Shares round-up: Pets at Home and Mobico

Pets at Home and transport group Mobico have failed to inspire bargain-hunting investors after the companies laid out their turnaround positions in gloom-laden updates today.

FTSE 250-listed Pets at Home Group (LSE:PETS) highlighted shortcomings in areas such as product innovation and availability as it posted an 84% slide in its retail arm’s underlying profit to just £3.5 million.

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The continued growth of its veterinary services division protected the overall results, which showed a 33.5% drop in profit to £36.2 million and an unchanged dividend of 4.7p a share.

Chair Ian Burke, who is running the business after chief executive Lyssa McGowan stepped down in the wake of a profit warning in September, said it was clear  that “urgent and necessary action” is needed to return the retail business to growth.

He has already implemented a turnaround plan during his first 10 weeks in temporary charge, with the focus on the four priorities of product, price, execution and cost. 

The company believes that the root cause of its sales shortfall has been product related, particularly as the market has shifted to new premium, direct-to-consumer entrants.

While admitting that such issues can take time to fix, it said it is moving ahead with a plan to reset and revitalise its ranges in the key area of advanced nutrition and accessories.

The shares edged 6p higher at 213.2p but remain well short of the 273p seen in the summer. 

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Broker Peel Hunt said today that shares did not strike it as being “alarmingly cheap” as it reiterated a target price of 180p and Hold recommendation.

It said: “The vets business is valuable but is tied to a retail arm that needs a reset. The new CEO will have a lot to solve and it will take time, so we believe a conservative stance is prudent.”

The shares of National Express owner Mobico Group (LSE:MCG) recovered from a weak start to stand 0.4p higher at 22.1p, having fallen 70% in the past year as part of a longer reverse dating back to 2022.

Today’s update for the quarter to 30 September highlighted increased competition on key coach routes and impact of lower consumer confidence in its West Midland bus operation as UK revenues fell 3.2% compared with a year earlier.

Continued strong trading by the Alsa business in Spain meant Mobico recorded year-to-date revenues growth of 5.4%.

This compared with 7% in first-half results and leaves the company on course to deliver a full-year operating profit towards the lower end of its previous guidance range of between £180 million and £195 million. It recorded a figure of £187.7 million in 2024.

Executive chair Phil White, who has returned to the group after his previous spell as chief executive of National Express between 1997 and 2006, announced a comprehensive cost-savings programme as part of efforts to improve financial performance.

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He is leveraging Alsa’s best practice across the company and exploring options to monetise the assets of the West Midland bus arm ahead of its return to public control by 2029.

White said: “The key priorities for our new leadership team remain strengthening the group’s balance sheet and improving profitability through our strategic initiatives.”

City firm Berenberg made no change to its estimates and reiterated its Hold rating and 35p price target, noting that its estimates were already at the bottom of the company’s guidance range.