APP.L Regulatory News (APP)

30 April 2020

Appreciate Group plc

("Appreciate" the "Company" or the "Group")

Year End Trading Update

Notice of Results

Appreciate Group plc, the UK's leading multi-retailer redemption product provider to corporate and consumer markets, announces an update on trading for its financial year ended 31 March 2020.

Summary

· Results broadly in line with expectations - having been impacted by the lockdown in last few weeks of our financial year:

o Revenue* expected to be £118m

o Adjusted PBT* expected to be c.£11.5m (excluding a non-cash impairment charge expected to be in the range of £2-3.0m and exceptional items of £0.5m)

· Year-end free cash of £30m (excluding funds required to be held in trust), and projected adequate liquidity for at least until 31 March 2021 covering a range of financial scenarios

· Actions being taken to mitigate the impact of the lockdown on trading in the new financial year

· Continued progress implementing the strategic business plan and pivoting to digital products to position the Group to emerge from the lockdown a stronger business

*subject to audit and restricted data due to Covid 19 related delays

Year End Trading Update

Trading & Impact of Covid 19

As reported in our market update issued on 31 March 2020, trading for the 11 months to February 2020 was in line with expectations. During March, we followed Government health and safety advice and temporarily closed our distribution and warehouse facilities in order to protect our employees and local communities by limiting the spread of Covid 19. During this time, our focus has been to accelerate our digital offering with a number of new products launched, helping to partially mitigate the fact that our ability to distribute physical product has been limited. Although immediate demand is significantly reduced, we are well placed for when market conditions normalise.

The redemption rates of our products currently in circulation have also been affected, as the number of outlets open to use our products has decreased, albeit we continue to see customers redeeming products in high street stores that remain open and at online retailers. However, lower redemption rates in March, as a consequence of lower consumer spending, have had a financial impact on the results for the year ended 31 March 2020, amounting to around £0.3m on profitability. Conversely, this delay in spending has a positive impact on cashflow.

Exceptional Items

In accordance with IFRS we have conducted an impairment review of balance sheet items at the balance sheet date (31 March 2020). Current market conditions and uncertainty are expected to lead to an impairment charge for some assets, particularly the land and buildings at Valley Road, currently held as an asset held for sale (the previously planned sale of which has now been postponed), and the investment in our brand engagement agency, FMI, acquired in 2016. We expect these non-cash charges to the profit and loss account to be in the range of £2-3.0m. Under certain circumstances, IFRS specifically allows for impairment reversals in later periods, should conditions change.

In addition, following a management restructure in Q4 to streamline our operations, we expect to include £0.5m of redundancy costs in exceptional items for the 2019/20 financial year.

Outlook

The Board remains positive about the prospects of the business and the long term benefits of the Group's strategic business plan which is currently being implemented. Whilst the UK remains in lockdown and the timing of a return to normal market conditions remains unknown, it is difficult to assess the overall impact of Covid-19 on the new financial year ending 31 March 2021. In the short-term, demand in our Corporate and Other Consumer areas is approximately 70% below last year. Additions to our order book for our Christmas Savings business are normally completed by now and it is currently 10% below the prior year. Current cancellation rates are similar to previous years and we continue to reassure our customers that their savings remain protected by the Park Prepayment Protection Trust.

Following the decision by the Bank of England to reduce the base rate, there will be an adverse annualised impact to interest income of £1.5m, if the rate remains at this level for the whole of the new financial year.

We remain focussed on reducing costs where possible and delaying any discretionary spend or capital projects. We have cancelled annual pay reviews, postponed the leadership team's share incentive awards and will be reviewing all bonus schemes. As previously announced, we decided to cancel the interim dividend payable in April 2020, conserving £2m of cash, and will review the full year dividend at the time of the announcement of our annual results.

We have taken advantage of the Government's Job Retention Scheme with approximately 80 employees being furloughed, whose pay we have topped up to 100%. Our remaining c.230 employees are taking advantage of our technology investments and are working from home to high levels of productivity.

Looking further ahead we remain confident in our growth plan. The Board has reviewed several financial scenarios of the likely impact of Covid 19 on the business and, in each of those scenarios, we have positive free cash this financial year. However, in order to accelerate our medium and long-term growth, as well as invest in the continued switch to digital, we have commenced a bank financing exercise and we will provide an update on progress with our annual results.

Strategic Progress

We have made good progress during the year continuing the implementation of our strategic business plan (as set out in December 2018) to build a robust and scalable platform on which to grow. We categorised these plans under four pillars: Productivity, Appeal, Clarity and Experience (PACE). The main areas of progress are as follows:

· Completed our relocation to Liverpool city centre and implemented technology to facilitate agile working. This has enabled the majority of our employees to work from home during the current lockdown.

· Continued the long term switch to digital products; this included important learnings from our trials of new digital products, Select and Giftli, enabling us to design an enhanced proposition for full launch later this year.

We will provide a fuller update on progress with the four pillars of the strategic business plan with the annual results announcement.

Ian O'Doherty, Chief Executive of Appreciate, said:

"Appreciate delivered another good performance last year. Covid-19 has impacted everyone, but we are safeguarding our staff, preserving cash, reducing costs, switching emphasis to our digital offerings and preparing carefully for the resumption of full operations post-lockdown supported by our strong balance sheet.

"We have also established a recovery plan whilst accelerating strategic change already underway; this includes enhancing our sales and marketing capabilities, improving internal business practices and ensuring that we deliver ongoing initiatives. Overall, we believe this will enable us to emerge from the lockdown a stronger business."

Notice of Results

Reflecting recent advice from the FRC and FCA around issuing results, and our desire to provide greater clarity around the impact of COVID-19 on current financial year performance, the Group is postponing its planned announcement of its final results (which had been expected to be issued on 17 June 2020). Accordingly, we will make a further announcement regarding our notice of results in due course.

END

For further information please contact:

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 2.7 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.

Giftli: Giftli is a personalised gift card, available to spend online at over 60 brands. The card can be personalised through photos and a personalised message.

Select Digital 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.

For further information on Appreciate Group please visit: www.appreciategroup.co.uk 

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. Details of the trust are set out here: https://www.getpark.co.uk/CORPORATE/declaration.pdf