APP.L Regulatory News (APP)

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").

28 April 2022

Appreciate Group plc 

Year-end trading update 

Strong full-year performance ahead of expectations

Third consecutive quarter of double digit growth in underlying billings in Q4

Chief Financial Officer to stand down

Appreciate Group plc (the 'Group'), the UK's leading multi-retailer redemption product provider to Corporate and consumer markets, today provides an update on its full-year performance for the year ended 31 March 2022. Due to the impact of Covid-19 in FY21, we have used FY20 as the primary comparison, the financial period prior to the pandemic, as well as providing FY21 data.

Highlights

· Adjusted profit before tax for the year expected to be ahead of market expectations1

· Q4 saw the third consecutive quarter of double-digit growth in underlying billings* versus FY20 driven by strong Corporate demand and increased digital billings

· FY22 underlying billings were £222.0m, up 8.9% on FY20 (£203.8m) and 5.5% higher than FY21 (£210.5m)

· Total Group billings of £385.8m (FY20: £406.5m) (FY21: £419.9m)

· Billings from the Christmas Savings book for FY23 are expected to be down by c.-4%, showing an improvement on recent trends

· Following changes to the accounting standard relating to the treatment of capitalised cloud computing arrangements, the Group expects to make an adjustment to intangible assets leading to a non-cash exceptional P&L charge to the accounts for FY22 and a prior year adjustment for historic spend. We are in the process of agreeing the quantum of this charge with our auditors, but it is expected to be a proportion of the intangible asset spend which totals £10.0m across the three years

· Year‐end free cash of £19.5m as at 31 March 2022 (excluding funds required to be held in trust) (FY20: £29.6m) (FY21: £31.4m) - reflecting the growth in regulatory billings (which require increased customer monies to be held in trust until redemption)

* Corporate and Highstreetvouchers.com only** Billings through free school meal scheme were £16.2m (FY21: £23.0m) (FY20: Nil)1  Analyst expectations for FY22 profit before tax are £6.8m to £7.5m

As previously stated, the lockdown at the end of FY21, with non-essential retail largely closed, meant there was a delay in the redemption of the Group's products for which income is recognised at the point of redemption. The financial impact of this in FY21 was to reduce profits by £3.9m and, as expected, part of this has reversed in FY22, increasing profits in the year by £2.4m.

Chief Financial Officer departure 

The Group also announces today that Tim Clancy, the Group's Chief Financial Officer (CFO) will leave the Group with effect from the end of July 2022 to take up another opportunity. Tim was appointed to his current role in August 2018. The Group is seeking to appoint a replacement CFO as soon as possible to ensure a smooth hand over of responsibilities. The Board would like to thank Tim for his significant contribution to the launch of the Group's strategic business plan in 2018 and building a more robust and scalable platform for growth.

Growth momentum in Corporate

· Corporate billings were £212.1m - up 8.7% versus FY20 (£195.2m) and 5.4% on FY21 (£201.2m)

· Business retained from existing clients has recovered to over 90%, in line with pre-pandemic levels

Further progress in digital billings

· Full-year digital billings increased 18.7% to £54.0m (FY21: £45.5m) (FY20: £17.7m) excluding billings from free school meals

Reinvigorating Christmas Savings

· Projected billings for the Park Christmas Savings book for FY23 are currently down c.-4%, an improvement on recent trends

o FY22: £163.8m -15%

o FY21: £193.3m -8%

· This provides a greater level of confidence in our proposition and our belief that we can return the business to future growth

· This follows a major focus on improving performance, led by a fully integrated customer campaign across digital social media and TV channels to help drive customer acquisition.  Traditionally, these campaigns have been more heavily led by TV advertising

· Enhancements were also made to improve user experience, customer on-boarding and digital journeys, which helped boost levels of customers commencing their payment plans after initial orders were placed, with first-time payment direct debit rates up 32% year on year

Commitment to ESG

We have achieved an ISO 14001 Environmental Management certification and now meet the highest standards for environmental management, demonstrating a strong commitment to sustainability and protection. We also successfully completed an exercise using eco-friendly, non plastic cards with one of our large Corporate clients and are now rolling this out more widely.

Impact of new IFRS on Cloud Accounting

Over the last three years, Appreciate Group has capitalised £10.0m of in-scope intangible assets in compliance with IAS 38.

During 2021, the International Financial Reporting Interpretations Committee (IFRIC) published clarifying guidance in relation to the accounting treatment for configuration and customisation costs in a cloud computing arrangement. This guidance is mandatory for all companies reporting under IFRS, and changes resulting from the adoption of the guidance are to be applied retrospectively.

We are currently working with our auditors to finalise the revised accounting treatment and agree the quantum of this charge, but expect to make an adjustment to reclassify a proportion of the £10.0m intangible asset. This will lead to an exceptional non-cash charge in FY22 and a prior year adjustment.

Notice of results

Appreciate Group expects to publish its full-year results for FY22 on 28 June 2022.

Ian O'Doherty, Chief Executive Officer, Appreciate Group plc, commented:

"I am pleased to report a strong outcome for the year and results ahead of our expectations.

"The benefits of the investments we have made are now being realised in digital and Corporate, where our differentiated proposition is particularly strong. We have also made good progress in Christmas Savings and can see opportunities to return this part of our business to growth in the coming years.

"Whilst economic uncertainties remain, particularly following recent rises in the cost of living, our strong Q4 performance provides us with confidence for our prospects for the forthcoming financial year and beyond, and we are well positioned to build on our strong capabilities to capture future growth opportunities."

END

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Notes to Editors:

Appreciate Group is one of the UK's leading gifting, pre-payment and engagement companies, and experts at creating joyful experiences and connecting people to the things in life they enjoy the most.

Everything Appreciate Group does is focused on creating more joy in the world, and it is proud to be trusted to help its customers create moments they can treasure and remember, whether they are giving, celebrating or rewarding.

Appreciate Group is a financial services business with a wide portfolio of brands which provide solutions for its consumer and business customers. Its consumer-facing brands meet a range of prepayment and gifting needs, while its business products help Corporate customers reward and recognise their employees and clients.

Appreciate Group is home to many of the country's most-loved gifting, pre-payment and engagement solutions including Park Christmas Savings, Highstreetvouchers.com and Love2shop, and we are fast-becoming the home of digital innovation in gifting.

Whether it's saving towards the perfect family Christmas or celebrating with gift cards and vouchers, we create and supply products that millions of people trust when it comes to giving and receiving with family, friends or colleagues.

Park Christmas Savings: As the UK's largest family Christmas savings club, Park Christmas Savings has helped over three million families budget for Christmas on a short-term or year-round basis.

Love2shop: Love2shop offers gift cards and gift vouchers available to spend at stores and attractions across the UK. They are also used through our Love2shop Business Services providing Corporate partners with incentives and rewards for their employees and clients.

Love2shop Contactless Gift Card: The UK's first fully digital multi-retailer gift card, available to spend online or in-store through your mobile wallet.

Appreciate Group plc's shares are traded on AIM, a market operated by the London Stock Exchange.

The Park Prepayments Protection Trust is designed to increase protection for customers' prepayments. The Trust has three directors, two of whom are independent of Appreciate.