The benefits of Pets at Home decrease on the costs of restructuring the veterinarian

Pets at Home, the pet-to-veterinary business, announced a sharp drop in pre-tax profits and warned that its costs would increase as a result of the restructuring of its struggling veterinary business.

The group, which targets short sellers who are turning to the troubled UK retail sector as a result of cuts in discretionary spending by households, said first-half profits fell to £ 40m, against £ 40.8m in the same period last year.

The drop is attributable to heavy expenses for the restructuring of the company's veterinary business, which Pets operates in the form of joint ventures with independent firms. CEO Peter Pritchard is now planning to buy 55 veterinarians from 55 out of 471 coaches, which he says would cost the group £ 49m by 2020.

During the six months to October 11, Pets received £ 30 million in charges for the restructuring of this veterinary business. This included a provision of £ 16.2 million for the group's loans to veterinarians, which he said "should no longer be recoverable".

According to Pritchard, veterinarians with whom pets work have experienced "increased costs". These include, he said, the fees charged to them by pets for their participation in joint ventures.

"We will have to recalibrate the activity to generate more measured growth," he said.

The shares in Pets, which in previous years had been hugely successful as animal enthusiasts for its services such as pawdicures and nutritional advice, have dropped 63% to 115p since the peak reached in October 2015. About one-tenth of the shares are now being lent to short sellers, according to Markit.

Pets 'like-for-like revenue was up 5.5% over the first half of the year, as prices were as close as possible to online retailers' prices, which, however, contributed to a 1.6% decline. gross margin, which reached 50.3%. The group also spent £ 4 million on price reduction.

"Pets at Home is a healthy business and customers love what we do," said Pritchard, who joined the company in May.

"Examining our veterinary group has been a priority," he added. "I recognize that we have been growing at a fast pace and, more recently, we have seen the pressure of rising costs and fees being charged to this young company."