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Pets at Home Grp (PETS)


Wednesday 09 June, 2021

Pets at Home Grp

Annual Report & Accounts and Notice of AGM

RNS Number : 2372B
Pets At Home Group Plc
09 June 2021






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

Pets at Home Group Plc (LSE: PETS) ("Company") today announces that its Annual Report and Accounts for the year ended 25 March 2021 ("Annual Report"), Notice ("Notice") of the 2021  Annual General Meeting ("AGM") and Form of Proxy for the 2021 AGM have been sent to shareholders and the Annual Report and Notice are available on the Company's website at .

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 :

· Annual Report and Accounts for the year ended 25 March 2021;

· Notice of the 2021 AGM; and

· Form of Proxy for the 2021 AGM.

The Company's AGM will be held at 11.00 am on 8 July 2021 at Pets at Home, Chester House, Stanley Green Trading Estate, Handforth, Cheshire, SK9 3RN .

As noted in the Notice of the 2021 AGM, in light of the ongoing uncertainty concerning the exact timescales for the easing of lockdown restrictions, it is expected that the 2021AGM will be held in a similar format to last year. The Board recommends that shareholders do not attend the 2021 AGM this year due to the ongoing need to protect public safety. If however, despite this recommendation, shareholders do intend to attend the 2021 AGM in person, they are asked to  register their intention to attend as soon as possible in advance of the 2021 AGM by emailing [email protected] to allow for appropriate arrangements to be made.

As detailed in the Notice of the 2021 AGM, shareholders are able to ensure their votes are counted by submitting proxies in advance, either online or by post. The Board is also inviting shareholders to submit questions in advance of the 2021 AGM and answers to questions on key themes will be made available on the Company's website, , as soon as practically possible after the 2021 AGM. Further details on how to vote and submit questions in advance of the 2021 AGM can be found in the Notice of the 2021 AGM.

The Company's preliminary results announcement on 27 May 2021 included, in addition to the preliminary financial results for the year ended 25 March 2021, information on important events that occurred during the year and their impact on those financial statements. 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 25 March 2021.





Pets at Home Group Plc:

+44 (0) 161 486 6688

Lucy Williams, Company Secretary


About Pets At Home

Pets at Home Group Plc is the UK's leading pet care business; our commitment is to make sure pets and their owners get the very best advice, products and care. Pet products are available online or from our 452 stores, many of which also have vet practices and grooming salons. Pets at Home also operates a UK leading small animal veterinary business, with 441 First Opinion practices located both in our stores and in standalone locations. For more information visit:




Directors Responsibility Statement


The responsibility statement below has been prepared in connection with the Company's Annual Report and Accounts for the year ended 25 March 2021.


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 Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.


The Directors of Pets at Home Group Plc consider the annual report and accounts taken as a whole, is fair, balanced and understandable and provides the necessary information for shareholders to assess the Group's position and performance, business model and strategy.


This responsibility statement was approved by the Board of Directors on 20 May 2021 and signed on its behalf by Peter Pritchard, Group Chief Executive Officer.


Principal Risks and Uncertainties


A risk management framework is in place allowing risks to be identified, assessed and managed within appetite, whilst taking advantage of opportunities. This allows the strategy to be effectively delivered and protects value for shareholders.


Risk Management Framework


The responsibility for risk management operates at all levels throughout the Group.


Board of Directors


The Board of Directors has overall responsibility for the Group's risk and internal control frameworks. It determines the nature and level of principal risks and sets risk appetite. Undertakes a robust assessment of the Group's principal risks.


Audit and Risk Committee


Assists the Board fulfil its corporate governance and oversees responsibilities in relation to financial reporting, internal controls and the risk management framework. Provides oversight and challenge to the assessment of principal risks. Reviews internal financial controls and the risk management framework and assesses their effectiveness in mitigating Group level risks and advises the Executive Management Team on risk appetite. Reviews and oversees the Group risk register - reviews detailed risk reports at each sitting with supplementary reporting from the management team on specific key risks. Conducts regular deep dives into key risk areas with relevant Directors to understand the nature of the risks and adequacy of the mitigations and controls that are in place.


Executive Management Team


Collectively responsible for managing risk. Key risks are allocated to an Executive Management Team member for oversight and ultimate ownership. Receives regular risk updates and reports from Board committees, internal audit, assurance teams and external advisors.


Internal Audit

Gives objective assurance to the Board and Audit and Risk Committee on the effectiveness of the risk management framework. Holds meetings with risk owners across the business four times per year. Updates the individual risk registers, including actions and progess made, assesses risk ratings and documents the controls in place that help mitigate each risk. Recommends improvements and corrective actions.


Operational Management


Owns and manages operational and project risk. Ensures Group policies and procedures are implemented and complied with and implements mitigating actions. Communicates significant risks via reporting processes to the senior management team.  


Key Risks


The key risks identified by the Board are summarised below.


COVID-19 pandemic and Brexit


The Board has reviewed the risks and opportunities presented by COVID-19 and the UK's exit from the European Union.


In response to these challenges, we have clearly set out our priorities and have appropriate, balanced, and calibrated mitigation plans in place for our people, our customers and their pets, supply chain, operating model, and liquidity.


Our priorities are first and foremost to safeguard the wellbeing and safety of our colleagues, partners, customers and their pets, and suppliers as well as ensuring the continuity of customer service in our stores and practices.


Whilst the longer term effects remain unclear, we continue to monitor the risks and the ongoing impacts closely. Based on our scenario planning and latest view from Government. We have assessed our risk profiles of which eight remain stable. Liquidity and credit risk has reduced (high to low), sustainability and climate change has increased (low to medium).


We will remain vigilant, continue to plan, stay agile, and communicate with our colleagues and stakeholders accordingly to put our business in the strongest position possible for the future.


Both have the potential to affect the following principal risks:


• Competition

• Our people and culture

• Supply chain and sourcing

• Services and stores expansion

• Liquidity and credit

• Treasury and finance

• Regulatory and compliance


Brand and reputation


Description and impact


Our vision is to be 'The Best Pet Care Business in the World'. We believe that 'Pets come first' and pet welfare remains our highest priority.


Protecting our strong brand, reputation and customer loyalty is essential to our business. Failure to do so could result in not attracting new customers and a loss of trust and confidence in the Group and its brands by customers, colleagues, shareholders, and other stakeholders.




Advancing pet welfare will always be a priority in line with our number one value 'Pets come first.' As a retailer of small pets and Veterinary group the highest possible welfare and clinical standards must always be maintained.


The Group's pet welfare and clinical standards are overseen by the ESG Committee (environment, social and governance), whose remit includes maintaining and improving our high standards.


Reporting into this committee is the newly established Pet Welfare Committee, which oversees the assurance and governance of pet welfare (including breeders and our supply chain), quality and welfare considerations of products, services and events, and the Group's position on pet welfare and pets in society. Regular meetings with stakeholders from across the Group allow us to be quicker and more agile with communications and improving procedures where needed.


We have rigorous processes in place to ensure welfare standards across our stores, in-store adoption centres, grooming salons and our breeders. All are regularly assessed against a comprehensive set of welfare standards both by internal and external independent assessors. We also have a highly visible field operations team that are focused on maintaining the highest pet welfare standards. Despite the ongoing challenges due to COVID-19 we have maintained our pet welfare audit programme with a mixture of virtual and on-site assessments carried out by our independent assessors.


Every store colleague is also empowered to refuse to sell a pet if they have any doubts about the suitability of its forever home.


We also operate a confidential 'Pet Promise Line' where colleagues can raise concerns about pet care directly with our Head of Pets, who is a qualified veterinary surgeon. Any call to this line results in appropriate action to address the concerns raised.


We have started to change how we talk about and sell rabbits which is part of a wider project to further improve rabbit welfare. We know that, despite our best efforts, customers often do not understand the complexity or commitment of pet ownership. Rabbits are now only sold in half our stores which all have an in-store veterinary practice. We have also increased the price of rabbits to make them more of a considered purchase.


The Group also interacts with customers' pets daily through its First Opinion veterinary practices. All veterinary surgeons and nurses are subject to the Royal College of Veterinary Surgeons' (RCVS) Code of Conduct.


293 practices are accredited under the RCVS Practice Standards Scheme (PSS), with a further 57 currently enrolled to become accredited. This is a voluntary scheme, which through setting standards and carrying out regular assessments, aims to promote and maintain the highest standards of veterinary care. To become accredited, practices volunteer for rigorous assessment every four years and will have met a range of standards. Practices are also subject to independent spot-checks between assessments. The accreditation process has been suspended for much of the financial year due to the pandemic, but we will continue to drive and support PSS accreditation when it has fully resumed. To support our colleagues further our clinical development team, who are all veterinary surgeons, audit to our internally developed 'Aspiring to Clinical Excellence' (ACE) audit programme which has helped improve clinical standards and processes across the Group. The support has been further enhanced by our quality improvement programme which has provided granular detail, as well as clear direction and prioritisation for our future support activities.


The Group has, in conjunction with the VetCompass research team at the Royal Veterinary College, secured a research grant from PetPlan UK. This will facilitate research into antibiotic prescribing behaviours which will advance the profession's knowledge of this critical subject that has implications for both human and animal health.


We have strong relationships with the large animal and pet rescue charities in the UK and engage with them regularly on pet ownership and welfare issues. We are the biggest grant giver to the rescue sector in the UK through the Pets at Home Foundation and our VIP Lifelines scheme. This year we have supported the rescue sector with an emergency grant scheme to help them to cover essential costs during the pandemic. We have held sessions specifically focussing on the impact of the pandemic on pet ownership and pet welfare with the large rescue charities. We also held two roundtable events for over 20 small and medium sized local pet rescues in December 2020. The rescue sector has not seen an increase in relinquishment of pets as of April 2021. We will be monitoring the situation closely with the sector and ensuring that our help is placed where it will have most impact. We are also aware that as restrictions ease more support may be needed to help pets and owners adapt to changing lifestyles and we will work to ensure our pet care ecosystem is here to support our customers during their pet ownership journey.




As we continue to increase the size and scale of our pet care service offering, we must ensure that pet welfare and clinical standards continue to be maintained at the mandated high level across the Group.


We continually monitor and improve our standards to ensure they remain robust and best in class.


Following Government requirements for COVID-19 and RCVS guidance, our First Opinion practices remain open to deliver essential care. We trust our veterinary surgeons as professionals to take each case on its own merit and continue to undertake what is essential for the pet's health and welfare needs.


Risk profile: High


Change on prior year : Stable


Links to strategy : Bring the pet experience to life, Use data and VIP to better serve customers,

Set our people free to serve, 50% of sales from pet services.




Description and impact


The Group competes with a wide variety of retailers, including other pet specialists, pure play online competitors, supermarkets, discounters, online pet healthcare platforms, veterinary groups, and independent practices.


There is increased online competition as large well-known internet businesses expand into pet products and established pet product sites improve and expand their offer. There is also a high level of new start-ups into the subscription market.


Not offering an attractive model to our future Joint Venture Partners whilst keeping abreast of, and responding to, developments by all our competition in the areas of price, range, quality, clinical care, and customer service could have an adverse impact on the Group's financial performance and impact opportunities for growth.




We offer pet owners a complete pet care experience, something our competitors cannot. Through our combination of pet products and related services, which we make affordable, convenient, and rewarding, we can differentiate ourselves and take share across all channels and key categories of our pet care ecosystem.


As a specialist retailer, the delivery of friendly expertise through our highly engaged and trained colleagues and partners is a key element of our proposition and we continue to invest to ensure our service standards are continually improved.


Market research is carried out to review the pet market to understand what our competitors are doing worldwide. This helps identify changes or initiatives that can be implemented to help keep Pets at Home a leader in the UK market. In addition, we are constantly reviewing expansion opportunities into new adjacencies that would contribute to our pet care ecosystem.


We maintain competitive prices across Advanced Nutrition own label foods as well as branded food lines and pet essentials. While we know that our customers are typically loyal, we are conscious of price investment activity seen across the grocers, who are continuing to respond with price cuts and price matching. Rather than responding in turn with deep price cuts and an everyday low-price approach, we are further honing our price and promotions strategy, to ensure that we will be targeting price investment across product areas that customers will really notice and care about, supported by compelling promotional activity to ensure that our value message really resonates with our customers.


We continue to evolve our proposition through the addition of vets and groomers into our existing store estate whilst continuing to innovate our pet care centre format - with the intention of making our stores more experiential destinations for our current and prospective customers with the regular introduction of new and exclusive products into our food and accessory ranges. We are also undertaking some 'test and learn' pilots to innovate the format of our veterinary practices, enhancing and modernising the customer's experience in receiving pet healthcare.


Our veterinary business is the largest branded veterinary business in the UK and continues to have a differentiated strategy versus its scale UK competitors, which all employ variations of a 'buy and build' model. The relationship with our Retail stores and VIP club, Joint Venture model, and ability to advertise at national scale under a single brand are key aspects of a strategy that remain difficult for any competitor to replicate - in part or in whole. We continued to use these competitive advantages during the past year to drive above market customer sales growth. We are also delivering on the important work of improving the profitability in each of our First Opinion veterinary businesses for the benefit of our Joint Venture Partners and the Group.


Our omnichannel participation of retail sales is increasing. More customers are using online as part of their shopping repertoire as it has been the lifeline for many pet owners over the past year. Customer buying behaviour was already rapidly changing in an increasingly challenging and competitive retail landscape, with greater demands around price, convenience, service, and experience. Investments in our omnichannel and distribution capability have enabled us to meet increased customer expectations this year. To help our customers shop even more safely we have extended our delivery choice and flexibility through the launch of two new services, a one-hour Click & Collect service across all our stores and the contactless Deliver to Car service across more than 150 stores.


We have also introduced a deliver to home service for our veterinary customers for the supply of preventive and therapeutic veterinary medicines. This has been well received by customers as a convenient solution where travel restrictions have been in place.


As part of our continued investment in our digital experience we have launched a transformational programme to join up our online experience for our customers. To achieve this, we are embarking on a ground-up greenfield, re-imagining of our entire digital eco-system to create our pet care platform of the future.


There has been continued growth in our membership across our VIP, and Puppy and Kitten clubs with increasing spend across our pet care platform. The clubs help introduce customers to all parts of the business and members typically spend more than non-members. Acquiring customers at the very start of their pet journey helps create loyalty and lock in lifetime value. We are also uniquely positioned with our VIP data. Having over eight years of pet and customer data, means we can generate deep insights and deliver an increasingly personalised customer journey.


Our strategy is to embed an analytic culture throughout the Group which underpins our capability framework, to use our insights to drive strategic decision making, and to optimise the working life of our colleagues and partners. To maximise this opportunity, we have recruited a 45-strong team consisting of data scientists, cloud engineers and analysts.


The analytical platform, including the single customer/pet view, was delivered in January 2021. This will optimise our strategy to provide an increasingly personalised customer experience. We have also launched our campaign management through Salesforce and since the half year we have delivered over 80 new campaigns and have been able to use insight and data science algorithms to optimise audience selection. In particular, the reward mailer and churn tests have proven successful in driving incremental revenue and retention.


We are now focusing on how we deliver benefit from our analytics investment, especially in driving prioritisation and value enablement, and in the growth of our subscription offers, improving customer retention and implementing segmental customer lifetime value to monitor long term value of propositions and VIP.





We are in a strong position in a large, resilient market that has seen structural growth over the past 12 months due to an unprecedented increase in pet ownership.


We rapidly adapted our operations to be able to continue as an 'essential' retailer and to keep our veterinary practices open. Working strictly within the guidelines from the Government and the RCVS, the professional body governing veterinary practitioners, our priority has always been the safety and wellbeing of all our stakeholders, whilst meeting the needs of the nation's pets in exceptional circumstances.


Due to COVID-19 we have seen a significant shift to online, as well as economic uncertainty driving an increased customer focus on value and convenience.


We expect to see continued strong growth in our Puppy and Kitten clubs by driving awareness through enhanced marketing campaigns and underpinned by a growing pet population.


Circa 67% of the small animal veterinary market in the UK is corporately owned. We can benefit from our strong strategic footing as the only corporate vet Joint Venture business in the UK that provides an owner-operator model that gives entrepreneurial First Opinion vets the ability to own their own business and operate with complete clinical freedom.


Risk profile: Medium


Change on prior year : Stable


Links to strategy : Bring the pet experience to life, Use data and VIP to better serve customers,

50% of sales from pet services


Services and stores expansion


Description and impact


A key part of the Group's growth strategy is to deliver 50% of sales from pet care services, by having a complete pet care strategy aligned across the Group. If we are unable to deliver the initiatives laid out in our strategy our expected financial performance could be adversely impacted.




Our business model has pet care at its heart and our core focus is providing our customers with affordable, convenient, and flexible pet care solutions through our growing online platform and estate of 441 First Opinion veterinary practices and 452 stores.


We continue to invest across all channels to make pet care as engaging as possible.


The acquisition of The Vet Connection ('TVC') a long established veterinary telehealth provider in November 2020, marks an important development in our digital capabilities providing trusted advice and even more convenient pet care services. The opportunities arising from the scalability of the clinical protocols and proprietary telehealth platform and incorporating their capabilities into our existing customer offer, across product, services and subscriptions, will enhance the overall customer experience, help drive customer acquisition, retention and lifetime value as well as increasing the flexibility around our veterinary partners work-life balance.


On 31st December 2020, the Group also completed the sale of the five Specialist referral practices (the 'Specialist Group') to Linnaeus Group. The sale was part of the continuing focus on customer-facing activities across our omnichannel retailing and First Opinion veterinary operations.


There has been continued growth in our pet care subscription customers. We have over 1 million customers across the Group on our subscription platform, from which we build loyalty, increase customer lifetime value, and generate a predictable annuity revenue stream. In addition, new client registrations across our First Opinion veterinary practices have increased. We welcomed over 465,000 new clients this year.


To take advantage of this opportunity we have recruited an 11-strong dedicated Propositions Team, who are working across the Group to introduce new and unique bundles of products and services aimed at providing complete pet care, with significant potential to personalise and tailor packages to customers.


Due to COVID-19 restrictions our expansion and refurbishment programme has been largely put on hold this year, which has given us time to re-evaluate our offer, store proposition and our physical retail strategy as we respond to continued change in customer buying behaviours, the channel shift to online and our customers' need for even greater value and convenience.


We will remain agile so that we can quickly respond, adapt, and innovate our formats to maximise the potential from our estate and ensure that we have the right number of stores and practices in the appropriate format and location. Delivering the best of our pet care centre proposition across all formats will help drive experience, acquisition and fulfilment capability and will reflect the evolving requirements of our customer's pet care journeys, both in the short and long term.


This year we have launched one new pet care centre taking us to 19 stores in this format, with two smaller next generation stores in Camden and Putney, the performance of which will inform our decision-making on a wider rollout inside the M25. We have also opened a new in-store practice in Bracknell and re-opened our Perth store and practice which was destroyed by fire in August 2019, whist completing five conversions of company owned First Opinion practices to Joint Venture partnerships.


Further capacity will be added when our new Distribution Hub comes online from 2023. This facility has been scoped to support the business growth both in-store and on-line until the early 2030's.


Our store estate is also entirely leased which gives us great flexibility. As leases come up for expiry or contain a break, we will assess our portfolio on a case-by-case basis before deciding whether to renew the lease, to close or relocate a unit. We continue to monitor and plan to mitigate the risk of landlords redeveloping sites for alternative uses at lease expiry. In response to COVID-19 all our stores benefited from Government support regarding business rates applicable to the retail sector, which we also applied to the in-store vet practices. In December 2020, the Group repaid £28.9m of business rates relief received across the business. This decision reflects the Company's guiding principle of treating all stakeholders fairly and is supported by the continuing strong performance of the business.




Despite the near term uncertainties posed by COVID-19 and the UK's exit from the European Union, we remain confident in our long term strategic plan to deliver 50% of sales from pet care services. The Group is in a strong competitive position which allows us to capture this opportunity through our differentiated pet care offering.


We expect to see participation in subscriptions and services continue to grow led by our ability to extend, and increasingly personalise our offering whilst taking advantage of the significant increase in pet ownership.


While positive progress around vaccinations for COVID-19 reduces the level of uncertainty ahead, our priority remains safeguarding the health, safety, and wellbeing of all our colleagues, partners, and customers. We have ceased any operation where the health and safety of our colleagues and customers may be compromised.


We continue to monitor all developments and to re-evaluate our strategic plans we progress through the year.


Risk profile: Medium


Change on prior year : Stable


Links to strategy : Bring the pet experience to life, Set our people free to serve, 50% of sales from pet services


Our People


Description and impact


Our People strategy recognises that our colleagues and partners are fundamental to the success of our business and key to us achieving our aim of becoming 'The Best Pet Care Business in the World'.


We must keep our unique culture alive through our shared values and behaviours to safeguard the long term sustainability of our business.


We must also attract, develop, and retain talented, engaged colleagues and partners that will deliver quality service and clinical care to our customers and their pets and achieve our strategic ambitions.




This has been a year like no other and our priority has been keeping our people safe and well to be able to continue to provide essential veterinary care and feed the nations pets through the pandemic. Please refer to pages 10 and 11 of the Annual Report for an overview of how we enabled our colleagues to continue to work safely.


The strength of our culture and values has never been more important and they supplied the anchor from which every decision was made during this time of crisis. Our focus has been both on the physical safety and the emotional wellbeing of colleagues whether they have been working in stores, vet practices or at home, shielding or on Company paid furlough. We have recognised everyone's individual circumstances and challenges and have looked to provide support and guidance to cover these different circumstances.


This year we took the opportunity of our annual colleague survey to focus on two specific areas that our colleagues told us were particularly important to them: wellbeing, and diversity and inclusion. We also know that these topics are closely connected with attracting, engaging, and retaining great talent. Using insight from the survey and other listening mechanisms we have developed our diversity and inclusion strategy which has included the launch of four colleague networks since January 2021 and celebrating key diversity events. From a wellbeing perspective we have been focussing on maintaining the sense of belonging that could have been challenged by remote working. Weekly communications from the CEO have continued throughout the year (communication was more frequent during the first lockdown). We have also provided more support to colleagues and partners who have been dealing with challenging situations with customers. We have taken opportunities across the year to thank our colleagues such as the thank you payments made in April 2020, issuing free shares to all colleagues in July, and the Christmas lunch Thank You.


We have set up a working group called 'modern ways of working'. This is exploring how we support our colleagues, and attract new talent, as we transition out of the restrictions that we have been living and working under over the last 12 months and establish a new normal which supports our colleagues to work in a way that enables them to be productive, collaborate with others, and balance their home, and work lives.


Despite the pandemic we have been able to progress our talent strategy. We launched our capability framework which articulates what great looks like for all colleagues. This framework has been used to create the development programmes that have started during the year such as the 'Fearless' store manager's training programme. Our training and development programmes support the development of pet care expertise in our ecosystem which in turn creates a competitive differentiator and enables us to attract and retain great talent. Our grooming training provides industry leading skills in our salons with colleagues undergoing over 1400 hours of training to be able to pass our nine stage assessment process. Many of our groomers also go on to complete our City and Guilds accredited level 1 and 2 stage training. During the year we have continued to complete grooming training investing in 3,500 hours of virtual training with a particular focus on first aid and animal behaviour training.


Regarding our veterinary graduates, we are pleased that during FY21, we delivered our CPD programme by successfully transitioning programmes to virtual formats so that graduates continued with their development.


Availability of vet talent remains a key risk across the sector. The change to UK immigration policy, the COVID-19 pandemic and changes to the vet locum market because of IR35 have added to the workforce challenges the sector faces within the context of a constrained global supply of vet talent.


We continue to evolve our vet workforce strategy to address these concerns and to mitigate the risks. Our leading vet graduate programme recruits 80 newly qualified vets per annum and was recognised by the Institute of Student Employers in December 2020 for its innovation in preparing new graduates for working life. We have launched new flexible contracts in March 2021 to provide vets with greater choice and flexibility and are partnering with Timewise to review our flexible working practises. We have a targeted international recruitment strategy which focuses on key markets where clinical education meets UK standards. We have delivered impressive results through targeted social media recruitment campaigns and have increased our presence on social media channels. We restructured our recruitment team during 2021 and now have an in-house headhunting team who focus on building a talent pipeline for current and future vacancies.


We have invested in training and support for colleague wellbeing. We have developed an online training programme - Thriving at Work - with the Veterinary Defence Society and will be introducing Mental Health First Aiders in practices over the course of the next 12 months.


As we enter a new normal with the roll out of the vaccination programme and the relaxation of restrictions, we will continue to monitor all Government guidelines to keep our colleagues and customers safe. We will also continue to listen and support our colleagues, invest in their training and development, and focus on how we can support their overall wellbeing.




We continue to make great progress with our People strategy across the Group and remain in a strong position to attract, retain and develop our colleagues.


We continue to seek new opportunities to further enhance our colleague experience; however, uncertainties associated with COVID-19 will need a careful and considered approach.


Risk profile: Medium


Change on prior year : Stable


Links to strategy : Bring the pet experience to life, Set our people free to serve, 50% of sales from pet services.


Information Security and Business Systems


Description and impact


Mitigating information security related risks whilst implementing new ways of working due to COVID-19 was paramount throughout the year. Protecting customer and colleague data against increasingly sophisticated attacks comes with added cost linked to the remediation of associated risk (people, process, technology, and data). Our ability to adapt to these challenging demands is vital to delivering our strategy, maintaining target growth levels and be secure from data security breaches and legal challenges.




In response to the challenges raised by COVID-19 our information security policies covering people, process, technology, and data have been continuously reviewed, adapted, followed, and monitored. Risks have been assessed and managed as business processes evolved. Home working and social isolating ensured we had sufficient resources to maintain our core information security functions and management system, whilst continuing to identify opportunities for improvement.


Our risk-based information security management system, designed to protect confidentiality, integrity, and availability of business-critical information is a strategic project. The management system ensures that information security controls are reviewed and improved on a continual basis. A risk-based methodology allows us to identify, assess and react to the ever-changing threat landscape, including vulnerabilities exploited at other organisations.


To better protect our business from outages caused by changes, we have implemented a revised change management process which is risk based to accurately impact assess changes and ensure that greater focus is placed on high-risk changes. We use our weekly Change Approval Board meetings to discuss these changes in more detail and minimise any impact on service.


We have embarked on a significant risk reduction programme this year, replacing many

of our legacy back-up and disaster recovery (DR) solutions by investing in a new managed third party Data Centre which acts as our DR site for most of our internally hosted key tier 1 and 2 systems.


In response to COVID-19 we have implemented remote working across all our key teams, including the expansion of our telephony system for use at home and the implementation of Microsoft Teams meaning our colleagues can work from any location.


Our established information security training, awareness and testing programme ensures colleagues understand the risks and threats associated with protecting data.


We remain committed to delivering secure high-performance systems that underpin our strategic plan. Scalable, secure, cloud-based solutions are adopted where they support our strategy.




To deliver our vision to become 'The Best Pet Care Business in the World.' we will continue to monitor the threat landscape, utilise a risk management methodology that will allow us to balance risks versus investment and ensure appropriate controls are implemented. In-house expertise will be supplemented with external support to review and validate existing controls, recommend opportunities for improvement, and provide executive level assurance of the current control level.


Awareness, training, and testing campaigns will continue, educating colleagues about the risks associated with data and physical security.


Cloud-based solutions will continue to be our go-to platform where the technology aligns to our security, strategic and operational goals.


We will continue to invest in our risk reduction programme and adopt a continuous service improvement cycle around this.


Risk profile: Medium


Change on prior year : Stable


Links to strategy : Use data and VIP to better serve customers, Set our people free to serve



Supply Chain and Sourcing


Description and impact


As we source our products and raw materials globally, we are exposed to the risks associated with international trade, such as inflation, changing regulatory frameworks and currency exposure.


We must ensure that our suppliers share and uphold our approach to business ethics, human rights (including safety, modern slavery) and the environment.


We are also exposed to the risks associated with the quality and safety of products produced locally and globally on behalf of the Group, many of which are own brand or exclusive private labels.


We have two national Distribution Centres covering the north and south of the UK, respectively. A disaster at one of these may result in a significant interruption to the supply of stock for many stores and in the fulfilment of internet orders.


A failure to manage this risk could lead to significant reputational damage.




During such a challenging year, the strength of our long-standing relationships with key suppliers was crucial to preserving our supply chain. Across third party brands, private label food manufacturers in the UK and accessory suppliers in Asia, we were able to minimise disruption to customers and continue meeting their pet care needs. Our earlier investments in omnichannel capacity, new customer acquisition channels and subscription services had equipped us to meet above-trend levels of demand and, with disruption in Asia supply stabilising relatively quickly, our product availability held up well.


The Product and Supply Chain Committee is responsible for developing the Responsible Sourcing strategy. Its scope covers the full value chain impact of products including packaging, raw materials, and the environmental impacts of manufacture, Human Rights, and product sustainability innovation. During this year, the committee has developed a roadmap to deliver the relevant targets for our Better World Pledge. More details can be found on page 64 of the Annual Report. An independent human rights risk assessment has been conducted during Q4 FY21. The recommendations will be implemented from FY22, under the direction of an ethical manager joining the business during Q1 FY22.


Having Pets at Home colleagues on the ground in Asia working collaboratively with suppliers enables us to closely monitor compliance with the Group's Code of Ethics and Business Conduct policy, and our Supplier Quality Manual. In addition, an independent third party undertakes visits to further monitor compliance with Group policies.


We continue to invest in our quality assurance and control processes and to ensure the effectiveness of our Far East sourcing office in mitigating our sourcing risks in the region.


For our own label and private label food products we have identified alternative suppliers where appropriate and have developed contingency plans.


This year we have substantially mitigated the quality and safety risks in our range development. All testing protocols have been interrogated and strengthened where necessary. We continue to mitigate the risks associated with existing products through ongoing monitoring and surveillance.


In the Vet Group we have worked closely with all suppliers to understand and mitigate any potential risks to manufacture and supply of critical pharmaceutical and consumable clinical products. We have continued with our intended programme of contract renewals during the year despite the interruption due to COVID-19. Provisions made for ring-fenced stock holdings with both wholesaler and manufacturers have proved successful in maintaining security of supply.


Business continuity plans are in place for the Distribution Centres. They help us mitigate the impact of a disaster by enabling us to service all stores and orders for a priority range of SKUs from a single Distribution Centre whilst we source a second facility and recover full product supply. We have also opened a second site in Stoke which supports our Business Continuity plans as well as increasing our storage capacity to support business growth.


Exposure to foreign currency movements and freight rate increases is a risk that is mitigated through our hedging strategy; see the Treasury and finance risk.




We will continue to actively monitor developments due to COVID-19 and the UK's exit from the European Union.


Our preparations to mitigate the impact from tariffs, logistics and foreign currency movements were in place well ahead of the transition deadline. We continue to monitor the situation in Northern Ireland to ensure continuity of supply and the smooth running of our operations locally.


However, we do recognise that exposure to foreign currency movements and freight market fluctuations will be a heightened risk.


During 2022, we aim to up weight our product quality and safety compliance monitoring with the recruitment of added in-house auditing personnel.


We are aligning our 2030 strategy to the UN Sustainable Goals, recognising that our actions can impact issues globally and locally and both are important. There is a real consciousness and accelerating trend for ecologically sustainable products. We have ambitions across our key brand strategies to bring sustainability into our innovation plans and range architecture going forward.


Risk profile: Low


Change on prior year : Stable


Links to strategy : Bring the pet experience to life


Liquidity and Credit


Description and impact


The business requires adequate cash resources to enable it to fund its growth plans through its capital projects and 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.




The Group's finances are continually monitored in the context of its growth plans and of the wider economic landscape. The Group's core financing facilities are in place until September 2023. The Group maintains close working relationships with its banking partners to ensure sufficient liquidity and credit is available. The Group monitors a range of potential cash flow sensitivities to ensure the banking facilities in place remain sufficient and adequate considering evolving macro and micro-economic factors. As a result, the Group is confident that it has adequate facilities in place, with a broad syndicate of banks.


The Group's growth plans in respect of Joint Venture veterinary practices are 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 also provides additional financial support to First Opinion practices to underpin their working capital requirements and growth in clinical capacity. This investment is a particular feature of the Joint Venture operating model and in making this investment the Group considers its total returns across all practices on a portfolio basis. The Group has from time to time bought out and consolidated a number of Joint Venture veterinary practices. As part of these acquisitions, the Group settles any liabilities for third party bank loans and leases within these practices on behalf of the Joint Venture Partner, with all such liabilities being written off. For the practices which the Group continues to operate under a Joint Venture Agreement, the Group has established a credit impairment provision to reflect the assessment of extended loans and investments being repaid over different lengths of time, with different risks of return, to provide for any potential shortfall.


The Group has facilities in place with recognised lenders that give us confidence that our medium-term growth plans are financed adequately. The Group ensures that all cash surpluses are invested with banks that 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 where appropriate and developed contingency plans in respect of own label and private label food products.




The evolving position in relation to COVID-19 and the ongoing economic impact of the pandemic has created increased uncertainty in relation to forecast cash flows, liquidity, and credit requirements. We continue to monitor our finances and build relationships with our finance providers to ensure that the business is well positioned to manage its cash flows effectively and ensure sufficient liquidity is available.


Mindful of these prevailing circumstances, we recognise the potential need to support some of our Joint Venture veterinary practices with additional funding during the year ahead. Such funding will be available for those businesses that remain viable over the longer term, taking into account resilience evidenced within the sector throughout the last financial year.


We do not expect any other significant macro-economic changes in the short to medium term that may affect this risk area although the continued development of the UK's relationship with the EU may have some bearing.


The increase in the Group's liquidity headroom in the financial year, supported by the strength of trading throughout the period, has led to the liquidity risk profile reducing.


Risk profile: Low


Change on prior year : Decrease


Links to strategy : Bring the pet experience to life, 50% of sales from pet services


Treasury and Financial


Description and impact


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 Asia. The political and macro-economic environment has increased currency pressures and we may see this continue for some time. The Group also faces risks from changes to interest rates and compliance with taxation legislation. If we do not 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 exchange rate fluctuation is managed via forward foreign currency contracts that 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 replacement of LIBOR by the FCA as the interest rate benchmark by the end of 2021, and the consequential impact on interest cost. To manage this risk the Group has interest rate swaps in place that fix the interest rate on a considerable proportion of the Group borrowings and continues to monitor and engage in preparing for the transition to the alternative benchmark to LIBOR. Further details can be found on page 183 of the Annual Report. All hedging activity is undertaken by the Group Treasury function in accordance with the Group Treasury policy that sets out the criteria for counterparties with whom the Group can transact, which states that all hedging activities are undertaken in the context of known and forecast cash flows, with speculative transactions specifically prohibited.




On-going currency movements between the US dollar and GBP may result in further exchange risk, particularly considering the evolving position in relation to COVID-19, and the UK's developing relationship with the EU. We will continue to monitor this and adjust our approach to hedging where necessary.


Risk profile: Medium


Change on prior year : Stable


Links to strategy : Bring the pet experience to life, 50% of sales from pet services


Regulatory and Compliance


Description and impact


Many of the Group's activities are regulated by national and international legislation, applicable industry regulations and standards including, but not limited to, trading, advertising, packaging, product quality, health and safety, pet shop licensing, National Minimum Wage and National Living Wage, Equality Act, modern slavery, bribery, data protection, environment, the RCVS Code of Professional Conduct for Veterinary Surgeons, and the implementation of the off-payroll regulations (IR35). Failure to comply with the obligations set out in this and other applicable legislation may lead to financial penalties and reputational damage.




We actively monitor regulatory developments in the UK and Europe (as applicable) and our existing obligations where we have internal policies and standards to ensure compliance where appropriate. We also provide training for colleagues where needed and operate a confidential whistleblowing hotline for colleagues, partners, customers, and clients to raise concerns regarding any potential breach of legal or regulatory obligations in confidence.


Our suppliers commit to and are audited against adhering to relevant regulations, such as the Modern Slavery Act 2015, the Bribery Act 2010, and the General Data Protection Regulation (implemented in the UK by means of the Data Protection Act 2018) (GDPR). The Group's Data Protection Officer, and executive sponsored steering committee, monitors Group compliance with legal requirements relating to personal data, ensuring relevant policies are up to date and works with our Information Security Steering Committee which monitors data security.


We have also refreshed all relevant agreements in readiness for the changes to HMRC's off-payroll regulations (IR35) which came into force in April 2021. The Group will continue to monitor any impact on the regulatory and compliance landscape that this and other issues bring.




We continue to monitor legal and regulatory developments across the UK and Europe and will plan accordingly.


Risk profile: Low


Change on prior year : Stable


Links to strategy : Bring the pet experience to life, Use data and VIP to better serve customers,

50% of sales from pet services, Set our people free to serve


Sustainability and Climate Change


Description and impact


The success of our business over the long term will depend on the social and environmental sustainability of our operations, the resilience of our supply chain and our ability to manage the impact of any potential climate change on our business model and performance. The key risk to the Group relates to assessing and reducing the environmental impact of the direct operations and across the value chain. This could result in an impact to the Group's reputation and strategic plan. Examples of risk include extreme weather events affecting demand, sales, our operations and supply chains and more stringent environmental regulation could affect the cost of production and operational flexibility.




The ESG Committee meets at least three times a year to approve and review the implementation of the approved social value strategy, Our Better World Pledge. The Group executive board reports to the ESG committee and is supported by management committees that oversee different areas of the agenda. The Climate Change and Waste committee and the Product and Supply Chain Committee, both established in 2019, continue to implement our strategy and actions regarding the sustainability of our operations and our supply chains. During the year we conducted a climate change risk assessment as part of our commitment to align our reporting and disclosures to the TCFD (Task Force on Climate-related Financial Disclosures) framework and this can be found on page 69 of the Annual Report. We have also concluded an assessment of our scope 3 carbon and developed a reduction target aligned to the Paris agreement which we have committed to submit to the Science-based Target Initiative (SBTi) for approval.


For extreme weather we actively monitor and forecast demand and, should this risk occur, we would review planned and tactical promotional activity to decide whether strengthening this would drive sales.





The social value strategy, Our Better World Pledge, can be found on page 64 of the Annual Report, and in our separate social value report. This includes a summary of our targets relating to sustainability and climate change and our performance over the last year. Further improvements to our subscription and omnichannel services offering will continue to improve our resilience to reduced store footfall during periods of extreme weather.


Risk profile: Medium


Change on prior year : Increase


Links to strategy : Bring the pet experience to life, 50% of sales from pet services



Related Party Transactions


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 due to the factors explained in note 1.4 of the financial statements.


Commitments relating to these veterinary practices are included within notes 25 to 27 of the financial statements.


The transactions entered into during the period, and the balances outstanding at the end of the period are contained in note 27 to the financial statements.

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