Pets at Home Store

Source: Pets at Home

Pets at Home total retail revenue grew 5.9% to £1.28bn

Retail group Pets at Home posted record revenues of more than £1.4bn last year, but saw margins hit by rising costs and energy prices.

Total group revenues grew 6.6% to £1.4bn, with group like-for-like revenue up 7.9% and quarterly growth accelerating sequentially throughout the year.

Total retail revenue grew 5.9% to £1.28bn, with organic revenue growth of 7.5%.

Within retail, food grew at 11.4%, supported by good availability and the group’s strong price position, while accessories declined by 0.9% overall, as a good performance in commodity-type accessories was offset by a softer performance in more discretionary accessories.

Retail services, which includes grooming, pet sales and insurance commissions, were flat year on year.

Meanwhile vet group revenues were up 13.3% to £122.8m, up 13.4% on an organic basis.

The group said it attained a market share of 24%, taking five-year gains to 600bps in the growing UK petcare market.

Total consumer revenues were up 6.5% to £1,782m (8.5% on a 52-week basis), supported by both volume and value growth, with the group ending the year with its strongest quarter.

However; group gross margin decreased by 157 bps to 47.6%, with retail gross margin down 184bps to 47%.

New distribution centre

Operating costs grew 5.6% to of £543.7m, driven by inflation in raw materials, wages, energy, and foreign exchange costs. The figure also includes £12.9m of non-underlying costs incurred in the year, predominantly related to its transition to a new distribution centre.

Therefore group underlying profit before tax was up 4.8% to £136.4m, albeit ahead of previous guidance, with strong trading performance partly offset by higher energy costs.

Statutory profit before tax fell 17.7% to £122.5m, reflecting the previous gain on the sale of its Specialist Group in 2022 and the costs of bringing its new DC on stream.

The group plans to grow sales by 7% per annum over the medium term supported by growth in the £7.2bn UK pet car market, its scale and investment in digital, store refreshes and the opportunity for 40 new stores.

It will also target 10% PBT growth CAGR over the medium term as it benefits from investments in its platform and capabilities as well as productivity gains.

CEO Lyssa McGowan said: “Our record performance over the past year demonstrates that our compelling petcare offer continues to resonate strongly with consumers. Through our unique blend of products, services and expert advice we were able to serve pet owners better, grow our consumer base, and win more market share, building on our leading position in the UK petcare market.

“I am also delighted to announce our updated strategic ambition to build the world’s best petcare platform. I am incredibly excited about the opportunity ahead, building on the tremendous success the business has enjoyed in recent years, and capitalising on our unique growth opportunity.”

Pets at Home shares have fallen 4% on the news back to 352.6p.

Morning update

Fever-Tree remains on track to meet market expectations despite the elevated inflationary environment, it has announced ahead of its AGM later this morning.

The premium mixers group said it has enjoyed its highest share of the UK on-trade to date during the first quarter, up 6% since 2020, with off-trade sales expected to build momentum through the year aided by new launches and multiple activations.

The US has had a strong start to the year in both the on- and off-trade, with good value and volume growth across all categories, with particularly strong growth in Flavoured Sparkling and Club Soda.

In Europe, Fever-Tree continues to gain value share of the premium mixer category at retail, with particularly encouraging growth in Italy and France, while it has made “good sales and operational progress” across its Rest of the World regions.

It said it was confident that the brand would continue to deliver strong revenue growth as it enters its key summer trading period and therefore reiterates top-line guidance range as set out in March at £390m to £405m.

Whilst inflationary cost pressures remain elevated, the group continues to be focused on delivering initiatives to mitigate these costs and expects to drive margin improvements through the year, which means it remains on-track to deliver EBITDA in-line with guidance range of £36m to £42m for 2023.

Meanwhile, it has announced Coline McConville will step down from the board later this year, having served nine years as a non-executive director.

Following the conclusion of today’s AGM, McConville will be succeeded as senior independent director by Kevin Havelock, who joined the board in January 2018, while Laura Hagan will take over as chair of the remuneration committee.

Additionally, Clare Swindell joins as an independent non-executive director and chair of the audit committee following the conclusion of today’s AGM.

She is currently co-CEO at Camelot, operator of The National Lottery, having joined as CFO in 2017 before being appointed to the board in 2019. Prior to that she was group CFO at Dunnhumby, having previously spent over 17 years at Tesco.

Elsewhere, sweetener group Tate & Lyle has posted double-digit growth in sales and profits driven by a jump in pricing as sales volumes fell.

Revenue was 19% higher in constant currency at £1.4bn in the year to 31 March.

The group said its focus was on delivering revenue growth and margin expansion through solution selling, mix management and pricing.

Sales volumes were 7% lower, reflecting this approach and the impact of supply chain disruption, the exit of low margin business and the impact of industrial action in the Netherlands in the first half.

Additionally, the group said it saw some demand softness and customer destocking in the fourth quarter.

However, it successfully delivered strong price/mix leverage of 25ppts with equal weighting of mix management and the pass-through of input costs inflation (including higher corn costs). Acquisitions also contributed one percentage point of revenue growth.

All regions saw double-digit revenue growth reflecting this benefit from pass through of inflation, strong mix management and lower volume.

To recover incremental input costs, it implemented a programme of supplementary price increases, while customer contracts were successfully renewed for the 2023 calendar year recovering further higher input costs.

Therefore, adjusted EBITDA was up 21% in constant currency at £271m benefiting from mix management, pricing and operational leverage. This, together with the benefit from productivity, saw adjusted EBITDA margins expand by 40bps in constant currency.

For the year ending 31 March 2024, the group expects to deliver constant currency revenue growth of 4%-6% and adjusted EBITDA growth of 7%-9%.

CEO Nick Hampton said: “It has been an excellent first year for the new Tate & Lyle with strong financial performance and significant strategic progress.

“Our key financial measures were all met, with group revenue and adjusted EBITDA showing double-digit growth and productivity savings well ahead of target. It’s also been another year of strategic progress as we further improved the mix of the business.

“Tate & Lyle’s expertise in sweetening, mouthfeel and fortification plays directly into increasing consumer demand for food and drink which is healthy, tasty, convenient, and more sustainable and affordable. The growth opportunity ahead is substantial and we saw encouraging progress in the year with revenue from new products and solutions wins both demonstrating good momentum.

“The repositioning of Tate & Lyle continues at pace. With our clear strategic focus and strong scientific and solutions capabilities, we are well-placed to progress our strategy and deliver on the five-year financial growth ambition.”

On the markets this morning, the FTSE 100 has fallen another 0.6% to 7,583.3pts.

Risers include Tate & Lyle, up 2.1% to 801p, PZ Cussons, up 0.5% to 196.8p and PayPoint, up 0.4% to 407.3p.

Fallers include Coca-Cola HBC, down 4.6% to 2,385p, Bakkavor, down 3.4% to 91.2p and Imperial Brands, down 2.8% to 1,746p.

Yesterday in the City

Marks & Spencer was the big news of the day yesterday, with the formerly beleaguered retail group jumping 12.9% to 184.8p as the group’s turnaround strategy showed signs of working as revenues jumped 10% and clothing & home sales registered double-digit growth.

The wider FTSE 100 fell back 1.8% to 7,627.1pts on higher than expected official inflation figures.

Other risers yesterday included McBride, up 3.5% to 30p, Hotel Chocolat, up 2.6% to 161p, M&S partner Ocado, up 2.3% to 411.8p, Glanbia, up 2.2% to €13.94, Bakkavor, up 2.2% to 94.4p and Premier Foods, up another 1.4% to 132.6p.

The day’s fallers included Just Eat, down 4.7% to 1,331p, Cranswick, down 4.1% to 3,174p, WH Smith, down 4% to 1,593p, PayPoint, down 3.7% to 405.5p, SSP Group, down 3.5% to 263p and Hilton Food Group, down 2.7% to 750p.