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1 1
Investor Presentation February 2016
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Investment case & overview
2
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3
Who we are – differentiated offering
One stop shop: store, vet & groomer
Strong private labels & own brands
Wide product range, frequent innovation
Seamless shopping across stores & omnichannel
Industry leading colleague retention & engagement
Targeting 500 stores, 700 vet practices, 350 in-store groomers
Leading in fast growth, high margin market segments such as Advanced Nutrition & pet services
>4m VIP loyalty card members enabling highly targeted merchandise & services cross-selling
Trusted brands, underpinned by the shared love of pets between
customers & colleagues
UK pet market – clear leader Growth - multiple levers
More stores than the 5 closest competitors combined
UK’s largest vet & grooming services provider
Pets at Home taking market share across all categories
Pet market has consistently outgrown UK retail
Market transition to online slow but steady
Vet Group
413 stores
359 practices
4 stores + groomer
2 referral hospitals
Website + store
Immature pet services business fast growing with higher operating margins
201 groomers
3
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4 FY14: FY15:
CROIC FCF conversion
Dividend Cover Leverage
21.7% 22.6%
84% 77%
N/A 2.5x
2.3x 1.6x
FY15 Underlying EBITDA £121.3m, margin 16.6% FY15 Revenue £729.1m
91%
9%
Merchandise
Pet Services
54% 46%
Food Accessories
45% 55%
Vet services fee income
Other Services (Grooming salons, insurance, pet sales)
Pet Services (still immature)
Merchandise
Higher than Group
Lower than Group
Group EBITDA margin hierarchy
Vet services EBITDA margin is accretive Growing participation supports investment in the Group
£666.1m
£63.0m
£306.8m
£359.3m
£34.8m
£28.2m
50% 55% 60% 65% 70% 75% 80%
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8
Incremental EBITDA margin from new vet practices
4
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UK pet market
5
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The pet market continues to grow ahead of general retail Strongest growth in Advanced Nutrition, Treats & Services
6
£5.7bn £6.1bn CAGR 3.5%
4.1%
5.3%
3.8%
1.9%
14.0% 10.4%
0.4%
2.0%
UK retail CAGR 1.5%
2012-14 CAGR
Source: OC&C Strategy Consultants
Vet services
Grooming
Insurance
Health & Hygiene
Advanced Nutrition Treats
Other food
Other accessories
2012 2014
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Channel shift in the pet market has been evolutionary, not revolutionary
7
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
Personal Accessories
DIY/Gardening
Health & Beauty
UK Grocery
Pet Products
Furniture
Consumer Healthcare
Homewares
Clothing/Footwear
Toys/Games
Consumer Appliances
Electronics
Health & Hygiene Small, fits through letterbox
Advanced Nutrition Branded, higher price point
Large accessories Considered, infrequent purchase
The highest growth categories
Source: OC&C 2015 Includes C&C spend
Online participation of retail categories
Over 50% of the online pet market is low growth, low margin grocery food
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Transition of market to online consistent with our expectations Click & Collect outgrowing home delivery
8
£215m £263m
£9m
£16m
2012 2014
Click & Collect Home delivery
Online participation increased at <1% per annum & is expected to continue at this rate
Source: OC&C data.
10.7%
37.9%
CAGR 11.8%
£224m
£279m
7.3% 8.6% Online participation of pet market
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We have taken share across all segments
9
12% 14%
75% 72%
5% 3%
1% 3% 7% 9%
2012 2014
44% 53%
47% 35%
9% 12%
2012 2014
Food & Treats* +2% share
Advanced Nutrition +9% share
Vet Services +3% share
Accessories +3% share
33% 36%
17% 17%
22% 22%
9% 11%
20% 15%
2012 2014
Source: OC&C data. Vet corporates include CVS, Medivet and Independent Vetcare (IVC) * Total Food including grocery & Advanced Nutrition
Pets at Home Grocers Pet specialists (Incl. vets)
Online specialists Other Vet corporates Vet independents
6% 9%
11% 13%
83% 78%
2012 2014
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We are growing our share online as well as offline
10 Source: OC&C 2014
Pets at Home online market share
-
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
Advanced Nutrition Large Accessories Health & Hygiene
2012
2014
2012 2014
2012 2014
Online market share Total market share (online & offline)
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Headroom for growth in UK, and a defensible position for Pets at Home, given US comparison
UK vs US Key Statistics 2014
! Premium food (eg Advanced Nutrition, Organic, Grain Free, ‘Bridging’ brands)
! Accessories range (breadth, depth & innovation)
! Grooming services
Opportunities for Pets at Home
! Higher pet penetration
! Lower LFL food prices, but more developed premium food sector
! Higher accessories spend
! More developed demand for services
! Two scale pet specialists with significant market share (PetSmart & PetCo) – versus one in UK (Pets at Home)
Key Differences in US
11 Source: OC&C data. Includes VAT * Excludes pet services ** 2012 data
UK US
Market
Pet products market* £3.9bn £23.2bn
2008-14 CAGR 2.5% 3.7%
Dog/cat population 17.9m 146.9m
Dogs/cats per person 0.28 0.46
Market structure
% Grocers 58% 36%
% Online 8.6% 6.0%
% Top 2 pet specialists 21% 27%
Headroom for growth
% Participation AN food 11% 25%
% Participation grooming** 4% 10%
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Strategy
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Our strategy
Product and Innovation
Product Mix & Own Brand
Optimised Store & Pet Services
Roll Out
Strategy
Driv
ers
of C
ore
Gro
wth
Grow LFL
Grow Space
Grow Margin
VIP Club
Omnichannel
Services (Vets & Groomers)
Services Maturity
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Our customer: the engaged pet owner, who values range, quality & advice
14
Customer rankings of key purchase criteria from 1-5 (where 5 is most important)
2.00
3.00
4.00
5.00
Highly engaged pet owners Low engagement pet owners
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We are leveraging our unique ‘one stop shop’ proposition, with nationwide retail footprint, pet services and omni-channel offering
15
Brand awareness & visibility
Sector leading colleague expertise & qualified professionals
Customer relationships & acquisition
Best value private brands & own labels, plus exclusives
Innovation, refreshment & sourcing advantages
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£54.9m £61.3m
£20.5m
£24.5m
H1 FY15 H1 FY16
Wainwright's Other AN
13.7%
We are leading the market & growing our share in Advanced Nutrition foods
16
Recent innovation Advanced Nutrition revenues
£75.4m
£85.8m
19.8%
11.5%
Exclusively launched the 2nd largest US brand
Innovation in the form of high quality dehydrated food
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13.36cm 0.39cm 0.43cm 13.36cm
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Blunt relationship
§ Customer
§ Simple pet info
§ Generic communications
§ Some pet targeting
Pet Personal
§ Advanced Nutrition
§ Prescription food
§ Tailored food offerings
§ Relevant vet benefits
§ Tailored health and hygiene
§ All key pet types / ages /
§ Breeds ...
§ 3rd party services
Designed around My VIP
We are here
Developing the relationship with our VIPs, moving towards a lifetime value view of the customer
Personalised online offers & content
Repeat order reminders
Brand specific rewards
Tailored services
Pet specific content
Best value and priority for VIPS
17
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c50% of our online orders are picked up in-store
Store convenience for frequent food purchase
Stores will always be a fundamental part of our proposition
18
Vet & grooming services will never be delivered online
Live pet & grooming provides entertainment & education
Customers want to bring their pet, & talk pet with other
owners Average basket <£20, not a
natural online market
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Whilst adapting to our customers shopping habits by working towards a seamless offline & online experience
19
Order in-store kiosks
Increase extended
online product range
Order in-store via colleague
PetPads
Richer online content & imagery
Digital screens to showcase
extended range
Greater potential for
online bookings
VIP App
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Primary Practices
In-store or standalone
Extended hours
Super Surgery
24/7
CT scanner
Particular pet
specialists
Growing our veterinary business through through convenience & specialisms
20
Our primary practices can inter-refer & leverage the benefits of other Vet Partners
Primary Practices
CT scanner
Particular pet specialists
Super Surgery
In-store or standalone
Extended hours
24/7
Particular pet
specialists
Super Surgery
Super Surgery
CT scanner CT CT scanner
In-store or standalone
Extended hours
24/7
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Acquiring specialist referral hospitals to access an additional and complementary segment of the market
21
! Solidifies our specialist credentials & reputation ! Captures additional market spend ! Vertical integration ! Minimises revenue leak from primary practices
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13.36cm 0.39cm 0.43cm 13.36cm
6.03cm
5.12cm
0.76cm
1.64cm
7.20cm
8.43cm
We know that Services and omnichannel bring a strong benefit to our retail business
22
191 237 179 233 290 417
Store Other Vet, Groom, Web
Additional customer
spend
Last 12 Month VIP Club Member Spend (£)
145
Captures last 12 month VIP send to start Oct 2015. Vets consist of Companion Care practices. Accounts for total transactions including online
Visit Freq 6.9 9.5 10.0 9.3 14.1
# VIPs 2,262,418 104,682 67,739 207,688 8,490
12.7
22,812
21.4
1,183
17% 26% 40% 30% 69% 36% 81% y/y growth
Store only Store + Groomer
Store + Online
Store + Vet
Store + Vet + Groomer
Store + Vet + Online
Store + Vet + Groomer + Online
71 83 183
297
336
436
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Services will continue to underpin margin & deliver accretion in the long term
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Store only Store + Groomer + Vet
EBITDA/sq ft from store
EBITDA/sq ft from store,
groomer & vet fee income
Combined Services
Uplift +24%
Vet rent payment to store
Store only represents mature superstores opened FY10 & earlier Store + Vet + Groomer represents mature superstores, mature vets opened in FY08 & earlier, and Groomers opened FY12 & earlier Number of stores used in analysis: Store only = 92, Store + Vet + Groomer = 9
The uplift has grown as vets & groomers mature
further
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205
130
229
413
83
132
62
120
89
87
Groom Room
Standalone Vet
In-store Vet
Stores
Existing Potential Retrofits Potential New
Current Portfolio (excludes Barkers & new formats)
Our opportunity is both large & long term: growth will be fuelled by rollout and maturity benefits for at least another 15 years
Total Potential UK Estate
Approximate time to full rollout & maturity
1
1
24
>500
>450
>250
>350
11 yrs
16 yrs
16 yrs
10 yrs
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H1 FY16 financials
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Consistently strong performance in Services Merchandise growth slowed by Health & Hygiene
Revenue £m H1 FY15 H1 FY16 Change
Merchandise
Food £188.7 £202.1 7.1%
Accessories £159.6 £160.5 0.6%
Total £348.3 £362.6 4.1%
Like-for-like 3.7% 1.0%
Services
Fee income from JV vet practices £14.8 £18.4 23.8%
Other1 £18.4 £23.5 28.2%
Total £33.2 £41.9 26.2%
Like-for-like 10.2% 10.5%
Group Total £381.5 £404.5 6.0%
Like-for-like2 4.2% 1.8%
1 Includes revenue from wholly owned Group Venture vet practices & other veterinary income,, Groom Rooms, live pet sales & insurance commission 2 Comprises total sales/fee revenue in a financial period compared to revenue achieved in a prior period, post cannibalisation, for stores, grooming salons and vets that have been trading for 52 weeks. LfL includes revenue from the Group’s online operations 26
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Gross margin expansion in both Merchandise & Services
27 H1 FY15 H1 FY16
Merchandise Services
55.9% 31.7%
Merchandise Services
56.6% 32.2%
+69 bps +49 bps
Services
Merchandise
53.8% 54.1%
0.58% (0.32)%
Increased Services mix within Group outweighs Services
margin improvement
Terms AN mix Wainwright’s Global sourcing Slower accessories growth Price investment
Maturing vets New grooming salons Northwest Surgeons Pet welfare in-store
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EBITDA margin: Services & operational efficiencies providing support for investment in colleagues & seamless shopping
EBITDA margin bridge
0.12% 0.13%
0.35%
0.48%
15.1% 15.0%
H1 FY15 H1 FY16
Operational leverage
IFRS2 Colleagues
Seamless shopping &
systems
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Strong earnings growth as a result of refinancing
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Group income statement H1 FY15 H1 FY16 Change
EBITDA 57.8 60.7 5.1%
margin (%) 15.1% 15.0% (13) bps
Depreciation & amortisation (11.9) (12.5) 5.0%
Net interest (5.4) (3.0)* (44.6)%
Profit before tax 40.5 45.2 11.8%
Tax (9.0)** (9.4) 5.8%
rate (%) 22.0% 20.9% (117) bps
Net income 31.5 35.8 13.4%
EPS (pence) 6.3 7.2 13.4%
DPS (pence) 1.8 2.0 11.1%
* Pre exceptional interest charge of £4.3m, associated with amortisation of fees from previous financing facility ** Pre exceptional tax credit of £4.3m
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Capital investment reflects space rollout & seamless shopping
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Capital Investment, £m H1 FY15 H1 FY16
New stores / Groomers 5.4 4.5
Services retrofit & refurb 3.7 2.1
Other refurbishment 1.6 1.4
Systems 1.7 2.1
Other 2.3 3.6
Total 14.7 13.7
CROIC H1 FY15* H1 FY16
21.4% 22.2%
Mezzanine in DC for the extended online range Timing of wholly owned vet practices
Lower Services rollout this H1 vs prior year
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Improved FCF conversion Working capital outflow in H1 typical of our trading cycle
Cashflow, £m H1 FY15 H1 FY16 Change
EBITDA 58.6 62.3
Working capital (8.8) (8.1)
Provisions (0.2) (0.2)
Operating cashflow 49.6 54.0 8.8%
Tax (6.3) (5.3)
Interest cost & debt issuance (5.2) (5.0)
Capex (cash) (14.6) (14.7)
Other** (1.2) 0.5
Free cashflow 22.3 29.5 32.3%
Conversion 38.0% 47.3% 929 bps
31
Cash working cap, £m H1 FY15 H1 FY16
Inventories (5.8) (11.5)
Trade & other receivables (5.9) (3.0)
Trade & other payables 3.0* 6.4
Working capital (8.8) (8.1)
* Excludes £25.2m in IPO related payables **Other: represents movements in investments and interest income, and disposals
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£10,000
£30,000
£50,000
£70,000
£90,000
£110,000
£130,000
£150,000
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Every new practice adds c£22,000 to our cost base
Increasing margin leverage to come as vet practices and Groom Rooms mature
Groom Room economics located in-store Vet practice economics located in-store
32
! Vet practices take c7 years to mature ! 74% of vet practices less than 7 years old
! Groom Rooms take c5 years to mature ! 84% of Groomers less than 5 years old
EBITDA accretion & margin leverage as practices mature
Cohort of 8 Groom Rooms
Cohort of 8 Companion Care practices
-10%
0%
10%
20%
30%
£-
£40,000
£80,000
£120,000
Year 1 Year 2 Year 3 Year 4
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£57.8m
£60.7m
H1 FY15 H1 FY16
£33.8m
£38.7m
H1 FY15 H1 FY16
6.3p
7.2p
H1 FY15 H1 FY16
£381.5m
£404.5m
H1 FY15 H1 FY16
Summary of financial KPIs
EPS & Dividend Payout Ratio
Revenue & Like-For-Like Growth
4.2% 1.8%
EBITDA & Margin
FCF & Conversion
15.1% 15.0%
29% 28% 38.0% 47.3%
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£22.3m
£29.5m
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Financial definitions
Like-for-like ‘Like-for-Like’ sales growth comprises total sales/fee revenue in a financial period compared to revenue achieved in a prior period, post cannibalisation, for stores, grooming salons and vets that have been trading for 52 weeks. LfL includes revenue from the Group’s online operations Free cashflow Free Cashflow is defined as net cash from operating activities, less net cash used in investing activities, less interest paid & debt issue costs, and is stated before cash flows for exceptional costs and acquisitions of subsidiaries CROIC Represents cash returns divided by the average of gross capital (GCI) invested for the last twelve months and GCI for the last twelve months. 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.
34