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(Alliance News) - Pets At Home Group PLC on Tuesday said its profit quadrupled in the first half of its financial year, resulting from a sizeable impairment loss on receivables a year before, as well as higher revenue from both Retail and Vet Group divisions.
Shares in Pets at Home were up 9.6% at 235.00 pence in London in morning trade.
The firm's pretax profit for the 28 weeks ended October 10 was GBP34.0 million, more than four times its GBP8.0 million profit a year prior. This was due to a GBP16.2 million impairment loss on receivables the year before, which fell to only USD295,000 in financial 2019.
Another major contributor to the profit rise was a 9.4% increase in Pets at Home's revenue to GBP546.3 million from GBP499.3 million. This included an 8.1% rise in Retail revenue to GBP479.8 million from GBP443.7 million Vet Group revenue, meanwhile, increased 20% to GBP66.5 million from GBP55.6 million.
Underlying trading, which excludes the 2018 impairment loss, as well as impairments and joint venture veterinary practise purchase impairments, showed a pretax profit of GBP41.7 million, up from GBP37.9 million.
Pets at Home maintained its interim dividend at 2.5 pence per share.
Chief Executive Peter Pritchard said: "The programme to buy out a number of Joint Venture practices is already complete, whilst changes we have made to the fee arrangements for ongoing practices are already showing signs of positive progress and will be followed by further planned adjustments in the second half of the year.
"All this provides a strong foundation, meaning we have much to look forward to in FY20 and beyond, and we now expect to return to profit growth a year ahead of our original plan. In the meantime, we will remain focused on serving our customers, their pets and our partners better than ever before."
Looking ahead, Pets At Home said it expects to sustain profit growth from its Retail unit, while the second half will see the full impact of changes to the company's fee arrangements for its ongoing joint venture practices. Some pre-opening costs from expanding capacity at its Dick White Referrals and opening a fifth specialist referral centre in Scotland will be incurred, which will hurt its Vet Group underlying profit.
The firm is confident in its second half, expecting underlying profit growth and underlying pretax profit pre-IFRS16 to be near the top end of market consensus.
Pets at Home said: "Our focus remains on sustaining the return to profit growth, and we expect to generate further underlying profit and free cashflow growth from FY21, despite the potential headwind posed to Retail gross margin by USD currency movements. Due to our current hedging position, such movements will not impact FY20 profit guidance issued below."
By Anna Farley; annafarley@alliancenews.com
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