Coronavirus Update

Appreciate Group Plc - Full Year Results

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Appreciate Group plc

Preliminary Final Results for the Year Ended 31 March 2020

Summary

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 2020, and provides an update on current trading for the new financial year to date.

Financial highlights

  • Trading for the 11 month period to the end of February 2020 was in line with expectations with final month of the financial year impacted by the COVID-19 lockdown
  • Billings* down marginally by 1.6 per cent to £419.9m (2019: £426.9m)
  • Revenue up by 2.1 per cent to £112.7m (2019: £110.4m)
  • Profit before tax before exceptional items** of £11.4m (2019: £12.5m)
  • Total cash balances, including monies held in trust and deposits, of £132.3m (2019: £134.0m)
  • Year end free cash of £29.6m (2019: £36.9m) (excluding funds held in trust)
  • Exceptional items of £3.7m (2019: £1.2m) following impairments of goodwill and the value of our former main operating site at Valley Road
  • The Board has decided not to recommend a final dividend given continued short-term uncertainty from COVID-19. The Board intends to return to its dividend policy as soon as it is prudent to do so.  

Statutory results  

  • Operating profit of £6.4m (2019: £9.7m)
  • Profit before tax of £7.7m (2019: £11.3m)
  • Earnings per share of 2.96p (2019: 4.78p)

Operational and strategic highlights  

Divisional performance

Corporate

  • Growth in billings* of 1.5 per cent to £197.7m (2019: £194.8m)
  • Corporate revenue decreased 2.4 per cent to £50.3m (2019: £51.5m
  • Increased demand seen from existing and new clients recruited prior to lockdown
  • Segmental profit decreased by £1.2m to £6.6m (2019: £7.8m) due to higher administration costs.

Consumer

  • Billings* fell by 4.3 per cent to £222.2m (2019: £232.1m)
  • Revenue up 5.9 per cent to £62.4m (2019: £58.9m)
  • Increased customers coming to us directly and using digital
  • Improvements in gross margin due to changing mix  
  • Segmental profit of £5.3m (2019: £6.8m) primarily due to an increase in administration costs and exceptional redundancy costs.

Strategic business plan well advanced

  • Strategic business plan now well advanced with logistics and operations already complete; infrastructure investment has significantly enhanced the scalability, resilience and efficiency of the business.
  • New digital offerings have improved our appeal to customers - including a contactless-enabled digital gift card. 
  • Further progress made in move to more profitable card and digital products - paper share of product mix fell to 41.9 per cent (2019: 48.4 per cent).
  • Renamed business to Appreciate Group plc (from Park Group plc) to reflect our product range and position as an innovative payments, savings and rewards provider.
  • Relocated our offices to Chapel Street, Liverpool as part of workplace and cultural transformation.
  • Attracting new talent into the organisation as a consequence of our relocation, providing the skills needed for our future business.

COVID-19 impact and response

  • Our investment in technology and work practices meant that over 80 per cent of the Group's employees were able to seamlessly transition to home working immediately after lockdown.
  • COVID-19 has led to an acceleration in the appeal of digital products that will support our future plans.  
  • Prioritised digital offerings to support customers through the pandemic by adding e-codes and e-cards to our proposition on highstreetvouchers.com.
  • Physical dispatch area operational again from May after being closed at lockdown.
  • Approximately 80 colleagues furloughed during April before a phased reopening of fulfilment operations from May 2020

Current trading and outlook

  • Total billings* have progressively recovered as lockdown eases; 48 per cent down as at the end of Q1 in the new financial year compared to Q1 in the prior year.
  • Sale of Budworth Properties Limited, a Group subsidiary which owns the land and buildings located at Valley Road, Birkenhead, completed on 10 August for a transaction value of £3.2m providing operational flexibility.
  • Bank financing completed; £15m revolving credit facility provides additional financial flexibility and sufficient cash headroom to enable the business to trade with confidence, as well as drive sales of higher margin products and investment in shift to digital.  
  • Proposals made to cease production of hampers.
  • New digital products launched and tested.

Ian O'Doherty, Chief Executive Officer, commented:

"We've made significant progress in implementing our strategy to adapt our business for the future. Our focus on digital products and delivery has intensified, and we've accelerated our development of smarter, more efficient ways of working. This will position us well for doing business after COVID-19.

"Our continued investment in transformation, with changes to logistics and operations completed, is already showing significant benefits. Whilst our performance has been interrupted by the lockdown, we have seen trading start to recover and expect the resumption of growth founded on the more robust and scalable business model.

"We are confident that delivery of the strategic business plan will be the bedrock of strong and sustained future growth."