nemo2014\Presentations\Analyst Presentation Jan14\201401 Nemo Analyst Presentation Master-22nd Jan FINAL.pptx Investor Presentation October 2017
nemo2014\Presentations\Analyst Presentation Jan14\201401 Nemo Analyst Presentation Master-22nd Jan FINAL.pptx Forward looking statements Forward-Looking Statements INCLUDED IN THIS PRESENTATION ARE FORWARD-LOOKING MANAGEMENT COMMENTS AND OTHER STATEMENTS THAT REFLECT MANAGEMENT’S CURRENT OUTLOOK FOR FUTURE PERIODS These expectations are based on currently available competitive, financial, and economic data along with our current operating plans and are subject to risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward- looking statements. The forward-looking statements in this presentation should be read in conjunction with the risks and uncertainties discussed in the Pets At Home Annual Report and Accounts. 2
nemo2014\Presentations\Analyst Presentation Jan14\201401 Nemo Analyst Presentation Master-22nd Jan FINAL.pptx Market 3
nemo2014\Presentations\Analyst Presentation Jan14\201401 Nemo Analyst Presentation Master-22nd Jan FINAL.pptx Pet market growth has accelerated, driven by faster pace in veterinary, insurance and accessories 2012-14 CAGR 2014-16 CAGR Total Market £6.8bn 4% 4.5% £0.32bn Specialist veterinary referrals 11% 10% £1.9bn First Opinion veterinary 5% 4% Grooming 7% 7% £0.23bn Insurance 7.5% 10% £1.1bn Health & Hygiene 1% 2.5% £0.36bn Other accessories 1% 1.5% £0.48bn Advanced Nutrition 14% 9% £0.33bn Treats 8% 5% £0.47bn Other food 1% 0% £1.7bn Online 9% 11% 2016 participation Source: OC&C Strategy Consultants, refers to calendar years 4 Source: OC&C 2017. Data refers to calendar years.
nemo2014\Presentations\Analyst Presentation Jan14\201401 Nemo Analyst Presentation Master-22nd Jan FINAL.pptx Our total pet product market share has grown from 19% to 20% through 2014-2016 Vet Group Pet product market share by player, 2016 Retail 100% 3% 8% 9% 13% 7% 90% 21% 16% 14% 13% 80% 15% 12% 70% 19% Market Share 8% 19% 60% 50% 17% 64% 40% 73% 36% 6% 30% 53% 20% 36% 10% 21% 13% 5% 0% Advanced Nutrition Bridging Grocery Treats Accessories Pets at Home Grocers Discounters Vets Pet Specialists Online (Specialists and Non-Specialists) Other Pets at Home +2% +3% 0% +1% +2% Share Change 2014-2016 5 Source: OC&C 2017. Data refers to calendar years.
nemo2014\Presentations\Analyst Presentation Jan14\201401 Nemo Analyst Presentation Master-22nd Jan FINAL.pptx Stores are an important part of future market growth. Bricks and mortar sales along with C&C expected to grow at 2.7% per annum Retail Pet Products Market 2016-21 Vet Group CAGR 4500 Total 3.0% Expected UK Pet Product Market Value (£bn.) 4000 Online Deliver to Home 5.3% 3500 Online Click and Collect 30.0% 2.7% 3000 Bricks and Mortar 2.1% 2500 2000 1500 1000 500 0 2016A 2021E Bricks and Mortar Online Click and Collect Online Deliver to Home Online participation c11% c15% 0f pet market 6 Source: OC&C 2017. Data refers to calendar years.
nemo2014\Presentations\Analyst Presentation Jan14\201401 Nemo Analyst Presentation Master-22nd Jan FINAL.pptx The vet market continues to consolidate and we are one of three major players with leading market share Vet Group Retail PAH Vet Group has a 12% market share with a If all our existing practices were mature, young practice estate estimated PAH share would be 18% 100% 100% 90% 90% 80% 80% 70% 70% Market Share Market Share 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% 2012 2014 2016 Actual Estimated Mature PAH JV CVS Medivet IVC Other PAH JV CVS Medivet IVC Other 7 Source: OC&C 2017 and Pets at Home estimates Note: Data refers to calendar years, by estimated revenue per practice.
nemo2014\Presentations\Analyst Presentation Jan14\201401 Nemo Analyst Presentation Master-22nd Jan FINAL.pptx Strategic overview 8
nemo2014\Presentations\Analyst Presentation Jan14\201401 Nemo Analyst Presentation Master-22nd Jan FINAL.pptx Our Integrated Store: a unique combination of product, services and expertise under one roof 9
nemo2014\Presentations\Analyst Presentation Jan14\201401 Nemo Analyst Presentation Master-22nd Jan FINAL.pptx More than just a pet shop … over 28% of customer revenues are spent on Services, with >£260m from our Vet Group Pet products and services share of customer spend Vet Group Retail 28% 72% Vet and Grooming Services Retail Products 10 Vet services include revenues generated by first opinion practices and specialist referral centres .
nemo2014\Presentations\Analyst Presentation Jan14\201401 Nemo Analyst Presentation Master-22nd Jan FINAL.pptx Having an integrated product and services offering drives overall customer spend and frequency Vet Group VIP loyalty card data: average yearly spend of product and services customers Services £- £- £76 £339 £490 spend Store £125 £396 £195 £295 £245 spend Spend per annum (£) Store Only Store and Web Store & Web & Store & Vet & Web Store & Vet & Web & Groomer Groomer Customer type Store Vet Online Groom Customer Transactions 6 34 11 19 22 per annum 11
nemo2014\Presentations\Analyst Presentation Jan14\201401 Nemo Analyst Presentation Master-22nd Jan FINAL.pptx Why we are better together Vet Group Retail Annual EBITDA £0.5m Annual EBITDA £0.3m A mature store with integrated services delivers an EBITDA uplift of 24% per square foot compared to a mature store without services 12 Note: Includes central cost allocation .
nemo2014\Presentations\Analyst Presentation Jan14\201401 Nemo Analyst Presentation Master-22nd Jan FINAL.pptx We have invested to integrate services into over 54% of our stores. Few are mature, with significant profit maturity to come. Number of mature integrated store units Retail 200 15 FY17A FY18E FY19E FY20E FY21E FY22E FY23E 13 Note: An integrated store unit is defined as a store which incorporates a first opinion veterinary practice and a groom room
nemo2014\Presentations\Analyst Presentation Jan14\201401 Nemo Analyst Presentation Master-22nd Jan FINAL.pptx Our strategy is designed to maximise our competitive position and market opportunity Key Growth Drivers Price, innovation, services & advice Vet Group Like For Like Omnichannel Drivers of Core Growth VIP club members Optimised Store & Space Services Rollout Vet practice maturity Margin Private label mix 14
nemo2014\Presentations\Analyst Presentation Jan14\201401 Nemo Analyst Presentation Master-22nd Jan FINAL.pptx Veterinary business 15
nemo2014\Presentations\Analyst Presentation Jan14\201401 Nemo Analyst Presentation Master-22nd Jan FINAL.pptx Our core business is first opinion small animal veterinary practices, with recent extension into specialist referral care Vet Group Retail First opinion practices Referral centres 438 practices at end FY17 Internal medicine 289 in-store Oncology 149 standalone Orthopaedic surgery Covers all aspects of general small animal Soft tissue surgery veterinary work: preventative care, Neurology and neurosurgery emergency care, sick pet work Diagnostic imaging Health plans 24/7 out of hours care Extended hours Own brand nutraceuticals 16
nemo2014\Presentations\Analyst Presentation Jan14\201401 Nemo Analyst Presentation Master-22nd Jan FINAL.pptx We have a shared ownership model which runs our businesses, creating loyalty & incentivising future growth First Opinion Specialist Referral Joint Venture Partners Shared Venture Partners Typical number of partners One Multiple / practice Equity / capital value Partner has 100% Key clinicians have 5-25% entitlement JVP. Pets at Home Vet Group SVPs & management supported Day to day management & provides business services by Pets at Home Vet Group influence PAH receive 15-17% of practice revenue plus other management Practice revenue, costs & balance fees, for which we provide Impact on Group financials sheet are consolidated business services. In-store practices also pay rent to PAH Partner share of practice 100% 5-25% dividend Typical timeframe partner 10 years + Minimum 4 years chooses to sell 17
nemo2014\Presentations\Analyst Presentation Jan14\201401 Nemo Analyst Presentation Master-22nd Jan FINAL.pptx Our first opinion Joint Venture business model is unique in the UK veterinary market Each practice is a separate company, jointly owned by the Vet Group & JV Vet Partner Commercial Bank Small business loan: c£320k JV Practice Own ‘A shares’: Own ‘B shares’: Entitlement to profit & Influence on key business capital gains decisions to protect Group Personal loan: c£30k Corporate loan: c£30k Working capital support JV Partner PAH Vet Group Full salary paid from day 1 (average market Receive fees of 15-17% of practice revenues plus rate) other management fees Right to all dividends after repayment of bank Provide all back office functions & specialist loan business support (these are our operating costs) Capital gains at exit Provide working capital support when needed to support practice growth 18
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