Pets at Home H1 profits dented by rising freight and energy costs

Pets at Home has seen underlying profit before tax fall by 9.3% to £59.2m in the first half of the year, largely driven by increased freight and energy costs over the period. According to the group, profits were also hit by a year-on-year increase in investment in digital assets, which was expensed through the P&L. Nonetheless, the group maintained its full-year guidance after total sales rose by 7.3% to £727.2m, driven by the “record” customer numbers seen over the period. Like-for-like sales were up by 6.4%, with Q2 accelerating against the Q1 run rate, and the final period of H1 marked the “strongest to date” for the group. The period was in part marked by higher new customer levels. Registrations to its Puppy and Kitten club “continued at pace”, accelerating throughout H1 and averaging 29,000 per week in Q2, more than three-fold higher than pre-pandemic, and ahead of the FY22 exit rate. Elsewhere, the number of subscription plans across the group grew by 11% year-on-year to 1.6 million, generating over £135m in annualised recurring customer revenue. New client registrations across its veterinary practices also remained strong, growing to an average of 8,800 per week, increasing its active client base to 1.7 million. Overall, the group said consumer spend and demand “remains strong” across the group, bolstered by a “record” number of UK pet owners continuing to “prioritise spending on their pets”, underpinned by trends of humanisation and premiumisation. The group has maintained its full-year guidance despite the “challenging” macro-economic environment, and expects full-year profit before tax to be in line with analyst consensus, which is currently £131m, with a range of £121m to £136m. Looking further ahead, the group said its prospects “remain strong”, noting it will continue with its strategic investments, and that its £2.3bn medium term customer revenue opportunity “remains intact”, having made better than expected progress to date. Lyssa McGowan, CEO, said: “In my first six months as CEO, I have spent my time forming a deep understanding of the business and sector, learning from the ground up how the business operates. I am more convinced that Pets at Home is well positioned to capitalise on an attractive growth opportunity in our structurally growing pet care market, supported by our unique blend of products and services, deeply embedded culture and expert, passionate colleagues, and partners. “Our first half performance shows progress and resilience across the business. In a challenging macro-environment, the pet care industry remains in growth across all channels, and we have continued to acquire new customers at an impressive rate, setting new records for customer numbers in recent months.”