Creating a better world
for pets and the people
who love them
Annual Report & Accounts 2023
Pets at Home Group Plc Annual Report & Accounts 2023
What we do
We provide the best
products, services
and advice to
guide pet owners
through their pet
care journey
Our unique proposition of products, services
and advice allows us to deliver complete
pet care to consumers in a way competitors
cannot easily replicate, and enables us to
continue to take share across both our key
markets of retail and veterinary.
For more information please visit:
https://investors.petsathome.com
Strategic Report
Governance
Financial Statements
Highlights
Sustainability highlights
Over
£8.2m
raised to support pet charities
11,000
hours donated to local communities
41%
reduction in CO2e emissions vs FY16
Contents
Strategic report
02 Business model
04
Investment case
06 Chair’s statement
08 Chief Executive’s statement
10
Key performance indicators
12 Market overview
14
16
20 Chief Financial Officer’s review
23
Stakeholder engagement
Sustainability review
Risk review
Chair’s introduction
Board of Directors
Leadership and purpose
Governance
31
32
34
36 Division of responsibilities
39 Composition, succession and evaluation
42 Nomination and Corporate Governance
Committee Report
Audit and Risk Committee Report
ESG Committee Report
TCFD statement
Directors’ Remuneration Report
Directors’ Report
Statement of Directors’ Responsibilities
44
50
52
61
87
94
Independent Auditor’s Report
Financial statements
96
102 Consolidated income statement
102 Consolidated statement of comprehensive
income
103 Consolidated balance sheet
104 Consolidated statement of changes in equity
105 Consolidated statement of cash flows
106 Company balance sheet
107 Company statement of changes in equity
108 Company statement of cash flows
109 Notes (forming part of the financial statements)
169 Glossary – Alternative Performance Measures
172 Advisors and contacts
Financial highlights
Revenue (£m)
£1,404.2m
+6.6%
2023
2022
2021
£1,404.2m
£1,317.8m
£1,142.8m
Profit before tax (PBT) (£m)
£122.5m
2023
2022
2021
£122.5m
£148.7m
£106.3m
Underlying PBT1 (£m)
£136.4m
2023
2022
2021
£136.4m
£130.1m
£77.4m
Dividend per share (pence)
12.8p
2023
2022
2021
12.8p
11.8p
8.0p
(17.7)%
+4.8%
+8.5%
1
Alternative Performance Measures (APMs) are defined and reconciled to IFRS information, where possible, on page 169. Statutory PBT was £122.5m, down 17.7% YoY. In FY22 we benefitted
from the second tranche of the proceeds from the disposal of the Specialist Group (£19.2m credit) while in FY23 PBT includes a total of £13.9m of non-underlying costs (includes £12.9m of
operating costs and £1.0m of lease interest), predominantly due to the transition to our new distribution centre.
01
Pets at Home Group Plc Annual Report & Accounts 2023
Business model
A unique combination of
products, services and advice
Business activities
P e t Care Platform
O u r
Pet-products
& advice
in-store
In-store vet
practices
Retail
A wide range of pet products is
available both online and in our
stores, which offer far more to
the pet owner than just a place
to buy food and accessories.
Through a combination of
our in-store experience and
services, knowledgeable
colleagues and award winning
VIP loyalty club, we aim to make
pet ownership convenient,
affordable and rewarding.
We provide a comprehensive
range of small animal veterinary
services through a network of
general 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.
V
e
t
G
r
o
u
p
Digitally-led
pet healthcare
solutions
VIP loyalty
club
Standalone
vet practices
Vet Group
Omnichannel &
subscriptions
Pet-products
online
R
e
t
a
i
l
Grooming
salons
Other pet
care services
Underpinned by Our Bet t e r
W o r l d P l e
g e
d
Differentiators
Trusted and well
known brand
Passionate and
expert advice
Extensive and
growing data
capability
02
Strategic Report
Governance
Financial Statements
Stores
457
Groomers
339
Revenue
Operating profit
£1.3bn
£100m
Practices
444
Telehealth consultations
115k
Revenue
£123m
Operating profit
£52m
Scalable
omnichannel
platform
Differentiated,
sector-leading
vet services
Unique digital
experience
03
Pets at Home Group Plc Annual Report & Accounts 2023
Investment case
A clear and
compelling
investment case
04
Strategic Report
Governance
Financial Statements
Strong position
in a growing,
resilient market
– We have 24% share of a £7.2bn pet
care market providing significant
opportunity to take further share
The pet care market is in structural
growth underpinned by increasing
humanisation, premiumisation, and
penetration
–
A unique
proposition of
pet care solutions
Scalable
omnichannel
platform
–
An expanding platform of pet care,
combining product, services and expert
advice from a trusted, well known brand
– Consumers who engage across all of
our channels spend up to 9x more each
year compared to those who shop solely
in our stores
– Creating a proprietary digital platform
where customers can access their
entire pet care needs in one place
– Our telehealth business enhances our
digital capabilities, providing trusted
advice and even more convenient pet
care services
24%
market share
457
pet care centres
40%
online orders collected in store
Unique Joint
Venture veterinary
model
Extensive and
growing data
capability
Subscriptions create
a predictable, visible
income stream
–
–
Largest branded veterinary business
in the UK, with practices located in
two-thirds of stores
Practice maturity represents a
significant future growth opportunity,
with further upside from practice
rollout, extension and productivity
– Unique VIP loyalty club, providing over
10 years’ worth of proprietary pet and
customer data
– Over 1.6 million pet care plan
subscriptions across the Group,
up 8% year-on-year
– By leveraging our data insights, we
can offer more personalised, targeted
solutions, driving customer loyalty,
retention and lifetime value
– Our existing three core plans generate
over £150m of visible, repeatable
consumer revenue per year, supporting
further share of wallet gain
444
veterinary practices
7.7m
VIP loyalty club members
1.6m
pet care plans
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 of £98.2m and dividend
per share increased to 12.8p
Strong commitment
to responsible
business
–
Strong commitment to sustainability
with a strategy designed to balance
the interests of all stakeholders
– Balanced Board of Directors with
a broad range of skills, experience,
and expertise
8.5%
increase in dividend
£8.2m
raised for charities
05
Pets at Home Group Plc Annual Report & Accounts 2023
Chair’s statement
A strategy to drive us forward
We have continued to invest in digitising
our business, making it easy for us to
interact with consumers however they
choose. We have also improved our
operational capability with the opening
of our new distribution centre in Stafford,
which underpins our capacity needs for the
next decade and materially reduces the
cost of product deliveries to our pet care
centre network.
Our strong purpose-led culture, and our
core values play a critical role in supporting
this strategy.
Acting ethically has always been at the
heart of our business and by focusing
on financial sustainability, as well as the
sustainability of human and natural capital,
our strategy will ensure we continue to
run a responsible business as well as a
successful one.
I am confident this updated strategy will
deliver sustainable long term value to all
our stakeholders.
Colleagues
The fundamental strength of Pets at
Home is our culture. The skill, passion and
expertise of our colleagues remains a key
strategic advantage as they guide pet
owners through their pet care journey.
Every single colleague across the business
has contributed to the success of the last
year. Personally, and on behalf of the Board,
I would like to thank them for their ongoing
hard work and dedication.
Governance
During the year, we were delighted to
welcome Roger Burnley to the Board as an
independent Non-Executive Director. Roger
has deep knowledge of the retail sector
and food supply chains and his experience
will be of great value to the business as it
embarks on the next stage of its ambitious
growth plan.
Sharon Flood, Chair of the Remuneration
Committee, and Stanislas Laurent,
Non-Executive Director, will each step
down from the Company's Board having
each served six years as independent
Non-Executive Directors.
The Directors, on behalf of the Company,
wish to thank them both for their
dedicated service.
Dennis Millard, who has served as the
Company's Senior Independent Director for
nine years, stood down from that position
in February 2023, however, will remain a
Director of the Company for a further year,
continuing to contribute his highly valuable
experience and retail industry knowledge.
Zarin Patel was appointed as Senior
Independent Director, having acted as a
Non-Executive Director of the Company
since 2021.
Dividend
The robust performance delivered over the
past year demonstrates both the resilience
of the pet care market and the strength of
our unique model. The business continues
to be highly cash generative, and despite
strong levels of investment, we finish the
year in a net cash position.
As such, the Board is pleased to recommend
a final dividend of 8.3 pence per share to be
paid on 11 July 2023 to shareholders on the
register at the close of trading on 16 June
2023. This will take the full year dividend
to 12.8 pence per share, up 8.5% on the
previous year.
Looking ahead
The pet care sector is undergoing
structural growth, and our fully integrated
omnichannel model positions Pets at Home
well to benefit from these favourable sector
and consumer trends. Our balance sheet
strength enables us to continue investing
in our existing strengths and the new
capabilities needed to build the world’s best
pet care platform. We look to the future with
ambition and confidence, with our newly
defined strategy enabling us to deliver
ever higher standards of performance
for our consumers, our colleagues, our
communities, the environment, and of
course for our shareholders.
Ian Burke
Chair
25 May 2023
In a challenging economic
environment, we delivered
a record year of sales and
underlying profit demonstrating
the strength of the pet care
market and the advantages of our
unique omnichannel model. Over
the past year we have continued
to welcome many new pet owners
into the business, made great
progress on our key strategic
initiatives, and refreshed and
refined our sustainability strategy.
Strategy
Our purpose is to create a better world
for pets and the people who love them.
During her first year with the business, our
CEO Lyssa McGowan, along with the wider
Board and executive management team,
has updated our strategy.
This strategy is to build an integrated,
omnichannel, consumer centric platform
which unifies our unique blend of products,
services, and advice, connecting them
seamlessly across all channels to deliver
an unrivalled experience to our consumers.
The recent launch of our new Pets brand
brings together all our products and
services under one master brand and
represents our new consumer positioning as
a provider of all pet owners’ pet care needs.
06
Strategic Report
Governance
Financial Statements
Our purpose
To create a better world for pets
and the people who love them
Our vision
To build the world’s best pet care platform
One integrated business
Consumer centric
Omnichannel
Sustainable
Our role
We provide the best products, services
and advice to guide pet owners through
their pet care journey
Health
Behaviour
Companionship
Nutrition
Environment
Our values
We put
pets first
We’re experts
in our field
We lead
the way
We help owners
be their best
We’re proud
of what we do
together
07
Pets at Home Group Plc Annual Report & Accounts 2023
Chief Executive’s statement
Building the world’s
best pet care platform
–
Building the world’s best pet
care platform
Integrated – a unified blend of
products, services and advice.
– Our pet care platform will truly integrate
all our products and services. Once
built, our platform will be leveraged
across all our verticals; all accessed
via a unified pet care app enabling
consumers to fulfil all their pet
care needs, from booking surgical
appointments and ordering repeat
prescription deliveries to managing
nutrition subscriptions and buying a
special birthday treat. In the future, we
will leverage our platform to unlock new
adjacencies.
The recent launch of our new Pets
brand brings together our products
and services under one master brand
and represents our new consumer
positioning as a provider of all your
pet care needs – however, whenever
and wherever you want. This unified
positioning will significantly enhance
marketing efficiency and effectiveness
across our services.
We are the only business which has
successfully brought together clinical
and retail services at scale, operating
the UK’s most productive veterinary
business with consumer revenues of
c£500m across 444 practices, enabled
by our unique joint venture partnership
model.
We will continue to leverage our
category authority and expertise to
lead on innovation, making it easier for
pet owners to access the best products
and services for their pets. Our new
long-term agreement with Cranswick
will support further innovation and
growth across own brand – a key area of
competitive advantage. We will increase
presence in fast growing areas, e.g.
fresh and frozen.
–
–
Our medium-term vision – One
unified pet care platform to unlock
our potential.
Our medium-term vision and strategy is
to build the world’s best pet care platform.
This will generate sustainable value for all
stakeholders, as we create a better world
for pets and the people that love them. We
are the largest, and by far the most trusted,
pet care business in the UK. We already
have a leading 24% share of the £7.2bn UK
pet care market, an industry supported by
structural growth, underpinning resilience
and predictability in our revenues. We are
the only player that combines products,
services and expertise across the full pet
care market, with scale and credibility
in every area. Our strategy will unlock
a unique opportunity we have to bring
together everything that pet owners need
in one place.
08
–
Omnichannel – seamlessly connected
for the consumer.
– Our network of 457 pet care centres
gives us scale and reach advantages,
bringing us closer to pet owners
and able to offer more flexibility and
convenience than competitors, all
under one roof. We will continue to
invest behind the opportunity for
new pet care centres in attractive
catchments, particularly urban, with
clinical services, tailored ranges and
innovation across food and accessories.
As our joint venture vet practices reach
maturity it unlocks growth opportunities
in advanced practices and 24hr
hospitals, significantly extending the
physical footprint and range of clinical
services offered by our network of
veterinary practices, so supporting
growth and profitability.
We are bringing together our physical
and digital capabilities, creating
hybrid experiences such as virtual
consultations. Our investments
in technology will make it easier
for us to interact with consumers
however they chose, whilst matching
the right colleague expertise to
the right consumer need, driving
better productivity alongside better
outcomes for pets and pet owners.
Our new DC is onstream, underpinning
capacity needs beyond the next
decade and will materially reduce our
cost to serve. Deliveries to our store
network are underway and we will
look to move to one DC from three by
Spring 2024, improving fulfilment costs,
consumer experience and efficiency.
–
–
Consumer centric – an unrivalled
experience.
–
Our deep and unique insights into
pet owners’ needs increasingly drives
our actions. Our data capability is
increasingly integrated through our
operation driving targeted, effective
offers, improving operational efficiency,
and growing predictable, sticky revenue
streams through our CRM.
Strategic Report
Governance
Financial Statements
Planet - to make pet care
environmentally sustainable by
leading in sustainable pet food.
– We will continue to reduce the carbon
intensity of our own operation, having
successfully grown our business while
reducing our operational carbon
emissions by 41% since 2016.
– By leading in sustainable pet food,
evidenced by our investment in the
Good Dog Food company, we can help
to move the industry to a future with
lower carbon emissions, and improve
biodiversity.
–
–
Our financial framework – delivering
sustainable value for shareholders.
Ambition to grow sales 7% per annum
over the medium term supported by:
– We expect the £7.2bn UK pet care
market to grow c4% per annum as
the pet care market is supported by
three structural growth trends of:
humanisation; premiumisation; and
penetration.
Our unique pet care platform helps
drive outperformance of c300bps
versus the market supported by
the following.
Our clear competitive scale and
reach advantages, our unique
data capabilities, and our category
authority and innovation.
Reducing friction will grow share
of wallet by driving frequency
and enabling cross-sell/upsell.
Investment behind our physical assets
with a medium-term opportunity for
40 new stores, ongoing store refresh
programme, and leveraging our data
to tailor ranges locally.
Our Vet Group will grow through
maturity, extensions (20+ in FY24),
advanced capabilities, and new sites
(5-15 pa), growing consumer revenues
at 9% CAGR over the medium-term.
–
–
–
Target 10% PBT growth CAGR
over the medium term through:
– Operating leverage as we deliver growth
through the investments we have made
in our platform and capabilities, while
the costs of these investments tapers
going forward.
Ongoing initiatives to target efficiencies
and drive further productivity gains
across the business.
Improving mix as our vet revenues grow
faster than the group average driving
up margins and improving FCF (already
around 50% of Group FCF).
–
–
Move FCF conversion towards
70% of PBT in the medium term:
– Delivering growth in profits using
investments we have already made
in the business such as our new
distribution centre and the build phase
of digital investment.
Moving beyond the peak of our
investment plan. Much of the capital to
deliver our growth ambitions has been
invested and capex will taper towards a
normalised level around £50m.
Many of the future investments are low
risk and proven e.g. vet extensions, new
stores, space swaps.
–
–
Maintain capital discipline and a clear
capital allocation policy to create long
term shareholder value.
Our capital allocation priorities are
unchanged:
1.
Invest in the business. c£400m
investment (capex and opex) over
the medium term.
2. Pay a progressive ordinary dividend
targeting 50% EPS payout.
3. Explore inorganic growth opportunities.
Focus on strategic investments and
bolt-on M&A.
Return excess cash to shareholders
subject to maintaining a prudent
balance sheet and not constraining
the business.
4.
Lyssa McGowan
Chief Executive Officer
25 May 2023
09
– Growing share of wallet is our greatest
opportunity, unlocked by creating easy,
seamless, and enjoyable experiences.
Creating unique, compelling, and
brilliantly simple journeys and
experiences to drive revenue, share of
wallet and lifetime value. Our average
consumer spends £160 a year with
us, but our most engaged spend over
£900, highlighting our significant
growth headroom.
– We already have 1.6m subscriptions
with significant headroom to grow. Our
digital and data platform, integrated
with face-to-face expertise, will allow us
to offer an enhanced range of brilliantly
simple, highly compelling, and great
value subscriptions to lead the market
and drive lifetime value.
Our values underpin everything
– maintaining commitment to a
sustainable future.
We will be unwavering in delivering the best
outcomes for all our stakeholders.
Pets - to improve the life of every pet in
the UK by being the leading advocate
for pet welfare.
– We will continue to adopt the highest
welfare standards for pets under our
care, use our voice externally to extend
this to all pets, and support pets in need
though our Foundation.
– We help pet owners take the best care
of their pet through our nutritional
advice, high-quality fulfilling products,
and highest quality clinical care.
People - to be the best employer
and developer of talent by creating
rewarding, sustainable careers in pet
care open to everyone.
–
Investing in clinical and non-clinical
expertise, with clear focus on wellbeing,
diversity, and inclusion.
Earn As You Learn is a core part of our
strategy as we provide colleagues the
ability to earn above Real Living Wage
while enhancing service and expertise
for pet owners.
–
Pets at Home Group Plc Annual Report & Accounts 2023
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 strategic pillars to ensure we can
track delivery against our key objectives.
Financial KPIs shown represent those used
by the business to monitor performance.
Management recognise that as Alternative
Performance Measures1 they differ to
statutory metrics, but believe they
represent the most appropriate KPIs.
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 consumers.
In order to consolidate the reporting
requirements under sections 414CA and
414CB of the Companies Act 2006 in
respect of non-financial reporting, the list
on page 93 shows where in the Annual
Report to find each of the disclosure
requirements.
Financial performance
Consumer revenue1
(£m)
Underlying profit
before tax1 (£m)
Free cash flow1 (£m)
£1,782.4m
+6.5%
£136.4m
+4.8%
£98.2m
+3.5%
2023
2022
2021
£1,782.4m
£1,673.8m
£1,437.1m
2023
2022
2021
£136.4m
£130.1m
2023
2022
2021
£77.4m
£98.2m
£95.0m
£67.4m
Representing strong like-for-
like1 growth in both our Retail
and Vet businesses.
Reflecting strong trading
performance in a challenging
cost environment.
Enabling us to invest in our
business, reduce debt and
increase our dividend.
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 including the clarification
of IAS38, first adopted in FY22.
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
We expect the business to
sustain underlying profit
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?
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
our 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 growth in consumer
revenue generated across
the Group year on year. This
includes spend across all
brands and includes the sales
made by Joint Venture vet
practices, rather than the
fee income received by
Pets at Home.
Why is it important?
By growing consumer 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 general
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.
1
Alternative Performance Measures
(APMs) are defined and reconciled to IFRS
information, where possible, on page 169.
2 Restated.
10
Strategic Report
Governance
Financial Statements
Strategic performance
Number of active VIPs
(m)
Consumer revenue1
from services (%)
VIP consumer revenue1
(£m)
Consumer revenue1 per
FTE colleague (£k)
7.7m
+5.4%
2023
2022
2021
32.5%
+34bps
£1,195.6m
+9.7%
£216.6k
+5.1%
7.7m
7.3m
6.2m
2023
2022
2021
32.5%
32.1%
32.8%
2023
2022
2021
£1,195.6m
£1,090.0m
£875.5m
2023
2022
2021
£216.6k
£206.0k2
£183.1k
Driven by the success of our
Puppy and Kitten clubs, and
supported by a growing pet
population.
What we are measuring
Growth in the net number of
active members of our VIP
loyalty club. An active member
is defined as a consumer
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
consumers to engage with our
suite of products and services.
Achieved through strong
revenue growth as well as
efficiency initiatives in-store.
What we are measuring
Consumer 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.
Reflecting the strong growth
in our veterinary business.
What we are measuring
The proportion of total
consumer revenue contributed
by our various pet care
services. This is defined as
consumer revenue made
by both Joint Venture and
company managed vet
practices, grooming salons,
subscriptions, pet sales, pet
insurance commissions and
revenue generated through
our telehealth business.
Why is it important?
The ability to offer consumers
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 vet practices
to grow, whilst also increasing
the number of consumers
signed up to our subscription
platforms.
Driven by growth in active
members, and an increase in
members shopping across
more than one channel.
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 7.7m
active pet owners is a unique
asset providing data and
insight to help us increase
share-of-wallet, attract and
retain new consumers, and
encourage further spend
across our suite 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.
11
Pets at Home Group Plc Annual Report & Accounts 2023
Market overview
A growing pet care market
The pet market remains
resilient and in growth and
we continue to take share.
For more information:
https://investors.petsathome.com
UK pet care market
£7.2bn
By sector value 20221
Accessories2
Food2
Veterinary3
£1.0bn
£3.4bn
£2.5bn
1 Source: Pets at Home data and UK market reports.
2
Includes online spend from pet products.
3 Veterinary includes general practices.
12
Strategic Report
Governance
Financial Statements
Market driver:
A growing UK
pet population
The UK is a nation of pet lovers, with the
pet population now estimated at over 30m,
having grown significantly over the last few
years as more people than ever before have
sought the companionship and support a
pet can offer.
Market driver:
Humanisation
of pets
Pets are increasingly being treated as a
member of the family with a continued
trend of selecting higher quality diets, an
increased focus on gifting and wellness,
and a greater desire to use the very best
health care treatments and supplements.
Our approach:
We cater for a variety of pet types at
accessible locations nationwide and online
and offer a wide range of pet products
and pet care services. In particular, we are
increasingly focused on welcoming new
pet owners, introducing them to all parts of
our pet care offering, and nurturing lifelong
relationships with them.
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
pets and their owners.
Market share
24%
Our share of the
UK pet care market
Market growth
8%
Estimated total YoY
growth in UK pet
care market
Market driver:
Continued channel
shift to online
Online penetration of the pet products
market continues its upwards trend, and
was c23% in 2022. Price competitiveness
and convenience remain important to the
online shopping experience, driven by
ease of price comparison and the different
delivery options typically offered.
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:
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 20%. 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.
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 vet
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 for pet owners.
Our market share in 20221 (%)
48%
22%
19%
Market growth during 20221
Accessories2
Food2
Veterinary3
+4%
+9%
+8%
1 Source: Pets at Home data and UK market reports.
2
Includes online spend from pet products.
3 Veterinary includes general practices.
13
Pets at Home Group Plc Annual Report & Accounts 2023
Stakeholder engagement and s172 statement
Colleagues
11 CEO videos with >8,900 views
Suppliers
360 active suppliers
Charity and Community
£8.2m raised through Pets at Home
Foundation and VIP Lifelines
Customers
7.7m active VIP members
Investors and
Shareholders
222 institutions met
Key priorities
How we engage with colleagues forms a
critical part of us remaining a great place to
work. It will also be a vital part of us working
towards ensuring everyone has a rewarding,
fulfilling and sustainable career with us.
Understanding how macro trends impact
our colleagues helps ensure our proposition
meets their needs today and in the future.
How Pets at Home engages
The Remuneration Committee Chair, Sharon
Flood remains the colleague representative
and she attended colleague listening sessions
in FY23. The Chair spent four days listening
and engaging with colleagues across the
business. A revised senior leadership team
(~130 colleagues) meeting structure was
launched bringing together key decision
makers across the business on a more regular
basis. Our CEO launched her ‘video diaries’
which are shared with all colleagues. 11 have
been released with >8,900 views. We ran a
business wide listening campaign for our
sustainability strategy with all teams invited
to participate. Over 500 teams participated
1000s of ideas submitted as part of our
strategy update. A Joint Venture Council
representing our Joint Venture Partners meets
regularly to discuss strategic, operational, and
clinical matters. It is attended by members of
the Vet Executive Management Team.
Key Messages
In a year of transition of senior leadership
it was never more important to listen and
engage with colleagues. The economic
headwinds amplified this and it was essential
colleagues knew we were there for them.
Our engagement survey told us we still have
high levels of colleague engagement and
colleagues felt their wellbeing mattered.
Our diversity and inclusion strategy is
entering its third year and we will now build
on the foundations we have been laying.
Inclusive recruitment will be our primary
focus as we look to build a workforce
that represents the communities where it
operates and where everyone feels welcome.
The sustainability listening campaign
demonstrated our colleagues truly care
about their environmental impact and are
actively making changes in how they operate
daily. Our wellbeing strategy continues to roll
out our mental health first aider programme
with over 80% of vet practices now having
a trained colleague on-site and over 700
colleagues trained across the business.
Key priorities
As we continue to shift perception of
our business to being a complete pet
care provider it is essential that we work
closely with our supply base and develop
and strengthen strategic relationships.
Our suppliers will form a critical part of us
achieving our SBTi near-term and net-zero
targets and a priority this year has been in
continuing to engage with and support them
on their sustainability journeys.
How Pets at Home engages
Pets at Home has a relatively stable supplier
base. Strong relationships have been built
over several 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 and EU-
based suppliers. The sourcing office in Hong
Kong manages the day-to-day relationships
with our supplier partners in this region. We
continued with top-to-top business review
meetings with our priority strategic suppliers
and hosted a supplier conference in
September 2022. Across the year we ensure
there is ample opportunity to ask questions,
raise concerns and discuss opportunity areas.
Key Messages
The cost-of-living crisis and the impact this
has had on the cost of raw materials and
products has dominated engagement with
suppliers to ensure supply of affordable pet
care for our customers and their pets. This was
balanced with discussions on our emerging
strategy refresh with particular focus on our
food strategy within our vision to build the
world’s best pet care platform. Our suppliers
have told us that understanding the long-term
strategy enables them to invest appropriately
in their businesses. The supplier conference
enabled engagement on our product strategy,
particularly own brand, ongoing investment
in our business infrastructure including our
new distribution centre and digital ambitions.
We also dedicated time to our sustainability
strategy. 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 Responsible Products Committee
has continued to be focused on the
development of the responsible sourcing
strategy, including our scope 3 packaging
and raw material approaches. We have just
started to visit our suppliers in China now
that COVID-19 restrictions have lifted and
this will be a priority during the year.
Key priorities
Working closely with the pet rescue sector
and our charity partners has never been
more important. We can only meet their
needs by truly listening and engaging with
them. The pet ownership boom, COVID-19
and economic headwinds have placed
unprecedented pressures on the sector.
Our priority remains steadfast in how we
keep as many pets in loving homes as
possible.
How Pets at Home engages
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 what
trends they are seeing in pet relinquishment
and critical areas of concern for the charities.
During FY23 surveys were completed by our
rescue community with over 300 responses.
The Foundation also joined some of the
regular meetings held by the CEOs 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
The cost-of-living crisis and increase in pet
relinquishment were critical areas for the
Foundation over the last 12 months.
Our engagement with the charity sector
enables us to structure our programmes to
optimise impact. This includes 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. In FY23 we
awarded £1.47m to pet rescue charities in
grants, and awarded £752k grants to pet
and people charities, VIP Lifelines supported
many national and local charities supporting
their local communities. 342 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.
Over £600k was raised for Hearing Dogs
during the first summer fundraiser and after
the sudden and tragic earthquake in Turkey
and Syria we committed £100k with £50k to
the Red Cross humanitarian fund and £50k
committed to supporting animal rescues
getting help to where it was needed most.
14
Key priorities
Key priorities
Key priorities
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.
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 sustainability strategy, capital
allocation and management succession.
The industry bodies influence the regulatory
environment in which our business operates
and lobby on our and our industry's behalf in
critical areas. Maintaining close relationships
means we keep the critical two-way dialogue
going to inform and support positions, be
aware of where policies may impact our
strategies or people and to lobby in areas of
importance, such as sustainability, medicines
or government consultations.
How Pets at Home engages
How Pets at Home engages
How Pets at Home engages
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.
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 all resolutions were passed.
We have also reinstated site visits to our pet
care centres and vet practices as part of our
ongoing engagement, as well as attendance
at investor conferences both in the UK and
overseas. A strategy update was hosted
alongside our full year results, featuring
a range of presentations from senior
management. A number of ESG focused
sessions have been held with the Chief
Legal Officer and ESG Director.
Key Messages
Key Messages
Key Messages
We have positive, ongoing and transparent
Participation in the BRC net-zero and
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.
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 Deliver From Store service,
enabling quick and convenient delivery.
Our new distribution centre came online
which will offer greater efficiency across
our supply chain and better availability for
customers. We also made great progress in
the digitisation of the business with this year
seeing the launch of an enhanced mobile
app bringing together VIP and shopping in
one easy to use experience.
Industry
BRC – We are represented in all
pathways of the BRC net-zero roadmap
BVA – All vets are members of the
British Veterinary Association (BVA)
Through our active membership of the British
Retail Consortium (BRC), we continue to
contribute to various initiatives and working
groups. These include the BRC Climate
Actions Net Zero 2040 Road Map, Diversity
and Inclusion Charter and policy work and
action on the cost-of-living crisis.
The Vet Group maintains close working
relationships with key industry bodies
including the RCVS, the BVA and the Major
Employers Group and relevant pet welfare
bodies. All JVPs and vets are members of the
RCVS and the BVA. We have Practice and
Support Office colleagues who operate at a
senior level in many of the main veterinary
organisations including the BVA, the Society
of Practising Veterinary Surgeons' (SPVS)
Educational Trust and Vet Sustain.
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.
Engagement with industry bodies enables
the Vet Group Clinical Services, Pets at
Home Pet team and the People team to
provide informed support and advice to
partners and store colleagues and actively
participate in industry-wide discussion
and co-creation of solutions to systemic
workforce challenges.
The creation and launch of a £500k pet,
clinical and sustainability research fund
will enable us to invest in robust academic
research in critical areas.
Strategic Report
Governance
Financial Statements
Colleagues
Suppliers
11 CEO videos with >8,900 views
360 active suppliers
Charity and Community
£8.2m raised through Pets at Home
Foundation and VIP Lifelines
Customers
7.7m active VIP members
Investors and
Shareholders
222 institutions met
Key priorities
Key priorities
Key priorities
How Pets at Home engages
How Pets at Home engages
How we engage with colleagues forms a
critical part of us remaining a great place to
work. It will also be a vital part of us working
towards ensuring everyone has a rewarding,
fulfilling and sustainable career with us.
Understanding how macro trends impact
our colleagues helps ensure our proposition
meets their needs today and in the future.
The Remuneration Committee Chair, Sharon
Flood remains the colleague representative
and she attended colleague listening sessions
in FY23. The Chair spent four days listening
and engaging with colleagues across the
business. A revised senior leadership team
(~130 colleagues) meeting structure was
launched bringing together key decision
makers across the business on a more regular
basis. Our CEO launched her ‘video diaries’
which are shared with all colleagues. 11 have
been released with >8,900 views. We ran a
business wide listening campaign for our
sustainability strategy with all teams invited
to participate. Over 500 teams participated
1000s of ideas submitted as part of our
strategy update. A Joint Venture Council
representing our Joint Venture Partners meets
regularly to discuss strategic, operational, and
clinical matters. It is attended by members of
the Vet Executive Management Team.
In a year of transition of senior leadership
it was never more important to listen and
engage with colleagues. The economic
headwinds amplified this and it was essential
colleagues knew we were there for them.
Our engagement survey told us we still have
high levels of colleague engagement and
colleagues felt their wellbeing mattered.
Our diversity and inclusion strategy is
entering its third year and we will now build
on the foundations we have been laying.
Inclusive recruitment will be our primary
focus as we look to build a workforce
that represents the communities where it
operates and where everyone feels welcome.
The sustainability listening campaign
demonstrated our colleagues truly care
about their environmental impact and are
actively making changes in how they operate
daily. Our wellbeing strategy continues to roll
out our mental health first aider programme
with over 80% of vet practices now having
a trained colleague on-site and over 700
colleagues trained across the business.
As we continue to shift perception of
our business to being a complete pet
care provider it is essential that we work
closely with our supply base and develop
and strengthen strategic relationships.
Our suppliers will form a critical part of us
achieving our SBTi near-term and net-zero
targets and a priority this year has been in
continuing to engage with and support them
on their sustainability journeys.
Pets at Home has a relatively stable supplier
base. Strong relationships have been built
over several 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 and EU-
based suppliers. The sourcing office in Hong
Kong manages the day-to-day relationships
with our supplier partners in this region. We
continued with top-to-top business review
meetings with our priority strategic suppliers
and hosted a supplier conference in
September 2022. Across the year we ensure
there is ample opportunity to ask questions,
raise concerns and discuss opportunity areas.
The cost-of-living crisis and the impact this
has had on the cost of raw materials and
products has dominated engagement with
suppliers to ensure supply of affordable pet
care for our customers and their pets. This was
balanced with discussions on our emerging
strategy refresh with particular focus on our
food strategy within our vision to build the
world’s best pet care platform. Our suppliers
have told us that understanding the long-term
strategy enables them to invest appropriately
in their businesses. The supplier conference
enabled engagement on our product strategy,
particularly own brand, ongoing investment
in our business infrastructure including our
new distribution centre and digital ambitions.
We also dedicated time to our sustainability
strategy. 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 Responsible Products Committee
has continued to be focused on the
development of the responsible sourcing
strategy, including our scope 3 packaging
and raw material approaches. We have just
started to visit our suppliers in China now
that COVID-19 restrictions have lifted and
this will be a priority during the year.
Working closely with the pet rescue sector
and our charity partners has never been
more important. We can only meet their
needs by truly listening and engaging with
them. The pet ownership boom, COVID-19
and economic headwinds have placed
unprecedented pressures on the sector.
Our priority remains steadfast in how we
keep as many pets in loving homes as
possible.
How Pets at Home engages
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 what
trends they are seeing in pet relinquishment
and critical areas of concern for the charities.
During FY23 surveys were completed by our
rescue community with over 300 responses.
The Foundation also joined some of the
regular meetings held by the CEOs 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
The cost-of-living crisis and increase in pet
relinquishment were critical areas for the
Foundation over the last 12 months.
Our engagement with the charity sector
enables us to structure our programmes to
optimise impact. This includes 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. In FY23 we
awarded £1.47m to pet rescue charities in
grants, and awarded £752k grants to pet
and people charities, VIP Lifelines supported
many national and local charities supporting
their local communities. 342 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.
Over £600k was raised for Hearing Dogs
during the first summer fundraiser and after
the sudden and tragic earthquake in Turkey
and Syria we committed £100k with £50k to
the Red Cross humanitarian fund and £50k
committed to supporting animal rescues
getting help to where it was needed most.
Key Messages
Key Messages
Key priorities
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 sustainability strategy, capital
allocation and management succession.
How Pets at Home engages
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 all resolutions were passed.
We have also reinstated site visits to our pet
care centres and vet practices as part of our
ongoing engagement, as well as attendance
at investor conferences both in the UK and
overseas. A strategy update was hosted
alongside our full year results, featuring
a range of presentations from senior
management. A number of ESG focused
sessions have been held with the Chief
Legal Officer and ESG Director.
Key Messages
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.
Key priorities
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.
How Pets at Home engages
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
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 Deliver From Store service,
enabling quick and convenient delivery.
Our new distribution centre came online
which will offer greater efficiency across
our supply chain and better availability for
customers. We also made great progress in
the digitisation of the business with this year
seeing the launch of an enhanced mobile
app bringing together VIP and shopping in
one easy to use experience.
Industry
BRC – We are represented in all
pathways of the BRC net-zero roadmap
BVA – All vets are members of the
British Veterinary Association (BVA)
Key priorities
The industry bodies influence the regulatory
environment in which our business operates
and lobby on our and our industry's behalf in
critical areas. Maintaining close relationships
means we keep the critical two-way dialogue
going to inform and support positions, be
aware of where policies may impact our
strategies or people and to lobby in areas of
importance, such as sustainability, medicines
or government consultations.
How Pets at Home engages
Through our active membership of the British
Retail Consortium (BRC), we continue to
contribute to various initiatives and working
groups. These include the BRC Climate
Actions Net Zero 2040 Road Map, Diversity
and Inclusion Charter and policy work and
action on the cost-of-living crisis.
The Vet Group maintains close working
relationships with key industry bodies
including the RCVS, the BVA and the Major
Employers Group and relevant pet welfare
bodies. All JVPs and vets are members of the
RCVS and the BVA. We have Practice and
Support Office colleagues who operate at a
senior level in many of the main veterinary
organisations including the BVA, the Society
of Practising Veterinary Surgeons' (SPVS)
Educational Trust and Vet Sustain.
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.
Engagement with industry bodies enables
the Vet Group Clinical Services, Pets at
Home Pet team and the People team to
provide informed support and advice to
partners and store colleagues and actively
participate in industry-wide discussion
and co-creation of solutions to systemic
workforce challenges.
The creation and launch of a £500k pet,
clinical and sustainability research fund
will enable us to invest in robust academic
research in critical areas.
15
Pets at Home Group Plc Annual Report & Accounts 2023
Sustainability review
Our Better World Pledge
Strategy Development
We began the development of our
sustainability strategy in FY20 with a
detailed materiality assessment and
extensive internal and external stakeholder
engagement. Our new strategy was named
'Our Better World Pledge' and our purpose
articulated 'to create a better world for Pets
and the People who love them' and it was
launched externally with our FY21 reporting.
Two years later we are delighted with the
progress that we have made launching new
initiatives for our colleagues and customers
and gaining a deeper understanding of
our value chain environmental impacts
and where we need to prioritise our focus.
During the year we have been engaged
in a refresh of our strategy alongside the
continued focus on implementing key
programmes and embedding involvement
across the organisation.
Highlights over the last year
We were extremely proud to be recognised
in the Retail Week 2023 awards as
Responsible Retailer of the Year. A
unanimous decision by the judges meant
Pets at Home took the Responsible Retailer
accolade, reflecting the breadth of its
achievements over the past year.
Planet
Focusing on scope 3 emissions projects, following the
approval from the science based targets initiative of our
near term 2030 and long term 2040 scope 1, 2 and 3 carbon
reduction targets
Launch of carbon maturity programmes with our supplier
through the 'knowledge hub'
Investment in a cultivated meat company, focusing on the
pet food market
Pets
–
Long term supplier partnership agreement with Cranswick to
work together on achieving our net zero goals alongside our
commercial objectives
Pet pouch packaging collection points now in 94% of our pet
care centres, collecting over 7 million pet pouches to date
– Woodland trust pet memory scheme in its second year, over
–
£500k donated to date
Embedding of the rebranding of the company charity to
'The Pets at Home Foundation', raising over £5m during FY23
and reaching the £50m achievement since forming in 2006
Rolling our pet food collection points to over 200 stores in
partnership with the Blue Cross
–
1,291 colleagues have been trained to pet advisor level and
we have 1,827 suitably qualified persons (SQP) working in our
pet care centres
–
–
–
–
–
People
–
Increase of 46% in our vet nurse apprentices, and our award
winning vet graduate programme has 158 graduates across
both cohorts
– More than 90% of support office and retail colleagues and
70% of our practice colleagues have completed our diversity
and inclusion foundation training. This training is critical to
our colleagues having a baseline understanding of diversity
and inclusion principles
16
– Development and launch of our consolidated Responsible
Sourcing Handbook for suppliers containing our latest
policies and implementation guidance. Disclosure of our
own brand tier one factory sites
Strategic Report
Governance
Financial Statements
Embedding our strategy in our business
We have seen a fantastic response to our volunteering programme
called Our Better World Pledge days, which has remained an
underpin to annual bonus for relevant colleagues. Over 11,000 hours
have been donated during the year which is an increase of over 20%
vs the previous year.
The remuneration policy has been reviewed this year and, subject
to shareholder approval at the AGM on 6 July 2023, the annual
bonus will include a sustainability target representing 10% of the
maximum award. Completion of our community volunteering day,
called Our Better World Pledge Day will also remain an underpin for
relevant colleagues. The Directors' Remuneration Report on page 84
contains more details on our policy review.
Our revolving credit facility, agreed in March 2022, is linked to
sustainability targets. We now have financial incentives (or penalties)
to accelerate our work on pets, people and planet through targets
focused on carbon reduction, supporting pets in need and
community action. In the first year of this scheme we have achieved
all three targets. More details on our performance can be found on
page 4 of our standalone sustainability report.
17
Pets at Home Group Plc Annual Report & Accounts 2023
Sustainability review continued
Our updated framework has created
strategic priorities from the longer list
of core priorities that our materiality
assessment identified.
Planet
Our three pillars of impact (planet, pets
and people) have remained the same but
planet has moved to the front recognising
the significant global climate and nature
based challenges that we are facing. We
have identified sustainable pet food as our
strategic priority. Within our business strategy
we have ambitions to grow our share in the
food category, particularly in the premium
part of the market which has historically
been categorised by higher meat protein
content recipes. To grow our share we will
be developing our premium and overall own
brand proposition in a sustainable way.
Refreshing the strategy
In the autumn of 2022 we began a refresh
of the Our Better World Pledge strategy to
ensure it aligned to the emerging business
priorities and our updated materiality
assessment. We undertook a stakeholder
engagement process which included
but wasn't limited to a 'Big Listen' with
our colleagues and a series of one to one
meetings with five of our shareholders.
Our business strategy has
sustainability clearly embedded
The overall business strategy has been
updated which included the adoption of a
singular purpose for the business including
sustainability as a key component in the
delivery of our vision to build the world’s
best pet care platform.
Our sustainability strategy supports
key priorities in the business strategy
It was really important that our refreshed
strategy addressed important sustainability
issues and was connected and aligned
to key business priorities. For us, this is
what sustainability requires, both financial
sustainability and environmental and social
sustainability.
Pets
Within our pets pillar we will be focusing on
improving the lives of every pet in the UK.
Our clear definition of our role to provide
pet care and the definition of this will help
guide our actions from the pets in our care,
through to the products, services and
advice that we give to guide pet owners.
We will retain our position as the biggest
grant giver to UK pet charities, being
there when pets need our help. An area of
increased focus will be the opportunity for
us to use our credible voice to advocate for
pets more broadly.
People
Turning to our people pillar we have
focused our strategic priority to be the best
employer and developer of pet care talent.
This covers the whole of our business with
a particular focus on vet talent where we
have a strategic business priority to disrupt
the status quo in the veterinary industry
to unlock our growth plans. To do this we
will be creating rewarding, sustainable
careers in the pet care sector for everyone
with colleagues fully representing our
diverse communities.
We have updated our targets to align with
this strategy, these can be read in full in our
standalone sustainability report.
Sustainability strategy: Our Better World Pledge
Our purpose
To create a better world for pets and the people who love them
Planet
To make pet care
environmentally
sustainable
Pets
To improve the
life of every pet
in the UK
People
To be the best employer
and developer of pet
care talent
By leading in sustainable pet food:
–
Environmental impacts on carbon,
land use, water and nature
–
Innovative, sustainable packaging
– Nutritional needs met, affordably
By being the leading advocate
for pet welfare:
By creating rewarding, sustainable
careers in pet care for everyone:
–
–
Adopting the highest welfare and
clinical standards for pets in our care
Providing pet owners with the
best products, service and advice
– Continuous investment in pet care
expertise
– Compelling clinical careers and
development opportunities
– Using our voice and expertise
– Colleagues fully representing our
to advocate for pets
– Being the largest grant giver
to pet charities in the UK
diverse communities
For more information about the
Planet pillar progress see our
sustainability report page 10
For more information about the
Pets pillar progress see our
sustainability report page 20
For more information about the
People pillar progress see our
sustainability report page 30
18
Strategic Report
Governance
Financial Statements
Looking ahead:
As we look ahead to this year we
have some clear priorities outlined
which will enable the development
of our refreshed strategy.
Scope 3 remains our biggest priority
within planet and we will continue
to engage our suppliers on the
management of carbon in our
product supply chains. The work of
understanding and then managing the
reduction of carbon in pet food will be
focusing on carbon footprinting our
own brand food ranges, building on
the insight of the full lifecycle analysis
(LCA) work that we have done this year.
Within the Vet part of our business
we have some exciting project
plans including our anaesthetic gas
stewardship programmes and the launch
of a new clinical academy which will help
us to create a sustainable pipeline of
highly engaged vet and nurse talent with
the clinical and behavioural skills and
experiences to create leading clinical
teams. Later in the year we will begin
our involvement in a ground-breaking
research project in partnership with the
Royal Vet College and Vet Compass.
This multi year project will focus on
improved stewardship in veterinary
antimicrobial usage across all of our
practices using a blended qualitative
and quantitative approach.
The Pets at Home Foundation will continue
to be there for pets when they need
us through our fundraising and grant
programme. For example, we will see
benefits start to be realised from one of our
largest grants of just over £300,000 to the
Blue Cross foodbank programme. This grant
will be used to fund co-ordinators to ensure
the programme is rolled out across the UK
with the ambition that anyone who needs to
access pet food from a food bank is able to.
From a people perspective we will be
further developing our market leading
pet expertise programmes. The next
cohort of our Pet Care Expert programme
colleagues will begin their nine-month
learning programme, and phase two of our
unique nutrition training programme will
launch to all colleagues involved in pet care
across our ecosystem, including our clinical
colleagues.
We are focused on increasing the
representation of ethnic diversity amongst
our colleagues to better connect with
diverse pet owners and reflect the
communities we work in. We will be further
developing our inclusive recruitment
processes, and inclusive leadership
education to enable our leaders and
managers to fulfil new representation
goals in an authentic and credible way.
We'll be continuously monitoring progress
through our enhanced diversity data
capture and reporting.
Our standalone sustainability report
provides shareholders with a detailed
overview of Our Better World pledge
strategy and performance including
our updated materiality assessment
and refreshed targets.
Read more in our
2023 Sustainability Report
The ESG Committee report which includes
our TCFD statement is on page 50
19
Pets at Home Group Plc Annual Report & Accounts 2023
Chief Financial Officer’s review
Delivering strong growth
whilst investing for the future
FY23 Financial highlights
Revenue (£m)
£1,404.2m
+6.6%
Statutory PBT (£m)
£122.5m
(17.7)%
Underlying PBT 1,2,3,4 (£m)
£136.4m
+4.8%
Dividend per share (pence)
12.8p
+8.5%
A year of record revenue
and underlying profitability
in a challenging economic
environment demonstrates
the strength of our unique
omnichannel platform, and
the resilience of the pet care
market.
Mike Iddon, Chief Financial Officer
1
Alternative Performance Measures (APMs) are defined and reconciled to IFRS information, where possible, on page 169.
2 FY22 non-underlying credit of £0.1m relates to the release of a provision held against property leases allocated against non-underlying gross margin.
3
FY23 non-underlying items of £10.1m relate to transition costs relating to our new distribution centre, £2.7m relating to restructuring of certain support functions, and £0.1m relating to
aborted project costs, all allocated against non-underlying operating costs. FY22 non-underlying credit of £19.2m relates to the profit on disposal of the Specialist Group, allocated as
other income.
4 FY23 non-underlying cost of £1.0m relates to transition costs relating to our new distribution centre, recognised within non-underlying interest charge. FY22 non-underlying cost of
£0.7m relates to loan fees written off upon refinance of our revolving credit facility, allocated against non-underlying interest charge.
20
Strategic Report
Governance
Financial Statements
Financial review of FY23
The FY23 period represents the 52 weeks from 1 April 2022 to
30 March 2023. The comparative period represents the 53 weeks
from 26 March 2021 to 31 March 2022.
We have embraced the 9.7% increase in National Living Wage,
and we have now secured pricing on 80-90% of our FY24 energy
requirements. In addition, we have hedged over 90% of our foreign
exchange requirements for the next 12 months, in line with our
treasury policy, at an average rate of $1.21 (FY23: $1.34).
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 general practices) and Central (includes Group costs,
finance expenses and the Group’s veterinary telehealth business).
Finance expense
The net finance expense, including interest charged on lease
liabilities, decreased to £14.3m (FY22: £15.1m) predominantly driven
by a YoY increase in interest received on cash balances. Of this,
£12.4m (FY22: £11.4m) related to interest expense on lease liabilities.
Revenue
Group revenue in FY23 grew 6.6% to £1,404.2m (FY22: £1,317.8m) and
like-for-like1 (LFL) revenue grew 7.9%.
Retail revenue grew 5.9% to £1,278.7m (FY22: £1,206.9m), with LFL1
revenue growth of 7.5%. Within Retail, food grew at 11.4% supported
by good availability and our strong price position. Accessories
declined by 0.9% overall, however our commodity-type accessories
performed well, offset by a softer performance in more discretionary
accessories. Retail services, which includes grooming, pet sales and
insurance commissions, were flat year-on-year ('YoY').
Vet Group revenue was up 13.3% to £122.8m (FY22: £108.4m) and
LFL1 revenue grew by 13.4%.
Total Joint Venture fee income increased by 10.5% to £77.2m (FY22:
£69.9m) and revenues from company managed practices increased
by 20.4% to £37.5m (FY22: £31.2m).
Revenue of £2.7m (FY22: £2.5m) was recognised within our Central
division in relation to The Vet Connection, our telehealth business.
Gross margin
Group gross margin5 decreased YoY in line with expectations by 157
bps to 47.6% (FY22: 49.2%).
Gross margin within Retail was 47.0%, a reduction of 184 bps over
the prior year (FY22: 48.9%) predominantly driven by food growing
ahead of accessories (142 bps impact on Group gross margin).
Gross margin within the Vet Group increased by 130 bps to 53.4%
(FY22: 52.1%). 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.
Operating costs
Operating costs6 of £543.7m (FY22: £515.1m) grew at 5.6% including
£12.9m of non-underlying costs incurred in the year, predominantly
due to the transition to our new distribution centre.
On a 52-week basis, and excluding DC transition costs, operating
costs6 grew 5.1%.
We continue to maintain a tight operational grip on industry-wide
cost headwinds, including raw materials, wages, energy, and foreign
exchange costs. As well as directly mitigating these costs where
possible, we are also proactively offsetting them through our
ongoing self-help initiatives. Our programme of rent reductions is
progressing well and, where we have actively sought to reduce the
rent at lease events, we have achieved an average reduction of 20%.
We continue to target efficiencies across consumables and goods
not for resale, and we are driving further productivity gains across
our stores and supply chain, using technology to lower our overall
cost to serve.
Profit before tax
Group statutory profit before tax was £122.5m (FY22: £148.7m).
In FY22 we benefitted from the second tranche of the proceeds
from the disposal of the Specialist Group (£19.2m credit) while
in FY23 PBT includes a total of £13.9m of non-underlying costs
(includes £12.9m of operating costs and £1.0m of lease interest),
predominantly due to the transition to our new distribution centre.
Group underlying profit before tax1 was £136.4m (FY22: £130.1m),
with a profit margin7 of 9.7% (FY22: 9.9%), impacted by increased
energy costs (up £14.9m YoY) and the YoY increase in investment in
digital assets (up £5.9m YoY), which are expensed through the P&L
in line with IAS38 accounting policies.
Retail statutory profit before tax was £87.7m (FY22: £101.4m). Retail
underlying profit before tax was £98.8m (FY22: £101.4m) with a profit
margin7 of 7.7% (FY22: 8.4%) reflecting the sustained strong trading
across the year, offset by the cost headwinds described earlier.
Vet Group statutory profit before tax was £50.9m (FY22: £43.2m)
with a profit margin7 of 41.5% (FY22: 39.8%), driven by a strong sales
performance, continued gross margin expansion, and a tight grip on
operating costs.
Taxation, profit after tax, and EPS
Total tax expense was £21.8m for the year, an effective rate of 18%.
Statutory profit after tax decreased by 19.2% to £100.7m (FY22:
£124.5m). Statutory basic earnings per share were 20.5 pence
(FY22: 24.9 pence) and underlying basic earnings per share1 were
22.8 pence (FY22: 21.2 pence).
Working capital
The movement in working capital8 for FY23 was an inflow of
£19.8m, predominantly driven by the strong growth in the business.
Inventories increased by 29% to £108.6m reflecting the impacts
of cost inflation, a small increase for the opening of the new DC
and investment to support higher availability which is supporting
better growth.
Payables increased by 16% to £261.5m primarily driven by a 31%
increase in trade payables, in line with the increase in inventories
and driven by the growth of the business over the past year.
Receivables were broadly stable, decreasing 3.5% to £51.8m. Within
receivables, the strong financial performance across our Joint
Venture vet practices contributed to the gross value of operating
loans reducing by £6.4m to £13.8m from £20.2m at FY22 year
end. The provision held against the gross value of operating loans
decreased by £1.6m to £3.4m from £5.0m at FY22 year end.
21
Pets at Home Group Plc Annual Report & Accounts 2023
Chief Financial Officer’s review continued
Investment
Total investment in the year was £105.2m (FY22: £73.1m), split
£75.3m capital investment (FY22: £49.1m), and £29.9m of cloud-based
digital investment which is expensed through the P&L (FY22: £24.0m).
Total investment of £105.2m was focused on three strategic growth
areas; investment in data analytics and business systems totalling
£37.8m (FY22: £30.9m), as we continue to progress our data and
digital agenda, a £43.7m (FY22: £10.4m) investment as we complete
our new distribution centre, and £17.5m (FY22: £17.2m) to continue
with our store refurbishment programme.
Free cash flow
Free cash flow1 after interest and tax, but before acquisitions and
disposals was £98.2m (FY22: £95.0m). The increase in free cash flow
compared with the prior year primarily reflects the underlying profit
growth and lower cash tax payment, offset by increased investment
in the business to drive future organic growth.
Our free cash flow for the year includes the following items:
–
£22.0m in lease-related incentives made up of £12.4m in
landlords' cash contribution and £9.6m from our share of
development profit on disposal
£9.5m lower cash tax payment versus the standard rate of
corporation tax, due to a corporation tax receivable brought
forward into FY23 which is not expected to recur going forward
£4.4m reduction in net operating loans
–
–
During FY23 we incurred £13.9m of non-underlying costs, mostly
related to the transition to the new Stafford DC.
Free cash flow1 (£m)
Net cash flow from operating activities
Lease payments11
Cash receipts from lease incentives
Debt issue costs
Net cash capex12
Net cash interest13
Purchase of own shares
Free cash flow1
FY23
251.2
(68.9)
22.0
(0.1)
(77.2)
(14.7)
(14.1)
98.2
FY22
248.1
(67.3)
–
(3.3)
(55.5)
(14.7)
(12.3)
95.0
The cash and cash equivalents at the end of the year were £178.0m,
up £12.0m year-on-year (FY22: £166.0m).
The cash generation described above enables us to pay a record
dividend payment and fund our £50m share buyback programme
which completed in the year. Our net cash position1 at the end of
the year was £54.7m (cash £178.0m, debt £123.3m), and net debt1
was £366.7m on a lease adjusted basis. This represents a leverage
ratio1 of (0.3)x underlying EBITDA or 1.5x on a lease adjusted basis.
Net cash (£m)
Opening net cash1
Free cash flow1
Equity dividends paid
Share buyback
Acquisitions9
Disposals10
Closing net cash1
Pre-IFRS 16 leverage1
Lease adjusted leverage1
FY23
66.0
98.2
(58.7)
(50.3)
(0.5)
–
54.7
(0.3)x
1.5x
FY22
1.4
95.0
(48.5)
–
(1.7)
19.8
66.0
(0.4)x
1.3x
The Group’s underlying cash return on invested capital (CROIC)1 in
the year decreased to 22.7% (FY22: 25.0%) having been through a
year of peak investment as we build our digital platform and bring
our new DC onstream, with the cash benefits to come in future years.
Capital allocation
Our capital allocation policy 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 refurbishment programme), 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 platform
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 the year we have
completed a £50m share buyback programme and have today
announced a further £50m buyback for the year ahead.
Dividend
The Board has recommended a final dividend of 8.3 pence per
share, an increase of 10.7% on the prior year. This takes the total
dividend for the year to 12.8 pence per share, an increase of 8.5%
on the prior year, reflecting our strong cash performance and
balance sheet. The final dividend will be payable on 11 July 2023 to
shareholders on the register at the close of trading on 16 June 2023.
Divisional free cash flow
Retail
Vet Group
Central
Group1
FCF (£m)
67.0
44.7
(13.5)
98.2
Mike Iddon
Chief Financial Officer
25 May 2023
5 Gross margin is calculated as gross profit as a percentage of revenue.
6 Operating costs are the sum of selling and distribution expenses and administrative expenses.
7 Profit margin is calculated as underlying profit before tax as a percentage of revenue.
8 Working capital is the sum of YoY movements in trade and other receivables, inventories, trade and other payables, and provisions.
9 FY23 and FY22 includes investment in certain company managed practices.
10 FY22 includes the cash proceeds in relation to the disposal of the Specialist Group net of fees and cash held upon disposal.
11 Lease payments are cash payments for the principal portion of the right-of-use lease liability.
12 Net cash capex is proceeds from the sale of property, plant and equipment less costs to acquire right-of-use assets and acquisition of property, plant and equipment and other intangible assets.
13 Net cash interest is interest received less interest paid and interest paid on lease obligations.
22
Strategic Report
Governance
Financial Statements
Risk review
Risk management
Effective risk management is an integral part of running our business and is fundamental to us achieving our strategic objectives,
implementing core business initiatives, and protecting long term stakeholder value. The Board is responsible for the nature and
level of the principal risks we are willing to take and have overall responsibility for the Group’s risk and internal control frameworks.
Risk Governance
We operate a three lines of defence model, as illustrated below.
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Principal
risks and
uncertainties
Board
– Sets strategy.
– Collectively responsible for managing risk.
– Sets tone from the top.
– Sets risk appetite, risk tolerance and determines the nature and level of principal risks.
Corporate
risks
Executive Management Team (EMT)
Collectively responsible for identifying and managing risk, and monitoring risk exposure.
Audit and Risk Committee (ARC)
Oversee the Group’s internal control
and risk management frameworks.
– Provide oversight and challenge
to the assessment of principal,
corporate, and emerging risks
– Advises the EMT on risk appetite
First line of defence
Second line of defence
Third line of defence
Business risks
Operational senior management
& risk champions
Ensure risk management process is
adhered to.
Management Committees
Provide oversight over the management
of business level risks.
Business assurance functions
Monitor compliance with company
policies and procedures and provide
assurance over business controls to the
Management Committees and the EMT.
Operational Risk
Monitor adherence with risk
appetite framework, implement risk
management processes and risk
framework improvements.
Group Internal Audit
Provides objective assurance to the
Board and ARC on the effectiveness
of the risk management framework.
– Has a direct reporting line to the ARC
– Risk based Internal audit plan
approved by the ARC
– Respond to new areas of risk or
change and re-prioritise plan
throughout the year
For further details about key roles and responsibilities within our governance structure, please see the Governance report on page 31.
Risk management process
We take a practical approach to risk management. Our process
has five steps, integrated across the three lines of defence and our
governance framework. Having a top down, bottom-up approach
gives us a comprehensive view of risks, either current or emerging,
their status and the effectiveness of mitigation plans. An appropriate
level of oversight and assurance is provided through this process.
Identify
1
Report
5
Management
information
Governance
2 Assess
Key controls
Culture, values
and behaviours
Policies and
procedures
4
Monitor
3
Manage
Identify and assess – Each business, function and key project
identify their current and emerging risks considering their strategic
plan, objectives, and external environments. A standardised risk
scoring methodology is used across the Group to analyse risks. This
helps the escalation and consolidation of risks into a Group-wide
view. Horizon scanning exercises are conducted with the senior
management team as part of the annual strategy and business
planning cycles and risk management processes.
Manage – Each business, function and key project maintain
detailed risk registers and mitigation plans which are approved by
their leadership teams and the appropriate Executive Management
Team (EMT) member. Each principal, corporate and emerging risk is
owned by a member of the EMT who is accountable for confirming
that adequate controls and necessary mitigation plans are in place
to bring the risk within an acceptable tolerance. A range of risks are
managed on an ongoing basis, which are not currently considered
significant enough to be included on the corporate risk register.
Monitor – Each risk register is reviewed by the relevant senior
management team at least four times a year before submission to
the EMT. Threats on the watch list are reviewed alongside the risk
registers. Risk scoring and key risk indicators are also reviewed to
track the risk and progress of mitigation plans. Assurance is gathered
from across the three lines of defence to support this process. Risks
are also reported to relevant management committees, such as the
Environmental, Social and Governance Committee.
Report – The Corporate risk register is reported to the EMT, Board
and Audit and Risk Committee (ARC) four times a year. Risks are
considered both independently and collectively to fully understand
their dependencies and potential impact on the business. The ARC
conducts deep dives in key risk areas with the EMT and functional
leadership teams. The principal risks and uncertainties are submitted
to the ARC ahead of final review and approval by the Board.
Emerging risks
We define emerging risks as those that can potentially have a
significant impact on the Group in the medium to long term, where the
full extent of the scale, impact, or likelihood may not be fully understood
but need to be tracked. Identification and review of emerging risks
follows our risk management process described above. Emerging
risks considered a priority are summarised below on pages 24 to 30.
Climate risks
Climate change risks are also integrated into our risk management
process. Actions identified are captured on the Group’s risk register
and are monitored by the ESG Committee (supported by the Audit
and Risk Committee). Details of this and our overall approach to
TCFD can be found on page 52 of this report and in more detail in
our sustainability report.
23
Pets at Home Group Plc Annual Report & Accounts 2023
Risk review continued
Link to strategy
1
Bring the pet
experience to life
2
Set our people
free to serve
3 Use data and VIP to
better serve customers
4
50% of sales from
pet services
Risk Profile/
Risk Appetite
L
Low
M Medium
H High
Change on
previous year
Stable
Increased
Decreased
Brand & Reputation
Owner: Chief Consumer Officer
Risk Type: Strategic
Links to strategy
1
2
3
4
Risk profile
H
Risk appetite
L
Change on previous year:
Description
Protecting and enhancing our strong brand value and holding pet welfare as our number one priority is essential in attracting and retaining our consumers and clinical talent
and the trust and value our stakeholders place in us. This is the responsibility of every colleague. We are aware that trust and reputation can quickly be lost so we continuously
monitor and ensure that our business actions align to pet welfare and consumer and clinical expectations. Pet welfare remains our highest priority.
Key responses
– Established the Pet Welfare Committee to uphold and drive
forward animal welfare standards within our own operations
including the quality and welfare considerations of our products
and services.
– New clinical strategy led by our newly appointed Group
Veterinary Officer bringing our clinical and pet welfare expertise
and governance together.
– The majority of practices are accredited or working towards
being accredited under the RCVS Practice Standards
Scheme (PSS).
– Risk-based product safety and integrity testing and inspection
programme to monitor ongoing safety compliance of our own
label products.
– Own label products developed with the support of the Group’s
internal veterinary expertise and external behavioural experts.
– Dedicated Compliance Team to monitor customer reviews and
customer complaints.
– Tested product recall procedures.
– Rigorous welfare standards in place operationalised through
quarterly unannounced audits across stores, in-store adoption
centres, and grooming salons. Quarterly announced audits and
three separate, external, independent veterinary led audits each
year for each animal supplier.
– Conducted monthly research with our consumers and wider
market to understand their changing needs and expectations
and understand their opinions and expectations on our brand to
drive business action.
– Through our Pet Foundation we donated to pet charities and
NGOs in Ukraine and Turkey to support the basic needs and
welfare of pets affected by war and the environmental disasters.
Emerging risks
– Continued impact
on consumers with
inflationary and costs
challenges.
– New and emerging
animal diseases
particularly associated
with imported pets.
– Veterinary professional
regulatory changes.
– Veterinary professional
and public opinion
around the keeping
and selling of Non-
Traditional Companion
Animals.
Outlook and further actions planned
– Protecting, enhancing, and communicating our strong brand
value will remain our focus in FY24, with a core message around
pet welfare and our pet expertise and knowledge.
– We are committed to continually monitoring, improving
capability, and supporting our colleagues and supply partners to
maintain high pet health and welfare standards.
– We will also be implementing a comprehensive brand and
consumer tracking programme to continuously monitor our
consumer expectations, brand health and consumer reputation.
The results will drive business action where required.
– Review of all planned product, service, and proposition changes
via our Pet Welfare Committee to ensure they meet our pet
welfare and brand credentials.
– Creating a credible and visible evidence based active leading
voice on pet health and welfare with consumers and the pet
care industry to drive the highest standards and change
where required.
– Establishing a Quality Improvement framework under the
new Head of Quality Improvement and Education to support
our veterinary practices with guidance on expected clinical
standards.
– Review of Non-Traditional Companion Animals and how we
respond and educate.
– Introducing new data-driven platforms to identify and
monitor product safety risk and improve reporting on raw
material sources.
Risk appetite
We place the welfare of pets and the value of our brand at the front and centre of all we do, along with our societal responsibilities in relation to the planet and people.
The group has no appetite for any risk which may compromise the trust and value which our communities and stakeholders place in our brand.
24
Strategic Report
Governance
Financial Statements
Information security and business critical systems
Owner: Chief Data & Information Officer
Risk Type: Strategic/Operational
Links to strategy
1
2
3
4
Risk profile
H
Risk appetite
L
Change on previous year:
Description
The availability and security of our IT systems and accurate data is vital for us to operate safely whilst maintaining the security of customer, colleague, and company
confidential data.
Key responses
– Invested heavily in our cyber security position both from a
personnel and technology standpoint.
– Delivered awareness training and engagement campaigns
including a security champion network.
– Ran Tabletop Breach exercises with Executive Management
Team, Legal Team, and IT.
– Delivered policies aligned to ISO27001.
– Set up an Information Security Steering Group with business
stakeholders.
– Provided six monthly updates to the PLC board at the Risk and
Audit Committee.
– Engaged an Incident Response Expert organisation on retainer.
– Developed an incident management response plan combined
with specific cyber-attack playbooks. These form the basis of a
continuing improvement process when it comes to our approach
to incident response.
Outlook and further actions planned
– While our security maturity has improved significantly over the
last 12 months, cyber-attacks continue to grow in frequency
and complexity.
– Cyber Security strategy that began in FY23, designed to take a
risk-based approach to improve our security maturity, minimise
the likelihood of and increase the ability to identify and respond
to a cyber-attack.
– The strategy includes colleague awareness and training,
improved email filtering, end point protections, vulnerability
monitoring and remediation.
– Plan to migrate all colleagues onto Office365 with Multi Factor
Authentication.
– Identity management processes will be improved including
escalated and privileged accounts.
– We continue to review our third parties on a risk basis to ensure
we have the appropriate contractual and technical controls
in place.
Emerging risks
– Geopolitical situations
are creating more
advanced attacks,
which may inadvertently
impact our business
or be repurposed by
organised cybercrime
gangs.
– As more companies
become victims of cyber
attacks, customers and
colleagues who reuse
emails and passwords
become an attack vector.
– Artificial Intelligence
increases the complexity
of attacks such as
phishing to make it more
difficult for an average
colleague to spot.
Risk appetite
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 have plans in
place to minimise the likelihood and impact of any business-critical technology failure.
Sustainability and climate change
Owner: Chief Legal Officer
Risk Type: Strategic
Links to strategy
1
4
Risk profile
M
Risk appetite
L
Change on previous year:
Description
The success of our business over the long term depends on the Group operating sustainably in financial, environmental, and social terms. Our stakeholders, including investors,
colleagues and customers need to be assured that we are acting responsibly across our business operations and supply chains. If we do not meet these expectations the
Group’s brand reputation, licence to operate and financial performance could be threatened. More stringent environmental regulation could affect the cost of production and
operational flexibility. Over the long term, physical risks from extreme weather events and transition risks from potential stringent regulation, or failure to efficiently decarbonise
our value chain, could increase the cost of production and impact operational flexibility.
Key responses
– Full update of materiality assessment and refresh of
sustainability strategy (see page 18).
– Assessment of physical and transitionary climate change related
risks (see TCFD statement page 52).
– Prioritisation of material areas within strategy refresh.
– Allocation of capital across five years to enable the delivery of
further operational carbon reductions.
– Launch of the Supplier Knowledge hub and supplier scope 1 & 2
reductions expectations at the supplier conference.
– Launch of our Responsible Sourcing Handbook containing all
relevant policies and implementation guidance for suppliers
(available on our corporate website).
– Investment in laboratory grown meat start up.
– Launch of long-term strategic pet food supplier partnership.
– Increased dedicated in-house sustainability resource.
Emerging risks
– Our TCFD scenario
analysis identified
the sustainability of
pet ownership as an
emerging risk. Our
TCFD statement on
page 52 explains this
risk in more detail.
Outlook and further actions planned
– Our updated sustainability strategy, Our Better World Pledge,
can be found in summary on page 16 and in our separate
sustainability report. This includes new targets relating to
sustainability and climate change and a set of clear priorities
that align to our business strategy. These cover our three pillars
of planet, pets, and people. The first pillar, planet, is now being
given more emphasis and prominence recognising both the
urgency of the global environmental issues and the complexities
involved in tackling them.
– New target and activity on carbon footprinting of own brand pet
food ranges.
– New target and activity on measuring supplier scope 1 and 2
carbon maturity.
– Testing of HVO fuel to reduce carbon impact of HGVs.
– Anaesthetic gas training to help practices manage gas use.
– Installation of solar panels on new DC site in Stafford.
– Inclusion of ESG objectives for all senior leadership team bonus
schemes (see remuneration report page 61).
– Sustainability training for senior leadership team.
Risk appetite
The Group takes its responsibilities in relation to sustainability seriously not only because it is the right thing to do but because it is critical to ensuring the sustainability of the
business. We define sustainability as achieving environmental sustainability, social sustainability as well as financial sustainability and all three of these dimensions are critical to
creating value in the long term.
25
Pets at Home Group Plc Annual Report & Accounts 2023
Risk review continued Link to strategy
1
Bring the pet
experience to life
2
Set our people
free to serve
3 Use data and VIP to
better serve customers
4
50% of sales from
pet services
Risk Profile/
Risk Appetite
L
Low
M Medium
H High
Change on
previous year
Stable
Increased
Decreased
People and Organisational Capability
Owner: Chief People Officer
Risk Type: Strategic
Links to strategy
1
2
3
4
Risk profile
M
Risk appetite
L
Change on previous year:
Description
Our 16,000+ colleagues and Partners are fundamental to the success of our business. It is essential that we attract, retain, develop, and reward our talent across the Group.
Having the right talent will help us meet the needs of our consumers, drive our consumer-centric, omnichannel pet care ecosystem and deliver our business strategy.
Key responses
– Reward strategy to attract and retain talent.
– Expansion of external candidate pipeline outside mainstream
talent pools.
– Retention incentives to retain critical talent.
– Continuous review and response to the impact of
cost of living on our people.
– Development of career pathways to retain talent
groups and develop internal capability.
– Steering 'Great Conversations' (our performance management
tool) to better drive colleague performance.
Outlook and further actions planned
– We continue to focus on the attraction and retention of critical
talent, reducing colleague turnover and the development
of colleague skills ensuring we have the right skills and
organisational capability to deliver the business strategy.
– There are continuing global restrictions and challenges in the
specialist and clinical talent market.
– FY24 will also focus on organisational capability and the
effectiveness of our people systems to be an enabler to this.
– Review and develop fresh life stage and style benefits.
– Continue to monitor impact of cost of living on our people and
– Promoting the brand through a national tactic to recruitment
their families.
Emerging risks
– Continuing restrictions
and challenges in the
specialist and clinical
talent market.
– Reducing attractiveness
of the UK as a work
and life destination for
European clinical talent.
– High employment.
with ‘always on’ approach.
– Support international recruitment for clinical talent.
– Optimisation of social media sites and careers website.
– Investment in the approach to contracts for locum population
in Vet practices.
– People data and analytics will be key in ensuring the People
strategy supports the delivery of the business strategic pillars.
Retail
– Developing an updated ‘new starter’ induction programme for
retail colleagues.
– Launching a joiner and exit survey to understand the experience
of both.
– Working with field teams to increase colleague hours through
dual contracts.
– Launch of the new grooming re-set programme.
Vet Business
– Building a clinical academy.
– Scaling of our graduate programme.
– Implement the new Practice Management and Joint Venture
Partner leadership programme.
Risk appetite
We expect our colleagues and partners to act in line with our culture, values, and behaviours. The business 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.
26
Strategic Report
Governance
Financial Statements
Competition and Consumers
Owner: Chief Consumer Officer
Risk Type: Strategic
Links to strategy
1
2
4
Risk profile
M
Risk appetite
M
H
Change on previous year:
Description
The Group competes in a wide ranging competitive market including other pet specialists, pure play online competitors, online marketplaces, direct to customer businesses,
supermarkets, discounters, online pet healthcare platforms, veterinary groups, and independent practices. There continues to be strong online competition including new
start-ups, including those focused on subscriptions. 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 of services offered, clinical care, and experience. There also remains a level of uncertainly of any further impact
of economy and inflation on consumer and household budgets. Failing to be aware and manage all these factors could have an adverse impact on the Group’s financial
performance and opportunities for growth.
Key responses
– Strategic review of our consumer value proposition including
pricing which has driven our strategic priorities for FY24.
– Launched promotional and value offers to our consumers with
a core focus on our food which is one of the biggest pet care
household expenses including Switch and Save, VIP Member
offers and pay day offers.
– Continued development of tailored consumer campaigns to our
VIP members utilising proprietary propensity modelling which is
driving consumer retention and loyalty.
– Monthly consumer and cost of living sentiment research to
continue to understand consumer sentiment and concerns and
drive our business planning.
– Creation of new Consumer team and appointment of new Chief
Consumer Officer to drive our consumer centric approach and
productise our value proposition.
– Continually launched new ranges throughout the year –
including new Wainwrights dog food products, small animal
food ranges, insect protein food and new cooling ranges in
the summer.
– Expanding our veterinary services – for example, the relocation
and opening of the Northampton practice to create our largest
animal hospital facility and services.
Outlook and further actions planned
– We will remain within a highly competitive market and there
remains ongoing uncertainty for our consumers as to the impact
of the economic and inflationary pressures on household budget.
However, we have the strategies, processes, and structures
in place to continue to monitor this and review our consumer
propositions as required.
– Continued focus and investments in our value and pricing
position and communication of this to our consumers.
– Implementing a new real time consumer satisfaction tracking
programme across our retail, vets and digital customer services
teams to drive understanding of our consumer experience.
– Well established product development which will ensure we
launch new or enhanced products/ranges to our core food,
health, and accessories categories.
– Developing and expanding our veterinary services by opening
new veterinary practices and expanding services in current
practices.
– Regular monitoring of the market and competitor pricing to
ensure we continue to provide competitive value and provide
the best options for our consumers.
– Monitoring the effectiveness of our processes by regularly
tracking our business and competitors against the measures our
consumers tell us are important to them and drive their behaviour.
– Continue the development of impactful consumer propositions
which meet consumers' pet care needs and deliver differentiated
value.
Emerging risks
– Disruption from new
competitors taking
advantage of new
market dynamics.
– Continued
macroeconomic
uncertainty post-
pandemic.
– Adjustment to new
processes set out in
the EU-UK Trade and
Cooperation Agreement.
– Material changes
in consumer
buying behaviour
driven by concerns
around affordability,
sustainability, and the
environment making pet
ownership less attractive.
Risk appetite
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.
Pet care centre expansion
Owner: Chief Consumer Officer
Risk Type: Strategic
Links to strategy
1
3
4
Risk profile
M
Risk appetite
M H
Change on previous year:
Description
A key part of the Group’s strategy is to grow and strengthen our omnichannel pet care platform, which offers a wide range of pet product and services through both physical and
digital channels. If we fail to deliver our planned growth in our footprint and services, our expected growth and financial performance could be adversely impacted.
Key responses
– Opened one new Pet Care Centre and twenty-one
refurbishments to create enhanced locations.
– Opened one new vet practice and completed extensions of
current practices to give us the ability to provide services to our
consumers including the relocation of Northampton practice to
create our largest animal hospital facility and services.
– We made material progress on our priority investment
programmes that will help enable our omnichannel model.
These include our new distribution centre in Stafford, which
will become operational in FY24 and our multi-year digital
investment programme Polestar.
– Our store estate remains entirely leased, which gives us great
flexibility.
Outlook and further actions planned
– The Group is in a strong competitive position through our unique
omnichannel pet care model.
– We will continue to invest in our physical locations (both
pet care centres and vet practices), including new sites and
refurbishment.
– We will continue to invest in the key enabling infrastructure,
including our supply chain and digital platform.
– We will continue to evolve our value propositions (including
subscriptions) based on consumer insights and feedback.
Emerging risks
– Speed of change
in innovation and
advances in pet care
and clinical technology
– Material changes in
customer behaviour
and needs, driven
by concerns around
affordability,
sustainability, and the
environment making
pet ownership less
attractive.
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.
27
Pets at Home Group Plc Annual Report & Accounts 2023
Risk review continued Link to strategy
1
Bring the pet
experience to life
2
Set our people
free to serve
3 Use data and VIP to
better serve customers
4
50% of sales from
pet services
Risk Profile/
Risk Appetite
L
Low
M Medium
H High
Change on
previous year
Stable
Increased
Decreased
Responsible sourcing and supply chain
Owner: Retail Chief Operating Officer and Vet Chief Operating Officer
Risk Type: Operational
Links to strategy
1
4
Risk profile
M
Risk appetite
M
Change on previous year:
Description
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. Failing to meet our responsible sourcing commitments could damage consumer confidence and our business reputation, which could
have a negative impact on business performance. A disaster at one of our distribution centres or the wholesaler for veterinary products may result in a significant disruption to the
supply of stock to stores, essential products to our practices and in the fulfilment of internet orders.
Emerging risks
– Geopolitical uncertainty
and disruption.
– Modern Slavery
reporting is on the rise in
the UK and globally.
– Continuing labour
shortages in the UK
manufacturing, logistics
and agricultural sectors.
Outlook and further actions planned
– Rising production, material and labour costs and the disruption
of raw material supply chains puts pressure on suppliers and
means normal levels of due diligence could be bypassed to
ensure the continuity of labour and materials for the fulfilment
of customer orders. This increases the risk of human rights
violations and environmental damage occurring undetected in
lower tiers of supply chains. We therefore work in partnership
with our suppliers and in collaboration with industry to
understand and mitigate these risks together.
– Increasing price uncertainty as suppliers continue to react to 12
months+ of high inflation.
– We are mindful of the potential risk of supplier failure, either
through insolvency or through an inability to deliver products
due to global supply chain challenges.
– Our supplier audits continue, and we anticipate being able to
resume our programme in China as pandemic travel restrictions
are eased.
– We are working with our own label suppliers to map lower tiers
of the supply chain and to support them in conducting risk
assessments. Where there is a high risk commodity, industry,
sourcing location or vulnerable workers, we’ll work with them to
ensure we have full visibility of ethical standards.
Key responses
– Our Responsible Products Committee meets regularly and
is responsible for developing the strategy for managing the
environmental and ethical impacts of our products on our
value chain.
– A comprehensive Supplier Code of Conduct provides clear
supplier expectations in relation to human rights, environmental,
ethical, and legal standards. This is supported by a Responsible
Sourcing Handbook which brings our Supplier Code of Conduct
to life with detailed implementation requirements, guidance, and
signposting to additional resources. Our responsible sourcing
requirements form a key part of our contractual agreements
with suppliers.
– Engagement with industry bodies and external experts for
collaboration, sharing and development of industry best practice.
– Qualified internal Ethical Auditor.
– Modern slavery awareness training forms a key part of our
mandatory colleague training for Support Office colleagues.
– Dedicated whistleblowing reporting mechanism for workers
within our supply chain to report concerns.
– Robust onboarding and ongoing monitoring programme of
own label supplier standards including announced and semi-
announced audits of production facilities conducted by Pets
at Home colleagues or third-party audit bodies. Suppliers are
supported to remediate non-conformances.
– Data systems are used to manage our audit and supplier data.
This enables us to better track the resolution of issues and
understand more about our suppliers, their workforce, and their
risk profile.
– Vaccine supply and freight costs for veterinary products has
stabilised through close interaction with the supplier plus
ongoing managed allocation of product until there was enough
supply in the UK to return to unrestricted supply. Agreed
ring-fenced stock has protected us from market shortages
of products.
– Business continuity plans are in place for the distribution
centres. We can 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.
Risk appetite
The Group does not tolerate any breach of company policies, local laws, or regulations in our supply chain. We have clear expectations of our suppliers in relation to upholding
human rights, providing safe working conditions, meeting acceptable labour standards, and protecting the environment. The safety and integrity of our products is of paramount
importance so we will not compromise standards. We always collaborate with our suppliers to help them achieve our requirements but where standards are persistently not met
or we encounter a zero-tolerance issue, we will end our business relationship.
28
Strategic Report
Governance
Financial Statements
Liquidity and credit
Owner: Chief Financial Officer
Risk Type: Finance
Links to strategy
1
4
Risk profile
L
Risk appetite
L
Change on previous year:
Description
The Group 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. 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 veterinary general 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.
Outlook and further actions planned
– The Group’s liquidity headroom in the financial year, and the
length of time to expiry of the Group’s core financing facilities,
will continue to be monitored periodically.
– The evolving political and macro-economic situation is likely to
lead to sustained uncertainty in relation to forecast cash flows,
liquidity, and credit requirements. We will continue to monitor
our finances and build relationships with our finance providers
to ensure that the business is well positioned to manage its cash
flows effectively and ensure sufficient liquidity is available.
– 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.
Emerging risks
– The continued
development of the UK’s
relationship with the EU.
– The evolving supply
chain and inflationary
factors.
Key responses
– 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.
– 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.
– 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 has settled any liabilities for third party
bank loans and leases within these practices on behalf of the
Joint Venture Partner, with all such liabilities being written off.
– For the practices which the Group continues to operate under
a Joint Venture Agreement, the Group has an established 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.
Risk appetite
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.
29
Pets at Home Group Plc Annual Report & Accounts 2023
Risk review continued
Link to strategy
1
Bring the pet
experience to life
2
Set our people
free to serve
3 Use data and VIP to
better serve customers
4
50% of sales from
pet services
Risk Profile/
Risk Appetite
L
Low
M Medium
H High
Change on
previous year
Stable
Increased
Decreased
Treasury and finance
Owner: Chief Financial Officer
Risk Type: Finance
Links to strategy
1
4
Risk profile
L
Risk appetite
L
Change on previous year:
Description
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 Group also faces risks
from changes to interest rates due to its exposure to debt facilities with floating interest rates linked to SONIA. The Group has an exposure to potential tax compliance issues
which could lead to financial or reputational loss. If we do not manage these exposures, there could be an impact on the Group’s financial performance with a consequential
impact on operational and growth plans.
Key responses
– This exposure to exchange rate fluctuation is managed via
forward foreign currency contracts that are designated as cash
flow hedges. The group has an established guiderail for foreign
exchange hedging in terms of both percentage forecast foreign
currency purchase coverage and time horizon hedged out to.
– This exposure to interest rate fluctuation is managed via floating
to fixed interest rate swap contracts that are designated as cash
flow hedges. The group has an established guiderail for interest
rate hedging in terms of both percentage forecast debt coverage
and time horizon hedged out to.
– 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.
– The Group operates within the Group Tax Policy framework which
aims to maintain a low risk appetite approach to its tax affairs.
Outlook and further actions planned
– The political and macro-economic environment has resulted in
ongoing heightened foreign currency and interest rate pressures,
and we may see this continue for some time.
– Ongoing currency movements between the US dollar and GBP
may result in further exchange risk, particularly considering the
geopolitical and macro-economic environment, and the UK’s
developing relationship with the EU.
– These risks are appropriately mitigated through the group’s
Treasury Policy, Tax Policy, and risk management strategies. The
group will continue to manage this through its well-established
foreign exchange and interest rate hedging policies, and more
widely its group-wide treasury and tax policies. We do not expect
any increased threat from other significant macro-economic
changes in the short to medium term.
Emerging risks
– Continued
macroeconomic and
geopolitical uncertainty.
– Adjustment to new
processes set out in
the EU-UK Trade and
Cooperation Agreement.
Risk appetite
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.
Legal and compliance
Owner: Chief Legal Officer
Risk Type: Legal and compliance
Links to strategy
1
2
3
4
Risk profile
L
Risk appetite
L
Change on previous year:
Description
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 and corruption, 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.
Outlook and further actions planned
– We continue to monitor legal and regulatory developments
across the UK and Europe and will plan accordingly.
Emerging risks
– New and amended
regulations, including
further amendments to
the law resulting from
Brexit.
– Significant strengthening
of UK consumer
laws and regulations
around the usage of
digital information,
and increasingly
stringent environmental
regulation.
Key responses
– 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. Training is provided for colleagues where needed.
– We 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.
– We understand the value of ongoing training and communication to
raise awareness of the personal data handled by the business, how
to keep it safe and how to help prevent personal data incidents.
We carry out regular induction, awareness, and refresher training
for all our colleagues in Retail, Vets, and the Support Offices.
Risk appetite
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 the necessary steps to comply with applicable laws and regulations.
30
Strategic Report
Governance
Financial Statements
Chair’s introduction to Governance
Strong governance to
support strategic focus
During the year, the Nomination and Corporate Governance
Committee has been refreshed with additional meetings and greater
focus on corporate governance updates, succession, organisational
changes, board skills gap analysis and Non-Executive Director
succession planning. Restructuring the Executive Management
Team during the year and the creation of the consumer function
and the Chief Consumer Officer role, have ensured that the most
appropriate structure is in place to deliver the future strategy.
New hires at Non-Executive Director level with the appointments of
Roger Burnley and Dr Natalie-Jane Macdonald, further complement
the skills of the current Board.
The culture and values remain strong within the business. I am
proud of the diverse nature of the Board of Pets at Home. The
business achieved its highest ranking to date in this year’s FTSE
Women Leaders Review and appointed its first female CEO and
Senior Independent Non-Executive Director, all of which should
be celebrated.
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 6 July 2023 at 11am.
Ian Burke
Chair, Pets at Home Group Plc
25 May 2023
On behalf of the Board, I am pleased to present our
Corporate Governance Report for the financial year
ended 30 March 2023.
During this financial year, the Board has continued to oversee and
shape the strategic direction of the business, to ensure that the
business remains sustainable over the long-term.
Following the streamlining of the strategy at the start of the year
and clarity on key priorities, it has been essential for the Board to
ensure that appropriate governance is in place to support this. Deep
dives have been introduced at each meeting of the Board on one
or two of the strategic pillars, with the subjects rotating during the
year. The deep dives have ensured that the Board has in-depth
knowledge of the key strategic initiatives, the chance to meet the
senior leadership team involved directly and the opportunity to
challenge and question.
The sustainability strategy has also been simplified this year to
add focus and direction to the key sustainability priorities for
the business. In addition, sustainability is now a standing agenda
item at meetings of the main Board, to ensure that sustainability
considerations are given sufficient focus in the decision
making process.
31
Pets at Home Group Plc Annual Report & Accounts 2023
Board of Directors
Chair
Non-Executive Directors
Ian Burke
Chair
Zarin Patel
Dennis Millard
Sharon Flood
Stanislas Laurent
Susan Dawson
Roger Burnley
Lyssa McGowan
Mike Iddon
Senior Independent
Non-Executive Director
Non-Executive Director
Independent
Non-Executive Director
Independent
Non-Executive Director
Independent
Non-Independent
Chief Executive Officer
Chief Financial Officer
Non-Executive Director
Non-Executive Director
Appointment to the Board
2020
Appointment to the Board
2021
Appointment to the Board
2014
Appointment to the Board
2017
Appointment to the Board
2017
Current roles
Past roles
– Member of the
Board of Governors
of Birmingham
City University
– Non-Executive Chair
of Studio Retail
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 Vet Partners
Holdings Ltd
Contribution to the Board
Wealth of experience
from the leisure
and retail sectors.
Ian has significant prior
experience of participation
in audit and remuneration
committees.
Current roles
– Non-Executive Director
and Chair of the Audit
and Risk Committee
of Anglian Water
Services Limited
– Independent
Non-Executive Director
at Hays Plc
– Independent Non-
Executive Director
and Chair 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
– Non-Executive Director
and Senior Independent
Non-Executive Director
of Post Office Limited
and member of its
Audit Committee
– Independent member
of the Audit and
Risk Committee
of John Lewis
Partnership Plc
– Chief Financial Officer
of the BBC
– Chief Operating Officer
of The Grass Roots
Group Plc
Contribution to the Board
Wide ranging financial
and commercial expertise.
Zarin is also a Chartered
Accountant.
Current roles
– Partner at Highland
Europe (Growth equity)
and Non-Executive
Director at various
portfolio companies
Past roles
– President and CEO
of Photobox Group
– COO of AOL Europe
Current roles
Past roles
– Senior Independent
Director of Superdry Plc
– Non-Executive Chair of
Watches of Switzerland
Group Plc
– Chair of Halfords Plc
– Senior Independent
Director of
Debenhams Plc
– Chair of Connect
Group Plc
– Senior Independent
Director of Premier
Farnell Plc
– Senior Independent
Director of Xchanging Plc
– Non-Executive Director
of Exel Plc
Current roles
– Chair of Audit at Cityfibre
– Board member and
Chair of Safety and
Security at Getlink SE
– External member of the
University of Cambridge
Council
– Fellow of Chapter Zero
– Independent Non-
Executive Director at
Scottish Mortgage
Investment Trust Plc
Past roles
– Chair of Seraphine
Group Plc
– Chair of Audit Committee
at Crest Nicholson Plc
– Chair of Finance at
Science Museum Group
– Chair of Audit Committee
at Network Rail
– Chair of ST Dupont S.A.
– Group Chief Financial
Officer at Sun European
– Finance Director at
John Lewis Department
Stores
– Chair of Audit at Shelter
Contribution to the Board
Wide ranging public
company experience
with retail, strategic
and financial expertise.
Dennis is also a Chartered
Accountant and holds
an MBA.
Contribution to the Board
Retail, finance and public
company experience.
Sharon is also a Chartered
Management Accountant.
Contribution to the Board
Entrepreneurial
background with
digital and technology
experience.
Considerable veterinary
experience and expertise
on the training and
wellbeing of vets.
Deep knowledge of the
retail sector and food
supply chains.
Contribution to the Board
Contribution to the Board
Contribution to the Board
Contribution to the Board
Financial knowledge and
retail industry expertise.
Broad experience
in consumer-facing
businesses, expertise in
customer and digital first
initiatives, experience
in data and digital
transformation.
Appointment to the Board
Appointment to the Board
Appointment to the Board
Appointment to the Board
2022
Current role
2016
Current roles
– Advisor with Bain &
– Chief Executive Officer
– Chief Financial Officer
2023
Current roles
Company
Artisan
Past roles
– Chair of Plate-Up Limited
– Chair of Finnebrogue
– Executive Director at
J Sainsbury Plc
– COO and CEO at
Asda Stores Limited
Past roles
– Chief Consumer Officer
at Sky UK Limited
– Non-Executive Director
at Wm Morrison
Supermarkets Plc
2018
Current roles
– Trustee of Pet
Blood Bank
Past roles
– Dean of the Institute
of Veterinary Science
at the University
of Liverpool
– Council member of
the Royal College of
Veterinary Surgeons
(RCVS)
– Member of the Veterinary
Products Committee
– Member of the
Antimicrobial Resistance
and Healthcare
Associated Infections
Committee for the
Department of Health
– Non Executive Director
and Audit and Risk
Committee Chair of
Wickes Group Plc
Past roles
– Chief Financial Officer
of New Look from
2014-2016
– Held a number of
senior finance roles
over 13 years working
for Tesco Plc both in
the UK and overseas.
These included Group
Planning, Tax and
Treasury Director, UK
Finance Director and
Chief Financial Officer
of Tesco Homeplus
(South Korea)
– Number of senior roles
with Kingfisher Plc and
Whitbread Plc
Committees
N E
Committees
A R N E
Committees
N A R E
Committees
N A R E
Committees
N A E
Committees
N R E
Committees
N A R E
E
Committees
Committees
Committees – Key
N Nomination and Corporate Governance A Audit and Risk R Remuneration
E ESG (Environmental, Social and Governance)
Chair of Committee
32
Strategic Report
Governance
Financial Statements
Executive Directors
2014
Current roles
Past roles
– Senior Independent
Director of Superdry Plc
– Non-Executive Chair of
Watches of Switzerland
Group Plc
– Chair of Halfords Plc
– Senior Independent
Director of
Debenhams Plc
– Chair of Connect
Group Plc
– Senior Independent
Director of Premier
Farnell Plc
– Senior Independent
Director of Xchanging Plc
– Non-Executive Director
of Exel Plc
2017
Current roles
2017
Current roles
– Chair of Audit at Cityfibre
– Partner at Highland
Europe (Growth equity)
and Non-Executive
Director at various
portfolio companies
Past roles
– President and CEO
of Photobox Group
– COO of AOL Europe
– Board member and
Chair of Safety and
Security at Getlink SE
– External member of the
University of Cambridge
Council
– Fellow of Chapter Zero
– Independent Non-
Executive Director at
Scottish Mortgage
Investment Trust Plc
Past roles
– Chair of Seraphine
Group Plc
– Chair of Audit Committee
at Crest Nicholson Plc
– Chair of Finance at
Science Museum Group
– Chair of Audit Committee
at Network Rail
– Chair of ST Dupont S.A.
– Group Chief Financial
Officer at Sun European
– Finance Director at
John Lewis Department
Stores
– Chair of Audit at Shelter
Ian Burke
Chair
2020
Current roles
Past roles
– Member of the
Board of Governors
of Birmingham
City University
– Non-Executive Chair
of Studio Retail
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 Vet Partners
Holdings Ltd
Wealth of experience
from the leisure
and retail sectors.
Ian has significant prior
experience of participation
in audit and remuneration
committees.
Committees
N E
Committees – Key
2021
Current roles
– Non-Executive Director
and Chair of the Audit
and Risk Committee
of Anglian Water
Services Limited
– Independent
Non-Executive Director
at Hays Plc
– Independent Non-
Executive Director
and Chair 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
– Non-Executive Director
and Senior Independent
Non-Executive Director
of Post Office Limited
and member of its
Audit Committee
– 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
Wide ranging financial
and commercial expertise.
Zarin is also a Chartered
Accountant.
Zarin Patel
Dennis Millard
Sharon Flood
Stanislas Laurent
Susan Dawson
Roger Burnley
Lyssa McGowan
Mike Iddon
Senior Independent
Non-Executive Director
Non-Executive Director
Independent
Independent
Non-Executive Director
Non-Executive Director
Independent
Non-Executive Director
Non-Independent
Non-Executive Director
Chief Executive Officer
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
2018
Appointment to the Board
2023
Appointment to the Board
2022
Appointment to the Board
2016
Current roles
– Advisor with Bain &
Company
– Chair of Plate-Up Limited
– Chair of Finnebrogue
Artisan
Past roles
– Executive Director at
J Sainsbury Plc
– COO and CEO at
Asda Stores Limited
Current role
– Chief Executive Officer
Past roles
– Chief Consumer Officer
at Sky UK Limited
– Non-Executive Director
at Wm Morrison
Supermarkets Plc
Current roles
– Trustee of Pet
Blood Bank
Past roles
– Dean of the Institute
of Veterinary Science
at the University
of Liverpool
– Council member of
the Royal College of
Veterinary Surgeons
(RCVS)
– Member of the Veterinary
Products Committee
– Member of the
Antimicrobial Resistance
and Healthcare
Associated Infections
Committee for the
Department of Health
Current roles
– Chief Financial Officer
– Non Executive Director
and Audit and Risk
Committee Chair of
Wickes Group Plc
Past roles
– Chief Financial Officer
of New Look from
2014-2016
– Held a number of
senior finance roles
over 13 years working
for Tesco Plc both in
the UK and overseas.
These included Group
Planning, Tax and
Treasury Director, UK
Finance Director and
Chief Financial Officer
of Tesco Homeplus
(South Korea)
– Number of senior roles
with Kingfisher Plc and
Whitbread Plc
Committees
A R N E
Committees
N A R E
Committees
N A E
Committees
N R E
Committees
N A R E
Committees
Committees
E
Contribution to the Board
Considerable veterinary
experience and expertise
on the training and
wellbeing of vets.
Contribution to the Board
Deep knowledge of the
retail sector and food
supply chains.
Contribution to the Board
Financial knowledge and
retail industry expertise.
Contribution to the Board
Broad experience
in consumer-facing
businesses, expertise in
customer and digital first
initiatives, experience
in data and digital
transformation.
Contribution to the Board
Contribution to the Board
Contribution to the Board
Contribution to the Board
Contribution to the Board
Retail, finance and public
company experience.
Sharon is also a Chartered
Management Accountant.
Entrepreneurial
background with
digital and technology
experience.
Wide ranging public
company experience
with retail, strategic
and financial expertise.
Dennis is also a Chartered
Accountant 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
33
Pets at Home Group Plc Annual Report & Accounts 2023
Leadership and purpose
Principal governance
activities during the
financial year
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 the following.
Provision 38 – The pension contribution rate for the outgoing
CEO (Peter Pritchard) was 9% of base salary from the start
of the financial year until he left the business on 31 May 2022.
The pension contribution rates for the CFO and the current
CEO are 6.5%, being the rate provided to the majority of
colleagues in central support office functions, therefore
ensuring the business is fully aligned with the provisions
of the Code.
2023 Board considerations
During the year the Board spent its time considering a wide range
of matters, including:
– Development of the Group’s strategic plan;
– Deeps dives on the key strategic initiatives;
– Updates from key business functions, including health
and safety, cyber security and data protection;
Sustainability and climate matters;
– Business performance;
–
– Overall performance of individual business functions;
–
The cost of living crisis and inflation challenges;
– 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;
–
– Competitor and customer updates;
– Diversity, talent, capability and succession planning matters;
–
–
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;
Regulatory matters, corporate governance and corporate
reporting;
–
Approval of the financing arrangements and treasury items;
– Non Executive Director and Executive Management Team
–
succession and talent development;
Engagement with key stakeholders and the impact of Board
decisions on such stakeholders;
– Board evaluation; and
–
Key strategic projects and priorities across the Group.
34
Strategic Report
Governance
Financial Statements
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. The Board has considered risks and
opportunities to the business throughout the year during the course
of Board meetings.
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. 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 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 Executive Management Team and senior leadership teams
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.
Number of meetings1
Director
Ian Burke (Chair)
Dennis Millard (Deputy Chair)2
Peter Pritchard3
Lyssa McGowan3
Mike Iddon3
Sharon Flood4
Stanislas Laurent
Susan Dawson
Zarin Patel
Roger Burnley
Board
8
8/8
8/8
2/2
8/8
8/8
7/8
8/8
8/8
8/8
2/2
Remuneration
Committee
Audit and Risk
Committee
Nomination and Corporate
Governance Committee
ESG
Committee
5
–
4/4
–
–
–
5/5
–
5/5
5/5
1/1
4
–
4/4
–
–
–
4/4
4/4
–
4/4
–
3
3/3
3/3
–
–
–
3/3
3/3
3/3
3/3
1/1
3
3/3
3/3
1/1
2/2
–
2/3
3/3
3/3
3/3
1/1
1 Excludes the strategy day, which all Directors attended.
2 Dennis Millard stepped down as a formal member of the Audit and Risk Committee and the Remuneration Committee on 14 February 2023. He continues to attend meetings of those
Committees as an observer from 14 February 2023.
3
Although not formally appointed as a member of the Audit and Risk and Remuneration Committees, Peter Pritchard (until the date of his resignation) and Lyssa McGowan attended
meetings of such Committees 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.
4 Sharon Flood did not attend a Board and ESG Committee meeting due to a prior commitment and was appropriately updated after those meetings.
35
Pets at Home Group Plc Annual Report & Accounts 2023
Division of responsibilities
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 page 37.
Board Committees
Audit and Risk
Committee
Nomination and Corporate
Governance Committee
Remuneration
Committee
Environmental, Social and
Governance (ESG) Committee
Chief Executive Officer
Leads the Executive Management Team and represents management on
the Board in conjunction with the Group Chief Financial Officer
Executive Management Team
The Executive Management Team supports the Chief Executive Officer
with the day-to-day management of the Group’s operations and
executes the Group’s strategy once agreed by the Board
Retail
Senior Leadership Team
Consumer
Senior Leadership Team
Vet Group
Senior Leadership Team
Investment
Committee
Health and Safety
Committee
Products and Supply
Chain Committee
Climate Change and
Waste Committee
Pet Welfare
Committee
Pensions
Committee
Vet Group Better World
Pledge Committee
36
Strategic Report
Governance
Financial Statements
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 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 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. Only the terms of
reference for the ESG Committee were updated during the 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.
Executive Management Team
In addition to the Board, the Group has the Executive Management
Team which includes: the Chief Executive Officer, Chief Financial
Officer, Retail Chief Operating Officer, Vet Group Chief Operating
Officer, Chief People Officer, Chief Data and Information Officer,
Chief Legal Officer and Company Secretary and the Chief
Consumer Officer. Supporting the Executive Management Team
are senior leadership teams for retail, vet and consumer. The senior
leadership teams support the Executive Management Team in the
implementation of strategy and risk and governance oversight
across their respective divisions.
Management committees
Details of our management committees are set out below:
Investment Committee
The Investment Committee assists the Board with the Group’s
store and veterinary surgery rollout and development process to
ensure the Group’s investment process is managed effectively
and rigorously throughout the Group. The Investment Committee
is chaired by the Chief Financial Officer and is also attended by
the Chief Executive Officer and other members of the Executive
Management Team and senior leadership team, including the
Director of Property and the 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, standalone veterinary surgeries, vet
extensions, 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 standalone 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 further approval by 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 Committee
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 Chief Legal Officer 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 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 Sustainability Report.
Other Management Committees
Pensions Committee
The Pensions Committee operates to consider pensions related
issues across the business.
Pet Welfare Committee
The Pet Welfare Committee is responsible for leading the business
to be the credible, trusted voice in pet welfare and the guardians of
the value ‘we put pets first’. The Committee considers all pet welfare
matters impacting the group and research.
Product and Supply Chain Committee
The Product and Supply Chain Committee is responsible for
considering sustainability issues in the supply chain.
Climate Change and Waste Committee
The Climate Change and Waste Committee considers all climate
and waste matters impacting the business.
Vet Group Better World Pledge Committee
The Vet Group Better World Pledge Committee operates to consider
sustainability issues and actions across the vet business and joint
venture practices.
37
Whistleblowing policy
The Company has a duty to conduct its affairs in an open and
responsible way. We are committed to high standards of corporate
governance and compliance with legislation and appropriate codes
of practice. By knowing about any wrong doing or malpractice at
an early stage, we stand a good chance of taking the necessary
steps to stop it. The Group has a whistleblowing policy designed
to encourage colleagues to identify such situations and report
them without fear of repercussions or recriminations provided that
they are acting in good faith. The policy sets out how any concerns
may be raised and the response which can be expected from the
Company and in what timescales.
A copy of the Group’s Code of Ethics and Business Conduct is
published on the Group’s website https://investors.petsathome.
com/responsibility/policies-and-procedures/code-of-ethics-and-
business-conduct.
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.
Pets at Home Group Plc Annual Report & Accounts 2023
Division of responsibilities continued
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
23 to 30. 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 48 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 2022 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
23 March 2023.
–
–
– 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 Chief Financial Officer.
All capital investments during the year have been approved by
the 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 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 48.
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 44 to 45.
–
–
38
Strategic Report
Governance
Financial Statements
Composition, succession and evaluation
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, one Non-Independent
Non-Executive Director and one Non-Executive Chair. The Directors’
biographies are contained on pages 32 to 33. The Board considers
that all of its Non-Executive Directors, with the exception of Dennis
Millard, 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.
Dennis Millard has served on the Board as an Independent
Non-Executive Director for nine years (as at 18 February 2023) and
is therefore no longer considered independent in accordance with
Provision 10 of the 2018 Code due to exceeding nine years tenure.
The skills matrix for the Board on page 41 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
advisors. 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.
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 72 to 73. The service agreements and letters
of appointment are available for inspection at the Company’s
registered office during normal business hours. At each Annual
General Meeting of the Company all Directors will stand for re-
election in accordance with the 2018 Code. Each financial year
the 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
32, 33 and 41 and why their contribution is, and continues to be,
important to the Company’s long-term sustainable success.
Board effectiveness
The time commitments of each of the Non-Executive Directors are
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 and inclusion
The Board understands the importance of having a diverse
membership and recognises that diversity encompasses not only
gender but also background, ethnicity and experience.
The group’s diversity and inclusion aim is to increase diverse
representation of colleagues to reflect the communities we live
and work in. 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. Every effort is made 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. The group continues
to be a member of the Business Disability Forum.
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 33 and in the Sustainability Report.
The Board was pleased to meet the Parker Review targets on ethnic
diversity again this year. The Board was also pleased to see the
highest ranking to date for the business in the FTSE Women Leaders
Report on gender balance this year.
39
Pets at Home Group Plc Annual Report & Accounts 2023
Composition, succession and evaluation continued
The following tables set out the information required by Listing Rule 9.8.6R(10), in the prescribed format.
1. (a) Table for reporting on gender identity or sex
Men
Women
Not specified/prefer not to say
2. (b) Table for reporting on ethnic background
White British or other White (including minority-white groups)
Mixed/Multiple Ethnic Groups
Asian/Asian British
Black/African/Caribbean/Black British
Other ethnic group, including Arab
Not specified/prefer not to say
Number of Board
members
Percentage of the
Board
Number of senior
positions on the
Board (CEO, CFO,
SID and Chair)
Number in
executive
management
Percentage
of executive
management
5
4
–
56%
44%
–
2
2
–
2
5
–
29%
71%
–
Number of Board
members
Percentage of the
Board
Number of senior
positions on the
Board (CEO, CFO,
SID and Chair)
Number in
executive
management
Percentage
of executive
management
7
–
–
–
2
–
78%
–
–
–
22%
–
2
–
–
–
2
–
5
1
–
–
1
–
71%
14%
–
–
14%
–
The data above was collected by way of individual confirmation from the Board and Executive Management Team and is correct as at 24 May 2023.
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 43.
Board evaluation
Further information relating to this year’s Board evaluation can be found on page 43 of the Nomination and Corporate Governance
Committee report.
40
Strategic Report
Governance
Financial Statements
Director
Pet Owner
Expertise
Accounting, Finance and Audit
Risk Management
Regulatory
Governance
Corporate Transactions (M&A)
International (running a non UK Business)
General Management (CEO)
People and Culture
General Retailing Experience
Customer Service and
Communications Experience
Online Retailing Experience
Marketing/Branding
General Services
Veterinary
Charity/Social Purpose
Data
IT and Technology
Omnichannel
Strategic Leadership
Vision and Mission
Sustainability and Climate Change
Transformation Leadership
Chair of Plc Board
Chair of Plc Board Committee
Pets at Home Group Plc – Board Skills Matrix
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Board
by Tenure
Board
by Age
Board
by Gender
Balance of the Board
(Exec/Non-Exec)
Under 1 year
1-3 years
3-8 years
8+ years
1/9
2/9
5/9
1/9
45-50
50-55
56-60
61-65
+66
1/9
2/9
2/9
2/9
2/9
Female
Male
4/9
5/9
Executive Directors 2/9
Non-Executive
Directors
7/9
41
Pets at Home Group Plc Annual Report & Accounts 2023
Nomination and Corporate Governance Committee Report
Introduction
The Nomination and Corporate Governance Committee is a key
committee of the Board whose role is to keep the composition
and structure of the Board and its Committees under review and
has responsibility for nominating candidates for appointment as
Directors to the Board having 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
senior leadership 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,
Zarin Patel and Roger Burnley. Each member is an Independent
Non-Executive Director, with the exception of Dennis Millard who
ceased to be independent due to his tenure on 18 February 2023.
The majority of the Committee’s members are independent. 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
Ian Burke (Chair)
21 May 2020
Dennis Millard
18 February 2014
Sharon Flood
25 May 2017
Susan Dawson
12 July 2018
Stanislas Laurent
25 May 2017
Zarin Patel
20 May 2021
Roger Burnley
14 February 2023
To
To date
To date
To date
To date
To date
To date
To date
No of
meetings
3/3
3/3
3/3
3/3
3/3
3/3
1/1
There were three formal Committee meetings held in the financial
year and members’ attendance was as shown in the table above.
Board appointments and resignations
As noted last year, Lyssa McGowan was appointed to the Board as
CEO Designate on 25 April 2022, prior to her appointment as CEO
on 1 June 2022, following Peter Pritchard’s resignation on 31 May
2022. Lyssa has made an excellent start in her role and the Board
look forward to her progressing the plans she has set in motion
during the next financial year.
The Board was pleased to announce Roger Burnley’s appointment
as Independent Non-Executive Director with effect from 14 February
2023. Roger will be a member of the Audit and Risk Committee, the
ESG Committee, the Remuneration Committee and the Nomination
and Corporate Governance Committee with effect from his
appointment. The Board is pleased to welcome Roger and he brings a
wealth of knowledge from his retail and food supply chain experience.
Ian Burke
Chair, Nomination and Corporate Governance Committee
Who is on the Nomination and Corporate Governance
Committee?
Member
Ian Burke (Chair)
Dennis Millard
Sharon Flood
Susan Dawson
Stanislas Laurent
Zarin Patel
Roger Burnley
No. of meetings
3/3
3/3
3/3
3/3
3/3
3/3
1/1
What we did in 2023
–
–
–
–
–
Assessed Board composition and how it may be enhanced.
Reviewed and considered Board evaluation and effectiveness.
Reviewed the independence of the Non-Executive Directors.
Reviewed and considered Directors’ conflicts of interest.
Reviewed the time commitment and length of service of the
Non-Executive Directors.
Recommended the appointment of Roger Burnley and
Dr Natalie-Jane Macdonald as Non-Executive Directors.
Reviewed and considered executive succession plans, including
the restructuring of the Executive Management Team.
Reviewed the frequency and focus of meetings of the
Committee.
Reviewed the Committee’s corporate governance obligations.
–
–
–
–
What we will do in 2024
– Continue to review Board composition and effectiveness.
– Consider succession planning.
–
Review corporate governance obligations and updates.
– Undertake a Board evaluation and continue to develop areas
identified for improvement.
42
Strategic Report
Governance
Financial Statements
In addition, Dr Natalie-Jane Macdonald will join the Board as an
Independent Non-Executive Director with effect from 27 May
2023. Natalie will be a member of the Nomination and Corporate
Governance Committee and the ESG Committee from appointment.
She brings an exceptional level of strategic and operational
healthcare experience, together with knowledge of complex
consumer businesses at an executive and board level, skills which
will be valuable as Pets at Home continues to build its consumer-
centric, omnichannel, pet care platform. The Board looks forward to
working with Natalie in FY24.
Stanlislas Laurent and Sharon Flood have indicated their intention
to step down from the Board on 26 May 2023 and will not therefore
stand for re-election at this year’s AGM.
Dennis Millard stepped down from his role as Senior Independent
Non-Executive Director with effect from 14 February 2023. Dennis
will remain with the Board for a further 12 months. Dennis stepped
down from being a member of the Remuneration Committee and
Audit and Risk Committee, after he ceased being independent, but
will continue to attend those Committees as an observer.
Zarin Patel was appointed as Senior Independent Non-Executive
Director from 14 February 2023.
A number of changes have also taken place at Executive
Management Team level.
Board evaluation and effectiveness
This year, the Board carried out an internal evaluation, following last
year’s evaluation being carried out externally by MWM Consulting.
An assessment and discussion took place in relation to key focus
areas highlighted by the MWM review including: having less
transactional/agenda free time, strategy, shareholders, succession
planning and Committees. Progress was discussed against each of
the areas highlighted and the Board was considered to be effective.
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 40 of the
Governance Report.
Louise Stonier was appointed as Vet Group Chief Operating Officer
on 24 June 2022, following Jane Balmain’s resignation. Kathryn Imrie
joined the business in the newly created role of Chief Consumer
Officer on 20 February 2023. Rachel Mooney joined as Chief People
Officer from October 2022 until May 2023.
Lisa Miao and Lucy Williams were promoted to the Executive
Management Team in the respective roles of Retail Chief Operating
Officer and Chief Legal Officer and Company Secretary, with Lucy
now taking responsibility for the Legal, ESG, Procurement, Data
Protection, Health and Safety, and People functions. The data
function for the business now reports to William Hewish, Chief Data
and Information Officer.
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.
Succession planning and Group talent development
At Board and Committee level, the Committee has considered
the skills required to deliver the strategy and objectives in the
longer term.
The Board’s view on independence is contained on page 39 of the
Governance Report. For further information on Board composition,
diversity and independence, please see the Governance Report on
page 39 to 40.
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.
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 2023
43
Pets at Home Group Plc Annual Report & Accounts 2023
Audit and Risk Committee Report
Monitored the control environment of the Group including our
general risk management processes, as well as emerging and
evolving risks considering the presence of key risk factors as noted
above, and ongoing focus around pet welfare protocols. We have
also monitored the controls and processes relating to the release of
key IT and distribution projects.
Reviewed the effectiveness of the Group’s whistleblowing
procedures, fraud effectiveness framework, health and safety plans,
and the activities and effectiveness of the Internal Audit function to
meet the requirements of the Internal Audit plan.
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
treatment.
The Committee has continued to monitor progress of the Internal
Controls over Financial Reporting ('ICFR') project. A new Internal
Financial Controls team has been put in place, dedicated to
improving the robustness of the internal control environment and
designing and executing processes to conduct business activities
and manage associated risks within the appetite set by the Board.
We have worked with the ESG Committee to continue to support
the development of the Group’s risk 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. We also commissioned
an external review of the disclosures.
Cyber security risk continues to be one of the Group’s Principal
Risks and an area we remain vigilant given the increasingly complex
nature of cyber attacks. In December 2022 the business saw an
increase in malicious activity which was contained quickly with
minimal impact to data or services. The cyber security policies,
controls and plans have been reviewed regularly by the Committee
at the biannual Risk and Audit Review by the Board of Directors.
During the year the Financial Reporting Council (‘FRC’) Corporate
Review team carried out a review of our Annual Report and
Accounts for the year ended March 2022. The review was based
solely on the Annual Report and Accounts and did not benefit
from detailed knowledge of our business or an understanding
of the underlying transactions entered into. The review has not
highlighted any questions or queries requiring a response, however
in the interests of supporting continuous reporting improvement
there were a number of matters raised for our attention which we
considered in relation to our 2023 Annual Report and Accounts.
As a result of the FRC’s review, we have considered and improved
clarity of disclosure in relation to a number of areas including
the prominence of Alternative Performance Measures (‘APMs’)
compared to equivalent IFRS measures and Task Force on Climate-
related Financial Disclosures (‘TCFD’), specifically with reference to
the recent thematic review.
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
No. of meetings
4/4
4/4
4/4
4/4
Roger Burnley joined the Audit and Risk Committee on 14 February 2023.
Dennis Millard stepped down on 14 February 2023 and Sharon Flood will
step down on 26 May 2023. There have been no meetings since Roger
Burnley’s appointment.
Introduction
This is my second 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.
What we did in 2023
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 global supply chain issues,
inflationary pressures and the impact of consumer confidence.
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.
44
Strategic Report
Governance
Financial Statements
Committee membership
The Committee members have been selected to provide a wide
range of financial, retail, technology 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 32 to 41.
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 matters 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.
What we will do in 2024
Continue to build on what we did in 2023 and to carry out our
responsibilities as set out in the terms of reference. Continue to
monitor emerging and maturing risks, in particular risks from the
Ukraine crisis, the global supply chain issues, cyber security and
data 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.
Review the proposals set out by the Government in response to the
Department for Business, Energy, and Industrial Strategy (‘BEIS’)
corporate governance reform agenda.
Continue to develop our Internal Controls Framework and monitor
progress of the Internal Controls over Financial Reporting ('ICFR')
project. We will continue to monitor and build our fraud policy
and carry out a fraud effectiveness review across the business.
We are developing our audit and assurance policy in preparation
for legislative requirements. We will review the newly published
Minimum Audit Standards for Audit Committees and the
forthcoming proposals from the Department of Business and Trade
Strategy corporate governance reform agenda and company code
changes from the FRC.
Consider the risk implications of the refreshed strategy.
Review the progress and delivery of major projects including the
new distribution centre (Project Spice), digital capability (Project
Polestar), Vet Group transformation (Project Apollo) and cyber
security enhancements. We have ongoing embedded assurance
within major strategic projects to report back to the Board and
Audit and Risk Committee on key risk themes.
Continue to review the development of the Data Protection
framework and data compliance programme across the business.
Carry out a competitive external audit tender in relation to the financial
year ended March 2026, ensuring a focus on audit quality and
effectiveness and giving due consideration to competition in the audit
market with reference to the FRC’s December 2022 policy paper.
Continue to work with the ESG Committee to support the
development of the Group’s scenario planning and reporting
in relation to Task Force on Climate-Related Financial
Disclosures (‘TCFD’), specifically relating to new requirements
and recommendations made by the FRC.
45
Pets at Home Group Plc Annual Report & Accounts 2023
Audit and Risk Committee Report continued
Audit and Risk Committee meetings
The Committee met on four occasions during the financial year with each meeting having a distinct agenda to reflect the annual reporting
cycle of the Group. The agenda is regularly reviewed and developed to meet the changing needs of the Group.
A summary of the key matters considered at each meeting is as follows:
Meeting
Financial reporting
Risk management/internal control
Internal audit
External audit
May
22
– Review of the Annual Report and Accounts
for the period ended 31 March 2022
– Review of IFRIC Cloud computing
arrangements
– 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 Final Dividend recommendation
and distributable reserves
September
22
– Review of progress of subsidiary
financial statements for the period
ended 31 March 2022
November
22
– Review of the Interim Financial Statements
– Review of appropriateness and quantum of
Alternative Performance Measures (‘APMs’),
with the intention to streamline for the year
end reporting
– 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
joint venture companies
– Review Interim Dividend recommendations
and distributable reserves
January
23
– Review of Corporate Risk Register
– Review of principal risks for the Annual Report
– Review of Whistleblowing policy
– Review of Health and Safety reports
– Review of Tax policy
– Review of Treasury policy
– Report on
Annual Financial
Statements and
external audit
– Review of policy
on non-audit fees
– Review of FY23
Internal Audit plan
– Review reports on
progress of the
Internal Audit plan
including Data
Governance, Vet
Group finance
transformation
(Project Apollo) and
Risk Culture
– Review of principal risks and the related mitigation plans
– Review of Risk Management Framework
– Review of Risk Appetite Framework
– Review of key priorities and readiness assessment
relating to the Internal Controls over Financial Reporting
('ICFR') project
– Review of Whistleblowing reports
– Review of Health and Safety reports
– Review of Treasury policy
– Review of cyber security maturity and controls
– Review progress on implementation of Vet Group
finance transformation programme
– Review of principal risks and the related mitigation plans
– Risk management including review of updated risk
appetite
– Review of Whistleblowing reports
– Deep dive review of Health and Safety reports
– Review reports on
– Review of
FY22 external
consultancy
and professional
services spend
– Approval to
commence External
Audit tender
progress of Internal
Audit plan including
cloud management,
disaster recovery
and wellbeing
framework
– Review programme
on implementation
of internal audit
actions
– Review reports on
– Report on review
progress of Internal
Audit plan and
update actions
including TCFD
disclosures
of Interim Financial
Statements
– Approval of external
audit strategy for
the year ended
30 March 2023
– Approval of external
audit fees
– Review reports
on progress of
Internal Audit plan
including cash and
banking (Retail and
Group) and Retail
discounting
– Review of FRC
correspondence
– Assessed
external auditor
effectiveness as
appropriate
– Review of completeness of emerging risks
– Deep dive on Data Protection risks
– Review of cyber security maturity and approval of
actions to improve maturity
– Review progress of the Internal Controls over Financial
Reporting ('ICFR') project
– Review of the proposals in relation to the Audit and
Assurance Policy as set out by the Government in
response to the Department for Business and Trade
Strategy corporate governance reform agenda
– Fraud effectiveness and update on external fraud
trend reports
– Review of Whistleblowing reports
– Review of Health and Safety reports
46
Strategic Report
Governance
Financial Statements
Financial statement reporting matters
The Committee considered several significant matters 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.
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.
Issue
Nature of the risk
How the risk was addressed by the Committee
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, 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 and challenged management’s process
for testing goodwill for potential impairment, allocation of goodwill
across cash-generating units (CGUs’), and ensuring appropriate
sensitivity analysis and disclosure. This included challenging the key
assumptions within each CGU: 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, 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.
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 23 to 30. The review includes the consideration of 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 91 is appropriate.
Fair, balanced and understandable
The Committee considered the Annual Report and Financial Statements for the financial year ended 30 March 2023, taken as a whole,
including the non-underlying costs associated with the relocation of the distribution centre and group restructure and the simplification of
the APMs. The Committee has 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 30 March 2023 are fair,
balanced and understandable, while providing the information necessary for shareholders to assess the Group’s position and performance,
business model and strategy.
47
Pets at Home Group Plc Annual Report & Accounts 2023
Audit and Risk Committee Report continued
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 processes have been in place for the year under review and up to the date of approval
of the Annual Report and Accounts. The Committee provides oversight and challenge to the assessment of principal risks as set out on page
23. The Group’s key risks and uncertainties are set out on pages 24 to 30. The three lines of defence governance model is set out on page 23
along with the Board’s risk management process.
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 have also reviewed the risk appetite framework.
We continue to align with the TCFD requirements for climate related risks and opportunities, specifically around the physical risks, transition
risks and emerging risks around sustainable pet ownership.
The Committee explores specific key risks of the Group in detail, inviting the management team to discuss the matters 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, Health and Safety and Data Protection. The Internal Audit team is independent, appropriately
skilled and has a direct reporting line to the Committee. The Internal Audit plan is based on providing assurance on key risks, controls and
compliance throughout the year (see table of topics covered below). We use the varied experience of the Committee members to ensure
assurance is focused on all the right issues. The Committee reviews the reports and recommendations in detail and ensures that action is
taken in a timely manner to improve the control environment. The Committee has also performed risk reviews with management on a number
of key risk areas as detailed in the Audit and Risk Committee meetings section on page 46. The Board, through the Audit and Risk Committee,
are satisfied that the internal control framework is effective but acknowledges that the Internal Controls over Financial Reporting (ICFR)
project is underway to enhance internal financial controls, which both the Board and Committee will continue to monitor in FY24.
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
Financial
Legal and regulatory compliance
48
Work undertaken
– Project Spice (distribution centre), capital project assurance
– Project Polestar (digital capability), capital project assurance
– Project Apollo (Vet Group finance transformation), capital project assurance
– TCFD disclosures
– Vet finance system and access management
– Retail Distribution Centre stock receiving
– Retail customer complaints management
– Cyber-threat scenario management
– Payroll-system pay elements
– Colleague wellbeing
– Goods not for resale framework
– Disaster recovery plans for principal IT systems
– Cloud strategy and management
– Pet welfare (Retail)
– Supporting Vet practice performance
– Cash and banking controls (Retail and Central)
– Retail customer discounts
– Travel and expenses
– GDPR compliance
– IR35 compliance
– Senior Accounting Officer certification process
Strategic Report
Governance
Financial Statements
All reports, related findings and recommended actions have been discussed by the Committee and are tracked to completion.
External audit
KPMG presents their audit plan, risk assessment and audit findings to the Committee, identifying their consideration of the key audit risks for
the year and the scope of their work. These reports are discussed throughout the audit cycle. These risks were 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 management override of controls. 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 matters in detail.
In line with the Statutory Audit Regulation and Directive, we have commenced a tender for our March 2026 year-end audit and our intention
is to conclude this process during the financial year ending 28 March 2024. The tender will aim to comply with the quality standards set out
in the newly published Minimum Audit Standards for Audit Committees which includes the consideration of both ‘Big Four’ and challenger
audit firms. KPMG, who have audited the Group since 2000, were reappointed at the AGM on 7 July 2022. Ailsa Griffin has been appointed
audit partner for the financial year ending 30 March 2023, replacing Stuart Burdass as part of the planned cycle of audit partner rotation.
External auditor’s effectiveness
The Committee considered the quality, 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. Continuing from the process
in the previous year, we conducted an audit quality and effectiveness review through a questionnaire to Committee members, management,
and members of the finance team, which delivered focused insight into KPMG’s effectiveness. We considered the audit quality reviews on
the firm and sought confirmation that recommendations were appropriately actioned where relevant to the audits of our Company and Group.
Auditor independence
Maintaining the objectivity and independence of the external auditors is essential. The Committee has taken appropriate steps to ensure
that the Company’s external auditors are independent of the Company and obtained written confirmation from them that they comply with
guidelines on independence issued by the relevant accountancy and auditing bodies.
Additional non-audit services provided by the auditors may impair their independence or give rise to a perception that their independence
may be impaired. The Group has a policy in relation to the provision on non-audit services that is aligned with the EU Regulation and
Statutory Audit Directive to provide further clarity over the type of work that is acceptable for the external auditors to carry out. The policy
sets out the process required for approval and a cap to the total non-audit fees for permitted services (at 70% of the audit fee). The policy
was last reviewed in the year ended 30 March 2023.
Audit and non-audit fees paid to KPMG in the year were £1,388,000 and an analysis is presented in note 3 to the consolidated financial
statements. Non-audit fees represent 8% of the audit fee. Non-audit services provided by the external auditors during the 2023 financial
year comprised audit related assurance services, in the form of an independent review of the half-yearly statements and a financial covenant
compliance certificate. The Committee concluded that the provision of such services was appropriate given that they were closely related to
the work performed in the external audit process and, for reason of effectiveness and efficiency, it was considered advantageous to engage
the external auditors due to their knowledge and expertise.
Resolutions to 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 6 July 2023.
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.
Zarin Patel
Chair, Audit and Risk Committee
25 May 2023
49
Pets at Home Group Plc Annual Report & Accounts 2023
ESG Committee Report
Susan Dawson
Chair of the ESG Committee
Who is on the ESG Committee?
Member
Susan Dawson (Chair)
Ian Burke
Dennis Millard
Sharon Flood
Stan Laurent
Zarin Patel
Roger Burnley
Peter Pritchard
Lyssa McGowan
No. of meetings
3/3
3/3
3/3
2/3
3/3
3/3
1/1
1/1
2/2
What we did in FY23
– Continued to focus on the monitoring and delivery of our high
standards of pet welfare across the Group
– Overseen the refresh of the sustainability strategy, including an
updated materiality assessment, and the agreement of three
strategic priority areas
– Monitored the progress of the Group’s approach to the Task
Force on Climate related Financial Disclosure (TCFD)
– Moved the review and focus on ESG risks to this Committee,
–
reporting to the Audit and Risk Committee
Reviewed and approved an updated supplier code of conduct
and a Responsible Sourcing Handbook for suppliers
50
What we will do in FY24
In addition to our continued focus on pet welfare and ESG risks,
during FY24 we will focus on the development of the refreshed
strategy and the embedding of this across the business in particular:
– Monitor delivery against our net zero targets and how these are
–
–
embedded into the relevant business areas
Agree the strategies and review progress in relation to the
sustainability strategic priority areas of pet food and supplier scope 1
and 2 carbon maturity
Strengthen the sustainability skills and capability across the
business
Introduction and strategic approach
The Committee oversees the governance of our sustainability
strategy. In my fifth year as Chair I am delighted to see the progress
that we have made in the first two years of the ‘Our Better World
Pledge’ strategy and the important step of refreshing it to align with
the updated business strategy.
Our strategic approach to ESG is organised around three pillars of
Planet, Pets and People 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
purpose, to create a better world for pets and the people who
love them.
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 includes the approach to
assessing salient human rights risks across the operations and
supply chains.
Following COP26 in Glasgow in 2021 and the many subsequent
scientific updates, the future of our planet has become a larger
part of the focus of all business’s including Pets at Home. We
recognise the need to not be complacent about our response and
controls around this material topic therefore, climate change and
environmental impact have now been made a standing item at
every ESG Committee and additionally at every Board meeting.
It has been a year of change with Peter Pritchard leaving the
business and Lyssa McGowan becoming the sixth CEO. During this
time 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 chaired by a Director and sponsored
by an Executive Management team member. Our ESG Director and
Sustainability Manager also attend all of these meetings. There has
been an important update to our Pet Welfare Committee which
is now chaired by our Group Veterinary Officer and now reviews
pet welfare governance and strategy from a clinical and retail
perspective.
Strategic Report
Governance
Financial Statements
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, five additional Board members have been selected to
attend the meetings. The CEO (Peter Pritchard for the first meeting
of the year and Lyssa McGowan from the second meeting onwards)
is the Executive member of the Committee. There have been some
changes in executive responsibilities during the year which has
meant that Louise Stonier, Chief People and Culture Officer, joined
the April meeting and from September Lucy Williams, Chief Legal
Officer, attended in her capacity of being the executive member
with ESG responsibility. Amy Whidburn, ESG Director, and Karlien
Heyrman, Head of Pets, attend each Committee meeting.
Highlights
Strategy refresh
–
The first Committee meeting of the year in April 2022 began
with a progress review of the previous financial year. The
Committee reflected that although considerable progress had
been made across many areas, there was a need to develop
some strategic priority areas which would be differentiated from
the core priorities
The September Committee reviewed the strategy refresh
proposal including the timeline and process and the emerging
priority focus areas. The Committee agreed with the emerging
priority focus area around scope 3 and particularly pet food
The February Committee primarily focused on the strategy
refresh. The materiality assessment was reviewed in detail.
The Committee received an update on stakeholder input and
perspectives on this assessment including a series of one to one
meetings with five of our larger shareholders
–
–
TCFD disclosure
–
The Committee reviewed and approved the TCFD disclosure
to be included in the Annual Report and agreed to make
TCFD an agenda item at every ESG Committee for the rest
of the financial year. It was also agreed that ESG risks would
be brought to the Committee as a standing item, this was in
recognition of the benefit of allowing more dedicated time to
review and discuss these risks and report back to the Audit
and Risk Committee. An external audit of our TCFD readiness
was agreed to take place in September 2022, which was then
subsequently reviewed at the Board and the ESG Committee
meetings
Human Rights
–
The second Committee meeting in September 2022 received
the annual update on the Human Rights strategy and progress
along with the review and approval of the annual Modern
Slavery Act statement. An updated supplier code of conduct
was reviewed and approved along with the plans to launch a
consolidated Responsible Sourcing Handbook for suppliers
that contains all relevant policies and supporting guidance in
one document. The Group’s Human Rights specialist provided
a detailed update on ethical audit progress and plans to
resume in-house audits in China when COVID-19 restrictions
allow. China was discussed as an area of concern because it
had been almost three years since physical audits had taken
place and it is the Group’s largest sourcing country outside of
the UK. In recognition of this concern some deep dive audits
had been conducted by an independent third party and the
results of these were discussed. The Committee agreed with
the recommendation to publish our tier 1 retail supply chain, the
number of workers in tier one factories, and gender diversity
ESG risk
–
ESG risks were reviewed at the September and February
Committee meetings. This included a deep dive of three
corporate ESG risks and how TCFD had been successfully
integrated into the corporate risk framework
The Committee reviewed the results of an internal audit on the
controlled drug policy and procedures which is an important
area given the heightened risk in the vet profession
–
Pet welfare
–
Pet welfare is a standing agenda item at every ESG Committee
meeting and the Head of Pets attends every ESG Committee
meeting. In addition to the regular reporting on pet governance,
the Committee received an update regarding the changes to
the Pet Welfare Committee. The Committee is now chaired
by Gudrun Ravetz, Group Veterinary Officer, and the Terms of
Reference (ToR) have been updated. Gudrun gave an update
from the relaunched committee’s first meeting and agreement
to focus advocacy and action on four priority topics: kept
animals bill; nutrition and obesity; behaviour and aversive
training techniques and responsible dog breeding. This is in
addition to the existing focus on pet welfare considerations
relating to our products and services and governance of pets
in our care
The ToR for the ESG Committee were reviewed in the April 2023
meeting. The ToR can be found on the Pets at Home Group
investor website.
Susan Dawson
Chair of the ESG Committee
25 May 2023
51
Pets at Home Group Plc Annual Report & Accounts 2023
TCFD statement
Introduction
Pets at Home recognise the climate emergency poses both risks and opportunities to our strategy and operations. To that end, sustainability
and climate change is featured as a principal risk within our Annual Report (see page 25). We are committed to implementing the TCFD
recommendations, having made voluntary disclosures ahead of the FCA’s mandatory requirements for UK Premium Listed Companies to
report. Pets at Home is required to implement the reporting recommendations of the TCFD (as set out in Listing Rule LR 9.8.6R) for the
accounting period starting on or after 1 January 2021.
In this section, we outline our approach to climate-related risks and opportunities, which our scenario analysis concludes will likely present
over the long-term which we define as between five and 20 years. In the last year we have made significant progress integrating climate-
related risks within our risk management framework and business strategy.
Our disclosures are consistent with the TCFD’s four recommendations, and 10 of its 11 recommended disclosures, in line with the TCFD
‘Guidance for All Sectors’ (LR9.8.6BG). The remaining disclosure for ‘Strategy: Describe the impact of climate-related risks and opportunities
on the organisation’s businesses, strategy, and financial planning’, is partially consistent. We have analysed the risks in the short to medium
term, which we classify as now to five years, and this analysis has been built into the going concern assessment detailed in note 1.3 on page
109 and the goodwill impairment testing detailed in note 13 on page 130. Our quantification of financial impact over the long term (five to 20
years) is work in progress due to the level of uncertainty. We will continue to enhance our financial impact models across the year with a view
to disclosing these in our future reporting. Our ESG materiality review includes climate action and pet food sustainability as material topics
and is referenced in our resilience statement on page 56. In the interest of space we have not included this full materiality assessment in this
statement; it can be found in our standalone sustainability report.
Governance
Disclosure requirement
Description of progress
a) Describe the Board’s
oversight of climate-related
risks and opportunities
The Board led by the Chair, Ian Burke, has ultimate responsibility for sustainability and climate change and ensuring
that the strategy creates mutual value for stakeholders, including colleagues, customers, shareholders, and society.
Oversight of climate change strategy is a matter reserved for the Board, via the ESG Committee.
– The ESG Committee comprises all Non-Executive Directors and the Chief Executive and Chief Financial Officer and
is chaired by a Non-Executive Director. This Committee has a standing climate-change item on every agenda. The
Committee meets at least three times a year and receives a written update at every meeting and an in-depth review
on an annual basis. The regular update includes a review of ESG risks and the status of climate-related projects and
initiatives. The in-depth review includes a progress update against the 2030 and 2040 carbon reduction targets vs
a 2020 base. For example, in April 2023 the Board meeting reviewed the pathways to achieving the long term 2040
carbon reduction goals within the pet food area which represents a large proportion of scope 3 emissions. Scope 1
and 2 emissions are updated in full on an annual basis and the forward forecast is refreshed and discussed.
– In addition, climate change has been made a standing agenda item at every Board meeting since December 2022.
– During the year the Chair has undertaken additional climate related training through the completion of a six-week
training course at the Said Business School on ‘Leading Sustainable Corporations’. Climate-related skills and
experience are included in the skills matrix of the Board of Directors included in the Annual Report on page 41.
The Board provides challenge to the Executive Management Team on progress against the goals and targets of
the climate strategy and ensures the Group has an effective risk management system in place. This is principally
governed via two main Committees: the Audit and Risk Committee and the ESG Committee.
– At the ESG Committee meeting in April 2023 it was agreed that the Board and Executive Management Committee
would receive an externally facilitated immersion session on sustainability and climate change during FY24.
– Oversight and management of climate-related risks and opportunities occur at a number of levels in the
organisation. Chart one below summarises the key forums and members of senior management with responsibility
for climate-related issues. The reporting lines flow up to the Board level band of Committees.
Across FY23, the Board made a series of key decisions relating to our climate-related risks and resilience strategy.
Examples include:
– The review, refinement, and approval of three over-arching climate-related risks and opportunities, following the
conclusion of our TCFD qualitative scenario analysis. This has ensured our climate risks are now fully integrated into
our corporate risk management process.
– As part of our strategic business review, capital has been allocated across a 5-year timescale to enable investments
to further reduce our operational environmental impact and scope 1 and 2 emissions. For example, in our distribution
network, £2.8m of capital was approved to invest in a solar installation and battery storage at our new distribution
centre at Stafford, reducing our dependency on purchased electricity. Additionally, a trial has been approved to
test the use of HVO renewable fuel in our HGV fleet. This would enable us to operate our fleet with a considerably
reduced carbon footprint by removing the use of fossil fuels. Both of these initiatives are key to enabling the
business to achieve a 42% reduction in scope 1 and 2 emissions by 2030 vs a 2020 base.
– The approval of long-term strategic partnerships with Cranswick Group plc. Pet food has been identified as a key
pathway to delivering our long-term carbon reduction targets (see target section page 60). It accounts for a large
proportion of our scope 3 emissions. These long-term partnerships enable collaboration with supplier stakeholders
on carbon reduction projects.
52
Strategic Report
Governance
Financial Statements
Disclosure requirement
Description of progress
b) Describe Management’s
The Chief Executive Officer has overall responsibility for climate change and sustainability topics.
role in assessing/
managing climate-related
risks and opportunities
– The Chief Executive is supported by the ESG Director and Executive management team to develop and implement
the strategy through a number of management committees. Each committee is chaired by a Director. Our Better
World Pledge (OBWP) strategy includes climate strategy as a key pillar. Progress towards delivering this strategy
is discussed and updated at the Executive Management Team meeting on a regular basis and was specifically
discussed three times during FY23.
– Our new remuneration policy links an element of Executive remuneration to sustainability-related objectives,
effective from FY24 and can be found on page 64 of this Annual Report.
As shown in Chart One, the management of climate change projects is the responsibility of three principal committees:
1.
The Climate Change and Waste Committee meets every six weeks and is responsible for developing and
implementing the business strategy relating to operational environmental impact. This includes scope 1 and 2
energy and carbon emissions for buildings, transport logistics, and waste management.
2.
The Responsible Products Committee meets every six weeks and is responsible for developing the strategy for
managing the value chain environmental and ethical impacts of our products. This includes human rights, circularity
and waste, packaging, raw materials, and scope 3 emissions of product ingredients, manufacturing, use and disposal.
3.
The Vet Group OBWP Committee meets every six weeks and is responsible for developing the strategy for vet
specific climate and environmental related risks and opportunities, such as a reduction in anaesthetic gas use.
Each committee is responsible for climate-related idea generation, operational delivery, project management, KPI
development, and progress tracking. Progress is tracked using a project management approach that ladders up to
period reporting to the Executive Management Team and the Board.
Chart One – Pets at Home’s Oversight and Management of climate-related risks and opportunities
Oversight and Management of Climate Related Risks and Opportunities
d
r
a
o
B
t
n
e
m
e
g
a
n
a
M
r
e
h
t
O
Plc Board. Responsible for the overall leadership of the Group including matters of Governance, Reputation, Environmental and
Social Sustainability.
ESG Committee. Reviews and monitors the Group’s
approach to Environmental, Social and Governance topics.
Climate change is a key component of this.
Audit and Risk Committee. Reviews and monitors the
Group’s Risk Management Framework which includes
climate related risks.
Executive Management Team. Responsible for identifying climate related risks within their business function and delivering
the Climate Strategy.
CEO. Accountable
to the Board for the
implementation of the
Climate Strategy.
CFO. Accountable to the
Board for integrating climate
related metrics and targets
into business decision
making and reporting.
ESG Director. Responsible
for Climate Strategy
development and subject
matter expert.
Head of Internal Audit.
Provides objective assurance
to the Board and Audit
and Risk Committee on the
effectiveness of the Risk
Management Framework.
Climate Change and Waste Committee.
Responsible for consideration of climate
related risks and opportunities that impact
our business operations.
Responsible Products Committee.
Responsible for climate related risks
and opportunities that impact our
products and broader supply chains.
Vet Group OBWP Committee.
Specific responsibility for the impact of
climate change on pets and veterinary
care and vet specific topics.
Group Risk Manager and Business Risk Champions. Consider climate related risks and opportunities that impact the operations and
strategic priorities within their relevant business area.
The chart above shows the key committee, forums and individuals with responsibility for climate related matters. All of these committees and
individuals report up to the Board. Escalation procedures are in place to enable responsibilities to be met.
53
Pets at Home Group Plc Annual Report & Accounts 2023
TCFD statement continued
Strategy
Strategic overview and context
This year we updated our business strategy to create a single purpose
for the business, ‘to create a better world for pets and the people who
love them’. Sustainability has been placed at the heart of our role ‘to
build the world’s best pet care platform’. Our sustainability strategy was
refreshed to ensure that we are prioritising actions to make a material
impact and create a commercial advantage. Within the ‘Planet’ pillar
of our sustainability strategy we have provided more focus around the
delivery of our Science Based Targets initiative (‘SBTi’) approved near-
term (2030) and net-zero (2040) emissions reduction targets. We have
created a new goal ‘to make pet care environmentally sustainable’ and
plan to achieve this by prioritising making pet food sustainable, which
is the most important and complex of our carbon reduction pathways.
Making pet care environmentally sustainable is our strategy to manage
and mitigate climate risks and develop climate resilience over the long
term. In addition, we see environmentally sustainable pet care as an
opportunity to be world leading and gain commercial advantage.
In FY22, we conducted a qualitative scenario analysis to review
climate-related impacts. We developed three customised
scenarios, each rooted in prevailing scientific evidence from
the Intergovernmental Panel on Climate Change (IPCC),
the International Energy Agency (IEA) and Principles for Responsible
Investment (PRI) (see: Information box 1), and during a series of internal
workshops reviewed climate-related impacts across our short, medium,
and long-term time horizons (see Information box 2). These time frames
have been selected because of the alignment with our business
process, cycles and strategic goals. The short term time frame aligns
to our business financial forecasting cycle, the medium term aligns
to the strategic planning cycle and the long term aligns to the long
term SBTi approved carbon reduction targets that we have set.
The scenario analysis identified eight high-level risks/opportunities
which were subjected to an initial materiality review and discussed
with the Board. This year we have refined these risks and
opportunities further through analysis and research, resulting in two
being removed because they are not material. We have grouped
the risks into three over-arching categories under which six of the
initial high-level risks now sit: Physical risks, Transition risks and
Sustainable Pet Ownership. The first two sit together under our
Group principal risk of Sustainability and Climate Change, the third
is categorised as an emerging risk. This third risk is monitored via
the Group watch list of emerging and developing threats, where the
timeline, impact or potential mitigation is not yet clear.
These risks and our analysis are summarised in Information box 2.
Information box 1 – a qualitative scenario analysis was conducted in FY22, over a period of three months and was reviewed
and shaped by the Executive Management Team and ESG Committee.
Scenario analysis
coverage
Temperature
alignment of scenario
Parameters and assumptions
Climate-related scenario
Physical and
Transition scenarios
Company-wide
1.5˚C
Physical and
Transition scenarios
Company-wide
2˚C
Physical and
Transition scenarios
Company-wide
3˚C
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. The scenario was developed by incorporating
scenarios which are rooted in prevailing scientific evidence. Specifically:
– Representative Concentration Pathway (RCP) 2.6
– Shared Socioeconomic Pathway (SSP) 1
– PRI Inevitable Policy Response (IPR): 1.5C Required Policy Scenario
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 parts of the world. The scenario was developed by
incorporating scenarios which are rooted in prevailing scientific evidence. Specifically:
– RCP 4.5
– SSP 2
– PRI IPR: Forecast Policy Scenario
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. The scenario was developed by incorporating scenarios
which are rooted in prevailing scientific evidence. Specifically:
– RCP 6.0
– SSP 5
Information box 2
Risk
Physical
Transition
Sustainable Pet Ownership
54
Short-Term 1-3 years Medium-Term 3-5 years
Long-Term 5-20 years
Time frame
Likely
Likely
Likely
Probability:
Impact:
1.5/2°C
Low
Low
Probability:
Moderate
Impact:
Moderate
Probability:
Impact:
Scenario
3°C
Moderate
Moderate
Low
Low
Emerging
Strategic Report
Governance
Financial Statements
The impact of these climate-related risks on our businesses and strategy are further disclosed in the following tables. Over the next year,
we plan to further refine the quantification of these climate-related risks and opportunities over the long term (five to 20 years) in order
to better understand their potential financial impacts. Our initial assessment has identified that in the long term there could be material
financial impacts.
TCFD Strategy Disclosure requirement sections a and b: Description of climate-related risks and opportunities identified and their impact on
business, strategy and financial planning identified.
1. Physical risk – category: Chronic. 3°C scenario
Proximity:
Long term (five to 20 years)
Risk rating before mitigation:
Probability: Moderate
Impact: Low – Moderate
As climate change persists,
we expect these effects to
increase in the long-term
and our broader supply
chains could be vulnerable.
Description of risk:
Cost of repair and/or loss
of revenue from assets and
supply chain disruption.
Extreme weather events
affecting continuity of
own operations, supply of
products and retail sales
(stores, distribution centres,
vet practices) and disrupting
supply chain sourcing
(raw material sourcing and
supplier operations).
Business impact:
Modelling of our UK sites indicates that the
vast majority are not located in areas of
flood risk. While we have observed weather
events increase in severity and frequency
over recent years, operational impacts have
been minor and further incidents in the
short and medium term can be managed
within the framework and cost of existing
controls.
The majority of our pet food is sourced from
the UK. Initial assessment of raw material
and manufacturing exposure to risk of
extreme weather events in the short and
medium term is assessed as low. Further
work is required to understand long-term
impacts on UK farming and raw material
availability.
Our accessories ranges are predominantly
sourced overseas. Initial assessment of raw
material and manufacturing exposure to risk
of extreme weather in the short and medium
term is assessed as low. Further work is
required to understand long-term weather-
related impacts.
2. Transition Risk – categories: Regulatory requirements and Reputation. 1.5°C scenario
Description of risk:
Increase in the cost
of doing business
Operational and value chain
decarbonisation – inability
to efficiently transition our
value chain and products
and services to low carbon
models.
Possible introduction
of more stringent
environmental regulation
has the potential to increase
the cost of production
and operational flexibility,
as carbon costs become
increasingly internalised.
Business impact:
Increased operating costs relating to the
transition to a low carbon economy e.g.,
higher energy costs, changes in production
costs, and direct and indirect carbon
taxation e.g., meat tax on pet food.
Proximity:
Long term (five to 20 years)
Risk rating before mitigation:
Probability: Moderate
Impact: Moderate
Further work is planned
to understand long-term
R&D investment cost,
and its effect on margin,
assuming no action taken
to mitigate risk.
Capital investments relating to uncertainty
and nascent development of low carbon
technology e.g., alternative fuels for
distribution vehicles. Market competition
and unpredictable costs relating to delivery
of our carbon transition plan, particularly in
relation to the availability and demand for
new products and services e.g., high quality
carbon removal opportunities.
Products and services not transitioned
quickly enough to low carbon models to
meet consumer shift in preference to low
meat/no meat pet food and low carbon
accessory products resulting in loss of
revenue and reputational damage.
Risk Management and
mitigation actions:
– Ongoing assessment of climate-related
weather vulnerabilities in relation to our
operations, suppliers and raw materials.
– Monitoring the frequency and severity
of climate-related weather events.
– Regular review of business continuity
plans for the distribution centres.
– Conducting climate risk reviews
proactively ahead of decisions to locate
new operational infrastructure or select
new suppliers.
– Continuing to strengthen our long-
standing relationships with key
suppliers and freight partners.
– Maintaining sourcing location
flexibility, across the medium to long
term, to switch supply lines away
from areas of emerging risk, including
review of weather-related risk when
new sourcing locations are being
considered.
Risk Management and
mitigation actions:
– Business case – capital allocation to
invest in operational infrastructure to
reduce operational carbon, such as
securing low carbon energy resilience.
– Long term supplier partnerships to
enable collaboration and investment in
innovative R&D solutions.
– R&D investment to develop the market
for animal-meat alternatives. Also an
opportunity to become the market
leader in alternative pet food protein
for consumers, a potential revenue
opportunity.
– Pet food strategy - mitigation of meat
protein tax could include pass on to
customers to enable switching to lower
carbon options.
– Supplier engagement underway to
decarbonise supply chain.
– Investing in renewable energy
generation to reduce cost exposure
to carbon pricing.
55
Pets at Home Group Plc Annual Report & Accounts 2023
TCFD statement continued
3. Sustainable Pet Ownership – Category: Market. 3°C scenario
Business impact:
The implicit and explicit price of carbon
drives up prices and general living costs
are squeezed. At the same time pet
ownership becomes socially unacceptable
as consumers seek to reduce their
environmental impact and pets are seen as
a luxury and climate burden. In this scenario,
pet numbers fall as fewer consumers opt for
pet ownership.
Expanding products and services marketed
as environmentally sustainable drives
revenue and market share, as consumers
switch to sustainable brands.
Description of risk/
opportunity:
Emerging
Pet ownership – changes
in pet ownership, over
the long-term driven by
potential cost increases
of pet care, due to the
manifestation of physical
and transitional risks.
Changes in consumer
attitudes to pet ownership,
where owning a pet may be
viewed as irresponsible in a
warming world.
Counter balancing these is
the opportunity of increased
customer revenue and
market share from Pets at
Home leading the market for
environmentally sustainable
pet care, in a warming world.
Proximity:
Long term (5 to 20 years)
Risk Management and
mitigation actions:
Risk rating before
mitigating action:
Probability: Very Low
Impact: Moderate
Pet ownership has historically
been resilient to economic
and social factors, this seems
unlikely to change over the
next 10 years. Market insight
on pet ownership and trends
offers early signals to changes.
Our experience suggests these
will be gradual over time.
This risk is monitored via the
Group watch list of emerging
risks, where the timeline,
impact or potential mitigation is
not yet clear.
Our strategy is to make pet care
environmentally sustainable, thereby
neutralising potential consumer
concerns that pet ownership is socially
unacceptable.
– Strategic investment in priority
areas such as pet food to identify
lower carbon ingredients and
manufacturing processes that meet
consumer expectations.
– Ongoing long-term monitoring of
consumer and societal attitudes to
pet ownership.
– Regular monitoring of consumer
and market trends to identify
shifts in behaviour to which we
can respond.
– Frequent planned range reviews
to respond to change in consumer
preferences.
– Championing the benefits that pets
bring to our lives, e.g., enhanced
wellbeing via consolidation of
existing research.
TCFD Strategy disclosure requirement section c: Describe the resilience of your strategy, taking into consideration different
climate related scenarios, including a 2°C or lower scenario
The scenario planning work was conducted using three different warming scenarios. These have been used to develop the impact on our
identified physical, transitional and emerging risks and this has then informed our strategic response to ensure that we are developing a
resilient strategy. Our sustainability strategy ‘Our Better World Pledge’ has been refreshed during FY23 which has enabled this latest work
on risk at different warming scenarios to be a key consideration in developing our response. The key element of this strategy update has
been the prioritisation of our scope 3 emissions, and within that, pet food as the largest impact area and a non-discretionary purchase for
pet owners. Our materiality assessment identified sustainable pet food and climate action among the top sustainability topics to address.
Our strategic response to the physical risks following our analysis focuses on monitoring. Our UK based operations present a lower risk and
our supply chain locations remain flexible in the long term which provides resilience to the most extreme (3°C) scenario. Within the supply
chain the majority our pet food suppliers are UK based and this remains our strategy.
The impacts of a lower warming scenario (1.5°C) on our transitionary risks are higher as more change and investment would have been
required to enable the temperature increases to be contained at lower levels. Our strategic response is to ensure a smooth transition as
we work with our suppliers to decarbonise supply chains and products and as we invest in areas of technological potential to support the
long-term transition (such as lab grown meat). Strategic resilience will be ensured through working consistently towards the long term goals
often before our customers are demanding them. We have been investing in our operational decarbonisation for many years, purchasing
renewable energy since 2017 and investing in LEDs and buildings’ energy management systems. As we make new investments our strategy is
to consider how we can do this in a carbon efficient way, for example our new DC in Stafford does not use natural gas and we are investing in
solar and battery storage.
Our emerging risk around pet ownership could present in any of the different warming scenarios. Our strategy of making pet ownership
sustainable is relevant and builds resilience through reducing the impact of owning pets and reducing the likelihood of pet ownership as
being viewed as a luxury. Equally our strategy of celebrating the benefits that pets bring to our lives builds resilience by demonstrating
value creation.
We will continue to review our strategic approach to ensure it aligns to the prevailing scientific advice and best practice. Over the next year,
we will further develop the quantification of these climate-related risks and opportunities on our business, strategy and financial planning
over the long term (5 to 20 years) to enhance further the resilience of our strategy.
56
Strategic Report
Governance
Financial Statements
Risk Management
Disclosure requirement
Description/progress
a) Describe the processes for
identifying and assessing
climate-related risks.
b) Describe the processes for
managing climate-related
risks.
The initial process for identifying climate risks for TCFD took place through a series of scenario planning workshops.
These included detailed horizon scanning briefings and then consideration of the implication through the eyes of the
key stakeholders of the business (pet, customer, vet, store manager, supplier) in three different global warming scenarios
(see information box 1). This led to the 8 high level risks and opportunities to be created. This process and its outcomes were
reviewed by the Executive Management team and the ESG Committee. These 8 high level risks and opportunities have
been refined and consolidated into the three ESG risks that sit under the principal risk of sustainability and climate change.
On an ongoing basis risks are identified through the risk management system. At a business level this happens using the
risk champions who include ESG risks as part of their risk assessment for their respective areas of the business. Additionally
the climate change, responsible products and vet group committees are responsible for identifying climate change risks.
On an annual basis overall ESG materiality assessment is reviewed, and this includes detailed consideration of established
and emerging topics that are relevant to climate change. At this annual review the ESG Committee also reviews existing and
emerging regulatory requirements related to climate change. On a three yearly basis this materiality review becomes a deep
dive exercise where external stakeholder feedback is gathered to horizon scan topics and review assessment of importance.
These risks are assessed using the corporate standardised risk scoring methodology which includes measurement of
likelihood, impact, and proximity. This produces a gross risk score before mitigating actions. This aids the escalation
and consolidation of risks into a Group-wide view. See the risk framework on page 23 of this Annual Report.
The climate related risks are managed using our corporate risk management framework. Each risk has a gross, net score,
and a target score where the risk is not within appetite. Mitigating actions are then monitored for expected remediation
of the risk and progress towards the target score. This mitigation strategy assigns owners and timescales to each
action. Progress against the strategy is updated and reported to the executive management team and the Audit and
Risk Committee four times a year. In addition, our climate risks, along with other ESG risks, are reviewed at each ESG
Committee, which meets at least three times a year.
Examples of risk mitigation and management exercised for Transition risks include engaging suppliers to commit
to having carbon reduction plans in place by 2027. Also, investing in solar at our Stafford Distribution Centre and
continuing to invest in renewable electricity.
c) Describe how processes for
identifying, assessing, and
managing climate-related
risks are integrated into
overall risk management.
Chart two demonstrates how Pets at Home’s climate-related risks are fully integrated into our overall risk management
approach. Climate related risks are identified, assessed, and managed through the corporate risk management
approach which classifies risks as business, corporate or principal risks. Our ability to identify, assess and effectively
manage current and emerging risks is critical in ensuring the continued success of our business.
Chart Two - climate-related risks are fully integrated into our overall risk management approach
Risk Management Framework
The Group’s
emerging risks are
assessed and agreed
by the Executive
Management Team
and the Board. A
watch list of emerging
and developing
threats is maintained,
and these flow into
our risk framework at
the appropriate level
for each risk.
Principal
Risks
Corporate Risks
Business Risks
Principal Risks
• Risks that could threaten our business model, future
performance, solvency or liquidity.
• Material climate related risks are captured under the
principal risk Climate Change and Sustainability.
• Reported in the Annual Report and Sustainability Report.
Corporate Risks
• Risks that are promoted from a business level risk
register as they sit near to or above the appetite
level set by the Board.
• Owned by an Executive Director, ESG corporate risks
being owned by the Chief Executive Officer.
• Reported in detail to the Executive Management Team,
the Board and A&R Committee 4 x a year.
Business Risks
• Risks that are identified and managed at a business unit,
strategic project or function level.
• The ESG function has its own risk register.
• The ESG Director owns and manages climate related
risks and implementation of mitigating actions.
• Grouping of climate related risks in Group wide risk
management system for reporting to ESG function.
57
Pets at Home Group Plc Annual Report & Accounts 2023
TCFD statement continued
Metrics and Targets
Disclosure requirement
Description/progress
a) Disclose the metrics used
to assess climate-related
risks and opportunities in
line with its strategy and
risk management process.
These metrics are used to monitor our performance in managing and assessing climate-related risks and opportunity
identified in the Strategy section.
Physical risks
– Mapping and tracking weather sensitivity for UK key infrastructure locations. Mapping to weather sensitivity
completed.
– Mapping and tracking Supply Chain locations for tier 1. Mapping location of tier one own brand factories, disclosed on
our corporate website.
– Tracking of extreme climate related weather events and impacts in operations and supply chains. This is a new area
and we are considering how we can track starting with our operations the actual financial impact of severe weather
events (lost business and repair costs).
Transition risks
– Monitoring the percentage of suppliers with scope 1 and 2 carbon reduction plans in place. New metric, progress will
be disclosed in FY24 reporting.
– Monitoring the proportion of own brand pet food range with carbon footprinting completed. New metric, progress will
be disclosed in FY24 reporting.
Sustainable Pet Ownership an emerging risk
– Ongoing long-term monitoring of consumer and societal attitudes to pet ownership.
– Regular monitoring of consumer and market trends to identify shifts in behaviour to which we can respond.
In addition, Pets at Home reports using the SASB methodology. We complete the CDP climate change disclosure on an
annual basis, our latest disclosure achieved an overall score of ‘B’.
b) Disclose scope 1, scope
2, and, if appropriate,
scope 3 greenhouse gas
(GHG) emissions, and the
related risks.
Pets at Home has measured and disclosed our scope 1 and 2 CO2e emissions since FY14. These emissions (including
both location-based and market-based) are externally assured on an annual basis. Trend data from FY16 is updated and
reported annually in our sustainability report. We measured our scope 3 baseline, in order to set net zero targets, and this
has been validated by the Science Based Targets initiative. During FY24 we will begin the work to include Forest, Land
and Agriculture emissions in our scope 3 baseline, in line with SBTi’s FLAG requirement.
Operational (scope 1 and 2) performance
During the year we have continued to invest in energy reducing initiatives. We have run an education campaign with
colleagues to further reduce our use of energy in our buildings. All of our forklifts at our DCs are now electric. We have
moved our company car fleet list to a low carbon selection and 75% of our company cars are now either EV or hybrid.
Our absolute carbon used has reduced by 4.3%. Our intensity-based performance has continued to improve year/year at
17.2 Tonnes CO2e relative to £1,404m revenue.
Our scope 1 emissions reduction of 2.2% has been caused by the removal of red diesel from our business which has
offset the increase in diesel emissions of 5.4% as our business has grown, and our network reconfiguration as we ramp up
operations at our new national distribution centre in Stafford and transition from our current operation from multiple sites.
From an efficiency perspective our km/l has remained broadly flat at 2.97 in FY23 vs 2.94 in FY22.
Our scope 2 emissions have shown a slight improvement of 6.2% benefiting from the de-carbonisation of the national grid.
The element of our scope 3 emissions which we report within our operational footprint, included in table 3, have
increased by 7.4%. This is a small part of our total scope 3 emissions that are reported in more detail on page 60.
Our performance over the longer term continues to demonstrate the importance of carbon reduction to our business.
Since 2016 our revenue has grown by 80.2% and our absolute emissions have reduced by 41.5% as shown in table 1.
58
Strategic Report
Governance
Financial Statements
Carbon reporting summary
Table 1: Scope 1 & 2 carbon emissions eight year performance tonnes CO2e emissions
Emissions
Scope 1
FY16
9,498
FY17
9,619
Tonnes CO2e emissions
FY18
FY19
FY20
FY21
FY22
FY23
FY23 vs FY16
9,649
8,431
12,085
11,337
11,968
11,709
Scope 2 (location based)
31,680
28,840
21,584
17,066
15,133
13,616
13,200
12,386
Total
% change
41,178
38,459
31,233
25,497
27,218
24,953
25,168
24,095
-7%
-19%
-18%
7%
-8%
1%
-4%
23.3%
-62.1%
-41.5%
Group
Revenue
£m
% change
779
834
7.1%
899
7.8%
961
6.9%
1,059
10.2%
1,143
7.9%
1,318
1,404
80.2%
15.3%
6.6%
Normalisation/Intensity
52.9
46.1
35.1
26.5
25.7
21.8
19.1
17.2
-67.5%
% change
-13.0%
-25.0%
-24.0%
-3.0%
-15.0%
-12.5%
-10.0%
Normalisation: Intensity calculated using Group revenue and location based scope 1 & 2 emissions. Exclusions: Anaesthetics &Fugitive emissions are included from year FY20 onwards.
Intensity has been calculated using Group revenue and location based scope 1 and 2 emissions
Table 2: Carbon emissions summary by Scope 2021/22/23
2020/21
(scope 2 location-based)
2021/22
(scope 2 location-based)
2022/23
(scope 2 location-based)
2022/23
(scope 2 market-based)
Tonnes CO2e emissions
Scope 1
Scope 2
Scope 3 (see additional inclusions)
Total
11,337
13,616
4,697
29,650
11,968
13,200
4,954*
30,122
Inclusion of 1,500 tonnes of carbon mitigation
Scope 1 and Scope 2 kWh
90,400,963
96,425,923
Normalisation of CO2e scope 1 & 2 to £m revenue
21.8
19.1
11,709
12,386
5,319
29,414
27,914
96,138,431
17.2
11,709
0
5,319
17,028
15,528
Methodology: We have applied UK SECR and WBCSD/WRI Greenhouse Gas Protocol Corporate Standard as our methodology. We have used emissions factors from UK Government 2022
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 2021/22.
Additional inclusions: We have included the emissions from our standalone vet practices and some elements of our scope 3 emissions where we have greater operational oversight
(3rd party business travel, 3rd party logistics and distribution and electricity transmission and distribution losses).
Exclusions: Only anaesthetics sourced from preferred Pets at Home suppliers has been included in the calculation.
Exclusions: Train and air journeys are not reported, as no accurate carbon intensity data was available. This will be worked on in FY24 to ensure inclusion going forward.
Estimation: Where this year’s data was not available 1.9% of sites used last year’s consumption data.
Independent verification: Our 2022/23 scope 1, 2 and some scope 3 emissions (3rd party business travel, 3rd party logistics and distribution and electricity transmission and distribution
losses) Please refer to page 42 of the sustainability report for their assurance statement.
Market-based criteria: Since October 2017 we have procured 100% renewable electricity backed by REGOs and assessed for conformance with GHG Protocol scope 2 Quality Criteria.
An emission factor of zero has therefore been applied since that date to calculate our scope 2 market-based figure, whilst a location-based factor was used to calculate scope 3 emissions
from transmission and distribution losses.
Carbon mitigation: Pets at Home Ltd is donating £45,000 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 1,500 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 6,400 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.
Restatements: Absolute scope 3 greenhouse gas emissions (tCO2e) have been restated for FY22 from 5453 to 4954 due to an incorrect emissions factor being used in FY22 for 3rd party
diesel fuel. Greenhouse gas emissions from natural gas were incorrectly allocated to scope 1 emissions in FY22 therefore 590 tC02e has been moved from scope 1 to scope 2. This does not
affect the total absolute greenhouse gas emissions and has not bee restated for years before FY22.
59
Pets at Home Group Plc Annual Report & Accounts 2023
TCFD statement continued
Disclosure requirement
Description/progress
b) Disclose scope 1, scope 2,
and, if appropriate, scope
3 greenhouse gas (GHG)
emissions, and the related
risks continued
Value chain (scope 3) emissions Tonnes CO2e
Our scope 3 assessment and SBTi target setting approach demonstrated that like most retail-based businesses the
largest part of our impact comes through our products being made, used and disposed of. We completed an original
assessment in FY20 and updated this in FY21. This assessment was reviewed as part of our SBTi target setting approval
process. Following SBTi guidelines, this scope 3 assessment includes the relevant GHG protocol categories which is why
it is bigger than the limited scope 3 categories included in table 2 on page 59. We have not reassessed our scope 3 base
since then, instead prioritising our resources to our carbon reduction activities that the assessments helped to identify.
c)
Describe the targets used
to manage climate-related
risks and opportunities
and performance
against targets.
l Scope 1
11.7k t CO2e
l Scope 2
12.4k t CO2e
l Scope 3 885k t CO2e
Tonnes CO2e location based FY23 scope 1 and 2 data, scope 3 assessment FY21
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.
– Near-term: Pets at Home commits to reduce absolute scope 1 and 2 GHG emissions 42% by FY30 from a 2020
base year.
– 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 FY30 from a 2020 base year.
– Long-term: Pets at Home Group commits to reduce absolute scope 1 and 2 GHG emissions 90% by FY40 from a 2020
base year. Pets at Home Group also commits to reduce scope 3 GHG emissions 90% within the same time frame.
These targets have been approved by the Science Based Targets initiative. Actions and progress to achieve these targets
are reported in our Sustainability Report on page 16.
Related Targets:
– By 2028 all priority suppliers to have carbon reduction plans in place and 50% to have achieved leadership status.
This is a new target and progress will be updated in FY24 reporting.
– By 2028 all priority own brand food products to be carbon footprinted. This is a new target and progress will be
updated in FY24 reporting.
– By 2028 all priority raw materials to be sustainable and packaging recyclable. These are existing targets and our
reporting can be seen on page 18 of our standalone sustainability report.
– By 2028 create, protect and restore 15k acres of UK native woodland (2020 base). This is an existing target and our
reporting can be seen on page 15 of our standalone sustainability report.
We also identify other opportunities to align our targets to climate reduction goals. For example, our revolving credit
facility with HSBC acting as sustainability coordinator, agreed in March 2022, is linked to sustainability targets. The Group
now has financial incentives (or penalties) to accelerate our work on pets, people and planet through targets focused on
carbon reduction, supporting pets in need and community action. Our performance against our sustainability linked loan
can be seen on page 4 in the standalone Sustainability Report.
Our new remuneration policy links an element of Executive remuneration to sustainability objectives, effective from FY24.
Read more on page 64
of the Annual Report.
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Governance
Financial Statements
Directors’ Remuneration Report
Business Performance
FY23 was a year of significant financial challenge due to the
turbulent economic backdrop, which impacted energy prices,
FX costs, freight, and inflation. Despite this, we will exit FY23 with
underlying PBT1 of £136.4m (vs. £130.1m (53 weeks) in FY22), having
grown sales ahead of the market, and with more customers than
ever before. We have also made notable steps forward in our
strategic initiatives, including the first despatches from our Stafford
DC and the launch of our new digital app, with record investments
into our strategic capabilities in FY23.
Highlights Include:
–
The UK pet care market remains in growth, and our scale and
reach continue to drive share gains. In the past year we gained
further share to 24%, taking 5-year gains to 600bps.
– We continued to welcome new customers to the platform,
–
growing our VIP club to 7.7m active members (+5%) averaging
over 24,000 Puppy & Kitten sign-ups a week and with 8,500
new vet clients a week.
Total Group revenue growth of 6.6% to £1,404.2m, with
Group like-for-like1 (LFL) revenue up 7.9%, with quarterly LFL
accelerating sequentially throughout the year.
– Vet Group revenue increased by 13.3%, with LFL1 revenue up
13.4%. Across our general practices we are now consistently
delivering in excess of £10m consumer revenue1 per week.
Retail revenue growth of 5.9%, and LFL1 growth of 7.5%. All
channels remain in growth, and we delivered further progress
in our relative price competitiveness.
–
– Group free cash flow1 up 3.5% to £98.2m reflecting YoY
underlying profit growth offset by our planned increased
investment into our key strategic growth areas.
– Our new DC is now onstream, underpinning capacity needs
beyond the next decade and will materially reduce our cost to
serve. Deliveries to our store network are underway and we will
look to move to one DC from three by Spring 2024, improving
fulfilment costs, consumer experience and efficiency.
– Continued progress in the development of our digital platform,
with Q3 seeing the launch of an enhanced mobile app bringing
together VIP and shopping in one easy to use experience.
Shareholder Experience
–
–
Overall, the shareholder experience in FY23 was positive.
The share price has moved to £3.61 on the 30 March 2023 with
a 12 month high of £3.93 recorded on 27 February 2023.
Reported results have been towards the upper end of market
expectations, particularly in terms of revenue, and as a result we
upgraded our full year profit guidance alongside our Q3 results
in January.
Despite the strong performance our overall share price reaction
has been fairly muted and influenced by the macro-economic
climate all businesses across the UK are facing.
The interim dividend was increased by 5% to 4.5p and a £50m
share buyback programme completed.
The final dividend per share of 8.3p, an increase of 11% YoY.
Full year dividend per share of 12.8p, an increase of 8% YoY.
–
–
–
–
Sharon Flood
Chair of the Remuneration Committee
Who is on the Remuneration Committee?
Member
Period from
To
Dennis Millard
1 April 2022
14 February 2023
Sharon Flood (Chair)
1 April 2022
Prof Susan Dawson
1 April 2022
Zarin Patel
1 April 2022
30 March 2023
30 March 2023
30 March 2023
Roger Burnley
14 February 2023
30 March 2023
Meetings
attended
4/4
5/5
5/5
5/5
1/1
Introduction
On behalf of the Remuneration Committee (Committee), I am pleased
to present our Directors’ Remuneration Report (DRR) for FY23.
FY23: Looking back
Overview
Our performance over the past year has been strong, in what
remains a challenging macro-environment. Our business, and the
wider industry, remains in growth across all channels, demonstrating
the resilience of the pet care category and the strength of our
unique model. We have supported our colleagues and provided
lifelines to our local communities throughout the cost of living
challenges while delivering strong returns for our investors and an
enhanced proposition for our customers.
1 Alternative Performance Measure (APMs) are defined and reconciled to IFRS information, where possible, on page 169.
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Directors’ Remuneration Report continued
Colleague Hardship Fund:
– We awarded over £283,000 in grants to colleagues through the
Colleague Hardship Fund supporting our colleagues through
periods of unexpected financial difficulties.
Wellbeing:
– We closed our stores on Boxing Day to give all our retail store
and grooming colleagues an invaluable two-day break.
– We invested nearly £100,000 in Mental Health First Aid training
and Manager’s Mental Health training across the business.
A further 207 colleagues were trained in Mental Health First
Aid this year, Over 80% of our veterinary practices have one
Mental Health First Aid trained colleague per practice providing
vital support to colleagues. We also brought our total number
of managers who received Manager’s Mental Health training
to 425.
Recognition:
– We have awarded £280,000 to colleagues through our various
recognition schemes across the business.
Supporting colleagues through the cost-of-living challenges:
– Resources: We developed our online digital Benefits and
Recognition platform which is available 24/7 creating a section
called ‘Money’. Colleagues could access a plethora of tools,
tips, advice, resource and support, including hundreds of
shopping discounts, budget calculators, Cycle2Work schemes,
financial aid and grants, access to our Colleague Hardship Fund,
simplifying the government support into small digestible chunks.
The support was easy to read and understand. Colleagues
felt less overwhelmed meaning anyone needing support knew
where to go and how to get it, supporting colleagues at a time
when they need it most.
Education: We wanted colleagues to realise the true value from
all of our benefits, support and discounts, which led us to invest
in financial education, hosting a ‘cost of living and all things
money’ live and interactive Q&A session with a financial expert
to engage colleagues with simple steps to improving their
financial position.
Savings and Discounts: By offering discounts and savings
through our online benefits platform, in FY23 colleagues have
saved a collective £162,000 on their everyday shopping. We
also increased our colleague discount to 30% for our own
branded products.
Loans: For those colleagues wanting to borrow money, we
partnered with Salary Finance to support our colleagues to
borrow in a sustainable way. Introducing affordable loans
and debt consolidation with realistic, fair and manageable
repayment plans.
–
–
–
Supporting our customers
–
Throughout FY23 we constantly reviewed our price position
vs. key competitors to ensure that the output of any pricing
decisions we make as a response to cost price increases does
not jeopardise our commitment to our pricing principles around
maintaining a fair price index differential to our key competitors.
The Nutrition Campaign, ‘Food for Less, Advice for Free’, focuses
on supporting customers through the cost-of-living challenges
to select the right, affordable food for their pet, no matter what
their budget.
The new Pets at Home app brings together VIP and shopping in
one easy to use experience.
Introduction of Pet Care Expert Live video call for customers to
speak to Experts in-store.
Launched a new trial of the capability to offer customers
nutrition subscriptions in-store.
Introduced a new digital tool in our Vet Group to enable quick
and easy appointment booking, payment, and communication
between practice and client, removing friction from the
consumer experience.
–
–
–
–
–
Supporting our colleagues
–
We continue to invest in, and focus our attention, on short,
medium and long term financial resilience combined with
financial education and wellbeing.
Investment in base pay:
–
–
–
The average increase in base pay for our colleagues was 9.4%
(wider workforce).
81.7% of our hourly paid store and grooming colleagues were
paid the 2022/2023 Real Living Wage or more by investing in
our earn as you learn pay structure and rewarding training.
We awarded an out of cycle pay increase in addition to our
annual pay review for our hourly paid store, grooming and
Distribution Centre colleagues.
In April 2023 we increased our hourly store and grooming pay
rates to a starting rate of £10.60 (+10.4% vs April 2022).
– Colleagues can now earn 30p more than the Real Living
–
Wage on completion of the first step of their training which is
achievable after three months.
– Within Support Office, we awarded higher increases to our
colleagues below senior management levels.
Colleague bonus:
–
All colleagues will be awarded their usual annual bonus in
respect of FY23 in line with the usual timeline.
Colleague share ownership:
– We continued our investment in colleague share ownership
awarding 10,300 colleagues an award of free shares and we
continued to offer our Sharesave scheme at a 20% discounted
option price.
– Over 4,500 colleagues received access to awards which vested
under our free share scheme and our Sharesave scheme
creating greater colleague share ownership, supporting their
medium to longer term financial resilience.
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Financial Statements
Supporting our communities
–
2,009 colleagues have completed a Better World Pledge Day
in FY23, donating over 11,000 hours to support Pets, People or
Planet.
£100,000 was donated to help individuals, families, and
communities caught up in the Turkey-Syria earthquake crisis.
Over £2,000,000 was raised through our Santa Paws appeal,
the biggest fundraising appeal in aid of the Pets at Home
Foundation.
Launched a nationwide Pet Food Bank service with Blue Cross.
£2,900,000 granted to pet rescue and rehoming organisations
through the Pets at Home Foundation.
Over £283,000 paid to our colleagues in FY23 through the
Colleague Hardship Fund.
Through our Colleague Appreciation Day initiative, 1,100
colleagues donated their celebration for a tree to be planted
on their behalf with the Woodland Trust (£5,500),
1,000 colleagues donated their £5 celebration to food banks
(£5,000), and 400 colleagues donated to the Pets at Home
Foundation (£2,000).
–
–
–
–
–
–
–
Directors’ remuneration in respect of FY23
FY23 was the third and final year of our current Remuneration
Policy, approved by shareholders in 2020. In the light of the context
set out above, the Committee made the following decisions in
respect of Executive Pay.
Base Salary:
The CEO and CFO received a standard increase of 3.5% in line with
the increase awarded to all senior management colleagues which was
substantially less than the wider workforce increase of an average
of 9.4% throughout FY23. Salary increases in respect of FY23 were
effective from 14 October 2022 (day 1 of our first period after our half
year point, P8).
In FY23 we committed to carrying out a benchmarking exercise
for the Non-Executive member fees. The benchmarking exercise
revealed that our fees were behind the market benchmark and in
light of these fees having never been increased since they were set
in 2014, it was agreed to increase the Non-Executive Director fee,
Committee Chair fee and Board Chair fee by 6.6%, being the known
wider workforce average increase at the time of review. The Senior
Independent Director fee remains competitive and therefore no
adjustment was made.
Pension:
There were no changes to the Executive pension contribution in
FY23. Executive Directors already receive a pension contribution
capped at the rate provided to the majority of colleagues in central
support office functions. Currently this is up to 6.5% of base salary
and consistent with workforce rates at other retailers. The company
continues to actively target an increase in the rate available to all
other colleagues by at least 0.5% per year.
Annual Bonus:
The Executive Directors were assessed against Group underlying
Profit Before Tax (PBT) (65%), Group Free Cash Flow (FCF) (25%),
Pet Care Plans (10%) 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.
In light of business and stakeholder context set out above, the
Committee was comfortable that the formulaic outcome set
out immediately below was fair and appropriate therefore no
adjustments were made and no discretion was exercised in relation
to that outcome. FY23 bonuses 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 underlying PBT target range was set between £130.7m and
£140.7m. Actual underlying PBT was £136.4m and achieved a
bonus target of trigger 3.3, 66%.
The Group Free Cash Flow target range was set between
£74.2m and £82.2m and the actual Free Cash Flow was £98.2m,
in excess of the maximum target.
The Pet Care Plans target range was set between 1.54m and
1.61m net plans. The actual number of net Pet Care Plans
achieved was 1.60m, bonus trigger 4.80%.
The bonus outcome was therefore £710,286 for the CEO,
which represents 71% of bonus max (pro-rated by length of
employment), and £474,301 for the CFO, which represented
76% of the bonus maximum.
Restricted Stock Plans:
The TSR financial underpin was met and the Committee was also
comfortable that having assessed these awards for any windfall
gains on both vest and grant of the 2020 RSP awards, that no
discount should be applied and therefore the Executive Directors’
awards will vest 100% in May 2023 and will be subject to the 2 year
post vest holding period. The annual RSP awards were also granted
to all eligible colleagues, including the Executive Directors, in May
2022 under the usual terms.
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Directors’ Remuneration Report continued
Directors’ remuneration in respect of FY24
Base Salary
The usual annual pay review will take place for the Executive
Management Team in September 2023. 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 considering
the salary increases in the context of the broader colleague
population and business performance.
Pension
No changes proposed for FY24.
Annual Bonus
The maximum bonus opportunity will continue to be 170% of
salary for the CEO and 150% of salary for the CFO with one-third
of any bonus paid being deferred in shares for two years in line
with the bonus deferral policy. The Executive Directors’ annual
bonus will be based on Group PBT (65%), Group FCF (25%) and
sustainability measures (10%), underpinned by a mandatory Better
World Pledge Day (BWPD) supporting Pets, People and our Planet.
The sustainability measures combined with the BWPD will together
support the various pillars of our ESG Strategy which focus on Pets,
People and our Planet.
Restricted Stock Plans
Awards granted during FY24 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 underpin which will take into account share price
performance as well as financial and strategic performance with
a three-year vesting schedule and two-year post vesting holding
period as set out in the Remuneration Policy. The Committee
considered the shareholder experience when determining award
levels. As recent share price performance has been positive, it was
judged that no reduction to the normal grant level was required.
Closing remarks
We hope that you find this report helpful and we would welcome
any feedback or comments on this report. We look forward to
your support of the resolutions for approval of by binding vote
at the Company’s AGM on 6 July 2023 for our new Directors’
Remuneration Policy and by advisory vote for our Directors’
Remuneration Report which sets out how we have applied our
existing policy during FY23.
Finally, I would like to highlight that this will be my last report as
Chair of the Committee. Having served in the role since July 2017,
I will be resigning from the role and stepping down from the Board
following our AGM on 6 July 2023. I am delighted to hand over to
Susan Dawson who will be succeeding me in the role and I would
like to wish Susan every success in the future in her new role.
Sharon Flood
Chair of the Remuneration Committee
25 May 2023
FY24: Looking forward
Remuneration Policy
We have undertaken a thorough and detailed review of our existing
policy to assess whether it remains appropriate and relevant in
the context of our strategic plan and business goals set against a
changing macro-economic environment. The Committee concluded
that the Policy remains appropriate in respect of salary, annual
bonus and benefits provided to Executive Directors, and there
are no changes proposed in respect of these elements. There are,
however, a few minor amendments to our Policy to ensure our Policy
remains in line with best practice and current governance.
–
The key areas within the Policy to be amended, subject to
Shareholder approval at the 6 July 2023 AGM are:
– No changes are proposed to the base pay, pension, annual
bonus or Restricted Stock Plan awards (RSP): The annual
bonus will remain at 170% of salary for the CEO and 150% for the
CFO and the RSP level will remain at 100% of salary for the CEO
and 75% of salary for the CFO. Executive Directors will continue
to receive a pension contribution capped at 6.5% of base salary.
For RSP awards made under new policy the RSP underpin will
be judgement-based allowing the Committee to take a broader
range of considerations into account when determining vesting.
Pets at Home was an early adopter of an RSP six years ago and
at that time, a TSR underpin was deemed appropriate following
shareholder feedback. Market practice has since evolved and
a judgement-based assessment aligns Pets at Home with
the majority of other businesses using RSPs. A judgement-
based underpin will allow the Committee to continue to take
share price performance into account in addition to business,
individual and wider company performance during the vesting
period.
A post-cessation shareholding guideline was introduced in the
previous policy and required Executive Directors to retain the
lower of 2x salary (or their actual shareholding) for 1 year and 1x
salary for 2 years. New policy will fully align with the Investment
Association guidelines of the lower of 2x salary or their actual
shareholding for 2 years post cessation, starting with shares
awarded from the start of FY24 onwards.
–
The Committee acknowledges the importance of ESG targets for
shareholders, particularly environmental carbon emissions, and the
Board is close to finalising its sustainability strategy. As RSPs are not
designed to incorporate performance conditions, it is intended that
ESG performance targets will be included in the Company’s annual
bonus scheme when the Committee is confident that relevant and
measurable ESG targets can be set.
The Committee has carried out a consultation exercise with
our major shareholders on both the proposed changes to our
remuneration policy as well as the performance of the business.
At our AGM on 6 July 2023 we will be asking shareholders to pass
resolutions to approve our new Directors’ Remuneration Policy
and our FY23 Directors’ Remuneration Report. Further details of
the consultations on remuneration and the new policy are in the
Directors’ Remuneration Report on pages 65 to 75.
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Financial Statements
Our Directors’ Remuneration Policy
The Committee considered a range of materials when undertaking
the policy review including:
–
Feedback following interviews with many key internal
stakeholders (including Executive and Non-Executive Directors,
People Team, Reward and other management team members)
as well as feedback obtained from our colleague listening
programme, further details on which can be found at page 75;
Consultations with investors received prior to the 2023 AGM;
Proxy agency reports on our FY23 DRR;
The feedback received from Director engagement with our
largest shareholders and their proxy advisors undertaken
between March to July on the potential changes in our policy;
Company performance over the policy review period;
Recent governance updates and best practices;
The total pay opportunity in comparison to highly relevant
external market benchmarks;
The experience of our colleagues, shareholders and wider
stakeholders.
–
–
–
–
–
–
–
a) Introduction
The Committee presents our Directors’ Remuneration Policy
(the Policy) which 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 is to be approved by shareholders at the Annual
General Meeting on 6 July 2023 and becomes effective on the date
it is approved.
The Policy explains the purpose and principles underlying the
structure of remuneration packages and how the Policy links
remuneration to the achievement of sustained high performance
and long-term value creation.
Overall remuneration is structured and set at levels to enable us to
recruit and retain high calibre colleagues necessary for business
success, whilst ensuring that our reward structure and performance
measures are aligned to the strategy and are simple to communicate
to participants and shareholders.
The following section on pages 65 to 75 sets out our Directors’
Remuneration Policy (Policy) for all of the Executive Directors and
the Non-Executive Directors (as well as any individuals who may
become Directors whilst this Policy is in effect) for approval by
shareholders at the Company’s AGM in July 2023. A copy of
our current policy that was approved by shareholders at the
Company’s AGM in July 2020 can be found on the Group’s
website (https://investors.petsathome.com).
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 continue to 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.
Underpin
– The satisfaction of an underpin that applies to RSP awards and as shall be determined by the Committee whereby the Committee
can adjust vesting for business, individual and wider Company performance.
– Serves as a security mechanism to prevent pay-outs for poor performance.
Share price
– Share price inherently links pay to performance.
– Build-up of shareholding, 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.
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Directors’ Remuneration Report continued
UK Corporate Governance Code – Provision 40 alignment
The table below explains how the Remuneration Committee has addressed the factors set out in Provision 40 of the UK Corporate
Governance Code.
Factor
How taken into account
Clarity – remuneration arrangements
should be transparent and promote
effective engagement with
shareholders and the workforce
The Remuneration Committee has aimed to incorporate simplicity and transparency into the design and delivery
of our Remuneration Policy. The remuneration structure aims to be simple for both participants and shareholders
to understand and is closely aligned to the strategic priorities of the business. We aim for disclosure of the Policy
and how it is implemented to be clear and succinct.
Simplicity – remuneration structures
should avoid complexity and their
rationale and operation should be easy
to understand
Our remuneration arrangements are purposefully simple, comprising fixed pay (salary, benefits, pension/cash in
lieu), a short-term incentive plan (Annual Bonus) and a long-term incentive plan (RSP).
Risk – remuneration arrangements
should ensure reputational and other
risks from excessive rewards, and
behavioural risks that can arise from
target-based incentive plans, are
identified and mitigated
The Policy includes a number of points to mitigate potential risk, including:
– defined limits on the maximum opportunity levels under incentive arrangements;
– provisions to allow malus and clawback to be applied, where appropriate;
– annual bonus performance targets calibrated at appropriately stretching but sustainable levels; and
– bonus deferral, RSP holding periods, in-employment and post-employment shareholding requirements
ensuring alignment of interests between Executive Directors and shareholders and encouraging sustainable
performance.
Predictability – the range of possible
values of rewards to individual Directors
and any other limits or discretions
should be identified and explained at
the time of approving the policy
Proportionality – the link between
individual awards, the delivery
of strategy and the long-term
performance of the company should
be clear. Outcomes should not reward
poor performance
We aim for our disclosure to be clear to allow shareholders to understand the range of potential values which
may be earned under the remuneration arrangements.
A significant part of an Executive’s reward is linked to performance with a clear line of sight between business
performance and the delivery of shareholder value.
Alignment to culture –incentive
schemes should drive behaviours
consistent with company purpose,
values and strategy
The incentive arrangements and annual bonus performance measures used are strongly aligned to those that
the Board considers when determining the success of the implementation of the Group’s purpose, values and
strategy. Arrangements are consistent in structure at all seniority levels, supporting a culture where all employees
are aligned to the company’s success.
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Pay element – Fixed pay
Base Salary
Purpose and link to strategy
Operation
The Company provides
competitive salaries suitable
to attract and retain
individuals of the right calibre
to develop and execute the
business strategy.
– 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.
Benefits
Purpose and link to strategy
Operation
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.
– 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.
Maximum opportunity
Changes
– Whilst there is no maximum
No changes.
salary level, any increases will
normally be broadly in line with
the wider colleague population.
– Higher increases may be made
under certain circumstances,
at the Committee’s discretion.
For example, this may include:
increase in the scope and/or
responsibility of the individual’s
role; and development of the
individual within the role.
Changes
No changes.
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.
Pension
Purpose and link to strategy
Operation
Maximum opportunity
Changes
To provide colleagues with
an allowance for retirement
planning.
– Pension contributions are made to either the Group Pension
Plan, or to personal pension schemes, or cash allowances in
lieu of contributions are paid.
– The employer contribution
level for all current and any
future external hire or internally
promoted Executive Director
is provided to the majority of
colleagues in central support
office functions from time to
time (currently 6.5%).
No changes
other than
formalising
previous
commitments
made to
align current
executive
pension
contributions
with colleagues
into policy.
67
Pets at Home Group Plc Annual Report & Accounts 2023
Directors’ Remuneration Report continued
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.
Changes
No
changes
Operation
Maximum opportunity
Performance measures
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.
– 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 73 of the Policy.
– Change of control provisions apply
as set out on page 73 of the Policy.
– Leaver provisions apply as set out on
page 72 of the Policy.
– 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, which
may include ESG metrics.
– 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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Strategic Report
Governance
Financial Statements
Maximum opportunity
Performance measures
Changes
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.
– 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.
RSP awards made
in FY24 shall be
subject to a holistic
underpin that allows
the Committee to
take into account
factors including
overall financial
performance,
the shareholder
experience,
performance
against strategic
imperatives and any
serious reputational
damage (subject to
approval at the AGM
on 6 July 2023).
Long Term Incentive Plan1
Purpose and
link to strategy
Operation
– 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.
– 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
Committee is satisfied that performance in
respect of the underpins has been satisfactory.
Where the Committee concludes that
performance has not been satisfactory it has
discretion to reduce the number of shares
subject to an RSP vesting downwards including
to zero. 100% of the award will vest on the third
anniversary of grant, subject to the achievement
of the aforementioned assessment 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 award, the holding period.
– Malus and clawback provisions apply to these
awards in circumstances as set out on page 73
of the policy.
– Change of control provisions apply as set out on
page 73 of the policy.
– Leaver provisions apply as set out on page 72 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
Maximum opportunity
Performance measures
Changes
– SAYE is an HMRC-approved scheme where
– The market value
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%).
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.
No changes.
– There are no
performance
measures attached
to awards under the
SAYE.
69
Pets at Home Group Plc Annual Report & Accounts 2023
Directors’ Remuneration Report continued
Chair and Non-Executive Directors’ Remuneration Policy
Purpose and
link to strategy
Operation
Maximum opportunity
Performance measures
Changes
To attract and retain
high calibre individuals
by offering market
competitive fee
arrangements.
– Non-Executive Directors receive a basic fee in
– Current fee levels can be found
n/a
No changes.
respect of their Board duties.
on page 84.
– 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.
– 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.
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.
Shareholding guidelines and post cessation shareholding requirements
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.
Executive Directors are subject to a post cessation shareholding requirement equal to the lower of 200% of base salary or their actual
shareholding at the date of cessation. This applies to shares awarded after the start of FY21 when the requirement was first adopted. The
requirement was for 200% for one year and 100% for two years. From the start of FY24 Executive Directors will be required to hold 200%
(or their actual shareholding if lower) for two years post cessation unless the Committee determines otherwise. This applies to shares
awarded after the start of FY24.
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 2020.
Remuneration Committee discretion
As described elsewhere in this Policy, the Committee may exercise its discretion to: (i) determine the size of the annual bonus and restricted
share plan awards granted to Executive Directors; (ii) set the performance measures and targets attaching to the annual bonus and restricted
share plan awards granted to Executive Directors; (iii) amend such performance measures and targets if events occur which result in the original
measures and targets no longer being a fair measure of performance; (iv) override the formulaic outcomes of such performance measures and
targets to ensure that payments under the annual bonus plan and restricted stock plan reflect the underlying performance of the business or
of the Executive Director concerned; (v) decide whether and to what extend dividend equivalents should apply to awards under the deferred
share bonus arrangements and/or the restricted stock plan; (vi) apply malus and clawback; (vii) adjust the shares subject to the deferred share
bonus arrangements, the SAYE options and the restricted stock plan awards in the event of a variation of the Company’s share capital (or similar
corporate event); (viii) apply the holding period; (ix) apply the leaver provisions; and (x) apply the change of control provisions. In addition, the
Committee may exercise its discretion in order to make such other non-material decisions affecting the Executive Directors’ awards in order to
facilitate the administration of the annual bonus plan, RSP and SAYE respectively. Any and all decisions will be made within policy maxima and
in accordance with the applicable plan rules. Use of discretion will be disclosed in the relevant Directors’ Remuneration Report.
70
Strategic Report
Governance
Financial Statements
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
Overall
Fixed elements
(base salary,
pension and
other benefits)
Policy and operation
The Committee’s approach when considering the overall remuneration
arrangements in the recruitment of a member of the Board from
an external party is to take account of the Executive Director’s
remuneration package in their prior role, the market positioning of
the remuneration package, and not to pay more than necessary to
facilitate the recruitment of the individual.
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 70.
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 67 to 69.
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.
Short term
incentives
The individual will be eligible to participate in the annual bonus plan,
in accordance with the rules and terms of the plan in operation at the
time. The maximum level of opportunity will be no greater than that
set out in the Policy Table above (i.e. 170% of base salary for the CEO
and 150% for the CFO).
Long term
incentives
The individual will be eligible to participate in the RSP, in accordance
with the rules and terms of the plan in operation at the time.
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).
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.
– 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.
– The Committee will seek to structure any buy-out awards such that
overall they are no more generous in terms of quantum or vesting
period than the awards due to be forfeited.
– In determining the quantum and structure of these commitments,
the Committee will seek to provide broadly equivalent value
and replicate, as far as practicable, the timing and performance
requirements of the awards forfeited.
– 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 70.
– If promotion is part way through the year, an additional
top-up award may be made to bring the Executive
Director’s opportunity to a level that is appropriate in
the circumstances.
71
Pets at Home Group Plc Annual Report & Accounts 2023
Directors’ Remuneration Report continued
c) Service contracts and loss of office arrangements
The Committee’s policy on service contracts and termination arrangements for Executive Directors is on pages 72 to 73. 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 Lyssa McGowan provides for
a notice period of 12 months from the Company and
six months from the individual.
– New Executive Directors will be appointed on service contracts
that have a notice period of not more than 12 months for both the
Company and the individual.
– The service contract for Mike Iddon provides for
a notice period from both the Company and the
individual of six months.
– The Committee considers this policy provides an appropriate balance
between the need to retain the services of key individuals for the
benefit of the business and the need to limit the potential liabilities of
the Company in the event of termination.
Contractual
payments
– Executive Directors’ service contracts allow for
termination 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.
– 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.
Short term
incentives
– The Committee’s policy is not to award an annual
incentive for any portion of the notice period not
served.
– Where an Executive Director leaves office 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.
– 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.
– 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.
Long term
incentives
72
Strategic Report
Governance
Financial Statements
Area
Change
in control
Malus and
clawback
Policy and operation
– The Committee’s policy is that service contracts
– Under the RSP, any holding periods applicable to vested awards
should not provide for additional compensation on
severance as a result of a change in control.
(including awards that vest early because of the change of control)
will fall away on/immediately prior to the change of control.
– Under the CSOP, the PSP and the RSP, the Committee
will determine whether and to what extent awards
shall vest, taking into account all relevant factors
including Company performance, the period of time
elapsed since the date of grant and the interests of
our shareholders.
– 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.
– Annual bonus payments and long term incentive
– Any material breach of a participant’s terms and conditions of
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
and payment 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;
employment; and/or any material violation of Company policy, rules of
regulation; Serious reputational damage or material loss caused by the
participant’s actions; and
– Material contravention by the participant of the Company’s ethics and
values.
– Malus and clawback will continue to apply to any bonus payments or
awards retained by leavers and/or on a change of control.
External appointments
Executive Directors are permitted to hold an external appointment with the prior consent of the Board. Any fees may be retained by the individual.
Chair and Non-Executive Directors
The Non-Executive Directors, including the Chair of the Board, have letters of appointment which set out their duties and responsibilities.
They do not have service contracts. The key terms of the appointments are set out in the table below:
Provision
Period
Policy
– Initially appointed for a period of three years, subject to annual review and notice
– In line with the UK Code, all Directors will seek annual 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 84
Expiry of current term
– See page 42 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.
73
Pets at Home Group Plc Annual Report & Accounts 2023
Directors’ Remuneration Report continued
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 FY24, 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%.
Lyssa McGowan
Maximum +
50% RSP3
Maximum
Meeting
expectations
Minimum
£650,819
£2,571,779
£2,271,629
£1,863,425
Mike Iddon
Maximum +
50% RSP3
Maximum
Meeting
expectations
Minimum
£1,577,905
£1,418,775
£1,164,165
£463,988
£0
£500,000
£1,000,000
£1,500,000 £2,000,000 £2,500,000
£3,000,000
£0
£500,000
£1,000,000
£1,500,000
£2,000,000
Fixed Pay1
Bonus
RSP2
50% RSP3
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 100% of salary for the CEO and 75% of salary for the CFO.
3 50% RSP has been calculated using the closing share price of £3.610 on 30 March 2023 plus 50%, resulting in a share price of £5.415.
Scenario
Assumptions
Fixed pay
All performance
scenarios
– 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 FY24
– Pension – based on the FY24 6.5% contribution levels
Variable pay
Minimum performance
– No pay out under the annual bonus
– No vesting under the RSP
Meeting expectations
– 60% of the maximum pay-out under the annual bonus (i.e. 102% of salary for the CEO and 90% 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
– 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)
Impact of 50%
share price increase
over the period
– Based on the share price on 30 March 2023 (£3.610), the last day of the financial year FY23 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.
74
Strategic Report
Governance
Financial Statements
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 colleagues. The Committee is also consulted concerning any major changes in colleague benefit and pay structures throughout
the business.
The remuneration package for all colleagues (including the Executive Directors) are 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), market benchmarks (survey benchmarks and we consider the views of the Real Living Wage Foundation) and the financial and
economic environment of the business, 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.
Further details of the remuneration decisions applied across the business and shared with the Committee can be found on pages 61 to 63 of the
Chair’s introduction.
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. 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.
Sharon Flood, as the Non-Executive Director 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.
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, 2020 and 2023 Policy, during the formation of our ESG strategy, and we have continued to consult with
shareholders through the last financial year particularly in relation to the renewal of our 2023 Directors’ Remuneration Policy subject to
shareholder approval at our 6 July 2023 AGM.
We directly engaged with our top 20 shareholders to discuss the proposed changes to the 2023 Policy, all of which were offered a call to
discuss these changes further if they wished. It was positive to see that there was very little feedback from our shareholders, and those that
did engage were broadly supportive and welcomed the change.
We will continue to monitor shareholder views when evaluating and setting ongoing remuneration strategy, and we are committed to
consulting with shareholders prior to any significant changes to our Policy.
g) Minor amendments
The Committee may make minor amendments to the Policy set out above (for regulatory, exchange control, tax or administrative purposes or
to take account of a change in legislation) without obtaining shareholder approval for that amendment.
75
Pets at Home Group Plc Annual Report & Accounts 2023
Directors’ Remuneration Report continued
Annual Report on Remuneration
a) Directors’ remuneration – report on implementation for the year ended 30 March 2023
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 79 represents the audited section of this report.
b) Single total figure of remuneration for Executive Directors for the year ended 30 March 2023
The following table sets out the total remuneration for Executive Directors for the year ended 30 March 2023. All payments are in line with
the Policy.
Director
FY23
Lyssa McGowan
Peter Pritchard
Mike Iddon
FY22
Peter Pritchard
Mike Iddon
Base salary (£)
Benefits
(£)
Pension
(£)
Total
fixed pay (£)
Annual
bonus
(£)
Long term
incentives
(£)
Total
variable pay (£)
Total
(£)
493,246
90,962
416,623
1,773
1,987
12,055
32,061
8,187
27,080
527,080
101,135
455,758
710,286
–
474,301
–
–
405,3092
710,286
–
879,610
1,237,3661
101,135
1,335,369
550,000
389,623
11,971
11,971
49,500
35,270
611,471
436,864
845,633
528,499
374,3313
535,8224
1,219,964
1,064,321
1,831,435
1,501,185
1 FY23 base salary, benefits and pension contributions have been calculated using actual amounts earned then pro-rated for Lyssa’s time in appointment and bonus pro-rated based on
length of service in FY23.
2 The 2020 RSP will vest in full on 29 May 2023 since the absolute TSR had been achieved. The value has been calculated using £3.610 being the closing share price on 30 March 2023,
the financial year end. The figure reflects 100% of the 2020 RSP award, however the true value will be subject to the share price at the time of vest.
3 The 2019 RSP vested in full on 30 May 2022 since the absolute TSR underpin which was 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 vested in full in May FY23. The 25% tranches due to vest in FY24 and FY25 will lapse in full.
4 The 2019 RSP vested in full on 30 May 2022 since the absolute TSR underpin which was 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.
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 6.5% of their salary or a cash
allowance where the annual allowance has been reached.
Annual bonus – corresponds to the amount earned in respect of the relevant financial year. Details of how this was calculated are set out below.
Long term incentives – corresponds to the amount earned by the Executive Directors in respect of the relevant financial year. Details of
how this was calculated are set out in the footnotes above.
Annual bonus
The Executive Directors were assessed against stretching PBT, FCF and Pet Care Plan subscription targets. Underlying PBT for the 52 week
period ended 30 March 2023, was £136.4m (53 week period ended 31 March 2022: £130.1m), which was ahead of guidance and between the
minimum and maximum targets. This represents a growth of 4.8% YoY. FCF was £98.2m (FY22: £95.0m) which exceeded the maximum target.
–
–
–
–
The maximum annual bonus opportunity in respect of FY23 for the CEO was 170% of base salary and 150% of base salary for the CFO.
In FY23, Executive Directors had an annual bonus based on Group PBT (65%), Group FCF (25%), Pet Care Plan subscriptions (10%) and
a mandatory ESG bonus underpin which required each Executive Director to complete a Better World Pledge Day. Our Better World
Pledge (OBWP) Days have been carried out by all of our Support Office colleagues and store managers. The OBWP Days provide
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.
Free Cash Flow is defined as net increase/(decrease) in cash before the impacts of dividends paid, share buybacks, investments,
proceeds from new loans and repayment of borrowings.
Pet Care Plan subscriptions are calculated on the number of net Pet Care Plans after the removal of any anomalies, paused or cancelled
Pet Care Plans. We achieved 1.60m net Pet Care Plans (FY22: 1.48m).
76
Strategic Report
Governance
Financial Statements
The table below shows the targets set and the achieved pay out levels for Executive Directors:
Performance measures
Underlying PBT
Free Cash Flow
Net Pet Care Plans
Total
Target
Achieved
% Weighting
Minimum
Maximum
Total
£130.7m
£74.2m
1.54m plans
£140.7m
£82.2m
1.61m plans
£136.4m
£98.2m
1.60m plans
65%
25%
10%
100%
%
66%
100%
80%
75.9%
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 on pages 61 to 63, 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 usual, the FY23 bonus 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 FY23 will be delivered in cash.
Long term incentives
Awards granted under the RSP for 2019 vested in May 2022, 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 2023 and the remaining 25% in 2024. 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 2019 award.
Awards granted to the Executive Directors under the RSP in 2020 will vest in full in May 2023 as a result of the absolute TSR underpin having
been met, and the Committee was also comfortable that having assessed these awards for any windfall gains on both vest and grant of the
2020 RSP awards, that no discount should be applied and therefore the awards vested in full, with a 2 year post vest holding requirement.
The Committee has reviewed the outcomes of the variable incentive plans, as well as the overall levels of remuneration to ensure that, in the
wider economic context and 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 – TSR
Targets
Performance achieved
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.
2020 RSP – due to vest May 2023 based on FY23 performance
TSR performance was positive.
Underpin met and award vesting will be 100% in May 2023 subject to a 2 year post
vest holding period.
77
Pets at Home Group Plc Annual Report & Accounts 2023
Directors’ Remuneration Report continued
c) Single total figure of remuneration for Non-Executive Directors for the year ended 30 March 2023
The following table sets out the total remuneration for Non-Executive Directors and the Chair of the Board for the year ended 30 March
2023 (‘FY23’).
Director
Dennis Millard1
Stanislas Laurent
Sharon Flood
Prof Susan Dawson
Ian Burke
Zarin Patel2
Roger Burnley3
Basic fees
(£)
Additional fees
(£)
Remuneration
Committee Chair
(£)
Audit & Risk
Committee
Chair (£)
51,523
51,523
51,523
51,523
206,092
51,523
6,765
20,0001
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
10,305
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
10,305
n/a
Nomination
& Corporate
Governance
Committee
Chair (£)
CSR and Pets
Come First
Committee
Chair (£)
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
10,305
n/a
n/a
n/a
Total single
figure FY23 (£)
Total single
figure FY22 (£)
71,523
51,523
61,827
61,827
206,092
61,827
6,765
70,000
50,000
60,000
60,000
200,000
57,057
n/a
N.B. Chair of the Board, basic Non-Executive Director fee, and Board Committee chair fees increased by 6.6% effective from 14 October 2022 (day 1 of our first period after half year (P8)).
Therefore, all fees detailed above are reflective of the mid-year annual pay increase.
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 Zarin Patel was appointed as Senior Independent Director on 14 February 2023.
3 On 14 February 2023 Roger Burnley joined as Non-Executive Director. Roger’s fees have been pro-rated to reflect this.
d) Scheme interests awarded during the financial year
In FY23 Executive Directors received RSP awards in line with the Policy as follows:
Executive Director
Lyssa McGowan
Mike Iddon
Date of award
31 May 2022
31 May 2022
Number of
shares awarded under
the RSP
168,115
89,130
Grant price
of RSP awards
Nil cost awards
Nil cost awards
% of salary for
total awards
100%
75%
Performance
period end date
20 March 2025
20 March 2025
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 £3.450.
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 (FY23 to FY25). 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 FY23 award. In accordance with the Policy, 100% of the award will vest on the third anniversary of grant, subject
to the achievement of the TSR underpin and continued employment at that date, followed by a two-year post vest holding period until the
fifth anniversary of grant. If the vested award is exercised during this two-year period, the net number of shares acquired (after taxes and
transaction fees have been settled) must continue to be held (and cannot be sold) until the fifth anniversary of grant.
e) Payments for loss of office
No payments for loss of office were made during the financial year.
f) Payments to past Directors
No payments were made to past Directors during the year.
78
Strategic Report
Governance
Financial Statements
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, Executive Directors have been subject to a post cessation shareholding requirement of 200% of salary
for one year and 100% of salary for two years under the Policy applicable from FY24. Subject to shareholder vote at the July 2023 AGM, this
post-cessation shareholding requirement will be extended to 200% of salary for two years, starting with shares awarded from the start of
FY24 onwards.
The Committee reviews share ownership levels annually.
Current shareholding levels for Directors are set out in the table below:
Director
Lyssa McGowan
Mike Iddon
Dennis Millard
Stanislas Laurent
Sharon Flood
Prof Susan Dawson
Ian Burke
Zarin Patel
Roger Burnley
Shareholding
as a % of salary
Shares owned outright at
30 March 2023
Interests in share incentive
schemes, awarded without
performance conditions at
30 March 2023
Interests in share incentive
schemes, awarded subject to
performance conditions at
30 March 2023
Shares owned outright at
31 March 2022
Number of shares
17%
244%
–
–
–
–
–
–
–
32,325
327,155
30,000
30,000
60,088
4,195
47,900
30,000
–
7,386
63,276
–
–
–
–
–
–
–
168,115
384,899
–
–
–
–
–
–
–
n/a
243,892
30,000
30,000
60,088
4,195
47,900
30,000
n/a
Shareholding as a % of salary has been calculated using the closing share price at year end on £3.610.
This represents the end of the audited section of the report.
79
Pets at Home Group Plc Annual Report & Accounts 2023
Directors’ Remuneration Report continued
h) TSR performance chart
The Company’s shares were admitted to the premium listing segment of the Official List maintained by the UK Financial Conduct Authority
and to trading on the London Stock Exchange plc’s main market for listed securities on 17 March 2014. The chart below shows performance
from that date until the end of FY23. This disclosure will be expanded in subsequent years in line with the regulations.
FTSE 250
FTSE 350 General Retailers
Pets at Home
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1
CEO
FY141
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23
CEO single
figure of
remuneration
Annual bonus
pay-out (as %
of maximum
opportunity)
Long term
incentive
vesting (as %
of maximum
opportunity)
LM
PP2
IK4
NW5
LM
PP
IK
NW
LM
PP
IK
NW
–
–
–
£19,460
–
–
–
£790,461
–
–
–
£962,2246
–
–
£662,087
£129,696
–
–
£575,953
–
–
£930,298
£122,037
–
–
–
£1,599,7103 £2,140,916
–
–
–
–
–
£1,831,435
–
–
£1,237,366
£101,135
–
–
–
–
–
73%
–
–
–
–
–
–
–
75%
–
–
–
–
–
–
–
60%
–
–
–
96%6
–
–
20.4%
–
–
–
16.8%9
–
–
–
–8
–
–
–
–
–
–
75.8%
–
–
–
16.8%
–
–
–
100%
–
–
–
100%
–
–
–
100%
–
–
–
100%
–
–
–
90.4%
–
–
–
100%
–
–
71%7
–
–
–
–
–
–
–
LM – Lyssa McGowan PP – Peter Pritchard
IK – Ian Kellett NW – Nick Wood
1
In FY14, the single figure of remuneration relates to the period 17 March 2014 to 27 March 2014.
2 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 vested 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 was 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.
3 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.
4 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.
5 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.
6 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 with the value of £198,168 of the Matching Awards.
7 Lyssa McGowan’s bonus outturn was prorated by length of employment, therefore the bonus outturn of 75.9% was reduced to reflect her time in employment during the FY23 bonus year.
8
Ian Kellett waived his bonus for FY18.
9 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
on 17 March 2019 and were made available on the first working day being 18 March 2019. The value is based on the share price of 160p being the share price on 15 March 2019, being the
last working day before the shares were released.
80
Strategic Report
Governance
Financial Statements
i) Percentage change in Directors’ remuneration
The table below sets out the increase in total remuneration of Directors and that of all colleagues for FY23:
Lyssa McGowan (CEO)2
Mike Iddon (CFO)3
Dennis Millard
Stanislas Laurent
Sharon Flood
Prof Susan Dawson
Ian Burke
Zarin Patel
Roger Burnley2
All colleagues4
% Change in base salary
FY22 to FY23
% Change in bonus earned
FY22 to FY231
% Change in benefits
FY22 to FY23
n/a
3.5%
2.2%
3.0%
3.0%
3.0%
3.0%
8.4%
n/a
9.4%
n/a
-10.3%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
-17.2%5
n/a
-17.2%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
no change
1 We achieved a bonus outturn of 75.9% in FY23 vs 90.4% in FY22.
2 Lyssa McGowan and Roger Burnley were both appointed during FY23 and therefore no annual change is shown.
3 Mike Iddon’s benefits have reduced due to a decrease in his company pension contribution to 6.5%.
4 All colleague information is presented by comparing the average annual bonus paid in FY22 to the average annual bonus paid in FY23 and includes colleagues who started throughout FY23.
5 The average colleague bonus has reduced due to lower targets being achieved across the business this year, combined with more bonuses being pro-rated for new joiners within senior roles in
FY23 which has influenced the overall average decrease.
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 PBT
Returned to shareholders:
Dividend
Share Buy Back
Payments to colleagues:
Wages and salaries
FY23
£m
136.4
58.7
50.3
FY22
£m
130.1
48.5
–
FY21
£m
87.5
37.1
–
FY20
£m
93.5
37.1
–
FY19
£m
89.7
37.2
–
FY18
£m
84.5
37.3
–
FY17
£m
96.5
39.9
–
261.9
235.2
227.6
203.1
187.8
181.0
162.9
81
Pets at Home Group Plc Annual Report & Accounts 2023
Directors’ Remuneration Report continued
k) Our CEO pay ratio FY23
This is our fourth 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.
FY231
FY22
FY21
FY20
Base Pay (FTE)
Single figure remuneration
Base Pay (FTE)
Single figure remuneration
Base Pay (FTE)
Single figure remuneration
Base Pay (FTE)
Single figure remuneration
Ratio
CEO
25th%tile
Median
75th%tile
£584,208
£1,338,502
£550,000
£1,831,435
£514,703
£2,140,916
£504,084
£1,599,710
27:1
59:1
28:1
88:1
26:1
106:1
30:1
90:1
23:1
50:1
23:1
72:1
22:1
88:1
27:1
78:1
17:1
38:1
17:1
52:1
17:1
69:1
23:1
59:1
Note: Ratios rounded to the nearest whole number.
1 The FY23 single figure is using the data required by the regulation, i.e. a combination of Lyssa McGowan’s and Peter Pritchard’s remuneration throughout FY23. For the FY23 single figure,
no shares are included as the 2020 scheme lapsed in full for Peter Pritchard when he left in May 2022, and Lyssa McGowan has no share plans which are vesting in FY23. The FY23 bonus
scheme outturn for the CEO is 71% vs FY22 at 90.4%. Benefits are lower as Lyssa McGowan is not enrolled in Private Medical Insurance. Base pay includes the amount received by both
Lyssa McGowan and Peter Pritchard. An increase is shown as Lyssa McGowan joined on a higher salary than Peter Pritchard.
The following table provides base salary and total remuneration information in respect of the 25th, 50th and 75th percentile colleagues,
on a full-time equivalent basis.
Year
FY23
Base Salary
Total Remuneration
CEO
584,208
1,339,070
25th
21,746
22,501
50th
25,654
26,748
75th
33,452
22,501
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 to FY23 include
100% of the RSP awards which have vested based on the financial year which the performance measurement period was measured over,
whereas the FY20 and FY21 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 vested in full in 2022. The 25% tranches due to vest in 2023 and 2024
lapsed in full, in line with the agreed leaver provisions for Peter Pritchard. For FY23, no LTIPs were included in the CEO pay ratio as all of
Peter’s 2020 RSPs had lapsed in full and Lyssa had no share grants due to vest in FY23. 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.
82
Strategic Report
Governance
Financial Statements
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 colleague listening sessions across all of our divisions combined with our annual engagement survey and pulse surveys ensure that
our colleagues have a voice. The sessions allow us to gauge colleagues in their views on the impact of the cost of living challenges, overall
team morale, service levels, senior leadership management of the business, and how their teams are feeling about the next phase of our pet
care journey.
Our colleagues are incredibly passionate about our sustainability strategy and we knew it was essential to engage them in our strategy
refresh. To do this we launched a company wide listening and engagement campaign called ‘The Big Listen’ where we went out to all teams
and trained them to run sessions to capture what they were currently doing, what they could do in the future and what their ideas were for
business wide initiatives and opportunities from an environmental perspective. We were overwhelmed with the level of engagement with
over 1,000 unique ideas contributed from more than 500 listening sessions. This campaign also saw the launch of our first Better World
Pledge Planet champions network with almost 200 colleagues signing up to be champions in their areas. We are now focused on playing
back the insights and critically applying the actions to the business.
The Committee also receives feedback on the results from the engagement and pulse surveys to ensure the colleague voice and opinions
from across the business as well as our Joint Venture Partners are heard and considered as part of our decision making.
Colleague share ownership
It is pleasing that this pillar of our engagement strategy continues to come to fruition with our third RSP vesting in May 2022. The RSPs were
offered to both salaried and hourly colleagues at all levels which resulted in enhancing shareholdings or creating new shareholders in over
4,500 of our colleagues. The next RSP awards will vest at the end of May 2023 which will further enhance or create new shareholdings for
over 4,700 colleagues.
We also granted a further 1.7m shares to 10,300 colleagues via the RSP in May 2022 which will vest in 2025.
Our 2019 Sharesave matured on 1 December 2022, generating a potential value of £1.1m, and a potential profit of £0.3m to over 300
colleagues based on the closing share price on the maturity date of £2.740.
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 2022, with a take up of 15.38%, 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 interest last year.
Gender Pay Gap report
We published our Gender Pay Gap report on 4 April 2023. Our mean pay gap reduced, and our median pay gap remained stable. Our bonus
pay gap increased which is impacted by the number of women working part-time in our business as we are required to calculate our bonus
pay gap from actual bonus amounts paid, without taking account pro-ration, whereas in practice, bonus payments are pro-rated where a
colleague works part-time.
Since the reporting period for our gender pay gap, we now have a greater balance of males and females in senior roles, and an
over index with females in senior leadership roles. The FTSE Women Leaders Review recognised our high representation of women
at executive level and our ranking increased from 22nd to 7th this year. 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 30 March 2023, the Company’s dilution position was
1.89% for all plans and 1.09% 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 Officer 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 42 of the report.
83
Pets at Home Group Plc Annual Report & Accounts 2023
Directors’ Remuneration Report continued
Statement of implementation for FY24
This section provides an overview of how the Committee is proposing to implement our new Policy in FY24 subject to shareholder approval
at our AGM on 6 July 2023.
Base salary
The date for the pay review for the Executive Team now aligns to the wider management and salaried colleague population and takes place
in October 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 on page 67 of the report. There are no proposed changes in the benefits policy for
FY24 other than anticipated standard inflationary increases on premiums.
Pensions
Executive Directors already receive a pension contribution capped at the rate provided to the majority of colleagues in central support office
functions. Currently this is up to 6.5% of base salary and consistent with workforce rates at other retailers. The company continues to actively
target an increase in the rate available to all other colleagues by at least 0.5% per year.
Annual bonus
The maximum annual bonus opportunity for Executive Directors in respect of FY24 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 FY24. 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 68. As detailed on page 64 the target metrics
include FCF, PBT, sustainability measures 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 FY24 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 a judgement-based underpin which will allow the Committee to
take share price performance into account in addition to business, individual and wider company performance during the vesting period.
The three-year vesting schedule and two-year post-vest holding period will apply to these awards.
Sharesave
The Company intends to operate the Sharesave scheme again for FY24. 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 again in October and benchmarked against relative market comparisons to see
whether there have been any changes in the market and to establish if the fees need a further adjustment in FY24. This follows an increase in
fees in FY23 as they had fallen behind the market benchmarks having not been adjusted prior to FY23 since 2014. The table below shows the
Non-Executive Director fee structure for FY24 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.
84
FY24
£213,200
£53,300
£10,660
£20,000
Strategic Report
Governance
Financial Statements
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 FY23
amounted to £199,939 (FY22: £57,850) based on the required time commitment.
During FY23 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 FY23 and the
Committee members’ attendance is also shown in the table below:
Member
Dennis Millard
Sharon Flood (Chair)
Prof Susan Dawson
Zarin Patel
Roger Burnley
Period from
1 April 2022
1 April 2022
1 April 2022
1 April 2022
14 February 2023
To
14 February 2023
30 March 2023
30 March 2023
30 March 2023
30 March 2023
Meetings attended
4/4
5/5
5/5
5/5
1/1
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
Lyssa McGowan
Amy Smith
Gordon Dunn
Rachel Mooney
Stanislas Laurent
Ian Burke
Jessica Norton
Laura O’Kane
Paul Townsend
Alex Little
Position
Chief People and Culture Officer
CEO
CFO
Legal Director and Company Secretary
CEO
Head of Reward
Vet People Director
Chief People Officer
Non-Executive Director
Chair of the Board
Willis Towers Watson Director | Executive Compensation
Willis Towers Watson Senior Director
Willis Towers Watson
Willis Towers Watson
None of the individuals were involved in making decisions at meetings regarding their own compensation.
Governance
The Board and the Committee consider that, throughout FY23 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.
85
Pets at Home Group Plc Annual Report & Accounts 2023
Directors’ Remuneration Report continued
Shareholder voting
At the Annual General Meeting on 7 July 2022, the total number of shares in issue with voting rights was 498,756,282. The resolution to
approve the Directors’ Remuneration Report received the following votes from shareholders:
To approve the Directors’ Remuneration Report for the year ended 31 March 2022
Votes for1
%2
Votes against
%
Votes total
% of issued share capital3
Votes withheld 4
1 Votes ‘for’ include discretionary votes.
2 Percentages above are rounded to two decimal places.
3 Issued share capital at meeting date: 498,756,282.
364,013,541
90.83
36,771,235
9.17
400,784,776
80.36
8,943
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 64, our Directors’ Remuneration Report will be subject to an advisory vote at our AGM to be held on
6 July 2023.
On behalf of the Board
Sharon Flood
Chair of the Remuneration Committee
25 May 2023
86
Strategic Report
Governance
Financial Statements
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: England and Wales
Type:
Public Limited Company
8885072
Epsom Avenue, Stanley Green Trading Estate, Handforth, Cheshire, SK9 3RN
+44 161 486 6688
10 February 2014
Statutory information
Amendment of the Articles
Appointment and Removal of Directors
Board of Directors
Branches outside of the UK
Change of Control
Colleague Engagement
Colleague Diversity and Disabilities
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
Future Developments of the Business
Financial position of the Group, its cash flows,
liquidity position and borrowing facilities
Greenhouse Gas Emissions
Going Concern
Health and Safety
Section heading
Directors’ Report
Directors’ Report
Directors’ Report
Board of Directors
Directors’ Report
Directors’ Report
Strategic Report – Sustainability Review
Directors’ Report
Directors’ Report
Directors’ Remuneration Report
Strategic Report – Sustainability Review
Directors’ Report
Board of Directors
Directors’ Report
Directors’ Report
Directors’ Report
Directors’ Report
Directors’ Remuneration Report
Note 23 to the consolidated financial statements
Strategic Report
Chief Financial Officer’s review
Strategic Report – Sustainability Review
Directors’ Report
Strategic Report – Sustainability Review
Human Rights and Modern Slavery Statement
Directors’ Report
Independent Auditors
Internal Controls and Risk Management
Political Donations
Profits and Dividend
Post Balance Sheet Events
Powers for the Company to issue or buy back its shares
Powers of the Directors
Directors’ Report
Audit and Risk Committee Report
Governance Report
Directors’ Report
Directors’ Report
Directors’ Report
Directors’ Report
Directors’ Report
Page number
91
89
89
32 to 33
92
92
32
83
39
83
26 to 29, 36
89
32 to 33
92
89
89
94
79
142 to 153
8 to 30
20 to 22
12 to 19
91
37
92
93
49
23 to 30
91
91
91
90
89
87
Pets at Home Group Plc Annual Report & Accounts 2023
Directors’ Report continued
Statutory information
Principal Activities
Research and Development
Restrictions on Transfer of Securities
Stakeholder Engagement
Share Capital
Significant Related Party Transactions
Significant Shareholders
Section heading
Directors’ Report
Directors’ Report
Directors’ Report
Strategic Report – Stakeholder engagement
Directors’ Report
Note 22 to the consolidated statements
Directors’ Report
Note 27 to the consolidated statements
Directors’ Report
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
Page number
88
88
90
14 to 15
90
141
91
160 to 161
90
161 to 171
93
44 to 49
31 to 94
61 to 86
42 to 43
5 to 30
30
91
90
Disclosures required under Listing Rules
In accordance with Listing Rule 9.8.4C, the information required to
be disclosed in the Annual Report under Listing Rules 9.8.4R and
9.8.6(8) is disclosed on the following pages of this Annual Report:
Disclosure
Long-term incentive schemes
Significant contracts
Dividend waivers
Statement of capitalised interest
Climate-related financial disclosures
consistent with TCFD
Page number
72
92
Note 9 to the consolidated
financial statements
123
52 to 60
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 (pages 5 to 30) sets out the innovation
carried out by the Group in relation to product and service
development. Our funding of the Senior Clinical Training
Scholarship (Residency) in Small Mammal Medicine and Surgery
at the University of Edinburgh School of Veterinary Studies is
progressing well. As part of the partnership our clinical colleagues in
Vets for Pets are able to access expert clinical advice from the team
at the University of Edinburgh to aid them in providing the best of
care for small mammals.
We are committed to creating good veterinary workplaces and are
also aware of the levels of stress endured by veterinary professionals
which can impact negatively on their mental health. We have
partnered with the University of Edinburgh to support a cross-
disciplinary project aimed at better understanding how we can
prevent veterinary suicide. The aims of the project are: to provide
insight into factors influencing methods of suicide attempt among
veterinary professionals, to understand people’s attitudes to and
experience of restriction of access to means of suicide in veterinary
workplaces and to help identify opportunities for veterinary suicide
prevention. As part of our commitment to continual improvement
and professional engagement we have become a member of the
Responsible Use of Medicines in Agriculture Companion Animal and
Equine Group (RUMA CA&E) which was established to define the
principles of responsible use of medicines in the companion animal
and equine sectors. It covers the responsible use of medicines in
dogs, cats, rabbits, small mammals, exotic animals kept as pets, and
equids. RUMA CA&E’s current focus is on the responsible use of
antibiotics and as a member we will be contributing to collation of
evidence and establishment of evidence-based activities that will
enhance antibiotic stewardship.
88
Strategic Report
Governance
Financial Statements
Directors
The names of the persons who, at any time during the financial year,
were Directors of the Company are:
Name
Date of appointment
Date of resignation
Dennis Millard
18 February 2014 (reappointed)
Mike Iddon
17 October 2016 (reappointed)
Sharon Flood
25 May 2017 (reappointed)
Stanislas Laurent
25 May 2017 (reappointed)
n/a
n/a
n/a
n/a
Peter Pritchard
27 April 2018
31 May 2022
Susan Dawson
12 July 2018 (reappointed)
Ian Burke
27 March 2020 (reappointed)
Lyssa McGowan
25 April 2022
Roger Burnley
14 February 2023
Zarin Patel
14 April 2021
n/a
n/a
n/a
n/a
n/a
Further details in relation to Director changes are included on
pages 42 to 43.
Appointment and removal of Directors
The appointment and removal 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.
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 79.
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 24 May 2023 (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 73.
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.
89
Pets at Home Group Plc Annual Report & Accounts 2023
Directors’ Report continued
Share capital
The issued share capital of the Company as at 30 March 2023
was 483,197,785 Ordinary Shares of 1 pence each. As at 24 May
2023, being the latest practicable date prior to the date of this
Annual Report, the issued share capital of the Company remained
483,197,785 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.
During the 2023 financial period, the Company carried out a share
buyback programme which commenced on 20 June 2022 and
finished on 11 January 2023. The Company’s share capital was
reduced from 500,000,000 Ordinary Shares of 1 pence each to
483,197,785 Ordinary Shares of 1 pence each as noted above.
Details of colleague share schemes are provided in note 24 to the
Group’s financial statements.
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 30 March
2023, 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.
Number of Ordinary
Shares as at
30 March 2023
Percentage of
issued share
capital (%)
Nature of holding
(direct/indirect)
Name of shareholder
Schroder Investment
Management Ltd.
Capital Research
Global Investors
Jupiter Asset
Management Ltd
Allianz Global
Investors GmbH
BlackRock Investment
Management (UK) Ltd
47,128,473
33,154,950
21,566,522
17,582,899
16,401,174
The Vanguard Group Inc
16,144,847
9.8
6.9
4.5
3.6
3.4
3.3
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
No changes have been disclosed in accordance with Disclosure
Guidance and Transparency Rule 5.1.2R in the period between
30 March 2023 and 23 May 2023 (being not more than one
month prior to the date of the Notice of Annual General Meeting).
Voting rights
All members who hold Ordinary Shares are entitled to attend and
vote at the Annual General Meeting. On a show of hands at a
general meeting every member present in person shall have one
vote and on a poll, every member present in person or by proxy shall
have one vote for every Ordinary Share held. No shareholder holds
Ordinary Shares carrying special rights relating to the control of
the Company and the Directors are not aware of any agreements
between holders of the Company’s shares that may result in
restrictions on voting rights.
Powers for the Company to issue shares: The Directors were
granted authority at the previous Annual General Meeting on 7 July
2022 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 6 July 2023 (or, if earlier,
until the close of business on 6 October 2023). 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 7 July 2022 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 2022 Annual General Meeting,
seek to renew these powers at the 2023 Annual General Meeting.
Powers for the Company to buy back its shares: The Company
was authorised by its shareholders on 7 July 2022, at the 2022
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 2023 Annual General Meeting to be
held on 6 July 2023.
90
Strategic Report
Governance
Financial Statements
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 £100.7m (FY22: £124.5m). The results
are discussed in greater detail in the Chief Financial Officer’s
review on pages 20 to 22.
A final dividend of 8.3 pence per ordinary share (FY22: 7.5 pence
per ordinary share) will be recommended to the Company’s
shareholders in respect of the 2023 financial year. The final
dividend will be proposed by the Directors at the 2023 Annual
General Meeting on 6 July 2023 in respect of the financial year
ended 30 March 2023 to add to an interim dividend of 4.5 pence
per ordinary share paid on 6 January 2023 (FY22: 4.3 pence per
ordinary share).
The Directors’ proposed final dividend of 8.3 pence per ordinary
share takes the total dividend payable in respect of the 2023
financial year to 12.8 pence per ordinary share. The ex-dividend
date will be 15 June 2023 and, subject to shareholder approval
being obtained at the 2023 Annual General Meeting, the final
dividend of 8.3 pence per ordinary share will be payable on 11 July
2023 to shareholders on the register at the close of business on
16 June 2023.
Political donations
The Group made no political donations and incurred no political
expenditure during the year (FY22: 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 FY23 were
51 days (FY22: 53 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 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 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 8 to 9. The basis of
preparation and going concern assessment can be found within
note 1 to the financial statements.
Viability statement
The Group has developed a detailed strategic and business
planning (‘SBP’) process, which comprises a strategic plan (Strategic
Plan) containing financial projections and a Business Plan which
forms a detailed near term one-year plan for the upcoming financial
year. The SBP process produces standard outputs in respect of
the key financial performance metrics of the Group which deliver
consolidated financial plans at both Group level and at a number
of levels within the Group. The Strategic Plan is reviewed each
year by the Board as part of the strategy review process. Once
approved by the Board, the Strategic Plan is cascaded across
the Group and provides the basis for setting all detailed financial
budgets and strategic actions that are subsequently used by the
Board to monitor performance. 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 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
23 to 30 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.
91
Pets at Home Group Plc Annual Report & Accounts 2023
Directors’ Report continued
Modern Slavery Act
Our Modern Slavery Statement is reviewed and approved by the
Board on an annual basis and published on our investor website.
The statement covers the activities of Pets at Home Limited and
Companion Care (Services) Limited (whose activities fall within the
scope of s.54(2) of the Modern Slavery Act 2015) and details the
policies, processes and actions taken to ensure that slavery and
human trafficking are not taking place in our supply chain or any
part of our business.
Anti bribery matters
The Group has a zero tolerance approach to bribery and corruption
and supports colleagues to make decisions in line with this position.
The Group’s anti-bribery policy applies to all colleagues and extends
to our business dealings and transactions in all countries in which
the business operates. The policy is implemented in conjunction
with the Group’s Code of Ethics and Business Conduct. Colleagues
receive training in relation to bribery and corruption as appropriate.
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.
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:
–
The Group has a revolving credit facility 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. In addition the Group has a
£26m loan facility to fund the purchase of capital items which
expires on 27 March 2030 and mirrors the terms of the senior
facilities agreement.
92
–
–
–
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 the
HSBC and Lloyds facilities are capable of being reborrowed and
contain clauses that vary the maximum facility limits over their
availability periods. As at 30 March 2023, the maximum facility
limit on the Lloyds and HSBC facility agreements were £20m
and £18.5m respectively. Both facility agreements contained
one-year extension options, which have now been successfully
exercised, taking the revised availability periods to April 2024
and May 2024 respectively. CCSL is currently in discussions
with Santander with a view to extending their availability period
by a further year from November 2023 to November 2024.
Alongside these new facilities, the portfolio of Joint Venture
companies also have existing loans in place with NatWest (RBS),
Lloyds, HSBC and Santander under historic agreements. These
agreements are no longer active, however the loans drawn
down under them are still amortising.
Pursuant to the terms of these facility agreements entered
into in November 2020, April and May 2021, CCSL and V4P
provide guarantees in respect of a certain fixed proportion
of the outstanding facility loans provided to the Joint
Venture practices which borrow under the facility. The facility
agreements contain customary prepayment, cancellation and
default provisions which include the event of a change of
control (direct or indirect) of CCSL or V4P. For these purposes
‘control’ means the power (whether by way of ownership of
shares, proxy, contract, agency or otherwise) to: (a) cast or
control more than 90% of the votes that may be cast at a
general meeting of CCSL or V4P (as relevant); (b) appoint or
remove all or a majority of the Directors of CCSL or V4P (as
relevant); (c) give directions with respect to the operating and
financial policies of CCSL or V4P (as relevant) with which the
Directors are obliged to comply; and/or (d) hold beneficially
(directly or indirectly) at least 90% of the issued share capital
of CCSL or V4P (as relevant). The historic agreements contain
similar clauses and guarantees.
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 32 to 33) 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.
Strategic Report
Governance
Financial Statements
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 2022 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 2023 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 49
of the Audit and Risk Committee Report.
Corporate Governance Statement
The Corporate Governance Report is referred to on pages 31 to 94
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 23 to 30. 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 36
to 41. The Code can be viewed on the FRC’s website at frc.org.uk
Additional Information
In order to consolidate our reporting requirements, the following
information is incorporated by reference into this Directors’ Report:
Colleague engagement
Colleague share ownership and plans
Colleague diversity and disabled persons
Greenhouse gas emissions
Page
83
83
39
Sustainability
Report, 12 to 19
Approval of Annual Report
The Strategic Report, Corporate Governance Statement and the
Governance Report were approved by the Board on 18 May 2023.
This Directors’ Report was approved by the Board on 18 May 2023
and signed on its behalf by:
Lucy Williams
Chief Legal Officer and Company Secretary
25 May 2023
Non-financial reporting
Non-financial measures are an important part of our business. The table below
constitutes the Company’s non-financial information statement as required by
sections 414CA and 414CB of the Companies Act 2006. Our Sustainability Report
and websites (www.petsathome.com and investors.petsathome.com) contain
non-financial information, including actions, to manage our environmental and
social impact and look after our colleagues.
Copies of our policies are available on our
investor website: investors.petsathome.com
Information relating to our business
model is included on pages 2 to 3
Our non-financial KPIs are
detailed on page 11
Information relating to how the business
manages risk is set out on pages 23 to 30
Reporting
requirement
Environmental
matters
Colleagues
Relevant policies and documents
Further information and outcomes
– Packaging policy
– Environmental policy
– Social Value Strategy
– Supplier Code of Conduct
– Responsible Sourcing Handbook
– Raw Materials Sourcing Policy
– Sustainability Report
– Annual Report pages 16 to 19
– Diversity and Inclusion Policy
– Diversity and Inclusion Strategy
– Whistleblowing policy
– Health and Safety policy
– Colleague Handbook
– Sustainability Report
– Gender Pay Gap Report
– Annual Report pages 39 to 40
Social matters
– Responsible Sourcing Handbook
– Supplier Code of Conduct
– Social Value Strategy
– Whistleblowing policy
– Tax strategy
– Sustainability Report
– Pets at Home Foundation Impact Report
Respect for
human rights
– Human Rights policy
– Responsible Sourcing Handbook
– Supplier Code of Conduct
– Social Value Strategy
– Child Protection Procedure
– Whistleblowing policy
– Sustainability Report
– Human Rights and Modern Slavery Statement
– Annual Report pages 51 and 92
Anti-corruption
and anti-bribery
matters
– Anti-bribery policy
– Code of Ethics and Business
– Responsible Sourcing Handbook
– Supplier Code of Conduct
– Annual Report page 92
Conduct
93
Pets at Home Group Plc Annual Report & Accounts 2023
Statement of Directors’ Responsibilities in respect
of the Annual Report and the Financial Statements
The Directors are responsible for preparing the Annual Report and
the Group and parent Company financial statements in accordance
with applicable law and regulations.
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:
Lyssa McGowan
Chief Executive Officer
25 May 2023
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.
94
Strategic Report
Governance
Financial Statements
Financial statements
Independent Auditor’s Report
Financial statements
96
102 Consolidated income statement
102 Consolidated statement of comprehensive income
103 Consolidated balance sheet
104 Consolidated statement of changes in equity as at 30 March 2023
104 Consolidated statement of changes in equity as at 31 March 2022
105 Consolidated statement of cash flows
106 Company balance sheet
107 Company statement of changes in equity as at 30 March 2023
107 Company statement of changes in equity as at 31 March 2022
108 Company statement of cash flows
109 Notes (forming part of the financial statements)
169 Glossary – Alternative Performance Measures
172 Advisors and contacts
95
Overview
Materiality:
Group financial
statements as a whole
£6.8m (2022: £6.5m)
5.0% (2022: 5.0%) of underlying profit
before tax
Coverage
97% (2022: 98%) of underlying Group
profit before tax
Key audit matters
Recurring risks
Parent Company
key audit matter
vs 2022
Carrying value of Vets
Group CGU Goodwill
Carrying value of parent
Company’s investment
in its subsidiary
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.
Pets at Home Group Plc Annual Report & Accounts 2023
Independent Auditor’s Report
to the members of Pets at Home Group Plc
1. Our opinion is unmodified
We have audited the financial statements of Pets at Home Group
plc ('the Company') for the 52 week period ended 30 March 2023
which comprise the Consolidated Income Statement, Consolidated
Statement of Comprehensive Income, Consolidated Balance
Sheet, Consolidated Statement of Changes in Equity, Consolidated
Statement of Cash Flows, Company Balance Sheet, Company
Statement of Changes in Equity, 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 30 March
2023 and of the Group’s profit for the 52 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 10 financial periods ended 30 March 2023. 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.
96
Strategic Report
Governance
Financial Statements
Impairment of
Goodwill allocated
to the Vet Group
Cash Generating
Unit ('CGU')
(£362 million;
2022: £362 million)
Refer to page 47
(Audit Committee
Report), page 115
(accounting policy)
and page 130
(financial disclosures).
The risk
Our response
Forecast based assessment:
Goodwill in the Vet Group cash
generating unit ('CGU') is significant
and is based on higher growth rates
than other parts of the business.
The estimated recoverable amount
is subjective due to the inherent
uncertainty involved in forecasting
and discounting future cash flows,
specifically the projected revenue
growth and the gross margin
percentage, 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 value in use of
the Vet Group cash generating unit
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
concluded that reasonably possible
changes to the value in use of the
Vet Group cash generating unit
would not be expected to result in
material impairment.
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:
– Re-performance: we re-performed the value in use calculations
and compared data used in the model against source information,
where applicable;
– Historical comparison: we assessed the reasonableness of the
Vet Group’s budgets by considering the historical accuracy of
previous forecasts;
– Benchmarking assumptions: we used our own internal discount
rate tools to assess the reasonableness of the Vet Group’s
discount rate by comparing the Group’s assumptions to externally
derived data;
– Our sector experience: we assessed whether key assumptions
included in the forecast cash flows, such as projected revenue
growth and gross margin percentage, reflect our knowledge of
the business and industry, including known or probable changes
in the business environment and for consistency with industry
analyst reports;
Sensitivity analysis: we performed breakeven analysis on the
assumptions and checked whether the Directors have identified
reasonably possible downside scenarios in their own sensitivity
analysis; and
–
– 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.
The financial statements (note 13)
disclose the sensitivities estimated
by the Group.
Our results
– We found the Group’s conclusion that there is no impairment of the
Vet Group CGU goodwill to be acceptable (2022 result: acceptable).
Recoverability
of the Parent
Company’s
investment in
its subsidiary
(£936.2 million;
2022: £936.2 million)
Refer to page 47
(Audit Committee
Report), page 110
(accounting policy)
and page 158
(financial disclosures).
Low risk, high value:
The carrying amount of the Parent
Company’s investment in its only
direct subsidiary (Pets at Home No.
1 Limited) represents 61.6% (2022:
60.8%) of the parent Company’s
total assets. Its recoverability
is not a high risk of significant
misstatement or subject to
significant judgement. However,
due to its 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 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:
–
Tests of detail: we compared the value of the investment to the
market capitalisation as at the period end date and post period end;
– Comparing valuations: as the investment’s carrying amount
exceeded the net asset value, we compared the carrying amount
to the expected value of the business based on the value in use
calculation prepared by the Directors in relation to the goodwill
impairment; and assessed the accuracy of the key inputs into the
value in use calculations; and
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
– We found the Company’s conclusion that there is no impairment of
its investment in its subsidiary to be acceptable (2022: acceptable).
We continue to perform procedures over the accounting treatment of costs related to cloud-based software arrangements. However,
following the application of a consistent methodology regarding the treatment of these costs in line with the IFRS Interpretation Committee’s
agenda decision in relation to configuration or customisation costs in a cloud computing arrangement, we have not assessed this as one of
the most significant risks in our current period audit and, therefore, it is not separately identified in our report this period.
97
Pets at Home Group Plc Annual Report & Accounts 2023
Independent Auditor’s Report continued
to the members of Pets at Home Group Plc
The scope of the audit work performed was fully substantive as
we did not rely upon the Group's internal control over financial
reporting.
Normalised Group
profit before tax
£136.4m (2022: £130.1m)
Group
materiality
£6.8m (2022: £6.5m)
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
£6.8m (2022: £6.5m), determined with reference to a benchmark of
Group profit before tax, normalised to exclude the non-underlying
items as disclosed in note 3, of £136.4m, of which it represents 5.0%
(2022: 5.0%).
Materiality for the parent Company financial statements as a
whole was set at £3.4m (2022: £2.9m), which is the component
materiality for the parent Company determined by the Group
audit engagement team. This is lower than the materiality we
would otherwise have determined with reference to parent
Company total assets, of which it represents 0.22% (2022: 0.19%).
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% (2022: 75%) of materiality
for the financial statements as a whole, which equates to £5.1m
(2022: £4.9m) for the Group and £2.6m (2022: £1.7m) for the
parent Company.
We agreed to report to the Audit Committee any corrected or
uncorrected identified misstatements exceeding £0.3m (2022:
£0.3m), in addition to other identified misstatements that warranted
reporting on qualitative grounds.
Of the Group’s 8 (2022: 8) reporting components, we subjected 3
(2022: 3) to full scope audits for Group purposes. For the residual
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 components within the scope of our work accounted for the
percentages illustrated opposite.
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 Group team approved the component materialities, which
ranged from £3.2m to £6.2m (2022: £2.9m to £6.2m), having
regard to the mix of size and risk profile of the Group across
the components.
The Group team visited 3 (2022: 3) component locations. Video and
telephone meetings were also held with these component auditors.
At these visits and 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 work on 1 of the 8 components (2022: 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.
98
£6.8m
Whole financial statements
materiality (2022: £6.5m)
£5.1m
Whole financial
statements performance
materiality (2022: £4.9m)
£6.2m
Range of materiality at
3 components (£3.4m
to £6.2m) (2022: £2.9m
to £6.2m)
£0.3m
Misstatements reported
to the Audit Committee
(2022: £0.3m)
Group revenue
Group profit before tax
0
0
100%
(2022: 100%)
100
100
3
12
97%
(2022: 88%)
88
97
Group total assets
Normalised Group
profit before tax
0
2
100%
(2022: 98%)
98
100
3
2
97%
(2022: 98%)
98
97
l Full scope for Group audit purposes 2023
l Residual components 2023
l Full scope for Group audit purposes 2022
l Residual components 2022
We applied this percentage in our determination of performance
materiality because we did not identify any factors indicating an
elevated level of risk.
l Normalised PBT
l Group materiality
Strategic Report
Governance
Financial Statements
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
Company or to cease their operations, and as they have concluded
that the Group’s and the Company’s financial position means that
this is realistic. They have also concluded that there are no material
uncertainties that could have cast significant doubt over their ability
to continue as a going concern for at least a year from the date of
approval of the financial statements ('the going concern period').
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
Company’s financial resources or ability to continue operations over
the going concern period. The risks that we considered most likely
to adversely affect the Group’s and Company’s available financial
resources and/or metrics relevant to debt covenants over this
period were:
–
–
Failure to meet sales growth targets; and
The impact of inflation on the Group’s cost base.
We considered whether these risks could plausibly affect the
liquidity or covenant compliance in the going concern period by
comparing severe but plausible downside scenarios that could
arise from these risks individually and collectively against the level
of available financial resources and covenants indicated by the
Group’s financial forecasts.
Our procedures included:
– We critically assessed assumptions in base case and downside
scenarios relevant to liquidity and covenant metrics, in
particular in relation to revenue growth by comparing to
published economic forecasts and historical trends and
overlaying knowledge of the entity' plans based on approved
budgets and our knowledge of the entity and the sector in
which it operates;
– We assessed whether downside scenarios applied mutually
consistent and severe assumptions in aggregate, using our
assessment of the possible range of each key assumption and
our knowledge of inter-dependencies;
– We compared past budgets to actual results to assess the
Directors' track record of budgeting accurately;
– We inspected the confirmation from the lender of the
level of committed financing, and the associated covenant
requirements; and
– 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 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 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
110 is materially consistent with the financial statements and our
audit knowledge.
–
However, as we cannot predict all future events or conditions and
as subsequent events may result in outcomes that are inconsistent
with judgements that were reasonable at the time they were made,
the above conclusions are not a guarantee that the Group or the
Company will continue in operation.
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 high level policies and
procedures to prevent and detect fraud, as well as whether they
have knowledge of any actual, suspected or alleged fraud.
Reading 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.
This included communication from the Group audit team to the
component audit team of relevant fraud risks identified at the Group
level and request to the component audit team to report to the
Group audit team any instances of fraud that could give rise to a
material misstatement at the Group level.
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.
99
Pets at Home Group Plc Annual Report & Accounts 2023
Independent Auditor’s Report continued
to the members of Pets at Home Group Plc
We did not identify any additional fraud risks.
We performed procedures including:
–
Identifying journal entries to test for all full scope components
based on risk criteria and comparing the identified entries
to supporting documentation. These included those posted
by senior finance management and other unexpected users,
postings to overrider accounts close to the period end and
journal entries posted to unexpected account combinations
including revenue or cash.
Assessing whether the judgements made in making accounting
estimates are indicative of a potential bias.
–
We discussed with the audit committee matters related to actual
or suspected fraud, for which disclosure is not necessary, and
considered any implications for our audit.
Identifying and responding to risks of material misstatement
related to 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 others management (as required
by 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.
We communicated identified laws and regulations throughout our
team and remained alert to any indications of non- compliance
throughout the audit. This included communication from the
Group audit team to the component audit team of relevant laws
and regulations identified at the Group level, and a request for
the component audit team to report to the Group audit team any
instances of non-compliance with laws and regulations that could
give rise to a material misstatement at the Group level.
The potential effect of these laws and regulations on the financial
statements varies considerably.
Firstly, the Group is subject to laws and regulations that directly
affect the financial statements including financial reporting
legislation (including related companies legislation), distributable
profits legislation and taxation legislation and we assessed the
extent of compliance with these laws and regulations as part of our
procedures on the related financial statement items.
Secondly, the Group is subject to many other laws and regulations
where the consequences of non-compliance could have a material
effect on amounts or disclosures in the financial statements, for
instance through the imposition of fines or litigation. We identified
the following areas as those most likely to have such an effect: sale
of goods and consumer rights legislation, animal welfare legislation,
health and safety, data protection laws, anti-bribery, employment
law, regulatory capital and liquidity, and certain aspects of Company
legislation recognising the nature of the Group’s activities. Auditing
standards limit the required audit procedures to identify non-
compliance with these laws and regulations to enquiry of the
Directors and other management and inspection of regulatory and
legal correspondence, if any. Therefore if a breach of operational
regulations is not disclosed to us or evident from relevant
correspondence, an audit will not detect that breach.
100
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 fraud 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.
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 period is consistent with the financial statements; and
in our opinion those reports have been prepared in accordance
with the Companies Act 2006.
Directors’ remuneration report
In our opinion the part of the Directors’ Remuneration Report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
Disclosures of emerging and principal risks and longer-term
viability
We are required to perform procedures to identify whether there is a
material inconsistency between the Directors’ disclosures in respect
of emerging and principal risks and the viability statement, and the
financial statements and our audit knowledge.
Based on those procedures, we have nothing material to add or
draw attention to in relation to:
–
the Directors’ confirmation within the Viability Statement on
page 91 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;
Strategic Report
Governance
Financial Statements
–
–
the Emerging Risks disclosures describing these risks and how
emerging risks are identified, and explaining how they are being
managed and mitigated; and
the Directors’ explanation in the Viability Statement of how
they have assessed the prospects of the Group, over what
period they have done so and why they considered that period
to be appropriate, and their statement as to whether they
have a reasonable expectation that the Group will be able to
continue in operation and meet its liabilities as they fall due
over the period of their assessment, including any related
disclosures drawing attention to any necessary qualifications
or assumptions.
We are also required to review the Viability Statement, set out on
page 91 under the Listing Rules. Based on the above procedures, we
have concluded that the above disclosures are materially consistent
with the financial statements and our audit knowledge.
Our work is limited to assessing these matters in the context of
only the knowledge acquired during our financial statements
audit. As we cannot predict all future events or conditions and as
subsequent events may result in outcomes that are inconsistent
with judgements that were reasonable at the time they were made,
the absence of anything to report on these statements is not a
guarantee as to the Group’s and Company’s longer-term viability.
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.
9. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 94,
the Directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair
view; such internal control as they determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error; assessing the Group
and parent Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern; and
using the going concern basis of accounting unless they either
intend to liquidate the Group or the parent Company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue our
opinion in an auditor’s report. Reasonable assurance is a high level
of assurance, but does not guarantee that an audit conducted
in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud
or error and are considered material if, individually or in aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial statements.
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.
Ailsa Griffin (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
1 St Peters Square
Manchester
M2 3AE
25 May 2023
101
Pets at Home Group Plc Annual Report & Accounts 2023
Consolidated income statement
for the 52 week period ended 30 March 2023
52 week period ended
30 March 2023
Non-underlying
items (note 3)
£m
53 week period ended
31 March 2022 (reclassified)1
Total
£m
Underlying trading
£m
Non-underlying
items (note 3)
£m
Note
Underlying trading
£m
Revenue
Cost of sales
Impairment gains on receivables
Gross profit
Selling and distribution expenses
Administrative expenses
Other income1
Profit on disposal of subsidiary
Operating profit
Financial income
Financial expense
Net financing expense
Profit before tax
Taxation
Profit for the period
2
3
3
3
3
2,3
6
7
8
1,404.2
(737.9)
2.0
668.3
(409.8)
(121.0)
12.2
–
149.7
2.7
(16.0)
(13.3)
136.4
(24.4)
112.0
1 See note 1.1 for an explanation of the prior year reclassification.
–
–
–
–
(10.1)
(2.8)
–
–
(12.9)
–
(1.0)
(1.0)
(13.9)
2.6
(11.3)
1,404.2
(737.9)
2.0
668.3
(419.9)
(123.8)
12.2
–
136.8
2.7
(17.0)
(14.3)
122.5
(21.8)
100.7
1,317.8
(670.6)
0.7
647.9
(393.9)
(121.2)
11.7
–
144.5
0.2
(14.6)
(14.4)
130.1
(24.3)
105.8
–
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
(393.9)
(121.2)
11.7
19.2
163.8
0.2
(15.3)
(15.1)
148.7
(24.2)
124.5
Basic and diluted earnings per share attributable to equity shareholders of the Company:
Equity holders of the parent – basic
Equity holders of the parent – diluted
Dividends paid and proposed are disclosed in note 9.
The notes on pages 109 to 168 form an integral part of these financial statements.
52 week period ended
30 March 2023
53 week period ended
31 March 2022
Note
5
5
20.5p
20.2p
24.9p
24.5p
Consolidated statement of comprehensive income
for the 52 week period ended 30 March 2023
Profit for the period
Other comprehensive income
Items that are or may be recycled subsequently into profit or loss:
Foreign exchange translation differences
Effective portion of changes in fair value of cash flow hedges
Other comprehensive income for the period, before income tax
Income tax on other comprehensive income
Other comprehensive income for the period, net of income tax
Total comprehensive income for the period
The notes on pages 109 to 168 form an integral part of these financial statements.
52 week period ended
30 March 2023
£m
53 week period ended
31 March 2022
£m
Note
100.7
124.5
22
22
15,22
(0.1)
(10.6)
(10.7)
1.3
(9.4)
91.3
(0.0)
7.9
7.9
(1.2)
6.7
131.2
102
Strategic Report
Governance
Financial Statements
Consolidated balance sheet
at 30 March 2023
Note
At 30 March 2023
£m
At 31 March 2022
(restated)1
£m
11
12
13
15
16
14
16
17
18
20
19
12
21
16
19
12
21
16
22
146.9
359.6
989.5
1.9
10.9
1,508.8
108.6
2.2
51.8
–
178.0
340.6
1,849.4
(261.5)
(1.2)
(83.3)
(3.9)
(3.7)
(353.6)
(119.3)
(338.1)
(12.9)
(0.4)
(470.7)
(824.3)
1,025.1
4.8
(372.0)
113.3
(0.1)
0.2
(1.6)
1,280.5
1,025.1
108.9
340.1
987.1
1.1
14.1
1,451.3
84.5
3.0
53.7
9.1
166.0
316.3
1,767.6
(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
Non-current assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Deferred tax asset1
Other non-current assets
Current assets
Inventories
Other financial assets
Trade and other receivables
Corporation tax receivable
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Other interest-bearing loans and borrowings
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
Capital redemption 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:
Mike Iddon
Chief Financial Officer
25 May 2023
Company number: 08885072
The notes on pages 109 to 168 form an integral part of these financial statements.
103
Pets at Home Group Plc Annual Report & Accounts 2023
Consolidated statement of changes in equity
as at 30 March 2023
Share
capital
£m
Consolidation
reserve
£m
5.0
(372.0)
Merger
reserve
£m
113.3
Cash flow
hedging
reserve
£m
Translation
reserve
£m
Capital
redemption
reserve
£m
Balance at 31 March 2022
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
Share buyback
Purchase of own shares
Total contributions by and distributions to owners
Balance at 30 March 2023
–
–
–
–
–
–
–
–
(0.2)
–
(0.2)
4.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3.4
–
(9.3)
(9.3)
4.3
4.3
–
–
–
–
–
–
(0.0)
–
(0.1)
(0.1)
–
–
–
–
–
–
–
–
(372.0)
113.3
(1.6)
(0.1)
Retained
earnings
£m
Total
equity
£m
1,300.0
1,049.7
100.7
–
100.7
–
–
(58.7)
4.9
(2.0)
(50.3)
(14.1)
100.7
(9.4)
91.3
4.3
4.3
(58.7)
4.9
(2.0)
(50.3)
(14.1)
(120.2)
(120.2)
1,280.5
1,025.1
–
–
–
–
–
–
–
–
–
0.2
–
0.2
0.2
Consolidated statement of changes in equity
as at 31 March 2022
Balance at 25 March 2021
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
5.0
(372.0)
113.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Cash flow
hedging
reserve
£m
(1.5)
–
6.7
6.7
(1.8)
(1.8)
–
–
–
–
–
Translation
reserve
£m
Retained
earnings
£m
(0.0)
1,231.7
–
(0.0)
(0.0)
–
–
–
–
–
–
–
124.5
–
124.5
–
–
(48.5)
4.9
(0.3)
(12.3)
(56.2)
Total
equity
£m
976.5
124.5
6.7
131.2
(1.8)
(1.8)
(48.5)
4.9
(0.3)
(12.3)
(56.2)
Balance at 31 March 2022
5.0
(372.0)
113.3
3.4
(0.0)
1,300.0
1,049.7
104
Strategic Report
Governance
Financial Statements
Consolidated statement of cash flows
for the 52 week period ended 30 March 2023
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
Movement in working capital
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 receipts from lease incentives
Cash payments for the principal portion of the right-of-use lease liability
Purchase of own shares
Share buyback
Interest paid
Interest paid on lease obligations
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
The notes on pages 109 to 168 form an integral part of these financial statements.
52 week
period ended
30 March 2023
£m
53 week
period ended
31 March 2022
£m
100.7
103.4
–
(2.7)
17.0
4.9
21.8
245.1
3.4
(24.1)
36.9
3.6
19.8
(13.7)
251.2
–
2.7
(1.9)
(0.5)
0.4
–
(75.7)
(75.0)
(58.7)
123.3
(100.0)
(0.1)
22.0
(68.9)
(14.1)
(50.3)
(5.0)
(12.4)
(164.2)
12.0
166.0
178.0
124.5
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
Pets at Home Group Plc Annual Report & Accounts 2023
Company balance sheet
at 30 March 2023
Non-current assets
Investments in subsidiaries
Deferred tax asset1
Trade and other receivables
Current assets
Other financial assets
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
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
Capital redemption reserve
Cash flow hedging reserve
Retained earnings
Total equity
1 See note 1.1 for an explanation of the prior year restatement.
At
30 March 2023
£m
Note
At
31 March 2022
(restated)1
£m
28
15
17
16
18
20
19
16
22
936.2
2.8
578.4
1,517.4
2.0
0.4
2.4
936.2
2.8
600.2
1,539.2
1.6
–
1.6
1,519.8
1,540.8
(618.0)
(618.0)
(97.3)
(0.4)
(97.7)
(715.7)
804.1
4.8
113.3
0.2
1.2
684.6
804.1
(552.9)
(552.9)
(96.9)
–
(96.9)
(649.8)
891.0
5.0
113.3
–
1.3
771.4
891.0
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 52 week period ended 30 March 2023 was £33.4m (profit for the 53 week period ended 31 March
2022 was £23.8m).
On behalf of the Board:
Mike Iddon
Chief Financial Officer
25 May 2023
Company number: 08885072
The notes on pages 109 to 168 form an integral part of these financial statements.
106
Strategic Report
Governance
Financial Statements
Company statement of changes in equity
as at 30 March 2023
Balance at 31 March 2022
Total comprehensive income for the period
Profit 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
Share buyback
Purchase of own shares
Total contributions by and distributions to owners
Balance at 30 March 2023
Share
capital
£m
5.0
Merger
reserve
£m
113.3
Cash flow
hedging
reserve
£m
Capital
redemption
reserve
£m
Retained
earnings
£m
1.3
–
(0.1)
(0.1)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
113.3
1.2
–
–
–
–
–
–
(0.2)
–
(0.2)
4.8
–
–
–
–
–
–
–
0.2
–
0.2
0.2
771.4
33.4
–
33.4
(58.7)
4.9
(2.0)
(50.3)
(14.1)
(120.2)
684.6
Company statement of changes in equity
as at 31 March 2022
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 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
Balance at 31 March 2022
5.0
113.3
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
–
–
–
–
–
1.3
23.8
–
23.8
(48.5)
7.9
(0.3)
(12.3)
(53.2)
771.4
Total
equity
£m
891.0
33.4
(0.1)
33.3
(58.7)
4.9
(2.0)
(50.3)
(14.1)
(120.2)
804.1
Total
equity
£m
917.9
23.8
2.5
26.3
(48.5)
7.9
(0.3)
(12.3)
(53.2)
891.0
107
Pets at Home Group Plc Annual Report & Accounts 2023
Company statement of cash flows
for the 52 week period ended 30 March 2023
Cash flows from operating activities
Profit 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
Decrease/(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
Share buyback
Interest paid
Purchase of own shares
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
52 week period ended
30 March 2023
£m
53 week period ended
31 March 2022
£m
33.4
1.5
4.9
(3.0)
36.8
62.8
3.5
103.1
21.9
21.9
(58.7)
100.0
(100.0)
–
(50.3)
(1.5)
(14.1)
(124.6)
0.4
–
0.4
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)
–
–
–
108
Strategic Report
Governance
Financial Statements
Notes (forming part of the financial statements)
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.
New standards and interpretations issued by the International Accounting Standards Board (IASB) and the International Financial Reporting
Interpretations Committee (IFRIC) becoming effective during the 52 week period ended 30 March 2023 have not had a material impact on
the Group’s financial statements.
The Group is assessing the impact of IFRS 17 Insurance Contracts (applicable for the financial period beginning 31 March 2023).
The Group receives rental and other occupancy income from Joint Venture veterinary practices which are located within the Group’s
retail stores, and that income has increased as this part of the Group’s business has grown. Therefore, the Directors have concluded that
this income should be separately presented on the face of the income statement. Following the change in the current period presentation
and to aid comparability, the Directors have also reclassified the comparative amounts for the 53 week period ended 31 March 2022 and
so £11.7m has been reclassified from selling and distribution expenses to other income. There is no impact on profit, net assets, or the cash
flow statement.
The Directors have restated the presentation of the deferred tax assets in the Consolidated and Company balance sheets as at 31 March
2022. Under IAS 1, deferred tax is classified as a non-current balance. As a result, the £1.1m of deferred tax assets on the Group balance
sheet and £2.8m on the Company balance sheet at 31 March 2022 have been reclassified from current assets to non-current assets.
The restatement has had no impact on profit, net assets, or the cash flow statement.
The Directors have restated the number and FTE of colleagues in note 4 for the 53 week period ended 31 March 2022. These have been
restated to show averages across the financial period.
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 Group and 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 Group and 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 Group and 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, despite net current liabilities of £13.0m and 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 consumer confidence, geopolitical tensions
and the actual and potential impact on supply chains, as well as energy cost inflation on liquidity and future performance. The Group
has also considered the impact of climate change and the Task Force on Climate Related Financial Disclosures (‘TCFD’) scenario analysis
conducted in undertaking this assessment.
109
Pets at Home Group Plc Annual Report & Accounts 2023
Notes (forming part of the financial statements) continued
1 Significant accounting policies continued
1.3 Going concern continued
The Group has access to a revolving credit facility of £300m which expires in March 2027 and a £26.0m asset backed loan which expires
on 27 March 2030. The Group has £123.3m drawn down at 30 March 2023 and cash balances of £178.0m. The lowest level of headroom
forecast over the next 12 months from the date of signing of the financial statements is in excess of £360.5m in the base case scenario. 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 £346.6m 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. Two 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. A third extreme scenario, which is considered highly unlikely was also
modelled to thoroughly sensitise the assumptions in the base case scenario. The three scenarios include:
–
Scenario 1: Reduction on Group like-for-like sales growth assumptions of 1% in each year throughout the forecast period, but ordinary
dividends continue to be paid.
Scenario 2: Using scenario 1 outcomes and further impacted by a conflated risk impact of £26.5m on sales and £13.25m on PBT per
annum (using specific financial risks taken from the Group risk register with sales and PBT financial impact quantified), with dividends
held at 12.8p per share per annum.
Scenario 3: Group like-for-like sales growth declines to 0% in each year and a conflated risk impact of £84.5m on sales and £42.0m
on PBT is applied (using the top risks from the Group risk register with sales and PBT impact quantified), with dividends cut to nil to
conserve cash.
–
–
Against these negative scenarios, adjusted projections showed no breach of covenants. Further mitigating actions could also be taken in
such scenarios should it be required, including reducing capital expenditure.
Despite net current liabilities of £13.0m at Group level and £615.6m in the Company, the Directors of Pets at Home Group Plc, having made
appropriate enquiries including the principal risks and uncertainties on pages 23 to 30, consider that the Group and Company will have
sufficient funds to continue to meet their liabilities 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 Group consolidated financial statements and the
Company only financial statements as at and for the period ended 30 March 2023.
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. 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.
110
Strategic Report
Governance
Financial Statements
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 £0.1m.
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
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.
b)
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, interest-bearing 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.
111
Pets at Home Group Plc Annual Report & Accounts 2023
Notes (forming part of the financial statements) continued
1 Significant accounting policies continued
1.8 Derivative financial instruments and hedging continued
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.
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 to 10 years
– the term of the lease
Depreciation methods, useful lives and residual values are reviewed at each balance sheet date.
The impact of climate change, particularly in the context of risks identified in the Task Force on Climate Related Financial Disclosures (‘TCFD’)
scenario analysis have been considered and no material impact on the carrying value, useful lives or residual values have been identified.
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.
Expenditure on Software as a Service (‘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 Group 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.
The impact of climate change, particularly in the context of risks identified in the Task Force on Climate Related Financial Disclosures (‘TCFD’)
scenario analysis have been considered and no material impact on the carrying value, useful lives or residual values have been identified.
112
Strategic Report
Governance
Financial Statements
1.12 Leases
On completion of a lease, 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. In the current period the Group has received
a lease incentive of £22m (2022: £nil) in relation to the new distribution centre. The cash received has been included within cash flows from
financing activities on the basis that it is associated with the payments for the lease liability.
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.
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. This rental income is presented in other income in the Consolidated
Income Statement.
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.
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.
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Notes (forming part of the financial statements) continued
1 Significant accounting policies continued
1.14 Assessment of control with regard to Joint Ventures
The Group has assessed, and continually assesses, whether the level of an individual Joint Venture veterinary practice’s indebtedness to the
Group, particularly those with high levels of indebtedness, implies that the Group has the practical ability to control the Joint Venture, which
would result in the requirement to consolidate. In making this judgement, the Group reviewed the terms of the Joint Venture agreement
and the question of practical ability, as a provider of working capital to control the activities of the practice. This included consideration
of barriers to the Group’s ability to exercise such practical or other control which include difficulty in replacing Joint Venture Partners due
to the shortage of veterinarians in the UK and reputational damage within the veterinary network should the Group attempt to exercise
control, as well as potential barriers to the Joint Venture Partner exercising their own power over the activities of the practice. We note that
under the terms of the Joint Venture agreement, the partners run their practices with complete operational and clinical freedom. The Group
is satisfied that on the balance of evidence from the Group’s experience as shareholder and provider of working capital support to the
practices, it does not have the current ability to exercise control over those practices to which operating loans are advanced, and therefore
non consolidation is appropriate.
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 Stock Keeping
Unit ('SKU'). 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 considers Joint Venture receivables (operating loans) to be in default when the underlying
veterinary practice is significantly under-performing against its business plan, assessed based on future cash flow forecasts for the individual
practices which utilise consistent assumptions across all practices. Any shortfall in repayment of the Joint Venture loans and receivables
following the 10-year forecast period are considered to be in default. Loss given default is also determined based on the forecast shortfall
amount. Those within the performing credit risk category are deemed to have low credit risk. Practices categorised within the in default
credit risk categories are those considered to be in default based on their cash flow forecast. Significant increase in credit risk is not
applicable to Joint Venture operating loans due to the on-demand payment terms.
The Group considers initial set up loans to Joint Ventures to be in default when the loan remains outstanding once the practice has reached
15 years of age. Significant increase in credit risk is defined as any practice which has an operating loan which is in default as defined above.
All other loans are considered to be performing and have low credit risk.
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.
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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.
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 Group 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.
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Pets at Home Group Plc Annual Report & Accounts 2023
Notes (forming part of the financial statements) continued
1 Significant accounting policies continued
1.17 Employee benefits continued
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.
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 substantially 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 Company managed practices and income from
the provision of administrative support services to Joint Venture veterinary practices. Revenue received for the provision of veterinary
services is recognised at the point of provision of the service and is recognised net of value added tax, colleague discounts, coupons and
vouchers. Fee income received from the Joint Venture veterinary practice companies for administrative support services is recognised in the
period the services relate to and recorded net of value added tax. Fee income received from Joint Venture companies in relation to network
purchasing arrangements is recognised as the contractual commitments are fulfilled to create an entitlement to the revenue. The Group also
receives revenue in relation to business development for the Joint Venture companies and recognises this within operating income.
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Financial Statements
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 other income.
ii) Grooming revenue
Grooming revenue is recognised net of value added tax, colleague discounts, coupons and vouchers, at the point of provision of the service
to the customer. Deposits received are deferred until the grooming service has been performed.
iii) Insurance commissions
Insurance commissions are recognised on a pro-rated basis over the period the insurance policy relates to.
Accrued income
Accrued income relates to income in relation to fees from Joint Venture veterinary practices, 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.
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 period 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.
Fixed lump sum income: These are typically guaranteed lump sum payments made by the supplier and are not based on volume. Fixed
lump sum income is usually predicated on confirmation of a supplier contract and typically includes performance conditions upon the
Group, such as marketing and promotional campaigns. These amounts are recognised periodically when contractual milestones have
been met such as the promotion being run or marketing in-store.
Growth income: These are tiered volumetric rebates relating to growth targets agreed with the supplier in the joint business planning
process. These are retrospective rebates based on sales volumes or purchased volumes. Income is recognised to the extent that it is
reasonably certain that the conditions will be achieved, with such certainty increasing in the latter part of the calendar year.
2.
3.
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 period end are included within trade and
other receivables.
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Pets at Home Group Plc Annual Report & Accounts 2023
Notes (forming part of the financial statements) continued
1 Significant accounting policies continued
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 (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.
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.
1.24 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 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.
1.25 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 169.
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Governance
Financial Statements
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 General Practice veterinary practices.
Central includes the 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 operating expenses
Segment operating profit/(loss)
Underlying net financing expense
Non-underlying financing expense
Profit/(loss) before tax
Total non-underlying items
Underlying profit/(loss) before tax
52 week period ended 30 March 2023
Retail
£m
1,278.7
601.5
109.9
(10.1)
99.8
(11.1)
(1.0)
87.7
11.1
98.8
Vet Group
£m
122.8
65.6
51.7
–
51.7
(0.8)
–
50.9
–
50.9
Central
£m
2.7
1.2
(11.9)
(2.8)
(14.7)
(1.4)
–
(16.1)
2.8
(13.3)
Non-underlying operating expenses in the periods ended 30 March 2023 and 31 March 2022 are explained in note 3.
Income statement
Revenue
Underlying gross profit
Underlying operating profit/(loss)
Non-underlying items
Segment operating profit
Underlying net financing expense
Non-underlying financing expense
Profit before tax
Total non-underlying items
Underlying profit/(loss) before tax
53 week period ended 31 March 2022
Retail
£m
Vet Group
£m
Central
£m
1,206.9
589.9
112.5
–
112.5
(11.1)
–
101.4
–
101.4
108.4
56.5
43.2
0.1
43.3
(0.1)
–
43.2
(0.1)
43.1
2.5
1.5
(11.2)
19.2
8.0
(3.2)
(0.7)
4.1
(18.5)
(14.4)
Total
£m
1,404.2
668.3
149.7
(12.9)
136.8
(13.3)
(1.0)
122.5
13.9
136.4
Total
£m
1,317.8
647.9
144.5
19.3
163.8
(14.4)
(0.7)
148.7
(18.6)
130.1
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Pets at Home Group Plc Annual Report & Accounts 2023
Notes (forming part of the financial statements) continued
2 Segmental Reporting continued
Segmental revenue analysis by revenue stream
Retail – Food
Retail – Accessories
Retail – Services
Vet Group – Joint Venture 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 – Joint Venture fee income
Vet Group – Company managed practices
Vet Group – Other income
Central – Veterinary telehealth services
Total
3 Expenses and auditor’s remuneration
Included in operating profit are the following:
Retail
£m
744.8
486.4
47.5
–
–
–
–
1,278.7
Retail
£m
668.8
490.6
47.5
–
–
–
–
1,206.9
52 week period ended 30 March 2023
Vet Group
£m
Central
£m
–
–
–
77.2
37.5
8.1
–
122.8
–
–
–
–
–
–
2.7
2.7
53 week period ended 31 March 2022
Vet Group
£m
Central
£m
–
–
–
69.9
31.2
7.3
–
108.4
–
–
–
–
–
–
2.5
2.5
Total
£m
744.8
486.4
47.5
77.2
37.5
8.1
2.7
1,404.2
Total
£m
668.8
490.6
47.5
69.9
31.2
7.3
2.5
1,317.8
52 week period ended
30 March 2023
£m
53 week period ended
31 March 2022
(reclassified)1
£m
Non-underlying items
Provisions for voluntary redundancies for colleagues at existing Distribution Centres
Provisions for retention bonuses for colleagues at existing Distribution Centres
Pre-opening costs for new Distribution Centre
Dual running costs of operating new and existing Distribution Centres
Project management costs of opening new Distribution Centre
Depreciation of property plant and equipment (dual running costs)
Depreciation of right-of-use assets (dual running costs)
Group restructure costs
Aborted transaction costs
Costs associated with the purchase of Joint Venture veterinary practices
Profit on disposal of subsidiary
Total non-underlying items
Underlying items
Impairment gains on receivables
Software as a service (SaaS) expense
Depreciation of property, plant and equipment
Amortisation of intangible assets
Depreciation of right-of-use assets
Rentals under operating leases:
Expenses relating to short term or low value leases
Other income
Rental income from sub-leasing right-of-use assets to third parties
Rental and other occupancy income from related parties1
Share-based payment charges
2.1
1.8
4.0
0.4
0.7
0.4
0.7
2.7
0.1
–
–
12.9
(2.0)
29.9
25.7
9.8
66.8
0.1
(0.3)
(12.2)
4.9
–
–
–
–
–
–
–
–
–
(0.1)
(19.2)
(19.3)
(0.7)
24.0
25.4
8.8
69.7
0.1
(0.3)
(11.7)
4.9
1 Rental and other occupancy income from related parties is included in other income. Following the change in the current period presentation and to aid comparability, the Directors
have also reclassified the comparative amounts for the 53 week period ended 31 March 2022 and so £11.7m has been reclassified from selling and distribution expenses to other income.
120
Strategic Report
Governance
Financial Statements
Non-underlying items in operating profit
New Distribution Centre
The Group is in the process of building a new Distribution Centre which is due to become fully operational in summer 2023. This will replace
the existing Distribution Centres. The process is a significant operational change for the Group, outside of the ordinary course of business.
As part of the transition, the Group has incurred operational and payroll costs which it has classed as non-underlying. The items are split out
as follows:
–
£2.1m of non-underlying charges relate to a provision for voluntary redundancies for colleagues employed within the existing
Distribution Centres.
£1.8m of non-underlying charges relate to a provision for retention bonuses for colleagues at the existing Distribution Centres to remain
employed by the Group until the point at which the sites close.
£4.0m of non-underlying charges relate to pre-opening costs for the new Distribution Centre such as rent and utilities which have been
incurred despite the site not yet being fully operational.
£1.5m of non-underlying charges relate to costs incurred whilst the existing Distribution Centres and the new distribution centre are
both in operation. These ‘dual running’ costs incurred are temporary, and won’t continue after the closure of the existing distribution
centres. A further £1.0m of dual running costs relates to the interest expense on the lease liabilities of the Distribution Centres. This is
shown within finance expenses below operating profit on the consolidated income statement.
£0.7m of non-underlying charges relate to project management costs of opening the new Distribution Centre, including the transfer of
inventory from the existing Distribution Centres.
–
–
–
–
The remaining non-underlying items relate to:
–
£2.7m of non-underlying charges relate to costs for a restructure within the Group Support Office. These have been finalised and have
either been paid or are due for payment in the following financial year.
£0.1m of non-underlying charges relate to aborted transaction costs.
–
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 represented
contingent deferred consideration received as a result of the Specialist Referral Centres achieving certain key performance indicators.
During the 53 week period ended 31 March 2022, 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.
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.
Underlying items
The rentals under short term leases disclosed in relation to the 52 week period ended 30 March 2023 and the 53 week period ended
31 March 2022 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
52 week period ended
30 March 2023
£m
53 week period ended
31 March 2022
£m
0.0
1.3
0.1
0.0
1.4
0.0
1.0
0.1
0.2
1.3
121
Pets at Home Group Plc Annual Report & Accounts 2023
Notes (forming part of the financial statements) continued
4 Colleague numbers and costs
The average number of persons employed by the Group (including Directors) during the period, analysed by category, was as follows:
Sales and distribution – FTE
Administration – FTE
Sales and distribution – total
Administration – total
52 week period ended
30 March 2023
Number
53 week period ended
31 March 2022
(restated)1
Number
7,063
960
8,023
10,371
1,006
11,377
6,859
869
7,728
9,869
926
10,795
1 The number of colleagues and FTE for the 53 week period ended 31 March 2022 have been restated to show the average number and FTE of colleagues across the financial period.
The aggregate payroll costs of these persons were as follows:
Wages and salaries
Social security costs
Contributions to defined contribution pension plans
52 week period ended
30 March 2023
£m
53 week period ended
31 March 2022
(restated)1
£m
261.9
23.0
8.6
293.5
235.2
21.7
7.9
264.8
1 Costs from FY22 have been restated by £4.0m to take into account the cost of colleagues implementing Software as a Service (‘SaaS’) based projects.
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
52 week period ended
30 March 2023
£m
53 week period ended
31 March 2022
£m
2.9
0.6
1.3
0.1
4.9
7.1
2.7
0.2
10.0
2.8
0.5
1.6
0.1
5.0
6.7
1.9
0.3
8.9
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.
122
Strategic Report
Governance
Financial Statements
5 Earnings per share
Basic earnings per share is calculated by dividing the net profit for the period attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the period.
Diluted earnings per share is calculated by dividing the net profit for the period attributable to ordinary shareholders by the weighted
average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued
on the conversion of all dilutive potential ordinary shares into ordinary shares.
Profit attributable to equity shareholders of the parent (£m)
Basic weighted average number of shares
Dilutive potential ordinary shares
Diluted weighted average number of shares
Basic earnings per share
Diluted earnings per share
6 Finance income
Interest receivable on loans to Joint Venture veterinary practices
Other interest receivable
Total finance income
7 Finance expense
Bank loans at effective interest rate
Underlying interest expense on lease liability
Non-underlying interest expense on lease liability
Non-underlying accelerated amortisation on debt issue costs
Total finance expense
8 Taxation
Recognised in the income statement
Current tax expense
Current period
Adjustments in respect of prior periods
Current tax expense
Deferred tax expense
Origination and reversal of temporary differences
Impact of difference between deferred and current tax rates
Adjustments in respect of prior periods
Deferred tax expense
Total tax expense
52 week period ended
30 March 2023
53 week period ended
31 March 2022
Underlying
trading
After non-underlying
items
Underlying
trading
After non-underlying
items
112.0
491.9
6.5
498.4
22.8p
22.5p
100.7
491.9
6.5
498.4
20.5p
20.2p
105.8
500.0
7.4
507.4
21.2p
20.8p
124.5
500.0
7.4
507.4
24.9p
24.5p
52 week period ended
30 March 2023
£m
53 week period ended
31 March 2022
£m
0.4
2.3
2.7
0.2
0.0
0.2
52 week period ended
30 March 2023
£m
53 week period ended
31 March 2022
£m
4.6
11.4
1.0
–
17.0
3.2
11.4
–
0.7
15.3
52 week period ended
30 March 2023
£m
53 week period ended
31 March 2022
£m
24.2
(0.9)
23.3
(0.6)
(0.1)
(0.8)
(1.5)
21.8
23.6
(0.6)
23.0
1.1
0.2
(0.1)
1.2
24.2
The UK corporation tax standard rate for the period was 19% (2022: 19%). Deferred tax at 30 March 2023 has been calculated based on the
rate of 25% which is the 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.
123
Pets at Home Group Plc Annual Report & Accounts 2023
Notes (forming part of the financial statements) continued
8 Taxation continued
Deferred tax recognised in comprehensive income
Effective portion of changes in fair value of cash flow hedges (note 22)
Reconciliation of effective tax rate
52 week period ended
30 March 2023
£m
53 week period ended
31 March 2022
£m
(1.3)
1.2
Profit for the period
Total tax expense/(credit)
Profit excluding taxation
Tax using the UK corporation tax rate for the period of 19%
(53 week period ended 31 March 2022: 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
52 week period ended 30 March 2023
53 week period ended 31 March 2022
Underlying
trading
£m
Non-underlying
items
£m
112.0
24.4
136.4
25.9
(0.1)
0.8
(1.7)
1.1
–
(1.6)
24.4
(11.3)
(2.6)
(13.9)
(2.6)
–
–
–
–
–
–
(2.6)
Total
£m
100.7
21.8
122.5
23.3
(0.1)
0.8
(1.7)
1.1
–
(1.6)
21.8
Underlying
trading
£m
Non-underlying
items
£m
105.8
24.3
130.1
24.7
0.2
0.6
(0.8)
0.3
–
(0.7)
24.3
18.7
(0.1)
18.6
3.5
–
–
–
–
(3.6)
–
(0.1)
Total
£m
124.5
24.2
148.7
28.2
0.2
0.6
(0.8)
0.3
(3.6)
(0.7)
24.2
The UK corporation tax standard rate for the 52 week period ended 30 March 2023 was 19% (53 week period ended 31 March 2022: 19%).
The effective tax rate before non-underlying items for the 52 week period ended 30 March 2023 was 17.9% (53 week period ended 31 March
2022: 18.7%).
9 Dividends paid and proposed
Declared and paid during the period
Final dividend of 7.5p per share (2021: 5.5p per share)
Interim dividend of 4.5p per share (2022: 4.3p per share)
Proposed for approval by shareholders at the AGM
Final dividend of 8.3p per share (2022: 7.5p per share)
Group and Company
52 week period ended
30 March 2023
£m
53 week period ended
31 March 2022
£m
37.0
21.7
40.1
27.2
21.3
37.5
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 30 March 2023 and 31 March 2022 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 30 March 2023: 5,323,525 shares; holding at 31 March 2022: 3,363,989 shares).
10 Business combinations
In the 52 week period ended 30 March 2023, 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 30 March 2023, £2.0m of operating loans relating to these practices were written off in advance of the acquisitions.
Up to the date of acquisition and in the comparative period being the 53 week period ending 31 March 2022, 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.
124
Strategic Report
Governance
Financial Statements
Subsidiaries acquired in the 52 week period ended 30 March 2023
Accrington Vets4Pets Limited
Companion Care (Banbury) Limited
Companion Care (Chippenham) Limited
Bangor Wales Vets4Pets Limited
Newtownards Vets4Pets Limited
Companion Care (Llantrisant) Limited
Principal activity
Date of acquisition
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
16/06/2022
24/06/2022
28/06/2022
19/10/2022
24/11/2022
07/03/2023
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%
100%
100%
100%
100%
100%
100%
0.0
0.0
0.0
0.0
0.0
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. On acquisition, assets and liabilities are
revalued to fair value. Pre existing relationships between the Group and acquired Joint Venture practices are not considered part of the
business combination and have been removed from the fair values of assets and liabilities recognised on acquisition.
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
Intangible assets
Non-current liabilities
Lease liabilities
Current liabilities
Bank loans
Overdrafts
Partner loans
Trade and other payables
Net (liabilities)/assets
Goodwill arising on acquisition
Consideration
Less: Fair value of assets acquired
Goodwill arising on acquisition
Impairment of goodwill
Carrying value of goodwill
0.1
0.1
0.1
0.3
0.1
0.0
(0.2)
(0.2)
(0.4)
(2.4)
(2.5)
–
–
–
–
0.3
–
–
–
0.4
2.1
2.8
0.1
0.1
0.1
0.3
0.4
0.0
(0.2)
(0.2)
–
(0.3)
0.3
£m
0.5
(0.3)
0.2
–
0.2
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 goodwill acquired on the purchase of the six Joint Venture practices has been allocated to the Vet Group CGU.
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.
125
Pets at Home Group Plc Annual Report & Accounts 2023
Notes (forming part of the financial statements) continued
10 Business combinations continued
Goodwill arising on acquisition continued
In the 53 week period ended 31 March 2022, the Group 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 advance of the acquisitions.
Subsidiaries acquired in the 53 week period ended 31 March 2022
Principal activity
Date of acquisition
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
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
Veterinary practice
8 April 2021
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.
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
Overdrafts
Trade and other payables
Net (liabilities)/assets
0.7
0.0
0.1
0.9
0.8
–
(0.8)
(1.5)
(0.3)
(3.2)
(3.3)
–
–
–
–
–
0.7
–
–
–
–
0.7
Goodwill arising on acquisition of veterinary practice subsidiaries in 53 week period ended 31 March 2022
Consideration
Less: Fair value of assets acquired
Goodwill arising on acquisition
Impairment of goodwill
Carrying value of goodwill
126
0.7
0.0
0.1
0.9
0.8
0.7
(0.8)
(1.5)
(0.3)
(3.2)
(2.6)
£m
2.1
2.6
4.7
(3.7)
1.0
Strategic Report
Governance
Financial Statements
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.
The goodwill acquired on the purchase of the 11 Joint Venture practices has been allocated to the Vet Group CGU.
During the 52 week period ended 30 March 2023, the Group invested £1.0m in Project Blu Ltd, a sustainable pet product company, and
acquired 8.7% of the shares.
During the 53 week period ended 31 March 2022, the Group invested £0.0m in Dog Stay Limited. The Group’s percentage stake in Dog Stay
Limited has remained unchanged at 12% following the investment.
11 Property, plant and equipment
Freehold
property
£m
Leasehold
improvements
£m
Fixtures, fittings,
tools and
equipment
£m
Assets under
construction
£m
Cost
Balance at 31 March 2022
Additions
On acquisition (note 10)
Brought into use
Transfers1
Disposals
Balance at 30 March 2023
Depreciation
Balance at 31 March 2022
Depreciation charge for the period
Disposals
Balance at 30 March 2023
Net book value
At 31 March 2022
At 30 March 2023
2.4
–
–
–
–
–
2.4
0.4
0.0
–
0.4
2.0
2.0
65.7
11.7
0.2
0.8
–
(0.4)
78.0
32.9
4.4
(0.6)
36.7
32.8
41.3
Total
£m
342.4
65.3
0.3
–
(1.7)
(1.0)
261.6
34.5
0.1
0.8
–
(0.6)
12.7
19.1
–
(1.6)
(1.7)
–
296.4
28.5
405.3
200.2
21.7
(0.6)
221.3
61.4
75.1
–
–
–
–
12.7
28.5
233.5
26.1
(1.2)
258.4
108.9
146.9
1
Included within the cost of assets under construction brought forward at 31 March 2022 was £1.7m which related to software assets under construction. These have been reallocated to
intangible assets as at 30 March 2023.
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
–
9.3
–
3.4
–
12.7
–
–
–
–
–
12.7
Total
£m
310.1
33.6
0.9
–
(2.2)
342.4
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.
127
Pets at Home Group Plc Annual Report & Accounts 2023
Notes (forming part of the financial statements) continued
12 Leases
As Lessee
Property, plant and equipment comprise owned and leased assets that do not meet the definition of investment property.
The majority of the Group’s trading stores, standalone veterinary practices, 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 31 March 2022
Additions
Cost reallocation1
Disposals
Balance at 30 March 2023
Depreciation
Balance at 31 March 2022
Depreciation charge for the period
Cost reallocation1
Disposals
Balance at 30 March 2023
Net book value
At 31 March 2022
At 30 March 2023
Property
£m
Equipment
£m
531.6
83.4
(0.2)
–
614.8
199.2
64.1
0.2
–
263.5
332.4
351.3
16.6
4.0
–
(0.3)
20.3
8.9
3.4
–
(0.3)
12.0
7.7
8.3
Total
£m
548.2
87.4
(0.2)
(0.3)
635.1
208.1
67.5
0.2
(0.3)
275.5
340.1
359.6
1
Included within the cost of property right-of use assets brought forward at 31 March 2022 was £0.2m which related to accumulated amortisation. This has been reallocated to
accumulated amortisation and has no impact on net book value.
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 52 week period ended 30 March 2023.
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
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
Total
£m
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.
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Financial Statements
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 three years
Between three and five years
Between five and ten years
More than ten years
Total undiscounted lease liabilities
Carrying value of lease liabilities included in the statement of financial position
Current
Non-current
At 30 March
2023
£m
At 31 March
2022
£m
83.3
145.3
99.5
103.9
59.4
491.4
421.4
83.3
338.1
78.3
137.9
99.0
94.3
13.8
423.3
383.0
78.3
304.7
For the lease liabilities at 30 March 2023 a 0.1% change in the discount rate used would have increased the carrying value of lease liabilities
by £1.8m (31 March 2022: £1.4m).
Following increases in Bank of England interest rates in the 52 week period ended 30 March 2023, the Group has reviewed and
subsequently revised the interest rates implicit in new leases and lease extensions in line with IFRS 16. The revised rates used are between
4.8% and 5.4% and vary according to the length of the lease.
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. These leases are included within the lease
balances disclosed on the face of the balance sheet and a related provision has been made for other property costs relating to these properties.
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. An onerous lease provision was recognised where management believed there was a risk of default or where the
property remained vacant for a period of time. As part of this review the Group has assessed the ability to sub-lease the property and the
right-of-use asset has been written down to £nil where the Group does not consider a sublease likely.
13 Intangible assets
Cost
Balance at 31 March 2022
Additions
On acquisition (note 10)
Transfers1
Brought into use
Disposals
Balance at 30 March 2023
Amortisation
Balance at 31 March 2022
Amortisation charge for the period
Balance at 30 March 2023
Net book value
At 31 March 2022
At 30 March 2023
Goodwill
£m
Customer lists
and ‘know-how’
£m
Software
£m
Software under
construction
£m
959.1
–
0.2
–
–
–
959.3
0.1
–
0.1
959.0
959.2
6.7
–
0.4
–
–
(0.1)
7.0
1.0
0.7
1.7
5.7
5.3
68.3
5.5
–
(4.0)
1.9
–
71.7
45.9
9.1
55.0
22.4
16.7
–
4.5
–
5.7
(1.9)
–
8.3
–
–
–
–
8.3
Total
£m
1,034.1
10.0
0.6
1.7
–
(0.1)
1,046.3
47.0
9.8
56.8
987.1
989.5
1
Included within the cost of assets under construction in fixed assets brought forward at 31 March 2022 was £1.7m which related to software assets under construction. These have been
reallocated to intangible assets as at 30 March 2023. A further £4.0m of software assets under construction were classified as software assets in use at 31 March 2022. These have been
reallocated to software assets under construction.
129
Pets at Home Group Plc Annual Report & Accounts 2023
Notes (forming part of the financial statements) continued
13 Intangible assets continued
Cost
Balance at 25 March 2021
Additions
On acquisition (note 10)
Disposals
Balance at 31 March 2022
Amortisation
Balance at 25 March 2021
Amortisation charge for the period
Disposals
Balance at 31 March 2022
Net book value
At 25 March 2021
At 31 March 2022
Goodwill
£m
Customer lists
and ‘know-how’
£m
Software
£m
Total
£m
958.5
–
1.0
(0.4)
959.1
0.1
–
–
0.1
958.4
959.0
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
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 General Practice 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 30 March 2023 and 31 March 2022, the Group is deemed to have CGUs as follows:
Retail
TVC
Vet Group
Total
Goodwill
At 30 March
2023
£m
At 31 March
2022
£m
586.1
11.1
362.0
959.2
586.1
11.1
361.8
959.0
The recoverable amount of the CGU 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)
52 week period ended
30 March 2023
53 week period ended
31 March 2022
Retail
Vet Group
TVC
Retail
Vet Group
TVC
5
2.0%
12%
8%
46%
5
3.5%
11%
10%
61%
5
2.0%
11%
34%
61%
5
2.0%
11%
7%
48%
5
3.5%
11%
10%
63%
5
2.0%
11%
35%
59%
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 2022 financial statements.
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Governance
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 linkages between the
three operating segments and increasing the Group’s service offering. These linkages are embedded in the revenue growth assumption as
a result of offering online veterinary consultations as an additional service to Joint Venture veterinary practices. 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 impact of climate change and in particular the risks identified in 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 due to the growth in the pet care 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.
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
Increasing the discount rate by 100 bps
Reduction in gross margin percentage of 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.
14 Inventories
Finished goods
At 30 March 2023
£m
At 31 March 2022
£m
108.6
84.5
The cost of inventories recognised as an expense and included in ‘cost of sales’ is £642.6m (53 week period ended 31 March 2022: £585.3m).
Inventory expensed to cost of sales includes the cost of the Stock Keeping Units (‘SKUs’) sold, supplier income, stock wastage and foreign
exchange variances.
At 30 March 2023 the inventory provision amounted to £4.0m (31 March 2022: £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 £8.4m (31 March 2022: £10.3m).
In the 52 week period ended 30 March 2023, the value of inventory written off to the income statement amounted to £9.6m (53 week period
ended 31 March 2022: £7.6m).
131
Pets at Home Group Plc Annual Report & Accounts 2023
Notes (forming part of the financial statements) continued
15 Deferred tax assets and liabilities
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
At 30 March 2023
At 31 March 2022
Assets
£m
Liabilities
£m
–
1.0
–
3.4
1.1
5.5
(2.2)
–
(0.5)
(0.9)
–
(3.6)
Total
£m
(2.2)
1.0
(0.5)
2.5
1.1
1.9
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
Property, plant and equipment
Financial assets
Financial liabilities
Other short term timing differences
Share based payments
Net deferred tax assets/(liabilities)
Movement in deferred tax during the period
Property, plant and equipment
Net financial assets/(liabilities)
Other short term timing differences
Share based payments
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
Share based payments
Company
Movement in deferred tax during the period
Net financial liabilities
Other short term timing differences
Share based payments
31 March
2022
£m
Recognised
in income
£m
Recognised
in equity
£m
30 March
2023
£m
1.9
(0.8)
(3.1)
3.1
1.1
(4.1)
–
5.6
–
1.5
–
1.3
–
(2.0)
(0.7)
(2.2)
0.5
2.5
1.1
1.9
25 March
2021
£m
Recognised
in income
£m
Recognised
in equity
£m
31 March
2022
£m
3.5
0.4
(3.5)
3.4
3.8
(1.6)
–
0.4
–
(1.2)
–
(1.2)
–
(0.3)
(1.5)
1.9
(0.8)
(3.1)
3.1
1.1
31 March
2022
£m
Recognised
in income
£m
Recognised
in equity
£m
30 March
2023
£m
(0.3)
–
3.1
2.8
–
2.1
–
2.1
(0.1)
–
(2.0)
(2.1)
(0.4)
2.1
1.1
2.8
The rate used to calculate deferred tax assets and liabilities is 25% based on the rate at which the majority of items are expected to reverse.
Movement in deferred tax during the prior period
Net financial assets/(liabilities)
Share based payments
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.
132
Strategic Report
Governance
Financial Statements
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 30 March 2023
£m
At 31 March 2022
£m
At 30 March 2023
£m
At 31 March 2022
£m
0.4
6.6
1.2
2.1
0.6
–
–
10.9
0.2
8.6
2.1
1.1
0.5
1.6
0.0
14.1
–
–
–
–
–
–
–
–
–
–
–
–
–
1.6
–
1.6
Investments in Joint Venture veterinary practices
Investments represent £0.4m (2022: £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.
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 £6.6m (2022: £8.6m) 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 £1.0m (2022: £1.2m).
As at 31 March 2022
Net repayment and further advances
Provisions utilised during the period
As at 30 March 2023
Gross loan value
£m
Expected credit loss
£m
Carrying value of loan
£m
9.8
(2.2)
–
7.6
(1.2)
–
0.2
(1.0)
8.6
(2.2)
0.2
6,6
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. The loans are
categorised as performing, significant increase in credit risk or in default in accordance with the policy set out in note 1.16. The loss allowance
is calculated depending on the credit risk of each loan, the Group’s expectations of future cash flow recoverability and practice age in
accordance with the policy set out in note 1.16.
Credit risk
Performing
Significant increase in credit risk
Gross carrying amount
Loss allowance
Net carrying amount
At 30 March 2023
£m
At 31 March 2022
£m
6.6
1.0
7.6
(1.0)
6.6
8.1
1.7
9.8
(1.2)
8.6
133
Pets at Home Group Plc Annual Report & Accounts 2023
Notes (forming part of the financial statements) continued
16 Other financial assets and liabilities continued
Loans to Joint Venture veterinary practices – other loans
Loans to Joint Venture veterinary practices – other loans of £1.2m (2022: £2.1m) 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 (2022: £nil).
As at 31 March 2022
Net repayment and further advances
Provisions made during the period
As at 30 March 2023
Gross loan value
£m
Expected credit loss
£m
Carrying value of loan
£m
2.1
(0.9)
–
1.2
–
–
–
–
2.1
(0.9)
–
1.2
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.
Group
Company
At 30 March 2023
£m
At 31 March 2022
£m
At 30 March 2023
£m
At 31 March 2022
£m
1.6
1.6
–
–
Group
1.6
1.6
–
–
Company
At 30 March 2023
£m
At 31 March 2022
£m
At 30 March 2023
£m
At 31 March 2022
£m
–
2.0
–
0.2
2.2
0.5
–
2.2
0.3
3.0
–
2.0
–
–
2.0
–
–
–
–
–
Group
Company
At 30 March 2023
£m
At 31 March 2022
£m
At 30 March 2023
£m
At 31 March 2022
£m
(0.3)
(3.4)
(3.7)
–
(0.0)
(0.0)
–
–
–
–
–
–
Group
Company
At 30 March 2023
£m
At 31 March 2022
£m
At 30 March 2023
£m
At 31 March 2022
£m
(0.4)
(0.4)
–
–
(0.4)
(0.4)
–
–
Other financial assets
Non-current assets
Interest rate swaps
Other financial assets
Current assets
Fuel forward contracts
Interest rate swaps
Forward exchange contracts
Other receivables
Other financial liabilities
Current liabilities
Fuel forward contracts
Forward exchange contracts
Non-current liabilities
Interest rate swaps
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Financial Statements
17 Trade and other receivables
Current assets
Trade receivables
Amounts owed by Joint Venture veterinary practices – operating loans
Amounts owed by Joint Venture veterinary practices – trading balances
Other receivables
Prepayments
Accrued income
Non-current assets
Amounts owed by Group undertakings
Group
Company
At 30 March 2023
£m
At 31 March 2022
£m
At 30 March 2023
£m
At 31 March 2022
£m
13.5
10.4
11.5
5.7
3.4
7.3
–
51.8
14.9
15.2
–
13.1
1.7
8.8
–
53.7
–
–
–
–
–
–
578.4
578.4
–
–
–
–
–
–
600.2
600.2
Trade and other receivables
The impairment of trade and other receivables is assessed in line with IFRS9. As at 30 March 2023 and 31 March 2022 the impact of
expected credit loss on these balances was deemed to be immaterial and as such no provision has been made.
The Group applies the simplified approach under IFRS9 and default to lifetime expected credit loss. The ECL is immaterial on the trade
receivables balance for the 52 week period ended 30 March 2023 (53 week period ended 31 March 2022: £nil).
Amounts owed by Joint Venture veterinary practices
Amounts owed by Joint Venture veterinary practices represent trading balances and operating loans owed by Joint Venture veterinary
practices to the Group.
The impairment of amounts owed by Joint Venture Veterinary practices relating to trading balances are assessed in line with IFRS 9. As at
30 March 2023 and 31 March 2022, the impact of expected credit loss on these balances was deemed to be immaterial due to the short term
nature of these balances and as such no provision has been made.
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 £3.4m (2022: £5.0m). The basis for this
allowance and the movement in the period is set out below.
Group
As at 31 March 2022
Loans written off
Net repayment and further advances
Utilisation of provision
Release of impairment recognised during the period
As at 30 March 2023
Gross loan value
£m
Expected credit loss
£m
Carrying value of loan
£m
20.2
(2.0)
(4.4)
–
–
13.8
(5.0)
–
–
1.3
0.3
(3.4)
15.2
(2.0)
(4.4)
1.3
0.3
10.4
During the 52 week period ended 30 March 2023, £2.0m of operating loans which were deemed to be in default were written off in advance
of the acquisition of the ‘A’ shares (53 week period ended 31 March 2022: £2.3m) which led to the control and consolidation of these
practices. Further details of these acquisitions are provided in note 10.
135
Pets at Home Group Plc Annual Report & Accounts 2023
Notes (forming part of the financial statements) continued
17 Trade and other receivables continued
Group continued
The Group holds expected credit losses of £3.4m against operating loans of £13.8m (31 March 2022: ECLs of £5.0m against operating loans
of £20.2m). 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
future cash flow forecast, 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 30 March 2023
£m
At 31 March 2022
£m
9.1
4.7
13.8
(3.4)
10.4
9.5
10.7
20.2
(5.0)
15.2
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 £0.8m (31 March 2022: £1.2m). 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.
18 Cash and cash equivalents
Group
Company
At 30 March 2023
£m
At 31 March 2022
£m
At 30 March 2023
£m
At 31 March 2022
£m
Cash and cash equivalents
178.0
166.0
0.4
–
19 Other interest-bearing loans and borrowings
Group
Company
At 30 March 2023
£m
At 31 March 2022
£m
At 30 March 2023
£m
At 31 March 2022
£m
97.3
22.0
119.3
96.9
–
96.9
97.3
–
97.3
96.9
–
96.9
Non-current liabilities
Unsecured bank loans
Asset backed loans
Total
136
Strategic Report
Governance
Financial Statements
Current liabilities
Asset backed loans
Terms and debt repayment schedule
Group
Company
At 30 March 2023
£m
At 31 March 2022
£m
At 30 March 2023
£m
At 31 March 2022
£m
1.2
–
–
–
Currency
Nominal
interest rate
Revolving credit facility GBP
GBP
Asset backed loan
SONIA +1.35%
SONIA +1.50%
Year of
maturity
2027
2030
Face value at
30 March 2023
£m
Carrying amount at
30 March 2023
£m
Face value at
31 March 2022
£m
Carrying amount at
31 March 2022
£m
100.0
23.3
97.3
23.2
100.0
–
96.9
–
The drawn amount on the £300.0m revolving credit facility was £100.0m at 30 March 2023 (drawn amount on the £300m revolving credit
facility was £100.0m at 31 March 2022) 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). The loan also has ESG linked metrics which will be reflected in the margin payable, which
is +/- 5bps. Face value represents the principal value of the revolving credit facility. The facility is unsecured.
On 27 March 2023, the Group entered into a loan agreement to fund the purchase of capital items. The drawn amount on the £26m facility at
30 March 2023 was £23.3m. Interest is charged on the amount drawn at SONIA plus 1.5%. The Group will make monthly repayments until the
loan matures on 27 March 2030. The repayments do not begin until the full facility has been drawn.
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
Greater than five years
At 30 March 2023
£m
At 31 March 2022
£m
1.2
3.7
111.2
7.2
123.3
–
–
100.0
–
100.0
The £100m revolving credit facility at 30 March 2023 is held by the Company. The £23.3m of asset backed loan are held by Pets at Home
Limited, a 100% owned subsidiary 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. From 25 September 2023 the Group has new fixed interest rate swap
agreements covering £50.0m of senior facility borrowing at a blended fixed rate of 5.058%.
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 31 March 2022
£m
Cash flow
£m
Non-cash movement
£m
At 30 March 2023
£m
166.0
–
(100.0)
66.0
12.0
(1.2)
(22.1)
(11.3)
–
–
–
–
178.0
(1.2)
(122.1)
54.7
137
Pets at Home Group Plc Annual Report & Accounts 2023
Notes (forming part of the financial statements) continued
20 Trade and other payables
Current
Trade payables
Accruals and deferred income
Amounts owed to Joint Venture veterinary practices
Other payables including tax and social security
Amounts owed to Group undertakings
Group
Company
At 30 March 2023
£m
At 31 March 2022
£m
At 30 March 2023
£m
At 31 March 2022
£m
155.5
68.5
4.5
33.0
–
261.5
118.5
62.8
9.2
34.3
–
224.8
–
1.5
–
–
616.5
618.0
–
0.4
–
–
552.5
552.9
Amounts owed to Joint Venture veterinary practices that relate to trading balances are interest free and repayable on demand.
Within accruals and deferred income above, contract liabilities under IFRS15 of £0.5m (2022: £0.7m) relate to advanced consideration
received from customers in relation to gift vouchers, cards and points redeemable by charities. This revenue will be recognised as the
vouchers, cards and points are redeemed, which is expected to be over the next two years.
Within accruals above, contract liabilities under IFRS15 of £1.9m (2022: £1.6m) 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 31 March 2022
Provisions made during the period
Provisions utilised during the period
Provisions reclassified
Balance at 30 March 2023
Current
Non-current
Dilapidation
provision
£m
Closed stores
provision
£m
Provisions for exit and
closure costs relating
to Joint Venture
veterinary practices
£m
Provision for exit
and closure costs
relating to existing
Distribution Centres
£m
7.9
1.6
(0.3)
–
9.2
1.3
–
(0.1)
(0.5)
0.7
4.0
0.6
(1.9)
0.5
3.2
–
3.7
–
–
3.7
Total
£m
13.2
5.9
(2.3)
–
16.8
At 30 March 2023
£m
At 31 March 2022
£m
3.9
12.9
16.8
6.5
6.7
13.2
As a result of the planned closure of the existing Distribution Centres, at 30 March 2023, the Group has a provision of £2.0m for voluntary
redundancies for colleagues employed at those sites. The Group also holds a provision of £1.7m for retention bonuses payable to colleagues
at the existing Distribution Centres provided they remain employed by the Group until the sites close. Further information is provided in
note 3.
The closed stores provision relates to the rates, service charge and utilities payable on 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.
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 3 and 14 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.
138
Strategic Report
Governance
Financial Statements
22 Capital and reserves
Share capital
Group
At 25 March 2021
At 31 March 2022
At 30 March 2023
Company
At beginning of period
Nominal value of shares cancelled in year following purchase by the Group
On issue at period end - authorised
Share capital
Number
500,000,000
500,000,000
483,197,785
Share capital
£m
5.0
5.0
4.8
Share capital
30 March 2023
£m
5.0
(0.2)
4.8
In the 52 week period ended 30 March 2023, the Company bought back and cancelled 16,802,215 ordinary shares for total consideration
including stamp duty of £50.3m, at an average market value of 298 pence per share.
At beginning of period
On issue at period end - authorised
Share capital
31 March 2022
£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.
Capital redemption reserve
The capital redemption reserve comprised the par value of the 16.8m shares purchased and cancelled as part of the share buyback
programme completed in the 52 week period ended 30 March 2023.
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 30 March 2023, the EBT held 5,766,243 ordinary shares (31 March 2022: 3,363,989) with a cost of £19,546,982 (2022: £12,833,137).
The average market value of these shares as at 30 March 2023 was 367.2 pence per share (31 March 2022: 361.40 pence per share).
139
Pets at Home Group Plc Annual Report & Accounts 2023
Notes (forming part of the financial statements) continued
22 Capital and reserves continued
Other comprehensive income
30 March 2023
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
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
Translation reserve
£m
Cash flow
hedging reserve
£m
Total other
comprehensive income
£m
(0.1)
–
–
(0.1)
–
(10.6)
1.3
(9.3)
(0.1)
(10.6)
1.3
(9.4)
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
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$105m 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 30 March 2023, 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.
140
Strategic Report
Governance
Financial Statements
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:
30 March 2023
Cash and cash equivalents
Trade payables
Forward exchange contracts
Balance sheet exposure
31 March 2022
Cash and cash equivalents
Trade payables
Forward exchange contracts
Balance sheet exposure
Euro
£m
0.3
(2.9)
0.0
(2.6)
Euro
£m
0.0
(2.1)
0.0
(2.1)
US Dollar
£m
6.8
(7.2)
(3.3)
(3.7)
US Dollar
£m
0.2
(5.2)
2.2
(2.8)
HKD
£m
–
–
–
–
HKD
£m
0.0
–
–
0.0
Total
£m
7.1
(10.1)
(3.3)
(6.3)
Total
£m
0.2
(7.3)
2.2
(4.9)
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
30 March 2023
£m
31 March 2022
£m
30 March 2023
£m
31 March 2022
£m
0.2
(0.0)
(0.1)
–
(0.0)
(0.0)
0.2
0.1
A 5% strengthening of the above currencies against the pound sterling in any period would have had the equal but opposite effect on the
above currencies to the amounts shown above, on the basis that all other variables remain constant.
Managing interest rate benchmark reform and associated risks
The Group's exposure to sterling SONIA designated in hedging relationships is £123.3m at 30 March 2023, £100.0m of which represents the
nominal amount of the hedging interest rate swap and the principal amount of the hedged sterling-denominated revolving credit facility.
Interest rate risk
Cash flow and fair value interest rate risk
The Group’s interest rate risk arises from long-term borrowings. As at 30 March 2023 the Group had a revolving credit facility with a face
value totalling £100.0m and an asset backed loan with a face value of £23.3m. The Group’s borrowings as at 30 March 2023 incur interest
at a rate of 1.35% to 1.50% 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. From 25 September 2023 the Group
has new fixed interest rate swap agreements covering £50.0m of senior facility borrowing at a blended fixed rate of 5.058% which expires on
25 September 2024. The hedge is structured to hedge at least 70% of the forecast outstanding debt for the next year.
141
Pets at Home Group Plc Annual Report & Accounts 2023
Notes (forming part of the financial statements) continued
23 Financial instruments continued
Sensitivity analysis 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 30 March 2023
£m
Book value
At 31 March 2022
£m
Book value
At 30 March 2023
£m
Book value
At 31 March 2022
£m
100.0
23.3
123.3
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 30 March 2023 is
£100.0m which is 100% of the drawn down revolving credit facility, and the remaining unhedged 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 30 March 2023
£m
At 31 March 2022
£m
0.5
(0.5)
0.1
(0.1)
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.
142
Strategic Report
Governance
Financial Statements
Exposure to credit risk
The Group’s maximum exposure to credit risk, being the carrying amount of financial assets, is summarised in the table within the fair values
section below.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.
Management prepares and monitors rolling forecasts of the Group’s cash balances based on expected cash flows to ensure, as far as
possible, that it will have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions without risking
damage to the Group’s reputation. Covenants are monitored on a regular basis to ensure there is no risk or breach which would lead to an
‘Event of Default’ and compliance certificates are issued as required to the syndicate agent.
The following are the contractual maturities of financial liabilities including estimates of interest payable based on SONIA rates at the end of
the financial period:
Group
30 March 2023
Non-derivative financial liabilities
Bank loans (note 19)
Trade payables (note 20)
31 March 2022
Non-derivative financial liabilities
Bank loans (note 19)
Trade payables (note 20)
Company
30 March 2023
Non-derivative financial liabilities
Bank loans (note 19)
31 March 2022
Non-derivative financial liabilities
Bank loans (note 19)
Carrying
amount
£m
Contractual
cash flows
£m
120.5
155.5
276.0
140.5
155.5
296.0
Carrying
amount
£m
Contractual
cash flows
£m
96.9
118.5
215.4
100.0
118.5
218.5
1 year
or less
£m
6.6
155.5
162.1
1 year
or less
£m
–
118.5
118.5
1 to
<2 years
£m
2 to
<5 years
£m
5 years
and over
£m
7.5
–
7.5
118.8
–
118.8
7.6
–
7.6
1 to
<2 years
£m
2 to
<5 years
£m
5 years
and over
£m
–
–
–
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
97.3
97.3
111.9
111.9
4.0
4.0
2.7
2.7
105.2
105.2
–
–
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
96.9
96.9
100.0
100.0
–
–
–
–
100.0
100.0
–
–
143
Pets at Home Group Plc Annual Report & Accounts 2023
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:
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
2.0
(0.4)
(3.4)
(0.3)
(2.1)
2.0
(0.4)
(3.4)
(0.3)
(2.1)
2.0
–
(3.4)
(0.3)
(1.7)
–
(0.4)
–
–
(0.4)
–
–
–
–
–
–
–
–
–
–
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
0.5
4.3
1.6
2.2
0.5
4.3
–
2.2
0.5
2.7
1.6
–
–
1.6
–
–
–
–
–
–
–
–
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
2.0
(0.4)
1.6
2.0
(0.4)
1.6
2.0
–
2.0
–
(0.4)
(0.4)
–
–
–
–
–
–
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
–
–
–
–
Group
30 March 2023
Interest rate swaps:
Current assets (note 16)
Non-current liabilities (note 16)
Forward exchange contracts:
Current liabilities (note 16)
Fuel forward contracts:
Current liabilities (note 16)
31 March 2022
Interest rate swaps:
Assets (note 16)
Forward exchange contracts:
Assets (note 16)
Fuel forward contracts:
Assets (note 16)
Company
30 March 2023
Interest rate swaps:
Assets (note 16)
Liabilities (note 16)
31 March 2022
Interest rate swaps:
Assets (note 16)
144
Strategic Report
Governance
Financial Statements
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.
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).
145
Pets at Home Group Plc Annual Report & Accounts 2023
Notes (forming part of the financial statements) continued
23 Financial instruments continued
Fair values of financial instruments continued
30 March 2023
Carrying amount
Financial assets measured at fair value
Other investments (note 16)
Interest rate swaps used for hedging (note 16)
Financial assets not measured at fair value
Investments in Joint Venture veterinary practices (note 16)
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)
Financial liabilities measured at fair value
Fuel forward exchange 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)
30 March 2023
Fair value
Financial assets measured at fair value
Other investments (note 16)
Interest rate swaps used for hedging (note 16)
Financial assets not measured at fair value
Investments in Joint Venture veterinary practices (note 16)
Amounts owed by Joint Venture veterinary practices –
funding, trading and operating loans (note 17)
Loans to Joint Venture veterinary practices – initial set up loans (note 16)
Loans to Joint Venture veterinary practices – other loans (note 16)
Non-current other receivables (note 16)
Financial liabilities not measured at fair value
Other interest-bearing loans and borrowings (note 19)
146
Fair value
– hedging
instruments
£m
FVOCI – equity
instruments
£m
Financial assets
at amortised
cost
£m
Other
financial
liabilities
£m
Total
carrying
amount
£m
–
2.0
2.0
–
–
–
–
–
–
–
–
(0.3)
(3.4)
(0.4)
(4.1)
–
–
–
–
–
–
2.1
–
2.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.4
19.2
21.9
178.0
6.6
1.2
0.6
227.9
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(83.3)
(338.1)
(155.5)
(4.5)
(120.5)
(701.9)
Level 1
£m
Level 2
£m
Level 3
£m
–
–
–
–
–
–
–
2.1
2.0
0.4
21.9
6.6
1.2
0.6
–
–
–
–
–
–
–
–
(123.3)
–
(123.3)
2.1
2.0
4.1
0.4
19.2
21.9
178.0
6.6
1.2
0.6
227.9
(0.3)
(3.4)
(0.4)
(4.1)
(83.3)
(338.1)
(155.5)
(4.5)
(120.5)
(701.9)
Total
£m
2.1
2.0
0.4
21.9
6.6
1.2
0.6
Strategic Report
Governance
Financial Statements
31 March 2022
Carrying amount
Financial assets measured at fair value
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
Investments in Joint Venture veterinary practices (note 16)
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)
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
–
–
–
–
–
–
–
–
–
1.1
–
–
–
1.1
–
–
–
–
–
–
–
–
–
(0.0)
(0.0)
(0.0)
(0.0)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.2
28.0
15.2
166.0
8.6
2.1
0.5
0.3
220.9
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(78.3)
(304.7)
(118.5)
(9.2)
(96.9)
(607.6)
1.1
2.2
0.5
1.6
5.4
0.2
28.0
15.2
166.0
8.6
2.1
0.5
0.3
220.9
(0.0)
(0.0)
(78.3)
(304.7)
(118.5)
(9.2)
(96.9)
(607.6)
31 March 2022
Fair value
Financial assets measured at fair value
Other investments (note 16)
Interest rate swaps used for hedging (note 16)
Financial assets not measured at fair value
Investments in Joint Venture veterinary practices (note 16)
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 (note 16)
Other receivables (note 16)
Financial liabilities not measured at fair value
Other interest-bearing loans and borrowings (note 19)
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1.1
2.0
0.2
15.2
8.6
2.1
0.5
0.3
1.1
2.0
0.2
15.2
8.6
2.1
0.5
0.3
(100.0)
–
(100.0)
147
Pets at Home Group Plc Annual Report & Accounts 2023
Notes (forming part of the financial statements) continued
23 Financial instruments continued
Changes in liabilities arising from financing activities
Group
Balance at 31 March 2022
Changes from financing cash flows
Proceeds from loans and borrowings
Repayment of borrowings
Lease incentives received
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
Amortisation of debt issue costs
Total other changes
Balance at 30 March 2023
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
Company
Balance at 31 March 2022
Changes from financing cash flows
Proceeds from loans and borrowings
Repayment of borrowings
Total changes from financing cash flows
Other changes
Amortisation of debt issue costs
Total other changes
Balance at 30 March 2023
148
Loans and
borrowings
£m
96.9
123.3
(100.0)
–
–
23.3
–
–
–
(0.1)
0.4
0.3
120.5
Loans and
borrowings
£m
98.7
100.0
(100.0)
–
–
–
–
–
(3.3)
0.7
0.8
(1.8)
96.9
Lease
liabilities
£m
383.0
–
–
22.0
(83.1)
(61.1)
12.4
87.4
(0.3)
–
–
99.5
421.4
Lease
liabilities
£m
409.7
–
–
(78.2)
(78.2)
11.5
41.3
(1.3)
–
–
–
51.5
383.0
Loans and
borrowings
£m
96.9
100.0
(100.0)
–
0.4
0.4
97.3
Total
£m
479.9
123.3
(100.0)
22.0
(83.1)
(37.8)
12.4
87.4
(0.3)
(0.1)
0.4
99.8
541.9
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
479.9
Total
£m
96.9
100.0
(100.0)
–
0.4
0.4
97.3
Balance at 25 March 2021
Changes from financing cash flows
Proceeds from loans and borrowings
Repayment of borrowings
Total changes from financing cash flows
Other changes
Capitalisation of debt issue costs
Accelerated amortisation of debt issue costs
Amortisation of debt issue costs
Total other changes
Balance at 31 March 2022
Foreign currency risk
Inventory purchases
Commodity price risk
Fuel purchases
Interest rate risk
Variable rate instruments
Strategic Report
Governance
Financial Statements
Loans and
borrowings
£m
98.7
100.0
(100.0)
–
(3.3)
0.7
0.8
(1.8)
96.9
Total
£m
98.7
100.0
(100.0)
–
(3.3)
0.7
0.8
(1.8)
96.9
Cash flow hedge reserve
2023
£m
(2.5)
(0.3)
1.2
Commodity price risk
Foreign currency risk
Interest rate risk
Forward exchange
contracts- fuel
Forward exchange
contracts- inventory
Interest rate swaps
2022
£m
1.7
0.4
1.3
2022
£m
1.6
–
Nominal amount
Carrying amount-asset
Carrying amount-liability
Changes in the value of hedging instrument recognised
in OCI
Amount of hedging reserve transferred to cost of inventory
2023
£m
0.0
(0.3)
0.5
2022
£m
0.5
–
0.1
2023
£m
0.0
(3.4)
2022
£m
2.2
(0.0)
2023
£m
2.0
(0.4)
2.2
(0.4)
1.6
(1.5)
The following table provides a reconciliation by risk category of hedging reserve and analysis of OCI items, net of tax, resulting from cash flow
hedging accounting:
Balance at 31 March 2022/25 March 2021
Changes in fair value
Foreign currency risk-inventory purchase
Commodity risk-fuel
Interest rate risk
Tax on movements on reserves during the year
Balance at 30 March 2023/31 March 2022
2023
£m
3.4
(5.5)
(0.9)
0.1
1.3
(1.6)
2022
£m
(1.5)
2.6
0.5
3.0
(1.2)
3.4
149
Pets at Home Group Plc Annual Report & Accounts 2023
Notes (forming part of the financial statements) continued
23 Financial instruments continued
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
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.
Forward exchange
contracts and interest
rate swaps
Market comparison technique – the fair values
are based on broker quotes. Similar contracts are
traded in an active market and the quotes reflect
the actual transactions on similar instruments.
Other financial liabilities Other financial liabilities include the fair values of
the put and call options over the non-controlling
interests of subsidiary undertakings. The fair values
represent the best estimate of amounts payable
based on future earnings performance discounted
to present value.
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
Hedge accounting
Cash flow hedges
At 30 March 2023 and 31 March 2022, the Group held the following instruments to hedge exposures to changes in foreign currency and
interest rates.
Maturity 2023
Maturity 2022
1-6 months
6-12 months
More than 1 year
1-6 months
6-12 months
More than 1 year
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
50.1
1.16
1.14
100.0
0.811%
30.8
1.21
1.11
–
–
–
–
–
50.0
5.058%
52.9
1.37
1.18
–
–
21.0
1.34
1.18
–
–
–
–
–
100.0
0.811%
Company
The Company held interest rate swaps as at 30 March 2023 and 31 March 2022 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.
150
Strategic Report
Governance
Financial Statements
24 Share-based payments
At 30 March 2023 and 31 March 2022, 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.
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.
151
Pets at Home Group Plc Annual Report & Accounts 2023
Notes (forming part of the financial statements) continued
24 Share-based payments continued
2 PSP continued
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.
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 15.38% 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.
152
Strategic Report
Governance
Financial Statements
b) Issue of invitations
Invitations to participate in the SAYE may be made during each 42 day period from (and including) (i) the date on which any amendment
to the SAYE is approved or adopted by the Company’s shareholders, (ii) the announcement of the Company’s final or interim results for any
financial period, (iii) the occurrence of an event which the Remuneration Committee considers to be an non-underlying event concerning
the Group or (iv) changes to the legislation affecting tax approved SAYE option schemes coming into effect. If any of the above periods is a
‘close period’ as a result of the application of the Model Code for Securities Transactions by Directors of Listed Companies (or as a result of
the Company’s equivalent internal share dealing rules) and the Company is prohibited from issuing invitations and/or granting options as a
result, then invitations may be made within 42 days of the end of the close period.
Invitations may be issued by the trustee of an employee benefit trust. No invitations may be issued or options granted more than ten years
after the adoption of the SAYE.
c) Exercise price
The price at which an option holder may acquire shares on the exercise of an option shall be determined by the Board but shall not be less
than the greater of 80% of the market value of a share at the time of grant and its nominal value.
d) Savings contract
Options may be granted by the Board or the trustee of an employee benefit trust. Upon applying for an option, the colleague will be required
to enter into an approved savings contract with a savings institution nominated by the Company which lasts for three years. The maximum
amount which an employee is permitted to contribute under SAYE contracts is £500 per month. The Board may set lower savings limits than
this for different colleagues by reference to objective criteria such as levels of salary or length of service. The minimum contribution is £5 per
month (or such greater amount as the Board may specify, not to exceed £10). The total exercise price of the shares over which the option is
granted may not exceed the aggregate of the monthly contributions and bonus payable at the end of the colleague’s related SAYE contract.
e) Scheme limits
The number of newly issued shares over which (or in respect of which) options may be granted under the SAYE on any date of grant shall be
limited so that the total number of shares issued or capable of being issued in any ten year period under all the Company’s employee share
schemes (including the 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.
153
Pets at Home Group Plc Annual Report & Accounts 2023
Notes (forming part of the financial statements) continued
24 Share-based payments continued
4 RSA continued
For the purposes of these limits, no account will be taken of options or awards granted before, on or in connection with Admission and no
account will be taken of options or awards which have lapsed, been surrendered or otherwise become incapable of exercise or vesting.
Shares held in treasury will be treated as newly issued shares for the purposes of these limits (as long as this is required by institutional
investor guidelines), but (for the avoidance of doubt) shares acquired in the market will not.
e) Individual limits
The aggregate market value of shares comprised in awards granted to a colleague under the RSA, PSP and the CSOP in any financial year
shall not exceed 150% of their annual salary for that year. Market value for these purposes will be calculated by reference to the market value
of the shares on the relevant date of grant as determined by the Board (following consultation with the Remuneration Committee) in its
absolute discretion.
Fair value of share awards
The expected volatility is based on historical volatility of a peer group of companies over a relevant period prior to award. The expected life
is the average expected period to exercise, which has been taken as three years. The risk free rate of return is the yield on zero-coupon UK
government bonds with a life equal to this expected life.
Options are valued using a Black-Scholes option-pricing model for the non-market based (EPS element) performance conditions and a
Monte-Carlo simulation for the market-based (TSR element) performance conditions.
Special provisions allow early exercise in the case of death, injury, disability, redundancy, retirement or because the Company which employs
the option holder ceases to be part of the Group or in the event of a change in control, reconstruction or winding up of the Company.
The key assumptions used in the fair value of the awards were as follows:
RSA
PSP
2022
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
£3.47
£0.00
32%
10
2.00%
n/a
£3.47
£4.57
£0.00
32%
10
2.00%
n/a
£4.57
£2.28
£0.00
32%
10
2.00%
n/a
£2.28
£1.87
£0.00
32%
10
2.00%
n/a
£1.87
£1.37
£0.00
32%
10
2.00%
n/a
£1.37
£2.59
£0.00
32%
10
2.00%
0.50%
£2.06
£2.75
£0.00
30%
10
2.00%
1.07%
£2.06
£2.45
£0.00
30%
10
2.00%
1.07%
£2.06
At grant date
Share price
Exercise price
Expected volatility
Option life (years)
Expected dividend yield
Risk free interest rate
Weighted average fair value of options granted
CSOP
SAYE
2017
2016
2015
2022
2021
2020
£2.59
£2.59
32%
10
2.00%
0.50%
£0.65
£2.75
£2.75
32%
10
2.00%
2.25%
£0.89
£2.31
£2.31
37%
10
2.00%
2.25%
£0.75
£3.05
£2.44
37%
3
2.00%
1.40%
£1.16
£5.13
£4.10
33%
3
2.00%
0.64%
£1.68
£2.87
£2.29
32%
3
2.00%
0.20%
£0.95
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
154
PSP
000
2
–
–
–
–
2
–
CSOP
000
476
–
(32)
(114)
(2)
328
2.57
SAYE
000
3,218
2,276
(1,102)
(490)
(11)
3,891
2.55
RSA
000
5,925
1,778
(855)
(1,830)
(11)
5,007
–
Total
000
9,621
4,054
(1,989)
(2,434)
(24)
9,228
NA
Strategic Report
Governance
Financial Statements
The Group income statement charge recognised in respect of share-based payments for the 52 week period ended 30 March 2023 is £4.9m
(53 week period ended 31 March 2022: £4.9m).
25 Commitments
Capital commitments
At 30 March 2023, the Group is committed to incur capital expenditure of £3.0m (31 March 2022: £21.7m). Capital commitments
predominantly relate to the cost of investment in and refurbishment of the new Pets at Home Distribution Centre.
At 30 March 2023, the Group has a commitment to increase the loan funding to Joint Venture companies of £0.4m (31 March 2022: £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 £7.6m (31 March 2022: £11.2m).
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
Accrington Vets4Pets Limited
Alton Vets4Pets Limited
Andover Vets4Pets Limited
Bangor Wales Vets4Pets Limited
Companion Care (Ballymena) Limited
Companion Care (Banbury) Limited
Companion Care (Barnsley Cortonwood) Limited
Bearsden Vets4Pets Limited
Bedminster Vets4Pets Limited
Belfast Stormont Vets4Pets Limited
Bicester Vets4Pets Limited
Blackpool Warbreck Vets4Pets Limited
Bonnyrigg Vets4Pets Limited
Borehamwood Vets4Pets Limited
Bourne Vets4Pets Limited
Bracknell Vets4Pets Limited
Bramley Vets4Pets Limited
Brighton Vets4Pets Limited
Carmarthen Vets4Pets Limited
Companion Care (Chippenham) Limited
Clitheroe Vets4Pets Limited
Corby Vets4Pets Limited
Craigavon Vets4Pets Limited
Davidsons Mains Vets4Pets Limited
Denbigh Vets4Pets Limited
Doncaster Vets4Pets Limited
East Kilbride South Vets4Pets Limited
Ellesmere Port Vets4Pets Limited
Companion Care (Ely) Limited
Evesham Vets4Pets Limited
Companion Care (Exeter) Limited
Companion Care (Exeter Marsh) Limited
Companion Care (Farnborough) Limited
Registered number
09393267
11024679
10015704
09639868
08132407
08314827
08294444
08606393
04141142
07780175
09267870
09022077
10285804
08394978
10757330
09319066
10200670
10605544
04238788
13539268
09498169
08107702
09878308
08163294
08846831
07726992
10976376
04335358
09628917
09725644
04417089
09269582
04930076
08314727
07673889
155
Pets at Home Group Plc Annual Report & Accounts 2023
Notes (forming part of the financial statements) continued
26 Contingencies continued
Exemption from audit by parent guarantee continued
Company
Grantham Vets4Pets Limited
Guildford Vets4Pets Limited
Handforth Vets4Pets Limited
Haverfordwest Vets4Pets Limited
Huddersfield Vets4Pets Limited
Inverurie Vets4Pets Limited
Kendal 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 (Llantrisant) 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
Newtownards Vets4Pets Limited
Northwich Vets4Pets Limited
Pet Advisory Services Limited
Prescot Vets4Pets Limited
Rawtenstall Vets4Pets Limited
Redditch Vets4Pets Limited
Runcorn Vets4Pets Limited
Sheldon Vets4Pets Limited
Sidcup Vets4Pets Limited
South Shields Quays Vets4Pets Limited
Companion Care (Slough) Limited
St Neots Vets4Pets Limited
Staines Vets4Pets Limited
Companion Care (Stratford-upon-Avon) Limited
Sudbury 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
Pets at Home No.1 Limited
Pets at Home Holdings Limited
Pet City Limited
Pet City Holdings Limited
Pet City Resources Limited
Vets4Pets Services Limited
Vets4Pets Veterinary Group Limited
156
Registered number
08361049
13470077
13371655
09485504
07207906
11056047
10163314
07680864
08536904
10291543
09881176
09966547
06959208
08080307
07149744
08285995
05171954
05094399
10516552
10602806
09869384
10756991
10425760
08425358
07957431
10067571
11107287
09180974
08878815
09009519
05612150
11446894
08822150
08187232
09848857
07427613
09811640
13584062
07329166
09916308
09881179
11023079
11145982
SC230445
09190138
07620413
09869355
07103838
08878037
03911784
08887355
03864149
02466773
02342109
02634797
05055601
04263054
Strategic Report
Governance
Financial Statements
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 £7.6m (31 March 2022: £11.2m).
The transactions entered into during the period and the balances outstanding at the end of the period are as follows:
Transactions
Fees for services provided to Joint Venture veterinary practices
Rental and other occupancy charges to Joint Venture veterinary practices
Total income from Joint Venture veterinary practices
Acquisitions
Consideration for Joint Venture veterinary practices acquired (note 10)
Balances
Included within trade and other receivables (note 17):
Operating loans
– Gross value of operating loans
– Allowance for expected credit losses held for operating loans
Net operating loans
Trading balances
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)
30 March 2023
£m
31 March 2022
£m
77.2
12.2
89.4
0.5
13.8
(3.4)
10.4
11.5
7.6
(1.0)
6.6
1.2
–
1.2
(4.5)
29.6
69.9
11.7
81.6
2.1
20.2
(5.0)
15.2
–
9.8
(1.2)
8.6
2.1
–
2.1
(9.2)
22.9
Fees for services provided to related party veterinary practices are included within revenue and relate to charges for support services
offered in such areas as clinical development, promotion and methods of operation as well as service activities including accountancy, legal
and property. In accordance with IFRS15, revenue in the 52 week period ended 30 March 2023 and the 53 week period ended 31 March 2022
excludes irrecoverable fee income from Joint Venture veterinary practices.
Funding for new practices represents the amounts advanced by the Group to support veterinary practice opening costs. The funding is short
term and the related party Joint Venture veterinary practice draws down their own bank funding to settle these amounts outstanding with
the Group shortly after opening.
Trading balances represent costs incurred and income received by the Group in relation to the services provided to the Joint Venture
veterinary practices that have yet to be recharged.
Operating loans represent amounts advanced to related party Joint Venture veterinary practices to support their working capital
requirements and longer term growth. The loans advanced to the practices are interest free and either repayable on demand or repayable
within 90 days of demand. No facility exists and the levels of loans are monitored in relation to review of the practices performance against
business plan. Based on the projected cash flow forecast on a practice by practice basis, the funding is often expected to be required
for a number of years. As practices generate cash on a monthly basis it is applied to the repayment of brought forward operating loans.
For immature practices, loan balances may increase due to operating requirements. The balances above are shown net of allowances for
expected credit losses held for operating loans of £3.4m (31 March 2022: £5.0m).
157
Pets at Home Group Plc Annual Report & Accounts 2023
Notes (forming part of the financial statements) continued
27 Related parties continued
Joint Venture veterinary practice transactions continued
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 £1.0m (31 March 2022: £1.2m).
In the 52 week period ended 30 March 2023, the value of loans written off recognised in the income statement amounted to £2.0m which
relates to operating loans. 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.
At 30 March 2023, the Group had a commitment to increase the loan funding to Joint Venture companies of £0.4m (31 March 2022: £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 Investment in subsidiaries
Company
At 30 March 2023 and 31 March 2022
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 £959.2m at 30 March 2023 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 addresses
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
Project Blu Limited: 34 Cardiff Road, Dinas Powys, Wales CF64 4JS
The registered office of all the remaining companies in which the Group has an interest in the share capital is Epsom Avenue, Stanley Green,
Handforth, Cheshire, England SK9 3RN.
Group
Details of the subsidiary undertakings are as follows:
In the 52 week period ended 30 March 2023, the Group has also acquired 100% of the ‘A’ shares of six 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.
158
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
Accrington Vets4Pets Limited
Addlestone Vets4Pets Limited
Alton Vets4Pets Limited
Andover Vets4Pets Limited
Aylesbury Berryfields Vets4Pets Limited
Bangor Wales 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
Bromborough Vets4Pets Limited
Cambridge Perne Road Vets4Pets Limited
Canvey Vets4Pets Limited
Carmarthen Vets4Pets Limited
Chorley Vets4Pets Limited
Strategic Report
Governance
Financial Statements
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
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Country of
incorporation
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
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Class of
shares held
At 30 March
2023 %
At 31 March
2022 %
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
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
50
100
100
100
100
50
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
159
Pets at Home Group Plc Annual Report & Accounts 2023
Notes (forming part of the financial statements) continued
28 Investment in subsidiaries continued
Group continued
Company
Clacton Vets4Pets Limited
Clitheroe Vets4Pets Limited
Colchester Layer Road Vets4Pets Limited
Colchester Vets4Pets Advanced Practice Limited
Companion Care (Ballymena) Limited
Companion Care (Banbury) Limited
Companion Care (Barnsley Cortonwood) Limited
Companion Care (Chippenham) 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 (Llantrisant) 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
Crosby Vets4Pets Limited
Davidsons Mains Vets4Pets Limited
Denbigh Vets4Pets Limited
Didcot Vets4Pets Limited
Doncaster 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
Horsham Vets4Pets Limited
Huddersfield Vets4Pets Limited
Inverness Vets4Pets Limited
Inverurie Vets4Pets Limited
Kendal Vets4Pets Limited
Kingswood Vets4Pets Limited
Lancaster Vets4Pets Limited
Leamington Spa Vets4Pets Limited
Leamington Spa Myton Road Vets4Pets Limited
Leeds Kirkstall Vets4Pets Limited
Leicester St Georges Vets4Pets Limited
160
Holding
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Country of
incorporation
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Class of
shares held
At 30 March
2023 %
At 31 March
2022 %
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
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
50
100
50
100
100
100
100
100
100
50
100
100
100
100
100
100
100
100
100
100
100
100
100
–
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
100
100
100
100
100
100
100
–
100
100
Company
Leven Vets4Pets Limited
Linlithgow Vets4Pets Limited
Littleover Vets4Pets Limited
Liverpool OS Vets4Pets Limited
Long Eaton Vets4Pets Limited
Maidstone Vets4Pets Limited
Malvern Vets4Pets Limited
Market Harborough Vets4Pets Limited
Marlborough Vets4Pets Limited
Melton Mowbray Vets4Pets Limited
Mexborough Vets4Pets Limited
Milton Keynes Broughton Vets4Pets Limited
Monmouth Vets4Pets Limited
Musselburgh Vets4Pets Limited
Newark Vets4Pets Limited
Newbury Vets4Pets Limited
Newhaven Vets4Pets Limited
Newton Mearns Vets4Pets Limited
Newtownards 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 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
Strategic Report
Governance
Financial Statements
Holding
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Country of
incorporation
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Class of
shares held
At 30 March
2023 %
At 31 March
2022 %
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
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
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
100
100
50
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
161
Pets at Home Group Plc Annual Report & Accounts 2023
Notes (forming part of the financial statements) continued
28 Investment in subsidiaries continued
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
Airdrie Vets4Pets Limited
Alsager Vets4Pets Limited
Altrincham Vets4Pets Limited
Amesbury Vets4Pets Limited
Bagshot Vets4Pets Limited
Bangor 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
Bracknell Peel Centre Vets4Pets Limited
Bradford Idle Vets4Pets Limited
Brighouse Vets4Pets Limited
Bristol Emerson Green Vets4Pets Limited
Bristol Imperial Vets4Pets Limited
Bristol Kingswood Vets4Pets Limited
Bristol Longwell Green Vets4Pets Limited
Bromsgrove Vets4Pets Limited
Buckingham Vets4Pets Limited
Bulwell Vets4Pets Limited
Burscough Vets4Pets Limited
Burton-On-Trent Vets4Pets Limited
Bury St Edmunds Vets4Pets Limited
Bury Vets4Pets Limited
Byfleet Vets4Pets Limited
Caerphilly Vets4Pets Limited
Camborne Vets4Pets Limited
Cannock Vets4Pets Limited
Canterbury Sturry Vets4Pets Limited
Cardiff Ely Vets4Pets Limited
Cardiff Newport Road Vets4Pets Limited
Carlisle Vets4Pets Limited
Carrickfergus Vets4Pets Limited
Castleford Vets4Pets Limited
Catterick Vets4Pets Limited
Chadwell Heath Vets4Pets Limited
Cheadle Hulme Vets4Pets Limited
Chester Caldy Vets4Pets Limited
Chester Vets4Pets Limited
162
Holding
Country of incorporation
Class of
shares held
At 30 March
2023 %
At 31 March
2022 %
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
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
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
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
Holding
Country of incorporation
Class of
shares held
At 30 March
2023 %
At 31 March
2022 %
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
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
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
163
Company
Chesterfield Vets4Pets Limited
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 (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 (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
Companion Care (Falmouth) Limited
Pets at Home Group Plc Annual Report & Accounts 2023
Notes (forming part of the financial statements) continued
28 Investment in subsidiaries continued
Investments in Joint Venture practices and other investments continued
Company
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 (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
164
Holding
Country of incorporation
Class of
shares held
At 30 March
2023 %
At 31 March
2022 %
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
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
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
Company
Companion Care (Southend-On-Sea) Limited
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
Crewe Vets4Pets Limited
Cross Hands Vets4Pets Limited
Cumbernauld Vets4Pets Limited
Dagenham Vets4Pets Limited
Darlington Vets4Pets Limited
Daventry Vets4Pets Limited
Denton Vets4Pets Limited
Dewsbury Vets4Pets Limited
Dorchester 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
Strategic Report
Governance
Financial Statements
Holding
Country of incorporation
Class of
shares held
At 30 March
2023 %
At 31 March
2022 %
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
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
50
50
50
50
50
50
50
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
100
50
50
50
50
50
50
50
100
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
165
Pets at Home Group Plc Annual Report & Accounts 2023
Notes (forming part of the financial statements) continued
28 Investment in subsidiaries continued
Investments in Joint Venture practices and other investments continued
Company
Guernsey Vets4Pets Limited
Halesowen Vets4Pets Limited
Halifax Vets4Pets Limited
Hamilton Vets4Pets Limited
Harrogate New Park Vets4Pets Limited
Harrogate Vets4Pets Limited
Hartlepool Vets4Pets Limited
Hastings Vets4Pets Limited
Havant Vets4Pets Limited
Haverhill Vets4Pets Limited
Hayling Island Vets4Pets Limited
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
Kilmarnock 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
166
Holding
Country of incorporation
Class of
shares held
At 30 March
2023 %
At 31 March
2022 %
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
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
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
Company
Middlesbrough Cleveland Park Vets4Pets Limited
Middlesbrough Vets4Pets Limited
Middleton Vets4Pets Limited
Millhouses Vets4Pets Limited
Morpeth Vets4Pets Limited
New Milton Vets4pets Limited
Newcastle-Upon-Tyne Vets4Pets Limited
Newmarket Vets4Pets Limited
Newport Vets4Pets Limited
Newton Abbot Vets4Pets Limited
Newtownabbey Vets4Pets Limited
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
Pentland 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
Project Blu 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 Drakehouse Vets4Pets Limited
Sheffield Wadsley Bridge Vets4Pets Limited
Shelfield Vets4Pets Limited
Shrewsbury Meole Brace Vets4Pets Limited
Shrewsbury Vets4Pets Limited
Sittingbourne Vets4Pets Limited
Solihull Vets4Pets Limited
Strategic Report
Governance
Financial Statements
Holding
Country of incorporation
Class of
shares held
At 30 March
2023 %
At 31 March
2022 %
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
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
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
9
12
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
100
50
50
50
50
50
50
50
50
50
–
12
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
100
50
50
50
50
50
50
167
Pets at Home Group Plc Annual Report & Accounts 2023
Notes (forming part of the financial statements) continued
28 Investment in subsidiaries continued
Investments in Joint Venture practices and other investments continued
Company
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
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
Holding
Country of incorporation
Class of
shares held
At 30 March
2023 %
At 31 March
2022 %
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
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
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
During the 52 week period ended 30 March 2023, the Group has sold 100% of the ‘A’ shares in five companies which were previously
classified as subsidiaries, and subsequent to the sale of the ‘A’ shares, have been accounted for as Joint Venture veterinary practices, which
has led to the reduction in the holding in five entities listed above to 50% investment.
168
Strategic Report
Governance
Financial Statements
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. The number and appropriateness of APMs presented in the Financial Statements has been
reviewed and reduced from the comparative period to those considered to be the most relevant for measuring the performance of the Group.
Consequently, APMs are used by the Directors and management for performance analysis, planning, reporting and incentive setting purposes.
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 10 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 non-underlying items, being 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.
Free cash flow: Net increase/(decrease) in cash before the impacts of dividends paid, share buybacks, investments, proceeds from new
loans and repayment of borrowings.
References to Underlying GAAP measures and Underlying APMs throughout the financial statements are measured before the effect of
non-underlying items.
APM
Definition
Reconciliation
Consumer
revenue
Consumer revenue being statutory Group
revenue, less Joint Venture veterinary
practice fee income (which forms part of
statutory revenue within the Vet Group),
plus gross consumer revenue made by Joint
Venture veterinary practices (unaudited).
Like-for-like
revenue
Underlying profit
before tax
‘Like-for-like’ revenue 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 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.
Consumer revenue (£m)
FY23
FY22
Note
Statutory Group revenue
Joint Venture fee income
Revenue by Group managed veterinary practices
Revenue by all veterinary practices
1,404.2
(77.2)
(37.5)
492.9
1,317.8
(69.9)
(31.2)
457.1
CIS
2
2
Consumer revenue
1,782.4
1,673.8
CIS = Consolidated income statement
Not applicable.
Underlying PBT (£m)
Underlying PBT
Non-underlying items
Profit before tax
CIS = Consolidated income statement
FY23
136.4
(13.9)
122.5
FY22
130.1
18.6
148.7
Note
CIS
CIS
169
Pets at Home Group Plc Annual Report & Accounts 2023
Glossary – Alternative Performance Measures continued
APM
Definition
Reconciliation
Underlying
basic EPS
Free cash flow
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.
Net increase/(decrease) in cash before the
impacts of dividends paid, share buybacks,
investments, proceeds from new loans and
repayment of borrowings.
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.
Net working capital movement is a measure
of the cash required by the business to fund
its inventory, receivables and payables.
Underlying basic EPS (p)
Underlying basic EPS
Non-underlying items
Basic earnings per share
Free cash flow (£m)
Net increase in cash
Remove effects of:
Dividends
Acquisition of subsidiary
Proceeds from new loan
Repayment of borrowings
Share buyback
Proceeds from sale of PPE relating to GVs
Disposal of subsidiaries net of cash disposed
(non-underlying)
Free cash flow
CFS = Consolidated statement of cash flows
FY23
22.8
(2.3)
20.5
FY22
21.2
3.7
24.9
FY23
12.0
58.7
0.5
(123.3)
100.0
50.3
–
–
98.2
FY22
64.6
48.5
1.7
(100.0)
100.0
–
(0.6)
(19.2)
95.0
Note
5
5
Note
CFS
CFS
CFS
CFS
CFS
CFS
CFS
Underlying CROIC
FY23
FY22
Note
Cash returns:
Underlying operating profit
Share-based payment charges
Effective tax rate
Tax charge on above
Underlying 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:
Debtors
Stock
Creditors
Provisions
GCI (at period end)
Average
Underlying CROIC
149.7
4.9
154.6
19%
(29.4)
125.2
102.3
227.5
405.3
635.1
1,046.3
(906.4)
9.1
(121.6)
51.8
108.6
(265.2)
(16.8)
1,067.8
1,002.7
22.7%
2
3
2
11
12
13
16
see
definition
144.5
4.9
149.4
19%
(28.4)
121.0
103.9
224.9
342.4
548.2
1,034.1
(906.4)
9.9
(90.7)
62.8
84.5
(224.8)
(13.2)
937.5
899.5
25.0%
170
Strategic Report
Governance
Financial Statements
APM
Definition
Reconciliation
Net cash/(debt)
Cash and cash equivalents less loans
and borrowings.
Net cash/(debt) (£m)
Cash and cash equivalents
Loans and borrowings
Net cash/(debt)
FY23
FY22
Note
178.0
(123.3)
166.0
(100.0)
54.7
66.0
18
19
Total
indebtedness
Cash and cash equivalents less loans
and borrowings plus lease liabilities.
Total indebtedness (£m)
FY23
FY22
Note
Pre IFRS 16
leverage
Net cash (above) divided by underlying
EBITDA less expected rental charges
pre IFRS 16.
Lease adjusted
leverage
Total indebtedness divided by underlying
EBITDA.
Cash and cash equivalents
Loans and borrowings
Net cash/(debt)
Lease liabilities
Total indebtedness
178.0
(123.3)
54.7
(421.4)
166.0
(100.0)
66.0
(383.0)
(366.7)
(317.0)
18
19
12
Pre IFRS 16 leverage
FY23
FY22
Note
Net (cash) (above)
Statutory operating profit
Underlying depreciation of property, plant and
equipment
Underlying depreciation of right-of-use assets
Amortisation of intangible assets
Non-underlying depreciation of property, plant
and equipment
Non-underlying depreciation of right-of-use assets
Other non-underlying items in EBITDA
Underlying EBITDA
Less:
Proforma rental charges pre IFRS 16
Underlying EBITDA (pre IFRS 16)1
(54.7)
136.8
25.7
66.8
9.8
0.4
0.7
11.8
252.0
(79.9)
172.1
(66.0)
163.8
25.4
69.7
8.8
–
–
(19.3)
248.4
(80.8)
167.6
Pre IFRS 16 leverage
(0.3)x
(0.4)x
3
3
3
3
3
3
1 Proforma rental charges pre IFRS 16 cannot be directly referenced in the financial statements as the
balance represents 52 weeks (FY22: 53 weeks) of rental charges for each lease held at the balance
sheet date.
Lease adjusted leverage
Total indebtedness (above)
Underlying EBITDA
Lease adjusted leverage
Note
FY23
366.7
252.0
1.5x
FY22
317.0
248.4
1.3x
171
Pets at Home Group Plc Annual Report & Accounts 2023
Advisors and contacts
Registered Office
Epsom Avenue
Stanley Green Trading Estate
Handforth
Cheshire
SK9 3RN
United Kingdom
Registered Number
8885072
Investor Relations
petsathomeplc.com
investorrelations@petsathome.co.uk
+44 (0)161 486 6688
Corporate Brokers
HSBC
8 Canada Square
London
E14 5HQ
Numis Securities Limited
45 Gresham Street
London
EC2V 7BF
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
172
Pets at Home Group Plc
Chester House
Epsom Avenue
Handforth,
Wilmslow
Cheshire
SK9 3RN
United Kingdom
petsathome.com