Appreciate trades in line ahead of takeover by PayPoint

Corporate and consumer loyalty and redemption specialist Appreciate Group said in an update on Friday that trading in its third quarter was “as expected”, reflecting its normal pattern of seasonality.

The AIM-traded company said that as a result, its profit outlook was in line with the board's expectations, despite current economic headwinds.

Billings in the underlying Appreciate Business Service (ABS) rose to £74.5m in the three months ended 31 December, from £71.4m year-on-year, although it had nil billings for free school meals, compared to £4.6m in the year-before period.

Its Park Christmas Savings (PCS) billings improved to £135.4m from £129.7m, while High Street Vouchers (HSV) slipped to £15.2m from £18m.

That made for total billings in the third quarter of £225m, up from £223.6m year-on-year.

Total revenue for the period stood at £65.8m, growing from £59.7m a year earlier, while free cash fell to £16.8m from £33.6m, and monies held in trust grew to £123.8m from £116.7m.

The group said it continued to prioritise driving profitable billings within its High Street Vouchers business, ahead of volumes.

In the Appreciate Business Services market, it said it continued to focus on retaining its existing corporate clients, while increasing the number of new clients purchasing for the first time.

New client numbers increased 27% over the same time last year, which was offset by a reduction in average order value of 8% across the entire ABS client base.

The new Park Christmas Savings 2023 campaign launched in September, with “encouraging early signs” that the channel could return to growth.

It said the division traded strongly in the third quarter, and was in-line with expectations for the year-to-date, underpinned by continued high levels of agent and direct customer retention rates.

Free cash was lower than last year due to the continued shift towards digital products, a normalising of spending patterns, and a higher dividend payment in the year.

The group said it had not needed to draw down its £15m revolving credit facility, adding that there was no expectation that it would need to do so in the foreseeable future.

On 7 November, the boards of Appreciate Group and PayPoint announced that they had reached agreement on the terms of a recommended offer, under which PayPoint would acquire the entire issued and to-be-issued share capital of Appreciate Group.

The merger would take place through a court-sanctioned scheme of arrangement.

A circular concerning the offer was published on 2 December, with the process still subject to court and general meeting approvals, at meetings scheduled for 20 January, and the satisfaction or waiver of the remaining scheme conditions.

“We are pleased to report trading has been in line with expectations despite the challenging macroeconomic environment,” said executive chair Guy Parsons.

“We have continued to work to accelerate the simplification of the business and to drive our most profitable billings, which is intended to enhance earnings in the medium term.

“We are also ensuring that we are earning a suitable risk adjusted return from the large cash sums held on deposit.”

At 1442 GMT, shares in Appreciate Group were up 1.04% at 41.38p.

Reporting by Josh White for Sharecast.com.