August 2014 Investor Presentation

Transcription

nemo2014\Presentations\Analyst Presentation Jan14\201401 Nemo Analyst Presentation Master-22nd Jan FINAL.pptx
August 2014
Investor Presentation
1
Forward looking statements
Forward-Looking Statements
INCLUDED IN THIS PRESENTATION ARE FORWARD-LOOKING MANAGEMENT
COMMENTS AND OTHER STATEMENTS THAT REFLECT MANAGEMENT’S CURRENT
OUTLOOK FOR FUTURE PERIODS
These expectations are based on currently available competitive, financial, and economic
data along with our current operating plans and are subject to risks and uncertainties that
could cause actual results to differ materially from the results contemplated by the forwardlooking statements.
The forward-looking statements in this presentation should be read in conjunction with the
risks and uncertainties discussed in the Pets At Home Annual Report and Accounts.
2
Investment Highlights
3
We have a special business with a great future
1
Clear leader & specialist retailer in the attractive UK pet care market
2
Unique ‘one stop shop’ proposition with nationwide retail footprint, pet services and omni-channel
3
4
Clear growth story with multiple levers
Strong financial performance and highly cash generative
4
Market Position
5
The UK's leading pet retailer, small animal veterinary services
provider & grooming salon operator
1991
2000
First store
opens in
Chester
UK
2001
2003
2007
2008
2009
2010
2011
2012
2013
2014
.com
.com
Stoke NDC
Relaunch
Northampton
SDC
SQP Licenses
386 Stores
150th Store
200th Store
300th Store
350th Store
293 Vets
1st Vet
50th Vet
100th Vet
1st In-store V4P
50th Groomer
100th Groomer
Largest UK vet
services provider
148
Groomers
1st Groomer
6
UK pet market is large, resilient and growing across all
categories
Positive year on year market
growth since 2008 delivering
a CAGR of 2.6%
Large and highly fragmented
addressable market £5.4bn
Services represent ~50% of
the market
Future growth driven by
humanisation,
premiumisation and
increased uptake of services
UK Pet Care Market
+4.3%
£6.7bn
Projection
2.6%
5.2%
£4.6bn
£4.4bn
0.4
0.2
0.4
0.2
1.4
1.4
0.4
0.4
0.3
0.3
0.2
0.1
0.2
0.1
£5.3bn
£5.4bn
£4.9bn
£5.0bn
£5.1bn
0.5
0.2
0.5
0.2
0.6
0.2
0.2
0.2
1.6
1.6
1.6
1.5
1.5
0.6
0.7
£5.7bn
0.7
1.1
0.2
0.2
1.9
1.7
0.5
0.4
0.5
0.4
0.4
0.4
0.3
0.2
0.2
0.3
0.3
0.2
0.3
0.3
0.2
0.3
0.3
0.2
0.3
0.3
0.2
0.4
0.4
0.3
0.3
0.2
0.4
0.3
1.5
1.5
1.6
1.6
1.6
1.7
1.7
1.8
1.9
2006
2007
2008
2009
2010
2011
2012
2013F
2017F
Source: OC&C
Note: All figures to calendar year end and exclude VAT
1 ONS data defined as all retailing including automotive fuel
Total
Insurance
Grooming
Vet
Services
Other
Accessories
CAGR
2008-12 2012-17
2.6%
4.3%
8.0%
9.3%
3.3%
4.1%
1.4%
3.2%
Health &
Hygiene
Treats
0.3%
2.5%
2.6%
2.6%
Advanced
Nutrition
9.5%
5.3%
7.7%
7.7%
0.8%
3.1%
Other Food
CAGR
2008-12 2012-17
Total
Services
3.1%
5.1%
Total
1.3%
Accessories
2.6%
Total
Food
3.9%
2.4%
UK Retail1: 2.2%
7
Pets at Home’s core customers are engaged – driving enhanced
customer spend
Pets at Home vs. Non Pets at Home Customers - Pet Ownership
Dog
£890
100%
Cat Multi
Cat Multi
80%
44.1%
57.2%
Dog Multi
Multiple
Pet
Customers
1,000
1,000
900
900
800
700
600
500
400
300
200
100
0
<3.5
3.5-6.5
800
700
600
500
400
300
200
100
0
<3.5
>6.5
3.5-6.5
>6.5
Engagement (Out of 10)
Engagement (Out of 10)
Influence of Engagement on Customers’ Key Purchase Criteria2
Dog Multi
60%
Cat
Average Annual Spend of
Pets at Home Customer
(£)
£620
Average Annual Spend of
Pets at Home Customer (£)
Average
Total
Annual
Spend
Key Differences for Engaged Customers1
Less Important
Other Only
More Important
(4)%
40%
Other Only
Cat only
55.9%
Cat only
42.8%
20%
Dog only
Single
Pet
Customers
(16)%
(3)%
Priceisismore
moreimportant
importantto
toless
less
Price
engagedcustomers
customers
engaged
Products and
services are more
important to highly
engaged customers
5%
1%
Dog only
(11)%
0%
Non Pets at Home
Customer
(7)%
Customer
Note: All charts based on survey of >5,000 pet owners conducted in July 2013
1 Engagement score based on sum of scores (1-5) for 2 questions
—  I tell my pets I love them at least twice a day
—  I take my pets to the vet regularly for check-ups
2 Difference of engaged customers vs. less engaged customers, showing % delta from the average score
8%
Price
Products
Convenience
Colleagues
7%
17%
8
We are gaining share across all segments of the market
UK Pet Care and Vet Market – Share, 2009–121
Food:
Advanced Nutrition:
Accessories:
Vet Services:
Potential to gain further share from
independents & grocers
Potential to gain share from
vets and specialists
specialists & independents
independent practices
2,017
4.4%
1.9%
6.4%
2.8%
2,172
4.9%
5.8%
4.2%
Delta
2009–12 (ppts)
2.0%
+0.4
+0.1
-0.6
+1.4
167
209
34.5%
2.4%
28.1%
Delta
2009–12 (ppts)
-6.4
2.4%
+0.0
8.4%
+0.1
16.8%
+0.2
8.3%
74.3%
70.6%
-3.7
779
Delta
2009–12 (ppts)
23.0%
19.9%
-3.1
5.7%
9.0%
+3.3
22.3%
-8.2
757
30.5%
1,549
1,603
Delta
2009–12 (ppts)
80.8%
-7.7
88.5%
0.5%
16.6%
0.3% 15.9%
+0.2
+2.3
13.5%
38.3%
44.4%
+6.1
27.0%
10.1%
12.6%
2009
2012
Pets at Home
32.3%
+5.2
+2.4
2009
Grocers - Store
2012
Grocers - Online
2009
Other Pet Specialists
2012
Online Specialists
Source: OC&C
¹ Figures Exclude VAT
2 The 5.9% includes 3.4% from Companion Care and 2.5% from Vets4Pets (inc. Acquisition) – though V4P not acquired by Pets at Home until April 2013
3 Includes: CVS Group, IVC, Medivet Group, Vets Now (No revenue data for Goddards available) – figure is therefore likely higher
Other
13.3%³
+3.8
9.5%³
2.0%²
5.9%²
+3.9
2009
2012
Private and Small Vet Practices
9
Online expected to gain share in pet products market by c1% per
annum, Click & Collect projected to outpace home delivery
Online Penetration of Pet Products vs Retail 20121
Total Pet Products
CAGR
2012-2017
7.3%
4.5%
Total UK Grocery
40.0%
Electronics & Electricals
% of Total Category Sales
UK Pet Care Pet Products Online Fulfilment Projection
20.4%
Vitamins & Dietary Supplements
Contact Lenses
17.4%
Sports Nutrition
16.8%
CAGR
2012-2017
15.6%
Clothing & Footwear
£314m
10.5%
Homewares (small)
Home & DIY
6.8%
£249m
4.9%
Health & Beauty
£216m
Online Penetration of Pet Products1,2
8
(4%)
£216m
208
(96%)
8
(4%)
7.3%
5.1%
5.9%
6.5%
2012
208
(96%)
Online
Penetration
7.3%
of Pet Products
3.4%
2012
2008
Source: OC&C
1 Includes Click & Collect
2 Food & Non-Food
2009
2010
2011
+12.3%
87
(23%)
+61.2%
£348m
15.0%
Baby Home and Travel Equipment
£386m
2012
£281m
34
21
(8%)
(11%)
13
(5%)
236
2013F
(95%)
21
260
(8%)
(92%)
260
(92%)
2014F
8.1%
8.8%
Home Delivery
2013F
2014F
Home Delivery
£386m
+12.3%
87
(23%)
+61.2%
£348m
£314m
£281m
£249m
236
(95%)
13
(5%)
54
(16%)
54
(16%)
34
280
(11%)
(89%)
280
(89%)
2015F
299
294
(84%)
(77%)
294
(84%)
2016F
(77%)
2017F
9.6%
10.2%
Click & Collect²
2015F
2016F
299
+7.5%
+7.5%
11.0%
2017F
Click & Collect²
10
Strategy
11
Our Strategy: Delivering across the PawPrint allows us to drive
growth in like-for-like, space and gross margin
Key Growth Drivers
Engagement
Product and
Innovation
LFL
Drivers of Core Growth
Space
VIP Club
Omnichannel
Services (Vets &
Groomers)
Optimised Store &
Pet Services Roll
Out
Product Mix & Own
Brand
Gross Margin
Services Maturity
12
Colleague & customer engagement is central to our success
LFL Growth: Engagement
High Colleague Engagement and Retention
93%
Trained and Experience Colleagues
93%
4 step training; enhanced salaries for qualified colleagues
91%
83%
83%
Step 4
Step 3
81%
Step 2
Step 1
Engagement
FY12
FY13
Engagement
Pawsitively
outrageous
service
Retention
Resulting in Higher Basket
Knowledge
Friendliness
5%
1
Data from FY14 prepared by SMG
Selling
through
expertis
e
Outrageous Customer Service
Fish4Opinion Net Promoter Score
£22.00
£22.04
Less than satisfied Highly satisfied
Expertise
FY14
Size1
£21.01
Retention
84%
84%
FY13
FY14
7%
£20.64
Less than satisfied Highly satisfied
77%
FY12
13
Unique products, high growth products & higher margin own
brands are critical to our strategy
LFL Growth: Product & Innovation
2012
>2,750 SKUs launched
in FY14,
refreshing 1/3 of our
product range
Sales of private label
AN brand, Wainwright’s
dog food, grew 26.7%
to £27.2m
In-house expertise to
design and brand
products
New launches of dog
Grain Free
and Wainwright’s cat
2013
2014
Own/private label
products
42% gross store
revenues
Advanced Nutrition
56% of dog & cat food
sales excl. treats (FY13:
53%)
Successful exclusive
products launches,
such as Smart Bones
AN market forecast to
grow ahead of
the pet food market
Reported growth 18%
LFL growth 13%
£124.0
£105.3
FY13
FY14
Pets At Home Advanced Nutrition revenues
14
Over 50% of SKUs unique to Pets at Home – with a highly
differentiated range in accessories
LFL Growth: Product & Innovation
Range Overlap Analysis vs. Amazon, Tesco.com, Zooplus, Medicanimal, Fetch.com
Proportion of Overlapping SKUs1 With Pets at Home2
% Overlap
19%
12%
15%
24%
12%
9%
35%
14%
12%
54%
Food
Unique To PAH
7%
6%
75%
54%
40%
Overall
12%
11%
4%
6%
26%
24%
79%
22%
28%
Treats
Small Accessories
Overlap With One Other Retailer
Large Accessories
Overlap With Two Retailers
Health & Hygiene
1%
12%
33%
53%
Other
Overlap With Three Or More Retailers
Percentage of Unique SKUs – Pets at Home vs. Amazon, Tesco.com, Zooplus, Medicanimal, Fetch.com
vs. Amazon
Overall
Food
59%
50%
Treats
Small
Accessories
Large
Accessories
Health &
Hygiene
Other
59%
vs. Fetch.com
vs. Medicanimal
75%
57%
84%
72%
73%
93%
vs. Zooplus
89%
76%
82%
vs. Tesco.com
Overall
89%
80%
54%
40%
73%
54%
76%
91%
92%
97%
99%
75%
79%
87%
88%
95%
98%
79%
96%
92%
98%
97%
29%
54%
62%
89%
67%
99%
28%
53%
Based on the top 4,000 identifiable SKUs (by sales volume) on the Pets at Home website which account for 80.9% of gross sales
Source: Compability Online Store Checks, OC&C analysis
1 Top 4,000 Pets at Home SKUs, by sales volume, identifiable on Pets at Home website, compared to other retailers
2 Competitors: Amazon (Includes Amazon and Amazon Marketplace), Tesco.com, Zooplus, Medicanimal, Fetch.com
15
VIP Club has grown at a rapid rate
LFL Growth: VIP Club
VIP Club Card, launched November 2012
"
"
Allows us to deliver targeted marketing
communications to owners & their pets
>7 million pets registered by owners
Membership and revenue capture rapidly growing1
3.0
60.0%
2.4
2.5
2.0
2.0
"
Every swipe awards lifelines, which convert to
charity donations >£1m raised FY14
"
My VIP magazine has an estimated readership
of >1.1 million, c£100 of vouchers in each issue
"
Voted ‘Best Loyalty Programme’ in retail by the
Loyalty Awards 2014
30.0%
1.2
1.0
0.5
40.0%
1.6
1.5
50.0%
20.0%
0.7
10.0%
0.2
-
0.0%
Jan 13
Apr 13
Aug 13
Members (m)
Dec 13
Mar 14
Jul 14
% Revenue Captured
VIP Customer Basket Size2
£21.89
+40%
£15.60
1 Pets
2
at Home VIP data to the 17th July 2014, extracted by GI Systems
Average basket sizes for VIP & Non VIP Customers in FY14
Avg Basket Size Non VIP
Customer
Avg Basket Size VIP Customer
16
VIP will allow us to pursue a >£1.5bn wallet share opportunity
with current customers
LFL Growth: VIP Club
Strategic
Initiatives
Calendar Year 2012
Annual Spend in Market, ex VAT
100%
£209m
£1,963m
£779m
£1,603m
£676m £182m
Total=
£5,412m
Total Spend
%
Cross Sell
Services
90%
80%
41%
70%
£3,252m
49%
60%
67%
60%
60%
55%
60%
50%
14%
Increase Share
of High Margin
Own Label
18%
40%
30%
44%
34%
24%
40%
42%
£1,530m
28%
£630m
12%
32%
9%
Spend at Pets at Home by Customers
Accessories
Other Food
Advanced
Nutrition
0%
Vet Services
6%
1%
Spend at Other by Pets at Home Customers
Source: 2012 Consumer Survey of >5,000 Respondents, OC&C analysis
Note: All figures exclude VAT
3%
Leverage VIP
Data with
Suppliers
Grooming
10%
Insurance
20%
Non Pets at Home Customer Spend
17
The highest traffic pet website in the UK
LFL Growth: Omnichannel
Market share of UK pet retail traffic 1
Visitors to our site versus competitors
47%
12%
12%
11%
7%
3%
Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr
13 13 13 13 13 13 13 13 13 13 14 14 14 14
www.petsathome.co.uk
www.petplanet.co.uk
Amazon UK - Pet Supplies
5%
3%
Other
www.pet-supermarket.co.uk
www.zooplus.co.uk
Econometric research suggests that every 16 visits to our website drives 1 in-store customer transaction2
Source: Hitwise
1 Data represents week average from 16 May 2014
2 Based on econometric research undertaken for the company
18
Our website is a portal for customer engagement, driving footfall
to stores & services
LFL Growth: Omnichannel
New website launched January 2014
Developments to come
"
Full mobile & tablet friendly
versions
"
Targeting 12,000 SKUs
"
Continue to drive Click &
Collect and Deliver To Store
"
Redemption of VIP vouchers
Optimise
Integration with
stores
"
Deliver To Store now live across our portfolio
"
4 clicks to checkout (as Amazon)
"
More than 9,800 SKUs, extended range of over 2,900
SKUs to stores
"
Click & Collect - two hour service
"
Subscription food service in trial
19
Retrofitting vets and groomers to existing stores drives
store LFL & increases overall customer spend
LFL Growth: Services
"
293 vet practices: 174 in-store & 119 standalone
"
148 salons: 146 in stores, 2 in stand-alone vets
"
Vet retrofit delivers c£39k rent benefit to store
"
Groomer retrofitted when store space too small for vet
"
18 retrofits to stores in FY14, 10 in Q1 FY15
"
11 retrofits to stores in FY14, 9 in Q1 FY15
Retrofitting services drives
footfall & lifts store LFLs by c1%
Services increase overall
customer spend & loyalty
In store services provide a one
stop, convenient offer for pet lovers
20
VIP allows us to drive increased spend on services as well as
increased spend in store
LFL Growth: Services
Last 12 Month VIP Club Member Spend (£)
Store
871
Other
643
513
322
Additional
customer
spend
362
250
412
135
191
Visit
Frequency3
231
Store Only
Store +
Groomer
5.9
10.3
10.0
47,589
36,112
# of People 1,580,716
in Sample
club member spend for the FY14
Vets consist of Companion Care practices
3 Accounts for total transactions including online
160
Store + Online Store + Vet²
231
266
Store + Vet²
+ Groomer
Store + Vet²
+ Online
Store + Vet²
+ Groomer
+ Online
12.7
19.5
18.7
30.2
122,560
9,417
4,040
329
1 VIP
2
21
Strong track record of rollout: We plan to open at least 25 stores,
60 vets & 50 Groom Rooms in the FY15
Space Rollout
Consistent store rollout
Largest branded small animal veterinary services provider
Net of 1 closure*
Includes Barkers
+9
+32
+32
+32
377
92 Vets4Pets
acquisition
386
119
345
313
119
97
5
87
• 
+16
+116
+19
FY12
+69
FY13
FY14
Q1 FY15
Stores with
Vet
Stores with Groom Room
FY12
28%
19%
FY13
32%
25%
FY14
42%
34%
Q1 FY15
45%
38%
* Knutsford store closed: an old high street trial at the end of lease
111
FY12
FY13
In-store
158
174
FY14
Standalone
Q1 FY15
Largest grooming salon operator in the UK
+42
+26
+18
129
+19
148
87
61
FY12
FY13
FY14
Q1 FY15
22
Significant opportunity for growth: Target portfolio of 500 stores,
700 vets & 300 Groom Rooms
Space Rollout
Rollout based on strict economic returns criteria
Market sizing for stores
"
Customer requirement for stores driven by
specialist offer, need for advice & pet
services proposition
Store target stress tested against scenarios for
both market decline & a more rapid transition to
omnichannel
"
Convenience element of offering & small
basket size indicates limit to customer
travelling time – c10 minutes drive
"
Roll out to date has been disciplined - all stores
opened before FY12 profitable
"
Lack of specialist competitors gives room for
larger rollout programme
"
New stores opened only after strict economic
and returns analysis conducted - our new store
footprints are smaller & incorporate services as
part of returns criteria (all new stores planned to
incorporate a vet and a groomer from opening)
"
Market analysis conducted in conjunction with
CACI has identified capacity for further rollout
"
Market sizing for vets
"
700 practices will give UK coverage with a
unified vet brand
"
Vet target portfolio higher than stores as
customers unlikely to travel >5 minutes with
a pet
"
Creates infill opportunity for vets between
stores, i.e. standalone practices
23
Significant opportunity for expansion – maturity & penetration of
vets and groomers is low
Space Rollout
Stores
Stores
In-storeVet
Vet
In-store
Standalone
StandaloneVet
Vet
Groom Room
Groomers
371
386
140
174
1
119
110¹
1
148
121¹
Existing
Years to
Maturity
% Existing Opened
Since FY10
>500
4-5
30%
c35%
>450
7
59%
c70%
>250
7
60%2
c53%
>300
4-5
73%
80%
Current Total
Potential
Portfolio
>129
114
198182
>112
94
131
>140
108
121
44
>58
Potential Retrofits
Source: CACI, Pets at Home. Existing store/practice numbers as at 17 July 2014
1 Proforma for Vets4Pets acquisition
Potential New
24
Higher margin Advanced Nutrition and private brands are key
contributors
Gross Margin Growth: Product Mix / Own Brand
Private brand / own labels are 42% of gross store revenues
Advanced Nutrition penetration of dog & cat food revenues
47%
44%
53%
56%
Private brand / own labels as % gross store food revenues
32.9%
67.1%
FY 13
Other Dog and Cat Food (exc Treats)
FY 14
Advanced Nutrition
Wainwrights Dog Advanced Nutrition private brand sales
£30.0
28.3%
£25.0
£20.0
£15.0
£7.3m
£5.0
28.0%
27.5%
£5.7m
Own label & private brand
Other
Private brand / own labels as % gross store accessories revenues
27.0%
26.5%
£10.0
28.5%
26.5%
£15.8m
£19.9m
FY 13
FY 14
£0.0
26.0%
25.5%
Wainwrights Dry Dog
W/W participation of dog AN
49.9%
50.1%
Wainwrights Wet Dog
Own label & private brand
Other
25
Our Vet Group Joint Venture model is unique and successful
We make it easy for a Vet to establish their own practice
The model incentivises the Vet to grow
JV Practice
Loan from JV Vet
Partner £30,000
Cash outflows, Years1-7
JV Practice
Loan from Pets At
Home £30-60,000
JV Partner benefits
from all profit &
capital accretion
Larger loan from
Bank c£320,000
Enables vet to start up own practice with minimal investment
% income to PAH
for admin support
Rent to PAH (instore practices only)
Average market
salary to Vet Partner
1. Repay bank loan
2. Repay PAH loan
3. Repay Vet
Partner loan
" No need to find full funding alone, or buy into existing Partnership
Removes financing & setup burden
" PAH agreement with lending bank for debt facility to open practices
" PAH takes care of administration, legal and paperwork
Head start on building reputation & client list
" Brand awareness and national advertising
When loans repaid (avg 7 years), vet can take up to 100% dividend
" Vet concentrates on what they do best, whilst we take care of back
office support, administration & marketing
" Vet has maximum incentive as a result of dividend model
" Share structure allows for vet exit strategy and profit from running a
successful business, giving us the opportunity to intervene if necessary
" Practice within a store has captive audience & footfall
" Brand new practice with state of the art equipment
26
Increasing margin leverage as vet practices and Groom Rooms
mature
Gross Margin Growth: Services Maturation
Vet practice economics located in-store
c64% of vet portfolio open since 2010
£140,000
£130,000
Groom Room economics located in-store
c75% of grooming portfolio open since 2010
c64% practices
less than 4 yrs old
£106,000
£120,000
£83,000
£110,000
£73,000
£100,000
£90,000
£80,000
Inc
ing
reas
age
ver
gin le
mar
£70,000
£18,000
£60,000
£7,000
£50,000
£0
£40,000
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8
Average fee income to PAH
Mixed historical cohort of 8 Companion Care practices
FY12
FY13
Average Sales
FY14
Average EBITDA
Cohort of 8 Groom Rooms opened in FY12
For every 60 practices added, we incur an additional c£1.3m
increase in central support costs
27
Financials
28
A track record of top line and like-for-like for growth, with high
cash returns on investment
Revenue & Like-For-Like Growth
1.4%
2.6%
10.6
CAGR
%
2.4%
Underlying EBITDA & Margin
16.8%
16.5%
16.6%
£665.4m
£110.7m
£598.3m
£544.3m
£98.5m
£91.2m
FY12
FY13
FY14
FY12
Underlying Unlevered Free Cash Flow & Conversion
86%
98%
84%
£96.8m
£92.4m
£78.6m
FY12
FY13
FY14
CROIC
FY13
FY14
22.6%
21.7%
CROIC excludes goodwill on KKR acquisition. FY14: excludes £25m of payables
related to outstanding IPO costs at year end. FY13: software and other intangible
assets have been reduced by £45.6m of goodwill associated with the acquisition
of Vets4Pets which was acquired at the end of FY13 and hence FY13 includes
no trading results from that acquisition
FY13
FY14
29
Strong revenue growth across all categories
Revenue £m
FY13
FY14
Change
Food
£297.9
£327.1
9.8%
Accessories
£268.5
£288.0
7.3%
Total Merchandise
£566.4
£615.1
8.6%
Services & other1
£31.9
£50.3
57.4%
Total Group revenue
£598.3
£665.4
11.2%
Like-For-Like growth2
2.6%
2.4%
Revenue £m
Q1 FY14
Q1 FY15
Change
Merchandise Revenue
£176.6
£192.5
9.0%
Food Revenue
8.8%
Accessories Revenue
9.2%
Services & other1
£14.4
£18.3
27.3%
Total Group revenue
£191.0
£210.8
10.4%
Like-For-Like growth2
0.2%
4.1%
1 Includes revenue from Joint Venture and wholly owned Group Venture vet practices, Groom Rooms, live pet sales & insurance commission
2 Total revenue in the financial period compared to revenue achieved in the prior period, post cannibalisation, for stores, grooming salons & vets trading for 52 weeks. Includes omnichannel.
30
Segment margins have improved, overall gross margin has
contracted due to mix
Gross Margin Bridge
Includes:
Growth in Vets Group
Includes:
Terms
Maturing Vet JVs
Global sourcing, Asia
Vets4Pets synergies
Advanced Nutrition
Wholly owned GV vets
Own brand
Newer Groom Rooms
Food mix vs Accessories
Pet welfare
0.1%
0.4%
54.1%
53.8%
FY13A
Merchandise
Services & Other
FY13
FY14A
FY14
Change
Merchandise
Services
Merchandise
Services
Merchandise
Services
Revenue Mix
94.7%
5.3%
92.4%
7.6%
-222 bps
+222 bps
Gross Margin
56.0%
22.5%
56.1%
26.3%
+14 bps
+386 bps
31
EBITDA margin reflects significant investment in colleagues,
stores and distribution
EBITDA Margin Bridge
Includes:
Includes:
ssss
Vets growth
Vets integration
efficiencies
New stores
VIP / marketing
Auto- enrolment
0.2%
0.3%
16.5%
16.6%
32
Pre-tax cash flow conversion strong, despite increased capital
expenditure
Working Capital, £m5
FY13
FY14
Inventories
42.1
46.1
Cashflow, £m
FY13
FY14
Underlying EBITDA
98.5
110.7
Working capital change
19.3
9.7
Trade & other receivables
34.0
42.0
Underlying operating cashflow
117.8
120.4
Trade & other payables4
(99.8)
(121.5)
Capital expenditure
(20.4)
(26.3)
Investments
(1.2)
(1.7)
Working capital
(23.7)
(33.4)
Other
0.6
0
WC Movement, £m
FY13
FY14
Pre-tax cash before exceptionals
96.8
92.4
98%
84%
Increase in inventories
(1.7)
(4.0)
Exceptional items1
(7.3)
(1.2)
Increase in trade & other
receivables
(6.0)
(8.0)
Pre-tax cash available for debt
service
89.5
91.2
Increase in trade and other
payables
Acquisitions2
(47.9)2,3
(2.0)
27.0
21.7
Pre-tax, post acquisitions cash
available for tax, debt service
41.6
89.2
Net working capital
movement
19.3
9.7
Conversion %
Exceptionals includes related party fees, costs commensurate with operating the business as a publicly quoted company and IFRS2 related share based payment credits and charges. Excludes out standing payments
associated with IPO costs
2 Excludes costs of acquisition (£4.6m), which are included in exceptionals in 2013 Actual
3 Acquisitions are net of cash acquired
4 FY14 excludes £25.2m in other payables, reflecting out standing payments associated with IPO costs
1
5The
"trade and other receivables" and "trade and other payables" balances presented have been adjusted to reflect movements in the fair value of financial instruments which are held as assets or liabilities on the
balance sheet, in accordance with their presentation within the Statement of Cash Flows. The “trade and other payables” balances presented in the above table have been adjusted to exclude exceptional movements in
working capital relating to accrued transaction costs, in accordance with the presentation of such items within the Statement of Cash Flows.
33
Capital expenditure driven by new stores and refurbishments
Robust balance sheet with 2.3x ND / EBITDA
Capital Expenditure
Leverage Reconciliation
£m
FY13
FY14
£m
New stores
10.7
10.9
Stated Gross Debt
319.9
Services
2.7
5.1
Add back: issue costs
5.1
Major projects
2.7
4.0
Adjusted Gross Debt
325.0
Other capex
5.9
10.0
Cash
90.8
Less IPO related cash
(24.9)
Total capex
22.0
30.0
Adjusted cash
65.9
CROIC
22.6%
21.7%
Net Debt
259.1
Underlying EBITDA
110.7
Leverage
2.34x
Capex fully funded from operating cash flow
" FY14 capital expenditure reflective of
" 32 new store openings at a cost of £10.9m
" Major refurbishment capital of £5.1m to facilitate Vet /
Groom Room additions in 20 stores
Underlying ND position adjusted for a timing
difference in IPO and Plc related costs due to be paid
from IPO cash proceeds
" New services rollout
" Introduction of SAP
34
We have a special business with a great future
1
Clear leader & specialist retailer in the attractive UK pet care market
2
Unique ‘one stop shop’ proposition with nationwide retail footprint, pet services and omni-channel
3
4
Clear growth story with multiple levers
Strong financial performance and highly cash generative
35
Appendix
36
Financial definitions
Like-for-like
‘Total sales revenue in a financial period compared to revenue achieved in a prior period for stores, grooming
salons and vets that have been trading for 52 weeks. Includes revenue from the Group’s online store.
Underlying EBITDA
Group underlying operating profit under IFRS (which includes amortisation of landlord and developer
contributions received), plus depreciation and amortisation, and profits and losses on disposal where these are
included in operating profit. Excludes exceptional items, related party fees, costs commensurate with operating
the business as a publicly quoted company and IFRS2 related share based payment credits and charges
Underlying unleveraged free cash flow
Underlying EBITDA, adjusted for changes in working capital, acquisitions of property, plant and equipment and
other intangible assets, investments in other financial assets, proceeds from the sale of property, plant and
equipment and is stated before cash flows for exceptional costs and acquisitions of subsidiaries. FY14 FCF has
been adjusted through the removal of a £25.2m increase in other payments reflecting payables associated with
IPO costs outstanding at year end to give an underlying unlevered FCF
CROIC
Represents cash returns divided by the average of gross capital (GCI) invested for the current financial year and
GCI for the prior financial year. Cash returns represent underlying EBITDA less depreciation & amortisation,
plus rental charges, reduced by tax equivalent to the corporate tax rate, plus depreciation and amortisation.
GCI represents Gross Property, Plant and Equipment plus Software and other intangibles excluding the
goodwill created on the acquisition of the group by KKR (£906,445,000) plus net working capital plus rent
multiplied by a factor to impute the commitment of the group to its rental obligation. A multiple of 8 has been
used.
37
Guidance
Pet market outlook and economic indicators positive - lack of sustained rise in disposable incomes gives some caution
Trading in the current financial year is progressing in line with our expectations
Guidance
"
Store and services rollout per annum, more than …
"
25 stores
"
60 vet practices (c30 retrofits)
"
50 Groom Rooms (c35 retrofits)
"
Gross margin mix: Benefit from services maturation & growth, modest Merchandise margin expansion
"
Plc costs of c£2.5m
"
Capital expenditure: £34-35m per annum
"
Net interest cost: c3.0%
"
FY15E tax rate 22% (+1% to underlying tax rate)
"
FY15E leverage: c2.0x underlying EBITDA, decreasing by 0.5x per annum thereafter
"
Dividend: FY15E 30-40% payout ratio, split 1/3 interim, 2/3 final
38
Pets at Home is the largest specialist pet care retailer and small
animal veterinary Group
#1 Specialist Pet Care Retailer
#1 Branded Small Animal Veterinary Group
386
235
293
20
22
262
48
56
114
111
52
89
49
Vet Group
Source: Company websites. Store/practice numbers August 2014
39
Only provider offering a full suite of pet products and services
Grocers
Specialists
Online
Vets
Depth of SKUs in Food
ü
ü
ü
ü
û
Depth of SKUs in Accessories
ü
û
ü
ü
û
Extensive Own Brand Food
and Accessories¹
ü
ü
û
û
û
Advanced Nutrition Category
Leadership
ü
û
ü
û
û
Advice from Trained
Colleagues
ü
û
ü
û
ü
Live Pets in Store
ü
û
ü
û
û
Extensive Pet Services (e.g.
vets, grooming, nutrition
consultations)²
ü
û
û
û
ü
Customer Insight /
Membership Programme³
ü
ü
û
ü
ü
Convenient Proposition
ü
ü
ü
ü
ü
Significant Community
Engagement
ü
ü
û
û
ü
Based on searches conducted as of 6 December 2013
¹ Jollyes and Pets Corner have more limited own brand offering
² Certain specialists provide limited services, such as grooming
³ Asda and Morrisons (grocers), MedicAnimal and Ocado (online) and Medivet (Vets) do not have a recognised membership programme
40
Headroom for growth in UK, and a defensible position for Pets at
Home, given US comparison
UK vs US Key Statistics 2012 (Excluding VAT)
Market Size
UK
US
Market Size 2012 (£bn)1
£3.7
£23.2
2008-12 CAGR (%)1
3%
4%
# Households (m)
26
132
45%
56%
1.9
2.1
Spend per Pet food & accessories (£)
£157
£142
Spend/pet food (£)
£116
£90
Spend/pet accessories (£)
£42
£52
% Grocers
56%
35%
4%
6%
19%
26%
% Penetration Advanced Nutrition
8%
15%
% Penetration Organic/Healthy Food
2%
9%
% Households with pets
Average # Pets/Household with pet
Market
Structure
(Share of
Food &
Accessories)
Consumer
Headroom
for Growth
Key Differences in US
% Pureplay Internet Retailers
% Top Two Pet Specialists2
" Higher pet penetration
" Lower LFL food prices, but more
developed premium food sector
" Higher accessories spend
" More developed demand for some
services
" Two scale pet specialists with significant
market share (PetSmart & PetCo) –
versus one in UK (Pets at Home)
Opportunities for Pets at Home
" Premium food (eg Advanced Nutrition,
Organic, Grain Free, ‘Bridging’ brands)
" Accessories range (breadth, depth &
innovation)
" Grooming and Day Care services
% Grooming Penetration
3
4%
10%
Source: OC&C
1 Market Size & CAGR refer to Food (Grocery, AN, Treats), Accessories and Grooming. NB Does not include Vet Services or Insurance
2 Market Share breakdown: Pets at Home (Food: 13%, Accessories: 32%), Jollyes (Food: 0.4%, Accessories: 1.9%), PetSmart (Food: 16%, Accessories: 17% ), PetCo (Food: 9%, Accessories: 10% - NB assumes PetCo has
same Food / Accessories revenue split as PetSmart)
3 Grooming Penetration is defined as the proportion of the dog and cat population groomed in a year
41
We have a proven model to identify size of opportunity for
superstores
Step 1
Step 2
Step 3
Step 4
Demand
mapped
Catchment areas
identified
Opportunities
assessed
New stores
modelled
" UK pet care
market potential
has been
calculated by
postcode area
and a demand
map created
" Market potential
already
absorbed within
a 10 min drivetime of existing
stores has been
mapped
" Using CACI
models, a
defined payback
hurdle and a
manual sense
check highest
priority new
store locations
have been
identified
" Gravity model
simulates
opening of new
stores and
opportunity is
remodelled each
time
Vet market potential calculated in a similar way
42
Case study of footprint expansion: Basildon example
Step 1
Step 2
Step 3
Demand mapped
Catchment areas identified
Opportunities assessed
"
Market potential calculated by
postcode using Acorn demographic
types (darker colour = higher potential)
"
Blue dot is existing Pets at Home store
"
Market potential within 10 minute drive
time of existing store shown in grey
"
10 minute drive time catchment for
potential new site overlaid
"
Unabsorbed market potential remains
in colour
"
Sufficient demand to justify opening a
second store (purple dot)
" CACI analysis demonstrated sufficient demand to justify a second store in Basildon
" Basildon Pipps Hill opened in March 2013 and is delivering ahead of business plan
Source: CACI gravity model
43
Product is the most important purchase criterion for highly
engaged customers
Importance of Key Purchase Criteria for Customers
Highly Engaged Customers1
Average score out of 5
Difference Versus Less Engaged Customers
Delta in % Difference Versus Average Score
Less Important
4.4
Products That I Want
Price is more important to less
engaged customers
5%
1%
4.2
Convenient Opening Hours
Good Promotions
4.2
Convenient Location
4.2
(7)%
8%
7%
3.9
3.9
Products and
services are more
important to highly
engaged customers
(11)%
4.1
Wide Range of Products
Source: Pets at Home 2013 Consumer Survey, OC&C analysis
1 Highly Engaged Customers: Cat Lover, Dog Lover, Dog Multi
(3)%
4.3
High Quality Products
Knowledgeable Store Colleagues
(16)%
4.3
Products In Stock
Available Store Colleagues
(4)%
4.4
Good Value For Money
More Important
Price
Products
Convenience
Colleagues
17%
44
Underlying to reported EBITDA reconciliation
£000
FY14
Operating profit
£78,842
Exceptional items
£10,574
Related party fees
£1,221
IFRS2 share based payment charges
£31
Underlying operating profit
£90,668
Depreciation and amortisation
£19,990
Underlying EBITDA
£110,658
FY14 excludes
"
Exceptional items: costs associated with the Initial Public Offering on 17 March 2014 (£9.4m), and costs
associated with the integration of the Vets4Pets business (£2.3m) net of a VAT refund (£1.1m)
"
Related party fees
"
Costs commensurate with operating the business as a publicly quoted company
"
IFRS2 related share based payment credits and charges
FY15 onwards
"
Excludes IFRS2 related share based payment credits and charges & any exceptional items
"
Includes Plc costs of c£2.5m
45
Our team
Tony De Nunzio
Non-Executive Chairman
" Joined as Chairman in March 2010. Currently
Non-executive Chairman of Maxeda and Nonexecutive Director of Alliance Boots. Previously
CEO of Asda and Deputy Chairman of Galiform
Peter Pritchard
Commercial Director
" Joined in January 2011. Previously Exec Non
Food Director at Asda (13 years at Asda) and
Buying Director at Wilkinsons (2 years).
Previous commercial roles at Iceland,
Sainsburys and M&S
Nick Wood
CEO
" Joined as CEO in June 2012. Previously
CEO of American Golf for 4 years and
10 years management at Dixons
Sally Hopson
Customer and People Director, CEO Vets
" Joined in December 2008. Previously
spent 14 years at Asda as Retail
Operations Director and Marketing
Operations Director
Ian Kellett
CFO
" Joined as CFO in April 2006. Previously
Deputy Finance Director at JD Wetherspoon
Plc
Phil Hackney
Logistics and Business Systems Director
" Joined in February 2007. Previously
held senior roles at Boots and Tech
Data
46

August 2014 Investor Presentation

Transcription

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