Despite a bullish trading update in August, when Pets at Home (PETS) revealed improved trading at its health and hygiene division, these interim results left the market disappointed. While better sales of health and hygiene products contributed to the 2.5 per cent rise in like-for-like sales, softer-than-expected grocery food sales - a result of a highly competitive market and a warm autumn - meant total merchandise revenues fell slightly short of analysts' expectations.
What's more, despite a surge in services revenues to £61.9m, from £41.9m, what should usually be higher-margin work isn’t actually flowing through to the bottom line as expected. A large number of grooming salons - which are loss-making at first - have opened, while three new veterinary specialist referral centres led to a 19 basis-point contraction in services margins. Overall, that took the group's gross margin down 15 basis points to 53.9 per cent. Costs associated with the referral centres are also pushing administration costs up, as is the newly introduced national living wage, which added about £1m to staff costs during the period.
Analysts at Liberum expect pre-tax profits of £93.3m for the year ending March 2017, giving EPS of 14.7p, compared with £97.3m and 15.4p in FY2016.
| PETS AT HOME (PETS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 222p | MARKET VALUE: | £1.11bn | |
| TOUCH: | 221-222p | 12-MONTH HIGH: | 292p | LOW: 204p |
| DIVIDEND YIELD: | 3.6% | PE RATIO: | 14 | |
| NET ASSET VALUE: | 171p* | NET DEBT: | 20% | |
| Half-year to 13 Oct | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 405 | 40.9 | 6.5 | 2.0 |
| 2016 | 441 | 46.0 | 7.2 | 2.5 |
| % change | +9 | +12 | +11 | +25 |
Ex-div: 1 Dec Payment: 6 Jan *Includes intangible assets of £989m, or 198p a share | ||||
