Rewards group well positioned for alternative Christmas

Liverpool-based rewards group Appreciate is benefiting from moves by companies offering vouchers as a replacement for traditional office parties.

It saw interim revenues and billings decline, and pre-tax losses deepen, but shareholders will receive a reinstated dividend for the six months to September 30.

Revenues of £27.389m were down on the previous year’s £33.230m, while billings of £98.839m compared with £120.213m in 2019. Last year’s pre-tax loss of £1.280m deepened to a loss of £6.223m.

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. It is an alternative performance measure, which the directors believe provides a more meaningful measure of the level of activity of the group than revenue.

However, the group has decided to reinstate an interim dividend, paying 0.4p per share, against the 1.05p per share payout the previous year.

The group’s business is highly seasonal and the first half of the year typically sees a loss, which has been exacerbated this year following the impact of COVID-19, particularly early in the period when lockdown measures were first introduced.

The majority of annual revenues and profit is typically generated in the second half of the group’s financial year and it has seen a seasonal month-on-month rise in billings in October and November.

The group said its interim performance remains ahead of its original mid-range scenario for the potential impact of COVID-19.

Cash balances, including cash held in trust, at September 30, 2020, were £227.3m, up from £213.1m last year, and the group announced free cash levels of £24.9m, compared with £7.7m at the same state in 2019.

Appreciate now focuses on rewards vouchers and pre-paid cards, having decided to exit its traditional Christmas hampers business.

It said its corporate division enjoyed an 87% increase in business from new clients, to £3.1m, although billings down 16.9% to £66.6m and revenues reduced 21.7% to £19.0m.

It said it successfully enabled Summer free school meals through digital vouchers for use at Iceland and continued to expand redemption partners with online and essential retail, adding new brands such as Schuh and Foot Locker.

The consumer division reported a 19.6% fall in billings to £32.3m and a 6.5% decrease in revenues to £8.3.

This year’s Christmas Savings order book is now completed and was down eight per cent, but ahead of previous expected levels of 10% due to fewer cancellations over the year.

Hamper production has now ceased and the exit from the business is now complete with the majority of customers migrating to alternative group products.

Appreciate also announced the closure of its contract packing business, on December 18, 2020.

In current trading, billings continue to show significant month-on-month improvement and are running closer to levels seen last year.

In light of the group’s resilient performance through the crisis, it said it intends to repay all of the £0.3m received under the Government’s Coronavirus Job Retention Scheme. The majority of furloughed colleagues had returned to work by June, and all have now returned.

The last two months of the calendar year are traditionally the busiest for the corporate business. Early signs for November are that the growth seen so far this year is set to continue as companies seek alternatives to staff Christmas parties.

And the group said lockdown measures in November 2020 are having far less impact than earlier in the year following the evolution of the business in recent months and no restrictions on the ability to dispatch physical products at this time.

Chief executive, Ian O’Doherty, said: “I am pleased that trading during our critical Q3 trading period is progressing well with Christmas savings orders now fully completed, and that we are in a position to reinstate the dividend for shareholders.

“The decisive actions we took to intensify the focus on digital and accelerate parts of our strategy have led to a steady recovery and now improvement in performance, following the initial shock when lockdown measures were first introduced in March.

“The first two months of the second half have seen us trade closer to 2019 levels, with a continued recovery expected to enable the significant swing in profitability the group typically sees in its important second half trading period.

“The repositioning of the business will ensure it is more resilient during the current November lockdown, whilst putting us in the strongest competitive position to deliver growth when life returns to normal.”