Annual Report & Accounts 2023
Creating a beer world
for pets and the people
who love them
What we do
We provide the best
products, services
and advice to
guide pet owners
through their pet
care journey
Our unique proposition of products, services
and advice allows us to deliver complete
pet care to consumers in a way competitors
cannot easily replicate, and enables us to
continue to take share across both our key
markets of retail andveterinary.
For more information please visit:
https://investors.petsathome.com
01
Strategic Report Governance Financial Statements
£1,404.2m
£
136.4m
£
122.5m
12.8p
+6.6%
2023
2023
2023
2023
£136.4m
£122.5m
12.8p
£1,317.8m
£130.1m
£148.7m
11.8p
£1,142.8m
£77.4m
£106.3m
8.0p
2022
2022
2022
2022
2021
2021
2021
2021
+4.8%
(17.7)%
+
8.5%
£1,404.2m
Highlights
Sustainability highlights
Contents Financial highlights
Strategic report
02 Business model
04 Investment case
06 Chair’s statement
08 Chief Executive’s statement
10 Key performance indicators
12 Market overview
14 Stakeholder engagement
16 Sustainability review
20 Chief Financial Officer’s review
23 Risk review
Governance
31 Chair’s introduction
32 Board of Directors
34 Leadership and purpose
36 Division of responsibilities
39 Composition, succession and evaluation
42 Nomination and Corporate Governance
Committee Report
44 Audit and Risk Committee Report
50 ESG Committee Report
52 TCFD statement
61 Directors’ Remuneration Report
87 Directors’ Report
94 Statement of Directors’ Responsibilities
Financial statements
96 Independent Auditor’s Report
102 Consolidated income statement
102 Consolidated statement of comprehensive
income
103 Consolidated balance sheet
104 Consolidated statement of changes in equity
105 Consolidated statement of cash flows
106 Company balance sheet
107 Company statement of changes in equity
108 Company statement of cash flows
109 Notes (forming part of the financial statements)
169 Glossary – Alternative Performance Measures
172 Advisors and contacts
1 Alternative Performance Measures (APMs) are dened and reconciled to IFRS information, where possible, on page 169. Statutory PBT was £122.5m, down 17.7% YoY. In FY22 we benetted
from the second tranche of the proceeds from the disposal of the Specialist Group (£19.2m credit) while in FY23 PBT includes a total of £13.9m of non-underlying costs (includes £12.9m of
operating costs and £1.0m of lease interest), predominantly due to the transition to our new distribution centre.
Revenue (£m)
Underlying PBT
1
(£m)
Prot before tax (PBT) (£m)
Dividend per share (pence)
£8.2m
raised to support pet charities
Over
11,000
hours donated to local communities
41%
reduction in CO
2
e emissions vs FY16
Pets at Home Group Plc Annual Report & Accounts 2023
02
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VIP loyalty
club
Pet-products
& advice
in-store
In-store vet
practices
Grooming
salons
Other pet
care services
Omnichannel &
subscriptions
Digitally-led
pet healthcare
solutions
Pet-products
online
Standalone
vet practices
Business model
A unique combination of
products, services and advice
Business activities
Retail
A wide range of pet products is
available both online and in our
stores, which offer far more to
the pet owner than just a place
to buy food and accessories.
Through a combination of
our in-store experience and
services, knowledgeable
colleagues and award winning
VIP loyalty club, we aim to make
pet ownership convenient,
affordable and rewarding.
Vet Group
We provide a comprehensive
range of small animal veterinary
services through a network of
general practices which handle
all aspects of general veterinary
care, as well as offering round-
the-clock veterinary telehealth
advice and triage so clients can
access all their pet healthcare
needs whenever they need to.
Differentiators
Trusted and well
known brand
Passionate and
expert advice
Extensive and
growing data
capability
03
Strategic Report Governance Financial Statements
Stores
457
Practices
444
Revenue
£1.3bn
Revenue
£123m
Groomers
339
Telehealth consultations
115k
Operating prot
£100m
Operating prot
£52m
Scalable
omnichannel
platform
Dierentiated,
sector-leading
vet services
Unique digital
experience
04
Pets at Home Group Plc Annual Report & Accounts 2023
Investment case
A clear and
compelling
investment case
05
Strategic Report Financial StatementsGovernance
Strong position
in a growing,
resilient market
– We have 24% share of a £7.2bn pet
care market providing signicant
opportunityto take further share
– The pet care market is in structural
growth underpinned by increasing
humanisation, premiumisation, and
penetration
A unique
propositionof
pet care solutions
– An expanding platform of pet care,
combining product, services and expert
advice from a trusted, well known brand
– Consumers who engage across all of
our channels spend up to 9x more each
year compared to those who shop solely
in our stores
Scalable
omnichannel
platform
– Creating a proprietary digital platform
where customers can access their
entire pet care needs in one place
– Our telehealth business enhances our
digital capabilities, providing trusted
advice and even more convenient pet
care services
UniqueJoint
Venture veterinary
model
– Largest branded veterinary business
in the UK, with practices located in
two-thirds of stores
– Practice maturity represents a
signicant future growth opportunity,
with further upside from practice
rollout, extension and productivity
Extensiveand
growing data
capability
– Unique VIP loyalty club, providing over
10 years’ worth of proprietary pet and
customer data
– By leveraging our data insights, we
can offer more personalised, targeted
solutions, driving customer loyalty,
retention and lifetime value
Subscriptionscreate
apredictable, visible
incomestream
– Over 1.6 million pet care plan
subscriptions across the Group,
up 8% year-on-year
– Our existing three core plans generate
over £150m of visible, repeatable
consumer revenue per year, supporting
further share of wallet gain
Strong nancial
positionand
returns potential
– Robust balance sheet with good
liquidity, low leverage and signicant
headroom on banking covenants
– Highly cash generative with free
cash ow of £98.2m and dividend
pershareincreased to 12.8p
Strong commitment
toresponsible
business
– Strong commitment to sustainability
with a strategy designed to balance
theinterests of all stakeholders
– Balanced Board of Directors with
a broad range of skills, experience,
andexpertise
24%
market share
457
pet care centres
40%
online orders collected in store
444
veterinary practices
1.6m
pet care plans
7.7m
VIP loyalty club members
8.5%
increase in dividend
£8.2m
raised for charities
Pets at Home Group Plc Annual Report & Accounts 2023
06
Chair’s statement
A strategy to drive us forward
In a challenging economic
environment, we delivered
a record year of sales and
underlying prot demonstrating
the strength of the pet care
market and the advantages of our
unique omnichannel model. Over
the past year we have continued
to welcome many new pet owners
into the business, made great
progress on our key strategic
initiatives, and refreshed and
rened our sustainability strategy.
Strategy
Our purpose is to create a better world
forpets and the people who love them.
During her rst year with the business, our
CEO Lyssa McGowan, along with the wider
Board and executive management team,
has updated our strategy.
This strategy is to build an integrated,
omnichannel, consumer centric platform
which unies our unique blend of products,
services, and advice, connecting them
seamlessly across all channels to deliver
anunrivalled experience to our consumers.
The recent launch of our new Pets brand
brings together all our products and
services under one master brand and
represents our new consumer positioning as
a provider of all pet owners’ pet careneeds.
We have continued to invest in digitising
our business, making it easy for us to
interact with consumers however they
choose. We have also improved our
operational capability with the opening
of our new distribution centre in Stafford,
which underpins our capacity needs for the
next decade and materially reduces the
cost of product deliveries to our pet care
centre network.
Our strong purpose-led culture, and our
core values play a critical role in supporting
this strategy.
Acting ethically has always been at the
heart of our business and by focusing
on nancial sustainability, as well as the
sustainability of human and natural capital,
our strategy will ensure we continue to
run a responsible business as well as a
successful one.
I am condent this updated strategy will
deliver sustainable long term value to all
ourstakeholders.
Colleagues
The fundamental strength of Pets at
Home is our culture. The skill, passion and
expertise of our colleagues remains a key
strategic advantage as they guide pet
owners through their pet care journey.
Every single colleague across the business
has contributed to the success of the last
year. Personally, and on behalf of the Board,
I would like to thank them for their ongoing
hard work and dedication.
Governance
During the year, we were delighted to
welcome Roger Burnley to the Board as an
independent Non-Executive Director. Roger
has deep knowledge of the retail sector
and food supply chains and his experience
will be of great value to the business as it
embarks on the next stage of its ambitious
growth plan.
Sharon Flood, Chair of the Remuneration
Committee, and Stanislas Laurent,
Non-Executive Director, will each step
down from the Company's Board having
each served six years as independent
Non-ExecutiveDirectors.
The Directors, on behalf of the Company,
wish to thank them both for their
dedicatedservice.
Dennis Millard, who has served as the
Company's Senior Independent Director for
nine years, stood down from that position
in February 2023, however, will remain a
Director of the Company for a further year,
continuing to contribute his highly valuable
experience and retail industry knowledge.
Zarin Patel was appointed as Senior
Independent Director, having acted as a
Non-Executive Director of the Company
since 2021.
Dividend
The robust performance delivered over the
past year demonstrates both the resilience
of the pet care market and the strength of
our unique model. The business continues
to be highly cash generative, and despite
strong levels of investment, we nish the
year in a net cash position.
As such, the Board is pleased to recommend
a nal dividend of 8.3 pence per share to be
paid on 11 July 2023 to shareholders on the
register at the close of trading on 16 June
2023. This will take the full year dividend
to 12.8 pence per share, up 8.5% on the
previous year.
Looking ahead
The pet care sector is undergoing
structural growth, and our fully integrated
omnichannel model positions Pets at Home
well to benet from these favourable sector
and consumer trends. Our balance sheet
strength enables us to continue investing
in our existing strengths and the new
capabilities needed to build the world’s best
pet care platform. We look to the future with
ambition and condence, with our newly
dened strategy enabling us to deliver
ever higher standards of performance
for our consumers, our colleagues, our
communities, the environment, and of
course for our shareholders.
Ian Burke
Chair
25 May 2023
07
Strategic Report Governance Financial Statements
Our purpose
Our vision
Our role
Our values
To create a beer world for pets
and the people who love them
To build the world’s best pet care platform
We provide the best products, services
and advice to guide pet owners through
their pet care journey
One integrated business Consumer centric
Health Behaviour Companionship Nutrition Environment
Omnichannel Sustainable
We put
pets rst
We lead
the way
We’re experts
in our eld
We help owners
be their best
We’re proud
of what we do
together
Pets at Home Group Plc Annual Report & Accounts 2023
08
Chief Executive’s statement
Building the world’s
best petcare platform
Building the world’s best pet
careplatform
Integrated – a unied blend of
products, services and advice.
– Our pet care platform will truly integrate
all our products and services. Once
built, our platform will be leveraged
across all our verticals; all accessed
via a unied pet care app enabling
consumers to full all their pet
care needs, from booking surgical
appointments and ordering repeat
prescription deliveries to managing
nutrition subscriptions and buying a
special birthday treat. In the future, we
will leverage our platform to unlock new
adjacencies.
– The recent launch of our new Pets
brand brings together our products
and services under one master brand
and represents our new consumer
positioning as a provider of all your
pet care needs – however, whenever
and wherever you want. This unied
positioning will signicantly enhance
marketing efficiency and effectiveness
across our services.
– We are the only business which has
successfully brought together clinical
and retail services at scale, operating
the UK’s most productive veterinary
business with consumer revenues of
c£500m across 444 practices, enabled
by our unique joint venture partnership
model.
– We will continue to leverage our
category authority and expertise to
lead on innovation, making it easier for
pet owners to access the best products
and services for their pets. Our new
long-term agreement with Cranswick
will support further innovation and
growth across own brand – a key area of
competitive advantage. We will increase
presence in fast growing areas, e.g.
fresh and frozen.
Omnichannel – seamlessly connected
for the consumer.
– Our network of 457 pet care centres
gives us scale and reach advantages,
bringing us closer to pet owners
and able to offer more exibility and
convenience than competitors, all
under one roof. We will continue to
invest behind the opportunity for
new pet care centres in attractive
catchments, particularly urban, with
clinical services, tailored ranges and
innovation across food and accessories.
– As our joint venture vet practices reach
maturity it unlocks growth opportunities
in advanced practices and 24hr
hospitals, signicantly extending the
physical footprint and range of clinical
services offered by our network of
veterinary practices, so supporting
growth and protability.
– We are bringing together our physical
and digital capabilities, creating
hybrid experiences such as virtual
consultations. Our investments
in technology will make it easier
for us to interact with consumers
however they chose, whilst matching
the right colleague expertise to
the right consumer need, driving
better productivity alongside better
outcomesfor pets and pet owners.
– Our new DC is onstream, underpinning
capacity needs beyond the next
decade and will materially reduce our
cost to serve. Deliveries to our store
network are underway and we will
look to move to one DC from three by
Spring 2024, improving fullment costs,
consumer experience and efficiency.
Consumer centric – an unrivalled
experience.
– Our deep and unique insights into
pet owners’ needs increasingly drives
our actions. Our data capability is
increasingly integrated through our
operation driving targeted, effective
offers, improving operational efficiency,
and growing predictable, sticky revenue
streams through our CRM.
Our medium-term vision – One
unied pet care platform to unlock
ourpotential.
Our medium-term vision and strategy is
tobuild the world’s best pet care platform.
This will generate sustainable value for all
stakeholders, as we create a better world
for pets and the people that love them. We
are the largest, and by far the most trusted,
pet care business in the UK. We already
have a leading 24% share of the £7.2bn UK
pet care market, an industry supported by
structural growth, underpinning resilience
and predictability in our revenues. We are
the only player that combines products,
services and expertise across the full pet
care market, with scale and credibility
in every area. Our strategy will unlock
a unique opportunity we have to bring
together everything that pet owners need
in oneplace.
09
Strategic Report Governance Financial Statements
– Growing share of wallet is our greatest
opportunity, unlocked by creating easy,
seamless, and enjoyable experiences.
Creating unique, compelling, and
brilliantly simple journeys and
experiences to drive revenue, share of
wallet and lifetime value. Our average
consumer spends £160 a year with
us, but our most engaged spend over
£900, highlighting our signicant
growth headroom.
– We already have 1.6m subscriptions
with signicant headroom to grow. Our
digital and data platform, integrated
with face-to-face expertise, will allow us
to offer an enhanced range of brilliantly
simple, highly compelling, and great
value subscriptions to lead the market
and drive lifetime value.
Our values underpin everything
– maintaining commitment to a
sustainable future.
We will be unwavering in delivering the best
outcomes for all our stakeholders.
Pets - to improve the life of every pet in
the UK by being the leading advocate
for pet welfare.
– We will continue to adopt the highest
welfare standards for pets under our
care, use our voice externally to extend
this to all pets, and support pets in need
though our Foundation.
– We help pet owners take the best care
of their pet through our nutritional
advice, high-quality fullling products,
and highest quality clinical care.
People - to be the best employer
and developer of talent by creating
rewarding, sustainable careers in pet
care open to everyone.
– Investing in clinical and non-clinical
expertise, with clear focus on wellbeing,
diversity, and inclusion.
– Earn As You Learn is a core part of our
strategy as we provide colleagues the
ability to earn above Real Living Wage
while enhancing service and expertise
for pet owners.
Planet - to make pet care
environmentally sustainable by
leadingin sustainable pet food.
– We will continue to reduce the carbon
intensity of our own operation, having
successfully grown our business while
reducing our operational carbon
emissions by 41% since 2016.
– By leading in sustainable pet food,
evidenced by our investment in the
Good Dog Food company, we can help
to move the industry to a future with
lower carbon emissions, and improve
biodiversity.
Our nancial framework – delivering
sustainable value for shareholders.
Ambition to grow sales 7% per annum
over the medium term supported by:
– We expect the £7.2bn UK pet care
market to grow c4% per annum as
the pet care market is supported by
three structural growth trends of:
humanisation; premiumisation; and
penetration.
– Our unique pet care platform helps
drive outperformance of c300bps
versus the market supported by
thefollowing.
– Our clear competitive scale and
reach advantages, our unique
data capabilities, and our category
authorityand innovation.
– Reducing friction will grow share
of wallet by driving frequency
andenabling cross-sell/upsell.
– Investment behind our physical assets
with a medium-term opportunity for
40 new stores, ongoing store refresh
programme, and leveraging our data
totailor ranges locally.
– Our Vet Group will grow through
maturity, extensions (20+ in FY24),
advanced capabilities, and new sites
(5-15 pa), growing consumer revenues
at 9% CAGR over the medium-term.
Target 10% PBT growth CAGR
overthemedium term through:
– Operating leverage as we deliver growth
through the investments we have made
in our platform and capabilities, while
the costs of these investments tapers
going forward.
– Ongoing initiatives to target efficiencies
and drive further productivity gains
across the business.
– Improving mix as our vet revenues grow
faster than the group average driving
up margins and improving FCF (already
around 50% of Group FCF).
Move FCF conversion towards
70%ofPBT in the medium term:
– Delivering growth in prots using
investments we have already made
in the business such as our new
distribution centre and the build phase
of digital investment.
– Moving beyond the peak of our
investment plan. Much of the capital to
deliver our growth ambitions has been
invested and capex will taper towards a
normalised level around £50m.
– Many of the future investments are low
risk and proven e.g. vet extensions, new
stores, space swaps.
Maintain capital discipline and a clear
capital allocation policy to create long
term shareholder value.
Our capital allocation priorities are
unchanged:
1. Invest in the business. c£400m
investment (capex and opex) over
themedium term.
2. Pay a progressive ordinary dividend
targeting 50% EPS payout.
3. Explore inorganic growth opportunities.
Focus on strategic investments and
bolt-on M&A.
4. Return excess cash to shareholders
subject to maintaining a prudent
balance sheet and not constraining
the business.
Lyssa McGowan
Chief Executive Officer
25 May 2023
Pets at Home Group Plc Annual Report & Accounts 2023
10
2023 2023 2023£1,782.4m £136.4m £98.2m
£1,673.8m £130.1m £95.0m
£1,437.1m £77.4m £67.4m
2022 2022 2022
2021 2021 2021
£136.4m
+4.8%
£1,782.4m
+6.5%
£98.2m
+3.5%
Key performance indicators
Progress across all pillars
ofour pet care strategy
To support delivery of our
strategy, we have a clearly dened
set of key performanceindicators.
We are committed to generating
shareholder value and nancial returns,
and therefore focus on three nancial
metrics we believe are the best measure
of our performance. Alongside nancial
KPIs, we also have KPIs specic to each
of our strategic pillars to ensure we can
trackdelivery against our key objectives.
Financial KPIs shown represent those used
by the business to monitor performance.
Management recognise that as Alternative
Performance Measures
1
they differ to
statutory metrics, but believe they
represent the most appropriate KPIs.
Whilst we set out some of our future
strategic priorities, we will continue to
remain agile and adaptable in how we
deliver pet care toconsumers.
In order to consolidate the reporting
requirements under sections 414CA and
414CB of the Companies Act 2006 in
respect of non-nancial reporting, the list
on page 93 shows where in the Annual
Report to nd each of the disclosure
requirements.
Financial performance
Consumer revenue
1
(£m)
Underlying prot
before tax
1
(£m)
Free cash ow
1
(£m)
Representing strong like-for-
like
1
growth in both our Retail
and Vet businesses.
Reecting strong trading
performance in a challenging
cost environment.
Enabling us to invest in our
business, reduce debt and
increase our dividend.
What we are measuring
The growth in consumer
revenue generated across
the Group year on year. This
includes spend across all
brands and includes the sales
made by Joint Venture vet
practices, rather than the
fee income received by
Pets atHome.
Why is it important?
By growing consumer revenue
across all parts of our business
ahead of the market, we are
able to gain market share. In
particular, this means focusing
on the sales made by general
vet practices, whether they
be under the Joint Venture
or company managed model.
Future plans
We expect our strategic
initiatives to deliver like-for-
like
1
growth ahead of the
market across both the Retail
and Veterinary segments.
What we are measuring
The underlying protability of
the Group as a result of our
strategic progress. We have
shown underlying prot before
tax on a constant accounting
basis including the clarication
of IAS38, rst adopted in FY22.
Why is it important?
By generating strong levels
of underlying prot, we are
able to demonstrate that our
pet care strategy remains
the right one, and that we
are delivering against our
strategicobjectives.
Future plans
We expect the business to
sustain underlying prot
growth going forward.
What we are measuring
The cash available for return
to shareholders after investing
in the needs of the business.
Why is it important?
Delivering free cash ow
allows us to make strategic
investments in the business
to fuel further growth,
whilst providing an appropriate
return to shareholders.
Future plans
Releasing free cash ow from
our vet business remains a
signicant value creation
opportunity. This, alongside
further prot growth in Retail,
will allow Group underlying free
cash ow to grow sustainably
in the medium term.
1 Alternative Performance Measures
(APMs) are dened and reconciled to IFRS
information, where possible, on page 169.
2 Restated.
11
Strategic Report Governance Financial Statements
2023 20232023 20237.7m 32.5% £1,195.6m £216.6k
7.3m 32.1% £1,090.0m £206.0k
6.2m 32.8% £875.5m £183.1k
2022 20222022 2022
2021 20212021 2021
32.5%
+34bps
£216.6k
+5.1%
7.7m
+5.4%
£1,195.6m
+9.7%
Strategic performance
Number of active VIPs
(m)
Consumer revenue
1
from services (%)
VIP consumer revenue
1
(£m)
Consumer revenue
1
per
FTE colleague (£k)
Driven by the success of our
Puppy and Kitten clubs, and
supported by a growing pet
population.
Reecting the strong growth
in our veterinary business.
Driven by growth in active
members, and an increase in
members shopping across
more than one channel.
Achieved through strong
revenue growth as well as
efficiency initiatives in-store.
What we are measuring
Growth in the net number of
active members of our VIP
loyalty club. An active member
is dened as a consumer
who has transacted with the
Group in the last 52 weeks.
Why is it important?
By providing complete pet care
through a trusted brand, we
will attract more pet owners
to engage with the Group,
increasing our market share.
Future plans
We will continue to leverage
our omnichannel pet care
model to make it convenient,
affordable and rewarding for
consumers to engage with our
suite of products and services.
What we are measuring
The proportion of total
consumer revenue contributed
by our various pet care
services. This is dened as
consumer revenue made
by both Joint Venture and
company managed vet
practices, grooming salons,
subscriptions, pet sales, pet
insurance commissions and
revenue generated through
our telehealth business.
Why is it important?
The ability to offer consumers
pet care services in addition
to pet products is a key
competitive differentiator
for the Group.
Future plans
Generating sales from
services is an essential part
of being a pet care business
and not solely a retailer. We
will continue to focus on
supporting our vet practices
to grow, whilst also increasing
the number of consumers
signed up to our subscription
platforms.
What we are measuring
The increase in spend from
VIP loyalty club members
across the Group year on year.
This includes all spend across
both the Retail and Vet Group
businesses.
Why is it important?
Our VIP loyalty club of 7.7m
active pet owners is a unique
asset providing data and
insight to help us increase
share-of-wallet, attract and
retain new consumers, and
encourage further spend
across our suite of products
and services.
Future plans
Continuing to leverage our
data capabilities is a key
underpin of our future growth
plans. We are harnessing our
deep actionable insights to
better serve the needs of
pet owners and deliver more
personalised content and offers
relevant to each individualpet.
What we are measuring
Consumer revenue generated
per full-time-equivalent
colleague employed directly
by the Group.
Why is it important?
By creating efficiencies we allow
colleagues across the Group
to focus on sales generating
activities and delivering
exceptional service to our
customers, Partners and clients.
Future plans
Our focus is on operating
efficiently across all parts of
the Group, ensuring we can
remain agile in how we deliver
our strategic priorities whilst
maintaining an appropriate
cost base.
Pets at Home Group Plc Annual Report & Accounts 2023
12
By sector value 2022
1
Accessories
2
£1.0bn
Food
2
£3.4bn
Veterinary
3
£2.5bn
1 Source: Pets at Home data and UK market reports.
2 Includes online spend from pet products.
3 Veterinary includes general practices.
Market overview
A growing pet care market
The pet market remains
resilient and in growth and
wecontinue to take share.
For more information:
https://investors.petsathome.com
UK pet care market
£7.2bn
13
Strategic Report Governance Financial Statements
Market growth during 2022
1
Accessories
2
+4%
Food
2
+9%
Veterinary +8%
1 Source: Pets at Home data and UK market reports.
2 Includes online spend from pet products.
3 Veterinary includes general practices.
48%
22%
19%
Our market share in 2022
1
(%)
Market driver:
A growing UK
petpopulation
The UK is a nation of pet lovers, with the
pet population now estimated at over 30m,
having grown signicantly over the last few
years as more people than ever before have
sought the companionship and support a
pet can offer.
Our approach:
We cater for a variety of pet types at
accessible locations nationwide and online
and offer a wide range of pet products
and pet care services. In particular, we are
increasingly focused on welcoming new
pet owners, introducing them to all parts of
our pet care offering, and nurturing lifelong
relationships with them.
Market driver:
Continued channel
shift to online
Online penetration of the pet products
market continues its upwards trend, and
was c23% in 2022. Price competitiveness
and convenience remain important to the
online shopping experience, driven by
ease of price comparison and the different
delivery options typically offered.
Our approach:
Recent investment in our digital capabilities
and fullment automation, together with
competitive pricing, have enabled us
to take share of the online market, now
estimated at 20%. However our approach
extends beyond just traditional online
shopping, with a multi-faceted omnichannel
proposition encompassing collect in-store,
order in-store and subscription platforms,
all of which offer increased convenience
forcustomers.
Market driver:
Humanisation
of pets
Pets are increasingly being treated as a
member of the family with a continued
trend of selecting higher quality diets, an
increased focus on gifting and wellness,
anda greater desire to use the very best
health care treatments and supplements.
Our approach:
Through our in-store colleagues and online
content, we are able to explain the health
benets of feeding your pet a better quality
diet, whilst competitive pricing makes
higher quality Advanced Nutrition pet
food increasingly accessible. With many
colleagues pet owners themselves, they
understand the emotional bond between
pets and their owners.
Market driver:
Advances in
veterinary care
The veterinary care market continues to
advance through scientic research, and
the range of healthcare options available
to pet owners is increasing. Together with
agrowing awareness and affordability of
petinsurance, more pet owners are able
to do what is best for their pet throughout
their lifetime.
Our approach:
We aim to partner with the very best
veterinarians and vet nurses across our
network of Joint Venture and company
managed practices to deliver the best
possible care to clients. By locating vet
practices across the UK, both inside Pets
atHome stores and in standalone locations,
and offering 24/7 access to trusted
advicethrough our telehealth business,
wemake access to this high quality care
easy and convenient for pet owners.
Market share
24%
Our share of the
UK pet care market
Market growth
8%
Estimated total YoY
growth in UK pet
care market
Pets at Home Group Plc Annual Report & Accounts 2023
14
Stakeholder engagement ands172 statement
Colleues
11 CEO videos with >8,900 views
Suppliers
360 active suppliers
Charity and Community
£8.2m raised through Pets at Home
Foundation and VIP Lifelines
Customers
7.7m active VIP members
Investors and
Shareholders
222 institutions met
Industry
BRC – We are represented in all
pathways of the BRC net-zero roadmap
BVA – All vets are members of the
British Veterinary Association (BVA)
Key priorities
How we engage with colleagues forms a
critical part of us remaining a great place to
work. It will also be a vital part of us working
towards ensuring everyone has a rewarding,
fulfilling and sustainable career with us.
Understanding how macro trends impact
our colleagues helps ensure our proposition
meets their needs today and in the future.
Key priorities
As we continue to shift perception of
our business to being a complete pet
care provider it is essential that we work
closely with our supply base and develop
and strengthen strategic relationships.
Our suppliers will form a critical part of us
achieving our SBTi near-term and net-zero
targets and a priority this year has been in
continuing to engage with and support them
on their sustainabilityjourneys.
Key priorities
Working closely with the pet rescue sector
and our charity partners has never been
more important. We can only meet their
needs by truly listening and engaging with
them. The pet ownership boom, COVID-19
and economic headwinds have placed
unprecedented pressures on the sector.
Our priority remains steadfast in how we
keep as many pets in loving homes as
possible.
Key priorities
Customers are demanding a highly
personalised shopping experience, and one
that is seamless across channels. If we are
not able to deliver this experience, then
we risk losing both existing and potential
new customers to competitors. Customers
continue to seek flexible and convenient
ways to shop and look after their pets.
Key priorities
As we continue to shift perception of Pets
at Home from a retailer with services to a
complete pet care provider, it remains vitally
important to engage with shareholders and
potential investors alike to explain our unique
business model and articulate the future
strategy. There has been engagement around
specific topics over the course of the year
including our sustainability strategy, capital
allocation and management succession.
Key priorities
The industry bodies influence the regulatory
environment in which our business operates
and lobby on our and our industry's behalf in
critical areas. Maintaining close relationships
means we keep the critical two-way dialogue
going to inform and support positions, be
aware of where policies may impact our
strategies or people and to lobby in areas of
importance, such as sustainability, medicines
or government consultations.
How Pets at Home engages
The Remuneration Committee Chair, Sharon
Flood remains the colleague representative
and she attended colleague listening sessions
in FY23. The Chair spent four days listening
and engaging with colleagues across the
business. A revised senior leadership team
(~130 colleagues) meeting structure was
launched bringing together key decision
makers across the business on a more regular
basis. Our CEO launched her ‘video diaries’
which are shared with all colleagues. 11 have
been released with >8,900 views. We ran a
business wide listening campaign for our
sustainability strategy with all teams invited
to participate. Over 500 teams participated
1000s of ideas submitted as part of our
strategy update. A Joint Venture Council
representing our Joint Venture Partners meets
regularly to discuss strategic, operational, and
clinical matters. It is attended by members of
the Vet Executive Management Team.
How Pets at Home engages
Pets at Home has a relatively stable supplier
base. Strong relationships have been built
over several years and the buying, technical
and innovation teams work closely together
to create unique products for pets and
their owners. Over 95% of food product
purchases and over 50% of accessory
product purchases are from UK and EU-
based suppliers. The sourcing office in Hong
Kong manages the day-to-day relationships
with our supplier partners in this region. We
continued with top-to-top business review
meetings with our priority strategic suppliers
and hosted a supplier conference in
September 2022. Across the year we ensure
there is ample opportunity to ask questions,
raise concerns and discuss opportunity areas.
How Pets at Home engages
The Pets at Home Foundation engages
with the animal rescue sector in the
UK on a regular basis. The team, which
includes a veterinary nurse, have long-
term relationships with the sector and are
familiar with the issues that they face and
the help that they need, which supports the
community strategy. The Foundation sends
out a regular survey to understand what
trends they are seeing in pet relinquishment
and critical areas of concern for the charities.
During FY23 surveys were completed by our
rescue community with over 300 responses.
The Foundation also joined some of the
regular meetings held by the CEOs of the
large national pet rescue and animal welfare
charities. This ongoing engagement with the
charity sector helps us to focus our efforts
where the impact on pet welfare will be
greatest.
How Pets at Home engages
We regularly communicate with our VIP
community through a variety of mediums
such as email, direct mail and the VIP App.
Communications are designed not only
to provide discounts and benefits, but
also to share helpful pet care content and
encourage feedback. We also continue to
conduct regular pulse surveys, with both
existing customers and non-shoppers, to
assess customers’ evolving behaviours and
preferences.
How Pets at Home engages
The CEO, CFO and Investor Relations
team are involved in ongoing interaction
throughout the year via conference calls,
meetings and small round table events.
Atthe AGM all resolutions were passed.
Wehave also reinstated site visits to our pet
care centres and vet practices as part of our
ongoing engagement, as well as attendance
at investor conferences both in the UK and
overseas. A strategy update was hosted
alongside our full year results, featuring
a range of presentations from senior
management. A number of ESG focused
sessions have been held with the Chief
LegalOfficer and ESG Director.
How Pets at Home engages
Through our active membership of the British
Retail Consortium (BRC), we continue to
contribute to various initiatives and working
groups. These include the BRC Climate
Actions Net Zero 2040 Road Map, Diversity
and Inclusion Charter and policy work and
action on the cost-of-living crisis.
The Vet Group maintains close working
relationships with key industry bodies
including the RCVS, the BVA and the Major
Employers Group and relevant pet welfare
bodies. All JVPs and vets are members of the
RCVS and the BVA. We have Practice and
Support Office colleagues who operate at a
senior level in many of the main veterinary
organisations including the BVA, the Society
of Practising Veterinary Surgeons' (SPVS)
Educational Trust and VetSustain.
Key Messages
In a year of transition of senior leadership
it was never more important to listen and
engage with colleagues. The economic
headwinds amplified this and it was essential
colleagues knew we were there for them.
Our engagement survey told us we still have
high levels of colleague engagement and
colleagues felt their wellbeing mattered.
Our diversity and inclusion strategy is
entering its third year and we will now build
on the foundations we have been laying.
Inclusive recruitment will be our primary
focus as we look to build a workforce
that represents the communities where it
operates and where everyone feels welcome.
The sustainability listening campaign
demonstrated our colleagues truly care
about their environmental impact and are
actively making changes in how they operate
daily. Our wellbeing strategy continues to roll
out our mental health first aider programme
with over 80% of vet practices now having
a trained colleague on-site and over 700
colleagues trained across the business.
Key Messages
The cost-of-living crisis and the impact this
has had on the cost of raw materials and
products has dominated engagement with
suppliers to ensure supply of affordable pet
care for our customers and their pets. This was
balanced with discussions on our emerging
strategy refresh with particular focus on our
food strategy within our vision to build the
world’s best pet care platform. Our suppliers
have told us that understanding the long-term
strategy enables them to invest appropriately
in their businesses. The supplier conference
enabled engagement on our product strategy,
particularly own brand, ongoing investment
in our business infrastructure including our
new distribution centre and digital ambitions.
We also dedicated time to our sustainability
strategy. Our category approach enables
supplier engagement in the approach and
opportunities at a category level across
the short and long term. During the year
the Responsible Products Committee
has continued to be focused on the
development of the responsible sourcing
strategy, including our scope 3 packaging
and raw material approaches. We have just
started to visit our suppliers in China now
that COVID-19 restrictions have lifted and
this will be a priority during the year.
Key Messages
The cost-of-living crisis and increase in pet
relinquishment were critical areas for the
Foundation over the last 12 months.
Our engagement with the charity sector
enables us to structure our programmes to
optimise impact. This includes larger grants
for specific change programmes and regular
support through vouchers from VIP lifelines
and support at a local level through our
charity of the year programme. In FY23 we
awarded £1.47m to pet rescue charities in
grants, and awarded £752k grants to pet
and people charities, VIP Lifelines supported
many national and local charities supporting
their local communities. 342 Pets at Home
stores partner with a local charity to enable
them to raise awareness and funds by
fundraising in our stores over specific in
store events.
Over £600k was raised for Hearing Dogs
during the first summer fundraiser and after
the sudden and tragic earthquake in Turkey
and Syria we committed £100k with £50k to
the Red Cross humanitarian fund and £50k
committed to supporting animal rescues
getting help to where it was needed most.
Key Messages
With trends such as online shopping and
subscriptions becoming increasingly
prevalent, we are ensuring that we invest in
these areas of the business. Insights gained
throughout the year form an integral part
of our annual five-year strategic planning
process, to ensure that we are building a
business which remains relevant to today’s
pet owners. During this year we continued
roll out of our Deliver From Store service,
enabling quick and convenient delivery.
Our new distribution centre came online
which will offer greater efficiency across
our supply chain and better availability for
customers. We also made great progress in
the digitisation of the business with this year
seeing the launch of an enhanced mobile
app bringing together VIP and shopping in
one easy to use experience.
Key Messages
We have positive, ongoing and transparent
dialogue with our shareholder base and
we value feedback and insight which is
considered by the Executive Management
Team. The investor website is kept updated
with all of the latest announcements and
provides information about the Group and
its activities.
Key Messages
Participation in the BRC net-zero and
Diversity and Inclusion charters and groups
mean we are playing our role in solving
global challenges which include and go
beyond our own value chain.
Engagement with industry bodies enables
the Vet Group Clinical Services, Pets at
Home Pet team and the People team to
provide informed support and advice to
partners and store colleagues and actively
participate in industry-wide discussion
and co-creation of solutions to systemic
workforce challenges.
The creation and launch of a £500k pet,
clinical and sustainability research fund
will enable us to invest in robust academic
research in critical areas.
15
Strategic Report Governance Financial Statements
Colleues
11 CEO videos with >8,900 views
Suppliers
360 active suppliers
Charity and Community
£8.2m raised through Pets at Home
Foundation and VIP Lifelines
Customers
7.7m active VIP members
Investors and
Shareholders
222 institutions met
Industry
BRC – We are represented in all
pathways of the BRC net-zero roadmap
BVA – All vets are members of the
British Veterinary Association (BVA)
Key priorities
How we engage with colleagues forms a
critical part of us remaining a great place to
work. It will also be a vital part of us working
towards ensuring everyone has a rewarding,
fulfilling and sustainable career with us.
Understanding how macro trends impact
our colleagues helps ensure our proposition
meets their needs today and in the future.
Key priorities
As we continue to shift perception of
our business to being a complete pet
care provider it is essential that we work
closely with our supply base and develop
and strengthen strategic relationships.
Our suppliers will form a critical part of us
achieving our SBTi near-term and net-zero
targets and a priority this year has been in
continuing to engage with and support them
on their sustainabilityjourneys.
Key priorities
Working closely with the pet rescue sector
and our charity partners has never been
more important. We can only meet their
needs by truly listening and engaging with
them. The pet ownership boom, COVID-19
and economic headwinds have placed
unprecedented pressures on the sector.
Our priority remains steadfast in how we
keep as many pets in loving homes as
possible.
Key priorities
Customers are demanding a highly
personalised shopping experience, and one
that is seamless across channels. If we are
not able to deliver this experience, then
we risk losing both existing and potential
new customers to competitors. Customers
continue to seek flexible and convenient
ways to shop and look after their pets.
Key priorities
As we continue to shift perception of Pets
at Home from a retailer with services to a
complete pet care provider, it remains vitally
important to engage with shareholders and
potential investors alike to explain our unique
business model and articulate the future
strategy. There has been engagement around
specific topics over the course of the year
including our sustainability strategy, capital
allocation and management succession.
Key priorities
The industry bodies influence the regulatory
environment in which our business operates
and lobby on our and our industry's behalf in
critical areas. Maintaining close relationships
means we keep the critical two-way dialogue
going to inform and support positions, be
aware of where policies may impact our
strategies or people and to lobby in areas of
importance, such as sustainability, medicines
or government consultations.
How Pets at Home engages
The Remuneration Committee Chair, Sharon
Flood remains the colleague representative
and she attended colleague listening sessions
in FY23. The Chair spent four days listening
and engaging with colleagues across the
business. A revised senior leadership team
(~130 colleagues) meeting structure was
launched bringing together key decision
makers across the business on a more regular
basis. Our CEO launched her ‘video diaries’
which are shared with all colleagues. 11 have
been released with >8,900 views. We ran a
business wide listening campaign for our
sustainability strategy with all teams invited
to participate. Over 500 teams participated
1000s of ideas submitted as part of our
strategy update. A Joint Venture Council
representing our Joint Venture Partners meets
regularly to discuss strategic, operational, and
clinical matters. It is attended by members of
the Vet Executive Management Team.
How Pets at Home engages
Pets at Home has a relatively stable supplier
base. Strong relationships have been built
over several years and the buying, technical
and innovation teams work closely together
to create unique products for pets and
their owners. Over 95% of food product
purchases and over 50% of accessory
product purchases are from UK and EU-
based suppliers. The sourcing office in Hong
Kong manages the day-to-day relationships
with our supplier partners in this region. We
continued with top-to-top business review
meetings with our priority strategic suppliers
and hosted a supplier conference in
September 2022. Across the year we ensure
there is ample opportunity to ask questions,
raise concerns and discuss opportunity areas.
How Pets at Home engages
The Pets at Home Foundation engages
with the animal rescue sector in the
UK on a regular basis. The team, which
includes a veterinary nurse, have long-
term relationships with the sector and are
familiar with the issues that they face and
the help that they need, which supports the
community strategy. The Foundation sends
out a regular survey to understand what
trends they are seeing in pet relinquishment
and critical areas of concern for the charities.
During FY23 surveys were completed by our
rescue community with over 300 responses.
The Foundation also joined some of the
regular meetings held by the CEOs of the
large national pet rescue and animal welfare
charities. This ongoing engagement with the
charity sector helps us to focus our efforts
where the impact on pet welfare will be
greatest.
How Pets at Home engages
We regularly communicate with our VIP
community through a variety of mediums
such as email, direct mail and the VIP App.
Communications are designed not only
to provide discounts and benefits, but
also to share helpful pet care content and
encourage feedback. We also continue to
conduct regular pulse surveys, with both
existing customers and non-shoppers, to
assess customers’ evolving behaviours and
preferences.
How Pets at Home engages
The CEO, CFO and Investor Relations
team are involved in ongoing interaction
throughout the year via conference calls,
meetings and small round table events.
Atthe AGM all resolutions were passed.
Wehave also reinstated site visits to our pet
care centres and vet practices as part of our
ongoing engagement, as well as attendance
at investor conferences both in the UK and
overseas. A strategy update was hosted
alongside our full year results, featuring
a range of presentations from senior
management. A number of ESG focused
sessions have been held with the Chief
LegalOfficer and ESG Director.
How Pets at Home engages
Through our active membership of the British
Retail Consortium (BRC), we continue to
contribute to various initiatives and working
groups. These include the BRC Climate
Actions Net Zero 2040 Road Map, Diversity
and Inclusion Charter and policy work and
action on the cost-of-living crisis.
The Vet Group maintains close working
relationships with key industry bodies
including the RCVS, the BVA and the Major
Employers Group and relevant pet welfare
bodies. All JVPs and vets are members of the
RCVS and the BVA. We have Practice and
Support Office colleagues who operate at a
senior level in many of the main veterinary
organisations including the BVA, the Society
of Practising Veterinary Surgeons' (SPVS)
Educational Trust and VetSustain.
Key Messages
In a year of transition of senior leadership
it was never more important to listen and
engage with colleagues. The economic
headwinds amplified this and it was essential
colleagues knew we were there for them.
Our engagement survey told us we still have
high levels of colleague engagement and
colleagues felt their wellbeing mattered.
Our diversity and inclusion strategy is
entering its third year and we will now build
on the foundations we have been laying.
Inclusive recruitment will be our primary
focus as we look to build a workforce
that represents the communities where it
operates and where everyone feels welcome.
The sustainability listening campaign
demonstrated our colleagues truly care
about their environmental impact and are
actively making changes in how they operate
daily. Our wellbeing strategy continues to roll
out our mental health first aider programme
with over 80% of vet practices now having
a trained colleague on-site and over 700
colleagues trained across the business.
Key Messages
The cost-of-living crisis and the impact this
has had on the cost of raw materials and
products has dominated engagement with
suppliers to ensure supply of affordable pet
care for our customers and their pets. This was
balanced with discussions on our emerging
strategy refresh with particular focus on our
food strategy within our vision to build the
world’s best pet care platform. Our suppliers
have told us that understanding the long-term
strategy enables them to invest appropriately
in their businesses. The supplier conference
enabled engagement on our product strategy,
particularly own brand, ongoing investment
in our business infrastructure including our
new distribution centre and digital ambitions.
We also dedicated time to our sustainability
strategy. Our category approach enables
supplier engagement in the approach and
opportunities at a category level across
the short and long term. During the year
the Responsible Products Committee
has continued to be focused on the
development of the responsible sourcing
strategy, including our scope 3 packaging
and raw material approaches. We have just
started to visit our suppliers in China now
that COVID-19 restrictions have lifted and
this will be a priority during the year.
Key Messages
The cost-of-living crisis and increase in pet
relinquishment were critical areas for the
Foundation over the last 12 months.
Our engagement with the charity sector
enables us to structure our programmes to
optimise impact. This includes larger grants
for specific change programmes and regular
support through vouchers from VIP lifelines
and support at a local level through our
charity of the year programme. In FY23 we
awarded £1.47m to pet rescue charities in
grants, and awarded £752k grants to pet
and people charities, VIP Lifelines supported
many national and local charities supporting
their local communities. 342 Pets at Home
stores partner with a local charity to enable
them to raise awareness and funds by
fundraising in our stores over specific in
store events.
Over £600k was raised for Hearing Dogs
during the first summer fundraiser and after
the sudden and tragic earthquake in Turkey
and Syria we committed £100k with £50k to
the Red Cross humanitarian fund and £50k
committed to supporting animal rescues
getting help to where it was needed most.
Key Messages
With trends such as online shopping and
subscriptions becoming increasingly
prevalent, we are ensuring that we invest in
these areas of the business. Insights gained
throughout the year form an integral part
of our annual five-year strategic planning
process, to ensure that we are building a
business which remains relevant to today’s
pet owners. During this year we continued
roll out of our Deliver From Store service,
enabling quick and convenient delivery.
Our new distribution centre came online
which will offer greater efficiency across
our supply chain and better availability for
customers. We also made great progress in
the digitisation of the business with this year
seeing the launch of an enhanced mobile
app bringing together VIP and shopping in
one easy to use experience.
Key Messages
We have positive, ongoing and transparent
dialogue with our shareholder base and
we value feedback and insight which is
considered by the Executive Management
Team. The investor website is kept updated
with all of the latest announcements and
provides information about the Group and
its activities.
Key Messages
Participation in the BRC net-zero and
Diversity and Inclusion charters and groups
mean we are playing our role in solving
global challenges which include and go
beyond our own value chain.
Engagement with industry bodies enables
the Vet Group Clinical Services, Pets at
Home Pet team and the People team to
provide informed support and advice to
partners and store colleagues and actively
participate in industry-wide discussion
and co-creation of solutions to systemic
workforce challenges.
The creation and launch of a £500k pet,
clinical and sustainability research fund
will enable us to invest in robust academic
research in critical areas.
Pets at Home Group Plc Annual Report & Accounts 2023
16
Sustainability review
Our Beer World Pledge
Strategy Development
We began the development of our
sustainability strategy in FY20 with a
detailed materiality assessment and
extensive internal and external stakeholder
engagement. Our new strategy was named
'Our Better World Pledge' and our purpose
articulated 'to create a better world for Pets
and the People who love them' and it was
launched externally with our FY21 reporting.
Two years later we are delighted with the
progress that we have made launching new
initiatives for our colleagues and customers
and gaining a deeper understanding of
our value chain environmental impacts
and where we need to prioritise our focus.
During the year we have been engaged
in a refresh of our strategy alongside the
continued focus on implementing key
programmes and embedding involvement
across the organisation.
Highlights over the last year
We were extremely proud to be recognised
in the Retail Week 2023 awards as
Responsible Retailer of the Year. A
unanimous decision by the judges meant
Pets at Home took the Responsible Retailer
accolade, reecting the breadth of its
achievements over the past year.
– Focusing on scope 3 emissions projects, following the
approval from the science based targets initiative of our
near term 2030 and long term 2040 scope 1, 2 and 3 carbon
reduction targets
– Launch of carbon maturity programmes with our supplier
through the 'knowledge hub'
– Investment in a cultivated meat company, focusing on the
pet food market
– Long term supplier partnership agreement with Cranswick to
work together on achieving our net zero goals alongside our
commercial objectives
– Pet pouch packaging collection points now in 94% of our pet
care centres, collecting over 7 million pet pouches to date
– Woodland trust pet memory scheme in its second year, over
£500k donated to date
– Embedding of the rebranding of the company charity to
'ThePets at Home Foundation', raising over £5m during FY23
andreaching the £50m achievement since forming in 2006
– Rolling our pet food collection points to over 200 stores in
partnership with the Blue Cross
– 1,291 colleagues have been trained to pet advisor level and
we have 1,827 suitably qualied persons (SQP) working in our
pet carecentres
– Increase of 46% in our vet nurse apprentices, and our award
winning vet graduate programme has 158 graduates across
bothcohorts
– More than 90% of support office and retail colleagues and
70% of our practice colleagues have completed our diversity
and inclusion foundation training. This training is critical to
our colleagues having a baseline understanding of diversity
and inclusion principles
– Development and launch of our consolidated Responsible
Sourcing Handbook for suppliers containing our latest
policies and implementation guidance. Disclosure of our
ownbrand tier one factory sites
Planet
Pets
People
17
Strategic Report Financial StatementsGovernance
Embedding our strategy in our business
We have seen a fantastic response to our volunteering programme
called Our Better World Pledge days, which has remained an
underpin to annual bonus for relevant colleagues. Over 11,000 hours
have been donated during the year which is an increase of over 20%
vs the previous year.
The remuneration policy has been reviewed this year and, subject
to shareholder approval at the AGM on 6 July 2023, the annual
bonus will include a sustainability target representing 10% of the
maximum award. Completion of our community volunteering day,
called OurBetter World Pledge Day will also remain an underpin for
relevantcolleagues. The Directors' Remuneration Report on page 84
contains more details on our policy review.
Our revolving credit facility, agreed in March 2022, is linkedto
sustainability targets. We now have nancial incentives (orpenalties)
to accelerate our work on pets, people and planet through targets
focused on carbon reduction, supporting pets in need and
community action. In the rst year of this scheme we have achieved
all three targets. More details on our performance can be found on
page 4 of our standalone sustainability report.
Pets at Home Group Plc Annual Report & Accounts 2023
18
Sustainability review continued
Refreshing the strategy
In the autumn of 2022 we began a refresh
of the Our Better World Pledge strategy to
ensure it aligned to the emerging business
priorities and our updated materiality
assessment. We undertook a stakeholder
engagement process which included
but wasn't limited to a 'Big Listen' with
our colleagues and a series of one to one
meetings with ve of our shareholders.
Our business strategy has
sustainability clearly embedded
The overall business strategy has been
updated which included the adoption of a
singular purpose for the business including
sustainability as a key component in the
delivery of our vision to build the world’s
bestpet care platform.
Our sustainability strategy supports
key priorities in the business strategy
It was really important that our refreshed
strategy addressed important sustainability
issues and was connected and aligned
to key business priorities. For us, this is
what sustainability requires, both nancial
sustainability and environmental and social
sustainability.
Our updated framework has created
strategic priorities from the longer list
of core priorities that our materiality
assessment identied.
Planet
Our three pillars of impact (planet, pets
and people) have remained the same but
planet has moved to the front recognising
the signicant global climate and nature
based challenges that we are facing. We
have identied sustainable pet food as our
strategic priority. Within our business strategy
we have ambitions to grow our share in the
food category, particularly in the premium
part of the market which has historically
been categorised by higher meat protein
content recipes. To grow our share we will
be developing our premium and overall own
brand proposition in a sustainable way.
Pets
Within our pets pillar we will be focusing on
improving the lives of every pet in the UK.
Our clear denition of our role to provide
pet care and the denition of this will help
guide our actions from the pets in our care,
through to the products, services and
advice that we give to guide pet owners.
Wewill retain our position as the biggest
grant giver to UK pet charities, being
there when pets need our help. An area of
increased focus will be the opportunity for
us to use our credible voiceto advocate for
pets more broadly.
People
Turning to our people pillar we have
focused our strategic priority to be the best
employer and developer of pet care talent.
This covers the whole of our business with
a particular focus on vet talent where we
have a strategic business priority to disrupt
the status quo in the veterinary industry
to unlock our growth plans. To do this we
will be creating rewarding, sustainable
careers in the pet care sector for everyone
with colleagues fully representing our
diversecommunities.
We have updated our targets to align with
this strategy, these can be read in full in our
standalone sustainability report.
Our purpose
To create a beer world for pets and the people who love them
By leading in sustainable petfood:
– Environmental impacts on carbon,
land use, water and nature
– Innovative, sustainable packaging
– Nutritional needs met, affordably
By being the leading advocate
for pet welfare:
– Adopting the highest welfare and
clinical standards for pets in our care
– Providing pet owners with the
bestproducts, service and advice
– Using our voice and expertise
toadvocate forpets
– Being the largest grant giver
topet charities in the UK
By creating rewarding, sustainable
careers in pet care for everyone:
– Continuous investment in pet care
expertise
– Compelling clinical careers and
development opportunities
– Colleagues fully representing our
diverse communities
Planet Pets People
To make pet care
environmentally
sustainable
To improve the
life of every pet
in the UK
To be the best employer
and developer of pet
care talent
For more information about the
Planet pillar progress see our
sustainability report page 10
For more information about the
Pets pillar progress see our
sustainability report page 20
For more information about the
People pillar progress see our
sustainability report page 30
Sustainability strategy: Our Better World Pledge
19
Strategic Report Governance Financial Statements
Looking ahead:
As we look ahead to this year we
have some clear priorities outlined
which will enable the development
of our refreshed strategy.
Scope 3 remains our biggest priority
within planet and we will continue
to engage our suppliers on the
management of carbon in our
product supply chains. The work of
understanding and then managing the
reduction of carbon in pet food will be
focusing on carbon footprinting our
own brand food ranges, building on
theinsight of the full lifecycle analysis
(LCA) work that we have done thisyear.
Within the Vet part of our business
we have some exciting project
plans including our anaesthetic gas
stewardship programmes and the launch
of a new clinical academy which will help
us to create a sustainable pipeline of
highly engaged vet and nurse talent with
the clinical and behavioural skills and
experiences to create leading clinical
teams. Later in the year we will begin
our involvement in a ground-breaking
research project in partnership with the
Royal Vet College and Vet Compass.
This multi year project will focus on
improved stewardship in veterinary
antimicrobial usage across all of our
practices using a blended qualitative
andquantitative approach.
The Pets at Home Foundation will continue
to be there for pets when they need
us through our fundraising and grant
programme. For example, we will see
benets start to be realised from one of our
largest grants of just over £300,000 to the
Blue Cross foodbank programme. This grant
will be used to fund co-ordinators to ensure
the programme is rolled out across the UK
with the ambition that anyone who needs to
access pet food from a food bank is able to.
From a people perspective we will be
further developing our market leading
pet expertise programmes. The next
cohort of our Pet Care Expert programme
colleagues will begin their nine-month
learning programme, and phase two of our
unique nutrition training programme will
launch to all colleagues involved in pet care
across our ecosystem, including our clinical
colleagues.
We are focused on increasing the
representation of ethnic diversity amongst
our colleagues to better connect with
diverse pet owners and reect the
communities we work in. We will be further
developing our inclusive recruitment
processes, and inclusive leadership
education to enable our leaders and
managers to full new representation
goalsin an authentic and credible way.
We'll be continuously monitoring progress
through our enhanced diversity data
capture andreporting.
Our standalone sustainability report
provides shareholders with a detailed
overview of Our Better World pledge
strategy and performance including
ourupdated materiality assessment
andrefreshed targets.
The ESG Committee report which includes
our TCFD statement is on page 50
Read more in our
2023 Sustainability Report
Pets at Home Group Plc Annual Report & Accounts 2023
20
Chief Financial Officer’s review
Delivering strong growth
whilst investing for the future
A year of record revenue
and underlying protability
in a challenging economic
environment demonstrates
the strength of our unique
omnichannel platform, and
the resilience of the pet care
market.
Mike Iddon, Chief Financial Officer
FY23 Financial highlights
Revenue (£m)
£1,404.2m
+6.6%
Statutory PBT (£m)
£122.5m
(17.7)%
Underlying PBT
1,2,3,4
(£m)
£136.4m
+4.8%
Dividend per share (pence)
12.8p
+8.5%
1 Alternative Performance Measures (APMs) are dened and reconciled to IFRS information, where possible, on page 169.
2 FY22 non-underlying credit of £0.1m relates to the release of a provision held against property leases allocated against non-underlying gross margin.
3 FY23 non-underlying items of £10.1m relate to transition costs relating to our new distribution centre, £2.7m relating to restructuring of certain support functions, and £0.1m relating to
aborted project costs, all allocated against non-underlying operating costs. FY22 non-underlying credit of £19.2m relates to the prot on disposal of the Specialist Group, allocated as
other income.
4 FY23 non-underlying cost of £1.0m relates to transition costs relating to our new distribution centre, recognised within non-underlying interest charge. FY22 non-underlying cost of
£0.7m relates to loan fees written off upon renance of our revolving credit facility, allocated against non-underlying interest charge.
21
Strategic Report Governance Financial Statements
Financial review of FY23
The FY23 period represents the 52 weeks from 1 April 2022 to
30March 2023. The comparative period represents the 53 weeks
from 26 March 2021 to 31 March 2022.
The Group’s results are shown as three segments that represent
the size of the respective businesses and our internal reporting
structures; Retail (includes products purchased online and in-store,
pet sales, grooming services and insurance products), Vet Group
(includes general practices) and Central (includes Group costs,
nance expenses and the Group’s veterinary telehealth business).
Revenue
Group revenue in FY23 grew 6.6% to £1,404.2m (FY22: £1,317.8m) and
like-for-like (LFL) revenue grew 7.9%.
Retail revenue grew 5.9% to £1,278.7m (FY22: £1,206.9m), with LFL
revenue growth of 7.5%. Within Retail, food grew at 11.4% supported
by good availability and our strong price position. Accessories
declined by 0.9% overall, however our commodity-type accessories
performed well, offset by a softer performance in more discretionary
accessories. Retail services, which includes grooming, pet sales and
insurance commissions, were at year-on-year ('YoY').
Vet Group revenue was up 13.3% to £122.8m (FY22: £108.4m) and
LFL revenue grew by 13.4%.
Total Joint Venture fee income increased by 10.5% to £77.2m (FY22:
£69.9m) and revenues from company managed practices increased
by 20.4% to £37.5m (FY22: £31.2m).
Revenue of £2.7m (FY22: £2.5m) was recognised within our Central
division in relation to The Vet Connection, our telehealth business.
Gross margin
Group gross margin decreased YoY in line with expectations by 157
bps to 47.6% (FY22: 49.2%).
Gross margin within Retail was 47.0%, a reduction of 184 bps over
the prior year (FY22: 48.9%) predominantly driven by food growing
ahead of accessories (142 bps impact on Group gross margin).
Gross margin within the Vet Group increased by 130 bps to 53.4%
(FY22: 52.1%). This increase reects the strong sales growth across
our Joint Venture estate driving strong fee income growth with the
cost base to support those practices remaining largely xed.
Operating costs
Operating costs of £543.7m (FY22: £515.1m) grew at 5.6% including
£12.9m of non-underlying costs incurred in the year, predominantly
due to the transition to our new distribution centre.
On a 52-week basis, and excluding DC transition costs, operating
costs grew 5.1%.
We continue to maintain a tight operational grip on industry-wide
cost headwinds, including raw materials, wages, energy, and foreign
exchange costs. As well as directly mitigating these costs where
possible, we are also proactively offsetting them through our
ongoing self-help initiatives. Our programme of rent reductions is
progressing well and, where we have actively sought to reduce the
rent at lease events, we have achieved an average reduction of 20%.
We continue to target efficiencies across consumables and goods
not for resale, and we are driving further productivity gains across
our stores and supply chain, using technology to lower our overall
cost to serve.
We have embraced the 9.7% increase in National Living Wage,
and we have now secured pricing on 80-90% of our FY24 energy
requirements. In addition, we have hedged over 90% of our foreign
exchange requirements for the next 12 months, in line with our
treasury policy, at an average rate of $1.21 (FY23: $1.34).
Finance expense
The net nance expense, including interest charged on lease
liabilities, decreased to £14.3m (FY22: £15.1m) predominantly driven
by a YoY increase in interest received on cash balances. Of this,
£12.4m (FY22: £11.4m) related to interest expense on lease liabilities.
Prot before tax
Group statutory prot before tax was £122.5m (FY22: £148.7m).
In FY22 we benetted from the second tranche of the proceeds
from the disposal of the Specialist Group (£19.2m credit) while
in FY23 PBT includes a total of £13.9m of non-underlying costs
(includes £12.9m of operating costs and £1.0m of lease interest),
predominantly due to the transition to our new distribution centre.
Group underlying prot before tax was £136.4m (FY22: £130.1m),
with a prot margin of 9.7% (FY22: 9.9%), impacted by increased
energy costs (up £14.9m YoY) and the YoY increase in investment in
digital assets (up £5.9m YoY), which are expensed through the P&L
in line with IAS38 accounting policies.
Retail statutory prot before tax was £87.7m (FY22: £101.4m). Retail
underlying prot before tax was £98.8m (FY22: £101.4m) with a prot
margin of 7.7% (FY22: 8.4%) reecting the sustained strong trading
across the year, offset by the cost headwinds described earlier.
Vet Group statutory prot before tax was £50.9m (FY22: £43.2m)
with a prot margin of 41.5% (FY22: 39.8%), driven by a strong sales
performance, continued gross margin expansion, and a tight grip on
operating costs.
Taxation, prot after tax, and EPS
Total tax expense was £21.8m for the year, an effective rate of 18%.
Statutory prot after tax decreased by 19.2% to £100.7m (FY22:
£124.5m). Statutory basic earnings per share were 20.5 pence
(FY22: 24.9 pence) and underlying basic earnings per share were
22.8pence (FY22: 21.2 pence).
Working capital
The movement in working capital for FY23 was an inow of
£19.8m,predominantly driven by the strong growth in the business.
Inventories increased by 29% to £108.6m reecting the impacts
of cost ination, a small increase for the opening of the new DC
and investment to support higher availability which is supporting
bettergrowth.
Payables increased by 16% to £261.5m primarily driven by a 31%
increase in trade payables, in line with the increase in inventories
and driven by the growth of the business over the past year.
Receivables were broadly stable, decreasing 3.5% to £51.8m. Within
receivables, the strong nancial performance across our Joint
Venture vet practices contributed to the gross value of operating
loans reducing by £6.4m to £13.8m from £20.2m at FY22 year
end. The provision held against the gross value of operating loans
decreased by £1.6m to £3.4m from £5.0m at FY22 year end.
Pets at Home Group Plc Annual Report & Accounts 2023
22
Investment
Total investment in the year was £105.2m (FY22: £73.1m), split
£75.3m capital investment (FY22: £49.1m), and £29.9m of cloud-based
digital investment which is expensed through the P&L (FY22: £24.0m).
Total investment of £105.2m was focused on three strategic growth
areas; investment in data analytics and business systems totalling
£37.8m (FY22: £30.9m), as we continue to progress our data and
digital agenda, a £43.7m (FY22: £10.4m) investment as we complete
our new distribution centre, and £17.5m (FY22: £17.2m) to continue
with our store refurbishment programme.
Free cash ow
Free cash ow after interest and tax, but before acquisitions and
disposals was £98.2m (FY22: £95.0m). The increase in free cash ow
compared with the prior year primarily reects the underlying prot
growth and lower cash tax payment, offset by increased investment
in the business to drive future organic growth.
Our free cash ow for the year includes the following items:
– £22.0m in lease-related incentives made up of £12.4m in
landlords' cash contribution and £9.6m from our share of
development prot on disposal
– £9.5m lower cash tax payment versus the standard rate of
corporation tax, due to a corporation tax receivable brought
forward into FY23 which is not expected to recur going forward
– £4.4m reduction in net operating loans
During FY23 we incurred £13.9m of non-underlying costs, mostly
related to the transition to the new Stafford DC.
Free cash flow (£m) FY23 FY22
Net cash flow from operating activities 251.2 248.1
Lease payments (68.9) (67.3)
Cash receipts from lease incentives 22.0 –
Debt issue costs (0.1) (3.3)
Net cash capex (77.2) (55.5)
Net cash interest (14.7) (14.7)
Purchase of own shares (14.1) (12.3)
Free cash flow 98.2 95.0
The cash and cash equivalents at the end of the year were £178.0m,
up £12.0m year-on-year (FY22: £166.0m).
Divisional free cash flow FCF (£m)
Retail 67.0
Vet Group 44.7
Central (13.5)
Group 98.2
Chief Financial Officer’s reviewcontinued
The cash generation described above enables us to pay a record
dividend payment and fund our £50m share buyback programme
which completed in the year. Our net cash position at the end of
the year was £54.7m (cash £178.0m, debt £123.3m), and net debt
was £366.7m on a lease adjusted basis. This represents a leverage
ratio of (0.3)x underlying EBITDA or 1.5x on a lease adjusted basis.
Net cash (£m) FY23 FY22
Opening net cash 66.0 1.4
Free cash flow 98.2 95.0
Equity dividends paid (58.7) (48.5)
Share buyback (50.3) –
Acquisitions (0.5) (1.7)
Disposals – 19.8
Closing net cash 54.7 66.0
Pre-IFRS 16 leverage (0.3)x (0.4)x
Lease adjusted leverage 1.5x 1.3x
The Group’s underlying cash return on invested capital (CROIC) in
the year decreased to 22.7% (FY22: 25.0%) having been through a
year of peak investment as we build our digital platform and bring
our new DC onstream, with the cash benets to come in future years.
Capital allocation
Our capital allocation policy prioritises investing cash in areas
that will expand the Group and deliver attractive returns. These
areas include organic investment (into our digital capability, our
infrastructure, and our store refurbishment programme), our
progressive ordinary dividend policy (which approximates to 50%
of earnings per share) and value-accretive opportunities including
M&A (which are strategically aligned to expanding our platform
in core and adjacent markets). We will return to shareholders
any surplus free cash ow after these items, and it is the Board’s
intention to review this on an annual basis. In the year we have
completed a £50m share buyback programme and have today
announced a further £50m buyback for the year ahead.
Dividend
The Board has recommended a nal dividend of 8.3 pence per
share, an increase of 10.7% on the prior year. This takes the total
dividend for the year to 12.8 pence per share, an increase of 8.5%
on the prior year, reecting our strong cash performance and
balance sheet. The nal dividend will be payable on 11 July 2023 to
shareholders on the register at the close of trading on 16 June 2023.
Mike Iddon
Chief Financial Officer
25 May 2023
5 Gross margin is calculated as gross prot as a percentage of revenue.
6 Operating costs are the sum of selling and distribution expenses and administrative expenses.
7 Prot margin is calculated as underlying prot before tax as a percentage of revenue.
8 Working capital is the sum of YoY movements in trade and other receivables, inventories, trade and other payables, and provisions.
9 FY23 and FY22 includes investment in certain company managed practices.
10 FY22 includes the cash proceeds in relation to the disposal of the Specialist Group net of fees and cash held upon disposal.
11 Lease payments are cash payments for the principal portion of the right-of-use lease liability.
12 Net cash capex is proceeds from the sale of property, plant and equipment less costs to acquire right-of-use assets and acquisition of property, plant and equipment and other intangible assets.
13 Net cash interest is interest received less interest paid and interest paid on lease obligations.
23
Strategic Report Governance Financial Statements
Risk review
Risk management
Effective risk management is an integral part of running our business and is fundamental to us achieving our strategic objectives,
implementing core business initiatives, and protecting long term stakeholder value. The Board is responsible for the nature and
level of the principal risks we are willing to take and have overall responsibility for the Group’s risk and internal control frameworks.
that adequate controls and necessary mitigation plans are in place
to bring the risk within an acceptable tolerance. A range of risks are
managed on an ongoing basis, which are not currently considered
signicant enough to be included on the corporate risk register.
Monitor – Each risk register is reviewed by the relevant senior
management team at least four times a year before submission to
the EMT. Threats on the watch list are reviewed alongside the risk
registers. Risk scoring and key risk indicators are also reviewed to
track the risk and progress of mitigation plans. Assurance is gathered
from across the three lines of defence to support this process. Risks
are also reported to relevant management committees, such as the
Environmental, Social and Governance Committee.
Report – The Corporate risk register is reported to the EMT, Board
and Audit and Risk Committee (ARC) four times a year. Risks are
considered both independently and collectively to fully understand
their dependencies and potential impact on the business. The ARC
conducts deep dives in key risk areas with the EMT and functional
leadership teams. The principal risks and uncertainties are submitted
to the ARC ahead of nal review and approval by the Board.
Emerging risks
We dene emerging risks as those that can potentially have a
signicant impact on the Group in the medium to long term, where the
full extent of the scale, impact, or likelihood may not be fully understood
but need to be tracked. Identication and review of emerging risks
follows our risk management process described above. Emerging
risks considered a priority are summarised below on pages 24 to 30.
Climate risks
Climate change risks are also integrated into our risk management
process. Actions identied are captured on the Group’s risk register
and are monitored by the ESG Committee (supported by the Audit
and Risk Committee). Details of this and our overall approach to
TCFD can be found on page 52 of this report and in more detail in
our sustainability report.
Principal
risks and
uncertainties
Board
– Sets strategy.
– Collectively responsible for managing risk.
– Sets tone from the top.
– Sets risk appetite, risk tolerance and determines the nature and level of principal risks.
Executive Management Team (EMT)
Collectively responsible for identifying and managing risk, and monitoring risk exposure.
Audit and Risk Committee (ARC)
Oversee the Group’s internal control
and risk management frameworks.
– Provide oversight and challenge
to the assessment of principal,
corporate, and emerging risks
– Advises the EMT on risk appetite
Group Internal Audit
Provides objective assurance to the
Board and ARC on the effectiveness
of the risk management framework.
– Has a direct reporting line to the ARC
– Risk based Internal audit plan
approved by the ARC
– Respond to new areas of risk or
change and re-prioritise plan
throughout the year
Business assurance functions
Monitor compliance with company
policies and procedures and provide
assurance over business controls to the
Management Committees and the EMT.
Operational Risk
Monitor adherence with risk
appetite framework, implement risk
management processes and risk
framework improvements.
Operational senior management
& risk champions
Ensure risk management process is
adhered to.
Management Committees
Provide oversight over the management
of business level risks.
Corporate
risks
Business risks
Top down
Oversight, identication, assessment
and mitigation of Group level risks
Bottom up
Identication, assessment and mitigation
of risk across key business areas
Escalation
For further details about key roles and responsibilities within our governance structure, please see the Governance report on page 31.
First line of defence Second line of defence Third line of defence
Risk Governance
We operate a three lines of defence model, as illustrated below.
Identify and assess – Each business, function and key project
identify their current and emerging risks considering their strategic
plan, objectives, and external environments. A standardised risk
scoring methodology is used across the Group to analyse risks. This
helps the escalation and consolidation of risks into a Group-wide
view. Horizon scanning exercises are conducted with the senior
management team as part of the annual strategy and business
planning cycles and risk management processes.
Manage – Each business, function and key project maintain
detailed risk registers and mitigation plans which are approved by
their leadership teams and the appropriate Executive Management
Team (EMT) member. Each principal, corporate and emerging risk is
owned by a member of the EMT who is accountable for conrming
1
Identify
Policies and
procedures
Culture, values
and behaviours
Key controls
Management
information
Governance
5
4 3
2
Assess
Manage
Report
Monitor
Risk management process
We take a practical approach to risk management. Our process
has ve steps, integrated across the three lines of defence and our
governance framework. Having a top down, bottom-up approach
gives us a comprehensive view of risks, either current or emerging,
their status and the effectiveness of mitigation plans. An appropriate
level of oversight and assurance is provided through this process.
Pets at Home Group Plc Annual Report & Accounts 2023
24
Links to strategy Risk prole Risk appetite Change on previous year:
1 LH2 3 4
Brand & Reputation
Owner: Chief Consumer Officer
Risk Type: Strategic
Link to strategy
1
Bring the pet
experience to life
2
Set our people
free to serve
3
Use data and VIP to
better serve customers
Risk Prole/
Risk Appetite
L Low M Medium H High
Change on
previous year
Stable Increased Decreased
4
50% of sales from
pet services
Risk reviewcontinued
Description
Protecting and enhancing our strong brand value and holding pet welfare as our number one priority is essential in attracting and retaining our consumers and clinical talent
and the trust and value our stakeholders place in us. This is the responsibility of every colleague. We are aware that trust and reputation can quickly be lost so we continuously
monitor and ensure that our business actions align to pet welfare and consumer and clinical expectations. Pet welfare remains our highest priority.
Risk appetite
We place the welfare of pets and the value of our brand at the front and centre of all we do, along with our societal responsibilities in relation to the planet and people.
The group has no appetite for any risk which may compromise the trust and value which our communities and stakeholders place in our brand.
Key responses
– Established the Pet Welfare Committee to uphold and drive
forward animal welfare standards within our own operations
including the quality and welfare considerations of our products
and services.
– New clinical strategy led by our newly appointed Group
Veterinary Officer bringing our clinical and pet welfare expertise
and governance together.
– The majority of practices are accredited or working towards
being accredited under the RCVS Practice Standards
Scheme(PSS).
– Risk-based product safety and integrity testing and inspection
programme to monitor ongoing safety compliance of our own
label products.
– Own label products developed with the support of the Group’s
internal veterinary expertise and external behavioural experts.
– Dedicated Compliance Team to monitor customer reviews and
customer complaints.
– Tested product recall procedures.
– Rigorous welfare standards in place operationalised through
quarterly unannounced audits across stores, in-store adoption
centres, and grooming salons. Quarterly announced audits and
three separate, external, independent veterinary led audits each
year for each animal supplier.
– Conducted monthly research with our consumers and wider
market to understand their changing needs and expectations
and understand their opinions and expectations on our brand to
drive business action.
– Through our Pet Foundation we donated to pet charities and
NGOs in Ukraine and Turkey to support the basic needs and
welfare of pets affected by war and the environmental disasters.
Outlook and further actions planned
– Protecting, enhancing, and communicating our strong brand
value will remain our focus in FY24, with a core message around
pet welfare and our pet expertise and knowledge.
– We are committed to continually monitoring, improving
capability, and supporting our colleagues and supply partners to
maintain high pet health and welfare standards.
– We will also be implementing a comprehensive brand and
consumer tracking programme to continuously monitor our
consumer expectations, brand health and consumer reputation.
The results will drive business action where required.
– Review of all planned product, service, and proposition changes
via our Pet Welfare Committee to ensure they meet our pet
welfare and brand credentials.
– Creating a credible and visible evidence based active leading
voice on pet health and welfare with consumers and the pet
care industry to drive the highest standards and change
whererequired.
– Establishing a Quality Improvement framework under the
new Head of Quality Improvement and Education to support
our veterinary practices with guidance on expected clinical
standards.
– Review of Non-Traditional Companion Animals and how we
respond and educate.
– Introducing new data-driven platforms to identify and
monitor product safety risk and improve reporting on raw
materialsources.
Emerging risks
– Continued impact
on consumers with
inationary and costs
challenges.
– New and emerging
animal diseases
particularly associated
with imported pets.
– Veterinary professional
regulatory changes.
– Veterinary professional
and public opinion
around the keeping
and selling of Non-
Traditional Companion
Animals.
25
Strategic Report Governance Financial Statements
Links to strategy Risk prole Risk appetite Change on previous year:
1 LH2 3 4
Information security and business critical systems
Owner: Chief Data & Information Officer
Risk Type: Strategic/Operational
Description
The availability and security of our IT systems and accurate data is vital for us to operate safely whilst maintaining the security of customer, colleague, and company
condential data.
Risk appetite
The Group has no appetite for cyber security risk which may compromise our reputation, our technology solutions, and the personal data within them. We endeavour to protect
our data in line with legislation and best practice. The Group accepts a balanced level of operational technology risk to protect and enhance our operations. We have plans in
place to minimise the likelihood and impact of any business-critical technology failure.
Key responses
– Invested heavily in our cyber security position both from a
personnel and technology standpoint.
– Delivered awareness training and engagement campaigns
including a security champion network.
– Ran Tabletop Breach exercises with Executive Management
Team, Legal Team, and IT.
– Delivered policies aligned to ISO27001.
– Set up an Information Security Steering Group with business
stakeholders.
– Provided six monthly updates to the PLC board at the Risk and
Audit Committee.
– Engaged an Incident Response Expert organisation on retainer.
– Developed an incident management response plan combined
with specic cyber-attack playbooks. These form the basis of a
continuing improvement process when it comes to our approach
to incident response.
Outlook and further actions planned
– While our security maturity has improved signicantly over the
last 12 months, cyber-attacks continue to grow in frequency
andcomplexity.
– Cyber Security strategy that began in FY23, designed to take a
risk-based approach to improve our security maturity, minimise
the likelihood of and increase the ability to identify and respond
to a cyber-attack.
– The strategy includes colleague awareness and training,
improved email ltering, end point protections, vulnerability
monitoring and remediation.
– Plan to migrate all colleagues onto Office365 with Multi Factor
Authentication.
– Identity management processes will be improved including
escalated and privileged accounts.
– We continue to review our third parties on a risk basis to ensure
we have the appropriate contractual and technical controls
inplace.
Emerging risks
– Geopolitical situations
are creating more
advanced attacks,
which may inadvertently
impact our business
or be repurposed by
organised cybercrime
gangs.
– As more companies
become victims of cyber
attacks, customers and
colleagues who reuse
emails and passwords
become an attack vector.
– Articial Intelligence
increases the complexity
of attacks such as
phishing to make it more
difficult for an average
colleague to spot.
Links to strategy Risk prole Risk appetite Change on previous year:
1 M L4
Sustainability and climate change
Owner: Chief Legal Officer
Risk Type: Strategic
Description
The success of our business over the long term depends on the Group operating sustainably in nancial, environmental, and social terms. Our stakeholders, including investors,
colleagues and customers need to be assured that we are acting responsibly across our business operations and supply chains. If we do not meet these expectations the
Group’s brand reputation, licence to operate and nancial performance could be threatened. More stringent environmental regulation could affect the cost of production and
operational exibility. Over the long term, physical risks from extreme weather events and transition risks from potential stringent regulation, or failure to efficiently decarbonise
our value chain, could increase the cost of production and impact operational exibility.
Risk appetite
The Group takes its responsibilities in relation to sustainability seriously not only because it is the right thing to do but because it is critical to ensuring the sustainability of the
business. We dene sustainability as achieving environmental sustainability, social sustainability as well as nancial sustainability and all three of these dimensions are critical to
creating value in the long term.
Key responses
– Full update of materiality assessment and refresh of
sustainability strategy (see page 18).
– Assessment of physical and transitionary climate change related
risks (see TCFD statement page 52).
– Prioritisation of material areas within strategy refresh.
– Allocation of capital across ve years to enable the delivery of
further operational carbon reductions.
– Launch of the Supplier Knowledge hub and supplier scope 1 & 2
reductions expectations at the supplier conference.
– Launch of our Responsible Sourcing Handbook containing all
relevant policies and implementation guidance for suppliers
(available on our corporate website).
– Investment in laboratory grown meat start up.
– Launch of long-term strategic pet food supplier partnership.
– Increased dedicated in-house sustainability resource.
Outlook and further actions planned
– Our updated sustainability strategy, Our Better World Pledge,
can be found in summary on page 16 and in our separate
sustainability report. This includes new targets relating to
sustainability and climate change and a set of clear priorities
that align to our business strategy. These cover our three pillars
of planet, pets, and people. The rst pillar, planet, is now being
given more emphasis and prominence recognising both the
urgency of the global environmental issues and the complexities
involved in tackling them.
– New target and activity on carbon footprinting of own brand pet
food ranges.
– New target and activity on measuring supplier scope 1 and 2
carbon maturity.
– Testing of HVO fuel to reduce carbon impact of HGVs.
– Anaesthetic gas training to help practices manage gas use.
– Installation of solar panels on new DC site in Stafford.
– Inclusion of ESG objectives for all senior leadership team bonus
schemes (see remuneration report page 61).
– Sustainability training for senior leadership team.
Emerging risks
– Our TCFD scenario
analysis identied
the sustainability of
pet ownership as an
emerging risk. Our
TCFDstatement on
page 52 explains this
risk in moredetail.
Pets at Home Group Plc Annual Report & Accounts 2023
26
Risk reviewcontinued
Link to strategy
1
Bring the pet
experience to life
2
Set our people
free to serve
3
Use data and VIP to
better serve customers
Risk Prole/
Risk Appetite
L Low M Medium H High
Change on
previous year
Stable Increased Decreased
4
50% of sales from
pet services
Links to strategy Risk prole Risk appetite Change on previous year:
1 LM2 3 4
People and Organisational Capability
Owner: Chief People Officer
Risk Type: Strategic
Description
Our 16,000+ colleagues and Partners are fundamental to the success of our business. It is essential that we attract, retain, develop, and reward our talent across the Group.
Having the right talent will help us meet the needs of our consumers, drive our consumer-centric, omnichannel pet care ecosystem and deliver our business strategy.
Risk appetite
We expect our colleagues and partners to act in line with our culture, values, and behaviours. The business has no appetite for risk relating to the health, safety, and wellbeing of
our colleagues. We do however accept that there is an inherent level of risk in attracting and retaining critical talent across the Group.
Key responses
– Reward strategy to attract and retain talent.
– Expansion of external candidate pipeline outside mainstream
talent pools.
– Retention incentives to retain critical talent.
– Continuous review and response to the impact of
cost of living on our people.
– Development of career pathways to retain talent
groups and develop internal capability.
– Steering 'Great Conversations' (our performance management
tool) to better drive colleague performance.
– Promoting the brand through a national tactic to recruitment
with ‘always on’ approach.
– Support international recruitment for clinical talent.
– Optimisation of social media sites and careers website.
– Investment in the approach to contracts for locum population
inVet practices.
Outlook and further actions planned
– We continue to focus on the attraction and retention of critical
talent, reducing colleague turnover and the development
of colleague skills ensuring we have the right skills and
organisational capability to deliver the business strategy.
– There are continuing global restrictions and challenges in the
specialist and clinical talent market.
– FY24 will also focus on organisational capability and the
effectiveness of our people systems to be an enabler to this.
– Review and develop fresh life stage and style benets.
– Continue to monitor impact of cost of living on our people and
their families.
– People data and analytics will be key in ensuring the People
strategy supports the delivery of the business strategic pillars.
Retail
– Developing an updated ‘new starter’ induction programme for
retail colleagues.
– Launching a joiner and exit survey to understand the experience
of both.
– Working with eld teams to increase colleague hours through
dual contracts.
– Launch of the new grooming re-set programme.
Vet Business
– Building a clinical academy.
– Scaling of our graduate programme.
– Implement the new Practice Management and Joint Venture
Partner leadership programme.
Emerging risks
– Continuing restrictions
and challenges in the
specialist and clinical
talent market.
– Reducing attractiveness
of the UK as a work
and life destination for
European clinical talent.
– High employment.
27
Strategic Report Governance Financial Statements
Links to strategy Risk prole Risk appetite Change on previous year:
1 MM H2 4
Competition and Consumers
Owner: Chief Consumer Officer
Risk Type: Strategic
Description
The Group competes in a wide ranging competitive market including other pet specialists, pure play online competitors, online marketplaces, direct to customer businesses,
supermarkets, discounters, online pet healthcare platforms, veterinary groups, and independent practices. There continues to be strong online competition including new
start-ups, including those focused on subscriptions. We must continue to offer an attractive model for our future Joint Venture Partners while keeping ahead of, and responding
to, developments by our competitors around price, range of services offered, clinical care, and experience. There also remains a level of uncertainly of any further impact
of economy and ination on consumer and household budgets. Failing to be aware and manage all these factors could have an adverse impact on the Group’s nancial
performance and opportunities for growth.
Risk appetite
The Group recognises that to successfully compete and grow the business we need to take an acceptable level of risk, whilst staying within our overall Group risk appetite.
We have a higher appetite for risk in the creation of long-term value, developing our strategy and taking advantage of opportunities. In the execution of our strategic initiatives,
where we need to maximise benets realisation, we will only accept a moderate level of risk.
Key responses
– Strategic review of our consumer value proposition including
pricing which has driven our strategic priorities for FY24.
– Launched promotional and value offers to our consumers with
a core focus on our food which is one of the biggest pet care
household expenses including Switch and Save, VIP Member
offers and pay day offers.
– Continued development of tailored consumer campaigns to our
VIP members utilising proprietary propensity modelling which is
driving consumer retention and loyalty.
– Monthly consumer and cost of living sentiment research to
continue to understand consumer sentiment and concerns and
drive our business planning.
– Creation of new Consumer team and appointment of new Chief
Consumer Officer to drive our consumer centric approach and
productise our value proposition.
– Continually launched new ranges throughout the year –
including new Wainwrights dog food products, small animal
food ranges, insect protein food and new cooling ranges in
thesummer.
– Expanding our veterinary services – for example, the relocation
and opening of the Northampton practice to create our largest
animal hospital facility and services.
Outlook and further actions planned
– We will remain within a highly competitive market and there
remains ongoing uncertainty for our consumers as to the impact
of the economic and inationary pressures on household budget.
However, we have the strategies, processes, and structures
in place to continue to monitor this and review our consumer
propositions as required.
– Continued focus and investments in our value and pricing
position and communication of this to our consumers.
– Implementing a new real time consumer satisfaction tracking
programme across our retail, vets and digital customer services
teams to drive understanding of our consumer experience.
– Well established product development which will ensure we
launch new or enhanced products/ranges to our core food,
health, and accessories categories.
– Developing and expanding our veterinary services by opening
new veterinary practices and expanding services in current
practices.
– Regular monitoring of the market and competitor pricing to
ensure we continue to provide competitive value and provide
the best options for our consumers.
– Monitoring the effectiveness of our processes by regularly
tracking our business and competitors against the measures our
consumers tell us are important to them and drive their behaviour.
– Continue the development of impactful consumer propositions
which meet consumers' pet care needs and deliver differentiated
value.
Emerging risks
– Disruption from new
competitors taking
advantage of new
market dynamics.
– Continued
macroeconomic
uncertainty post-
pandemic.
– Adjustment to new
processes set out in
the EU-UK Trade and
Cooperation Agreement.
– Material changes
in consumer
buying behaviour
driven by concerns
around affordability,
sustainability, and the
environment making pet
ownership less attractive.
Links to strategy Risk prole Risk appetite Change on previous year:
1 M M H3 4
Pet care centre expansion
Owner: Chief Consumer Officer
Risk Type: Strategic
Description
A key part of the Group’s strategy is to grow and strengthen our omnichannel pet care platform, which offers a wide range of pet product and services through both physical and
digital channels. If we fail to deliver our planned growth in our footprint and services, our expected growth and nancial performance could be adversely impacted.
Risk appetite
We have a higher appetite for risk in the creation of long-term value, developing our strategy and taking advantage of opportunities. In the execution of our strategic initiatives,
where we need to maximise benets realisation, we will only accept a moderate level of risk.
Key responses
– Opened one new Pet Care Centre and twenty-one
refurbishments to create enhanced locations.
– Opened one new vet practice and completed extensions of
current practices to give us the ability to provide services to our
consumers including the relocation of Northampton practice to
create our largest animal hospital facility and services.
– We made material progress on our priority investment
programmes that will help enable our omnichannel model.
These include our new distribution centre in Stafford, which
will become operational in FY24 and our multi-year digital
investment programme Polestar.
– Our store estate remains entirely leased, which gives us great
exibility.
Outlook and further actions planned
– The Group is in a strong competitive position through our unique
omnichannel pet care model.
– We will continue to invest in our physical locations (both
pet care centres and vet practices), including new sites and
refurbishment.
– We will continue to invest in the key enabling infrastructure,
including our supply chain and digital platform.
– We will continue to evolve our value propositions (including
subscriptions) based on consumer insights and feedback.
Emerging risks
– Speed of change
in innovation and
advances in pet care
and clinical technology
– Material changes in
customer behaviour
and needs, driven
by concerns around
affordability,
sustainability, and the
environment making
pet ownership less
attractive.
Pets at Home Group Plc Annual Report & Accounts 2023
28
Risk reviewcontinued
Link to strategy
1
Bring the pet
experience to life
2
Set our people
free to serve
3
Use data and VIP to
better serve customers
Risk Prole/
Risk Appetite
L Low M Medium H High
Change on
previous year
Stable Increased Decreased
4
50% of sales from
pet services
Links to strategy Risk prole Risk appetite Change on previous year:
1 MM4
Responsible sourcing and supply chain
Owner: Retail Chief Operating Officer and Vet Chief Operating Officer
Risk Type: Operational
Description
As we source our products and raw materials globally, we are exposed to the risks associated with international trade, such as supplier failure or disruption, ination, changing
regulatory frameworks and currency exposure. Failing to meet our responsible sourcing commitments could damage consumer condence and our business reputation, which could
have a negative impact on business performance. A disaster at one of our distribution centres or the wholesaler for veterinary products may result in a signicant disruption to the
supply of stock to stores, essential products to our practices and in the fullment of internet orders.
Risk appetite
The Group does not tolerate any breach of company policies, local laws, or regulations in our supply chain. We have clear expectations of our suppliers in relation to upholding
human rights, providing safe working conditions, meeting acceptable labour standards, and protecting the environment. The safety and integrity of our products is of paramount
importance so we will not compromise standards. We always collaborate with our suppliers to help them achieve our requirements but where standards are persistently not met
or we encounter a zero-tolerance issue, we will end our business relationship.
Key responses
– Our Responsible Products Committee meets regularly and
is responsible for developing the strategy for managing the
environmental and ethical impacts of our products on our
valuechain.
– A comprehensive Supplier Code of Conduct provides clear
supplier expectations in relation to human rights, environmental,
ethical, and legal standards. This is supported by a Responsible
Sourcing Handbook which brings our Supplier Code of Conduct
to life with detailed implementation requirements, guidance, and
signposting to additional resources. Our responsible sourcing
requirements form a key part of our contractual agreements
withsuppliers.
– Engagement with industry bodies and external experts for
collaboration, sharing and development of industry best practice.
– Qualied internal Ethical Auditor.
– Modern slavery awareness training forms a key part of our
mandatory colleague training for Support Office colleagues.
– Dedicated whistleblowing reporting mechanism for workers
within our supply chain to report concerns.
– Robust onboarding and ongoing monitoring programme of
own label supplier standards including announced and semi-
announced audits of production facilities conducted by Pets
at Home colleagues or third-party audit bodies. Suppliers are
supported to remediate non-conformances.
– Data systems are used to manage our audit and supplier data.
This enables us to better track the resolution of issues and
understand more about our suppliers, their workforce, and their
risk prole.
– Vaccine supply and freight costs for veterinary products has
stabilised through close interaction with the supplier plus
ongoing managed allocation of product until there was enough
supply in the UK to return to unrestricted supply. Agreed
ring-fenced stock has protected us from market shortages
ofproducts.
– Business continuity plans are in place for the distribution
centres. We can service all stores and orders for a priority range
of SKUs from a single distribution centre whilst we source a
second facility and recover full product supply.
– We have sufficient storage capacity to support businessgrowth.
Outlook and further actions planned
– Rising production, material and labour costs and the disruption
of raw material supply chains puts pressure on suppliers and
means normal levels of due diligence could be bypassed to
ensure the continuity of labour and materials for the fullment
of customer orders. This increases the risk of human rights
violations and environmental damage occurring undetected in
lower tiers of supply chains. We therefore work in partnership
with our suppliers and in collaboration with industry to
understand and mitigate these risks together.
– Increasing price uncertainty as suppliers continue to react to 12
months+ of high ination.
– We are mindful of the potential risk of supplier failure, either
through insolvency or through an inability to deliver products
due to global supply chain challenges.
– Our supplier audits continue, and we anticipate being able to
resume our programme in China as pandemic travel restrictions
are eased.
– We are working with our own label suppliers to map lower tiers
of the supply chain and to support them in conducting risk
assessments. Where there is a high risk commodity, industry,
sourcing location or vulnerable workers, we’ll work with them to
ensure we have full visibility of ethical standards.
Emerging risks
– Geopolitical uncertainty
and disruption.
– Modern Slavery
reporting is on the rise in
the UK and globally.
– Continuing labour
shortages in the UK
manufacturing, logistics
and agricultural sectors.
29
Strategic Report Governance Financial Statements
Links to strategy Risk prole Risk appetite Change on previous year:
1 L L4
Liquidity and credit
Owner: Chief Financial Officer
Risk Type: Finance
Description
The Group requires adequate cash resources to enable it to fund its growth plans through its capital projects and working capital requirement. Without adequate cash resources,
the Group may be unable to deliver its growth plans, with a consequent impact on future nancial performance. The Group’s growth plans in respect of Joint Venture veterinary
practices are predicated on the availability of nance for new Joint Venture veterinary Partners to fund both the capital cost and working capital requirement for each new
practice opening. The Group also provides additional nancial support to veterinary general practices to underpin their working capital requirements and growth in clinical
capacity. This investment is a particular feature of the Joint Venture operating model and in making this investment the Group considers its total returns across all practices on a
portfolio basis.
Risk appetite
The Group has a low appetite for funding, liquidity, and credit risk. We apply a cautious and balanced approach to these risks to safeguard access to funding whilst maintaining
sufficient liquidity to meet our current nancial obligations and future nancial forecasts. The Group does not tolerate any breach in liquidity and credit contracts or Group
liquidity and credit nancial policies.
Key responses
– The Group’s nances are continually monitored in the context
of its growth plans and of the wider economic landscape.
The Group’s core nancing facilities are in place until March
2027. The Group maintains close working relationships with
its banking partners to ensure sufficient liquidity and credit is
available. The Group monitors a range of potential cash ow
sensitivities to ensure the banking facilities in place remain
sufficient and adequate considering evolving macro and
micro-economicfactors.
– The Group ensures that all cash surpluses are invested with
banks that have credit ratings and investment criteria that meet
the requirements set out in the Group Treasury Policy, which has
been approved by the Board.
– The Group’s key suppliers are exposed to credit risk and as part
of the Group’s overall risk management programme, the business
has identied alternative suppliers where appropriate and
developed contingency plans in respect of own label and private
label food products.
– The Group has from time to time bought out and consolidated
a number of Joint Venture veterinary practices. As part of these
acquisitions, the Group has settled any liabilities for third party
bank loans and leases within these practices on behalf of the
Joint Venture Partner, with all such liabilities being written off.
– For the practices which the Group continues to operate under
a Joint Venture Agreement, the Group has an established credit
impairment provision to reect the assessment of extended loans
and investments being repaid over different lengths of time, with
different risks of return, to provide for any potential shortfall.
The Group has facilities in place with recognised lenders that
give us condence that our medium-term growth plans are
nancedadequately.
Outlook and further actions planned
– The Group’s liquidity headroom in the nancial year, and the
length of time to expiry of the Group’s core nancing facilities,
will continue to be monitored periodically.
– The evolving political and macro-economic situation is likely to
lead to sustained uncertainty in relation to forecast cash ows,
liquidity, and credit requirements. We will continue to monitor
our nances and build relationships with our nance providers
to ensure that the business is well positioned to manage its cash
ows effectively and ensure sufficient liquidity is available.
– We recognise the potential need to support some of our Joint
Venture veterinary practices with additional funding during the
year ahead. Such funding will be available for those businesses
that remain viable over the longer term, considering resilience
evidenced within the sector throughout the last nancial year.
Emerging risks
– The continued
development of the UK’s
relationship with the EU.
– The evolving supply
chain and inationary
factors.
Pets at Home Group Plc Annual Report & Accounts 2023
30
Risk reviewcontinued
Links to strategy Risk prole Risk appetite Change on previous year:
1 2 3 L L4
Legal and compliance
Owner: Chief Legal Officer
Risk Type: Legal and compliance
Description
Many of the Group’s activities are regulated by national and international legislation, applicable industry regulations and standards including, but not limited to, consumer and
competition laws, trading, advertising, packaging, product quality, health and safety legislation and guidance, pet shop licensing, National Minimum Wage and National Living
Wage, Equality Act, modern slavery, anti bribery and corruption, data protection, environmental regulations, the Corporate Governance Code, the RCVS Code of Professional
Conduct for Veterinary Surgeons, and the off-payroll regulations (IR35). Failure to comply with the obligations set out in this and other applicable legislation may lead to nancial
penalties and reputational damage and other consequences for the business and its Directors.
Risk appetite
The Group is committed to acting ethically, lawfully, and always in the best interests of our stakeholders and therefore has an extremely low appetite for compliance breaches,
either regulatory or of our principal internal polices, including for example, our Health and Safety policy and our Code of Business Ethics and Conduct. Anyone who acts on our
behalf is expected to act in line with our policies, values, and behaviours and to take the necessary steps to comply with applicable laws and regulations.
Key responses
– We actively monitor regulatory developments in the UK and
Europe (as applicable) and our existing obligations where we
have internal policies and standards to ensure compliance where
appropriate. Training is provided for colleagues where needed.
– We operate a condential whistleblowing hotline for colleagues,
Partners, suppliers, and people working within our supply chain
to raise concerns regarding any potential breach of legal or
regulatory obligations in condence.
– Our suppliers commit to comply with all relevant business
regulations for the territories in which they operate and to meet
international labour standards which are laid out in our Supplier
Code of Conduct. We reinforce this by placing contractual
obligations on our suppliers and support where necessary.
– The Group’s Data Protection Officer and executive sponsored
steering committee monitors Group compliance with legal
requirements relating to personal data, ensuring relevant policies
are up to date and works with our Information Security Steering
Committee which monitors data security.
– We understand the value of ongoing training and communication to
raise awareness of the personal data handled by the business, how
to keep it safe and how to help prevent personal data incidents.
We carry out regular induction, awareness, and refresher training
for all our colleagues in Retail, Vets, and the Support Offices.
Outlook and further actions planned
– We continue to monitor legal and regulatory developments
across the UK and Europe and will planaccordingly.
Emerging risks
– New and amended
regulations, including
further amendments to
the law resulting from
Brexit.
– Signicant strengthening
of UK consumer
laws and regulations
around the usage of
digital information,
and increasingly
stringent environmental
regulation.
Links to strategy Risk prole Risk appetite
Change on previous year:
1 LL4
Treasury and nance
Owner: Chief Financial Officer
Risk Type: Finance
Description
The Group has an exposure to exchange rate risk in respect of the US dollar, which is the principal purchase currency for goods sourced from Asia. The Group also faces risks
from changes to interest rates due to its exposure to debt facilities with oating interest rates linked to SONIA. The Group has an exposure to potential tax compliance issues
which could lead to nancial or reputational loss. If we do not manage these exposures, there could be an impact on the Group’s nancial performance with a consequential
impact on operational and growth plans.
Risk appetite
The Group has a low appetite for balance sheet risk. We apply a cautious approach to safeguard the strength and resilience of the balance sheet.
We also take an ethical and low risk approach to tax. The Group does not tolerate any breach in key nancial policies, such as the Group Treasury Policy.
Key responses
– This exposure to exchange rate uctuation is managed via
forward foreign currency contracts that are designated as cash
ow hedges. The group has an established guiderail for foreign
exchange hedging in terms of both percentage forecast foreign
currency purchase coverage and time horizon hedged out to.
– This exposure to interest rate uctuation is managed via oating
to xed interest rate swap contracts that are designated as cash
ow hedges. The group has an established guiderail for interest
rate hedging in terms of both percentage forecast debt coverage
and time horizon hedged out to.
– All hedging activity is undertaken by the Group Treasury
function in accordance with the Group Treasury Policy that sets
out the criteria for counterparties with whom the Group can
transact, which states that all hedging activities are undertaken
in the context of known and forecast cash ows, with speculative
transactions specically prohibited.
– The Group operates within the Group Tax Policy framework which
aims to maintain a low risk appetite approach to its tax affairs.
Outlook and further actions planned
– The political and macro-economic environment has resulted in
ongoing heightened foreign currency and interest rate pressures,
and we may see this continue for some time.
– Ongoing currency movements between the US dollar and GBP
may result in further exchange risk, particularly considering the
geopolitical and macro-economic environment, and the UK’s
developing relationship with the EU.
– These risks are appropriately mitigated through the group’s
Treasury Policy, Tax Policy, and risk management strategies. The
group will continue to manage this through its well-established
foreign exchange and interest rate hedging policies, and more
widely its group-wide treasury and tax policies. We do not expect
any increased threat from other signicant macro-economic
changes in the short to medium term.
Emerging risks
– Continued
macroeconomic and
geopolitical uncertainty.
– Adjustment to new
processes set out in
the EU-UK Trade and
Cooperation Agreement.
Link to strategy
1
Bring the pet
experience to life
2
Set our people
free to serve
3
Use data and VIP to
better serve customers
Risk Prole/
Risk Appetite
L Low M Medium H High
Change on
previous year
Stable Increased Decreased
4
50% of sales from
pet services
31
Financial StatementsStrategic Report Governance
Chair’s introduction to Governance
Strong governance to
support strategic focus
On behalf of the Board, I am pleased to present our
Corporate Governance Report for the nancial year
ended 30 March 2023.
During this nancial year, the Board has continued to oversee and
shape the strategic direction of the business, to ensure that the
business remains sustainable over the long-term.
Following the streamlining of the strategy at the start of the year
and clarity on key priorities, it has been essential for the Board to
ensure that appropriate governance is in place to support this. Deep
dives have been introduced at each meeting of the Board on one
or two of the strategic pillars, with the subjects rotating during the
year. The deep dives have ensured that the Board has in-depth
knowledge of the key strategic initiatives, the chance to meet the
senior leadership team involved directly and the opportunity to
challenge and question.
The sustainability strategy has also been simplied this year to
add focus and direction to the key sustainability priorities for
the business. In addition, sustainability is now a standing agenda
item at meetings of the main Board, to ensure that sustainability
considerations are given sufficient focus in the decision
makingprocess.
During the year, the Nomination and Corporate Governance
Committee has been refreshed with additional meetings and greater
focus on corporate governance updates, succession, organisational
changes, board skills gap analysis and Non-Executive Director
succession planning. Restructuring the Executive Management
Team during the year and the creation of the consumer function
and the Chief Consumer Officer role, have ensured that the most
appropriate structure is in place to deliver the future strategy.
Newhires at Non-Executive Director level with the appointments of
Roger Burnley and Dr Natalie-Jane Macdonald, further complement
the skills of the current Board.
The culture and values remain strong within the business. I am
proud of the diverse nature of the Board of Pets at Home. The
business achieved its highest ranking to date in this year’s FTSE
Women Leaders Review and appointed its rst female CEO and
Senior Independent Non-Executive Director, all of which should
becelebrated.
I hope that this report provides a clear outline of the work the Board
has undertaken during the year and how our governance and Board
agendas are aligned with the Group’s strategy. I look forward to
welcoming shareholders to our AGM at the Pets at Home Support
Office on 6 July 2023 at 11am.
Ian Burke
Chair, Pets at Home Group Plc
25 May 2023
Pets at Home Group Plc Annual Report & Accounts 2023
32
Board of Directors
Non-Executive DirectorsChair
Ian Burke
Chair
Zarin Patel
Senior Independent
Non-Executive Director
Dennis Millard
Non-Executive Director
Sharon Flood
Independent
Non-ExecutiveDirector
Stanislas Laurent
Independent
Non-ExecutiveDirector
Susan Dawson
Independent
Non-ExecutiveDirector
Roger Burnley
Non-Independent
Non-Executive Director
Lyssa McGowan
Chief Executive Officer
Mike Iddon
Chief Financial Officer
Appointment to the Board
2020
Appointment to the Board
2021
Appointment to the Board
2014
Appointment to the Board
2017
Appointment to the Board
2017
Appointment to the Board
2018
Appointment to the Board
2023
Appointment to the Board
2022
Appointment to the Board
2016
Current roles
Past roles
– Member of the
Board of Governors
of Birmingham
CityUniversity
– Non-Executive Chair
ofStudioRetail
GroupPlc
– Non-Executive Senior
Independent Director
of intu properties Plc
– Chair and Chief
Executive Officer
ofRank Group Plc
– Chief Executive Officer
ofHolmesPlace
HealthClubs
– Chief Executive Officer
of ThistleHotels Plc
– Chair of Vet Partners
Holdings Ltd
Current roles
– Non-Executive Director
and Chair ofthe Audit
and Risk Committee
ofAnglian Water
Services Limited
– Independent
Non-Executive Director
at Hays Plc
– Independent Non-
Executive Director
andChair of the Audit
and Risk Committee
ofHM Treasury
– Trustee of National
Trust and Chairof
itsAuditCommittee
– Member of Chapter Zero
– Member of Women
onBoards
Past roles
– Non-Executive Director
and Senior Independent
Non-Executive Director
of Post Office Limited
and member of its
AuditCommittee
– Independent member
of the Auditand
Risk Committee
of JohnLewis
PartnershipPlc
– Chief Financial Officer
of the BBC
– Chief Operating Officer
of The Grass Roots
Group Plc
Current roles
Past roles
– Senior Independent
Director ofSuperdry Plc
– Non-Executive Chair of
Watches ofSwitzerland
Group Plc
– Chair of Halfords Plc
– Senior Independent
Director of
Debenhams Plc
– Chair of Connect
Group Plc
– Senior Independent
Director ofPremier
Farnell Plc
– Senior Independent
Director of Xchanging Plc
– Non-Executive Director
of Exel Plc
Current roles
– Chair of Audit at Citybre
– Board member and
Chair of Safety and
Security at Getlink SE
– External member of the
Universityof Cambridge
Council
– Fellow of Chapter Zero
– Independent Non-
Executive Director at
Scottish Mortgage
Investment Trust Plc
Past roles
– Chair of Seraphine
Group Plc
– Chair of Audit Committee
atCrestNicholson Plc
– Chair of Finance at
Science Museum Group
– Chair of Audit Committee
at Network Rail
– Chair of ST Dupont S.A.
– Group Chief Financial
Officer at Sun European
– Finance Director at
John Lewis Department
Stores
– Chair of Audit at Shelter
Current roles
– Partner at Highland
Europe (Growth equity)
and Non-Executive
Director at various
portfolio companies
Past roles
– President and CEO
ofPhotoboxGroup
– COO of AOL Europe
Current roles
– Trustee of Pet
BloodBank
Past roles
– Dean of the Institute
of Veterinary Science
at the University
ofLiverpool
– Council member of
the Royal College of
Veterinary Surgeons
(RCVS)
– Member of the Veterinary
ProductsCommittee
– Member of the
Antimicrobial Resistance
and Healthcare
Associated Infections
Committee for the
Department of Health
Current roles
– Advisor with Bain &
Company
– Chair of Plate-Up Limited
– Chair of Finnebrogue
Artisan
Past roles
– Executive Director at
JSainsbury Plc
– COO and CEO at
AsdaStores Limited
Current role
– Chief Executive Officer
Past roles
– Chief Consumer Officer
at Sky UK Limited
– Non-Executive Director
at Wm Morrison
Supermarkets Plc
Current roles
– Chief Financial Officer
– Non Executive Director
and Audit and Risk
Committee Chair of
WickesGroupPlc
Past roles
– Chief Financial Officer
of New Look from
2014-2016
– Held a number of
senior nance roles
over 13 years working
for Tesco Plc both in
the UK and overseas.
These included Group
Planning, Tax and
Treasury Director, UK
Finance Director and
Chief Financial Officer
of Tesco Homeplus
(South Korea)
– Number of senior roles
with Kingsher Plc and
Whitbread Plc
Contribution to the Board
Wealth of experience
from theleisure
and retailsectors.
Ianhassignicant prior
experience ofparticipation
in audit and remuneration
committees.
Contribution to the Board
Wide ranging nancial
and commercial expertise.
Zarin is alsoaChartered
Accountant.
Contribution to the Board
Wide ranging public
company experience
with retail, strategic
and nancial expertise.
Dennis isalso a Chartered
Accountant andholds
anMBA.
Contribution to the Board
Retail, nance and public
company experience.
Sharon is also a Chartered
Management Accountant.
Contribution to the Board
Entrepreneurial
background with
digital and technology
experience.
Contribution to the Board
Considerable veterinary
experience and expertise
on the training and
wellbeing of vets.
Contribution to the Board
Deep knowledge of the
retail sector and food
supply chains.
Contribution to the Board
Broad experience
in consumer-facing
businesses, expertise in
customer and digital rst
initiatives, experience
in data and digital
transformation.
Contribution to the Board
Financial knowledge and
retailindustry expertise.
Committees
N
E
Committees
A
R
N
E
Committees
N
A
R
E
Committees
N
A
R
E
Committees
N
A
E
Committees
N
R
E
Committees
N
A
R
E
Committees
E
Committees
Committees – Key
N
Nomination and Corporate Governance
A
Audit and Risk
R
Remuneration
E
ESG (Environmental, Social and Governance)
Chair of Committee
33
Financial StatementsStrategic Report Governance
Executive Directors
Ian Burke
Chair
Zarin Patel
Senior Independent
Non-Executive Director
Dennis Millard
Non-Executive Director
Sharon Flood
Independent
Non-ExecutiveDirector
Stanislas Laurent
Independent
Non-ExecutiveDirector
Susan Dawson
Independent
Non-ExecutiveDirector
Roger Burnley
Non-Independent
Non-Executive Director
Lyssa McGowan
Chief Executive Officer
Mike Iddon
Chief Financial Officer
Appointment to the Board
2020
Appointment to the Board
2021
Appointment to the Board
2014
Appointment to the Board
2017
Appointment to the Board
2017
Appointment to the Board
2018
Appointment to the Board
2023
Appointment to the Board
2022
Appointment to the Board
2016
Current roles
Past roles
– Member of the
Board of Governors
of Birmingham
CityUniversity
– Non-Executive Chair
ofStudioRetail
GroupPlc
– Non-Executive Senior
Independent Director
of intu properties Plc
– Chair and Chief
Executive Officer
ofRank Group Plc
– Chief Executive Officer
ofHolmesPlace
HealthClubs
– Chief Executive Officer
of ThistleHotels Plc
– Chair of Vet Partners
Holdings Ltd
Current roles
– Non-Executive Director
and Chair ofthe Audit
and Risk Committee
ofAnglian Water
Services Limited
– Independent
Non-Executive Director
at Hays Plc
– Independent Non-
Executive Director
andChair of the Audit
and Risk Committee
ofHM Treasury
– Trustee of National
Trust and Chairof
itsAuditCommittee
– Member of Chapter Zero
– Member of Women
onBoards
Past roles
– Non-Executive Director
and Senior Independent
Non-Executive Director
of Post Office Limited
and member of its
AuditCommittee
– Independent member
of the Auditand
Risk Committee
of JohnLewis
PartnershipPlc
– Chief Financial Officer
of the BBC
– Chief Operating Officer
of The Grass Roots
Group Plc
Current roles
Past roles
– Senior Independent
Director ofSuperdry Plc
– Non-Executive Chair of
Watches ofSwitzerland
Group Plc
– Chair of Halfords Plc
– Senior Independent
Director of
Debenhams Plc
– Chair of Connect
Group Plc
– Senior Independent
Director ofPremier
Farnell Plc
– Senior Independent
Director of Xchanging Plc
– Non-Executive Director
of Exel Plc
Current roles
– Chair of Audit at Citybre
– Board member and
Chair of Safety and
Security at Getlink SE
– External member of the
Universityof Cambridge
Council
– Fellow of Chapter Zero
– Independent Non-
Executive Director at
Scottish Mortgage
Investment Trust Plc
Past roles
– Chair of Seraphine
Group Plc
– Chair of Audit Committee
atCrestNicholson Plc
– Chair of Finance at
Science Museum Group
– Chair of Audit Committee
at Network Rail
– Chair of ST Dupont S.A.
– Group Chief Financial
Officer at Sun European
– Finance Director at
John Lewis Department
Stores
– Chair of Audit at Shelter
Current roles
– Partner at Highland
Europe (Growth equity)
and Non-Executive
Director at various
portfolio companies
Past roles
– President and CEO
ofPhotoboxGroup
– COO of AOL Europe
Current roles
– Trustee of Pet
BloodBank
Past roles
– Dean of the Institute
of Veterinary Science
at the University
ofLiverpool
– Council member of
the Royal College of
Veterinary Surgeons
(RCVS)
– Member of the Veterinary
ProductsCommittee
– Member of the
Antimicrobial Resistance
and Healthcare
Associated Infections
Committee for the
Department of Health
Current roles
– Advisor with Bain &
Company
– Chair of Plate-Up Limited
– Chair of Finnebrogue
Artisan
Past roles
– Executive Director at
JSainsbury Plc
– COO and CEO at
AsdaStores Limited
Current role
– Chief Executive Officer
Past roles
– Chief Consumer Officer
at Sky UK Limited
– Non-Executive Director
at Wm Morrison
Supermarkets Plc
Current roles
– Chief Financial Officer
– Non Executive Director
and Audit and Risk
Committee Chair of
WickesGroupPlc
Past roles
– Chief Financial Officer
of New Look from
2014-2016
– Held a number of
senior nance roles
over 13 years working
for Tesco Plc both in
the UK and overseas.
These included Group
Planning, Tax and
Treasury Director, UK
Finance Director and
Chief Financial Officer
of Tesco Homeplus
(South Korea)
– Number of senior roles
with Kingsher Plc and
Whitbread Plc
Contribution to the Board
Wealth of experience
from theleisure
and retailsectors.
Ianhassignicant prior
experience ofparticipation
in audit and remuneration
committees.
Contribution to the Board
Wide ranging nancial
and commercial expertise.
Zarin is alsoaChartered
Accountant.
Contribution to the Board
Wide ranging public
company experience
with retail, strategic
and nancial expertise.
Dennis isalso a Chartered
Accountant andholds
anMBA.
Contribution to the Board
Retail, nance and public
company experience.
Sharon is also a Chartered
Management Accountant.
Contribution to the Board
Entrepreneurial
background with
digital and technology
experience.
Contribution to the Board
Considerable veterinary
experience and expertise
on the training and
wellbeing of vets.
Contribution to the Board
Deep knowledge of the
retail sector and food
supply chains.
Contribution to the Board
Broad experience
in consumer-facing
businesses, expertise in
customer and digital rst
initiatives, experience
in data and digital
transformation.
Contribution to the Board
Financial knowledge and
retailindustry expertise.
Committees
N
E
Committees
A
R
N
E
Committees
N
A
R
E
Committees
N
A
R
E
Committees
N
A
E
Committees
N
R
E
Committees
N
A
R
E
Committees
E
Committees
Committees – Key
N
Nomination and Corporate Governance
A
Audit and Risk
R
Remuneration
E
ESG (Environmental, Social and Governance)
Chair of Committee
Pets at Home Group Plc Annual Report & Accounts 2023
34
Leadership and purpose
Principal governance
activities during the
financial year
Compliance with the 2018 UK Corporate Governance
Code (the ‘2018 Code’)
The Governance Report outlines how the Board has applied
the main principles of good governance as required by the UK
Corporate Governance Code issued by the Financial Reporting
Council in July 2018, the Disclosure Guidance and Transparency
Rules (‘DTRs’) and the Listing Rules (‘LRs’).
The Board is responsible for ensuring that the Group has the
necessary frameworks in place to ensure compliance with the
Code. The Board believes that during this nancial year, the
Group was in full compliance with the Code, save the following.
Provision 38 – The pension contribution rate for the outgoing
CEO (Peter Pritchard) was 9% of base salary from the start
of the nancial year until he left the business on 31 May 2022.
The pension contribution rates for the CFO and the current
CEO are 6.5%, being the rate provided to the majority of
colleagues in central support office functions, therefore
ensuring the business is fully aligned with the provisions
of the Code.
2023 Board considerations
During the year the Board spent its time considering a wide range
of matters, including:
– Development of the Group’s strategic plan;
– Deeps dives on the key strategic initiatives;
– Updates from key business functions, including health
and safety, cyber security and data protection;
– Business performance;
– Sustainability and climate matters;
– Overall performance of individual business functions;
– The cost of living crisis and ination challenges;
– Budgets and long-term plans for the Group;
– Risk management and controls, including reputation risk and
corporate governance;
– Financial statements, announcements and nancial reporting
matters;
– Competitor and customer updates;
– Diversity, talent, capability and succession planning matters;
– Reviewing Committee reports;
– Approving signicant items of capital expenditure and
contracts requiring Board approval under the Board’s
reserved matters;
– Group culture, behaviours and results from the colleague
listening surveys;
– Shareholder feedback;
– Regulatory matters, corporate governance and corporate
reporting;
– Approval of the nancing arrangements and treasury items;
– Non Executive Director and Executive Management Team
succession and talent development;
– Engagement with key stakeholders and the impact of Board
decisions on such stakeholders;
– Board evaluation; and
– Key strategic projects and priorities across the Group.
35
Financial StatementsStrategic Report Governance
Oversight of development and implementation
of revised strategy
The Board continues to oversee and support the transformation
and development of the strategic vision for the Group, in line
with the Board’s aim to generate and preserve long-term value.
Increased focus and time has been given to Group strategy during
meetings of the Board this year. The Board has considered risks and
opportunities to the business throughout the year during the course
of Board meetings.
Board meetings and attendance
In this nancial year, the Board met formally eight times and
attended an annual strategy day meeting. Ad hoc meetings of both
the Board and Committees were arranged to deal with matters
between scheduled Board meetings as appropriate. Board meetings
were preceded by Committee meetings with the meetings lasting
the majority of the day in most cases. Topics for the Board meetings
are determined at the beginning of the year and new items are
added to this as and when appropriate in consultation with the
Board and Executive Management Team. All Directors receive
papers in advance of Board meetings via an electronic board paper
system which enables the fast dissemination of quality information
in a safe and secure manner. These include a monthly Board report
with updates from each of the Chief Executive Officer and the Chief
Financial Officer, which monitors the achievements against the
Group’s key performance indicators, both nancial and strategic.
Performance against budget is reported to the Board monthly and
any substantial variances are explained.
Forecasts for the year are revised and reviewed regularly. Members
of the Executive Management Team and senior leadership teams
are also invited to present at Board meetings from time to time
so that Non-Executive Directors keep abreast of developments in
the Group. For the Board, these meetings are an opportunity to
meet colleagues below the level of the Executive Management
Team and for colleagues asked to present, this is a valuable part
of their career development. It is important to the Group that all
Directors understand external views of the Group. Throughout the
year, regular reporting is provided to the Board by the Company’s
Director of Investor Relations and Corporate Affairs covering broker
reports and the output of meetings with signicant shareholders.
Directors’ conicts of interest
The Articles of Association of the Company give the Directors the
power to consider and, if appropriate, authorise conict situations
where a Director’s declared interest may conict or does conict
with the interests of the Company. Procedures are in place at every
meeting for individual Directors to report and record any potential
or actual conicts which arise. The register of reported conicts is
maintained by the Company Secretary and reviewed by the Board
at least annually. The Board has complied with these procedures
during the year.
Board
Remuneration
Committee
Audit and Risk
Committee
Nomination and Corporate
Governance Committee
ESG
Committee
Number of meetings
1
8 5 4 3 3
Director
Ian Burke (Chair) 8/8 – – 3/3 3/3
Dennis Millard (Deputy Chair)
2
8/8 4/4 4/4 3/3 3/3
Peter Pritchard
3
2/2 – – – 1/1
Lyssa McGowan
3
8/8 – – – 2/2
Mike Iddon
3
8/8 – – – –
Sharon Flood
4
7/8 5/5 4/4 3/3 2/3
Stanislas Laurent 8/8 – 4/4 3/3 3/3
Susan Dawson 8/8 5/5 – 3/3 3/3
Zarin Patel 8/8 5/5 4/4 3/3 3/3
Roger Burnley 2/2 1/1 – 1/1 1/1
1 Excludes the strategy day, which all Directors attended.
2 Dennis Millard stepped down as a formal member of the Audit and Risk Committee and the Remuneration Committee on 14 February 2023. He continues to attend meetings of those
Committees as an observer from 14 February 2023.
3 Although not formally appointed as a member of the Audit and Risk and Remuneration Committees, Peter Pritchard (until the date of his resignation) and Lyssa McGowan attended
meetings of such Committees as an observer at the invitation of the Chair. In addition, Mike Iddon also attended meetings of the Audit and Risk, Remuneration and ESG Committees as an
observer, despite not being formally appointed as a member of those Committees.
4 Sharon Flood did not attend a Board and ESG Committee meeting due to a prior commitment and was appropriately updated after those meetings.
Pets at Home Group Plc Annual Report & Accounts 2023
36
Pets at Home Group Plc Board of Directors
The Board is collectively responsible for the long-term success of the Company. The business of the Company is managed
by the Board which may exercise all of the powers of the Company. The Board delegates certain matters to Board
Committees, and delegates the detailed implementation of matters approved by the Board and the day-to-day operational
management of the business to the Group Chief Executive Officer. Further details can be found on page 37.
Chief Executive Officer
Leads the Executive Management Team and represents management on
the Board in conjunction with the Group Chief Financial Officer
Executive Management Team
The Executive Management Team supports the Chief Executive Officer
with the day-to-day management of the Group’s operations and
executes the Group’s strategy once agreed by the Board
Board Committees
Nomination and Corporate
Governance Committee
Remuneration
Committee
Retail
Senior Leadership Team
Consumer
Senior Leadership Team
Vet Group
Senior Leadership Team
Products and Supply
Chain Committee
Climate Change and
Waste Committee
Investment
Committee
Health and Safety
Committee
Pet Welfare
Committee
Environmental, Social and
Governance (ESG) Committee
Audit and Risk
Committee
Pensions
Committee
Vet Group Better World
Pledge Committee
Division of responsibilities
Governance structure
The Group’s governance structure in respect of the Board and Committees is as detailed in the diagram below.
Governance Structure,
Roles/Responsibilities,
Board Commiees
37
Financial StatementsStrategic Report Governance
The role of the Board
Division of responsibilities
The Company is led and controlled by the Board which is
collectively responsible for the long-term and sustainable
performance of the Group. The roles of Chair and Chief Executive
Officer are separate and clearly dened, with the division of
responsibilities set out in writing and agreed by the Board.
The denitions of the roles are published on the Group’s website
https://investors. petsathome.com/investors/governance/division-
of-responsibilities-for-the-ceo-and-the-chairman/.
Board Committees
The Board has established four Board Committees: an Audit
and Risk Committee, a Nomination and Corporate Governance
Committee, a Remuneration Committee and an ESG Committee.
Each Committee has written terms of reference which are approved
by the Board and subject to review each year. Only the terms of
reference for the ESG Committee were updated during the year.
The terms of reference are available on request from the Company
Secretary and are published on the Group’s website https://
investors.petsathome.com/investors/governance/our-committees.
Executive Management Team
In addition to the Board, the Group has the Executive Management
Team which includes: the Chief Executive Officer, Chief Financial
Officer, Retail Chief Operating Officer, Vet Group Chief Operating
Officer, Chief People Officer, Chief Data and Information Officer,
Chief Legal Officer and Company Secretary and the Chief
Consumer Officer. Supporting the Executive Management Team
are senior leadership teams for retail, vet and consumer. The senior
leadership teams support the Executive Management Team in the
implementation of strategy and risk and governance oversight
across their respectivedivisions.
Management committees
Details of our management committees are set out below:
Investment Committee
The Investment Committee assists the Board with the Group’s
store and veterinary surgery rollout and development process to
ensure the Group’s investment process is managed effectively
and rigorously throughout the Group. The Investment Committee
is chaired by the Chief Financial Officer and is also attended by
the Chief Executive Officer and other members of the Executive
Management Team and senior leadership team, including the
Director of Property and the Development Director. The Investment
Committee meets formally at least nine times a year and otherwise
as may be required. Duties of the Investment Committee include
reviewing and considering all proposals presented for the
acquisition of new stores, standalone veterinary surgeries, vet
extensions, Support Offices, Distribution Centres and any other type
of property for which occupation is proposed for use by a member
of the Group; approving all material variations and works of a capital
nature proposed to be carried out to any property in which the
Group has a right of occupation; approving all material variations to
proposed property and standalone surgery acquisitions; periodically
reviewing proposed changes to the reporting and presentation of
property investment criteria; reviewing all proposals presented for
lease renewals and reviewing alternative strategies for new store
investment, formats and geographical markets and reporting on
such strategies to the Board for nal approval on the terms of any
such matter; and reviewing all proposals for the dispositions of all
or part of any of the leases on stores including any sub-letting,
assignments, surrenders or relocations and approving or rejecting
any such proposals as appropriate. Each of the matters approved
by the Investment Committee is subject to further approval by the
Board where it falls within the level of expenditure requiring full
Board approval. The Investment Committee formally updates the
Board at least once a year, with additional regularupdates.
Health and Safety Committee
Health and safety is a key priority for the Board and senior
management. The Board has established a Health and Safety
Committee that meets at least on a quarterly basis and is chaired
by the Chief Legal Officer and Company Secretary with the agenda
led by the Group Head of Health and Safety. The Committee is
attended by key individuals in the business who are responsible for
certain areas of health and safety including the veterinary business,
retail, and grooming, and the Committee is tasked with reviewing the
Group’s overall health and safety performance. The Group’s wellbeing
and engagement manager also attends the meetings. A health
and safety policy is in place for the Group which is reviewed on a
regular basis. The Distribution Centres have their own dedicated
health and safety manager and a separate health and safety sub-
committee which also meets on a regular basis. The Vet Group also
has a designated health and safety manager and health and safety
assessors. Further details of the work of the Health and Safety
Committee are contained in our separate Sustainability Report.
Other Management Committees
Pensions Committee
The Pensions Committee operates to consider pensions related
issues across the business.
Pet Welfare Committee
The Pet Welfare Committee is responsible for leading the business
to be the credible, trusted voice in pet welfare and the guardians of
the value ‘we put pets rst’. The Committee considers all pet welfare
matters impacting the group and research.
Product and Supply Chain Committee
The Product and Supply Chain Committee is responsible for
considering sustainability issues in the supply chain.
Climate Change and Waste Committee
The Climate Change and Waste Committee considers all climate
and waste matters impacting the business.
Vet Group Better World Pledge Committee
The Vet Group Better World Pledge Committee operates to consider
sustainability issues and actions across the vet business and joint
venture practices.
Pets at Home Group Plc Annual Report & Accounts 2023
38
Internal control and risk management
The Board is responsible for the Group’s system of internal control
and for reviewing its effectiveness. The Board has carried out a
robust assessment of the Group’s emerging and principal risks,
including those that would threaten its business model, future
performance, solvency, liquidity or reputation as detailed on pages
23 to 30. The Board delegates to the Executive Management
Team the responsibility for designing, operating and monitoring
these systems. The systems are based on a process of identifying,
evaluating and managing key and emerging risks, and include the
risk management processes set out on page 48 of the Audit and Risk
Committee Report.
The systems of internal control were in place throughout the period
and up to the date of approval of the Annual Report. The systems
of internal control are designed to manage rather than eliminate
the risk of failure to achieve business objectives. They can only
provide reasonable and not absolute assurance against material
errors, losses, fraud or breaches of law and regulations. A number of
internal controls operate across the business. The key controls the
business relied upon during the year are set out below:
– The annual Group-wide strategic review of the existing ve-year
strategic plan took place in November 2022 and was reviewed
and approved by the Board. Following this approval, the
business carried out its annual business plan and budget cycle,
again culminating in formal review and approval by the Board on
23 March 2023.
– Management accounts have been reviewed at meetings of
the Board. These reviews covered the comparison of actual
performance against budget in the period end management
accounts and consideration of outturn for the year. The period
end accounts are prepared by the nance team and reviewed
by the Chief Financial Officer.
– All capital investments during the year have been approved by
the Chief Financial Officer; an authority framework is in place
which details the approvals required for specic levels of capital
spend including those capital projects requiring full Board
approval. In line with delegation by the Board, the Investment
Committee, chaired by the Chief Financial Officer, has reviewed
and approved investments in respect of the acquisition
and t-out of new stores, and new standalone and in-store
veterinarypractices.
– There is an Internal Audit department in place that has its scope
agreed with the Audit and Risk Committee and has reported
at each Audit and Risk Committee meeting throughout the
year. All internal audit reports are presented to the Audit and
Risk Committee for review and consideration of any material
ndings. Where audit ndings have been raised, management
have agreed appropriate actions and these are prioritised based
on risk. Further details of the areas covered in the internal audit
reports can be found in the Audit and Risk Committee Report on
page 48.
– A clearly articulated delegated authority framework in respect
of all purchasing activity is in place across the Group. This
is complemented by systemic controls including a contract
approval policy that reects the agreed authority framework
and clear segregation of duties between relevant functions
and departments.
– A schedule of matters reserved for the Board is in place
for approving signicant transactions and strategic and
organisational change. Board discussion of the key risks and
uncertainties facing the Group and the risk management
system. Further details are contained in the Audit and Risk
Committee Report on pages 44 to 45.
Whistleblowing policy
The Company has a duty to conduct its affairs in an open and
responsible way. We are committed to high standards of corporate
governance and compliance with legislation and appropriate codes
of practice. By knowing about any wrong doing or malpractice at
an early stage, we stand a good chance of taking the necessary
steps to stop it. The Group has a whistleblowing policy designed
to encourage colleagues to identify such situations and report
them without fear of repercussions or recriminations provided that
they are acting in good faith. The policy sets out how any concerns
may be raised and the response which can be expected from the
Company and in what timescales.
A copy of the Group’s Code of Ethics and Business Conduct is
published on the Group’s website https://investors.petsathome.
com/responsibility/policies-and-procedures/code-of-ethics-and-
business-conduct.
Share dealing code
The Company has adopted a share dealing code in relation to
its shares. The share dealing code applies to the Directors, its
other Persons Discharging Managerial Responsibility and certain
colleague insiders of Group companies and they are responsible
for procuring the compliance of their respective connected
persons with the Company’s share dealing code. Pets at Home’s
investor website is also regularly updated with news and
information, including this Annual Report which sets out our
strategy and performance together with our plans for future
growth http://investors.petsathome.com.
Division of responsibilities continued
39
Financial StatementsStrategic Report Governance
Board balance and independence
The 2018 Code recommends that at least half the board of
Directors of a UK-listed company, excluding the chair, should
comprise Non-Executive Directors determined by the board
to be independent in character and judgement and free from
relationships or circumstances which may affect, or could appear
to affect, the Directors’ judgement. The Board currently consists of
ve Independent Non-Executive Directors, one Non-Independent
Non-Executive Director and one Non-Executive Chair. The Directors’
biographies are contained on pages 32 to 33. The Board considers
that all of its Non-Executive Directors, with the exception of Dennis
Millard, are independent in character and judgement and that both
individually and collectively, the Directors have the range of skills,
knowledge, diversity of experience and dedication necessary to lead
the Group and also contribute signicantly to the work of the Board,
together with the requisite strategic and commercial experience.
Dennis Millard has served on the Board as an Independent
Non-Executive Director for nine years (as at 18 February 2023) and
is therefore no longer considered independent in accordance with
Provision 10 of the 2018 Code due to exceeding nine years tenure.
The skills matrix for the Board on page 41 demonstrates the
Board’s breadth of experience. More than half of the Directors are
considered to be independent in accordance with the 2018 Code.
In addition, the 2018 Code recommends that, on appointment, the
chair of a company with a premium listing on the Official List should
meet the independence criteria set out in the 2018 Code. The Board
considers that Ian Burke meets the independence criteria set out in
the 2018 Code.
Directors’ induction and ongoing training
It is important to the Board that Non-Executive Directors have the
ability to inuence and challenge appropriately. New Directors
receive a full, formal and tailored induction on joining the Board,
including meeting with the Executive Management Team and
advisors. The induction includes visits to the Group’s stores,
veterinary surgeries, Distribution Centres and other operational
locations together with training on the Group’s core values
including its culture, environmental, social and governance issues
as well as behaviours that are in place to support the Group’s
values. Individual training needs are reviewed regularly and training
is provided where a need is identied or requested. All Directors
receive frequent updates on a variety of issues relevant to the
Group’s business, including regulatory and governance issues.
Appointment terms and election of Directors
All Directors have service agreements or letters of appointment and
the details of their terms are set out in the Directors’ Remuneration
Report on pages 72 to 73. The service agreements and letters
of appointment are available for inspection at the Company’s
registered office during normal business hours. At each Annual
General Meeting of the Company all Directors will stand for re-
election in accordance with the 2018 Code. Each nancial year
theChair will liaise with Non-Executive Directors to assess and
review individual contributions to the Board and performance
overthe nancial period. The skills and experience which each
Non-Executive Director brings to the Board are detailed on pages
32, 33 and 41 and why their contribution is, and continues to be,
important to the Company’s long-term sustainable success.
Board effectiveness
The time commitments of each of the Non-Executive Directors are
considered regularly and reviewed annually. The Board is satised
that the Chair and each of the Non-Executive Directors are able to
devote sufficient time to the Group’s business.
Diversity and inclusion
The Board understands the importance of having a diverse
membership and recognises that diversity encompasses not only
gender but also background, ethnicity and experience.
The group’s diversity and inclusion aim is to increase diverse
representation of colleagues to reect the communities we live
and work in. The group’s policy for all colleagues and applicants
is to remove barriers to ensure equality of opportunity regardless
of sex, race, ethnic origin or nationality, pregnancy or maternity,
age, disability, religious or other philosophical belief, marital status,
sexual orientation, gender or gender reassignment. Our culture of
inclusivity ensures colleagues with different backgrounds, interests,
appearances, perspectives and working styles feel welcome.
Applications for employment from candidates who have a disability
are given full and fair consideration, and candidates are assessed
in accordance with their particular skills and abilities. The group
takes all reasonable steps to meet its responsibilities towards the
training and employment of people with a disability, and to ensure
that appropriate training, career development and promotion
opportunities are available to all colleagues, irrespective of
disability. Every effort is made to provide continuity of employment
in the event that any colleague becomes disabled. Attempts are
made in every circumstance to provide employment, whether this
involves adapting the current job role and remaining in the same
job, or moving to a more appropriate job role. The group continues
to be a member of the Business Disability Forum.
Board composition was reviewed by the Board this year to ensure
that the requirements of the Code are met. No changes were
recommended, however, the Nomination and Corporate Governance
Committee will continue to regularly review the diversity of the
Board and the Executive Management Team on an ongoing basis.
The Board was considered to have an appropriate mix of tenure,
skills and experience. The Board believes that appointments
should be made solely on merit, an ethos which applies across
the business. The Board continues to ensure that it maintains
an appropriate balance through a diverse mix of experience,
background, skill, knowledge and insight, to further strengthen the
diversity and experience already on the Board. Signicant work has
been undertaken by the Group this year on diversity and inclusion,
asdetailed on page 33 and in the Sustainability Report.
The Board was pleased to meet the Parker Review targets on ethnic
diversity again this year. The Board was also pleased to see the
highest ranking to date for the business in the FTSE Women Leaders
Report on gender balance this year.
Composition, succession and evaluation
Pets at Home Group Plc Annual Report & Accounts 2023
40
The following tables set out the information required by Listing Rule 9.8.6R(10), in the prescribed format.
1. (a) Table for reporting on gender identity or sex
Number of Board
members
Percentage of the
Board
Number of senior
positions on the
Board (CEO, CFO,
SID and Chair)
Number in
executive
management
Percentage
of executive
management
Men 5 56% 2 2 29%
Women 4 44% 2 5 71%
Not specified/prefer not to say – – – – –
2. (b) Table for reporting on ethnic background
Number of Board
members
Percentage of the
Board
Number of senior
positions on the
Board (CEO, CFO,
SID and Chair)
Number in
executive
management
Percentage
of executive
management
White British or other White (including minority-white groups) 7 78% 2 5 71%
Mixed/Multiple Ethnic Groups – – – 1 14%
Asian/Asian British – – – – –
Black/African/Caribbean/Black British – – – – –
Other ethnic group, including Arab 2 22% 2 1 14%
Not specified/prefer not to say – – – – –
The data above was collected by way of individual conrmation from the Board and Executive Management Team and is correct as at 24 May 2023.
Succession
The Board has continued to focus on succession planning and Group talent development this year. Further detail of the work undertaken by
the Nomination and Corporate Governance Committee in this area is included on page 43.
Board evaluation
Further information relating to this year’s Board evaluation can be found on page 43 of the Nomination and Corporate Governance
Committee report.
Composition, succession and evaluation continued
41
Financial StatementsStrategic Report Governance
Board
byTenure
Board
by Age
Board
by Gender
Balance of the Board
(Exec/Non-Exec)
Under 1 year 1/9
1-3 years 2/9
3-8 years 5/9
8+ years 1/9
45-50 1/9
50-55 2/9
56-60 2/9
61-65 2/9
+66 2/9
Female 4/9
Male 5/9
Executive Directors 2/9
Non-Executive
Directors 7/9
Pets at Home Group Plc – Board Skills Matrix
Director
Ian
Burke
Zarin
Patel
Dennis
Millard
Sharon
Flood
Stan
Laurent
Susan
Dawson
Lyssa
McGowan
Mike
Iddon
Roger
Burnley
Pet Owner
Expertise
Accounting, Finance and Audit
Risk Management
Regulatory
Governance
Corporate Transactions (M&A)
International (running a non UK Business)
General Management (CEO)
People and Culture
General Retailing Experience
Customer Service and
CommunicationsExperience
Online Retailing Experience
Marketing/Branding
General Services
Veterinary
Charity/Social Purpose
Data
IT and Technology
Omnichannel
Strategic Leadership
Vision and Mission
Sustainability and Climate Change
Transformation Leadership
Chair of Plc Board
Chair of Plc Board Committee
Pets at Home Group Plc Annual Report & Accounts 2023
42
Nomination and Corporate Governance Committee Report
What we did in 2023
– Assessed Board composition and how it may be enhanced.
– Reviewed and considered Board evaluation and effectiveness.
– Reviewed the independence of the Non-Executive Directors.
– Reviewed and considered Directors’ conicts of interest.
– Reviewed the time commitment and length of service of the
Non-Executive Directors.
– Recommended the appointment of Roger Burnley and
DrNatalie-Jane Macdonald as Non-Executive Directors.
– Reviewed and considered executive succession plans, including
the restructuring of the Executive Management Team.
– Reviewed the frequency and focus of meetings of the
Committee.
– Reviewed the Committee’s corporate governance obligations.
What we will do in 2024
– Continue to review Board composition and effectiveness.
– Consider succession planning.
– Review corporate governance obligations and updates.
– Undertake a Board evaluation and continue to develop areas
identied for improvement.
Introduction
The Nomination and Corporate Governance Committee is a key
committee of the Board whose role is to keep the composition
and structure of the Board and its Committees under review and
has responsibility for nominating candidates for appointment as
Directors to the Board having regard to its structure, size and
composition (including the skills, knowledge, experience and
diversity of its members).
We are also tasked with ensuring that succession plans are in
place for the Directors, the Executive Management Team and the
senior leadership teams, taking into consideration the current
Board structure, the leadership requirements of the Group and
the wider commercial and market environment within which the
Group operates. The full terms of reference for the Nomination
and Corporate Governance Committee can be found on the
Company’swebsite.
Committee membership
The UK Corporate Governance Code recommends that a majority
of the members of a nomination committee should be independent
Non-Executive Directors. The Nomination and Corporate
Governance Committee is chaired by myself, and its other members
are Dennis Millard, Sharon Flood, Susan Dawson, Stanislas Laurent,
Zarin Patel and Roger Burnley. Each member is an Independent
Non-Executive Director, with the exception of Dennis Millard who
ceased to be independent due to his tenure on 18 February 2023.
The majority of the Committee’s members are independent. The
Nomination and Corporate Governance Committee meets not less
than once a year. The following Directors served on the Nomination
and Corporate Governance Committee during the nancial year:
Member Period from To
No of
meetings
Ian Burke (Chair) 21 May 2020 To date 3/3
Dennis Millard 18 February 2014 To date 3/3
Sharon Flood 25 May 2017 To date 3/3
Susan Dawson 12 July 2018 To date 3/3
Stanislas Laurent 25 May 2017 To date 3/3
Zarin Patel 20 May 2021 To date 3/3
Roger Burnley 14 February 2023 To date 1/1
There were three formal Committee meetings held in the nancial
year and members’ attendance was as shown in the table above.
Board appointments and resignations
As noted last year, Lyssa McGowan was appointed to the Board as
CEO Designate on 25 April 2022, prior to her appointment as CEO
on 1 June 2022, following Peter Pritchard’s resignation on 31 May
2022. Lyssa has made an excellent start in her role and the Board
look forward to her progressing the plans she has set in motion
during the next nancial year.
The Board was pleased to announce Roger Burnley’s appointment
as Independent Non-Executive Director with effect from 14 February
2023. Roger will be a member of the Audit and Risk Committee, the
ESG Committee, the Remuneration Committee and the Nomination
and Corporate Governance Committee with effect from his
appointment. The Board is pleased to welcome Roger and he brings a
wealth of knowledge from his retail and food supply chain experience.
Who is on the Nomination and Corporate Governance
Committee?
Member No. of meetings
Ian Burke (Chair) 3/3
Dennis Millard 3/3
Sharon Flood 3/3
Susan Dawson 3/3
Stanislas Laurent 3/3
Zarin Patel 3/3
Roger Burnley 1/1
Ian Burke
Chair, Nomination and Corporate Governance Committee
43
Financial StatementsStrategic Report Governance
In addition, Dr Natalie-Jane Macdonald will join the Board as an
Independent Non-Executive Director with effect from 27 May
2023. Natalie will be a member of the Nomination and Corporate
Governance Committee and the ESG Committee from appointment.
She brings an exceptional level of strategic and operational
healthcare experience, together with knowledge of complex
consumer businesses at an executive and board level, skills which
will be valuable as Pets at Home continues to build its consumer-
centric, omnichannel, pet care platform. The Board looks forward to
working with Natalie in FY24.
Stanlislas Laurent and Sharon Flood have indicated their intention
to step down from the Board on 26 May 2023 and will not therefore
stand for re-election at this year’s AGM.
Dennis Millard stepped down from his role as Senior Independent
Non-Executive Director with effect from 14 February 2023. Dennis
will remain with the Board for a further 12 months. Dennis stepped
down from being a member of the Remuneration Committee and
Audit and Risk Committee, after he ceased being independent, but
will continue to attend those Committees as an observer.
Zarin Patel was appointed as Senior Independent Non-Executive
Director from 14 February 2023.
A number of changes have also taken place at Executive
Management Team level.
Louise Stonier was appointed as Vet Group Chief Operating Officer
on 24 June 2022, following Jane Balmain’s resignation. Kathryn Imrie
joined the business in the newly created role of Chief Consumer
Officer on 20 February 2023. Rachel Mooney joined as Chief People
Officer from October 2022 until May 2023.
Lisa Miao and Lucy Williams were promoted to the Executive
Management Team in the respective roles of Retail Chief Operating
Officer and Chief Legal Officer and Company Secretary, with Lucy
now taking responsibility for the Legal, ESG, Procurement, Data
Protection, Health and Safety, and People functions. The data
function for the business now reports to William Hewish, Chief Data
and Information Officer.
Succession planning and Group talent development
At Board and Committee level, the Committee has considered
the skills required to deliver the strategy and objectives in the
longerterm.
The Committee is responsible for reviewing talent, capability and
succession at the most senior levels of the business, however, in
the last four nancial years, the Committee has increased its focus
on talent development, retention and succession below Board
and Executive Management Team level. This work has involved
considering skills and capability gaps along with succession
planning immediately below the Executive Management Team and
the development of a talent framework whereby colleagues are
assessed against the Group’s core competencies and development
plans put in place to support colleagues in reaching their full
potential. Considerable progress has been made in identifying gaps
in the talent pool in addition to mitigating the risks associated with
unforeseen events such as key individuals leaving the business.
Board evaluation and effectiveness
This year, the Board carried out an internal evaluation, following last
year’s evaluation being carried out externally by MWM Consulting.
An assessment and discussion took place in relation to key focus
areas highlighted by the MWM review including: having less
transactional/agenda free time, strategy, shareholders, succession
planning and Committees. Progress was discussed against each of
the areas highlighted and the Board was considered to be effective.
Diversity
The Board is committed to supporting work initiatives that promote
a culture of inclusion and diversity. The Committee recognises the
importance of diversity and inclusion both in the Boardroom and
throughout the organisation and understands that a diverse Board
will offer wider perspectives which lead to better decision-making,
enabling it to meet its responsibilities. We take into account a
variety of factors before recommending any new appointment to
the Board, including relevant skills to perform the role, experience,
knowledge, ethnicity and gender. The most important priority of
the Committee, however, is ensuring that the best candidate is
selected to join the Board. We will monitor the Group’s approach to
people development to ensure that it continues to enable talented
individuals to enjoy career progression with the Group.
Further details on Board diversity can be found on page 40 of the
Governance Report.
Conicts of interest and independence of the
Non Executive Directors
The Board has delegated authority to the Committee to consider,
and where necessary authorise, any actual or potential conicts of
interest arising in respect of the Directors, however any potential
conicts of interest were considered during Board meetings as they
arose during the course of this year.
We also support the Board in its annual consideration of the
Conicts of Interest Register, which is carried out prior to the
publication of the Annual Report, and consider the independence of
the Non-Executive Directors, in the context of the criteria set out in
the Corporate Governance Code.
The Board’s view on independence is contained on page 39 of the
Governance Report. For further information on Board composition,
diversity and independence, please see the Governance Report on
page 39 to 40.
I will be available at the Annual General Meeting to answer
any questions on the work of the Nomination and Corporate
Governance Committee and I look forward to reporting on further
progress as we continue our work next year.
Ian Burke
Chair, Nomination and Corporate Governance Committee
25 May 2023
Pets at Home Group Plc Annual Report & Accounts 2023
44
Audit and Risk Committee Report
Introduction
This is my second report as Chair of the Audit and Risk Committee
(‘the Committee’), having joined the Board in April 2021. I am
pleased to report that the Committee has been highly engaged
in assisting the Board in fullling its responsibilities to protect the
interests of shareholders regarding the integrity of the nancial
reporting, the adequacy and effectiveness of internal controls and
risk management systems, and the effectiveness of both the Internal
Audit function and external audit relationship.
What we did in 2023
Carried out our responsibilities as set out in the terms of reference,
including monitoring the integrity, challenging the judgemental
areas, and advising the Board on whether external reporting is fair,
balanced, and understandable.
Reviewed and challenged the Longer-Term Viability Statement
(‘LTVS’) and going concern basis of preparation in advance of its
approval by the Board, particularly considering the presence of key
risk factors such as climate change, current geopolitical tensions
including the situation in Ukraine, the global supply chain issues,
inationary pressures and the impact of consumer condence.
Aspart of this work, the carrying value of the goodwill balance
hasbeen reviewed, as has the distributable reserves position
priorto the declaration of dividends.
Monitored the control environment of the Group including our
general risk management processes, as well as emerging and
evolving risks considering the presence of key risk factors as noted
above, and ongoing focus around pet welfare protocols. We have
also monitored the controls and processes relating to the release of
key IT and distribution projects.
Reviewed the effectiveness of the Group’s whistleblowing
procedures, fraud effectiveness framework, health and safety plans,
and the activities and effectiveness of the Internal Audit function to
meet the requirements of the Internal Audit plan.
Continued to monitor the process and controls around extending
nancial support to Joint Venture veterinary practices, and the
recoverability of those loans and investments. We have also
continued to review whether the level of practice indebtedness,
or any other factors, infers additional control to the Group of a
practice, and whether this challenges the existing accounting
treatment.
The Committee has continued to monitor progress of the Internal
Controls over Financial Reporting ('ICFR') project. A new Internal
Financial Controls team has been put in place, dedicated to
improving the robustness of the internal control environment and
designing and executing processes to conduct business activities
and manage associated risks within the appetite set by the Board.
We have worked with the ESG Committee to continue to support
the development of the Group’s risk scenario planning and reporting
in relation to Task Force on Climate-Related Financial Disclosures
(‘TCFD’) and the related considerations in the Group’s going
concern and longer-term viability assessment, including reviewing
the commitments published by the Group. We also commissioned
an external review of the disclosures.
Cyber security risk continues to be one of the Group’s Principal
Risks and an area we remain vigilant given the increasingly complex
nature of cyber attacks. In December 2022 the business saw an
increase in malicious activity which was contained quickly with
minimal impact to data or services. The cyber security policies,
controls and plans have been reviewed regularly by the Committee
at the biannual Risk and Audit Review by the Board of Directors.
During the year the Financial Reporting Council (‘FRC’) Corporate
Review team carried out a review of our Annual Report and
Accounts for the year ended March 2022. The review was based
solely on the Annual Report and Accounts and did not benet
from detailed knowledge of our business or an understanding
of the underlying transactions entered into. The review has not
highlighted any questions or queries requiring a response, however
in the interests of supporting continuous reporting improvement
there were a number of matters raised for our attention which we
considered in relation to our 2023 Annual Report and Accounts.
As a result of the FRC’s review, we have considered and improved
clarity of disclosure in relation to a number of areas including
the prominence of Alternative Performance Measures (‘APMs’)
compared to equivalent IFRS measures and Task Force on Climate-
related Financial Disclosures (‘TCFD’), specically with reference to
the recent thematic review.
Zarin Patel
Chair ofthe Audit andRiskCommittee
Who is on the Audit and Risk Committee?
Member No. of meetings
Zarin Patel (Chair) 4/4
Sharon Flood 4/4
Dennis Millard 4/4
Stanislas Laurent 4/4
Roger Burnley joined the Audit and Risk Committee on 14 February 2023.
Dennis Millard stepped down on 14 February 2023 and Sharon Flood will
step down on 26 May 2023. There have been no meetings since Roger
Burnley’s appointment.
45
Financial StatementsStrategic Report Governance
What we will do in 2024
Continue to build on what we did in 2023 and to carry out our
responsibilities as set out in the terms of reference. Continue to
monitor emerging and maturing risks, in particular risks from the
Ukraine crisis, the global supply chain issues, cyber security and
data privacy. Continue to focus on the control environment of the
Group, including pet welfare across our operations and the controls
and processes relating to the release of key projects, in what is a
key year for the delivery of our IT, distribution and internal nancial
controls projects.
Review the proposals set out by the Government in response to the
Department for Business, Energy, and Industrial Strategy (‘BEIS’)
corporate governance reform agenda.
Continue to develop our Internal Controls Framework and monitor
progress of the Internal Controls over Financial Reporting ('ICFR')
project. We will continue to monitor and build our fraud policy
and carry out a fraud effectiveness review across the business.
We are developing our audit and assurance policy in preparation
for legislative requirements. We will review the newly published
Minimum Audit Standards for Audit Committees and the
forthcoming proposals from the Department of Business and Trade
Strategy corporate governance reform agenda and company code
changes from the FRC.
Consider the risk implications of the refreshed strategy.
Review the progress and delivery of major projects including the
new distribution centre (Project Spice), digital capability (Project
Polestar), Vet Group transformation (Project Apollo) and cyber
security enhancements. We have ongoing embedded assurance
within major strategic projects to report back to the Board and
Auditand Risk Committee on key risk themes.
Continue to review the development of the Data Protection
framework and data compliance programme across the business.
Carry out a competitive external audit tender in relation to the nancial
year ended March 2026, ensuring a focus on audit quality and
effectiveness and giving due consideration to competition in the audit
market with reference to the FRC’s December 2022 policy paper.
Continue to work with the ESG Committee to support the
development of the Group’s scenario planning and reporting
in relation to Task Force on Climate-Related Financial
Disclosures (‘TCFD’), specically relating to new requirements
andrecommendations made by the FRC.
Committee membership
The Committee members have been selected to provide a wide
range of nancial, retail, technology and commercial experience
necessary to full the duties and responsibilities of the Committee.
Each member of the Committee is an independent Non-Executive
Director and has, through their other business activities,
considerable experience in nancial matters. Further details of
the Committee members and their experience can be found on
pages32 to 41.
The Chair of the Company’s Board, Executive Management Team
and senior managers within the business are invited to attend
meetings as appropriate to ensure that the Committee maintains a
current and well-informed view of events within the business, and
to reinforce a strong risk management culture. The Group Company
Secretary acts as secretary to the Committee.
The Committee meets according to the requirements of the
Company’s nancial calendar. The meetings of the Committee
also provide the opportunity for the Independent Non-Executive
Directors to meet without the Executive Directors present and to
raise any matters of concern with the internal and external auditors.
Committee members also meet in private prior to each Committee
meeting and hold separate private sessions with the internal auditor
and the external auditor, to provide additional opportunity for open
dialogue and feedback without management present.
Committee activities
The Committee’s role primarily covers the following areas:
– Financial reporting and narrative reporting;
– Ongoing viability;
– Risk management systems;
– Internal controls;
– Internal audit; and
– External audit.
Pets at Home Group Plc Annual Report & Accounts 2023
46
Audit and Risk Committee Report continued
Audit and Risk Committee meetings
The Committee met on four occasions during the nancial year with each meeting having a distinct agenda to reect the annual reporting
cycle of the Group. The agenda is regularly reviewed and developed to meet the changing needs of the Group.
A summary of the key matters considered at each meeting is as follows:
Meeting Financial reporting Risk management/internal control Internal audit External audit
May
22
– Review of the Annual Report and Accounts
for the period ended 31 March 2022
– Review of IFRIC Cloud computing
arrangements
– Review of goodwill impairment
– Review of supplier income recognition policy
– Review of operating loan provisioning policy
– Review of consolidation consideration for
Joint Venture Companies
– Review of disclosures in relation to
acquisitions and disposals
– Review of considerations of the Group’s
longer-term viability and going concern
– Review of Final Dividend recommendation
and distributable reserves
– Review of Corporate Risk Register
– Review of principal risks for the Annual Report
– Review of Whistleblowing policy
– Review of Health and Safety reports
– Review of Tax policy
– Review of Treasury policy
– Review of FY23
Internal Audit plan
– Review reports on
progress of the
Internal Audit plan
including Data
Governance, Vet
Group nance
transformation
(Project Apollo) and
Risk Culture
– Report on
Annual Financial
Statements and
external audit
– Review of policy
on non-audit fees
September
22
– Review of progress of subsidiary
nancial statements for the period
ended 31 March 2022
– Review of principal risks and the related mitigation plans
– Review of Risk Management Framework
– Review of Risk Appetite Framework
– Review of key priorities and readiness assessment
relating to the Internal Controls over Financial Reporting
('ICFR') project
– Review of Whistleblowing reports
– Review of Health and Safety reports
– Review of Treasury policy
– Review of cyber security maturity and controls
– Review progress on implementation of Vet Group
nance transformation programme
– Review reports on
progress of Internal
Audit plan including
cloud management,
disaster recovery
and wellbeing
framework
– Review programme
on implementation
of internal audit
actions
– Review of
FY22 external
consultancy
and professional
services spend
– Approval to
commence External
Audit tender
November
22
– Review of the Interim Financial Statements
– Review of appropriateness and quantum of
Alternative Performance Measures (‘APMs’),
with the intention to streamline for the year
end reporting
– Review of goodwill impairment
– Review of considerations of the Group’s
longer-term viability and going concern
– Review of operating loan provisioning policy
– Review of consolidation consideration for
joint venture companies
– Review Interim Dividend recommendations
and distributable reserves
– Review of principal risks and the related mitigation plans
– Risk management including review of updated risk
appetite
– Review of Whistleblowing reports
– Deep dive review of Health and Safety reports
– Review reports on
progress of Internal
Audit plan and
update actions
including TCFD
disclosures
– Report on review
of Interim Financial
Statements
– Approval of external
audit strategy for
the year ended
30March 2023
– Approval of external
audit fees
January
23
– Review of completeness of emerging risks
– Deep dive on Data Protection risks
– Review of cyber security maturity and approval of
actions to improve maturity
– Review progress of the Internal Controls over Financial
Reporting ('ICFR') project
– Review of the proposals in relation to the Audit and
Assurance Policy as set out by the Government in
response to the Department for Business and Trade
Strategy corporate governance reform agenda
– Fraud effectiveness and update on external fraud
trendreports
– Review of Whistleblowing reports
– Review of Health and Safety reports
– Review reports
on progress of
Internal Audit plan
including cash and
banking (Retail and
Group) and Retail
discounting
– Review of FRC
correspondence
– Assessed
external auditor
effectiveness as
appropriate
47
Financial StatementsStrategic Report Governance
Financial statement reporting matters
The Committee considered several signicant matters in the year, considering in all instances the views of the Company’s external auditor.
The Committee has assessed the key risks and emerging risks and considers the key risks within the nancial statements to be the carrying
value of goodwill and parent Company’s investment in subsidiaries.
The Committee oversaw the TCFD reporting together with the ESG Committee and considered the impact of climate change on the Group’s
longer-term viability and carrying values. The Committee considered the following in making its assessment of the reporting in the nancial
statements.
Issue Nature of the risk How the risk was addressed by the Committee
Carrying value
of goodwill and
parent Company’s
investment in
subsidiaries
The Group holds a significant goodwill
balance, and the Company holds significant
investments in subsidiary companies. There
are several factors that could impact on the
future profitability and cash flows of the
business, threat of competition, changes in
market behaviour, and changes in the broader
macro-economic environment (including
inflationary pressures) and there is a risk that
the business will not meet the required financial
performance to support the carrying value of
the Group and Company’s intangible assets.
The Committee reviewed and challenged management’s process
for testing goodwill for potential impairment, allocation of goodwill
across cash-generating units (CGUs’), and ensuring appropriate
sensitivity analysis and disclosure. This included challenging the key
assumptions within each CGU: principally cash flow forecasts, growth
rates and discount rates and comparing the Group’s value in use to its
market capitalisation. This review considered the current geopolitical
tensions including the situation in Ukraine, energy prices, supply
chain security, and inflationary pressures on the Group’s financial
performance and future cash flows and therefore the carrying value of
the Group and Company’s intangible assets.
The Committee also reviewed KPMG’s work and conclusions on this
risk and the key assumptions they tested in reaching their conclusions.
The Committee is satisfied that there is no impairment to the Group’s
goodwill balance or the Company’s investment in subsidiaries and that
there is appropriate disclosure in the financial statements.
Ongoing viability
In considering viability overall, the Committee reviewed the Group’s strategic plan with particular focus on the key assumptions in relation
to revenue, cost growth and cash ow management. Sensitivities to these key assumptions were also reviewed based on the impact of the
Group’s key risks, individually and conated, as set out on pages 23 to 30. The review includes the consideration of the impact of wider
macro-economic factors including inationary pressures, supply chain stability, energy prices and geopolitical instability, and further
operational disruption on future cash ows, as well as the potential impact of climate change as set out in our TCFD scenario analysis.
Following a review of the detailed considerations set out above by the Committee and Executive Management Team, the Committee is
satised that it is appropriate for the Group to continue to adopt the going concern basis in preparing the Annual Report and Accounts of
the Group and, further, that the Longer-Term Viability Statement on page 91 is appropriate.
Fair, balanced and understandable
The Committee considered the Annual Report and Financial Statements for the nancial year ended 30 March 2023, taken as a whole,
including the non-underlying costs associated with the relocation of the distribution centre and group restructure and the simplication of
the APMs. The Committee has concluded that the disclosures as well as processes and controls underlying its production were appropriate,
and recommended to the Board that the Annual Report and Financial Statements for the nancial year ended 30 March 2023 are fair,
balanced and understandable, while providing the information necessary for shareholders to assess the Group’s position and performance,
business model and strategy.
Pets at Home Group Plc Annual Report & Accounts 2023
48
Audit and Risk Committee Reportcontinued
Risk management and internal controls
Risk management and the system of internal control are the responsibility of the Board. It ensures that there is a process in place to identify,
assess and manage signicant risks that may affect achievement of the Group’s objectives and that the level and prole of such risks is
acceptable (based on the Board’s risk appetite). The processes have been in place for the year under review and up to the date of approval
of the Annual Report and Accounts. The Committee provides oversight and challenge to the assessment of principal risks as set out on page
23. The Group’s key risks and uncertainties are set out on pages 24 to 30. The three lines of defence governance model is set out on page 23
along with the Board’s risk management process.
Throughout the year we have improved our processes for identifying and assessing current and emerging risks, and identifying and reporting
against key risk indicators, building on our strong culture and behaviours framework. We have also reviewed the risk appetite framework.
We continue to align with the TCFD requirements for climate related risks and opportunities, specically around the physical risks, transition
risks and emerging risks around sustainable pet ownership.
The Committee explores specic key risks of the Group in detail, inviting the management team to discuss the matters and mitigations and
further proposed actions. During the year, the Committee considered risks specic to the Retail and Vet Group operations and key IT and
distribution projects, as well as cyber security, Health and Safety and Data Protection. The Internal Audit team is independent, appropriately
skilled and has a direct reporting line to the Committee. The Internal Audit plan is based on providing assurance on key risks, controls and
compliance throughout the year (see table of topics covered below). We use the varied experience of the Committee members to ensure
assurance is focused on all the right issues. The Committee reviews the reports and recommendations in detail and ensures that action is
taken in a timely manner to improve the control environment. The Committee has also performed risk reviews with management on a number
of key risk areas as detailed in the Audit and Risk Committee meetings section on page 46. The Board, through the Audit and Risk Committee,
are satised that the internal control framework is effective but acknowledges that the Internal Controls over Financial Reporting (ICFR)
project is underway to enhance internal nancial controls, which both the Board and Committee will continue to monitor in FY24.
Internal Audit
The Internal Audit function has a direct line of report into the Committee and is an important part of the independent assurance processes
within the business. The Committee reviews and approves the Internal Audit plan for the year which is developed to address key risks across
the business as well as reviewing core governance, nancial and commercial processes.
The Head of Internal Audit and Risk attends each Committee meeting, updating on progress against the audit plan throughout the year,
reporting on any key control weaknesses identied and progress against mitigating actions.
Specic work performed during the year in our key risk areas included:
Risk area Work undertaken
Strategic – Project Spice (distribution centre), capital project assurance
– Project Polestar (digital capability), capital project assurance
– Project Apollo (Vet Group finance transformation), capital project assurance
– TCFD disclosures
Operational – Vet finance system and access management
– Retail Distribution Centre stock receiving
– Retail customer complaints management
– Cyber-threat scenario management
– Payroll-system pay elements
– Colleague wellbeing
– Goods not for resale framework
– Disaster recovery plans for principal IT systems
– Cloud strategy and management
– Pet welfare (Retail)
– Supporting Vet practice performance
Financial – Cash and banking controls (Retail and Central)
– Retail customer discounts
– Travel and expenses
Legal and regulatory compliance – GDPR compliance
– IR35 compliance
– Senior Accounting Officer certification process
49
Financial StatementsStrategic Report Governance
All reports, related ndings and recommended actions have been discussed by the Committee and are tracked to completion.
External audit
KPMG presents their audit plan, risk assessment and audit ndings to the Committee, identifying their consideration of the key audit risks for
the year and the scope of their work. These reports are discussed throughout the audit cycle. These risks were the carrying value of goodwill
(across the Group, but with specic reference to Vet Group goodwill), the carrying value of the parent Company’s investment in subsidiaries,
and management override of controls. In their reports presented to the Committee at both the interim and full year, the auditors considered
these risks to be appropriately addressed and raised no signicant areas of concern in these or any other areas of their review.
KPMG also attend the Committee meetings and meet separately, without management present, to discuss any matters in detail.
In line with the Statutory Audit Regulation and Directive, we have commenced a tender for our March 2026 year-end audit and our intention
is to conclude this process during the nancial year ending 28 March 2024. The tender will aim to comply with the quality standards set out
in the newly published Minimum Audit Standards for Audit Committees which includes the consideration of both ‘Big Four’ and challenger
audit rms. KPMG, who have audited the Group since 2000, were reappointed at the AGM on 7 July 2022. Ailsa Griffin has been appointed
audit partner for the nancial year ending 30 March 2023, replacing Stuart Burdass as part of the planned cycle of audit partner rotation.
External auditor’s effectiveness
The Committee considered the quality, effectiveness, independence, and objectivity of the external auditors through the review of all reports
provided, regular contact and dialogue both during Committee meetings and separately without management. Continuing from the process
in the previous year, we conducted an audit quality and effectiveness review through a questionnaire to Committee members, management,
and members of the nance team, which delivered focused insight into KPMG’s effectiveness. We considered the audit quality reviews on
the rm and sought conrmation that recommendations were appropriately actioned where relevant to the audits of our Company andGroup.
Auditor independence
Maintaining the objectivity and independence of the external auditors is essential. The Committee has taken appropriate steps to ensure
that the Company’s external auditors are independent of the Company and obtained written conrmation from them that they comply with
guidelines on independence issued by the relevant accountancy and auditing bodies.
Additional non-audit services provided by the auditors may impair their independence or give rise to a perception that their independence
may be impaired. The Group has a policy in relation to the provision on non-audit services that is aligned with the EU Regulation and
Statutory Audit Directive to provide further clarity over the type of work that is acceptable for the external auditors to carry out. The policy
sets out the process required for approval and a cap to the total non-audit fees for permitted services (at 70% of the audit fee). The policy
was last reviewed in the year ended 30 March 2023.
Audit and non-audit fees paid to KPMG in the year were £1,388,000 and an analysis is presented in note 3 to the consolidated nancial
statements. Non-audit fees represent 8% of the audit fee. Non-audit services provided by the external auditors during the 2023 nancial
year comprised audit related assurance services, in the form of an independent review of the half-yearly statements and a nancial covenant
compliance certicate. The Committee concluded that the provision of such services was appropriate given that they were closely related to
the work performed in the external audit process and, for reason of effectiveness and efficiency, it was considered advantageous to engage
the external auditors due to their knowledge and expertise.
Resolutions to reappoint KPMG as auditors and to authorise the Directors to agree their remuneration will be put to shareholders at the
Annual General Meeting that will take place on 6 July 2023.
Audit Committee effectiveness
During the year, a review was undertaken of the effectiveness of the Audit and Risk Committee. The Committee was found to be broadly
effective and aims to mature its oversight of the technology risks as the Group becomes more digitally focused.
Zarin Patel
Chair, Audit and Risk Committee
25 May 2023
Pets at Home Group Plc Annual Report & Accounts 2023
50
What we did in FY23
– Continued to focus on the monitoring and delivery of our high
standards of pet welfare across the Group
– Overseen the refresh of the sustainability strategy, including an
updated materiality assessment, and the agreement of three
strategic priority areas
– Monitored the progress of the Group’s approach to the Task
Force on Climate related Financial Disclosure (TCFD)
– Moved the review and focus on ESG risks to this Committee,
reporting to the Audit and Risk Committee
– Reviewed and approved an updated supplier code of conduct
and a Responsible Sourcing Handbook for suppliers
What we will do in FY24
In addition to our continued focus on pet welfare and ESG risks,
during FY24 we will focus on the development of the refreshed
strategy and the embedding of this across the business in particular:
– Monitor delivery against our net zero targets and how these are
embedded into the relevant business areas
– Agree the strategies and review progress in relation to the
sustainability strategic priority areas of pet food and supplier scope 1
and 2 carbon maturity
– Strengthen the sustainability skills and capability across the
business
Introduction and strategic approach
The Committee oversees the governance of our sustainability
strategy. In my fth year as Chair I am delighted to see the progress
that we have made in the rst two years of the ‘Our Better World
Pledge’ strategy and the important step of refreshing it to align with
the updated business strategy.
Our strategic approach to ESG is organised around three pillars of
Planet, Pets and People where the Group has material impact and
creates value. We believe these pillars are the right way through
which to approach our responsibilities and align with our Group
purpose, to create a better world for pets and the people who
lovethem.
Recognising that the Group participates in a broad range of
activities and services involving pets, their welfare remains a
central part of the Committee’s focus and a standing item on every
Committee meeting agenda. The Committee maintains a regular
and detailed review of pet welfare. The Committee regularly reviews
the Group’s policies and procedures in relation to pet welfare in
itsretail business and supply chain, and the development of its
clinical governance framework in the veterinary services business.
The Committee’s focus on people includes the approach to
assessing salient human rights risks across the operations and
supply chains.
Following COP26 in Glasgow in 2021 and the many subsequent
scientic updates, the future of our planet has become a larger
part of the focus of all business’s including Pets at Home. We
recognise the need to not be complacent about our response and
controls around this material topic therefore, climate change and
environmental impact have now been made a standing item at
everyESG Committee and additionally at every Board meeting.
It has been a year of change with Peter Pritchard leaving the
business and Lyssa McGowan becoming the sixth CEO. During this
time the management committees established in FY20 to support
the Better World Pledge strategy, have continued to meet on a
regular basis. Each of them is chaired by a Director and sponsored
by an Executive Management team member. Our ESG Director and
Sustainability Manager also attend all of these meetings. There has
been an important update to our Pet Welfare Committee which
is now chaired by our Group Veterinary Officer and now reviews
pet welfare governance and strategy from a clinical and retail
perspective.
Susan Dawson
Chair of the ESG Committee
Who is on the ESG Committee?
Member No. of meetings
Susan Dawson (Chair) 3/3
Ian Burke 3/3
Dennis Millard 3/3
Sharon Flood 2/3
Stan Laurent 3/3
Zarin Patel 3/3
Roger Burnley 1/1
Peter Pritchard 1/1
Lyssa McGowan 2/2
ESG Committee Report
51
Financial StatementsStrategic Report Governance
Committee membership
The ESG Committee, which meets at least three times a year, is
chaired by Susan Dawson. Acknowledging the importance of ESG
to the Group, ve additional Board members have been selected to
attend the meetings. The CEO (Peter Pritchard for the rst meeting
of the year and Lyssa McGowan from the second meeting onwards)
is the Executive member of the Committee. There have been some
changes in executive responsibilities during the year which has
meant that Louise Stonier, Chief People and Culture Officer, joined
the April meeting and from September Lucy Williams, Chief Legal
Officer, attended in her capacity of being the executive member
with ESG responsibility. Amy Whidburn, ESG Director, and Karlien
Heyrman, Head of Pets, attend each Committee meeting.
Highlights
Strategy refresh
– The rst Committee meeting of the year in April 2022 began
with a progress review of the previous nancial year. The
Committee reected that although considerable progress had
been made across many areas, there was a need to develop
some strategic priority areas which would be differentiated from
the corepriorities
– The September Committee reviewed the strategy refresh
proposal including the timeline and process and the emerging
priority focus areas. The Committee agreed with the emerging
priority focus area around scope 3 and particularly pet food
– The February Committee primarily focused on the strategy
refresh. The materiality assessment was reviewed in detail.
The Committee received an update on stakeholder input and
perspectives on this assessment including a series of one to one
meetings with ve of our larger shareholders
TCFD disclosure
– The Committee reviewed and approved the TCFD disclosure
to be included in the Annual Report and agreed to make
TCFD an agenda item at every ESG Committee for the rest
of the nancial year. It was also agreed that ESG risks would
be brought to the Committee as a standing item, this was in
recognition of the benet of allowing more dedicated time to
review and discuss these risks and report back to the Audit
and Risk Committee. An external audit of our TCFD readiness
was agreed to take place in September 2022, which was then
subsequently reviewed at the Board and the ESG Committee
meetings
Human Rights
– The second Committee meeting in September 2022 received
the annual update on the Human Rights strategy and progress
along with the review and approval of the annual Modern
Slavery Act statement. An updated supplier code of conduct
was reviewed and approved along with the plans to launch a
consolidated Responsible Sourcing Handbook for suppliers
that contains all relevant policies and supporting guidance in
one document. The Group’s Human Rights specialist provided
a detailed update on ethical audit progress and plans to
resume in-house audits in China when COVID-19 restrictions
allow. China was discussed as an area of concern because it
had been almost three years since physical audits had taken
place and it is the Group’s largest sourcing country outside of
the UK. In recognition of this concern some deep dive audits
had been conducted by an independent third party and the
results of these were discussed. The Committee agreed with
the recommendation to publish our tier 1 retail supply chain, the
number of workers in tier one factories, and gender diversity
ESG risk
– ESG risks were reviewed at the September and February
Committee meetings. This included a deep dive of three
corporate ESG risks and how TCFD had been successfully
integrated into the corporate risk framework
– The Committee reviewed the results of an internal audit on the
controlled drug policy and procedures which is an important
area given the heightened risk in the vet profession
Pet welfare
– Pet welfare is a standing agenda item at every ESG Committee
meeting and the Head of Pets attends every ESG Committee
meeting. In addition to the regular reporting on pet governance,
the Committee received an update regarding the changes to
the Pet Welfare Committee. The Committee is now chaired
by Gudrun Ravetz, Group Veterinary Officer, and the Terms of
Reference (ToR) have been updated. Gudrun gave an update
from the relaunched committee’s rst meeting and agreement
to focus advocacy and action on four priority topics: kept
animals bill; nutrition and obesity; behaviour and aversive
training techniques and responsible dog breeding. This is in
addition to the existing focus on pet welfare considerations
relating to our products and services and governance of pets
inour care
The ToR for the ESG Committee were reviewed in the April 2023
meeting. The ToR can be found on the Pets at Home Group
investorwebsite.
Susan Dawson
Chair of the ESG Committee
25 May 2023
Pets at Home Group Plc Annual Report & Accounts 2023
52
TCFD statement
Introduction
Pets at Home recognise the climate emergency poses both risks and opportunities to our strategy and operations. To that end, sustainability
and climate change is featured as a principal risk within our Annual Report (see page 25). We are committed to implementing the TCFD
recommendations, having made voluntary disclosures ahead of the FCA’s mandatory requirements for UK Premium Listed Companies to
report. Pets at Home is required to implement the reporting recommendations of the TCFD (as set out in Listing Rule LR 9.8.6R) for the
accounting period starting on or after 1 January 2021.
In this section, we outline our approach to climate-related risks and opportunities, which our scenario analysis concludes will likely present
over the long-term which we dene as between ve and 20 years. In the last year we have made signicant progress integrating climate-
related risks within our risk management framework and business strategy.
Our disclosures are consistent with the TCFD’s four recommendations, and 10 of its 11 recommended disclosures, in line with the TCFD
‘Guidance for All Sectors’ (LR9.8.6BG). The remaining disclosure for ‘Strategy: Describe the impact of climate-related risks and opportunities
on the organisation’s businesses, strategy, and nancial planning’, is partially consistent. We have analysed the risks in the short to medium
term, which we classify as now to ve years, and this analysis has been built into the going concern assessment detailed in note 1.3 on page
109 and the goodwill impairment testing detailed in note 13 on page 130. Our quantication of nancial impact over the long term (ve to 20
years) is work in progress due to the level of uncertainty. We will continue to enhance our nancial impact models across the year with a view
to disclosing these in our future reporting. Our ESG materiality review includes climate action and pet food sustainability as material topics
and is referenced in our resilience statement on page 56. In the interest of space we have not included this full materiality assessment in this
statement; it can be found in our standalone sustainability report.
Governance
Disclosure requirement Description of progress
a) Describe the Board’s
oversight of climate-related
risks and opportunities
The Board led by the Chair, Ian Burke, has ultimate responsibility for sustainability and climate change and ensuring
that the strategy creates mutual value for stakeholders, including colleagues, customers, shareholders, and society.
Oversight of climate change strategy is a matter reserved for the Board, via the ESG Committee.
– The ESG Committee comprises all Non-Executive Directors and the Chief Executive and Chief Financial Officer and
is chaired by a Non-Executive Director. This Committee has a standing climate-change item on every agenda. The
Committee meets at least three times a year and receives a written update at every meeting and an in-depth review
on an annual basis. The regular update includes a review of ESG risks and the status of climate-related projects and
initiatives. The in-depth review includes a progress update against the 2030 and 2040 carbon reduction targets vs
a 2020 base. For example, in April 2023 the Board meeting reviewed the pathways to achieving the long term 2040
carbon reduction goals within the pet food area which represents a large proportion of scope 3 emissions. Scope 1
and 2 emissions are updated in full on an annual basis and the forward forecast is refreshed and discussed.
– In addition, climate change has been made a standing agenda item at every Board meeting since December 2022.
– During the year the Chair has undertaken additional climate related training through the completion of a six-week
training course at the Said Business School on ‘Leading Sustainable Corporations’. Climate-related skills and
experience are included in the skills matrix of the Board of Directors included in the Annual Report on page 41.
The Board provides challenge to the Executive Management Team on progress against the goals and targets of
the climate strategy and ensures the Group has an effective risk management system in place. This is principally
governed via two main Committees: the Audit and Risk Committee and the ESG Committee.
– At the ESG Committee meeting in April 2023 it was agreed that the Board and Executive Management Committee
would receive an externally facilitated immersion session on sustainability and climate change during FY24.
– Oversight and management of climate-related risks and opportunities occur at a number of levels in the
organisation.Chart one below summarises the key forums and members of senior management with responsibility
forclimate-related issues. The reporting lines flow up to the Board level band of Committees.
Across FY23, the Board made a series of key decisions relating to our climate-related risks and resilience strategy.
Examples include:
– The review, refinement, and approval of three over-arching climate-related risks and opportunities, following the
conclusion of our TCFD qualitative scenario analysis. This has ensured our climate risks are now fully integrated into
our corporate risk management process.
– As part of our strategic business review, capital has been allocated across a 5-year timescale to enable investments
to further reduce our operational environmental impact and scope 1 and 2 emissions. For example, in our distribution
network, £2.8m of capital was approved to invest in a solar installation and battery storage at our new distribution
centre at Stafford, reducing our dependency on purchased electricity. Additionally, a trial has been approved to
test the use of HVO renewable fuel in our HGV fleet. This would enable us to operate our fleet with a considerably
reduced carbon footprint by removing the use of fossil fuels. Both of these initiatives are key to enabling the
business to achieve a 42% reduction in scope 1 and 2 emissions by 2030 vs a 2020 base.
– The approval of long-term strategic partnerships with Cranswick Group plc. Pet food has been identified as a key
pathway to delivering our long-term carbon reduction targets (see target section page 60). It accounts for a large
proportion of our scope 3 emissions. These long-term partnerships enable collaboration with supplier stakeholders
on carbon reduction projects.
Disclosure requirement Description of progress
b) Describe Management’s
role in assessing/
managing climate-related
risks and opportunities
The Chief Executive Officer has overall responsibility for climate change and sustainability topics.
– The Chief Executive is supported by the ESG Director and Executive management team to develop and implement
the strategy through a number of management committees. Each committee is chaired by a Director. Our Better
World Pledge (OBWP) strategy includes climate strategy as a key pillar. Progress towards delivering this strategy
is discussed and updated at the Executive Management Team meeting on a regular basis and was specifically
discussed three times during FY23.
– Our new remuneration policy links an element of Executive remuneration to sustainability-related objectives,
effective from FY24 and can be found on page 64 of this Annual Report.
As shown in Chart One, the management of climate change projects is the responsibility of three principal committees:
1. The Climate Change and Waste Committee meets every six weeks and is responsible for developing and
implementing the business strategy relating to operational environmental impact. This includes scope 1 and 2
energy and carbon emissions for buildings, transport logistics, and waste management.
2. The Responsible Products Committee meets every six weeks and is responsible for developing the strategy for
managing the value chain environmental and ethical impacts of our products. This includes human rights, circularity
and waste, packaging, raw materials, and scope 3 emissions of product ingredients, manufacturing, use and disposal.
3. The Vet Group OBWP Committee meets every six weeks and is responsible for developing the strategy for vet
specific climate and environmental related risks and opportunities, such as a reduction in anaesthetic gas use.
Each committee is responsible for climate-related idea generation, operational delivery, project management, KPI
development, and progress tracking. Progress is tracked using a project management approach that ladders up to
period reporting to the Executive Management Team and the Board.
Chart One – Pets at Home’s Oversight and Management of climate-related risks and opportunities
53
Financial StatementsStrategic Report Governance
Oversight and Management of Climate Related Risks and Opportunities
BoardOther Management
Plc Board. Responsible for the overall leadership of the Group including matters of Governance, Reputation, Environmental and
Social Sustainability.
Group Risk Manager and Business Risk Champions. Consider climate related risks and opportunities that impact the operations and
strategic priorities within their relevant business area.
Executive Management Team. Responsible for identifying climate related risks within their business function and delivering
the Climate Strategy.
CEO. Accountable
to the Board for the
implementation of the
Climate Strategy.
ESG Director. Responsible
for Climate Strategy
development and subject
matter expert.
CFO. Accountable to the
Board for integrating climate
related metrics and targets
into business decision
making and reporting.
Head of Internal Audit.
Provides objective assurance
to the Board and Audit
and RiskCommittee on the
effectiveness of the Risk
Management Framework.
ESG Committee. Reviews and monitors the Group’s
approach to Environmental, Social and Governance topics.
Climate change is a key component of this.
Climate Change and Waste Committee.
Responsible for consideration of climate
related risks and opportunities that impact
our business operations.
Vet Group OBWP Committee.
Specic responsibility for the impact of
climate change on pets and veterinary
care and vet specic topics.
Responsible Products Committee.
Responsible for climate related risks
and opportunities that impact our
products and broader supply chains.
Audit and Risk Committee. Reviews and monitors the
Group’s Risk Management Framework which includes
climate related risks.
The chart above shows the key committee, forums and individuals with responsibility for climate related matters. All of these committees and
individuals report up to the Board. Escalation procedures are in place to enable responsibilities to be met.
Pets at Home Group Plc Annual Report & Accounts 2023
54
Strategy
Strategic overview and context
This year we updated our business strategy to create a single purpose
for the business, ‘to create a better world for pets and the people who
love them’. Sustainability has been placed at the heart of our role ‘to
build the world’s best pet care platform’. Our sustainability strategy was
refreshed to ensure that we are prioritising actions to make a material
impact and create a commercial advantage. Within the ‘Planet’ pillar
of our sustainability strategy we have provided more focus around the
delivery of our Science Based Targets initiative (‘SBTi’) approved near-
term (2030) and net-zero (2040) emissions reduction targets. We have
created a new goal ‘to make pet care environmentally sustainable’ and
plan to achieve this by prioritising making pet food sustainable, which
is the most important and complex of our carbon reduction pathways.
Making pet care environmentally sustainable is our strategy to manage
and mitigate climate risks and develop climate resilience over the long
term. In addition, we see environmentally sustainable pet care as an
opportunity to be world leading and gain commercial advantage.
In FY22, we conducted a qualitative scenario analysis to review
climate-related impacts. We developed three customised
scenarios, each rooted in prevailing scientic evidence from
the Intergovernmental Panel on Climate Change (IPCC),
theInternational Energy Agency (IEA) and Principles for Responsible
Investment (PRI) (see: Information box 1), and during a series of internal
workshops reviewed climate-related impacts across our short, medium,
and long-term time horizons (see Information box 2). These time frames
have been selected because of the alignment with our business
process, cycles and strategic goals. The short term time frame aligns
to our business nancial forecasting cycle, the medium term aligns
to the strategic planning cycle and the long term aligns to the long
term SBTi approved carbon reduction targets that we have set.
The scenario analysis identied eight high-level risks/opportunities
which were subjected to an initial materiality review and discussed
with the Board. This year we have rened these risks and
opportunities further through analysis and research, resulting in two
being removed because they are not material. We have grouped
the risks into three over-arching categories under which six of the
initial high-level risks now sit: Physical risks, Transition risks and
Sustainable Pet Ownership. The rst two sit together under our
Group principal risk of Sustainability and Climate Change, the third
is categorised as an emerging risk. This third risk is monitored via
the Group watch list of emerging and developing threats, where the
timeline, impact or potential mitigation is not yet clear.
These risks and our analysis are summarised in Information box 2.
TCFD statementcontinued
Information box 1 – a qualitative scenario analysis was conducted in FY22, over a period of three months and was reviewed
and shaped by the Executive Management Team and ESG Committee.
Climate-related scenario
Scenario analysis
coverage
Temperature
alignment of scenario Parameters and assumptions
Physical and
Transition scenarios
Company-wide 1.5˚C Action taken has achieved the aims set out in the 2015 Paris Agreement to limit
climate change to below 1.5˚C of pre-industrial levels, but with significant shifts in
policy, cost and consumer behaviours. The scenario was developed by incorporating
scenarios which are rooted in prevailing scientific evidence. Specifically:
– Representative Concentration Pathway (RCP) 2.6
– Shared Socioeconomic Pathway (SSP) 1
– PRI Inevitable Policy Response (IPR): 1.5C Required Policy Scenario
Physical and
Transition scenarios
Company-wide 2˚C Not much has changed from today. Some action has been taken, but it’s very
much business as usual. Uncertainty increases, and impacts of a changing climate
manifest themselves in vulnerable parts of the world. The scenario was developed by
incorporating scenarios which are rooted in prevailing scientific evidence. Specifically:
– RCP 4.5
– SSP 2
– PRI IPR: Forecast Policy Scenario
Physical and
Transition scenarios
Company-wide 3˚C Economies around the world have continued to be powered by fossil fuels. As a
result, the planet is in crisis and well past the point of no return by 2030. Global
warming has accelerated and changes in climate are all around, tangible and, in
some cases, catastrophic. The scenario was developed by incorporating scenarios
which are rooted in prevailing scientific evidence. Specifically:
– RCP 6.0
– SSP 5
Information box 2
Time frame Scenario
Risk Short-Term 1-3 years Medium-Term 3-5 years Long-Term 5-20 years 1.5/2°C 3°C
Physical Likely Probability: Low Moderate
Impact: Low Moderate
Transition Likely Probability: Moderate Low
Impact: Moderate Low
Sustainable Pet Ownership Likely Probability:
Emerging
Impact:
55
Financial StatementsStrategic Report Governance
The impact of these climate-related risks on our businesses and strategy are further disclosed in the following tables. Over the next year,
we plan to further rene the quantication of these climate-related risks and opportunities over the long term (ve to 20 years) in order
to better understand their potential nancial impacts. Our initial assessment has identied that in the long term there could be material
nancial impacts.
TCFD Strategy Disclosure requirement sections a and b: Description of climate-related risks and opportunities identied and their impact on
business, strategy and nancial planning identied.
1. Physical risk – category: Chronic. 3°C scenario
Description of risk:
Cost of repair and/or loss
of revenue from assets and
supply chain disruption.
Extreme weather events
affecting continuity of
own operations, supply of
products and retail sales
(stores, distribution centres,
vet practices) and disrupting
supply chain sourcing
(raw material sourcing and
supplier operations).
Business impact:
Modelling of our UK sites indicates that the
vast majority are not located in areas of
flood risk. While we have observed weather
events increase in severity and frequency
over recent years, operational impacts have
been minor and further incidents in the
short and medium term can be managed
within the framework and cost of existing
controls.
The majority of our pet food is sourced from
the UK. Initial assessment of raw material
and manufacturing exposure to risk of
extreme weather events in the short and
medium term is assessed as low. Further
work is required to understand long-term
impacts on UK farming and raw material
availability.
Our accessories ranges are predominantly
sourced overseas. Initial assessment of raw
material and manufacturing exposure to risk
of extreme weather in the short and medium
term is assessed as low. Further work is
required to understand long-term weather-
related impacts.
Proximity:
Long term (five to 20 years)
Risk rating before mitigation:
Probability: Moderate
Impact: Low – Moderate
As climate change persists,
we expect these effects to
increase in the long-term
and our broader supply
chains could be vulnerable.
Risk Management and
mitigation actions:
– Ongoing assessment of climate-related
weather vulnerabilities in relation to our
operations, suppliers and raw materials.
– Monitoring the frequency and severity
of climate-related weather events.
– Regular review of business continuity
plans for the distribution centres.
– Conducting climate risk reviews
proactively ahead of decisions to locate
new operational infrastructure or select
new suppliers.
– Continuing to strengthen our long-
standing relationships with key
suppliers and freight partners.
– Maintaining sourcing location
flexibility, across the medium to long
term, to switch supply lines away
from areas of emerging risk, including
review of weather-related risk when
new sourcing locations are being
considered.
2. Transition Risk – categories: Regulatory requirements and Reputation. 1.5°C scenario
Description of risk:
Increase in the cost
ofdoingbusiness
Operational and value chain
decarbonisation – inability
to efficiently transition our
value chain and products
and services to low carbon
models.
Possible introduction
of more stringent
environmental regulation
has the potential to increase
the cost of production
and operational flexibility,
as carbon costs become
increasingly internalised.
Business impact:
Increased operating costs relating to the
transition to a low carbon economy e.g.,
higher energy costs, changes in production
costs, and direct and indirect carbon
taxation e.g., meat tax on pet food.
Capital investments relating to uncertainty
and nascent development of low carbon
technology e.g., alternative fuels for
distribution vehicles. Market competition
and unpredictable costs relating to delivery
of our carbon transition plan, particularly in
relation to the availability and demand for
new products and services e.g., high quality
carbon removal opportunities.
Products and services not transitioned
quickly enough to low carbon models to
meet consumer shift in preference to low
meat/no meat pet food and low carbon
accessory products resulting in loss of
revenue and reputational damage.
Proximity:
Long term (five to 20 years)
Risk rating before mitigation:
Probability: Moderate
Impact: Moderate
Further work is planned
to understand long-term
R&D investment cost,
and its effect on margin,
assuming no action taken
tomitigaterisk.
Risk Management and
mitigation actions:
– Business case – capital allocation to
invest in operational infrastructure to
reduce operational carbon, such as
securing low carbon energy resilience.
– Long term supplier partnerships to
enable collaboration and investment in
innovative R&D solutions.
– R&D investment to develop the market
for animal-meat alternatives. Also an
opportunity to become the market
leader in alternative pet food protein
for consumers, a potential revenue
opportunity.
– Pet food strategy - mitigation of meat
protein tax could include pass on to
customers to enable switching to lower
carbon options.
– Supplier engagement underway to
decarbonise supply chain.
– Investing in renewable energy
generation to reduce cost exposure
tocarbon pricing.
Pets at Home Group Plc Annual Report & Accounts 2023
56
3. Sustainable Pet Ownership – Category: Market. 3°C scenario
Description of risk/
opportunity:
Emerging
Pet ownership – changes
in pet ownership, over
the long-term driven by
potential cost increases
of pet care, due to the
manifestation of physical
and transitional risks.
Changes in consumer
attitudes to pet ownership,
where owning a pet may be
viewed as irresponsible in a
warming world.
Counter balancing these is
the opportunity of increased
customer revenue and
market share from Pets at
Home leading the market for
environmentally sustainable
pet care, in a warming world.
Business impact:
The implicit and explicit price of carbon
drives up prices and general living costs
are squeezed. At the same time pet
ownership becomes socially unacceptable
as consumers seek to reduce their
environmental impact and pets are seen as
a luxury and climate burden. In this scenario,
pet numbers fall as fewer consumers opt for
pet ownership.
Expanding products and services marketed
as environmentally sustainable drives
revenue and market share, as consumers
switch to sustainable brands.
Proximity:
Long term (5 to 20 years)
Risk rating before
mitigatingaction:
Probability: Very Low
Impact: Moderate
Pet ownership has historically
been resilient to economic
and social factors, this seems
unlikely to change over the
next 10 years. Market insight
on pet ownership and trends
offers early signals to changes.
Our experience suggests these
will be gradual over time.
This risk is monitored via the
Group watch list of emerging
risks, where the timeline,
impact or potential mitigation is
not yet clear.
Risk Management and
mitigation actions:
Our strategy is to make pet care
environmentally sustainable, thereby
neutralising potential consumer
concerns that pet ownership is socially
unacceptable.
– Strategic investment in priority
areas such as pet food to identify
lower carbon ingredients and
manufacturing processes that meet
consumer expectations.
– Ongoing long-term monitoring of
consumer and societal attitudes to
pet ownership.
– Regular monitoring of consumer
and market trends to identify
shiftsin behaviour to which we
canrespond.
– Frequent planned range reviews
to respond to change in consumer
preferences.
– Championing the benefits that pets
bring to our lives, e.g., enhanced
wellbeing via consolidation of
existing research.
TCFD Strategy disclosure requirement section c: Describe the resilience of your strategy, taking into consideration different
climate related scenarios, including a 2°C or lower scenario
The scenario planning work was conducted using three different warming scenarios. These have been used to develop the impact on our
identied physical, transitional and emerging risks and this has then informed our strategic response to ensure that we are developing a
resilient strategy. Our sustainability strategy ‘Our Better World Pledge’ has been refreshed during FY23 which has enabled this latest work
on risk at different warming scenarios to be a key consideration in developing our response. The key element of this strategy update has
been the prioritisation of our scope 3 emissions, and within that, pet food as the largest impact area and a non-discretionary purchase for
petowners. Our materiality assessment identied sustainable pet food and climate action among the top sustainability topics to address.
Our strategic response to the physical risks following our analysis focuses on monitoring. Our UK based operations present a lower risk and
our supply chain locations remain exible in the long term which provides resilience to the most extreme (3°C) scenario. Within the supply
chain the majority our pet food suppliers are UK based and this remains our strategy.
The impacts of a lower warming scenario (1.5°C) on our transitionary risks are higher as more change and investment would have been
required to enable the temperature increases to be contained at lower levels. Our strategic response is to ensure a smooth transition as
we work with our suppliers to decarbonise supply chains and products and as we invest in areas of technological potential to support the
long-term transition (such as lab grown meat). Strategic resilience will be ensured through working consistently towards the long term goals
often before our customers are demanding them. We have been investing in our operational decarbonisation for many years, purchasing
renewable energy since 2017 and investing in LEDs and buildings’ energy management systems. As we make new investments our strategy is
to consider how we can do this in a carbon efficient way, for example our new DC in Stafford does not use natural gas and we are investing in
solar and battery storage.
Our emerging risk around pet ownership could present in any of the different warming scenarios. Our strategy of making pet ownership
sustainable is relevant and builds resilience through reducing the impact of owning pets and reducing the likelihood of pet ownership as
being viewed as a luxury. Equally our strategy of celebrating the benets that pets bring to our lives builds resilience by demonstrating
valuecreation.
We will continue to review our strategic approach to ensure it aligns to the prevailing scientic advice and best practice. Over the next year,
we will further develop the quantication of these climate-related risks and opportunities on our business, strategy and nancial planning
over the long term (5 to 20 years) to enhance further the resilience of our strategy.
TCFD statementcontinued
57
Financial StatementsStrategic Report Governance
Risk Management
Disclosure requirement Description/progress
a) Describe the processes for
identifying and assessing
climate-related risks.
The initial process for identifying climate risks for TCFD took place through a series of scenario planning workshops.
These included detailed horizon scanning briefings and then consideration of the implication through the eyes of the
key stakeholders of the business (pet, customer, vet, store manager, supplier) in three different global warming scenarios
(see information box 1). This led to the 8 high level risks and opportunities to be created. This process and its outcomes were
reviewed by the Executive Management team and the ESG Committee. These 8 high level risks and opportunities have
been refined and consolidated into the three ESG risks that sit under the principal risk of sustainability and climate change.
On an ongoing basis risks are identified through the risk management system. At a business level this happens using the
risk champions who include ESG risks as part of their risk assessment for their respective areas of the business. Additionally
the climate change, responsible products and vet group committees are responsible for identifying climate change risks.
On an annual basis overall ESG materiality assessment is reviewed, and this includes detailed consideration of established
and emerging topics that are relevant to climate change. Atthis annual review the ESG Committee also reviews existing and
emerging regulatory requirements related to climate change. On a three yearly basis this materiality review becomes a deep
dive exercise where external stakeholder feedback is gathered to horizon scan topics and review assessment of importance.
These risks are assessed using the corporate standardised risk scoring methodology which includes measurement of
likelihood, impact, and proximity. This produces a gross risk score before mitigating actions. This aids the escalation
andconsolidation of risks into a Group-wide view. See the risk framework on page 23 of this Annual Report.
b) Describe the processes for
managing climate-related
risks.
The climate related risks are managed using our corporate risk management framework. Each risk has a gross, net score,
and a target score where the risk is not within appetite. Mitigating actions are then monitored for expected remediation
of the risk and progress towards the target score. This mitigation strategy assigns owners and timescales to each
action. Progress against the strategy is updated and reported to the executive management team and the Audit and
Risk Committee four times a year. In addition, our climate risks, along with other ESG risks, are reviewed at each ESG
Committee, which meets at least three times a year.
Examples of risk mitigation and management exercised for Transition risks include engaging suppliers to commit
to havingcarbon reduction plans in place by 2027. Also, investing in solar at our Stafford Distribution Centre and
continuingto invest in renewable electricity.
c) Describe how processes for
identifying, assessing, and
managing climate-related
risks are integrated into
overall risk management.
Chart two demonstrates how Pets at Home’s climate-related risks are fully integrated into our overall risk management
approach. Climate related risks are identified, assessed, and managed through the corporate risk management
approachwhich classifies risks as business, corporate or principal risks. Our ability to identify, assess and effectively
manage current and emerging risks is critical in ensuring the continued success of our business.
Risk Management Framework
Principal Risks
• Risks that could threaten our business model, future
performance, solvency or liquidity.
• Material climate related risks are captured under the
principal risk Climate Change and Sustainability.
• Reported in the Annual Report and Sustainability Report.
The Group’s
emerging risks are
assessed and agreed
by the Executive
Management Team
and the Board. A
watch list of emerging
and developing
threats is maintained,
and these ow into
our risk framework at
the appropriate level
for each risk.
Corporate Risks
• Risks that are promoted from a business level risk
register as they sit near to or above the appetite
level set by the Board.
• Owned by an Executive Director, ESG corporate risks
being owned by the Chief Executive Officer.
• Reported in detail to the Executive Management Team,
the Board and A&R Committee 4 x a year.
Business Risks
• Risks that are identied and managed at a business unit,
strategic project or function level.
• The ESG function has its own risk register.
• The ESG Director owns and manages climate related
risks and implementation of mitigating actions.
• Grouping of climate related risks in Group wide risk
management system for reporting to ESG function.
Principal
Risks
Corporate Risks
Business Risks
Chart Two - climate-related risks are fully integrated into our overall risk management approach
Pets at Home Group Plc Annual Report & Accounts 2023
58
Metrics and Targets
Disclosure requirement Description/progress
a) Disclose the metrics used
to assess climate-related
risks and opportunities in
line with its strategy and
risk management process.
These metrics are used to monitor our performance in managing and assessing climate-related risks and opportunity
identified in the Strategy section.
Physical risks
– Mapping and tracking weather sensitivity for UK key infrastructure locations. Mapping to weather sensitivity
completed.
– Mapping and tracking Supply Chain locations for tier 1. Mapping location of tier one own brand factories, disclosed on
our corporate website.
– Tracking of extreme climate related weather events and impacts in operations and supply chains. This is a new area
and we are considering how we can track starting with our operations the actual financial impact of severe weather
events (lost business and repair costs).
Transition risks
– Monitoring the percentage of suppliers with scope 1 and 2 carbon reduction plans in place. New metric, progress will
be disclosed in FY24 reporting.
– Monitoring the proportion of own brand pet food range with carbon footprinting completed. New metric, progress will
be disclosed in FY24 reporting.
Sustainable Pet Ownership an emerging risk
– Ongoing long-term monitoring of consumer and societal attitudes to pet ownership.
– Regular monitoring of consumer and market trends to identify shifts in behaviour to which we can respond.
In addition, Pets at Home reports using the SASB methodology. We complete the CDP climate change disclosure on an
annual basis, our latest disclosure achieved an overall score of ‘B’.
b) Disclose scope 1, scope
2, and, if appropriate,
scope 3 greenhouse gas
(GHG) emissions, and the
related risks.
Pets at Home has measured and disclosed our scope 1 and 2 CO
2
e emissions since FY14. These emissions (including
both location-based and market-based) are externally assured on an annual basis. Trend data from FY16 is updated and
reported annually in our sustainability report. We measured our scope 3 baseline, in order to set net zero targets, and this
has been validated by the Science Based Targets initiative. During FY24 we will begin the work to include Forest, Land
and Agriculture emissions in our scope 3 baseline, in line with SBTi’s FLAG requirement.
Operational (scope 1 and 2) performance
During the year we have continued to invest in energy reducing initiatives. We have run an education campaign with
colleagues to further reduce our use of energy in our buildings. All of our forklifts at our DCs are now electric. We have
moved our company car fleet list to a low carbon selection and 75% of our company cars are now either EV or hybrid.
Our absolute carbon used has reduced by 4.3%. Our intensity-based performance has continued to improve year/year at
17.2 Tonnes CO
2
e relative to £1,404m revenue.
Our scope 1 emissions reduction of 2.2% has been caused by the removal of red diesel from our business which has
offset the increase in diesel emissions of 5.4% as our business has grown, and our network reconfiguration as we ramp up
operations at our new national distribution centre in Stafford and transition from our current operation from multiple sites.
From an efficiency perspective our km/l has remained broadly flat at 2.97 in FY23 vs 2.94 in FY22.
Our scope 2 emissions have shown a slight improvement of 6.2% benefiting from the de-carbonisation of the national grid.
The element of our scope 3 emissions which we report within our operational footprint, included in table 3, have
increased by 7.4%. This is a small part of our total scope 3 emissions that are reported in more detail on page 60.
Our performance over the longer term continues to demonstrate the importance of carbon reduction to our business.
Since 2016 our revenue has grown by 80.2% and our absolute emissions have reduced by 41.5% as shown in table 1.
TCFD statementcontinued
59
Financial StatementsStrategic Report Governance
Carbon reporting summary
Table 1: Scope 1 & 2 carbon emissions eight year performance tonnes CO
2
e emissions
Tonnes CO
2
e emissions
FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY23 vs FY16
Emissions
Scope 1 9,498 9,619 9,649 8,431 12,085 11,337 11,968 11,709 23.3%
Scope 2 (location based) 31,680 28,840 21,584 17,066 15,133 13,616 13,200 12,386 -62.1%
Total 41,178 38,459 31,233 25,497 27,218 24,953 25,168 24,095 -41.5%
% change -7% -19% -18% 7% -8% 1% -4%
Group
Revenue
£m 779 834 899 961 1,059 1,143 1,318 1,404 80.2%
% change 7.1% 7.8% 6.9% 10.2% 7.9% 15.3% 6.6%
Normalisation/Intensity 52.9 46.1 35.1 26.5 25.7 21.8 19.1 17.2 -67.5%
% change -13.0% -25.0% -24.0% -3.0% -15.0% -12.5% -10.0%
Normalisation: Intensity calculated using Group revenue and location based scope 1 & 2 emissions. Exclusions: Anaesthetics &Fugitive emissions are included from year FY20 onwards.
Intensity has been calculated using Group revenue and location based scope 1 and 2 emissions
Table 2: Carbon emissions summary by Scope 2021/22/23
Tonnes CO
2
e emissions
2020/21
(scope 2 location-based)
2021/22
(scope 2 location-based)
2022/23
(scope 2 location-based)
2022/23
(scope 2 market-based)
Scope 1 11,337 11,968 11,709 11,709
Scope 2 13,616 13,200 12,386 0
Scope 3 (see additional inclusions) 4,697 4,954* 5,319 5,319
Total 29,650 30,122 29,414 17,028
Inclusion of 1,500 tonnes of carbon mitigation 27,914 15,528
Scope 1 and Scope 2 kWh 90,400,963 96,425,923 96,138,431
Normalisation of CO
2
e scope 1 & 2 to £m revenue 21.8 19.1 17.2
Methodology: We have applied UK SECR and WBCSD/WRI Greenhouse Gas Protocol Corporate Standard as our methodology. We have used emissions factors from UK Government 2022
conversion factors, IEA 2019 for international sites and AIB residual mix from 2020.
Methodology: An operational control approach has been used for the organisational boundary. This is the same as last year 2021/22.
Additional inclusions: We have included the emissions from our standalone vet practices and some elements of our scope 3 emissions where we have greater operational oversight
(3rdparty business travel, 3rd party logistics and distribution and electricity transmission and distribution losses).
Exclusions: Only anaesthetics sourced from preferred Pets at Home suppliers has been included in the calculation.
Exclusions: Train and air journeys are not reported, as no accurate carbon intensity data was available. This will be worked on in FY24 to ensure inclusion going forward.
Estimation: Where this year’s data was not available 1.9% of sites used last year’s consumption data.
Independent verication: Our 2022/23 scope 1, 2 and some scope 3 emissions (3rd party business travel, 3rd party logistics and distribution and electricity transmission and distribution
losses) Please refer to page 42 of the sustainability report for their assurance statement.
Market-based criteria: Since October 2017 we have procured 100% renewable electricity backed by REGOs and assessed for conformance with GHG Protocol scope 2 Quality Criteria.
An emission factor of zero has therefore been applied since that date to calculate our scope 2 market-based gure, whilst a location-based factor was used to calculate scope 3 emissions
from transmission and distribution losses.
Carbon mitigation: Pets at Home Ltd is donating £45,000 to the Woodland Trust, a company limited by guarantee (Company Number: 1982873) and a registered charity, Charity
Number England and Wales: No. 294344, Scotland No. SC038885 whose registered office is at Kempton Way, Grantham, Lincolnshire NG31 6LL) to absorb 1,500 tonnes of carbon dioxide
(equivalent to our use of fugitive gas, natural gas in our buildings and electricity procured outside of the Group renewable contract), through the planting of 6,400 trees, helping with our
strategy to reduce our business carbon footprint.
UK proportions: Pets at Home operations are UK based except for a small office in Hong Kong. Therefore less than 0.1% of total scope 1 and 2 emissions and kWh usage was from outside
ofthe UK.
Restatements: Absolute scope 3 greenhouse gas emissions (tCO
2
e) have been restated for FY22 from 5453 to 4954 due to an incorrect emissions factor being used in FY22 for 3rd party
diesel fuel. Greenhouse gas emissions from natural gas were incorrectly allocated to scope 1 emissions in FY22 therefore 590 tC02e has been moved from scope 1 to scope 2. This does not
affect the total absolute greenhouse gas emissions and has not bee restated for years before FY22.
Pets at Home Group Plc Annual Report & Accounts 2023
60
Disclosure requirement Description/progress
b) Disclose scope 1, scope 2,
and, if appropriate, scope
3 greenhouse gas (GHG)
emissions, and the related
risks continued
Value chain (scope 3) emissions Tonnes CO
2
e
Our scope 3 assessment and SBTi target setting approach demonstrated that like most retail-based businesses the
largest part of our impact comes through our products being made, used and disposed of. We completed an original
assessment in FY20 and updated this in FY21. This assessment was reviewed as part of our SBTi target setting approval
process. Following SBTi guidelines, this scope 3 assessment includes the relevant GHG protocol categories which is why
it is bigger than the limited scope 3 categories included in table 2 on page 59. We have not reassessed our scope 3 base
since then, instead prioritising our resources to our carbon reduction activities that the assessments helped toidentify.
Scope 1 11.7k t CO
2
e
Scope 2 12.4k t CO
2
e
Scope 3 885k t CO
2
e
Tonnes CO
2
e location based FY23 scope 1 and 2 data, scope 3 assessment FY21
c) Describe the targets used
to manage climate-related
risks and opportunities
and performance
againsttargets.
At Pets at Home, we have taken the decision to set our carbon emissions target using the guidance of the Science Based
Targets initiative (SBTi). We have made this decision because science-based targets provide companies with a clearly
defined path to reduce emissions in line with the Paris Agreement goals.
– Near-term: Pets at Home commits to reduce absolute scope 1 and 2 GHG emissions 42% by FY30 from a 2020
baseyear.
– Near-term: Pets at Home commits to reduce absolute scope 3 GHG emissions from purchased goods and services, and
upstream transportation and distribution 42% by FY30 from a 2020 base year.
– Long-term: Pets at Home Group commits to reduce absolute scope 1 and 2 GHG emissions 90% by FY40 from a 2020
base year. Pets at Home Group also commits to reduce scope 3 GHG emissions 90% within the same time frame.
These targets have been approved by the Science Based Targets initiative. Actions and progress to achieve these targets
are reported in our Sustainability Report on page 16.
Related Targets:
– By 2028 all priority suppliers to have carbon reduction plans in place and 50% to have achieved leadership status.
This is a new target and progress will be updated in FY24 reporting.
– By 2028 all priority own brand food products to be carbon footprinted. This is a new target and progress will be
updated in FY24 reporting.
– By 2028 all priority raw materials to be sustainable and packaging recyclable. These are existing targets and our
reporting can be seen on page 18 of our standalone sustainability report.
– By 2028 create, protect and restore 15k acres of UK native woodland (2020 base). This is an existing target and our
reporting can be seen on page 15 of our standalone sustainability report.
We also identify other opportunities to align our targets to climate reduction goals. For example, our revolving credit
facility with HSBC acting as sustainability coordinator, agreed in March 2022, is linked to sustainability targets. The Group
now has financial incentives (or penalties) to accelerate our work on pets, people and planet through targets focused on
carbon reduction, supporting pets in need and community action. Our performance against our sustainability linked loan
can be seen on page 4 in the standalone Sustainability Report.
Our new remuneration policy links an element of Executive remuneration to sustainability objectives, effective from FY24.
Read more on page 64
of the Annual Report.
TCFD statementcontinued
61
Financial StatementsStrategic Report Governance
Directors’ Remuneration Report
Business Performance
FY23 was a year of signicant nancial challenge due to the
turbulent economic backdrop, which impacted energy prices,
FXcosts, freight, and ination. Despite this, we will exit FY23 with
underlying PBT of £136.4m (vs. £130.1m (53 weeks) in FY22), having
grown sales ahead of the market, and with more customers than
ever before. We have also made notable steps forward in our
strategic initiatives, including the rst despatches from our Stafford
DC and the launch of our new digital app, with record investments
into our strategic capabilities in FY23.
Highlights Include:
– The UK pet care market remains in growth, and our scale and
reach continue to drive share gains. In the past year we gained
further share to 24%, taking 5-year gains to 600bps.
– We continued to welcome new customers to the platform,
growing our VIP club to 7.7m active members (+5%) averaging
over 24,000 Puppy & Kitten sign-ups a week and with 8,500
new vet clients a week.
– Total Group revenue growth of 6.6% to £1,404.2m, with
Group like-for-like (LFL) revenue up 7.9%, with quarterly LFL
accelerating sequentially throughout the year.
– Vet Group revenue increased by 13.3%, with LFL revenue up
13.4%. Across our general practices we are now consistently
delivering in excess of £10m consumer revenue per week.
– Retail revenue growth of 5.9%, and LFL growth of 7.5%. All
channels remain in growth, and we delivered further progress
in our relative price competitiveness.
– Group free cash ow up 3.5% to £98.2m reecting YoY
underlying prot growth offset by our planned increased
investment into our key strategic growth areas.
– Our new DC is now onstream, underpinning capacity needs
beyond the next decade and will materially reduce our cost to
serve. Deliveries to our store network are underway and we will
look to move to one DC from three by Spring 2024, improving
fullment costs, consumer experience and efficiency.
– Continued progress in the development of our digital platform,
with Q3 seeing the launch of an enhanced mobile app bringing
together VIP and shopping in one easy to use experience.
Shareholder Experience
– Overall, the shareholder experience in FY23 was positive.
– The share price has moved to £3.61 on the 30 March 2023 with
a 12 month high of £3.93 recorded on 27 February 2023.
– Reported results have been towards the upper end of market
expectations, particularly in terms of revenue, and as a result we
upgraded our full year prot guidance alongside our Q3 results
in January.
– Despite the strong performance our overall share price reaction
has been fairly muted and inuenced by the macro-economic
climate all businesses across the UK are facing.
– The interim dividend was increased by 5% to 4.5p and a £50m
share buyback programme completed.
– The nal dividend per share of 8.3p, an increase of 11% YoY.
Full year dividend per share of 12.8p, an increase of 8% YoY.
Introduction
On behalf of the Remuneration Committee (Committee), I am pleased
to present our Directors’ Remuneration Report (DRR) for FY23.
FY23: Looking back
Overview
Our performance over the past year has been strong, in what
remains a challenging macro-environment. Our business, and the
wider industry, remains in growth across all channels, demonstrating
the resilience of the pet care category and the strength of our
unique model. We have supported our colleagues and provided
lifelines to our local communities throughout the cost of living
challenges while delivering strong returns for our investors and an
enhanced proposition for our customers.
Sharon Flood
Chair of the Remuneration Committee
Who is on the Remuneration Committee?
Member Period from To
Meetings
attended
Dennis Millard 1 April 2022 14 February 2023 4/4
Sharon Flood (Chair) 1 April 2022 30 March 2023 5/5
Prof Susan Dawson 1 April 2022 30 March 2023 5/5
Zarin Patel 1 April 2022 30 March 2023 5/5
Roger Burnley 14 February 2023 30 March 2023 1/1
1 Alternative Performance Measure (APMs) are dened and reconciled to IFRS information, where possible, on page 169.
Pets at Home Group Plc Annual Report & Accounts 2023
62
Supporting our customers
– Throughout FY23 we constantly reviewed our price position
vs. key competitors to ensure that the output of any pricing
decisions we make as a response to cost price increases does
not jeopardise our commitment to our pricing principles around
maintaining a fair price index differential to our key competitors.
– The Nutrition Campaign, ‘Food for Less, Advice for Free’, focuses
on supporting customers through the cost-of-living challenges
to select the right, affordable food for their pet, no matter what
their budget.
– The new Pets at Home app brings together VIP and shopping in
one easy to use experience.
– Introduction of Pet Care Expert Live video call for customers to
speak to Experts in-store.
– Launched a new trial of the capability to offer customers
nutrition subscriptions in-store.
– Introduced a new digital tool in our Vet Group to enable quick
and easy appointment booking, payment, and communication
between practice and client, removing friction from the
consumer experience.
Supporting our colleagues
– We continue to invest in, and focus our attention, on short,
medium and long term nancial resilience combined with
nancial education and wellbeing.
Investment in base pay:
– The average increase in base pay for our colleagues was 9.4%
(wider workforce).
– 81.7% of our hourly paid store and grooming colleagues were
paid the 2022/2023 Real Living Wage or more by investing in
our earn as you learn pay structure and rewarding training.
– We awarded an out of cycle pay increase in addition to our
annual pay review for our hourly paid store, grooming and
Distribution Centre colleagues.
– In April 2023 we increased our hourly store and grooming pay
rates to a starting rate of £10.60 (+10.4% vs April 2022).
– Colleagues can now earn 30p more than the Real Living
Wage on completion of the rst step of their training which is
achievable after three months.
– Within Support Office, we awarded higher increases to our
colleagues below senior management levels.
Colleague bonus:
– All colleagues will be awarded their usual annual bonus in
respect of FY23 in line with the usual timeline.
Colleague share ownership:
– We continued our investment in colleague share ownership
awarding 10,300 colleagues an award of free shares and we
continued to offer our Sharesave scheme at a 20% discounted
option price.
– Over 4,500 colleagues received access to awards which vested
under our free share scheme and our Sharesave scheme
creating greater colleague share ownership, supporting their
medium to longer term nancial resilience.
Colleague Hardship Fund:
– We awarded over £283,000 in grants to colleagues through the
Colleague Hardship Fund supporting our colleagues through
periods of unexpected nancial difficulties.
Wellbeing:
– We closed our stores on Boxing Day to give all our retail store
and grooming colleagues an invaluable two-day break.
– We invested nearly £100,000 in Mental Health First Aid training
and Manager’s Mental Health training across the business.
A further 207 colleagues were trained in Mental Health First
Aid this year, Over 80% of our veterinary practices have one
Mental Health First Aid trained colleague per practice providing
vital support to colleagues. We also brought our total number
of managers who received Manager’s Mental Health training
to425.
Recognition:
– We have awarded £280,000 to colleagues through our various
recognition schemes across the business.
Supporting colleagues through the cost-of-living challenges:
– Resources: We developed our online digital Benets and
Recognition platform which is available 24/7 creating a section
called ‘Money’. Colleagues could access a plethora of tools,
tips, advice, resource and support, including hundreds of
shopping discounts, budget calculators, Cycle2Work schemes,
nancial aid and grants, access to our Colleague Hardship Fund,
simplifying the government support into small digestible chunks.
The support was easy to read and understand. Colleagues
felt less overwhelmed meaning anyone needing support knew
where to go and how to get it, supporting colleagues at a time
when they need it most.
– Education: We wanted colleagues to realise the true value from
all of our benets, support and discounts, which led us to invest
in nancial education, hosting a ‘cost of living and all things
money’ live and interactive Q&A session with a nancial expert
to engage colleagues with simple steps to improving their
nancial position.
– Savings and Discounts: By offering discounts and savings
through our online benets platform, in FY23 colleagues have
saved a collective £162,000 on their everyday shopping. We
also increased our colleague discount to 30% for our own
branded products.
– Loans: For those colleagues wanting to borrow money, we
partnered with Salary Finance to support our colleagues to
borrow in a sustainable way. Introducing affordable loans
and debt consolidation with realistic, fair and manageable
repayment plans.
Directors’ Remuneration Reportcontinued
63
Financial StatementsStrategic Report Governance
Supporting our communities
– 2,009 colleagues have completed a Better World Pledge Day
in FY23, donating over 11,000 hours to support Pets, People or
Planet.
– £100,000 was donated to help individuals, families, and
communities caught up in the Turkey-Syria earthquake crisis.
– Over £2,000,000 was raised through our Santa Paws appeal,
the biggest fundraising appeal in aid of the Pets at Home
Foundation.
– Launched a nationwide Pet Food Bank service with Blue Cross.
– £2,900,000 granted to pet rescue and rehoming organisations
through the Pets at Home Foundation.
– Over £283,000 paid to our colleagues in FY23 through the
Colleague Hardship Fund.
– Through our Colleague Appreciation Day initiative, 1,100
colleagues donated their celebration for a tree to be planted
ontheir behalf with the Woodland Trust (£5,500),
– 1,000 colleagues donated their £5 celebration to food banks
(£5,000), and 400 colleagues donated to the Pets at Home
Foundation (£2,000).
Directors’ remuneration in respect of FY23
FY23 was the third and nal year of our current Remuneration
Policy, approved by shareholders in 2020. In the light of the context
set out above, the Committee made the following decisions in
respect of Executive Pay.
Base Salary:
The CEO and CFO received a standard increase of 3.5% in line with
the increase awarded to all senior management colleagues which was
substantially less than the wider workforce increase of an average
of 9.4% throughout FY23. Salary increases in respect of FY23 were
effective from 14 October 2022 (day 1 of our rst period after our half
year point, P8).
In FY23 we committed to carrying out a benchmarking exercise
for the Non-Executive member fees. The benchmarking exercise
revealed that our fees were behind the market benchmark and in
light of these fees having never been increased since they were set
in 2014, it was agreed to increase the Non-Executive Director fee,
Committee Chair fee and Board Chair fee by 6.6%, being the known
wider workforce average increase at the time of review. The Senior
Independent Director fee remains competitive and therefore no
adjustment wasmade.
Pension:
There were no changes to the Executive pension contribution in
FY23. Executive Directors already receive a pension contribution
capped at the rate provided to the majority of colleagues in central
support office functions. Currently this is up to 6.5% of base salary
and consistent with workforce rates at other retailers. The company
continues to actively target an increase in the rate available to all
other colleagues by at least 0.5% per year.
Annual Bonus:
The Executive Directors were assessed against Group underlying
Prot Before Tax (PBT) (65%), Group Free Cash Flow (FCF) (25%),
Pet Care Plans (10%) and a mandatory ESG bonus underpin, which
required the senior leadership team, including the Executive
Directors to complete a Better World Pledge Day. Targets were
set in May against a budget that was agreed to be ambitious
andstretching.
In light of business and stakeholder context set out above, the
Committee was comfortable that the formulaic outcome set
out immediately below was fair and appropriate therefore no
adjustments were made and no discretion was exercised in relation
to that outcome. FY23 bonuses will be delivered two thirds in cash
and a third will be awarded in shares in line with the bonus deferral
policy. The shares will not be released until a two-year holding
period is complete.
– The underlying PBT target range was set between £130.7m and
£140.7m. Actual underlying PBT was £136.4m and achieved a
bonus target of trigger 3.3, 66%.
– The Group Free Cash Flow target range was set between
£74.2m and £82.2m and the actual Free Cash Flow was £98.2m,
in excess of the maximum target.
– The Pet Care Plans target range was set between 1.54m and
1.61m net plans. The actual number of net Pet Care Plans
achieved was 1.60m, bonus trigger 4.80%.
– The bonus outcome was therefore £710,286 for the CEO,
which represents 71% of bonus max (pro-rated by length of
employment), and £474,301 for the CFO, which represented
76%of the bonus maximum.
Restricted Stock Plans:
The TSR nancial underpin was met and the Committee was also
comfortable that having assessed these awards for any windfall
gains on both vest and grant of the 2020 RSP awards, that no
discount should be applied and therefore the Executive Directors’
awards will vest 100% in May 2023 and will be subject to the 2 year
post vest holding period. The annual RSP awards were also granted
to all eligible colleagues, including the Executive Directors, in May
2022 under the usual terms.
Pets at Home Group Plc Annual Report & Accounts 2023
64
FY24: Looking forward
Remuneration Policy
We have undertaken a thorough and detailed review of our existing
policy to assess whether it remains appropriate and relevant in
the context of our strategic plan and business goals set against a
changing macro-economic environment. The Committee concluded
that the Policy remains appropriate in respect of salary, annual
bonus and benets provided to Executive Directors, and there
are no changes proposed in respect of these elements. There are,
however, a few minor amendments to our Policy to ensure our Policy
remains in line with best practice and current governance.
The key areas within the Policy to be amended, subject to
Shareholder approval at the 6 July 2023 AGM are:
– No changes are proposed to the base pay, pension, annual
bonus or Restricted Stock Plan awards (RSP): The annual
bonus will remain at 170% of salary for the CEO and 150% for the
CFO and the RSP level will remain at 100% of salary for the CEO
and 75% of salary for the CFO. Executive Directors will continue
to receive a pension contribution capped at 6.5% of base salary.
– For RSP awards made under new policy the RSP underpin will
be judgement-based allowing the Committee to take a broader
range of considerations into account when determining vesting.
Pets at Home was an early adopter of an RSP six years ago and
at that time, a TSR underpin was deemed appropriate following
shareholder feedback. Market practice has since evolved and
a judgement-based assessment aligns Pets at Home with
the majority of other businesses using RSPs. A judgement-
based underpin will allow the Committee to continue to take
share price performance into account in addition to business,
individual and wider company performance during the vesting
period.
– A post-cessation shareholding guideline was introduced in the
previous policy and required Executive Directors to retain the
lower of 2x salary (or their actual shareholding) for 1 year and 1x
salary for 2 years. New policy will fully align with the Investment
Association guidelines of the lower of 2x salary or their actual
shareholding for 2 years post cessation, starting with shares
awarded from the start of FY24 onwards.
The Committee acknowledges the importance of ESG targets for
shareholders, particularly environmental carbon emissions, and the
Board is close to nalising its sustainability strategy. As RSPs are not
designed to incorporate performance conditions, it is intended that
ESG performance targets will be included in the Company’s annual
bonus scheme when the Committee is condent that relevant and
measurable ESG targets can be set.
The Committee has carried out a consultation exercise with
our major shareholders on both the proposed changes to our
remuneration policy as well as the performance of the business.
At our AGM on 6 July 2023 we will be asking shareholders to pass
resolutions to approve our new Directors’ Remuneration Policy
and our FY23 Directors’ Remuneration Report. Further details of
the consultations on remuneration and the new policy are in the
Directors’ Remuneration Report on pages 65 to 75.
Directors’ remuneration in respect of FY24
Base Salary
The usual annual pay review will take place for the Executive
Management Team in September 2023. The Committee will
continue to benchmark against relative market comparisons to
ensure that the package is considered competitive and does not
pose a risk to retention and succession planning whilst considering
the salary increases in the context of the broader colleague
population and business performance.
Pension
No changes proposed for FY24.
Annual Bonus
The maximum bonus opportunity will continue to be 170% of
salary for the CEO and 150% of salary for the CFO with one-third
of any bonus paid being deferred in shares for two years in line
with the bonus deferral policy. The Executive Directors’ annual
bonus will be based on Group PBT (65%), Group FCF (25%) and
sustainability measures (10%), underpinned by a mandatory Better
World Pledge Day (BWPD) supporting Pets, People and our Planet.
The sustainability measures combined with the BWPD will together
support the various pillars of our ESG Strategy which focus on Pets,
People and our Planet.
Restricted Stock Plans
Awards granted during FY24 will continue to be set in line with the
Remuneration Policy with a maximum grant value of 100% of salary
for the CEO and 75% of salary for the CFO and will continue to vest
subject to an underpin which will take into account share price
performance as well as nancial and strategic performance with
a three-year vesting schedule and two-year post vesting holding
period as set out in the Remuneration Policy. The Committee
considered the shareholder experience when determining award
levels. As recent share price performance has been positive, it was
judged that no reduction to the normal grant level was required.
Closing remarks
We hope that you nd this report helpful and we would welcome
any feedback or comments on this report. We look forward to
your support of the resolutions for approval of by binding vote
at the Company’s AGM on 6 July 2023 for our new Directors’
Remuneration Policy and by advisory vote for our Directors’
Remuneration Report which sets out how we have applied our
existing policy during FY23.
Finally, I would like to highlight that this will be my last report as
Chair of the Committee. Having served in the role since July 2017,
I will be resigning from the role and stepping down from the Board
following our AGM on 6 July 2023. I am delighted to hand over to
Susan Dawson who will be succeeding me in the role and I would
like to wish Susan every success in the future in her new role.
Sharon Flood
Chair of the Remuneration Committee
25 May 2023
Directors’ Remuneration Reportcontinued
65
Financial StatementsStrategic Report Governance
The Committee considered a range of materials when undertaking
the policy review including:
– Feedback following interviews with many key internal
stakeholders (including Executive and Non-Executive Directors,
People Team, Reward and other management team members)
as well as feedback obtained from our colleague listening
programme, further details on which can be found at page 75;
– Consultations with investors received prior to the 2023 AGM;
– Proxy agency reports on our FY23 DRR;
– The feedback received from Director engagement with our
largest shareholders and their proxy advisors undertaken
between March to July on the potential changes in our policy;
– Company performance over the policy review period;
– Recent governance updates and best practices;
– The total pay opportunity in comparison to highly relevant
external market benchmarks;
– The experience of our colleagues, shareholders and wider
stakeholders.
a) Introduction
The Committee presents our Directors’ Remuneration Policy
(the Policy) which applies to all of the Executive Directors and
the Non-Executive Directors (as well as any individuals who may
become Directors or cease to be Directors whilst this Policy is in
effect). The Policy is to be approved by shareholders at the Annual
General Meeting on 6 July 2023 and becomes effective on the date
itisapproved.
The Policy explains the purpose and principles underlying the
structure of remuneration packages and how the Policy links
remuneration to the achievement of sustained high performance
and long-term value creation.
Overall remuneration is structured and set at levels to enable us to
recruit and retain high calibre colleagues necessary for business
success, whilst ensuring that our reward structure and performance
measures are aligned to the strategy and are simple to communicate
to participants and shareholders.
The following section on pages 65 to 75 sets out our Directors’
Remuneration Policy (Policy) for all of the Executive Directors and
the Non-Executive Directors (as well as any individuals who may
become Directors whilst this Policy is in effect) for approval by
shareholders at the Company’s AGM in July 2023. A copy of
our current policy that was approved by shareholders at the
Company’s AGM in July 2020 can be found on the Group’s
website (https://investors.petsathome.com).
Remuneration principles
The objectives of our Directors’ Remuneration Policy are:
Strategy
To have incentives that are appropriate for our business for the next three years as we continue to focus on delivering long term,
sustainable returns to investors. To reward in ways that support delivery of our integrated pet care strategy.
Culture
To adopt a ‘bottom-up’ approach to remuneration – a policy that works for our colleagues and can be applied to our Executives.
To support our ongoing desire to embed share ownership across the organisation. To assist with succession planning.
Retention
To simplify and therefore enhance perceived value of awards and thereby reduce flight risk.
Shareholders
To deliver better value to shareholders by:
– Improving perceived value;
– Creating stronger alignment with shareholders; and
– Increasing focus on long term sustainable value creation.
How we ensure pay for performance linkage:
Annual bonus – Pay-out linked to achievement of robust and challenging annual performance targets and any bonus achieved is paid 2/3rd cash
and 1/3rd shares with a two-year deferral period to ensure a link with longer term performance and shareholder experience.
– Full disclosure of bonus – commitment to disclosing all target ranges on a retrospective basis at the end of the financial year
inquestion.
Underpin – The satisfaction of an underpin that applies to RSP awards and as shall be determined by the Committee whereby the Committee
canadjust vesting for business, individual and wider Company performance.
– Serves as a security mechanism to prevent pay-outs for poor performance.
Share price – Share price inherently links pay to performance.
– Build-up of shareholding, long term vesting and holding horizon and post-cessation shareholding guidelines incentivise Executive
Directors to increase focus on long term, sustainable performance and value creation.
Our Directors’ Remuneration Policy
Pets at Home Group Plc Annual Report & Accounts 2023
66
UK Corporate Governance Code – Provision 40 alignment
The table below explains how the Remuneration Committee has addressed the factors set out in Provision 40 of the UK Corporate
Governance Code.
Factor How taken into account
Clarity – remuneration arrangements
should be transparent and promote
effective engagement with
shareholders and the workforce
The Remuneration Committee has aimed to incorporate simplicity and transparency into the design and delivery
of our Remuneration Policy. The remuneration structure aims to be simple for both participants and shareholders
to understand and is closely aligned to the strategic priorities of the business. We aim for disclosure of the Policy
and how it is implemented to be clear and succinct.
Simplicity – remuneration structures
should avoid complexity and their
rationale and operation should be easy
tounderstand
Our remuneration arrangements are purposefully simple, comprising fixed pay (salary, benefits, pension/cash in
lieu), a short-term incentive plan (Annual Bonus) and a long-term incentive plan (RSP).
Risk – remuneration arrangements
should ensure reputational and other
risks from excessive rewards, and
behavioural risks that can arise from
target-based incentive plans, are
identified andmitigated
The Policy includes a number of points to mitigate potential risk, including:
– defined limits on the maximum opportunity levels under incentive arrangements;
– provisions to allow malus and clawback to be applied, where appropriate;
– annual bonus performance targets calibrated at appropriately stretching but sustainable levels; and
– bonus deferral, RSP holding periods, in-employment and post-employment shareholding requirements
ensuring alignment of interests between Executive Directors and shareholders and encouraging sustainable
performance.
Predictability – the range of possible
values of rewards to individual Directors
and any other limits or discretions
should be identified and explained at
the time of approving the policy
We aim for our disclosure to be clear to allow shareholders to understand the range of potential values which
may be earned under the remuneration arrangements.
Proportionality – the link between
individual awards, the delivery
of strategy and the long-term
performance of the company should
be clear. Outcomes should not reward
poorperformance
A significant part of an Executive’s reward is linked to performance with a clear line of sight between business
performance and the delivery of shareholder value.
Alignment to culture –incentive
schemes should drivebehaviours
consistent withcompany purpose,
values and strategy
The incentive arrangements and annual bonus performance measures used are strongly aligned to those that
the Board considers when determining the success of the implementation of the Group’s purpose, values and
strategy. Arrangements are consistent in structure at all seniority levels, supporting a culture where all employees
are aligned tothe company’s success.
Directors’ Remuneration Reportcontinued
67
Financial StatementsStrategic Report Governance
Pay element – Fixed pay
Base Salary
Purpose and link to strategy Operation Maximum opportunity Changes
The Company provides
competitive salaries suitable
to attract and retain
individuals of the right calibre
to develop and execute the
business strategy.
– Base salaries are paid in cash and are pensionable.
– Base salaries will be reviewed annually by the Remuneration
Committee. Any changes will usually take effect from 1 October
in line with the wider management and salaried colleague
group. The Committee takes into consideration a number of
factors when setting salaries, including (but not limited to):
– Size and scope of the individual’s responsibilities;
– The individual’s skills, experience and performance;
– Typical salary levels for comparable roles within appropriate
pay comparators, including practice for retail companies
and the broader FTSE 250; and
– Pay and conditions elsewhere in the Group.
– Whilst there is no maximum
salary level, any increases will
normally be broadly in line with
the wider colleague population.
– Higher increases may be made
under certain circumstances,
at the Committee’s discretion.
For example, this may include:
increase in the scope and/or
responsibility of the individual’s
role; and development of the
individual within the role.
No changes.
Benefits
Purpose and link to strategy Operation Maximum opportunity Changes
The Company provides
colleagues with market
competitive benefits
suitable to attract and retain
individuals of the right calibre
to develop and execute the
business strategy.
– The Company provides a range of benefits, which may include:
– a company car (or cash equivalent)
– life assurance
– permanent health insurance
– private medical insurance
– These benefits are not pensionable.
– Other benefits may be offered from time to time, if considered
appropriate by the Committee and consistent with the
Company’s overriding purpose for offering such benefits.
– The Company may also meet any reasonable home working
and/or certain mobility costs, such as relocation support,
expatriate allowances, temporary living and transportation
expenses in line with the prevailing home working and/or
mobility policies and practice for other senior executives.
– Executive Directors are eligible to participate in any tax
approved all-colleague share plans operated by the Company
on the same basis as other eligible colleagues such as the
SAYE scheme.
The cost to the Company of
providing other benefits may
vary depending on, for example,
market practice and the cost of
insuring certain benefits.
The Committee keeps the level
of benefit provision under regular
review.
No changes.
Pension
Purpose and link to strategy Operation Maximum opportunity Changes
To provide colleagues with
an allowance for retirement
planning.
– Pension contributions are made to either the Group Pension
Plan, or to personal pension schemes, or cash allowances in
lieu of contributions are paid.
– The employer contribution
level for all current and any
future external hire or internally
promoted Executive Director
is provided to the majority of
colleagues in central support
office functions from time to
time (currently 6.5%).
No changes
other than
formalising
previous
commitments
made to
align current
executive
pension
contributions
with colleagues
into policy.
Pets at Home Group Plc Annual Report & Accounts 2023
68
Pay element – Variable pay
Annual bonus
Purpose and
link to strategy Operation Maximum opportunity Performance measures Changes
To incentivise
the delivery of
our business plan
on an annual
basis. To reward
performance against
key performance
indicators which are
critical to the delivery
of our business
strategy.
– Delivery will normally be in cash and
is not pensionable.
– Performance measures are set
annually and pay-out levels are
determined by the Committee after
the year-end, based on performance
against those targets during the
relevant financial year.
– The Committee may amend the
performance targets and measures
during the relevant financial year
if events occur which result in
the original targets and measures
no longer being a fair measure of
performance.
– The Committee may amend
formulaic bonus outcomes if they
do not reflect the wider shareholder
experience over the period or the
performance of the Executive
Director in delivery of the business
strategy and results.
– Malus and clawback provisions apply
to these awards in circumstances as
set out on page 73 of the Policy.
– Change of control provisions apply
as set out on page 73 of the Policy.
– Leaver provisions apply as set out on
page 72 of the Policy.
The maximum bonus
opportunity shall be
170% of base salary
for the CEO and 150%
of base salary for the
CFO provided 1/3 of
any bonus achieved
will be paid in shares
(or share awards) and
subject to a two-year
holding period.
– Each year, the Committee determines the
measures and weightings within the following
parameters:
– At least 75% of the annual bonus will be
based on financial performance measures;
and
– No more than 25% of the annual bonus will
be based on performance against non-
financial measures, including for example,
individual and strategic objectives, which
may include ESG metrics.
– The Committee ensures that targets are
appropriately stretching in the context of the
business plan and that there is an appropriate
balance between incentivising Executive
Directors to meet financial targets for the year
and to deliver specific non-financial goals. This
balance allows the Committee to effectively
reward performance against the key elements
of our strategy.
– The performance metrics for the annual
bonus for the Executive Directors are set out
retrospectively within the Annual Report.
– The Committee has discretion to amend
formulaic bonus outcomes if they do not
reflect the wider shareholder experience over
the period or the performance of the Executive
Director in delivery of the business strategy
and results. Where discretion is applied this
will be summarised within the Annual Report.
No
changes
Directors’ Remuneration Reportcontinued
69
Financial StatementsStrategic Report Governance
Long Term Incentive Plan
1
Purpose and
link to strategy Operation Maximum opportunity Performance measures Changes
– To promote
continued alignment
between Executive
Directors and
shareholders,
increasing focus on
long term sustainable
value creation.
– To support our
principle of
embedding share
ownership across the
organisation.
– To assist with
succession planning.
– Awards will be made under the RSP annually.
– Share awards are normally made in the form of
nil cost options but may be awarded in other
forms if appropriate (such as conditional share
awards). The plan rules specify that awards
may also be satisfied in cash although this is
unlikely to apply to Executive Directors (other
than partially, to facilitate the net settlement of
an award).
– No award will vest under the RSP unless the
Committee is satisfied that performance in
respect of the underpins has been satisfactory.
Where the Committee concludes that
performance has not been satisfactory it has
discretion to reduce the number of shares
subject to an RSP vesting downwards including
to zero. 100% of the award will vest on the third
anniversary of grant, subject to the achievement
of the aforementioned assessment of the TSR
underpin and continued employment.
– Following vesting, the award will vest after three
years followed by a two-year holding period
until the fifth anniversary of grant. If the vested
award is exercised during this two-year period,
the net number of shares acquired (after taxes
have been settled) must continue to be held
(and cannot be sold) until the fifth anniversary
of grant.
– Additional shares (or cash) may be awarded
in lieu of dividends on any shares which
vest, which would have been paid during the
vesting period and, in the case of a vested but
unexercised award, the holding period.
– Malus and clawback provisions apply to these
awards in circumstances as set out on page 73
of the policy.
– Change of control provisions apply as set out on
page 73 of the policy.
– Leaver provisions apply as set out on page 72 of
the policy.
The maximum value
of restricted shares
that may be awarded
in respect of any
financial year for
new hires effective
27March 2020
may be up to 100%
of salary. Existing
Executives may
only be awarded a
maximum of 75% of
salary.
– There are no
performance targets
attached to the
awards.
– A baseline
performance underpin
applies, which
requires absolute
TSR performance to
be positive over the
first three years of
the vesting period. If
the underpin is not
achieved, the awards
lapse in full.
RSP awards made
in FY24 shall be
subject to a holistic
underpin that allows
the Committee to
take into account
factors including
overall financial
performance,
the shareholder
experience,
performance
against strategic
imperatives and any
serious reputational
damage (subject to
approval at the AGM
on 6 July 2023).
SAYE
1
Purpose and
link to strategy Operation Maximum opportunity Performance measures Changes
– An all-colleague plan,
which encourages
long term
shareholding and
aligns the interests of
UK colleagues with
shareholders.
– Executive Directors
are eligible to
participate.
– SAYE is an HMRC-approved scheme where
eligible colleagues are granted savings-related
share options to subscribe for shares in the
Company.
– Options are granted to be exercisable in
conjunction with either a three-year or five-year
savings contract with a monthly savings limit set
according to HMRC limits (currently £500 per
month out of taxed income).
– Options are normally granted at a discount to
market price at the time of invitation, as per
HMRC regulations (currently a maximum of 20%).
– The market value
of the shares under
option at the date
of maturity of the
Sharesave savings
contract, less the
grant price of
the option at the
contract start date.
– There are no
performance
measures attached
to awards under the
SAYE.
No changes.
Pets at Home Group Plc Annual Report & Accounts 2023
70
Chair and Non-Executive Directors’ Remuneration Policy
Purpose and
link to strategy Operation Maximum opportunity Performance measures Changes
To attract and retain
high calibre individuals
by offering market
competitive fee
arrangements.
– Non-Executive Directors receive a basic fee in
respect of their Board duties.
– Further fees are paid to Non-Executive Directors
in respect of Deputy Chair of the Board and/or
chairship of Board Committees.
– The Non-Executive Chair receives an all-
inclusive fee for the role.
– The remuneration of the Non-Executive Chair is
set by the Remuneration Committee, whilst the
Board as a whole is responsible for determining
Non-Executive Director fees. These fees are the
sole element of Non-Executive remuneration
and they are not eligible for incentive awards,
pensions or other benefits.
– Fees are typically reviewed annually.
– Expenses incurred in the performance of
Non-Executive duties for the Company may be
reimbursed or paid for directly by the Company,
as appropriate, including any tax due on the
benefits.
– Current fee levels can be found
on page 84.
– Fees are set at a level which
is considered appropriate to
attract and retain the calibre
of individual required by the
Company.
– The Company’s Articles of
Association provide that the
total aggregate remuneration
paid to the Non-Executive Chair
and the NEDs will be within the
limits set by shareholders.
n/a No changes.
The Committee may in the event of any variation of the Company’s share capital, demerger, delisting, or other event which may affect the value of awards, adjust or amend the terms of awards
in accordance with the rules of the relevant share plan. In the case of the SAYE, any changes may be subject to HMRC approval if required.
Shareholding guidelines and post cessation shareholding requirements
The Committee believes that colleague share ownership is an important means to support long-term commitment to the Company and the
alignment of colleague interests with those of shareholders.
Executive Directors are subject to a shareholding requirement of 200% of base salary, which should be built up over a period of ve years.
Executive Directors are subject to a post cessation shareholding requirement equal to the lower of 200% of base salary or their actual
shareholding at the date of cessation. This applies to shares awarded after the start of FY21 when the requirement was rst adopted. The
requirement was for 200% for one year and 100% for two years. From the start of FY24 Executive Directors will be required to hold 200%
(ortheir actual shareholding if lower) for two years post cessation unless the Committee determines otherwise. This applies to shares
awarded after the start of FY24.
Legacy matters
The Committee will honour remuneration related commitments to former, current and future Executive and Non-Executive Directors
(including the exercise of any discretions available to the Committee in relation to such commitments) where the terms were agreed prior
to them becoming a Director (provided that, in the opinion of the Committee, the payment was not in consideration for the individual
becoming an Executive Director or Non-Executive Director of the Company) and/or where the terms were agreed and commitments made
in accordance with the previous Remuneration Policy approved by the Company’s shareholders in July 2017. For these purposes, payments
include the Committee satisfying awards of variable remuneration and, in relation to an award over shares, the terms of the payment are
agreed at the time the award is granted. This includes allowing the vesting of outstanding awards under the CSOP, PSP and RSP, the terms
ofwhich are detailed in the previous policy that was approved by shareholders at the Company’s AGM in July 2020.
Remuneration Committee discretion
As described elsewhere in this Policy, the Committee may exercise its discretion to: (i) determine the size of the annual bonus and restricted
share plan awards granted to Executive Directors; (ii) set the performance measures and targets attaching to the annual bonus and restricted
share plan awards granted to Executive Directors; (iii) amend such performance measures and targets if events occur which result in the original
measures and targets no longer being a fair measure of performance; (iv) override the formulaic outcomes of such performance measures and
targets to ensure that payments under the annual bonus plan and restricted stock plan reect the underlying performance of the business or
of the Executive Director concerned; (v) decide whether and to what extend dividend equivalents should apply to awards under the deferred
share bonus arrangements and/or the restricted stock plan; (vi) apply malus and clawback; (vii) adjust the shares subject to the deferred share
bonus arrangements, the SAYE options and the restricted stock plan awards in the event of a variation of the Company’s share capital (or similar
corporate event); (viii) apply the holding period; (ix) apply the leaver provisions; and (x) apply the change of control provisions. In addition, the
Committee may exercise its discretion in order to make such other non-material decisions affecting the Executive Directors’ awards in order to
facilitate the administration of the annual bonus plan, RSP and SAYE respectively. Any and all decisions will be made within policy maxima and
inaccordance with the applicable plan rules. Use of discretion will be disclosed in the relevant Directors’ Remuneration Report.
Directors’ Remuneration Reportcontinued
71
Financial StatementsStrategic Report Governance
Remuneration arrangements throughout the Company
The Policy for our Executive Directors is designed in line with the remuneration philosophy and principles that underpin remuneration for
the wider Company. The Company believes in having a consistent approach to remuneration rather than designing alternative plans for our
Executive Directors. All our reward arrangements are built around the common objectives and principles outlined below:
– Aligned incentives – A meaningful proportion of remuneration is based on performance. Individuals are incentivised towards consistent
nancial and non-nancial business goals and objectives, in addition to appropriate individual goals.
– Colleagues as shareholders – Our culture is built on a cohesive team approach and widespread shareholding amongst colleagues
which we believe enhances our long-term sustainable success by promoting stewardship and alignment amongst a wide colleague
participation group.
– Transparency – our Policy seeks to reect our culture and values in being open and transparent about our reward offering at all levels in
our organisation, from how we operate reward in our supply chain and stores, right through to our Support Offices.
b) Recruitment policy
The following table sets out the various components which would be considered for inclusion in the remuneration package for the
appointment of an Executive Director and the approach to be adopted by the Committee in respect of each component and which remain
unchanged from the previous Policy.
Element Policy and operation
Overall The Committee’s approach when considering the overall remuneration
arrangements in the recruitment of a member of the Board from
an external party is to take account of the Executive Director’s
remuneration package in their prior role, the market positioning of
the remuneration package, and not to pay more than necessary to
facilitate the recruitment of the individual.
Where an Executive Director is appointed from within the
business, in addition to considering the matters detailed
for external candidates, the normal policy of the Company
is that any legacy arrangements would be honoured in line
with the original terms and conditions as set out under
legacy matters on page 70.
Fixed elements
(base salary,
pension and
other benefits)
We recognise that salary levels drive other elements of the package
and would therefore seek to pay a salary which is competitive, but no
more than necessary to secure the individual. The Executive Director
would be eligible to participate in our benefit and pension plans,
including coverage under all Executive Director and colleague pension
and benefit programmes in accordance with the terms and conditions
of such plans, as may be amended by the Company from time to time.
The maximum level of opportunity will be no greater than that set out in
the Policy Table above i.e. in line with the rate provided to the majority
of our salaried colleagues, unless the Executive Director is appointed
from within the business, in which case the rate will be as set out for
incumbent Executive Directors in the Policy Table on page 67 to 69.
The Company may meet certain mobility costs, including
relocation support, expatriate allowances, temporary living
and transportation expenses in line with the prevailing
mobility policy and practice for senior executives.
Short term
incentives
The individual will be eligible to participate in the annual bonus plan,
in accordance with the rules and terms of the plan in operation at the
time. The maximum level of opportunity will be no greater than that
set out in the Policy Table above (i.e. 170% of base salary for the CEO
and 150% for the CFO).
Long term
incentives
The individual will be eligible to participate in the RSP, in accordance
with the rules and terms of the plan in operation at the time.
The maximum level of opportunity will be no greater than
that set out in the Policy Table above (i.e. 75% of base salary
for current Executive Directors and up to 100% of salary for
new hires).
Buy-out awards – The Committee will consider what buy-out awards (if any)
are reasonably necessary to facilitate the recruitment of a
new Executive Director in all circumstances. This includes an
assessment of the awards which would be forfeited on leaving their
current employer.
– The Committee will seek to structure any buy-out awards such that
overall they are no more generous in terms of quantum or vesting
period than the awards due to be forfeited.
– In determining the quantum and structure of these commitments,
the Committee will seek to provide broadly equivalent value
and replicate, as far as practicable, the timing and performance
requirements of the awards forfeited.
– Buy-out awards, if used, will be granted using the
Company’s existing Long Term Incentive Plans to the
extent possible, although awards may also be granted
outside of these plans if necessary and as permitted
under the Listing Rules.
– In the case of an internal hire, any outstanding awards
made in relation to the previous role will be allowed to
pay out according to their original terms as set out under
legacy matters on page 70.
– If promotion is part way through the year, an additional
top-up award may be made to bring the Executive
Director’s opportunity to a level that is appropriate in
thecircumstances.
Pets at Home Group Plc Annual Report & Accounts 2023
72
c) Service contracts and loss of office arrangements
The Committee’s policy on service contracts and termination arrangements for Executive Directors is on pages 72 to 73. In principle, it is
the Committee’s policy that there should be no element of reward for failure. The Committee’s approach when considering payments in
the event of a loss of office is to take account of the individual circumstances, including the reason for the loss of office, Company and
individual performance, contractual obligations of both parties as well as share plan and pension scheme rules. For the avoidance of doubt,
Non-Executive Directors will not receive compensation for loss of office.
The key employment terms and conditions of the current Executive Directors, as stipulated in their service contracts, are set out below:
Area Policy and operation
Notice period – The service contract for Lyssa McGowan provides for
a notice period of 12 months from the Company and
six months from the individual.
– The service contract for Mike Iddon provides for
a notice period from both the Company and the
individual of six months.
– New Executive Directors will be appointed on service contracts
that have a notice period of not more than 12 months for both the
Company and the individual.
– The Committee considers this policy provides an appropriate balance
between the need to retain the services of key individuals for the
benefit of the business and the need to limit the potential liabilities of
the Company in the event of termination.
Contractual
payments
– Executive Directors’ service contracts allow for
termination with contractual notice from the
Company or termination by way of payment in lieu of
notice (PILON), at the Company’s discretion. Payment
in lieu of notice would be made where circumstances
dictate that the Executive Directors’ services are not
required for their full notice period.
– Neither notice nor PILON will be given in the event of
gross misconduct.
– Payment in lieu of notice will be limited to base salary and contractual
benefits for the relevant notice period.
– There is no contractual entitlement to a payment under the annual
bonus in respect of the notice period.
– Service contracts allow for mitigation if the individual finds alternative
employment.
Short term
incentives
– The Committee’s policy is not to award an annual
incentive for any portion of the notice period not
served.
– Where an Executive Director leaves office after the
end of a performance year but before the payment is
made, the executive will remain eligible for an annual
bonus for that performance year, subject to the
normal assessment of performance achieved over
the period.
– Where an Executive Director leaves office during a performance year,
any bonus would be at the Committee’s absolute discretion and would
take into account performance and the time served during the period.
– No bonus will be paid in the event of gross misconduct.
– Where an Executive Director holds shares pursuant to a deferred
share bonus arrangement, the shares will be retained upon a loss of
office event but the holding period will continue to apply (unless the
Committee determines otherwise in its absolute discretion).
– Deferred shares that are subject to a holding period will still count
towards the Company’s post-cessation shareholding policy (in force
from time to time).
Long term
incentives
– The treatment of unvested long term incentive awards
is governed by the rules of the relevant incentive
plan, which are summarised below: CSOP, PSP, RSP
and SAYE.
– Under the CSOP, PSP and RSP, the default position is
for both vested (to the extent not yet exercised) and
unvested awards to lapse upon a loss of office event.
– Under the RSP, the default position is for vested
awards to be exercisable on the usual date and
unvested awards to lapse upon a loss of office event.
– Where an individual is determined to be a ‘good
leaver’ (which includes for reasons of death, illness,
injury, disability, retirement, sale or transfer out of the
Group or any other reason at the discretion of the
Committee) the Committee may allow vested awards
(to the extent not yet exercised) to be retained and
unvested awards to continue to subsist until the
relevant vesting date(s), subject to satisfaction of the
performance conditions/financial underpin and pro-
rated for time served.
– Alternatively, the Committee may, at its discretion, allow unvested
awards to vest at an earlier date, having regard to the achievement of
performance conditions/financial underpin to that date and the period
of time that has passed since the date of grant. The Committee may
choose to apply no reduction in the amount vesting if it is considered
appropriate given the particular circumstances.
– Either way, vested RSP awards (or the shares acquired upon the
exercise of vested RSP awards) will continue to be subject to a two-
year holding period upon a loss of office event (unless the Committee
determines otherwise in its absolute discretion).
– Under the SAYE, the default position is for unvested awards to lapse
upon a loss of office event.
– Where an individual is determined to be a ‘good leaver’ in accordance
with HMRC regulations (which include for reasons of death) unvested
awards may vest pro-rata by reference to the period of time that has
elapsed since the date of the grant and up to six months following the
leaver event (12 months in the case of death).
– Vested (but unexercised) awards under the CSOP, PSP, RSP and SAYE
will count towards the Company’s post-cessation shareholding policy
(in force from time to time), including vested RSP awards (or shares
acquired upon the exercise of vested RSP awards) that are subject to
a holding period.
Directors’ Remuneration Reportcontinued
73
Financial StatementsStrategic Report Governance
Area Policy and operation
Change
in control
– The Committee’s policy is that service contracts
should not provide for additional compensation on
severance as a result of a change in control.
– Under the CSOP, the PSP and the RSP, the Committee
will determine whether and to what extent awards
shall vest, taking into account all relevant factors
including Company performance, the period of time
elapsed since the date of grant and the interests of
our shareholders.
– Under the RSP, any holding periods applicable to vested awards
(including awards that vest early because of the change of control)
will fall away on/immediately prior to the change of control.
– Under any deferred share bonus arrangements, any holding periods
applicable to deferred shares will fall away on/immediately prior to a
change of control.
– Under the SAYE, awards shall vest pro-rata by reference to the period
of time that has elapsed since the date of grant and up to six months
following the change of control.
Malus and
clawback
– Annual bonus payments and long term incentive
awards (but not including SAYE awards) are subject
to malus and clawback for a period beginning on the
date of award and ending two years following vesting
and payment in the event of:
– A material misstatement of audited results;
– Serious financial irregularity;
– Any circumstances justifying summary dismissal of
a participant from their office or employment with
any Group company including, but not limited to,
dishonesty, fraud, misrepresentation or breach
oftrust;
– Any material breach of a participant’s terms and conditions of
employment; and/or any material violation of Company policy, rules of
regulation; Serious reputational damage or material loss caused by the
participant’s actions; and
– Material contravention by the participant of the Company’s ethics and
values.
– Malus and clawback will continue to apply to any bonus payments or
awards retained by leavers and/or on a change of control.
External appointments
Executive Directors are permitted to hold an external appointment with the prior consent of the Board. Any fees may be retained by the individual.
Chair and Non-Executive Directors
The Non-Executive Directors, including the Chair of the Board, have letters of appointment which set out their duties and responsibilities.
They do not have service contracts. The key terms of the appointments are set out in the table below:
Provision Policy
Period – Initially appointed for a period of three years, subject to annual review and notice
– In line with the UK Code, all Directors will seek annual reappointment by shareholders at the AGM
Appointment terms – Three months’ notice by either the Company or the Non-Executive Director
– Non-Executive Directors and the Chair of the Board are not entitled to compensation on leaving the Board
Fees – As set out on page 84
Expiry of current term – See page 42 for details of the expiry of the current term of Non-Executive Directors’ letters of appointment
Availability of documentation
Service contracts and letters of appointment for all Directors are available for inspection by any person at our registered office in Handforth, Cheshire.
They will also be available for inspection during the 30 minutes prior to the start of our AGM.
Pets at Home Group Plc Annual Report & Accounts 2023
74
d) Illustration of the Remuneration Policy
Our remuneration arrangements have been designed to ensure that a signicant proportion of pay is dependent on the delivery of stretching
short term and long term performance targets, aligned with the creation of sustainable shareholder value. The Committee considers the
level of remuneration that may be received under different performance outcomes to ensure that this is appropriate in the context of the
performance delivered and the value added for shareholders. The charts below provide illustrative values of the potential remuneration
packages for Executive Directors in FY24, prior to any salary increase not yet awarded, under three assumed performance scenarios and
including an example of the impact on RSP, should the share price increase by 50%.
MinimumMinimum
£2,000,000£3,000,000 £0£0 £500,000£500,000 £1,000,000£1,000,000 £1,500,000£1,500,000 £2,000,000 £2,500,000
Meeting
expectations
Meeting
expectations
MaximumMaximum
Maximum +
50% RSP
3
Maximum +
50% RSP
3
Fixed Pay
1
Bonus RSP
2
50% RSP
3
Mike IddonLyssa McGowan
£1,577,905£2,571,779
£1,418,775£2,271,629
£1,164,165£1,863,425
£463,988£650,819
These charts are for illustrative purposes only and actual outcomes may differ from those shown.
1 Fixed pay includes car allowance, pension, current salary and private health insurance (if they participate).
2 Is illustrated above as 100% of salary for the CEO and 75% of salary for the CFO.
3 50% RSP has been calculated using the closing share price of £3.610 on 30 March 2023 plus 50%, resulting in a share price of £5.415.
Scenario Assumptions
Fixed pay
All performance
scenarios
– Consists of total fixed pay, including base salary, benefits and pension
– Base salary – excludes any potential salary increase not yet awarded
– Benefits – amount estimated to be received by each Executive Director in FY24
– Pension – based on the FY24 6.5% contribution levels
Variable pay
Minimum performance – No pay out under the annual bonus
– No vesting under the RSP
Meeting expectations – 60% of the maximum pay-out under the annual bonus (i.e. 102% of salary for the CEO and 90% of salary for the CFO)
– 100% vesting under the RSP (i.e. 100% of salary for CEO and 75% of salary for CFO)
Maximum performance – 100% of the maximum pay-out under the annual bonus (i.e. 170% of salary for the CEO and 150% of salary for the CFO)
– 100% vesting under the RSP (i.e. 100% of salary for CEO and 75% of salary for CFO)
Impact of 50%
share price increase
over the period
– Based on the share price on 30 March 2023 (£3.610), the last day of the financial year FY23 plus 50%
Note: All-colleague share plans (i.e. the SAYE) have been excluded. Any legacy awards made in accordance with the policy for 2014 which Executive Directors hold have been excluded.
Directors’ Remuneration Reportcontinued
75
Financial StatementsStrategic Report Governance
e) Consideration of conditions elsewhere in the Company
As per the Committee’s terms of reference, we also review the pay and conditions of colleagues at levels below the Executive Directors.
Thisincludes approving the design of and determining targets for the principal performance related pay schemes, such as the bonus scheme
operated by the Company, and approving the total annual payments made under such schemes that have been made throughout the year
to our colleagues. The Committee is also consulted concerning any major changes in colleague benet and pay structures throughout
thebusiness.
The remuneration package for all colleagues (including the Executive Directors) are reviewed on an annual basis and a consistent approach
is applied at all levels. As part of the annual salary and benets review, the Company takes into account industry standards, future legislative
framework (including the National Minimum Wage, the National Living Wage, the Apprenticeship Levy and the gender pay gap reporting
requirements), market benchmarks (survey benchmarks and we consider the views of the Real Living Wage Foundation) and the nancial and
economic environment of the business, both internally and externally. The annual salary and benets review is presented to the Committee with
recommendations on remuneration throughout the colleague base, including any proposed salary increases to be applied to all colleagues’
wages, including the Executive Directors.
Further details of the remuneration decisions applied across the business and shared with the Committee can be found on pages 61 to 63 of the
Chair’s introduction.
As such, the Committee has regard to this Group-wide annual review process when setting its Remuneration Policy for Executive Directors.
Whilst our colleagues are not directly consulted as part of the process of determining pay, the output from our colleague listening groups and
engagement surveys is considered when carrying out the annual salary and benets review, including any pulse surveys specically dedicated
to pay and benets. A signicant number of our colleagues are also shareholders and so are able to express their views on remuneration in the
same way as other shareholders.
Sharon Flood, as the Non-Executive Director with responsibility for consultation with the wider colleague population, also ensures that our
colleagues’ voice is heard by the Committee and gives them direct access to the Committee Chair via our regular listening sessions.
f) Consideration of shareholder views
The Committee has always been committed to dialogue with the Company’s shareholder base; we actively consulted with shareholders
during the formulation of our 2017, 2020 and 2023 Policy, during the formation of our ESG strategy, and we have continued to consult with
shareholders through the last nancial year particularly in relation to the renewal of our 2023 Directors’ Remuneration Policy subject to
shareholder approval at our 6 July 2023 AGM.
We directly engaged with our top 20 shareholders to discuss the proposed changes to the 2023 Policy, all of which were offered a call to
discuss these changes further if they wished. It was positive to see that there was very little feedback from our shareholders, and those that
did engage were broadly supportive and welcomed the change.
We will continue to monitor shareholder views when evaluating and setting ongoing remuneration strategy, and we are committed to
consulting with shareholders prior to any signicant changes to our Policy.
g) Minor amendments
The Committee may make minor amendments to the Policy set out above (for regulatory, exchange control, tax or administrative purposes or
to take account of a change in legislation) without obtaining shareholder approval for that amendment.
Pets at Home Group Plc Annual Report & Accounts 2023
76
Annual Report on Remuneration
a) Directors’ remuneration – report on implementation for the year ended 30 March 2023
This section of the report sets out how the Policy, approved by shareholders at the Company’s Annual General Meeting (AGM) on 9 July
2020 (2020 Policy), has been applied in the nancial year being reported on.
The information presented from this section up until the relevant note on page 79 represents the audited section of this report.
b) Single total gure of remuneration for Executive Directors for the year ended 30 March 2023
The following table sets out the total remuneration for Executive Directors for the year ended 30 March 2023. All payments are in line with
the Policy.
Director Base salary (£)
Benefits
(£)
Pension
(£)
Total
fixed pay (£)
Annual
bonus
(£)
Long term
incentives
(£)
Total
variable pay (£)
Total
(£)
FY23
Lyssa McGowan 493,246 1,773 32,061 527,080 710,286 – 710,286 1, 237,366
1
Peter Pritchard 90,962 1,987 8,187 101,135 – – – 101,135
Mike Iddon 416,623 12,055 27,080 455,758 474,301 405,309
2
879,610 1,335,369
FY22
Peter Pritchard 550,000 11,971 49,500 611,471 845,633 374,331
3
1,219,964 1,831,435
Mike Iddon 389,623 11,971 35,270 436,864 528,499 535,822
4
1,064,321 1,501,185
1 FY23 base salary, benets and pension contributions have been calculated using actual amounts earned then pro-rated for Lyssa’s time in appointment and bonus pro-rated based on
length of service in FY23.
2 The 2020 RSP will vest in full on 29 May 2023 since the absolute TSR had been achieved. The value has been calculated using £3.610 being the closing share price on 30 March 2023,
the nancial year end. The gure reects 100% of the 2020 RSP award, however the true value will be subject to the share price at the time of vest.
3 The 2019 RSP vested in full on 30 May 2022 since the absolute TSR underpin which was calculated as at the end of FY22 had been achieved. However, in line with the agreed leaver
treatment, only the rst 50% of the 2019 award vested in full in May FY23. The 25% tranches due to vest in FY24 and FY25 will lapse in full.
4 The 2019 RSP vested in full on 30 May 2022 since the absolute TSR underpin which was calculated as at the end of FY22 had been achieved. The value has been calculated using £3.614
being the closing share price on 31 March 2022, the nancial year end which corresponds to the end of the performance period. The gure reects 100% of the 2019 RSP award, however
the true value will vary due to the phased release over the three years: 50% in FY23, 25% in FY24 and 25% in FY25, and will be subject to the share price at the time of vest.
Base salary – corresponds to the amount received during the relevant nancial year.
Benets – corresponds to the taxable value of benets received during the relevant nancial year and principally includes company car (or
cash equivalent), life assurance and permanent health insurance.
Pension – corresponds to either the amount contributed to personal pension plans or the cash value of the salary supplement received
during the relevant nancial year. Executive Directors received a Company pension contribution worth 6.5% of their salary or a cash
allowance where the annual allowance has been reached.
Annual bonus – corresponds to the amount earned in respect of the relevant nancial year. Details of how this was calculated are set out below.
Long term incentives – corresponds to the amount earned by the Executive Directors in respect of the relevant nancial year. Details of
how this was calculated are set out in the footnotes above.
Annual bonus
The Executive Directors were assessed against stretching PBT, FCF and Pet Care Plan subscription targets. Underlying PBT for the 52 week
period ended 30 March 2023, was £136.4m (53 week period ended 31 March 2022: £130.1m), which was ahead of guidance and between the
minimum and maximum targets. This represents a growth of 4.8% YoY. FCF was £98.2m (FY22: £95.0m) which exceeded the maximum target.
– The maximum annual bonus opportunity in respect of FY23 for the CEO was 170% of base salary and 150% of base salary for the CFO.
– In FY23, Executive Directors had an annual bonus based on Group PBT (65%), Group FCF (25%), Pet Care Plan subscriptions (10%) and
a mandatory ESG bonus underpin which required each Executive Director to complete a Better World Pledge Day. Our Better World
Pledge (OBWP) Days have been carried out by all of our Support Office colleagues and store managers. The OBWP Days provide
signicant value and non-nancial support to a range of different charities, in addition to the nancial support we already provide.
Colleagues have supported a range of people, pet and climate change focused charities.
– Free Cash Flow is dened as net increase/(decrease) in cash before the impacts of dividends paid, share buybacks, investments,
proceeds from new loans and repayment of borrowings.
– Pet Care Plan subscriptions are calculated on the number of net Pet Care Plans after the removal of any anomalies, paused or cancelled
Pet Care Plans. We achieved 1.60m net Pet Care Plans (FY22: 1.48m).
Directors’ Remuneration Reportcontinued
77
Financial StatementsStrategic Report Governance
The table below shows the targets set and the achieved pay out levels for Executive Directors:
Performance measures
Target Achieved
% Weighting Minimum Maximum Total %
Underlying PBT 65% £130.7m £140.7m £136.4m 66%
Free Cash Flow 25% £74.2m £82.2m £98.2m 100%
Net Pet Care Plans 10% 1.54m plans 1.61m plans 1.60m plans 80%
Total 100% 75.9%
In order to achieve full pay-out, the Committee had set ambitious and stretching targets which required the individuals to deliver
performance which signicantly exceeded business expectations.
The Committee has reviewed whether the payments achieved reect the wider business performance and the experience of shareholders
during the year.
The Committee carefully considered whether the bonus outcome should be adjusted. However after signicant assessment and in the
light of the business and stakeholder context set out above in the Chair’s letter on pages 61 to 63, the Committee was comfortable that the
formulaic outcome was fair and appropriate. No adjustments were therefore made to the bonus targets and no discretion was exercised
in relation to the outcome. As usual, the FY23 bonus will be delivered two thirds in cash and a third will be awarded in shares in line with
the bonus deferral policy for the CEO and CFO. The shares will not be released until a two-year holding period is complete. For all other
colleagues, the bonus for FY23 will be delivered in cash.
Long term incentives
Awards granted under the RSP for 2019 vested in May 2022, including awards for the Executive Directors under the RSP which were subject
to the agreed performance metrics of an absolute TSR underpin. The absolute TSR underpin was met, therefore awards vested according to
the relevant timetable. For Executive Directors, this means 50% immediately, 25% in 2023 and the remaining 25% in 2024. The absolute TSR
was calculated using a standard methodology that calculates returns to shareholders based on a change in share price and dividends paid
to shareholders, assuming that those dividends are reinvested into Pets at Home shares. The averaging period for TSR and share price was 3
months prior to the start and end of the performance period for the 2019 award.
Awards granted to the Executive Directors under the RSP in 2020 will vest in full in May 2023 as a result of the absolute TSR underpin having
been met, and the Committee was also comfortable that having assessed these awards for any windfall gains on both vest and grant of the
2020 RSP awards, that no discount should be applied and therefore the awards vested in full, with a 2 year post vest holding requirement.
The Committee has reviewed the outcomes of the variable incentive plans, as well as the overall levels of remuneration to ensure that, in the
wider economic context and external environment they remain consistent with the underlying performance of the business and are in line
with both colleague and shareholder experience. On this basis, we are satised that this is the case. In light of this, the Committee decided
not to make any adjustments.
Performance metric – TSR
Targets Performance achieved
A baseline performance underpin applies, which requires absolute
TSR performance to be positive over the first three years of the
vesting period. If the underpin is not achieved, the awards lapse
in full.
2020 RSP – due to vest May 2023 based on FY23 performance
TSR performance was positive.
Underpin met and award vesting will be 100% in May 2023 subject to a 2 year post
vest holding period.
Pets at Home Group Plc Annual Report & Accounts 2023
78
c) Single total gure of remuneration for Non-Executive Directors for the year ended 30 March 2023
The following table sets out the total remuneration for Non-Executive Directors and the Chair of the Board for the year ended 30 March
2023 (‘FY23’).
Director
Basic fees
(£)
Additional fees
(£)
Remuneration
Committee Chair
(£)
Audit & Risk
Committee
Chair (£)
Nomination
& Corporate
Governance
Committee
Chair (£)
CSR and Pets
Come First
Committee
Chair (£)
Total single
figure FY23 (£)
Total single
figure FY22 (£)
Dennis Millard
1
51,523 20,000
1
n/a n/a n/a n/a 71,523 70,000
Stanislas Laurent 51,523 n/a n/a n/a n/a n/a 51,523 50,000
Sharon Flood 51,523 n/a 10,305 n/a n/a n/a 61,827 60,000
Prof Susan Dawson 51,523 n/a n/a n/a n/a 10,305 61,827 60,000
Ian Burke 206,092 n/a n/a n/a n/a n/a 206,092 200,000
Zarin Patel
2
51,523 n/a n/a 10,305 n/a n/a 61,827 57,057
Roger Burnley
3
6,765 n/a n/a n/a n/a n/a 6,765 n/a
N.B. Chair of the Board, basic Non-Executive Director fee, and Board Committee chair fees increased by 6.6% effective from 14 October 2022 (day 1 of our rst period after half year (P8)).
Therefore, all fees detailed above are reective of the mid-year annual pay increase.
1 The additional fee paid to Dennis Millard is in respect of his position as Deputy Chair of the Board and Senior Independent Director.
2 Zarin Patel was appointed as Senior Independent Director on 14 February 2023.
3 On 14 February 2023 Roger Burnley joined as Non-Executive Director. Roger’s fees have been pro-rated to reect this.
d) Scheme interests awarded during the nancial year
In FY23 Executive Directors received RSP awards in line with the Policy as follows:
Executive Director Date of award
Number of
shares awarded under
the RSP
Grant price
of RSP awards
% of salary for
total awards
Performance
period end date
Lyssa McGowan 31 May 2022 168,115 Nil cost awards 100% 20 March 2025
Mike Iddon 31 May 2022 89,130 Nil cost awards 75% 20 March 2025
All awards are made as performance shares based on a percentage of salary and the value is divided by the closing share price the day
before the grants, being £3.450.
The awards were made subject to the satisfaction of the achievement of the absolute TSR underpin at the end of the performance period
of the three nancial years (FY23 to FY25). A positive absolute TSR using a standard methodology that calculates returns to shareholders
based on a change in share price and dividends paid to shareholders, assuming that those dividends are reinvested into Pets at Home
shares, is required in order for the awards to vest. The averaging period for TSR and share price was 3 months prior to the start and end of the
performance period for the FY23 award. In accordance with the Policy, 100% of the award will vest on the third anniversary of grant, subject
to the achievement of the TSR underpin and continued employment at that date, followed by a two-year post vest holding period until the
fth anniversary of grant. If the vested award is exercised during this two-year period, the net number of shares acquired (after taxes and
transaction fees have been settled) must continue to be held (and cannot be sold) until the fth anniversary of grant.
e) Payments for loss of office
No payments for loss of office were made during the nancial year.
f) Payments to past Directors
No payments were made to past Directors during the year.
Directors’ Remuneration Reportcontinued
79
Financial StatementsStrategic Report Governance
g) Statement of Directors’ shareholding and share interests
The Committee believes that colleague share ownership is an important means to support long term commitment to the Company and the
alignment of colleague interests with those of shareholders.
Executive Directors are subject to a shareholding requirement of 200% of base salary, which should be built up over a period of ve years.
Under the Policy applicable from FY21, Executive Directors have been subject to a post cessation shareholding requirement of 200% of salary
for one year and 100% of salary for two years under the Policy applicable from FY24. Subject to shareholder vote at the July 2023 AGM, this
post-cessation shareholding requirement will be extended to 200% of salary for two years, starting with shares awarded from the start of
FY24 onwards.
The Committee reviews share ownership levels annually.
Current shareholding levels for Directors are set out in the table below:
Director
Shareholding
as a % of salary
Number of shares
Shares owned outright at
31 March 2022
Shares owned outright at
30 March 2023
Interests in share incentive
schemes, awarded without
performance conditions at
30 March 2023
Interests in share incentive
schemes, awarded subject to
performance conditions at
30 March 2023
Lyssa McGowan 17% 32,325 7,386 168,115 n/a
Mike Iddon 244% 327,155 63,276 384,899 243,892
Dennis Millard – 30,000 – – 30,000
Stanislas Laurent – 30,000 – – 30,000
Sharon Flood – 60,088 – – 60,088
Prof Susan Dawson – 4,195 – – 4,195
Ian Burke – 47,900 – – 47,900
Zarin Patel – 30,000 – – 30,000
Roger Burnley – – – – n/a
Shareholding as a % of salary has been calculated using the closing share price at year end on £3.610.
This represents the end of the audited section of the report.
Pets at Home Group Plc Annual Report & Accounts 2023
80
h) TSR performance chart
The Company’s shares were admitted to the premium listing segment of the Official List maintained by the UK Financial Conduct Authority
and to trading on the London Stock Exchange plc’s main market for listed securities on 17 March 2014. The chart below shows performance
from that date until the end of FY23. This disclosure will be expanded in subsequent years in line with the regulations.
CEO FY14
1
FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23
CEO single
figure of
remuneration
LM – – – – – – – – – £1,237,366
PP
2
– – – – – £930,298 £1,599,710
3
£2,140,916 £1,831,435 £101,135
IK
4
– – – £662,087 £575,953 £122,037 – – – –
NW
5
£19,460 £790,461 £962,224
6
£129,696 – – – – – –
Annual bonus
pay-out (as %
of maximum
opportunity)
LM – – – – – – – – – 71%
PP – – – – – 75.8% 100% 100% 90.4% –
IK – – – 20.4% –
8
– – – – –
NW 73% 75% 60% – – – – – – –
Long term
incentive
vesting (as %
of maximum
opportunity)
LM – – – – – – – – – –
PP – – – – – 16.8% 100% 100% 100% –
IK – – – 16.8%
9
– – – – – –
NW – – 96%
6
– – – – – – –
LM – Lyssa McGowan PP – Peter Pritchard IK – Ian Kellett NW – Nick Wood
1 In FY14, the single gure of remuneration relates to the period 17 March 2014 to 27 March 2014.
2 Peter Pritchard was appointed on 27 April 2018 therefore his single gure remuneration as CEO for 2018/19 reects this partial year of service in role. His FY20 single gure includes the full
value of his total 2017 RSP award which vested on a phased basis in line with the Policy, 50% in July 2020, and 25% of the award will vest in each of years four and ve. The true value will
vary due to the phased release over the three years and was subject to the share price at the time. Peter’s FY21 single gure includes the full value of his total 2018 RSP award which will
vest on a phased basis, 50% May 2021, 15% May 2022 and 25% May 2023.
3 The FY20 single gure has been adjusted since the FY20 Annual Report was issued to include the 2017 RSP award which vested based on the performance period of FY20 as opposed to
the grant awarded in FY20 as previously disclosed.
4 Ian Kellett was appointed on 4 April 2016 and stepped down from his role on 27 April 2018 before leaving the Group effective 31 May 2018.
5 Nick Wood resigned as an Executive Director on 4 April 2016, however, he continued in the business until 1 July 2016. His payment in FY17 relates to the period from 1 April 2016 to 1 July 2016.
6 Under the early leaver provisions of the plan rules, Nick Wood received 19.2% of his total Matching Award under the Co-Investment Plan, as shown in the single gure table. Given that this
included time pro rating, with performance against the performance conditions being at 96% of maximum, the latter is shown here with the value of £198,168 of the Matching Awards.
7 Lyssa McGowan’s bonus outturn was prorated by length of employment, therefore the bonus outturn of 75.9% was reduced to reect her time in employment during the FY23 bonus year.
8 Ian Kellett waived his bonus for FY18.
9 Shares were awarded on 17 March 2014 under the Co-Investment Plan. Based on performance in the period March 2014 to March 2017 the performance conditions for these shares
were measured in 2017 and the Committee determined that 16.8% of the awards would vest. The vested award became exercisable in equal tranches, subject to continued employment,
between May 2017 and March 2019. The rst tranche of shares were released when the award vested in March 2017. The value for FY17 is based on the share price of 198.19p, being the
average share price over the last three months of the performance period, being the period from 1 January to 30 March 2017. The second tranche of shares were released on 17 March 2018.
The value is based on the share price of 178.3p being the share price on 16 March 2018, being the last working day before the shares were released. The nal third tranche of shares vested
on 17 March 2019 and were made available on the rst working day being 18 March 2019. The value is based on the share price of 160p being the share price on 15 March 2019, being the
last working day before the shares were released.
Directors’ Remuneration Reportcontinued
220
200
180
160
140
120
100
80
60
40
17 May 14
17 Mar 14
17 Jul 14
17 Sep 14
17 Nov 14
17 Jan 15
17 Mar 15
17 May 15
17 Jul 15
17 Sep 15
17 Nov 15
17 Jan 16
17 Mar 16
17 May 16
17 Jul 16
17 Sep 16
17 Nov 16
17 Jan 17
17 Mar 17
17 May 17
17 Jul 17
17 Sep 17
17 Nov 17
17 Jan 18
17 Mar 18
17 May 18
17 Jul 18
17 Sep 18
17 Nov 18
17 Jan 19
17 Mar 19
17 May 19
17 Jul 19
17 Sep 19
17 Nov 19
17 Jan 20
17 Mar 20
17 May 20
17 Jul 20
17 Sep 20
17 Nov 20
17 Jan 21
17 Mar 21
17 May 21
17 Jul 21
17 Sep 21
17 Nov 21
17 Jan 22
17 Mar 22
17 May 22
17 Jul 22
17 Sep 22
17 Nov 22
17 Jan 23
17 Mar 23
Share price performance (rebased to 100)
FTSE 250
FTSE 350 General Retailers
Pets at Home
81
Financial StatementsStrategic Report Governance
i) Percentage change in Directors’ remuneration
The table below sets out the increase in total remuneration of Directors and that of all colleagues for FY23:
% Change in base salary
FY22 to FY23
% Change in bonus earned
FY22 to FY23
1
% Change in benefits
FY22 to FY23
Lyssa McGowan (CEO)
2
n/a n/a n/a
Mike Iddon (CFO)
3
3.5% -10.3% -17. 2%
Dennis Millard 2.2% n/a n/a
Stanislas Laurent 3.0% n/a n/a
Sharon Flood 3.0% n/a n/a
Prof Susan Dawson 3.0% n/a n/a
Ian Burke 3.0% n/a n/a
Zarin Patel 8.4% n/a n/a
Roger Burnley
2
n/a n/a n/a
All colleagues
4
9.4% -17.2%
5
no change
1 We achieved a bonus outturn of 75.9% in FY23 vs 90.4% in FY22.
2 Lyssa McGowan and Roger Burnley were both appointed during FY23 and therefore no annual change is shown.
3 Mike Iddon’s benets have reduced due to a decrease in his company pension contribution to 6.5%.
4 All colleague information is presented by comparing the average annual bonus paid in FY22 to the average annual bonus paid in FY23 and includes colleagues who started throughout FY23.
5 The average colleague bonus has reduced due to lower targets being achieved across the business this year, combined with more bonuses being pro-rated for new joiners within senior roles in
FY23 which has inuenced the overall average decrease.
j) Relative importance of the spend on pay
The following table shows the relationship between the Group’s PBT, distributions to shareholders and the total remuneration paid to all
colleagues.
FY23
£m
FY22
£m
FY21
£m
FY20
£m
FY19
£m
FY18
£m
FY17
£m
Underlying PBT 136.4 130.1 87.5 93.5 89.7 84.5 96.5
Returned to shareholders:
Dividend 58.7 48.5 37.1 37.1 37. 2 37.3 39.9
Share Buy Back 50.3 – – – – – –
Payments to colleagues:
Wages and salaries 261.9 235.2 227.6 203.1 187.8 181.0 162.9
Pets at Home Group Plc Annual Report & Accounts 2023
82
k) Our CEO pay ratio FY23
This is our fourth year reporting our CEO pay ratio in line with the Code requirements.
The table below sets out the single gure total remuneration of the CEO compared to the median, lower quartile and upper quartile of the
colleague population. Remuneration is calculated on the same basis under methodology A of The Companies (Miscellaneous Reporting)
Regulations 2018. The ratio when calculated as required by the regulations can vary substantially from year to year as the CEO total
remuneration is more heavily weighted towards variable pay elements. For this reason, we have also included a base pay comparison
which we believe will be a more consistent method of comparison between each reporting year.
Ratio
CEO 25th%tile Median 75th%tile
FY23
1
Base Pay (FTE) £584,208 27:1 23:1 17:1
Single figure remuneration £1,338,502 59:1 50:1 38:1
FY22 Base Pay (FTE) £550,000 28:1 23:1 17:1
Single figure remuneration £1,831,435 88:1 72:1 52:1
FY21 Base Pay (FTE) £514,703 26:1 22:1 17:1
Single figure remuneration £2,140,916 106:1 88:1 69:1
FY20 Base Pay (FTE) £504,084 30:1 27:1 23:1
Single figure remuneration £1,599,710 90:1 78:1 59:1
Note: Ratios rounded to the nearest whole number.
1 The FY23 single gure is using the data required by the regulation, i.e. a combination of Lyssa McGowan’s and Peter Pritchard’s remuneration throughout FY23. For the FY23 single gure,
no shares are included as the 2020 scheme lapsed in full for Peter Pritchard when he left in May 2022, and Lyssa McGowan has no share plans which are vesting in FY23. The FY23 bonus
scheme outturn for the CEO is 71% vs FY22 at 90.4%. Benets are lower as Lyssa McGowan is not enrolled in Private Medical Insurance. Base pay includes the amount received by both
Lyssa McGowan and Peter Pritchard. An increase is shown as Lyssa McGowan joined on a higher salary than Peter Pritchard.
The following table provides base salary and total remuneration information in respect of the 25th, 50th and 75th percentile colleagues,
on a full-time equivalent basis.
Year CEO 25th 50th 75th
FY23 Base Salary 584,208 21,746 25,654 33,452
Total Remuneration 1,339,070 22,501 26,748 22,501
We expect to see substantial variations in our ratio as long term incentive plans and deferred bonus schemes mature creating substantial
variation in the ratio when compared at the single gure level. All of the single gure remuneration numbers above for FY20 to FY23 include
100% of the RSP awards which have vested based on the nancial year which the performance measurement period was measured over,
whereas the FY20 and FY21 awards vest over 3 years, 50% in year one and 25% in year two and three. For FY22 the single gure remuneration
number includes only the rst 50% of the 2019 RSP award which vested in full in 2022. The 25% tranches due to vest in 2023 and 2024
lapsed in full, in line with the agreed leaver provisions for Peter Pritchard. For FY23, no LTIPs were included in the CEO pay ratio as all of
Peter’s 2020 RSPs had lapsed in full and Lyssa had no share grants due to vest in FY23. It should also be noted that the bonus maximum has
increased and the share price has decreased between FY21 and FY22. The LTIPs in FY22 were calculated based on the closing share price
on 31 March 2022 (nancial year end) of £3.614 and the FY21 LTIPs have been calculated based on the closing share price on 25 March 2021
(nancial year end) of £3.862. We therefore believe that at the base pay level our CEO pay ratio compares favourably with the wider retail
sector and comparable FTSE companies.
Directors’ Remuneration Reportcontinued
83
Financial StatementsStrategic Report Governance
l) Consideration of wider colleague pay
Our culture and colleague engagement
Pets at Home’s unique culture and high levels of colleague engagement continue to be a key differentiator in attracting talent to our Group.
Our colleague listening sessions across all of our divisions combined with our annual engagement survey and pulse surveys ensure that
our colleagues have a voice. The sessions allow us to gauge colleagues in their views on the impact of the cost of living challenges, overall
team morale, service levels, senior leadership management of the business, and how their teams are feeling about the next phase of our pet
carejourney.
Our colleagues are incredibly passionate about our sustainability strategy and we knew it was essential to engage them in our strategy
refresh. To do this we launched a company wide listening and engagement campaign called ‘The Big Listen’ where we went out to all teams
and trained them to run sessions to capture what they were currently doing, what they could do in the future and what their ideas were for
business wide initiatives and opportunities from an environmental perspective. We were overwhelmed with the level of engagement with
over 1,000 unique ideas contributed from more than 500 listening sessions. This campaign also saw the launch of our rst Better World
Pledge Planet champions network with almost 200 colleagues signing up to be champions in their areas. We are now focused on playing
back the insights and critically applying the actions to the business.
The Committee also receives feedback on the results from the engagement and pulse surveys to ensure the colleague voice and opinions
from across the business as well as our Joint Venture Partners are heard and considered as part of our decision making.
Colleague share ownership
It is pleasing that this pillar of our engagement strategy continues to come to fruition with our third RSP vesting in May 2022. The RSPs were
offered to both salaried and hourly colleagues at all levels which resulted in enhancing shareholdings or creating new shareholders in over
4,500 of our colleagues. The next RSP awards will vest at the end of May 2023 which will further enhance or create new shareholdings for
over 4,700 colleagues.
We also granted a further 1.7m shares to 10,300 colleagues via the RSP in May 2022 which will vest in 2025.
Our 2019 Sharesave matured on 1 December 2022, generating a potential value of £1.1m, and a potential prot of £0.3m to over 300
colleagues based on the closing share price on the maturity date of £2.740.
The Executive Management Team and Board will continue to actively encourage engagement with our share plans and we see our share
schemes as a key differentiator in both attracting talent and aiding colleague retention. We granted a further offering of the Sharesave
scheme in September 2022, with a take up of 15.38%, our highest take up rate since our rst issue in 2014, which we believe is as a result of
the favourable business performance combined with the rst and second maturity of the RSP and a successful 2018 Sharesave maturity
which encouraged further colleague shareholder engagement interest last year.
Gender Pay Gap report
We published our Gender Pay Gap report on 4 April 2023. Our mean pay gap reduced, and our median pay gap remained stable. Our bonus
pay gap increased which is impacted by the number of women working part-time in our business as we are required to calculate our bonus
pay gap from actual bonus amounts paid, without taking account pro-ration, whereas in practice, bonus payments are pro-rated where a
colleague works part-time.
Since the reporting period for our gender pay gap, we now have a greater balance of males and females in senior roles, and an
over index with females in senior leadership roles. The FTSE Women Leaders Review recognised our high representation of women
at executive level and our ranking increased from 22nd to 7th this year. A full copy of the Gender Pay Gap report can be found here:
https://investors.petsathome.com/responsibility/policies-and-procedures/gender-pay-gap-report/.
m) Dilution limits
In accordance with the IA Guidelines, the Company can satisfy awards under its colleague share plans with new issue shares up to maximum
of 10% of its issued share capital in a rolling ten-year period and within this 10% limit, the Company can only issue 5% of its issued share
capital to satisfy awards under discretionary plans (i.e. the CSOP, PSP and RSP). As at 30 March 2023, the Company’s dilution position was
1.89% for all plans and 1.09% for the Executive plans.
n) External appointments
Executive Directors are entitled to accept one external appointment outside the Company with the consent of the Board. Any fees received
may be retained by the Director. As at the date of this report, Mike Iddon, the Chief Financial Officer, is appointed to the Board of Wickes
Group plc as a Non-Executive Director (appointed 28 April 2021). The Chief Executive Officer holds no external appointment for which they
receive a fee.
o) Non-Executive Directors – letters of appointment
A summary of the Non-Executive Directors’ letters of appointment is contained on page 42 of the report.
Pets at Home Group Plc Annual Report & Accounts 2023
84
Statement of implementation for FY24
This section provides an overview of how the Committee is proposing to implement our new Policy in FY24 subject to shareholder approval
at our AGM on 6 July 2023.
Base salary
The date for the pay review for the Executive Team now aligns to the wider management and salaried colleague population and takes place
in October each year.
When reviewing the Executive Team’s base pay, the Committee will continue to benchmark against relative market comparisons to ensure
that the package is considered competitive and does not pose a risk to retention and succession planning, whilst at the same time taking into
consideration the salary increase to the broader colleague population and external impacts on the business. The Committee may over time
approve salary increases that are ahead of the wider colleague population if this is indicated by a signicant gap in market benchmark.
Benets
The Committee sets benets in line with the Policy set out on page 67 of the report. There are no proposed changes in the benets policy for
FY24 other than anticipated standard inationary increases on premiums.
Pensions
Executive Directors already receive a pension contribution capped at the rate provided to the majority of colleagues in central support office
functions. Currently this is up to 6.5% of base salary and consistent with workforce rates at other retailers. The company continues to actively
target an increase in the rate available to all other colleagues by at least 0.5% per year.
Annual bonus
The maximum annual bonus opportunity for Executive Directors in respect of FY24 will continue at 170% for the CEO and to 150% for the
CFO. A third of bonus will be awarded in shares in line with the bonus deferral policy. The shares will not be released until a two-year holding
period is complete. This will continue to remain in place in FY24. We believe this will support in maintaining the alignment of Executive and
shareholder interests.
The annual bonus framework will be in line with that presented in the Policy table on page 68. As detailed on page 64 the target metrics
include FCF, PBT, sustainability measures and will continue to have an ESG underpin which requires each Executive Director to complete a
Better World Pledge Day.
As with previous years, the annual bonus will be subject to malus and clawback provisions. This provides the Committee with the ability to
take back amounts previously paid out for a period of up to two years under certain circumstances, including misstatement and misconduct.
Long Term Incentive Awards
It is proposed that awards under the RSP will be made in FY24 following the preliminary results announcement at 100% of salary for the
CEOand 75% of salary for the CFO in line with the Policy and subject to a judgement-based underpin which will allow the Committee to
takeshare price performance into account in addition to business, individual and wider company performance during the vesting period.
Thethree-year vesting schedule and two-year post-vest holding period will apply to these awards.
Sharesave
The Company intends to operate the Sharesave scheme again for FY24. The maximum monthly savings will be retained at £500 per month.
Executive Directors are eligible to participate.
Non-Executive Director remuneration
The fees paid to the Non-Executive Directors will be reviewed again in October and benchmarked against relative market comparisons to see
whether there have been any changes in the market and to establish if the fees need a further adjustment in FY24. This follows an increase in
fees in FY23 as they had fallen behind the market benchmarks having not been adjusted prior to FY23 since 2014. The table below shows the
Non-Executive Director fee structure for FY24 that will be reviewed in October:
FY24
Chair of the Board (all-inclusive fee) £213,200
Basic Non-Executive Director fee £53,300
Board Committee Chair fee £10,660
Deputy Chair and Senior Independent Director £20,000
There are no fees paid for membership of Board Committees.
Directors’ Remuneration Reportcontinued
85
Financial StatementsStrategic Report Governance
The Remuneration Committee
Shareholder context for the Committee’s activities
During the year, the Committee received independent advice on executive remuneration matters from Willis Towers Watson (WTW). WTW
is a member of the Remuneration Consultants Group and, as such, voluntarily operates under the code of conduct in relation to executive
remuneration consulting in the UK. The Committee has reviewed the advice provided by WTW during the year and is comfortable that it has
been objective and independent. Total fees received by WTW in relation to the remuneration advice provided to the Committee during FY23
amounted to £199,939 (FY22: £57,850) based on the required time commitment.
During FY23 the Committee also received support from Travers Smith LLP on the terms of the discretionary and all-colleague share plans.
Committee membership and meetings
The Directors listed below in the table served on the Committee during the year. The Committee met four times during FY23 and the
Committee members’ attendance is also shown in the table below:
Member Period from To Meetings attended
Dennis Millard 1 April 2022 14 February 2023 4/4
Sharon Flood (Chair) 1 April 2022 30 March 2023 5/5
Prof Susan Dawson 1 April 2022 30 March 2023 5/5
Zarin Patel 1 April 2022 30 March 2023 5/5
Roger Burnley 14 February 2023 30 March 2023 1/1
The individuals listed in the table below, none of whom were Committee members, attended at least part of a meeting by invitation during
the year.
Attendee Position
Louise Stonier Chief People and Culture Officer
Peter Pritchard CEO
Mike Iddon CFO
Lucy Williams Legal Director and Company Secretary
Lyssa McGowan CEO
Amy Smith Head of Reward
Gordon Dunn Vet People Director
Rachel Mooney Chief People Officer
Stanislas Laurent Non-Executive Director
Ian Burke Chair of the Board
Jessica Norton Willis Towers Watson Director | Executive Compensation
Laura O’Kane Willis Towers Watson Senior Director
Paul Townsend Willis Towers Watson
Alex Little Willis Towers Watson
None of the individuals were involved in making decisions at meetings regarding their own compensation.
Governance
The Board and the Committee consider that, throughout FY23 and up to the date of this report, the Company has complied with the
provisions of the UK Corporate Governance Code relating to Directors’ remuneration.
Pets at Home Group Plc Annual Report & Accounts 2023
86
Shareholder voting
At the Annual General Meeting on 7 July 2022, the total number of shares in issue with voting rights was 498,756,282. The resolution to
approve the Directors’ Remuneration Report received the following votes from shareholders:
To approve the Directors’ Remuneration Report for the year ended 31 March 2022
Votes for
1
364,013,541
%
2
90.83
Votes against 36,771,235
% 9.17
Votes total 400,784,776
% of issued share capital
3
80.36
Votes withheld
4
8,943
1 Votes ‘for’ include discretionary votes.
2 Percentages above are rounded to two decimal places.
3 Issued share capital at meeting date: 498,756,282.
4 A vote withheld is not a vote in law and is not counted in the calculation of the proportion of votes ‘for’ and ‘against’ a resolution.
Annual General Meeting
As set out in my statement on page 64, our Directors’ Remuneration Report will be subject to an advisory vote at our AGM to be held on
6 July 2023.
On behalf of the Board
Sharon Flood
Chair of the Remuneration Committee
25 May 2023
Directors’ Remuneration Reportcontinued
87
Financial StatementsStrategic Report Governance
Directors’ Report
This section of the Annual Report includes additional information required to be disclosed under the Companies Act 2006 (Companies
Act), the UK Corporate Governance Code 2018 (‘2018 Code’), the Disclosure Guidance and Transparency Rules and the Listing Rules of the
Financial Conduct Authority.
The Company has chosen in accordance with section 414C(11) of the Companies Act to provide disclosures and information in relation to
a number of additional matters which are covered elsewhere in this Annual Report. These matters and cross-references to the relevant
sections of this Annual Report are shown in the table below.
Pets at Home Group Plc
Registered Number: 8885072
Registered Office: Epsom Avenue, Stanley Green Trading Estate, Handforth, Cheshire, SK9 3RN
Telephone Number: +44 161 486 6688
Date of Incorporation: 10 February 2014
Country of Incorporation: England and Wales
Type: Public Limited Company
Statutory information Section heading Page number
Amendment of the Articles Directors’ Report 91
Appointment and Removal of Directors Directors’ Report 89
Board of Directors Directors’ Report 89
Board of Directors 32 to 33
Branches outside of the UK Directors’ Report 92
Change of Control Directors’ Report 92
Colleague Engagement Strategic Report – Sustainability Review 32
Directors’ Report 83
Colleague Diversity and Disabilities Directors’ Report 39
Colleague Share Ownership and Plans Directors’ Remuneration Report 83
Community Strategic Report – Sustainability Review 26 to 29, 36
Compensation for loss of office Directors’ Report 89
Directors’ Biographies Board of Directors 32 to 33
Directors’ Information to Auditors Directors’ Report 92
Directors’ Insurance and Indemnities Directors’ Report 89
Directors’ Interests Directors’ Report 89
Directors’ Responsibility Statement Directors’ Report 94
Executive Share Plans Directors’ Remuneration Report 79
Financial Instruments Note 23 to the consolidated financial statements 142 to 153
Future Developments of the Business Strategic Report 8 to 30
Financial position of the Group, its cash flows,
liquiditypositionandborrowing facilities
Chief Financial Officer’s review 20 to 22
Greenhouse Gas Emissions Strategic Report – Sustainability Review 12 to 19
Going Concern Directors’ Report 91
Health and Safety Strategic Report – Sustainability Review 37
Human Rights and Modern Slavery Statement Directors’ Report 92
Independent Auditors Directors’ Report 93
Audit and Risk Committee Report 49
Internal Controls and Risk Management Governance Report 23 to 30
Political Donations Directors’ Report 91
Profits and Dividend Directors’ Report 91
Post Balance Sheet Events Directors’ Report 91
Powers for the Company to issue or buy back its shares Directors’ Report 90
Powers of the Directors Directors’ Report 89
Pets at Home Group Plc Annual Report & Accounts 2023
88
Statutory information Section heading Page number
Principal Activities Directors’ Report 88
Research and Development Directors’ Report 88
Restrictions on Transfer of Securities Directors’ Report 90
Stakeholder Engagement Strategic Report – Stakeholder engagement 14 to 15
Share Capital Directors’ Report 90
Note 22 to the consolidated statements 141
Significant Related Party Transactions Directors’ Report 91
Note 27 to the consolidated statements 160 to 161
Significant Shareholders Directors’ Report 90
Subsidiary and Associated Undertakings Note 28 to the consolidated statements 161 to 171
Statement of Corporate Governance Directors’ Report 93
The Audit and Risk Committee Report Governance Report 44 to 49
The Governance Report Governance Report 31 to 94
The Directors’ Remuneration Report Governance Report 61 to 86
The Nomination and Corporate Governance Committee Report Governance Report 42 to 43
Strategic Report Strategic Report 5 to 30
Treasury and Risk Management Strategic Report 30
Viability Statement Directors’ Report 91
Voting Rights Directors’ Report 90
Directors’ Report continued
Disclosures required under Listing Rules
In accordance with Listing Rule 9.8.4C, the information required to
be disclosed in the Annual Report under Listing Rules 9.8.4R and
9.8.6(8) is disclosed on the following pages of this Annual Report:
Disclosure Page number
Long-term incentive schemes 72
Significant contracts 92
Dividend waivers Note 9 to the consolidated
financial statements
Statement of capitalised interest 123
Climate-related financial disclosures
consistent with TCFD
52 to 60
The Company’s registrar is Computershare Investor Services Plc
situated at The Pavilions, Bridgwater Road, Bristol, BS99 6ZZ.
Research and development
The Strategic Report (pages 5 to 30) sets out the innovation
carriedout by the Group in relation to product and service
development. Our funding of the Senior Clinical Training
Scholarship(Residency) in Small Mammal Medicine and Surgery
at the University of Edinburgh School of Veterinary Studies is
progressing well. As part of the partnership our clinical colleagues in
Vets for Pets are able to access expert clinical advice from the team
at the University of Edinburgh to aid them in providing the best of
care forsmallmammals.
We are committed to creating good veterinary workplaces and are
also aware of the levels of stress endured by veterinary professionals
which can impact negatively on their mental health. We have
partnered with the University of Edinburgh to support a cross-
disciplinary project aimed at better understanding how we can
prevent veterinary suicide. The aims of the project are: to provide
insight into factors inuencing methods of suicide attempt among
veterinary professionals, to understand people’s attitudes to and
experience of restriction of access to means of suicide in veterinary
workplaces and to help identify opportunities for veterinary suicide
prevention. As part of our commitment to continual improvement
and professional engagement we have become a member of the
Responsible Use of Medicines in Agriculture Companion Animal and
Equine Group (RUMA CA&E) which was established to dene the
principles of responsible use of medicines in the companion animal
and equine sectors. It covers the responsible use of medicines in
dogs, cats, rabbits, small mammals, exotic animals kept as pets, and
equids. RUMA CA&E’s current focus is on the responsible use of
antibiotics and as a member we will be contributing to collation of
evidence and establishment of evidence-based activities that will
enhance antibiotic stewardship.
89
Financial StatementsStrategic Report Governance
Directors
The names of the persons who, at any time during the nancial year,
were Directors of the Company are:
Name Date of appointment Date of resignation
Dennis Millard 18 February 2014 (reappointed) n/a
Mike Iddon 17 October 2016 (reappointed) n/a
Sharon Flood 25 May 2017 (reappointed) n/a
Stanislas Laurent 25 May 2017 (reappointed) n/a
Peter Pritchard 27 April 2018 31 May 2022
Susan Dawson 12 July 2018 (reappointed) n/a
Ian Burke 27 March 2020 (reappointed) n/a
Lyssa McGowan 25 April 2022 n/a
Roger Burnley 14 February 2023 n/a
Zarin Patel 14 April 2021 n/a
Further details in relation to Director changes are included on
pages42 to 43.
Appointment and removal of Directors
The appointment and removal of Directors of the Company is
governed by the Articles.
Appointment of Directors: A Director may be appointed by the
Company by an ordinary resolution of the Company’s shareholders
or by the Board. The Board or any Committee authorised by the
Board may from time to time appoint one or more Directors to hold
any employment or executive office for such period and on such
terms as they may determine and may also revoke or terminate any
such appointment. A Director appointed by the Board holds office
only until the next Annual General Meeting of the Company and is
then eligible for reappointment.
Annual re-election of Directors: All Directors stand for re-election
on an annual basis in line with the recommendations of the 2018 Code.
Removal of Directors: A Director may be removed by the Company
in certain circumstances set out in the Articles or by a special
resolution of the Company’s shareholders.
Vacation of office: The office of a Director shall be vacated if
(amongst other circumstances): (i) he/she is prohibited by law
from being a Director; (ii) he/she resigns; (iii) his/her resignation is
requested by all of the other Directors; (iv) he/she is or has been
suffering from mental or physical ill health and the Board resolves
that his/her office be vacated; (v) he/she is absent without the
permission of the Board from meetings of the Board (whether or
not an alternate Director appointed by him/her attends) for six
consecutive months and the Board resolves that his/her office is
vacated; (vi) he/she becomes bankrupt; (vii) he/she ceases to be a
Director by virtue of the Companies Act; or (viii) he/she is removed
from office pursuant to the Articles.
Powers of the Directors
Subject to the Articles, the Companies Act, any directions given by
the Company by special resolution of the Company’s shareholders
and any relevant statutes and regulations, the business of the
Company will be managed by the Board which may exercise all the
powers of the Company.
Directors’ interests
Information relating to the Directors’ interests in, and options over,
Ordinary Shares in the capital of the Company are shown in the
Directors’ Remuneration Report on page 79.
In accordance with Disclosure Guidance and Transparency Rule
9.8.6R(1)(a) and (b), in the period between the end of the nancial
year and 24 May 2023 (being not more than one month prior to the
date of the Notice of Annual General Meeting), there have been no
changes to such interests.
In line with the requirements of the Companies Act, each Director
has notied the Company of any situation in which he or she has,
or could have, a direct or indirect interest that conicts, or possibly
may conict, with the interests of the Company (a situational
conict). These were considered and approved by the Board in
accordance with the Articles and each Director informed of the
authorisation and any terms on which it was given. The Board has
formal procedures to deal with Directors’ conicts of interest as
and when they arise. The Board reviews and, where considered
appropriate, approves situational conicts of interest that were
reported to it by Directors and a register of those situational
conicts is maintained by the Company. The register is reviewed
bythe Board on an ongoing basis.
Compensation for loss of office
The Company does not have any agreements with any Director
or colleague that would provide compensation for loss of office
or employment (whether through resignation, redundancy or
otherwise) resulting from a takeover bid except that it should be
noted that provisions of the Company’s share schemes may cause
options and awards granted to Directors or colleagues under such
schemes to vest on a takeover. For further information on the
change of control provisions in the Company’s share schemes refer
to the Directors’ Remuneration Report on page 73.
Directors’ insurance and indemnities
The Company maintains Directors’ and officers’ liability insurance
cover for its Directors and officers (and those of other Group
companies) as permitted under the Articles and the Companies
Act. Such insurance policies were renewed during the period and
remain in force as at the date of this Annual Report. Each Director
and officer of the Company also has the benet of a qualifying
indemnity, as dened by section 236 of the Companies Act, and
as permitted by the Articles. An indemnity deed is entered into
by a Director at the time of his or her appointment to the Board.
Prospectus liability insurance remains in force which provides
cover for liabilities incurred by certain Directors in the performance
of their duties in connection with the issue of the Company’s
prospectus dated 28 February 2014 in relation to the Company’s
Initial Public Offering and Listing.
No amount was paid under any of these indemnities or insurances
during the nancial year other than the applicable insurance
premiums.
Pets at Home Group Plc Annual Report & Accounts 2023
90
Share capital
The issued share capital of the Company as at 30 March 2023
was 483,197,785 Ordinary Shares of 1 pence each. As at 24 May
2023, being the latest practicable date prior to the date of this
Annual Report, the issued share capital of the Company remained
483,197,785 Ordinary Shares of 1 pence each. Further information
regarding the Company’s issued share capital can be found in note
22 to the Group’s nancial statements.
During the 2023 nancial period, the Company carried out a share
buyback programme which commenced on 20 June 2022 and
nished on 11 January 2023. The Company’s share capital was
reduced from 500,000,000 Ordinary Shares of 1 pence each to
483,197,785 Ordinary Shares of 1 pence each as noted above.
Details of colleague share schemes are provided in note 24 to the
Group’s nancial statements.
Voting rights
All members who hold Ordinary Shares are entitled to attend and
vote at the Annual General Meeting. On a show of hands at a
general meeting every member present in person shall have one
vote and on a poll, every member present in person or by proxy shall
have one vote for every Ordinary Share held. No shareholder holds
Ordinary Shares carrying special rights relating to the control of
the Company and the Directors are not aware of any agreements
between holders of the Company’s shares that may result in
restrictions on voting rights.
Powers for the Company to issue shares: The Directors were
granted authority at the previous Annual General Meeting on 7 July
2022 to allot shares in the Company under two separate resolutions:
(i) up to one-third of the Company’s issued share capital; and (ii) up
to two-thirds of the Company’s issued share capital in connection
with a rights issue. These authorities apply until the end of the
Annual General Meeting to be held on 6 July 2023 (or, if earlier,
until the close of business on 6 October 2023). During the period,
the Directors did not use their power to issue shares under the
authorities, but did satisfy options and awards under the Company’s
option and incentive schemes.
The Directors were also granted authority at the previous Annual
General Meeting on 7 July 2022 to disapply pre-emption rights.
This resolution (which is in accordance with the guidance issued
by the Pre-Emption Group (the ‘PEG Principles’)) sought the
authority to disapply pre-emption rights over 5% of the Company’s
issued ordinary share capital. A further authority was also granted
to disapply pre-emption rights in respect of an additional 5% for
nancing a transaction which the Directors determine to be an
acquisition or other capital investment as allowed by the PEG
Principles. During the period, the Directors did not use their power
to issue shares under the authorities, but did satisfy options and
awards under the Company’s option and incentive schemes. The
Company will, consistent with the 2022 Annual General Meeting,
seek to renew these powers at the 2023 Annual General Meeting.
Powers for the Company to buy back its shares: The Company
was authorised by its shareholders on 7 July 2022, at the 2022
Annual General Meeting, to purchase in the market up to 10% of
its issued Ordinary Shares (excluding any treasury shares), subject
to certain conditions laid out in the authorising resolution. This
standard authority is renewable annually and the Directors will seek
to renew this authority at the 2023 Annual General Meeting to be
held on 6 July 2023.
Directors’ Report continued
Restrictions on transfer of Ordinary Shares
The Company’s shares are freely transferable, save as set out below.
The transferor of a share is deemed to remain the holder until the
transferee’s name is entered in the register. The Board can decline
to register any transfer of any share which is not a fully paid share.
The Company does not currently have any partially paid shares.
TheBoard may also decline to register a transfer of a certicated
share unless the instrument of transfer: (A) is duly stamped or
certied or otherwise shown to be exempt from stamp duty and is
accompanied by the relevant share certicate; (B) is in respect of
only one class of share; and (C) if to joint transferees, is in favour of
not more than four such transferees. Registration of a transfer of an
uncerticated share may be refused in the circumstances set out
in the CREST Regulations (as dened in the Articles) and where, in
the case of a transfer to joint holders, the number of joint holders
towhom the uncerticated share is to be transferred exceeds four.
Certain restrictions are also imposed by laws and regulations
(suchas the Market Abuse Regulation) and pursuant to the
Company’s share dealing code whereby certain Directors and
Persons Discharging Managerial Responsibility and restricted
colleagues require clearance to deal in the Company’s securities.
Signicant shareholdings
Information provided to the Company pursuant to the Disclosure
Guidance and Transparency Rules is published on a Regulatory
Information Service and on the Company’s website. As at 30 March
2023, the following information had been received, in accordance
with DTR5.1.2R, from holders of notiable interests in the Company’s
issued share capital. These gures represent the number of shares
and percentages held as at the date of notication to the Company.
It should be noted that these holdings may have changed since
notied to the Company however, notication of any change is not
required until the next applicable threshold is crossed.
Name of shareholder
Number of Ordinary
Shares asat
30 March 2023
Percentage of
issued share
capital (%)
Nature of holding
(direct/indirect)
Schroder Investment
Management Ltd.
47,128,473 9.8 Indirect
Capital Research
Global Investors
33,154,950 6.9 Indirect
Jupiter Asset
Management Ltd
21,566,522 4.5 Indirect
Allianz Global
Investors GmbH
17,582,899 3.6 Indirect
BlackRock Investment
Management (UK) Ltd
16,401,174 3.4 Indirect
The Vanguard Group Inc 16,144,847 3.3 Indirect
No changes have been disclosed in accordance with Disclosure
Guidance and Transparency Rule 5.1.2R in the period between
30March 2023 and 23 May 2023 (being not more than one
month prior to the date of the Notice of Annual General Meeting).
91
Financial StatementsStrategic Report Governance
Signicant related party transactions
There are no contracts of signicance during the nancial period
between the Company or any Group company and: (1) a Director
of the Company; (2) a close member of a Director’s family; or (3)
acontrolling shareholder of the Company.
Amendment of the Articles
The Articles may only be amended by a special resolution of the
Company’s shareholders in a general meeting, in accordance with
the Companies Act.
Prots and dividend
The consolidated prot for the year after taxation and all
non-underlying items was £100.7m (FY22: £124.5m). The results
arediscussed in greater detail in the Chief Financial Officer’s
reviewonpages 20 to 22.
A nal dividend of 8.3 pence per ordinary share (FY22: 7.5 pence
per ordinary share) will be recommended to the Company’s
shareholders in respect of the 2023 nancial year. The nal
dividend will be proposed by the Directors at the 2023 Annual
General Meeting on 6 July 2023 in respect of the nancial year
ended 30March 2023 to add to an interim dividend of 4.5 pence
per ordinary share paid on 6 January 2023 (FY22: 4.3 pence per
ordinaryshare).
The Directors’ proposed nal dividend of 8.3 pence per ordinary
share takes the total dividend payable in respect of the 2023
nancial year to 12.8 pence per ordinary share. The ex-dividend
date will be 15 June 2023 and, subject to shareholder approval
being obtained at the 2023 Annual General Meeting, the nal
dividend of 8.3 pence per ordinary share will be payable on 11 July
2023 to shareholders on the register at the close of business on
16June2023.
Political donations
The Group made no political donations and incurred no political
expenditure during the year (FY22: nil). It remains the Company’s
policy not to make political donations or to incur political
expenditure, however the application of the relevant provisions
of the Companies Act is potentially very broad in nature and, as
with last year, the Board is seeking shareholder authority to ensure
that the Group does not inadvertently breach these provisions as
a result of the breadth of its business activities. The Board has no
intention of using this authority.
Suppliers
The Group understands the importance of maintaining good
relationships with suppliers and it is Group policy to agree
appropriate terms and conditions for its transactions with suppliers
(ranging from standard written terms to individually negotiated
contracts) and for payment to be made in accordance with these
terms, provided the supplier has complied with its obligations.
Average trade creditors of the Group’s operations for FY23 were
51days (FY22: 53 days).
Post balance sheet events
There are no post balance sheet events that are non-adjusting
requiring disclosure.
Going concern
The unprecedented uncertainty created by current geopolitical
instability, inationary pressures, economic uncertainty and the
potential impacts of climate change as noted in our TCFD scenario
analysis, make it challenging to predict how the business will be
impacted in the year ahead, but on the basis of current nancial
projections and facilities available, the Directors are satised that
the Group is well placed to manage its business risks successfully
and therefore have a reasonable expectation that the Group has
adequate resources to continue in operational existence for a period
of 12 months from the date of approval of the nancial statements.
Accordingly, the nancial statements continue to be prepared on a
going concern basis.
The impact of geopolitical instability on our supply chains, the
impact of inationary pressures and the considerations from
our TCFD scenario analysis are discussed in detail in the Chief
Executive Officer’s statement on pages 8 to 9. The basis of
preparation and going concern assessment can be found within
note 1 to the nancial statements.
Viability statement
The Group has developed a detailed strategic and business
planning (‘SBP’) process, which comprises a strategic plan (Strategic
Plan) containing nancial projections and a Business Plan which
forms a detailed near term one-year plan for the upcoming nancial
year. The SBP process produces standard outputs in respect of
the key nancial performance metrics of the Group which deliver
consolidated nancial plans at both Group level and at a number
of levels within the Group. The Strategic Plan is reviewed each
year by the Board as part of the strategy review process. Once
approved by the Board, the Strategic Plan is cascaded across
the Group and provides the basis for setting all detailed nancial
budgets and strategic actions that are subsequently used by the
Board to monitor performance. The SBP process covers a ve-year
period. The ve-year plan provides a robust planning tool against
which strategic decisions can be made. In making their viability
assessment, the Board has taken into consideration that nancing
facilities are maintained for the duration of the Strategic Plan and
the potential impact of geopolitical instability, inationary pressures
and climate change on future cash ows and liquidity. The Directors
have considered a combination of risks and uncertainties and the
mitigating controls operated by the Group as detailed on pages
23 to 30 that may impact on the Group’s reputation and its ability
to trade. These risks include issues on pet welfare, competitor
activity and broader macro-economic risks and their impact on the
Strategic Plan on an individual and combined level. On this basis
and in conjunction with other matters considered and reviewed by
the Board during the year, the Board has reasonable expectations
that the Group will be able to continue in operation and meet its
liabilities as they fall due over the ve nancial years used for its
assessment. In making this assessment, the Board has assumed that
there is no material change in the legislative environment in relation
to the sale of small animals and the practice of veterinary medicine.
It is recognised that such future assessments are subject to a
level of uncertainty that increases with time and therefore future
outcomes cannot be guaranteed or predicted with certainty.
Pets at Home Group Plc Annual Report & Accounts 2023
92
Modern Slavery Act
Our Modern Slavery Statement is reviewed and approved by the
Board on an annual basis and published on our investor website.
The statement covers the activities of Pets at Home Limited and
Companion Care (Services) Limited (whose activities fall within the
scope of s.54(2) of the Modern Slavery Act 2015) and details the
policies, processes and actions taken to ensure that slavery and
human trafficking are not taking place in our supply chain or any
part of our business.
Anti bribery matters
The Group has a zero tolerance approach to bribery and corruption
and supports colleagues to make decisions in line with this position.
The Group’s anti-bribery policy applies to all colleagues and extends
to our business dealings and transactions in all countries in which
the business operates. The policy is implemented in conjunction
with the Group’s Code of Ethics and Business Conduct. Colleagues
receive training in relation to bribery and corruption as appropriate.
Our policies and contractual controls
We are committed to ensuring there is transparency in our business
and throughout our supply chain. Our Code of Ethics and Business
Conduct policy reects our commitment to acting ethically and
with integrity in all our business dealings and relationships and we
expect full compliance with it by colleagues, suppliers and business
partners. Our policy is reviewed on an annual basis.
Our suppliers are also required to comply with our Ethical Trading
policy which sets out the minimum standards that they are required
to adhere to wherever they procure materials, manufacture or
perform services for, or supply products to, our business. We also
contractually require suppliers to comply with the Group’s Code
ofEthics and Business Conduct policy.
Our supplier standard general terms and conditions include a
right for Pets at Home to conduct audits on supplier compliance.
Our Group Whistleblowing policy promotes vigilance amongst
colleagues and encourages central reporting of concerns about
anyissue or suspicion in any parts of our business or supply chain.
Branches outside of the UK
The Company has no branches outside of the UK.
Change of control
The only signicant agreements to which the Company is a party
that take effect, alter or terminate upon a change of control of
the Company following a takeover bid, and the effect thereof,
areasfollows:
– The Group has a revolving credit facility with a total facility
amount of £300m. This senior facilities agreement expires
on 29 March 2027 (unless extended in accordance with its
terms), and contains customary prepayment, cancellation and
default provisions including, if required by a lender, mandatory
prepayment of all utilisations provided by that lender upon
the sale of all or substantially all of the business and assets of
the Group or a change of control. In addition the Group has a
£26m loan facility to fund the purchase of capital items which
expires on 27 March 2030 and mirrors the terms of the senior
facilitiesagreement.
Directors’ Report continued
– The Company’s subsidiary, Companion Care (Services) Ltd
(CCSL), has an existing facility agreement dated November
2020 with Santander for a £20m reducing basis (non-revolving)
loan facility with a three-year availability period. In addition to
the Santander facility agreement, CCSL also has an agreement
with Lloyds dated May 2021 and, along with Vet4Pets Limited
(V4P), a further facility with HSBC dated April 2021. Both the
HSBC and Lloyds facilities are capable of being reborrowed and
contain clauses that vary the maximum facility limits over their
availability periods. As at 30 March 2023, the maximum facility
limit on the Lloyds and HSBC facility agreements were £20m
and £18.5m respectively. Both facility agreements contained
one-year extension options, which have now been successfully
exercised, taking the revised availability periods to April 2024
and May 2024 respectively. CCSL is currently in discussions
with Santander with a view to extending their availability period
by a further year from November 2023 to November 2024.
– Alongside these new facilities, the portfolio of Joint Venture
companies also have existing loans in place with NatWest (RBS),
Lloyds, HSBC and Santander under historic agreements. These
agreements are no longer active, however the loans drawn
down under them are still amortising.
– Pursuant to the terms of these facility agreements entered
into in November 2020, April and May 2021, CCSL and V4P
provide guarantees in respect of a certain xed proportion
of the outstanding facility loans provided to the Joint
Venture practices which borrow under the facility. The facility
agreements contain customary prepayment, cancellation and
default provisions which include the event of a change of
control (direct or indirect) of CCSL or V4P. For these purposes
‘control’ means the power (whether by way of ownership of
shares, proxy, contract, agency or otherwise) to: (a) cast or
control more than 90% of the votes that may be cast at a
general meeting of CCSL or V4P (as relevant); (b) appoint or
remove all or a majority of the Directors of CCSL or V4P (as
relevant); (c) give directions with respect to the operating and
nancial policies of CCSL or V4P (as relevant) with which the
Directors are obliged to comply; and/or (d) hold benecially
(directly or indirectly) at least 90% of the issued share capital
of CCSL or V4P (as relevant). The historic agreements contain
similar clauses and guarantees.
Directors’ information to auditors
In accordance with section 418 of the Companies Act, each Director
who held office at the date of the approval of this Directors’ Report
(whose names and functions are listed in the Board of Directors on
pages 32 to 33) conrms that, so far as he or she is aware, there is no
relevant audit information of which the Group’s auditor is unaware,
and that each Director has taken all of the steps that he or she
ought to have taken as a Director in order to make himself or herself
aware of any relevant audit information and to establish that the
Group’s auditor is aware of that information.
93
Financial StatementsStrategic Report Governance
Independent auditors
During the 2016 nancial year, a competitive tender process of
audit services was completed in accordance with the requirements
of The Statutory Audit Services for Large Companies Market
Investigation (Mandatory Use of Competitive Tender Processes and
Audit Committee Responsibilities) Order 2014 (the Order). KPMG
LLP was reappointed as auditor of the Company at the 2022 Annual
General Meeting. The Company’s auditor, KPMG LLP, has indicated
their willingness to continue their role as the Company’s auditor.
Resolutions concerning the reappointment of KPMG LLP as auditor
of the Company and to authorise the Directors to determine their
remuneration will be proposed at the 2023 Annual General Meeting
as set out in the Notice of Annual General Meeting. For further
information on the reappointment of the auditors, refer to page 49
of the Audit and Risk Committee Report.
Corporate Governance Statement
The Corporate Governance Report is referred to on pages 31 to 94
and includes details of compliance with the Code. A description
of the main features of our internal control and risk management
arrangements in relation to the nancial reporting process is
set out on page 23 to 30. The information required under DTR
7.2.6R can be found in the Governance section of this Annual
Report. Adescription of the Board composition, operation and
itsCommittees, including diversity matters, is set out on pages 36
to41. The Code can be viewed on the FRC’s website at frc.org.uk
Non-nancial reporting
Non-nancial measures are an important part of our business. The table below
constitutes the Company’s non-nancial information statement as required by
sections 414CA and 414CB of the Companies Act 2006. Our Sustainability Report
and websites (www.petsathome.com and investors.petsathome.com) contain
non-nancial information, including actions, to manage our environmental and
social impact and look after our colleagues.
Additional Information
In order to consolidate our reporting requirements, the following
information is incorporated by reference into this Directors’ Report:
Page
Colleague engagement 83
Colleague share ownership and plans 83
Colleague diversity and disabled persons 39
Greenhouse gas emissions Sustainability
Report, 12 to 19
Approval of Annual Report
The Strategic Report, Corporate Governance Statement and the
Governance Report were approved by the Board on 18 May 2023.
This Directors’ Report was approved by the Board on 18 May 2023
and signed on its behalf by:
Lucy Williams
Chief Legal Officer and Company Secretary
25 May 2023
Reporting
requirement Relevant policies and documents Further information and outcomes
Environmental
matters
– Packaging policy
– Environmental policy
– Social Value Strategy
– Supplier Code of Conduct
– Responsible Sourcing Handbook
– Raw Materials Sourcing Policy
– Sustainability Report
– Annual Report pages 16 to 19
Colleagues – Diversity and Inclusion Policy
– Diversity and Inclusion Strategy
– Whistleblowing policy
– Health and Safety policy
– Colleague Handbook
– Sustainability Report
– Gender Pay Gap Report
– Annual Report pages 39 to 40
Social matters – Responsible Sourcing Handbook
– Supplier Code of Conduct
– Social Value Strategy
– Whistleblowing policy
– Tax strategy
– Sustainability Report
– Pets at Home Foundation Impact Report
Respect for
human rights
– Human Rights policy
– Responsible Sourcing Handbook
– Supplier Code of Conduct
– Social Value Strategy
– Child Protection Procedure
– Whistleblowing policy
– Sustainability Report
– Human Rights and Modern Slavery Statement
– Annual Report pages 51 and 92
Anti-corruption
and anti-bribery
matters
– Anti-bribery policy
– Code of Ethics and Business
Conduct
– Responsible Sourcing Handbook
– Supplier Code of Conduct
– Annual Report page 92
Copies of our policies are available on our
investor website: investors.petsathome.com
Information relating to our business
model is included on pages 2 to 3
Our non-nancial KPIs are
detailed on page 11
Information relating to how the business
manages risk is set out on pages 23 to 30
Pets at Home Group Plc Annual Report & Accounts 2023
94
Statement of Directors’ Responsibilities in respect
of the Annual Report and the Financial Statements
The Directors are responsible for preparing the Annual Report and
the Group and parent Company nancial statements in accordance
with applicable law and regulations.
Company law requires the Directors to prepare Group and parent
Company nancial statements for each nancial year. Under that
law they are required to prepare the Group nancial statements in
accordance with UK-adopted international accounting standards
and applicable law and have elected to prepare the parent
Company nancial statements on the same basis.
Under company law the Directors must not approve the nancial
statements unless they are satised that they give a true and fair
view of the state of affairs of the Group and parent Company and
of the Group’s prot or loss in the period. In preparing each of the
Group and parent Company nancial statements, the Directors are
required to:
– Select suitable accounting policies and then apply them
consistently;
– Make judgements and estimates that are reasonable, relevant
and reliable;
– State whether they have been prepared in accordance with UK
adopted international accounting standards;
– Assess the Group and parent Company’s ability to continue as
a going concern, disclosing, as applicable, matters related to
going concern; and
– Use the going concern basis of accounting unless they either
intend to liquidate the Group or the parent Company or to
cease operations, or have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the parent
Company’s transactions and disclose with reasonable accuracy at
any time the nancial position of the parent Company and enable
them to ensure that its nancial statements comply with the
Companies Act 2006.
They are responsible for such internal control as they determine is
necessary to enable the preparation of nancial statements that are
free from material misstatement, whether due to fraud or error, and
have general responsibility for taking such steps as are reasonably
open to them to safeguard the assets of the Group and to prevent
and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, Directors’ Report,
Directors’ Remuneration Report and Corporate Governance
Statement that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity of
the corporate and nancial information included on the Company’s
website. Legislation in the UK governing the preparation and
dissemination of nancial statements may differ from legislation in
other jurisdictions.
In accordance with Disclosure Guidance and Transparency Rule
4.1.14R, the nancial statements will form part of the annual nancial
report prepared using the single electronic reporting format under
the TD ESEF Regulation. The auditor’s report on these nancial
statements provides no assurance over the ESEF format.
Responsibility statement of the Directors in respect of the
annual nancial report
We conrm that to the best of our knowledge:
– The nancial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, nancial position and prot or loss of the
Company and the undertakings included in the consolidation
taken as a whole; and
– The Strategic Report includes a fair review of the development
and performance of the business and the position of the issuer
and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face.
We consider the Annual Report and Accounts, taken as a whole, is
fair, balanced and understandable and provides the information
necessary for shareholders to assess the Group’s position and
performance, business model and strategy.
Approved by the Board and signed on its behalf by:
Lyssa McGowan
Chief Executive Officer
25 May 2023
95
Strategic Report Financial StatementsGovernance
Financial statements
Financial statements
96 Independent Auditor’s Report
102 Consolidated income statement
102 Consolidated statement of comprehensive income
103 Consolidated balance sheet
104 Consolidated statement of changes in equity as at 30March 2023
104 Consolidated statement of changes in equity as at 31March 2022
105 Consolidated statement of cash flows
106 Company balance sheet
107 Company statement of changes in equity as at 30March 2023
107 Company statement of changes in equity as at 31March 2022
108 Company statement of cash flows
109 Notes (forming part of the financial statements)
169 Glossary – Alternative Performance Measures
172 Advisors and contacts
Pets at Home Group Plc Annual Report & Accounts 2023
96
Independent Auditor’s Report
to the members of Pets at Home Group Plc
1.Our opinion is unmodied
We have audited the nancial statements of Pets at Home Group
plc ('the Company') for the 52 week period ended 30 March 2023
which comprise the Consolidated Income Statement, Consolidated
Statement of Comprehensive Income, Consolidated Balance
Sheet, Consolidated Statement of Changes in Equity, Consolidated
Statement of Cash Flows, Company Balance Sheet, Company
Statement of Changes in Equity, Company Statement of Cash Flows
and the related notes, including the accounting policies in note 1.
In our opinion:
– the nancial statements give a true and fair view of the state of
the Group’s and of the parent Company’s affairs as at 30 March
2023 and of the Group’s prot for the 52 week period then
ended;
– the Group nancial statements have been properly prepared
in accordance with UK-adopted international accounting
standards;
– the parent Company nancial statements have been properly
prepared in accordance with UK-adopted international
accounting standards and as applied in accordance with the
provisions of the Companies Act 2006; and
– the nancial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards
on Auditing (UK) ('ISAs (UK)') and applicable law. Our responsibilities
are described below. We believe that the audit evidence we have
obtained is a sufficient and appropriate basis for our opinion. Our
audit opinion is consistent with our report to the audit committee.
We were rst appointed as auditor by the shareholders on
10February 2014. The period of total uninterrupted engagement is
for the 10 nancial periods ended 30 March 2023. We have fullled
our ethical responsibilities under, and we remain independent of the
Group in accordance with, UK ethical requirements including the
FRC Ethical Standard as applied to listed public interest entities.
Nonon-audit services prohibited by that standard were provided.
Overview
Materiality:
Groupnancial
statements as awhole
£6.8m (2022: £6.5m)
5.0% (2022: 5.0%) of underlying prot
before tax
Coverage 97% (2022: 98%) of underlying Group
prot before tax
Key audit matters vs 2022
Recurring risks Carrying value of Vets
Group CGU Goodwill
Parent Company
key audit matter
Carrying value of parent
Company’s investment
in its subsidiary
2. Key audit matters: our assessment of risks of material
misstatement
Key audit matters are those matters that, in our professional
judgement, were of most signicance in the audit of the nancial
statements and include the most signicant assessed risks of
material misstatement (whether or not due to fraud) identied by
us, including those which had the greatest effect on: the overall
audit strategy; the allocation of resources in the audit; and directing
the efforts of the engagement team. We summarise below the key
audit matters, in decreasing order of audit signicance, in arriving at
our audit opinion above, together with our key audit procedures to
address those matters and, as required for public interest entities,
our results from those procedures. These matters were addressed,
and our results are based on procedures undertaken, in the
context of, and solely for the purpose of, our audit of the nancial
statements as a whole, and in forming our opinion thereon, and
consequently are incidental to that opinion, and we do not provide
aseparate opinion on these matters.
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Strategic Report Financial StatementsGovernance
The risk Our response
Impairment of
Goodwill allocated
to the Vet Group
Cash Generating
Unit ('CGU')
(£362 million;
2022:£362million)
Refer to page 47
(Audit Committee
Report), page 115
(accounting policy)
and page 130
(nancial disclosures).
Forecast based assessment:
Goodwill in the Vet Group cash
generating unit ('CGU') is signicant
and is based on higher growth rates
than other parts of the business.
The estimated recoverable amount
is subjective due to the inherent
uncertainty involved in forecasting
and discounting future cash ows,
specically the projected revenue
growth and the gross margin
percentage, which form the basis
ofthe value in use calculation.
The effect of these matters is that,
as part of our risk assessment
for audit planning purposes, we
determined that the value in use of
the Vet Group cash generating unit
had a high degree of estimation
uncertainty, with a potential
range of reasonable outcomes
greater than our materiality for the
nancial statements as a whole. In
conducting our nal audit work, we
concluded that reasonably possible
changes to the value in use of the
Vet Group cash generating unit
would not be expected to result in
material impairment.
The nancial statements (note 13)
disclose the sensitivities estimated
by the Group.
We performed the tests below rather than seeking to rely on any of the
Group’s controls because the nature of the balance is such that we
would expect to obtain audit evidence primarily through the detailed
procedures described.
Our procedures included:
– Re-performance: we re-performed the value in use calculations
and compared data used in the model against source information,
whereapplicable;
– Historical comparison: we assessed the reasonableness of the
VetGroup’s budgets by considering the historical accuracy of
previous forecasts;
– Benchmarking assumptions: we used our own internal discount
rate tools to assess the reasonableness of the Vet Group’s
discount rate by comparing the Group’s assumptions to externally
deriveddata;
– Our sector experience: we assessed whether key assumptions
included in the forecast cash ows, such as projected revenue
growth and gross margin percentage, reect our knowledge of
the business and industry, including known or probable changes
in the business environment and for consistency with industry
analystreports;
– Sensitivity analysis: we performed breakeven analysis on the
assumptions and checked whether the Directors have identied
reasonably possible downside scenarios in their own sensitivity
analysis; and
– Assessing transparency: we assessed whether the disclosures
about the impairment testing appropriately reect the risks inherent
in the assessment of the recoverability of Vet Group goodwill.
Our results
– We found the Group’s conclusion that there is no impairment of the
Vet Group CGU goodwill to be acceptable (2022 result: acceptable).
Recoverability
of the Parent
Company’s
investment in
its subsidiary
(£936.2 million;
2022: £936.2million)
Refer to page 47
(Audit Committee
Report), page 110
(accounting policy)
and page 158
(nancial disclosures).
Low risk, high value:
The carrying amount of the Parent
Company’s investment in its only
direct subsidiary (Pets at Home No.
1 Limited) represents 61.6% (2022:
60.8%) of the parent Company’s
total assets. Its recoverability
is not a high risk of signicant
misstatement or subject to
signicant judgement. However,
due to its materiality in the context
of the parent Company nancial
statements this is considered to
be the area that had the greatest
effect on our overall parent
Company audit.
We performed the tests below rather than seeking to rely on any of the
Group’s controls because the nature of the balance is such that we
would expect to obtain audit evidence primarily through the detailed
procedures described.
Our procedures included:
– Tests of detail: we compared the value of the investment to the
market capitalisation as at the period end date and post period end;
– Comparing valuations: as the investment’s carrying amount
exceeded the net asset value, we compared the carrying amount
to the expected value of the business based on the value in use
calculation prepared by the Directors in relation to the goodwill
impairment; and assessed the accuracy of the key inputs into the
value in use calculations; and
– Sensitivity analysis: we performed sensitivity analysis on the
key assumptions and checked whether the Directors have
identied reasonably possible downside scenarios in their own
sensitivityanalysis.
Our results
– We found the Company’s conclusion that there is no impairment of
its investment in its subsidiary to be acceptable (2022: acceptable).
We continue to perform procedures over the accounting treatment of costs related to cloud-based software arrangements. However,
following the application of a consistent methodology regarding the treatment of these costs in line with the IFRS Interpretation Committee’s
agenda decision in relation to conguration or customisation costs in a cloud computing arrangement, we have not assessed this as one of
the most signicant risks in our current period audit and, therefore, it is not separately identied in our report this period.
Pets at Home Group Plc Annual Report & Accounts 2023
98
100%
(2022: 100%)
100%
(2022: 98%)
97%
(2022: 88%)
97%
(2022: 98%)
3
3
100
100
97
97
100
98
0
2 2
0
0
88
98
12
Group revenue
Group total assets
Group prot before tax
Normalised Group
prot before tax
3. Our application of materiality and an overview of the
scope of our audit
Materiality for the Group nancial statements as a whole was set at
£6.8m (2022: £6.5m), determined with reference to a benchmark of
Group prot before tax, normalised to exclude the non-underlying
items as disclosed in note 3, of £136.4m, of which it represents 5.0%
(2022: 5.0%).
Materiality for the parent Company nancial statements as a
whole was set at £3.4m (2022: £2.9m), which is the component
materiality for the parent Company determined by the Group
auditengagement team. This is lower than the materiality we
wouldotherwise have determined with reference to parent
Company total assets, of which it represents 0.22% (2022: 0.19%).
In line with our audit methodology, our procedures on individual
account balances and disclosures were performed to a lower
threshold, performance materiality, so as to reduce to an acceptable
level the risk that individually immaterial misstatements in individual
account balances add up to a material amount across the nancial
statements as a whole.
Performance materiality was set at 75% (2022: 75%) of materiality
for the nancial statements as a whole, which equates to £5.1m
(2022: £4.9m) for the Group and £2.6m (2022: £1.7m) for the
parentCompany.
We applied this percentage in our determination of performance
materiality because we did not identify any factors indicating an
elevated level of risk.
We agreed to report to the Audit Committee any corrected or
uncorrected identied misstatements exceeding £0.3m (2022:
£0.3m), in addition to other identied misstatements that warranted
reporting on qualitative grounds.
Of the Group’s 8 (2022: 8) reporting components, we subjected 3
(2022: 3) to full scope audits for Group purposes. For the residual
components, we performed analysis at an aggregated Group level
to re-examine our assessment that there were no signicant risks of
material misstatement within these.
The components within the scope of our work accounted for the
percentages illustrated opposite.
The Group team performed procedures on the items excluded from
underlying Group prot before tax.
The Group team instructed component auditors as to the signicant
areas to be covered, including the relevant risks detailed above and
the information to be reported back.
The Group team approved the component materialities, which
ranged from £3.2m to £6.2m (2022: £2.9m to £6.2m), having
regard to the mix of size and risk prole of the Group across
thecomponents.
The Group team visited 3 (2022: 3) component locations. Video and
telephone meetings were also held with these component auditors.
At these visits and meetings, the ndings reported to the Group
team were discussed in more detail, and any further work required
by the Group team was then performed by the component auditor.
The work on 1 of the 8 components (2022: 1 of the 8 components)
was performed by component auditors and the rest, including the
audit of the parent Company, was performed by the Group team.
The scope of the audit work performed was fully substantive as
we did not rely upon the Group's internal control over nancial
reporting.
Independent Auditor’s Report continued
to the members of Pets at Home Group Plc
Normalised Group
protbefore tax
£136.4m (2022: £130.1m)
Group
materiality
£6.8m (2022: £6.5m)
£6.8m
Whole nancial statements
materiality (2022: £6.5m)
£6.2m
Range of materiality at
3 components (£3.4m
to £6.2m) (2022: £2.9m
to £6.2m)
£0.3m
Misstatements reported
to the Audit Committee
(2022: £0.3m)
£5.1m
Whole nancial
statements performance
materiality (2022: £4.9m)
Normalised PBT
Group materiality
Full scope for Group audit purposes 2023
Residual components 2023
Full scope for Group audit purposes 2022
Residual components 2022
99
Strategic Report Financial StatementsGovernance
4. The impact of climate change on our audit
In planning our audit, we have performed a risk assessment of the
potential impact of risks arising from climate change on the business
and the impact of the commitments made by the Group on the
nancial statements. We held discussions with our own climate
change professionals to challenge our risk assessment.
Based upon this risk assessment, we concluded that climate risk
has no material effect on the nancial statements due to the nature
of the Group’s current business operations and, in particular, the
headroom between the carrying value and recoverable amount
ofgoodwill and parent Company investment in subsidiaries.
There was no impact of climate change on our key audit matters
included in section 2.
We have read the disclosure of climate change in the front half of
the annual report and considered consistency with the nancial
statements and our audit knowledge.
5. Going concern
The Directors have prepared the nancial statements on the going
concern basis as they do not intend to liquidate the Group or the
Company or to cease their operations, and as they have concluded
that the Group’s and the Company’s nancial position means that
this is realistic. They have also concluded that there are no material
uncertainties that could have cast signicant doubt over their ability
to continue as a going concern for at least a year from the date of
approval of the nancial statements ('the going concernperiod').
We used our knowledge of the Group, its industry, and the general
economic environment to identify the inherent risks to its business
model and analysed how those risks might affect the Group’s and
Company’s nancial resources or ability to continue operations over
the going concern period. The risks that we considered most likely
to adversely affect the Group’s and Company’s available nancial
resources and/or metrics relevant to debt covenants over this
period were:
– Failure to meet sales growth targets; and
– The impact of ination on the Group’s cost base.
We considered whether these risks could plausibly affect the
liquidity or covenant compliance in the going concern period by
comparing severe but plausible downside scenarios that could
arise from these risks individually and collectively against the level
of available nancial resources and covenants indicated by the
Group’s nancial forecasts.
Our procedures included:
– We critically assessed assumptions in base case and downside
scenarios relevant to liquidity and covenant metrics, in
particular in relation to revenue growth by comparing to
published economic forecasts and historical trends and
overlaying knowledge of the entity' plans based on approved
budgets and our knowledge of the entity and the sector in
which it operates;
– We assessed whether downside scenarios applied mutually
consistent and severe assumptions in aggregate, using our
assessment of the possible range of each key assumption and
our knowledge of inter-dependencies;
– We compared past budgets to actual results to assess the
Directors' track record of budgeting accurately;
– We inspected the conrmation from the lender of the
level of committed nancing, and the associated covenant
requirements; and
– We assessed the completeness of the going concern disclosure.
Our conclusions based on this work:
– we consider that the Directors’ use of the going concern basis
of accounting in the preparation of the nancial statements
isappropriate;
– we have not identied, and concur with the Directors’
assessment that there is not, a material uncertainty related
to events or conditions that, individually or collectively, may
cast signicant doubt on the Group’s or Company's ability to
continue as a going concern for the going concern period;
– we have nothing material to add or draw attention to in relation
to the Directors’ statement in note 1.3 to the nancial statements
on the use of the going concern basis of accounting with no
material uncertainties that may cast signicant doubt over the
Group and Company’s use of that basis for the going concern
period, and we found the going concern disclosure in note 1.3 to
be acceptable; and
– the related statement under the Listing Rules set out on page
110 is materially consistent with the nancial statements and our
audit knowledge.
However, as we cannot predict all future events or conditions and
as subsequent events may result in outcomes that are inconsistent
with judgements that were reasonable at the time they were made,
the above conclusions are not a guarantee that the Group or the
Company will continue in operation.
6. Fraud and breaches of laws and regulations –
ability to detect
Identifying and responding to risks of material misstatement
due to fraud
To identify risks of material misstatement due to fraud ('fraud risks')
we assessed events or conditions that could indicate an incentive or
pressure to commit fraud or provide an opportunity to commit fraud.
Our risk assessment procedures included:
– Enquiring of Directors as to the Group’s high level policies and
procedures to prevent and detect fraud, as well as whether they
have knowledge of any actual, suspected or alleged fraud.
– Reading Board meeting minutes.
– Considering remuneration incentive schemes and performance
targets for Directors and key management personnel.
– Using analytical procedures to identify any unusual or
unexpected relationships.
We communicated identied fraud risks throughout the audit team
and remained alert to any indications of fraud throughout the audit.
This included communication from the Group audit team to the
component audit team of relevant fraud risks identied at the Group
level and request to the component audit team to report to the
Group audit team any instances of fraud that could give rise to a
material misstatement at the Group level.
As required by auditing standards, and taking into account possible
pressures to meet prot targets, we perform procedures to address
the risk of management override of controls, in particular the risk
that Group and component management may be in a position to
make inappropriate accounting entries. On this audit we do not
believe there is a fraud risk related to revenue recognition due to
the simplistic nature of revenue transactions, and the absence of
judgement in revenue recognition.
Pets at Home Group Plc Annual Report & Accounts 2023
100
Independent Auditor’s Report continued
to the members of Pets at Home Group Plc
We did not identify any additional fraud risks.
We performed procedures including:
– Identifying journal entries to test for all full scope components
based on risk criteria and comparing the identied entries
to supporting documentation. These included those posted
by senior nance management and other unexpected users,
postings to overrider accounts close to the period end and
journal entries posted to unexpected account combinations
including revenue or cash.
– Assessing whether the judgements made in making accounting
estimates are indicative of a potential bias.
We discussed with the audit committee matters related to actual
or suspected fraud, for which disclosure is not necessary, and
considered any implications for our audit.
Identifying and responding to risks of material misstatement
related to compliance with laws and regulations
We identied areas of laws and regulations that could reasonably
be expected to have a material effect on the nancial statements
from our general commercial and sector experience, and through
discussion with the Directors and others management (as required
by auditing standards), and discussed with the Directors and other
management the policies and procedures regarding compliance
with laws and regulations.
As the Group is regulated, our assessment of risks involved gaining
an understanding of the control environment including the entity’s
procedures for complying with regulatory requirements.
We communicated identied laws and regulations throughout our
team and remained alert to any indications of non- compliance
throughout the audit. This included communication from the
Group audit team to the component audit team of relevant laws
and regulations identied at the Group level, and a request for
the component audit team to report to the Group audit team any
instances of non-compliance with laws and regulations that could
give rise to a material misstatement at the Group level.
The potential effect of these laws and regulations on the nancial
statements varies considerably.
Firstly, the Group is subject to laws and regulations that directly
affect the nancial statements including nancial reporting
legislation (including related companies legislation), distributable
prots legislation and taxation legislation and we assessed the
extent of compliance with these laws and regulations as part of our
procedures on the related nancial statement items.
Secondly, the Group is subject to many other laws and regulations
where the consequences of non-compliance could have a material
effect on amounts or disclosures in the nancial statements, for
instance through the imposition of nes or litigation. We identied
the following areas as those most likely to have such an effect: sale
of goods and consumer rights legislation, animal welfare legislation,
health and safety, data protection laws, anti-bribery, employment
law, regulatory capital and liquidity, and certain aspects of Company
legislation recognising the nature of the Group’s activities. Auditing
standards limit the required audit procedures to identify non-
compliance with these laws and regulations to enquiry of the
Directors and other management and inspection of regulatory and
legal correspondence, if any. Therefore if a breach of operational
regulations is not disclosed to us or evident from relevant
correspondence, an audit will not detect that breach.
Context of the ability of the audit to detect fraud or
breaches of law or regulation
Owing to the inherent limitations of an audit, there is an unavoidable
risk that we may not have detected some material misstatements
in the nancial statements, even though we have properly planned
and performed our audit in accordance with auditing standards.
For example, the further removed non- compliance with laws and
regulations is from the events and transactions reected in the
nancial statements, the less likely the inherently limited procedures
required by auditing standards would identify it.
In addition, as with any audit, there remained a higher risk of non-
detection of fraud, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal controls.
Our audit procedures are designed to detect material misstatement.
We are not responsible for preventing non-compliance or fraud
andcannot be expected to detect non-compliance with all laws
andregulations.
7. We have nothing to report on the other information in the
Annual Report
The Directors are responsible for the other information presented
in the Annual Report together with the nancial statements.
Ouropinion on the nancial statements does not cover the other
information and, accordingly, we do not express an audit opinion
or, except as explicitly stated below, any form of assurance
conclusionthereon.
Our responsibility is to read the other information and, in doing so,
consider whether, based on our nancial statements audit work,
the information therein is materially misstated or inconsistent with
the nancial statements or our audit knowledge. Based solely on
that work we have not identied material misstatements in the
otherinformation.
Strategic report and Directors’ report
Based solely on our work on the other information:
– we have not identied material misstatements in the strategic
report and the Directors’ report;
– in our opinion the information given in those reports for the
nancial period is consistent with the nancial statements; and
– in our opinion those reports have been prepared in accordance
with the Companies Act 2006.
Directors’ remuneration report
In our opinion the part of the Directors’ Remuneration Report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
Disclosures of emerging and principal risks and longer-term
viability
We are required to perform procedures to identify whether there is a
material inconsistency between the Directors’ disclosures in respect
of emerging and principal risks and the viability statement, and the
nancial statements and our audit knowledge.
Based on those procedures, we have nothing material to add or
draw attention to in relation to:
– the Directors’ conrmation within the Viability Statement on
page 91 that they have carried out a robust assessment of the
emerging and principal risks facing the Group, including those
that would threaten its business model, future performance,
solvency and liquidity;
101
Strategic Report Financial StatementsGovernance
– the Emerging Risks disclosures describing these risks and how
emerging risks are identied, and explaining how they are being
managed and mitigated; and
– the Directors’ explanation in the Viability Statement of how
they have assessed the prospects of the Group, over what
period they have done so and why they considered that period
to be appropriate, and their statement as to whether they
have a reasonable expectation that the Group will be able to
continue in operation and meet its liabilities as they fall due
over the period of their assessment, including any related
disclosures drawing attention to any necessary qualications
orassumptions.
We are also required to review the Viability Statement, set out on
page 91 under the Listing Rules. Based on the above procedures, we
have concluded that the above disclosures are materially consistent
with the nancial statements and our audit knowledge.
Our work is limited to assessing these matters in the context of
only the knowledge acquired during our nancial statements
audit. As we cannot predict all future events or conditions and as
subsequent events may result in outcomes that are inconsistent
with judgements that were reasonable at the time they were made,
the absence of anything to report on these statements is not a
guarantee as to the Group’s and Company’s longer-term viability.
Corporate governance disclosures
We are required to perform procedures to identify whether
there is a material inconsistency between the Directors’ corporate
governance disclosures and the nancial statements and our
auditknowledge.
Based on those procedures, we have concluded that each of the
following is materially consistent with the nancial statements and
our audit knowledge:
– the Directors’ statement that they consider that the annual
report and nancial statements taken as a whole is fair, balanced
and understandable, and provides the information necessary for
shareholders to assess the Group’s position and performance,
business model and strategy;
– the section of the annual report describing the work of the
Audit Committee, including the signicant issues that the audit
committee considered in relation to the nancial statements,
and how these issues were addressed; and
– the section of the annual report that describes the review of
the effectiveness of the Group’s risk management and internal
control systems.
We are required to review the part of the Corporate Governance
Statement relating to the Group’s compliance with the provisions of
the UK Corporate Governance Code specied by the Listing Rules
for our review. We have nothing to report in this respect.
8. We have nothing to report on the other matters on which
we are required to report by exception
Under the Companies Act 2006, we are required to report to you if,
in our opinion:
– adequate accounting records have not been kept by the parent
Company, or returns adequate for our audit have not been
received from branches not visited by us; or
– the parent Company nancial statements and the part of
the Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns; or
– certain disclosures of Directors’ remuneration specied by
– law are not made; or
– we have not received all the information and explanations we
require for our audit.
We have nothing to report in these respects.
9. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 94,
the Directors are responsible for: the preparation of the nancial
statements including being satised that they give a true and fair
view; such internal control as they determine is necessary to enable
the preparation of nancial statements that are free from material
misstatement, whether due to fraud or error; assessing the Group
and parent Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern; and
using the going concern basis of accounting unless they either
intend to liquidate the Group or the parent Company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether
the nancial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue our
opinion in an auditor’s report. Reasonable assurance is a high level
of assurance, but does not guarantee that an audit conducted
in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud
or error and are considered material if, individually or in aggregate,
they could reasonably be expected to inuence the economic
decisions of users taken on the basis of the nancial statements.
A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.
The Company is required to include these nancial statements
in an annual nancial report prepared using the single electronic
reporting format specied in the TD ESEF Regulation. This
auditor’s report provides no assurance over whether the annual
nancial report has been prepared in accordance with that format.
10. The purpose of our audit work and to whom we owe our
responsibilities
This report is made solely to the Company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Company’s members those matters we are required to state to them
in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company’s members,
as a body, for our audit work, for this report, or for the opinions we
have formed.
Ailsa Griffin (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
1 St Peters Square
Manchester
M2 3AE
25 May 2023
Pets at Home Group Plc Annual Report & Accounts 2023
102
Consolidated income statement
Note
52 week period ended
30 March 2023
53 week period ended
31 March 2022 (reclassified)
1
Underlying trading
£m
Non-underlying
items (note 3)
£m
Total
£m
Underlying trading
£m
Non-underlying
items (note 3)
£m
Total
£m
Revenue 2 1 ,404 .2 – 1,404 . 2 1,31 7 .8 – 1,31 7 .8
Cost of sales (7 3 7. 9 ) – (7 3 7.9 ) (670.6 ) 0.1 (670 . 5 )
Impairment gains on receivables 3 2 .0 – 2 .0 0.7 – 0.7
Gross profit 668.3 – 668. 3 6 4 7. 9 0.1 64 8.0
Selling and distribution expenses (4 0 9. 8 ) (1 0 .1 ) (4 1 9.9 ) (3 9 3 .9 ) – (3 9 3 .9 )
Administrative expenses 3 (1 21 .0 ) (2. 8 ) (123. 8 ) (121. 2 ) – (121. 2 )
Other income
1
3 12. 2 – 12. 2 11.7 – 11 .7
Profit on disposal of subsidiary 3 – – – – 1 9. 2 1 9. 2
Operating profit 2,3 1 4 9. 7 (1 2 .9 ) 136.8 144. 5 1 9. 3 163 . 8
Financial income 6 2.7 – 2.7 0.2 – 0. 2
Financial expense 7 (16 .0 ) (1 . 0 ) (1 7. 0 ) (14 .6 ) (0. 7 ) (1 5. 3 )
Net financing expense (13 .3 ) (1 .0 ) (14 . 3 ) (14 . 4 ) (0.7 ) (1 5 .1 )
Profit before tax 136.4 (1 3 .9 ) 122.5 13 0 .1 18.6 14 8 .7
Taxation 8 (24 . 4 ) 2 .6 (21 . 8 ) (24.3 ) 0.1 (24 . 2 )
Profit for the period 112 .0 (11 . 3 ) 1 00.7 105.8 18.7 1 24 .5
1 See note 1.1 for an explanation of the prior year reclassication.
Basic and diluted earnings per share attributable to equity shareholders of the Company:
Note
52 week period ended
30 March 2023
53 week period ended
31 March 2022
Equity holders of the parent – basic 5 20.5 p 24 .9 p
Equity holders of the parent – diluted 5 20. 2 p 24. 5 p
Dividends paid and proposed are disclosed in note 9.
The notes on pages 109 to 168 form an integral part of these nancial statements.
Consolidated statement of comprehensive income
for the 52 week period ended 30 March 2023
Note
52 week period ended
30 March 2023
£m
53 week period ended
31 March 2022
£m
Profit for the period 100. 7 124. 5
Other comprehensive income
Items that are or may be recycled subsequently into profit or loss:
Foreign exchange translation differences 22 (0.1 ) (0. 0 )
Effective portion of changes in fair value of cash flow hedges 22 (10 . 6 ) 7.9
Other comprehensive income for the period, before income tax (10. 7 ) 7.9
Income tax on other comprehensive income 15,22 1.3 (1. 2 )
Other comprehensive income for the period, net of income tax (9. 4 ) 6.7
Total comprehensive income for the period 91.3 131. 2
The notes on pages 109 to 168 form an integral part of these nancial statements.
for the 52 week period ended 30 March 2023
103
Strategic Report Financial StatementsGovernance
Consolidated balance sheet
Note
At 30 March 2023
£m
At 31 March 2022
(restated)
1
£m
Non-current assets
Property, plant and equipment 11 1 46 .9 1 0 8 .9
Right-of-use assets 12 3 5 9. 6 3 4 0 .1
Intangible assets 13 9 8 9. 5 9 8 7. 1
Deferred tax asset
1
15 1 .9 1.1
Other non-current assets 16 1 0.9 14 .1
Current assets
Inventories 14 108.6 84.5
Other financial assets 16 2.2 3.0
Trade and other receivables 17 51 . 8 53.7
Corporation tax receivable – 9. 1
Cash and cash equivalents 18 178 .0 166.0
Total assets 1 , 8 4 9. 4 1 , 7 6 7. 6
Current liabilities
Trade and other payables 20 (261.5 ) (224 . 8 )
Other interest-bearing loans and borrowings 19 (1 . 2 ) –
Lease liabilities 12 (83. 3 ) (78 . 3 )
Provisions 21 (3 .9 ) (6. 5 )
Other financial liabilities 16 (3. 7 ) (0 .0 )
(3 5 3 .6 ) (3 0 9. 6 )
Non-current liabilities
Other interest-bearing loans and borrowings 19 (1 1 9. 3 ) (96.9 )
Lease liabilities 12 (338.1 ) (304.7 )
Provisions 21 (1 2 .9 ) (6 . 7 )
Other financial liabilities 16 (0. 4 ) –
(470 . 7 ) (4 0 8 .3 )
Total liabilities (824 . 3 ) (7 1 7.9 )
Net assets 1 ,0 2 5 .1 1 , 0 4 9. 7
Equity attributable to equity holders of the parent
Ordinary share capital 22 4.8 5.0
Consolidation reserve (372 .0 ) (372 . 0 )
Merger reserve 113. 3 113 . 3
Translation reserve (0.1 ) (0. 0 )
Capital redemption reserve 0. 2 –
Cash flow hedging reserve (1 . 6 ) 3.4
Retained earnings 1, 280.5 1,3 00.0
Total equity 1, 02 5.1 1 , 0 4 9. 7
1 See note 1.1 for an explanation of the prior year restatement.
Company number: 08885072
The notes on pages 109 to 168 form an integral part of these nancial statements.
at 30 March 2023
Pets at Home Group Plc Annual Report & Accounts 2023
104
Consolidated statement of changes in equity
Share
capital
£m
Consolidation
reserve
£m
Merger
reserve
£m
Cash flow
hedging
reserve
£m
Translation
reserve
£m
Capital
redemption
reserve
£m
Retained
earnings
£m
Total
equity
£m
Balance at 31 March 2022 5.0 (372 . 0 ) 113. 3 3.4 (0.0 ) – 1,3 00.0 1 ,0 49. 7
Total comprehensive income for the period
Profit for the period – – – – – – 100.7 100.7
Other comprehensive income (note 22) – – – (9. 3 ) (0.1 ) – – (9. 4 )
Total comprehensive income for the period – – – (9. 3 ) (0.1 ) – 100.7 91.3
Hedging gains and losses reclassified to inventory – – – 4.3 – – – 4.3
Total hedging gains and losses reclassified to
inventory – – – 4.3 – – – 4.3
Transactions with owners, recorded directly in equity
Equity dividends paid – – – – – – (58.7 ) (58. 7 )
Share-based payment charge – – – – – – 4 .9 4 .9
Deferred tax movement on IFRS2 reserve – – – – – – (2 .0 ) (2 .0 )
Share buyback (0. 2 ) – – – – 0.2 (50. 3 ) (5 0. 3 )
Purchase of own shares – – – – – – (14 .1 ) (14 .1 )
Total contributions by and distributions to owners (0. 2 ) – – – – 0.2 (120. 2 ) (120.2 )
Balance at 30 March 2023 4 .8 (3 72 .0 ) 113. 3 (1 .6 ) (0.1 ) 0. 2 1,280.5 1 ,0 2 5 .1
Consolidated statement of changes in equity
as at 31 March 2022
Share
capital
£m
Consolidation
reserve
£m
Merger
reserve
£m
Cash flow
hedging
reserve
£m
Translation
reserve
£m
Retained
earnings
£m
Total
equity
£m
Balance at 25 March 2021 5.0 (372 . 0 ) 11 3 . 3 (1. 5 ) (0.0 ) 1,23 1.7 9 76 . 5
Total comprehensive income for the period
Profit for the period – – – – – 124 . 5 124 . 5
Other comprehensive income (note 22) – – – 6.7 (0.0 ) – 6.7
Total comprehensive income for the period – – – 6 .7 (0.0 ) 124 . 5 131. 2
Hedging gains and losses reclassified to inventory – – – (1.8 ) – – (1.8 )
Total hedging gains and losses reclassified to inventory – – – (1.8 ) – – (1.8 )
Transactions with owners, recorded directly in equity
Equity dividends paid – – – – – (48 .5 ) (48 .5 )
Share-based payment charge – – – – – 4 .9 4 .9
Deferred tax movement on IFRS2 reserve – – – – – (0. 3 ) (0 .3 )
Purchase of own shares – – – – – (12 . 3 ) (12. 3 )
Total contributions by and distributions to owners – – – – – (56 . 2 ) (5 6 . 2 )
Balance at 31 March 2022 5.0 (372 . 0 ) 113 . 3 3.4 (0.0 ) 1, 300.0 1 , 0 4 9. 7
as at 30 March 2023
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Strategic Report Financial StatementsGovernance
Consolidated statement of cash ows
52 week
period ended
30 March 2023
£m
53 week
period ended
31 March 2022
£m
Cash flows from operating activities
Profit for the period 10 0.7 124. 5
Adjustments for:
Depreciation and amortisation 103. 4 1 03 .9
Profit on disposal of subsidiaries – (1 9. 2 )
Financial income (2 .7 ) (0. 2 )
Financial expense 1 7. 0 14. 6
Share-based payment charges 4 .9 4 .9
Taxation 21.8 24 . 2
Decrease in trade and other receivables 3.4 0.6
(Increase) in inventories (2 4 .1 ) (0. 8 )
Increase in trade and other payables 3 6 .9 1 9. 8
Increase in provisions 3.6 6.8
Movement in working capital 1 9. 8 26 . 4
Tax paid (13.7 ) (31 .0 )
Net cash flow from operating activities 251 . 2 248 .1
Cash flows from investing activities
Proceeds from the sale of property, plant and equipment – 0. 3
Interest received 2.7 0. 3
Costs to acquire right-of-use assets (1 .9 ) (0. 3 )
Acquisition of subsidiaries, net of cash acquired (0. 5 ) (1.7 )
Disposal of subsidiaries, net of cash disposed 0. 4 0. 6
Disposal of subsidiaries, net of cash disposed (non-underlying) – 1 9. 2
Acquisition of property, plant and equipment and other intangible assets (75 .7 ) (55. 5 )
Net cash used in investing activities (75 .0 ) (37.1 )
Cash flows from financing activities
Equity dividends paid (58.7 ) (4 8 . 5 )
Proceeds from new loan 123.3 10 0.0
Repayment of borrowings (1 00. 0 ) (100.0 )
Debt issue costs (0.1 ) (3. 3 )
Cash receipts from lease incentives 22 .0 –
Cash payments for the principal portion of the right-of-use lease liability (68 .9 ) (6 7. 3 )
Purchase of own shares (1 4 .1 ) (12. 3 )
Share buyback (50. 3 ) –
Interest paid (5 .0 ) (3 .5 )
Interest paid on lease obligations (12 . 4 ) (11 . 5 )
Net cash used in financing activities (16 4 .2 ) (14 6. 4 )
Net increase in cash and cash equivalents 12 .0 64.6
Cash and cash equivalents at beginning of period 166 .0 101.4
Cash and cash equivalents at end of period 178.0 166 .0
The notes on pages 109 to 168 form an integral part of these nancial statements.
for the 52 week period ended 30 March 2023
Pets at Home Group Plc Annual Report & Accounts 2023
106
Company balance sheet
Note
At
30 March 2023
£m
At
31 March 2022
(restated)
1
£m
Non-current assets
Investments in subsidiaries 28 936.2 936.2
Deferred tax asset
1
15 2.8 2.8
Trade and other receivables 17 578.4 600.2
1,517.4 1,539.2
Current assets
Other financial assets 16 2.0 1.6
Cash and cash equivalents 18 0.4 –
2.4 1.6
Total assets 1,519.8 1,540.8
Current liabilities
Trade and other payables 20 (618.0) (552.9)
(618.0) (552.9)
Non-current liabilities
Other interest-bearing loans and borrowings 19 (97.3) (96.9)
Other financial liabilities 16 (0.4) –
(97.7) (96.9)
Total liabilities (715.7) (649.8)
Net assets 804.1 891.0
Equity attributable to equity holders of the parent
Ordinary share capital 22 4.8 5.0
Merger reserve 113.3 113.3
Capital redemption reserve 0.2 –
Cash flow hedging reserve 1.2 1.3
Retained earnings 684.6 771.4
Total equity 804.1 891.0
1 See note 1.1 for an explanation of the prior year restatement.
As permitted by section 408 of the Companies Act 2006, the Company’s income statement has not been included in these nancial
statements. The Company’s prot for the 52 week period ended 30 March 2023 was £33.4m (prot for the 53 week period ended 31 March
2022 was £23.8m).
On behalf of the Board:
Mike Iddon
Chief Financial Officer
25 May 2023
Company number: 08885072
The notes on pages 109 to 168 form an integral part of these nancial statements.
at 30 March 2023
107
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Company statement of changes in equity
Share
capital
£m
Merger
reserve
£m
Cash flow
hedging
reserve
£m
Capital
redemption
reserve
£m
Retained
earnings
£m
Total
equity
£m
Balance at 31 March 2022 5.0 113.3 1.3 – 771.4 891.0
Total comprehensive income for the period
Profit for the period – – – – 33.4 33.4
Other comprehensive income – – (0.1) – – (0.1)
Total comprehensive income for the period – – (0.1) – 33.4 33.3
Transactions recorded directly in equity
Equity dividends paid – – – – (58.7) (58.7)
Share-based payment charge – – – – 4.9 4.9
Deferred tax movement on IFRS2 reserve – – – – (2.0) (2.0)
Share buyback (0.2) – – 0.2 (50.3) (50.3)
Purchase of own shares – – – – (14.1) (14.1)
Total contributions by and distributions to owners (0.2) – – 0.2 (120.2) (120.2)
Balance at 30 March 2023 4.8 113.3 1.2 0.2 684.6 804.1
Company statement of changes in equity
as at 31 March 2022
Share
capital
£m
Merger
reserve
£m
Cash flow
hedging
reserve
£m
Retained
earnings
£m
Total
equity
£m
Balance at 25 March 2021 5.0 113.3 (1.2) 800.8 917.9
Total comprehensive income for the period
Profit for the period – – – 23.8 23.8
Other comprehensive income – – 2.5 – 2.5
Total comprehensive income for the period – – 2.5 23.8 26.3
Transactions recorded directly in equity
Equity dividends paid – – – (48.5) (48.5)
Share-based payment charge – – – 7.9 7.9
Deferred tax movement on IFRS2 reserve – – – (0.3) (0.3)
Purchase of own shares – – – (12.3) (12.3)
Total contributions by and distributions to owners – – – (53.2) (53.2)
Balance at 31 March 2022 5.0 113.3 1.3 771.4 891.0
as at 30 March 2023
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108
Company statement of cash ows
52 week period ended
30 March 2023
£m
53 week period ended
31 March 2022
£m
Cash flows from operating activities
Profit for the period 33.4 23.8
Financial expense 1.5 3.2
Share-based payment charges 4.9 7.9
Tax (3.0) (2.9)
36.8 32.0
Increase in trade and other payables 62.8 44.6
Tax paid 3.5 3.5
Net cash flow from operating activities 103.1 80.1
Cash flows from investing activities
Decrease/(increase) in amounts owed by group undertakings 21.9 (12.8)
Net cash flow used in investing activities 21.9 (12.8)
Cash flows from financing activities
Equity dividends paid (58.7) (48.5)
Proceeds from new loan 100.0 100.0
Repayment of borrowings (100.0) (100.0)
Debt issue costs – (3.3)
Share buyback (50.3) –
Interest paid (1.5) (3.2)
Purchase of own shares (14.1) (12.3)
Net cash used in financing activities (124.6) (67.3)
Net increase in cash and cash equivalents 0.4 –
Cash and cash equivalents at beginning of period – –
Cash and cash equivalents at end of period 0.4 –
for the 52 week period ended 30 March 2023
109
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110
1 Signicant accounting policies continued
1.3 Going concern continued
Notes (forming part of the nancial statements) continued
111
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112
1 Signicant accounting policies continued
Notes (forming part of the nancial statements) continued
113
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114
1 Signicant accounting policies continued
Notes (forming part of the nancial statements) continued
115
Strategic Report Financial StatementsGovernance
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116
1 Signicant accounting policies continued
1.17 Employee benets continued
Notes (forming part of the nancial statements) continued
117
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118
1 Signicant accounting policies continued
Notes (forming part of the nancial statements) continued
119
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120
2 Segmental Reporting continued
Notes (forming part of the nancial statements) continued
121
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122
Notes (forming part of the nancial statements) continued
123
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124
8 Taxation continued
Notes (forming part of the nancial statements) continued
125
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126
10 Business combinations continued
Goodwill arising on acquisition continued
Notes (forming part of the nancial statements) continued
127
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128
Notes (forming part of the nancial statements) continued
129
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130
13 Intangible assets continued
Notes (forming part of the nancial statements) continued
131
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132
Notes (forming part of the nancial statements) continued
133
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134
16 Other nancial assets and liabilities continued
Notes (forming part of the nancial statements) continued
135
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136
17 Trade and other receivables continued
Group continued
Notes (forming part of the nancial statements) continued
137
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138
Notes (forming part of the nancial statements) continued
139
Strategic Report Financial StatementsGovernance
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140
22 Capital and reserves continued
Notes (forming part of the nancial statements) continued
141
Strategic Report Financial StatementsGovernance
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142
23 Financial instruments continued
Sensitivity analysis continued
Notes (forming part of the nancial statements) continued
143
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144
23 Financial instruments continued
Notes (forming part of the nancial statements) continued
145
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146
23 Financial instruments continued
Fair values of nancial instruments continued
Notes (forming part of the nancial statements) continued
147
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148
23 Financial instruments continued
Notes (forming part of the nancial statements) continued
149
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150
23 Financial instruments continued
Notes (forming part of the nancial statements) continued
151
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152
24 Share-based payments continued
2 PSP continued
Notes (forming part of the nancial statements) continued
153
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154
24 Share-based payments continued
4 RSA continued
Notes (forming part of the nancial statements) continued
155
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156
Notes (forming part of the nancial statements) continued
26 Contingencies continued
Exemption from audit by parent guarantee continued
157
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158
27 Related parties continued
Joint Venture veterinary practice transactions continued
Notes (forming part of the nancial statements) continued
159
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160
Notes (forming part of the nancial statements) continued
28 Investment in subsidiaries continued
Group continued
161
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28 Investment in subsidiaries continued
Notes (forming part of the nancial statements) continued
163
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164
Notes (forming part of the nancial statements) continued
28 Investment in subsidiaries continued
Investments in Joint Venture practices and other investments continued
165
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Notes (forming part of the nancial statements) continued
28 Investment in subsidiaries continued
Investments in Joint Venture practices and other investments continued
167
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168
Notes (forming part of the nancial statements) continued
28 Investment in subsidiaries continued
Investments in Joint Venture practices and other investments continued
169
Strategic Report Financial StatementsGovernance
Guidelines on Alternative Performance Measures (APMs) issued by the European Securities and Markets Authority came into effect for all
communications released on or after 3 July 2016 for issuers of securities on a regulated market.
In the reporting of nancial information, the Directors have adopted various APMs of historical or future nancial performance, position or
cash ows other than those dened or specied under International Financial Reporting Standards (IFRS).
The Directors measure the performance of the Group based on the following nancial measures which are not recognised under UK-adopted
international accounting standards and consider these to be important measures in evaluating the Group’s strategic and nancial
performance. The Directors believe that these APMs assist in providing additional useful information on the underlying trends, performance
and position of the Group.
APMs are also used to enhance the comparability of information between reporting periods by adjusting for non-underlying items, to aid the
user in understanding the Group’s performance. The number and appropriateness of APMs presented in the Financial Statements has been
reviewed and reduced from the comparative period to those considered to be the most relevant for measuring the performance of the Group.
Consequently, APMs are used by the Directors and management for performance analysis, planning, reporting and incentive setting purposes.
All APMs relate to the current period results and comparative period where provided.
APMs considered by the business to be a key performance indicator are explained in more detail on page 10 of the Annual Report.
The key APMs used by the Group are:
‘Like-for-Like’ sales growth comprises total revenue in a nancial period compared to revenue achieved in a prior period for stores, online
operations, grooming salons and veterinary practices that have been trading for 52 weeks or more, excluding fee income from Joint Venture
veterinary practices where the Group has bought out the Joint Venture Partners or will offer to buy out the Joint Venture Partners in
thefuture.
Underlying PBT: Underlying prot before tax (PBT) is based on pre-tax prot before the impact of non-underlying items, being certain costs
or incomes that derive from events or transactions that fall outside the normal activities of the Group and are excluded by virtue of their size
and nature in order to reect management’s view of the performance of the Group.
Free cash ow: Net increase/(decrease) in cash before the impacts of dividends paid, share buybacks, investments, proceeds from new
loans and repayment of borrowings.
References to Underlying GAAP measures and Underlying APMs throughout the nancial statements are measured before the effect of
non-underlying items.
APM Definition Reconciliation
Consumer
revenue
Consumer revenue being statutory Group
revenue, less Joint Venture veterinary
practice fee income (which forms part of
statutory revenue within the Vet Group),
plus gross consumer revenue made by Joint
Venture veterinary practices (unaudited).
Consumer revenue (£m) FY23 FY22 Note
Statutory Group revenue 1,404.2 1,317.8 CIS
Joint Venture fee income (77.2) (69.9) 2
Revenue by Group managed veterinary practices (37.5) (31.2) 2
Revenue by all veterinary practices 492.9 457.1
Consumer revenue 1,782.4 1,673.8
CIS = Consolidated income statement
Like-for-like
revenue
‘Like-for-like’ revenue growth comprises total
revenue inafinancial period compared to
revenue achieved in aprior period for stores,
online operations, grooming salons and
veterinary practices that have been trading
for 52 weeks or more, excluding fee income
from Joint Venture veterinary practices where
the Group has bought out the Joint Venture
Partners or will offer to buy out the Joint
Venture Partners in the future.
Not applicable.
Underlying profit
before tax
Underlying profit before tax (PBT) is based
on pre-tax profit before the impact of
certain costs or incomes that derive from
events or transactions that fall outside
the normal activities of the Group and are
excluded by virtue of their size and nature
in order to reflect management’s view of the
performance of the Group.
Underlying PBT (£m) FY23 FY22 Note
Underlying PBT 136.4 130.1 CIS
Non-underlying items (13.9) 18.6 CIS
Profit before tax 122.5 148.7
CIS = Consolidated income statement
Glossary – Alternative Performance Measures
Pets at Home Group Plc Annual Report & Accounts 2023
170
APM Definition Reconciliation
Underlying
basic EPS
Underlying basic earnings per share (EPS)
is basedon earnings per share before the
impact of certain costs or incomes that
derive from events ortransactions that fall
outside the normal activities ofthe Group
and are excluded by virtue of their size and
nature in order to reflect management’s view
oftheperformance of the Group.
Underlying basic EPS (p) FY23 FY22 Note
Underlying basic EPS 22.8 21.2 5
Non-underlying items (2.3) 3.7 5
Basic earnings per share 20.5 24.9
Free cash flow Net increase/(decrease) in cash before the
impacts of dividends paid, share buybacks,
investments, proceeds from new loans and
repayment of borrowings.
Free cash flow (£m) FY23 FY22 Note
Net increase in cash 12.0 64.6 CFS
Remove effects of:
Dividends 58.7 48.5 CFS
Acquisition of subsidiary 0.5 1.7 CFS
Proceeds from new loan (123.3) (100.0) CFS
Repayment of borrowings 100.0 100.0 CFS
Share buyback 50.3 – CFS
Proceeds from sale of PPE relating to GVs – (0.6)
Disposal of subsidiaries net of cash disposed
(non-underlying) – (19.2) CFS
Free cash flow 98.2 95.0
CFS = Consolidated statement of cash ows
Underlying
CROIC
Cash return on invested capital represents
cash returns divided by the average of gross
capital invested (GCI) for the last 12 months.
Cash returns represent underlying operating
profit before share-based payments subject
to tax, then adjusted for depreciation of PPE,
right-of-use assets and amortisation. GCI
represents gross PPE, right-of-use assets
and software, and other intangibles excluding
the goodwill created on the acquisition
of the Group by KKR (£906,445,000) plus
networking capital, before the effect of
non-underlying items in the period.
Net working capital movement is a measure
of the cashrequired by the business to fund
its inventory, receivables and payables.
Underlying CROIC FY23 FY22 Note
Cash returns:
Underlying operating profit 149.7 144.5 2
Share-based payment charges 4.9 4.9 3
154.6 149.4
Effective tax rate 19% 19%
Tax charge on above (29.4) (28.4)
125.2 121.0
Underlying depreciation and amortisation 102.3 103.9 2
Cash returns 227.5 224.9
Gross capital invested (GCI):
Gross property, plant and equipment 405.3 342.4 11
Gross right-of-use assets 635.1 548.2 12
Intangibles 1,046.3 1,034.1 13
Less KKR goodwill (906.4) (906.4)
Investments 9.1 9.9 16
Net working capital: (121.6) (90.7) see
denition
Debtors 51.8 62.8
Stock 108.6 84.5
Creditors (265.2) (224.8)
Provisions (16.8) (13.2)
GCI (at period end) 1,067.8 937.5
Average 1,002.7 899.5
Underlying CROIC 22.7% 25.0%
Glossary – Alternative Performance Measures continued
171
Strategic Report Financial StatementsGovernance
APM Definition Reconciliation
Net cash/(debt) Cash and cash equivalents less loans
and borrowings.
Net cash/(debt) (£m) FY23 FY22 Note
Cash and cash equivalents 178.0 166.0 18
Loans and borrowings (123.3) (100.0) 19
Net cash/(debt) 54.7 66.0
Total
indebtedness
Cash and cash equivalents less loans
and borrowings plus lease liabilities.
Total indebtedness (£m) FY23 FY22 Note
Cash and cash equivalents 178.0 166.0 18
Loans and borrowings (123.3) (100.0) 19
Net cash/(debt) 54.7 66.0
Lease liabilities (421.4) (383.0) 12
Total indebtedness (366.7) (317.0)
Pre IFRS 16
leverage
Net cash (above) divided by underlying
EBITDA less expected rental charges
pre IFRS 16.
Pre IFRS 16 leverage FY23 FY22 Note
Net (cash) (above) (54.7) (66.0)
Statutory operating profit 136.8 163.8
Underlying depreciation of property, plant and
equipment 25.7 25.4 3
Underlying depreciation of right-of-use assets 66.8 69.7 3
Amortisation of intangible assets 9.8 8.8 3
Non-underlying depreciation of property, plant
and equipment 0.4 – 3
Non-underlying depreciation of right-of-use assets 0.7 – 3
Other non-underlying items in EBITDA 11.8 (19.3) 3
Underlying EBITDA 252.0 248.4
Less:
Proforma rental charges pre IFRS 16 (79.9) (80.8)
Underlying EBITDA (pre IFRS 16)
1
172.1 167.6
Pre IFRS 16 leverage (0.3)x (0.4)x
1 Proforma rental charges pre IFRS 16 cannot be directly referenced in the nancial statements as the
balance represents 52 weeks (FY22: 53 weeks) of rental charges for each lease held at the balance
sheet date.
Lease adjusted
leverage
Total indebtedness divided by underlying
EBITDA.
Lease adjusted leverage FY23 FY22 Note
Total indebtedness (above) 366.7 317.0
Underlying EBITDA 252.0 248.4
Lease adjusted leverage 1.5x 1.3x
Pets at Home Group Plc Annual Report & Accounts 2023
172
Advisors and contacts
Registered Office
Registered Number
8885072
Investor Relations
petsathomeplc.com
investorrelations@petsathome.co.uk
+44 (0)161 486 6688
Corporate Brokers
HSBC
8 Canada Square
London
E14 5HQ
Numis Securities Limited
45 Gresham Street
London
EC2V 7BF
Legal Advisors
Simpson Thacher & Bartlett LLP
CityPoint
One Ropemaker Street
London
EC2Y 9HU
Travers Smith LLP
10 Snow Hill
London
EC1A 2AL
Auditor
KPMG LLP
1 St Peter's Square
Manchester
M2 3AE
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS99 6ZZ
Pets at Home Group Plc
Chester House
Epsom Avenue
Handforth,
Wilmslow
Cheshire
SK9 3RN
United Kingdom
petsathome.com