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Appreciate Group Plc LSE:PARK London Ordinary Share GB0006710643 ORD 2P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
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Appreciate Group PLC Full Year Results

12/08/2020 7:00am

UK Regulatory (RNS & others)


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RNS Number : 8918V

Appreciate Group PLC

12 August 2020

12 August 2020

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 GBP419.9m (2019: GBP426.9m) 
   --      Revenue up by 2.1 per cent to GBP112.7m (2019: GBP110.4m) 
   --      Profit before tax before exceptional items** of GBP11.4m (2019: GBP12.5m) 

-- Total cash balances, including monies held in trust and deposits, of GBP132.3m (2019: GBP134.0m)

   --      Year end free cash of GBP29.6m (2019: GBP36.9m) (excluding funds held in trust) 

-- Exceptional items of GBP3.7m (2019: GBP1.2m) 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 GBP6.4m (2019: GBP9.7m) 
   --      Profit before tax of GBP7.7m (2019: GBP11.3m) 
   --      Earnings per share of 2.96p (2019: 4.78p) 

Operational and strategic highlights

Divisional performance

   --      Corporate 

o Growth in billings* of 1.5 per cent to GBP197.7m (2019: GBP194.8m)

o Corporate revenue decreased 2.4 per cent to GBP50.3m (2019: GBP51.5m)

o Increased demand seen from existing and new clients recruited prior to lockdown

o Segmental profit decreased by GBP1.2m to GBP6.6m (2019: GBP7.8m) due to higher administration costs.

   --      Consumer 

o Billings* fell by 4.3 per cent to GBP222.2m (2019: GBP232.1m)

o Revenue up 5.9 per cent to GBP62.4m (2019: GBP58.9m)

o Increased customers coming to us directly and using digital

o Improvements in gross margin due to changing mix

o Segmental profit of GBP5.3m (2019: GBP6.8m) 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 GBP3.2m providing operational flexibility.

-- Bank financing completed; GBP15m 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."

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) 
 Ian O'Doherty, CEO      Richard Crawley        Reg Hoare 
  Tim Clancy, CFO         Jamie Richards         Katie Hunt 
                                                 Charles Hirst 
 Andy Hammerton, Head 
  of Corporate Affairs     Tel: 020 3100 2222     Tel: 020 3128 8193 
                                                  Email: appreciategroup@mhpc.com 
  Tel: 0151 653 1700 
 

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.

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.

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

Chairman's statement

Introduction

Our heritage stretches more than five decades, and during that time we've weathered many storms as a business. Consistently, we have emerged ready for growth, and we intend to do so again.

The Board, our management teams and all our colleagues have worked with dedication and focus to develop and implement our new strategy over the last two years; and, more recently, to manage and mitigate the unprecedented challenges posed by the consequences of the COVID-19 pandemic.

As well as adapting our business for the future during this period, notably by intensifying our focus on digital products and delivery, we have strengthened our focus on developing smarter, more efficient ways of working that will set us up well to capitalise on doing business after COVID-19.

Because of the foundations we have put in place over the last two years - in particular the new office and IT investment - we have been able to transition to home working and maintain continuity for much of what we do. This has ensured we are well placed to deliver on customer demands, maintain satisfaction, and accelerate the development of new products and services, some of which are defining our market.

During the past year, we've taken the opportunity to become a better, stronger business, innovating in digital, building resilience, testing new products and reaching new markets, so we are well positioned to continue to increase our market share and fulfil our ambition and those of our stakeholders.

Results for the year

Results are broadly in line with expectations, having been impacted by the COVID-19 pandemic and subsequent lockdown in the last weeks of our financial year.

Billings* decreased by 1.6 per cent in the year to 31 March 2020 to GBP419.9m (2019: GBP426.9m) despite good growth from our Corporate business. Revenue increased slightly by 2.1 per cent to GBP112.7m (2019: GBP110.4m) driven by a rise in Consumer revenue.

Operating profit before exceptional items ** for the year was GBP10.1m (2019: GBP10.9m). Interest income was GBP1.5m (2019: GBP1.6m) on average cash balances (including cash held in trust) of GBP177m (2019: GBP174.0m), after which profit before tax was GBP8.3m (2019: GBP11.3m).

Profit before tax and exceptionals was GBP11.4m (2019: GBP12.5m) before exceptional charges of GBP3.7m relating to the impairments of goodwill, impairment of our former main operating site, and restructuring costs (2019: GBP1.2m of exceptional items). Total cash balances, including monies held in trust and bank deposits, at 31 March 2020 were GBP132.3m (2019: GBP134.0m).

* See accounting policies for a reconciliation of billings to revenue

** see financial review for reconciliation of adjusted to statutory profit measure

COVID-19 update

Whilst the timing of a return to normal market conditions remains unclear, the impact of COVID-19 on the current financial year ending 31 March 2021 will be significant. However, we expect the improvement seen in trading over recent months to continue and for performance to recover thereafter . We also recognise that this could be tempered in the event of a second wave.

Demand in our Corporate and Consumer areas has been approximately 48 per cent below last year since lockdown began. We have previously stated that our Christmas Savings order book business is approximately 10 per cent below the prior year, and cancellation rates remain similar to previous years, and this has remained the case. Our customers continue to benefit from their savings being protected by the Park Prepayment Protection Trust.

We remain focussed on driving efficiencies where possible and delaying any discretionary spend or capital projects. We have cancelled annual pay reviews and made no awards for FY2019/20 under the company wide annual bonus plan.

Dividend

We reported in March that the Board had decided that it was prudent not to pay the interim dividend of 1.05 pence per ordinary share as previously announced and due to be paid on 6 April 2020.

The Board recognises the importance of dividends to its shareholders and is committed to its progressive dividend policy which seeks to reflect the Group's strong underlying cash flow and profit generation, whilst retaining sufficient capital to fund investment in the business.

The UK trading conditions continue to be uncertain and at this point, despite favourable trends, the outcome of our peak Q3 trading period remains uncertain. In addition, the ongoing pandemic poses risk to successful operational delivery. We know from experience that an outage of any kind - people absence, system interruption, etc. - at an inopportune time can have a disproportionate impact. These factors combined lead the Board to consider it prudent not to recommend a dividend for this financial year. It has been the Board's policy to distribute just over half of post-tax profit as dividend, with one third of that as an interim dividend and the remaining two thirds as a final dividend. The Board intends to return to that policy as soon as it is appropriate to do so.

In considering its recommendation on the dividend this year, the Board has taken into account the fact that Appreciate Group has received GBP243,000 through the Government's Coronavirus Job Retention Scheme between March and June and has put in place a financing facility of GBP15 million (a measure planned prior to the COVID-19 crisis) to cover cash flow fluctuations reflecting its evolving business model from the strategic changes implemented last year.

Investing in our people to deliver growth

Board changes

In September, we strengthened the Board with the appointment of Sally Cabrini as a non-executive director and Chair of the Remuneration Committee. Sally brings with her a record of relevant experience as a board member. She is Chair of the Remuneration Committee at FirstGroup plc and was a member of audit and risk committees and Chair of the remuneration committee of Lookers plc. Her executive experience includes roles with Interserve Group Limited, and United Utilities plc.

We were also pleased to announce the appointment of John Gittins, an existing non-executive director, as Senior Independent Director.

Our colleagues

The Board would like to thank all our colleagues for their outstanding hard work, adaptability and resilience. Through this challenging period, the Board and leadership team have remained focused on doing the very best for our people; by ensuring their safety and well-being and by providing them with the necessary tools, support, training and development to thrive in these times of change.

Central to this is a strong culture that supports everyone in working together with clarity and purpose as we deliver our growth plans. We have significantly improved the working environment and technology used by colleagues and made a commitment to improving employee engagement along with our ability to communicate, driving openness and dialogue, as well as enhancing collaboration.

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 now well advanced with elements such as logistics and operations already complete.

The Board has reviewed five financial scenarios of the potential impact of COVID-19 on the business. We remain focused on managing liquidity due to swings in free cash from month to month, driven by the timings of monies being moved in and out of trusts, and the purchasing of third party, single retailer redemption products. To support this , a bank financing exercise has been completed, which will provide the additional financial flexibility to protect against downside risk in the short term; whilst enabling longer term growth, as well as investing in the continued switch to digital products. Further details are contained within our going concern disclosures.

The investment in transformation that we have been undertaking has already shown benefit, although this has inevitably been interrupted by the lockdown. We continue to expect good future growth prospects founded on the more robust and scalable business model we are creating.

In summary, we are pleased with the considerable progress that we have made and are making, and we are confident that delivery of the strategic business plan will lay the foundations for strong and sustained growth in future years.

Laura Carstensen

Chairman

12 August 2020

Chief Executive's Review

Introduction

This was another year in which Appreciate Group has taken a number of important steps forward, as we continued to build upon our position as one of the UK's leading gifting, pre-payment and engagement companies.

Our consumer-facing brands meet a range of prepayment and gifting needs, while business products support engagement by helping corporate customers reward and recognise their employees and clients.

We are pleased to report that we have made tangible progress on the strategic business plan announced in December 2018. During last year we relocated our offices, implemented new technologies, trialled new digital products and changed the company name and brand. All of this has contributed to the development of a robust and scalable business model that will enable us to take advantage of the growth opportunities in our markets.

We remain confident in our strategy and in the medium to long-term opportunity, particularly as the current pandemic is leading to an acceleration to digital in all areas of consumer and business activity. We continue to believe that the steps we are taking will strengthen the Group's proposition for consumers, businesses and redemption partners alike. Our ability to capitalise on opportunities in the fast-evolving markets that we serve has increased, but the timing of this has been set back by the COVID-19 pandemic.

Thankfully, work completed and investments made during the recent past, particularly in technology, the ability to work from home and business continuity, have meant that we have been better positioned to cope with the challenges of the pandemic than we would otherwise have been. We are already seeing improvements in the efficiency of our operations, which will lead to enhanced profitability in future years. Our continued progress implementing the strategic business plan and pivoting to digital products has positioned the Group well to emerge from the lockdown a stronger business.

COVID-19 impact and response

Trading for the 11-month period to the end of February 2020 was in line with our expectations. The final month of the financial year brought the COVID-19 lockdown; the market challenges of this period are well documented, but the business responded well to the disruption and there are some encouraging signs for the future.

The safety of our colleagues, their families, our customers and our communities is our first priority. In line with Government guidelines at year end, we initially closed all our facilities, including our fulfilment and reconciliation operation. The investment in technology we have made over the last year meant that over 80 per cent of the Group's employees were able to work from home immediately and effectively. We have supported those colleagues unable to fulfil their role from home through parental leave or furloughing under the Government's Coronavirus Job Retention Scheme.

Group trading websites continued to accept and fulfil orders, but our emphasis shifted to digital delivery only. Without the ability to dispatch physical product, our products available for sale were initially limited. We have addressed this by prioritising our digital offerings and adding e-codes and e-cards to our proposition on highstreetvouchers.com (HSV). However, many corporate clients continue to request physical product and we have been able to accommodate this with a phased easing of restrictions on fulfilment from May 2020 (all the time adhering to Government guidelines and ensuring the safety of colleagues).

In our year end trading update, issued on 30 April 2020, we acknowledged the initial impact of lockdown by stating that "demand in our Corporate and Other Consumer areas is approximately 70 per cent below last year." I am pleased to report that we have seen trading gradually improve in the new financial year. Total billings have started to recover; they were down 47 per cent year on year in May, and 35 per cent down in June to give a year to date position of 48 per cent down for the first quarter. We also stated that "current cancellation rates (for our Christmas Savings business) are similar to previous years" and this has remained the case as at the end of July 2020.

The redemption rates of our products currently in circulation have also been affected, as the number of outlets open to use our products decreased, although we continue to see customers redeeming products in high street stores that are open and at online retailers. We made the decision to extend the date of products which were due to expire at the end of March 2020 for a period of several months whilst many shops were closed to help mitigate this and support our customers.

Lower redemption rates in March 2020 have had an adverse financial impact on the results for the year ended 31 March 2020. Conversely, this delay in spending has a positive impact on cash flow. Overall redemptions in the new financial year starting 1 April 2020 are down year-on-year by approximately 39 per cent as at 31 July 2020. Within that, not surprisingly, redemptions in physical shops are down and redemptions online are up (approximately -75 per cent and +44 per cent respectively).

Part of our overall strategy has been to promote our own products as much as possible, with the result that overall billings of our multi-redemption products are 91 per cent of the total from April 2020 to July 2020, up from 84 per cent at the same point last year. The same is true within Corporate, where billings of our multi-redeemer products increased to 89 per cent from 83 per cent.

On HSV we have promoted all available digital products, which has included many single-store e-codes. This has resulted in the percentage of digital products jumping to 45 per cent since their introduction last year. We have also seen billings of our multi-redemption products increasing from 76 per cent to 79 per cent for the first four months of the new financial year.

As well as adding to the range on HSV, we have taken steps to optimise the flow of traffic to our website. During the month of April there were 279,684 visits to HSV, down 25 per cent on last year. May was 8 per cent lower; whilst June and July both saw slightly more visits than the previous year following the measures taken and recovery from lockdown.

We have also taken steps to improve the conversion of sales opportunities created. Since the end of March, the conversion rate on HSV has improved. The average conversion rate over the last five days of March - in the immediate aftermath of lockdown - was 2.78 per cent; while the average over the months from May to July 2020 has been around 5 per cent.

These are encouraging signs regarding number of visitors and conversion to sales. Work to optimise the flow of traffic and conversion rate continues.

Divisional review

We continue to operate in dynamic and growing markets, serving customers in both corporate and consumer channels. There has been an encouraging rate of growth in the UK gift card market during the calendar year 2019, with growth in the second half at 12 per cent and the market now estimated to be worth approximately GBP7bn annually.#

#Source: UK Gift Card and Voucher Association

Corporate (44.6 per cent of Group revenue in the year ended 31 March 2020)

Appreciate Group's Corporate business provides around 42,000 business customers with market-leading incentive, recognition and rewards options for an estimated two million recipients through around 190 redemption partners with almost 24,000 outlets.

Corporate billings of GBP197.7m were 1.5 per cent ahead of the prior year (2019: GBP194.8m). Corporate revenue was GBP50.3m (2019: GBP51.5m) representing a decrease of 2.4 per cent. Segmental profit decreased by GBP1.2m to GBP6.6m (2019: GBP7.8m) due to higher administration costs. The pre-exceptionals performance from our Corporate business was driven through a combination of billings growth and a more profitable product mix.

In the year we strengthened the businesses we work with by adding organisations such as BP, Britvic and Howdens as prestigious new partners.

Consumer (55.4 per cent of Group revenue in the year ended 31 March 2020)

Consumers can access Appreciate Group's multi-retailer redemption product directly from our website highstreetvouchers.com or via our leading Christmas savings offering, which currently helps approximately 350,000 families budget for Christmas.

Our Consumer business billings were GBP222.2m compared to GBP232.1m in the prior year. Consumer revenue was GBP62.4m (2019: GBP58.9m) which produced a segmental profit of GBP5.3m versus GBP6.8m in the prior year. This fall in profit was primarily due to an increase in administration costs and exceptional redundancy costs of GBP0.4m.

Appreciate Group has continued to attract increasing numbers of customers directly. However, the challenges with the legacy agency model in the Christmas savings business persist, and we are taking actions to mitigate this.

Significant improvements have been made in the customer offering during the period. We have taken our core product into the mobile era, creating a contactless-enabled digital gift card, which can be loaded into the wallet app on a smartphone. This can be delivered by various means - email, SMS or WhatsApp - and is simple, transparent and easy to use. This development allows instant celebration and reward of moments that matter to customers, with a wide range of redemption partners, both online and contactless in-store using a mobile device.

Progress with our strategic business plan

We have made good progress during the year, continuing the implementation of our strategic business plan, as set out in December 2018, in building a robust and scalable platform from which to grow.

Productivity

We have taken numerous steps to become more efficient and effective. During the year, we s uccessfully completed a large-scale office relocation to Liverpool city centre, establishing a modern, collaborative working culture; we migrated to cloud-based computing and digital collaboration and workflow solutions (Office 365); we introduced new technologies to facilitate agile working; and we invested in our team and talent.

The project to implement a new Enterprise Resource Planning (ERP) system is progressing well, despite some COVID-19 related delays. This will provide the scalability, resilience and efficiency required for more seamless and automated back office support functions across the business.

In addition to facilitating the move to Liverpool, we streamlined the remaining operations based at Valley Road in Birkenhead to enable the sale of the site, as well as harnessing efficiencies through new channels. One example of this is a stronger focus on promoting chat for Customer Care, which has led to a 31 per cent increase in chat sessions and 8 per cent fewer voice calls year on year.

On 10 August we announced that we had completed the sale of our land and premises at Valley Road in Birkenhead to HP (Valley Road) Limited for GBP3.2m. The site had been substantially vacated since the relocation to Liverpool, but continues to house our fulfilment and reconciliation operations. A limited amount of space for these activities will be leased back as part of the agreement.

Appeal

In terms of broadening our customer appeal, we have s uccessfully tested two new products - Select Digital Gift Card and Giftli - as part of work to target currently untapped demand from a broader audience. We are using these learnings to further develop our digital strategy.

Leading our industry, we took gifting into the mobile era with the contactless-enabled digital gift card, which can be loaded into the wallet app on mobile devices and allow instant celebration and reward of moments that matter to customers. Important learnings from these trials are being incorporated into an enhanced proposition for Corporate clients.

As well as this innovation in product development, we have enhanced the experience and journey for Park Christmas Savings customers, streamlined our social media and marketing communications and added e-codes and e-cards to highstreetvouchers.com and offered digital gift card to corporate clients.

Clarity

To bring clarity to our offer for all customers, we have r edefined and rationalised our brand architecture, which included renaming Park Group plc to Appreciate Group plc. We believe this more accurately reflects the Group's product range and position as an innovative payments, savings and rewards provider to Corporate and Consumer markets. This allows the Group to take full advantage of the growth opportunities available in an expanding market. We also refreshed the Park Christmas Savings brand through all channels including the website and app.

Key to supporting this has been the development of clear brand guidelines and a company tone of voice, as well as significantly boosting our Group brand activation and awareness activities, with targeted social media postings and community partnerships.

Our core business functions are now focused around products and market segment, centralising some of the activity previously conducted separately within the business units, and we have a robust and disciplined approach to new product development.

The number of product variants we offer has been consolidated and simplified, in particular reducing the number of single retailer physical products on sale through all channels.

We are now proposing to cease production of hampers and merchandise. This decision was initially taken for the Christmas 2020 season to protect the health of our workforce and provide our customers with certainty given the potential for disruption in the supply chain during the ongoing lockdown and potential of further restrictions. This enabled us to carry out a longer term review of the future of the hamper business, and we have commenced consultation with colleagues about proposals to close this part of our business. Whilst hampers were the roots from which we grew as a business more than 50 years ago, they now only equate for less than 2 per cent of billings and are no longer considered part of our future strategy. All hamper customers will be offered the chance to migrate to other Appreciate Group products so that we can help them continue to budget and pay for Christmas.

Experience

We have taken significant steps to make us easier to work with for all of our customers, particularly in the digital space.

During the year we have created an end-to-end, fully digital experience for gift-card purchase, delivery and redemption, with contactless capability in a mobile phone wallet, working with Mastercard and CleverCards. We believe this has been, in many ways, a real game-changer for our industry, as it completely reimagines how gift cards should work in a mobile-enabled world.

We've also improved the digital and physical experience for our customers; enhanced the client on-boarding journey;

worked to optimise the conversion rates on our websites; launched new ERP solutions, developed resilience and security in our networks, standardised our complaints process and established a Customer Committee to help drive improvements in the customer experience.

Looking ahead

I am extremely proud to lead a team of colleagues who are dedicated to our purpose of creating joyful experiences and connecting people to the things in life they enjoy. This unwavering commitment has never been more evident than in recent months when they have risen to the challenge to support our customers and partners. Their commitment gives me confidence that, combined with our strategy, we are strongly positioned for the future.

Ian O'Doherty

Chief Executive

12 August 2020

Financial Review

Impact of Covid-19

At the start of lockdown in March 2020, just like many businesses across the UK, the Group followed Government guidance and temporarily closed its distribution and warehouse facilities to help stop the spread of coronavirus. With no means to fulfil physical orders at that time the Group's focus shifted to digital products.

In May 2020 the Valley Road facility reopened with social distancing procedures in place. Demand in our Corporate and Other Consumer areas reduced during the lockdown period with April demand 70 per cent lower than prior year. We have seen trading gradually improve in the new financial year; billings were down 47 per cent year on year in May, and 35 per cent down in June to give a year to date position of -48 per cent at the end of Q1.

Although the Christmas Savers order book is currently 9 per cent below the prior year, most customer plans are normally in place by March and we have seen normal cancellations trends since then, so this part of the business has to date, been unaffected.

Redemptions have also significantly fallen, with an 80 per cent decrease for vouchers and 61 per cent decrease for cards and e-codes compared to quarter one of the prior year. Despite this overall reduction in redemptions, which beneficially reduces cash outflow, we have a seen a significant shift to online redemption partners and grocery retail, reflecting the flexibility of our products.

The Group has taken several actions to conserve cash by reducing discretionary expenditure. These actions include the following:

-- 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 per cent by the Group. In quarter one of the financial year ending 31 March 2021, there were an average of 65 employees on furlough per month, for a total saving of GBP243,000.

-- Dividend cancellation - The Group decided to cancel the dividend payment for 2020, which has conserved GBP6m of cash.

-- Deferral of VAT payments - The Group has deferred GBP936,000 of VAT payments between March and June 2020. These are now payable by 31 March 2021.

-- Employee remuneration revisions - The decision was made to cancel all annual pay reviews and bonuses.

The Board has reviewed five forecast scenarios, covering a range of likely outcomes: base case plus two downside and two upside scenarios. The Group is currently trading slightly ahead of the base case and has carefully considered the base case, downside scenarios, current trading and trends since the year end and the assessment of reverse stress tests. Having secured a GBP15m revolving credit facility we have adequate flexibility to provide sufficient cash headroom to enable the business to trade with confidence. Further details are contained within our going concern disclosures.

The Board continues to actively manage the risks of the business which have been updated for the impact of Covid-19. We are planning for a peak season which will be delivered whilst adhering to social distancing guidelines. The decision to close our hamper and third party packing business will give additional operational flexibility to achieve this. Following our technology investments over the last year, which further strengthen our business continuity plan, the majority of employees continue to effectively work from home.

Billings and Revenue

The Group's products are split into the following categories:

-- Multi-retailer redemption products - Love2shop vouchers, flexecash(R) cards, Mastercards and e-codes

   --      Single retailer redemption products - third party retailer vouchers, cards and e-codes 
   --      Other - hampers, merchandise and consultancy fees 

Following the adoption of IFRS15 in the prior financial year, multi-retailer redemption product billings are the gross value of goods and services shipped and invoiced to customers during the year. Revenue for multi-retailer redemption products is the net service fee received on redemption, cardholder fees and breakage which are recognised when multi-retailer redemption products are redeemed.

For single retailer redemption products and other, both billings and revenue are the gross value of goods and services shipped and invoiced to customers during the year.

 
 Billings*                      2020    2019   Change 
                                GBPm    GBPm        % 
 Multi-retailer redemption 
  products                     354.3   362.4     -2.2 
 Single retailer redemption 
  products                      52.9    50.8     +4.2 
 Other                          12.7    13.7     -7.3 
 Total                         419.9   426.9     -1.6 
 

Multi-retailer redemption product billings includes billings in respect of e-codes which are capable of being converted into either multi-retailer redemption products or single retailer redemption products. Revenue figures below reflect the product into which the e-code is converted by the cardholder.

 
 Revenue                        2020    2019   Change 
                                GBPm    GBPm        % 
 Multi-retailer redemption 
  products                      37.9    41.1     -7.9 
 Single retailer redemption 
  products                      62.1    55.6    +11.7 
 Other                          12.7    13.7     -7.3 
 Total                         112.7   110.4     +2.1 
 

The mix of in-house, multi-retailer products remains high, in line with the strategy of promoting our own products. The mix of multi-retailer redemption products was 84.4 per cent of total billings, marginally lower than last year's 84.9 per cent.

Revenue increased by 2.1 per cent to GBP112.7m due to a greater mix of single retailer redemption products which are reported gross in revenue as opposed to multi-retailer redemption products which are reported net in revenue. The value of multi-retailer revenue has decreased by 7.9 per cent offset by strong demand for single retailer redemption products which were 11.7 per cent higher, due to higher online demand, particularly e-codes which can be converted to single retailer products.

Profit from operations

The Group's operations are divided into two principal operating segments:

-- Consumer - which represents sales to consumers, utilising the Group's Christmas savings offering and our website, highstreetvouchers.com; and

-- Corporate - comprising sales to businesses, offering primarily sales of the Love2shop voucher, flexecash(R) cards, Mastercards and e-codes in addition to other retailer vouchers.

All other segments comprise central costs and property costs which are shown separately in order to give a more meaningful view of divisional performance.

 
                         2020      2019    Change 
                      GBP'000   GBP'000   GBP'000 
-------------------  --------  --------  -------- 
Consumer                5,327     6,809   (1,482) 
-------------------  --------  --------  -------- 
Corporate               6,581     7,789   (1,208) 
-------------------  --------  --------  -------- 
All other segments    (5,512)   (4,866)     (646) 
-------------------  --------  --------  -------- 
Operating profit        6,396     9,732   (3,336) 
-------------------  --------  --------  -------- 
 

Consumer

In the Consumer business, customer billings have decreased by 4.3 per cent from GBP232.1m to GBP222.2m. Billings for Christmas savers were down by 4 per cent and there was a similar performance in other Consumer billings, derived through the highstreetvouchers.com website, which were also 4 per cent lower than last year, offset by other products which were 1.5 per cent lower. Revenue has increased by 5.9 per cent to GBP62.4m (2019: GBP58.9m), primarily due to a higher mix of single retailer redemption products.

Operating profit was GBP5.3m, a decrease of GBP1.5m (22.1 per cent) from the GBP6.8m achieved in the prior year. This was primarily due to an increase in administration costs, as explained below, and exceptional redundancy costs of GBP0.4m.

Corporate

In the Corporate business customer billings have increased by 1.5 per cent, from GBP194.8m to GBP197.7m. This growth was due to GBP7.5m of new business, continuing good retention rates of existing clients (95 per cent) and strong online billings which were 13 per cent higher than prior year. Corporate revenue fell by 2.4 per cent over the prior year, from GBP51.5m to GBP50.3m due to a higher mix of card and digital products (66.6 per cent vs 60.0 per cent last year) which have more deferred revenue.

Operating profit decreased by 15.4 per cent to GBP6.6m (2019: GBP7.8m) due to higher administration costs, as explained below.

All other segments

Central and property costs increased by 12.2 per cent from GBP4.9m to GBP5.5m. This increase is due to the higher impairment cost of the Valley Road site at GBP1.8m (2019: GBP1.2m).

Administration Costs

Administration costs increased from GBP17.4m to GBP20.0m due the costs of strategy implementation and additional management and professional fees. Strategy implementation costs of GBP1.5m relate to the office relocation and rebranding and will be non-recurring.

Reconciliation of adjusted to statutory profit

The Board believes that adjusted profit excluding exceptional items such as impairments and redundancy costs is the best measure of the underlying performance of the Group. This gives stakeholders a better understanding of the Group's trading position in the year by adjusting for items which are significant in value, infrequent and in the case of impairments, do not have a cashflow impact in the year.

 
                                      Operating    Profit       Profit 
   2020                                  profit    before    after tax 
                                                      tax 
                                        GBP'000   GBP'000      GBP'000 
 Profit before exceptional items         10,072    11,376        9,187 
 Impairment of property, plant and 
  equipment and available for sale 
  assets                                (1,813)   (1,813)      (1,813) 
 Impairment of goodwill                 (1,316)   (1,316)      (1,316) 
 Impairment of obsolete stock             (124)     (124)        (124) 
 Redundancy costs                         (423)     (423)        (423) 
                                     ----------  --------  ----------- 
 Statutory profit                         6,396     7,700        5,511 
                                     ----------  --------  ----------- 
 
 2019 
 Profit before exceptional items         10,942    12,514       10,092 
 Impairment of property, plant and 
  equipment                             (1,210)   (1,210)      (1,210) 
                                     ----------  --------  ----------- 
 Statutory profit                         9,732    11,304        8,882 
                                     ----------  --------  ----------- 
 
 

Exceptional Costs

In September 2019, the Group relocated its head office from Birkenhead to Liverpool. Following this move, we have now successfully sold the freehold land and building at Valley Road, Birkenhead whilst securing a lease-back for the space still occupied by a small number of operational staff. Our balance sheet reflects the expected disposal of this asset, which is classified as an 'asset held for sale', following the previously announced impairment charge to the P&L account of GBP1.8m.

We have reviewed our brand engagement agency, FMI, acquired in 2016, which is reliant on one large client and also involved in business relating to event management which is heavily impacted by restrictions following lockdown. We have concluded that the goodwill is impaired relating to this acquisition, totalling GBP0.9m.

Subsequent to our year end, we have taken the decision to cease production of hampers. We have impaired the value of stock for hampers held at 31 March 2020 by GBP0.1m which reflects the likely re-sale value of these stock items. Additionally, we have impaired the value of Family Hampers customer lists by GBP0.4m.

During the year, we restructured our marketing department with the aim of creating different roles focused on digital marketing. The redundancy costs relating to employees made redundant following this review amounted to GBP0.4m.

Finance income

Finance income decreased by 6.3 per cent to GBP1.5m from GBP1.6m. Average total cash held by the Group, including cash held in trust during the year increased by 1.7 per cent to GBP177m (2019 : GBP174m), however the yield achieved on this higher cash balance decreased due to the decrease in base rates.

Taxation

The effective tax rate for the year was 28.4 per cent (2019: 21.4 per cent) of profit before tax. The increase compared to the prior year was primarily due to the fact that the increased impairment charge in respect of the Valley Road site and part of the impairment of goodwill did not attract tax relief. In addition to this, the cancellation of the corporation tax rate reduction to 17 per cent, which was due to be effective from 1 April 2020, has resulted in an increase in deferred tax charges in the current year.

Earnings per share

Basic earnings per share (EPS) fell by 38.1 per cent from 4.78p in 2019 to 2.96p. Excluding the exceptional charge basic EPS is 5.04p (2019: 5.43p), down 7.2 per cent.

Dividends

The Board has reviewed five forecast scenarios, covering a range of outcomes, and have carefully considered the base case scenario, current trading and trends since the year end and the assessment of reverse stress tests. The UK trading conditions continue to be uncertain and at this point, before the outcome of our peak Q3 trading period, the Board consider it prudent not to recommend a dividend for this financial year (prior year 3.20p per share).

It has been the Board's policy to distribute just over half of post-tax profit as dividend, with one third of that as an interim dividend and the remaining two thirds as a final dividend. The Board intends to return to that policy as soon as it is appropriate to do so.

Cash flows and treasury

Cash flows from operating activities were GBP5.6m, GBP1.2m (17.6 per cent) lower than the prior year, due to an increase in monies held in trust and higher tax payments, offset by a working capital cash inflow. Monies in trust grew from GBP99.3m in 2019 to GBP102.7m. This growth was primarily in the Park Card Services Limited e-money Trust (PCSET) to support the e-money float in accordance with regulatory requirements. This increased by GBP7.6m to GBP44.2m due to higher levels of card and digital business.

In addition, GBP55.1m (2019: GBP60.9m) was held by the Park Prepayments Trustee Company Limited. The trust holds payments received in respect of orders for delivery the following Christmas. The conditions for the release of this money to the Group are detailed in the trust deed, which is available at www.getpark.co.uk.

Also, at 31 March 2020, the Group held GBP3.4m of other ring fenced funds (2019: GBP1.8m).

At the end of March 2020 GBP29.6m (2019: GBP36.9m) of cash was held by the Group. This was GBP7.2m (19.6 per cent) lower than the prior year due to the switch to a higher mix of regulated products which is cash consumptive in the short term plus higher capital expenditure relating to strategy implementation.

The total amount of cash and deposits net of any overdraft position held by the Group, combined with the monies held in trust, has decreased in the year by 1.3 per cent to GBP132.3m from GBP134.0m. These total balances peaked at just under GBP234m in the year, representing a marginal decrease of GBP1.2m from the prior year.

We have completed a bank financing exercise of an unsecured 5 year revolving credit facility (RCF) with Santander UK of GBP15m plus an additional uncommitted accordion of GBP10m. This facility will provide the additional financial flexibility to protect against downside risk in the short term; whilst enabling longer term growth, as well as investing in the continued switch to digital products. The RCF has 3 covenant requirements, as detailed within the going concern disclosures.

Intangible Assets

As part of the Board's strategy to develop a scalable and resilient platform to enable future growth, we have continued to invest in our technology platform in the year with GBP3.1m of additions (prior year GBP0.8m). This included investment in a new ERP platform, Microsoft Dynamics 365.

IFRS16

With effect from 1 April 2019 we adopted IFRS16 relating to leases. The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to recognise most leases on the statement of financial position. Under IFRS16 the Group recognises a right-of-use-asset (ROUA) and a lease liability (LL) at the lease commencement date. At the balance sheet date this balance was GBP3.8m and further details are available in note 13.

Trade and other payables

Included within trade and other payables is deferred income in respect of multi-retailer redemption products (vouchers, cards and e-codes). Revenue is deferred for service fees and breakage, net of discount. The amount of revenue deferred at March 2020 has increased to GBP7.4m from GBP7.0m in the prior year due to an increase in card mix and slower redemption of paper vouchers. The increase in card mix, where breakage levels are higher, has resulted in greater deferred revenue.

Provisions

At 31 March 2020, provisions have decreased to GBP53.8m from GBP58.3m. This was mainly due to an increase in the amounts provided in respect of flexecash(R) cards of GBP1.1m and a decrease in the amounts provided for unspent vouchers of GBP6.1m. The value of unspent vouchers included in the provision, arises primarily from sales in the Corporate business.

Pensions

The Group continues to operate two defined benefit pension schemes, where pensions at retirement are based on service and final salary. These schemes are now closed to future accrual of benefit arising from service with the Group. These schemes have a combined net pension surplus of GBP4.2m based on the valuation under IAS19 performed at 31 March 2020 (2019: surplus of GBP1.9m).

The Group has recognised net interest income of GBP44,000 (2019: GBP73,000) in the statement of profit or loss in respect of the pension schemes. In addition, the Group has recognised a re-measurement gain in the statement of comprehensive income (SOCI) of GBP1.9m (2019: loss of GBP0.8m) net of tax.

In the year ended 31 March 2020, there were no contributions by the Group to the schemes (2019: GBP0.5m). The latest triannual scheme funding reports, performed as at 31 March 2019, indicated that one scheme had a technical provisions deficit (reflecting the liabilities to pay pension benefits in relation to past service as they fall due) of GBP0.1m and one had a surplus on the same basis of GBP1.6m. No further contributions to either scheme are currently required. The next triannual valuation will be undertaken as at 31 March 2022 when the positions will be reassessed.

Tim Clancy

Chief Financial Officer

12 August 2020

* See accounting policies for a reconciliation of billings to revenue

Going Concern

The financial statements are prepared on a going concern basis.

At the start of lockdown in March 2020, just like many businesses across the UK, the Group followed Government guidance and temporarily closed its distribution and warehouse facilities to help stop the spread of coronavirus. With no means to fulfil physical orders at that time the Group's focus shifted to digital products. In May 2020 the Valley Road facility reopened with social distancing procedures in place.

There has been a negative impact on trading for quarter one of the financial year ending 31 March 2021, with reductions in billings compared to the same period in the prior year of 45 per cent for corporate and 65 per cent for HSV, our website where we service both consumer and corporate customers. Redemptions have also significantly fallen, with an 80 per cent decrease for vouchers and 61 per cent decrease for cards and e-codes compared to quarter one of the prior year.

Despite this, as the year has progressed the month-on-month trend in billings has been encouraging, with significant improvement being shown in each successive month's results. Corporate and HSV billings for April 2020 were 35 per cent and 19 per cent respectively of April 2019 billings, whereas for June 2020 were 68 per cent and 54 per cent of the levels seen in June 2019.

The Group has taken action to conserve cash during this uncertain time and support its position as a going concern. These actions include the following:

-- 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 per cent by the Group. In quarter one of the financial year ending 31 March 2021, there were an average of 65 employees on furlough per month, for a total saving of GBP243,000 in the quarter.

-- Dividend cancellation - The Group decided to cancel the dividend payment for 2020, which has conserved GBP6m of cash.

-- Deferral of VAT payments - The Group has deferred GBP936,000 of VAT payments between March and June 2020. These are now payable by 31 March 2021.

Employee remuneration revisions - The decision was made to cancel all annual pay reviews, make no awards for FY2019/20 under the company wide annual bonus plan, and to postpone the leadership team's share incentive awards for the year ended 31 March 2020.

In addition to the above actions that have already been taken, management have reviewed the cost base of the business in order to identify any further potential savings.

Forecasting

Five scenarios have been modelled in order to assess the potential impact of the Covid-19 pandemic on the results of the Group going forward. The key variables that are altered between scenarios are: corporate and HSV demand, Christmas Savers order book cancellations and reductions, and paper and card redemptions. The scenarios model the upcoming two year period, with specific focus on the twelve months from the signing of the annual report and accounts. The base case was approved by the Board. Management concluded that this base case reflected their best estimate of the likely impact of Covid-19, with initial trading slightly ahead, and this base case has also been used in the financing discussions with the banks.

Base case scenario

The base case scenario, assumes decreases in corporate and HSV billings against the initial forecast of 60 per cent in quarter one of the year ending 31 March 2021, with a gradual recovery through the financial year to 25 per cent down in quarter four. In quarter one and two of the year ending 31 March 2022 (which goes just beyond the twelve month going concern window from signing of the accounts), growth of 40 per cent against the 2021 forecast is assumed. The reduction in Christmas Savers in year one is 11 per cent.

The actual results for quarter one are slightly ahead of the base case, with overall corporate and HSV billings decreasing by 48 per cent compared to the 60 per cent assumed. In addition, July trading is ahead of forecast. This gives the Group confidence that the base case scenario is currently the best estimate and minimises the likelihood of any downside risks modelled within the other scenarios.

From a going concern perspective, the monthly forecasting of the Group's free cash balance in this scenario is the key area for consideration, as liquidity is the principal going concern risk. The base case, before usage of the RCF, shows a negative free cash balance in July 2021, recovering by September 2021.

Downside scenario

In addition to the base case, management also considered the downside scenario that assumed decreases in corporate and HSV billings against the initial forecast of 75 per cent in quarter one of the year ending 31 March 2021, with a gradual recovery through the financial year to 25 per cent down in quarter four. In quarter one and two of the year ending 31 March 2022, growth of 40 per cent against the 2021 forecast is assumed. The reduction in Christmas Savers in year one is 14 per cent. This forecast a negative free cash balance, before usage of the RCF, in June 2021.

Further actions possible

Management has identified further actions which could be freely implemented in order to conserve cash. These actions do not include any staff redundancies other those being consulted on in respect of the closure of the fulfilment business.

These savings include:

   --      reduction in discretionary consultancy and IT costs; 
   --      delaying the implementation of the new ERP system; and 
   --      cancelling the bonus for the year ending 31 March 2021. 

These were overlaid net of additional costs, including those associated with the closure of the fulfilment business.

The overall impact of these actions is to bolster the cash position of the Group, with the base case, before usage of the RCF, showing a small shortfall in August 2021.

New financing

The Group has access to a recently agreed committed RCF of GBP15m, with an additional uncommitted accordion of GBP10m.

With the RCF in place, and having cancelled the final dividend payment, the directors consider that sufficient headroom exists to cover any negative sensitivities of COVID-19 in both the base case and downside scenario.

The following covenants are in place with regards to the RCF:

-- Leverage/net debt cover - debt must not be greater than three times the last twelve months (LTM) rolling earnings before interest, taxation, depreciation and amortisation (EBITDA);

-- Interest cover - LTM rolling EBITDA must not be less than four times the LTM rolling interest charge. This is expected to be approximately GBP50,000 per month, resulting in a LTM rolling interest charge of GBP0.6m, meaning LTM rolling EBITDA must not fall below GBP2.4m; and

-- Christmas Savers cash - requires that Christmas Savers cash cannot be lower than monies in advance.

A LTM basis is used due to the seasonality of the Group's business. The leverage/net debt cover and interest cover covenants are assessed on a biannual basis starting in March 2021. The Christmas savers cash covenant is measured quarterly starting March 2021.

With the RCF in place, in line with the base case forecast, it is not envisaged that the Group will draw down on the facility until July 2021. The Group is forecast to be in full compliance with the three covenants throughout the twelve month period from the signing of the annual report and accounts, with sufficient headroom in place in both the base case and downside scenarios.

Reverse Stress Tests

Several reverse stress tests have been completed. These allow management to assess their current financial resources and the likelihood that such a 'business-breaking' scenario would occur.

Reverse stress tests were run in respect of accelerated voucher redemption, reduced voucher billings and reduced Corporate and HSV billings (across vouchers, cards and codes). Each stress test brought forward the timing at which the RCF was required within the business. In each test, with the RCF in place and in some cases with further mitigating actions, each position could be managed, albeit the covenants currently agreed would be breached. However, management were satisfied that each reverse stress test was highly unlikely due to the extreme nature of the sensitivity required.

Conclusion

The directors have carefully considered the base case, downside scenario, current trading and trends since the year end and the assessment of the reverse stress tests. In light of the newly agreed GBP15m RCF, 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 consolidated financial statements.

Risk Factors

Financial risks

 
Risk area                                Potential impact                        Mitigation 
-------------------------------------    ------------------------------------    ------------------------------------- 
Group funding                            The Group, like many other              The Group manages its capital to 
                                         companies, depends on its ability to    safeguard its ability to operate as a 
                                         continue to service its debts           going concern. The 
                                         as they fall due and to have access     Group has access to funds for working 
                                         to finance where this is necessary.     capital from the PPPT for a defined 
                                                                                 period in the year, 
                                                                                 although the Group has not used this 
                                                                                 facility in either of the last two 
                                                                                 years. 
 
                                                                                 The Group have secured a 5 year RCF 
                                                                                 which will provide additional 
                                                                                 financial flexibility. In 
                                                                                 addition the Group has a high level 
                                                                                 of visibility of future revenue 
                                                                                 streams from some of its 
                                                                                 Consumer business. The funding 
                                                                                 requirements of the business are 
                                                                                 continually reforecast to 
                                                                                 ensure that sufficient liquidity 
                                                                                 exists to support its operations and 
                                                                                 future plans. 
-------------------------------------    ------------------------------------    ------------------------------------- 
Treasury risks                           The Group has significant funds on      The Group treasury policy ensures 
                                         deposit and as such is exposed to       that funds are only placed with and 
                                         interest rate risk, counterparty        spread between high 
                                         risk and exchange rate movements.       quality counterparties and where 
                                                                                 appropriate any exchange rate 
                                                                                 exposure is managed, utilising 
                                                                                 forward contracts, to minimise any 
                                                                                 potential impact. Some funds are 
                                                                                 placed on fixed term deposits 
                                                                                 to mitigate interest rate 
                                                                                 fluctuations. 
-------------------------------------    ------------------------------------    ------------------------------------- 
Banking system                           Disruption to the banking system        The Group seeks wherever possible to 
                                         would adversely impact on the           offer the widest possible range of 
                                         Group's ability to collect              payment options to 
                                         payments from customers and could       customers to reduce the potential 
                                         adversely affect the Group's cash       impact of failure of a single payment 
                                         position.                               route. 
-------------------------------------    ------------------------------------    ------------------------------------- 
Pension funding                          The Group may be required to            The Group's pension schemes are 
                                         increase its contributions to cover     closed to future benefit accrual 
                                         any funding shortfalls.                 related to service. Funding 
                                                                                 rates are in accordance with the 
                                                                                 agreements reached with the trustees 
                                                                                 after consultation with 
                                                                                 the scheme actuary. 
-------------------------------------    ------------------------------------    ------------------------------------- 
Financial services and other market      The business model may be               The Group has a regulatory team that 
regulation                               compromised by changes in existing      monitors and enforces compliance with 
                                         regulation or by the introduction       existing regulations 
                                         of new regulation. Possible new         and keeps the Group up to date with 
                                         regulation could include a              impending regulation. The Group 
                                         requirement to ring fence funds         shares the objectives 
                                         for vouchers sold to consumers. This    of Government in treating customers 
                                         would adversely affect the Group's      fairly and in the protection of 
                                         cash position.                          customer prepayments. 
                                                                                 The Group operates a number of trusts 
                                                                                 to safeguard funds held on behalf of 
                                                                                 customers. 
-------------------------------------    ------------------------------------    ------------------------------------- 
Credit risks                             Failure of one or more customers and    Customers are given an appropriate 
                                         the risk of default by credit           level of credit based on their 
                                         customers due to reduced                trading history and financial 
                                         economic activity.                      status, and a prudent approach is 
                                                                                 adopted towards credit control. 
                                                                                 Credit insurance is used in the 
                                                                                 majority of cases where customers do 
                                                                                 not pay in advance. 
-------------------------------------    ------------------------------------    ------------------------------------- 
 

Operational risks

 
Risk area                                Potential impact                         Mitigation 
-------------------------------------    -------------------------------------    ------------------------------------ 
Business continuity                      Failure to provide adequate service      The Group has a hybrid technology 
                                         levels to customers, retail partners     resiliency strategy incorporating on 
                                         or other suppliers,                      premise and Cloud high 
                                         resulting in a failure to maintain       availability services. We have three 
                                         services that generate revenue.          separate data/comms centres and a 
                                                                                  remote recovery site 
                                                                                  for core data and infrastructure to 
                                                                                  ensure that service is maintained in 
                                                                                  the event of a site 
                                                                                  loss event. We have implemented 
                                                                                  Microsoft Office 365 which supports 
                                                                                  full remote working capability 
                                                                                  for all office based staff. 
                                                                                  Our focus is on the elimination of 
                                                                                  any single point of failure in our 
                                                                                  IT systems. 
                                                                                  The Group has decided to upgrade its 
                                                                                  IT Systems by implementing a new ERP 
                                                                                  system, Microsoft 
                                                                                  Dynamics, which will provide 
                                         There is a risk that an attack on our    scalability, resilience and 
                                         infrastructure by an individual or       efficiency. 
                                         Group could be successful 
                                         and impact the availability of           The Group plans and tests its 
                                         critical systems.                        business continuity procedures in 
                                                                                  preparation for catastrophic 
 Cyber security                                                                   events and also to deal with the 
                                                                                  existence of counterfeit vouchers or 
                                                                                  cards. 
 
                                         Incorrect data retention, data           Our infrastructure has a layered 
                                         management or data loss with             approach to cybersecurity with 
                                         customer, financial, regulatory,         proactive external and internal 
                                         reputational impact                      monitoring and alerting designed to 
                                                                                  prevent unauthorised access and 
                                                                                  active defence to reduce 
                                                                                  the likelihood and impact of a 
 Data management                                                                  successful attack. We are ISO 27001 
                                                                                  certified. 
 
                                         Hardware and software obsolescence 
                                         causing system failure with customer, 
                                         financial, regulatory,                   We have implemented a new Data 
                                         reputational impact                      Warehouse with automated data 
                                                                                  cleansing and active data management 
                                                                                  per GDPR rules; we have Active Data 
                                                                                  loss prevention protocols in 
 Technology risk                                                                  messaging platforms and have 
                                         Implementation of new hardware,          deployed Microsoft Office 365 with 
                                         software, managed services causing       higher encryption standards; we are 
                                         system failure with customer,            PCI and ISO 27001 certified 
                                         financial, regulatory, reputational 
                                         impact 
 
                                                                                  The Group is actively addressing 
                                                                                  hardware and software obsolescence 
                                                                                  and is implementing a 
                                                                                  new ERP system, Microsoft Dynamics 
                                                                                  as well as hybrid Cloud solutions 
                                                                                  which will improve scalability, 
                                                                                  resilience and efficiency 
 
                                                                                  Developed and purchased software and 
                                                                                  services are extensively tested 
                                                                                  prior to implementation. 
                                                                                  There is a robust vendor management 
                                                                                  process for critical service 
                                                                                  suppliers. 
-------------------------------------    -------------------------------------    ------------------------------------ 
Loss of key management                   The Group depends on its directors       Existing key appointments are 
                                         and key personnel. The loss of the       rewarded with competitive 
                                         services of any directors                remuneration packages including long 
                                         or other key employees could damage      term incentives linked to the 
                                         the Group's business, financial          Group's performance and shareholder 
                                         condition and results.                   return. 
-------------------------------------    -------------------------------------    ------------------------------------ 
Relationships with high street and       The Group is dependent upon the          The Group has a dedicated team of 
online retailers                         success of its Love2shop voucher and     managers whose role it is to ensure 
                                         flexecash(R) card. These                 that the Group's products 
                                         products only operate provided the       have a full range of retailers. They 
                                         participating retailers continue to      also work closely with all retailers 
                                         accept them as payment                   to promote their 
                                         for goods or services provided. The      businesses to our customers who 
                                         failure of one or more participating     utilise our vouchers and cards to 
                                         retailers could make                     drive forward incremental 
                                         these products less attractive to        sales to their retail outlets. 
                                         customers.                               Contracts which provide minimum 
                                                                                  notice periods for withdrawal 
                                                                                  are in place with all retailers and 
                                                                                  are designed to mitigate any 
                                                                                  potential impact on our business. 
                                                                                  We are a Mastercard issuer and use 
                                                                                  the services of a transaction 
                                                                                  processor for some of our 
                                                                                  products to be accepted at 
                                                                                  retailers. 
-------------------------------------    -------------------------------------    ------------------------------------ 
Failure of the distribution network      The failure of the distribution          Wherever possible the Group seeks to 
                                         network during the Christmas period,     utilise a wide range of 
                                         for example a Post Office                geographically spread carriers 
                                         strike, road network disruption or       to mitigate the failure of a single 
                                         fuel shortages could adversely impact    operator. 
                                         the results and reputation 
                                         of Appreciate's brands.                  The strategy towards digital will 
                                                                                  also help mitigate this risk. 
-------------------------------------    -------------------------------------    ------------------------------------ 
Brand perception and reputation          Adverse market perception in relation    Operation of a process of continual 
                                         to the Group's products or services,     review of all marketing media, 
                                         for example, following                   material and websites to 
                                         the collapse of a competitor. This       promote transparency to customers. 
                                         could result in a downturn in demand     Extensive testing and rigorous 
                                         for its products and                     internal controls exist for all 
                                         services.                                Group systems to maintain continuity 
                                                                                  of online customer service. 
                                                                                  Our brand strategy has been 
                                                                                  thoroughly reviewed. 
-------------------------------------    -------------------------------------    ------------------------------------ 
Promotional activity                     The success of the Group's annual        Detailed management processes that 
                                         promotional campaign is essential to     are designed to optimise the cost of 
                                         ensure the continued                     recruiting customers 
                                         recruitment of customers. Failure to     are in place. 
                                         recruit would result in loss of 
                                         revenue to the Group. 
                                         Promotional activity must also be 
                                         cost effective. 
-------------------------------------    -------------------------------------    ------------------------------------ 
Competition                              Loss of margins or market share          The Group has a broad base of 
                                         arising from increased activity from     customers and no single customer 
                                         competitors.                             represents more than 4 per 
                                                                                  cent of total customer billings. 
                                                                                  Significant resources are dedicated 
                                                                                  to developing and maintaining strong 
                                                                                  relationships with 
                                                                                  customers and to developing new and 
                                                                                  innovative products which meet their 
                                                                                  precise needs. 
-------------------------------------    -------------------------------------    ------------------------------------ 
Coronavirus (COVID-19)                   Coronavirus poses a threat to both       Plans for business continuity, 
                                         the health                               working practices, staff deployment 
                                         of employees and the businesses of       and welfare across sites, 
                                         Appreciate Group.                        working from home and hygiene 
                                                                                  precautions have been implemented. 
                                                                                  They are reviewed on an ongoing 
                                                                                  basis. 
 
                                                                                  The financial impact upon the 
                                                                                  business is monitored closely. We 
                                                                                  have modelled various financial 
                                                                                  scenarios to cover, for example, 
                                                                                  liquidity risk. They contain 
                                                                                  mitigating actions such as obtaining 
                                                                                  bank finance or altering the mix of 
                                                                                  products sold. We have added to our 
                                                                                  range of digital products 
                                                                                  as part of our strategy. For further 
                                                                                  details on how we model the 
                                                                                  businesses cash requirements, 
                                                                                  please see the Financial Review. 
 
                                                                                  The closure during lockdown of high 
                                                                                  street stores may prevent the 
                                                                                  receipt and redemption of 
                                                                                  our paper vouchers. We continued to 
                                                                                  receive and redeem vouchers for 
                                                                                  essential stores on a 
                                                                                  limited service basis during 
                                                                                  lockdown, with the safety of our 
                                                                                  staff of paramount concern, 
                                                                                  and our operations will return to 
                                                                                  normal, again with the safety of our 
                                                                                  staff of paramount 
                                                                                  concern, as high street shops 
                                                                                  re-open. 
 
                                                                                  The potential impact of coronavirus 
                                                                                  on our production, warehousing and 
                                                                                  distribution facilities 
                                                                                  has been assessed. 
 
                                                                                  We are reviewing our "Working from 
                                                                                  Home" policy and procedures and will 
                                                                                  only require all staff 
                                                                                  to return to work when it is safe to 
                                                                                  do so. 
 
                                                                                  If there is a "second wave" of the 
                                                                                  virus we believe all relevant staff 
                                                                                  can work from home. 
                                                                                  If the high street is closed with 
                                                                                  only essential shops opening then we 
                                                                                  can offer a limited 
                                                                                  service in order for customers to 
                                                                                  use our products to purchase 
                                                                                  essential items. We will also 
                                                                                  continue to enhance our digital 
                                                                                  product offering accordingly. 
-------------------------------------    -------------------------------------    ------------------------------------ 
 

Appreciate Group plc

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

FOR THE YEAR TO 31 MARCH 2019

 
                                                                     2020       2019 
                                                         Notes    GBP'000    GBP'000 
 
 Billings                                                    6    419,857    426,901 
                                                                ---------  --------- 
 
 Revenue                                                     6 
 
   *    Goods - Single retailer redemption products                62,142     55,624 
 
   *    Other goods                                                 6,240      7,511 
 
   *    Services - Multi-retailer redemption products              37,870     41,111 
 
   *    Other services                                              6,371      6,119 
 
   *    Other                                                         101         29 
                                                                ---------  --------- 
                                                                  112,724    110,394 
 
 Cost of sales excluding exceptional 
  items                                                          (79,778)   (79,117) 
 Impairment of obsolete stock                               11      (124)          - 
                                                                ---------  --------- 
 Gross profit                                                      32,822     31,277 
 Distribution costs                                               (2,838)    (2,934) 
 Administrative expenses                                         (20,036)   (17,401) 
 
 Impairment of property, plant and 
  equipment                                                 10      (163)    (1,210) 
 Impairment of assets held for sale                         12    (1,650)          - 
 Impairment of goodwill                                      9    (1,316)          - 
 Redundancy costs                                           14      (423)          - 
                                                                ---------  --------- 
 Operating profit                                                   6,396      9,732 
 
 Finance income                                                     1,481      1,572 
 Finance costs                                                      (177)          - 
                                                                ---------  --------- 
 Profit before taxation                                             7,700     11,304 
 Taxation                                                         (2,189)    (2,422) 
                                                                ---------  --------- 
 Profit for the year attributable 
  to equity holders of the parent                                   5,511      8,882 
                                                                ---------  --------- 
 
 
 Earnings per share    8 
 : basic                   2.96p   4.78p 
 : diluted                 2.96p   4.77p 
 
 

Appreciate Group plc

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR TO 31 MARCH 2020

 
                                                            2020      2019 
                                                         GBP'000   GBP'000 
 
 Profit for the year                                       5,511     8,882 
 Other comprehensive income/(expense) 
 Items that will not be reclassified to profit 
  or loss: 
  Remeasurement of defined benefit pension 
  schemes                                                  2,235   (1,009) 
 Deferred tax on defined benefit pension schemes           (383)       172 
                                                        --------  -------- 
                                                           1,852     (837) 
                                                        --------  -------- 
 Items that may be reclassified subsequently 
  to profit or loss: 
 Foreign exchange translation differences                     18       (3) 
 
 Other comprehensive income/(expense) for 
  the year net of tax                                      1,870     (840) 
                                                        --------  -------- 
 
 Total comprehensive income for the year attributable 
  to equity holders of the parent                          7,381     8,042 
                                                        --------  -------- 
 

Appreciate Group plc

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2020

 
                                                           As at          As at 
                                                        31.03.20       31.03.19 
                                     Notes               GBP'000        GBP'000 
 Assets 
 Non-current assets 
 Goodwill                                9                   800          2,168 
 Other intangible assets                                   4,757          2,295 
 Property, plant and equipment          10                 2,662          6,216 
 Right of use assets                    13                 3,799              - 
 Retirement benefit asset                                  4,206          1,927 
                                                          16,224         12,606 
                                            --------------------  ------------- 
 Current assets 
 Inventories                            11                 2,840          4,574 
 Trade and other receivables                               9,457         12,582 
 Tax receivable                                              266              - 
 Other financial assets                                        -            200 
 Monies held in trust                                    102,693         99,251 
 Cash                                                     29,632         36,868 
                                            --------------------  ------------- 
                                                         144,888        153,475 
 Assets held for sale                   12                 3,153              - 
                                                         148,041        153,475 
                                            --------------------  ------------- 
 
 Total assets                                            164,265        166,081 
                                            --------------------  ------------- 
 
   Liabilities 
 Current liabilities 
 Bank overdraft                                                -        (2,305) 
 Trade payables                                         (57,150)       (61,191) 
 Payables in respect of cards and 
  vouchers                                              (17,060)       (14,193) 
 Deferred income                                         (7,359)        (6,983) 
 Other payables                                          (5,294)        (5,280) 
 Tax payable                                                   -          (580) 
 Provisions                                             (53,802)       (58,286) 
                                            --------------------  ------------- 
                                                       (140,665)      (148,818) 
                                            --------------------  ------------- 
 Non-current liabilities 
 Deferred tax liability                                  (1,121)          (553) 
 Lease liabilities                      13               (4,132)              - 
                                            --------------------  ------------- 
                                                         (5,253)          (553) 
                                            --------------------  ------------- 
 
 Total liabilities                                     (145,918)      (149,371) 
                                            --------------------  ------------- 
 
 
 Net assets                                               18,347         16,710 
                                            --------------------  ------------- 
 
   Equity attributable to equity 
   holders of the parent 
 
 
   Share capital                                           3,727          3,727 
 Share premium                                             6,470          6,470 
 Retained earnings                                         8,461          6,824 
 Other reserves                                            (311)          (311) 
 
 Total equity                                             18,347         16,710 
                                            --------------------  ------------- 
 

Appreciate Group plc

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 2019                        3,727      6,470       (311)       6,824    16,710 
 
 Total comprehensive income for 
  the year 
 Profit                                             -          -           -       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 
                                            ---------  ---------  ----------  ----------  -------- 
 
 Balance at 1 April 2018                        3,711      6,137       (311)       4,488    14,025 
 
 Total comprehensive income for 
  the year 
 Profit as restated                                 -          -           -       8,882     8,882 
 
 Other comprehensive expense 
 Remeasurement of defined benefit 
  pension schemes                                   -          -           -     (1,009)   (1,009) 
 Tax on defined benefit pension 
  schemes                                           -          -           -         172       172 
 Foreign exchange translation adjustments           -          -           -         (3)       (3) 
                                            ---------  ---------  ----------  ----------  -------- 
 Total other comprehensive income                   -          -           -       (840)     (840) 
                                            ---------  ---------  ----------  ----------  -------- 
 Total comprehensive income for 
  the year                                          -          -           -       8,042     8,042 
                                            ---------  ---------  ----------  ----------  -------- 
 
 Transactions with owners, recorded 
  directly in equity 
 Equity settled share-based payment 
  transactions                                      -          -           -          11        11 
 Tax on equity settled share-based 
  payment transactions                              -          -           -        (45)      (45) 
 Exercise of share options                         12        333           -           -       345 
 LTIP shares awarded                                4          -           -         (4)         - 
 Dividends                                          -          -           -     (5,668)   (5,668) 
                                            ---------  ---------  ----------  ----------  -------- 
 Total contributions by and distribution 
  to owners                                        16        333           -     (5,706)   (5,357) 
                                            ---------  ---------  ----------  ----------  -------- 
 
 Balance at 31 March 2019                       3,727      6,470       (311)       6,824    16,710 
                                            ---------  ---------  ----------  ----------  -------- 
 

Other reserves relate to the acquisition of a minority interest in a subsidiary.

Appreciate Group plc

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR TO 31 MARCH 2020

 
                                                      2020      2019 
                                           Notes   GBP'000   GBP'000 
 Cash flows from operating activities 
 Cash generated from operations               16     6,866     6,874 
 Interest received                                   1,648     1,497 
 Interest paid                                         (8)         - 
 Tax paid                                          (2,864)   (1,576) 
                                                  --------  -------- 
 Net cash generated from operating 
  activities                                         5,642     6,795 
 
   Cash flows from investing activities 
 Proceeds from sale of property, 
  plant and equipment                                    1         - 
 Purchase of intangible assets                     (3,103)     (781) 
 Purchase of property, plant and 
  equipment                                        (1,927)     (371) 
 
 Net cash used in investing activities             (5,029)   (1,152) 
 
 Cash flows from financing activities 
 Lease incentive payment                               500         - 
 Payment of lease liabilities                         (81)         - 
 Proceeds from exercise of share 
  options                                                -       345 
 Dividends paid to shareholders                    (5,963)   (5,668) 
 Net cash used in financing activities             (5,544)   (5,323) 
                                                  --------  -------- 
 Net (decrease)/increase in cash 
  and cash equivalents                             (4,931)       320 
                                                  --------  -------- 
 
 Cash and cash equivalents at beginning 
  of period                                         34,563    34,243 
                                                  --------  -------- 
 
 Cash and cash equivalents at end 
  of period                                         29,632    34,563 
                                                  --------  -------- 
 
 Cash and cash equivalents comprise: 
 Cash                                               29,632    36,868 
 Bank overdrafts                                         -   (2,305) 
                                                  --------  -------- 
                                                    29,632    34,563 
                                                  --------  -------- 
 
   (1)   Basis of preparation 

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS's) as adopted by the European Union (EU) including International Financial Reporting Interpretations Committee (IFRIC) interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

Appreciate Group plc is incorporated and domiciled in the United Kingdom. The financial statements have been prepared under the historical cost convention, as modified by the accounting for financial instruments at fair value where required by IAS 39 Financial Instruments: Recognition and Measurement. The Group financial statements are presented in sterling and all values are rounded to the nearest thousand (GBP'000) except where otherwise stated.

The accounting policies have been applied consistently to all periods presented in these financial statements and by all Group entities.

   (2)   Going concern 

The financial statements are prepared on a going concern basis.

At the start of lockdown in March 2020, just like many businesses across the UK, the Group followed Government guidance and temporarily closed its distribution and warehouse facilities to help stop the spread of coronavirus. With no means to fulfil physical orders at that time the Group's focus shifted to digital products. In May 2020 the Valley Road facility reopened with social distancing procedures in place.

There has been a negative impact on trading for quarter one of the financial year ending 31 March 2021, with reductions in billings compared to the same period in the prior year of 45 per cent for corporate and 65 per cent for HSV, our website where we service both consumer and corporate customers. Redemptions have also significantly fallen, with an 80 per cent decrease for vouchers and 61 per cent decrease for cards and e-codes compared to quarter one of the prior year.

Despite this, as the year has progressed the month-on-month trend in billings has been encouraging, with significant improvement being shown in each successive month's results. Corporate and HSV billings for April 2020 were 35 per cent and 19 per cent respectively of April 2019 billings, whereas for June 2020 were 68 per cent and 54 per cent of the levels seen in June 2019.

The Group has taken action to conserve cash during this uncertain time and support its position as a going concern. These actions include the following:

-- 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 per cent by the Group. In quarter one of the financial year ending 31 March 2021, there were an average of 65 employees on furlough per month, for a total saving of GBP243,000 in the quarter.

-- Dividend cancellation - The Group decided to cancel the dividend payment for 2020, which has conserved GBP6m of cash.

-- Deferral of VAT payments - The Group has deferred GBP936,000 of VAT payments between March and June 2020. These are now payable by 31 March 2021.

-- Employee remuneration revisions - The decision was made to cancel all annual pay reviews, make no awards for FY2019/20 under the company wide annual bonus plan, and to postpone the leadership team's share incentive awards for the year ended 31 March 2020.

In addition to the above actions that have already been taken, management have reviewed the cost base of the business in order to identify any further potential savings.

Forecasting

Five scenarios have been modelled in order to assess the potential impact of the Covid-19 pandemic on the results of the Group going forward. The key variables that are altered between scenarios are: corporate and HSV demand, Christmas Savers order book cancellations and reductions, and paper and card redemptions. The scenarios model the upcoming two year period, with specific focus on the twelve months from the signing of the annual report and accounts. The base case was approved by the Board. Management concluded that this base case reflected their best estimate of the likely impact of Covid-19, with initial trading slightly ahead, and this base case has also been used in the financing discussions with the banks.

Base case scenario

The base case scenario, assumes decreases in corporate and HSV billings against the initial forecast of 60 per cent in quarter one of the year ending 31 March 2021, with a gradual recovery through the financial year to 25 per cent down in quarter four. In quarter one and two of the year ending 31 March 2022 (which goes just beyond the twelve month going concern window from signing of the accounts), growth of 40 per cent against the 2021 forecast is assumed. The reduction in Christmas Savers in year one is 11 per cent.

The actual results for quarter one are slightly ahead of the base case, with overall corporate and HSV billings decreasing by 48 per cent compared to the 60 per cent assumed. In addition, July trading is ahead of forecast. This gives the Group confidence that the base case scenario is currently the best estimate and minimises the likelihood of any downside risks modelled within the other scenarios.

From a going concern perspective, the monthly forecasting of the Group's free cash balance in this scenario is the key area for consideration, as liquidity is the principal going concern risk. The base case, before usage of the RCF, shows a negative free cash balance in July 2021, recovering by September 2021.

Downside scenario

In addition to the base case, management also considered the downside scenario that assumed decreases in corporate and HSV billings against the initial forecast of 75 per cent in quarter one of the year ending 31 March 2021, with a gradual recovery through the financial year to 25 per cent down in quarter four. In quarter one and two of the year ending 31 March 2022, growth of 40 per cent against the 2021 forecast is assumed. The reduction in Christmas Savers in year one is 14 per cent. This forecast a negative free cash balance, before usage of the RCF, in June 2021.

Further actions possible

Management has identified further actions which could be freely implemented in order to conserve cash. These actions do not include any staff redundancies other those being consulted on in respect of the closure of the fulfilment business.

These savings include:

   --      reduction in discretionary consultancy and IT costs; 
   --      delaying the implementation of the new ERP system; and 
   --      cancelling the bonus for the year ending 31 March 2021. 

These were overlaid net of additional costs, including those associated with the closure of the fulfilment business.

The overall impact of these actions is to bolster the cash position of the Group, with the base case, before usage of the RCF, showing a small shortfall in August 2021.

New financing

The Group has access to a recently agreed committed RCF of GBP15m, with an additional uncommitted accordion of GBP10m.

With the RCF in place, and having cancelled the final dividend payment, the directors consider that sufficient headroom exists to cover any negative sensitivities of COVID-19 in both the base case and downside scenario.

The following covenants are in place with regards to the RCF:

-- Leverage/net debt cover - debt must not be greater than three times the last twelve months (LTM) rolling earnings before interest, taxation, depreciation and amortisation (EBITDA);

-- Interest cover - LTM rolling EBITDA must not be less than four times the LTM rolling interest charge. This is expected to be approximately GBP50,000 per month, resulting in a LTM rolling interest charge of GBP0.6m, meaning LTM rolling EBITDA must not fall below GBP2.4m; and

-- Christmas Savers cash - requires that Christmas Savers cash cannot be lower than monies in advance.

A LTM basis is used due to the seasonality of the Group's business. The leverage/net debt cover and interest cover covenants are assessed on a biannual basis starting in March 2021. The Christmas savers cash covenant is measured quarterly starting March 2021.

With the RCF in place, in line with the base case forecast, it is not envisaged that the Group will draw down on the facility until July 2021. The Group is forecast to be in full compliance with the three covenants throughout the twelve month period from the signing of the annual report and accounts, with sufficient headroom in place in both the base case and downside scenarios.

Reverse Stress Tests

Several reverse stress tests have been completed. These allow management to assess their current financial resources and the likelihood that such a 'business-breaking' scenario would occur.

Reverse stress tests were run in respect of accelerated voucher redemption, reduced voucher billings and reduced Corporate and HSV billings (across vouchers, cards and codes). Each stress test brought forward the timing at which the RCF was required within the business. In each test, with the RCF in place and in some cases with further mitigating actions, each position could be managed, albeit the covenants currently agreed would be breached. However, management were satisfied that each reverse stress test was highly unlikely due to the extreme nature of the sensitivity required.

Conclusion

The directors have carefully considered the base case, downside scenario, current trading and trends since the year end and the assessment of the reverse stress tests. In light of the newly agreed GBP15m RCF, 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 consolidated financial statements.

   (3)   Changes to International Financial Reporting Standards 

Interpretations and standards which became effective during the year

The following accounting standards and interpretations, that are relevant to the Group, became effective during the year:

 
 
                                                       Effective 
                                                        from accounting 
                                                        period beginning 
                                                        on or after: 
  IFRIC 23    Uncertainty over Income Tax Treatment    1 Jan 2019 
  IFRS 16     Leases                                   1 Jan 2019 
 

The impact of IFRS 16 on the financial statements is shown in the leases accounting policy below.

IFRIC 23 has not had a material impact upon the Group's financial performance or position.

Interpretations and standards which have been issued and are not yet effective

Amendments to IAS 1 and IAS 8: Definition of Material

In October 2018, the IASB issued amendments to IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to align the definition of 'material' across the standards and to clarify certain aspects of the definition. The new definition states that, 'Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.'.

The amendments to the definition of material are not expected to have a significant impact on the Group's consolidated financial statements.

   (4)   Accounting policies 

The financial information in this preliminary announcement has been prepared in accordance with the accounting policies described in the annual report and accounts for the year ended 31 March 2019, except for those policies described below. The annual report and accounts for the year ended 31 March 2019 can be found on our website at www.appreciategroup.co.uk .

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 statement of profit or loss. 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

Provisions - Dilapidations

An amount is provided to cover the future cost of removing leasehold improvements and restoring the Group's leased offices to their previous condition. Per IAS16.16, if an entity installs leasehold improvements that it is later obligated to remove, the obligating event is the installation of the leasehold improvements, and therefore the debit side of this provision is recorded as part of the leasehold improvements in the property, plant and equipment note.

Leases

With effect from 1 April 2019 the Group has adopted IFRS 16, Leases which supersedes IAS 17: Leases, IFRIC 4: Determining Whether an Arrangement Contains a Lease, SIC 15: Operating Leases - Incentives and SIC 27: Evaluating the Substance of Transactions in the Legal Form of a Lease. The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to recognise most leases on the statement of financial position.

The Group has applied a modified retrospective approach when transitioning to the new standard. Under this approach, the standard is applied retrospectively and the cumulative effect of initial application of the standard is recognised at the date of adoption, and no restatements have been made in respect of prior periods, as the modified retrospective method eliminates the need to restate comparative information on transition.

Policy applicable before 1 April 2019

Operating lease rentals are charged to the statement of profit or loss on a straight-line basis over the period of the lease.

Policy applicable from 1 April 2019

At inception of a contract the Group assesses whether a contract is, or contains, a lease. A contract is, or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. This policy is applied to contracts entered into, or modified on or after 1 April 2019.

At inception or on reassessment of a contract that contains a lease component, the Group allocates the consideration in the contact to each lease component on the basis of their relative standalone price. However, for leases of land and buildings in which it is a lessee, the Group has elected not to segregate non-lease components and account for the lease and non-lease components as a single lease component.

Definition of a lease

Previously the Group determined at inception whether an arrangement is, or contains a lease under IFRIC 4. Under IFRS16, the Group assesses whether a contract is or contains a lease based on the definition of a lease.

On transition, the Group performed a review of all major contracts to determine whether any contracts not defined as a lease under IAS17 and IFRIC 4, should be reassessed as a lease under IFRS16. After a comprehensive contract review the Group determined that there were no contracts not defined as a lease under IAS17 and IFRIC 4 that should be redefined as a lease under IFRS16.

As a lessee

As a lessee, the Group previously classified leases as operating or finance leases based on its assessment of whether the lease transferred significantly all of the risks and rewards incidental to ownership of the underlying asset to the Group.

Under IFRS 16 the Group recognises a right-of-use-asset (ROUA) and a lease liability (LL) at the lease commencement date. The right-of-use-asset is initially measured at cost, which comprises:

   --      The amount of the initial measurement of the LL; 
   --      Any lease payments made at or before the commencement date, less any lease incentives; 
   --      Any initial direct cost incurred by the lessee; 

-- An estimate of costs to be incurred by the lessee in restoring the site on which the assets are located.

The right-of-use-asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term. In addition, the right-of-use-asset is periodically tested for impairment (see 'Impairment of property, plant and equipment and intangibles' accounting policy) , and adjusted for certain remeasurements of the lease liability.

At transition, right-of-use-assets were measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.

Lease payments included in the measurement of the lease liability comprise the following:

   --      fixed payments including in substance fixed payments, less any lease incentives receivable; 

-- variable lease payments that depend on an index or rate, initially measured using the index or rate as at the commencement date;

   --      amounts expected to be payable under a residual value guarantee; and 

-- the exercise price under a purchase option that the Group is reasonably certain to exercise an option, and penalties for early termination unless the Group is reasonably certain not to terminate early.

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change of index or rate, if there is a change in future lease payments arising from a change in the Group's estimate of the amount payable under a residual value guarantee, if there is a change in lease term, or if the Group changes its assessment of whether it will exercise a purchase extension or termination option.

At transition, lease liabilities were measured at the present value of the remaining lease payments, discounted at the Group's incremental borrowing rate as at 1 April 2019.

Practical expedients taken

The Group used the following practical expedients when applying IFRS 16 to leases previously classified as operating leases under IAS 17.

-- Applied a single discount rate for a portfolio of leases with reasonably similar characteristics.

-- Relied on its assessment of whether leases are onerous immediately before the date of initial application

-- Applied the short-term leases exemptions to leases with a lease term that ends within 12 months of the date of initial application.

-- Excluded initial direct costs from measuring the right-of-use-assets and liabilities at the date of initial application.

-- Used hindsight in determining the lease term where the contract contained options to extend or terminate the lease.

Short term leases and leases of low value assets

The Group has elected not to recognise right-of-use-assets and lease liabilities for short term leases of plant & machinery that have a lease term of 12 months or less and leases of low value assets of less than GBP5,000 (being mainly storage space). The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

Under IAS 17

In the comparative period, as a lessee the leases were operating leases and were not recognised in the Group's statement of financial position. Payments made under operating leases were recognised on a straight-line basis over the term of the lease. Lease incentives received were recognised as an integral part of the lease expense, over the term of the lease.

As a lessor

When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease.

To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not then it is an operating lease. As part of this assessment, the Group considers certain indicators such as whether the lease is for the major part of the economic life of the asset.

When the Group is an intermediate lessor, it accounts for its interest in the head lease and sub-lease separately. It assesses the lease classification of the sub-lease with reference to the right-of-use-asset arising from the head lease, not with reference to the underlying asset. If a head lease is a short-term lease to which the Group applies the exemption described above, then it classifies the sub-lease as an operating lease.

If an arrangement contains a lease and a non-lease component, the Group applies IFRS 15 to allocate the consideration in the contract.

As at the transition date the Group did not act as a lessor. In November 2019 the Group sub-let a portion of an office building that it occupied under a lease commenced in February 2018. Under IFRS 16, the Group is required to assess the classification of the sub-lease with reference to the right-of-use-asset and not the underlying asset.

The Group applied IFRS 15 Revenue from Contracts with Customers to allocate consideration in the contract to each lease and non-lease component.

Impact on Financial Statements

On transition to IFRS 16, the Group recognised and presented separately on the balance sheet GBP125k of right-of-use-assets and GBP125k lease liabilities. The modified retrospective method applied by the Group eliminated the need to restate this comparative information upon transition.

When measuring lease liabilities, the Group discounted lease payments using its incremental borrowing rate at 1 April 2019. The weighted average applied rate is 5.25 per cent. The Incremental Borrowing Rate was calculated based upon an indicative borrowing rate from our bankers. In arriving at the rate charged due account was taken of the Group's current lack of borrowing, and the fact that the vast majority of the assets under lease were property.

Reconciliation of Prior Year Operating Lease Commitments to Lease Liabilities

 
            Description               Land and Buildings   Plant & Equipment    Total 
                                                 GBP'000             GBP'000   GBP'000 
                                     -------------------  ------------------  -------- 
 Operating Lease commitments 
  at 31 March 2019 as disclosed 
  in the Group's Consolidated 
  financial statements                               127                 119       246 
                                     -------------------  ------------------  -------- 
 Discount using the incremental 
  borrowing rate as at 31 March 
  2019                                               (6)                 (3)       (9) 
                                     -------------------  ------------------  -------- 
 Discounted using the incremental 
  borrowing rate as at 31 March 
  2019                                               121                 116       237 
                                     -------------------  ------------------  -------- 
 Lease payments made pre March 
  2019 relating to post March 
  2019 Period                                        (4)                   -       (4) 
                                     -------------------  ------------------  -------- 
 Commitments disclosed as 
  at 31 March 2019 for which 
  underlying assets and leases 
  became active during year 
  ended 31 March 2020, so included 
  within additions in the year                         -                (94)      (94) 
                                     -------------------  ------------------  -------- 
 Maintenance Costs in Lease 
  commitments                                                            (6)       (6) 
                                     -------------------  ------------------  -------- 
 Short term leases                                                       (8)       (8) 
                                     -------------------  ------------------  -------- 
 Lease Liabilities recognised 
  as at 1 April 2019                                 117                   8       125 
                                     -------------------  ------------------  -------- 
 

Billings

Billings represents the value of goods and services shipped and invoiced to customers during the year and is recorded net of VAT, rebates and discounts. Billings is an alternative performance measure, which the directors believe provides a more meaningful measure of the level of activity of the Group than revenue. This is due to revenue from multi-retailer redemption products being reported on a 'net' basis, whilst revenue from single retailer redemption products and other goods are reported on a 'gross' basis.

The reconciliation between billings and revenue is as follows:

 
                                                    2020        2019 
                                                 GBP'000     GBP'000 
--------------------------------------------  ----------  ---------- 
 Billings                                        419,857     426,901 
 Multi-retailer redemption products - gross 
  to net revenue recognition                   (306,574)   (315,305) 
 Timing of revenue recognition                     (559)     (1,202) 
--------------------------------------------  ----------  ---------- 
 Revenue                                         112,724     110,394 
--------------------------------------------  ----------  ---------- 
 
   (5)   Key judgements and estimates 

The preparation of financial statements in conformity with IFRS requires the use of estimates and judgements that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates.

Judgements

In applying the accounting policies, management has made the following judgements:

Pensions

The Group has two defined benefit pension schemes where the fair value of plan assets exceeds the present value of the scheme liabilities. The Group has determined, based on an evaluation of the rules of each of the pension schemes and legal advice, that it has a right to a refund during the life of the plan or when the plan is settled, that is not conditional upon factors beyond the entity's control.

Revenue

In applying the principles of IFRS 15, management have considered whether the Group is a principal or agent when it supplies multi-retailer redemption products. Having assessed the nature of the Group's contractual relationships with retailers, the directors have concluded that the Group acts as an agent in exchange for a service fee as it does not control the transfer of goods or services by the retailer to the product holder upon redemption. This results in 'net' revenue recognition as described in the revenue recognition accounting policy.

For cardholder fees and breakage associated with multi-retailer redemption products, the Group acts as a principal in its contractual relationship with the product holders. This results in 'gross' revenue recognition as described in the revenue recognition accounting policy.

Under IFRS 15, e ntities are required to disclose disaggregated revenue information to illustrate how the nature, amount, timing and uncertainty about revenue and cash flows are affected by economic factors. Management have considered this requirement and have disclosed information with regard to type of good or service, market or type of customer, timing of transfer of goods or services and geographical region. Management believe that this level of disaggregation is sufficient to satisfy the disclosure requirements of the standard.

Unredeemed cards

The directors have assessed the features of the Group's multi-retailer redemption products and concluded that unredeemed balances on corporate gifted cards do not meet the definition of a financial liability within the scope of IFRS 9. This is because the cards have expiry dates after which the card cannot be redeemed. The cards can also be redeemed with the Group for certain goods or services and cannot be redeemed in cash. As a result, the liabilities relating to these products are not within the scope of IFRS 9 and are instead measured in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

Land and buildings

An assessment was made whether the property asset at Valley Road was an asset held for sale at 30 September 2019. As the sale of the property was considered to be highly probable within 12 months, the property was classified as an asset held for sale. At 31 March 2020, a reassessment of this position took place and all of the criterial were met for the property to continue to be classed as an asset held for sale. This assessment included an exception to the one-year rule being taken under IFRS 5.9, as the COVID-19 pandemic had delayed the sale of the asset.

Determining the lease term of contracts with renewal and termination options - Group as lessee

The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.

The Group has one lease contract that includes extension and termination options. This is the new lease of floor 3 and 4, 20 Chapel Street Liverpool. The Group included the renewal period as part of the lease term, as in the year the Group has relocated the majority of its operations to the newly leased site in Liverpool City Centre. As a result of this, the lease extension is reasonably certain to be exercised.

Estimates

The key assumptions and other sources of estimation uncertainty at the reporting date are described below:

Provisions for unredeemed vouchers and cards

A provision is made in respect of unredeemed vouchers and cards. The provision is calculated by estimating anticipated amounts payable to retailers on redemption and the expected timing of payments. Historical data over a number of years and current trends are regularly reviewed and are used to prepare these estimates. Any differences to the estimates may necessitate a material adjustment to the level of the provision held in the statement of financial position. Management have considered the sensitivities of the key estimates and do not foresee that any likely change in these estimates will have a material impact on the size of the provision.

In the updated base case scenario, card and vouchers redemptions are assumed to decrease against the prior year redemptions for the same period by 50 per cent in Q1, 30 per cent in Q2, and then catch up to cumulative normal levels in Q3 and Q4, making up the Q1 and Q2 shortfall.

Post year end redemptions for the first quarter of the financial year ended 31 March 2021 have been lower than the 50 per cent decrease on prior year levels forecasted by the Group. The actual decrease in voucher redemptions was 80 per cent, and the actual decrease in card redemptions was 62 per cent, when compared to the corresponding quarter in the prior year. However, as redemptions are continuing to increase, and given that the base case scenario assumes a catch up by the end of the financial year, any impact of this would be negligible.

Breakage

For multi-retailer redemption products where the end user has no right of redemption (corporate gifted cards), the Group may expect to earn a breakage amount. In order to calculate the expected breakage amount, the Group estimates how many products will be fully redeemed and how many will be partially redeemed. For those which are partially redeemed, the Group estimates projected balances remaining on the products at expiry. Historical data and current trends regarding patterns of redemption and expiry are used to prepare the estimates. As redemption behaviour may differ by market, historical data and current trends are reviewed at this level. If the expected level of breakage were to change by 0.1 per cent, the impact on revenue for the reporting period would be GBP0.2m. Management have considered the sensitivity of this estimate and do not foresee that any likely change to the estimate will have a material impact on either the level of deferred income held in the statement of financial position or the amount of revenue for the reporting period.

Deferred income - Love2shop voucher redemption timing

Revenue for multi-retailer redemption products is recognised in proportion to actual redemption timing, generating deferred income balances until the point of redemption. For Love2shop vouchers, there is a time delay between the point of redemption and when they are physically returned to the Group for validation and accounting purposes. To negate the effects of this delay, an adjustment is made at the end of the reporting period, which estimates the value of vouchers already redeemed but not yet returned to the Group and records the associated revenue. Historical data over a number of years and current trends are used to prepare the estimate. Management have considered the sensitivity of this estimate and do not foresee that any likely change to the estimate will have a material impact on either the level of deferred income held in the statement of financial position or the amount of revenue for the reporting period.

Assets held for sale - Value of Valley Road site

A valuation was carried out as at 31 March 2020 in order to determine the fair value less costs to sell of the Valley Road site. This valuation was carried out on a vacant possession basis. This valuation resulted in the value of the asset being written down to GBP3,153k. Any differences to this estimate may necessitate a material adjustment to the value of the assets held for sale in the statement of financial position.

Goodwill

Goodwill arising on acquisition represents the difference between the consideration and the fair value of net assets acquired. Goodwill is not amortised, but is reviewed annually for impairment and whenever events or changes in circumstances indicate that the carrying value of the goodwill may not be receivable. The impairment review relies on a number of assumptions (see note 9 for details). Any differences to the assumptions made may necessitate a material adjustment to the level of goodwill held in the statement of financial position.

Other intangible Assets

At each reporting date the Group reviews the carrying value of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. The assessment of costs capitalised as intangible assets to generate future economic benefits: Judgement is applied in assessing whether costs incurred, both internal and external, will generate future economic benefits. Significant judgements and estimates are applied in determining the carrying value of the assets, including assumptions made in respect of the status of the programme each asset relates to, and there may be a range of possible outcomes when a programme is complex.

Incremental borrowing rate (IBR)

The Group cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. This rate was determined to be 5.25 per cent.

   (6)   Segmental analysis 

The Group's operations are divided into two principal operating segments:

-- Consumer - which represents sales to consumers, utilising the Group's Christmas savings offering and our website, highstreetvouchers.com; and

-- Corporate - comprising sales to businesses, offering primarily sales of the Love2shop voucher, flexecash(R) cards, Mastercards and e-codes in addition to other retailer vouchers.

All other segments are those items relating to the corporate activities of the Group which it is felt cannot be reasonably allocated to either business segment.

The amount included within the elimination column reflects products sold by the corporate segment to the consumer segment. They have been included in elimination so as to show the total revenue for both segments.

Finance income, finance costs and taxation are not allocated to individual segments as they are managed on a Group basis.

 
                                                               All other 
                                      Consumer     Corporate    segments     Elimination     Group 
 2020                                  GBP'000       GBP'000     GBP'000         GBP'000   GBP'000 
 Billings 
 External billings                     222,207       197,650           -               -   419,857 
 Inter-segment billings                      -       171,933           -       (171,933)         - 
                                   -----------  ------------  ----------  --------------  -------- 
 Total billings                        222,207       369,583           -       (171,933)   419,857 
                                   -----------  ------------  ----------  --------------  -------- 
 
 Revenue 
 External revenue                       62,447        50,277           -               -   112,724 
 Inter-segment revenue                       -        22,797           -        (22,797)         - 
                                   -----------  ------------  ----------  --------------  -------- 
 Total revenue                          62,447        73,074           -        (22,797)   112,724 
                                   -----------  ------------  ----------  --------------  -------- 
 
 Results 
 Segment operating profit/(loss)         5,327         6,581     (5,512)                     6,396 
                                   -----------  ------------  ----------  --------------  -------- 
 Finance income                                                                              1,481 
 Finance costs                                                                               (177) 
                                                                                          -------- 
 Profit before taxation                                                                      7,700 
 Taxation                                                                                  (2,189) 
                                                                                          -------- 
 Profit                                                                                      5,511 
                                                                                          -------- 
 

All other segments loss comprises primarily of staff costs and professional fees.

In arriving at segment operating profit/(loss) exceptional costs have been charged to the segments as follows:

 
                                                         All other 
                                Consumer     Corporate    segments     Group 
                                 GBP'000       GBP'000     GBP'000   GBP'000 
 Impairment of obsolete 
  stock                              124             -           -       124 
 Impairment of goodwill              434           882           -     1,316 
 Redundancy costs                    224           199           -       423 
 Impairment of Valley Road 
  site                                 -             -       1,813     1,813 
                             -----------  ------------  ----------  -------- 
 

An analysis of the Group's external revenue is as follows:

 
 
                                Consumer     Corporate      Group 
                                 GBP'000       GBP'000    GBP'000 
 Revenue from contracts 
  with customers 
 Goods - Single retailer 
  redemption products             31,227        30,915     62,142 
 Other goods                       6,153            87      6,240 
 Services - Multi-retailer 
  redemption products             22,591        15,279     37,870 
 Other services                    2,386         3,985      6,371 
 Other                                90            11        101 
                             -----------  ------------  --------- 
                                  62,447        50,277    112,724 
                             -----------  ------------  --------- 
 

The majority of revenue from contracts with customers is recognised at a point in time.

The Group has elected not to report on segment assets and liabilities as this information is not provided to the Chief Operating Decision Maker (CODM) and is not relevant to the CODM's decision making. In respect of Appreciate Group plc the CODM is regarded as the executive members of the Board of directors. Since the last reporting period the Group no longer segments the Statement of Financial Position due to rationalisation of accounting processes.

 
                                                               All other 
                                      Consumer     Corporate    segments     Elimination     Group 
 2019                                  GBP'000       GBP'000     GBP'000         GBP'000   GBP'000 
 Billings 
 External billings                     232,096       194,805           -               -   426,901 
 Inter-segment billings                      -       134,714           -       (134,714)         - 
                                   -----------  ------------  ----------  --------------  -------- 
 Total billings                        232,096       329,519           -       (134,714)   426,901 
                                   -----------  ------------  ----------  --------------  -------- 
 
 Revenue 
 External revenue                       58,886        51,508           -               -   110,394 
 Inter-segment revenue                       -        38,204           -        (38,204)         - 
                                   -----------  ------------  ----------  --------------  -------- 
 Total revenue                          58,886        89,712           -        (38,204)   110,394 
                                   -----------  ------------  ----------  --------------  -------- 
 
 Results 
 Segment operating profit/(loss)         6,809         7,789     (4,866)                     9,732 
                                   -----------  ------------  ----------  --------------  -------- 
 Finance income                                                                              1,572 
 Finance costs                                                                                   - 
                                                                                          -------- 
 Profit before taxation                                                                     11,304 
 Taxation                                                                                  (2,422) 
                                                                                          -------- 
 Profit                                                                                      8,882 
                                                                                          -------- 
 

All other segments loss comprises primarily of staff costs and professional fees.

In arriving at segment operating profit/(loss) exceptional costs have been charged to the segments as follows:

 
                                                           All other 
                                 Consumer      Corporate    segments     Group 
                                  GBP'000        GBP'000     GBP'000   GBP'000 
 Impairment of Valley Road 
  site                                  -              -       1,210     1,210 
                             ------------  -------------  ----------  -------- 
 

An analysis of the Group's external revenue is as follows:

 
 
                                Consumer     Corporate      Group 
                                 GBP'000       GBP'000    GBP'000 
 Revenue from contracts 
  with customers 
 Goods - Single retailer 
  redemption products             30,487        25,137     55,624 
 Other goods                       7,431            80      7,511 
 Services - Multi-retailer 
  redemption products             19,062        22,049     41,111 
 Other services                    1,892         4,227      6,119 
 Other                                14            15         29 
                             -----------  ------------  --------- 
                                  58,886        51,508    110,394 
                             -----------  ------------  --------- 
 

The majority of revenue from contracts with customers is recognised at a point in time.

 
 (7) Taxation                          2020     2019 
                                    GBP'000    GBP'000 
 Charge for the year - current 
  and deferred                        2,189    2,422 
                                  ---------  --------- 
 

Comments on the effective tax rate can be found in the Financial Review.

   (8)   Earnings per share 

The calculation of basic and diluted EPS is based on the profit on ordinary activities after taxation of GBP5,511,000 (2019: GBP8,882,000) and on the weighted average number of shares, calculated as follows:

 
                                                 2020          2019 
 Basic EPS - weighted average number 
  of shares                               186,347,228   185,964,433 
 Diluting effect of employee share 
  options                                           -       112,540 
                                         ------------  ------------ 
 Diluted EPS - weighted average number 
  of shares                               186,347,228   186,076,973 
                                         ------------  ------------ 
 

650,337 shares have been considered anti-dilutive during the year, that could potentially dilute basic EPS in the future.

   (9)   Goodwill 
 
                              GBP'000 
 Cost - Actual or deemed 
 At 31 March 2019 and 2020      5,048 
                             -------- 
 
 Impairment 
 At 1 April 2019                2,880 
 Impairment in year             1,368 
                             -------- 
 At 31 March 2020               4,248 
                             -------- 
 
 Net book amount 
 At 31 March 2020                 800 
                             -------- 
 At 31 March 2019               2,168 
                             -------- 
 
 Cost - Actual or deemed 
 At 31 March 2018 and 2019      5,048 
                             -------- 
 
 Impairment 
 At 1 April 2018                2,863 
 Impairment in year                17 
                             -------- 
 At 31 March 2019               2,880 
                             -------- 
 
 Net book amount 
 At 31 March 2019               2,168 
                             -------- 
 At 31 March 2018               2,185 
                             -------- 
 
 
                         Goodwill                                 Goodwill 
                               at     Additions     Impairment          at 
                     1 April 2019                                 31 March 
                                                                      2020 
 CGUs                     GBP'000       GBP'000        GBP'000     GBP'000 
 Consumer                   1,286             -          (486)         800 
 Corporate                    882             -          (882)           - 
 Net book amount            2,168             -        (1,368)         800 
 

The Group tests annually for impairment of goodwill. The recoverable amounts of CGUs are determined using value in use calculations, which are considered higher than the fair value less costs to sell.

Consumer - Family (GBP739,000) & Country Hampers Franchisee (GBP61,000)

The key data and assumptions in the value in use calculations were as follows:

-- The final order position for the previous Christmas.

-- The base case scenario gross margins. These margins are forecast to be maintained going forward.

-- Average agent retentions forecast. These are based on historical performance of agent retention achieved. Historically, such forecasts have been materially correct. An additional 12 per cent fall in retention has been factored into the forecast for the year ended 31 March 2021 to reflect the current trading environment (an 11 per cent fall in retention per year is typically used, which has been increased to 23 per cent for the year ended 31 March 2021).

-- Base case scenario revenue. This is based on average historical order value and average agent retention rates which have been extrapolated forward 10 years. The generally high retention values for customers supports the adoption of a 10 year customer life cycle value as being appropriate for the business. No revenue growth has been factored into the data used in the calculation (2019: nil).

The resulting cash flows were discounted using a weighted pre-tax discount rate of 16.54 per cent (2019: 6.25 per cent).

The impairment in the year of GBP434,000 (2019: nil) against the Family Franchisee goodwill represents the impact of excluding hamper contribution from the value in use calculations combined with a higher pre-tax discount rate. This is included within exceptional costs in the Consumer segment.

A sensitivity analysis was performed where changes in key assumptions were tested, those being changes in pre-tax discount rate and retention of agents.

An increase in pre-tax discount rate of 1 per cent would lead to further impairment of an additional GBP23,000.

A decrease in retentions of 1 per cent (to 78 per cent for the year ended 31 March 2021 and 88 per cent per year after this) would lead to further impairment of an additional GBP32,000.

The impairment in the year of GBP52,000 (2019: GBP17,000) against the Country Hampers Franchisee goodwill represents the reduction in agents that were originally acquired from Country Hampers. This is included within administrative expenses.

Corporate - Fisher Moy International (GBPnil)

The key assumptions in the value in use calculations were as follows:

-- Forecast revenue. This is based on the current order book, average customer retention and expected new business, which has been extrapolated forward 10 years. This has been sensitised to consider the worst case scenario impact of COVID-19. No revenue growth has been factored into the calculation.

-- Forecast gross margins. These are based on forecasts of profit resulting from the forecast revenue, which have been sensitised to consider the worst case scenario impact of the COVID-19 pandemic on the business for the coming year. These margins have then been forecast to be maintained going forward.

The resulting cash flows were discounted using a pre-tax discount rate of 16.54 per cent (2019: 6.25 per cent).

Management have carefully considered the base case forecast, the worst case sensitivities, the customer base (which consists of one dominant customer) and the entity specific circumstances relating to its industry.

In light of these considerations, there has been an impairment in the year of GBP882,000, which reduces the Corporate Goodwill to a value of GBPnil (2019: GBP882,000). This is recognised as an exceptional item in the year ended 31 March 2020.

   (10)   Property, plant and equipment 
 
                               Land and       Leasehold         Fixtures 
                              buildings    improvements    and equipment     Vehicles      Total 
                                GBP'000         GBP'000          GBP'000      GBP'000    GBP'000 
 Cost of valuation 
 At 1 April 2019                 15,636               -            3,996           20     19,652 
 Additions at cost                    -           1,649              279            -      1,928 
 Transfer to Assets held 
  for sale                     (14,531)               -                -            -   (14,531) 
 Disposals                            -               -             (33)            -       (33) 
                            -----------  --------------  ---------------  -----------  --------- 
 At 31 March 2020                 1,105           1,649            4,242           20      7,016 
                            -----------  --------------  ---------------  -----------  --------- 
 
 Accumulated depreciation 
 At 1 April 2019                 10,620               -            2,799           17     13,436 
 Charge in year                      50              57              403            1        511 
 Impairment                         163               -                -            -        163 
 Transfer to Assets held 
  for sale                      (9,728)               -                -            -    (9,728) 
 Disposals                            -               -             (28)            -       (28) 
                            -----------  --------------  ---------------  -----------  --------- 
 At 31 March 2020                 1,105              57            3,174           18      4,354 
                            -----------  --------------  ---------------  -----------  --------- 
 
 Net book amount 
 At 31 March 2020                     -           1,592            1,068            2      2,662 
                            -----------  --------------  ---------------  -----------  --------- 
 At 31 March 2019                 5,016               -            1,197            3      6,216 
                            -----------  --------------  ---------------  -----------  --------- 
 
 Cost of valuation 
 At 1 April 2018                 15,636               -            8,261           20     23,917 
 Additions at cost                    -               -              371            -        371 
 Disposals                            -               -          (4,636)            -    (4,636) 
                            -----------  --------------  ---------------  -----------  --------- 
 At 31 March 2019                15,636               -            3,996           20     19,652 
                            -----------  --------------  ---------------  -----------  --------- 
 
 Accumulated depreciation 
 At 1 April 2018                  9,176               -            7,041           16     16,233 
 Charge in year                     234               -              394            1        629 
 Impairment                       1,210               -                -            -      1,210 
 Disposals                            -               -          (4,636)            -    (4,636) 
                            -----------  --------------  ---------------  -----------  --------- 
 At 31 March 2019                10,620               -            2,799           17     13,436 
                            -----------  --------------  ---------------  -----------  --------- 
 
 Net book amount 
 At 31 March 2019                 5,016               -            1,197            3      6,216 
                            -----------  --------------  ---------------  -----------  --------- 
 At 31 March 2018                 6,460               -            1,220            4      7,684 
                            -----------  --------------  ---------------  -----------  --------- 
 

At 30 September 2019, an assessment was made as to whether the Valley Road property was an Asset held for sale. All of the criteria were met, and the property was transferred from Property, plant and equipment to Assets held for sale (see note 12). Prior to the transfer to Assets held for sale the property was impaired by GBP163,000.

During the year, the Group relocated its head office to Liverpool city centre. There were several additions to Property, plant and equipment which relate to fit-out costs and equipment purchased for the new office. These have been classed as leasehold improvements.

   (11)   Inventories 
 
                      2020      2019 
                   GBP'000   GBP'000 
 Raw materials          35       252 
 Finished goods      2,805     4,322 
                  --------  -------- 
                     2,840     4,574 
                  --------  -------- 
 

The cost of inventories recognised as an expense in the year is GBP55,103,000 (2019: GBP52,435,000).

The write down of inventories recognised as an expense in the period is GBP184,000 (2019: GBP49,000).

Following the announcement in August 2020 that the Group would be consulting on the closure of the packing operations, including hamper packing, the Group impaired raw materials and finished goods stock held at 31 March 2020 by GBP124,000, which is included within the GBP184,000 as detailed above.

   (12)   Assets held for sale 
 
                                                  2020      2019 
                                               GBP'000   GBP'000 
 Transfer from property, plant and equipment     4,803         - 
 Impairment                                    (1,650)         - 
                                              --------  -------- 
                                                 3,153         - 
                                              --------  -------- 
 

An assessment was carried out at 30 September 2019 as to whether the Valley Road property was an Asset held for sale. All of the criteria were met, and since that time the property has been classed as such. Depreciation was stopped at this point and the property was held at fair value. As at 31 March 2020 a reassessment of this position took place and all of the criteria were met for the property to continue to be classed as an Asset held for sale. This assessment included an exception to the one-year rule being taken under IFRS 5.9, as the Covid-19 pandemic had delayed the sale of the asset, meaning that the sale may not occur within the original 12-month period. This exception was allowable as the Group has taken the necessary actions to respond to this change in circumstance and the asset remains available for immediate sale.

A valuation was carried out as at 31 March 2020 in order to determine the fair value less costs to sell of the asset. This resulted in an impairment of GBP1,650,000. This impairment was in addition to an impairment of GBP163,000 made prior to the transfer of the property to Assets held for sale, taking the total impairment in the year to GBP1,813,000.

   (13)   Leases 

Group as a lessee

The Group leases many assets including land and buildings and plant and machinery. Information about leases for which the Group is a lessee is presented below.

Right of Use Assets

 
                               Land and            Plant 
                              buildings    and equipment     Total 
                                GBP'000          GBP'000   GBP'000 
 Cost or valuation 
 At 1 April 2019                    117                8       125 
 Additions                        3,904               67     3,971 
 Disposals                         (18)                -      (18) 
                            -----------  ---------------  -------- 
 At 31 March 2020                 4,003               75     4,078 
                            -----------  ---------------  -------- 
 
 Accumulated depreciation 
 At 1 April 2019                      -                -         - 
 Charge in year                     268               17       285 
 Disposals                          (6)                -       (6) 
                            -----------  ---------------  -------- 
 At 31 March 2020                   262               17       279 
                            -----------  ---------------  -------- 
 
 Net book amount 
 At 31 March 2020                 3,741               58     3,799 
                            -----------  ---------------  -------- 
 

The increase in land and buildings right of use assets (ROUAs) in the period is the result of the new lease of floors 3 and 4, 20 Chapel Street Liverpool. The increase in plant and equipment ROUAs in the period is the result of the leasing of forklift trucks for our Valley Road warehouse facilities.

There are no securities held or financial covenants required to be maintained in respect of these leases.

There is a dilapidation provision of GBP50,000 related to the Chapel Street lease. The debit is held within leasehold improvements in Property, plant and equipment (note 10), and the credit with Trade and other payables.

Lease liabilities

 
                       Land and            Plant 
                      buildings    and equipment     Total 
                        GBP'000          GBP'000   GBP'000 
 At 1 April 2019            117                8       125 
 New leases               4,063               67     4,130 
 Interest expense           174                3       177 
 Lease payments            (61)             (20)      (81) 
                    -----------  ---------------  -------- 
 At 31 March 2020         4,293               58     4,351 
                    -----------  ---------------  -------- 
 

The cost relating to variable lease payments that do not depend on an index or a rate amounted to GBPnil in the period.

There were no leases with residual value guarantees or leases not yet commended to which the Group is committed.

Maturity Analysis - contractual undiscounted cash flows

 
                                                 GBP'000 
 Less than one year                                  219 
 One to five years                                 1,662 
 More than five years                              4,555 
 Undiscounted lease liabilities at 31 March 
  2020                                             6,436 
                                                -------- 
 

Lease liabilities included in the statement of financial position

 
                                               GBP'000 
 Current                                           219 
 Non-current                                     4,132 
 Discounted lease liabilities at 31 March 
  2020                                           4,351 
                                              -------- 
 

Amounts recognised in the statement of profit or loss

 
                                                                   GBP'000 
 Interest on lease liabilities                                         177 
 Expense relating to short-term leases (included within 
  administrative expenses)                                              10 
 Expense relating to leases of low value assets excluding 
  short term leases (included within administrative expenses)            1 
 Variable lease payments not included in the measurement                 - 
  of lease liabilities 
 Gain arising from subletting Right of 
  Use Assets                                                           (1) 
 Total amount recognised in the statement of profit or 
  loss for the year ended 31 March 2020                                187 
                                                                  -------- 
 

Amounts recognised in the statement of cash flows

 
                                             GBP'000 
 Total Cash Outflows for leases for the 
  year ended 31 March 2020                        81 
                                            -------- 
 

i. Real estate leases

The Group leases land and buildings for its head office and regional offices. The lease for the Group's head office runs for 10 years, and regional offices for between 3 to 10 years. The head office lease includes an option to renew the lease for a period of up to 5 years at the end of the contract term.

Extension options

The 10 year head office lease contains an extension option of 5 years. Where practicable, the Group seeks to include extension options in new leases to provide operational flexibility. The extension options held are exercisable only by the Group and not by the lessors. The Group assesses at lease commencement whether it is reasonably certain to exercise the extension options. The Group reassesses whether it is reasonably certain to exercise the option if there is a significant event or significant change in the circumstances within its control. The head office has been accounted for on the basis that the extension option will be taken and is therefore accounted for on a 15 year basis. There are no other extension options, and there are no termination options expected to be exercised.

ii. Other leases

The Group adopted IFRS16 on 1st April 2019. At that date the Group were leasing plant and machinery within leases that had less than 6 months left to run. These leases are short term. The Group elected not to recognise right-of-use-assets and lease liabilities for these leases.

The Group also leases storage space for sales displays. The value of this lease is less than one thousand pound per year. These leases are of low value under IFRS16 definition. The Group elected not to recognise right-of-use-assets and lease liabilities for these leases.

Group as a lessor

Lease Income from lease contracts in which the Group acts as a lessor is as below.

i. Operating Lease

The Group sub-leases part of an office building in Oxford that it leased in February 2018. As at the 1 April 2019 the Group had sublet a portion of this office space. The Group had previously classified this lease income as operating lease income, because the lease does not transfer substantially all the risks and rewards incidental to the ownership of the assets. Due to the fact that at 1 April 2019 the lease had only 3 months left the income was treated in the accounts as operating lease income. This was accounted for within other income.

 
                                                 Land and            Plant 
                                                buildings    and equipment     Total 
                                                  GBP'000          GBP'000   GBP'000 
 Operating lease income year ended 31 March 
  2020                                                  2                -         2 
                                              -----------  ---------------  -------- 
 

ii. Finance Lease

In November 2019 the Group sublet a further portion of its Oxford office building. The Group has classified the sub-lease as a finance lease, because the sub-lease is for the whole remaining term of the head lease, which ends 31 January 2021. The GBP18,000 disposal of ROUA and GBP6,000 disposal of accumulated depreciation in the ROUA table in this note reflect the derecognition of the sub-leased portion of the office.

 
                                              Land and            Plant 
                                             buildings    and equipment     Total 
                                               GBP'000          GBP'000   GBP'000 
 Finance lease income year ended 31 March            -                -         - 
  2020 
                                           -----------  ---------------  -------- 
 

The following table sets out a maturity analysis of lease receivables, showing the undiscounted lease payments to be received after the reporting date.

Finance Leases maturity analysis - contractual undiscounted cashflows

 
                                                   GBP'000 
 Less than one year                                      9 
 One to five years                                       - 
 Total undiscounted lease payments receivable 
  as at 31 March 2020                                    9 
                                                  -------- 
 
 Unearned finance income                                 - 
 
 Net investment in the lease as at 31 March 
  2020                                                   9 
 

These are included within other receivables.

   (14)   Employees and directors 

During the year there were redundancy costs of GBP423,000 which relate to a one-off redundancy exercise. The driving force behind this exercise was the shift in the business strategy towards digital products.

   (15)   Dividends 

Amounts recognised as distributed to equity holders in the year:

 
                                                         2020      2019 
                                                      GBP'000   GBP'000 
 Interim dividend for the year ended 31 March 2019 
  of 1.05p (31 March 2018 : 1.00p)                      1,957     1,855 
 Final dividend for the year ended 31 March 2019 
  of 2.15p (31 March 2018 : 2.05p)                      4,006     3,813 
                                                     --------  -------- 
                                                        5,963     5,668 
                                                     --------  -------- 
 

Due to the outbreak of the Covid-19 pandemic, the Group decided it was prudent not to pay the interim dividend of 1.05p per share in respect of the financial year ended 31 March 2020 which was due to be paid on 6 April 2020. The Group have now been able to further assess forecast scenarios, current trading, trends since year end and reverse stress tests. Given the UK trading conditions continue to be uncertain, the Board do not consider it prudent to recommend a dividend for this financial year.

   (16)   Reconciliation of profit for the year to net cash inflow from operating activities 
 
                                             2020       2019 
                                          GBP'000    GBP'000 
 Profit for the year                        5,511      8,882 
 
 Adjustments for: 
 Tax                                        2,189      2,422 
 Interest income                          (1,481)    (1,572) 
 Interest expense                             177          - 
 Research and development tax credit            -       (54) 
 Depreciation and amortisation              1,659      1,394 
 Impairment of property, plant and 
  equipment/assets held for sale            1,813      1,210 
                                         --------  --------- 
 Impairment of other intangibles               21          - 
                                         --------  --------- 
 Impairment of goodwill                     1,368         17 
                                         --------  --------- 
 Loss on sale of property, plant 
  and equipment                                 4          - 
 Decrease in other financial assets           200          - 
 Decrease/(increase) in inventories         1,734      (766) 
 Decrease/(increase) in trade and 
  other receivables                         2,968    (1,589) 
 Decrease in trade and other payables     (1,578)      (877) 
 (Decrease)/increase in provisions        (4,484)     10,274 
 Increase in monies held in trust         (3,442)   (12,259) 
 Movement in retirement benefit 
  obligation                                 (44)      (215) 
 Translation adjustment                        18        (3) 
 Taxes paid on share-based payments             -      (116) 
 Share-based payments                         233        126 
                                         --------  --------- 
 Net cash inflow from operating 
  activities                                6,866      6,874 
                                         --------  --------- 
 
   (17)   Subsequent events 

Sale of Valley Road Birkenhead

In December 2018 the Group announced a new strategy that included relocating the head office from Birkenhead to Liverpool city centre to an office environment that allowed for more collaborative working and was better positioned to improve retention of staff and recruitment of new talent. In September 2019 the business successfully relocated the majority of staff to Liverpool with some operational departments remaining in Birkenhead. At this point, the net asset value of the property situated in Birkenhead was transferred from property, plant and equipment to assets held for sale on the Group balance sheet. This property was owned by Budworth Properties Limited, a Group subsidiary. On 10 August 2020 Budworth Properties Limited was sold to HP (Valley Road) Limited for GBP3.2m and as part of the transaction the Group has leased back space for the small number of remaining operational staff. The balance sheet reflects the expected disposal of this asset, which is classified as an asset held for sale, following the previously announced impairment charge to the statement of profit or loss of GBP1.8m. The value of the disposal supports the recognised carrying value as at 31 March 2020, meaning no further impairment charge is necessary.

Proposed closure of packing operations

In July 2020, the Group announced to customers that it would not be supplying hampers and merchandise for 2020 due to health and safety concerns relating to the ability to pack these products within social distancing rules and the risk of receiving components due to shortages in stock or distribution problems following the impact of Covid-19. In August 2020 the Group announced to staff that it was commencing a period of consultation about the proposed closure of our packing business including hamper packing, third party packing and provision of storage. If this decision is confirmed, following a period of consultation with staff, it is expected that operation of the packing business will cease by the end of 2020. As the company owning the land and buildings at Valley Road where the hamper packing business is based has been sold and a short term lease has been taken to allow the wind down of the business, no charge is expected in the financial statements for 2020/21. Following consultation with staff, if no suitable alternative employment can be found, any redundancy costs will be charged to the statement of profit or loss and treated as exceptional costs. The net cost of this, excluding any customer cancellations or margin erosion from switching to alternative products, is expected to be approximately GBP0.3m. Within the financials statements for the year ended 31 March 2020 we have already recognised a charge of GBP0.1m to write down the associated stock products held at year end to their net realisable value. This charge has been recognised as an exceptional charge in the period (see note 11). There are no other expected costs relating to this decision.

Bank financing

We have completed a bank financing exercise, securing a 5 year revolving credit facility (RCF) with Santander of GBP15m plus an additional uncommitted accordion of GBP10m. This facility will provide the additional financial flexibility to protect against downside risk in the short term; whilst enabling longer term growth, as well as investing in the continued switch to digital products. The RCF has 3 covenant requirements, as detailed within the going concern statement.

Government support

Since 31 March the Group has taken advantage of both the Government's Job Retention Scheme and deferral of VAT payments.

   (18)   Responsibility Statement 

To the best of each director's knowledge:

 
 --   the financial statements, prepared in accordance with the 
       applicable set of accounting standards, give a true and fair 
       view of the assets, liabilities, financial position and profit 
       or loss of the Company and the undertakings included in the 
       consolidation taken as a whole; and 
 --   the management report includes a fair review of the development 
       and performance of the business and the position of the issuer 
       and the undertakings included in the consolidation taken as 
       a whole, together with a description of the principal risks 
       and uncertainties that they face. 
 

(19) The financial information set out above does not constitute the Group's statutory accounts for the years ended 31 March 2020 or 2019 but is derived from those accounts.

Statutory accounts for 2019 have been delivered to the registrar of companies. The auditor, Ernst & Young LLP, has reported on the 2019 accounts; the report (i) was unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

The statutory accounts for 2020 will be delivered to the registrar of companies following the AGM. The auditors have reported on these accounts; their report is unqualified and does not include a statement under either section 498(2) or (3) of the Companies Act 2006.

The annual report will be posted to shareholders on or before 7 September 2020 and will be available from that date on the Group's website: www.appreciategroup.co.uk.

-ends

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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