Pets at Home shares wagging as vet services thrive

Share in Pets at Home wagged happily on Friday as the company reported a 6.1% rise in first quarter revenue on the back of higher-margin veterinary services.

Group revenue growth of was 8.1% to £277.4m, the company said in a trading statement. Of this, £32.4m came from vet services, an increase of 18.4% year on year.

This included joint venture vet practice income up 19.9% to £19.4m where mature practices were growing ahead of the market and younger practices were performing in line with our expectations, the company added.

Retail revenue growth was up 6.9% to £245m, including omnichannel revenue up 47.3% to £19.1m.

“We know one of the biggest opportunities in our business is to accelerate the maturity and returns of our vet practices,” said chief executive Peter Pritchard.

“We therefore need to address the challenges, such as the shortage of veterinary practitioners and the associated cost and cashflow support that is required. At the same time, there will always be a need to keep our retail pricing competitive.”

The company said its retail price position continued to strengthen to competitive levels and its overall price gap to online retailers, where it has faced stiff competition, had halved in the past 18 months.

For the full year the company said group gross margin dilution forecasts for the full year remained unchanged at 75-125 basis points, adding that margin dilution will be greater in the first half, reflecting price investment phasing

"As part of our ongoing investment appraisal of new stores, we have decided not to proceed with the opening of two stores for which lease arrangements had been committed. The full cost of the leases, at £1.6m, will be absorbed within underlying profit in the first half," it said.

"Full year profit and cashflow outlook remains in line with our expectations and guidance."