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PETS At Home(PETS) Fundamentals

This lot have been buying and still its dropping - sick as a parrot.

Chase Nominees Ltd > 4%

Chase Nominees Ltd > 5%

Nomura Buy 211.00 209.25 - 245.00 Initiates/Starts

Analyst's site visit

Final Results

Financial highlights

· Performance in line with management expectations at the time of IPO, underlying EBITDA of £110.7m, up 12.4% year-on-year
· Revenues grew 11.2% to £665.4m, reflecting store portfolio expansion and strength across food, accessories and services
· Like-for-like sales growth of 2.4%, driven by VIP Club success, strength in Advanced Nutrition, omni-channel, and the growing maturity of Groom Rooms and vet practices
· Like-for-like growth in revenues generated within the Joint Venture veterinary practices of 14.0%, underpinning fee income growth
· Underlying EBITDA margin expansion of 17bps to 16.6%, reflecting the leverage from our services business, which represents 7.6% of Group revenues (FY13: 5.3%)

Operational highlights

· 32 new stores opened during the year, taking our total store portfolio to 377
· Now the largest small animal veterinary services provider in the UK with 277 practices, reflective of 47 in-store and 22 standalone openings in the year
· Successful integration of Vets4Pets, acquired March 2013, with a single support office now established for the combined vet business
· Largest number of Groom Rooms opened in a single year; 42 new salons, bringing the portfolio to 129
· VIP Club reached 2m members at the end of FY14, 1.5m members added in the year
· Pets At Home website relaunched in January 2014, now featuring a wider range of products, fewer clicks to checkout and enhanced presentation of our pet services

A buy in this weeks IC - Store expansion, decent growth and scope for improved profitability leave Pets at Home looking like a compelling long-term growth play that's
well-placed to benefit from improving consumer conditions. Yet the shares trade on fairly undemanding 15 times forecast earnings, which fails to reflect that potential.

Pets at Home becoming "very over-spaced", says Morgan Stanley

Thu, 03 July 2014

Morgan Stanley has started coverage of Pets at Home with an 'underweight' rating, highlighting concerns that the business is "becoming very over-spaced".

"We think that Pets at Home is a solid business. Its record over the last circa 15 years is very impressive, reflecting, we believe, both an attractive customer proposition and a strong competitive position, driven by an experienced management team," the US bank said.

However, with one of the largest out-of-town store estates in the UK retail sector and its sales densities peaking in 2010, Pets at Home's categories are "vulnerable to Internet channel shift", Morgan Stanley explained.

What's more, the retailer, run by Chief Executive Nick Wood, plans to continue opening 20-25 new stores every year, which are usually on 15-year leases.

The bank also believes that the group's margins may prove to be "unsustainably high". It said that an operating profit margin of 13.4% in the most recent financial year "seems very high for a business that obtains almost 50% of sales from pet food".

The stock was given a 155p target price, representing substantial downside from Thursday morning's share price of around 203p.

Posting of Annual Report & Notice of AGM

Interim Management Statement


Summary

· Like-for-like sales growth of 4.1%, driven by VIP Club momentum, strength in Advanced Nutrition and Health & Hygiene, and continued growth of our veterinary practices and Groom Rooms

· Like-for-like revenue growth of 18.3% within the Joint Venture veterinary practices, resulting in strong fee income growth within our Services revenues

· Total revenue grew by 10.4% to £210.8m, driven by new store openings and continued strength across Food, Accessories and Services

· Merchandise revenues grew by 9.0% to £192.5m, with 8.8% growth in Food revenues and 9.2% growth in Accessories revenues

· Services revenues grew by 27.3% to £18.3m, reflecting both new openings and the developing maturity of our veterinary practices and Groom Rooms

· VIP Club reached 2.4m members, up from 2m at FY14 end

Reduction of Capital

As contemplated in the Company's IPO Prospectus dated 28 February 2014 and pursuant to a shareholder resolution passed on 27 February 2014, the Company is pleased to announce that it has completed a reduction of capital, whereby £1,080,477,000 standing to the credit of the Company's share premium account was cancelled, creating distributable reserves of an equivalent amount (the "Cancellation"). The Cancellation was formally approved by the High Court and became effective on 30 July 2014. The Cancellation has no effect on the overall net asset position of the Company.

- Ends -

Beaufort Securities Buy 187.30 182.00 - - Initiates/Starts

Trading Statement

H1 FY15 financial summary

· Like-for-like sales growth of 4.2% both in the Q2 and H1 FY15, driven by strength in Advanced Nutrition, Health & Hygiene, VIP Club momentum, and continued growth in fee income from our veterinary practices and Groom Rooms

· Total revenue growth of 10.2% to £381.5m

o Merchandise revenues up 8.9% to £348.3m, driven by new store openings and continued strength in Food, as well as Accessories;

o Services revenues up 27.0% to £33.2m, reflecting both new openings and the growing revenue streams from our maturing vet practices and Groom Rooms

· Strong revenue growth of 28.0%, and like-for-like revenue growth of 15.5%, within the underlying Joint Venture veterinary practices

· Gross margin improvements in line with our expectations to deliver full year Services gross margin expansion, and a modest Merchandise gross margin benefit

· VIP Club reached 2.6m members, up from 2.0m at the end of the FY14

· The Group continues to trade in line with our expectations for the full financial year


Operational summary

During the first half, we continued to execute on our growth strategy. We added 8 stores net to the portfolio; including 10 new stores, one store closure in Knutsford, and a temporary closure of our Rugby store, which will be relocated in the first half of the FY16. We opened 26 veterinary practices and 23 Groom Rooms. Of the new vet practice and Groom Room openings, 15 and 12 respectively were retrofits to existing stores. We continue to expect to deliver gross openings of at least 25 new stores, 60 new veterinary practices and 50 new Groom Room salons in the FY15.

Our loyalty scheme, VIP Club, continued to gain strong traction from engaged pet owners, adding 600,000 members in the half year to reach a total of 2.6 million. VIP card swipe rate at store tills in the second quarter represented 58% of revenues, compared with 52% at the end of the FY14.

On our website, Deliver To Store (DTS) became fully operational in the second quarter, enhancing our omnichannel shopping experience for customers. DTS allows customers to order products for pickup the following day which are not currently in stock at their local store, including the extended online only range of 3,400 SKUs, bringing the total online range to over 10,800 SKUs.

Finally back to £2.

Bought in earlier this morning skinny. I've had this on my radar for some time now. The nearest store to me is some distance away from my house, but they have a good online delivery which is free for orders over £29 and since I have two dogs it's easy for me to spend over £29!

I wont be using either the vet practice or the groom room for my two as I'm very happy with both that I use at the moment, but it's a very good idea to have these on site.

Actually, it's worth going in to the store db4 as I think they have changed somewhat since they went public. Certainly their prices have gone up and, in my opinion, the stock and the quality have gone down a little. They are local to me which is why I have used them in the past, but have since found a store called Jollyes which have opened up in competition and they look to have a far better choice of products and better prices, though it remains to be seen if the pricing is just to get customers to visit. I know that they (PETS) make good money from the veterinary franchises in the store, but not sure if that is going to be enough to prevent people looking for better value.

HARRYCAT - I had a look at Jollyes website and they didn't seem to have such a good online shopping facility as PETS. I feed my dogs either Forthglade, Natures Diet or James Wellbeloved dried dog food and there is a really good selection of that on the PETS website with prices similar to Scats where I usually shop in store.

I'm not sure how well the veterinary franchises will work. I have a vet who is very local, within walking distance of the house and as my dogs get older I find it important for my peace of mind to have a vet that has a 24 hour emergency service.

We have three cats (not my career choice) but I do love them. There is a large Pets at Home store down at the beach in Aberdeen. My wife feeds them a mixture of IAM's dried food and meat. ASDA used to beat them hands down on price on both products. Sadly ASDA have stopped selling the meat or wet products as such and no longer have the same variety of dried food. So she now uses PAH exclusively and the standard delivery is free.

On the odd occasion we visit the store it is always busy and the staff are very polite. I only mention this because ASDA are situated next door. So it would appear PAH have done there research and must be cashing in on ASDA'S reluctance to stock a full range of both products.

Interim Results

H1 FY15 financial highlights

· Total revenue growth of 10.2% to £381.5m
o Merchandise revenues up 8.9% to £348.3m, comprised of Food revenues up 9.6% to £188.7m and Accessories revenues up 8.0% to £159.6m
o Services revenues up 27.0% to £33.2m, reflecting both new openings and the growing revenue streams from our maturing vet practices and Groom Rooms

· Like-for-like (LFL) sales growth 4.2%, driven by strength in Advanced Nutrition, Health & Hygiene, VIP Club, growth from our vet practices and Groom Rooms, and omnichannel
o Merchandise LFL revenue growth of 3.7%
o Services LFL revenue growth of 10.2%

· Gross margin of 53.8%, +20bps on the prior year; reflecting Merchandise margin +7bps to 55.9% and strong Services margin expansion +546bps to 31.7%

· Underlying EBITDA of £58.6m (+10.8%) and margin of 15.4%, expansion of 8bps on the prior year, despite £1.4m in additional Plc operating costs

· Underlying free cashflow of £33.8m, conversion of 57.7% compared with prior year at 43.8%

· Interim dividend of 1.8p per share

H1 FY15 Operational highlights

· Added 8 stores net to the portfolio total of 385; including 10 new stores, one store closure in Knutsford, and a temporary closure of our Rugby store which will be relocated in H1 FY16

· Opened 26 veterinary practices, bringing the total portfolio to 303

· Opened 23 Groom Rooms, bringing the total portfolio to 152

· VIP Club reached 2.6m members, up from 2.0m at the end of FY14

· Wainwright's grew 54.8% to £20.5m, driven by launches of WW's Cat & Grain Free for dogs

· Refreshed 30% of total SKUs, of which over a third are own brand or private label

· Deliver To Store online offering now fully operational, which gives customers access to the extended omnichannel range of 10,800 SKUs for pickup in their local store

Outlook

The pet care market outlook remains positive. We continue to expect gross openings of around 25 stores, 60 veterinary practices and 50 Groom Room salons in FY15.

Management and the Board remain confident in the Group's prospects for the year and trading since the end of the half year period has been in line with our expectations.


Nick Wood, Chief Executive Officer, commented:

"We are pleased with our first half financial performance. We continue to deliver on our strategy to be the leading destination brand for pet lovers, with particularly strong performance from new growth areas including vets and groom rooms. Our passion for pets guides everything we do and it's a passion we share with our customers, with more than half a million joining our VIP Club during this period."

"We end the first half in a strong financial position, the business remains very cash generative and we are pleased to announce our first dividend payment. Looking ahead, we will continue to focus on our successful strategy, and by doing so, we are confident that we can deliver sustainable long-term growth."

One of Shares 15 for 2015.

Despite the above have bought a few today. :0)