U.S. Markets open in 57 mins

Edited Transcript of PETS.L earnings conference call or presentation 22-May-19 9:30am GMT

Preliminary 2019 Pets at Home Group PLC Earnings Presentation

London Jun 25, 2019 (Thomson StreetEvents) -- Edited Transcript of Pets at Home Group PLC earnings conference call or presentation Wednesday, May 22, 2019 at 9:30:00am GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Michael Iddon

Pets at Home Group Plc - Group CFO & Executive Director

* Peter Pritchard

Pets at Home Group Plc - Group CEO, Director & CEO of Vet Group

================================================================================

Conference Call Participants

================================================================================

* Andrew Ian Porteous

HSBC, Research Division - Analyst, European Retail

* Geoffrey Frith Ruddell

Morgan Stanley, Research Division - MD

* Matthew C. Garland

Citigroup Inc, Research Division - Assistant VP & Senior Associate

* Simon Bowler

Numis Securities Limited, Research Division - Analyst

* Tony Shiret

Whitman Howard Limited, Research Division - UK General Retail Analyst

* Tushar Jain

Goldman Sachs Group Inc., Research Division - Research Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Peter Pritchard, Pets at Home Group Plc - Group CEO, Director & CEO of Vet Group [1]

--------------------------------------------------------------------------------

Good morning, everybody, and welcome. I'm Peter Pritchard. I'm the group CEO of Pets at Home, and with me today is Mike Iddon. And it gives me great pleasure to take you through today our full year '19 prelims. So in the next hour or so, I'll cover off the group strategic update, and Mike will cover off the review of FY '19. And at the end, of course, we have time for your questions.

Last year, we launched our new strategy to become the best pet care business in the world. And 1 year on, I'm really pleased to say we've made really good progress. We've delivered everything we said we'd do and in line with the guidance that we gave back in November. Bringing our retail and vet business together to create a pet care solution for our customers is working. Our FY '19 results are ahead of our expectations. Retail has returned to profit growth a year ahead of expectations, and our vet recalibration is on track. And our core business is performing well.

The pet market remains attractive. It's in structural growth, and we're taking share across all categories, both online and off-line. Our performance is driven by strong customer metrics. We have more VIP members. We have more customer shopping services. We have more people visiting our website and better website conversion. So I'm really pleased with the progress that we're making.

Our strategy to focus on pet care, we believe, is a compelling plan. So let me remind you of what that plan looks like. It's built on 4 pillars: our first pillar is about bringing the pet experience to life. What really makes Pets at Home unique are not the components of the business but the way in which we bring it together, to make pet care easy, accessible, convenient and fun for pet owners. No one else can do this. We believe it's our secret sauce.

That's why we're rightsizing our retail business and renewing our stores to ensure that our proposition is easily accessible to customers. That's why we put pets at the center of what we do. It's where the brand really comes to life. That's why we use digital to join up the experience for customers and make it really easy. We're always ensuring we're competitive on price, and we're growing private label to grow loyalty, uniqueness and of course, margin. We're creating the best pet care experience and we think that's going to be very hard for others to match.

Our second pillar is 50% of our sales coming from pet services. Services really allow us to access the entire GBP 6 billion spend our customers spend each year in pet care. That's why we put more services into our business, leveraging our national physical scale. Today, we're in reach of 95% of the U.K. population within a 20 minute drive time of our estate. We're also reengineering how we service those needs to make them more convenient and easy, and that's why subscriptions are so important to us. We have a great First Opinion vet business, but we recognize we grew it too fast. So we're focused on those actions to get it back on track and release free cash flow growth. And finally, our specialist and referral hospitals are attractive and resilient to growing capacity, and the footprint makes sense. We have an unparalleled view of the pet care customer in the U.K.

Building our capabilities and unlocking that potential is the third pillar of our strategy, using our data and VIP to better serve our customers. The actions and the capability we are building are starting to produce benefits, and we're excited by the potential. And later on, I'm going to show you a few examples how -- of how that potential is being released. But quite simply, data in isolation doesn't create value. Turning the data into actionable insight does.

And we're using our insight to drive more retail customers into services: better personalizing our customer communications to drive more sales; giving our store colleagues access to information as they need it when a customer sits in front of them to help them work out the next best solution for that customer; and unlocking insight to make faster decisions; and moving forwards from looking behind to actually predicting what's about to happen; and making better business decisions. Of course, as we become data and digitally savvy, I passionately believe the role of our people plays a more important role. When you speak to our customers, it's very simple. They come to stores and practices to interact with people, not machines.

That's why the fourth pillar of our strategy is setting our people free to serve. People truly are the most precious asset in our business. And that's why I want to set them free from non-value adding activity to spend more quality time with my customers. Quite simply, when they do, they create value. That's why we're focused on building systems, processes and automation to set our people free to serve. Our people are really valuable. We want to do the things that machines can't do.

Against our new strategy, we've created a set of strategic KPIs which track the progress of our delivery. These 4 measures align to each strategic pillar and will give us consistent KPIs to track delivery. And as you can see, we're making good progress.

So in bringing the pet experience to life, our customer transactions are growing 5.3% over 59 million transactions. If you look at 50% of our services coming from pet services, our sales come from pet services, today we stand at 34%. That's 175 basis points year-on-year. As we better serve customers using our VIP and data, we can see GBP 591 million worth of our sales are now associated to our VIP members. That's up 17.7% year-on-year. As we liberate our colleagues to better serve our customers, you can see that our sales are up 3.9% to GBP 174,000 per colleague.

So let's turn our attention to our retail business. Our retail business is performing really strongly. It's returned to profit a year ahead, and we've now had 9 quarters of like-for-like growth. We think that's an exceptional performance from our retail business. All parts of the business are performing strongly. If I look at my pure bricks business, that's growing at 2%. If I look at my pure e-com business, that's growing at 27%. And if I look at my e-com business combined with store-generated sales for e-com, such as Order-In-Store and subscriptions, that's growing at an impressive 43% like for like.

We're consistently running ahead of the market, and we're taking share across all categories. I'm particularly proud of our 2-year like for like. If you look at our final quarter in Q4, that 6.5% like for like goes up against a 6.1% of the prior year, which is giving us a like for like -- a 2-year like for like in excess of 12%. I think by anybody's measure, that's a pretty strong performance. Of course, success in retail has many factors.

Over the next few slides, I'll share with you the building blocks of our success. First, turning our attention to price. Pricing in isolation hasn't driven our sales. We had become uncompetitive against a new breed of very aggressive price competitor, and they were mainly online. Our focus is on neutralizing that competition, and that's been our goal. We always want to make sure that price is never a reason why you should not shop at Pets at Home. Over the last 2 years, we've worked really hard and really smart, and we now think we've got ourselves to a compelling place. And quite simply, this is how we think about it. If I look at every single item I sell, which is directly comparable to my most aggressive online competitor, I weigh that volume back to our volume, we're within 5% of that most aggressive competitor, the toughest measure I can possibly use.

But customers don't buy thousands of items in a basket. They buy items. So we then look at it through a customer lens and look at those items which are most important to them, the ones they spend most money on, the ones they buy most often such as things like big bags of Advanced Nutrition food. And on those items, our price gap is now 0 or we are slightly cheaper. And on those same items, if you shop into our Easy Repeat service, it means they arrive when you want them to. It's dead easy. We're cheaper. We're 2% cheaper than our most aggressive online competitor. We feel that position has been really hard won, it's taken us 2 years to get to this position. But our pricing journey, of course, as a retailer, is never over. We always have to remain competitive for our customers and that's exactly what we will be doing.

If you look at our key customer metrics, we're in a good place. We are recruiting more customers into our VIP loyalty club, up 12%, 20% more customers are coming to our website, 22% of our VIP customers are now buying product and services and we're selling more private label of cat and dog food than ever before up 1.2 percentage points. We think that's really encouraging and reflective of the actions that we've taken over the last 2 years.

Our focus is also making sure that our digital experience is as good as our physical experience and we are demonstrating, again, good progress. Digital is important to us because it allows us to join up the pet care experience of customers, making it easy, making it convenient and most importantly, making it accessible when the customer wants to access it.

Last year, we both overhauled and added to our digital experience. In the last year, we have redesigned every single digital channel with our customers. We've made it so much easier, faster and intuitive. We've significantly reduced the amount of clicks from shopping to checking out. Our new account feature puts the customer directly in charge of their journey. If they want to reorder something they've bought before, it's really quick. If you want to manage your subscriptions, it's really easy. If you want to update your pet profile, it's really simple. And they are all really important because they form the basis of a future highly personalized journey in our digital channels.

You can now book your grooming for your dog online. Customers love this. No more ringing the salon. Colleagues love it too. They can focus on grooming and not answering the phone. We've also relaunched our VIP app. Your vouchers, they're now on your phone. Your card, they're now on your phone. And you can shop straight from the app, of course, to our website. Finally, you can now collect your parcels from our stand-alone vet practices. And that's something we'll continue to add to more practices this year.

We've also been really busy redesigning our store experience as well, and we call it the pet care center. Two stores, Stockport and Chesterfield, have been refreshed in this new format. Now in the future, we recognize that stores are places that you both have to go to but more importantly, they have to be places that you want to go to. In our new pet care center we just do exactly that. We're maximizing our services footprint the things today that you can't do digitally, like see the vet or like get a groom. But also, we're maximizing the reasons to go. We know the #1 reason why people come to Pets at Home are because of the pets in our stores. And that's why in our new format, you have the ability to get up close and personal with our pets in our brand-new interactive pet village.

Customers have told us that washing your dog at home is a bit of a nightmare. It destroys that 20-grand bathroom you just bought. You don't always want to groom it, so actually our new self-wash has been really well received by our customers. You can now adopt a cat from the store, from our RSPCA cat adoption lounge, the first of its kind in the country. Or you can attend a dog training class, a kid's pet workshop, a dog's birthday party or indeed a child's birthday party in our new event zone. Don't smile; they are sold out.

I can go on about it, but I just had a thought. It will be important that you can actually see it for yourselves. So let's have a look at our new pet care experience.

(presentation)

--------------------------------------------------------------------------------

Peter Pritchard, Pets at Home Group Plc - Group CEO, Director & CEO of Vet Group [2]

--------------------------------------------------------------------------------

I've probably seen more pet stores around the world than you'll have hot dinners, and I genuinely believe that this is one of the best pet care formats I've seen anywhere in the world.

Winning new customers is the lifeblood of our pet care business, quite simply because our pet population changes frequently. A typical dog will live between 10 and 14 years. With a static dog population, that means every year, there are hundreds of thousands of puppies being born. That's why our Puppy Club is so important. You want to get the customer at a very early stage, and our information shows us that actually, the sooner a customer engages with us, the longer their lifetime value is to us or the bigger the lifetime value is to us. And that's why our Puppy Club is focused on giving customers a very compelling reason to access all parts of our pet care experience right at the very beginning. We get them straight into VIP, which helps us control and manage that journey through their time with their puppy. It's been vitally important to our growth.

The results are really compelling. Since launch, we now have 230,000 puppy owners join our club. That's roughly 1 in 5 puppies in the country have signed up to the club. They spend 17% more than puppy owners who are not in the club. And they're becoming our most valuable services customer. Of course, having done that for puppy, it makes perfect sense to do that for kitten. And since its launch in September, we've already signed up 40,000 kittens into the club.

Our focus on pet care means we access a customer's total spend on pet care. And by focusing on doing so, we just access higher spend. Quite simply, the more services and channels a customer access with us, the more they spend with us. On that chart, the pink lozenges show the growth in customer numbers year-on-year ranked in different parts of our business. So not only are we growing our customer numbers in store, we're doing a good job at leveraging the volume of customers in retail and moving them into our services business.

I'm really pleased also with the work that we're moving in e-com and omnichannel. Our 65% growth is really strong, especially if you compare it up to a similarly strong number of last year.

So let's turn our attention to our First Opinion vet business. As we've previously discussed, our biggest opportunity is driving practice maturity. We don't acquire mature practices and consolidate them. We open every single practice from scratch. Only 18% of our practices are over 10 years of age. That's why practice maturity represents our biggest value creation opportunity, representing opportunity to treble free cash flow from our vet business. Our focus is on releasing our free cash flow. But we recognized last year that following the rapid growth of our business in 2014 to 2018, a small number of practices could not be successful. And some of them needed to change in order to reach their potential.

In November last year, following a very thorough review, we announced plans to recalibrate our First Opinion joint venture business. Everything we said we'd do is being done and exactly in line with the guidance that we set out in November. Before I take you through this, one of the things I was delighted we were able to do is to bring back Jane Balmain. Jane Balmain was the Founder of our vet group, and we encouraged Jane to come out of retirement on a temporary basis to support us. I'm delighted to say she is now the permanent COO of the vet business, and we're delighted she's back permanently.

Jane and the team are recalibrating our vet business focused on 3 actions: Firstly, we have to address practices that needed a significant intervention. And we've made huge progress. We've already bought out 48 practices and we've closed 19. And we expect a further 5 to 10 buyouts and a further 10 to 15 closures in the coming months.

Secondly, we identified that adjustments to some practices would accelerate their ability to become debt free, and that's through making temporary adjustments to their fee agreements. So in doing so, that reduces the time for a JV to become debt free. And it maximizes free cash flow generation for Pets.

And finally, other practice openings are now a much smaller part of our future plans. We would change the fee model for new practices, resulting in lower fees in early years and increasing the fees as a practice matures, making the agreements simpler with fewer fee variables and also making sure those -- the practice is set up with more headroom on their borrowings.

All 3 actions are progressing exactly as we planned. And we are ruthlessly focused on executing them really well. Once we're complete, we will have a portfolio cleansed of issues, aligned to our ambitions of free cash flow growth.

So let's turn our attention briefly to our specialist hospitals. The hospitals represent a unique and attractive opportunity in veterinary care. Today, we have 4 hospitals across the country, and we plan to continue to invest. At Dick White Referrals, we are executing a 3-year plan to dramatically increase the capacity. And that photograph on the right-hand side, the red building at the back represents the extension, which increases the space by 250% or 20 consult rooms. We're doing that because Dick White is at capacity, and we can see the demand for more capacity in that location. It will also cement its position as one of the leading vet hospitals in Europe. What's also important is a center of excellence is a really powerful tool in attracting, and recruiting and retaining the very valuable and very scarce talent in the very senior vet professional population.

Now as we've previously shared, we are building a strong subscription business. It's a key point of difference, and it's enormously value creating for us. We're [especially] making pet care really easy, simple and convenient, and that's why customers like subscriptions. It does exactly that, but we really like them too. We like them because they maximize spend by providing repeatable, predictable revenue. We've already built a suite of great product and service solutions right across our business. And today, our performance in such a short space of time, I think, is impressive. Today, we have 700,000 customers on some form of subscription plan with our business. And we're focused on growing absolute numbers as well as growing the number of product and service solutions that we offer.

Earlier I said I'd share with you how we're building capability and value through our data. I'm going to show you 1 very simple example, and this is how we build the range for our stores. So previously, it was a pretty manual process. We had a limited data set and it's how we used that data to translate into what range is right for a store location. Today, we're now uniting a very complex set of data variables: customer, store, product, comparatives, a lot more variables, and applying an artificial intelligence tool, we're able to analyze those results in a level that we haven't been able to before and more importantly, predict what we think the answer will be.

The task I previously described took about a week for a store. Today, we can do 450 stores in 20 minutes. It's quite a powerful tool. So we've been implementing the results of that in a trial, and that requires us to realign stores. So in our first trial of 6 stores, we saw the sales in those controls -- in those stores versus control increase by 2% and margin grew ahead of that. So very encouraging. So what we're now doing is stress testing that trial and putting it into more stores. But we're excited by it because once complete, we believe we've got the opportunity to build a phased rollout into subsequent years.

Now developing this step change in data insight requires investment in people and capability. I'm delighted that we've been able to attract some very senior talent, which I think reinforces the excitement we find from our talent and the opportunity that sits inside Pets at Home. So I was delighted to have appointed Robert Kent as our Chief Data Officer, last year. And he joined us from 10 years at Royal Mail, where he transformed their use of data. He's currently building a team of in-house experts, and that reduces our reliance on third parties, but more importantly, it means we take control of data in-house.

We're investing in systems to support the team in maximizing their efforts, but most importantly, to help grow our business faster. And we're making good progress. So this year, we will land new highly tailored marketing to drive more customers from retail into vet and services. We're increasing the quality of customer insights to drive more and better targeted communication, again, to drive sales. And long term, we'll be employing more artificial intelligence tools and building an unparalleled view of the pet care customer in the U.K. And finally, all of this allows our colleagues to be set free to serve.

We've been absolutely obsessed this year about freeing our colleagues up from tasks that do not create value, employing technologies, changing systems, processes or in some cases just not doing things. And that drive for greater efficiency and focus on the customer is really paying dividends. As I said before, it's resulted in sales per colleague increasing by 3.9%. And we think that's a great start. the job's not done. We've got a lot more work to do. And we're going to continue to build on the success of that work.

So to show you how our progress is translating into improved performance, I'm delighted to hand over to Mike, who will take you through our FY '19 results. Thank you.

--------------------------------------------------------------------------------

Michael Iddon, Pets at Home Group Plc - Group CFO & Executive Director [3]

--------------------------------------------------------------------------------

Good morning. As you just heard from Peter, we've made really good progress over the last year. We delivered profit ahead of expectations. Our retail business has returned to profit growth faster than we expected. And in the Vet Group, we're taking the right actions to drive future cash growth. That means the shape of our profit guidance for the year ahead remains unchanged. But it's from a much stronger base.

So let me now give you some more details about these headlines starting first with our key financial results where our strong revenue growth has helped us return the business to profit growth faster than planned. Total group revenue growth was 6.9%, and within that, our like-for-like sales growth was 5.7%. And that strong revenue growth helped drive the group underlying profit before tax to GBP 89.7 million, and that's a growth year-on-year of 6.1%.

The results today do include total nonunderlying charges of GBP 40.1 million, and these mainly relate to the actions we're taking now in our First Opinion vet business that we announced last year at our November interims. And I'll give you more detail about these later.

We had solid underlying free cash flow performance in the year with cash flow growth of 14% to GBP 63.6 million. And that's enabled us to maintain our full year dividend at 7.5p a share.

So let's take a closer look at what contributes to this financial result, starting first with our sales performance. We have seen strong customer revenue growth across both our retail and the Vet Group, helping grow group revenues in total to GBP 961 million with strong like-for-like sales growth of 5.7%. And that 5.7% was even stronger than the 5.5% like-for-like sales we had in FY '18.

In retail, we've now benefited from 9 successive quarters of like-for-like growth as we've progressively improved both our pricing and our offer. And this growth has come from omnichannel. It's come from our groom rooms. And it's come from our stores, which had like-for-like growth of 2%.

Competitive pricing is a key component of this growth alongside our continuing range development and product innovation. For example, Advanced Nutrition sales in the year grew by 10%, and we've continued to see very strong growth of over 70% in monthly flea and worm subscriptions. In the Vet Group, revenue grew by 13.1% to over GBP 106 million. We're operating in a market underpinned by structural growth. And that's benefited both our First Opinion practices and our specialist division, helping drive total like-for-like growth of 11.2%. The fee income from our joint venture vet practices grew by 5.2% to GBP 52.6 million. And that GBP 52.6 million excludes the GBP 4.1 million of fee income from the practices we are buying out that we announced back in last November. So on a like-for-like basis, our joint venture fee income actually increased by 12.2% in the year.

The revenue from company-managed practices has increased to over GBP 8 million. We now have 50 managed practices, including the practices we're buying out as part of the Vet Group recalibration. Back in November, we set out a plan to buy out up to 55 vet practices, and we're making good progress. The buyout program is largely complete. Up until last Friday, we brought out a total of 48 practices and closed 19 of these. And as we buy out those practices, we will fully consolidate the revenues and operational costs from the date of acquisition. And finally, the specialist division revenues grew by nearly 10% to GBP 37 million. And that investment -- and that's backed by the investments we're making to drive both capacity and capability in the division.

Let's take a closer look at how these actions have flowed through into our gross margin, which reflects both our planned price investments and the actions we're taking to improve the Vet Group. Total gross margin in the year was 50.7%, and that's 102 basis points lower year-on-year. It's tracking in line with both our retail investment plans and our targets for the Vet Group. Within retail, our cumulative price investment has reduced our prices to within only 5% of our key competitors.

In this year, the investment had an impact on group gross margin of 88 basis points, and that equates to GBP 8.5 million in lower prices year-on-year. We also had a small impact of 21 basis points due to the mix effect from the strong growth we saw in omnichannel sales. These sales are cash accretive but at a lower percentage gross margin due to the higher mix of food sales.

Within the Vet Group, gross margin improved year-on-year to 48%. The underlying business performance drove 28 basis points, with strong revenue growth helping to leverage what is otherwise a fixed cost base. And finally, as I mentioned earlier, we have derecognized the full year fee income of GBP 4.1 million from the joint venture practices we're buying out. Year-on-year, this reduced our gross margin by 21 basis points.

Looking ahead, as we plan our gross margin, the major investment phase of our price resets in retail is largely complete. Our future price reductions will be self-funded through a combination of operational leverage, the growth of our own label and better ranging, as Peter has just been explaining.

To help support the investments we've been making in gross margin, we have continued to be very focused on managing our operating costs. And here, we've driven operational efficiencies at the same time as investing in our strategic growth areas. Total operating costs in the year grew by 4.6% to GBP 357 million. That's a slower rate of growth than our sales growth of 6.9%, and that's helped reduce our costs as a percent of sales by 90 basis points and mitigate some of the impacts of investments we've been making in gross margin. We've continued to make good progress with a very comprehensive program of operational efficiency. The program addresses the whole of the cost base from store [parallel] costs and rents through to distribution and our support center costs. And that's helped reduce the cost growth in the core areas of the business to only 0.6%. And that's enabled us to invest in our growth areas, and that includes GBP 5.3 million into our omnichannel business, where our very strong sales growth, 43%, increased the fulfillment costs. And we've also invested behind our marketing and strengthening our support office team. And in the Vet Group, we've invested GBP 4.1 million to build capacity and people capability, both in our specialist division and in our First Opinion shared service center.

In the year ahead, we will be adopting the new IFRS 16 lease accounting standard. And although the standard fundamentally changes the accounting treatment of our leases and rents, it makes no change whatsoever into our cash flows or how we intend to plan and manage the business. Our focus on managing rent costs will remain as strong as ever. Over the next 5 years, we have over 210 lease events, that's either a break or a lease renewal, and that gives us a lot of operational flexibility. So far, we've been able to reduce rents by up to 30% on the most recent lease renewals. And as we enter the new financial year, we've already -- or we are already implementing the next phase of the actions to further reduce our operating costs.

So turning now to profit. We've returned the business to underlying profit growth. Profit at the EBITDA level grew by 5.5% to GBP 130 million. Our depreciation expense increased by 6.8% to GBP 36.8 million, but that reflects our planned shift of capital investment to support the digital and data agenda that Peter just outlined. And those tend to be faster-depreciating assets therefore, our EBIT profit measure grew by 5% to GBP 93.2 million. Operating margin was 9.7% and here, we saw the 90 basis points improvement in our costs as a percentage of sales, helping offset the 102 basis points reduction in gross margin percent. As a result, underlying PBT grew by 6.1% to GBP 89.7 million. And that strong profit growth helped improve EPS to 14.1p. And we plan to maintain our full year dividend at 7.5p a share.

Nonunderlying items are GBP 40.1 million, and in the main, that's driven from the costs relating to the buyout of 55 First Opinion practices we announced last November. So far, we've spent GBP 40.4 million, and we expect to complete the full buyout program within the overall total cost of GBP 49 million we announced last year. That means we're expecting a further GBP 8.5 million of nonunderlying costs in FY '20.

Turning now to our CapEx spend in the year. Our capital expenditure is now fully aligned to our strategic goals. Total capital spend in the year was GBP 34.5 million. That compares to GBP 40.7 million in FY '18. Looking ahead, we are still planning to spend up to GBP 40 million of capital a year. And that investment is going to be focused on 4 key areas: first, investing behind our strategy to make our stores complete pet care centers, offering our customers product, advice and services. Our first 2 in Stockport and Chesterfield are great examples of what we believe we can achieve.

Second, investing behind our data and digital agenda. This year, we relaunched our website across all platforms. That helped improve its look and feel, it increased the transactional speeds and it made shopping easier for our customers. Thirdly, we'll spend capital to improve the efficiency of our business. For example, in distribution. In the year, we invested over GBP 3 million in our 7 distribution centers in Northamptonshire. That helped automate our online picking and reduced our cost to serve.

Finally, we'll spend capital on building both capability and capacity in the Vet Group. For example, we're looking to expand our Specialist Referral centers, both through extensions to our existing centers such as the investment that Peter just outlined in Dick White referrals but also through adding new centers that further increase our national coverage. Our overall cash return on invested capital remains strong at nearly 19%. And we'll continue to take a disciplined returns approach to all of our capital investment.

That approach to capital investment together with our solid operational performance means that we continue to be strongly cash generative. And this has enabled us to maintain our dividend payment as well as taking the right actions in the Vet Group. Our operating cash flow was GBP 126.5 million. After adjusting for non-operating cash items including the lower CapEx, underlying free cash flow improved to GBP 63.6 million. And that gives us a strong conversion of nearly 49% on the underlying EBITDA.

Non-underlying cash outflow of GBP 8.9 million, you can see on the slide, in the main relates to our joint venture buyout program and was used to repay bank debt and partner loans. We estimate that the full cash cost of the buyout program will be within the GBP 27 million we announced last November, and therefore, there's a further GBP 19 million expected in FY '20. After all the cash flows, including the buyout program, retained cash was a positive GBP 14.7 million. That helped reduce our net debt from GBP 135 million to GBP 120 million and leverage from 1.1x to 0.9x.

Looking ahead into this year, we do need to comply with the new rules for the faster payment of Corporation Tax. This means we're going to make an additional onetime-only tax payment of around GBP 11 million. That equates to a full payment of our Corporation Tax in FY '20, which previously, we would have paid part of in FY '21. The impact of this change in the payment of Corporation Tax means our group underlying free cash flow for the year ahead will be lower.

Working capital is a really important component of that overall cash flow. And our working capital remains strong, and our operating loan balance has decreased. We continue to have a strong trade working capital cycle. The increase you see on the slide in our inventory of GBP 7.3 million includes GBP 4 million for the stock build we announced in January to protect the business from the potentially disruptive impacts of Brexit. Strong payables and receivables helped offset that stock build giving an overall improvement of just over GBP 12 million in our trade working capital. That helped fund an increase of GBP 9.6 million in the operating loans to our ongoing joint venture practices, leaving a total group cash working capital improvement of GBP 2.5 million.

The bottom of the slide includes a table showing the movement of the operating loan balance and the split of the provision between the practices in our buyout program and the underlying element for our ongoing practices. In total, we've got a provision of GBP 14.3 million against an overall gross operating loan balance of GBP 42.2 million. And that provision of GBP 14.3 million splits GBP 7.2 million, which is a full provision held against the remaining operating loan balances for the practices we've still got to buy back and GBP 7.1 million held against the operating loans for the ongoing practices. And as I mentioned earlier, we estimate that we'll complete the full buyout program of 55 practices within a total P&L impact of GBP 49 million and cash costs of GBP 27 million that we announced at our interim results last November.

So in summary, we delivered a strong set of financial results. As shown by our key financial measures, we benefited from strong like-for-like sales growth across both Vet Group and retail. The underlying gross margin is in line with where we planned it to be. We've got underlying profit growth in both our Vet Group and retail. And the retail business has returned to profit growth faster than planned, helped by the very strong sales growth and the sharp focus on controlling our costs. Finally, we're generating strong underlying free cash flow and conversion in both Vet Group and retail.

So in conclusion, we've come into the new financial year with real momentum in the retail business which, in the year ahead, will translate into profit growth in retail. And we're making meaningful progress to reset our Vet Group on a stronger foundation for future cash growth. The buyout program is on track, and we will be adjusting the fee arrangements for some practices to reduce the need for operating loans going forward. The progress we've made, which is in line with the plan we set out, means that the shape of our profit guidance for the year ahead remains unchanged but builds from a much stronger base driven from last year's outperformance.

Thanks for listening. I'll now hand back to Peter to wrap up. And then we'll go to Q&A.

--------------------------------------------------------------------------------

Peter Pritchard, Pets at Home Group Plc - Group CEO, Director & CEO of Vet Group [4]

--------------------------------------------------------------------------------

Thanks, Mike. So you can see for yourself we're making good progress against our plans. We're delivering exactly what we set out to do. I think we're also demonstrating how a specialist like ourselves can continue to thrive and grow in a very changing consumer environment. We're a key player in the pet market, and that market is continued to forecast to grow. And I think that provides a very exciting opportunity for us within that marketplace. We're leveraging our unique assets and creating compelling and unique proposition for customers as being a pet care business which is delivering for customers. We remain really confident about the year ahead, and we enter the year with good momentum. As we previously guided, this year, we will complete the recalibration of our vet business alongside our retail business, which is now back on track. We expect the business to return to profit and cash growth in FY '21.

That's all from Mike and I now. We'd like to open the floor for questions. If you have a question, we'd be really happy if you can raise your hand so we can get a microphone to you. Thank you.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Geoffrey Frith Ruddell, Morgan Stanley, Research Division - MD [1]

--------------------------------------------------------------------------------

It's Geoff Ruddell, Morgan Stanley. Can I just ask 2 questions, please. The first which is roughly how many vet practices are likely to get new fee arrangements? And then the second one is you talked about being within 5% on the sort of directly comparable SKUs. How many SKUs are you talking about there?

--------------------------------------------------------------------------------

Peter Pritchard, Pets at Home Group Plc - Group CEO, Director & CEO of Vet Group [2]

--------------------------------------------------------------------------------

We'll answer your last one first. So if you look at directly comparable items, you're talking of just under 1,000 items which would be directly comparable to whichever retail we're looking at both online and off-line. They would be made up predominantly of branded SKUs or items which actually are indistinguishable because it just is what it is.

--------------------------------------------------------------------------------

Geoffrey Frith Ruddell, Morgan Stanley, Research Division - MD [3]

--------------------------------------------------------------------------------

And you have -- from memory it was 7,000 or 8,000 SKUs in the store total?

--------------------------------------------------------------------------------

Peter Pritchard, Pets at Home Group Plc - Group CEO, Director & CEO of Vet Group [4]

--------------------------------------------------------------------------------

We have -- in a typical store, we have about 6,500 to 7,000 SKUs. In our total store, we have just over 11,500 SKUs.

--------------------------------------------------------------------------------

Geoffrey Frith Ruddell, Morgan Stanley, Research Division - MD [5]

--------------------------------------------------------------------------------

And so presumably these SKUs are more sort of prominent than average, so -- I mean, what proportion of your sales do they account for?

--------------------------------------------------------------------------------

Peter Pritchard, Pets at Home Group Plc - Group CEO, Director & CEO of Vet Group [6]

--------------------------------------------------------------------------------

We haven't revealed that. But actually, the way I think about it because they're branded, these are big volume SKUs. And actually, when we talk about the basket because we are weighted to volume, it gives you probably the most appropriate measure of the relative value that people will pay. So a [big standing] item, disproportionately weight within the basket, so it gives us quite a top measure in terms of when we talk about our price difference.

--------------------------------------------------------------------------------

Geoffrey Frith Ruddell, Morgan Stanley, Research Division - MD [7]

--------------------------------------------------------------------------------

Okay. So it's considerably higher than just dividing 1,000 by 6.5?

--------------------------------------------------------------------------------

Peter Pritchard, Pets at Home Group Plc - Group CEO, Director & CEO of Vet Group [8]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Michael Iddon, Pets at Home Group Plc - Group CFO & Executive Director [9]

--------------------------------------------------------------------------------

I think the second -- or the first part of the question, Geoff, was how many vet practices are going to get fee adjustment. I think the best way to think about that is it isn't going to be one-size-fits-all sort of a cookie-cutter approach that everybody gets a fee adjustment. The team that worked this up are focused really on those practices -- and looking very specifically of a precise amount into each practice. And the aim of this is to get them to be breakeven quicker than they'd otherwise be and get them to be cash generative quicker than they otherwise would be. And all the costs of doing that are built into the guidance we're giving in the year ahead.

So we're not actually going to say how many practices. It's going to be the number it needs to be to get to the right outcome, but it's very precise. It's not a number that everyone gets the same reduction. It's a targeted, very specific, practice by practice fee adjustment that each of the practices gets them back to breakeven quicker than if we just left them on their own.

--------------------------------------------------------------------------------

Geoffrey Frith Ruddell, Morgan Stanley, Research Division - MD [10]

--------------------------------------------------------------------------------

And how do practices that don't get that fee adjustment react to effectively a competitor getting a competitive advantage?

--------------------------------------------------------------------------------

Michael Iddon, Pets at Home Group Plc - Group CFO & Executive Director [11]

--------------------------------------------------------------------------------

Well, I mean that's clearly something we've got to think really carefully about because at the moment, obviously, they're all paying the same fees. And potentially, that's going to be -- we've got to think that through really carefully. But I do think in our joint venture partners, the ones which have come through realize they've built their practices in a period when cost inflation was a lot lower. And actually, I think, on balance, the efforts we're taking with our less mature practices, which are the ones we're talking about, I think are actually being pretty well received. I think everybody understands it and the reasons behind it. And I think on balance, the partnership is positive about that.

--------------------------------------------------------------------------------

Tushar Jain, Goldman Sachs Group Inc., Research Division - Research Analyst [12]

--------------------------------------------------------------------------------

Tushar from Goldman Sachs. Three questions. First on accessories. Is there any internal initiatives you can take to accelerate the attachment of accessories in online because that has been lagging for quite a while? Second question is on cost savings. How should we think about the cost savings for the -- this year and the next year? Is it 40 to 50 basis points incremental to even on the group? And finally, if you can comment on -- if the vet availability in the U.K. has improved or improving? Any signs of improvement there?

--------------------------------------------------------------------------------

Peter Pritchard, Pets at Home Group Plc - Group CEO, Director & CEO of Vet Group [13]

--------------------------------------------------------------------------------

Well, let me talk about accessories first. Accessories, truthfully, is actually harder to sell online than it is in the store. So there's obvious thing you can do to improve it. It's actually improving photography, improving product information and all those things you would naturally do. But I think as you've said, there is natural bias that, actually, customers want to go and see, touch and feel. So often if -- I might need a new dog lead, I might not know exactly what I want, and I'd go and have a look. So actually that's why stores, I think, play a really important role.

And for a lot of the accessories that we sell, they require a degree of intervention. So one of the most popular services, for example, we provide in store is we fit harnesses for dogs, because getting it right is really important. And actually, buying online, the fit might not be right and therefore, you end up having to send things back. So accessories, I think, naturally has a slightly lesser bias online than it would in store. Do you want to deal with the second question and I'll then come back for the third one?

--------------------------------------------------------------------------------

Michael Iddon, Pets at Home Group Plc - Group CFO & Executive Director [14]

--------------------------------------------------------------------------------

Okay. So the second question was around costs?

--------------------------------------------------------------------------------

Tushar Jain, Goldman Sachs Group Inc., Research Division - Research Analyst [15]

--------------------------------------------------------------------------------

Costs and how we should think about it for the year.

--------------------------------------------------------------------------------

Michael Iddon, Pets at Home Group Plc - Group CFO & Executive Director [16]

--------------------------------------------------------------------------------

And how we should think about it in the year ahead. So clearly, we're looking to -- 2 things actually on our cost base: effectively make the core part of the business as efficient as we possibly can. And part of the costs we'll free up enable to grow the part of the business we want to invest in. So for example, our digital and data agenda. Year just gone, we grew total cost by about 4.6%. And clearly, one of our goals will be to grow our costs significantly lower than our sales growth. Particularly in retail, we're hoping to [gather] operational leverage of strong like-for-like and take costs out of running the business.

But clearly, we'll do it in a very balanced way. We certainly don't want to do anything that impacts customer service. And a lot of the work we're focusing on is making the business much simpler to run and things like efficiency improvements, for example, in that distribution DC in Northampton where it does make our cost to [save] cheaper. So I'm not going to give you a percentage growth we're going to plan on our cost increases. But it will be significantly lower than the sales growth we're planning for.

--------------------------------------------------------------------------------

Peter Pritchard, Pets at Home Group Plc - Group CEO, Director & CEO of Vet Group [17]

--------------------------------------------------------------------------------

And your third question is around vet availability. It is -- without question, it is challenging. Our overall vacancy is actually marginally coming down, which is good news. And we continue to work hard on recruitments, so we've gone quite broad. So we have a international recruitment program. We're investing heavily in our graduate program, but these are all slow, long [bone] things, and I don't think there's going to be anybody who's going to be able to think any dramatic changes. Ultimately, vets will choose employees that are good employees. And the one thing therefore we focus in on is actually being a really good employer. And we have a strong employer brand. We won Best Company to work for in the U.K. as voted for by the Sunday Times, as voted for by our people. So increasingly, we focus on those things as well to make sure it's not just about recruitment. It's as important about really good retention. And we focus on both.

--------------------------------------------------------------------------------

Simon Bowler, Numis Securities Limited, Research Division - Analyst [18]

--------------------------------------------------------------------------------

It's Simon Bowler from Numis. Three from myself, please. First, just a little update in terms of anything you've seen or not seen in terms of competitor reaction versus the pricing work you've been doing. Secondly, you spoke a bit around the opportunity around specialist referral centers. I'm just wondering if you can expand and give some kind of sense on what that could look like, how many centers you could have open the medium-term, et cetera.

And then finally, I appreciate it's going to be early days on this one, but from some of those vet practices that you've bought back, what have you learned when you've got into the details and the weeds of those businesses? Are there opportunities for you to trade them better than they were being done under previous ownership?

--------------------------------------------------------------------------------

Peter Pritchard, Pets at Home Group Plc - Group CEO, Director & CEO of Vet Group [19]

--------------------------------------------------------------------------------

Okay. Shall I do the first one on competitor reaction? Very interesting, actually. We haven't seen a big reaction from competitors. But I think in part, it's because actually, we've been narrowing the gap. So therefore, we've been taking our prices down to come closer to where their position was. And that's actually, I think, more challenging for them. So in answer to your question, no, we haven't seen a wholesale reaction from our competitor. But we're [probably] (inaudible) actually, we watch like a hawk. We watch all competitors. And if it changes, it changes. Do you want to talk about specialists now, Michael?

--------------------------------------------------------------------------------

Michael Iddon, Pets at Home Group Plc - Group CFO & Executive Director [20]

--------------------------------------------------------------------------------

Yes. Let me cover the specialist one off. So in the U.K. as a whole, there are actually only 26 multidisciplinary specialist referral centers. We own 4. We've got 1 in the East, which is Dick White. We got 1 in the South, which is Allison Moore. We got 1 in the Northwest -- we got 2 in the Northwest. And we know that's a really fast-growing market. It's actually growing faster than the First Opinion market. And it's obviously very high-end with good, high average transaction values. And that was quite a profitable area for us to invest in.

The ones we've invested in so far have been successful, including when we acquired those. We did it before the multiples got crazy. We do think the best way of expanding is probably through greenfield. We do look at opportunities to acquire, but the multiples are -- have made that very difficult. And so increasing national coverage, given where we've got the current ones, will be a very sensible thing for us to do. So in the year ahead, in that GBP 40 million of capital, we've set money aside to do that. And actually, we've also provided for an element of preopening costs in our P&L to deal with the opening of a new center. We haven't -- we've been working very hard on it. And we'll announce it as soon as we are able to talk about it more specifically.

--------------------------------------------------------------------------------

Peter Pritchard, Pets at Home Group Plc - Group CEO, Director & CEO of Vet Group [21]

--------------------------------------------------------------------------------

On the vet -- in the vet business, there's only 3 things that really matter. Your revenue from customers, the margin and your cost base. Vet practices are high-cost base environments because of your employment costs. And the biggest learning you get as you go through the practice is about actually looking at those 3 bookers and maximizing each of them. So on sales, all the work we're doing to drive more retail customers into services is exactly the right thing to do. And one of the initiatives we talked about last year was using our retail stores to drive recommendations. We're driving about 1,500 recommendations per week from stores into our vet practices, which is brilliant. And that's really strong indicator of future health.

The second thing, and this is really working with Jane and our team on the ground, and we've invested in more people on the ground, so we have a lower ratio now between what we call our area relationship managers and vet practices. We've taken that from about 25 down to 14 to 15. So we've got more people covering the ground, therefore, closer relationships with our partners. And they're working with those partners to access all the best practices around margin, all the best practices around cost control to drive those other 2 leads. So they're very much in the control of our partners.

So through really good information provision, good cost comparisons but also actually having people on the ground having those conversations, helping the vets, reminding ourselves that vets are great clinicians, really help them on their commercials, you can move the dial on all 3. And the answer is actually you've got to move the dial on all 3. And that's exactly where our focus is.

--------------------------------------------------------------------------------

Andrew Ian Porteous, HSBC, Research Division - Analyst, European Retail [22]

--------------------------------------------------------------------------------

So Andrew Porteous of HSBC. A few from me, if I could. You alluded to some further price investment, obviously, self-funded price investment. Could you just talk me through the thinking there? I mean do you see opportunities? Or what percentage [was] in further narrowing the gap or improving your relative price position? Or is it more about a bit of caution in case there is a competitor reaction?

I also had a question about the store space as well. You talked about rightsizing the store estate. I mean obviously, maybe the temptation to reduce it a little bit over time, but equally, if you're getting 30% rent reductions, that sort of changes the economics there as well. So can you talk about how you're thinking about that and what the store estate looks like over the sort of medium, long-term as well?

--------------------------------------------------------------------------------

Peter Pritchard, Pets at Home Group Plc - Group CEO, Director & CEO of Vet Group [23]

--------------------------------------------------------------------------------

Okay. Well, shall I talk about the price investment bit? We're clearly not going to sit here and announce any price investment program, and that would not be a sensible thing for us to do. I think our take out of this is a degree of paranoia. We will watch our competitors like a hawk. So any price work in part will be planned, and any price work will then be reactive. I think for us is we've take enormous comfort from the work that we've done. That shows the expandability within Pet. So -- and we've learned an awful lot. So we'll continue to learn and continue to use that insight to make smart decisions that grow our top line. And we'll continue to do that. Do you have a word about the [store estate]?

--------------------------------------------------------------------------------

Michael Iddon, Pets at Home Group Plc - Group CFO & Executive Director [24]

--------------------------------------------------------------------------------

I'll talk about the -- So we got 452 stores. And you're right to point out obviously the rents are getting lower, and we're very focused on getting the rents lower. But clearly, we're making them more efficient to run as well in terms of payroll. And also it's quite important in playing a key role in driving the omnichannel sales growth. So about 65% of all our transactions involve the store, either as part of a colleague in store giving advice to a customer and then placing an order in store or collecting an order they've ordered at home for delivery and picking up in store. So the stores are playing a really important role. And clearly, we see the future of the store estate as pet care centers and not just about products but services, advice and retail.

We do stress test those store financial performances all the time. We have about 5 loss-making stores, which we're dealing with, relatively few. And we stress test it by testing those assumptions on rents, payroll, sales growths. If a store is profitable and its outlook is looking really positive, why would you want close it? But we do look forward across the lease renewals. And clearly, we're synchronizing the work we're doing on optimization of the store estate with when the lease renewals are coming up. And often, there may be a better relocation opportunity in that particular town or it may be we've got 2 or 3 stores in 1 location where actually 2 stores will do. So over time, I would see our 452 stores coming down, not suddenly or dramatically. But maybe we'll end up with 410, 420. But it's not going to be a big store closure program.

--------------------------------------------------------------------------------

Matthew C. Garland, Citigroup Inc, Research Division - Assistant VP & Senior Associate [25]

--------------------------------------------------------------------------------

Matt Garland, Citi. One quick question. I was wondering how you were thinking about the development of your private label SKUs. Obviously, you're aiming towards 50%. I just wanted to understand how you're thinking about how it would progress and what categories it would go into?

And then I was also wondering around the -- obviously data optimization and things. What's -- what the kind of time line or thinking that you have around the longer-term areas that you've talked about and how that would develop?

--------------------------------------------------------------------------------

Peter Pritchard, Pets at Home Group Plc - Group CEO, Director & CEO of Vet Group [26]

--------------------------------------------------------------------------------

Sure. Well, on private label, we've already -- I know we have had a very strong private label share of our business here, and we're just around the 40% mark. And for us, there is undoubtedly the opportunity to create more private labels. And we'll continue to do. We actually see one of the biggest opportunities is leveraging the capability we've built. So Wainwrights, which is our leading dog food brand, actually is our best seller. So increasingly, we're looking at all our customer journeys, all our communications.

So for example, in the Puppy Club, we're making sure we're maximizing our private label presence. There's a very fine balanced reason over this, which is our starting point will always be what is the right product for the pet owner and the pet? And we'll never get into a situation of saying [that] it's always private label. Because if it's not, we won't do that if it's the wrong thing to do for customers. But we see a great opportunity just leveraging the assets we've got.

And we've never really invested in them that hard, they've been growing over time. And we think with some -- a [courageous] push, we will get some good growth on the back of that. And we're pleased by the progress we're seeing in that case.

On data, what you see today is -- actually, what you're seeing is a big investment and it's actually moving our capability further. We already got some good data capabilities. So our VIP club is grounded in data. I think for us is with -- with Robert and the team that we're investing in, that's about really changing our outlook from being backward-focusing in terms of what happened to try and to move to a situation where we can start to predict what happens. And I think that's a fundamental shift. And that's where we need new capabilities.

So for us, the things I described today, like the [store range and pet's life], we've got a roadmap of things that are going to land quite quickly initially and you'll see benefit. But some of these other bits actually requires a degree of time and investment, making sure we've got the right infrastructure for our data and making sure the cleanliness of our data coming in is the right way. And that's a bit of enablement of which what we're doing now. So I think you'll increasingly see from us increasing levels of sophistication, increasing levels of personalization and then along the way, I think you will see some step change moments where we fundamentally change what we do. And our road map is made up of both. This, now, I think for us is an ongoing journey. And I think it's a new currency of how you run a customer-facing business.

--------------------------------------------------------------------------------

Tony Shiret, Whitman Howard Limited, Research Division - UK General Retail Analyst [27]

--------------------------------------------------------------------------------

Tony Shiret from Whitman Howard. Just one question really. Apropos the video you showed about the pet care center, it focused on the features, obviously. Is there any work in there on sort of the composition of the sort of food and accessories ranges? And if there's more focus or more range or more concentration or whatever?

--------------------------------------------------------------------------------

Peter Pritchard, Pets at Home Group Plc - Group CEO, Director & CEO of Vet Group [28]

--------------------------------------------------------------------------------

What's really interesting about that store, that store contains, that was Stockport, contains 1,100 SKUs less than the previous store. That is one of the stores that we put through our optimization machine, and what we've been able to -- and I guess it will prove it, is that we think we can take the same sales from physically less SKUs because now we have the ability to access a customer for 11,000 SKUs, and they can have it tomorrow. And what it's allowed us to do is I think as you shop the store, first it has created space to invest in more theater, more new services, which is really important. It's created much more clarity for the customer. Because I think as a retailer, one of our jobs is to make sure we have not just only -- you can stock thousands of SKUs. That's lazy retailing. Really good retailing is about having edited ranges, and we're being very clear about when a range should be physically versus when a range should be digitally. So I think what's really exciting about Stockport I think is where the data has come to life and the potential that helps us to unlock in other stores.

The feedback from customers, and this is always a really interesting bit. Did you get it right? The initial feedback from stores is, they think there's more in the store than there is. I think it's because often, there's a classic phrase, less is more. You can see things. And if my only proxy is success and -- because we are still 6 weeks in, that the numbers will take time. Overall satisfaction from customers through our survey work in those 2 stores, both these stores were very much averaging. They've gone to the very top of our satisfaction levels from customers. That, for me, is the most exciting thing because if you get overall satisfaction right, in my experience, sales have a habit of following. And we're watching that like a hawk.

--------------------------------------------------------------------------------

Tony Shiret, Whitman Howard Limited, Research Division - UK General Retail Analyst [29]

--------------------------------------------------------------------------------

And sorry, just an obvious follow-up. What's coming up? Is it just -- what's coming out of the ranges? Is it just the stuff at the edge which wouldn't send in very much anyway?

--------------------------------------------------------------------------------

Peter Pritchard, Pets at Home Group Plc - Group CEO, Director & CEO of Vet Group [30]

--------------------------------------------------------------------------------

Yes. It's very much about where we've got not choice where we've got duplication. So we have 600 choices of colors on leads. That means you got about 7 variations of red. We probably don't need 7 variations of red. Maybe 2 will do. So I think what we've seen here is we've been very focused on -- and again, our data helps us understand what do customers really want. How does it impact the basket? And it helps to understand that some items which are very low volume are disproportionately important to customers. So we've been very focused on taking away duplication, not taking away choice.

--------------------------------------------------------------------------------

Tony Shiret, Whitman Howard Limited, Research Division - UK General Retail Analyst [31]

--------------------------------------------------------------------------------

And this -- sorry to keep [boring] for the World XI but is the range reduction in -- principally in accessories rather than food?

--------------------------------------------------------------------------------

Peter Pritchard, Pets at Home Group Plc - Group CEO, Director & CEO of Vet Group [32]

--------------------------------------------------------------------------------

No. It's actually -- it's pretty much across the board actually.

--------------------------------------------------------------------------------

Tony Shiret, Whitman Howard Limited, Research Division - UK General Retail Analyst [33]

--------------------------------------------------------------------------------

Thank you.