LONDON (ShareCast) - (ShareCast News) - Pets at Home Group said its merchandise repositioning was on track in its first half results on Tuesday, along with improved sales momentum, as its group like-for-like revenue growth improved to 3.9% from 2.5% in the first half of last year.
The FTSE 250 firm said its merchandise like-for-like revenue growth was up to 3.1% in the period from 31 March to 12 October, from 1.9% at the same time last year, while services like-for-like revenue growth hit 9.5% from 8.7%.

Looking at the hard numbers, Pets at Home's group revenue grew 6% year-on-year to £468m, with merchandise revenue up 4.6% to £396.7m and services revenue surging 15.3% to £71.3m.

The group's gross margin fell 198 basis points, however, to 51.9%, with its pre-exceptional EBITDA down 4.6% to £62.2m and a pre-exceptional profit before tax off 11.2% to £41.7m.

Pets at Home said its statutory profit before tax was down 11.3% at £40.8m, and free cash flow was 32.6% lower at £23.2m.

"Our strategic progress and trading momentum have steadily improved through the first half of the financial year," said group chief executive Ian Kellett.

"In the merchandise business, our like-for-like sales grew by 5.1% in the second quarter, driven by our pricing changes, omnichannel offer and product innovation."

Kellett said the company's veterinary business was taking market share, and hitting the revenue and profit growth levels expected from both the first opinion practices and specialist referral centres.

"We see the potential for significant future profit growth in our Vet Group, where 75% of practices are yet to mature."

Looking at its operations, Pets at Home said it saw "strong performance" from its omnichannel business with revenue up 81% to £24m, driven by order in-store and subscription plans.

Its veterinary business growth remained strong, with total income from joint venture vet practices up 16.1% to £28.0m and specialist referral centres said to be growing revenues at "double digit levels".

Its total interim dividend was confirmed at 2.5p per share, maintained at the prior year level.

Looking ahead, Pets at Home said its profit outlook for the 2018 full year remained in line with market expectations.

The board said that, as it saw the benefits of its pricing actions, it was accelerating its investment plans and now expected group gross margin dilution of between 200 and 250 basis points.

Operating cost growth was now expected at between 6% and 6.5%, as the board saw higher overall sales growth, and the associated costs of delivering a "fast growing" omnichannel business.

All other financial guidance was maintained.

"We are confident we are taking the right actions to reposition our merchandise business and having seen the results from our initial investments, we are accelerating our plans," Ian Kellett added.

"There remains much to do and we will continue to evolve our strategy and adapt to customers' needs in what remains a competitive market place."

Pets at Home also made a separate announcement on Tuesday, confirming that CEO Ian Kellett has decided to step down, to be replaced by current CEO of retail Peter Pritchard.

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