Pets at Home Group H2 2025 Earnings Report

Pets at Home Group EPS Results

• Actual EPS: GBX 21
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Pets at Home Group Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Pets at Home Group Announcement Details

• Quarter: H2 2025
• Date: 5/28/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, May 28, 2025
• Conference Call Time: 4:30AM ET

We are the UK’s leading pet care business, providing pet owners with everything they need to be able to look after their pet – from food, toys and bedding, and grooming services, right the way through to first opinion veterinary care. Our stores represent a unique environment and provide a practical, fun and unique experience for pet owners. We’ll help owners select the right food for their pet with nutrition consultations, help test the water is safe for their fish tank before new fish are introduced, and help socialise a new puppy with socilaisation and training classes - and much more. We’re also online and our customers can order their pet products for home delivery or collect in store. Because we are a specialist pet care business everything we sell is tested specifically for pets, which is something we believe makes us unique, giving the customer peace of mind that they are buying a quality item which has been responsibly sourced and tested and is specific to an animal. When we sell a pet to a new owner we use our unique Pet Pad process which ensures a perspective owner understands the welfare needs of their pet to be, asking customers to sign to say they have understood how to look after their new family addition. Our in store and stand-alone veterinary practices provide full veterinary care from preventative healthcare including health checks and vaccinations right through to digital x ray and operating theatres.

Pets at Home Group H2 2025 Earnings Call Transcript

Key Takeaways

• We’ve fully delivered a complete replatforming of distribution, digital and data capabilities alongside a unified master brand, positioning us to outgrow the pet care market in an increasingly omni-channel world.
• Our Vet Group achieved double-digit like-for-like revenue growth, now represents over half of group profits and free cash flow (£67m), driven by a highly cash-generative JV model and record low clinical vacancies.
• Subscriptions were a standout performance, with subscription revenues up 30%, Easy Repeat subscribers rising 35% and now representing 13% of total consumer revenues, boosting customer frequency and average spend.
• Free cash flow of £84m in FY25 was up 22% year-on-year and fully returned to shareholders through ordinary dividends and a £25m share buyback, with a target of 90% profit-after-tax to free cash flow conversion.
• For FY26 we expect mid-single digit revenue growth and group profits of £115m–£125m, balancing cost headwinds (wages, rates, insurance startup) with productivity initiatives and disciplined capital allocation.

Presentation

[Lyssa McGowan, CEO at Pets at Home Group]

All

[Lyssa McGowan, CEO at Pets at Home Group]

right, good morning everybody and welcome to our full year results presentation where Mike and I will take you through another year of progress as we draw a line under a period of major transformation and focus firmly on our exciting growth platform for the future. Today we have a packed agenda for you. I'll start by taking you through the deep transformation of our business over the last two years. Then I'll demonstrate that the pet care market remains attractive and show you how the platform we've built is set up to deliver outperformance in increasingly omni channel world. I'll share why our vet business is such a unique and valuable asset, clearly differentiated from corporate models, fundamentally more cash generative and now representing more than half of our group profits and cash flow.

[Lyssa McGowan, CEO at Pets at Home Group]

And then I'll hand over to Mike, who will take you through our increasing focus on free cash flow underpinned by predictable revenue streams and normalized levels of investment, which will support shareholder returns in the years ahead. So, let's get started by looking at the strategic progress we made in FY25. In FY twenty twenty five we grew Pets Club by another 5% to 8,200,000 members and this was helped by our new digital platform and was especially pleasing in a market where the numbers of puppies and kittens continue to normalise. Linked to that faster growth in members, we did see average consumer value dilute 2% to £175 but we saw strong performance with our retained customer base, where average spend continued to grow. Subscriptions were a real bright spot for the business last year and we grew subscription revenues by 30%.

[Lyssa McGowan, CEO at Pets at Home Group]

More than half of our vet consumers now have a care plan, and we're also pleased with the strong growth in retail subscriptions, which have now grown to 4% of revenue and we're excited about the enormous runway ahead. In the Vet business it was another tremendous year, with double digit growth in consumer revenues and this was high quality growth as well, driven by more visits, higher average spend, growth in care plans and even higher consumer satisfaction. We made further strides in winning clinical talent as the attractiveness of our JV model continues to gain traction, growing clinical headcount by 6% and ending the year with record low vacancies. We continue to grow our footprint in vets, opening three new practices and extending 15 in the year, and I'll come on to how we plan to accelerate this expansion in the future as a key driver of our growth. This progress translated into free cash flow of £84,000,000 in the year, up 22% on FY24 as we completed our big transformational projects and reduced our non underlying costs as planned.

[Lyssa McGowan, CEO at Pets at Home Group]

And we also returned all of that free cash flow to shareholders through ordinary dividends and a 25,000,000 share buyback. And we did all of this while continuing to make progress on our sustainability agenda supporting our people, pets and planet. So, as we exit FY twenty five we draw a line under a period of major transformation for pets. Over the last two years we have fully delivered a complete replatforming of our distribution, digital and data capabilities. These were significant undertakings, both in terms of the level of investment required and the resource they consumed within the business.

[Lyssa McGowan, CEO at Pets at Home Group]

Both are now 100% complete and we are laser focused on delivering the benefits for many years to come. It's worth taking a moment to step back and understand the deep transformation that the organisation has been through over the last two years and the great position that it puts us in today. Two years ago we had a portfolio of disjointed and outdated brands across retail, vets and grooming. We now have a single unified master brand that links everything together and this is having a significant impact on our consumers, with a 9% increase in brand consideration over the last year. Importantly, we've also seen a big uplift in consumers saying they know what we stand for, enabling us to form deeper and stronger connections.

[Lyssa McGowan, CEO at Pets at Home Group]

We've also completely transformed our digital and data capabilities. Two years ago we didn't have an app you could transact in, it was purely a loyalty scheme. We had a transactional website on a different close to end of life platform and we had analogue subscriptions capability. Today, we have an app, website and colleague device on a single platform capable of delivering a seamless experience, built on best in class open source components and integrated in house, which will enable us to iterate and improve far into the future. And we're starting to see the benefits in consumer engagement with the platform.

[Lyssa McGowan, CEO at Pets at Home Group]

This is coming through most clearly in subscriptions, where we've built a world leading omni channel experience, driving growth of Easy Repeat by 35% last year and with further acceleration in recent weeks as we launched in store. Two years ago, we operated out of three DCs with zero automation. We now have a single distribution center fulfilling all of our store and online deliveries. Our Stafford DC is an enterprise grade operation that will support our ambitions for the next decade. It has structurally improved our in store availability, now at record levels, and is driving efficiency in the fulfilment of our online and subscription orders through the use of automation.

[Lyssa McGowan, CEO at Pets at Home Group]

And lastly, we've been through significant organisational change and capability building over the last two years to create a truly integrated business. We've created a consumer function, bringing together and significantly upskilling areas like marketing, format, insight and digital to enable us to get the best out of our platform. We've combined our businesses into a single head office in Hanforth, bringing our people closer together to drive innovation and connection and importantly we've completed a comprehensive organisational restructuring to tune, simplify and drive performance. Now, strategic progress of this magnitude is certainly not easy, but businesses that do hard things thrive because they're difficult to follow or beat. I'm really proud of how our people came together to deliver these multiple complex projects and organisational change.

[Lyssa McGowan, CEO at Pets at Home Group]

Their passion, energy, connection and drive is now all firmly focused on future growth. And that focus on future growth is guided and inspired by our powerful purpose to create a better world for pets and the people who love them. It inspires and guides our colleagues every day and runs through everything we do. And this purpose also underpins our strategic vision to continue to build the world's best pet care platform. Our platform is integrated, omni channel and consumer centric.

[Lyssa McGowan, CEO at Pets at Home Group]

Integrated means bringing together a unique brand of products, services and advice across nutrition, accessories, preventative and curative health care, grooming and well-being, so a consumer can access everything that they need to care for their pet through our platform. And by being integrated we deliver significant economies of scope. We can do business better and cheaper because we operate across multiple verticals. For example, by sharing category expertise and speeding up time to market or by amortising our digital investment across a large revenue base. Omni channel means allowing consumers to seamlessly move between physical and digital experiences.

[Lyssa McGowan, CEO at Pets at Home Group]

Our face to face assets, pet care centres, practices, green rooms remain the bedrock and around that will increasingly wrap hybrid and virtual experiences, such as digital advice and support, seamless click and collect and e commerce and telemedicine. So our consumers can access the best care for their pets through whichever channel works for them. Being omni channel also gives us significant economies of scale, such as savings from leveraging our physical estate for click and collect, or using the VetConnection to provide 20 fourseven out of hours triage. Consumer centric means using our data at scale to anticipate consumers pet care needs and serve up exactly what they need, when they need it. This, coupled with our insight into the pet owner bond, means we can provide an unrivaled experience, fueling consumer and revenue growth and driving share of wallet.

[Lyssa McGowan, CEO at Pets at Home Group]

By making things easy and seamless, we drive cross sell, we'll drive upsell, we'll drive subscriptions and we'll drive lifetime value. And we can further leverage our data to underpin adjacent businesses like insurance. So, you see how our integrated omni channel consumer centric platform will leverage our scale, assets, data, capabilities and intimate understanding of the pet owner bond to deliver a service that no one else can and in doing so create sustainable competitive advantage. And it's this sustainable competitive advantage that will drive rewards for our shareholders. We expect to deliver mid single digit consumer revenue growth, with outperformance against the broader pet care market, supported by omni channel growth and further gains in vets.

[Lyssa McGowan, CEO at Pets at Home Group]

We'll drive profit growth ahead of sales growth in the medium term as we deliver efficiency and operating leverage throughout the business. Free cash flow remains a key focus for us, with our phase of major investments now behind us we expect free cash flow conversion of profit after tax to be 90%. And this cash flow will reward shareholders through our consistent capital allocation policy, our robust balance sheet and our track record of returning excess cash to shareholders. As we look forward to FY 2026 and beyond, we're very well positioned to deliver against our ambitious strategy. With a clear market leader, with a unique business operating in a very attractive structurally growing market.

[Lyssa McGowan, CEO at Pets at Home Group]

Over long periods the pet care market has grown at attractive rates. The pandemic boom in pet ownership saw a period of rapid growth, but premiumisation with consumption shifting towards higher end products such as advanced nutrition and humanisation, with our expectations for our pets increasingly converging with those we hold for ourselves, were both really well established before the pandemic and they remain strong today. The lower market growth that we saw in FY 2025, which has shown up in our financial results, was due to three clear factors. Two are particular to pet care and all three will phase out over time. First, we saw puppy and kitten numbers decline as the pet boom ended and we returned to a stable albeit higher pet population.

[Lyssa McGowan, CEO at Pets at Home Group]

This normalisation impact is now largely washed through and will start to become a tailwind as those pets age into the vets. Second, we saw a period of deflation, primarily driven by higher promotional intensity as we came out of a period of hyperinflation. We're now also seeing that ease back. And third, we've been operating against a backdrop of generally subdued consumer confidence. As these factors phase back, we expect that market growth will gradually return to historic norms of 4%.

[Lyssa McGowan, CEO at Pets at Home Group]

And as that growth comes back, our clear market leadership positions us to outperform the market. We have a truly unique business with scale and credibility across all key verticals. We have a rivaled reach and presence through our four fifty nine pet care centres, we have a differentiated vet model, now with four forty eight practices giving us a clear number two position in the primary veterinary care market. We have transformed digital and data capability, market leading omni channel subscriptions functionality, building frequency and share of wallet, deep expertise and know how through our 17,000 highly trained and skilled colleagues, and a new business being built in insurance. So you can see how the platform we've built positions us to win share, especially in an increasingly omni channel world.

[Lyssa McGowan, CEO at Pets at Home Group]

Growing share of wallet remains our greatest opportunity, over and above the already embedded lifetime value of our consumers. We know that as consumers engage with us across more of our products and services, we win more of their share of wallet. So, while an average consumer spends £175 a year with us, our most engaged consumers spend closer to a thousand. And there are no trade offs here. The more deeply and broadly consumers engage, the greater the total spend we consolidate onto our platform.

[Lyssa McGowan, CEO at Pets at Home Group]

Our integrated omni channel consumer centric platform is specifically designed to make it easier, enjoyable and more rewarding for customers to spend more of their wallet with us. We know the key drivers which boost share of wallet through our unrivaled first party data. For example, being a vet client, buying own brand food, using our digital channels, using the groom room, having a subscription, or buying accessories all drive strong uplifts in consumer value. And we'll increasingly leverage our data to personalize each consumer's experience, focused on winning their spend from other providers. And once we win that spend it's very sticky.

[Lyssa McGowan, CEO at Pets at Home Group]

Our consumers behavior is really predictable, with pre and post pandemic cohorts demonstrating very similar behaviour. Once we win consumers, their behaviours become established and embedded, giving us important visibility of their lifetime value. So we can hone and effectively tailor our investment in consumer acquisition and retention, supported by the leading analytical data capability that we've built. And this is an area we're looking to accelerate. Our subscriptions have grown impressively in recent years, but still only make up 13% of our total consumer revenues and we have significant opportunity particularly on the retail side of the business.

[Lyssa McGowan, CEO at Pets at Home Group]

We'll also look to increase annuity type revenue streams through building an insurance capability and growing in vets. So taken together, our share of wallet opportunity, combined with a runway to accelerate our sticky and predictable revenue streams, is highly compelling. And it's our digital and data platform that's the key to unlock that opportunity. One year in, we're engaging consumers through a significantly improved experience, interface and journeys. Consumer satisfaction is higher and we're seeing increased share of wallet as they shop the new platform.

[Lyssa McGowan, CEO at Pets at Home Group]

We now have experienced in house digital squads that drop new features daily, alongside automating and seamlessly integrating with our back end systems, so that the speed, content and functionality for our consumers is improving all the time. We're also plumbing in our incredible wealth of data to deliver machine learning operations at scale, using cutting edge beta technology from Microsoft to enable personalization, and this is already driving promising results in areas such as digital marketing and recommendations. We're now seeing good sales momentum and structurally better availability off the back of a stable and performing e commerce distribution operation in Stafford, and we're confident that we'll see a return to strong online growth through 2025. Now one of the big areas that our new technology platform unlocked was Easy Repeat and it was one of the real performance bright spots of the last year. We've totally transformed the proposition to a simple and consistent 10% off everything for click and collect and 5% off everything for home delivery.

[Lyssa McGowan, CEO at Pets at Home Group]

We've broadened the range to encompass over 5,000 essential pet products and we've completely redesigned the journey so consumers can easily sign up, amend and skip. And in the background we've automated key previous pain points, including out of stock substitutions and discount matching, and started to deploy personalization such as suggestions for add to order. And all of this is reflected in our results. Since we launched the new full Easy Repeat proposition in the autumn, we've seen a 35% uplift in subscribers, and those subscribers demonstrate a 50% uplift in frequency and a 53% uplift in ACV. And in the last few weeks we've also launched Easy Repeat subscriptions in store and the response has been really pleasing.

[Lyssa McGowan, CEO at Pets at Home Group]

This is a market leading capability in retail. We're at the forefront of leveraging our knowledgeable colleagues to guide consumers onto Easy Repeat, alongside leveraging our store assets to drive down fulfilment costs, while delivering a fully integrated omni channel experience. We're seeing well over a thousand sign ups every day across our store base and the profile of these customers is really attractive. Over 90% of our in store sign ups opting for click and collect compared to around 45% of those who sign up online. We're also seeing early signs of better frequency.

[Lyssa McGowan, CEO at Pets at Home Group]

75% of in store sign ups select between a two and a four week frequency, comparing really favourably to online sign ups where 80% are selecting a four to twelve week frequency. And the runway here is enormous. Since the year end we've increased easy repeat penetration from 34% of our Pets Club members and we have a huge opportunity ahead. An easy repeat is far from the only way in which our stores and online capability work together to create a differentiated omni channel experience. Now pet care centres clearly benefit from online through our long established and highly successful click and collect channel, but it also works the other way around too.

[Lyssa McGowan, CEO at Pets at Home Group]

We see a clear halo from our pet care centres back into online performance, as illustrated here by the data showing that when Brighton opened we saw a marked pickup in online sales in the catchment. And we see this pattern repeated across all of our new centre openings delivering a 25% improvement in online sales in each catchment over time. And we've also had real success with our four recently opened concept format stores. Consumers were delighted by our delivery of a more connective cohesive experience and a frictionless omni channel journey. And we've seen good uplifts, especially in key strategic priority areas such nutrition and health and well-being.

[Lyssa McGowan, CEO at Pets at Home Group]

So, we're now busy rolling key elements through our ongoing store refit programme. And now moving on to insurance, a vertical in which we believe we can use our omni channel platform to better meet consumer needs and create a capital light profit stream. Insurance is our largest adjacent vertical and it represents a £2,000,000,000 market opportunity and one that is expected to grow at 4% a year. We have a number of assets and capabilities that will enable us to create value here. We have a trusted brand, unrivaled data, a very large consumer base and an omni channel distribution capability which will support low cost customer acquisition.

[Lyssa McGowan, CEO at Pets at Home Group]

While leveraging these capabilities, we recognize that this is a new area of expertise. We've brought in a skilled team with experience across the pet insurance space and we'll partner with a carrier using their balance sheet. As we move towards launch in 2026, we expect to incur start up losses both this year and next before hitting break even point during FY 2028 as we build our book of business. And that investment is being made in the context of this being a material opportunity for the group in the future, potentially contributing around 10% of group profits in time. Now I'll move on to our Vet business, which now contributes more than half of our profits and cash flow.

[Lyssa McGowan, CEO at Pets at Home Group]

Reflecting that prominence we've given it the disclosure it really deserves. Our vets delivered another year of double digit growth. At practice level we grew our consumer revenues by 13% to £655,000,000 Our PBIC grew to £76,000,000 up 23% and the capital like nature of our Vet business meant that dropped through to £67,000,000 of free cash flow. Importantly, all our KPIs are looking healthy. Our growth is high quality, with visits up and increased sales from care plans.

[Lyssa McGowan, CEO at Pets at Home Group]

We grew clinical talent again and our vets continued to reduce indebtedness. The successful performance of our vet business is underpinned by our unique joint venture model, which brings together the best our partners have to offer with the support, expertise and broader platform of pets to deliver superior consumer and financial outcomes. Our vets operate with clinical and operational freedom, with their time focused on delivering great client and pet outcomes in practice, within a structure that incentivises them to run their businesses with a focus on long term value creation. They benefit from a trusted brand, scaled support services, access to capital, clinical development and the growing benefits of a broader PET platform to drive consumer acquisition and retention. Together, our model drives differentiated productivity and sector leading outcomes.

[Lyssa McGowan, CEO at Pets at Home Group]

The recent CMA papers showed that we operate in the most competitive catchments. So our vets win share by delivering better value and better service. Consumer satisfaction increased again and now stands at almost 90%. And our nation's local vet positioning is increasingly cutting through, with 85% of consumers aware of the Vets for Pets brand and strong increases in consideration. By putting customers at the heart of our business and maintaining a long term independent focus, we drive differentiated economics for our partners.

[Lyssa McGowan, CEO at Pets at Home Group]

Our practices are some of the most productive and efficient in the industry. The average debt fee practice now delivers £1,600,000 of revenues and £430,000 of EBITDA on a comparable basis, double that of our corporate competitors. The average dividend paid to our partners last year was over £150,000 and around 60% of our partners are now debt free and eligible for those dividends. As well as delivering great outcomes for consumers, pets and our partners, our JV model delivers a sustainable, predictable and capital light stream for us. Compared to fully owned corporate models, our model delivers steadier profit, given it's based on a share of revenues, better contribution margins, less exposure to cost volatility, all while requiring little of our capital to grow, resulting in excellent free cash flow conversion.

[Lyssa McGowan, CEO at Pets at Home Group]

The attractive nature of this model, combined with the sustained growth that we've delivered over the last few years, means that the Vet Group now delivers the majority of free cash flow. And we will continue to push for growth in our Vets Group, leveraging multiple proven growth levers. Now 40% of that growth will come from the embedded maturity of our existing practices. The average practice now turns over £1,400,000 a year and each will in time mature towards the £1,600,000 in revenue our established debt free practices currently achieve. The remaining 60% of our growth will come from proven growth levers of practice rollout, extensions and advanced capabilities.

[Lyssa McGowan, CEO at Pets at Home Group]

So let's first take a closer look at the rollout opportunity. The chart on the left shows the consistency of cohort maturity over time, underpinning the predictability of our revenue stream. When we open practices we're careful to select the right partner and to use our expertise to help them launch well and grow effectively, so we can be confident in how they mature. And the opportunity here is significant. There are very few areas in The UK where we have a lot of density today.

[Lyssa McGowan, CEO at Pets at Home Group]

We have the opportunity in up to 140 pet care centres where we don't have a pet, a vet today, and our successful standalone model means we can grow into any white space. We've put increased effort and resource this year into building our pipeline of potential partners, giving us confidence in delivering at least 10 new practices in FY twenty six and about a hundred in the medium term. Now on to extensions and advanced capabilities. We have a long track record of growing our practices well past initial maturity. Our ten plus year old cohorts collectively grew sales at 11% last year and even our most mature practices, those over twenty years old, continue to grow really strongly too.

[Lyssa McGowan, CEO at Pets at Home Group]

And we can further accelerate this growth through extensions and advanced capabilities. These increase the capacity of our practice and open new revenue streams for our partners, as well as providing growth opportunities for clinical talent. They allow practices to retain high value work in house rather than referring it out. It's better for the pet because they can access the expert care they need in a practice they're familiar with, without having to travel long distances or often incur an overnight stay, and it also provides a far more cost effective and less stressful option for the client. So our most of our advanced, so some of our most advanced practices are now attracting high value work in from other local primary care practices.

[Lyssa McGowan, CEO at Pets at Home Group]

Those practices where we've extended and added advanced capabilities of growing consumer sales by over 20% and delivered a return on investment for our partners of 20, as well as improving colleague well-being. We plan to do another 15 extensions in FY twenty six and about a hundred in the medium term, alongside continuing to support our partners in developing advanced capabilities such as imaging, cardiology, orthopedics and laparoscopy. So the stage is set for further growth in our vet group. Our model is unique, delivering highly compelling consumer proposition and continuing to grow strongly and outperform the market. By combining the best aspects of what we can offer with the best of what our partners bring, we unlock superior returns for our partners and shareholders.

[Lyssa McGowan, CEO at Pets at Home Group]

We still have significant potential to grow from here through embedded maturity, rollout, extensions and advanced capabilities. And that growth, given the capital light nature of the model, is highly cash generative. And with that, over to you Mike.

[Mike Iddon, CFO at Pets at Home Group]

Thank you, Lisa. I'm now going to give you an update on a resilient set of financial results, which we delivered through a year of transition to the new digital platform. Group consumer revenue grew by just under 3% to £2,000,000,000 And although our retail revenues declined by 2%, our Vet Group revenues had outstanding growth of 13%. Underlying profits of £133,000,000 were in line with our guidance. And for the first time, Vet Group profits exceed retail profits, Vet Group delivering £76,000,000 last year.

[Mike Iddon, CFO at Pets at Home Group]

Cash flow remained really strong at £84,000,000.22 percent growth year on year. And here again, we had a great result from the Vet Group with £67,000,000 of cash, and that surpasses the target we announced just a few years ago. We also made progress across our strategic KPIs. We now have 8,200,000 active Pet Club members. That's up 5% year on year.

[Mike Iddon, CFO at Pets at Home Group]

We did see a small drop of 2% in the total average consumer value of our Pet Club members, largely driven because we drove so many new active members towards the second half of the year. We had very strong growth, 30% in subscriptions, from easy repeat and care plans. And driving reliable, high quality subscription revenue is a key pillar of our strategy. As you can see from this slide, we now have 13% of our total consumer revenues on subscription. We also maintained our focus on recruitment retention of clinical headcount, and we now have three and a half thousand vets and nurses, up 6% year on year.

[Mike Iddon, CFO at Pets at Home Group]

So turning now to give you a bit more detail on those revenues. And our vet business continued continued to perform really strongly, and that helped offset a weaker than normal retail performance. Group consumer revenue grew 2.7%, just under £2,000,000,000 On a statutory basis, revenue growth was flat year on year, but in our vet business, we had really strong like for like growth of just over 16 with both joint venture and our company managed practices delivering high teens like for like growth. We have really strong momentum in the vet business and several well proven growth drivers. And these have helped grow average established practice revenues to an industry leading £1,600,000 a year.

[Mike Iddon, CFO at Pets at Home Group]

We updated last November, when we did our interim results, a necessary revision to how we recognize revenue from the sale of care plans. We've actually used our customer data to help more closely align the cash receipts from the care plans to the revenues we recognize as the customers use those care plans. And the full year benefit of making that change added £20,000,000 to our revenues and £4,900,000 to our profits, and that was across both joint venture and group managed practices. As we look ahead, those highly successful care plans will continue to support our growth alongside the focus on recruitment and retention of vet talent. And we'll continue to build capacity.

[Mike Iddon, CFO at Pets at Home Group]

We're planning 10 new practices in the year ahead and a further 15 extensions. And these levers will help drive the embedded maturity of our still relatively young practice portfolio, as well as our older practices, as Lisa was saying, practices over ten years old deliver 11% like for like last year. We did see a drop in retail revenues of 2%, Deflation, normalization of the pet care market weighed on growth, together with the impact of disruption as we transitioned to the new online platform. If you break that retail like for like down, stores performed more strongly than online. Online did feel the impact of that transition, particularly in quarter four.

[Mike Iddon, CFO at Pets at Home Group]

But it's now complete. And we've got a powerful omnichannel platform from which to grow future retail revenues. As Lisa was saying, we recently launched Easy Repeat sign up in store and we're already signing up 1,000 customers a day on Easy Repeat. We're starting from a low base, but we now have 4% of Petclan members having an Easy Repeat subscription. We've got a long runway of growth, and we know that those customers spend more and shop more frequently.

[Mike Iddon, CFO at Pets at Home Group]

For every 1% increase in the subscription base, we expect revenues to increase by around £10,000,000 Turning now to our profit result. We delivered profits of £133,000,000 That was in line with our guidance, and that was supported by stable margins and strong cost control. Gross margin grew 17 basis points year on year, flat gross margins in Retail and 105 basis points improvement in Vet Group margins. We continue to have a really tight grip on operating costs, got robust plans across procurement, occupancy, support office costs, all helping keep these costs flat year on year. And that's despite the external headwinds of National Living wage increases and business rates, which added together was around 18,000,000 of cost headwind in the year.

[Mike Iddon, CFO at Pets at Home Group]

So gross margin performance, together with keeping flat operating costs, helped us improve group underlying EBIT margin to 9%, and that was five basis points improvement year on year. Statutory profit was up over £120,000,000 That's 14% growth year on year. Big reduction there in non underlying costs as we completed those two very significant transformation programs. And that's an important milestone now past, and we're planning for no further non underlying costs in the year ahead. And Vet Group profits, pounds 76,000,000, exceeded retail profits for the first time, growing 23% year on year.

[Mike Iddon, CFO at Pets at Home Group]

Now turning to cash flow. We grew our cash flow by over 20% with a really strong result from the vet business. Total group cash flow was just under £84,000,000 That's plus £15,000,000 year on year, with £67,000,000 just over generated by the vet business. And the significant growth here still to come. That's from a combination of the embedded maturity in our younger practices, the rollout of new practices and the investments we're making in advanced capabilities and extensions.

[Mike Iddon, CFO at Pets at Home Group]

We also finished the year in a net cash positive position, and that's after returning over £84,000,000 to shareholders. The balance sheet is strong, it's robust, with no leverage and only 1.4x leverage on a lease adjusted basis. Our capital investment remains closely aligned to our strategic priorities. We opened four pet care centers last year, relocated one and rebuilt Chesterfield, and we're seeing good performance versus the business case targets for those new stores. Ours is a truly omnichannel approach, and typically, we see a digital halo of 25% revenue uplifts in the online sales in the catchments where we open a new pet care centre.

[Mike Iddon, CFO at Pets at Home Group]

We're also making great progress with our refit program, completing 32 refits in the year. That included four refits in the new format. And looking ahead, we plan to do around 30 to 35 refits a year. And where possible, we'll always extend the existing vet practice and where we can, retrofit a brand new vet practice. Here, we've got no shortage of new locations for practices.

[Mike Iddon, CFO at Pets at Home Group]

We've got over 140 stores still without a vet practice. And we've got a very well proven standalone model with 140 standalone vet practices. We plan to open a further 10 in FY twenty six and see space for a further 100 new vet practices over the medium term. We've now completed our multi year plan to optimize our distribution network that involved closing three existing legacy distribution centres, opening a brand new, future facing enterprise grade distribution centre at Stafford. That has inevitably disrupted sales over the last couple of years.

[Mike Iddon, CFO at Pets at Home Group]

But we're now through this period. The benefits now to come from the improved availability, which is now currently at some of the record levels we're seeing in our stores, better productivity and more online fulfillment capacity as we grow our online business. That peak of investment is now well behind us. And looking forward, we're planning for capital to be normalized at around £50,000,000 a year. And that capital investment is a key component of our balanced capital allocation, which enables us to grow the business and reward our shareholders.

[Mike Iddon, CFO at Pets at Home Group]

We have been very consistent and clear on the four parts to our capital allocation, and we followed it in a disciplined way now for a number of years. We've returned over £390,000,000 to shareholders over the last five years. And today, we're announcing a further £25,000,000 share buyback for the year ahead, which is which is the excess cash we're planning to generate in FY '26. Our Vet Group increasingly underpins the predictability of both the quality of our profits and cash flow. We are a clear number one in the clear number two in The UK First opinion sector and have just delivered another year of double digit growth and market share gains.

[Mike Iddon, CFO at Pets at Home Group]

The unique joint venture model drives differentiated economics for both ourselves and equally important, our Vet Partners, who earned in total £46,000,000 of dividends last year. The Vet Group now contributes one third of our consumer revenues, well over half of the group cash flow. As you can see from the chart, it's progressively grown profits over the last few years and now contributes more than half of group profits. We've got a clear runway of future growth in the Vet business, and that's powered by those proven value drivers. Yet the valuation of the business still continues to trade only in line with retail peers.

[Mike Iddon, CFO at Pets at Home Group]

Looking ahead into FY 'twenty six, we are facing into some significant cost headwinds. And whilst we have a robust plan to mitigate a lot of those headwinds, our group profits, as previously announced when we did the pre close update at the March, will be in the range of £115,000,000 to £125,000,000 This waterfall chart tries to set out the shape of that profit growth and splits it between trading growth, cost inflation, the productivity initiatives we've got in place and the key investment choices that shape that FY 2026 profit target. We're planning for continued profit growth in our Vet business, but at more moderate levels than last year. In retail, we're planning for lower profits with a gradual return to a more normalized market growth rate as we go through the year. The cost wins are significant.

[Mike Iddon, CFO at Pets at Home Group]

We've got around £20,000,000 of externally imposed costs, which together with underlying cost inflation does weigh on profit growth in retail in the year ahead. We will continue with our rigorous and robust productivity plans to improve productivity and efficiency right across the business. That's everything from our support office costs, simplification, occupancy costs, store operating costs, procurement costs and driving out productivity out of our brand new distribution center. We're also planning to put £3,000,000 further investment into our marketing and around £3,000,000 of setup costs to fund the growth of our new insurance business. And we're gonna have to rebuild variable colleague pay, and that's £10,000,000.

[Mike Iddon, CFO at Pets at Home Group]

So taking all that together, we're planning for group profits to be in the range of £115,000,000 to £125,000,000 in the year ahead. So in summary, we are well positioned to create value for all our customers and our shareholders. The benefits from our two scale transformation projects are all ahead of us, and the costs and disruption are all behind us. The Vet business has genuine momentum with well proven growth drivers and a long runway of high quality and reliable cash flow growth ahead. We've

[Mike Iddon, CFO at Pets at Home Group]

got

[Mike Iddon, CFO at Pets at Home Group]

a brand new digital platform, which will deliver a return to online growth, and we've already seen a significant step up in our subscriptions. Capital allocation is consistent and disciplined, and we will continue to return excess cash to shareholders. Strategy is on track. Our conviction is strong, and the outlook remains positive. Thank you for listening.

[Mike Iddon, CFO at Pets at Home Group]

I'll now hand back to Lisa.

[Lyssa McGowan, CEO at Pets at Home Group]

Thanks, Mike. So in summary, we've shared the really deep transformation our business has undergone over the last two years. We've demonstrated that we continue to operate in an attractive market and one in which we're the clear leader positioned to win. We've unpacked the ways in which our differentiated platform will allow us to take share and grow in an increasingly omni channel world. We've explained the centrality of our unique and attractive vets business to our future growth.

[Lyssa McGowan, CEO at Pets at Home Group]

And Mike has just taken you through how we'll deliver increasing free cash flow underpinned by predictable revenue streams that will enable us to reward shareholders. So taking all this together we look to the future with confidence and now Mike and I are happy to take your questions.

[Jonathan Pritchard, Retail analyst at Peel Hunt]

Morning, Jonathan Pritchard at Peel Hunt. Two or three for me. Just could you just I know you've alluded to some of the constituents, but within the vets like for like, could you just first numerically break down how we got to 13 and what contributed what? I note in the retail growth numbers, food actually slipped into negative territory. Just a few comments on that market please.

[Jonathan Pritchard, Retail analyst at Peel Hunt]

Then I think you've had a bit of change at the top in retail and in vets. Could you just talk us through what the new executives bring to the party and perhaps what's on their must do better list at the annual review?

[Lyssa McGowan, CEO at Pets at Home Group]

Great, thanks for those questions. I'll unpack retail and I'll let Mike unpack the vets growth. So in retail the trends in food aren't meaningfully different than the trends that we saw all of last year. As we went through Q4, our growth wasn't where we wanted it to be. But as we come into current trading now, we're on plan.

[Lyssa McGowan, CEO at Pets at Home Group]

Our vets are providing really strong and consistent growth as we've laid out. And in retail, had a progressive plan through this year, through Q1 and through the rest of the year, which we're seeing come through. So our availability is at record levels, our consumer satisfaction is at record levels, Easy Repeats providing really strong momentum. And online as we've come through that last piece of disruption from Stafford where we pushed out our delivery promises in order to protect the consumer experience, we're now back there and one time purchases recovered. So the build is coming through in current trading as expected, much better than in Q4 and food in particular actually is going strongly as we trade through the current quarter.

[Lyssa McGowan, CEO at Pets at Home Group]

Mike, do you want to unpack Yes,

[Mike Iddon, CFO at Pets at Home Group]

so Jonathan asked a question on what's driving the 13% Vet Group customer revenue. I think that growth is pretty broad based. It's it's across practices that are both, know, less than ten years old or over ten years old. And of course, we've been seeing those levels of growth now for some time. But you break down that 13%, it's a combination of things.

[Mike Iddon, CFO at Pets at Home Group]

We've got really good care plan growth. That's about half of it. And we've got growth in, some pricings in there, and we've also got growth in overall visits. So it's a combination of visits, some pricing, but a really strong, very successful, care plan.

[Lyssa McGowan, CEO at Pets at Home Group]

And on the question about executives, we've got, I think you're referring to our two new executives running COO of Retail and COO of Vets. Anya's come in COO of Retail, doing magnificent job background in both Tesco and Sainsbury's and a Danish supermarket. So a really strong background not just in the commercial side but actually has run stores before and I think we're seeing the benefit of that if you go into our stores today in terms of colleague motivation, store engagement, record consumer satisfaction. She's led the transition into our Stafford Distribution center, which we're now through. And now we'll be working closely with our Chief Consumer Officer to really drive the benefits of our omnichannel proposition and I think you're seeing all that already come through in our subscription.

[Lyssa McGowan, CEO at Pets at Home Group]

So really strong, really strong year there from Anja and and plenty more to come. In, in Richard in Vets, in our COO in Vets, we have somebody who has a really strong background in franchises actually. British military sports, fast food franchises, a pretty varied career, but the franchise experience is if you look at our vet business is much more of a b to b franchise model, and his ability to drive those relationships with partners and drive the benefits of our platform into the vets is really strong and I think again you're seeing that coming through in sustained growth. So really excited actually about the executive team that we've put together, the digital skills, different capabilities, the sum of the parts being greater than the whole and I think we're really set there.

[Alison Lygo, Director - Equity Research at Deutsche Numis]

Good morning. Hi, Alison from Deutsche Numis. Three for me if that's okay, please. Firstly, could you talk a bit about how you're thinking about price positioning as we head into the year, both in terms of where you feel like you need to kind of beat or be sharp and where potentially there's a bit of opportunity to kind of take a bit more in terms of pricing? And then the second one is just around wallet share.

[Alison Lygo, Director - Equity Research at Deutsche Numis]

So interest as to which sort of part of the wallet you think perhaps the average consumer is directing elsewhere and kind of why you think that is and what really kind of goes into that strategy to win it. And then the final one is just on the subscriptions and kind of the sign up that you're seeing around that. So imagine you've got a very strong base in terms of the food and the medicine, but what are your expectations and kind of what are you seeing early days in terms of particularly now it's in stores adding those kind of incremental extra items? Thank you.

[Lyssa McGowan, CEO at Pets at Home Group]

Great questions, thank you. So look on price, it's something we monitor really closely and keep in balance price position, competitive price position and we benchmark against key competitors market growth and margin. And in Q4 in particular the market was really deflationary and very noisy and promotional and we were a bit more rational which did phase into our growth there. As we've come into Q1 we're sharp on promotion and obviously with easy repeat launching you can get 10% off click and collect and 5% off home delivery and that's really powerful. And our own brand foods as well showed growth through last year again because they are really sharp on price and you get a great quality food for the same price.

[Lyssa McGowan, CEO at Pets at Home Group]

So while price comparison is important and it's something that we really keep an eye on and stay within you know clear guardrails particularly versus the grocers and Amazon which are the two big competitors we benchmark to, actually there's a number of elements of our business that I think are delivering real value, more value to the consumer for a lower price, in particular subscriptions push and own brand which constitutes a really high percentage of our sales. About 60%, seventy % of accessories are owned brand and around 30% of food, so that's important and growing. And obviously in the vets, while we compete in the most competitive parts of the market, our price position is really strong and one of the reasons that the customer chooses, they're not just getting a better value, better service, but they're getting better value. So that's sort of where we think of how we think about price. On wallet share, I think we laid out some of the levers there.

[Lyssa McGowan, CEO at Pets at Home Group]

We've got a number of ways in which we can drive wallet share and I think what the benefit of our digital platform and our data is that we know for each consumer what the next best action is actually to drive that wallet share. So we don't have to sort of be all things to all people, can actually be quite targeted in knowing what we need to do to drive that wallet share. I think increasingly you'll see us do those things in a much more personalised way enabled by our platform. Your third question was around subs. So we broadened our range and one of the big drivers of subscriptions growth is broadening the range from around less than a thousand pet products to 5,000 essentials.

[Lyssa McGowan, CEO at Pets at Home Group]

So it was very much focused on food lines and we've expanded that you can now get health and well-being, you can get puppy pads, salmon oil, all sorts of things that you might need on a regular basis. And we've worked with our suppliers to make sure those discounts are aligned and backed off. So actually what we're seeing in store is really interesting, it's not just the things that people need regularly but it's the things that they that are quite specific and where they really want to guarantee availability. So the price discount is one thing but knowing it's going to be there is something else. Vet food lines, sensitive stomach lines, wooden cat litter which is something that you know people if they like wood cat litter they like wood cat litter.

[Lyssa McGowan, CEO at Pets at Home Group]

So you know it's actually an availability play, as well as a price play. So I think that's quite interesting. And then we're using our data now to target, in add to order for example. So four days before you get your Easy Repeat we'll send you an email or a text notification to say would you like to add something to your order, you'll get your 10 or 5% off, we'll put it in the same box completely seamless. We're seeing really good uplift from that because we've personalised those using our data.

[Lyssa McGowan, CEO at Pets at Home Group]

So we're seeing a really strong uplift, so that's where things like on trend accessories, fashion, seasonal, that's where we can really drive those one off pickup lines in with the order and consolidate share onto our platform. Just in the foothills of that to be honest, but a huge runway ahead. And then obviously with 95% of our in store sign ups being click and collect and 45% of our online sign ups being click and collect, that's people coming into our store, that's footfall, our colleagues will talk to them as they're getting the parcel and say, is there anything else you'd like? So we should see that halo spend come through as well. Anything to add, Mike?

[Mike Iddon, CFO at Pets at Home Group]

Yeah, just, I think share of wallet is the biggest single opportunity. Average consumer value of our 8,200,000 pet club members is only a hundred and £75. We know they spend a lot more money than that elsewhere. The data we have on those pet club members, proprietary data, actually, to date, we've not really been able to fully deploy that. And as as Lisa's saying, the digital platform is the big unlock for us.

[Mike Iddon, CFO at Pets at Home Group]

Having launched that now and got it working, that is the big unlock that will allow us to use that data, communicate with those customers, build those relationships, and increase that share of wallet. So we're quite excited about that opportunity.

[Andrew Wade, SVP - Equity Research at Jefferies Financial Group]

We are. Yeah.

[Andrew Wade, SVP - Equity Research at Jefferies Financial Group]

Hi there. Andy Wade from Jefferies. I want to ask a couple of areas, first around that digital element and sort of completion of projects and so on. And the second one, going back to the pricing environment, we'll start with the digital one first. You sort of, I think you used the phrase that we're it's 100% complete now during the presentation on one of the slides.

[Andrew Wade, SVP - Equity Research at Jefferies Financial Group]

Whether you how do you draw the line in the sand on that in the sense that we still got the practice management system to come, haven't we? And what functionality do you not have that you will be able to have when you've got the practice management system in place? Just trying to really understand how much is fully unlocked now in terms of getting after that share of wallet and how much do we have to wait for a little bit more of that to be done? Guess that's the first one.

[Lyssa McGowan, CEO at Pets at Home Group]

Well, I suppose digital platforms are a bit like the fourth bridge, I mean they're never really complete and actually what we have done is 100 cut over now. So we are 100% on our new platform, new app, our new colleague device and we have 100% of our deliveries coming out of Stafford fully transitioned. So the project elements are done. We now have this incredible engine, this incredible capability. And as I alluded to in the presentation, we have in house digital squads.

[Lyssa McGowan, CEO at Pets at Home Group]

We chose not to just transition to another third party digital platform. We chose to take best in class platforms and components and integrate them in house. So we now have many developers back end, front end, UI, UX in house so that we can continue to develop that platform. We're in the foothills of really plugging our data in, as Mike said. So we've got data architects and data engineers.

[Lyssa McGowan, CEO at Pets at Home Group]

We're working with a beta technology from Microsoft around MLOps. But all of this, you know, we're we're literally releasing functionality now daily. It's getting better all day, every day. And that will just continue to happen, right? So subs has been the big break through.

[Lyssa McGowan, CEO at Pets at Home Group]

It's one of the things that we completely changed onto the new platform. But one time purchase using our first party data for marketing, incorporating AI search, you know, using personalization, that is all now in our future and we'll just continue on. And we have a roadmap that goes out for at least the next eighteen months of things and features that we want to drop. We want to incorporate much more advice, personalization, you know, the list is pretty much endless and that's all business case then it's all kind of working, it's all in progress. So it's really exciting.

[Lyssa McGowan, CEO at Pets at Home Group]

We are now a truly in house digital business with the data really starting to fuel every interaction. Our vision is that every interaction a customer has is personalized and fueled by data and we really are like many companies, in fact probably most companies, really in the foothills of that. But we have built this capability that we can use and pet care obviously lends itself so brilliantly to that because it's so specific to your pet, your pet type and the rest. There is one extra kind of project we want to do. It doesn't get in the way of any of that.

[Lyssa McGowan, CEO at Pets at Home Group]

So for our 8,200,000 Pets Club members and growing, who all more or less use retail or grooming, capability is relevant to all of them and we will improve and personalize their experience. For our 2,000,000 vet customers there's another piece to go which is the practice management system which will improve the productivity of our vets again so there'll be a material payback in practice. And it will also allow us to supercharge the kind of medical element or the clinical elements of the experience. We can already actually use the data but actually it will help us do things like book appointments, do post surgical consults through the same platform. So that will be the icing on the cake and it will work for the 2,000,000 customers that use our Vets and potentially allow us to serve more customers with veterinary type services because they'll be virtual and not tied to practice.

[Lyssa McGowan, CEO at Pets at Home Group]

That's coming. But actually for the 8,200,000 customers in our vets club, the runway is now.

[Andrew Wade, SVP - Equity Research at Jefferies Financial Group]

We're not waiting. to follow-up on that then, just to the cross selling element as in between vet and retail will be sort of enabled further by the practice management software being completed?

[Lyssa McGowan, CEO at Pets at Home Group]

Yes, be enabled further but we already have some data out of our existing practice management system, which we can use.

[Andrew Wade, SVP - Equity Research at Jefferies Financial Group]

Okay. And so we should be, I guess, looking at that £175 to be really starting to move forward in the next year

[Andrew Wade, SVP - Equity Research at Jefferies Financial Group]

or two Yes.

[Lyssa McGowan, CEO at Pets at Home Group]

Yep, exactly. Because we know the levers that drive that and that's what we're going to be driving, particularly using omni channel and online.

[Andrew Wade, SVP - Equity Research at Jefferies Financial Group]

Cool, very helpful. Thanks. And then the second one around price and price positioning and so on. Two little bits on it, suppose. The first one, you talked to Q4, the market deflationary, noisy, promotional, And you did chose not to follow that.

[Andrew Wade, SVP - Equity Research at Jefferies Financial Group]

So I'm sort of interested how, and you did allude to it already by talking about the balancing factors, but having guardrails in place where you have to be within a certain percentage of, I think historically you talked to zoo plus and yet not doing that when the market's going through a bit more of a promotional period. That must be a challenging, especially if that promotional environment drags on for two, three, four quarters, when do you decide that that's the new normal and not just a promotional period? I'm just interested in some color around how you manage that.

[Lyssa McGowan, CEO at Pets at Home Group]

Yes, well, that's an art, right, not a science, guardrails are guardrails, but we need to look at our in the end our shareholder returns, there's a number of factors that balance into that. Clearly, our performance in Q4, the like for like performance was impacted by a very deflationary promotional market where we were more rational. It was also impacted though by this last bit of transition into Stafford where we pushed out our customer promises in order to protect the customer experience. That didn't affect our subscriptions growth because obviously we have four days notice of shipping that, but it did affect our one time purchase. Now we have seen in Q1 that that has eased back.

[Lyssa McGowan, CEO at Pets at Home Group]

So we're fully through the Stafford, we're back on and growing well in line with our plan. And we have seen a much more rational market with some inflation coming back. We're still sharp on promo by the way, we're not pulling back but the market's got a lot less noisy, a lot more rational and we're happy with where we are now in that market and we're on our plan for Q1.

[Andrew Wade, SVP - Equity Research at Jefferies Financial Group]

Okay. And so and you mentioned Amazon and supermarkets, think historically it was Zooplus, have you changed that or is it still Zooplus as well?

[Lyssa McGowan, CEO at Pets at Home Group]

Look, have got a lot of competitors. We're a big business, we operate across many verticals. And on the vet side we will look at independents, we'll look at the big vet groups, on the retail side we would look at supermarkets, we'd look at generalists like Amazon, we'd look at specialists like Zooplus, we look at our D2C competitors, we look at our store based competitors like the Range and Jollies and for different parts of our business we would look at different primary competitors. At a macro level probably Amazon and the grocers are the too big in food, but actually we would look at a range and we've got some quite quite sophisticated price scraping and and price tools from our huge amount of data. And so we will we will make different decisions on, you know, different skews, different parts of our business.

[Andrew Wade, SVP - Equity Research at Jefferies Financial Group]

Historically, I think the guardrail was around being 4% to 5% within the price of what was as I understood it was Z plus but you're four to 5% of whoever you need. That still stands,

[Lyssa McGowan, CEO at Pets at Home Group]

That would be a sensible guardrail 5%. But as I said, subscriptions will that's 10% off and that's a growing part of our business. And in own brand would be substantially below the branded equivalent.

[Andrew Wade, SVP - Equity Research at Jefferies Financial Group]

Lovely. Thank you.

[Kane Slutzkin, Director - Healthcare Equity Research at Deutsche Numis]

Good morning, guys. Cain Snotsky from Deutsche Numis. Just a quick one on the Vet Group. You obviously pushed a good narrative today about the quality of the business. 10 openings this coming year, but more than 100 over a medium term now.

[Kane Slutzkin, Director - Healthcare Equity Research at Deutsche Numis]

I'm assuming medium term is five years, somewhere around there. So just wondering sort of the 10 versus the 100 odd. Are you could you be a bit more aggressive on those openings given the capital light nature, given you're kind of really pushing the narrative around the vet grouping?

[Mike Iddon, CFO at Pets at Home Group]

Yeah. So 10 openings, a hundred in the medium term. Could we push that harder? Answer, of course we could. What we don't want to do is compromise the quality of the opening.

[Mike Iddon, CFO at Pets at Home Group]

So, we've got no shortage of locations. We've got all the stores, 40 stores without a vet practice, and we've got the standalone model, which we've got just short of a 40 as well. That works really well. So no shortage of locations. But we know that the key ingredient is a successful practice, is a good joint venture partner.

[Mike Iddon, CFO at Pets at Home Group]

Now, we're in a great position in that the model is well understood, it's endorsed by all our existing partners, and we've got a really strong pipeline. So, yes, is the answer to your question. If we see more than 10 high quality suitable partners, we will go with more openings. But we don't wanna set a and chase an openings target and compromise quality. You went back in time, 02/1615, we're opening 60 practices a year.

[Mike Iddon, CFO at Pets at Home Group]

If anything, probably we overextended. Some of those were poorer quality partners. Then, of course, in 02/2018, we had to make a big adjustment. Yeah. So we're wary of that.

[Mike Iddon, CFO at Pets at Home Group]

We've learned the lessons. So it's about the quality. But, yes, we find good quality partners. We'll go faster than 10.

[Kane Slutzkin, Director - Healthcare Equity Research at Deutsche Numis]

Just last one, just on the components of the like for like, the 13, which you mentioned, half being the pet plan and then obviously price and visits. In the newer norm of sort of high single digit growth, how does that look in terms of those components?

[Mike Iddon, CFO at Pets at Home Group]

Oh, the split? Yes. Yes. I think there's always going to be bit of pricing in there, but we'll always be competitive. If anything, the data we've got access to says that I know we've been talking a lot about retail pricing, but in vets our pricing is very competitive.

[Mike Iddon, CFO at Pets at Home Group]

Our care plan pricing is really competitive and it's a very attractive care plan. So pretty much those components going forward, more visits, Lisa's point that we're actually going to see a tailwind now as the sort of COVID generation of pets age, visits, bit of ATV, curative as well as prevent curative mix going up. There's advanced procedures driving us slightly higher ticket. And our average transaction value is still less than £100 in our practices. And of course, adding on extensions enables us to develop more of those advanced capabilities.

[Mike Iddon, CFO at Pets at Home Group]

So it will be a combination of those going forward.

[Kane Slutzkin, Director - Healthcare Equity Research at Deutsche Numis]

Cool. Thanks.

[Charlie Perkins, Equity Research Associate at RBC Capital Markets]

Morning, guys. Morning. Charlie Perkins from RBC. So just two questions, if I may. So firstly, please can you just give us a little bit more color on the building blocks or sort of underlying assumptions behind the upper and lower end of the fiscal twenty twenty six PBT guidance range?

[Charlie Perkins, Equity Research Associate at RBC Capital Markets]

And secondly, I just wondered if you guys could share anything in particular that you've been doing to get the accessories moving, particularly on the sort of more discretionary side of things, anything you can share on that would be great. Thanks.

[Lyssa McGowan, CEO at Pets at Home Group]

Yeah. I'll accessories and then and then Mike can unpack the the building blocks. Accessories is a really important part of our business, obviously, and a key profit driver. And honestly we're not happy with the last couple of years. We've seen an accelerated shift in the market to accessories online.

[Lyssa McGowan, CEO at Pets at Home Group]

Something like almost half of the market of accessories is now online and clearly with our online transition we haven't participated in that market to the extent that we would have wanted to. In fact it was one of the reasons that we chose to do such a complete replatforming because our old website was just a grocery website. It really didn't lend itself to selling accessories. We now have a website that allows us to do that and we have today something like 10% participation of online is accessories. So we know we've got the product, we've got our sourcing office in China, we've got great quality, we've got great pricing, we know how to do it at Christmas, we're bang on trend, we're seasonal, Halloween's up.

[Lyssa McGowan, CEO at Pets at Home Group]

So we know how to do accessories, and we just the opportunity now to use our data and to use our online platform to participate in that part of the accessories market which we haven't really historically done in online is really significant. Now not to forget stores and we talked a bit about how easy repeat and add to order can help with those pickup items as footfall comes in on the back of Easy Repeat Click and Collect, that will drive accessory sales. So we won't forget about stores and there's innovation coming through, but really the big play to drive that harder is to get access to that online market where historically we really haven't had it. Mike, do you want to?

[Mike Iddon, CFO at Pets at Home Group]

Yeah, so we set this guidance for the year ahead, profit guidance 01/2015 to 01/2025. That's not about the predictability of our vet profits, by the way. I think that is more it's more around what's happening in in retail. As we came into this year, we're coming off a year where we had a very subdued consumer. In fact, the the data we've got shows there's no growth in pet product market last year, and quite a deflationary environment.

[Mike Iddon, CFO at Pets at Home Group]

So, a strong UK consumer and inflation coming back, and there's every sign that it's starting to come back, will take us towards the top end of that guidance. But a weaker UK consumer and a continued deflationary environment would take us towards the bottom end of that guidance. So it's all about external factors rather than anything. The things we can drive that shape that, so the productivity, the grip on the cost base, those are either initiatives we've already done. So we've done a lot of work on our operating costs in store.

[Mike Iddon, CFO at Pets at Home Group]

Anya has led that in terms of getting the right structures in store. The new distribution center online now driving more productivity. And the year on year benefit we get from a lot of simplification we did in our support center last year. That's all sort of never a given, but we can probably lean very heavily on that. So it is all around those external factors.

[Mike Iddon, CFO at Pets at Home Group]

It's The UK consumer and inflation which will take us towards the top end. Absent that, we'll be towards the bottom end.

[Operator]

Alright. We just have a couple online from the webcast. So firstly, from Richard Taylor at Barclays. Can you help us understand the outlook for profit margins in retail and your medium term financial framework? We can see you are targeting profit growth ahead of revenue growth, but are you targeting margin progression post FY twenty six in retail?

[Operator]

If so, how do you believe we can achieve this given price competition and potential ongoing wage headwinds?

[Mike Iddon, CFO at Pets at Home Group]

Yeah. Yeah. So we've had to set the right cost base in our retail business and we had to put back in the variable cost pay and we've had to put in the imposed costs on us for more payroll costs, national insurance and rates, like all the plastic tax, that's gone in as well. So we dealt with those through mitigations. We have got the right cost base now in our retail business.

[Mike Iddon, CFO at Pets at Home Group]

So as we look forward, we've got productivity to come out of our distribution center with those three old distribution centers now closed. We've got the right operating cost base in our retail business. We will continue to really grip our support center costs, and we've got a lot to do there in automation simplification. So we've got a good line of sight on that part of the cost base. And of course, our rents have been held pretty flat now.

[Mike Iddon, CFO at Pets at Home Group]

Total occupancy costs of the retail business, about 120,000,000, that's held pretty flat. So we'd expect costs to not grow at the rate they've been growing. You know, look at the plan the year ahead, it's 5% growth in costs in retail as as we've rebuilt that cost base. But we would expect, especially on our online business, great opportunity to start to really move our margins up. So, we've talked today a lot about, accessories, discretionary accessories, but still only 10% of our online sales.

[Mike Iddon, CFO at Pets at Home Group]

Our online sales historically have been more branded grocery product. So own label, advanced nutrition food, we think there's a big opportunity online there. So I think product mix online, I think, will be will be a big component of it. And and then those driving our online business and building back accessories into our store base, I think will also be drivers of the gross margin. So I think we'll see that volume growth we're planning flowing through into better retail profitability, but the cost base I think is now gonna be in the right place.

[Mike Iddon, CFO at Pets at Home Group]

So margins moving up, costs well controlled, getting growth back on the top line, and we'll see that operational leverage flow through.

[Operator]

Thank you. And it's time for one more from Alex Campbell from Phoenix Asset Management Partners. Is the priority to return company managed practices to JV partners or new sites?

[Lyssa McGowan, CEO at Pets at Home Group]

Yeah great question. Our preferred model is the JV model for all the reasons that we've outlined in the presentation today. We think it's the best model for driving client outcomes, client satisfaction and shareholder returns. So we will prioritize flipping company owned practices into JV ownership wherever we can and we've had a really good successful track record of doing that. Having said that though, we do have around 50 group managed practices and they performing really well.

[Lyssa McGowan, CEO at Pets at Home Group]

Actually we've put a different, lens and focus in the last couple of years around managing those and we've seen good returns and outcomes. So it is a model that works and it's a model where we can potentially trial some stuff because they're in house, but actually our focus is where we can find joint venture partners and quite often they do come internally. We would much rather have them under joint venture ownerships because that's our preferred model.

[Operator]

Thank you. If there's nothing further in the room Lisa I'll hand back to you for closing remarks.

[Lyssa McGowan, CEO at Pets at Home Group]

Great, well thank you for coming today and thank you for your really thoughtful questions. I hope you can see how excited Mike and I and the whole team at Pets at Home, all 17,000 of us are about the future, about the platform we've built and about how we can continue to create a better world every day for pets and the people who love them. Thank you.

Participants

Executives

• Lyssa McGowan, CEO
• Mike Iddon, CFO

Analysts

• Jonathan Pritchard, Retail analyst at Peel Hunt
• Alison Lygo, Director - Equity Research at Deutsche Numis
• Andrew Wade, SVP - Equity Research at Jefferies Financial Group
• Kane Slutzkin, Director - Healthcare Equity Research at Deutsche Numis
• Charlie Perkins, Equity Research Associate at RBC Capital Markets