Coronavirus Update

Appreciate Group Plc - AGM Statement and Trading Update

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Appreciate Group plc

AGM statement and trading update

Appreciate Group plc (the 'Group'), the UK's leading multi-retailer redemption product provider to corporate and consumer markets, is today holding its Annual General Meeting. The Chairman, Laura Carstensen, will make the following comments on current trading for the financial year commencing 1 April 2020

Trading continues to improve

In our Full Year Results on 12 August 2020 we stated that we had seen trading improve over the period since the start of the new financial year, seasonally our quietest trading period. This improvement has been maintained in the months of August and September, with underlying Corporate and Highstreetvouchers.com billings down 18 per cent in August versus August 2019. As of 27 September, billings for the month to date were 10 per cent higher than the same period in 2019. This provides an overall year to date position of -31 per cent.

 

April

May

June

July

August

September*

YTD*

Billings

-64%

-47%

-38%

-18%

-18%

+10%

-31%

Figures exclude Summer Free School Meals deal with Iceland

*up to 27 September 2020

Redemption rates have seen similar improvements, recovering from the significant impact when lockdown measures were introduced. Year to date redemptions to 31 August 2020 are 28% lower than 2019.

As stated in our Full Year Results on 12 August 2020, the Board reviewed several financial scenarios of the potential impact of COVID-19 on the business. Total billings remain marginally ahead of our mid-range scenario, with free cash standing at £23.9m as at 27 September 2020.

Our long term growth plans and investment in existing and new digital products is supported by the additional flexibility from the five year revolving credit facility (RCF) of £15m with Santander UK that was announced on 10 August 2020. This includes an additional uncommitted accordion of £10m.

Christmas savings

We previously stated that our Christmas Savings business was around 10% below the prior year and that cancellation rates remained similar to previous years. This remained the case up to completion of the 2020 Christmas order book. Our work to fulfil these orders is now underway and is part of our key Q3 trading period.

Q3 trading period

At the time of reporting our Full Year Results, we stated that the Q3 2020 trading period would be critical in our overall performance of the year due to the seasonal nature of our business. We have developed robust plans to ensure we can fulfil orders successfully over this period, whilst ensuring our colleagues are kept safe from the spread of coronavirus. Although we remain at an early stage in delivering this work, our approach is on track and good progress is being made. However we recognise that the external environment remains challenging and more stringent measures for coronavirus may have an impact.

Delivering our strategy

We have continued to focus on executing our strategic business plan, bringing forward initiatives where opportunities exist following changes in customer behaviour since the pandemic.

Earlier this month we rebranded our B2B business from Love2shop Business to Appreciate: The home of Love2shop. The new brand underpins plans for growth in this sector, as highlighted by a recent increase in new B2B business, which doubled between April and August 2020, driven largely by companies seeking to reward hard working colleagues for their efforts during the lockdown.  It helps reposition the business as experts in rewards and recognition, whilst retaining the well-known Love2shop in its name. It also aligns more closely with the Group master brand and our purpose of creating moments of joy in the world.

Expanding redemption partners

We continue to increase the redemption partners we work with and expand the choice available to customers. Earlier this month we added Heron Foods to our range of almost 200 retailers, leisure and experience providers. The discount food and frozen goods provider offers customers an even greater range of options when it comes to grocery shopping, alongside existing supermarket partners such as Asda, Iceland, Morrisons and Sainsburys.

Potential buyer for contract packing

On 12 August 2020 we outlined proposals to cease production of hampers and contract packing at our site in Birkenhead. Following recent interest, we are now in discussions to sell the contract packing business, and if agreement is reached, a deal would complete during October.

Whilst the sale value of this business would be nominal, it would reduce the operating costs and potential redundancy costs associated with this activity and secure employment for some of our colleagues. A further update will be provided when these discussions complete. 

This sale would exclude the hamper business which, following completion of the consultation exercise, we will now wind down before the end of 2020 in line with the proposal set out in August.

Return to office working

In September we began a pilot with a small number of colleagues returning to our head office in Liverpool, which had been closed since lockdown began in March. We have now paused this exercise following the latest Government guidance. We will use the learnings to help us plan for a return when it is safe to do so. The majority of colleagues continue to work seamlessly from home.

Looking ahead

I'm pleased that trading has continued to improve as lockdown has eased and our continued investment in transformation and smarter, more efficient ways of working have put us in a better position to handle the continued uncertainty of COVID-19.

We remain determined to emerge from the crisis in a stronger competitive position by bringing forward our focus on existing and new digital products and delivery which we believe will help us drive growth in the long term.

The experience of the last few months since the initial lockdown, for all its challenges, has confirmed that we have the right plan, a great leadership team and exceptionally committed colleagues and so we go forward with confidence.