Appreciate Group Plc - Final Results
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Appreciate Group plc
Final Results for the Year Ended 31 March 2021
A year of significant progress - weathering lockdowns whilst re-focussing the business and accelerating our digital proposition
Appreciate Group (the 'Group'), the UK's leading multi-retailer redemption product provider to Corporate and Consumer markets, today announces its final results for the financial year ended 31 March 2021, and provides an update on current trading for the new financial year to date.
· Profit before tax of £1.3m (2020: £7.7m), with profit before tax and exceptional items** of £2.3m (2020: £11.4m) excluding exceptional costs of £1.1m (2020: 3.7m of exceptional items) relating to redundancy costs, goodwill and stock impairments and profit on sale of assets held for sale.
· Results within the range of market expectations allowing for unaudited, non-recurring losses relating to the wind down of the hamper packing business of £1.1m (£1.2m staff costs, £0.3m lease costs and £0.8 other costs, offset by £1.2m revenue), related marketing and customer care costs of £0.4m now deployed elsewhere in the business, non-recurring costs of decommissioning the previous head office site of £0.3m and FMI losses of £0.1m before disposal.
· Group billings* down marginally by 3.2% to 406.5m (2020: 419.9m) following the early impact of the initial lockdown and ceasing of hamper packing.
· Revenue 5.2% lower to £106.8m (2020: 112.7m) in line with billings*.
· Digital billings* up almost four-fold to £68.5m (2020: £17.7m)
· Total cash balances, including monies held in trust and bank deposits, at 31 March 2021, were 163.5m (2020: 132.3m).
· Year end free cash (excluding monies held in trust) of £31.4m (2020: £29.6m).
· The Board has recommended a final dividend of 0.6p, making a full dividend for the year of 1.0p per share (2020: 0p)
· Operating profit £0.8m (2020: £6.4m)
· Operating profit before exceptional items** of £1.9m (2020: £10.1m)
· Earnings per share of 0.46p (2020: 2.96p)
Operational and strategic highlights
A resilient divisional performance given COVID headwinds
- Corporate billings* of £201.3m up 1.8% (2020: 197.7m)
- Underlying Corporate billings*, excluding free school meals, were £178.3m, 9.8% lower than prior year following impact of COVID.
- Corporate revenue increased 6.8% to £53.7m (2020: 50.3m)
- Performance benefitted from strong Corporate demand, particularly during peak Q3 trading period, and one-off free school meals initiative.
- Segmental profit decreased to 2.6m (2020: 6.6m) due to lower margin business (free school meals initiative) and higher administration costs.
- Billings* fell 7.6% to £205.3m (2020: £222.2m) due to impact of lockdowns and reduction in Christmas Savers.
- Revenue was 53.1m (2020: 62.4m) following deferral of redemptions due to impact of lockdowns on customers' ability to redeem in-stores.
- Segmental profit of 0.5m (2020: £5.3m) following lower revenue and £1.1m of exceptional costs relating to the closure of the hamper business.
- Increased customers coming to us directly, with billings* via highstreetvouchers.com 18.2% higher than prior year with particularly strong Q3.
Momentum continues in delivery of strategic business plan
The Group made further significant progress in delivering key elements of its strategic business plan during the year:
· Simplified, streamlined business - t he Group underwent considerable restructuring during the year, having disposed of, or withdrawn from, hamper production, contract packing, operations in the Republic of Ireland, and the brand engagement agency, FMI. The Group is now therefore fully focused on growing the core, more profitable business.
· Growth in digital - d igital billings* rose almost four-fold during the year. The Group will use its insight and learnings to drive further growth and continue to invest in enhancing its digital proposition. It is also placing greater focus on best practice digital marketing and commercial planning to support these aims.
· Financial flexibility - £15m revolving credit facility (excluding £10m uncommitted accordion) secured during pandemic to underpin the Group's long-term growth plans and migration towards digital products.
· B2B business rebranded - part of repositioning in a market offering significant growth opportunities. This was supported by launch of the Group's digital gift card product to Corporate clients. This helped deliver a strong Q3 performance including our busiest ever December.
· New distribution partnership with PayPoint - launched in May 2021 providing customers with access to purchase Love2shop products via a physical network of 28,000 outlets across the UK.
· Enterprise Resource Planning (ERP) programme - next phase will be delivered this summer. This is a cornerstone in the Group's plans to build a robust and scalable platform and will provide significant benefits through enhanced resilience and workflow. The following phase is due to be delivered in the second half of the financial year.
· Cultural transformation - exemplified by delivery of a range of important change initiatives throughout the year, despite the challenges for colleagues of working remotely.
· Broader redemption choice - continued to diversify the range to offer customers more flexibility between online and in store redemptions, with the ability to choose more food, hospitality, leisure and entertainment options alongside leading retailers. Food outlets added such as Nando's, Bella Italia and RealFoodHub.co.uk, alongside attractive brands such as Schuh and Superdry.
· Prestigious external recognition - Business Culture Award for Best Working Environment & Workplace Design, following the head office move to Chapel Street, Liverpool, as well as attaining a Great Place to Work accreditation with a Trust Index above that for the average UK company.
· Strengthened ESG commitment - we stepped up our positive contribution to society during the pandemic by broadening our relationship with Everton in the Community - funding equipment for its new children's education programme in the Liverpool City Region, supporting good causes, and helping meet the needs of tens of thousands of school children up and down the country through our involvement in the free school meals initiative.
Current trading and outlook
· Trading in the first 12 weeks of the current financial year has been slower than anticipated and continued to be impacted by the pandemic, as customer buying and spending patterns take time to return to normal levels. Billings* are considerably higher than the same period last year, as expected given the initial uncertainly created by the first lockdown. Billings* are marginally down on the previous year of 2019 by 8.6%, reflecting the continued impact of COVID on consumer behaviour.
· As stated in our year-end trading update on 29 April 2021, the Christmas Savings' order book has been held back by COVID?19 restrictions impacting face?to?face agent activity during the crucial renewal and recruitment period, combined with higher levels of unspent paper vouchers (up by £6.4m compared to last year) due to shopping restrictions, which customers appear to intend to use towards Christmas 2021, rather than starting a new savings plan. Whilst initiatives to recruit Christmas savings' customers continue, the order book is now predicted to be c.14% down following the continued COVID uncertainty, having quoted c.11% lower in April.
· The Group continues to focus on costs and minimising any unnecessary spending that is not aligned to its strategy.
* See accounting policies for a reconciliation of billings to revenue
** See financial review for reconciliation of adjusted to statutory profit measure
Ian O'Doherty, Chief Executive Officer, commented:
"Like other businesses, we have faced many challenges over the past year, but I'm pleased to say we have put the Group in the best position to weather the uncertainty. Having re-focussed the business on its core product and delivering for our customers and clients in the prepayment, gifting and engagement markets, and enhanced our digital capability, we have laid strong foundations for future years of growth.
" I am extremely proud of the dedication and commitment of our colleagues in delivering for customers throughout the period and want to thank them again for their extraordinary efforts.
"The speed at which levels of activity will return to normal remains unclear, however, we believe that as the economy emerges from lockdown, we are strongly positioned to exploit opportunities that arise in our market and deliver sustainable growth in future years."