Posting of Annual Report & Notice of AGM

RNS Number : 1575N

Pets At Home Group Plc

24 July 2014

 



FOR IMMEDIATE RELEASE, 24 JULY 2014

Pets at Home Group Plc: Posting of Annual Report & Accounts and Notice of AGM

Pets at Home Group Plc (the "Company") (LSE: PETS) today announces that its Annual Report and Accounts for the year ended 27 March 2014, Notice of the 2014 Annual General Meeting ("AGM") and Form of Proxy for the 2014 AGM have been sent to shareholders and are also available on the Company's website at http://investors.petsathome.com.

In compliance with LR9.6.1, the Company has today submitted electronic copies of the following documents to the National Storage Mechanism appointed by the Financial Conduct Authority and these will shortly be available for inspection at http://www.morningstar.co.uk/uk/NSM:

·     Annual Report and Accounts for the year ended 27 March 2014

·     Notice of the 2014 AGM

·     Form of Proxy for the 2014 AGM

The Company's first AGM will be held at 11.00 am on 9 September 2014 at The Hilton Hotel, 303 Deansgate, Manchester M3 4LQ.  In accordance with the Company's articles of association, the directors of the Company have determined that all of the resolutions to be put to the vote at the 2014 AGM as set out in the Notice of the 2014 AGM will be decided on a poll.

The Company's preliminary results announcement on 12 June 2014 included, in addition to the preliminary financial results for the year ended 27 March 2014, information on important events that occurred during the year and their impact on those financial results. That information, together with the information set out in the Appendix below is provided in compliance with the requirements of DTR6.3.5(2) (b). This information is not a substitute for reading the full Annual Report and Accounts for the year ended 27 March 2014.

The Company also announces that its accounting reference date has changed from 27 March to 31 March.

ENDS

Enquiries

Pets at Home Group Plc:                                                                 [phone]

Louise Stonier, Company Secretary

About Pets At Home

Pets at Home Group Plc is the holding company of the Pets At Home group of companies ("Pets At Home" or the "Group").

Pets At Home is the UK's leading specialist pet retailer and services provider, with a wide omni-channel offering.

Pets At Home operates from 377 stores located across the UK. The Group operates the UK's largest small animal veterinary business with 277 surgeries, run principally under a Joint Venture model using the Companion Care and Vets4Pets brand names. Pets at Home is the UK's leading operator of pet grooming services offered through its 129 Groom Room salons. The Group also owns and operates Ride-away, a specialist equine retail business with a York superstore, website and catalogue. For more information visit: http://investors.petsathome.com

Appendix

Directors Responsibility Statement

The responsibility statement below has been prepared in connection with the Company's Annual Report and Accounts for the year ended 27 March 2014.

The Directors of Pets At Home Group Plc confirm that to the best of their knowledge:

·     The financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

·     the Strategic Report/Directors' Report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

This responsibility statement was approved by the board of Directors of the Company (the "Board") on 11 June 2014 and signed on its behalf by Nick Wood, Chief Executive Officer and Ian Kellett, Chief Financial Officer.

Principal Risks and Uncertainties

An effective risk management process has been adopted to help the Group achieve its strategic objectives and enjoy long term success.

The Board and senior management team are collectively responsible for managing risk across the Group.  On a department by department basis risks are reviewed regularly and risk registers are updated at least three times a year.  The teams meet to discuss and agree:

§ Key risks by area (and any changes since the last review)

§ Risk ratings - by evaluating each risk and assigning a score

§ Identifying the required actions against each risk

§ Progress in executing agreed process improvement and implementing agreed risk mitigation

This process is then reviewed/monitored and reported to the Board and Audit Committee twice a year. The key risks identified by the Board are summarised below.

Reputation

The Group recognises the need to protect its reputation, as failure to do so could result in a loss of trust and confidence by both customers and colleagues.  As a retailer of small pets across a large number of stores, the highest possible welfare standards must be maintained at all times.  This also extends into the supply chain with our pet suppliers.  The Group operates a comprehensive pet welfare audit process, utilising internal and external resources, where all stores receive unannounced visits on a regular basis.  This helps ensure the Group's high standards are maintained across the chain.  With its suppliers, the Group expects the same high standards of welfare and all suppliers are visited regularly by vets, third party assessors, the Group's field pet team and an animal welfare organisation, and assessed against a comprehensive set of welfare and standards criteria.

The Group also deal with customers' pets on a daily basis through its veterinary surgeries, Groom Room salons and support adoption centres, which may on occasion result in the death or injury of pets whilst in our care. The Group has a clear set of operational protocols, with the veterinary practices subject to the professional standards mandated by the Royal College of Veterinary Surgeons and also has a highly visible field operations resource in respect of in-store pets, grooming and veterinary surgeries. Each area has specific resource focused on ensuring the highest pet welfare standards are maintained.

A "Reputational Risk" forum meets regularly to discuss this important area.  Areas for further improvement are identified and actions implemented to ensure appropriate risk mitigation strategies are in place to protect our brand.

Competition

The Group competes with a wide variety of retailers and vet practices, including other pet specialists, supermarkets and discounters. Online competition is also a risk, as large well known internet businesses expand into pet products and the established pet product sites improve and expand their offer. Failure to keep abreast of, and respond to, developments by our competition in the areas of price, range, quality and service could have an adverse impact on the Group's financial performance and impact opportunities for growth.

The Group continues to evolve its proposition through the addition of vets and groomers into existing store estate whilst continuing to innovate with the regular introduction of new and exclusive products into our food and accessory ranges. As a specialist retailer, the delivery of friendly expertise through highly engaged/trained store colleagues is a key element of the Group's proposition and the Group continues to invest to ensure its service standards, as measured by its customers through Fish4opinion, are continually improved.

The Pets at Home website was successfully upgraded in January 2014 to ensure the Group has a technology platform capable of supporting the Group's online strategy.  New site features include; click and collect, quick checkout, subscription services and improved site layout and content.

The VIP (Very Important Pet) club was launched in November 2012 and has been incredibly successful - attracting just under 2 million members as at 27 March 2014.  This customer database enables more targeted marketing, which helps drive up basket values and enables the Group to build a stronger sense of engagement with its customers and their pets.

Continuous market research is carried out to review the pet market both at home and abroad and understand what the Group's competitors are doing worldwide.  This helps identify further changes/initiatives that need to be implemented to help keep Pets at Home ahead of the competition in the UK and remain a leader in the market.

Stores and Services Expansion

A key part of the Group's growth strategy is to increase the number of stores and to grow its in-store and stand alone veterinary practices and Groom Room grooming salons. If the Group is  unable to deliver the number of sites necessary to fulfil the stores and service expansion laid out in its strategy, the Group's  expected financial performance could be adversely impacted.

To successfully open a new store, the Group has to, in the first instance, identify an appropriate location with lease terms that are acceptable. Any proposed new store investment has to deliver an appropriate financial return after taking into account any financial impact on the existing store portfolio. These processes are equally applicable when the Group looks to open a standalone veterinary practice, however, in common with the Group's in-store veterinary practice opening programme, the Group  also needs to recruit a joint venture veterinary partner with the ability to fund their investment into the joint venture and with the ability to provide the personal guarantee to the bank providing the third party financing to the joint venture veterinary practice.

The business maintains new store and new joint venture partner pipelines which identify potential locations and potential partners at each stage of our process. This enables the Board to monitor progress in delivering the expected number of new stores, veterinary practices and groom rooms.

Our People

As a specialist retailer, retaining highly trained and engaged colleagues is fundamental to the  continued success and the delivery of the Group's future growth. If the Group does not retain and train its colleagues, it is unlikely that the Group will be able to deliver the outstanding customer service which is a key element of the Group's proposition. The Group continues to invest in training to broaden the skill base of colleagues across the business. The Group also closely monitors colleague retention rates and engagement, the latter through our annual "We're All Ears" engagement survey which is followed up by "We're All Action" to ensure the business responds appropriately to the opportunities for improvement identified by colleagues. The Group  also has a rolling programme of listening groups across the business to ensure that the Group is addressing issues on an on-going basis.

As well as focusing on the development of existing talent within the business, the Group  recognises that the retention of high calibre, talented, senior management with the skills necessary to deliver the Group's growth plans is key to future success. In this regard, the Group's remuneration policy is designed to ensure executives of the necessary calibre are attracted and retained and that through our long term incentive plans and Company share option plan, colleagues across the business can share in the Group's success. Similarly, the Group continually reviews the remuneration and benefits packages available to all colleagues to ensure colleagues are appropriately rewarded for the substantial contribution they make to the Group's growth and success.

Business Systems

Pets At Home is aware of the need to keep core business systems up to date, with the capability to support the Group's growth plans. If investments in both systems and infrastructure do not keep pace with the growth of the business there may be a consequent limitation to the Group's  ability to trade and expand. 

The Group is in the process of upgrading its business critical systems to industry leading packages, the first of which was SAP which successfully went live in May 2014.  Our warehouse management system is currently being replaced with the JDA warehouse management solution in the next financial year.

Disaster recovery is a key part of the Group's systems strategy, enabling the Group  to continue to trade in the event of a system outage.  Disaster recovery plans have been reviewed and updated and a schedule for regular testing is now in place. The business also undertakes regular system penetration testing.

Supply Chain/Sourcing

During the financial year ended 27 March 2014, the Group imported approximately 17% of its total merchandise via Pets at Home (Asia) Limited, the Groups global sourcing company based in the Far East and as a consequence the Group is exposed to the risks associated with international trade, such as inflation, changing regulatory frameworks and currency exposure. The Group is also exposed to the risks associated with the quality and safety of products produced globally on behalf of the Group, many of which are own branded or exclusive private labels. A failure to adequately manage this risk could lead to reputational damage, reflected in a lack of confidence by customers and colleagues in the Group brands.

Having Pets at Home colleagues on the ground working collaboratively with suppliers enables the Group  to monitor closely compliance with the Group's Code of Ethics and Business Conduct policy, as well as compliance with the Group's Supplier Quality Manual. In addition, unannounced visits are undertaken by an independent third party to further monitor compliance with Group policies.

Liquidity and credit risk

The business requires adequate cash resources to enable it to fund its growth plans through its capital projects and/or an expansion of the Group's working capital requirement. Without adequate cash resources the Group may be unable to deliver its growth plans, with a consequent impact on future financial performance. A key workstream undertaken as part of the Company's Initial Public Offering ("IPO") in March 2014 was the assessment of the Group's financing requirement in the context of its growth plans. As a result, the Group is confident that it has adequate medium term financing in place, with a broad syndicate of nine  banks

The Group's growth plans in respect of joint venture veterinary practices is predicated on the availability of finance for new joint venture veterinary partners to fund both the capital cost and working capital requirement for each new practice opening. The Group has two revolving facilities in place with two major high street lenders which give the Board  confidence that the Group's medium term growth plans are financed adequately.

The Group ensures that all cash surpluses are invested with banks which have credit ratings and investment criteria that meet the requirements set out in the Group Treasury policy, which has been approved by the Board.

The Group's key suppliers are exposed to credit risk and as part of the Group's overall risk management programme, the business has identified alternative suppliers and developed contingency plans, particularly in respect of own label and private label food products.

Treasury and Financial Risk

The Group has an exposure to exchange rate risk in respect of the US dollar which is the principal purchase currency for goods sourced from the Far East. If the Group does not adequately manage this exposure there could be an impact on the Group's financial performance with a consequential impact on operational and growth plans. This exposure to FX fluctuation is managed via forward foreign currency contracts which are designated as cash flow hedges.

The Group has borrowings with floating interest rates linked to LIBOR, thereby exposing the Group to fluctuations in LIBOR and the consequent impact on interest cost. To manage this risk the Group has interest rate SWAP's in place which fix the interest rate on a significant proportion of the Group's borrowings.

All hedging activity is undertaken by the Group Treasury function in accordance with the Group Treasury policy which sets out the criteria for counterparties with whom the Group can transact and clearly states that all hedging activities are undertaken in the context of known and forecast cashflows, with speculative transactions specifically prohibited.

Related Party Transactions

Goods and services

In the year ended 27 March 2014:

·     Pursuant to the terms of a consultancy agreement which was terminated on the IPO of the Company, one non-executive director was paid a consultation fee of £156,000 (in the year ended 28 March 2013, £156,000).

·     Kohlberg Kravis Roberts & Co. L.P. received a management fee of £1,220,000 (in the year ended 28 March 2013, £1,196,000), which includes the provision of non-executive director services and expenses recharged. 

·     Kohlberg Kravis Roberts & Co. L.P. also received fees of £8,685,105 and expenses of £113,735 (in the year ended 28 March 2013, £nil), relating to a termination payment and transaction fees in connection with the termination of the advisory services agreement dated 19 March 2010 following the Company's IPO on 17 March 2014.

·     KKR Capital Markets Limited received fees of (i) £600,000 ( in the year ended 28 March 2013, £1,694,000), relating to professional services associated the Group's refinancing in April 2013, (ii) £1,775,000 (in the year ended 28 March 2013, £nil) relating to professional services associated with  the Group's refinancing in March 2014, (iii) £1,757,307 (in the year ended 28 March 2013, £nil) relating to fees in relation to the IPO in March 2014 and (iv) £200,000 (in the year ended 28 March 2013, £nil) relating to professional services associated with the arrangement of loan agreements which Companion Care Management Services Limited became party to in March 2014.

·     KKR Capstone received a management fee of £nil (in the year ended 28 March 2013, £102,000). (KKR Capstone uses the name "KKR" under licence but, for the avoidance of doubt, neither KKR & Co L.P. nor its affiliates owns or controls KKR Capstone or any of KKR Capstone's affiliates).

Transactions with key management personnel

The compensation of key management personnel is as follows:

		27March 2014	28 March 2013
		£000	£000
	Key management emoluments including social security costs	3,272	1,749
	Company contributions to money purchase pension plans	98	85
		3,370	1,834

Trade and other receivables

Group

Company

		At 27 March 2014	At 28 March 2013	At 27 March 2014
		£000	£000	£000
Trade receivables		5,761	3,298	-
Other receivables		16,479	7,628	-
Amounts owed by group undertakings		-	-	565,441
Employee loans		-	902	-
Prepayments and accrued income		19,919	19,940	-
Related party loans		-	2,273	-
Total		42,159	34,041	565,441

·     Included within trade and other receivables above are related party loans comprising unsecured loans advanced to colleagues of £nil (in the year ended 28 March 2013, £1,573,000) to fund the acquisition of shares in Manco 2 Limited pursuant to the Group's pre-IPO colleague share incentive plan.

·     In March 2013, Pets at Home Limited, Nick Wood and an affiliate of the Principal Shareholder (the "KKR Investor") entered into arrangements to facilitate the acquisition by NW PAH Investment LLP, a limited liability partnership incorporated under the United Kingdom Limited Liability Partnerships Act 2000 and controlled by Nick Wood and KKR Investor, of shares in Manco 1 Limited.  The amount of capital invested by KKR Investor of £700,000 was lent to KKR Investor pursuant to a loan agreement with Pets at Home Limited. The return on capital invested by KKR Investor accrued at 8% per annum compounded annually and was calculated on a daily basis. Prior to Listing, NW PAH Investments LLP distributed its assets to Nick Wood and KKR Investor, in accordance with the Reorganisation Agreement.  NW PAH Investments LLP is in the process of being dissolved. KKR Investor repaid all amounts owed to Pets at Home Limited following receipt of payment from Nick Wood prior to the year ended 27 March 2014.  This loan balance of £700,000 is accounted for in the related party loans balance above.

·     As detailed in the Consolidated Statement of Changes in Equity detailed in the Company's preliminary results announcement for the year ended 27 March 2014, on 17 March 2014 the Company issued 140,539,069 ordinary £0.01 shares at a premium of £2.44 per share in exchange for £344,321,000 additional paid in capital issued by PAH Lux S.a.r.l. This additional paid in capital of PAH Lux S.a.r.l. represented a related party transaction with investors in the Group prior to the IPO.

Trade and other payables

Group

Company

		At 27 March 2014	At 28 March 2013	At 27 March 2014
		£000	£000	£000
Current
Trade payables		79,005	52,199	-
Accruals and deferred income		49,898	35,094	14,797
Other payables including tax & social security		17,245	10,990	-
Corporation tax		3,399	4,549	-
Amounts owed to related party		-	1,467	-
		149,547	104,299	14,797
Non-current
Related party loan notes		-	21,799	-
Deferred income		31,068	28,168	-
		31,068	49,967	-

The Group held related party loan notes of £nil (period to 28 March 2013 £21.8m), due to colleagues and former colleagues of Pets at Home Limited who are part of the management team. The loans incurred interest at 8% per annum and the interest was capitalised until the loans were repaid on the IPO of the Company (including one payment to an Executive Director), and interest of £nil (period to 28 March 2013 £4.5m), was included in the balance.

Additional Details on Related Parties Transaction entered into the year ended 27 March 2014

•           KKR My Best Friend relationship agreement (Relationship Agreement):  This Relationship Agreement was entered into on 28 February 2014 and regulates the relationship between KKR My Best Friend Limited (Principal Shareholder) and the Company following IPO.  Subject to a certain minimum shareholding, the Relationship Agreement details the rights the Principal Shareholder has to representation on the Board and Nomination and Corporate Governance Committee; appoint observers to the Remuneration, Audit and the Pets Before Profit/CSR Committee and certain anti-dilution rights.  The Company has also undertaken to cooperate with the Principal Shareholder in the event of a sale of the shares held by the Principal Shareholder at any time following the IPO.

•           Reorganisation Agreement:  This Reorganisation Agreement was entered into on 28 February 2014  between (amongst others) the Company, the Principal Shareholder, certain Group companies, the Executive Directors and the Senior Executives and contained certain reorganisation steps that took place in connection with the IPO.

•           Engagement Letter: In connection with the Company's IPO, on 18 February 2014, KCM (together, with other Joint Global Coordinators), entered into an engagement letter with Pets at Home Interco Limited in respect of the provision of services in connection with the IPO of the Company.

•           Underwriting Agreement:  In connection with the Company's IPO, on 28 February 2014, the Company and the Principal Shareholder have entered into the underwriting agreement with, among others, the Board (excluding Paul Moody), the Executive Management Team, Goldman Sachs International, Merrill Lynch International, KKR Capital Markets Limited and Nomura International plc and the Principal Shareholder.  The fees paid to KKR Capital Markets Limited pursuant to the Underwriting Agreement are detailed above.

Veterinary practice transactions

The Group has entered into a number of arrangements with third parties in respect of veterinary practices.  These veterinary practices are deemed to be related parties under IFRS.

The transactions entered into during the period, and the balances outstanding at the end of the period are as follows:

				27 March 2014	28 March 2013
				£000	£000
	Transactions
	-  Fees for services provided to veterinary practices			21,610	9,304
	-  Rental charges to veterinary practices			5,039	3,791
	Balances
	-  Due from veterinary practice companies at end of period included within other receivables			12,673	4,648

 

END

 

 

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