Pet retailer Pets at Home (PETS) surprised investors in August with a first-quarter trading update that sent the share price surging on the back of good like-for-like sales. In October, the price began to come back down, before falling sharply again this week with the release of these half-year results, losing all the ground gained.
There are a few potential reasons for the latest drop. Pre-tax profit was down on both a statutory and adjusted basis, with the group gross margin declining 198 basis points to 51.9 per cent following "price repositioning" (price cuts) and adverse currency movements. Margins are expected to be further diluted by 200 basis points (bp) to 250bp in the year to March 2018 due to planned investments.
The other potential reason behind the drop is the announced departure of chief executive Ian Kellett to pursue “personal business interests”. Mr Kellett will leave on 31 May next year, to be replaced by Peter Pritchard, the retail division’s current chief. In addition, non-executive director Nicolas Gheysens has resigned from the board. Mr Gheysens works for private equity backer KKR, which has opted not to replace him, prompting speculation it will continue selling down its stake in Pets at Home. KKR sold a chunk of shares in October, hence some of that October weakness.
Analysts at Numis are forecasting pre tax profit of £83.7m, giving EPS of 13.3p for the year to March 2018 (from £96.4m and 15.2p in FY2017).
| PETS AT HOME (PETS) | ||||
| ORD PRICE: | 168p | MARKET VALUE: | £839m | |
| TOUCH: | 167.5-168p | 12-MONTH HIGH: | 246p | LOW: 154p |
| DIVIDEND YIELD: | 4.5% | PE RATIO: | 12 | |
| NET ASSET VALUE: | 178p* | NET DEBT: | 17% | |
| Half-year to 12 Oct | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 441 | 46.0 | 7.21 | 2.50 |
| 2017 | 468 | 40.8 | 6.5 | 2.50 |
| % change | +6 | -11 | -10 | |
| Ex-div: | 7 Dec | |||
| Payment: | 12 Jan | |||
| *Includes intangible assets of £992m, or 198p a share | ||||
