APP.L Regulatory News (APP)

28 June 2022

Appreciate Group plc

Replacement - Final Results for the Year Ended 31 March 2022

The following amendments have been made to the RNS announcement (RNS Number: 4274Q) released at 07:00 on 28 June 2022 by the Company:

Billings~ excluding Christmas Savings were £222.0m, up 3.6%, not 5.5% as previously announced, with FY21 billings at £214.3m. This follows three consecutive quarters of double-digit growth from Q2 onwards.

All other details remain unchanged. The error has been corrected and the full amended text is shown below.

~ See accounting policies for a reconciliation of billings to revenue

Final Results for the Year Ended 31 March 2022

Strong full-year performance driven by growth in Corporate

Important technology acquisition announced separately today 

Appreciate Group Plc (the 'Group'), 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 2022 and provides an update on current trading for the new financial year to date.

Financial highlights: 

· Profit before tax and exceptional items+ of £8.4m (Restated* FY21: £2.3m)

- Strong recovery in profitability of both divisions

- Excludes exceptional costs of £2.7m (Restated* FY21: £2.5m of exceptional items), largely in relation to certain intangibles related write offs, including the impact of changes in IFRS guidance on the treatment of cloud-based technology costs

- Adjusted PBT ahead of market expectations, as announced in year-end trading update on 28 April

· Group revenue up 15.4% to £123.3m (FY21: £106.8m) driven by a strong performance in the Corporate business

· Good progress with key areas of Corporate and digital billings:

o  Billings~ excluding Christmas Savings were £222.0m, up 3.6% (FY21: £214.3m), following three consecutive quarters of double-digit growth from Q2 onwards

o  Digital billings~ (excluding billings from free school meals) up 20.5% to £54.8m (FY21: £45.5m)

o  Total Group billings~ down to £385.8m (FY21: £406.5m) following reduction in billings~ from Christmas Savings which were impacted by lockdown measures, restricting agent collections

· Solid financial position maintained:

o  Total funds held, including monies held in trust and bank deposits, at 31 March 2022, were £139.7m (FY21: £163.5m)

o  Year-end free cash and cash equivalents (excluding monies held in trust) amounted to £20.2m (FY21: £31.4m), reflecting the normalisation of customer spending patterns during the year

· Underlying earnings per share of 3.46p (Restated* FY21 0.90p)

· The Board has recommended a final dividend of 1.2p, making a full dividend for the year of 1.8p per share (FY21: 1.0p)

Statutory results:

· Statutory profit before tax of £5.6m (Restated* FY21 loss of £0.1m)

· Statutory earnings per share of 2.36p (Restated* FY21: loss per share of 0.15p)

· Statutory diluted earnings per share 2.35p (Restated* FY21: 0.15p)

Gift card technology provider acquisition

· As announced separately today, the Group has acquired the entire share capital of MBL Holdco Ltd.

· Acquisition anticipated to accelerate the Group technology plans by approximately 18 months.

· As well as offering immediate commercial opportunities, it supports key areas of growth through SaaS solutions, outsourced gift card programmes and bespoke white labelling of gift card websites for Corporate clients.

Operational and strategic highlights - strong divisional performance bouncing back from Covid

· Corporate

o  Corporate billings~ of £212.1m up 5.4% (FY21: £201.3m)

o  Corporate revenue increased 42.8% to £76.7m (FY21: £53.7m)

o  Segmental operating profit of £7.8m (FY21: £2.6m)

o  Performance benefited from deferred revenue release in the year which was impacted by Covid restrictions last year, and from higher margins as billings~ from (lower margin) free school meals scheme reduced

· Consumer

o  Billings~ were £173.7m (FY21: £205.3m); reduction reflected lower billings~ from Christmas Savings due to impact of lockdown restrictions during key agent collections period

o  Consumer revenue was £46.5m (FY21: £53.1m) reflecting lower billings

o  Segmental operating profit of £3.3m (FY21: £0.5m)

Significant progress delivering our strategic business plan

· Strong growth in Corporate - three quarters of consecutive double-digit growth following market repositioning in FY21.

· Continued outperformance of digital - billings~ rose by more than a fifth.

· Reinvigorating Christmas Savings - projected billings for the Christmas Savings business for FY23 are currently down c.3%, a significant improvement on the 15% decline seen in FY22.

· ERP Progress - successfully replaced the legacy systems that support the HighStreetVouchers.com website, providing us with a more robust and scalable platform which supports our plans for growth.

· Operational improvements - enhancements in productivity and operational efficiencies with use of seasonal temps reduced by 11% during the peak trading period and Customer Care calls down by almost a third.

· Continued focus on costs - large one off costs incurred for major transformation initiatives now complete, administration costs now expected to reduce to c.£19.0m for FY23 (FY22: £21.3m).

· Broadening product appeal - further enhancements to redemption choice with new brands added to our multi-redemption range including Primark, Pandora and Sports Direct.

· Good progress with ESG commitments - achieved an ISO 14001 Environmental Management certification and introduced a new eco-friendly, non plastic card.

Current trading and outlook

· Trading in the first 12 weeks of the current financial year has been in line with the Board's expectations.

· Billings~ (excluding Christmas Savers) are up 4.5% on FY22 up to 24 June 2022.

· The Group continues to focus on reducing costs and leveraging the investments made in recent years to help grow profitability.

~ See accounting policies for a reconciliation of billings to revenue * The FY21 results have been restated as set out in the statement of significant accounting policies + See financial review for reconciliation of adjusted to statutory profit measure

Plans for new Chief Financial Officer

The search for a new Chief Financial Officer is continuing and the Group is encouraged by the standard of applicants. It plans to appoint an interim CFO by the end of July and will provide an update regarding a permanent appointment in due course.

Ian O'Doherty, Chief Executive Officer, commented:

"I am delighted that we outperformed and exceeded expectations last year, bouncing back strongly from the impact of the pandemic.

"We are enjoying continued growth in the Corporate segment, and within our product mix, in digital billings, whilst good progress is being made in reinvigorating Christmas Savings. We are also focused on reducing our cost base as we move forward.

"Notwithstanding economic headwinds, we are confident of delivering another year of progress through our increased capabilities. Initial trading so far this year has been encouraging and we are seeing strong demand from organisations that are focusing on retaining and attracting employees and customers during the current economic challenges.

"I would like to take this opportunity to thank the entire team for their hard work and commitment over what has been an incredibly busy year and look forward to building on this progress during the next 12 months."

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.

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 corporate 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, Appreciate Business Services 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 helps around three hundred thousand 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 Appreciate Business Services providing corporate partners with incentives and rewards for their employees and clients.

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

Chair Statement

Since joining the business as Chair in April, I have spent time meeting our colleagues and major shareholders to build a full understanding of the challenges we face as well as the many opportunities we have to grow.

It is with pleasure that in my first annual review I am able to report that the Group has delivered a strong performance for the year. As expected, the Group's financial results have bounced-back following the pandemic, with a substantial improvement in profits delivered through our range of products and services.

The improvements come as we transition to a new phase in our strategy and I'm excited about the opportunities we have to deliver increased value for our shareholders. Following progress in creating a more focussed organisation, with a robust and scalable business model, we can now build on these strengths to accelerate growth in the markets we've chosen to operate in.

All our colleagues across the organisation have shown tremendous dedication and enthusiasm rising to the challenge of supporting our customers and one another since the onset of the pandemic. I am proud of their resilience and continued commitment and I want to thank them for their outstanding efforts.

The Group has emerged from the pandemic in solid shape and enters FY23 from a position of strength with good momentum. We have a clear strategy and well-articulated customer propositions for growth. We are seeing the benefits of our re-focused approach in Corporate, with digital billings excluding free school meals up by a fifth, and an improved trend in Christmas Savings for FY23.

As we prepare for the future, I am confident in our prospects and that our team will continue to help create more joyful moments for a greater number of consumers and organisations in line with our ambitions.

Improved performance

The first quarter of the financial year got off to a slower than anticipated start as UK lockdowns remained in place and corporate clients were prioritising plans for the return of their people to the workplace. Since then, we have experienced three quarters of double-digit growth in billings~, excluding Christmas savers, compared to the same period prior to the pandemic.

At the centre of this improved performance is demand from organisations that have sought our products to reward and recognise their employees and attract and retain their customers, underpinned by the robust and scalable business platform we have been building.

There has been an improvement in the trend of projected billings for the Christmas Savings business for FY23, following this year's recruitment campaign. These are currently down c.3%, a significant improvement on historical trends, giving us confidence that we will be able to grow Christmas Savings billings again in the medium term.

Dividend

The Group is maintaining its progressive dividend policy to reflect the cash-generative nature of the business, the strong balance sheet and growth that has been seen. The Board is recommending a final dividend for FY22 of 1.2p (2021: 0.6p). Combined with the interim dividend of 0.6p (FY21: 0.4p), the resulting total dividend in respect of FY22 is 1.8p (FY21: 1.0p). The dividend will be payable on 3 October 2022 to shareholders on the register on 26 August 2022, subject to shareholder approval.

Board and governance

The Board invited me to take on the role of Chair from Laura Carstensen following her decision to stand down, having served almost nine years on the Board. I would like to thank Laura on behalf of the Board for her hard work in helping the Group evolve its strategy and growth journey, as well as helping it navigate the unprecedented challenges of the pandemic. The change of Chair comes at an opportune time, with the Group's strategy pivoting to leveraging the progress made in the Group's transformation to drive growth. I am confident I can help the Group as it seeks to achieve these growth ambitions and I look forward to working with the Board to lead the Group in the next successful stage of its journey.

As announced on 28 April 2022, Tim Clancy, will step down from his role as Chief Financial Officer at the end of July 2022 to take up another opportunity. The Group has started a search process, is encouraged by the quality of the candidates it is seeing, and will provide a further update when it has appointed a replacement. The Board would like to thank Tim for his significant contribution to the launch of the Group's strategic business plan in 2018 and for building a more robust and scalable platform for growth.

The Board takes its responsibilities to all its stakeholders seriously and we are committed to maintaining direct and productive relationships with our shareholders, colleagues and communities, taking a range of perspectives and feedback into account in our decision-making and stewardship.

Preparing for the future

I am pleased to confirm that the Group has bolstered its technology plans by completing the acquisition of MBL Holdco Ltd post year end, a gift card technology provider to UK businesses and consumers. The move provides us with access to MBL's market-leading technology platform and accelerates our technology plans by approximately 18 months, thus bringing forward our ability to leverage further growth for the Group. As well as offering immediate commercial opportunities, it strengthens our ability to deliver SaaS solutions, outsourced gift card programmes and bespoke white labelling of gift card websites for Corporate clients.

Our team is determined to build on the success in Corporate and has weighted resources accordingly to support efforts in this market, supported by enhancements to the proposition and strengthened data and insight capability to target B2B customer retention and acquisition. We also see opportunities to support Corporate customers with the challenges around staff retention and assisting employees through the cost of living crisis.

We are focused on capitalising on the increased capability of the business while refining our product range and customer experience to help drive customer appeal and loyalty.

Responsible business

People

The wellbeing of our colleagues remained a priority throughout the year. A new hybrid working model was introduced, combining the benefits of being together in the workplace with the flexibility that comes from remote working. We have listened to our colleagues' views through regular engagement surveys and we were delighted to receive a Great Place to Work accreditation for the second year in succession. This was achieved with an improved Trust Index and reflects the success of our cultural transformation. We also achieved a Best Workplace for Women Status, with fair treatment regardless of gender scoring 90%, underlining our commitment to diversity. We are committed to making further enhancements to make the Group an even better place to work using the feedback provided by our colleagues.

We also recognise that current rises in the cost of living are impacting our people. With this in mind, we are providing all colleagues with a one-off payment of £500 to help them with these challenges. While those not in a bonus scheme, will also receive a gift card of £250 as a thank you for their support.

Environment

In FY22, we achieved an ISO 14001 Environmental Management certification and now meet the highest international standards for environmental management, demonstrating our strong commitment to sustainability and protection. However, we recognise that this is only the start of the journey and that there is more we must do, which is why we are developing a Climate Transition Plan to fulfil our aim of becoming a future net zero organisation.

We also successfully completed an exercise using eco-friendly, non plastic cards with one of our large Corporate clients and are now rolling this out to other customers.

Communities

We are committed to helping create a positive impact in our communities; our ground-breaking programme with Everton in the Community is helping children in the Liverpool City Region learn technology skills that could help them in their future careers. Our support for the charity has now generated almost £750,000 of societal value.

Looking ahead

As we enter FY23, we remain cautious about the pressures on our customers, through increases in the cost of living, the terrible events taking place in Ukraine, the impacts of the UK's exit from the EU and the potential future paths of COVID-19. The team is focused on ensuring we remain well placed to support with the challenges faced by our customers, whether it be spreading the costs of major events such as Christmas, or helping Corporate clients with attracting and retaining their customers and employees.

We have good momentum and a clear focus on continuing to deliver our strategy to drive future years of growth. We are well positioned to capitalise on opportunities whilst remaining true to our purpose and values.

I am excited about the next phase in our journey with the Group and look forward to helping it deliver further progress and the success that is to come.

Guy ParsonsChair

27 June 2022

* The FY21 results have been restated as set out in the statement of significant accounting policies

~ See page accounting policies for a reconciliation of billings to revenue

Chief Executive's Review

Introduction

This is a year in which we have made significant progress as a Group, despite continued impacts from the pandemic on our customers, colleagues and business - particularly in the first half.

The commitment and consistent hard work of the team has delivered a strong financial performance. This demonstrates that our strategy to create a more modern organisation remains appropriate and is starting to deliver positive results. We are now in an improved position to exploit future opportunities. The benefits of the investments we have made in recent years are clearly coming through.

I am extremely proud to lead an organisation with people who display huge talent, passion, and commitment to help drive our business forward. This gives me confidence about what we can achieve over the next year and beyond to fully leverage the benefits of the changes we have made to accelerate our growth.

Results for the year

The Group has delivered a significantly improved financial performance, with profits rising on last year as trading returned to more normal patterns following the lifting of the UK's lockdown restrictions after Covid. This has been driven by strong demand in Corporate and an increase in digital billings (excluding billings from free school meals) of almost a fifth.

Profit before tax and exceptional items+ was £8.4m (Restated*FY21: £2.3m) excluding the main exceptional costs arising from IFRS guidance on how cloud-based technology costs are presented. This result reflects a strong second half, especially in our peak Q3 Christmas trading period. Profit before tax was £5.6m (Restated FY21*: -£0.1m).

Total Group billings~ of £385.8m were down on the previous year (FY21: £406.5m), largely due to a reduction in billings~ through the Government's free school meals scheme and an impact on Christmas Savings during the pandemic, when Agent collections were restricted by social distancing measures preventing face to face contact during the key customer recruitment period.

Billings~ excluding Christmas Savings were £222.0m, up 3.6% (FY21: £214.3m) following a strong performance in our Corporate business. Whilst the first quarter was initially slower than anticipated as lockdown restrictions began to be eased, these billings~ saw three consecutive quarters of double- digit growth from Q2 onwards.

Full-year digital billings~ increased 20.5% to £54.8m (FY21: £45.5m) excluding billings~ from free school meals.

Total Group revenue went up 15.4% to £123.3m (FY21: £106.8m) driven by an improvement in the Corporate business.

Operating profit before exceptional items+ for the year was £8.5m (Restated* FY21: £1.9m). Statutory Operating Profit was £5.7m (Restated* FY21: loss of £0.6m)

As outlined in our year end trading statement on 28 April 2022, the lockdowns in FY21 caused a delay in the redemption of the Group's products for which income is recognised at the point of redemption. The financial impact of this in FY21 was to reduce profits by £3.9m and, as expected, part of this has reversed in FY22 increasing profits in the year by £3.4m.

We previously stated that we expected to confirm a charge following changes to guidance on accounting for cloud computing arrangements from the International Financial Reporting Interpretations Committee (IFRIC). Following the finalisation of the adjustment, we can confirm that there was a total exceptional charge of £2.7m recorded in FY22 in relation to the Group's Intangible assets. Of this charge, £0.8m was associated with the change in accounting policy driven by the IFRIC agenda decision. Further, the FY21 results have been restated to reflect an exceptional charge of £1.4m and an opening reserves adjustment of £0.9m in relation to this change. Taken together, this reduces the total asset value, as at 31 March 2022, by £5.0m.

Underlying basic earnings per share went up from -0.15p (Restated*) in FY21 to 2.36p, and following the improvement in performance we are pleased to be in a position to declare a final dividend of 1.2p (FY21: 0.6p).

Year-end free cash and cash equivalents of £20.2m (FY21: £31.4m) as at 31 March 2022 - excluding funds required to be held in trust - reflected a catch up in customer spending patterns and continued growth in regulatory billings which require increased customer monies to be held in trust until redemption. Average funds held (including cash held in trust) were £178.6m (FY21: £181.2m).

~ See accounting policies for a reconciliation of billings to revenue * The FY21 results have been restated as set out in the statement of significant accounting policies + see financial review for reconciliation of adjusted to statutory profit measure

Divisional Review

Our business is split into two segments of Corporate - serving our B2B customers - and Consumer which supports retail customers through Park Christmas Savings and HighStreetVouchers.com.

Corporate (62.3% (2021: 50.2%) of Group revenue in the year ended 31 March 2022)

Appreciate Group's Corporate business provides around 40,000 business customers with market- leading incentive, recognition and rewards options for an estimated two million recipients to use with over 200 redemption partners online or across thousands of physical outlets.

Our Corporate business delivered strong growth with revenue increasing by £23.0m to £76.7m (FY21: £53.7m), benefitting from normalisation of customer spending patterns, net of a reduction in (lower margin) free school meals as a share of Corporate billings. Billings rose 5.4% to £212.1m versus £201.3m in FY21. As a result, segmental profit for Corporate increased from £2.6m in FY21 to £7.8m.

The division has historically had a successful track record in capturing repeat business from existing clients. Business retained from existing clients has returned to over 90%, in line with pre-pandemic levels. We continue to focus on increasing and diversifying the client base while maintaining high levels of repeat business which will drive further growth.

The division had seen a growth of new business during Q3 in the prior year because organisations bought our products to reward employees during lockdowns as an alternative to Christmas parties. We were pleased to be able to maintain a significant proportion of this business in the financial year 2022. We will be targeting further opportunities to support Corporate customers with the challenges they currently face around employee retention and in helping them support staff during the cost of living crisis, in addition to developing innovative approaches to customer retention and acquisition.

Corporate billings include billings of £26.0m (FY21: £22.0m) bought by organisations via our ecommerce site HighStreetVouchers.com. These are provided at a low cost to serve, with little administration required and without any negotiated discount.

Billings from the free school meals reduced to £16.2m (FY21: £23.0m), as use of the Government scheme, introduced to ensure vulnerable children did not go hungry during the pandemic when schools were closed, wound down.

We have continued to focus on broadening our client base by attracting new Corporate customers through greater use of insight, automation of onboarding, and sector-specific targeting. We served over 960 organisations for the first time, including well-known brands such as Brewdog, British Airways IAG Cargo and Go Outdoors who became partners.

Consumer (37.7% (2020: 49.8%) of Group revenue in the year ended 31 March 2022)

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 300,000 families budget for Christmas.

Consumer billings were £173.7m - down on the prior year (FY21: £205.3m). Consumer revenue was £46.5m (2020: £53.1m) with a segmental profit of £3.3m versus £0.5m in FY21, which had been impacted by the increase in deferred revenue due to reduced redemption options during lockdowns.

Billings for the Christmas Savings business were £164.0m, down from £193.3m in the previous financial year. These were particularly impacted by social distancing measures that restricted face-to-face contact during the key recruitment period for our agents. However, projected billings for the Christmas Savings business for FY23 are currently down c.3%, a significant improvement on the 15% decline seen in FY22. This follows a major focus on driving its performance, as described in more detail below.

Consumer billings via HighStreetVouchers.com were slightly lower at £10.1m (FY21: £10.2m). This included another strong December, traditionally the key trading month in the year, with billings of £3.1m (FY21: £3.3m). We continue to focus on driving traffic to our website and optimising conversion, with rates holding firm at 4.4%.

Clear strategy for growth

The Group's has undergone a transformation as part of its strategy to create a robust and scalable business model to support future growth. Following the progress made in delivering these initiatives, the strategy has now evolved to focus on leveraging the benefits of its investments to accelerate growth. Progress has been made in a number of key areas during the year:

Strong growth in Corporate

Our Corporate business has now seen three quarters of consecutive double-digit growth. This encouraging performance follows a repositioning of the business to the Corporate market in FY21 to better place us as experts in supporting organisations with reward and recognition.

Our Corporate business continues to deliver high levels of customer satisfaction. It is rated 'Excellent' overall based on customer reviews via Trustpilot with an average of 4.3 out of 5 and 94% of reviews rating it as 'excellent' or 'good'. Our Net Promoter Score (NPS) of 54% compares favourably - ahead of a benchmark for financial services of 44%.

Digital growth continues

Digital billings (excluding free school meals) continue to rise and now account for 19% of the product mix. Digital demand is particularly prevalent in e-gift codes which provide customers with the opportunity to exchange for a range of spending products online.

Working to reinvigorate Christmas Savings

During the year we delivered a significant change in our marketing, utilising a fully integrated campaign spanning digital, social media and TV channels to help drive customer acquisition for FY23. This was supported with enhancements to improve user experience, customer onboarding and digital journeys, which helped boost the number of customers commencing payment plans after initially signing up, with first-time direct debit payment rates up 32% year on year.

A new Mastercard enabled Love2shop products - the "Purple Card" - was launched to Christmas Savings customers which has also proven popular. Redeemable with 125 brands, the product currently accounts for orders of over £18m for FY23. We have also delivered an 'always on' campaign to strengthen relationships and engagement with our Agents to support the key customer recruitment period and to maintain regular dialogue to help focus on maintaining payment collections. Given the seasonal nature of the business, this campaign will determine the outcome for FY23, but early indications show a significant improvement in the level of decline seen in recent years.

Redemption range enhanced

We have continued to explore opportunities to strengthen the number and quality of our redemption partners to increase the attractiveness of our products for customers. We maintained our focus on broadening the appeal through leisure, hospitality and food options, alongside leading retailers. We were delighted to add attractive new brands to our redemption range during the year such as Pizza Express, Merlin attractions and Primark. We firmly believe each of these will prove attractive for our customers, with Primark of particular appeal to our Christmas Savers.

Strengthened leadership team

As part of the evolution of our strategy towards growth, and with much of the transformation work complete, we reshaped our leadership team to a smaller number. Jonathan Biggin joined us as Chief Operating Officer with responsibility to deliver our operational and technology plans. He has a key role to play in delivering our focus on back-office simplification and digitising customer journeys.

Enhanced digital marketing approach

Our marketing function has also been structured to support the focus on greater use of insight, digital marketing and commercial planning of campaigns. This includes a new Digital Acquisitions team with expertise in digital marketing. We also took the opportunity to align the Marketing and Product functions with our Commercial division, led by Chief Commercial Officer, Julian Coghlan, to underpin the focus on growth.

Leveraging our hero brand

In November, we launched our first-ever campaign specifically promoting Love2shop, the brand which underpins all our products. This was designed to boost existing high levels of awareness whilst promoting Love2shop during the Q3 peak trading period helping to boost prompted consumer awareness from 40% to 43% as at 31 March 2022.

PayPoint partnership

Our partnership with PayPoint - providing access to a physical distribution network of 28,000 UK outlets - got off to a slow start when it launched in May 2021. However, we have since gained significant insight to assist us in how we promote the products to the network's retailers and customers which will help us going forward. We have been supporting PayPoint in delivering promotional activity and are in discussions about potential ways to broaden the service which we believe would enhance the opportunities of the partnership.

Delivering efficiencies

ERP Progress

Through our Enterprise Resource Planning (ERP) programme we successfully replaced the legacy systems that support the HighStreetVouchers.com website. This is supporting scalability and resilience.

Operational improvements

We made a number of enhancements in productivity and operational efficiencies that led to improvements. Use of seasonal temps reduced by 11% during the peak trading period and Customer Care calls are down by almost a third. A ticketing system was introduced to help improve management of incoming enquiries for Corporate customers and is helping strengthen the customer experience.

Continued focus on costs

With significant investments in transformation over the last two years, the one off costs incurred for major initiatives such as the head office relocation, company rebranding, IT upgrades and consultancy costs are largely complete. We therefore expect administration costs to reduce to c.£19.0m next year, a significant reduction as a percentage of growing revenues.

Safeguarding customers' money

As an e-money provider, we are now required to undertake an annual audit of safeguarding practices. As expected, and referenced in our FY21 Annual Report and in line with many providers across the industry, last year's review identified several areas for improvement. We have made substantial progress over the last 12 months and this year's annual audit has significantly improved. We welcome any measures that are designed to provide increased protection for customers and we are committed to the relevant regulation in this area.

Looking ahead

Our long-term strategy has been to enable growth by creating a more robust and scalable business model. With the work required to deliver this transformation now complete, the business is making clear progress and in better shape.

As the cost of living rises sharply and with inflation predicted to hit double-digit in the year ahead, the macro-economic outlook remains challenging. However, I remain excited about the future opportunities for the Group and the undeniable potential we now have to continue to drive strong demand in Corporate, increase our digital billings, and reinvigorate Christmas savings.

We will continue to evolve so that we are best positioned to respond and thrive in an increasingly competitive and dynamic environment. We are ready to take advantage of the strong propositions in our markets and differentiated product and service offerings.

I am confident we will deliver success with the same commitment and determination that has been shown over the last 50 years.

Ian O'DohertyChief Executive27 June 2022

Chief Financial Officer Review

The Group's financial performance was significantly impacted by Covid-19 and the associated lockdowns in FY21. With these restrictions now coming to an end, the Group saw a return to growth in its core Corporate business and an overall return to greater profitability.

Billings~ and Revenue

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

Multi-retailer redemption products - Love2shop vouchers, flexecash® cards, Mastercards and e-codes

Single retailer redemption products - third party retailer vouchers, cards and e-codes

Other - Consultancy fees, SaaS fees and handling fees

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 non-redemption income 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.

~ See accounting policies for a reconciliation of billings to revenue

Total Group billings~ of £385.8m were down on the previous year (FY21: £406.5m), largely due to a reduction in billings through the Government's free school meals scheme and the impact on Christmas Savings during the pandemic, when Agent collections were restricted by social distancing measures preventing face to face contact during the key customer recruitment period.

Total billings excluding Christmas Savings, were £222.0m, up 3.6% (FY21: £214.3m) following a strong performance in our Corporate business. Whilst the first quarter was initially slower than anticipated as lockdown restrictions began to be eased, these billings saw three consecutive quarters of double-digit growth from Q2 onwards.

The mix of in-house, multi-retailer products remains high within billings, in line with the strategy of promoting our own products (Love2Shop). The mix of multi-retailer redemption products was 87.4% of total billings, marginally higher than last year's 86.5%.

Revenue increased by 15.4%, significantly there was an increase in Multi-retailer redemption product revenue of 54.3%, driven by a return to the high street following the ending of Covid-19 restrictions, this benefitted products that can be spent online and physically.

As referenced last year, Q4 FY2021 saw the start of another national lockdown, non-essential retail businesses were temporarily closed again, which limited the opportunity for our customers to use their products. This meant that redemption levels during Q4 FY2021 were lower than expected, leading to higher unspent balances. Whilst this preserved cash relating to unregulated products, it created a much higher level of deferred revenue in FY21. We had expected this deferred revenue to come through this financial year, as all lockdowns eased, and this was the case. The level of deferred revenue moved back to pre-pandemic levels (£7.8m in 2022 v £11.2m in 2021). Some of this comprised of additional non-redemption noted in the year in relation to vouchers where the group in FY21 had extended the redemption period for our customers. 

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® cards, Mastercards and e-codes in addition to other retailer vouchers.

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

* The FY21 results have been restated as set out in the statement of significant accounting policies

Consumer

In the Consumer business, customer billings have decreased by 15.4% from £205.3m to £173.7m largely driven by Billings for Christmas savers that were down by 15.3%. Billings from the Christmas Savings order book for Christmas 2022 are expected to be down by c.3%, showing an improvement on the annual decline noted in recent years.

The decline in Billings in FY22 led to a decrease in Revenue in the year by 12.5% to £46.5m (2021: £53.1m).

Operating profit was £3.3m, an increase of £2.8m from the profit of £0.5m in the prior year. This was primarily due to exceptional costs in the prior year of the closure of the Hamper packing business (£1.1m), these exceptional costs were not repeated in this financial year. Profitability has also improved because of an uplift in redemption.

Corporate

In the Corporate business, customer billings have increased by 5.4%, from £201.3m to £212.1m. These billings include £16.2m of Free School Meal codes (£23.0m in the prior year) redeemable through Iceland. Corporate revenue increased by 43% over the prior year, from £53.7m to £76.7m. This increase was due to increased billings referenced above plus more conversions to single retailer products (reported gross in revenue) and a higher deferred profit release.

Operating profit increased to £7.9m (2021: £2.6m) due to increased redemptions as spend patterns of customers normalised and additional non-redemption income relating to previous year's deferral materialised in the current year.

All other segments

This includes the exceptional charge in relation to impairment of other intangibles of £2.7m (2021: £1.4m).

Exceptional items

Exceptional items are presented separate from the underlying results of the Group where they are significant in size and nature, and either they do not form part of the trading activities of the Group, or their separate presentation enhances understanding of the financial performance of the Group. This presentation of underlying results gives stakeholders a better understanding of the Group's trading position.

Exceptional items during the year amounted to £2,744k (2021 (restated*): £2,456k) on a pre-tax basis and are summarised in the table below:

The main exceptional item included in the current year results is the one associated with the implementation of the new ERP system. The total cost of £2,667k is split into the following categories:

a) Certain project configuration and customisation costs associated with cloud computing arrangements (£739k), which are now expensed rather than being capitalised as intangible assets following IFRS Interpretation Committee guidance on this topic issued during the year. This is a change in accounting policy adopted in the current year but applied retrospectively, resulting in an additional exceptional charge of £1,390k in FY21. This change has resulted in the restatement of prior year results. For details on the change in accounting policy, please see the Statement of significant accounting policies.

b) Other costs incurred during the year associated with the Group's strategic ERP project which were deemed redundant in nature and therefore not eligible for capitalisation - £1,059k.

c) There was part of the new ERP project which was capitalised last year but in the current year management decided to discontinue the use of that element of the asset. This has resulted in an impairment charge of £869k recorded in the year.

The exceptional costs for FY21 were £1,066k prior to restatement. In the prior year, we closed the hamper production and contract packing businesses based at Valley Road. Following consultation with staff, we made 40 roles redundant and had incurred exceptional costs of £639k. Additionally, we had impaired the value of hamper stock by £414k.

The total tax impact of exceptional items was a reduction in tax charge of £681k in FY 22 (restated* FY21: reduction of £505k). 

Taxation

The effective tax rate for the year was 22.2% (2021: restated* 100.7%) of profit before tax. The rate is higher than the standard rate of corporation tax of 19%, primarily due to legal fees, depreciation of assets and the share option charge not attracting tax relief. 

Earnings per share

Basic earnings per share (EPS) rose to 2.36p from a restated* loss per share of (0.15)p in 2021. Excluding the exceptional charge basic EPS is 3.46p (2021: restated* 0.90p).

Dividends

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. Having already paid an interim dividend of 0.60p (2021: 0.40p) in April 2022, the Board is pleased to recommend a final dividend of 1.20p (2021: 0.60p) per share giving a full year dividend of 1.8p (2021: 1.00p) per share.

Cash flows and treasury

During the year, £6.6m of cash flows were utilized in operating activities. In FY21 we generated cash from operations of £3.4m (restated*) so there was an increase in cash usage of £10.0m in the year. This was driven primarily by the lower redemption levels in prior year which meant lower payments to our redemption partners and higher monies held in trust balance. With redemption patterns now returning to more normal levels, there has been a catch up this year on redemption, resulting in higher payments to suppliers, offset by a lower monies held in trust balance.

This reduction is offset by the decrease in monies held in trust balance, which has reduced from £132.1m in FY21 to £119.5m at 31 March 2022. The balance last year included ring fenced funds of £11.1m in relation to e-codes, which were funds not required to be ring fenced either by regulation or Trust. During the year, a decision was taken to release these funds to free cash, in line with other non-regulated products.

Balances held in respect of the Park Card Services Limited e-money Trust (PCSET), to support the e-money float in accordance with regulatory requirements, and the Park Prepayments Trustee Company Limited, which holds payments received in respect of orders for delivery the following Christmas, were broadly in line with balances in the prior year.

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 14.6% to £139.7m from £163.5m. These total balances peaked at just over £215m in the year, representing a decrease of £20.7m from the prior year.

In August 2020 we completed a bank financing exercise of an unsecured 5 year revolving credit facility (RCF) with Santander UK of £15m plus an additional uncommitted accordion of £10m. This facility provides additional financial flexibility enabling longer term growth, as well as investing in the continued switch to digital products. This facility has not yet been utilized to date.

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 non-redemption income, net of discount. The amount of revenue deferred at March 2022 has decreased to £7.8m from £11.2m in the prior year. The balance had increased at March 2021 due to the closure of non-essential retail in Q4 causing much slower redemptions by customers. This has not reoccurred in the current year.

Provisions

At 31 March 2022, provisions have decreased to £61.5m from £77.9m. This was mainly due to a decrease in the amounts provided in respect of amounts provided for unspent vouchers of £16.2m.

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 £1.3m based on the valuation under IAS19 performed at 31 March 2022 (2021 restated*: surplus of £0.5m).

The Group has recognised net interest income of £31,000 (2021: £99,000) 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 £0.9m (2021: loss of £2.1m) net of tax.

In the year ended 31 March 2022, there were no contributions by the Group to the schemes (2021: nil). 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 £0.1m and one had a surplus on the same basis of £1.6m. 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.

During the year, a retrospective change to the Park Group Pension Scheme has been made which has resulted in an increase of £1.6m in the associated pension liability at 31 March 2022 (PY: £1.6m). For details, please see the Statement of significant accounting policies.

Tim Clancy

Chief Financial Officer

27 June 2022

Going Concern Disclosures

The financial statements are prepared on a going concern basis.

The Group and Company's ability to continue as a going concern is dependent on maintaining adequate levels of liquidity and ensuring covenant compliance to continue to operate for the Going Concern assessment period to 30 November 2023 (the 'Going Concern period'). When assessing the going concern of the Group, the directors have reviewed the year to date financial results, and have modelled management's best estimate of financial results for the Going Concern period, which is based on the Board approved budget and five-year plan.

Liquidity and financing

At 31 March 2022, the Group held instantly accessible cash and cash equivalents of £20.2m (excluding Monies held in trust). The Group also has access to a £15m Revolving Credit Facility ("RCF") that is available until August 2025. A further £10m of uncommitted funds is available via an accordion facility attached to the RCF however this is uncommitted. The Group has not drawn down on the facility throughout FY22 or in the subsequent months, including and up to the date of these financial statements.

The Group is required to comply with covenants attached to the RCF. These covenants are:

· Interest Cover (the ratio of EBITDA to Finance Charges) in respect of any relevant period ending on or after 31 March 2021 shall not be less than 4.0:1.

· Adjusted Leverage (the ratio of Total Net Debt to Adjusted EBITDA) in respect of any relevant period ending on or after 30 September 2020 must not exceed 3.0:1.

· PPPT Balance (the ratio of PPPT Balance to Monies in Advance Balance) on each Quarter Date shall not be less than 1.0:1.

Approach to forecasting and sensitivities

The Group has taken a measured approach to its forecast. With Covid-19 restrictions now removed across the country, the Group has seen a return to a more normal trading pattern, which is also reflected in the results for FY22. Key assumptions in the plan, which models free cash available for use in the business, are:

1. Billings - Modest year on year growth driven by our Corporate business.

2. Cost base - Assumed reduction from FY 22 cost base due to known savings.

3. Non-Redemption - Rate of redemption is in line with current experience in FY22, with a level of overall non-redemption forecast to be in line with current trends observed in FY22.

4. Product mix - The base case assumes a modest decline in paper billings versus FY22 actuals, with a corresponding increase across card, digital and single store product billings in line with the Group's strategy.

5. Capital expenditure - In line with spend in FY22.

6. Completion of an acquisition in FY23. It is assumed that the post-acquisition costs will be net neutral during the going concern period. For details, please see note 27.

While the forecasting uncertainties associated with Covid-19 have eased, the Board acknowledges the uncertainty presented by the macro-economic indicators, including but not limited to the ongoing conflict in Ukraine and the cost of living crisis. Consequently, while the Board believes the base model used in the assessment is robust and achievable, a series of severe-but-plausible downside scenarios have also been considered as follows:

1. Reduction of 5% on Christmas Savers billings in FY23 and an additional 20% in the remaining period. Our order book for Christmas 2022 is secured and historic attrition rates considered within our base case. This 5% reduction provides a further sensitivity to our historic attrition rates on the secured order book.

2. Scenario one above and no growth on FY22 across both Engagement and Gifting.

3. Scenario one above and a 5% decline across both Engagement and Gifting as compared to FY22 actuals.

4. A 15% uplift on current spend rates on unregulated products and a 15% reduction in spend rates across regulated products.

5. A shift in product mix with 15% of unregulated products moving to regulated products.

6. A combined sensitivity covering scenarios 3, 4 and 5.

In the base model and across each of the additional six sensitivities, the Group will have adequate headroom on the available liquidity position, and will remain compliant with all banking covenants throughout the going concern period. The lowest liquidity headroom across all scenarios will be observed in September 2023 in the combined scenario (scenario six) of £6m without any mitigation - this is deemed to be remote.

Management have also performed a reverse stress test which shows that it will take a sustained reduction of 32% in billings across all channels in the going concern period against the base case model to breach the RCF covenant in September 2023. Liquidity however is not breached at this point. Subject to receiving relief on covenant requirements, it will take a sustained reduction of 52% in billings across all channels in the going concern period for the business to breach its liquidity model in September 2023. The Directors consider these scenarios to be remote based on past experience and recent trading.

In all of the aforementioned scenarios, including the reverse stress test, management has not taken any mitigating actions into consideration. The Group however does have several mitigating actions under its control including minimising capital expenditure to critical requirements, reducing levels of discretionary spend including bonus payments, rationalising its overhead base and curtailing future dividend payments which, although not forecast to be required, could be implemented in order to be able to meet the covenant tests and to continue to operate within borrowing facility limits.

Conclusion

Having carefully considered the base case, downside scenarios, reverse stress test, and trends since the year-end, as well as the £15m committed RCF, the directors have a reasonable expectation that the Group and Company have adequate resources to enable them to continue in operational existence for the period to 30 November 2023. Accordingly, the directors continue to adopt the going concern basis of accounting in preparing the Group and Company financial statements.

Principal Risks & Uncertainties

Financial risks

Operational risks

Assisted by our internal auditors, the Group is evolving its enterprise risk management framework to reflect a concentrated number of principal risk categories that better reflect the Group's actual risk profile across internal and external risks. As part of this, a number of risks that were included in last year's report have diminished in their likelihood or impact such that they no longer represent principal risks so have been removed from this section. These are risks relating to Brand perception and reputation, Promotional activity, Competition, and Coronavirus. These risks are however still monitored and reported on as part of the Group's risk management process that ensures management and the Audit Committee has visibility and can consider appropriate risk treatment based on their trending risk score.

Ian O'Doherty

Chief Executive Officer

27 June 2022

Appreciate Group PLC

Consolidated Statement of Profit or loss for the Year to 31 March 2022

All activities derive from continuing operations.

^Underlying represents the results before exceptional items. See the Statement of significant accounting policies for further details.

\* The 2021 results have been restated as set out in the Statement of significant accounting policies.

Appreciate Group PLC

Consolidated Statement of Comprehensive Income for the Year to 31 March 2022

\* The 2021 results have been restated as set out in the Statement of significant accounting policies.

Appreciate Group PLC

(Registration number: 1711939)

Statements of Financial Position as at 31 March 2022

The company reported a loss for the financial year ended 31 March 2022 of £2,357,000 (2021 loss: £2,233,000).

\* The 2021 results have been restated as set out in the Statement of significant accounting policies.

*\* The 2020 results have been restated as set out in the Statement of significant accounting policies.

The financial statements were approved and authorised for issue by the Board of Directors on 27 June 2022 and were signed on its behalf by:

.........................................

I O'Doherty

Chief executive

Appreciate Group PLC

Consolidated Statement of Changes in Equity

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

\* The 2021 results have been restated as set out in the Statement of significant accounting policies.

*\* The 2020 results have been restated as set out in the Statement of significant accounting policies.

Appreciate Group PLC

Company Statement of Changes in Equity

Appreciate Group PLC

Statements of Cash Flows for the Year to 31 March 2022

\* The 2021 results have been restated as set out in the Statement of significant accounting policies.

Appreciate Group PLC

Notes to the Accounts for the Year Ended 31 March 2022

Basis of preparation

The Group and parent Company financial statements have been prepared in accordance with UK adopted international accounting standards in conformity with the Companies Act 2006.

Appreciate Group plc is a company limited by shared and is incorporated and domiciled in the United Kingdom. It is listed on AIM.

The financial statements have been prepared under the historical cost convention. The Group and company financial statements are presented in sterling and all values are rounded to the nearest thousand (£'000) except where otherwise stated.

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

In preparing the financial statements, the Group has considered the impact of risks of climate change and concluded that it does not have a material impact on the recognition and measurement of the assets and liabilities in these financial statements as at 31 March 2022.

The exceptional items have been shown on the face of the profit and loss account as a separate column. This has no impact on the gross profit, operating profit or profit before tax amounts for FY21.

The financial information set out above does not constitute the Group or Company's statutory accounts for the years ended 31 March 2022 or 2021 but is derived from those accounts.

Statutory accounts for 2021 have been delivered to the registrar of companies. The auditor, Ernst & Young LLP, has reported on the 2021 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 2022 will be delivered to the registrar of companies following the AGM. The auditors have reported on these accounts; their report (i) is 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) does not contain a statement under section 498(2) or (3) of the Companies Act 2006.

The annual report will be posted to shareholders on or before 10 August 2022 and will be available from that date on the Group's website: www.appreciategroup.co.uk.

Going concern

The financial statements are prepared on a going concern basis.

The Group and Company's ability to continue as a going concern is dependent on maintaining adequate levels of liquidity and ensuring covenant compliance to continue to operate for the Going Concern assessment period to 30 November 2023 (the 'Going Concern period'). When assessing the going concern of the Group, the directors have reviewed the year to date financial results, and have modelled management's best estimate of financial results for the Going Concern period, which is based on the Board approved budget and five-year plan.

Liquidity and financing

At 31 March 2022, the Group held instantly accessible cash and cash equivalents of £20.2m (excluding Monies held in trust). The Group also has access to a £15m Revolving Credit Facility ("RCF") that is available until August 2025. A further £10m of uncommitted funds is available via an accordion facility attached to the RCF however this is uncommitted. The Group has not drawn down on the facility throughout FY22 or in the subsequent months, including and up to the date of these financial statements.

The Group is required to comply with covenants attached to the RCF. These covenants are:

Approach to forecasting and sensitivities

The Group has taken a measured approach to its forecast. With Covid-19 restrictions now removed across the country, the Group has seen a return to a more normal trading pattern, which is also reflected in the results for FY22. Key assumptions in the plan, which models free cash available for use in the business, are:

While the forecasting uncertainties associated with Covid-19 have eased, the Board acknowledges the uncertainty presented by the macro-economic indicators, including but not limited to the ongoing conflict in Ukraine and the cost of living crisis. Consequently, while the Board believes the base model used in the assessment is robust and achievable, a series of severe-but-plausible downside scenarios have also been considered as follows:

In the base model and across each of the additional six sensitivities, the Group will have adequate headroom on the available liquidity position, and will remain compliant with all banking covenants throughout the going concern period. The lowest liquidity headroom across all scenarios will be observed in September 2023 in the combined scenario (scenario six) of £6m without any mitigation - this is deemed to be remote.

Management have also performed a reverse stress test which shows that it will take a sustained reduction of 32% in billings across all channels in the going concern period against the base case model to breach the RCF covenant in September 2023. Liquidity however is not breached at this point. Subject to receiving relief on covenant requirements, it will take a sustained reduction of 52% in billings across all channels in the going concern period for the business to breach its liquidity model in September 2023. The Directors consider these scenarios to be remote based on past experience and recent trading.

In all of the aforementioned scenarios, including the reverse stress test, management has not taken any mitigating actions into consideration. The Group however does have several mitigating actions under its control including minimising capital expenditure to critical requirements, reducing levels of discretionary spend including bonus payments, rationalising its overhead base and curtailing future dividend payments which, although not forecast to be required, could be implemented in order to be able to meet the covenant tests and to continue to operate within borrowing facility limits.

Conclusion

Having carefully considered the base case, downside scenarios, reverse stress test, and trends since the year-end, as well as the £15m committed RCF, the directors have a reasonable expectation that the Group and Company have adequate resources to enable them to continue in operational existence for the period to 30 November 2023. Accordingly, the directors continue to adopt the going concern basis of accounting in preparing the Group and Company financial statements.

New standards, interpretations and amendments adopted

The following amendments and interpretations apply for the first time in 2022, but have not had a material impact on the Financial Statements of the Group:

New standards, amendments and interpretations not yet adopted

Certain new accounting standards and interpretations have been published that are not mandatory for 31 March 2022 reporting periods and have not been early adopted by the Group. None of these are expected to have a material impact on the Group in the current or future reporting periods or on foreseeable future transactions. Below is a list of new standards which will be effective in future periods:

*** Effective for annual periods beginning on or after 1 January 2022

**** Effective for annual periods beginning on or after 1 January 2023

Prior year restatement

The Statements of Financial Position for 31 March 2021 and 1 April 2020 have been restated. The table below summarises the changes made (All amounts in £'000).

Details of the changes are included in the proceeding paragraphs.

1) Change in accounting policy - Software as a Service ("SaaS") arrangements

Following the IFRS Interpretations Committee (IFRIC) agenda decision published in 2021, the Group has reviewed its accounting policy regarding the configuration and customisation costs incurred in implementing SaaS arrangements.

SaaS arrangements are arrangements in which the Group does not control the underlying software used in the arrangement.

The Group's revised policy is as follows:

Previously some configuration and customisation costs relating to SaaS arrangements, which did not result in a separately identifiable software intangible assets, had been capitalised.

The change in accounting policy has been retrospectively applied, resulting in a restatement to previously reported numbers. The impact on the Consolidated Statement of Profit or Loss for 31 March 2021 is an increase in exceptional administrative expense of £1,390k and a decrease in tax charge of £264k, resulting in a net change in profit after tax of £1,126k. The impact of change in accounting policy for FY22 is included in the Segmental note (Note 1).

The basic and diluted earnings per share for the year ended March 2021 has been restated from 0.46p per share to a loss of 0.15p per share, resulting in an impact of 0.61p per share in basic and diluted loss per share from continuing operations.

The impact on the Consolidated Statement of Cash Flows is an increase in the net cash inflow from investing activities of £1,390k (due to a reduction in the purchase of other intangibles) and a decrease in the net cash used in operating activities of £1,390k, with no change in the overall increase in cash and cash equivalents in the year.

2) Retrospective restatement of incorrect valuation of retirement benefit obligation

Since FY 11 (restated in FY 12) financial statements, Park Group Pension Scheme (PGPS) members' deferred benefits, for all relevant years past and present, have been revalued in line with the Consumer Prices Index ("CPI"). Prior to that the FY 10 financial year statements used the Retail Prices Index ("RPI") as the basis for deferred revaluation under the PGPS. This change to the revaluation index arose because of a change in scheme rules in 2007 that aligned the revaluation requirements with statutory minimum revaluation at the time and then a subsequent change in 2011 in the statutory minimum basis itself which changed from RPI to CPI.

The Group received legal advice in 2011 which was considered to support the change in indexation assumption that was disclosed in the FY12 financial statements. However, during the current year, a matter was raised by a member to the Trustees which indicated that the change described above was potentially incorrect in how it revalued deferred pensions at that time. Management has since sought further legal and pension advice in the year and have also consulted with the Trustees. Based on this, while the matter itself remains unresolved, it is considered probable that the change made in FY11 was based on an incorrect application of RPI and CPI. This would mean that certain deferred benefits relating to pensionable service during a particular time period may need to be uplifted. As a result, the pension liability has been recalculated using adjusted indexation assumptions after taking into account the likely change. The ultimate decision whether the change has to be made will be taken by the Trustees.

Given this change relates to 2011 and the years following, and arose because of potentially incorrect assumption and legal advice received at the time, this has resulted in the restatement of previously reported balances. The impact on the Statement of Financial position and Equity is a reduction in Retirement Benefit Asset and Retained Earnings of £1.6m at 1 April 2020 and at 31 March 2021. There is no impact on the Consolidated Statement of Profit or Loss or in the Consolidated Statement of Cash Flows.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the company and its subsidiaries made up to 31 March each year.

Subsidiaries are entities controlled by the investor. Control is achieved when the investor is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The results of a subsidiary undertaking are included in the consolidated financial statements from the date that control commences until the date that control ceases. All subsidiaries share the same reporting date and are based on consistent accounting policies. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests, even if doing so causes the non-controlling interests to have a deficit balance.

Intra-group balances, and any unrealised gains or losses or income and expenses arising from intra-group transactions, are eliminated on consolidation.

Generally, there is a presumption that a majority of voting rights results in control. The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non- controlling interest and other components of equity, while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value.

As permitted by section 408 of the Companies Act 2006, the statement of profit or loss of the parent company has not been separately presented. The profit of the parent company is shown in a footnote to its statement of financial position.

Business combinations

A business combination is recognised where separate entities or businesses have been acquired by the Group.

The acquisition method of accounting is used to account for the business combinations made by the Group. The cost of a business combination is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Where the consideration includes a contingent consideration arrangement, the contingent consideration is measured at its acquisition date fair value and included as part of the cost of the acquisition. Acquisition related costs are expensed as incurred.

Identifiable assets acquired and liabilities and contingent liabilities assumed in the business combination are measured initially at their fair values at the acquisition date. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the Group's share of the identifiable net assets of the subsidiary acquired, the difference is taken immediately to the statement of profit or loss.

Segmental reporting

An operating segment is a distinguishable component of an entity about which separate financial information is available that is evaluated regularly by management in deciding how to allocate resources and in assessing performance. Provided certain quantitative and qualitative criteria are fulfilled, IFRS 8 Operating Segments permits the aggregation of those components into reportable segments for the purposes of disclosure in the Group's financial statements. In assessing the Group's reportable segments, the directors have had regard to the nature of the products offered and the client bases amongst other factors. The operating segments as set out in note 1 are consistent with the internal reporting provided to the chief operating decision maker. For the purposes of IFRS 8 the chief operating decision maker has been identified as the executive members of the Board of directors. All inter-segment transfers are carried out at arm's length prices.

The Group operates in one geographical segment, being the UK. The Group operations in the Eurozone are immaterial to the results and assets of the Group in the year ended 31 March 2022 (31 March 2021 - same).

Revenue from contracts with customers

The Group recognises revenue from contracts with customers when control over the goods and services is transferred to the customer. Revenue is recognised at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods and services, net of VAT, rebates and discounts.

The Group is a principal if it controls the promised good or service before transferring it to the customer. The Group is an agent if its role is to arrange for another entity to provide the good or service. The Group acts as an agent in the sale of multi-retailer redemption products and travel agency services and therefore fees that are retained for its agency service are recorded in revenue on a net basis. For all other products and services, the Group acts as a principal and revenues are recorded on a gross basis.

As described below, the majority of revenues are recognised at a point in time. For multi-retailer redemption products, revenue is recognised when the products are redeemed; for single retailer redemption products and other goods, revenue is recognised when the products are received by the customer. Revenue for other services is recognised over time or at a point in time depending on the nature of the revenue stream, as described further in (ii) below.

The Group's multi-retailer redemption products may be partially or fully redeemed, and the unused amount (i.e. the non- refundable unredeemed or unspent funds on a voucher, card or e-code at expiry) is referred to as non-redemption income. Where the end user has no right of refund (corporate gifted cards), the Group may expect to earn a non-redemption income amount and this is recognised as revenue in proportion to the actual timing of redemptions. Where the customer has the right of refund, non-redemption income is recognised as revenue when the card has expired and the right of refund has lapsed.

Significant accounting judgements and estimates relating to revenue are described below.

The Group's primary revenue streams are as follows:

1. Services - multi-retailer redemption products

a) Love2shop vouchers

b) flexecash® cards and e-codes

c) Mastercards

2. Goods - single retailer redemption products

a) third party vouchers, cards and e-codes

3. Other services

a) brand engagement

b) packing

c) collection and delivery

d) travel agency

e) other services

Customers are offered standard business credit terms or pay in advance for their products and services.

For multi-retailer redemption products, the Group recognises revenue for service fees, card holder fees and non-redemption income.

The Group has contractual relationships with each of the redeemers. The Group earns a service fee from the redeemer when a consumer redeems their voucher, card or e-code with that redeemer.

Card holder fees are earned for services provided to cardholders such as issue, dealing with lost/stolen/damaged cards and maintenance.

 (i) Principal and Agent

Under IFRS15, the Group is a principal (and records revenue on a gross basis) if it controls the promised good or service before transferring it to the customer.

The Group is an agent (and records as revenue the net amount that it retains for its agency services) if its role is to arrange for another entity to provide the good or service.

For multi-retailer redemption products, in addition to the service fees noted above, the Group also earns cardholder fees and non-redemption income as follows:

For all revenue streams, intra-group sales are eliminated and revenue is recorded net of VAT, rebates and discounts.

(ii) Timing of revenue recognition

Under IFRS15, revenue is recognised when (or as) an entity satisfies an identified performance obligation by transferring a promised good or service to a customer. A good or service is considered to be transferred when the customer obtains control.

Travel commission represents variable consideration contingent on future events (as travel plans can be changed or cancelled after the original booking date). Accordingly, the Group does not recognise revenue until it is highly probable that a significant reversal in the amount of cumulative revenue will not occur.

Under IFRS15, certain costs related to discounts and commissions are recognised as follows:

(iii) Presentation and disclosure

Under IFRS15, the below items are presented as follows:

Prepaid costs and deferred income are not discounted to take into account the expected timing of redemption as the impact is not considered to be material. This is due to the fact that over 85% of multi-retailer redemption products are redeemed within 12 months of issue.

Contract balances

Trade Receivables

A receivable represents the Group's right to an amount of consideration that is unconditional (i.e. only the passage of time is required before payment of that consideration is due).

Contract Liabilities

A contract liability is the obligation to transfer goods or services to a customer for which the Group has received consideration from the customer. Contract liabilities are presented as deferred income within trade and other payables.

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 are as follows:

Operating profit/(loss)

Operating profit/(loss) is reported as profit before taxation and finance income and costs; but after distribution costs and administrative expenses.

Finance income and costs

Finance income comprises the returns generated on cash and cash equivalents, other financial assets, leases for which the Group is the lessor, and monies held in trust, and is recognised as it accrues.

Finance costs comprise the interest on external borrowings and lease liabilities, facility and arrangement fees and costs of obtaining external finance and are recognised as they accrue.

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 recoverable. Goodwill in existence at 1 April 2004, the date of transition to IFRS for the Group, is carried in the statement of financial position as deemed cost less accumulated impairment losses at that date.

Impairment of property, plant and equipment and intangibles

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. Intangible assets with indefinite lives, such as goodwill, are tested annually for impairment. All other assets subject to amortisation are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. In addition, assets not yet in use are also reviewed for any impairment. An impairment loss is recognised to the extent that the carrying amount of the asset exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and its value in use. Value in use is calculated using cash flows derived from budgets and projections approved by the board which are discounted at the Group's risk adjusted weighted cost of capital calculated from equity market data and borrowing rates.

Testing is performed at the level of a cash generating unit (CGU) in order to compare the CGU's recoverable amount against its carrying value. Goodwill and intangible assets, i.e. customer lists, are allocated to CGUs based on past acquisitions of Christmas savings club brands and customer lists. Whilst these are not operating segments, as management do not manage and review the business at this level, information is available to enable the assets to be tested for impairment at this level.

Any impairment is recognised immediately through the statement of profit or loss. Impairment losses are reversed if there is evidence of an increase in the recoverable amount of a previously impaired asset, but only to the extent that the recoverable amount does not exceed the carrying amount that would have been determined if no impairment loss had been recognised. Impairments in respect of goodwill are not subsequently reversed.

Other intangible assets

Purchased software

Acquired software licences are capitalised at cost and are amortised on a straight-line basis over their anticipated useful life, which is 3-5 years.

Software development

Costs that are directly associated with the creation of identifiable software, which meet the development asset recognition criteria as laid out in IAS 38 Intangible Assets, are recognised as intangible assets. Direct costs include the employment costs of staff directly involved in specific software development projects and external consultancy fees.

All other software development and maintenance costs are recognised as an expense as incurred.

Computer software development costs recognised as assets are amortised over their anticipated useful lives of between 3 and 10 years on a straight-line basis. Amortisation begins on the date the asset is completed.

Included in the Intangibles Asset balance is an asset of £4.6m that represents the implementation of a new ERP system that will replace our back office systems with a robust and scalable platform that will permit development of added value services. The ERP system went live during the year.

Customer lists

Customer lists acquired are included at cost less accumulated amortisation and impairment. They are amortised over their useful life of up to 10 years based on the pattern of forecast cash flows to be generated.

Investments

Investments are stated at cost less any provision for impairment in their value. Impairment is calculated based on lower of cost or recoverable amount, determined with reference to the higher of fair value less cost of disposal and value in use.

Property, plant and equipment

Property, plant and equipment is stated at cost less accumulated depreciation and impairment losses. Cost represents expenditure that is directly attributable to the purchase of the asset.

Depreciation is charged on a straight-line basis, so as to write off the costs of assets less their residual values over their estimated useful lives, on the following basis:

The assets' estimated useful lives, depreciation rates and residual values are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset's carrying value is written down immediately to its recoverable amount if its carrying value is greater than its recoverable amount.

The gain or loss arising on disposal of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the statement of profit or loss.

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:

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined by the average purchase price. Finished goods and work in progress includes attributable production overheads. Net realisable value is based on estimated selling price in the ordinary course of the business less cost of disposal having regard to the age, saleability and condition of the inventory.

Financial instruments

Financial assets and liabilities are recognised in the Group's statement of financial position when the Group becomes party to the contractual provisions of the instrument.

Financial assets

Financial assets are classified, at initial recognition, and subsequently measured at amortised cost, fair value through other comprehensive income (OCI), and fair value through profit or loss. The classification of financial assets at initial recognition depends on the financial asset's contractual cash flow characteristics and the Group's business model for managing them.

In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are 'solely payments of principal and interest (SPPI)' on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level.

The Group's business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.

The Group only holds financial assets that are classified as loans and receivables and are measured at amortised cost. The Group measures financial assets at amortised cost if both of the following conditions are met:

Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.

Derecognition

A financial asset (or, where applicable, a part of a financial asset or part of a Group of similar financial assets) is primarily derecognised (i.e. removed from the Group's statement of financial position) when:

When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Group continues to recognise the transferred asset to the extent of its continuing involvement.

Trade and other receivables and contract assets

For trade and other receivables and contract assets, the Group applies the simplified approach permitted by IFRS9, with lifetime expected credit losses (ECLs) recognised from initial recognition of the receivable or contract asset. These assets are assessed based on the Group's historical credit loss experience adjusted for forward looking information. The Group uses historical trends to then apply this to an assessment of the likely credit losses in the future. The Group's experience has shown that aging of receivable balances is primarily due to normal collection process issues rather than increased likelihood of non-recoverability. At each reporting date, management reviews the carrying amount of its receivables and contract assets to determine whether there is any indication that those assets had suffered an impairment loss.

In respect of receivables from subsidiaries, management's assessment of the impact of IFRS9 has focused on the change in IFRS9 around ECLs on intercompany balances. The loans to the subsidiary companies are classified as repayable on demand. Management have considered the probability of default, the loss given default, when the borrower is not capable of repaying on demand, and the discount rate when calculating ECLs.

Monies held in trust

On 13 August 2007 a declaration of trust constituted the PPPT to hold agents' prepayments. Park Prepayments Trustee Company Limited, as trustee of the trust, holds this money on behalf of agents. The conditions of the release of this money to the Group are detailed in the trust deed, which is available at www.getpark.co.uk.

On 16 February 2010 a declaration of trust constituted the PCSET to hold the e-money float in accordance with regulatory requirements. The e-money float represents the value of the obligations of the company to cardholders and redeemers. The liability in respect of deposits received on flexecash® cards, is held within trade payables and provisions.

Ring fenced funds represent amounts segregated from Group cash balances and are in respect of monies held on cards which are not subject to regulatory requirements.

Monies held under the declaration of trust with the PPPT and the PCSET on behalf of customers, cardholders and redeemers, and ring fenced funds are recognised on the statement of financial position as the Group has access to the interest on these monies and can, having met certain conditions, withdraw the funds. However, given the restrictions over these monies, the amounts held in trust and ring fenced funds are not included in cash and cash equivalents for the purposes of the statement of cash flows.

Cash and cash equivalents

Cash and cash equivalents includes cash in hand and deposits held with banks with short maturities of three months or less, however, the deposits can be accessed immediately if required. It is therefore considered appropriate that these deposits be classed as cash and cash equivalents. Bank overdrafts are shown within borrowings in current liabilities in the statement of financial position. Cash balances and overdrafts are offset where the Group has the ability and intention to settle these balances on a net basis. For cash flow purposes, bank overdrafts are shown within cash and cash equivalents.

Financial liabilities

Non-derivative financial liabilities are classified as other financial liabilities. The Group's other financial liabilities comprise borrowings, trade and other payables. Other financial liabilities are carried at amortised cost using the effective interest method. A financial liability is derecognised only when the obligation is extinguished, that is, when the obligation is discharged or cancelled or expires.

Trade and other payables

Trade and other payables are initially recorded at fair value and subsequently measured at amortised cost using the effective interest method. The unspent balances on flexecash® cards and e-codes where the cardholder has the right of redemption are accounted for as a financial liability as required under IFRS 9, and are reported separately under trade and other payables.

Provisions

Unredeemed vouchers and cards

Unredeemed vouchers and unspent balances on flexecash® cards and e-codes where the card holder does not have the right of refund (corporate gifted cards), are included at their present value at the date of recognition. This comprises the anticipated amounts payable to retailers on redemption, after applying an appropriate discount rate to take into account the expected timing of payments. Anticipated payments to retailers are assessed by reference to historical data as to voucher and card redemption rates and timings. The key estimates used in deriving the provision include the future service fees paid by retailers, interest rates used for discounting and the timing and amount of the future redemption of vouchers and cards. The future cash payments are discounted as required under IAS 37 Provisions, Contingent Liabilities and Contingent Assets, as the amounts are considered to be material. The service fee and non-redemption income associated with multi-retailer redemption products is deferred as described in the revenue recognition accounting policy.

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.

Employee benefits

Retirement benefit obligation

The Group has both defined benefit and defined contribution pension plans. The assets of the defined benefit pension plans are held in separate trustee administered funds.

Defined benefit plan

The fair value of the plan assets less the present value of the defined benefit obligation is recognised in the statement of financial position as the retirement benefit asset, after applying the asset ceiling test. The limit on the recognition of a defined benefit pension asset is measured as the value of economic benefit available to the group in the form of refunds or reductions in future contributions, in accordance with the rules of the pension schemes.

Regular valuations are prepared by independent professionally qualified actuaries on the projected unit credit method. The valuations are carried out every three years and updated on a yearly basis for accounting purposes. These determine the level of contribution required to fund the benefits set out in the rules of the plans and allow for the periodic increase of pensions in payment.

The schemes are closed to future accrual for years' service but pensions are still dependent on actual final salaries. Consequently, the Group may have an amendment in future where salary rises differ from those projected. For any related plan amendment, these are recognised immediately in the statement of profit or loss.

Remeasurements comprise actuarial gains and losses on the obligations and the return on scheme assets (excluding interest). They are recognised immediately in other comprehensive income in the Consolidated Statement of Comprehensive Income (SOCI). Net interest cost is calculated by applying the discount rate on liabilities to the net pension liability or asset (adjusted for cash flows over the accounting period) and is recognised within administrative expenses.

Defined contribution plans

For defined contribution plans, the Group pays contributions to privately administered pension plans on a contractual basis. The contributions are recognised as an employee benefit expense as they fall due.

Holiday pay

Provision is made for any holiday pay accrued by employees to the extent that the holiday entitlements accrued have not been taken at the period end.

Share-based payments

The Group operates a number of equity settled share-based payment plans.

The expense is calculated as the fair value of the share options at the date of grant, using monte-carlo simulation (LTIP and SGP awards), Black-Scholes formula (SAYE 2018) and the binomial method (SAYE 2015). A corresponding amount is recorded as an increase in equity. This expense is recognised on a straight-line basis over any relevant vesting period and is adjusted on a prospective basis at each period end for any changes in assumptions or estimates that relate to non-market conditions, taking into account the conditions existing at each year end. Where an employee fails to complete a specified service period, including termination of employment, the awards are considered to have been forfeited and the cumulative expense is reversed.

Own shares

The Group has an employee benefit trust used for the granting of shares to executives and certain employees. Own shares held are recognised at cost as a deduction from shareholders' equity. Subsequent consideration received for the sale of such shares is also recognised in equity, with any difference between the sales proceeds and original cost being taken to equity.

Foreign currency

Transactions in foreign currencies are recorded at the rates of exchange at the date the transactions occur. Amounts recognised in the SOCI are translation differences. Monetary assets and liabilities are restated at the prevailing exchange rate at each year end. Differences arising on restatement are included in the SOCI for the year.

Leases

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.

At inception or on reassessment of a contract that contains a lease component, the Group allocates the consideration in the contract 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.

As a lessee

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 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.

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:

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.

Short-term leases and leases of low-value assets

The Group applies the short-term lease recognition exemption to its 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 £5,000. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

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.

Taxation

The charge for taxation is based on the result for the year and takes into account taxation deferred because of temporary differences between the treatment of certain items for taxation and accounting purposes.

Current tax is the expected tax payable on the taxable result for the year using tax rules enacted or substantively enacted at the year end, and any adjustment to tax payable in respect of previous years.

Deferred tax is provided on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. The following temporary differences are not provided for: when the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transition, affects neither the accounting profit nor taxable profit or loss. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the year end and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

Taxation is recognised in the statement of profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Dividends

In accordance with IAS 10 Events After the Reporting Period, dividends are recognised in the financial statements in the period in which they are approved by shareholders in the case of the final dividends and when paid in the case of the interim dividends.

Exceptional items

Income statement items are presented in the middle column of the Consolidated income statement entitled Exceptional Items where they are significant in size and nature, and either they do not form part of the trading activities of the Group, or their separate presentation enables identification of the financial performance of the Group.

Items classified as Exceptional items are as follows:

Impairment charges and costs associated with other intangibles

Impairment charges related to non-current assets are non-cash items and tend to be significant in size. The presentation of these as exceptional items enables identification of the underlying financial performance of the Group. This also includes costs incurred in relation to the change in accounting policy with regards to SaaS arrangements, as described in more details in note titled 'Change in accounting policy - Software as a Service ("SaaS") arrangements'.

Net operating losses attributable to businesses identified as non-core

Operating results from businesses identified as non-core do not form part of the ongoing trading activities of the Group and they are therefore recorded separately in Exceptional items in order to enable the understanding of the ongoing financial performance of the Group and its businesses. Non-core businesses are those businesses that have been closed or disposed of, or where the Board has resolved to close or dispose of the business by the year end and which don't meet the criteria to be classified as a discontinued operation. There are currently no businesses classified as non-core, but the Group did discontinue the hamper business in the prior year and so the impairment of obsolete stock and redundancy costs associated with that business are included as exceptional items in FY21.

Other specific items

Other specific items are recorded in Exceptional items where they do not form part of the underlying trading activities of the Group in order to enable the understanding of the financial performance of the Group. This includes, for example, profit on sale of property not related to ongoing operations (i.e. related to a branch or business closure) or property sold as part of a fundamental restructuring programme. Profit on the sale of property in connection with branch or office moves in the normal course of business is included within underlying results.

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:

Other Intangibles

Following the IFRIC agenda decision, management has reviewed the costs incurred during the implementation of all SaaS arrangements. The IFRIC amongst other things makes a distinction between configuration and customisation and outlines that certain customisations can be capitalised if the criteria in IAS 38 is met. There was an element of judgement exercised in determination of which customisations could still result in recognition of an asset. It was concluded that any customisation that resulted in development of new code which is in the Group's possession, is a viable asset and can be capitalised, is under Group's control and from which future economic benefit can be derived by the Group. Consequently, these costs were capitalised. Any costs that did not meet the criteria were written off, as disclosed in the change in accounting policy note.

When assessing the costs noted above, management also identified certain other costs capitalised in the period which were redundant in nature and therefore did not meet the capitalisation criteria. An element of judgment was exercised in identifying these costs.

Pensions

The Group has two defined benefit pension schemes, as described in note 19, in one of them 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 the pension scheme and legal advice, that it has a right to a refund during the life of the schemes or when the schemes are settled, that is not conditional upon factors beyond the Group's control. On this basis, the Group has recognised the surplus in full as an asset on the balance sheet. This accounting treatment is consistent with prior years.

During the year a matter with regards to a potential incorrect valuation of the Park Group Pension Scheme was noted. While the matter remains unresolved, a judgment has been exercised by management in concluding that a change to certain deferred benefits is probable, based on legal advice received to date and discussion with Trustees. As a result, this has been included in the current year financial statements as a retrospective adjustment. For details, please see the Prior year restatements note in the Statement of significant accounting policies.

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 card holder fees and non-redemption income 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, entities 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. Directors 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. Directors 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 (note 17).

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 two material lease contracts that include extension and termination options. One of these is the lease of floor 3 and 4, 20 Chapel Street Liverpool. The Group included the renewal period as part of the lease term, as the majority of the Group's operations are based in this site in Liverpool City Centre. As a result of this, the lease extension is reasonably certain to be exercised.

The other lease is for rack space and data hosting services, which has an initial term of one year with an automatic rolling 12 month extension option if not cancelled. The lease was renewed for its second year during the period, and it has been estimated the lease will be renewed for a further one year, which is consistent with its original capitalised term of three years.

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, as described in note 17. 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.

Non-redemption income

For multi-retailer redemption products where the end user has no right of redemption (corporate gifted cards and vouchers), the Group may expect to earn a non-redemption income amount. In order to calculate the expected non-redemption income 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 non-redemption income were to change by 1.0%, the impact on revenue for the reporting period would be £0.1m. 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

As described in the revenue recognition accounting policy and as shown in note 16, 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.

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 6 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

The Group applies judgement in assessing whether the costs incurred, both internal and external, will generate future economic benefits and therefore should be capitalised. Any redundant costs are not capitalised, but are expensed during the period in which they are incurred. Amortisation commences when management determine the asset is available for use i.e. when it is in the location and condition necessary for it to be capable of operating in the manner intended by management.

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. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. At each reporting date the Group reviews the carrying value of its tangible and intangible assets, including those not yet in use, to determine whether there is any indication that those assets have suffered an impairment loss (see note 7 for details).

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. Management have used rates ranging from 3.4% to 3.5% in respect of leases entered in to during the year.

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

Both segments offer primarily sales of the Love2shop voucher, flexecash® cards, Mastercards and e-codes in addition to other retailer vouchers, cards and e-codes.

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 vouchers sold by the corporate vouchers 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.

The group operates in only one geographical segment, being the UK. The group's operations in Ireland were immaterial to the results of the group for the year ended 31 March 2022.

All other segments loss comprises primarily of staff costs, professional fees and the impairment of non-current assets.

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

The main exceptional item included in the current year results is the one associated with the implementation of the new ERP system. The total cost of £2,667k is split into the following categories:

The total tax impact of exceptional items was a reduction in tax charge of £681k in FY22.

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

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

For details of the Group's primary revenue streams, please see the revenue recognition accounting policy in the relevant section above.

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.