Spain Fund
28 Nov 2016
HL comment HL COMMENT (24 NOVEMBER 2016)First half results showed group revenue up by 9.1%, and the interim dividend is increased by 25%. While the outlook for the full year is unchanged, the group say that trading since the half year stage has been softer. The shares fell by 4.3% on the news.Our View:The theory behind the Pets at Home growth story is simple. It is the market leader in a resilient and growing market, and its stores are slicker and larger than independent rivals. This means that the group should be able to hoover up business just by rolling out stores in new locations. Once stores are open, additional services like grooming and vet practices can be tacked on, driving footfall and raising the likelihood of repeat custom.The catch is that growth looks to be slowing. One explanation is that although the pet market is likely to be fairly resilient to a downturn, it does raise the risk of customers migrating to on-line retailers. The competitors here are much more dangerous than the dingy independent stores that Pets has so far made light work of. Rivals such as Amazon can save the trouble of a trip to the store and often offer lower prices.Pets' VIP loyalty card is the group's secret weapon, allowing it to better understand what individual customers are buying and allowing personalised marketing offers to be created. Pets has over 3.5m active loyalty card customers and almost two thirds of till sales are now covered by VIP cards.Other minor headwinds in the near term include lower sterling raising the cost of supplies and the introduction of the living wage. However, with EBITDA margins of 15%, this shouldn't be too damaging, especially with margins set to grow in the grooming and veterinary businesses.The group aims to return spare capital to shareholders through special dividends where appropriate. Given the group's strong cash flows, history of de-leveraging and indications that management would be willing to tolerate a higher debt level going forwards, there is potential for some meaningful payments. In the meantime, the shares offer a prospective dividend yield of just over 3.5% and trade on a forward PE of around 14.8x.First half trading in detail:Group revenue grew to £441m, driven by new store openings and like-for-like (LFL) sales growth of 2.5%. Earnings before interest, tax, depreciation and amortisation (EBITDA) rose by 7.3%, with margins slightly lower as a result of the newly acquired specialist referral centres and the opening of new grooming salons.The Merchandise division, which accounts for close to 90% of group sales and includes pet food and accessories, saw revenue growth of 4.7%. LFL growth in the division was 1.9%, down on the 2.2% growth in Q1, but up on the 1% growth in H1 last year. Within Accessories, Health & Hygiene returned a more normalised performance after a weak first half last year. 8 new superstores were opened in the period.Revenue in the Services business, which includes vet services and grooming, increased by 47.6%, primarily driven by the opening of 17 new vet practices and 18 grooming salons. LFL growth was 8.7%.Free cash flow grew by 12% to £34.4m, however as result of £15m of acquisitions and dividend payments totalling £27.4m, net debt increased to £171m. The net debt to EBITDA ratio remains unchanged at 1.3x, well within the group's targeted range. The interim dividend is increased from 2p per share to 2.5p.All yield figures are variable and not guaranteed. The information in this article is not intended to be advice or a recommendation to buy, sell or hold any investment mentioned, nor is it a research recommendation. No view is given as to the present or future value or price of any investment, and investors should form their own view in relation to any proposed investment.
Ripley94
13 Oct 2016
Re: Rapid jump in price and volume Brought yesterday @ 220... cheaper today .
nk1999
12 Sep 2016
Citi view From ADVFN:"Citigroup initiated coverage of Pets at Home at 'buy' with a 275p price target, given its expectation of the medium-term margin upside opportunity and cash returns.The bank reckons that over the next 10 years, the vet business could generate an incremental £40m earnings before interest, tax, depreciation and amortisation on a full-year 2016 group EBITDA base of £125m and account for more than 35% of group EBITDA. It also reckons 225m of cash could be returned in dividends over the next three years.Citi said its investment thesis was structured on five main factors, the first being that merchandise will continue to drive the top line through store growth and LFL, although headwinds will limit EBITDA growth.It said services were the key driver of EBITDA growth through expansion and maturity.Citi said that while online competition was a concern, it was unlikely to be as disruptive as expected. It also said that against an uncertain UK demand outlook, Pet Care looks more resilient.Finally, it said the company will soon start to return excess cash to shareholders. "We expect surplus cash to be returned to shareholders via a special dividend, driving our expectation of a FY17 5% dividend yield (including a specialdividend)."
nk1999
04 Aug 2016
HL view "Our view:It seems the money we are prepared to spend on our pets knows no end, and as market leader Pets at Home are the recipient of much of it. The group is targeting an ever increasing share of customers' wallets, both through higher margin products like advanced nutrition (posh pet food) and additional in-store groomers and veterinary practices.The real attraction of Pets at Home is its ability to throw off cash, whilst opening new stores, both out of town and now, with its newer High Street formats, closer to its customers' homes too. Adding services to existing stores has the added benefit of increasing the frequency of customer visits and the revenues per store - contributing some impressive margins.Although we agree with Mr Kellett that the pet market is likely to be fairly resilient to a downturn, we feel that it does raise the risk of customers migrating to larger online retailers such as Amazon, who can often offer more competitive prices.The VIP loyalty card has been the group's secret weapon, allowing it to better understand what individual customers are buying and allowing personalised marketing offers to be created. Almost two thirds of till sales are now covered by VIP cards, giving a vast wealth of data to exploit.Other minor headwinds in the near term include lower sterling raising the cost of supplies and the introduction of the living wage. However, with EBITDA margins of 16% at present this shouldn't be too damaging and is expected to be offset by growth in margins in the grooming and veterinary businesses in the medium term.Pets aim to return spare capital to shareholders through special dividends where appropriate. Given the group's strong cash flows, history of deleveraging and indications that management would be willing to tolerate a higher debt level going forwards, there is potential for some meaningful payments. In the meantime, the group offers an ordinary dividend yield of just over 3% and trades on a forward PE of around 15.5x. "[link]
highsnlows
06 Jul 2016
Re: Why the drop The British have a compulsion to put their pets first and Pets At Home is well positioned to benefit from this. The inclusion of Companion Care Vets and Vets4Pets in their stores opens a whole area of income growth. Why pay the local vet when you can get equal or better service in store for less. HnL
Optimist1
05 Jul 2016
Re: Why the drop Well ever the Optimist, Though Canada Pension Plan and Old Mutual up stake the other day, so must see some value/dividend in them. all the best
turkey10
05 Jul 2016
Re: Why the drop Well let's hope so. I have spent a lot in the store but with tighter times will people not buy the cat food from Tesco?
Optimist1
05 Jul 2016
Re: Why the drop Pet owners will tend not to cut back on spending on their pets. Time will tell
turkey10
05 Jul 2016
Re: Why the drop I'm afraid the answer is simple, Brexit and the coming self imposed recession. Pets will suffer with a slow down and its premium products may well be hit. It's a shame such a good company. It will have to heavily discount to maintain its market position.
highsnlows
05 Jul 2016
Re: Why the drop But why have Liberum issued the note. What is the reason for their Sell advice. The fundamentals look great, it has a commanding market position etc etc.HnL
Optimist1
05 Jul 2016
Re: Why the drop Liberum Capital have issued a note - Sell £2.00 target so all the sheep have followed.Just topped up 2.045, many thanks Liberum. Div to come soon.
Optimist1
05 Jul 2016
Why the drop What bad news has leaked out??
Simbrad
27 May 2016
Beaufort on Research Tree this morning: "Shareholders cheered Pets at Home's strong results for FY2016, which demonstrated good financial and resilient LFL revenue growth. The management's confidence in the Group is well reflected in the +39% hike in full year dividend, representing 50% payout ratio which it intend to maintain for the FY2017. The Group expanded its VIP club members to 4.5 million, of which, 3.3 million of them are active members (those who have used their card in last 12 months), through tailored offers of products and services along with improved club member engagement, which continued to provide support to LFL growth. Looking ahead in FY2017, the Group targets opening a further 15-20 Pets at Home superstores, 45-55 vet practices and 50-60 grooming salons. The management expect gross margins to come under pressure primarily due to direct cost impact of National Living Wage (c.+£2m) and weaker Sterling, given that the Group increasingly sources significant level of purchases in US Dollar. The guidance for capital investment of c.£45m (including exceptional investment of £5m as part of a £8m two year energy saving project) was set, while maintaining 1.5x net debt/EBITDA or 1.75x in case of acquisition/investment. Trading so far in FY2017 remains in line with expectations. The Group's ongoing strategic investments in seamless shopping to enhance its system and website, together with growing loyalty scheme, should support merchandise sales (which enjoys a higher 57% gross margin) in the medium to longer term. Recognising the Group's performance, management confidence and its ongoing investment plans, Beaufort reiterates..."
nk1999
23 Apr 2016
Liberum From Citywire:"Pets at Home at ‘attractive entry point’Full-year results for Pets at Home (PETSP) will reassure current investors and marks a good entry point for new investors. Liberum analyst Adam Tomlinson retained his ‘buy’ recommendation and target price of 335p on the shares, which rose 2.8% to 246.3p yesterday.‘[The] full-year 2016 estimated trading update should reassure investors and we expect the shares to react positively,’ he said. ‘Management has reiterated full-year guidance and the fourth quarter has shown strong momentum across the business, with further improvements in the core merchandise division and ongoing strength in services. Key operational metrics are encouraging, with the roll-out plan hitting targets and growth in loyalty scheme members progressing well. ‘The new chief executive, previously chief financial officer, takes over a well-run business. With the shares below their March 2014 float price, we see an attractive entry point.’ "
turkey10
22 Apr 2016
Re: hi I have found the Vets in Pets at Home much cheaper than our local vet. Our local vet charged us £70 for worm tablets for three cats I paid less than half of this for the same medication at Pets at Home.
