TIDMAPP
RNS Number : 2459G
Appreciate Group PLC
24 November 2020
24 November 2020
Appreciate Group plc
Half Year Results for the six months ended 30 September 2020
A resilient performance as the Group benefits from accelerated
strategy
Performing ahead of mid-range scenario for the impact of
COVID-19
Summary
Appreciate Group plc, the UK's leading multi-redemption product
provider to corporate and consumer markets, is pleased to announce
its half year results for the six months ended 30 September
2020.
Appreciate Group's business is highly seasonal - the first half
of the year typically sees a loss, which has been exacerbated this
year following the impact of COVID-19, particularly early in the
period when lockdown measures were first introduced. The majority
of annual revenues and profit is typically generated in the second
half of the Group's financial year and the Group has seen a
seasonal month on month rise in billings in October and
November.
Financial Highlights
-- Performance remains ahead of original mid-range scenario for potential impact of COVID-19
-- Dividend reinstated - proposed interim dividend of 0.4p (H1 2019: 1.05p)
-- Billings declined by 17.8% to GBP98.8m (H1 2019: GBP120.2m) -
recovering from a 64% reduction in April a t the height of the
lockdown
-- Revenue reduced by 17.6% to GBP27.4m (H1 2019: GBP33.2m)
-- Adjusted pre-tax loss of GBP4.6m (H1 2019: GBP1.2m loss)
excluding GBP0.6m of exceptional closure costs, GBP0.6m trading
losses and GBP0.4m impairments of stock as a result of hamper and
contract packing business wind down; reported pre-tax loss of
GBP6.2m (H1 2019: GBP1.3m loss) including these items.
-- Cash balances, including cash held in trust, at 30 September
2020, were GBP227.3m (H1 2019: GBP213.1m)
-- Free cash of GBP24.9m (H1 2019: GBP7.7m)
Operational highlights
Corporate
-- Business from new clients up 87% to GBP3.1m, excluding
Iceland free school meals partnership, driven by demand from
clients seeking to thank hard working employee efforts during
pandemic
-- Billings down 16.9% to GBP66.6m (H1 2019: GBP80.1m)
-- Revenue reduced 21.7% to GBP19.0m (H1 2019: GBP24.3m)
-- Successfully enabled summer free school meals through digital vouchers for use at Iceland
-- Continued to expand redemption partners with online and
essential retail, adding new brands such as Schuh and Foot
Locker
Consumer
-- Billings down by 19.6% to GBP32.3m (H1 2019: GBP40.1m)
-- Revenue decreased 6.5% to GBP8.3m (H1 2019: GBP8.9m)
-- Christmas Savings order book now completed - down 8%, ahead
of previous expected levels of 10% due to fewer cancellations over
the year
Further progress in our strategy - shift to digital
continues
-- Digital billings almost tripled (+186%) to GBP24.2m (H1 2019:
GBP8.5m), boosted by Iceland partnership.
-- Paper billings down from 39% to 19% in overall product mix enhancing margin mix.
-- Completed sale of Budworth Properties Limited, a Group
subsidiary which owned the land and buildings located at Valley
Road, Birkenhead, for GBP3.2m.
-- GBP15m revolving credit facility with Santander UK put in
place providing additional financial flexibility, supporting
marketing of higher margin products and investments in shift to
digital.
-- B2B business rebranded as 'Appreciate: The home of Love2shop'
as part of growth plans and repositioning of the business as
experts in rewards and recognition, whilst retaining the
well-recognised Love2shop brand.
-- Launched Love2shop Contactless Gift Card to Corporate clients
in September, an in-wallet digital gift card building on insight
from consumer launch of digital gift card. Billings were GBP0.6m at
30 September.
-- Introduced new agency commission structure to help retain and
recruit new agents as part of plans to help grow the Christmas
Savings business.
-- Ambitious 2021 Park Christmas Savings marketing campaign
launches this month, with an integrated marketing approach
encompassing digital and social media alongside traditional
channels including TV.
-- Implementation of the Enterprise Resource Planning (ERP)
programme continues with the next phase on track to complete in
summer 2021.
Current trading - significant progress so far in the Group's critical key Q3 trading period
-- Billings continue to show significant month on month
improvement and are running closer to levels seen last year.
-- In light of the Group's resilient performance through the
crisis, we intend to repay all of the GBP0.3m received under the UK
Government's Coronavirus Job Retention Scheme. The Group prudently
utilised the scheme given the high level of uncertainty at the
outset of the crisis. However, the majority of furloughed
colleagues had returned to work by June, and all have now
returned.
-- The last two months of the calendar year are traditionally
the busiest for the Corporate business. Early signs for November
are that the growth seen so far this year is set to continue as
companies seek alternatives to staff Christmas parties.
-- Lockdown measures in November 2020 are having far less impact
than earlier in the year following the evolution of the business in
recent months and no restrictions on the ability to dispatch
physical products at this time.
Focusing on our core business - simplification continues
-- Hamper production ceased and exit now complete with the
majority of customers migrating to alternative Group products.
-- Contract packing business to close on 18 December 2020; costs
of closure included in these results.
Ian O'Doherty, Chief Executive Officer, at Appreciate Group plc,
said:
"I am pleased that trading during our critical Q3 trading period
is progressing well with Christmas savings orders now fully
completed, and that we are in a position to reinstate the dividend
for shareholders.
"The decisive actions we took to intensify the focus on digital
and accelerate parts of our strategy have led to a steady recovery
and now improvement in performance, following the initial shock
when lockdown measures were first introduced in March. The first
two months of the second half have seen us trade closer to 2019
levels, with a continued recovery expected to enable the
significant swing in profitability the Group typically sees in its
important second half trading period.
"The repositioning of the business will ensure it is more
resilient during the current November lockdown, whilst putting us
in the strongest competitive position to deliver growth when life
returns to normal."
Appreciate Group will host a webcast presentation for analysts
at 9.00am this morning.
If you would like to attend, please contact MHP on 020 3128 8193
or appreciategroup@mhpc.com
Appreciate Group Liberum MHP Communications
plc (NOMAD and broker)
Andy Hammerton, Head Richard Crawley Reg Hoare
of Corporate Affairs Jamie Richards Katie Hunt
Ian O'Doherty, CEO Charles Hirst
Tim Clancy, CFO
Tel: 0151 653 1700 Tel: 020 3100 2222 Tel: 020 3128 8193
Email: appreciategroup@mhpc.com
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").
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.
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. Details of
the trust are set out here:
https://www.getpark.co.uk/CORPORATE/declaration.pdf
Business review for the six months ended 30 September 2020
Introduction
Appreciate Group is one of the UK's leading gifting, pre-payment
and engagement companies with a wide portfolio of brands which
provide solutions for its consumer and business customers. It is
home to many of the country's most-loved gifting, pre-payment and
engagement solutions including Park Christmas Savings,
Highstreetvouchers.com and Love2shop.
As a seasonal business we traditionally expect to report a loss
for the first half of the year. Given the significant impact of
lockdown, particularly in the early period of the financial year,
this loss has increased compared to the prior year. However, the
Group is performing ahead of its mid-range scenario for the impact
of COVID-19 and has continued to see a seasonal month on month
improvement in billings in its important Q3 trading period to date
and November trading continues to reflect this trend.
Billings Apr May June July Aug Sept Oct YTD
GBPm 31/10
Corporate
and HSV
only
======================= ================== ================== ================== ================== ================== ================== ================= ==================
2020/21 5.0 7.4 8.6 11.8 10.2 14.9 24.0 81.9
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ----------------- ------------------
2019/20 14.0 13.7 13.8 14.4 12.4 13.0 26.4 107.6
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ----------------- ------------------
Variance % -63.9% -46.5% -37.5% -17.6% -17.7% +14.8% -9.3% -23.9%
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ----------------- ------------------
The Group is delivering a strategy to modernise its business,
proposition and infrastructure with the aim of building a robust,
scalable platform on which to drive future growth. Decisive action
was taken to adapt to the new environment, accelerating our focus
on digital during lockdown, which has helped mitigate the impacts
of the pandemic, whilst positioning the business for future
growth.
Resilient performance in H1 2020
The Group's reported a seasonal operating loss before
exceptional items, as in prior years and reflecting the impact of
COVID-19. We typically see about a quarter of our income in the
first half of the financial year and around three quarters coming
in the second half of the year. Adjusted pre-tax loss rose to
GBP4.6m (H1 2019: GBP1.2m loss) excluding GBP0.6m of exceptional
closure costs, GBP0.6m trading losses and GBP0.4m impairments of
stock as a result of the hamper and contract packing business wind
down. Including these items, reported pre-tax loss was GBP6.2m (H1
2019: GBP1.3m loss).
Billings decreased 17.8% in the six months to 30 September to
GBP98.8m (H1 2019: GBP120.2m). This represents a gradual recovery
in billings from the first months of lockdown - April having been
down as much as 64% and May down 47%. The recovery was in part
driven by management actions to intensify our focus on digital
solutions and expand e-gift card products on
highstreetvouchers.com, particularly those attractive to customers
in lockdown such as food outlets, streaming services and
gaming.
Group revenue was down by 17.6% at GBP27.4m (H1 2019: GBP33.2m)
heavily impacted by customers having less options to redeem
products when non-essential outlets were forced to close during
lockdown.
Our financial position remains strong, with cash balances,
including cash held in trust, increasing to GBP227.3m (H1 2019:
GBP213.1m) as at 30 September 2020. Free cash as at the 30
September 2020 stood at GBP24.9m (H1 2019: GBP7.7m). Additional
financial flexibility is provided from the five year revolving
credit facility (RCF) of GBP15m with Santander UK that was
announced in August 2020 - this facility also has an additional
uncommitted accordion of GBP10m.
Interest income reduced from GBP0.8m to GBP0.1m due to the cut
in interest rates as part of the Bank of England's package of
measures to support the economy and the additional costs of the new
revolving credit facility.
Paper billings reduced considerably from 39% of the product mix
to 19% or GBP18.5m (H1 2019: GBP45.2m) as a consequence of the
greater focus on digital products combined with our inability to
dispatch physical products when our operations were closed during
lockdown. Digital represented a quarter (25%) of total billings,
rising more than three-fold from 7% in the prior year, although
this has been partly helped by the success of the free school meals
partnership with Iceland. Overall, the switch to digital and away
from paper is expected to enhance the Group's margin mix.
Card sales as a percentage of the total went up slightly from
54% to 56%. Paper redemptions were down by more than half partly
due to lockdown measures preventing customers from redeeming
vouchers in store.
The product mix shift towards the more profitable
multi-redemption product is continuing with billings up from 83% in
2019 to 87% at GBP85.7m (H1 2019: GBP99.8m), as the flexibility of
being able to choose from a range of providers is proving more
appealing to customers. This was also helped by redemptions made
through our partnership with Iceland. Single store products fell
from 14% to 11%, a reduction from GBP16.8m to GBP10.9m of total
billings.
Although Corporate billings reduced by 16.9%, the business has
seen a rise in demand from new clients, up 87% in the financial
year to GBP3.1m (H1 2019: GBP1.7m). It is also benefiting from the
streamlining of its onboarding process, cutting the time taken down
from several weeks to a few days, enabling us to move swiftly to
support new customer demand. We expect to benefit from these
enhancements in the second half and beyond.
A partnership with BP has seen our product feature prominently
in advertising of its nationwide rewards programme, whilst we have
supported other well-known clients. We anticipate that the trend in
companies seeking to reward employees for their efforts during
lockdown will continue throughout November and December 2020, and
this will be bolstered as companies look for alternatives to
traditional Christmas parties.
Consumer billings were down 19.6%. We have continued to
prioritise digital offerings via highstreetvouchers.com to support
customers through the pandemic by adding e--codes and e--cards to
our proposition. We are also focusing on adding brands that are
relevant to our current customer base and future target audience
with greater online presence.
Our Park Christmas Savings 2021 marketing campaign gets underway
this month and will be our most integrated campaign ever, combining
increased social and digital focus with traditional media including
our usual TV advertising.
We have also continued to focus on expanding the range of
redemption partners to offer the UK's most diverse multi-redemption
product providing customers with a broad choice of online, retail,
leisure and entertainment providers. Heron Foods was an important
addition and we have seen a positive response from its customers;
its discounted frozen foods will appeal to Christmas savings
customers looking to shop for their Christmas groceries on a
budget. New brands such as Schuh, and Foot Locker have also been
added.
Strategy and business plan
Since December 2018 we have been implementing our strategic
business plan under four principal pillars set out below. We have
made further progress in each of these during this reporting
period:
Productivity: we will be more efficient and effective
-- In October, we were accredited as a Great Place To Work
following completion of our first Great Place To Work survey in
September. The survey was taken by 89% of colleagues with a Trust
Index rating of 67% putting us above the average UK company for
engagement. It has also helped us identify areas to focus on that
will make the organisation an even better workplace.
-- We have also been named as a finalist in the Business Culture
Awards 2020 for the category for 'Best Working Environment &
Workplace Design Approach.' This recognises our innovative approach
following our office relocation to Liverpool.
-- As part of our commitment to diversity, we signed up to the Women in Finance Charter.
-- We continue to maintain a seamless remote working
-- Successfully fulfilled the Peak season for Park Christmas
Savings and are well on track for the remainder of the season.
Appeal: we will broaden our customer appeal
-- Rebranded our B2B business as 'Appreciate: The home of
Love2shop' to support growth plans and position us as experts in
rewards and recognition.
-- Launched the Love2shop Contactless Gift Card to Corporate
clients, our in wallet digital gift card.
-- Significantly expanded e--codes and e--cards within our proposition.
-- Implemented the successful partnership with Iceland, working
at pace when the scheme was extended to ensure relevant consumers
could shop at the supermarket.
Clarity: we will focus on our multi-retailer r edemption
proposition
-- Exited hampers and contract packing ensuring we are fully
focused on driving the Core business.
-- Exiting the Republic of Ireland market and are in talks to
sell FMI, our brand engagement agency.
-- Alongside this, we have rebranded our B2B arm to better
position the business to be successful in the market.
Experience: we will be easier to work with for all of our
customers
-- Further improvements to the resilience and reliability of our
service through replacement of new state of the art servers.
-- Enterprise Resource Planning (ERP) programme continues with
next phase of implementation on track to complete in summer 2021.
This will boost efficiency and underpin the Group's plans to build
a more robust and scalable business model. This phase involves
replacing current back office systems for Highstreetvouchers.com
with Microsoft Dynamics 365, leading to enhanced efficiencies and
improvements in the customer experience. Total costs of
implementation are now expected to be in the range of GBP5.0m to
GBP5.5m, of which GBP4.1m have been incurred as at 30 September
2020.
-- We have seen a positive shift in how customers are experiencing our products.
-- Including the Iceland volume, digital billings have almost tripled from 9% to 25%.
-- In parallel, paper redemption volumes have dropped from 39%
to 19% of overall product mix, exaggerated because of lockdown.
-- For convenience during lockdown, we made our products and
solutions more flexible online, including food outlets, gaming and
entertainment, whilst also increasing access to essential
retail.
Interim dividend
In our Full Year Results on 12 August 2020 we outlined our
decision not to pay a dividend for the last financial year and said
we would review our position for this year in light of the Q3
trading period and operational risk associated with this
activity.
We now have a clearer view of performance through this period
and we are pleased to confirm that we will reinstate the
dividend.
The Board has declared an interim dividend of 0.4p per share.
The dividend will be paid on 6 April 2021 to shareholders on the
register on 26 February 2021, with an ex-dividend date of 25
February 2021. Appreciate Group's dividend policy seeks to reflect
the Group's strong underlying cash flow and profit generation,
whilst retaining sufficient capital to fund investment in the
business. Reinstating the dividend in a period of continued
uncertainty reflects the Board's confidence in the Group's recovery
in trading.
Outlook
The investments made in recent years as part of the strategic
business plan put the business in a much stronger position to
respond to the challenges when the pandemic hit. By accelerating
our plans and bringing forward the focus on digital products we
have been able to drive a significant recovery in performance
whilst putting us on a firm footing on which to drive long term
growth.
Nevertheless, significant uncertainties for the second half of
the year remain, not least the disruption from the second lockdown
that began in November 2020. However, we are in a much better
position this time given the investments we have made, the
evolution of the business, and because we are able to continue to
dispatch physical products unlike earlier in the year.
Although the second half of the financial year will therefore
remain challenging, we are optimistic that we can sustain the
recent recovery in our performance, enabling the significant swing
in profitability the Group typically sees in its important second
half trading period. This optimism is based around our belief in
the potential for strong demand for our products over the Christmas
period as consumers look to gift digitally, and corporate clients
look to reward their employees and is evidenced by the continuing
momentum of recovery.
Laura Carstensen
Chairman
24 November 2020
APPRECIATE GROUP PLC
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
FOR THE HALF YEAR TO 30 SEPTEMBER 2020
Half Year Half Year Year to
Notes to 30.09.20 to 30.09.19 31.03.20
GBP'000 GBP'000 GBP'000
Billings 98,839 120,213 419,857
-------------- ------------- ----------
Revenue
* Goods - Single retailer redemption products 16,996 19,904 62,142
* Other goods 177 67 6,240
* Services - Multi-retailer redemption products 8,100 10,083 37,870
* Other services 2,058 3,106 6,371
* Other 58 70 101
-------------- ------------- ----------
27,389 33,230 112,724
Cost of sales excluding exceptional
items (22,388) (24,988) (79,778)
Impairment of obsolete stock (400) - (124)
-------------- ------------- ----------
Gross profit 4,601 8,242 32,822
Distribution costs (366) (709) (2,838)
Administrative expenses (9,946) (9,577) (20,036)
-------------- ------------- ----------
Operating (loss)/profit before
exceptional item (5,711) (2,044) 9,948
Impairment of property, plant
and equipment 3 - - (163)
Impairment of assets held for
sale 3 - - (1,650)
Impairment of goodwill 3 - - (1,316)
Redundancy costs 3 (630) - (423)
Operating (loss)/profit (6,341) (2,044) 6,396
Finance income 459 789 1,481
Finance costs (382) (25) (177)
Profit on sale of assets held
for sale 41 - -
-------------- ------------- ----------
(Loss)/profit before taxation (6,223) (1,280) 7,700
Taxation 4 1,182 243 (2,189)
-------------- ------------- ----------
(Loss)/profit for the period
attributable to equity holders
of the parent (5,041) (1,037) 5,511
-------------- ------------- ----------
(Loss)/earnings per share 5
- basic (p) (2.71) (0.56) 2.96
- diluted (p) (2.71) (0.56) 2.96
All activities derive from continuing operations.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE HALF YEAR TO 30 SEPTEMBER 2020
Half Year Half Year Year to
to 30.09.20 to 30.09.19 31.03.20
GBP'000 GBP'000 GBP'000
(Loss)/profit for the period (5,041) (1,037) 5,511
Other comprehensive (expense)/income
Items that will not be reclassified to
profit or loss:
Remeasurement of defined benefit pension
schemes - - 2,235
Deferred tax on defined benefit pension
schemes - - (383)
- - 1,852
Items that may be reclassified subsequently
to profit or loss:
Foreign exchange translation differences (5) 13 18
Other comprehensive income/(expense) for
the period net of tax (5) 13 1,870
------------ ------------ ---------
Total comprehensive (expense)/income for
the period attributable to equity holders
of the parent (5,046) (1,024) 7,381
------------ ------------ ---------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2020
Notes 30.09.20 30.09.19 31.03.20
GBP'000 GBP'000 GBP'000
Assets
Non-current assets
Goodwill 800 2,168 800
Other intangible assets 6 6,917 2,617 4,757
Property, plant and equipment 2,742 2,105 2,662
Right of use asset 4,009 5,202 3,799
Retirement benefit asset 4,206 1,923 4,206
18,674 14,015 16,224
---------- ---------- ----------
Current assets
Inventories 10,566 20,452 2,840
Trade and other receivables 8,540 10,790 9,457
Tax receivable 1,831 1,269 266
Monies held in trust 202,315 205,448 102,693
Cash and cash equivalents 24,944 7,679 29,632
---------- ---------- ----------
248,196 245,638 144,888
Assets held for sale 7 1,024 4,966 3,153
249,220 250,604 148,041
---------- ---------- ----------
Total assets 267,894 264,619 164,265
---------- ---------- ----------
Liabilities
Current liabilities
Bank overdraft - (1,362) -
Trade payables (144,132) (142.411) (57.150)
Payables in respect of cards and vouchers (23,425) (20,799) (17,060)
Deferred income (8,231) (7,195) (7,359)
Other payables (3,549) (10,828) (5,294)
Provisions (68,598) (66,357) (53,802)
Liabilities directly associated with assets held for sale 7 (1,077) - -
---------- ---------- ----------
(249,012) (248,952) (140,665)
---------- ---------- ----------
Non-current liabilities
Lease liabilities (4,445) (5,266) (4,132)
Deferred tax liability (1,011) (553) (1,121)
---------- ---------- ----------
(5,456) (5,819) (5,253)
---------- ---------- ----------
Total liabilities (254,468) (254,771) (145,918)
---------- ---------- ----------
Net assets 13,426 9,848 18,347
---------- ---------- ----------
Equity attributable to equity holders of the parent
Share capital 3,727 3,727 3,727
Share premium 6,470 6,470 6,470
Retained earnings 3,540 (38) 8,461
Other reserves (311) (311) (311)
---------- ---------- ----------
Total equity 13,426 9,848 18,347
---------- ---------- ----------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Other Retained Total
capital premium reserves earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 April 2020 3,727 6,470 (311) 8,461 18,347
Total comprehensive expense
for the period
Loss for the period - - - (5,041) (5,041)
Other comprehensive income
Foreign exchange translation
adjustments - - - (5) (5)
--------- --------- ---------- ---------- ----------
Total other comprehensive
income - - - (5) (5)
--------- --------- ---------- ---------- ----------
Total comprehensive expense
for the period - - - (5,046) (5,046)
--------- --------- ---------- ---------- ----------
Transactions with owners,
recorded directly in equity
Equity settled share-based
payment transactions - - - 125 125
Total contributions by and
distribution to owners - - - 125 125
--------- --------- ---------- ---------- ----------
Balance at 30 September 2020 3,727 6,470 (311) 3,540 13,426
--------- --------- ---------- ---------- ----------
Balance at 1 April 2019 3,727 6,470 (311) 6,824 16,710
Total comprehensive expense
for the period
Loss for the period - - - (1,037) (1,037)
Other comprehensive income
Foreign exchange translation
adjustments - - - 13 13
--------- --------- ---------- ---------- ----------
Total other comprehensive
income - - - 13 13
--------- --------- ---------- ---------- ----------
Total comprehensive expense
for the period - - - (1,024) (1,024)
--------- --------- ---------- ---------- ----------
Transactions with owners,
recorded directly in equity
Equity settled share-based
payment transactions - - - 125 125
Dividends - - - (5,963) (5,963)
--------- --------- ---------- ---------- ----------
Total contributions by and
distribution to owners - - - (5,838) (5,838)
--------- --------- ---------- ---------- ----------
Balance at 30 September 2019 3,727 6,470 (311) (38) 9,848
--------- --------- ---------- ---------- ----------
Balance at 1 April 2019 3,727 6,470 (311) 6,824 16,710
Total comprehensive income
for the year
Profit for the year - - - 5,511 5,511
Other comprehensive expense
Remeasurement of defined
benefit pension schemes - - - 2,235 2,235
Tax on defined benefit pension
schemes - - - (383) (383)
Foreign exchange translation
adjustments - - - 18 18
--------- --------- ---------- ---------- ----------
Total other comprehensive
expense - - - 1,870 1,870
--------- --------- ---------- ---------- ----------
Total comprehensive income
for the year - - - 7,381 7,381
--------- --------- ---------- ---------- ----------
Transactions with owners,
recorded directly in equity
Equity settled share-based
payment transactions - - - 233 233
Tax on equity settled share-based
payment transactions - - - (14) (14)
Dividends - - - (5,963) (5,963)
--------- --------- ---------- ---------- ----------
Total contributions by and
distribution to owners - - - (5,744) (5,744)
--------- --------- ---------- ---------- ----------
Balance at 31 March 2020 3,727 6,470 (311) 8,461 18,347
--------- --------- ---------- ---------- ----------
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE HALF YEAR TO 30 SEPTEMBER 2020
Half Year Half Year Year to
Notes to 30.09.20 to 30.09.19 31.03.20
GBP'000 GBP'000 GBP'000
Cash flows from operating activities
Cash (used in)/generated from
operations 8 (4,576) (20,261) 6,866
Interest received 647 888 1,648
Interest paid (264) - (8)
Tax paid (399) (1,606) (2,864)
------------- ------------- ----------
Net cash (used in)/generated
from operating activities (4,592) (20,979) 5,642
------------- ------------- ----------
Cash flows from investing activities
Proceeds from sale of assets
held for sale 3,100 - -
Proceeds from sale of property,
plant and equipment - - 1
Purchase of intangible assets (2,755) (720) (3,103)
Purchase of property, plant and
equipment (364) (1,101) (1,927)
Net cash used in investing activities (19) (1,821) (5,029)
------------- ------------- ----------
Cash flows from financing activities
Lease incentive payment - 360 500
Payment of lease liabilities (77) (37) (81)
Dividends paid to shareholders - (5,769) (5,963)
------------- ------------- ----------
Net cash used in financing activities (77) (5,446) (5,544)
------------- ------------- ----------
Net (decrease)/increase in cash
and cash equivalents (4,688) (28,246) (4,931)
------------- ------------- ----------
Cash and cash equivalents at
beginning of period 29,632 34,563 34,563
------------- ------------- ----------
Cash and cash equivalents at
end of period 24,944 6,317 29,632
------------- ------------- ----------
Cash and cash equivalents comprise:
Cash 24,944 7,679 29,632
Bank overdrafts - (1,362) -
------------- ------------- ----------
24,944 6,317 29,632
------------- ------------- ----------
SEGMENTAL REPORTING
FOR THE HALF YEAR TO 30 SEPTEMBER 2020
Half Year Half Year Year to
to 30.09.20 to 30.09.19 31.03.20
GBP'000 GBP'000 GBP'000
Billings
Consumer 32,283 40,126 222,207
Corporate 66,556 80,087 197,650
------------- ------------- ----------
Total billings 98,839 120,213 419,857
------------- ------------- ----------
Revenue
Consumer 8,346 8,926 62,447
Corporate 19,043 24,304 50,277
------------- ------------- ----------
Total revenue 27,389 33,230 112,724
------------- ------------- ----------
Operating (loss)/profit
Consumer (3,768) (3,126) 5,327
Corporate (858) 2,742 6,581
All other segments (1,715) (1,660) (5,512)
------------- ------------- ----------
Operating (loss)/profit (6,341) (2,044) 6,396
------------- ------------- ----------
NOTES TO THE HALF YEAR RESULTS
(1) Basis of preparation
The financial information in this interim report has been
prepared in accordance with the International Financial Reporting
Standards as adopted by the EU and the AIM rules of the London
Stock Exchange and on the basis of the accounting policies
described in the Group's annual report and accounts for the year
ended 31 March 2020. These accounting policies have been based on
the current standards and interpretations expected to be effective
at 31 March 2021. The Group does not expect there to be a
significant impact on the results from standards, amendments or
interpretations which are available for early adoption but which
have not yet been adopted.
The financial statements have been prepared under the historical
cost convention, as modified by the accounting for financial
instruments at fair value. In addition, this interim financial
report does not comply with IAS34 Interim Financial Reporting,
which is not currently required to be applied under AIM rules.
The interim condensed consolidated financial statements do not
constitute statutory financial statements as defined in section 435
of the Companies Act 2006 and therefore do not include all the
information and disclosures required in the annual financial
statements and should be read in conjunction with the Group's
annual financial statements as at 31 March 2020. The financial
information for the preceding year is based on the statutory
financial statements for the year ended 31 March 2020. These
financial statements, upon which the auditors issued an unqualified
opinion, have been delivered to the Registrar of Companies. These
financial statements did not require a statement under either
section 498(2) or section 498(3) of the Companies Act 2006.
(2) Going concern
The financial statements are prepared on a going concern
basis.
In the Group's annual report and accounts for the year ended 31
March 2020, it was discussed that five scenarios were modelled to
assess the impact of the Covid-19 pandemic on the results of the
Group going forward. These scenarios focused specifically on the
twelve months from the signing of the annual report and accounts.
The key variables altered between scenarios were: corporate and HSV
demand, Christmas savers order book cancellations and reductions,
and paper and card redemptions.
For this interim financial report, the base case and downside
scenario were reassessed based on newly available financial
information from the six months to 30 September 2020.
Base case scenario reassessment
The reassessment of the base case scenario forecasts a positive
impact on results compared to the previous base case, with an 11
per cent increase in billings for the year ending 31 March 2021,
and a 1 per cent increase for the year ending 31 March 2022. The
key driver behind this is the forecast 25 per cent increase in
corporate billings for the year ending 31 March 2021, in part due
to the successful partnership with Iceland in the first six months
of the year.
From a going concern perspective, the monthly forecasting of the
Group's free cash balance is the key area for consideration, as
liquidity is the principal going concern risk. The reassessed base
case, before usage of the RCF, gives a negative free cash balance
in July 2021, recovering by September 2021. When the RCF is taken
into account, the Group has significant headroom against the lowest
forecast negative free cash position and all covenants are forecast
to be complied with.
Downside scenario reassessment
The reassessment of the downside scenario forecasts a positive
impact on results compared to the previous downside scenario in the
year ending 31 March 2021, with a 4 per cent increase in billings,
and a negative impact for the year ending 31 March 2022, with a 4
per cent decrease in billings. The reassessed downside scenario
forecasts a negative free cash balance in June 2021, recovering by
October 2021. All negative cash balances in this scenario can be
covered by usage of the RCF and all covenants are forecast to be
complied with.
Mitigating actions
Management have taken the following actions in the six months to
30 September 2020 in order to conserve cash:
-- Furloughing employees - The Group has utilised the
Government's Job Retention Scheme with a number of employees being
furloughed, whose pay has been topped up to 100%. In the six months
to 30 September 2020, the Group has realised GBP287k of savings
from this scheme. It is our intention to repay this money in the
second half of this year.
-- Dividend cancellation - As noted in the Group's annual report
and accounts for the year ended 31 March 2020, the dividend payment
for 2020 was cancelled, which conserved GBP6m of cash.
In addition, management have identified the following actions
which could be taken to further conserve cash:
-- Cancellation of the bonus of the year ending 31 March 2021;
-- Delaying the implementation of the remaining elements of the new ERP system; and
-- Further VAT deferral. The Group has deferred GBP936k of VAT
payments between March 2020 and June 2020. These are payable by 31
March 2021, however the Group is eligible to apply for a further
deferral. Under this further deferral, the payments would be made
on a monthly basis up until the end of March 2022, interest
free.
Conclusion
The directors have carefully considered the base case, downside
scenario and current trading and trends since the period end. In
light of the availability of the Group's GBP15m RCF to cover any
forecast negative free cash balances, the Directors have a
reasonable expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future.
Therefore, the Directors continue to adopt the going concern basis
of accounting in preparing the interim financial report.
(3) Exceptional items
30.09.20 30.09.19 31.03.20
GBP'000 GBP'000 GBP'000
Impairment of obsolete stock (400) - (124)
Impairment of property, plant
and equipment - - (163)
Impairment of assets held for
sale - - (1,650)
Impairment of goodwill - - (1,316)
Redundancy costs (630) - (423)
During the period, the Group made the decision to close the
hamper and contract packing parts of the business. Exceptional
costs have been incurred as a consequence of this decision. GBP400k
of impairments have been made to stock bought during the period
which is now obsolete. There have also been GBP630k of redundancy
costs associated with the closure, this consists of both costs paid
as at 30 September 2020 of GBP78k, and a provision for costs that
will be paid before the end of the financial year of GBP552k.
(4) Taxation
The taxation credit for the six months to 30 September 2020 has
been calculated using an overall effective tax rate of 19.0%, which
has been applied to the taxable income (half year to 30 September
2019 - 19.0%).
(5) Earnings per share
Basic earnings per share (EPS) is calculated by dividing the
earnings attributable to ordinary shareholders by the weighted
average number of ordinary shares outstanding during the
period.
For diluted EPS, the weighted average number of ordinary shares
in issue is adjusted to assume conversion of all dilutive potential
ordinary shares.
The calculation of basic and diluted EPS is based on the
following figures:
Half Year Half Year Year to
to 30.09.20 to 30.09.19 31.03.20
GBP'000 GBP'000 GBP'000
Earnings
(Loss)/profit before exceptional
item (4,011) (1,037) 9,187
Exceptional items (1,030) - (3,676)
--------------- --------------- ---------------
Total (loss)/earnings for period (5,041) (1,037) 5,511
--------------- --------------- ---------------
Half Year Half Year Year to
to 30.09.20 to 30.09.19 31.03.20
Weighted average number of
shares
Basic EPS - weighted average
number of shares 186,347,228 186,347,228 186,347,228
Diluting effect of employee
share options - - -
--------------- --------------- ---------------
Diluted EPS - weighted average
number of shares 186,347,228 186,347,228 186,347,228
--------------- --------------- ---------------
Basic EPS
Weighted average number of
ordinary shares in issue 186,347,228 186,347,228 186,347,228
--------------- --------------- ---------------
EPS (p) (2.71) (0.56) 2.96
--------------- --------------- ---------------
Underlying basic EPS
Weighted average number of
ordinary shares in issue 186,347,228 186,347,228 186,347,228
--------------- --------------- ---------------
EPS (p) (2.15) (0.56) 4.93
--------------- --------------- ---------------
Diluted EPS
Weighted average number of
ordinary shares 186,347,228 186,347,228 186,347,228
--------------- --------------- ---------------
EPS (p) (2.71) (0.56) 2.96
--------------- --------------- ---------------
Diluted EPS
Weighted average number of
ordinary shares 186,347,228 186,347,228 186,347,228
--------------- --------------- ---------------
EPS (p) (2.15) (0.56) 4.93
--------------- --------------- ---------------
(6) Other intangible assets
Half Year Half Year Year to
to 30.09.20 to 30.09.19 31.03.20
Other intangible assets GBP'000 GBP'000 GBP'000
6,917 2,617 4,757
Additions during the period include GBP1,812k related to the new
Enterprise Resource Planning (ERP) system. This will be the
cornerstone of the business to build on going forward, utilising
new, cloud-based technology. It is expected that amortisation will
commence in the year ending 31 March 2022, as this is when it is
expected the Group will commence deriving an economic benefit from
the asset.
(7) Assets held for sale
On initial classification as held for sale, assets are measured
at the lower of their present carrying amount and the fair value
less costs to sell, with any adjustments taken to the profit or
loss account. These assets are not depreciated.
Assets are classified as held for sale when they satisfy the
following criteria:
-- management is committed to a plan to sell
-- the asset is available for immediate sale
-- an active programme to locate a buyer is initiated
-- the sale is highly probable, within 12 months of
classification as held for sale (subject to limited exceptions)
-- the asset is being actively marketed for sale at a sales
price reasonable in relation to its fair value
-- actions required to complete the plan indicate that it is
unlikely that plan will be significantly changed or withdrawn.
Half Year Half Year Year to
to 30.09.20 to 30.09.19 31.03.20
GBP'000 GBP'000 GBP'000
Assets held for sale 1,024 4,966 3,153
Liabilities directly associated
with the assets held for sale 1,077 - -
The Group is in discussions with an interested party with
regards to the sale of its subsidiary Fisher Moy International
Limited, and at the time of assessment at 30 September 2020 the
Group believe that a sale is likely within twelve months and that
all of the criteria to classify it as an asset held for sale have
been met.
The assets held for sale balance as at 30 September 2019 and 31
March 2020 related to the Valley Road property, held by the Group's
subsidiary Budworth Properties Limited. This subsidiary was sold
during the period, generating a profit on sale of GBP41k.
(8) Reconciliation of net (loss)/profit to cash (used
in)/generated from operations
Half Year Half Year Year
to 30.09.20 to 30.09.19 to 31.03.20
GBP'000 GBP'000 GBP'000
Net (loss)/profit (5,041) (1,037) 5,511
Adjustments for:
Tax (1,182) (243) 2,189
Interest income (459) (789) (1,481)
Interest expense 382 25 177
Depreciation and amortisation 912 734 1,659
Impairment of property, plant
and equipment - - 1,813
Impairment of other intangibles - - 21
Impairment of goodwill - - 1,368
Profit on sale of assets held
for sale (41) - -
Loss on sale of property, plant
and equipment - - 4
Decrease in other financial
assets - 200 200
(Increase)/decrease in inventories (7,727) (15,878) 1,734
Decrease in trade and other
receivables 394 1,333 2,968
Increase/(decrease) in trade
and other payables 92,892 93,378 (1,578)
Increase/(decrease) in provisions 14,796 8,071 (4,484)
Increase in monies held in
trust (99,622) (106,197) (3,442)
Movement in retirement benefit
asset - 4 (44)
Translation adjustment (5) 13 18
Share-based payments 125 125 233
Cash (used in)/generated from
operations (4,576) (20,261) 6,866
------------- ------------- -------------
(9) Approval
This statement was approved by the board on 23 November
2020.
(10) Reports
A copy of this announcement will be available on the Group's
website from today www.appreciategroup.co.uk and will be mailed to
shareholders on or before 18 December 2020. Copies will also be
available for members of the public at the Company's registered
office - Valley Road, Birkenhead CH41 7ED and also at the offices
of the Company's registrars, Computershare Investor Services PLC, P
O Box 82, The Pavilions, Bridgwater Road, Bristol BS99 7NH.
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END
IR GZMZMGFZGGZZ
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November 24, 2020 02:00 ET (07:00 GMT)
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