APP.L Regulatory News (APP)

31 March 2020

Appreciate Group plc

Trading, COVID-19 and Dividend update

Appreciate Group plc (the 'Group') today provides an update on trading for its financial year ending 31 March 2020, the potential impact of COVID-19 on its business, and the measures it is taking to actively mitigate the risks to its customers, colleagues and business.

Summary

· Trading for the 11 month period to the end of February 2020 was in line with our expectations

· Greater uncertainty due to COVID-19 means providing forward looking financial guidance at this stage is inappropriate

· We have taken a number of steps to preserve cash including reducing discretionary expenditure, cancelling the interim dividend payment and reviewing bonuses

· The Group has a strong balance sheet, approximately £30 million of free cash (excluding funds required to be held in trust), and projected adequate liquidity covering a range of financial scenarios over the next twelve months

· We remain confident in our strategy and in the medium to long term opportunity, particularly as the current situation precipitates a move to digital

· A further update will be given in the second half of April which will provide an update on FY2019/20 financial performance

COVID-19 response, trading and outlook

The safety of our colleagues, their families and our communities, is our first priority and we are following the government's health and safety recommendations in order to responsibly do what we can to control the spread of COVID-19. As a result, we have acted quickly to temporarily close all our offices and fulfilment locations.

The investments in technology we have made over the last year mean that over 80% of the Group's employees are able to work from home effectively. We are now looking at how we can support those employees unable to fulfil their role from home, including through parental leave or furloughing employees under the government's Job Retention Scheme. Group trading websites also continue to accept and fulfil orders, but our emphasis has shifted to digital delivery only.

The situation has been changing rapidly, and it is currently difficult to predict the impact on our clients and any further threats and opportunities to come. However, over the week since we ceased the delivery of physical product following the temporary closure of our fulfilment facility, we have seen a substantial drop in new billings. We have also seen a small increase in the cancellation rate for Park Christmas Savings at a time when we would expect to add to our final Christmas 2020 order book. We will mitigate these trends by focusing on our digital delivery opportunities. Following the implementation of our 'digital first' strategy, we are in a strong position to do this quickly. Given the current uncertainty, the Board does not believe it would be appropriate to provide forward looking financial guidance at this time.

Balance sheet and liquidity

The Group has a strong balance sheet with no debt. The business currently has adequate liquidity for a range of financial scenarios with £30 million free cash, and the nature of our business is such that a short term reduction in billings will mean an increase in available cash.

Cash preservation and dividend update

The Board has taken steps to preserve cash by a close focus on costs, eliminating discretionary expenditure and delaying certain capital projects, including a re-phasing of our ERP implementation.

In addition, the Board has decided that it is prudent not to pay the interim dividend of 1.05 pence per ordinary share (representing £2.0 million of cash outflow) as previously announced and due to be paid on 6 April 2020. The Board recognises the importance of the dividend to our shareholders and will consider the quantum of any final dividend for FY2019/2020 at the time of the final results (currently due to be announced in June 2020) once it has been able to further assess the impacts of COVID-19.

If any bonus payments are earned as a consequence of the FY2019/2020 results, the Remuneration Committee will exercise its discretion on their quantum, and in any event delay payment of any such bonuses, so rewards to shareholders and management are aligned.

Ian O'Doherty, Chief Executive Officer of Appreciate, commented:

"Over the last year we have made great progress against the strategic plan we outlined in December 2018, to build a robust and scalable platform for future growth. The steps already taken have better enabled us to respond well and quickly to this crisis.

"Despite the immediate challenges of this unprecedented situation, we are taking all necessary actions to mitigate any adverse impacts and the Board remains confident that the Group is well positioned for growth in the medium and long term.

"We will provide a further update by the end of April."

For further information please visit https://www.appreciategroup.co.uk or contact:

The information contained within this announcement is deemed by Appreciate Group to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR").