Pets at Home has suffered a slump in half-year profits amid plans to buy back around 55 veterinary practices from joint venture partners.
The pet specialist said statutory pre-tax profit tumbled 80.5% to £8m during the 28 weeks to October 11. The fall was largely driven by a £29m charge it booked to “recalibrate” its vets business.
However, Pets at Home insisted the move would “allow practices to mature more swiftly” and “generate returns” for the business.
Within its core retail arm, total revenues grew 6% to £443.7m as like-for-likes advanced 4.7%.
Omnichannel revenues spiked 45.2% to £35.3m.
Pets at Home boss Peter Pritchard is bidding to turn the business into a “complete pet care company” and said a review of the First Opinion vet business was required “in recognition that the business’ environment has evolved”.
But the group said it recognised that some of its joint venture pet practices were experiencing “increasing cost pressures, including fees charged by Pets at Home”.
The business aims to “rebalance and simplify the fee structure” and will “buy back and consolidate” 55 vet practices. It warned that could lead to the closure of around 25 practices.
Despite the costs incurred by the review, Pets at Home said it expects to deliver pre-tax profit of £80m to £85m in its 2018/19 financial year.
Pritchard said: “Pets at Home is a healthy business and customers are loving what we do – responding to our price repositioning, investment in digital and the amazing service delivered by our vet partners.”
He added: “Reviewing our vet group has been a priority. I recognise we have grown at pace and more recently have seen the pressure that rising costs and our fees are placing on this young business. We will need to recalibrate the business to deliver more measured growth, while maintaining our plan to generate significant cash profits.
“We are focused on maximising our unique assets and delivering a plan for sustainable cashflow and profit growth. Given the success of the changes we have made in retail, I’m confident we can do this.”