Background
Woof! Plc is a subscription-based mail order supplier of pet food other pet-related products.
Established during the ‘dot.com’ technology boom of the late 1990’s, it has grown into one of
the UK’s leading e-commerce brands, with a number of prominent celebrity endorsers and a
market capitalisation on Euronext Dublin in excess of €250 million.
The company has maintained a number of its ‘quirky’ practices since its stockmarket flotation
in 2010 having a weekly ‘bring your pet to lunch’ day every Friday and allowing staff a day’s
holiday for their pet’s birthday.
From its headquarters in East London (in a technology park alongside a number of other
internet-based enterprises) the company’s workforce of 280 staff manages a complex network
of subcontracted manufacturing sites and distribution centres which produce and ship pet
foods under the Woof! brand.
Analysts believe its success has not been due to cutting-edge technology employed in its
customer-facing websites and logistics management systems, however, but rather its ability
to benefit from consumers wanting to give their pets heathier alternatives to supermarket pet
foods.
Recent performance
The company’s draft financial statements for the most recent financial year reflect the
following:
31 Dec 2019
(draft) 31 Dec 2018
Turnover €901m €833m
ROCE 7.8% 7.7%
Gearing 52% 55%
The company’s key focus over the past two years has been to increase incremental sales to
its core subscriber base. Customers currently pay between £30 – £50 month per pet for organic
pet foods delivered to the customer’s home. However, ‘add on’ sales such as generic toys and
grooming products which are charged for separately via the company’s e-commerce website,
now account for 17% of the company’s operating profits.
The company’s senior management team has been exploring two potential options to enable
the company to meet its 2020 revenue growth targets: an acquisition and a business
partnership.
WebVets acquisition
During 2019 Woof! purchased an option to acquire the entire issued share capital of WebVets,
an online veterinary practice. The option lapses on 30 June 2020. WebVets enables pet
owners to speak face-to-face to an experienced, qualified vet from the comfort of their own
home.
Vets are not able to prescribe medication from an online appointment. However, many pet
owners appreciate having the option to receive professional advice on non-urgent problems
and questions relating to their pet’s general wellbeing for a fixed consultation fee.
A successful acquisition of WebVets would allow Woof!’s registered subscribers to have
remote access to a qualified veterinary on a 24/7 basis. The incremental costs of acquisition
of £92m have envisaged to have a payback period of six years based on current cash flow
forecasts.
WebVets is currently owned by an Asia conglomerate that is keen to divest its European
interests. It is expected that none of the senior management team of WebVets would be
retained, but all key professional staff that were interviewed during the due diligence process
indicated that they would be happy to work for Woof!.
Partnership with Primo Vets
Primo Vets operates more than 250 veterinary practices throughout the UK and Ireland. It is
effectively a co-operative in which each individual veterinary practice owns a share in the
Primo Vets buying group.
Woof! has been exploring the possibility of Woof! offering a discounted monthly subscription
to Primo Vet’s clients whereby the referring practice would earn a commission. At Primo Vet’s
Annual General Meeting in December 2019, there was some concern as to whether this model
would be beneficial for Primo Vet’s members as it would potentially result in their own sales of
similar products reducing significantly.
In order to allay these concerns, the Chief Operating Officer of Woof!, intimated that should
Primo Vets members approve any deal, Woof! may be prepared to offer Woof! shares by way
of an incentive. Such an offer has not yet been agreed by the board of Woof!, although it is
due to be discussed at a forthcoming board meeting.