132.
The Board will also carry out a benchmarking review of the
Non-Executive Directors’ fees in October 2022 to ensure they
remain in line with the market since these have not changed
since 2014.
Pension
The CFO’s pension contributions have now been reduced to
6.5% of salary, from the start of FY23.
annual bonus
The maximum bonus opportunity will continue to be 170% of
salary for the CEO and 150% of salary for the CFO. In addition,
one-third of any bonus paid will continue to be deferred in
shares for two years in line with the bonus deferral policy.
For FY23, Executive Directors will continue to have an annual
bonus based on Group PBT (60%), Group FCF (20%) and Pet
Care Plans Subscriptions (20%), the latter of which supports our
social element of our ESG Strategy By signing up to a Pet Care
Plan subscription, the cost of the treatment works out cheaper
for the customer on average in comparison to buying the
required treatments each month. Subscription services also act
as a reminder to treat the pet, in a timely manner which is best
for the pet and promotes responsible pet ownership. Significant
consideration was given to also including an environmental
measure given the importance of sustainability and minimising
its own carbon footprint to the Group. However the Committee
was mindful that a one year target did not fully reflect the
scope of our ambition and it was agreed that the inclusion of
a meaningful and material focus on carbon reduction and /or
other ESG related metrics which would support both our values
and strategy would be addressed in the Remuneration Policy
review to be conducted during FY23.The FY23 bonus scheme
will however continue to have an ESG underpin which requires
the senior leadership team, including the Executive Directors to
complete a Better World Pledge Day.
restricted Stock Plans
Awards granted during FY23 will continue to be set in line with
the Remuneration Policy with a maximum grant value of 100%
of salary for the CEO and 75% of salary for the CFO and will
continue to vest subject to an absolute TSR financial underpin
with a three-year vesting schedule and two-year post vesting
holding period as set out in the Remuneration Policy. Given
recent share price performance, the Committee considered
whether a reduction to the grant level was required. Following
a detailed discussion, the Committee concluded that a reduction
was not appropriate as it is firmly believed that the recent drag
in the share price is a result of macro-economic factors which
do not reflect the strong and robust financial performance of
the business. See page 137 for more details.
closing remarks
We hope that you find this report helpful and we would
welcome any feedback or comments on this report, particularly
as we enter into the review period for our next Remuneration
Policy. We 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 7 July 2022. 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
25 May 2022
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Our Directors’ Remuneration Policy
(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.
Remuneration principles
the objectives of our Directors’ remuneration Policy are:
Strategy
culture
To have incentives that are appropriate for our business for the next three years as we focus on delivering long-term,
sustainable returns to investors. To 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.
retention
To simplify and therefore enhance perceived value of awards and thereby reduce flight risk.
Shareholders
To deliver better value to shareholders by:
• Improving perceived value;
• Creating stronger alignment with shareholders; and
• Increasing focus on long-term sustainable value creation.
How we ensure pay for performance linkage:
annual bonus
• Pay-out linked to achievement of robust and challenging annual performance targets and any bonus achieved is
paid 2/3rd cash and 1/3rd shares with a two-year deferral period to ensure a link with longer term performance
and shareholder experience.
• Full disclosure of bonus – commitment to disclosing all target ranges on a retrospective basis at the end of the
financial year in question.
culture
• 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.
Shareholders
• 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.
Pets at Home Group Plc Annual Report & Accounts 2022
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Directors’ remuneration report continued
Pay element – Fixed pay
Base Salary
Purpose
and link to
strategy
The Company
provides
competitive
salaries suitable to
attract and retain
individuals of the
right calibre to
develop and
execute the
business strategy.
Benefits
Purpose
and link to
strategy
The Company
provides
colleagues
with market
competitive
benefits suitable to
attract and retain
individuals of the
right calibre to
develop and
execute the
business strategy.
Pension
Purpose
and link to
strategy
To provide
colleagues with an
allowance
for retirement
planning.
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.
operation
• The Company provides a range of benefits, which may include:
– a company car (or cash equivalent)
– life assurance
– permanent health insurance
– private medical insurance
• These benefits are not pensionable.
• Other benefits may be offered from time to time, if considered
appropriate by the Committee and consistent with the Company’s
overriding purpose for offering such benefits.
• The Company may also meet any reasonable home working and/or
certain mobility costs, such as relocation support, expatriate
allowances, temporary living and transportation expenses in line with
the prevailing home working and/or mobility policies and practice for
other senior executives.
• Executive Directors are eligible to participate in any tax approved
all-colleague share plans operated by the Company on the same
basis as other eligible colleagues such as the SAYE scheme.
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 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.
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 9%,
and further reduced by the end of FY22
to align to the same maximum rate as for
new hires of 6.5% (excluding the exiting
CEO who will continue on his current
pension rate of 9% until he leaves on 31
May 2022). It should be noted that Executive
Directors have never received the maximum
of 15%.
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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 126 of the Policy.
• Change of control provisions apply as
set out on page 126 of the Policy.
• Leaver provisions apply as set out on
page 126 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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Directors’ remuneration report continued
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.
Pay element – variable pay
long term incentive Plan1
Purpose
and link to
strategy
To promote
continued
alignment
between Executive
Directors and
shareholders,
increasing focus
on long-term
sustainable value
creation.
To support our
principle of
embedding share
ownership across
the organisation.
To assist with
succession
planning.
operation
• Awards will be made under the RSP annually.
• Share awards are normally made in the form
of nil cost options but may be awarded in
other forms if appropriate (such as
conditional share awards). The plan rules
specify that awards may also be satisfied
in cash although this is unlikely to apply to
Executive Directors (other than partially, to
facilitate the net settlement of an award).
• 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 126 of the policy.
• Change of control provisions apply as
set out on page 126 of the policy.
• Leaver provisions apply as set out on
page 126 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.
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Performance measures
n/a.
Pay element – variable pay
chair and non-executive Directors’ remuneration Policy
Purpose
and link to
strategy
To attract and
retain high calibre
individuals by
offering market
competitive fee
arrangements.
operation
• Non-Executive Directors receive a basic fee
in respect of their Board duties.
• Further fees are paid to Non-Executive
Directors in respect of Deputy Chair of
the Board and/or Chairship of Board
Committees.
• 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.
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.
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
extent 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.
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Directors’ remuneration report continued
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.
(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
Policy and operation
overall
The Committee’s approach when considering the overall
remuneration arrangements in the recruitment of a member of
the Board from an external party is to take account of the Executive
Director’s remuneration package in their prior role, the market
positioning of the remuneration package, and not to pay more
than necessary to facilitate the recruitment of the individual.
Fixed elements
(base salary,
pension and
other benefits)
Short term
incentives
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 119-120.
The individual will be eligible to participate in the annual bonus
plan, in accordance with the rules and terms of the plan in
operation at the time. The maximum level of opportunity will
be no greater than that set out in the Policy Table above (i.e.
170% of base salary for the CEO and 150% for the CFO).
long term
incentives
The individual will be eligible to participate in the RSP,
in accordance with the rules and terms of the plan
in operation at the time.
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 123.
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
• 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.
• 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 123.
• In determining the quantum and structure of these
• If promotion is part way through the year, an
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.
additional top-up award may be made to bring
the Executive Director’s opportunity to a level
that is appropriate in the circumstances.
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(c) Service contracts and loss of office arrangements
The Committee’s policy on service contracts and termination arrangements for Executive Directors is on page 125-126. 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.
The key employment terms and conditions of the current Executive Directors, as stipulated in their service contracts, are set out below:
area
Policy and operation
notice period
• The service contract for Peter Pritchard provides for
a notice period of 12 months from the Company
and six months from the individual.
• 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 Lyssa McGowan provides
• The Committee considers this policy provides an appropriate
contractual
payments
Short term
incentives
long term
incentives
for a notice period of 12 months from the
Company and six months from the individual.
• The service contract for Mike Iddon provides for a
notice period from both the Company and the
individual of six months.
• Executive Directors’ service contracts allow for
termination with contractual notice from the
Company or termination by way of payment in
lieu of notice (PILON), at the Company’s discretion.
Payment in lieu of notice would be made where
circumstances dictate that the Executive Directors’
services are not required for their full notice period.
• Neither notice nor PILON will be given in the event
of gross misconduct.
• 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.
• The treatment of unvested long-term incentive
awards is governed by the rules of the relevant
incentive plan, which are summarised below: CSOP,
PSP, RSP and SAYE.
• Under the CSOP, PSP and RSP, the default position
is for both vested (to the extent not yet exercised)
and unvested awards to lapse upon a loss of
office event.
• Under the RSP, the default position is for vested
awards to be exercisable on the usual date
and unvested awards to lapse upon a loss of
office event.
• Where an individual is determined to be a ‘good
leaver’ (which includes for reasons of death, illness,
injury, disability, retirement, sale or transfer out of
the Group or any other reason at the discretion of
the Committee) the Committee may allow vested
awards (to the extent not yet exercised) to be
retained and unvested awards to continue to
subsist until the relevant vesting date(s), subject
to satisfaction of the performance conditions/
financial underpin and pro-rated for time served.
balance between the need to retain the services of key
individuals for the benefit of the business and the need to
limit the potential liabilities of the Company in the event
of termination.
• Payment in lieu of notice will be limited to base salary
and contractual benefits for the relevant notice period.
• There is no contractual entitlement to a payment under
the annual bonus in respect of the notice period.
• Service contracts allow for mitigation if the individual
finds alternative employment.
• 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).
• Alternatively, the Committee may, at its discretion, allow
unvested awards to vest at an earlier date, having regard to
the achievement of performance conditions/financial underpin
to that date and the period of time that has passed since the
date of grant. The Committee may choose to apply no
reduction in the amount vesting if it is considered appropriate
given the particular circumstances.
• Either way, vested RSP awards (or the shares acquired upon the
exercise of vested RSP awards) will continue to be subject to a
two-year holding period upon a loss of office event (unless the
Committee determines otherwise in its absolute discretion).
• Under the SAYE, the default position is for unvested awards
to lapse upon a loss of office event.
• Where an individual is determined to be a ‘good leaver’ in
accordance with HMRC regulations (which include for reasons
of death) unvested awards may vest pro rata by reference to
the period of time that has elapsed since the date of the grant
and up to six months following the leaver event (12 months in
the case of death).
• Vested (but unexercised) awards under the CSOP, PSP, RSP
and SAYE will count towards the Company’s post-cessation
shareholding policy (in force from time to time), including
vested RSP awards (or shares acquired upon the exercise of
vested RSP awards) that are subject to a holding period.
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Directors’ remuneration report continued
area
Policy and operation
change in
control
malus and
clawback
• The Committee’s policy is that service contracts
should not provide for additional compensation on
severance as a result of a change in control.
• Under the 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 their office or employment
with any Group company including, but not
limited to, dishonesty, fraud, misrepresentation
or breach of trust;
• Under the RSP, any holding periods applicable to vested
awards (including awards that vest early because of the
change of control) will fall away on/immediately prior to
the change of control.
• Under 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;
• Material contravention by the participant of the Company’s
ethics and values; and
• Malus and clawback will continue to apply to any bonus
payments or awards retained by leavers and/or on a
change of control.
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
Policy
Period
• 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 reappointment by shareholders at the AGM.
appointment
terms
• 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.
Fees
• As set out on page 137.
expiry of
current term
• 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.
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(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
potential remuneration packages for Executive Directors in FY23, 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%.
2023
50% RSP3
RSP2
Bonus
Fixed Pay1
Total
Minimum
Meeting expectations
Maximum
Maximum + 50% RSP3
Lyssa
McGowan
Mike
Iddon
Lyssa
McGowan
Mike
Iddon
Lyssa
McGowan
Mike
Iddon
Lyssa
McGowan
Mike
Iddon
£580,000
£307,500
£580,000
£307,500
£580,000
£307,500
£591,600
£369,000
£986,000
£615,000
£986,000
£615,000
£289,995
£153,746
£629,200
£448,705
£629,200
£448,705
£629,200
£448,705
£629,200
£448,705
£629,200
£448,705
£1,800,800
£1,125,205
£2,195,200
£1,371,205
£2,485,195
£1,524,951
These charts are for illustrative purposes only and actual outcomes may differ from those shown.
1 Fixed pay includes car allowance, pension, current salary and private health insurance (if they participate).
2 Is illustrated above as 75% of salary for the CFO and 100% of salary for the CEO.
3 50% RSP has been calculated using the closing share price of £3.6140 on 31 March 2022 plus 50%, resulting in a share price of £5.421.
Scenario
assumptions
Fixed pay
all performance
scenarios
variable pay
• 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 FY23
• Pension – based on the FY23 contribution levels (now reduced to 6.5%)
minimum
performance
• No pay out under the annual bonus
• No vesting under the RSP
on-target
performance
• 50% of the maximum pay-out under the annual bonus (i.e. 85% of salary for the CEO and 75% of salary for the CFO)
• 100% vesting under the RSP (i.e. 100% of salary for CEO and 75% of salary for CFO)
maximum
performance
impact of
50% share
• 100% of the maximum pay-out under the annual bonus (i.e. 170% of salary for the CEO and 150% of salary for
the CFO)
• 100% vesting under the RSP (i.e. 100% of salary for CEO and 75% of salary for CFO)
• Based on the share price on 31 March 2022 (£3.6140), the last day of the financial year FY22 plus 50%
Note 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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Directors’ remuneration report 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 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 FY22, this included the decision to increase our entry level rates by 6% to a minimum of £9.60 per hour,
10p ahead of the current NLW (£9.50). Our hourly paid retail store and grooming colleagues also now have the opportunity to
earn 20p more than the Real Living Wage on completion of the first stage of our training programme, which is achievable within
the first 3 to 6 months of employment representing our highest increase of 6.3% 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. Sharon Flood, 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 gave 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.
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 second RSP vested in May 2021, which resulted in enhancing or creating new shareholders in over 4,700 of our colleagues.
–
The next RSP awards will vest at the end of May 2022 which will further enhance or create new shareholdings for over
4,800 colleagues.
– We also granted a further 1.2m shares to 9,200 colleagues via the RSP in June 2021.
– Our 2018 Sharesave matured on 1 December 2021, generating a potential value of £14.7m, and a potential profit of £11.8m
to over 500 colleagues based on the closing share price on the maturity date of £4.6940.
– We granted a further offering of the Sharesave scheme in September 2021, with a take up of 17.55%, our highest take up
rate since our first issue in 2014.
(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).
FY23 is the final year of our current Remuneration Policy and we will therefore spend significant time reviewing our policy in
order to assess whether it remains fit for purpose in light of our strategy, wider economic environment in which we operate and
the developing legislative guidance on executive remuneration. We will be writing to shareholders for their views and opinions on
the supporting rationale for any proposed policy changes.
(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.
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Annual Report on Remuneration
(a) Directors’ remuneration – report on implementation for the year ended 31 march 2022
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 132 represents the audited section of this report.
(b) Single total figure of remuneration for executive Directors for the year ended 31 march 2022
The following table sets out the total remuneration for Executive Directors for the year ended 31 March 2022. All payments are in
line with the Policy.
Director
FY22
Peter Pritchard
Mike Iddon
FY21
Peter Pritchard
Mike Iddon
Base salary
(£)
Benefits
(£)
Pension
(£)
Total
fixed pay
(£)
Annual
bonus
(£)
Long term
incentives
(£)
Total
variable pay
(£)
Total
(£)
550,000
389,623
514,7031
356,9201
11,971
11,971
11,921
11,921
49,500
35,270
46,197
31,918
611,471
845,633
374,3314
1,219,964
1,831,435
436,864
528,499
535,8223
1,064,321
1,501,185
572,821
526,285
1,041,8092
1,568,0942
2,140,916
400,756
365,235
745,6252
1,110,8602
1,511,619
N.B. FY22 Base salary and pension contributions have been calculated using actual amounts earned over a 53 week year pro-rated to represent 52 weeks for a representative
year on year comparison to FY21.
1 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.
2 The 2018 RSP vested in full on 23 May 2021 since the absolute TSR underpin which was calculated as at the end of FY21 had been achieved. The value has been calculated
using £3.86 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 FY22, 25% in FY23 and 25% in FY24, and will be subject to
the share price at the time of vest.
3 The 2019 RSP will vest in full on 30 May 2022 since the absolute TSR underpin which is calculated as at the end of FY22 had been achieved. The value has been calculated
using £3.614 being the closing share price on 31 March 2022, the financial year end which corresponds to the end of the performance period. The figure reflects 100% of
the 2019 RSP award, however the true value will vary due to the phased release over the three years: 50% in FY23, 25% in FY24 and 25% in FY25, and will be subject to
the share price at the time of vest.
4 The 2019 RSP will vest in full on 30 May 2022 since the absolute TSR underpin which is calculated as at the end of FY22 had been achieved. However, in line with the
agreed leaver treatment, only the first 50% of the 2019 award will vest in May FY23. The 25% tranches due to vest in FY24 and FY25 will lapse in full.
Base salary – corresponds to the amount received during the relevant financial year.
Benefits – corresponds to the taxable value of benefits received during the relevant financial year and principally includes
company car (or cash equivalent), life assurance and permanent health insurance.
Pension – corresponds to either the amount contributed to personal pension plans or the cash value of the salary supplement
received during the relevant financial year. Executive Directors received a Company pension contribution worth 9% of their salary
or a cash allowance where the annual allowance has been reached. The CFO’s pension contributions were reduced to 6.5% at the
end of FY22.
annual bonus – corresponds to the amount earned in respect of the relevant financial year. Details of how this was calculated
are set out below.
long-term incentives – corresponds to the amount earned by the Executive Directors in respect of the relevant financial year.
Details of how this was calculated are set out in the footnotes above.
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Directors’ remuneration report continued
annual bonus
The Executive Directors were assessed against stretching PBT, FCF and Pet Care Plan subscription targets. Underlying proforma PBT,
on a like for like basis was £144.7m1 (FY21 £87.5m1), which was ahead of guidance. This represents a growth of 65.3% YoY. FCF
after interest, tax and before acquisitions was £107.3m before purchase of own shares, and £95.0m after purchase of own shares
which also exceeded the maximum target.
–
The maximum annual bonus opportunity in respect of FY22 for the CEO was 170% of base salary and 150% of base salary
for the CFO.
For FY22, Executive Directors have an annual bonus based on Group PBT (60%), Group FCF (20%), Pet Care Plan subscriptons
(20%) and a mandatory ESG underpin which required each Executive Director to complete a Better World Pledge Day. Our
Better World Pledge Days have been carried out by all of our salaried support office colleagues and it has provided significant
value and non-financial support to a range of different charities, in addition to the financial support we already provide.
Colleagues have supported a range of people, pet and climate change focused charities.
FCF 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.
Pet Care Plan subsciptions are calculated on the number of net pet care plans after the removal of any anomalies, paused
or cancelled Pet Care Plans. We achieved 1.48m net Pet Care Plans.
–
–
–
The table below shows the targets set, and the achieved pay out levels for Executive Directors:
Performance measures
% Base salary
Minimum
Maximum
%
Target
Achieved
Total
Group underlying proforma PBT
Group Free Cash Flow
Net Pet Care Plans
Total
60%
20%
£120.5m
£61.2m
£130.5m
£144.7m1
£69.2m
£95.0m
20% 1.34m plans
1.61m plans
1.48m plans
100%
100%
100%
52.21%
90.4%
1 Excluding the impact of the accounting policy change in relation to IAS38 Intangible Assets, our FY22 underlying pre-tax profit was £144.7m and the impact of the
accounting policy change was £14.6m. A reconciliation is set out below, with further detail provided in the CFO review.
FY22 Underlying pre-tax profit
FY21 Underlying pre-tax profit
Pre AP change
AP gross
Amortisation
saving
Net
Post AP
Change
£144.7m
£(24.0m)
£87.5m
£(15.4m)
£9.4m
£5.3m
£(14.6m)
£130.1m
£(10.1m)
£77.4m
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.
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 from page 115, 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 FY22 will be delivered two thirds in cash
and a third will be awarded in shares in line with the bonus deferral policy for the CEO and CFO. The shares will not be released
until a two-year holding period is complete. For all other colleagues, the bonus for FY22 will be delivered in cash.
long-term incentives
Awards granted under the RSP for 2018 vested in May 2021, including awards for the Executive Directors 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 2022 and the remaining 25% in 2023. 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 2018 award.
Awards granted to the Executive Directors under the RSP in 2019 will vest in May 2022 as a result of the absolute TSR underpin
having been met. For the Executive Directors, awards will vest 50% in 2022, 25% in 2023 and 25% in 2024.
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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 and the external environment, 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
Targets
Performance achieved
tSr
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.
2018 rSP – vest may 2021 based on FY21 performance
TSR performance positive 166.7%
Underpin met and award vesting will be 50% in 2021, 25% in 2022, 25% in 2023.
2019 rSP – due to vest may 2022 based on FY22 performance
TSR performance positive 207.7%
Underpin met and award vesting will be 50% in 2022, 25% in 2023, 25% in 2024.
(c) Single total figure of remuneration for non-executive Directors for the year ended 31 march 2022
The following table sets out the total remuneration for Non-Executive Directors and the Chair of the Board for the year ended
31 March 2022, FY22.The FY21 total single figure numbers below 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.
Additional
fees
(£)
Remuneration
Committee
Chair
(£)
Audit & Risk
Committee
Chair
(£)
Basic fees
(£)
Nomination &
Corporate
Governance
Committee
Chair
(£)
CSR and Pets
Come First
Committee
Chair
(£)
50,000
20,0001
50,000
50,000
50,000
200,000
50,000
50,000
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
10,000
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
10,000
10,000
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
10,000
n/a
n/a
n/a
Total
single figure
FY22
(£)
Total
single figure
FY21
(£)
70,000
50,000
60,000
60,000
68,385
48,846
58,615
58,615
200,000
195,385
57,0573
9,2312
n/a
42,857
Director
Dennis Millard
Stanislas Laurent
Sharon Flood
Prof Susan Dawson
Ian Burke
Zarin Patel
Karen Whitworth
N.B. FY22 Base salary and pension contributions have been calculated using actual amounts earned over a 53 week year, pro-rated
to represent 52 weeks for a representative year on year comparison to FY21.
1 The additional fee paid to Dennis Millard is in respect of his position as Deputy Chair of the Board and Senior Independent Director.
2 On 20 May 2021 Karen Whitworth stepped down as a Non-Executive Director and Chair of the Audit and Risk Committee. Karen’s fees have been pro-rated to reflect this.
3 On 14 April 2021, Zarin Patel joined as a Non-Executive Director, and Chair of the Audit & Risk Committee. Zarin’s fees have been pro-rated to reflect this.
(d) Scheme interests awarded during the financial year
In FY22 Executive Directors received RSP awards in line with the Policy as follows:
Executive Director
Peter Pritchard
Mike Iddon
Date of award
15 June 2021
15 June 2021
Number of shares
awarded under
the RSP
90,819
61,096
Grant price of
RSP awards
% of salary for
total awards
Performance
period end date
Nil cost awards
Nil cost awards
75%
75%
20 March 2024
20 March 2024
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 £4.542.
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 (FY22 to FY24). A positive absolute TSR 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, 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 2021 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.
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Directors’ remuneration report continued
(e) Payments for loss of office
No payments for loss of office were made during the financial year.
Peter Pritchard, who announced his intention in November 2021, to step down from his role as CEO in Summer 2022 and will
remain with the business until 31 May 2022 to ensure a seamless transition.
During the transition process between November and May 2022, Peter continued to work full-time and received his salary and
contractual benefits in line with the Policy, up to his date of termination, being 31 May 2022. He did not receive any further salary
or contractual benefits for the period of notice which remains.
Peter will receive his FY22 bonus.
All payments made to Peter in respect of FY22 are reported in the single figure of remuneration.
Peter’s 2019 RSP award will be treated in line with the agreed leaver provisions. 50% of the 2019 RSP will vest in full on the original
vesting date in May 2022, however the 25% due to vest in 2023 and 2024 will lapse in full.
The 2020 and 2021 RSP awards will also lapse in full on cessation.
No RSP award will be granted in 2022.
(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 one 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:
Shareholding
as a % of salary
Shares owned outright
at 31 March 2022
Number of shares
Interests in share
incentive schemes,
awarded without
performance conditions
at 31 March 2022
Interests in share
incentive schemes,
awarded subject to
performance conditions
at 31 March 2022
Shares owned outright
at 25 March 2021
1,040%
215%
1,582,601
243,892
0
4,385
639,020
459,244
–
–
–
–
–
–
–
–
–
30,000
27,470
30,000
60,088
4,195
47,900
30,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,467,917
172,485
3,713,026
30,000
27,470
30,000
60,088
4,195
47,900
n/a
Director
Peter Pritchard
Mike Iddon
Tony DeNunzio
Dennis Millard
Paul Moody
Stanislas Laurent
Sharon Flood
Prof Susan Dawson
Ian Burke
Zarin Patel
Shareholding as a % of salary has been calculated using the closing share price at year end on £3.614.
this represents the end of the audited section of the report.
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(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 FY22. This disclosure will be expanded in subsequent years in
line with the regulations.
220
200
180
160
140
120
100
80
60
40
March
2015
March
2016
March
2017
March
2018
March
2019
March
2020
March
2021
March
2022
— FTSE 250 — FTSE 350 General Retailers — Pets at Home
CEO
FY141
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
CEO single figure
of remuneration
Peter Pritchard 7
Ian Kellett 2
–
–
–
–
– 662,087 575,953 122,037
–
–
– 930,298
1,599,7108
2,140,916
1,831,435
n/a
n/a
n/a
n/a
n/a
n/a
Nick Wood 3
19,460 790,461
962,2244 129,696
n/a
n/a
Annual bonus
pay-out (as %
of maximum
opportunity)
Long-term incentive
vesting (as %
of maximum
opportunity)
Peter Pritchard
Ian Kellett
Nick Wood
Peter Pritchard
Ian Kellett
Nick Wood
–
–
–
–
–
–
73%
75%
60%
–
–
–
–
20.4%
–
–
–
– 16.8%6
n/a
n/a
96%4
–
–
–
75.8%
100%
100%
90.4%
n/a5
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
–
16.8%
100%
100%
100%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
1 In FY14, the single figure of remuneration relates to the period 17 March 2014 to 27 March 2014.
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 became 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 17 March and were made available on the first working day being the 18 March
2019. The value is based on the share price of 160p being the share price on 15 March 2019, being the last working day before the shares were released.
7 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.
8 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.
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Directors’ remuneration report continued
(i) Percentage change in remuneration of the Group ceo
The table below sets out the increase in total remuneration of the CEO and that of all colleagues for FY22:
Chief Executive
All colleagues 1
% Change in
base salary
FY21 to FY22
% Change in
bonus earned
FY21 to FY22
% Change
in benefits
FY21 to FY22
0%
7.3%
60.7%2
no change
-5.7%3
no change
1 All colleague information is presented by comparing the average annual bonus paid in FY21 to the average annual bonus paid in FY22 and includes colleagues who started
throughout FY22.
2 Although the wider colleague population bonus achieved was 90.4%, which was in line with the CEO’s achieved bonus, the CEO’s bonus earned has increased during FY22
as a result of the bonus maximum increasing from 100% to 170% in line with the policy approved in July 2020 but implemented in FY22.
3 The decrease in all colleague’s bonus earned is a result of the bonus outturn reaching 90.4% vs 100% in FY21.
The table below sets out the historical changes in CEO annual increase compared to those granted to all colleagues as previously
reported:
% Change in
base salary
FY16
% Change in
base salary
FY17
% Change in
base salary
FY18
% Change in
base salary
FY19
% Change in
base salary
FY20
% Change in
base salary
FY21
% Change in
base salary
FY22
Chief Executive
All colleagues
3%
3%
6.4%
2%
2%
2%
2%
2.51%
0%
2.78%
9.1%
4.83%
0%
7.3%
The 2017 CEO change reflects the appointment and promotion of Ian Kellett into the role of CEO replacing Nick Wood.
(j) relative importance of the spend on pay
The following table shows the relationship between the Group’s PBT, distributions to shareholders and the total remuneration paid
to all colleagues.
Underlying PBT1
Returned to shareholders:
Dividend
Payments to colleagues:
Wages and salaries
FY22
£m
144.72
FY21
£m
87.52
FY20
£m
93.5
FY19
£m
89.7
FY18
£m
84.5
FY17
£m
96.5
48.5
37.1
37.1
37.2
37.3
39.9
235.2
227.6
203.1
187.8
181.0
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.
2 Excluding the impact of the accounting policy change in relation to IAS38 Intangible Assets, our FY22 underlying pre-tax profit was £144.7m and the impact of the
accounting policy change was £14.6m. A reconciliation is set out below, with further detail provided in the CFO review.
FY22 Underlying pre-tax profit
FY21 Underlying pre-tax profit
Pre AP change
AP gross
Amortisation
saving
Net
Post AP
Change
£144.7m
£(24.0m)
£87.5m
£(15.4m)
£9.4m
£5.3m
£(14.6m)
£130.1m
£(10.1m)
£77.4m
(k) our ceo pay ratio FY22
This is our third year reporting our CEO pay 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.
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Ratio
CEO
25th%tile
Median
75th%tile
£550,000
£1,831,4351
£514,703
£2,140,916
£504,084
£1,599,710
26:1
88:1
26:1
106:1
30:1
90:1
22:1
72:1
22:1
88:1
27:1
78:1
17:1
52:1
17:1
69:1
23:1
59:1
FY22
Base Pay (FTE)
Single figure remuneration
FY21
Base Pay (FTE)
Single figure remuneration
FY20
Base Pay (FTE)
Single figure remuneration
Note: Ratios rounded to the nearest whole number.
1 The single figure remuneration number includes only the first 50% of the 2019 RSP award which will vest in full in 2022. The 25% tranches due to vest in 2023 and 2024
will lapse in full in line with the agreed leaver provisions for Peter Pritchard.
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. All of 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.
For FY22 the single figure remuneration number includes only the first 50% of the 2019 RSP award which will vest in full in 2022.
The 25% tranches due to vest in 2023 and 2024 will lapse in full in line with the agreed leaver provisions for Peter Pritchard. It
should also be noted that the bonus maximum has increased and the share price has decreased between FY21 and FY22. The LTIPs
in FY22 were calculated based on the closing share price on 31 March 2022 (financial year end) of £3.614 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 pay 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 Chair 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 from page 113 under the ESG
Committee report.
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 continues to come to fruition with our second RSP vesting last May.
The RSPs were offered to both salaried and hourly colleagues at all levels which resulted in enhancing colleague’s shareholdings or
creating new shareholders in over 4,700 of our colleagues. The next RSP awards will vest at the end of May 2022 which will further
enhance or create new shareholdings for over 4,800 colleagues.
We also granted a further 1.2m shares to 9,200 colleagues via the RSP in June 2021 which will vest in 2023.
Our 2018 Sharesave matured on 1 December 2021, generating a potential value of £14.7m, and a potential profit of £11.8m to
over 500 colleagues based on the closing share price on the maturity date of £4.6940.
The Executive Management Team and Board will continue to actively encourage engagement with our share plans and we see our
share schemes as a key differentiator in both attracting talent and aiding colleague retention. We granted a further offering of the
Sharesave scheme in September 2021, with a take up of 17.55%, 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 and second maturity of the RSP and a
successful 2018 Sharesave maturity which encouraged further colleague shareholder engagement last year.
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Directors’ Remuneration Report continued
Gender Pay Gap report
We published our Gender Pay Gap report on 1 April of this year. Our Group mean gender pay gap has reduced from 13.3%
to 12.5%. However, our median gender pay gap increased this year, this is mainly due to the investment in our data and digital
proposition due to these roles prominently being held by men.
In our 2020 Gender Pay Gap report, we included an additional ‘Normalised’ view, to incorporate colleagues who were on furlough
or shielding, as this heavily skewed our results. However, this year’s figures were not heavily impacted by this, so we did not include
this for our 2021 report. This does not include figures for our Joint Venture, veterinary partnerships since these are all individual
businesses owned by the veterinary partner(s) or The Vet Connection as their headcount is below 250 colleagues.
Each of our colleagues are accountable for embedding diversity and inclusion into everything we do, and we have focused on
encouraging colleagues to adopt an inclusive mindset. This year over 70% of our retail and store colleagues voluntarily completed
our bespoke new diversity and inclusion e-learning course.
Our newly appointed diversity and inclusion lead has worked with teams throughout our support office and operation to promote
and embed inclusive working practices.
We have inspired our colleagues through our diversity-themed Inspiring Fridays Talks, welcoming speakers including Clare Balding
and Wilfred Emmanuel-Jones (The Black Farmer) who shared their experiences of exclusion and the impact of changing mindsets.
For International Women’s Day, we were delighted to welcome Louise Watkins to talk to colleagues about her fabulous zigzag
career path embracing music and the humanities before taking up a tech-based role at Microsoft.
We’ve also heard from our own colleagues, including Board Member Zarin Patel who shared her career story and perspectives on
diversity and inclusion. Colleagues throughout our business have helped us mark national inclusive events during the year including
Pride month, International Men’s Day, International Day of Persons with Disabilities and a range of religious festivals.
During National Inclusion Week, we encouraged colleagues to think about everyday inclusion and respecting differences through
sharing ‘Three Words’ to describe themselves. We keep diversity and inclusion front of mind for our colleagues through our regular
diversity and inclusion newsletter and colleague updates on our Better Together weekly video.
The mean Gender Pay Gap is calculated on full time pay which is therefore not influenced by part time colleagues, whereas the
mean Gender Bonus Gap is actual bonus paid. If we have more females working part time, they will receive a smaller, pro-rated
bonus impacting the bonus mean. As we continue to encourage flexible working across all characteristics, we may find that the
bonus gap may increase. Our bonus gap results now include the first vesting of our Restricted Stock Plan (RSP) which was an
award to all colleagues of nil cost options subject to tax, essentially, free shares. Our first RSP vested in July 2020, which resulted
in enhancing or creating new shareholders in over 5,000 of our colleagues. However, this has impacted our bonus gender pay gap
results because higher value grants are given to colleagues in the most senior roles and more of these roles are held by men.
We are pleased to see improvement of more women in Quartile 4, our highest paid quartile for 2021.
We continued to publish reports for our Retail division (Pets at Home Limited), and our Vet division (Companion Care Services
Limited, which is our Vet Group Support Office).
Our actions in supporting internal development through our leadership programmes and our commitment to the ‘Be Inspired’
programme, 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 31 March 2022, the
Company’s dilution position was 1.89% for all plans and 1.25% 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.
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Statement of implementation for FY23
This section provides an overview of how the Committee is proposing to implement our Policy in FY23.
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 external impacts 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 from page 120 of the report. There are no proposed changes in the
benefits policy for FY23 other than anticipated standard inflationary increases on premiums.
Pensions
Pension contributions for the CFO have been reduced to a level of 6.5% of salary from the start of FY23 and pension contributions
for the incoming CEO are at a level of 6.5% of base salary in line with our Remuneration Policy.
annual bonus
The maximum annual bonus opportunity for Executive Directors in respect of FY23 will continue at 170% for the CEO and to 150%
for the CFO. A third of bonus will be awarded in shares in line with the bonus deferral policy. The shares will not be released until
a two-year holding period is complete. This will continue to remain in place in FY23. 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 119. As detailed on page 118 the target
metrics include FCF, PBT, strategic ESG measures linked to Pet Care Plan subscriptions and will continue to have an ESG underpin
which requires each Executive Director to complete a Better World Pledge Day.
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 FY23 following the preliminary results announcement at 100% of salary
for the CEO and 75% of salary for the CFO 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. Given recent share price performance, the Committee
considered whether a reduction to the grant level was required. Following a detailed discussion, the Committee concluded that a
reduction was not appropriate as it is firmly believed that the recent drag in the share price is a result of macro-economic factors
which do not reflect the strong and robust financial performance of the business given; record trading results, raised results
consensus throughout FY22, our total dividend for FY22 is 48% higher at 11.8p per share vs 8p in FY21 and, the circumstances
in Ukraine and macroeconomic challenges are creating a drag on share prices which most businesses are impacted by.
Sharesave
The Company intends to operate the Sharesave scheme again for FY23. 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 have been any changes in the market since the fees were set in 2014. The table below shows the Non-Executive
Director fee structure for FY23 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.
FY23
£200,000
£50,000
£10,000
£20,000
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Directors’ remuneration report continued
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 FY22 amounted to £57,850 (FY21: £57,030) based on the required time commitment.
During FY22 the Committee also received support from Travers Smith LLP on the terms of the discretionary and all-
colleague share plans.
committee membership and meetings
The Directors listed below in the table served on the Committee during the year. The Committee met four times during FY22 and
the Committee members’ attendance is also shown in the table below:
Member
Dennis Millard
Sharon Flood (Chair)
Prof Susan Dawson
Zarin Patel
Period from
To
26 March 2021
31 March 2022
26 March 2021
31 March 2022
26 March 2021
31 March 2022
14 April 2021
31 March 2022
Meetings
attended
3/3
3/3
3/3
3/3
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
Louise Stonier
Peter Pritchard
Mike Iddon
Lucy Williams
Stanislas Laurent
Karen Whitworth
Ian Burke
Amy Smith
Position
Chief People and Culture Officer
CEO
CFO
Group Legal Director and Company Secretary
Non-Executive Director
Non-Executive Director
Chair of the Board
Group Head of Reward
Jessica Norton (Willis Towers Watson)
Laura O’Kane (Willis Towers Watson)
Willis Towers Watson Director, Executive Compensation
Willis Towers Watson Senior Director
None of the individuals were involved in making decisions at meetings regarding their own compensation.
Governance
The Board and the Committee consider that, throughout FY22 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.
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Shareholder voting
At the Annual General Meeting on 8 July 2021, the total number of shares in issue with voting rights was 500,000,000.
The resolution to approve the Directors’ Remuneration Report received the following votes from shareholders:
ordinary resolutions
to approve the Directors’ remuneration report for the year ended 31 march 2021
Votes for1
%2
Votes against
%
Votes total
% of isc3
Votes withheld4
385,572,259
96.68
13,251,020
3.32
398,823,279
79.76
27,377
1 Votes ‘for’ include discretionary votes.
2 Percentages above are rounded to two decimal places.
3 Issued share capital at meeting date: 500,000,000.
4 A vote withheld is not a vote in law and is not counted in the calculation of the proportion of votes ‘for’ and ‘against’ a resolution.
annual General meeting
As set out in my statement on page 118, our Directors’ Remuneration Report will be subject to an advisory vote at our AGM to be
held on 7 July 2022.
On behalf of the Board
Sharon Flood
chair of the remuneration committee
25 May 2022
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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.
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.
Pets at Home Group Plc
registered number:
registered office:
telephone number:
Date of incorporation:
country of incorporation:
type:
Statutory information
amendment of the articles
appointment and removal of Directors
Board of Directors
Branches outside of the UK
change of control
colleague engagement
8885072
Epsom Avenue, Stanley Green Trading Estate, Handforth, Cheshire, SK9 3RN
+44 161 486 6688
10 February 2014
England and Wales
Public Limited Company
Section heading
Directors’ Report
Directors’ Report
Directors’ Report
Board of Directors
Directors’ Report
Directors’ Report
Strategic Report – Social Value
Directors’ Report
colleague Diversity and Disabilities
Directors’ Report
colleague Share ownership and Plans
community
compensation for loss of office
Directors’ Biographies
Directors’ information to auditors
Directors’ insurance and indemnities
Directors’ interests
Directors’ responsibility Statement
executive Share Plans
Financial instruments
Directors’ Remuneration Report
Strategic Report – Social Value
Directors’ Report
Board of Directors
Directors’ Report
Directors’ Report
Directors’ Report
Directors’ Report
Directors’ Remuneration Report
Note 23 to the consolidated financial statements
Future Developments of the Business
Strategic Report
Financial position of the Group, its cash flows,
liquidity position and borrowing facilities
Chief Financial Officer’s review
Greenhouse Gas emissions
Strategic Report- Social Value
Going concern
Health and Safety
Directors’ Report
Directors’ Report
Strategic Report – Social Value
Human rights and modern Slavery Statement
Directors’ Report
independent auditors
internal controls and risk management
Political Donations
Profits and Dividend
Post Balance Sheet events
Directors’ Report
Audit and Risk Committee Report
Governance Report
Directors’ Report
Directors’ Report
Directors’ Report
Pets at Home Group Plc Annual Report & Accounts 2022
Page number
146
143
143
88 – 89
149
149
42 – 61
142
142
142
42 – 61
144
88 – 89
150
144
144
151
119 – 128
204
35 – 85
62–67
42 – 61
148
146
42 – 61
147
150
107 – 112
86 – 106
146
146
146
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141
Statutory information
Section heading
Page number
Powers for the company to issue or buy back its shares
Directors’ Report
Powers of the Directors
Principal activities
research and Development
restrictions on transfer of securities
Stakeholder engagement
Share capital
Significant related party transactions
Directors’ Report
Directors’ Report
Directors’ Report
Directors’ Report
Directors’ Report
Note 22 to the consolidated statements
Directors’ Report
Note 27 to the consolidated statements
Strategic Report – Stakeholder engagement
32 – 35
Significant Shareholders
Directors’ Report
Subsidiary and associated Undertakings
Note 28 to the consolidated statements
Statement of corporate Governance
the audit and risk committee report
the Governance report
the Directors’ remuneration report
Directors’ Report
Governance Report
Governance Report
Governance Report
the nomination and corporate Governance committee report Governance Report
Strategic report
treasury and risk management
viability Statement
voting rights
Strategic Report
Strategic Report
Directors’ Report
Directors’ Report
145
144
141
141
145
144
203
146
220
145
221
150
107 – 112
90 – 103
115 – 140
104 – 106
08 – 85
72 – 85
147
144
Disclosures required under listing rule 9.8.4r
In accordance with Listing Rule 9.8.4C, the information required to be disclosed in the Annual Report under Listing Rule 9.8.4R is
disclosed on the following pages of this Annual Report:
Disclosure
long-term incentive schemes
Significant contracts
Dividend waivers
Page number
125
149
Note 9 to the consolidated
financial statements
Principal activities
The principal activity of the Group is that of a specialist omnichannel retailer of pet food, pet related products and pet accessories.
The Group is also 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 (pages 68-86) out the innovation carried out by the Group in relation to product and service development.
During 2021 the UK cat population experienced a distressing spike in pancytopenia cases but following investigations by the Food
Standards Agency, supported throughout by Pets at Home, disappointingly a definitive cause was not identified. As a result, we
launched a £100,000 feline pancytopenia research fund to accelerate investigations into, and improve understanding of, this
distressing disease. The application process is currently under way and will close at the end of May 2022.
Our understanding of the pets we sell in store is continually expanding and, to accelerate our knowledge of the welfare of these
pets, we intend to fund a Senior Clinical Training Scholarship (Residency) in Small Mammal Medicine and Surgery at the University
of Edinburgh School of Veterinary Studies. A clinical research project will form part of the agreement and it is expected the position
will run for four years from September 2022.
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Directors’ report continued
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
fund a two-year epidemiological study of interventions to improve antibiotic stewardship in veterinary practice, which is now
underway. In addition, the group are developing support for their own veterinary professionals to conduct research projects in
practice, which will launch in the Autumn of 2022.
colleague engagement
We continue to recognise how we engage with our colleagues is crucial to the success of our business and our vision. Being seen
to act upon their feedback is a critical driver for building trust in us and this serves to build our employer brand externally as well
as internally. Engaging with our colleagues also provides us with opportunities to identify potential operational efficiency
improvements, new growth opportunities as well as getting that vital ‘on the ground view’ coming through.
We recognise we need to have multiple channels for colleagues to engage with us and each other and not one size fits all.
Highlights for this year include running our third Group wide listening survey which for the second year running had a focus on
wellbeing. We continue to have ‘ask’ email addresses to both our Retail and Vet Group COO’s where colleagues can send in any
ideas or feedback they have on any area of the business. Sharon Flood is the appointed Board representative for wider colleague
engagement to ensure our colleagues are heard by the Board. ‘Tuned in’ listening sessions were held in June, September and
March and these were attended either by Ian Burke, Sharon Flood or Dennis Millard.
Our new colleague intra-net provides further opportunities to engage with colleagues across the Group through formal and
informal communications. Our weekly ‘Better Together’ videos which are led by a Group Executive management team member
allow us to share news, stories and key business successes and focuses across the whole Group. We have run 5 virtual ‘Inspiring
Friday’ events which are open to all colleagues and are an opportunity for colleagues to hear from internal and external role
models to help inspire them in their careers and daily lives.
We launched a profession wide listening survey to the Vet profession to challenge the status quo and strive for a better working
environment for all colleagues and veterinary teams within our profession. A follow-on Project Action has now launched which
is sharing the output and our commitments for action from the survey.
Further information on colleague engagement is included in the Social Value section of this report on pages 42 to 61 and in our
separate social value report held on our website.
colleague share ownership and plans
This pillar of our engagement strategy continued this year with the maturity of the second RSP which is offered to all eligible salaried
and hourly colleagues at all levels.
– Our second RSP vested in May 2021, which resulted in enhancing or creating new shareholders in 4,700 of our colleagues.
The next RSP awards will vest at the end of May 2022 which will further enhance or create new shareholdings for over
–
4,600 colleagues.
– We also granted a further 1.2m shares to 9,200 colleagues via the RSP in June 2021.
– All eligible colleagues will receive an award again in May/June 2022.
– We had a further offering of the sharesave scheme in September 2021, with our highest take up (excluding the year of IPO)
of 17.55%.
Further details of the Group’s colleague share plans are contained in the Directors’ Remuneration Report on page 135.
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. We continue to be 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
Social Value Report.
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We have once again published a combined Group figure for gender pay, excluding the Joint Venture Partners. In our 2020 report we
included an additional ‘normalised’ view, to incorporate colleagues who were on furlough or shielding, as this heavily skewed our
results. However, this year’s figures were not heavily impacted by this, so we only reported one set of figures.
Our Group mean pay gap reduced, however our median pay gap has increased. This is mainly due to the investment in our data
and digital proposition as these roles are predominantly held by men. There were more women in 2021 in our highest paid quartile.
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 continued to deliver our diversity and inclusion strategy supported by our CEO-led Diversity and Inclusion
leadership forum. The views of our colleagues have and will continue to inform our objectives and approach and our four colleague
network groups have delivered twelve different ‘Lunch and Learn’ sessions sharing the experiences and insights of colleagues with
different diverse characteristics.
Over 70% of our retail and store colleagues voluntarily completed our e-learning diversity and inclusion training which was rolled
out to colleagues from June 2021. We are asking all colleagues to incorporate inclusion into their objectives for the coming year
and we have launched a new diversity and inclusion policy and inclusion commitments, to help every colleague understand the
contribution they can make and how we will support them.
Along with our external commitments, sharing experience and knowledge around diversity and inclusion within the retail sector
and beyond is a key part of our approach and we have once again partnered with Retail Week’s Be Inspired campaign and a
further 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
Dennis Millard
Mike Iddon
Sharon Flood
Stanislas Laurent
Peter Pritchard
Susan Dawson
Ian Burke
Karen Whitworth
Zarin Patel
Date of appointment
Date of resignation
18 February 2014 (reappointed)
17 October 2016 (reappointed)
25 May 2017 (reappointed)
25 May 2017 (reappointed)
27 April 2018 (reappointed)
12 July 2018 (reappointed)
27 March 2020 (reappointed)
9 July 2020
14 April 2021
n / a
n / a
n / a
n / a
n / a
n / a
n / a
20 May 2021
n/a
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 succeeded Karen as Chair of
the Audit and Risk Committee.
On 3 November 2021, we announced that after eleven years in the business, Peter Pritchard considered it an appropriate time to step
down from his role as Chief Executive Officer and director of the Company with effect from late May 2022. On 7 February 2022,
we announced the appointment of Lyssa McGowan as Group Chief Executive Officer with effect from 1 June 2022. Lyssa was
appointed to the Board as CEO Designate on 25 April 2022 prior to her appointment as CEO on 1 June 2022 and Peter will
remain with the business until 31 May 2022 to ensure a seamless transition.
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 reappointment.
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.
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Directors’ report continued
Vacation of office: The office of a Director shall be vacated if (amongst other circumstances): (i) he/she is prohibited by law from
being a Director; (ii) he/she resigns; (iii) his/her resignation is requested by all of the other Directors; (iv) he/she is or has been
suffering from mental or physical ill health and the Board resolves that his/her office be vacated; (v) he/she is absent without the
permission of the Board from meetings of the Board (whether or not an alternate Director appointed by him/her attends) for six
consecutive months and the Board resolves that his/her office is vacated; (vi) he/she becomes bankrupt; (vii) he/she ceases to be
a Director by virtue of the Companies Act; or (viii) he/she 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 132.
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 25 May 2022 (being not more than one month prior to the date of the Notice of Annual General Meeting), there have
been no changes to such interests.
In line with the requirements of the Companies Act, each Director has notified the Company of any situation in which he or she has,
or could have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the Company (a situational
conflict). These were considered and approved by the Board in accordance with the Articles and each Director informed of the
authorisation and any terms on which it was given. The Board has formal procedures to deal with Directors’ conflicts of interest
as and when they arise. The Board reviews and, where considered appropriate, approves situational conflicts of interest that were
reported to it by Directors and a register of those situational conflicts is maintained by the Company. The register is reviewed by
the Board on an ongoing basis.
compensation for loss of office
The Company does not have any agreements with any Director or colleague that would provide compensation for loss of office
or employment (whether through resignation, redundancy or otherwise) resulting from a takeover bid except that it should be
noted that provisions of the Company’s share schemes may cause options and awards granted to Directors or colleagues under
such schemes to vest on a takeover. For further information on the change of control provisions in the Company’s share schemes
refer to the Directors’ Remuneration Report on page 125.
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 31 March 2022 was 500,000,000 Ordinary Shares of 1 pence each. As at 25 May
2022, 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 in
note 22 to the Group’s financial statements.
There have been no movements in the Company’s issued share capital in the 2022 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.
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Powers for the company to issue shares: The Directors were granted authority at the previous Annual General Meeting on
8 July 2021 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 7 July 2022 (or, if earlier, until the close of business on 7 October 2022). 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 8 July 2021 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 2021 Annual General Meeting, seek to renew these powers at the 2022 Annual
General Meeting.
Powers for the company to buy back its shares: The Company was authorised by its shareholders on 8 July 2021, at the
2021 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 2022 Annual General Meeting to be held on 7 July 2022. 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.
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 31 March 2022, 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
BlackRock Inc
JPMorgan Asset Management Holdings Inc
Jupiter Fund Management Plc
Number of
Ordinary Shares
as at 31 March 2022
Percentage of issued
share capital (%)
Nature of holding
(direct/indirect)
49,931,817
37,216,703
25,378,629
23,698,827
9.99%
7.44%
5.08%
4.73%
Indirect
Indirect
Indirect
Indirect
Pets at Home Group Plc Annual Report & Accounts 2022
146
Directors’ report continued
No changes have been disclosed in accordance with Disclosure Guidance and Transparency Rule 5.1.2R in the period between
1 April 2022 and 19 May 2022 (being not more than one month prior to the date of the Notice of Annual General Meeting).
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 £124.5m (FY21 restated: £90.4m). The results
are discussed in greater detail in the Chief Financial Officer’s review on pages 62 to 67.
A final dividend of 7.5 pence per ordinary share (FY21: 5.5 pence per ordinary share) will be recommended to the Company’s
shareholders in respect of the 2022 financial year. The final dividend will be proposed by the Directors at the 2022 Annual General
Meeting on 7 July 2022 in respect of the financial year ended 31 March 2022 to add to an interim dividend of 4.3 pence per
ordinary share paid on 7 January 2022 (FY21: 2.5 pence per ordinary share).
The Directors’ proposed final dividend of 7.5 pence per ordinary share takes the total dividend payable in respect of the 2022
financial year to 11.8 pence per ordinary share. The ex-dividend date will be 16 June 2022 and, subject to shareholder approval
being obtained at the 2022 Annual General Meeting, the final dividend of 7.5 pence per ordinary share will be payable on 12 July
2022 to shareholders on the register at the close of business on 17 June 2022.
Political donations
The Group made no political donations and incurred no political expenditure during the year (FY21: 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 FY22 were 53 days (FY21: 50 days).
Post balance sheet events
There are no post balance sheet events that are non-adjusting requiring disclosure.
Going concern
The unprecedented uncertainty created by COVID-19, along with current geopolitical instability, inflationary pressures, economic
uncertainty and the potential impacts of climate change as noted in our TCFD scenario analysis, make it challenging 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, the impact of geopolitical instability on our supply chains, the impact of inflationary
pressures and the considerations from our TCFD scenario analysis are discussed in detail in the Chief Executive Officer’s statement on
pages 62 to 67. The basis of preparation and going concern assessment can be found within note 1 to the financial statements.
Pets at Home Group Plc Annual Report & Accounts 2022
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147
viability statement
The Group has developed a detailed strategic and business planning (‘SBP’) process, which comprises a strategic plan (Strategic Plan)
containing financial projections and a Business Plan which forms a detailed near term one-year plan for the upcoming financial year.
The SBP process produces standard outputs in respect of the key financial performance metrics of the Group which deliver
consolidated financial plans at both Group level and at a number of levels within the Group. The Strategic Plan is reviewed each
year by the Board as part of the strategy review process. Once approved by the Board, the Strategic Plan is cascaded across the
Group and provides the basis for setting all detailed financial budgets and strategic actions that are subsequently used by the
Board to monitor performance.
The SBP process covers a five-year period. The five-year plan provides a robust planning tool against which strategic decisions can
be made. In making their viability assessment, the Board has taken into consideration that financing facilities are maintained for
the duration of the Strategic Plan and the potential impact of COVID-19, geopolitical instability, inflationary pressures and climate
change 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 72 to 85 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 457 stores, many of which also have vet practices and grooming
salons. Pets at Home also operates a UK-leading small animal veterinary business, supporting 443 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 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.
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 include a right for Pets at Home to conduct audits on supplier compliance.
Our Group Whistleblowing policy promotes vigilance amongst colleagues and encourages central reporting of concerns about
any issue or suspicion in any parts of our business or supply chain.
Pets at Home Group Plc Annual Report & Accounts 2022
148
Directors’ report continued
Greenhouse Gas emissions
The Group has calculated its greenhouse gas emissions since 2016. We report our seven-year performance for our scope 1 and
scope 2 emissions:
Scope 1 and 2 carbon emissions 7 year performance tonnes co2 e emissions
tonnes co2e emissions
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
FY18
9,649
21,584
31,233
FY19
8,431
17,066
25,497
-7% -19% -18%
FY20
12,085
15,133
27,218
7%
FY21
11,337
13,616
24,953
-8%
FY22
12,558
12,610
25,168
1%
834
7.1%
899
7.8%
961
1,059
6.9% 10.2%
1,318
1,143
7.9% 15.3%
46.1
19.1
-13.0% -25.0% -24.0% -3.0% -15.0% -12.5%
26.5
21.8
25.7
35.1
FY22
vs FY16
32%
-60%
-39%
69%
-64%
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, FY21 and FY22 only. 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.
Our scope 1 emissions were 12,558 and have increased by 11% 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 57% of Scope 1 emissions and
23.3% of total emissions. Eliminating these scope 1 emissions remains the most significant challenge we face in terms of further reducing our operational impact. For that
reason, we are closely monitoring the development of new technologies that will reduce the emissions associated with distributing our products.
As part of our social value strategy, 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 1.5°C above pre-industrial times by 2050. We have submitted
for SBTi review and approval, a near term 2030 target to reduce our scope 1, 2 and 3 emissions by 42% vs our 2020 base on our
pathway to the net zero goal. To achieve these goals, we have started to work with our suppliers to support them to set their
carbon reduction goals
methodology
We have calculated and reported our emissions in line with the GHG Protocol Corporate Accounting and Reporting Standard
as the combined Group. We have reported all of the emissions required under the Companies Act 2006 (Strategic Report and
Directors’ Reports) Regulations 2013. We have used emission factors from the UK Government’s GHG Conversion Factors for
Company Reporting 2021, and IEA 2020 for those overseas. The Group’s operations are based in the UK except for a small office
in Hong Kong. Therefore less than 0.1% of total scope 1 and 2 emissions and KWh are from outside the UK. The reporting period
is the financial year 2021/22, the same as that covered by the Annual Report and Accounts. The boundaries of reporting are
operational control. Overall emissions have been presented to both reflect location and market-based methodologies. Since 2017
the Group has purchased 100% renewable electricity backed by REGOs and assessed for conformance to the GHG Protocol Scope 2
quality criteria. An emissions factor of zero has 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 emissions.
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149
The following table compares scope 1 and 2 and a small element of scope 3 Greenhouse gas emissions for 2021/22 and 2020/21
carbon emissions summary by Scope 2021/22
Scope 1
Scope 2
Scope 3
Total
tonnes co2e emissions
2020/21 (scope 2
location-based)
11,337
13,616
4,697
29,651
2021/22 (scope 2
location-based)
12,558
12,610
5,453
30,621
2021/22 (scope 2
market-based)
12,558
173
5,453
18,184
Inclusion of 2,000 tonnes of carbon mitigation
Scope 1 and Scope 2 kWh
Normalisation of CO2e to £m revenue
• methodology: We have applied UK SECR and WBCSD/WRI Greenhouse Gas Protocol Corporate Standard as our methodology. We have used emissions factors from UK
28,621
96,425,923
19.1
90,400,963
21.8
16,184
Government 2021 conversion factors, IEA 2019 for international sites and AIB residual mix from 2020.
• methodology: An operational control approach has been used for the organisational boundary. This is the same as last year 2020/21.
• additional inclusions: We have included the emissions from our stand-alone vet practices and referral centres.
• 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 2021/22 scope 1,2 and some scope 3 emissions (3rd party diesel, electricity t&d losses and 3rd party business travel). Please refer to page
69 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 £50,000 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 2,000
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 8,533 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.
actions to reduce our operational energy impact
We will continue to identify opportunities to reduce GHG usage and to increase energy efficiencies. In financial year 2021–22,
projects we have implemented include:
–
testing energy reducing initiatives in our new Brighton pet care centre to assess viability for including them in future new pet
care centres;
installing LEDs into 100% of pets at home stores and office;
–
– Group scope 1 & 2 carbon emissions intensity measured against revenue improved by 12.5% to 19.1 compared to 21.8 last
year;
– Group absolute scope 1 and 2 location-based carbon emissions grew by 1% compared to last year during which period sales
revenue grew by 15.3%; and
– Group absolute scope 1 and 2 location-based carbon emissions reduced by 39% against our 2015/16 base, a period in which
sales revenue grew by 69%.
Branches outside of the UK
The Company has no branches outside of the UK.
change of control
The only significant agreements to which the Company is a party that take effect, alter or terminate upon a change of control
of the Company following a takeover bid, and the effect thereof, are as follows:
– On 29 March 2022, the Group entered into a senior facilities agreement with a total facility amount of £300m. This senior
facilities agreement expires on 29 March 2027 (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.
Pets at Home Group Plc Annual Report & Accounts 2022
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Directors’ report continued
–
The Company’s subsidiary, Companion Care (Services) Ltd (CCSL), has an existing facility agreement dated November 2020
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 also has an agreement with Lloyds dated May 2021 and, along with Vet4Pets Limited (V4P),
a further facility with HSBC dated April 2021. Both HSBC and Lloyds facilities are capable of being reborrowed and contain
clauses that vary the maximum facility limits over their availability periods. As at 31 March 2022, the maximum facility limit
on the Lloyds and HSBC facility agreements were £20m and £15m respectively. Both of these facility agreements have a
two-year availability period with a possible one-year extension, being at the discretion of the lender. The option to extend has
been submitted for both of the Lloyds and HSBC facilities. Taken together these facilities will provide funding for the Group’s
Joint Venture First Opinion practices over the next two 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 guarantee.
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 88 to 89) 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 reappointed as auditor of the Company at the 2021
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 reappointment of KPMG LLP as auditor of the Company and to authorise the Directors to determine their
remuneration will be proposed at the 2022 Annual General Meeting as set out in the Notice of Annual General Meeting.
For further information on the reappointment of the auditors, refer to page 112 of the Audit and Risk Committee Report.
corporate Governance Statement
The Corporate Governance Report on pages 90 to 103 is hereby incorporated by reference into this Directors’ Report and includes
details of compliance with the Code. A description of the main features of our internal control and risk management arrangements
in relation to the financial reporting process is set out on page 108 to 111. The information required under DTR 7.2.6R can be
found in the Governance section of this Annual Report. A description of the Board composition, operation and its Committees,
including diversity matters is set out on pages 88 to 103. The Code can be viewed on the FRC’s website at frc.org.uk
approval of annual report
The Strategic Report, Corporate Governance Statement and the Governance Report were approved by the Board on 19 May 2022.
This Directors’ Report was approved by the Board on 19 May 2022 and signed on its behalf by:
lucy Williams
Group legal Director and company Secretary
25 May 2022
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Financial StatementS
Statement of Directors’ responsibilities in respect
of the annual report and the Financial Statements
151
The Directors are responsible for preparing the Annual Report
and the Group and parent Company financial statements in
accordance with applicable law and regulations.
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 and reliable;
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 to liquidate the Group or the parent Company
or to cease operations, or have no realistic alternative but
to do so.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the parent
Company’s transactions and disclose with reasonable accuracy
at any time the financial position of the parent Company and
enable them to ensure that its financial statements comply
with the Companies Act 2006.
They are responsible for such internal control as they determine
is necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to fraud
or error, and have general responsibility for taking such steps
as are reasonably open to them to safeguard the assets of the
Group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, Directors’ Report,
Directors’ Remuneration Report and Corporate Governance
Statement that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company’s website. Legislation in the UK governing the
preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
In accordance with Disclosure Guidance and Transparency Rule
4.1.14R, the financial statements will form part of the annual
financial report prepared using the single electronic reporting
format under the TD ESEF Regulation. The auditor’s report on
these financial statements provides no assurance over the
ESEF format.
responsibility statement of the Directors
in respect of the annual financial report
We confirm that to the best of our knowledge:
–
the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair
view of the assets, liabilities, financial position and profit
or loss of the Company and the undertakings included
in the consolidation taken as a whole; and
the Strategic Report includes a fair review of the
development and performance of the business and the
position of the issuer and the undertakings included in the
consolidation taken as a whole, together with a description
of the principal risks and uncertainties that they face.
–
We consider the Annual Report and Accounts, taken as a
whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Group’s
position and performance, business model and strategy.
Approved by the Board and signed on its behalf by:
Peter Pritchard
Group chief executive officer
25 May 2022
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152
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 31 March 2022
Consolidated statement of changes in equity
as at 25 March 2021
Consolidated statement of cash flows
Company balance sheet
Company statement of changes in equity as at
31 March 2022
Company statement of changes in equity as at
25 March 2021
Company statement of cash flows
Notes (forming part of the financial statements)
Glossary – Alternative Performance Measures
Advisors and contacts
153
160
160
161
162
162
163
164
165
165
166
167
232
239
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FiNaNciaL StateMeNtS
independent auditor’s report to the members
of Pets at Home Group Plc only
153
1. our opinion is unmodified
We have audited the financial statements of Pets at Home
Group Plc (‘the Company’) for the 53 weeks ended 31 March
2022 which comprise the Consolidated income statement,
Consolidated statement of comprehensive income, the
Consolidated balance sheet, the Consolidated statement of
changes in equity, the Consolidated statement of cash flows,
Company balance sheet, the Company statement of changes
in equity, the Company statement of cash flows, 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 31 March 2022 and of the Group’s profit for the
53 week period then ended;
the Group financial statements have been properly
prepared in accordance with UK- adopted international
accounting standards;
the parent Company financial statements have been
properly prepared in accordance with UK- adopted
international accounting standards 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.
–
–
–
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 9 financial years ended 31 March 2022.
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
event driven
Parent company
key audit matter
£6.5m (2021:£3.75m)
5% (2021: 4.3% of Underlying
profit before tax
98% (2021: 93% of underlying
Group profit before tax
vs 2021
–
Carrying value of Vets
Group CGU Goodwill
new: Accounting
treatment of costs
related to cloud-
based software
arrangements
Carrying value of
parent Company’s
investment in
subsidiaries
Pets at Home Group Plc Annual Report & Accounts 2022
154
independent auditor’s report to the members
of Pets at Home Group Plc only continued
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.
We continue to perform procedures over operating loans to joint venture practices. However, there is no longer a risk that the
potential range of reasonable outcomes for the calculation of the expected credit loss is greater than materiality and 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 as
a key audit matter in our report this year.
the risk
our response
carrying value of vet
Group cGU Goodwill
(£362m; 2021: £361m)
Refer to page 112
(Audit and Risk
Committee Report),
page 178 (accounting
policy) and page 192
(financial disclosures).
Forecast based assessment:
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 cash flows, which form
the basis of the value in use
calculation.
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.
We performed the tests below rather than seeking to rely
on any of the Group’s controls because the nature of the
balance is such that we would expect to obtain audit
evidence primarily through the detailed procedures
described.
our procedures included:
n re-performance: we re-performed the calculations
performed for determining the value in use and
compared data used in the model against
source information, where applicable.
n Historical comparison: we assessed the
reasonableness of the Vet Group’s budgets by
considering the historical accuracy of previous
forecasts.
n Benchmarking assumptions: we used our
own internal discount rate tools to assess the
reasonableness of Vet Group’s discount rate by
comparing the Group’s assumptions to externally
derived data.
n our sector experience: we assessed 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 and for consistency with industry and
analyst reports.
n Sensitivity analysis: we performed sensitivity analysis
on the key assumptions and checked whether the
directors have identified plausible worst case
scenarios in their own sensitivity analysis.
n assessing transparency: we assessed whether the
disclosures about the impairment testing appropriately
reflect the risks inherent in the assessment of the
recoverability of Vet Group goodwill.
our results
n We found the Group’s conclusion that there is no
impairment of the Vet Group CGU goodwill to
be acceptable (2021: acceptable).
Pets at Home Group Plc Annual Report & Accounts 2022
StrateGic rePort
Governance
FiNaNciaL StateMeNtS
155
the risk
our response
accounting treatment of
costs related to cloud-
based software
arrangements
Costs related
to cloud-based
software £24.0m
(2021 restated: £15.4m)
Refer to page 110
(Audit and Risk
Committee Report),
page 172 (accounting
policy) and pages 192
(financial disclosures).
accounting treatment:
Previously, the Group capitalised
certain internal and external
costs in respect of cloud-based
software arrangements. In April
2021 the IFRS Interpretations
Committee (‘IFRIC’) published
an agenda decision in relation to
configuration and customisation
expenditure relating to cloud
computing arrangements,
including Software-as-a-Service
(SaaS). Following the interpretation
being published, the Group has
now reviewed and revised its
accounting policy in relation to
IAS38 Intangible Assets, which
includes accounting for such
SaaS arrangements.
The risk is that the accounting
policy change is not appropriately
applied to nor appropriately
disclosed in relation both the
current and prior financial years.
carrying value of the
parent company’s
investments in
subsidiaries
£936.2m (2021: £936.2m)
Refer to page 110
(Audit and Risk
Committee Report),
page 170 (accounting
policy) and page 221
(financial disclosures).
low risk, high value
The carrying amount of the
parent Company’s investments
in subsidiaries represents 60.8%
(2021: 61.3%) 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.
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:
n assessing accounting policy: we assessed the
accounting clarification of the IFRIC April 2021
agenda decision against the proposed change
in the Group’s accounting policy.
n test of detail: we agreed a sample of costs related
to cloud-based software arrangements to supporting
documentation and other relevant project information
to understand the nature of the items and considered
this against the accounting standards and related
interpretations.
n Personnel enquiries: we made enquiries with
selected employees who were assigned to projects
to corroborate the nature of the work performed
and considered this against the accounting standards
and related interpretations.
n assessing transparency: we assessed the adequacy
of the Group’s related disclosures in respect of the
change in accounting policy and the judgements
taken by the directors.
our results:
n We found the accounting treatment of costs related to
cloud-based software arrangements to be 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:
n tests of detail: we compared the value of
investments to the market capitalisation as at the
period end date and post period end.
n tests of detail: we obtained the directors’ view on
impairment of investments and checked whether this
is consistent with our audit testing.
n comparing valuations: for the investments where
the carrying amount exceeded the net asset value, we
compared the carrying amount to the VIU calculation
prepared by the directors in relation to the goodwill
impairment; and assessed the accuracy of the key
inputs into the VIU calculations.
n Sensitivity analysis: we performed sensitivity
analysis on the key assumptions and checked whether
the directors have identified reasonably possible
downside scenarios in their own sensitivity analysis.
our results:
n We found the Company’s conclusion that there is no
impairment of its investments in subsidiaries to be
acceptable (2021 result: acceptable).
Pets at Home Group Plc Annual Report & Accounts 2022
156
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
Materiality for the Group financial statements as a whole was
set at £6.5m (2021: £3.75m), determined with reference to a
benchmark of Group profit before tax normalised to exclude
this year’s non-underlying items as disclosed in note 3, of £130.1m
(2021: £87.5m prior to restatement) of which it represents 5%
(2021: 4.3%). We consider normalised Group profit before tax
to be the most appropriate benchmark as it provides a more
stable measure year on year than Group profit before tax.
Materiality for the parent Company financial statements as
a whole was set at £2.9m (2021: £1.8m), determined with
reference to a benchmark of parent Company total assets,
of which it represents 0.19% (2021: 0.12%).
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% (2021:75%) of
materiality for the financial statements as a whole, which
equates to £4.8m (2021: £2.8m) for the Group and £1.7m
(2021: £1.4m) for the parent Company. We applied this
percentage in our determination of performance materiality
because we did not identify any factors indicating an
elevated risk.
We agreed to report to the Audit Committee any corrected
or uncorrected identified misstatements exceeding £0.325m
(2021: £0.18m), in addition to other identified misstatements
that warranted reporting on qualitative grounds.
We were able to rely upon the Group’s internal control over
financial reporting in several areas of our audit, where our
controls testing supported this approach, which enabled
us to reduce the scope of our substantive audit work; in
the other areas the scope of the audit work performed
was fully substantive.
Of the Group’s 8 (2021: 8) reporting components, we subjected 3
(2021: 4) to full scope audits for Group purposes. For the residual
5 (2021:4) 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 underlying 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 (2021: 1 of the 8 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 £2.9m to £6.24m (2021: £1.3m to £3.5m), having
regard to the mix of size and risk profile of the Group across
the components.
Pets at Home Group Plc Annual Report & Accounts 2022
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 below.
Normalised Group
profit before tax
£130.1m (2021: £87.5m)
Group
materiality
£6.5m (2021: £3.75m)
£6.5m
Whole financial
statements materiality
(2021: £3.75m)
£4.875m
Whole financial
statements performance
materiality (2021: £2.8m)
£6.24m
Range of materiality
at 3 components
(£2.9 to £6.2m)
(2021: £1.3m to £3.5m)
£0.325m
Misstatements reported
to the audit committee
(2021 £0.18m)
l Normalised PBT
l Group materiality
Group revenue
Group profit before tax
0
3
100%
(2021: 97%)
97
100
12
7
88%
(2021: 93%)
93
88
Group total assets
Normalised group
profit before tax
2
1
98%
(2021: 99%)
99
98
2
7
98%
(2021: 93%)
93
98
l Full scope for Group audit purposes 2022
l Residual components 2022
l Full scope for Group audit purposes 2021
l Residual components 2021
STRATeGIc RePORT
GOveRNANce
Financial StatementS
157
4. The impact of climate change on our audit
In planning our audit, we have performed a risk assessment of
the potential impact of risks arising from climate change on the
business and the impact of the commitments made by the Group
on the financial statements. We held discussions with our own
climate change professionals to challenge our risk assessment.
Based upon this risk assessment, we concluded that climate
risk has no material effect on the financial statements due
to the nature of the Group’s current business operations and,
in particular, the headroom between the carrying value and
recoverable amount of goodwill and parent Company
investment in subsidiaries.
There was no impact of climate change on our key audit
matters included in section 2.
We have read the disclosure of climate change in the front
half of the annual report and considered consistency with
the financial statements and our audit knowledge.
5. 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 parent Company or to cease their operations,
and as they have concluded that the Group’s and the parent
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”).
We used our knowledge of the Group, its industry, and the
general economic environment to identify the inherent risks
to its business model and analysed how those risks might affect
the Group’s and parent 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 parent Company’s available financial resources and/or
metrics relevant to debt covenants over this period were:
the impact of inflation on the Group’s cost base; and
–
failure to meet sales growth targets.
–
We considered whether these risks could plausibly affect
liquidity or covenant compliance in the going concern
period by assessing the directors’ sensitivities over the level
of available financial resources and covenant thresholds
indicated by the Group’s financial forecasts taking account
of severe, but plausible adverse effects that could arise from
these risks individually and collectively. We assessed the
completeness 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 parent Company’s
ability to continue as a going concern for the going
concern period;
– 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 parent 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
151 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 parent Company will continue in operation.
6. 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.
– Reading 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, in
particular the risk that Group and component management may
be in a position to make inappropriate accounting entries. On
this audit we do not believe there is a fraud risk related to revenue
recognition due to the simplistic nature of revenue transactions,
and the absence of judgement in revenue recognition.
We did not identify any additional fraud risks.
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 understanding of the control environment including the
entity’s procedures for complying with regulatory requirements.
Pets at Home Group Plc Annual Report & Accounts 2022
158
independent auditor’s report to the members
of Pets at Home Group Plc only continued
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.
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 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.
Pets at Home Group Plc Annual Report & Accounts 2022
7. 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 on page 101 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 and uncertainties 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.
StrateGic rePort
Governance
FiNaNciaL StateMeNtS
159
We are also required to review the Viability statement, set
out on page 147 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 parent
Company’s longer-term viability.
9. respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 151,
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.
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. We have nothing to report on the other matters
on which we are required to report by exception
Under the Companies Act 2006, we are required to report to
you if, in our opinion:
–
adequate accounting records have not been kept by the
parent Company, or returns adequate for our audit have
not been received from branches not visited by us; or
the parent Company financial statements and the part of
the Directors’ Remuneration Report to be audited are not
in agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified
by law are not made; or
–
–
– we have not received all the information and
explanations we require for our audit.
We have nothing to report in these respects.
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.
A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.
The Company is required to include these financial statements
in an annual financial report prepared using the single electronic
reporting format specified in the TD ESEF Regulation. This auditor’s
report provides no assurance over whether the annual financial
report has been prepared in accordance with that format.
10. 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
25 May 2022
Pets at Home Group Plc Annual Report & Accounts 2022
160
consolidated income Statement
as at 31 March 2022
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
53 week period ended 31 march 2022
52 week period ended 25 March 2021 (restated)1
Note
2
3
3
3
2,3
6
7
8
Underlying
trading
£m
1,317.8
(670.6)
0.7
647.9
(382.2)
(121.2)
–
144.5
0.2
(14.6)
(14.4)
130.1
(24.3)
105.8
non-
underlying
items (note 3)
£m
–
0.1
–
0.1
–
–
19.2
19.3
–
(0.7)
(0.7)
18.6
0.1
18.7
total
£m
1,317.8
(670.5)
0.7
648.0
(382.2)
(121.2)
19.2
163.8
0.2
(15.3)
(15.1)
148.7
(24.2)
124.5
Underlying
trading
£m
Non-underlying
items (note 3)
£m
1,142.8
(583.2)
(0.8)
558.8
(321.0)
(142.0)
–
95.8
0.3
(18.7)
(18.4)
77.4
(15.8)
61.6
–
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)
(143.9)
30.2
124.7
0.3
(18.7)
(18.4)
106.3
(15.9)
90.4
1
See note 1.1 for an explanation of the prior year restatement.
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
1
See note 1.1 for an explanation of the prior year restatement.
Dividends paid and proposed are disclosed in note 9.
53 week
period ended
31 march 2022
52 week
period ended
25 March 2021
(restated)1
24.9p
24.5p
18.1p
17.7p
Note
5
5
The notes on pages 167 to 231 form an integral part of these financial statements.
consolidated Statement of comprehensive income
as at 31 March 2022
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
1
See note 1.1 for an explanation of the prior year restatement.
The notes on pages 167 to 231 form an integral part of these financial statements.
Pets at Home Group Plc Annual Report & Accounts 2022
Note
22
22
15,22
53 week
period ended
31 march 2022
£m
52 week
period ended
25 March 2021
(restated)1
£m
124.5
90.4
(0.0)
7.9
7.9
(1.2)
6.7
0.1
5.0
5.1
(0.3)
4.8
131.2
95.2
StrateGic rePort
Governance
FiNaNciaL StateMeNtS
consolidated Balance Sheet
as at 31 March 2022
161
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
Corporation tax receivable
Cash and cash equivalents
total assets
current liabilities
Trade and other payables
Lease liabilities
Provisions
Other financial liabilities
non-current liabilities
Other interest-bearing loans and borrowings
Lease liabilities
Provisions
Other financial 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
1
See note 1.1 for an explanation of the prior year restatement.
On behalf of the Board:
at 31 march
2022
£m
Note
At 25 March
2021
(restated)1
£m
11
12
13
16
14
15
16
17
18
20
12
21
16
19
12
21
16
22
108.9
340.1
987.1
14.1
99.6
368.7
979.5
16.7
1,450.2
1,464.5
84.5
1.1
3.0
53.7
9.1
166.0
317.4
83.7
3.8
1.5
49.3
1.1
101.4
240.8
1,767.6
1,705.3
(224.8)
(78.3)
(6.5)
(0.0)
(309.6)
(96.9)
(304.7)
(6.7)
–
(408.3)
(717.9)
1,049.7
5.0
(372.0)
113.3
(0.0)
3.4
1,300.0
1,049.7
(211.1)
(78.4)
(4.3)
(1.3)
(295.1)
(98.7)
(331.3)
(2.1)
(1.6)
(433.7)
(728.8)
976.5
5.0
(372.0)
113.3
(0.0)
(1.5)
1,231.7
976.5
mike iddon
Group chief Financial officer
25 May 2022
Company number: 08885072
The notes on pages 167 to 231 form an integral part of these financial statements.
Pets at Home Group Plc Annual Report & Accounts 2022
162
consolidated Statement of changes in equity
as at 31 March 2022
restated balance at 25 march 20211
total comprehensive income for the period
Profit for the period
Other comprehensive income (note 22)
total comprehensive income for the period
Hedging gains and losses reclassified to inventory
total hedging gains and losses reclassified
to inventory
transactions with owners, recorded directly
in equity
Equity dividends paid
Share based payment charge
Deferred tax movement on IFRS2 reserve
Purchase of own shares
total contributions by and distributions
to owners
Share
capital
£m
consolidation
reserve
£m
merger
reserve
£m
cash
flow
hedging
reserve
£m
translation
reserve
£m
retained
earnings
£m
total
equity
£m
5.0
(372.0)
113.3
(1.5)
(0.0)
1,231.7
976.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6.7
6.7
(1.8)
(1.8)
–
–
–
–
–
–
(0.0)
(0.0)
124.5
–
124.5
–
–
(48.5)
4.9
(0.3)
(12.3)
–
–
–
–
–
–
–
124.5
6.7
131.2
(1.8)
(1.8)
(48.5)
4.9
(0.3)
(12.3)
(56.2)
(56.2)
Balance at 31 march 2022
5.0
(372.0) 113.3
3.4
(0.0) 1,300.0
1,049.7
1
See note 1.1 for an explanation of the prior year restatement.
consolidated Statement of changes in equity
as at 25 March 2021 (restated)1
Balance at 26 march 2020 (as previously reported)
Impact of change in accounting policy
restated balance at 26 march 20201
total comprehensive income for the period
Profit for the period (restated)
Other comprehensive income (note 22)
total comprehensive income for the period
Hedging gains and losses reclassified to inventory
total hedging gains and losses reclassified to inventory
transactions with owners, recorded directly in equity
Equity dividends paid
Share based payment charge
Deferred tax movement on IFRS2 reserve
Purchase of own shares
total contributions by and distributions to owners
Share
capital
£m
Consolidation
reserve
£m
Merger
reserve
£m
5.0
–
5.0
(372.0)
–
113.3
–
(372.0)
113.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Cash flow
hedging
reserve
£m
Translation
reserve
£m
Retained
earnings
£m
Total
equity
£m
(2.8)
–
(2.8)
–
4.7
4.7
(3.4)
(3.4)
–
–
–
–
–
(0.1) 1,187.6
(8.6)
–
931.0
(8.6)
(0.1) 1,179.0
922.4
–
0.1
0.1
–
–
–
–
–
–
–
90.4
–
90.4
–
–
(37.1)
4.7
3.4
(8.7)
90.4
4.8
95.2
(3.4)
(3.4)
(37.1)
4.7
3.4
(8.7)
(37.7)
(37.7)
restated balance at 25 march 20211
5.0
(372.0)
113.3
(1.5)
(0.0) 1,231.7
976.5
1
See note 1.1 for an explanation of the prior year restatement.
Pets at Home Group Plc Annual Report & Accounts 2022
StrateGic rePort
Governance
FiNaNciaL StateMeNtS
consolidated Statement of cash Flows
as at 31 March 2022
163
cash flows from operating activities
Profit for the period
Adjustments for:
Depreciation and amortisation
Profit on disposal of subsidiaries
Financial income
Financial expense
Share-based payment charges
Taxation
Decrease in trade and other receivables
(Increase) in inventories
Increase in trade and other payables
Increase in provisions
Tax paid
Net cash flow from operating activities
cash flows from investing activities
Proceeds from the sale of property, plant and equipment
Interest received
Costs to acquire right-of-use assets
Acquisition of subsidiaries, net of cash acquired
Disposal of subsidiaries, net of cash disposed
Disposal of subsidiaries, net of cash disposed (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
Cash payments for the principal portion of the right-of-use lease liability
Settlement of ‘put and call’ liabilities (minimum amount)
Purchase of own shares
Interest paid
Interest paid on lease obligations
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
cash and cash equivalents at end of period
1
See note 1.1 for an explanation of the prior year restatement.
The notes on pages 167 to 231 form an integral part of these financial statements.
53 week
period ended
31 march 2022
£m
52 week
period ended
25 March 2021
(restated)1
£m
124.5
90.4
103.9
(19.2)
(0.2)
14.6
4.9
24.2
252.7
0.6
(0.8)
19.8
6.8
26.4
(31.0)
248.1
0.3
0.3
(0.3)
(1.7)
0.6
19.2
(55.5)
(37.1)
(48.5)
100.0
(100.0)
(3.3)
(67.3)
–
(12.3)
(3.5)
(11.5)
(146.4)
64.6
101.4
166.0
105.4
(30.2)
(0.3)
18.7
4.7
15.9
204.6
3.1
(22.1)
12.0
1.3
(5.7)
(17.5)
181.4
0.3
0.4
(0.4)
(16.9)
–
79.4
(21.2)
41.6
(37.1)
60.0
(125.0)
(0.2)
(66.6)
(5.5)
(8.7)
(4.8)
(12.8)
(200.7)
22.3
79.1
101.4
Pets at Home Group Plc Annual Report & Accounts 2022
Note
28
17
16
18
15
20
16
19
16
22
at 31 march
2022
£m
At 25 March
2021
(restated)1
£m
936.2
600.2
936.2
587.9
1,536.4
1,524.1
1.6
–
2.8
4.4
0.2
–
3.7
3.9
1,540.8
1,528.0
(552.9)
–
(552.9)
(96.9)
–
(96.9)
(649.8)
891.0
5.0
113.3
1.3
771.4
891.0
(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
164
company Balance Sheet
as at 31 March 2022
non-current assets
Investments in subsidiaries
Trade and other receivables
current assets
Other financial assets
Cash and cash equivalents
Deferred tax asset
total assets
current liabilities
Trade and other payables
Other financial liabilities
non-current liabilities
Other interest-bearing loans and borrowings
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
1
The prior year company balance sheet has been restated. See note 1.1 for an explanation of the prior year restatement.
On behalf of the Board:
mike iddon
Group chief Financial officer
25 May 2022
Company number: 08885072
The notes on pages 167 to 231 form an integral part of these financial statements.
Pets at Home Group Plc Annual Report & Accounts 2022
StrateGic rePort
Governance
FiNaNciaL StateMeNtS
company Statement of changes in equity
as at 31 March 2022
165
Balance at 25 march 2021
total comprehensive income for the period
Profit for the period
Other comprehensive income
total comprehensive income for the period
transactions with recorded directly in equity
Equity dividends paid
Share-based payment charge
Deferred tax movement on IFRS2 reserve
Purchase of own shares
total contributions by and distributions to owners
Share
capital
£m
5.0
merger
reserve
£m
113.3
cash flow
hedging
reserve
£m
retained
earnings
£m
(1.2)
800.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2.5
2.5
–
–
–
–
–
23.8
–
23.8
(48.5)
7.9
(0.3)
(12.3)
(53.2)
total
equity
£m
917.9
23.8
2.5
26.3
(48.5)
7.9
(0.3)
(12.3)
(53.2)
Balance at 31 march 2022
5.0
113.3
1.3
771.4
891.0
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 recorded directly in equity
Equity dividends paid
Share based payment charge
Deferred tax movement on IFRS2 reserve
Purchase of own shares
Total contributions by and distributions to owners
Share
capital
£m
5.0
Merger
reserve
£m
113.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Cash flow
hedging
reserve
£m
(1.6)
–
0.4
0.4
–
–
–
–
–
Retained
earnings
£m
846.0
(7.5)
–
(7.5)
(37.1)
4.7
3.4
(8.7)
(37.7)
Balance at 25 march 2021
5.0
113.3
(1.2)
800.8
Total
equity
£m
962.7
(7.5)
0.4
(7.1)
(37.1)
4.7
3.4
(8.7)
(37.7)
917.9
company income Statement
As permitted by section 408 of the Companies Act 2006, the Company’s income statement has not been included in these financial
statements. The Company’s profit for the 53 week period ended 31 March 2022 was £23.8m (loss for the 52 week period ended
25 March 2021 was £7.5m).
Pets at Home Group Plc Annual Report & Accounts 2022
166
company Statement of cash Flows
as at 31 March 2022
cash flows from operating activities
Profit/(loss) for the period
Financial expense
Share based payment charges
Tax
Increase in trade and other payables
Tax paid
Net cash flow from operating activities
cash flows from investing activities
Increase in amounts owed by group undertakings
Net cash flow used in investing 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
1
See note 1.1 for an explanation of the prior year restatement.
53 week
period ended
31 march 2022
£m
52 week
period ended
25 March 2021
(restated)1
£m
23.8
3.2
7.9
(2.9)
32.0
44.6
3.5
80.1
(12.8)
(12.8)
(48.5)
100.0
(100.0)
(3.3)
(3.2)
(12.3)
(67.3)
–
–
–
(7.5)
5.9
4.7
(3.1)
0.0
121.5
3.5
125.0
(8.7)
(8.7)
(37.1)
60.0
(125.0)
(0.2)
(5.3)
(8.7)
(116.3)
–
–
–
Pets at Home Group Plc Annual Report & Accounts 2022
StrateGic rePort
Governance
FiNaNciaL StateMeNtS
notes (forming part of the Financial Statements)
167
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 UK adopted international accounting standards and
applicable law. The Company’s financial statements have been prepared in accordance with UK adopted international accounting
standards as applied in accordance with the provisions of the Companies Act 2006 and applicable law. 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
UK adopted international accounting standards. The following new interpretation issued by the International Financial Reporting
Interpretations Committee (IFRIC) has had a material impact on the Group’s financial statements during the 53 week period ended
31 March 2022 and the 52 week period ended 25 March 2021.
Pets at Home Group Plc Annual Report & Accounts 2022
168
notes (forming part of the Financial Statements)
continued
1 Significant accounting policies continued
1.1 Basis of preparation continued
IFRIC: Configuration or Customisation Costs in a Cloud Computing Arrangement (IAS38 Intangible Assets)
In April 2021, the IFRS Interpretations Committee published an agenda decision in relation to configuration and customisation
expenditure relating to cloud computing arrangements, including Software as a Service (SaaS). The Committee has clarified the
position that configuration and customisation expenditure that is distinct from access to the cloud software can only be capitalised
to the extent it gives rise to an asset for a SaaS customer, i.e., they have the power to obtain the future economic benefits and
can restrict others’ access to those benefits, otherwise such expenditure should be expensed. Following the interpretation being
published, the Group has reviewed and revised its accounting policy in relation to IAS38 Intangible Assets, which includes
accounting for computer software. This has resulted in reclassifying £15.4m of expenditure that was previously capitalised as
an intangible asset and expensing this to the income statement as administrative expenses. Consequently, £5.3m of amortisation
charged in the period ended 25 March 2021 relating to expenditure previously capitalised has been reversed. The impact on profit
before tax for the 52-week period ended 25 March 2021 is a reduction in PBT of £10.1m. The impact on the 53 week period
ended 31 March 2022 profit before tax as a result of the change in accounting policy is a reduction in profit before tax of £14.6m.
Comparatives have been restated as relevant, with the detailed impact of the restatement set out below
consolidated income statement impact
Administrative expenses
Profit before tax
Tax charge
Profit for the period
Basic earnings per share
Diluted earnings per share
consolidated statement of financial position impact
Intangible assets
Deferred tax asset
Corporation tax receivable
Total assets
Corporation tax payable
Total liabilities
Net assets
Retained earnings
Total equity
consolidated statement of cash flows
Profit for the period
Depreciation and amortisation
Taxation
Increase in trade and other payables
Net cash flow from operating activities
Acquisition of property plant and equipment and other intangible assets
Net cash used in investing activities
consolidated statement of financial position impact
Intangible assets
Deferred tax asset
Total assets
Deferred tax liabilities
Total liabilities
Net assets
Retained earnings
Total equity
Pets at Home Group Plc Annual Report & Accounts 2022
2021
(previously
reported)
£m
(133.8)
116.4
(17.4)
99.0
19.8p
19.4p
1,000.2
2.9
–
1,724.0
(1.5)
(730.3)
993.7
1,248.9
993.7
99.0
110.8
17.4
10.2
195.1
(34.9)
27.9
2020
(previously
reported)
£m
1,006.4
–
1,768.9
(0.4)
(837.9)
931.0
1,187.6
931.0
Restatement
£m
(10.1)
(10.1)
1.5
(8.6)
(1.7p)
(1.7p)
(20.7)
0.9
1.1
(18.7)
1.5
1.5
(17.2)
(17.2)
(17.2)
(8.6)
(5.4)
(1.5)
1.8
(13.7)
13.7
13.7
Restatement
£m
(10.6)
1.6
(9.0)
0.4
0.4
(8.6)
(8.6)
(8.6)
2021
Restated
£m
(143.9)
106.3
(15.9)
90.4
18.1p
17.7p
979.5
3.8
1.1
1,705.3
–
(728.8)
976.5
1,231.7
976.5
90.4
105.4
15.9
12.0
181.4
(21.2)
41.6
2020
Restated
£m
995.8
1.6
1,759.9
–
(837.5)
922.4
1,179.0
922.4
StrateGic rePort
Governance
FiNaNciaL StateMeNtS
169
The Directors have restated the presentation of trade and other receivables on the Company balance sheet. These all relate to
amounts owed by Group undertakings which are repayable on demand, and bear no interest, but there is no valid expectation
that they will be settled within the next 12 months. As a result, the comparative amount of £587.9m of amounts owed by Group
undertakings as at 25 March 2021 has been reclassified from current to non-current assets as the Company did not intend for this
amount to be settled within 12 months of that reporting date. There is no impact on profit, tax or net assets and the cash flow
statement has been restated to reclassify the movement in these balances from operating to investing.
The Group has adopted the following IFRSs in these financial statements:
– Amendments to IFRS9: Interest Rate Benchmark Reform Phase 2 has been adopted from 26 March 2021. The Phase 2 has
been applied retrospectively, however, in accordance with the exceptions permitted in the Phase 2 amendments, the Group has
elected not to restate comparatives for the prior periods to reflect the application of these amendments. Since the Company has
no transactions for which the benchmark rate had been replaced with an alternative benchmark as at 25 March 2021, there is
no impact on the opening equity balances as a result of retrospective application. The details of the accounting policies are
disclosed in note 1.7 and 1.21. See also note 23 for related disclosures about risks and hedge accounting.
– Amendments to IFRS16: Leases COVID-19 Related Rent Concessions has been adopted. The amendment introduces an optional
practical expedient for leases in which the Group is a lessee. For leases to which the Group applies the practical expedient, the
Group is not required to assess whether eligible rent concessions that are a direct consequence of the COVID-19 pandemic are
lease modifications. The Group has applied the amendment retrospectively. The details of the accounting policies are disclosed
in note 1.12 and see also note 26 for related disclosures. The further amendment, which extended the concession period, has
been early adopted.
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. 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 geopolitical tensions and the actual
and potential impact on supply chains, energy cost inflation, as well as the ongoing impacts of the pandemic globally on the
Group’s financial position, liquidity and future performance. The Group has also considered the Task Force on Climate Related
Financial Disclosures (‘TCFD’) scenario analysis conducted in undertaking this assessment.
The Group has entered into a new revolving credit facility of £300m in the financial period, which expires in March 2027. The Group
has £100.0m drawn down at 31 March 2022 and cash balances of £166.0m. The lowest level of headroom forecast over the next
12 months from the date of signing of the financial statements is in excess of £356.7m in the base case scenario which occurs in
July 2022. On a sensitised basis, the lowest level of headroom forecast over the next 12 months from the date of approving of
the financial statements is £351.4m due to the removal of the dividend payment in an extreme scenario. 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 prior year revenue 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 per annum, with dividends held at 11.8p per share per annum
Scenario 3: Group like-for-like sales declines to 0% over the next year and a conflated risk impact of £92.5m on sales and
£46.25m on PBT per annum 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 £322.2m. Further mitigating actions could also be taken in such scenarios should it be required,
including reducing capital expenditure.
Pets at Home Group Plc Annual Report & Accounts 2022
170
notes (forming part of the Financial Statements)
continued
1 Significant accounting policies continued
1.3 Going concern continued
The Directors of Pets at Home Group Plc, having made appropriate enquiries including the principal risks and uncertainties on page
111, 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 31 March 2022.
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, nor joint control, 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 IAS32, 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
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(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.
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 purposes of the
cash flow statement and are only offset for balance sheet purposes where the offsetting criteria are met.
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 1.13).
1.8 Derivative financial instruments and hedging
Derivative financial instruments
Derivative financial instruments are recognised at fair value. The gain or loss on remeasurement 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.
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notes (forming part of the Financial Statements)
continued
1 Significant accounting policies continued
1.9 intra-group financial instruments
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
Fixtures, fittings, tools and equipment
Leasehold improvements
– 50 years
– 3-10 years
– the term of the lease
Depreciation methods, useful lives and residual values are reviewed at each balance sheet date.
1.11 intangible assets
Intangible assets acquired in a business combination
Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their
fair value at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated
amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
Customer lists are 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.
The Group’s accounting policy has been updated in year to reflect the agenda decision issued by the International Financial
Reporting Interpretations Committee (IFRIC) regarding configuration and customisation expenditure relating to cloud
computing arrangements.
Expenditure on SaaS customisation and configuration that is distinct from access to the cloud software can only be capitalised
to the extent it gives rise to an asset, i.e. where the Company has the power to obtain the future economic benefits and can
restrict others’ access to those benefits, otherwise such expenditure in relation to developing SaaS for use is expensed.
1.12 leases
The Group recognises a right-of-use asset, representing its right to use the underlying asset and a lease liability, representing its
obligation to make lease payments. The lease liability is measured at the present value of the lease payments over the term of the
lease, discounted using the interest rate implicit in the lease, or if that rate cannot be readily determined, the Group’s incremental
borrowing rate. The rate implicit in the lease cannot be readily determined and therefore a rate based on the Group’s incremental
borrowing rate is used. This rate is adjusted to take into account the risk associated with the length of the lease. Lease payments
will include any fixed payments, including as a result of stepped rent increases.
The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments
made at or before the lease commencement date and any lease incentives received or premiums paid.
The Group has lease contracts in relation to property and equipment. There are recognition exemptions for low-value assets and
short-term leases with a lease term of 12 months or less. Any leases under a short-term licence agreement are excluded as they fall
into the lease term of 12 months or less. The Group recognises the lease payments associated with these leases as an expense on
a straight-line basis over the term of the lease. The total value of leases where the Group has taken a recognition exemption is
disclosed in note 12.
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The Group has a small number of leases where it is an intermediate lessor. For these leases, it accounts for the interest in the head
lease and sub-lease separately. It assesses the lease classification of the sub-lease with reference to the right-of-use asset arising
from the head lease, not with reference to the underlying asset.
The Group currently receives rental income from related Joint Venture veterinary practices which are located within the Group’s retail
stores. These rental incomes are disclosed in note 3. Under IFRS16, the lease classification of sub-leases is assessed by reference to
the right-of-use asset under the head lease rather than the underlying asset. Therefore there will be no change in accounting for
this rental income, which will continue to be presented as other income within operating expenses.
Right-of-use assets may be impaired if the lease becomes onerous. Impairment costs would be charged to administrative expenses
if this occurred.
1.13 Business combinations
Business combinations are accounted for by applying the acquisition method as at the acquisition date, which is the date on which
control is transferred to the Group.
Acquisitions on or after 26 March 2010
For acquisitions on or after 26 March 2010, the Group measures goodwill at the acquisition date as:
–
–
–
–
the fair value of the consideration transferred; plus
the recognised amount of any non-controlling interests in the acquiree; plus
the fair value of the existing equity interest in the acquiree; less
the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.
When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.
Costs related to the acquisition, other than those associated with the issue of debt or equity securities, are expensed as incurred.
Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified
as equity, it is not remeasured 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.
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)
IFRS1 grants certain exemptions from the full requirements of Adopted IFRS for first time adopters. In respect of acquisitions prior
to 26 March 2010, goodwill is included on the basis of its deemed cost.
1.14 acquisitions and disposals of non-controlling interests
Acquisitions and disposals of non-controlling interests that do not result in a change of control are accounted for as transactions
with owners in their capacity as owners and therefore no goodwill is recognised as a result of such transactions. The adjustments to
non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. Any difference between the price
paid or received and the amount by which non-controlling interests are adjusted is recognised directly in equity and attributed to
the owners of the parent.
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notes (forming part of the Financial Statements)
continued
1 Significant accounting policies continued
1.15 inventories
Inventories are stated at the lower of cost and net realisable value. Cost is based on the weighted average cost principle and
includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs in bringing them
to their existing location and condition, less rebates and discounts.
Provision is made against specific inventory lines where market conditions identify an issue in recovering the full cost of that
SKU (Stock Keeping Unit). The provision focuses on the age of inventory and the length of time it is expected to take to sell, and
applies a progressive provision against the gross inventory based on the numbers of days’ stock on hand. Where necessary, further
specific provision is made against inventory lines, where the calculated provision is not deemed sufficient to carry the inventory at
net realisable value.
To the extent that the ageing profile of gross inventory as calculated by this provision methodology results in a material provision,
it will be disclosed as an estimate that may have an impact on subsequent periods. To the extent this is material, it will be disclosed
in note 1.22.
1.16 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 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 IAS36 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.
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An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods
are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed
if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the
extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation
or amortisation, if no impairment loss had been recognised.
1.17 employee benefits
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which the Company pays fixed contributions into a separate
entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution
pension plans are recognised as an expense in the income statement in the periods during which services are rendered
by employees.
Short term benefits
Short term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.
A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a
present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation
can be estimated reliably.
Share-based payments
A number of employees of the Company’s subsidiaries (including Directors) receive an element of remuneration in the form of
share-based payments, whereby employees render services in exchange for shares in Pets at Home Group Plc or rights over shares.
Share-based payments are measured at fair value at the date of grant. The fair value of transactions involving the granting of
shares is determined by the share price at the date of grant. The fair value of transactions involving the granting of share options
is calculated by an external valuer based on a binomial model. In valuing share-based payments, no account is taken of any
performance conditions, other than conditions linked to the price of the shares of Pets at Home Group Plc (‘market conditions’).
The cost of share-based payments is recognised, together with a corresponding increase in equity, on a straight-line basis over the
vesting period based on the Company’s estimate of how many of the awards will eventually vest. No expense is recognised for
awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as
vesting irrespective of whether or not the market condition is satisfied, provided that all other performance conditions are satisfied.
Where the terms of a share-based payment award are modified, as a minimum, an expense is recognised as if the terms had not
been modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modification,
as measured at the date of the modification.
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.
1.18 Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past
event, that can be reliably measured and it is probable that an outflow of economic benefits will be required to settle the obligation.
Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects risks specific to the liability.
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notes (forming part of the Financial Statements)
continued
1.19 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.
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 IFRS15 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.
i) Veterinary Group income
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 in the 53 week period ended 31 March 2022 and the 52 week
period ended 25 March 2021) 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 unutilised deferred revenue will be recognised as revenue. Revenue from ‘Vac4Life’ plans is deferred when
payment is received and then recognised in reducing proportions over the first three years of the plan when vaccinations/boosters
are provided.
Rental income received from in-store Joint Venture veterinary practices is disclosed within note 3 and is categorised as a credit within
selling and distribution expenses.
ii) Grooming revenue
Grooming revenue is recognised net of value added tax, colleague discounts, coupons and vouchers, at the point of provision of the
service to the customer. Deposits received are deferred until the grooming service has been performed.
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iii) Insurance commissions
Insurance commissions are recognised on a pro-rated basis over the period the insurance policy relates to.
Accrued income
Accrued income relates to income in relation to fees from Joint Venture veterinary practices, revenues generated through Specialist
Referral Centres (in the 52 week period ended 25 March 2021), 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 UK-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 232.
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 are explained
below. The supplier income arrangements are typically not coterminous with the Group’s financial period, instead running alongside
the calendar year. Such income is only recognised when there is reasonable certainty that the conditions for recognition have been
met by the Group, and the income can be measured reliably based on the terms of the contract. This income is recognised as a
credit within gross margin to cost of sales and, to the extent that the rebate relates to unsold stock purchases, as a reduction in
the cost of inventory.
Supplier income is recognised on an accruals basis, based on the expected entitlement that has been earned up to the balance sheet
date for each relevant supplier contract. The accrued incentives, rebates and discounts receivable at year end are included within
trade and other receivables.
Given the presence of the joint business plans, on the basis of the historic recoverability of accrued balances, and as amounts are
typically agreed with suppliers prior to recognition, supplier income is not considered to be an area of significant estimation that
could impact on the following financial year.
Supplier income comprises:
Overrider income
Overrider income comprises three main elements:
1. Fixed percentage-based income: These relate largely to volumetric rebates based on the joint business plan agreements with
suppliers. The income accrued is based on the Group’s latest forecast volumes and the latest contract agreed with the supplier.
Income is not recognised until the Group has reasonable certainty that the joint business agreement will be fulfilled, with the
amount of income accrued regularly reassessed and remeasured throughout the contractual period, based on actual
performance against the joint business plan.
2. Fixed lump sum income: These are typically guaranteed lump sum payments made by the supplier and are not based on volume.
Fixed lump sum income is usually predicated on confirmation of a supplier contract and typically includes performance conditions
upon the Group, such as marketing and promotional campaigns. These amounts are recognised periodically when contractual
milestones have been met such as the promotion being run or marketing in-store.
3. Growth income: These are tiered volumetric rebates relating to growth targets agreed with the supplier in the joint business
planning process. These are retrospective rebates based on sales volumes or purchased volumes. Income is recognised to the
extent that it is reasonably certain that the conditions will be achieved, with such certainty increasing in the latter part of the
calendar year.
Pets at Home Group Plc Annual Report & Accounts 2022
178
notes (forming part of the Financial Statements)
continued
1 Significant accounting policies continued
1.19 revenue and cost of sales continued
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.
1.20 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 gains or 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.
1.21 taxation
Tax on the profit or loss for the period comprises current and deferred tax. Tax is recognised in the income statement except to the
extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable or receivable on the taxable income or loss for the period, using tax rates enacted or
substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous periods.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial
recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than
in a business combination; and differences relating to investments in subsidiaries to the extent that they will probably not reverse
in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of
the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which
the temporary difference can be utilised.
1.22 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. The Directors consider that
it is not reasonably possible for the assumptions for the current financial year to change so significantly to warrant inclusion as
a significant estimate but acknowledge that there is estimation uncertainty over the assumptions used in future financial periods
when calculating future cash flows.
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1.23 Dividends
Final dividends are recognised in the Group’s financial statements as a liability in the period in which the dividends are approved by
shareholders such that the Company is obliged to pay the dividend. Interim equity dividends are recognised in the period in which
they are paid.
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.
Central includes veterinary telehealth business, Group costs and finance expenses. Revenue and costs are allocated to a segment
where reasonably possible. For the purposes of goodwill allocation, the veterinary telehealth business (hereafter known as TVC)
is classed as a separate CGU which sits within the central operating segment.
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
Underlying gross profit
Underlying operating profit/(loss)
Non-underlying items
Segment operating profit
Net financing expense
Profit before tax
53 week period ended 31 march 2022
retail
£m
vet Group
£m
1,206.9
589.9
112.5
–
112.5
(11.1)
101.4
108.4
56.5
43.2
0.1
43.3
(0.1)
43.2
central
£m
2.5
1.5
(11.2)
19.2
8.0
(3.9)
4.1
Non-underlying operating expenses in the periods ended 31 March 2022 and 25 March 2021 are explained in note 3.
Income statement
Revenue
Underlying gross profit
Underlying operating profit/(loss)
Non-underlying items
Segment operating profit/(loss)
Net financing expense
Profit/(loss) before tax
1
See note 1.1 for an explanation of the prior year restatement.
52 week period ended 25 March 2021 (restated)1
Retail
£m
1,018.9
501.6
71.7
–
71.7
(12.0)
59.7
Vet Group
£m
123.2
56.7
33.8
28.9
62.7
(0.5)
62.2
Central
£m
0.7
0.5
(9.7)
–
(9.7)
(5.9)
(15.6)
total
£m
1,317.8
647.9
144.5
19.3
163.8
(15.1)
148.7
Total
£m
1,142.8
558.8
95.8
28.9
124.7
(18.4)
106.3
Pets at Home Group Plc Annual Report & Accounts 2022
180
notes (forming part of the Financial Statements)
continued
53 week period ended 31 march 2022
retail
£m
vet Group
£m
112.5
24.1
68.5
7.7
212.8
43.2
1.3
1.2
0.6
46.3
central
£m
(11.2)
0.0
–
0.5
(10.7)
52 week period ended 25 March 2021 (restated)1
Retail
£m
Vet Group
£m
Central
£m
71.7
24.8
68.2
6.8
171.5
33.8
2.1
2.1
1.4
39.4
(9.7)
–
–
–
(9.7)
53 week period ended 31 march 2022
retail
£m
vet Group
£m
central
£m
668.8
490.6
47.5
–
–
–
–
–
–
–
69.9
31.2
7.3
–
1,206.9
108.4
–
–
–
–
–
–
2.5
2.5
52 week period ended 25 March 2021
Retail
£m
Vet Group
£m
Central
£m
551.5
431.4
36.0
–
–
–
–
–
–
–
–
57.0
25.5
6.8
33.9
–
1,018.9
123.2
–
–
–
–
–
–
–
0.7
0.7
total
£m
144.5
25.4
69.7
8.8
248.4
Total
£m
95.8
26.9
70.3
8.2
201.2
total
£m
668.8
490.6
47.5
69.9
31.2
7.3
2.5
1,317.8
Total
£m
551.5
431.4
36.0
57.0
25.5
6.8
33.9
0.7
1,142.8
2 Segmental reporting continued
Reconciliation of EBITDA before non-underlying items
Underlying operating profit/(loss)
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation of intangible assets
Underlying EBITDA
Reconciliation of EBITDA before non-underlying items
Underlying operating profit/(loss)
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation of intangible assets
Underlying EBITDA
1
See note 1.1 for an explanation of the prior year restatement.
EBITDA before non-underlying items is defined on page 232.
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
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
Central – Veterinary telehealth services
total
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3 expenses and auditor’s remuneration
Included in operating profit are the following:
non-underlying items
Costs associated with the purchase 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 (gains)/losses on receivables
Software as a service (SaaS) expense1
Depreciation of property, plant and equipment
Amortisation of intangible assets administrative expenses1
Depreciation of right-of-use assets
Rentals under operating leases:
Expenses relating to short term or low value leases
Other income
Rental income from sub-leasing right-of-use assets to third parties
Rental income from related parties2
Share-based payment charges
1
2
See note 1.1 for an explanation of the prior period restatement.
This other income is presented within selling and distribution expenses.
53 week
period ended
31 march 2022
£m
52 week
period ended
25 March 2021
(restated)1
£m
(0.1)
–
(19.2)
(19.3)
(0.7)
24.0
25.4
8.8
69.7
0.1
(0.3)
(7.4)
4.9
(0.6)
1.9
(30.2)
(28.9)
0.8
15.4
26.9
8.2
70.3
0.1
(0.3)
(7.3)
4.7
The non-underlying credit of £0.1m recognised in the 53 week period ended 31 March 2022 relates to the reversal of the
impairment of a right-of-use asset previously recognised on acquisition of a Joint Venture veterinary practice. The property has now
been sub-leased, and therefore the impairment has been reversed. The credit has been treated as a non-underlying item since the
original impairment was also treated in this way.
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 (collectively referred
to as the Specialist Referral Centres). The profit on disposal of £19.2m reported in the non-underlying items in the 53 week period
ended 31 March 2022 represents contingent deferred consideration received as a result of the Specialist Referral Centres achieving
certain key performance indicators. The fair value of this contingent deferred consideration was assessed as having nil value in the
52 week period ended 25 March 2021 due to the uncertainty around the financial performance of the Specialist Referral Centres in
the forthcoming financial year, and whether these would meet threshold key performance indicators which would trigger payment.
The Group has also recognised non-underlying charges of £0.7m in net financing expense. These related to the acceleration of
amortisation on debt issue costs, as a consequence of the related senior finance facilities being replaced on 31 March 2022.
The profit on disposal in the 52 week period ended 25 March 2021 represents cash consideration received and costs incurred
by the Group in relation to the disposal of the Specialist Referral Centres, 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
Pets at Home Group Plc Annual Report & Accounts 2022
182
notes (forming part of the Financial Statements)
continued
3 expenses and auditor’s remuneration continued
The remaining non-underlying operating expenses in the 52 week period ended 25 March 2021 of £1.3m relate to:
– £1.9m 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, 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 related to the release of provisions for exit and closure costs provided for under
IAS37 in relation to Joint Venture veterinary practices provided for in the 52-week period ended 26 March 2020.
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.
The amortisation charge on intangible assets for the period ended 25 March 2021 has been restated following the IFRS
Interpretations Committee accounting guidance on cloud computing arrangements. Subsequently, the Group has revised its
accounting policy in relation to intangible assets and has reclassified expenditure previously capitalised as intangible assets to
administrative expenses in the income statement. Any amortisation charged in the period on assets that have been reclassified
has therefore been reversed. See note 1.1 for further explanation of the prior period restatement.
Underlying items
The rentals under short term leases disclosed in relation to the 53 week period ended 31 March 2022 and the 52 week period
ended 25 March 2021 relate to leases under short-term agreements or of low value. These fall under the short-term and low
value exemptions so are excluded from the requirements of IFRS16 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 legislation
Review of interim financial statements
Other assurance services
53 week
period ended
31 march 2022
£m
52 week
period ended
25 March 2021
£m
0.0
1.0
0.1
0.2
1.3
0.0
0.9
0.1
0.0
1.0
4 colleague numbers and costs
The average number of persons employed by the Group (including Directors) during the period, analysed by category,
was as follows:
53 week
period ended
31 march 2022
number
52 week
period ended
25 March 2021
Number
7,323
969
8,292
9,334
928
6,538
732
7,270
8,904
1,100
10,262
10,004
Sales and distribution – FTE
Administration – FTE
Sales and distribution – total
Administration – total
Pets at Home Group Plc Annual Report & Accounts 2022
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183
The aggregate payroll costs of these persons were as follows:
Wages and salaries
Social security costs
Contributions to defined pension contribution plans
remuneration of Directors and executive management team
Executive Directors’ emoluments
Non-Executive Directors’ emoluments
Executive Directors’ amounts receivable under share options
Executive Directors’ pension contributions
total Directors’ remuneration
Executive Management Team emoluments
Executive Management Team amounts receivable under share options
Executive Management Team pension contributions
total executive management team remuneration
53 week
period ended
31 march 2022
£m
52 week
period ended
25 March 2021
£m
235.2
21.7
7.9
264.8
227.6
19.2
7.6
254.4
53 week
period ended
31 march 2022
£m
52 week
period ended
25 March 2021
£m
2.8
0.5
1.6
0.1
5.0
6.7
1.9
0.3
8.9
2.1
0.5
1.8
0.1
4.5
5.5
2.2
0.2
7.9
In the opinion of the Board, the key management as defined under revised IAS24 Related Party Disclosures are the Executive
Directors, Non-Executive Directors and the Executive Management Team. Executive Directors’ emoluments are also included
within the Executive Management Team emoluments disclosed above.
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
1
See note 1.1 for an explanation of the prior period restatement.
53 week period ended
31 march 2022
52 week period ended
25 March 2021 (restated)1
Underlying
trading
after
non-underlying
items
105.8
500.0
7.4
507.4
21.2p
20.8p
124.5
500.0
7.4
507.4
24.9p
24.5p
Underlying
trading
61.6
500.0
11.6
511.6
12.3p
12.0p
After non-
underlying
items
90.4
500.0
11.6
511.6
18.1p
17.7p
Pets at Home Group Plc Annual Report & Accounts 2022
184
notes (forming part of the Financial Statements)
continued
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 financial expense
Accelerated amortisation on debt issue costs (non-underlying item)
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
1
See note 1.1 for an explanation of the prior period restatement.
53 week
period ended
31 march 2022
£m
52 week
period ended
25 March 2021
£m
0.2
0.0
0.2
0.3
0.0
0.3
53 week
period ended
31 march 2022
£m
52 week
period ended
25 March 2021
£m
3.2
11.4
–
0.7
15.3
6.0
12.8
(0.1)
–
18.7
53 week
period ended
31 march 2022
£m
52 week
period ended
25 March 2021
(restated)1
£m
23.6
(0.6)
23.0
1.1
0.2
(0.1)
1.2
17.5
(1.7)
15.8
(1.1)
–
1.2
0.1
24.2
15.9
The UK corporation tax standard rate for the period was 19% (2021: 19%). Deferred tax at 31 March 2022 has been calculated
based on the rate of 22% which is the blended rate at which the majority of items are expected to reverse. This is due to the
increase in the main rate of corporation tax to 25% from April 2023, which was substantively enacted on 24 May 2021.
Pets at Home Group Plc Annual Report & Accounts 2022
StrateGic rePort
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FiNaNciaL StateMeNtS
Deferred tax recognised in comprehensive income
Effective portion of changes in fair value of cash flow hedges (note 22)
reconciliation of effective tax rate
185
53 week
period ended
31 march 2022
£m
52 week
period ended
25 March 2021
£m
1.2
0.3
Profit for the period
Total tax expense/(credit)
Profit excluding taxation
Tax using the UK corporation tax rate for the period of
19% (52 week period ended 25 March 2021: 19%)
Impact of difference between deferred and current tax
rates
Depreciation on expenditure not eligible for tax relief
Capital allowances super-deduction
Expenditure not eligible for tax relief
Non-taxable income
Adjustments in respect of prior periods
total tax expense
1
See note 1.1 for an explanation of the prior period restatement.
53 week period ended 31 march 2022
52 week period ended 25 March 2021 (restated)1
Underlying
trading
£m
105.8
24.3
130.1
non-
underlying
items
£m
18.7
(0.1)
18.6
total
£m
124.5
24.2
148.7
24.7
3.5
28.2
0.2
0.6
(0.8)
0.3
–
(0.7)
24.3
–
–
–
–
(3.6)
–
(0.1)
0.2
0.6
(0.8)
0.3
(3.6)
(0.7)
24.2
Underlying
trading
£m
61.6
15.8
77.4
14.7
–
0.6
1.0
(0.5)
15.8
Non-
underlying
items
£m
28.8
0.1
28.9
Total
£m
90.4
15.9
106.3
5.5
20.2
–
–
(5.4)
–
0.1
–
0.6
(4.4)
(0.5)
15.9
The UK corporation tax standard rate for the 53 week period ended 31 March 2022 was 19% (52 week period ended 25 March
2021: 19%). The effective tax rate before non-underlying items for the 53 week period ended 31 March 2022 was 18.7%.
9 Dividends paid and proposed
Declared and paid during the period
Final dividend of 5.5p per share (2021: 5.0p per share)
Interim dividend of 4.3p per share (2021: 2.5p per share)
Proposed for approval by shareholders at the AGM
Final dividend of 7.5p per share (2021: 5.5p per share)
Group and company
53 week
period ended
31 march 2022
£m
52 week
period ended
25 March 2021
£m
27.2
21.3
37.5
24.7
12.4
27.2
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 31 March 2022 and 25 March 2021 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 31 March 2022: 3,363,989 shares; holding at 25 March 2021:
5,958,116 shares).
Pets at Home Group Plc Annual Report & Accounts 2022
186
notes (forming part of the Financial Statements)
continued
10 Business combinations
In the 53 week period ended 31 March 2022, the Group has acquired 100% of the ‘A’ shares of 11 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 53 week period ended 31 March 2022, £2.3m 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 25 March 2021, 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.
Subsidiaries acquired in the 53 week period ended 31 march 2022
South Shields Quays Vets4Pets Limited
Companion Care (Barnsley Cortonwood)
Limited
Crewe Vets4Pets Limited
Lancaster Vets4Pets Limited
Companion Care (Ely) Limited
Kendal Vets4Pets Limited
Denbigh Vets4Pets Limited
Runcorn Vets4Pets Limited
Huddersfield Vets4Pets Limited
Blackpool Warbreck Vets4Pets Limited
Northwich Vets4Pets Limited
Principal activity
Date of acquisition
Veterinary practice
8 April 2021
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
29 April 2021
20 July 2021
19 August 2021
13 September 2021
29 October 2021
15 November 2021
20 December 2021
16 March 2022
18 March 2022
22 March 2022
Proportion of
voting equity
instruments
acquired
Total proportion
of voting equity
instruments
owned following
the acquisition
Cash
consideration
transferred
£m
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
–
–
–
0.9
0.7
–
–
–
–
0.5
–
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
Overdrafts
Trade and other payables
net liabilities
Pets at Home Group Plc Annual Report & Accounts 2022
Book value of
assets and
liabilities
acquired
£m
Adjustments
on acquisition
£m
Fair value of
assets and
liabilities
acquired
£m
0.7
0.0
0.1
0.9
0.8
–
(0.8)
(1.5)
(0.3)
(3.2)
(3.3)
–
–
–
–
–
0.7
–
–
–
–
0.7
0.7
0.0
0.1
0.9
0.8
0.7
(0.8)
(1.5)
(0.3)
(3.2)
(2.6)
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£m
2.1
2.6
4.7
(3.7)
1.0
Goodwill arising on acquisition
Consideration
Add: Fair value of liabilities acquired
Goodwill arising on acquisition
Impairment of goodwill
Carrying value of goodwill
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 IFRS3, the right-of-use asset has been brought on at a value equal to the lease liability, adjusted for any unfavourable
market conditions. These leases relate to standalone veterinary practices.
During the 53 week period ended 31 March 2022, the Group invested a further £0.0m in Dog Stay Limited. The Group’s percentage
stake in Dog Stay Limited has remained unchanged following the investment.
In the 52 week period ended 25 March 2021, 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 VetsDirect 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
Veterinary telehealth services
Veterinary telehealth services
Principal activity
Date of acquisition
27 November 2020
27 November 2020
Proportion of
voting equity
instruments
acquired
Cash
consideration
transferred
£m
100%
100%
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
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
Pets at Home Group Plc Annual Report & Accounts 2022
188
notes (forming part of the Financial Statements)
continued
10 Business combinations continued
Goodwill arising on acquisition
Consideration
Less: Fair value of assets acquired
Goodwill arising on acquisition
£m
16.5
(5.1)
11.4
Consideration has been given to other intangibles that are recognisable under IFRS3 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 scripts 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.
In the 52 week period ended 25 March 2021, the Group has acquired 100% of the ‘A’ shares of six 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.
Subsidiaries acquired in the 52 week period ended 25 march 2021
Principal activity
Date of acquisition
Sidcup Vets4Pets Limited
Sydenham Vets4Pets Limited
Grantham Vets4Pets Limited
Rawtenstall Vets4Pets Limited
Wallasey Bidston Moss Vets4Pets Limited
Companion Care (Farnborough) Limited
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
1 July 2020
1 July 2020
20 October 2020
28 October 2020
18 December 2020
18 March 2021
Total proportion
of voting equity
instruments
owned
following the
acquisition
Proportion of
voting equity
instruments
acquired
Cash
consideration
transferred
£m
50%
50%
50%
50%
50%
50%
100%
100%
100%
100%
100%
100%
0.9
0.7
0.0
0.0
0.0
0.0
Pets at Home Group Plc Annual Report & Accounts 2022
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assets acquired and liabilities recognised at the date of acquisition
The amounts recognised in respect of identifiable assets and liabilities relating to the acquisitions are as follows. The acquisition
disclosures have been combined as each acquisition is considered to be individually immaterial to the Group.
Book value of
assets and
liabilities
acquired
£m
Adjustments on
acquisition
£m
Fair value of
assets and
liabilities
acquired
£m
current assets
Cash and cash equivalents
Trade and other receivables
Inventories
non-current assets
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
0.7
0.2
0.1
0.4
0.4
–
(0.4)
(0.7)
(0.7)
0.0
–
–
–
–
–
0.7
–
–
–
0.7
Goodwill arising on acquisition of veterinary practice subsidiaries in 52 week period ended 25 march 2021
Consideration
Less: Fair value of assets acquired
Goodwill arising on acquisition
Impairment of goodwill
Carrying value of goodwill
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 IFRS3, 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.
Pets at Home Group Plc Annual Report & Accounts 2022
190
notes (forming part of the Financial Statements)
continued
11 Property, plant and equipment
cost
Balance at 25 March 2021
Additions
On acquisition (note 10)
Transfers1
Disposals
Balance at 31 march 2022
Depreciation
Balance at 25 March 2021
Depreciation charge for the period
Disposals
Balance at 31 march 2022
net book value
At 25 March 2021
at 31 march 2022
Freehold
property
£m
Leasehold
improvements
£m
Fixtures,
fittings, tools
and equipment
£m
Assets under
construction
£m
2.4
–
–
–
–
2.4
0.3
0.1
–
0.4
2.1
2.0
62.4
6.7
0.8
(3.4)
(0.8)
65.7
29.4
4.1
(0.6)
32.9
33.0
32.8
245.3
17.6
0.1
–
(1.4)
261.6
180.8
21.2
(1.8)
200.2
64.5
61.4
Total
£m
310.1
33.6
0.9
–
(2.2)
–
9.3
–
3.4
–
12.7
342.4
–
–
–
–
–
12.7
210.5
25.4
(2.4)
233.5
99.6
108.9
1
Included within the cost of leasehold improvements brought forward at 25 March 2021 was £3.4m which related to assets under construction. These have been
reallocated to assets under construction as at 31 March 2022.
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
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
Total
£m
306.2
18.9
0.4
(15.4)
310.1
189.1
26.9
(5.5)
210.5
117.1
99.6
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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 25 March 2021
Additions
On acquisition (note 10)
Disposals
Balance at 31 march 2022
Depreciation
Balance at 25 March 2021
Depreciation charge for the period
Disposals
Balance at 31 march 2022
net book value
At 25 March 2021
at 31 march 2022
Property
£m
equipment
£m
total
£m
493.5
37.6
0.8
(0.3)
531.6
132.8
66.5
(0.1)
199.2
360.7
332.4
14.7
2.9
–
(1.0)
16.6
6.7
3.2
(1.0)
8.9
8.0
7.7
508.2
40.5
0.8
(1.3)
548.2
139.5
69.7
(1.1)
208.1
368.7
340.1
The costs relating to leases for which the Group applied the practical expedient described in paragraph 5a of IFRS16 (leases with a
contract term of less than 12 months) amounted to £0.1m in the 53 week period ended 31 March 2022.
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
Total
£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
497.9
38.1
0.4
(28.2)
508.2
72.7
70.3
(3.5)
139.5
425.2
368.7
Pets at Home Group Plc Annual Report & Accounts 2022
192
notes (forming part of the Financial Statements)
continued
12 leases continued
The following table sets out the maturity analysis of lease payments, showing the undiscounted lease payments to be paid 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 31 march
2022
£m
At 25 March
2021
£m
78.3
236.9
108.1
423.3
383.0
78.3
304.7
78.4
241.9
131.9
452.2
409.7
78.4
331.3
For the lease liabilities at 31 March 2022 a 0.1% change in the discount rate used would have increased the carrying value of lease
liabilities by £1.4m (25 March 2021: £0.1m).
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 IAS36, 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 IAS17, 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
Restated balance at 25 March 20211
Additions
On acquisition (note 10)
Disposals
Balance at 31 march 2022
amortisation
Restated balance at 25 March 20211
Amortisation charge for the period
Disposals
Balance at 31 march 2022
net book value
At 25 March 2021
at 31 march 2022
1
See note 1.1 for an explanation of the prior period restatement.
Pets at Home Group Plc Annual Report & Accounts 2022
customer
lists and
‘know-how’
£m
Software
£m
total
£m
6.2
–
0.7
(0.2)
6.7
0.4
0.7
(0.1)
1.0
5.8
5.7
55.7
15.5
–
(2.9)
68.3
40.4
8.1
(2.6)
45.9
15.3
22.4
1,020.4
15.5
1.7
(3.5)
1,034.1
40.9
8.8
(2.7)
47.0
979.5
987.1
Goodwill
£m
958.5
–
1.0
(0.4)
959.1
0.1
–
–
0.1
958.4
959.0
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cost
Balance at 26 March 2020 as previously reported
Impact of change in accounting policy
restated balance at 26 march 20201
Additions
On acquisition (note 10)
Disposals
restated balance at 25 march 20211
amortisation
Balance at 26 March 2020
Impact of change in accounting policy
restated balance at 26 march 20201
Amortisation charge for the period
Disposals
restated balance at 25 march 20211
net book value
At 26 March 2020 (restated)1
at 25 march 2021 (restated)1
1
See note 1.1 for an explanation of the prior period restatement.
Goodwill
£m
Customer list
£m
Software
£m
Total
£m
981.3
–
981.3
–
11.8
(34.6)
958.5
0.1
–
0.1
–
–
0.1
981.2
958.4
1.9
–
1.9
–
5.1
(0.8)
6.2
0.5
–
0.5
0.2
(0.3)
0.4
1.4
5.8
63.1
(17.5)
45.6
10.1
0.1
(0.1)
55.7
39.3
(6.9)
32.4
8.0
–
40.4
13.2
15.3
1,046.3
(17.5)
1,028.8
10.1
17.0
(35.5)
1,020.4
39.9
(6.9)
33.0
8.2
(0.3)
40.9
995.8
979.5
impairment testing
Cash generating units (‘CGUs’), as defined by IAS36, 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. The veterinary telehealth business, hereafter disclosed as The Vet Connection (TVC) CGU, forms part of the Central
operating segment. Revenue and costs are allocated to a segment and CGU where reasonably possible.
As at 31 March 2022 and 25 March 2021, the Group is deemed to have CGUs as follows:
Retail
TVC
Vet Group
Total
Goodwill
at 31 march 2022
£m
At 25 March 2021
£m
586.1
11.1
361.8
959.0
586.1
11.4
360.9
958.4
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 (average over next 5 years)
53 week period ended
31 march 2022
52 week period ended
25 March 2021
retail
vet Group
tvc
Retail
Vet Group
5
2.0%
11%
7%
48%
5
3.5%
11%
10%
63%
5
2.0%
11%
35%
59%
5
2.0%
10%
4%
48%
5
3.5%
10%
11%
49%
Pets at Home Group Plc Annual Report & Accounts 2022
194
notes (forming part of the Financial Statements)
continued
13 intangible assets continued
impairment testing continued
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 IAS36 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 2021
financial statements.
The key assumptions in the business plans for the Retail, Vet Group and TVC 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 TVC forecast
assumptions are based on building on the synergies between the three operating segments and increasing the Group’s service
offering. The projections are based on all available information and growth rates do not exceed growth rates experienced in prior
periods. A different set of assumptions may be more appropriate in future years depending on changes in the macro-economic
environment and the industry in which each CGU operates. The Group has considered the Task Force on Climate Related Financial
Disclosures (‘TCFD’) scenario analysis conducted in undertaking this assessment.
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 and adjustments made to calculate the pre-tax discount rate which is
disclosed above in line with IAS36 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 Vet Group and TVC CGUs exceed the long-term average for the UK but is an appropriate rate for the industry.
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 (see note 10).
Within the Retail, Vet Group and TVC CGUs, 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 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.
Pets at Home Group Plc Annual Report & Accounts 2022
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at 31 march
2022
£m
84.5
At 25 March
2021
£m
83.7
14 inventories
Finished goods
The cost of inventories recognised as an expense and included in ‘cost of sales’ is £585.3m (52 week period ended 25 March 2021:
£487.6m).
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 31 March 2022 the inventory provision amounted to £3.9m (25 March 2021: £3.9m). 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 £10.3m (25 March 2021: £8.9m).
In the 53 week period ended 31 March 2022, the value of inventory written off to the income statement amounted to £7.6m
(52 week period ended 25 March 2021: £9.3m).
15 Deferred tax assets and liabilities
recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Property, plant and equipment
Financial assets
Financial liabilities
Other short-term timing differences
Arising on acquisition of intangible assets
SBP
Net deferred tax assets/(liabilities)
1
See note 1.1 for an explanation of the prior period restatement.
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
1
See note 1.1 for an explanation of the prior period restatement.
at 31 march 2022
At 25 March 2021 (restated)1
assets
£m
liabilities
£m
1.9
(0.0)
–
0.9
–
3.1
5.9
–
–
(0.8)
(4.0)
–
–
(4.8)
total
£m
1.9
(0.0)
(0.8)
(3.1)
–
3.1
1.1
Assets
£m
Liabilities
£m
3.5
0.6
–
2.3
–
3.4
9.8
–
–
(0.2)
(4.9)
(0.9)
–
(6.0)
Total
£m
3.5
0.6
(0.2)
(2.6)
(0.9)
3.4
3.8
25 March
2021 (restated)1
£m
Recognised in
income
£m
Recognised in
equity
£m
Recognised on
acquisition
£m
31 march
2022
£m
3.5
0.4
(2.6)
(0.9)
3.4
3.8
(1.6)
–
0.4
–
–
(1.2)
–
(1.2)
–
–
(0.3)
(1.5)
–
–
–
–
–
–
1.9
(0.8)
(2.2)
(0.9)
3.1
1.1
Pets at Home Group Plc Annual Report & Accounts 2022
196
notes (forming part of the Financial Statements)
continued
15 Deferred tax assets and liabilities continued
Other short-term timing differences primarily relate to inventory provisions.
movement in deferred tax during the prior period
Property, plant and equipment
Net financial assets/(liabilities)
Other short-term timing differences
Arising on acquisition of
intangible assets
SBP
26 March
2020
(as previously
stated)
£m
Impact of
change in
accounting
policy
£m
26 March
2020
(restated)1
£m
Recognised in
income
(restated)1
£m
Recognised
in equity
£m
Recognised
on acquisition
£m
2.4
0.7
(3.5)
–
–
(0.4)
0.6
–
1.5
–
–
2.1
3.0
0.7
(2.0)
–
–
1.7
0.5
–
(0.6)
–
–
(0.1)
–
(0.3)
–
–
3.4
3.1
–
–
–
(0.9)
–
(0.9)
25 March
2021
(restated)1
£m
3.5
0.4
(2.6)
(0.9)
3.4
3.8
1
See note 1.1 for an explanation of the prior period restatement.
company
Movement in deferred tax during the period
Net financial assets
SBP
25 March
2021
£m
Recognised in
income
£m
Recognised in
equity
£m
31 march
2022
£m
0.3
3.4
3.7
–
–
–
(0.6)
(0.3)
(0.9)
(0.3)
3.1
2.8
The rate used to calculate deferred tax assets and liabilities is 22% based on a blended rate at which the majority of items are
expected to reverse.
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
Fuel forward contracts
Group
Company
at 31 march
2022
£m
At 25 March
2021
£m
at 31 march
2022
£m
At 25 March
2021
£m
0.2
8.6
2.1
1.1
0.5
1.6
0.0
14.1
0.2
11.3
3.3
1.1
0.6
0.2
–
16.7
–
–
–
–
–
1.6
–
1.6
–
–
–
–
–
0.2
–
0.2
investments in Joint venture veterinary practices
Investments represent £0.2m (2021: £0.2m) 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.
Pets at Home Group Plc Annual Report & Accounts 2022
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197
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 £8.6m (2021: £11.3m) 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 IFRS9. 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 (2021: £1.2m).
As at 25 March 2021
Net repayment and further advances
Provisions made during the period
as at 31 march 2022
Closing position
Gross loan value
£m
Expected credit
loss
£m
Carrying value
of loan
£m
12.5
(2.7)
–
9.8
9.8
(1.2)
–
–
(1.2)
(1.2)
11.3
(2.7)
–
8.6
8.6
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 performing or in default. The loss allowance is calculated in accordance
with the policy set out in note 1.16, depending on the credit risk of each loan and the Group’s expectations of future cash
flow recoverability.
Credit risk
Performing
In default
Gross carrying amount
Loss allowance
Net carrying amount
at 31 march
2022
£m
At 25 March
2021
£m
8.1
1.7
9.8
(1.2)
8.6
10.5
2.0
12.5
(1.2)
11.3
loans to Joint venture veterinary practices – other loans
Loans to Joint Venture veterinary practices – other loans of £2.1m (2021: £3.3m) represent loan balances to Joint Venture veterinary
practices. These loans are unsecured, typically for five to seven years and attract an interest rate of SONIA plus 2.8%. The loans are
accounted for at amortised cost under IFRS9. 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 in note 1.16 as fully performing. Any expected credit losses are immaterial
(2021: £nil).
As at 25 March 2021
Net repayment and further advances
Provisions made during the period
as at 31 march 2022
Closing position
Gross loan value
£m
Expected
credit loss
£m
Carrying value
of loan
£m
3.3
(1.2)
–
2.1
2.1
–
–
–
–
–
3.3
(1.2)
–
2.1
2.1
Pets at Home Group Plc Annual Report & Accounts 2022
198
notes (forming part of the Financial Statements)
continued
16 other financial assets and liabilities continued
other investments
Other investments are held at fair value through other comprehensive income (‘FVOCI’). The fair values of investments in unlisted
equity securities are considered to be their carrying value as the impact of discounting future cash flows has been assessed as not
material and the investment is non-participatory.
Other financial assets
non-current assets
Interest rate swaps
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
non-current liabilities
Interest rate swaps
Group
Company
at 31 march
2022
£m
At 25 March
2021
£m
at 31 march
2022
£m
At 25 March
2021
£m
1.6
1.6
0.2
0.2
1.6
1.6
0.2
0.2
Group
Company
at 31 march
2022
£m
At 25 March
2021
£m
at 31 march
2022
£m
At 25 March
2021
£m
0.5
2.2
0.3
3.0
0.1
0.8
0.6
1.5
–
–
–
–
–
–
–
–
Group
Company
at 31 march
2022
£m
At 25 March
2021
£m
at 31 march
2022
£m
At 25 March
2021
£m
–
(0.0)
–
(0.0)
(0.0)
(1.2)
(0.1)
(1.3)
–
–
–
–
–
–
(0.1)
(0.1)
Group
Company
at 31 march
2022
£m
At 25 March
2021
£m
at 31 march
2022
£m
At 25 March
2021
£m
–
–
(1.6)
(1.6)
–
–
(1.6)
(1.6)
Pets at Home Group Plc Annual Report & Accounts 2022
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199
17 trade and other receivables
current assets
Trade receivables
Amounts owed by Joint Venture veterinary practices – funding for
new practices
Amounts owed by Joint Venture veterinary practices – operating loans
Other receivables
Prepayments
Accrued income
non-current assets
Amounts owed by Group undertakings
Group
Company
at 31 march
2022
£m
At 25 March
2021
£m
at 31 march
2022
£m
At 25 March
2021
(restated)1
£m
14.9
–
15.2
13.1
1.7
8.8
–
53.7
11.4
0.3
20.5
9.0
0.5
7.6
–
49.3
–
–
–
–
–
–
–
–
–
–
–
–
600.2
600.2
587.9
587.9
1
The prior year company balance sheet has been restated. See note 1.1 for an explanation of the prior year restatement.
trade and other receivables
The impairment of trade and other receivables is assessed in line with IFRS9. As at 31 March 2022 and 25 March 2021 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 IFRS9 and default to lifetime expected credit loss. The ECL is immaterial on the
trade receivables balance for the 53 week period ended 31 March 2022 (52 week period ended 25 March 2021: £nil).
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 IFRS9 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 1.16.
For those practices in default, a credit impairment charge is recognised under IFRS9 taking into account the Group’s expectations
of future cash flow recoverability. For other practices, a credit impairment charge is recognised under IFRS9, 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 £5.0m (2021: £6.2m).
The basis for this allowance and the movement in the period is set out below.
Group
As at 25 March 2021
Loans written off
Net repayment and further advances
Release of impairment recognised during the period
as at 31 march 2022
Closing position
Gross loan value
£m
Expected
credit loss
£m
Carrying
value of loan
£m
26.7
(2.3)
(4.2)
–
20.2
20.2
(6.2)
0.6
0.6
–
(5.0)
(5.0)
20.5
(1.7)
(3.6)
–
15.2
15.2
Pets at Home Group Plc Annual Report & Accounts 2022
200
notes (forming part of the Financial Statements)
continued
17 trade and other receivables continued
During the 53 week period ended 31 March 2022, £2.3m of operating loans which were deemed to be in default were written
off in advance of the acquisition of the ‘A’ shares (52 week period ended 25 March 2021: £1.4m) 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 £5.0m against operating loans of £20.2m (25 March 2021: ECLs of £6.2m against
operating loans of £26.7m). 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 1.16.
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 performing or in default. The loss allowance is calculated in accordance
with the policy set out in note 1.16, depending on the credit risk of each loan.
Credit risk
Performing
In default
Gross carrying amount
Loss allowance
Net carrying amount
at 31 march
2022
£m
At 25 March
2021
£m
9.5
10.7
20.2
(5.0)
15.2
15.9
10.8
26.7
(6.2)
20.5
Should forecast cash flows, as defined by the risk criteria in note 1.16, decrease by 0.5% over the 10-year time horizon, this would
lead to an increase in the required provision for operating loans of £1.2m (25 March 2021: £0.4m). 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 and overrider and promotional income
from suppliers which have not yet been invoiced. Accrued income is classified as current as it is expected to be invoiced and received
within 12 months of the period end date. Supplier income is recognised on an accruals basis, based on the expected entitlement
that has been earned up to the balance sheet date for each relevant supplier contract. As detailed in note 1.19, supplier income is
recognised as a credit within gross margin to cost of sales and is outside of the scope of IFRS15 and therefore a contract asset has
not been separately recognised. Further detail of the Group’s revenue recognition policy is provided in note 1.19.
company
Amounts owed by Group undertakings
Amounts owed by Group undertakings are repayable on demand bearing no interest but there is no valid expectation that it will be
settled within the next 12 months. Amounts owed by Group undertakings have been assessed in line with IFRS9 and an assessment
is made of the expected credit loss. As at 31 March 2022 and 25 March 2021 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 31 march
2022
£m
At 25 March
2021
£m
at 31 march
2022
£m
At 25 March
2021
£m
166.0
101.4
–
–
Pets at Home Group Plc Annual Report & Accounts 2022
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FiNaNciaL StateMeNtS
201
19 other interest-bearing loans and borrowings
non-current liabilities
Unsecured bank loans
terms and debt repayment schedule
Group
Company
at 31 march
2022
£m
At 25 March
2021
£m
at 31 march
2022
£m
At 25 March
2021
£m
96.9
98.7
96.9
98.7
Currency
interest rate Year of maturity
Nominal
Face value at
31 march
2022
£m
Revolving credit facility
Revolving credit facility
GBP SONIA +1.35%
GBP SONIA _1.15%
2027
2023
100.0
–
carrying
amount at
31 march
2022
£m
96.9
–
Face value at
25 March
2021
£m
–
100.0
Carrying
amount at
25 March
2021
£m
–
98.7
During the financial year, the Group entered into a new revolving credit facility of £300.0m which expires on 31 March 2027.
The drawn amount on the £300.0m facility was £100.0m at 31 March 2022 (drawn amount on the £248m facility was £100.0m
at 25 March 2021) and this amount is reviewed each month. Interest is charged at SONIA plus a margin based on leverage on a
pre-IFRS16 basis (net debt: EBITDA). Face value represents the principal value of the revolving credit facility. The facility is unsecured.
Following the cessation of Sterling LIBOR on 31 December 2021 the Group transitioned its existing revolving credit facility and
interest rate swap hedging products from LIBOR to SONIA. The effect of the transition was less than £0.1m. The new £300m
revolving credit facility entered into on 29 March 2022 is also linked to SONIA and the existing interest rate hedges continue to
be effective.
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 31 march
2022
£m
At 25 March
2021
£m
–
–
100.0
100.0
–
–
100.0
100.0
The loans at 31 March 2022 and 25 March 2021 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 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 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
25 March 2021
£m
101.4
–
(100.0)
1.4
Cash flow
£m
64.6
–
–
64.6
Non-cash
movement
£m
at
31 march 2022
£m
–
–
–
–
166.0
–
(100.0)
66.0
Pets at Home Group Plc Annual Report & Accounts 2022
202
notes (forming part of the Financial Statements)
continued
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 31 march
2022
£m
At 25 March
2021
£m
at 31 march
2022
£m
At 25 March
2021
£m
118.5
62.8
9.2
34.3
–
224.8
107.1
57.9
17.6
28.5
–
211.1
–
0.4
–
–
552.5
552.9
–
0.4
–
–
509.3
509.7
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 IFRS15 of £0.7m (2021: £0.8m) 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 IFRS15 of £1.6m (2021: £0.4m) 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 25 March 2021
Provisions made during the period
Provisions utilised during the period
Provisions released during the period
Balance at 31 march 2022
Current
Non-current
Provisions for
exit and closure
costs relating to
Joint Venture
veterinary
practices
£m
Dilapidation
provision
£m
Closed stores
provision
£m
3.4
4.8
(0.3)
–
7.9
0.7
1.0
(0.4)
–
1.3
2.3
2.5
(0.4)
(0.4)
4.0
Total
£m
6.4
8.3
(1.1)
(0.4)
13.2
at 31 march
2022
£m
At 25 March
2021
£m
6.5
6.7
13.2
4.3
2.1
6.4
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
one and three 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 dilapidations provision relates to the expected cost of repairs on leased properties at future lease expiry dates. The timing of
the utilisation of these provisions is variable depending on the expiry dates of the property leases concerned. In the 53 week period
ended 31 March 2022 a dilapidations provision of £4.1m was made for expected repairs at the Stoke Distribution Centre at the
expiry date of the lease.
Pets at Home Group Plc Annual Report & Accounts 2022
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203
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 IAS37. 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 15 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.
22 capital and reserves
Share capital
Group
At 26 March 2020
At 25 March 2021
at 31 march 2022
Company
At beginning of period
On issue at period end - authorised
At beginning of period
On issue at period end - authorised
Share capital
Number
Share capital
£m
500,000,000
500,000,000
500,000,000
5.0
5.0
5.0
Share capital
31 march 2022
£m
5.0
5.0
Share capital
25 March 2021
£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 as part of the IPO in 2014.
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 31 March 2022, the EBT held 3,363,989 ordinary shares (25 March 2021: 5,958,116) with a cost of £12,833,137 (2021:
£18,501,342). The market value of these shares as at 31 March 2022 was 361.40 pence per share (25 March 2021: 386.20
pence per share).
Pets at Home Group Plc Annual Report & Accounts 2022
204
notes (forming part of the Financial Statements)
continued
22 capital and reserves continued
other comprehensive income
31 March 2022
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
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
translation
reserve
£m
cash flow
hedging
reserve
£m
total other
comprehensive
income
£m
(0.0)
(0.0)
0.0
(0.0)
–
7.9
(1.2)
6.7
(0.0)
7.9
(1.2)
6.7
Translation
reserve
£m
Cash flow
hedging reserve
£m
Total other
comprehensive
income
£m
0.1
–
–
0.1
–
5.0
(0.3)
4.7
0.1
5.0
(0.3)
4.8
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$120m 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 31 March 2022, 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.
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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:
31 march 2022
Cash and cash equivalents
Trade payables
Forward exchange contracts
Balance sheet exposure
25 march 2021
Cash and cash equivalents
Trade payables
Forward exchange contracts
Balance sheet exposure
euro
£m
0.0
(2.1)
0.0
(2.1)
Euro
£m
0.5
(0.9)
–
(0.4)
US Dollar
£m
0.2
(5.2)
2.2
(2.8)
US Dollar
£m
0.3
(5.9)
(0.4)
(6.0)
HKD
£m
0.0
–
–
0.0
HKD
£m
0.0
–
–
0.0
total
£m
0.2
(7.3)
2.2
(4.9)
Total
£m
0.8
(6.8)
(0.4)
(6.4)
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 is post the impact of hedging and assumes that the change
occurred at the balance sheet date and had been applied to risk exposures existing at that date.
This analysis assumes that all other variables, in particular other exchange rates and interest rates, remain constant.
US Dollar
Euro
Equity
Profit or loss
31 march
2022
£m
(0.1)
–
25 March
2021
£m
–
–
31 march
2022
£m
0.2
0.1
25 March
2021
£m
0.3
–
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 is post the impact of hedging and assumes that the change
occurred at the balance sheet date and had been applied to risk exposures existing at that date.
Managing interest rate benchmark reform and associated risks
The Group’s exposure to sterling SONIA designated in hedging relationships is £100.0m at 31 March 2022 representing both the
nominal amount of the hedging interest rate swap and the principal amount of the hedged sterling-denominated revolving credit
facility. Following the cessation of Sterling LIBOR on 31 December 2021 the Group transitioned its previous revolving credit facility
and interest rate swap hedging products from LIBOR to SONIA. The effect of the transition was less than £0.1m. The new £300m
revolving credit facility entered into on 31 March 2022 is also linked to SONIA and the existing interest rate hedges continue to
be effective.
(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 31 March 2022, the Group had a revolving credit facility with
a face value totalling £100.0m. The Group’s borrowings as at 31 March 2022 incur interest at a rate of 1.35% plus SONIA 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 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 commenced on 31 March 2021 and will expire on 25 September 2023.
The hedge is structured to hedge at least 70% of the forecast outstanding debt for the next year.
Pets at Home Group Plc Annual Report & Accounts 2022
206
notes (forming part of the Financial Statements)
continued
23 Financial instruments continued
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 31 march
2022
£m
Book value
At 25 March
2021
£m
Book value
at 31 march
2022
£m
Book value
At 25 March
2021
£m
100.0
100.0
100.0
100.0
–
–
–
–
100.0
100.0
100.0
100.0
All borrowings bear a variable rate of interest based on SONIA. 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, which at
the 31 March 2022 is £100.0m which is 100% of the drawn down facility, 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 post hedging. This calculation assumes that the change occurred at the balance sheet date and had
been applied to risk exposures existing at that date.
This analysis assumes that all other variables, in particular foreign currency rates, remain constant and considers the effect of
financial instruments with variable interest rates, financial instruments at fair value through profit or loss or available for sale
with fixed interest rates and the fixed rate element of interest rate swaps. The analysis is performed on the same basis for the
comparative period.
equity
Increase
Decrease
Profit or loss
Increase
Decrease
at 31 march
2022
£m
At 25 March
2021
£m
0.5
(0.5)
–
–
0.5
(0.5)
–
–
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.
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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
31 March 2022
non-derivative financial liabilities
Bank loans (note 19)
Trade payables (note 20)
25 March 2021
carrying
amount
£m
contractual
cash flows
£m
1 year or less
£m
1 to <2 years
£m
2 to <5 years
£m
96.9
118.5
215.4
100.0
118.5
218.5
–
118.5
118.5
–
–
–
100.0
–
100.0
5 years
and over
£m
–
–
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
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)
98.7
107.1
100.0
107.1
–
107.1
–
–
100.0
–
1.7
1.2
0.0
1.7
1.2
0.0
0.1
1.2
0.0
0.8
0.8
–
–
–
–
208.7
210.0
108.4
0.8
100.8
–
–
–
–
–
–
5 years
and over
£m
–
–
carrying
amount
£m
contractual
cash flows
£m
1 year or less
£m
1 to <2 years
£m
2 to <5 years
£m
96.9
96.9
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
98.7
98.7
100.0
100.0
–
–
–
–
100.0
100.0
–
–
Pets at Home Group Plc Annual Report & Accounts 2022
company
31 March 2022
non-derivative financial liabilities
Bank loans (note 19)
25 March 2021
non-derivative financial liabilities
Bank loans (note 19)
208
notes (forming part of the Financial Statements)
continued
23 Financial instruments continued
liquidity risk and cash flow hedges
Cash flow hedges
The following table indicates the periods in which the cash flows associated with cash flow hedging instruments are expected to
occur and to affect profit or loss:
Group
31 March 2022
Interest rate swaps:
Assets (note 16)
Forward exchange contracts:
Assets (note 16)
Liabilities (note 16)
Fuel forward contracts:
Assets (note 16)
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)
company
31 March 2022
Interest rate swaps:
Assets (note 16)
25 March 2021
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
1.6
2.2
(0.0)
0.5
4.3
1.6
2.2
(0.0)
0.5
4.3
Carrying
amount
£m
Expected
cash flows
£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)
–
1.6
2.2
(0.0)
0.5
2.7
1 year
or less
£m
–
(0.1)
0.8
(1.2)
0.1
(0.0)
(0.4)
–
–
–
1.6
1 to <2
years
£m
–
(0.8)
–
–
–
–
–
–
–
–
–
2 to <5
years
£m
0.2
(0.8)
–
–
–
–
–
–
–
–
–
5 years
and over
£m
–
–
–
–
–
–
–
(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
1.6
1.6
1.6
1.6
–
–
1.6
1.6
–
–
–
–
Carrying
amount
£m
Expected
cash flows
£m
0.2
(1.7)
(1.5)
0.2
(1.7)
(1.5)
1 year
or less
£m
–
(0.1)
(0.1)
1 to <2
years
£m
–
(0.8)
(0.8)
2 to <5
years
£m
5 years
and over
£m
0.2
(0.8)
(0.6)
–
–
–
Pets at Home Group Plc Annual Report & Accounts 2022
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209
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 SONIA.
The impact of credit risk has an immaterial impact on the fair value.
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)
Pets at Home Group Plc Annual Report & Accounts 2022
210
notes (forming part of the Financial Statements)
continued
23 Financial instruments continued
31 March 2022
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)
Non-current other receivables (note 16)
Current other receivables (note 16)
Financial liabilities measured at fair value
Forward exchange contracts 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)
31 March 2022
Fair value
Fair
value
– hedging
instruments
£m
Fvoci – equity
instruments
£m
Financial
assets at
amortised
cost
£m
other
financial
liabilities
£m
total
carrying
amount
£m
–
–
2.2
0.5
1.6
4.3
–
–
–
–
–
–
–
–
0.2
1.1
–
–
–
1.3
–
–
–
–
–
–
–
–
(0.0)
(0.0)
(0.0)
(0.0)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
28.0
15.2
166.0
8.6
2.1
0.5
0.3
220.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(78.3)
(304.7)
(118.5)
(9.2)
(96.9)
607.6
level 1
£m
level 2
£m
level 3
£m
0.2
1.1
2.2
0.5
1.6
5.6
28.0
15.2
166.0
8.6
2.1
0.5
0.3
220.7
(0.0)
(0.0)
(78.3)
(304.7)
(118.5)
(9.2)
(96.9)
607.6
total
£m
0.2
1.1
15.2
8.6
2.1
0.5
0.3
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)
Non-current other receivables
Other receivables (note 16)
Financial liabilities not measured at fair value
Other interest-bearing loans and borrowings (note 19)
–
–
–
–
–
–
–
Pets at Home Group Plc Annual Report & Accounts 2022
–
–
–
–
–
–
0.2
1.1
15.2
8.6
2.1
0.5
0.3
(100.0)
–
(100.0)
StrateGic rePort
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FiNaNciaL StateMeNtS
211
Fair
value – hedging
instruments
£m
FVOCI – equity
instruments
£m
Financial assets
at amortised
cost
£m
Other
financial
liabilities
£m
Total
carrying
amount
£m
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)
Non-current other receivables (note 16)
Current 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
–
–
0.8
0.1
0.2
1.1
–
–
–
–
–
–
–
(0.0)
(1.2)
(1.7)
(2.9)
–
–
–
–
–
–
0.2
1.1
–
–
–
1.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
20.4
20.8
101.4
11.3
3.3
0.6
0.6
158.4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(78.4)
(331.3)
(107.1)
(17.6)
(98.7)
(633.1)
Level 1
£m
Level 2
£m
Level 3
£m
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)
–
–
–
–
–
–
–
–
–
–
–
–
–
0.2
1.1
20.8
11.3
3.3
1.2
(100.0)
–
(100.0)
0.2
1.1
0.8
0.1
0.2
2.4
20.4
20.8
101.4
11.3
3.3
0.6
0.6
158.4
(0.0)
(1.2)
(1.7)
(2.9)
(78.4)
(331.3)
(107.1)
(17.6)
(98.7)
(633.1)
Total
£m
0.2
1.1
20.8
11.3
3.3
1.2
Pets at Home Group Plc Annual Report & Accounts 2022
212
notes (forming part of the Financial Statements)
continued
23 Financial instruments continued
Changes in liabilities arising from financing activities
Balance at 25 march 2021
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
Capitalisation of debt issue costs
Accelerated amortisation of debt issue costs
Amortisation of debt issue costs
Total other changes
Balance at 31 march 2022
Loans and
borrowings
£m
98.7
100.0
(100.0)
–
–
–
–
–
(3.3)
0.7
0.8
(1.8)
Lease
liabilities
£m
409.7
–
–
(78.2)
(78.2)
11.5
41.3
(1.3)
–
–
–
51.5
Total
£m
508.4
100.0
(100.0)
(78.2)
(78.2)
11.5
41.3
(1.3)
(3.3)
0.7
0.8
49.7
96.9
383.0
479.9
Measurement of fair values
The following table shows the valuation techniques used in measuring Level 2 and Level 3 fair values at the balance sheet dates, as
well as the significant unobservable inputs used.
Type
Valuation technique
Significant unobservable
inputs
Inter-relationship between significant unobservable
inputs and fair value measurement
Investment in equity
securities
Forward exchange
contracts and interest
rate swaps
Other financial
liabilities
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.
Not applicable
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
Pets at Home Group Plc Annual Report & Accounts 2022
StrateGic rePort
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213
Hedge accounting
Cash flow hedges
At 31 March 2022 and 25 March 2021, the Group held the following instruments to hedge exposures to changes in foreign
currency and interest rates.
Foreign currency risk
Forward exchange contracts
Net exposure (£m)
Average GBP-USD forward contract rate
Average GBP-EUR forward contract rate
interest rate risk
Interest rate swaps
Net exposure (£m)
Average fixed interest rate
Maturity
1-6
months
6-12
months
more than
1 year
2022
2022
2022
1-6
months
2021
6-12
months
2021
More than
1 year
2021
52.9
1.37
1.18
–
–
21.0
1.34
1.18
–
–
–
42.4
1.32
1.11
18.0
1.36
1.15
–
–
–
–
–
100.0
0.811%
100.0
0.918%
–
–
100.0
0.811%
company
The Company held interest rate swaps as at 31 March 2022 and 25 March 2021 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 31 March 2022 and 25 March 2021, the Group has four share award plans, all of which are equity settled schemes.
1 cSoP
On 25 February 2014 the Company adopted the CSOP. Part I of the CSOP is tax approved under Schedule 4 to the Income Tax
(Earnings and Pensions) Act 2003 and provides for the grant of tax approved options. Part II of the CSOP provides for the grant
of unapproved options.
The tax approved options under Part I of the CSOP will be exercisable between the third and tenth anniversary of the date of grant,
subject to continued employment with the Group. These awards will be granted with an exercise price equal to the market value
of the shares at the grant date (as agreed with HMRC).
(a) Eligibility
All colleagues, including the Executive Directors and Senior Executives, are eligible to participate in the CSOP, at the discretion
of the Remuneration Committee.
Pets at Home Group Plc Annual Report & Accounts 2022
214
notes (forming part of the Financial Statements)
continued
24 Share-based payments continued
(b) Grant of options
No options may be granted more than ten years after the adoption of the CSOP. Options under the CSOP will not form part of
a colleague’s pensionable earnings.
(c) Vesting and performance
Colleagues who receive options under the CSOP and under the PSP in connection with Admission will be subject to the same
performance conditions described in Section 1 (d) above in respect of both grants. Colleagues who only receive options under
the CSOP in connection with Admission will not be subject to performance conditions.
(d) Exercise price
The price at which an option holder may acquire shares on the exercise of an option shall be determined by the Board but shall
not be less than the greater of market value of a share at the time of grant and its nominal value. The exercise price is therefore
fixed at grant date.
(e) Individual limits
No option may be granted to an eligible colleague under Part I of the CSOP which would result in the aggregate exercise prices
of shares comprised in all outstanding options granted to him/her under Part I, when aggregated with outstanding options held
under any other tax approved executive share option scheme established by the Company, exceeding the tax approved limit
(currently £30,000).
In addition, (both under Part I and II of the CSOP) the aggregate exercise price of shares comprised in options granted to a colleague
under the CSOP and the PSP in any financial year shall not exceed 150% of his/her annual salary for that year.
For the purposes of these limits, market value will be calculated by reference to the market value of the shares on or prior to the
relevant date of grant as determined by the Board (following consultation with the Remuneration Committee) and subject to HMRC
approval if applicable.
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).
2 PSP
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.
(a) Eligibility
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.
(c) Exercise price
The price at which a colleague may acquire shares on the exercise or vesting of an award under the PSP shall be determined by the
Remuneration Committee on the date of grant, and may, if the Remuneration Committee determines, be nil or nominal value only.
(d) Scheme limits
The number of newly issued shares over which (or in respect of which) awards may be granted under the PSP on any date shall
be limited so that: (i) the total number of shares issued and issuable in respect of options or awards granted in any ten year period
under the PSP and any other discretionary share option scheme of the Company (including the 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 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.
Pets at Home Group Plc Annual Report & Accounts 2022
StrateGic rePort
Governance
FiNaNciaL StateMeNtS
215
(e) Individual limits
The aggregate market value of shares comprised in awards granted to a colleague under the PSP, RSA and the CSOP in any financial
year shall not exceed 150% of their annual salary for that year.
For the purposes of awards granted on (or before) Admission, market value for these purposes was calculated by reference to
the Offer Price. For the purposes of awards granted following Admission, market value for these purposes will be calculated by
reference to the market value of the shares on the relevant date of grant as determined by the Board (following consultation with
the Remuneration Committee) in its absolute discretion.
(f) Performance
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.
–
3 SaYe
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 17.55% 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.
(a) Eligibility
All colleagues and full-time Directors of the Group, who have been in continuous service for such period of time (not exceeding five
years) as may be determined by the Board prior to the relevant date of grant of an option and who are liable to UK income tax, are
eligible to participate in the SAYE.
Participation may also be offered, at the discretion of the Board (taking account of the recommendations of the Remuneration
Committee), to other Directors or employees who otherwise do not satisfy all of the above criteria, although Non-Executive
Directors are not eligible to participate in the SAYE.
(b) Issue of invitations
Invitations to participate in the SAYE may be made during each 42 day period from (and including) (i) the date on which any
amendment to the SAYE is approved or adopted by the Company’s shareholders, (ii) the announcement of the Company’s final
or interim results for any financial period, (iii) the occurrence of an event which the Remuneration Committee considers to be an
non-underlying event concerning the Group or (iv) changes to the legislation affecting tax approved SAYE option schemes coming
into effect. If any of the above periods is a ‘close period’ as a result of the application of the Model Code for Securities Transactions by
Directors of Listed Companies (or as a result of the Company’s equivalent internal share dealing rules) and the Company is prohibited
from issuing invitations and/or granting options as a result, then invitations may be made within 42 days of the end of the close period.
Invitations may be issued by the trustee of an employee benefit trust. No invitations may be issued or options granted more than
ten years after the adoption of the SAYE.
Pets at Home Group Plc Annual Report & Accounts 2022
216
notes (forming part of the Financial Statements)
continued
24 Share-based payments continued
3 SaYe continued
(c) Exercise price
The price at which an option holder may acquire shares on the exercise of an option shall be determined by the Board but shall
not be less than the greater of 80% of the market value of a share at the time of grant and its nominal value.
(d) Savings contract
Options may be granted by the Board or the trustee of an employee benefit trust. Upon applying for an option, the colleague will
be required to enter into an approved savings contract with a savings institution nominated by the Company which lasts for three
years. The maximum amount which an employee is permitted to contribute under SAYE contracts is £500 per month. The Board
may set lower savings limits than this for different colleagues by reference to objective criteria such as levels of salary or length of
service. The minimum contribution is £5 per month (or such greater amount as the Board may specify, not to exceed £10). The total
exercise price of the shares over which the option is granted may not exceed the aggregate of the monthly contributions and bonus
payable at the end of the colleague’s related SAYE contract.
(e) Scheme limits
The number of newly issued shares over which (or in respect of which) options may be granted under the SAYE on any date of grant
shall be limited so that the total number of shares issued or capable of being issued in any ten year period under all the Company’s
employee share schemes (including the 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.
(f) Exercisability
Options will normally be exercisable during a period of six months following the allocation of a bonus under the related SAYE
contract and will normally lapse upon cessation of employment. Earlier exercise is, however, permitted if the colleague dies or leaves
employment through injury, disability, redundancy or retirement or where a colleague leaves employment of the Group by reason of
his employing company ceasing to be a member of the Group, or if the undertaking in which he is employed is sold outside the
Group. Early exercise will also be permitted in the event of a takeover, reconstructions or voluntary winding up of the Company.
4 rSa
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.
(a) Eligibility
All colleagues, including the Executive Directors and Senior Executives, are eligible to participate in the RSA, at the discretion of
the Remuneration Committee.
(b) Grant of awards
Awards under the RSA will not form part of a colleague’s pensionable earnings. Awards are not transferable (other than on death)
without the consent of the Remuneration Committee.
(c) Exercise price
The price at which a colleague may acquire shares on the exercise or vesting of an award under the RSA shall be determined by the
Remuneration Committee on the date of grant, and may, if the Remuneration Committee determines, be nil or nominal value only.
(d) Scheme limits
The number of newly issued shares over which (or in respect of which) awards may be granted under the RSA on any date shall
be limited so that: (i) the total number of shares issued and issuable in respect of options or awards granted in any ten year period
under the RSA and any other discretionary share option scheme of the Company (including the 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 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.
Pets at Home Group Plc Annual Report & Accounts 2022
StrateGic rePort
Governance
FiNaNciaL StateMeNtS
217
(e) Individual limits
The aggregate market value of shares comprised in awards granted to a colleague under the RSA, PSP and the CSOP in any financial
year shall not exceed 150% of their annual salary for that year. Market value for these purposes will be calculated by reference to
the market value of the shares on the relevant date of grant as determined by the Board (following consultation with the
Remuneration Committee) in its absolute discretion.
Fair value of share awards
The expected volatility is based on historical volatility of a peer group of companies over a relevant period prior to award. The
expected life is the average expected period to exercise, which has been taken as three years. The risk free rate of return is the yield
on zero-coupon UK government bonds with a life equal to this expected life.
Options are valued using a Black-Scholes option-pricing model for the non-market based (EPS element) performance conditions and
a Monte-Carlo simulation for the market-based (TSR element) performance conditions.
Special provisions allow early exercise in the case of death, injury, disability, redundancy, retirement or because the Company which
employs the option holder ceases to be part of the Group or in the event of a change in control, reconstruction or winding up of
the Company.
The key assumptions used in the fair value of the awards were as follows:
RSA
PSP
2021
2020
2019
2018
2017
2016
2015
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
£1.87
£0.00
32%
10
£4.57
£0.00
32%
10
£2.28
£0.00
32%
10
£1.37
£0.00
32%
10
2.00% 2.00% 2.00% 2.00%
n/a
£1.37
n/a
£2.28
n/a
£4.57
n/a
£1.87
£2.59
£0.00
32%
10
£2.75
£0.00
30%
10
£2.45
£0.00
30%
10
2.00% 2.00% 2.00%
0.50% 1.07% 1.07%
£2.06
£2.06
£2.06
2017
CSOP
2016
2015
2021
SAYE
2020
2019
£2.75
£2.75
32%
10
£2.59
£2.59
32%
10
£2.31
£2.31
37%
10
2.00% 2.00% 2.00%
0.50% 2.25% 2.25%
£0.75
£0.89
£0.65
£5.13
£4.10
33%
3
£2.87
£2.29
32%
3
£2.37
£1.98
32%
3
2.00% 2.00% 2.00%
0.64% 0.20% 0.20%
£0.78
£0.95
£1.68
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
PSP
000
2
–
–
–
–
2
–
CSOP
000
1,042
–
(22)
(541)
(3)
476
2.59
SAYE
000
6,014
1,187
(601)
(3,294)
(88)
3,218
2.81
RSA
000
7,097
1,167
(112)
(2,067)
(160)
5,925
–
Total
000
14,155
2,354
(735)
(5,902)
(251)
9,621
NA
The Group income statement charge recognised in respect of share-based payments for the 53 week period ended 31 March 2022
is £4.9m (52 week period ended 25 March 2021: £4.7m).
Pets at Home Group Plc Annual Report & Accounts 2022
218
notes (forming part of the Financial Statements)
continued
25 commitments
capital commitments
At 31 March 2022, the Group is committed to incur capital expenditure of £21.7m (25 March 2021: £6.1m). Capital commitments
predominantly relate to the cost of investment in and refurbishment of the new Pets at Home Distribution Centre and Pets at
Home stores.
At 31 March 2022, the Group has a commitment to increase the loan funding to Joint Venture companies of £0.8m (25 March
2021: £0.8m), this increase in funding is written into the Joint Venture agreements and becomes payable when certain criteria
are met.
26 contingencies
veterinary practices
Provisions are maintained by the Group, where necessary, against certain balances held with the veterinary practices. During the
period, the Group also had in place certain guarantees over the bank loans taken out by a number of veterinary practice companies
in which it holds an investment in non-participatory share capital. At the end of the period, the total amount of bank overdrafts and
loans guaranteed by the Group amounted to £11.2m (25 March 2021: £12.8m).
The Group is a guarantor for the lease for veterinary practices that are not located within Pets at Home stores. The Group is also
a guarantor to a small number of third parties where the lease has been reassigned.
exemption from audit by parent guarantee
The following wholly owned subsidiaries of the Company are covered by a guarantee provided by Pets at Home Group Plc and are
consequently entitled to an exemption under s479A from the requirement of the Act relating to the audit of individual accounts.
Under this guarantee, the Group will guarantee all outstanding liabilities of these entities. No liability is expected to arise under
the guarantee. The entities covered by this guarantee are disclosed below.
Company
Aberdeen Vets4Pets Limited
Aberdeen North Vets4Pets Limited
Alton Vets4Pets Limited
Andover Vets4Pets Limited
Companion Care (Ballymena) Limited
Companion Care (Barnsley Cortonwood Limited)
Bearsden Vets4Pets Limited
Bedminster Vets4Pets Limited
Belfast Stormont Vets4Pets Limited
Bicester Vets4Pets Limited
Blackpool Squires Gate Vets4Pets Limited
Blackpool Warbreck Vets4Pets Limited
Bonnyrigg Vets4Pets Limited
Borehamwood Vets4Pets Limited
Bourne Vets4Pets Limited
Bracknell Vets4Pets Limited
Bramley Vets4Pets Limited
Bramley Vets4Pets (Newco) Limited
Brighton Vets4Pets Limited
Carmarthen Vets4Pets Limited
Clitheroe Vets4Pets Limited
Corby Vets4Pets Limited
Craigavon Vets4Pets Limited
Crewe Vets4Pets Limited
Davidsons Mains Vets4Pets Limited
Denbigh Vets4Pets Limited
Doncaster Vets4Pets Limited
Dorchester Vets4Pets Limited
East Kilbride South Vets4Pets Limited
Ellesmere Port Vets4Pets Limited
Companion Care (Ely) Limited
Companion Care (Exeter) Limited
Companion Care (Exeter Marsh) Limited
Companion Care (Farnborough) Limited
Grantham Vets4Pets Limited
Pets at Home Group Plc Annual Report & Accounts 2022
Registered number
09393267
11024679
09639868
08132407
08294444
04141142
07780175
09267870
09022077
10285804
09578581
08394978
10757330
09319066
10200670
10605544
04238788
09772761
13539268
09498169
09878308
08163294
08846831
08966730
07726992
10976376
04335358
08708025
09628917
09725644
04417089
04930076
08314727
07673889
08361049
Company
Guildford Vets4Pets Limited
Handforth Vets4Pets Limited
Haverfordwest Vets4Pets Limited
Huddersfield Vets4Pets Limited
Inverurie Vets4Pets Limited
Kendal Vets4Pets Limited
Kilmarnock Vets4Pets Limited
Companion Care (Kirkcaldy) Limited
Lancaster Vets4Pets 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
Maidstone Vets4Pets Limited
Companion Care (Maidstone) 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
Northwich Vets4Pets Limited
Pentland Vets4Pets Limited
Pet Advisory Services Limited
Prescot Vets4Pets Limited
Rawtenstall Vets4Pets Limited
Redditch Vets4Pets Limited
Runcorn Vets4Pets Limited
Sheffield Drakehouse Vets4Pets Limited
Sheldon Vets4Pets Limited
Sidcup Vets4Pets Limited
South Shields Quays Vets4Pets Limited
Spalding Vets4Pets Limited
Companion Care (Slough) Limited
St Austell Vets4Pets Limited
St Neots Vets4Pets Limited
Staines 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
VetsDirect Limited
Wallasey Bidston Moss Vets4Pets Limited
Wellingborough Vets4Pets Limited
Wokingham Vets4Pets Limited
Wrexham Vets4Pets Limited
Companion Care Management Services Limited
Pets at Home (ESOT) Limited
Vets4Pets Services Limited
Vets4Pets Veterinary Group Limited
StrateGic rePort
Governance
FiNaNciaL StateMeNtS
219
Registered number
13470077
13371655
09485504
07207906
11056047
10163314
08850288
07680864
08536904
10291543
09881176
09966547
06959208
07149744
08285995
05171954
05094399
10516552
10602806
09869384
10756991
10425760
08425358
07957431
11107287
09360949
09180974
08878815
09009519
05612150
11446894
08790953
08822150
08187232
09848857
13720296
07427613
09878373
09811640
13584062
08282080
07329166
09916308
08802574
09881179
11023079
11145982
SC230445
09190138
07620413
09869355
07103838
08878037
03911784
05055601
04263054
Pets at Home Group Plc Annual Report & Accounts 2022
220
notes (forming part of the Financial Statements)
continued
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 £11.2m (25 March 2021: £12.8m).
The transactions entered into during the period and the balances outstanding at the end of the period are as follows:
transactions
– Fees for services provided to Joint Venture veterinary practices
– Rental and other occupancy charges to Joint Venture veterinary practices
Total income from Joint Venture veterinary practices
acquisitions
31 march 2022
£m
25 March 2021
£m
69.9
11.7
81.6
57.0
8.2
65.2
– Consideration for Joint Venture veterinary practices acquired (note 10)
2.1
1.6
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 Joint Venture veterinary practices – 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
20.2
(5.0)
15.2
9.8
(1.2)
8.6
2.1
–
2.1
(9.2)
22.9
26.7
(6.2)
20.5
12.5
(1.2)
11.3
3.3
–
3.3
(17.6)
25.2
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 IFRS15, revenue in the 53 week period ended 31 March 2022 and the 52 week
period ended 25 March 2021 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.
Pets at Home Group Plc Annual Report & Accounts 2022
StrateGic rePort
Governance
FiNaNciaL StateMeNtS
221
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 £5.0m (25 March 2021: £6.2m).
Loans to Joint Venture veterinary practices for other related parties – other loans 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 IFRS9. The balances above are shown net of allowances for expected credit losses held for initial
set up loans of £1.2m (25 March 2021: £1.2m).
In the 53 week period ended 31 March 2022, the value of loans written off recognised in the income statement amounted to
£2.3m which relates to operating loans. 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.
At 31 March 2022, the Group had a commitment to increase the loan funding to Joint Venture companies of £0.8m (25 March
2021: £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 leases 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 31 March 2022 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 £959.0m at 31 March 2022 exceeds the investments held in subsidiary
undertakings of £936.2m, and therefore management have concluded that under IAS36, 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.
Pets at Home Group Plc Annual Report & Accounts 2022
222
notes (forming part of the Financial Statements)
continued
28 investments in subsidiaries continued
Group
Details of the subsidiary undertakings are as follows:
In the 53 week period ended 31 March 2022, the Group has also acquired 100% of the ‘A’ shares of 11 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 1.4.
Further details of these acquisitions can be found in note 10.
Company
Brand Development Limited
Companion Care (Services) Limited
Companion Care Management Services Limited
Les Boues Limited
PAH Pty Limited
Pet Advisory Services Limited
Pet Investments Limited
Pets at Home (Asia) Limited
PAH Financial Services Limited
Pets at Home Holdings Limited
Pets at Home Limited
Pets at Home No.1 Limited
Pets at Home Superstores Limited
Pets at Home 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
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 Warbreck Vets4Pets Limited
Bodmin Vets4Pets Limited
Bolton Central Vets4Pets Limited
Bonnyrigg Vets4Pets Limited
Borehamwood Vets4Pets Limited
Bourne Vets4Pets Limited
Bracknell Vets4Pets Limited
Bradford Vets4Pets Limited
Bramley Vets4Pets Limited
Bramley Vets4Pets (Newco) Limited
Bridlington Vets4Pets Limited
Brighton Vets4Pets Limited
Holding
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Direct
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Pets at Home Group Plc Annual Report & Accounts 2022
Country of
incorporation
Class of shares
held
at 31 march
2022 %
At 25 March
2021 %
Guernsey
United Kingdom
United Kingdom
Jersey
Australia
United Kingdom
United Kingdom
Hong Kong
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
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
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
100
100
100
100
100
100
100
100
100
100
–
StrateGic rePort
Governance
FiNaNciaL StateMeNtS
Company
Bromborough Vets4Pets Limited
Cambridge Perne Road Vets4Pets Limited
Canvey Vets4Pets Limited
Carmarthen Vets4Pets Limited
Chorley Vets4Pets Limited
Clacton Vets4Pets Limited
Clitheroe Vets4Pets Limited
Colchester Layer Road Vets4Pets Limited
Colchester Vets4Pets Advanced Practice Limited
Companion Care (Ballymena) Limited
Companion Care (Barnsley Cortonwood) Limited
Companion Care (Ely) 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
Companion Care (Newport) Limited
Companion Care (Nottingham) Limited
Companion Care (Slough) Limited
Companion Care (Speke) Limited
Companion Care (Stratford-Upon-Avon) Limited
Corby Vets4Pets Limited
Coventry Canley Vets4Pets Limited
Craigavon Vets4Pets Limited
Crewe Vets4Pets Limited
Crosby Vets4Pets Limited
Davidsons Mains Vets4Pets Limited
Denbigh 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
Guildford Vets4Pets Limited
Handforth Vets4Pets Limited
Haverfordwest Vets4Pets Limited
Hemsworth Vets4Pets Limited
Hexham Vets4Pets Limited
Horden Vets4Pets Limited
Huddersfield Vets4Pets Limited
Inverness Vets4Pets Limited
Inverurie Vets4Pets Limited
Kendal Vets4Pets Limited
Kilmarnock Vets4Pets Limited
Kingswood Vets4Pets Limited
Lancaster Vets4Pets Limited
Leamington Spa Vets4Pets Limited
Leeds Kirkstall Vets4Pets Limited
Leicester St Georges Vets4Pets Limited
Leven Vets4Pets Limited
Linlithgow 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
223
Country of
incorporation
Class of shares
held
at 31 march
2022 %
At 25 March
2021 %
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
100
100
–
100
50
50
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
100
100
50
100
100
100
100
100
100
100
100
100
100
–
–
100
100
100
100
50
100
100
50
100
100
50
100
100
100
100
100
Pets at Home Group Plc Annual Report & Accounts 2022
224
notes (forming part of the Financial Statements)
continued
28 investments in subsidiaries continued
Company
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
Northwich 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
Rawtenstall Vets4Pets Limited
Redditch Vets4Pets Limited
Ripon Vets4Pets Limited
Runcorn 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
South Shields Quays Vets4Pets Limited
St Austell Vets4Pets Limited
St Neots Vets4Pets Limited
Staines Vets4Pets Limited
Stocksbridge Vets4Pets Limited
Stoke-On-Trent Vets4Pets Limited
Sudbury Vets4Pets Limited
Teesside Vets4Pets Limited
Thamesmead Vets4Pets Limited
The Heart of Dulwich Veterinary Care Limited
Thornbury Vets4Pets Limited
Tiverton Vets4Pets Limited
Uckfield Vets4Pets Limited
Uttoxeter Vets4Pets Limited
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
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Country of
incorporation
Class of shares
held
at 31 march
2022 %
At 25 March
2021 %
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
95
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
100
100
100
100
100
100
100
100
100
100
50
100
100
100
100
100
100
100
50
95
100
–
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Pets at Home Group Plc Annual Report & Accounts 2022
StrateGic rePort
Governance
FiNaNciaL StateMeNtS
225
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
Bitterne Vets4Pets Limited
Blackburn Vets4Pets Limited
Blackheath Vets4Pets Limited
Blackpool Squires Gate Vets4Pets Limited
Blackwood Vets4Pets Limited
Bolton 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 Newport Road Vets4Pets Limited
Carlisle Vets4Pets Limited
Carrickfergus Vets4Pets Limited
Castleford Vets4Pets Limited
Catterick Vets4Pets Limited
Chadwell Heath Vets4Pets Limited
Cheadle Hulme Vets4Pets Limited
Chester Caldy Vets4Pets Limited
Chester Vets4Pets Limited
Chesterfield Vets4Pets Limited
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
Country of
incorporation
Class of shares
held
at 31 march
2022 %
At 25 March
2021 %
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
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
Pets at Home Group Plc Annual Report & Accounts 2022
226
notes (forming part of the Financial Statements)
continued
28 investments in subsidiaries continued
Company
Cirencester Vets4Pets Limited
Clevedon Vets4Pets Limited
Cleveleys Vets4Pets Limited
Clifton Vets4Pets Limited
Clowne Vets4Pets Limited
Coalville 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 (Basildon Pipps Hill) Limited
Companion Care (Basildon) Limited
Companion Care (Basingstoke) Limited
Companion Care (Beckton) Limited
Companion Care (Bedford) Limited
Companion Care (Belfast) Limited
Companion Care (Bishopbriggs) Limited
Companion Care (Bletchley) Limited
Companion Care (Bolton) Limited
Companion Care (Bournemouth) Limited
Companion Care (Braintree) Limited
Companion Care (Brentford) Limited
Companion Care (Bridgend) Limited
Companion Care (Bridgwater) Limited
Companion Care (Brislington) Limited
Companion Care (Bristol Filton) Limited
Companion Care (Broadstairs) Limited
Companion Care (Burgess Hill) Limited
Companion Care (Cambridge Beehive) Limited
Companion Care (Cambridge) Limited
Companion Care (Cannock) Limited
Companion Care (Canterbury) Limited
Companion Care (Cardiff) Limited
Companion Care (Charlton) Limited
Companion Care (Chatham) Limited
Companion Care (Chelmsford) Limited
Companion Care (Cheltenham) Limited
Companion Care (Chesterfield) Limited
Companion Care (Chichester) Limited
Companion Care (Chingford) Limited
Companion Care (Chippenham) Limited
Companion Care (Christchurch) Limited
Companion Care (Colchester) Limited
Companion Care (Corstorphine) Limited
Companion Care (Coventry Walsgrave) Limited
Companion Care (Cramlington) Limited
Companion Care (Crawley) Limited
Companion Care (Crayford) Limited
Companion Care (Croydon) Limited
Companion Care (Derby Kingsway) Limited
Companion Care (Derby) Limited
Companion Care (Dunstable) Limited
Companion Care (Eastbourne) Limited
Companion Care (Enfield) 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
Pets at Home Group Plc Annual Report & Accounts 2022
Country of
incorporation
Class of shares
held
at 31 march
2022 %
At 25 March
2021 %
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
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
StrateGic rePort
Governance
FiNaNciaL StateMeNtS
Company
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
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
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
227
Country of
incorporation
Class of shares
held
at 31 march
2022 %
At 25 March
2021 %
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
Pets at Home Group Plc Annual Report & Accounts 2022
228
notes (forming part of the Financial Statements)
continued
28 investments in subsidiaries continued
Company
Companion Care (Stevenage) 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
Cross Hands Vets4Pets Limited
Cumbernauld Vets4Pets Limited
Dagenham Vets4Pets Limited
Darlington Vets4Pets Limited
Daventry 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 (Newco) 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
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
Pets at Home Group Plc Annual Report & Accounts 2022
Country of
incorporation
Class of shares
held
at 31 march
2022 %
At 25 March
2021 %
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
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
100
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
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
StrateGic rePort
Governance
FiNaNciaL StateMeNtS
Company
Harrogate New Park Vets4Pets Limited
Harrogate Vets4Pets Limited
Hartlepool Vets4Pets Limited
Hastings Vets4Pets Limited
Havant Vets4Pets Limited
Haverhill Vets4Pets Limited
Hayling Island Vets4Pets Limited
Heanor 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
Hull Anlaby Vets4Pets Limited
Hull Stoneferry Vets4Pets Limited
Hull Vets4Pets Limited
Ilkeston Vets4Pets Limited
Ipswich Vets4Pets Limited
Irvine Vets4Pets Limited
Kettering Vets4Pets Limited
Kidderminster Vets4Pets Limited
Kirkby in Ashfield 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
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
229
Country of
incorporation
Class of shares
held
at 31 march
2022 %
At 25 March
2021 %
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
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
Pets at Home Group Plc Annual Report & Accounts 2022
230
notes (forming part of the Financial Statements)
notes (forming part of the Financial Statements)
continued
continued
28 investments in subsidiaries continued
Company
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
Nottingham Chilwell Vets4Pets Limited
Nottingham Netherfield Vets4Pets Limited
Nuneaton Vets4Pets Limited
Oadby Vets4Pets Limited
Old Kent Road Vets4Pets Limited
Oxford Cowley Vets4Pets Limited
Paisley Vets4Pets Limited
Penrith Vets4Pets Limited
Penzance Vets4Pets Limited
Peterborough Vets4Pets Limited
Pontypridd Vets4Pets Limited
Poole Vets4Pets Limited
Portishead Vets4Pets Limited
Portsmouth Vets4Pets Limited
Prenton Vets4Pets Limited
Preston Vets4Pets Limited
Prestwich Vets4Pets Limited
Pure Pet Food Ltd
Quinton Vets4Pets Limited
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
Rushden Vets4Pets Limited
Saffron Walden Vets4Pets Limited
Salford 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 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
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
Pets at Home Group Plc Annual Report & Accounts 2022
Country of
incorporation
Class of shares
held
at 31 march
2022 %
At 25 March
2021 %
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
12
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
12
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
StrateGic rePort
Governance
FiNaNciaL StateMeNtS
231
Country of
incorporation
Class of shares
held
at 31 march
2022 %
At 25 March
2021 %
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
100
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
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
Company
Stourbridge Vets4Pets Limited
Street Vets4Pets Limited
Sunderland South Vets4Pets Limited
Sunderland Vets4Pets Limited
Sutton Coldfield Vets4Pets Limited
Sutton In Ashfield Vets4Pets Limited
Swindon Bridgemead Vets4Pets Limited
Swinton Vets4Pets Limited
Sydenham Vets4Pets Limited
Telford Madeley Vets4Pets Limited
Thurrock Vets4Pets Limited
Tilehurst Vets4Pets Limited
Torquay Vets4Pets Limited
Totton Vets4Pets Limited
Trafford Park Vets4Pets Limited
Trowbridge Vets4Pets Limited
Wakefield Vets4Pets Limited
Walkden Vets4Pets Limited
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
During the 53 week period ended 31 March 2022, the Group has sold 100% of the ‘A’ shares in four 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 four entities listed above to 50% investment.
Pets at Home Group Plc Annual Report & Accounts 2022
232
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
UK-adopted international accounting standards 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 results and comparative period where provided.
APMs considered by the business to be a key performance indicator are explained in more detail on page 40 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 and veterinary practices that have been trading for 52 weeks or more, excluding fee income
from Joint Venture veterinary practices where the Group has bought out the Joint Venture Partners or will offer to buy out the
Joint Venture Partners in the future.
Underlying PBt: 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 proforma profit before tax: Underlying proforma profit before tax 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, as well as the impact of
the in-year change in IAS38 intangible asset accounting policy.
Underlying free cash flow: Net increase/(decrease) in cash before the impacts of dividends paid, acquisition of subsidiaries,
proceeds from new loans and repayment of borrowings.
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
Definition
cash
eBitDa
Underlying EBITDA (see below) adjusted
for share-based payment charges.
The comparative cash EBITDA has been
restated to reflect the reclassification of
expenditure to the income statement
following the impact of the accounting
policy change detailed in note 1.1.
Reconciliation
Cash EBITDA (£m)
Underlying EBITDA
Share-based payment charge
Cash EBITDA
FY22
248.4
4.9
253.3
FY21
201.2
4.7
205.9
Note
2
3
Pets at Home Group Plc Annual Report & Accounts 2022
StrateGic rePort
Governance
FiNaNciaL StateMeNtS
233
APM
Definition
Underlying
eBitDa
Earnings before interest, tax, depreciation
and amortisation before the effect of
non-underlying items in the period.
The comparative underlying EBITDA has
been restated to reflect the reclassification
of expenditure to the income statement
following the impact of the accounting
policy change detailed in note 1.1.
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 share-based payments subject
to tax, then adjusted for depreciation of
PPE, right-of-use assets and amortisation.
GCI represents gross PPE, right-of-use
assets and software, and other intangibles
excluding the goodwill created on the
acquisition of the Group by KKR
(£906,445,000) plus net working
capital, before the effect of
non-underlying items in the period.
The comparative underlying CROIC has
been restated to reflect the reclassification
of expenditure to the income statement
following the impact of the accounting
policy change detailed in note 1.1.
Reconciliation
Underlying EBITDA (£m)
Statutory operating profit
Depreciation on tangible
fixed assets
Depreciation on right-of-use
assets
Amortisation of intangible
assets
Non-underlying items
Underlying EBITDA
FY22
163.8
25.4
69.7
8.8
(19.3)
248.4
FY21
124.7
26.9
70.3
8.2
(28.9)
201.2
Note
2
3,11
3,12
3,13
3
CROIC
FY22
FY21
Note
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
144.5
4.9
149.4
19%
(28.4)
121.0
103.9
224.9
95.8
4.7
100.5
19%
(19.1)
81.4
105.4
186.8
342.4
548.2
1,034.1
(906.4)
9.9
(90.7)
937.5
24.0%
310.1
508.2
1,020.4
(906.4)
12.6
(83.4)
861.5
21.7%
2
3
2
11
12
13
16
see definition
Pets at Home Group Plc Annual Report & Accounts 2022
234
Glossary – alternative Performance measures
continued
APM
Definition
Reconciliation
Underlying free cash flow (£m)
Underlying free cash flow
Non-underlying working
capital
Free cash flow
Underlying cash flow
Dividends
Acquisition of subsidiary
Proceeds from new loan
Repayment of borrowings
Non-underlying cash flow
Proceeds from sale of PPE
relating to GVs
Settlement of put and call
Disposal of subsidiaries
Net increase in cash
CFS = Consolidated statement of cash flows
Not applicable.
FY22
95.0
–
95.0
(48.5)
(1.7)
100.0
(100.0)
0.6
–
19.2
64.6
FY21
67.4
–
67.4
(37.1)
(16.9)
60.0
(125.0)
–
(5.5)
79.4
22.3
Note
CFS
CFS
CFS
CFS
CFS
CFS
Not applicable.
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.
The comparative underlying free cash
flow has been restated to reflect the
reclassification of expenditure to the
income statement following the impact
of the accounting policy change detailed
in note 1.1.
like-for-
like
2-year
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 and veterinary practices 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.
2-year ‘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 and veterinary practices
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.
Pets at Home Group Plc Annual Report & Accounts 2022
StrateGic rePort
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FiNaNciaL StateMeNtS
235
APM
Definition
Reconciliation
Underlying basic EPS (p)
Underlying basic EPS
Non-underlying items
Basic earnings per share
FY22
21.2
3.7
24.9
FY21
12.3
5.8
18.1
Underlying operating profit (£m)
Underlying operating profit
Non-underlying items
Operating profit
FY22
144.5
19.3
163.8
FY21
95.8
28.9
124.7
Underlying PBT (£m)
Underlying PBT
Non-underlying items
Profit before tax
CIS = Consolidated income statement
FY22
130.1
18.6
148.7
FY21
77.4
28.9
106.3
Note
5
5
Note
2
3
Note
CIS
CIS
Underlying
basic ePS
Underlying
operating
profit
Underlying
profit
before tax
Underlying basic earnings per share (EPS)
is based on earnings per share before the
impact of certain costs or incomes that
derive from events or transactions that fall
outside the normal activities of the Group
and are excluded by virtue of their size and
nature in order to reflect management’s
view of the performance of the Group.
The comparative underlying basic EPS has
been restated to reflect the reclassification
of expenditure to the income statement
following the impact of the accounting
policy change detailed in note 1.1.
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.
The comparative underlying operating
profit has been restated to reflect the
reclassification of expenditure to the
income statement following the impact
of the accounting policy change detailed
in note 1.1.
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.
The comparative underlying profit
before tax has been restated to reflect
the reclassification of expenditure to the
income statement following the impact
of the accounting policy change detailed
in note 1.1.
Group
underlying
proforma
profit
before tax
Underlying proforma profit before tax 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, as well as
the impact of the in-year change in IAS38
intangible asset accounting policy.
Underlying proforma PBT (£m)
Underlying PBT
Intangible asset costs
expensed
Intangible asset amortisation
reversal
Underlying proforma profit
before tax
CIS = Consolidated income statement
FY22
130.1
24.0
FY21
77.4
15.4
Note
CIS
(9.4)
(5.3)
144.7
87.5
Pets at Home Group Plc Annual Report & Accounts 2022
236
Glossary – alternative Performance measures
continued
APM
Definition
Reconciliation
retail
underlying
proforma
profit
before tax
vet Group
underlying
proforma
profit
before tax
Underlying
profit after
tax
Underlying
total tax
expense
Retail underlying proforma profit before
tax 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 division
and are excluded by virtue of their size and
nature in order to reflect management’s
view of the performance of the division,
as well as the impact of the in-year change
in IAS38 intangible asset accounting policy.
Retail underlying proforma PBT (£m)
Underlying PBT
Intangible asset costs
expensed
Intangible asset amortisation
reversal
Underlying proforma profit
before tax
FY22
101.4
22.5
FY21
59.7
13.2
Note
2
(9.3)
(5.3)
114.6
67.6
Vet Group underlying proforma PBT (£m)
Underlying PBT
Intangible asset costs
expensed
Intangible asset amortisation
reversal
Underlying proforma profit
before tax
FY22
43.1
1.5
FY21
33.3
2.2
Note
2
(0.1)
–
44.5
35.5
Underlying PAT (£m)
Underlying PAT
Non-underlying items
PAT
CIS = Consolidated income statement
FY22
105.8
18.7
124.5
FY21
61.6
28.8
90.4
Note
CIS
CIS
Underlying total tax expense (£m)
Underlying tax expense
Non-underlying items
Tax expense
CIS = Consolidated income statement
FY22
(24.3)
0.1
(24.2)
FY21
(15.8)
(0.1)
(15.9)
Note
CIS,8
CIS,8
Vet Group underlying proforma profit
before tax is based on the impact of the
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 division and are excluded
by virtue of their size and nature in order
to reflect management’s view of the
performance of the division, as well
as the impact of the in-year change in
IAS38 intangible asset accounting policy.
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.
The comparative underlying PAT has been
restated to reflect the reclassification of
expenditure to the income statement
following the impact of the accounting
policy change detailed in note 1.1.
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
or incomes that derive from events or
transactions that fall outside the normal
activities of the Group and are excluded
by235virtue of their size and nature
in order to reflect management’s view
of the performance of the Group.
The comparative underlying total tax
expense has been restated to reflect
the reclassification of expenditure to the
income statement following the impact
of the accounting policy change detailed
in note 1.1.
Pets at Home Group Plc Annual Report & Accounts 2022
StrateGic rePort
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FiNaNciaL StateMeNtS
237
APM
Definition
Underlying
net
working
capital
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.
The comparative underlying net working
capital has been restated to reflect the
reclassification of expenditure to the
income statement following the
impact of the accounting policy
change detailed in note 1.1.
Underlying
cash
working
capital
Working capital before increase/decrease
in gross operating loans to Joint Venture
practices
The comparative underlying cash
working capital has been restated to
reflect the reclassification of expenditure
to the income statement following the
impact of the accounting policy change
detailed in note 1.1.
Reconciliation
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
FY22
FY21
Note
26.4
(5.7)
CFS
(4.7)
(0.8)
19.8
6.8
(5.9)
(22.1)
12.0
1.3
21.1
(14.7)
6.5
10.8
27.6
(3.9)
(1.2)
26.4
FY22
62.8
84.5
(224.8)
(6.5)
(6.7)
(90.7)
FY22
26.4
(5.3)
(1.8)
(5.7)
FY21
50.4
83.7
(211.1)
(4.3)
(2.1)
(83.4)
FY21
(5.7)
(9.0)
21.1
(14.7)
CFS
CFS
CFS
Note
14
20
21
21
Note
27
Pets at Home Group Plc Annual Report & Accounts 2022
238
Glossary – alternative Performance measures
continued
APM
Definition
Reconciliation
Operating free cash flow(£m)
FY22
FY21
Note
operating
cash flow
Net cash flow from operating activities
per the cash flow statement, before the
effects of corporation tax payments,
non-underlying items, lease payments,
proceeds from the sale of PPE, and costs
to acquire right-of-use assets.
The comparative underlying operating
cash flow has been restated to reflect
the reclassification of expenditure to the
income statement following the impact
of the accounting policy change detailed
in note 1.1.
net cash/
(debt)
Cash and cash equivalents less loans
and borrowings.
total
indebted-
ness
Cash and cash equivalents less loans
and borrowings plus lease liabilities.
Net cash flow from operating
activities (per cash flow
statement)
Add back:
Tax paid
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
Costs to acquire ROU assets
Underlying free cash flow
CFS = Consolidated statement of cash flows
248.1
181.4
31.0
17.5
279.1
(67.3)
(11.5)
200.3
(31.0)
(3.5)
0.3
(3.3)
(12.3)
(55.5)
0.3
(0.3)
95.0
198.9
(66.6)
(12.8)
119.5
(17.5)
(4.8)
0.4
(0.2)
(8.7)
(21.2)
0.3
(0.4)
67.4
Net cash/(debt) (£m)
FY22
FY21
Cash and cash equivalents
Loans and borrowings
Net cash/(debt)
166.0
(100.0)
66.0
101.4
(100.0)
1.4
Total indebtedness (£m)
FY22
FY21
Cash and cash equivalents
Loans and borrowings
Net cash/(debt)
Lease liabilities
Total indebtedness
166.0
(100.0)
66.0
(383.0)
(317.0)
101.4
(100.0)
1.4
(409.7)
(408.3)
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)
FY22
FY21
Statutory Group revenue
Fee income
Sales by Joint Venture
veterinary practices
Customer sales
CIS = Consolidated income statement
1,317.8
(69.9)
1,142.8
(57.0)
425.9
351.3
1,673.8
1,437.1
Pets at Home Group Plc Annual Report & Accounts 2022
CFS
CFS
CFS
CFS
CFS
CFS
CFS
CFS
CFS
CFS
CFS
CFS
Note
18
19
Note
18
19
12
Note
CIS
2
StrateGic rePort
Governance
FiNaNciaL StateMeNtS
advisors and contacts
239
registered office
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
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 llP
1 St Peter’s Square
Manchester
M2 3AE
registrar
computershare investor Services Plc
The Pavilions
Bridgwater Road
Bristol
BS99 6ZZ
Pets at Home Group Plc Annual Report & Accounts 2022
240
notes
Pets at Home Group Plc Annual Report & Accounts 2022
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Pets at Home Group Plc
Epsom Avenue
Stanley Green Trading Estate
Handforth
Cheshire
SK9 3RN
United Kingdom
petsathome.com