Earnings Call: Q1 2021

Jul 31, 2020

Earnings release

Good morning, everyone, and thank you for joining us to discuss the Petahome Q1 Trading Update for Financial Year 2021. I'm Peter Pritchard, the Group CEO. And with me today is Mike Kiddin, our Group CFO. Our first quarter covers the sixteen week period from the March 27 to July 16, beginning a week after lockdown in The UK. So our entire quarter was impacted by COVID-nineteen. However, as an essential business, we've remained open throughout the pandemic. This has allowed us to gain valuable insight into customer behavior and adapt our operations to a new normal. But we believe to have a complete picture of the impact of COVID, it's really helpful to step back and talk to a twenty week view of trading to the final four weeks of last year pre lockdown and then the quarter one of this year, which, of course, takes in the whole of lockdown. As we previously described in the four weeks prior to lockdown, retail customers bought more merchandise, in effect, filling their cupboards. In this period, retail like for like was 36%. However, entering Q1 in the first eight weeks of the quarter, we saw the initial impact of lockdown as the government advised people to stay at home and only undertake essential journeys, and that resulted in negative group like for like, and it was driven by three key factors. Firstly, we saw the unwinding of the customer cupboard fill worth around £20,000,000 worth of merchandise sales. Secondly, in addition, we temporarily paused our grooming and pet sale operations so we could reengineer them to adhere to social distancing guidelines. And finally, in our vet group, we implemented all the guidelines in the Royal College of Veterinary Surgeons, which precluded all but emergency health care, meaning we saw significantly reduced customer sales across first opinion practices of around 30%. And we move into the second half of the quarter, where we've seen sales momentum return stronger and faster than our scenario planning had anticipated, and that was across all parts of our business. In retail, with cupboard fill now used up, customers returned to make food purchases, but we were also really encouraged by strong pickup and accessories. In particular, our puppy and kitten ranges have performed well as new pet owners visitors for their first big shop. The step up in store like for like sales was supported by the reinstatement of grooming services and pet sales, and that was made possible by new COVID safe operating procedures. As the RCVS guidelines gradually eased and combined with our model of an owner driver operation, like for like sales growth and first opinion rapidly improved, and we were up 4.6% in the second eight weeks of the quarter. So let me be clear. I've been talking about customer revenues in the practices themselves because we didn't have the best read through in terms of customer behavior. So looking through the whole of COVID from the March to the end of Q1, like for like customer sales have actually grown 3.5% year on year for the group as a whole. Within retail, the business is actually performing stronger than the prior year with a like for like of seven point five percent versus a run rate pre COVID of seven point two percent. Our omnichannel business has contributed significantly to that performance, with online order volumes remaining materially elevated and sales up 65% over that twenty week period. Our stores have also delivered a robust 1.6% like for like growth, where merchandise sales have more than offset lost sales from grooming and pet sales of approximately £7,000,000 In First Opinion Vets, we've seen a robust recovery and are now performing at normal levels, supported by the increased use of telemedicine, and that's allowed us to triage existing clients as well as acquire new ones. Plus, also launched a new deliver to home service for health plan medication, which has been particularly popular with our clients. We've continued to drive strong new client registrations as well as grow the number of clients who have a complete care health plan. Auspicious hospitals have also recovered well and are now operating at normal levels, too. We've been really encouraged by the performance of the business underlying the strength of our combined pet care model, our agility to respond to changing customer needs and the favorable trends within the pet care market. As people adopt new attitudes to work and leisure pursuits, we're seeing signs of increasing pet ownership, having witnessed increased levels of VIP puppy and kitten membership and new client registration in our vets. We believe that this, alongside the longer term trends of humanization and premiumization, should help drive future growth into this market. Now of course, it's far too early to extrapolate the recent rates for the balance of the year given the material uncertainties that exist. And even overnight, we're seeing a significant announcement with the lockdown in parts of the North of the country. However, these attractive market dynamics, together with our unique pet care model, strong liquidity and a robust balance sheet, give us confidence to progress investment and emerge an even stronger business. I've previously spoken about our ambitions to leverage our customer data to better serve customers' pet care needs, and I'm pleased to report that we're approaching a significant milestone of all of our data moving under our control from third parties. So by the time that we report our interim results, we will, for the first time, have a single view of our pet care customer. Combined with the investment we've already made in building a dedicated beta team, we're making really good progress with our plans. We now have 5,700,000 active VIPs, and a number of those buying both a product and a service has grown at 8.5% year on year. But let me be clear, we still have a really big opportunity to get more of our shoppers to shop across our entire ecosystem, and that's what our data focus will be focused upon delivering. Keeping our business efficient and low cost, of course, remains a priority. We recently appointed an experienced Productivity Director to lead a number of initiatives to support investment in growing our business capabilities. We've also accelerated our program of lease negotiations with landlords, where our strong covenant and commitment to paying rents in full throughout the crisis has put us in the strongest possible position to agree the best terms moving forward. And today, we've laid out our plans to make a significant investment in our omnichannel business by consolidating our legacy infrastructure and moving to a single site distribution center by FY 'twenty four. We plan to build a flexible, efficient and modern facility that allows us to grow with the changing needs of our customer. This investment is being made alongside more immediate initiatives such as enhancing our digital platforms and creating a new click and collect service, allowing our customers to shop how they want to and for us, to best decide how to fulfill their pet care needs. And finally, it goes without saying that I would like to sincerely thank each and every colleague across our business for their commitment over the last few months. I'm so proud of the way that they've responded to such challenging times and continue to serve customers and their pet in whatever way they can. They really are a truly remarkable set of people who are so dedicated to serve UK's pet owners. So I'll stop there. I'm sure you have a number of questions, which Mike and I will be pleased to answer. So I'll hand you back to Millie. Thank you. Our first question is from the line of Geoff Rodale from Morgan Stanley. Geoff, your line is open. Please go ahead. Great. Good morning. Can you hear me? Yes. Yes. Hi, Geoff. Yes. Good morning. Can I just ask three quick questions, The first of which is how should we think about gross margin trends in your retail business in the last sixteen weeks, given I imagine some of the product category mix is quite different and obviously much longer stronger online penetration? Secondly, are you seeing any signs of consumers trading down just in terms of the economic environment and what might be coming? And thirdly, could you put are there any figures you can put at all around the comments you were making about potential increases in the pet population? So how much your puppy club is growing, etcetera? Just if you have any view yet as to how much the pet population is likely to increase over the next twelve or twenty four months, that would be great. Well, I'll hand over to Mike first to deal the gross margin question, and I'll talk about mix on the pet population. Yes. Jack, your question on gross margin percent in the retail business last sixteen weeks, there's three trends playing into that. The first is, obviously, omnichannel has grown 71%. Booms is a stronger participation in omnichannel sales and that's lower margin than accessories. So you do get a mix impact on gross margin of that shape. Second dynamic is actually across the quarter, we've seen very strong performance in accessories, partly driven by customers setting up as they acquire new pets and the initial setup to support and attack those pets. Accessories is a higher margin in food. That will offset some of that mix impact from omnichannel, not completely, but does help mitigate it. The third is in our grooming business, which does go into our retail gross margin. The best way to think about that business is there's a service we provide from the colleagues. There's income we take in terms of the grooming fees against which we charge the payroll, and that's the gross margin. As Peter was saying, that business has been constrained. We've lost sales as a consequence of being closed, but we've continued to employ and pay those colleagues. So their payroll cost is hitting our cost base. It also goes into our gross margin. So that's a short term feature in the first quarter. Balance of the year, you'll see that continue because we're saying today our grooming business will probably operate at 75%, 85% of capacity because it's still going to be constrained in the balance of the year. So those are the three points I'd make to respond to your question on gross margin. Thanks, Mike. I'll just pick up questions about consumer trade. The answer in the short term is no. Pet products tend to be relatively low price points anyway, particularly in accessories that are actually very accessible. So we haven't seen any signs yet. I think we would be very cautious around the future because obviously, I think as we look at the economic outlook towards October, November, and clearly with furlough coming to an end, I think we would be super cautious about trying to anticipate how that's going to play through, but currently no consumer trade down. And on the pet population, I think that obviously the most important factor here is we've got more people now at home and they're likely to remain at home as they work from home. And that's obviously been a very favorable trend for pet ownership and more people have considered. It's still very, very early days and there are very few national statistics. But if I point to three things that we've witnessed is we saw the Kennel Club report that web searches for finding breeders was up over 100%. So people obviously are looking and observing. But bear in mind, generally, you can't create new pets out of thin air. There's a long breeding cycle. So I think that trend of people researching is a good one. We've seen a material step up in puppy and kitten membership over the last eight weeks and that's a good proxy for people coming in. And for us, that's really important because puppy and kitten will have a lifespan between twelve and twenty years. So that is a good indicator of future value growth. And the third will be new client registrations in our vet business, which over the last eight weeks have returned back to normal levels and slightly elevated, which again is another good proxy for people registering with a vet when they get a new pet. I think what's interesting as we look at the age profile of those new registrations, we've actually seen quite a strong profile to slightly older pets, which could indicate one of two things, either, people are rehoming pets from rescue centers or indeed, we've seen some switching behavior as some competitors maybe have closed down. So it's still quite early to try and read through, but the trends are certainly positive. That's very helpful color. Thank you. Thank you. We will now take a question from Andrew Porteous of HSBC. Andrew Lap, your line is open. Please go ahead. Good morning, guys. Really good performance as well through Q1, so well done. A couple of questions from my perspective. CapEx, obviously, you outlined the plans today around the online investment. Could you it feels like with that and the store refresh program, you probably got pretty good line of sight on CapEx over the sort of the next five years. Could you talk about how you sort of see that evolving annually and sort of what the key building blocks there are to think about? And then I guess linked to that, obviously, through lockdown plans for the Store Refresh program have been a little bit up in the air. Could you update us as to where you are on that? And perhaps if you can give us any indication of how the new stores are performing relative to the sort of the legacy stores? Sure. Look, I'll hand over to Mike to talk CapEx, and then I'll talk about the store refresh program. Yes. So I mean our plans on deploying CapEx really remain in line with our strategic priorities. I think we've looked at four things on that, Andrew. First of all, we're going to spend CapEx to support our digital and data agenda, and we're talking quite a bit about the progress we're making on that today. Secondly, we're investing behind the Vet Group, particularly in the Specialist Division. We've got our new center opening in Scotland later in the year. And we've got a plan to invest significantly in our largest specialist hospital, which is Dick White referrals. The third area we'd spend our capital on is converting stores into our new pet care format. We've done 18 of those so far. Now we've paused that, understandably, as we've gone through the COVID crisis. But clearly, that would be our plan to continue to put additional services into stores. And the fourth area is to build out and invest in infrastructure. And today, we're announcing the new DC we're going to open. Now that's that DC will open in three years' time. It will open in the summer of twenty twenty three. But that DC will help us manage the growth we're seeing in the business, our projected growth at that point. It will also help us achieve operational efficiencies. It will be more automated than the two DCs we have today and will enable us to serve customers better going forward. So we're more confident as we come out of the quarter. We're going to invest some of our upside back into the growth of the business. We think it's the right thing to do. But of course, we'll always be very disciplined with our approach on capital. And clearly, it will be returns driven in terms of how we prioritize. Thanks, Mike. In terms of the store refresh program, we've currently completed 18 store refreshes. Obviously, And we had to pause and have continued to pause through COVID. We do have a number of new a small number of new store openings planned for this year and some resites, and they will all open in the new refresh store format. And as soon as we're able to do so, we plan to continue with our refresh program. We're obviously taking a cautious approach at the moment, but that shouldn't be ready as we're going to stop. That's more about our ability to execute. And I think it reinforces for us, as we look at the performance of those refresh stores, where we focus on building out our services, particularly around Vets, subscriptions, click and collect. These are all really important parts of our store refresh program. We think they're as important moving forward as they have been through lockdown. So we're pleased with the performance we've seen. It's in line with our expectations. And I think it sort of demonstrates to us is an omnichannel approach is the right and the winning approach. Customers are shopping in a lot of different ways. As we're adjusting our store format to reflect that, we think that's actually a really positive movement forward still for us. So we're still very encouraged and committed to doing so. Excellent. Can I just come back on the CapEx point again? Should we still think about CapEx as sort of all these plans within the sort of 40,000,000 $45,000,000 that you normally run at? Yes. I think towards the top end of that, Andrew, with $45,000,000 I mean, we referenced the 48,000,000 today in the the fit out of the new staff at BC. Clearly, we'll look closely whether the best way to fund that capital will be through a sale and leaseback or similar funding arrangement. So that 48 will be in addition to that 45 So our normal run rate, 45,000,000, dollars 48 is in addition. But we'd love to see how best to from that really going point of view. Highly likely, we'll do what we do today with that type of capital, automation equipment, audit trucks, racking, where we do lease it. We'd probably be planning to do that. Thank you. Our next question is from Jonathan Pritchard with Peel Hunt. Jonathan, your line is open. Please go ahead. Thank you and good morning all. Just a question on market share. I know data is still on the ground, but your sense of the new VIP customers you have, obviously, a good slug of them are going to be brand new pet owners. But do you think you're perhaps winning from the specialists or winning from the supermarkets? Or is there any sort of trend you'd like to pick out that you might sense? Yes. Thank you, Jonathan. I'll pick up that question. You're right. Market share data in this market is really scant. So it's very hard for us to give you a qualified view. I think what we're seeing through the whole of COVID is people have gone to brands that they trust. And never has it been more important to deliver trust, particularly in terms of safety, safe shopping environments and doing the right thing for your customer. I think we're very well positioned there. And that's why I think we've seen a strong response from consumers. I would point to two things. I think we've got some other indicators. I think we saw Zooplus recently report on market share on their position in The U. K. I think they talked about 20% growth in the market that will play comparable to our 65%. So I think I probably suggest we probably gained a bit of share. And our overall number, if you read through it, 7.5, and we think the market is growing at sort of half that level, would suggest we're probably being gaining share across the piece. And I think the fact we've been open, national distribution, omnichannel means we've had more opportunity to serve more customers. So without giving you a qualified yes, I think the indicators there would suggest that we're probably on the winners' list rather than the losers' list. Okay. Thank you very much. Thank you. We'll now take a question from Owen Shiley from Berenberg. Your line is open. Please go ahead. Thanks. Good morning, guys. I was going to ask one on market share. So just two questions to me, if that's okay. The first was on the Stafford facility. If you could talk through what it will give you other than just more capacity? Also any kind of color on the level of technology that you're going to be stepping up to? And also any indications on ROI on that CapEx? And then the second question was where you've alluded to kind of setup costs for customers doing a big shop in store when they've just got a new animal. Is that worth stripping out at all? Is it a meaningful part of the like for like sales growth in recent weeks? Okay. Two really good questions. Let me talk about Stafford first, and Mike, please jump in if there's The anything I most important thing around Stafford is, obviously, we're consolidating two DCs into one. And the most important word I'd use would be flexibility. We can see the way customers are choosing to shop evolves and continues to evolve. And by having your stock in one location, it means we've got maximum flexibility to decide whether our stock goes direct to a customer's house or goes to a store. In the RNS, there's another really important piece that supports the Stafford facility. So we talked about our new order management system. And let me just bring to life what that allows you to do because it complements Stafford beautifully. Phase one of our order management system allows us to look at customer order and allows us to facilitate a really great click and collect experience. Phase two allows us to look at a customer order and say, where are you best serving that order, either through your centralized facility, where you pick and pack and dispatch to customers' home or indeed serve it from a local store and pick, pack and dispatch it to customers' home, too. So that flexibility point of order management system and a new single distribution center in effectively means you don't have one DC, you have four fifty one DCs. So flexibility is crucial, we believe, moving forward as we see customers changing the way that they shop, and that gives us the best ability to respond. In terms of tech, we are taking very much a proven approach to the technology and the automation in this DC. Our operations are relatively straightforward, are relatively simple. We deal with quite a lot of bulk, which doesn't always work very well in an automated environment. But those things that can be automated to give us maximum efficiency, we will do so. We've got a lot of experience recently in Northampton, so we're working out what works and what doesn't work. And that's given us a lot of insight to how we lay out our new DC. So we're not going to be in the Ocado robots approach. That's not our business. But we'll use sensible technology to give us proven efficiency. And in terms of that ROI, you could yes, was going say, hand over to Mike to the ROI point. So the way to think about the financial benefits we get out of that, Owen, there's three types. One is that DC will be more operationally efficient than running two. The automation we'll put in will enable us to be more efficient with our pick and our fulfillment. The second benefit we'll get was one that Peter alluded to with our order management system. We have more efficient use of stock, management of our stock to work on capital benefits. And the third is, of course, it will be a major enabler of our growth in terms of sales. And so if you take that together, we target our guide rail for investing capital is to achieve circa 18% cash return on invested capital overall of our capital, and that will include the investment we make in our new DC facility. So let me pick up the second part on the set of costs. One of the really lovely things we like when we see new pet owners is they have to equip themselves with all the things they need to welcome their new pet, whether it be a fish, obviously, you need the tank. If it's a dog, you need your beds. Probably just ask Andrew at HSBC, I'll tell you how expensive that is to do. You need a lot of stuff. And we like that, obviously, because it tends to be much more accessory based. And that's one of the things we've seen in our quarter one. So it's always a really good proxy for those customers. We would never break out in such a way. Obviously, we just report to Food and Accessories. But definitely, it's a one off benefit that you see. I think the interesting thing will be, as we go into quarter two, is actually if there's a continued new pet acquisition, we'll see that as we move forward. Obviously, hard to predict, but it is a factor of our business. And it's always been omnipresent. It's always there. I think what we've just seen at this point in time is an elevation across all pet types. Brilliant. Thank you. Question from Simon Boulder from Numis. Simon, your line is open. Please go ahead. Thank you. Two for myself, if it's okay. First one, kind of hopefully quite short with just can you give some color on the timing around the Phase two implementation of the order management system with the kind of fulfillment from store potential? And then the second question was just around telemedicine, which is obviously kind of mentioned within the statement this morning again. Just wondering if you could just add a little bit of color on how you're thinking about the implications of that for total customer spend or average spend or cost efficiencies in practices or those sorts of things? Yes, sure. Look, our order management system, Phase one, is very much focused on Click and Collect. And we've obviously now procured that software. We're now in our implementation phase. And we launched our first version of Click and Collect consumers in the autumn. And that's our first focus. We then work on the second stage, which is the ability to pick, pack and dispatch from store. And that's very much for us a next year opportunity. So we'll see it phase into FY 2022. Obviously, the biggest opportunity for us is Click and Collect. It allows us to divert an order from a centralized facility to a local facility. And obviously, the cheapest way of getting an order to any customer is going to come and collect the store. We know that's something actually which customers want to do and it's not a service we currently offer. So it's a win, I think, across all parts. Telemedicine is really interesting actually. So for those who are less familiar, telemedicine is in two forms, either through telephone consults or through video consults. And we have both facilities available to our practices. The RCVS do have quite clear guidelines around what you can and can't do, and therefore we operate within it. I think what we've seen is it's opened up a new channel of convenience. And I think particularly for a lot of consumers who have a degree of a worry but may not need a full on consultation with partners, that's proven to be very beneficial and it's actually very efficient for a partner because you can effectively see more clients very quickly. And obviously, you don't have to worry about social distancing. The RCDF are due to update their guidelines again because it was a temporary move that they gave. And obviously, we'll wait and see how they adopt. I suspect it's probably here to stay. It's really helpful. I think it's helpful to the client and it's helpful to the partner. I think the more interesting thing for telemedicine for me is how you just turn it into more of a service. And the way that we think about it is more about how do we incorporate this into our VIP membership. So maybe three in the middle of the night and you've a concern about your pet, typically, you'd have to go to an out of house surgery paying off a lot of money. Is that the sort of facility we could offer to our consumers as part of being our membership of our club? So we're thinking about it more as a broader service to our members rather than necessarily a straight revenue opportunity. But I think that's something which would be very well received by our consumers as a helpful benefit. So that's how we're thinking about it. Okay, great. And so can you just come back on the Click and Collect piece? Because I mean, I can order on the website for in store collection already, no? So what do you mean when you say it's a new service So proposition you're you're absolutely right. So today, if you order on the website and choose a store location, the first benefit you get is you can collect it for free. There's no distribution charge. But actually, that comes from our centralized facility and is shipped on our own fleet to store to customer collection. And it typically means that you've got a one to two day pickup. Click and collect will allow you to do exactly the same, but pickup from store within an hour. So it gives you more immediacy in terms of collection facility. And we don't currently have that facility for customers, so it will be a really lovely addition. If the stock is there close to you, we can tell you it's there, it's reserved for you, you pay for it and you go and collect it. Combined with something else we've done, we referred to it very briefly in our statement, but one of the new facilities we've offered to customers is currently in a small number of stores, but we anticipate to roll, is when you come to collect a parcel, you can now pull into a dedicated parking bay outside our store, scan a QR code and then we deliver that parcel direct to the boot of your car. And obviously, we developed this in light of COVID. Actually, we've seen a really strong take up from consumers because obviously, it's incredibly convenient, too. So we're going to broaden out all of the ways that you can order and all the ways you can collect to make it as convenient and easy as possible. Actually, the order management system is a really important piece of architecture to allow us to do that. Okay. Great. Thanks for clarifying. Cheers. Thanks, Amit. Lovely. Thank you. We will now take a question from Tony Shores of Hamillard Gordon. Tim, your line is open. Please go ahead. Thanks very much. The question has really sort of come up from just listening to what you've just said about online. I don't know why haven't asked this before, but in terms of the profitability of online, where relative to the achieved retail EBIT margin of sort of late single digits, where what is the profitability of an online order delivered? And it sounds relatively expensive doing an online click and collect at the moment. I mean, is there going to be a step change in the profitability of online because of these changes you're making? That's the question. It's a great question. I actually tasted something slightly more fundamental, which is looking at our share of wallet to our customers is still relatively low, I. There's a lot of headroom to go for. So I think the first thing is when a store based shopper starts to engage with us online, what doesn't happen is we don't see a shift of that behavior from store to online. What we see is that the total spend with us increases typically, it doubles. So straight away, the amount of revenue that we get goes up. When we look at an online order, a pure online order versus a store based order, there's a few interesting dynamics. The margin per order is lower because obviously, it's going direct to a customer's house. You've obviously got the incremental cost of a courier. But the order value tends to be twice the value of a retail order. So from a cash point of view, the cash profit is different between the two. The most efficient ways and the most profitable routes to serve a customer tend to be one of two ways. Either the customer goes and shops themselves in the store, that's where we make the strongest margins. Or secondly, where a customer chooses the store as a collection point, it gives us maximum efficiency. The least profitable way to serve a customer is when you deliver direct to their home through a courier. And that's why we have order thresholds on our orders to manage the profitability. The key thing for us is we're able to balance all of those off. And one of the benefits we see as we move forward is giving customers lots of different choices to how to serve. Firstly, works for the customer. It's everything from an hour, don't do it yourself through to an hour collection point to one or two day delivery points. So we try and influence customers to make sure overall, we're able to manage the mix of our business. If the entire business switch purely to online only direct to consumers like some pure play models, that actually is the least profitable way you could ever serve a customer. And that's why for us having an omnichannel and managing that mix and providing those facilities allows us to balance all of those off whilst winning the most amount of their revenue. So it's an act, it's a juggling act, but we've been able to manage that very carefully. And therefore, efficiency is important and choices are important. So to answer the question though, what is the margin on online now versus the achieved retail margin? And what's that going to go to under these new systems? Yes. We never disclosed that, Tony. I know why you're asking the question. I think it's a mathematical answer, isn't it? Because we don't it's the blended that matters. And I think just to build on Peter's point, we believe combination of a nationwide 150 plus store base together with the ability to deliver out of a single facility is the best combination to access value in the market. So true omnichannel retailer compared to a store only or a pure play only. And that's where we're investing behind that strategy. It's a false number to quote a channel margin percent for a store compared to a channel margin percent for online because a customer can order at home, they can pick up in store, they can go into a store and order online and come back the next day and pick it up. There's any combination of ways of taking an order from a customer, fulfilling that order and delivering it to the customer. So to pick out one particular channel, which is delivered to home, I think, would just be quite misleading, actually. It would be. And I think in light of that, if you look at what's happened to our business over the last two years, you've seen a significant shift. There's more customers shopping in an omnichannel way, but we've been able to grow profitability of our company. And that's the important thing for us is looking at the overall revenue coming in from the customer and the overall profitability per customer, and that's where our focus is. Okay, thanks. Thank you. Before we take a question from Matt Garland of Citi, can I just remind anybody still wishing to ask a question? Matt, your line is now open. Please go ahead and ask your question. Hi, guys. Thank you for taking my questions. The first one was just, I suppose, you've spoken quite a lot around the retail side of the business. But in terms of, I suppose, your thinking on the vets and breast opinion practice growth in terms of number of stores over the next few years or I suppose your longer term thinking around that part of the business, I wonder if you give some more details around that. Secondly, obviously, you talked a lot about the importance of the stores in terms of the total omnichannel experience. But given the kind of rise online and your comments around there's a lot of leases and things coming up for renewal. Do you see the four fifty stores as the store estate that you want? Or can you give us a long term idea where you think it will trend to give you the ability to serve customers but also reduce costs? And then finally, in terms of kind of the subscription, so I know that for some of the vet subscriptions, as an example, you take a proportion of those sales because it's obviously a joint venture practice structure in most of the debt practice businesses. Can you give us a split of the total number of customers and maybe what the kind of trend you're seeing in terms of people moving across subscriptions? Or what your thoughts are longer term in terms of development of subscriptions? Thank you. Okay. Well, let me talk first to the vets in terms of first opinion growth. When we reset the vet business some tie back now, we said the most important thing we want to do is recalibrate. And that's what we've been focusing on doing because we wanted to make sure our core business was performing the way that we wanted to. And we've been really pleased with the progress that we've made, and that continues to be our primary focus. That doesn't preclude us, however, from opening practices, and you will see a small number of practices open. We still have we still believe a decent runway of growth. There's still over 100 stores that have no vet practicing and we see them as an opportunity and that doesn't preclude us from opening some stand alones. But we won't go there just yet because our focus is still on making sure our core business works well. And I think as we move through this year and obviously COVID makes that a more challenging, but actually we do have some new vets still in the pipeline. And one of the bizarre things that we've seen through COVID, actually we've seen quite a lot of interest from vets come to talk to us about JV. So we'll there are always long lead times, but we're encouraged by that. Let me be really clear, we'll always make sure our core business works really well before we open that pipeline again. And just to add to that points that Peter mentioned on the Vets portfolio. I think to remember Matt is still a very young portfolio. We still have 30% of our practices are still less than four years old. So driving that maturity benefit out of our four forty one practices will still create a significant amount of both cash and profit growth for us to come before we open any new practices. So we still got significant value creation opportunity by driving the maturity of our existing portfolio. When we talk about I mean, it's a really good place to go to is when you think about online growth, what's the do you still going to need your stores? Of course, for many years, our stores have served a very different purpose as we built out our services business in terms of vets and groomers and subscriptions. Our stores do many things. For us, we think our store estate is about right. We will certainly be taking the opportunity through lease negotiations to drive the strongest possible terms we can with our landlords. And we have excellent relationship with landlords and we've found them to be very supportive through these conversations. So we think our estate is about right. I think the challenge increasingly becomes about how you continue to repurpose your stores to serve your customers as best as you can. So obviously, services are always the place to go. Increasingly, your stores are very convenient collection point to your customers and we think that will just continue. And I would point out that even despite COVID, actually our bricks and mortar stores actually continued to grow in over this twenty week period. So actually, people are still visiting stores and it just goes to demonstrate you need to have all of those things in your armory and that's why we took the Total Pet Care. And when we think about subscriptions, we've never really split out the balance of subscriptions, but it's actually made up of three parts. It's made up of health care plans in our vet business. It's made up of flea and worm subscription plans in our retail business. And it's also made up increasingly what we call ease of repeat orders. So these are no contract people to setting up a repeating delivery. And for us, are really important areas for us to continue to grow and build more bundles for customers because I think one thing we have seen is customers increasingly just want convenience. They want an easy life. And when you provide the number one reason why people sign up to the fleet program, by the way, isn't price, although it's very well priced. So they don't forget, it's something you need to do. It's not exactly the most exciting purchase in the world. Warming your dog is not that exciting, but you need to do it and you need to every four weeks. So the fact that it's arising on the doormat is why people sign up. And we think there's still a lot of opportunities to find those convenient points, remove a degree of friction, make your life a bit easier and build. So we're really focused in doing so. And actually our data team are crucially important in that area because we see the types of customers who are likely to subscribe and that gives us more lookalike customers to go for. So that's a great use of data example of how we're going to use our data to better serve customers. So we are going to be investing heavily in subscriptions. You're going to see more new plans arrive in the coming months. And we think customers are really predisposed to it because it allows them to spread across and make life that easy. Thank you. That ends today's question. I will now hand the call back to Peter for closing comments. Thank you, everybody. Thank you, everybody, for those questions. They were really high quality questions, and we really always have take the opportunity and enjoy the opportunity to talk about our business. I'd just like to thank you for your time and your continued support. And most importantly, to us all, please stay safe. Thank you.