Interim Results

FOR IMMEDIATE RELEASE, 4 DECEMBER 2014

Pets At Home Group Plc: Interim Financial Results FY15

Delivering on the strategic plan across all measures

Pets At Home Group Plc, the UK's leading specialist retailer of pet food, accessories, pet-related products and services, today announces its interim results for the 28 week period from 28th March to 9th October 2014.

H1 FY15 financial highlights

· Total revenue growth of 10.2% to £381.5m

o Merchandise revenues up 8.9% to £348.3m, comprised of Food revenues up 9.6% to £188.7m and Accessories revenues up 8.0% to £159.6m

o Services revenues up 27.0% to £33.2m, reflecting both new openings and the growing revenue streams from our maturing vet practices and Groom Rooms

· Like-for-like (LFL) sales growth 4.2%, driven by strength in Advanced Nutrition, Health & Hygiene, VIP Club, growth from our vet practices and Groom Rooms, and omnichannel

o Merchandise LFL revenue growth of 3.7%

o Services LFL revenue growth of 10.2%

· Gross margin of 53.8%, +20bps on the prior year; reflecting Merchandise margin +7bps to 55.9% and strong Services margin expansion +546bps to 31.7%

· Underlying EBITDA of £58.6m (+10.8%) and margin of 15.4%, expansion of 8bps on the prior year, despite £1.4m in additional Plc operating costs

· Underlying free cashflow of £33.8m, conversion of 57.7% compared with prior year at 43.8%

· Interim dividend of 1.8p per share

H1 FY15 Operational highlights

· Added 8 stores net to the portfolio total of 385; including 10 new stores, one store closure in Knutsford, and a temporary closure of our Rugby store which will be relocated in H1 FY16

· Opened 26 veterinary practices, bringing the total portfolio to 303

· Opened 23 Groom Rooms, bringing the total portfolio to 152

· VIP Club reached 2.6m members, up from 2.0m at the end of FY14

· Wainwright's grew 54.8% to £20.5m, driven by launches of WW's Cat & Grain Free for dogs

· Refreshed 30% of total SKUs, of which over a third are own brand or private label

· Deliver To Store online offering now fully operational, which gives customers access to the extended omnichannel range of 10,800 SKUs for pickup in their local store

Outlook

The pet care market outlook remains positive. We continue to expect gross openings of around 25 stores, 60 veterinary practices and 50 Groom Room salons in FY15.

Management and the Board remain confident in the Group's prospects for the year and trading since the end of the half year period has been in line with our expectations.

Nick Wood, Chief Executive Officer, commented:

"We are pleased with our first half financial performance. We continue to deliver on our strategy to be the leading destination brand for pet lovers, with particularly strong performance from new growth areas including vets and groom rooms. Our passion for pets guides everything we do and it's a passion we share with our customers, with more than half a million joining our VIP Club during this period."

"We end the first half in a strong financial position, the business remains very cash generative and we are pleased to announce our first dividend payment. Looking ahead, we will continue to focus on our successful strategy, and by doing so, we are confident that we can deliver sustainable long-term growth."

H1 FY15 Highlights

1 Includes veterinary Joint Venture fees and other income, Groom Room revenue, revenue from live pet sales and insurance commission

2 'Like-for-Like' sales growth comprises total sales/fee revenue in a financial period compared to revenue achieved in a prior period, post cannibalisation, for stores, grooming salons and vets that have been trading for 52 weeks. LfL includes revenue from the Group's online operations

3 H1 FY15 underlying EBITDA excludes £0.8m of IFRS2 share based payment charges. H1 FY14 underlying EBITDA excludes £0.6m of related party management fees

4 Represents underlying trading profit before tax, excluding £10.6m of exceptional expenses and £19.2m of exceptional interest charge.

5 FY14 excludes exceptional tax credit. H1 FY15 excludes an exceptional tax credit of £4.3m, see page 10 for details

6 Underlying unlevered Free Cashflow is defined as Underlying EBITDA, adjusted for changes in working capital, acquisitions of property, plant and equipment and other intangible assets, investments in other financial assets, proceeds from the sale of property, plant and equipment and is stated before cash flows for exceptional costs and acquisitions of subsidiaries

7 Conversion represents underlying unlevered FCF as a percentage of underlying EBITDA

8 Represents last twelve months underlying EBITDA

9 Store portfolio net of 10 new stores, one permanent closure in the period, and one temporary closure of Rugby, which will be relocated in the H1 FY16

Results presentation

A presentation for analysts and investors will be held today at 9.30am at Clifford Chance, 10 Upper Bank St, E14 5JJ, attendance is by invitation only. An audio webcast and statement of these results will be available at http://investors.petsathome.com

Enquiries

Pets At Home Group Plc: +44 (0) 161 486 6688

Amie Gramlick, Head Of Investor Relations

Media Enquiries:

Brunswick (Public Relations Advisors to Pets at Home): +44 (0) 207 404 5959

Tim Danaher

Natalia Dyett

About Pets At Home

Pets At Home Group Plc is the UK's leading specialist pet omnichannel retailer and services provider.

Pets At Home operates from 385 stores located across the UK. The Group operates the UK's largest small animal veterinary business with 303 practices, run principally under a Joint Venture model using the Companion Care and Vets4Pets brand names. Pets at Home is the UK's leading operator of pet grooming services offered through its 152 Groom Room salons. The Group also owns and operates Ride-away, a specialist equine retail business with a York superstore, website and catalogue. For more information visit: http://investors.petsathome.com/

Disclaimer

This statement of interim financial results does not constitute an invitation to underwrite, subscribe for, or otherwise acquire or dispose of any Pets At Home Group Plc shares or other securities nor should it form the basis of or be relied on in connection with any contract or commitment whatsoever. It does not constitute a recommendation regarding any securities. Past performance, including the price at which the Company's securities have been bought or sold in the past, is no guide to future performance and persons needing advice should consult an independent financial advisor.

Certain statements in this statement of interim financial results constitute forward-looking statements. Any statement in this document that is not a statement of historical fact including, without limitation, those regarding the Company's future expectations, operations, financial performance, financial condition and business is a forward-looking statement. Such forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially. These risks and uncertainties include, among other factors, changing economic, financial, business or other market conditions. These and other factors could adversely affect the outcome and financial effects of the plans and events described in this statement of interim financial results. As a result you are cautioned not to place reliance on such forward-looking statements. Nothing in this statement should be construed as a profit forecast.

Chief Executive's Review

Operational Key Performance Indicators

1 Store portfolio net of 10 new stores, one permanent closure in the period, and one temporary closure of Rugby, which will be relocated in the H1 FY16

2 FY14 openings include new format store, Barkers

3 Represents swipe rate of store-only transactions

4 Average swipe rate over half year period

5 Average swipe rate over Q4 FY14 period

During the first half of the financial year 2015, we saw good progression against our three strategic levers:

· Expanding like-for-like sales growth

· Space rollout and footprint development

· Continued focus on margin improvement

Expanding like-for-like growth

Product and innovation

A differentiated and unique offer is key to our strategy, improving customer loyalty and visit frequency. We have continued to refresh our product range, changing more than 2,100 SKUs (Stock Keeping Units) in the first half, representing nearly 30% of our total range. Of those products refreshed, over a third were private or own label products.

Range expansion and refreshment within Advanced Nutrition foods is of key strategic importance, driving growth in this higher margin product group. During the first half we added range extensions for both branded and own brand Advanced Nutrition, with extensions in Hills, Royal Canin, Applaws and increased pack sizes in our own brand Wainwright's. 

VIP Club

Our loyalty scheme, VIP Club, allows us to send personalised and targeted marketing offers to owners and their pets, and will continue to be one of the key levers through which we can take further market share. VIP continued to gain strong traction from engaged pet owners, adding 600,000 members in the first half of the financial year to reach a total of 2.6 million members, and now has over 9 million pets registered on its database. VIP card swipe rate represented 57% of revenues captured on store tills, compared with 52% at the end of FY14.

Whilst VIP Club is still young, having launched just under two years ago, our VIPs are already becoming more valuable and increasing their share of pet spend with us. We estimate our share of our customers' total pet spend in the market from VIPs less than 6 months old is 38%, compared with 47% for VIPs over 12 months old.

Omnichannel

Traffic and visits to our website, PetsAtHome.com, have continued to grow strongly during the period and our share of online pet market traffic remains strong at 45%. As well as creating direct online sales, econometrics analysis indicates one in every 14 visits to our website generates an in-store transaction. This measure has improved since the website relaunch in January, improving the efficiency of the new site at driving customers to purchase in stores. Vet appointments can also be booked online through the Vets4Pets website, which drives further transactions in our practices and stores.

Deliver To Store (DTS) became fully operational in August, enhancing our omnichannel shopping experience for customers. DTS allows customers to order products for pickup within 48 hours which are not currently in stock at their local store. This includes the extended online only range of 3,400 SKUs, bringing the total online range to over 10,800 SKUs. Our Click and Collect (C&C) service, which allows customers to place an order on the website for collection in store within two hours, continues to perform well. Whilst some C&C sales have been substituted by DTS, which is at an early stage, we believe DTS is delivering incremental sales to our omnichannel segment.

Looking ahead, we will continue to invest and plan to launch mobile and tablet friendly website versions in the final quarter of FY15 and increase our online product range towards a target of c14,000 SKUs. We will also enable the redemption of VIP vouchers online before financial year end, creating a seamless store and online shopping experience for VIP customers, as well as allowing us to track offer redemption rates and measure success and returns more easily.

Services

Retrofitting of veterinary practices and Groom Room salons to existing stores increases like-for-like store sales, by enhancing our overall proposition, driving store footfall and enabling cross-selling of products. During the first half, 15 veterinary practices and 12 Groom Room salons were added to existing stores.

Marketing

We returned to TV during the period, with our highly engaging advertisement 'My Pet Moments' featuring pet video clips crowd sourced from our customers. Audience responses have shown an increased love and appeal for Pets At Home, a stronger reception than prior campaigns.

Engagement

Customer engagement is central to the Group's success, creating loyalty and like-for-like sales growth. During the half year, customer advocacy, measured by a Net Promoter Score from over 8000 customers, was 85%, compared with the FY14 level of 84%.

Space rollout

A key part of the Group's strategy is to increase the number of stores, in-store and standalone veterinary practices, and Groom Room salons. During the first half, we continued to execute on our growth strategy. We finished the period with 385 stores, adding 8 stores net to the portfolio; including 10 new stores, one end of lease store closure in Knutsford, and a temporary closure of our Rugby store which will be relocated in the first half of FY16.

We opened 26 vet practices, bringing the total portfolio to 303, consisting of 182 in-store and 121 standalone vets. All new vet practices are opened under the Vets4Pets brand and we continue to work on the rebranding of Companion Care (CC) practices with our Joint Venture Vet partners. During the period, 20 CC practices rebranded to Vets4Pets, bringing the total number of Vets4Pets practices in the portfolio to 208. These practices are now benefitting from our national advertising campaign.

Groom Room openings also progressed strongly, with 23 new salons, taking the total number of Groom Rooms to 152.

The performance and returns on new stores, vet practices and Groom Rooms remain in line with our expectations.

Focus on margin

Advanced Nutrition (AN) growth and own brand participation are supportive to Merchandise margin, which expanded modestly by 7bps to 55.9% in H1 FY15 (H1 FY14: 55.9%). During the period, AN revenues grew by 18.9% to £75.4m (H1 FY14: £63.4m), with our private label product Wainwright's an important contributor, growing by 54.8% to £20.5m (H1 FY14: £13.2m). Wainwright's growth has been boosted by new additions such as Grain Free for dogs, and Wainwright's for cat, which were launched in the H2 FY14 period. AN now represents 59% of total dog and cat food revenues, excluding food treats (H1 FY14: 55%).

Own brand and private label products represented 42.1% of gross store revenues during the H1 FY15 (H1 FY14: 41.4%). To facilitate this growth, we continue to increase space allocated to Advanced Nutrition within stores, with the latest move completed in October 2014 post the end of the half year.

Services gross margin, which expanded to 31.7% in the H1 FY15 (H1 FY14: 26.2%), has expanded through the growing maturity of our veterinary practices, as well as synergies from our acquisition of Vets4Pets in FY14. As the vet practices mature and reach higher utilisation rates, there is an opportunity for our revenue stream to increase without a significant rise in our cost base, delivering margin leverage. Within the Groom Room business, new salons can be dilutive in the early years, with maturity achieved after five years.

Nick Wood

Chief Executive Officer

4 December 2014

Chief Financial Officer's Review

The H1 FY15 accounting period represents the 28 week period from 28th March to 9th October 2014. The comparative H1 FY14 period represents the 28 week period from 29th March to 10th October 2013.

Financial Key Performance Indicators

1 Includes Food and Accessories revenue

2 Includes veterinary Joint Venture fees and other income, Groom Room revenue, revenue from live pet sales and insurance commission

3 'Like-for-Like' sales growth comprises total sales/fee revenue in a financial period compared to revenue achieved in a prior period, post cannibalisation, for stores, grooming salons and vets that have been trading for 52 weeks. LfL includes revenue from the Group's online operations

4 H1 FY15 excludes an exceptional tax credit of £4.3m, see page 10 for details

5 Underlying unlevered Free Cashflow is defined as Underlying EBITDA, adjusted for changes in working capital, acquisitions of property, plant and equipment and other intangible assets, investments in other financial assets, proceeds from the sale of property, plant and equipment and is stated before cash flows for exceptional costs and acquisitions of subsidiaries

6 Conversion represents underlying unlevered FCF as a percentage of underlying EBITDA

7 Represents last twelve months underlying EBITDA

Sales and revenue

Total revenues in H1 FY15 grew by 10.2% to £381.5m (H1 FY14: £346.2m), with strong performance in all categories; food, accessories and services. Like-for-like sales grew by 4.2%driven by strength in Advanced Nutrition, Health & Hygiene, VIP Club momentum, and continued growth in fee income from our veterinary practices and Groom Rooms. Some of the strength in like-for-like growth can be attributed to annualising a weaker comparable in the Q1 FY14, when we experienced a period of sustained hot weather in the UK, which negatively impacted sales by c£2.6m. Adjusting for this weather impact, underlying like-for-like growth in the H1 FY15 was 3.4%.

Total merchandise revenues, which includes Food and Accessories, grew by 8.9% to £348.3m (H1 FY14: £320.0m).

Food revenues grew strongly by 9.6% to £188.7m (H1 FY14: £172.3m), reflective of strong performance in dog and cat Advanced Nutrition (AN) and frozen dog foods. AN revenues grew 18.9% to £75.4m (H1 FY14: £63.4m), with our private label product Wainwright's an important contributor, growing by 54.8% to £20.5m (H1 FY14: £13.2m). Grocery food performance was weaker, mainly driven by our continued re-allocation of space in stores towards AN. Wild bird food sales also saw some weakness, impacted by both the mild weather and competitor discounting. We have subsequently introduced a value range of wild bird foods to stores and are encouraged by the early performance of this range.

Accessories, revenues grew by 8.0% to £159.6m (H1 FY14: £147.7m), driven by Health and Hygiene sales which were boosted positively by the mild weather, cat accessories, and dog collars and leads. We experienced some weakness in Cat Litter, and in Aquatics. Aquatics weakness has been mainly driven by re-allocation of this space into services when vet practices and Groom Rooms are retrofitted to stores.

Services revenues grew 27.0% to £33.2m (H1 FY14: £26.2m), reflecting both new openings and the growing revenue streams from our maturing vet practices and Groom Rooms. Our Joint Venture veterinary practices continue to grow well ahead of market rates, generating fee income to Pets At Home of £14.8m (H1 FY14: £11.4m), representing a growth of 30.4% on the prior year.

Gross margin

Group H1 FY15 margin expanded by 20bps to 53.8% (H1 FY14: 53.6%), attributable mainly to the expansion in the gross margin of our Services business.

Gross margins within Merchandise were 55.9%, a modest expansion of 7 bps (H1 FY14: 55.9%), notwithstanding price investing in large accessories online and instore, and introducing a value range of wild bird feeds. This has been achieved through the mix of own brand participation, particularly the performance of Wainwright's Advanced Nutrition, improvements in terms with suppliers, and benefits from our dedicated Asia sourcing office.

Gross margin within the services business expanded by 546 bps to 31.7% (H1 FY14: 26.2%). The main contributors to expansion have been the continued delivery of synergies from the Vets4Pets acquisition and the growing maturity of both our vet practices and Groom Rooms. Synergies delivered an incremental £1.8m to Services gross profit in the H1 FY15. Whilst our Groom Rooms are contributing to gross margin growth, there is a dilutive effect as many salons are still immature. Services and other gross margin was also negatively impacted by our investment in live pet care within stores, where we continually invest to improve welfare standards.

We continue to expect an overall improvement in Group gross margin for the FY15. This will be driven by modest Merchandise margin expansion, alongside a larger Services margin expansion. Services gross margin will see a continued benefit from maturation and growth, and the final delivery of synergies from the Vets4Pets acquisition.

Operating costs

Selling and distribution expenses of £137.7m were constant as a percentage of Group revenue at 36.1% (H1 FY14: 36.2%). Occupation costs (rent, services charges and other costs) declined as a percentage of sales as we continue to benefit from a relatively benign rental market, as well as the offset to our rental costs from the retrofitting of vet practices to stores. Vet practices within stores pay an average rental contribution of £39,000 per practice to Pets At Home for the space occupied in store and contributed a £3.5m offset to our rental costs in H1 FY15 (H1 FY14: £2.6m). Colleague costs increased as a result of our high retention rates and 'Learn to Earn' 'Steps' training programme, and marketing costs were higher due to the increased investment in TV advertising and sponsorship.

Administration expenses of £21.8m were 5.7% of revenue (H1 FY14: 5.4%), mainly reflecting an additional £1.4m of costs associated with being a publicly listed company and £0.8m of IFRS2 share based payment charges. Excluding these costs, admin expenses would have declined to 5.1% of total revenues.

Underlying EBITDA

Underlying EBITDA of £58.6m represented a 10.8% increase on the previous year (H1 FY14: £52.9m), with an expansion in margin to 15.4% (H1 FY14: 15.3%). Underlying EBITDA excludes £0.8m of IFRS2 share based payment charges, to aid comparability with the prior year, during our first year as a public company.

The margin expansion is reflective of margin expansion in our Services business, from vets and Groom Rooms, which are margin accretive to the Group at an EBITDA level. Offsetting this margin leverage, this financial year, is the additional cost associated with being a publicly listed company, of £1.4m.

H1 FY14 underlying EBITDA negatively impacted by c£1.5m due to sustained hot weather experienced during the period.

Underlying EBITDA is calculated as Group underlying operating profit under IFRS (which includes amortisation of landlord and developer contributions received), plus depreciation and amortisation and profits and losses on disposal where these are included in operating profit. Excludes exceptional items, related party fees, and IFRS2 related share based payment credits and charges

Finance expense

Net finance expense for the half year period was £5.4m. We expect total net finance expense for the FY15 period to be £9.6 - 9.8m.

Taxation, net income & EPS

Underlying total tax expense for the period was £8.9m, a rate of 22.0% on pre tax profit, and in line with our expected tax rate for the full financial year. An exceptional tax credit of £4.3m related to the release of a provision made in the previous financial year in respect of interest deductability on debt associated with the pre IPO capital structure of the business.

Underlying trading profit for the period, after tax, was £31.5m (H1 FY14: £15.3m). Basic earnings per share, calculated on 500m shares in issue, were 6.3 pence.

Cash flows

Cash flow generation remains strong. The Group generated £49.1m in underlying operating cash flow during the period (H1 FY14: £38.4m). Underlying unlevered free cash flow before interest, tax and acquisitions was £33.8m (H1 FY14: £23.2m), representing a cash conversion rate of 57.7% (H1 FY14: 43.8%).

Underlying free cash flow has been adjusted through the use of underlying EBITDA, which excludes £0.8m of IFRS2 share based payment charges.

Borrowings and net debt

The Group's underlying net debt position at the end of the half year period was £232.8m, which represents a leverage ratio of 2.0x underlying EBITDA, a reduction from the FY14 position of 2.3x. We continue to expect further de-leverage in the second half of the financial year.

Working capital

The working capital balance increased by £10.2m during the first half period to £(23.2)m (FY14 underlying working capital position of £(33.4)m).

An increase in inventory of £5.8m reflects new store openings and the arrival of our Christmas stock ready for distribution into stores. Of the increase in trade receivables of £6.1m, half of the movement relates to a loan made to our Employee Benefit Trust (EBT), to facilitate an IPO related all-colleague bonus payment. The EBT holds shares in the Group which can be realised to settle the loan. The remainder of the receivables movement is linked to balances with new Joint Venture vet practices, whereby the Group funds initial setup costs until commercial funding is drawn down by the practice.The increase in trade payables of £1.7m, excluding the reduction in IPO related payables of £25.2m, is reflective of overall business growth.

Capital expenditure

Capital expenditure for the H1 FY15 was £14.6m (H1 FY14: £14.9m), of which the majority is represented by new store openings and refurbishments to allow the retrofitting of vet practices and Groom Rooms. New store capital expenditure totalled £5.7m (H1 FY14: £6.4m), whilst refurbishment capex, which often includes the requirement for a mezzanine floor installation, totalled £5.3m (H1 FY14: £1.9m). During the period, 5 new stores and 5 retrofits incorporated a mezzanine installation (H1 FY14: 3 mezzanines into new stores). We continued to enhance our business systems with £2.1m of capital investment during the period.

We continue to expect total capital expenditure for the financial year to be in the region of £34-35m.

Dividend

The Board has declared an interim dividend of 1.8 pence per share, payable on the 16th January 2015 to shareholders on the register at the close of trading on 12th December 2014. The Board is confident in targeting a total full year dividend payment of between 35-40% of earnings, reflective of the positive outlook for the business.

Ian Kellett

Chief Financial Officer

4 December 2014

Risks and Uncertainties

An effective risk management process has been adopted to help the Group achieve its strategic objectives and enjoy long term success. The Board does not consider that the principal risks and uncertainties have changed since the publication of the annual report for the year ended 27 March 2014. These comprise:

· Protecting reputation

· Competition with other retailers and vet practices, including other pet specialists, supermarkets, discounters, and online retailers

· Stores and services expansion and rollout

· Retaining and developing engaged colleagues

· Keeping core business systems up to date and with the capability to support the Group's growth plans

· Supply chain and sourcing risk

· Liquidity and credit risk

· Treasury and financial risk from exposure to US dollar fluctuations, in respect of goods sourced from Asia

A detailed explanation of these risks can be found on pages 48 to 51 of the 2014 Annual Report which is available at http://investors.petsathome.com

Responsibility Statement

We confirm that to the best of our knowledge:

· the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU;

· the interim management report includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statemetns; and a description of the principal risks and uncertainiies for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

By order of the Board on 3 December 2014

Nick Wood, Chief Executive Officer Ian Kellett, Chief Financial Officer

Independent Review Statement

INDEPENDENT REVIEW REPORT TO PETS AT HOME GROUP PLC 

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the 28 week period ended 9 October 2014 which comprises the Condensed Consolidated Income Statement, the Condensed Consolidated Statement of Comprehensive Income, the Condensed Consolidated Balance Sheet, the Condensed Consolidated Statement of Cash Flows, the Condensed Consolidated Statement of Changes in Equity and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. 

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA. 

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34Interim Financial Reporting as adopted by the EU. 

Our responsibility 

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. 

Conclusion 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the 28 week period ended 9 October 2014 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FCA. 

David Bills

for and on behalf of KPMG LLP 

Chartered Accountants 

St James' Square

Manchester

M2 6DS

3 Dec 2014

Condensed Consolidated Income Statement

There is no dilutive impact on earnings per share in any of the reported periods.

Condensed Consolidated Statement of Comprehensive Income

The notes on pages 8 to 23 form an integral part of these financial statements.

Condensed Consolidated Balance Sheet

Company number: 08885072

The notes on pages 8 to 23 form an integral part of these financial statements.

Condensed Consolidated Statement of Changes in Equity

(i) As contemplated in the Pets at Home Group Plc IPO Prospectus dated 28 February 2014 and pursuant to a shareholder resolution passed on 27 February 2014, Pets at Home Group Plc completed a reduction of capital, whereby £1,080,477,000 standing to the credit of the Company's share premium account was cancelled, creating distributable reserves of an equivalent amount. The cancellation was formally approved by the High Court, and the court order was registered by the Registrar of Companies and became effective on 30 July 2014. The cancellation has no effect on the overall net asset position of the Company and/or its group.

Condensed Consolidated Statement of Changes in Equity

Condensed Consolidated Statement of Changes in Equity

(i) On 17 March 2014 the Company issued 140,539,069 ordinary £0.01 shares at a premium of £2.44 per share in exchange for £344,321,000 additional paid in capital issued by PAH Lux S.a.r.l.

(ii) On 17 March 2014, the Company issued 3,974,537 ordinary £0.01 shares at a premium of £2.44 per share in exchange for shares issued by a subsidiary.

(iii) On 17 March 2014 the Company issued 189,579,314 ordinary £0.01 shares at a premium of £2.44 per share. Share issue costs of £26,202,000 were offset against the gross proceeds of £464,470,000.

Condensed Consolidated Statement of Cash Flows

(i) The tax charge is stated after the offset of the exceptional tax credit of £4,295,000 (note 6). Tax paid of £2,005,000 is stated after the offset of the exceptional tax credit of £4,295,000.

(ii) The IPO related payables at 27 March 2014 of £25,184,000 related to costs incurred as part of the IPO on 17 March 2014, which were included in accruals and other creditors at the period end date, which have been settled in full in the period to 9 October 2014.

Notes

1 Basis of preparation

Pets at Home Group Plc (the Company) is a company incorporated in the United Kingdom and its registered office is Epsom Avenue, Stanley Green, Handforth, Cheshire, SK9 3RN.

The company is listed on the London Stock Exchange.

The condensed consolidated interim financial statements as at and for the 28 week period ended 9 October 2014 comprise the Company and its subsidiaries (together referred to as the Group).

The consolidated financial statements of the Group as at and for the 52 week period ended 27 March 2014 are available on request from the Company's registered office and via the Company's website.

The consolidated financial statements are prepared on the historical cost basis except for derivative financial instruments, share based payments and certain investments measured at their fair value.

Statement of compliance

These condensed consolidated interim financial statements have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS34 Interim Financial Reporting as adopted by the EU. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group as at and for the 52 week period ended 27 March 2014.

The financial information included in this interim statement of results does not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006 (the "Act"). The statutory accounts for the 52 weeks ended 27 March 2014 have been reported on by the Company's auditors and delivered to the Registrar of Companies. The auditor's report was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

Going concern

The directors of Pets at Home Group Plc, having made appropriate enquiries, consider that adequate resources exist for the Group to continue in operational existence for the foreseeable future and that, therefore, it is appropriate to adopt the going concern basis in preparing the condensed consolidated interim financial statements as at and for the 28 week period ended 9 October 2014.

Significant accounting policies

The accounting policies adopted in preparation of the condensed consolidated interim financial statements as at and for the 28 week period ended 9 October 2014 are consistent with the policies applied by the Group in its consolidated financial statements as at and for the 52 week period ended 27 March 2014, except as described below:

· Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual profit or loss.

The following standards and interpretations, issued by the International Accounting Standards Board or the International Financial Reporting Interpretations Committee, have been adopted by the Group with no significant impact on its consolidated financial statements:

· IFRS 10 'Consolidated financial statements'

· IFRS 11 'Joint arrangements'

· IFRS 12 'Disclosure of interests in other entities'

· IAS 27 'Separate financial statements'

· IAS 28 'Investments in associates and joint ventures'

· IAS 32 (Amendment) 'Financial instruments: presentation - offsetting financial assets and liabilities'.

Notes (continued)

1 Basis of preparation (continued)

Basis of consolidation

On 17 March 2014, the entire share capital of the Group's previous parent company Pets at Home Lux S.a.r.l was acquired by Pets at Home Group Plc funded by an issue of shares in Pets at Home Group Plc in exchange for these shares. On the same date a number of other transactions were completed to swap debt and additional paid in capital held outside of the Group for ordinary shares in Pets at Home Group Plc.

Whilst the equity instruments of Pets at Home Lux S.a.r.l were legally acquired, in substance the Directors have determined that the transaction represents a continuation of the Pets at Home Lux S.a.r.l business. As such, this transaction has been accounted for as a reverse acquisition. Further details of this transaction can be found within the significant accounting policies section of the Group's financial statements for the 52 week period ended 27 March 2014, which are available on the Company's website.

Accounting estimates and judgments

The preparation of the condensed consolidated interim financial statements in conformity with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS34 Interim Financial Reporting as adopted by the EU requires management to make judgments, estimates and assumptions concerning the future that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. These judgments are based on historical experience and management's best knowledge at the time and the actual results may ultimately differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis and revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. 

The estimates and assumptions that have significant risk of causing a material adjustment to the carrying value of assets and liabilities are discussed below.

Carrying value of inventories

The Directors review the market value of and demand for its inventories on a periodic basis to ensure inventory is recorded in the financial statements at the lower of cost and net realisable value. Any provision for impairment is recorded against the carrying value of inventories. The Directors use their knowledge of market conditions to assess future demand for the Group's products and achievable selling prices.

Impairment of goodwill and other intangibles

Determining whether goodwill and other intangibles are impaired requires an estimation of the value in use of the cash-generating units to which goodwill and other intangible assets have been allocated. The value in use calculation requires estimation of future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value.

Assumptions relating to tax

The Group recognises expected assets for tax based on an estimation of the likely taxes receivable, which requires significant judgment as to the ultimate tax determination of certain items. Where the actual asset arising from these issues differs from these estimates, such differences will have an impact on income tax and deferred tax assets in the period when such determination is made.

Provisions

Provisions have been made for dilapidations and for closed stores. The provisions are based on historical experience and management's best knowledge at the time and are reviewed at each balance sheet date. The actual costs and timing of future cash flows are dependent on future events. Any difference between expectations and the actual future liability will be accounted for in the period when such determination is made.

Notes (continued)

2 Segmental reporting

The Directors consider there to be one operating and reportable segment, being that of the sale of pet products and services through retail outlets and the Group's website. 

The Group's Board receives monthly financial information at this level and uses this information to monitor the performance of the store portfolio, allocate resources and make operational decisions. The internal reporting received focuses on the Group as a whole and does not identify individual segments. To increase transparency, the Group has decided to include an additional voluntary disclosure analysing revenue within the reportable segments.

Notes (continued)

3 Operating profit

The performance of the operating segment is primarily based on a measure of Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) before exceptional items share based payment charges, and management charges (see note 13). This can be reconciled to statutory operating profit as follows:

Included in profit/loss are the following:

Exceptional costs in the 52 week period ended 27 March 2014 related to costs associated with the Initial Public Offering of Pets at Home Group Plc shares on the London Stock Exchange on 17 March 2014 (£9,383,000), and costs associated with the integration of the Vets4Pets business into the group (£2,308,000), offset by a credit relating to exceptional input VAT recovered (£1,117,000).

Notes (continued)

4 Earnings per share

Basic earnings per share is calculated by dividing the net profit for the period attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.

Diluted earnings per share is calculated by dividing the net profit for the period attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on the conversion of all dilutive potential ordinary shares into ordinary shares.