TIDMPETS
RNS Number : 2372B
Pets At Home Group Plc
09 June 2021
FOR IMMEDIATE RELEASE, 9 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
https://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
https://data.fca.org.uk/#/nsm/nationalstoragemechanism :
-- 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
irelations@petsathome.co.uk 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, https://investors.petsathome.com , 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.
S
Enquiries
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: 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 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.
Mitigation
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.
Outlook
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.
Competition
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.
Mitigation
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.
Outlook
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.
Mitigation
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 GBP28.9m 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.
Outlook
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.
Mitigation
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.
Outlook
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.
Mitigation
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.
Outlook
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.
Mitigation
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.
Outlook
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.
Mitigation
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.
Outlook
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.
Mitigation
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.
Outlook
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.
Mitigation
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.
Outlook
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.
Mitigation
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.
Outlook
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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END
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