Pets at Home Group PLC (LON:PETS) reported a 9.3% drop in profits for the first half as margins shrunk amid tough competition and rising cost pressures.
The company, which sells pet food, toys and accessories, said underlying profit before tax fell to £41.8mln in the six months to October 11 from £37.9mln last year.
The underlying group gross margin fell 160 basis points to 51.9% as it invested £4mln in “price repositioning activities” to address competition from newer pet food companies and as a shortage of veterinarians in the UK put upward pressure on salaries.
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Pets at Home is reviewing its veterinary business and said it would consider buying back 55 practices from joint venture partners as it believes it 25 would be more profitable if owned outright.
The group said another 30 practices may not be viable over the long term and some of them may be shut in the coming months.
“Since becoming the group CEO in May, I have had the opportunity to take stock of the wider group and shape my view of our future,” said Peter Pritchard.
He added that reviewing the veterinary division has been a priority.
“I recognise we have grown at pace and more recently, have seen the pressure that rising costs and our fees are placing on this young business. We will need to recalibrate the business to deliver more measured growth, whilst maintaining our plan to generate significant cash profits.”
The restructuring is expected to result in non-underlying income statement costs of up to £49mln and non-underlying cash costs of up to £27mln.
Revenue in the first half rose 6.7% to £499.3mln with retail sales up 6% and veterinary revenue up 12.3%.
The interim dividend was maintained at 2.5p.
Shares fell 1.4% to 112.9p.