# Appreciate Group: Digitising giving – delivering the future today

- Link: https://www.directorstalkinterviews.com/appreciate-group-digitising-giving-delivering-the-future-today/4121057230
- Published: 2022-03-18T07:49:25+00:00
- Author: Amilia Stone

We reviewed **Appreciate Group plc** (LON:APP) business model in our initiation,
Solid core + digital disruption = unique model, published on 1 September 2021, with
an update following its interim results, Interim results: solid progress, digital
delivering, published on 29 November 2021. In this note, we focus on a theme running
through both those reports – the digitalisation of the business and how the modernisation
of every aspect of procedures, cultures, products and management is fundamentally
changing the prospects for the group. Delivery is now key, and so we detail the “
proof of the pudding”: how APP is delivering the future today. Further evidence 
of this is expected with the April trading update.

 * **Benefits if delivered:** Investors gain from higher earnings, with more sales(
   broader product range, new markets, higher shares in very large revenue pools)
   from an efficient platform driving economies of scale and with fewer error rates.
   The valuation rating is also likely to improve, reflecting the improved earnings
   outlook.
 * **Proof of the pudding so far:** Administration costs are expected to fall by
   £1m (down 5%) this year, and peak season temporary staff are down 13%, despite
   higher volumes. Digital billings have more than quadrupled in two years, and 
   HighStreetVouchers.com traffic was up 32%, according to the recent trading statement.
 * **Valuation:** We use a range of valuation approaches, including a Gordon Growth
   Model (GGM), a Discounted Dividend Model (DDM) and a peer comparison. On the 
   assumptions we outline later in the report, the average indicative valuation 
   is 60p. As Appreciate Group is a growing business, there is upside potential 
   moving forward the base year.
 * **Risks:** FY’21/’22 was a challenging period for the Xmas Savings business, 
   as lockdown restrictions affected agent activity. The digital model is positive,
   but it is still being developed, and the transition is not risk-free. Anything
   adversely affecting redemption/distribution relationships would be negative. 
   There is a sensitivity to macroeconomics and near-term customer behaviour.
 * **Investment summary:** Combining a profitable core, decades of experience, (
   especially in managing key partnerships) and the latest technology give Appreciate
   Group a unique fintech strategy. It is at the early stages of the transition 
   to a digital model but has already attracted new partners like PayPoint. Comparable
   models are growing explosively and are on higher valuations. The accounting rules
   are unhelpful to understanding the business. Any fundamental strategic change
   introduces risk, and there is some economic sensitivity.

[DOWNLOAD THE FULL REPORT](https://www.hardmanandco.com/research/corporate-research/digitising-giving-delivering-the-future-today/?dm_i=49CL,1A1HZ,6NAI95,5WCZW,1#report-download)

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