Shares in retailer Pets at Home (PETS) rallied 9.5% to 234.8p as the pet care specialist posted forecast-beating first half results and said full year profit will be towards the top end of the £87m to £93m consensus range.
Today’s impressive results confirm there is continued momentum with the turnaround at one of Shares’ running Great Ideas selections, with Pets at Home bucking the wider downbeat retail trend under the leadership of chief executive officer (CEO) Peter Pritchard.
KEEPING INVESTORS PURRING
For the half to 10 October, Pets at Home reported a near-19% surge in underlying pre-tax profit to £45m, comfortably ahead of Numis Securities’ £41m estimate.
The performance was driven by continued momentum in the core retail business, where like-for-like sales bounded 7.8% higher, although Pets at Home also delivered a healthy sales advance from the vet division, which achieved 6.4% like-for-like revenue growth.
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With retail profit growth expected to continue and the second half to see the full benefits of the restructuring of the vet business, Pets at Home is on track to deliver full year profit growth ahead of plan.
‘Due to the progress we have made in the first half of full year 2020, we are confident about the rest of the year and now expect to deliver full year underlying profit growth, with group underlying profit before tax on a pre-IFRS 16 basis towards the top end of current market consensus’, said the company.
Before today, the company compiled consensus estimates had a range of £87m to £93m with a mean of £89m.
PRITCHARD’S PET SHOP JOY
In recent years, Pets at Home’s retail and vet divisions have come under pressure from rising online and discounter competition. However, Pritchard has stabilised the business and is introducing more customers to Pets’ complete pet care offer and is capturing a greater share of their overall spend.
‘We have seen sustained momentum in retail, with a 2-year like-for-like of 13%,’ explained the CEO. ‘This has been complemented by a meticulous delivery of our Vet Group recalibration.
The programme to buy out a number of Joint Venture practices is already complete, whilst changes we have made to the fee arrangements for ongoing practices are already showing signs of positive progress and will be followed by further planned adjustments in the second half of the year.’
THE NUMIS VIEW
‘We see this update as supportive of our positive view on the Pets at Home equity story,’ enthused Numis Securities, raising its full year 2020 taxable profits estimate by £5m to £93m.
‘Sustainable profitable market share gains in retail and the prospect of profit and cash growth in vet (the vet division) in full year 2021 and beyond, underpin an attractive growth story.’
