Pets at Home : Annual Report 2024

Bringing together

the very best in

pet care

Annual Report and Accounts 2024

Bringing together the very best in pet care

We provide the best products, services and advice to guide pet owners through their pet care journey.

We are the UK's leading pet care business, offering a unique blend of pet care solutions seamlessly connected across all channels, delivering an unrivalled experience to consumers.

For more information:

www.petsathomeplc.com

Strategic Report		Governance		Financial Statements	01

Highlights

Sustainability highlights	16,000	44%
£9.2m
raised to support pet charities	hours donated to local communities	reduction in absolute scope
		1 & 2 CO2e emissions in 9 years

Financial highlights

Revenue (£m)		Underlying PBT1	(£m)
£1,476.6m	£132.0m
+5.2%		(3.2)%
2024	£1,476.6m	2024	£132.0m
2023	£1,404.2m	2023	£136.4m
2022	£1,317.8m	2022	£130.1m

Profit before tax (PBT) (£m)

£105.7m

(13.7)%

2024	£105.7m
2023	£122.5m
2022	£148.7m

Dividend per share (pence)

12.8p

2024	12.8p
2023	12.8p
2022	11.8p

1 Alternative Performance Measures (APMs) are defined and reconciled to IFRS information, where possible, on pages 168 to 170.

01-32	33-92	93-170
Strategic Report	Governance	Financial statements
1	Highlights	33	Chair's Introduction to Governance	94	Independent Auditor's Report
2	Chair's Statement	34	Board of Directors	100	Consolidated Income Statement
4	Business Model	36	Leadership and Purpose	100	Consolidated Statement of
5	Investment Case	38	Division of Responsibilities		Comprehensive Income
6	Performance Summary	41	Composition, Succession and Evaluation	101	Consolidated Balance Sheet
7	Chief Executive Officer's Review	44	Nomination and Corporate	102	Consolidated Statement of Changes
8	Key Performance Indicators		Governance Committee Report		in Equity as at 28 March 2024
10	Market Overview	46	Audit and Risk Committee Report	102	Consolidated Statement of Changes
12	Stakeholder Engagement and	52	ESG Committee Report		in Equity as at 30 March 2023
103	Consolidated Statement of Cash Flows
	Section 172 Statement	54	TCFD Statement
	104	Company Balance Sheet
16	Sustainability Review	66	Directors' Remuneration Report
105	Company Statement of Changes
19	Chief Financial Officer's Review	70	Our Directors' Remuneration Policy
	in Equity as at 28 March 2024
22	Risks Review	85	Directors' Report
105	Company Statement of Changes
		92	Statement of Directors' Responsibilities
			in Equity as at 30 March 2023
				106	Company Statement of Cash Flows
				107	Notes (Forming Part of the
					Financial Statements)
				168	Glossary - Alternative Performance Measures

Pets at Home Group PlcAnnual Report and Accounts 2024

02

Chair's Statement

Delivering our strategy

FY24 has been a pivotal year for the business, in delivering against our strategy to build the world's best pet care platform. We have delivered some key foundations that will support long- term growth, alongside a resilient financial performance, in what remains a challenging economic environment. We have also made progress against our sustainability agenda.

Ian Burke, Chair

Strategy

Our business has a clear purpose - 'to create a better world for pets and the people who love them' - and a clear strategy to deliver this.

This strategy is to build an integrated, omnichannel, consumer centric platform which unifies our unique blend of products, services, and advice, connecting them seamlessly across all channels to deliver an unrivalled experience for consumers.

In what has been a challenging year for many, I am proud to say we have delivered progress against this strategy. We continued to support the nation's pet owners through offering a unique combination of convenient and affordable pet care solutions.

The launch of our unified Pets brand last April helped bring together all our products and services under one master brand, representing our consumer positioning as a provider of all pet owners' pet care needs.

Last Summer, we launched our new distribution centre (DC) in Stafford, which is now supporting all store deliveries. We will complete the transition of our online business to the new DC in the coming year which will vastly improve our operational capability, underpinning our capacity needs for the next decade.

And most recently, we reached a major milestone in the digitisation of the business, launching our brand new app and website to consumers. Once the integration of our new vet practice management system is implemented, this will provide pet owners a digital home for all of their pet care needs.

Our commitment to running a sustainable business plays a critical role in supporting this strategy. Acting responsibly has always been at the heart of our business and by focusing on financial sustainability, as well as the sustainability of human and natural capital, our strategy will ensure we continue to generate long-term sustainable growth for all of our stakeholders.

Colleagues

Our colleagues, and their unrivalled skill, passion, and expertise, remain a key strategic advantage. They are the face of our business, and work tirelessly every day to help guide pet owners through their pet care journey.

The last 12 months represent a critical year for the business with much to celebrate, but also with some challenges, such as the transition to our new DC, which our colleagues have successfully navigated by working well together. Personally, and on behalf of the Board, I would like to thank them for their ongoing hard work and dedication.

Pets at Home Group PlcAnnual Report and Accounts 2024

Strategic Report		Governance		Financial Statements	03

Governance

During the year, we were delighted to welcome Natalie-Jane Macdonald to the Board as an independent Non-Executive Director. Natalie has deep knowledge of the healthcare sector including experience at Bupa and Nuffield Health. Her experience will be of great value to the business as it embarks on the next stage of its ambitious growth plan, particularly in our veterinary business.

We also welcomed Angelique Augereau to the Board as an independent Non-Executive Director. Angelique has extensive experience in data, Artificial Intelligence and machine learning, having served as the Chief Analytics Officer at Capital One Financial Corporation. Her skills and expertise will ensure the Board is well placed to deal with future growth in this field.

Dennis Millard, who served as the Company's Senior Independent Director for nine years, stood down from that position in February 2023, however remained a Director of the Company for a further year.

The Directors, on behalf of the Company, wish to thank him for his dedicated service.

Susan Dawson, who has served on the Board as an independent Non-Executive Director since 2018, has decided to step down from the Board at this year's AGM. Myself and the Board would like to thank Susan for her service to the business.

Dividend

The business continues to be highly cash generative, and despite strong levels of investment, we finish the year in a net cash position.

As such, the Board has recommended a final dividend of 8.3 pence per share, taking the total dividend for the year to 12.8 pence per share. The final dividend will be payable on 16 July 2024 to shareholders on the register at the close of trading on 7 June 2024.

Looking ahead

Looking ahead, the growth outlook for the pet care sector remains promising, and our fully integrated omnichannel model positions Pets at Home well to benefit from these favourable market trends. The significant investments we have made in the business over the last year will continue to deliver benefits in the years ahead, and our balance sheet strength enables us to continue investing in the new capabilities needed to build the world's best pet care platform. We look to the future with much optimism and

I remain confident that our unique pet care strategy will continue to deliver long-term sustainable value to all our stakeholders.

Ian Burke

Chair

28 May 2024

Our Purpose

To create a better world for pets and the people who love them

Our Vision

To build the world's best pet care platform

Integrated	Omnichannel	Consumer-centric
A unified blend of products,	Seamlessly connected	An unrivalled experience
services and advice
	Our Sustainability Commitments
Planet	Pets	People

To make pet care	To improve the life of
environmentally sustainable	every pet in the UK

To be the best employer and developer of talent

04

Business Model

	r
u
O

	t
e
P

Car

e

Platform

Grooming and	Subscription
wellness	plans
Food and			General
		veterinary
nutrition
		practices
Accessories			Advanced
and			and 24-hour
consumables			veterinary care
Advice and	Digital and
support	hybrid
		solutions

Underpinne

d

by

O

ur

										e
										g
									d
								e
								l
							P
						d
					l
					r
				o
			W
		r
	e
tt
Be

Retail

Vet Group

A wide range of pet products are available both online and in our stores, which offer far more to the pet owner than just a place to buy food and accessories. Through a combination of our in-store experience and services, knowledgeable colleagues and award winning Pets loyalty club, we aim to make pet ownership convenient, affordable and rewarding.

We provide a comprehensive range of small animal veterinary services through a network of general practices, which handle all aspects of general veterinary care. We also offer round-the- clock veterinary telehealth advice and triage so clients can access all their pet healthcare needs whenever they need to.

Pets at Home Group PlcAnnual Report and Accounts 2024

Strategic Report		Governance		Financial Statements	05

Investment Case

A clear and compelling investment case

Leading position in a growing, resilient market

• We have a leading position in the £8.2bn pet care market, providing significant opportunity to take further share
• The pet care market is in structural growth underpinned by increasing humanisation, premiumisation and penetration

Unique pet care model

• An expanding platform of pet care, combining products, services and expert advice from a trusted, well known brand
• Only business in the UK offering complete pet care to owners throughout the full pet care journey, seamlessly connected across
  all channels

Best in class digital platform

• Creating a proprietary digital platform where customers can access their entire pet care needs in one place
• Launched new customer app and website in FY24, a key foundation for future growth, enabling us to deliver a succession of improvements in the years ahead

23%

market share

Differentiated veterinary business

• Largest branded veterinary business in the UK, with practices located in two-thirds of stores
• Practice maturity represents a significant future growth opportunity, with further upside from practice rollout, extension and advanced capabilities

£178

average customer value

Unrivalled proprietary data set

• Unique loyalty club, providing over 10 years' worth of proprietary analytical pet data
• By leveraging our data insights, we can offer more personalised, targeted solutions, driving customer loyalty, retention and lifetime value

+12%

average online order growth YoY

Well-invested nationwide physical network

• A well-located network of pet care centres, 58% with co-located grooming and veterinary services
• Well-investedestate, with 41 refits completed in FY24, offering an engaging and rewarding experience for consumers

447	7.8m	458
veterinary practices	active loyalty club members	pet care centres

Strong financial position and returns potential

• Robust balance sheet with good liquidity, low leverage and significant headroom on banking covenants
• Highly cash generative with free cash flow of £69.0m and dividend per share of 12.8p

Unwavering commitment to sustainability

• Strong commitment to sustainability with a strategy designed to balance the interests of all stakeholders
• Balanced Board of Directors with a broad range of skills, experience and expertise

Extensive pet care expertise

• Our colleagues, and their unrivalled skill, passion, and expertise, are a key strategic advantage
• Unique ability to provide pet owners with clinical, nutritional, and wellbeing advice through physical and digital channels

12.8p £9.2m 6,000+

Dividend per share

raised for charities

trained nutritionists

06

Performance Summary

Laying the foundations for future growth

Financial highlights

Consumer Revenue1

£1,906.3m

Revenue

£1,476.6m

Free cash flow1

£69.0m

Statutory PBT

£105.7m

Underlying PBT1

£132.0m

Dividend per share

12.8p

Strategic highlights

FY24 has been a year of delivery

Opened new DC

Stafford DC launched, now supporting 100% of stores. Online fulfilment next.

Launched digital platform

Launched new app and website to customers in FY24 as planned.

Invested in our physical assets

5 new stores, 41 refits, 3 new vets,

26 vet extensions and 10 company managed practices converted to JV.

Winning on vet talent

Improved attraction and retention, more vets driving growth in visits.

New brand

Launched our new Pets brand, bringing together our products and services under one master brand.

Accelerated innovation

Accelerated innovation across food and accessories, driving growth into own brand and premium categories.

CMA review

Responded to the CMA review into the veterinary sector, highlighting the uniqueness of our Joint Venture model.

For more information:

www.petsathomeplc.com

1 Alternative Performance Measures (APMs) are defined and reconciled to IFRS information, where possible, on pages 168 to 170.

Pets at Home Group PlcAnnual Report and Accounts 2024

Strategic Report		Governance		Financial Statements	07

Chief Executive Officer's Review

We have successfully delivered year one of our strategy

FY24 has been a pivotal year for the business, having delivered some key building blocks of our platform for long-term growth, and I am proud of the progress we have made in the year. The business has come together brilliantly to navigate any challenges faced this year, and we have delivered some key milestones of our strategy.

Lyssa McGowan, CEO

An integrated consumer experience

• Our pet care platform truly integrates our unique blend of products, services and advice. Once complete, it will span the entire group, seamlessly connecting consumers, vets and retail colleagues.
• Our Pets Club loyalty programme provides unique insights into the UK pet population, with over 10 years of analytical data on 10 million pets. We now have 7.8m active members, +2% YoY.
• Growing share of wallet is our greatest opportunity, unlocked by creating easy, frictionless, and enjoyable customer journeys across our platform.

A unique data and digital platform

Differentiated, sector-leading vets

• We are the only business which has successfully brought together clinical and retail services at scale, a key part of offering complete pet care to customers.
• Our unique practice owner model has driven record growth and consistent market outperformance, with consumer revenues now £576m, acting as a material contributor to the overall group.
• As more practices reach maturity it unlocks opportunities to drive additional growth through advanced capabilities, practice extensions, and the planned rollout of 5 to 15 new practices a year.

An unrivalled retail proposition

• We will leverage our category authority and expertise to lead on innovation in food, led by our own brands (up 13% YoY), introducing new ranges, and increasing our presence in emerging areas.
• We plan to return accessories to growth through driving premiumisation, leveraging exclusive licenses and tie- ups, and creating points of engagement around major events.
• We will continue to open new pet care centres in attractive catchments, particularly urban, targeting 35 to 40 new openings over the medium term, as well as continuing to invest in our existing estate.

• Our new app and website are live, transforming the shopping and subscription experience for pet owners. Early insights are positive, with average daily app sales up c25% vs pre-launch.
• This marks a major step in the digitisation of the business, but is only the beginning of what we will offer consumers, and we will continue to deliver a succession of improvements in the years ahead.
• We will increasingly leverage data to drive targeted and highly personalised offers, improve operational efficiency, and grow predictable, sticky revenue streams.

Spotlight on Sustainability

Acting responsibly has always been at the heart of our business, and our sustainability agenda, which we call our Better World Pledge, is fully integrated into our strategy, centred around a shared purpose of creating a better world for pets and the people who love them.

We are proud of the progress we have made this year:

• Planet: We will continue to reduce the carbon intensity of our own operation. Our 3.5% reduction in Scope 1 and 2 emissions in FY24 takes the reduction over the past 9 years to 44%.
• Pets: We remain the biggest supporter of pet-related charities in the UK through the Pets Foundation, having raised over £9.2m in this year alone.
• People: We continue to support the communities in which we operate, and our colleagues have collectively donated over 16,000 hours to local causes through our Better World Pledge days.

For more information:

Please visit out 2024 Sustainability Report

08

Key Performance Indicators

Strong progress in year one of our strategy

To support delivery of our strategy, we have a clearly defined set of key performance indicators.

We are committed to generating shareholder value and financial returns, and therefore focus on three financial metrics we believe are the best measure of our performance. Alongside financial KPIs, we also have KPIs aligned to our strategic progress to ensure we can track delivery against our key objectives.

Financial KPIs shown represent those used by the business to monitor performance. Management recognise that as Alternative Performance Measures1 they differ to statutory metrics, but believe they represent the most

Financial performance

Consumer revenue1 (£m)	Underlying profit
	before tax1 (£m)

£1,906.3m	£132.0m
+6.9%		(3.2)%
2024	£1,906.3m	2024	£132.0m
2023	£1,782.4m	2023	£136.4m
2022	£1,673.8m	2022	£130.1m

Free cash flow1 (£m)

£69.0m

(29.7)%

2024 £69.0m

2023£98.2m

2022£95.0m

appropriate KPIs.

In order to consolidate the reporting requirements under sections 414CA and 414CB of the Companies Act 2006 in respect of non-financial reporting, the list on page 91 shows where in the Annual Report to find each of the disclosure requirements.

For more information: www.petsathomeplc.com

What we are measuring

The growth in consumer revenue generated across the Group year on year. This includes spend across all brands and includes the sales made by Joint Venture vet practices, rather than the fee income received by Pets at Home.

Why is it important?

By growing consumer revenue across all parts of our business ahead of the market, we are able to gain market share. In particular, this means focusing on the sales made by general vet practices, whether they be under the Joint Venture or Company managed model.

Future plans

We expect our strategic initiatives to deliver like-for-like1 growth ahead of the market across both the Retail and Veterinary segments.

What we are measuring

The underlying profitability of the Group as a result of our strategic progress. We have shown underlying profit before tax1 prepared on the same accounting basis including the clarification of IAS 38 Intangible Assets relating to Cloud Computing Arrangements, first adopted in FY22. Statutory PBT in FY24 was £105.7m, down 13.7% YoY.

Why is it important?

By generating strong levels of underlying profit, we are able to demonstrate that our strategy remains the right one, and that we are delivering against our strategic objectives.

Future plans

We expect the business to sustain underlying profit growth going forward in line with our medium-term financial framework.

What we are measuring

The cash available for return to shareholders after investing in the needs of the business.

Why is it important?

Delivering free cash flow allows us to make strategic investments in the business to fuel further growth, whilst providing

an appropriate return to shareholders.

Future plans

Generating free cash flow from our vet business remains a significant value creation opportunity. This, alongside further profit growth in Retail, will enable Group underlying free cash flow to grow sustainably in the medium term.

1 Performance Measures (APMs) are defined and reconciled to IFRS information, where possible, on pages 168 to 170.

Pets at Home Group PlcAnnual Report and Accounts 2024