August 3, 2018 / 7:00 AM / 10 months ago

UPDATE 2-Demand for vet services lifts Pets at Home

* Revenues rise after expansion of vet services

* Shares bounce off record low

* Signs that strategy starting to pay off (Adds share move, analyst comments)

By Muvija M

Aug 3 (Reuters) - Pets at Home Group Plc reported a 6.1 percent rise in quarterly like-for-like revenue on Friday as it starts to see the benefits from a move into higher-margin veterinary services, sending its shares bouncing as much as 18 percent higher.

Facing aggressive competition from new entrants in the basic pet food business, Pets at Home has been focusing on offering veterinary care and pet grooming services and aims to double the number of practices it operates over the next decade.

“We know one of the biggest opportunities in our business is to accelerate the maturity and returns of our vet practices,” Chief Executive Officer Peter Pritchard said on Friday.

The company needs to address a shortage of vets and also keep its retail pricing competitive, Pritchard added, amid strong competition from online retailers such as Zooplus AG .

Pets at Home, founded in 1991 in the northern English city of Chester, is looking to double the number of practices it operates – mainly 50-50 joint venture partnerships with vets – to 1,000, the company told Reuters in June.

It said it would invest 20 million pounds ($26 million) next year in its vets business, which has a core profit margin of about 34 percent compared with its retail division’s 14 percent.

The company’s push also reflects a global boom in high-margin pet services such as healthcare, grooming and premium accessories including toys and bedding. U.S. consumer spending on such services is growing at double-digit percentage rates, driving a surge in deal-making in the area.

Revenue from veterinary services, which makes up 11.7 percent of the total, jumped 18.4 percent in the first quarter, the company said.

Pets at Home, which has 449 stores and 468 veterinary practices across Britain, stuck to its full-year forecast, and reported an 8.1 percent rise in total revenue to 277.4 million pounds for the 16 weeks ended July 19.

Liberum analysts upgraded Pets at Home stock to “Hold” from “Sell” as they believe the risk/reward profile may have shifted and noted the fourth consecutive quarter of like-for-like sales greater than 5 percent.

The shares traded almost 10 percent higher at 124.4 pence by 0815 GMT but had hit a record low on Thursday. They have halved in value since their flotation at 245 pence in 2014. ($1 = 0.7684 pounds) (Reporting by Sangameswaran S and Muvija M in Bengaluru; Editing by Amrutha Gayathri)

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