Pets at Home has unveiled a sharp fall in pre-tax profits and warned its costs will rise as it restructures its struggling veterinary operations.
The retailer reported that first-half profits dropped to £8 million from £40.8m the same time last year. The fall came on the back of substantial charges for restructuring the company’s vet business, which Pets at Home runs in the form of joint ventures (JV) with independent practices.
Chief executive Peter Pritchard announced today that he now plans to buy 55 out of the 471 practices back from the vets, which he said will cost the group up to £49m by 2020.
Mr Pritchard said: “With our JV practices, we plan to rebalance and simplify the fee structure, to allow practices to mature more swiftly and generate returns for both Pets at Home and joint venture partners (JVP). We will also offer to buy back and consolidate up to 55 practices from JVPs.
“Around 25 of these will be operated as company managed practices, whilst we will consider the options for the remainder, which may result in us proposing to close them. For all practices which we offer to buy back, JVPs will not be expected to repay outstanding borrowings to any parties and Pets at Home will settle any liabilities for third party bank loans and leases on behalf of the JVP.
“We expect this to result in total non-underlying income statement costs of up to £49m and non-underlying cash costs of up to £27m.”