Better than expect profit growth from veterinary services and pet product supplier Pets at Home (PETS) has put a rocket under its share price.

The stock is up 10% to 164p after it reported a 6.1% rise in underlying profit to £89.7m.

The company has slashed prices in the face of competition and although this has seen gross margins slump 1.22% in 2019 it has resulted in positive like-for-like sales from the retail division.

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Buying out several of its under-performing joint venture vet practices has involved a one-off hit of £48m which explains why at a statutory level pre-tax profit fell nearly 40% to £49.6m.

Numis analyst Simon Bowler says: ‘These results offer further evidence that management action to stabilise the retail arm has proven successful. From a base of sharper pricing and better invested and presented offer, we expect the business to achieve sustainable revenue and profit growth.’

His counterpart at Shore Capital Greg Lawless is also positive: ‘In our view, the company remains on the right path, and we note the confident tone from management in today’s statement.’

AJ Bell investment director Russ Mould says: ‘In theory this proposition should do well, Britons love their pets and are likely to be willing to part with hard-earned cash to keep them healthy, well-fed and comfortable.

‘In reality the company has been all over the place since it was let off the leash at its IPO in 2014 – the substantial borrowings which it carried from the outset didn’t help – and the shares are still tagged some way below the 245p they floated at. Today’s results are a step in the right direction, but there is more to do to earn the market’s full approval.’


Issue Date: 22 May 2019