Accrol Group Holdings plc Appoint Gareth Jenkins as new CEO

Accrol Group Holdings plc

Accrol Group Holdings plc (LON:ACRL), the AIM-listed leading independent tissue converter, announced today that Gareth Jenkins has been appointed as Chief Executive Officer with effect from 11 September 2017.

Gareth joins the Company having spent 24 years at DS Smith plc, one of Europe’s leading packaging companies manufacturing corrugated solutions for the retail, FMCG and industrial markets. He spent the last four years as Managing Director of the UK & Ireland packaging division and has extensive strategy, commercial, M&A and operational experience, gained in both the UK and in Europe.

Gareth will replace Steve Crossley, who is leaving the Company and stepping down from the Board with immediate effect to pursue other interests.

The Board confirms that the Company continues to trade in line with market expectations in terms of revenue, with profitability being broadly in line with market expectations.

Peter Cheung, Chairman of Accrol, commented: “We are very pleased to be joined by someone of Gareth’s calibre, and we look forward to benefiting from his wealth of experience built during a 24 year career at DS Smith plc. I would like to thank Steve for the contribution that he has made to Accrol, in particular his contribution to a successful IPO, and we wish him well for the future.”

Information on Gareth required to be disclosed under Schedule Two, paragraph (g) (i)-(viii) of the AIM Rules for Companies:

Gareth Paul Jenkins, aged 49, is not currently a director of any other company.

In addition, Gareth has held the following directorships in the past five years:

· DS Smith Business Services Limited

· DS Smith Corrugated Packaging Limited

· DS Smith Display Holding Limited

· DS Smith Packaging Limited

· CREO Retail Marketing Holdings Limited

· CREO Retail Marketing Ltd

· CREO Property Limited

· TRM Packaging Limited

· TRM Trustees Limited

· The Stone Trough Company Ltd (dissolved via voluntary strike-off on 18 March 2014)

Gareth has no interests in the share capital of Accrol Group Holdings plc.


Zeus Capital:

Accrol has provided a trading update confirming it is trading broadly in line with expectations. We update our forecasts to reflect a more conservative view of full year profits. While revenue trends are robust, we are reducing our 2018-20 EPS forecasts by 2.2% – 5.9%. Also contained within the statement is the announcement of a new CEO from DS Smith, which we believe is good news given his track record running a major division within a FTSE 100 business. Although trading conditions are not easy, we continue to believe Accrol remains attractive, trading on a discount to small cap peers, despite a ROCE approaching 16% and FCF yield of 4.5%.

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Trading update: The company has provided a trading update confirming it is trading at the lower end of the consensus range. We believe revenue growth is on track, with gross profit margins facing continued pressure. While the group remains well hedged on FX, paper prices continue to rise, increasing input costs, and customers remain focused on product re-engineering, which is ultimately putting pressure on the group’s gross margin. The company are due to report results for the interim period ending October 2017 in January 2018.

New CEO: We see this as good news given Gareth Jenkin’s track record at DS Smith PLC where he was Managing Director of the UK Packaging Division. During his time at DS Smith he held 10 different positions and therefore has extensive strategic, operational and M&A experience, gained over his 24-year career at the company. Before taking on the role of Managing Director of UK packaging he was sector director for retail corrugated, covering 8 operating units in the UK.

Forecasts: We are reducing our 2018E – 2020E EPS forecasts by 2.2%- 5.9%. The downgrade is primarily driven by more prudent gross margin assumptions. The challenging trading conditions which led us to downgrade forecasts in July (by 4.5% and 6.0% in 2018E and 2019E respectively) have persisted, leading us to take a more prudent view of gross profit margins through the forecast period. Price inflation is proving to be a slow process across the sector. While prices for some products are starting to increase (e.g. 4-pack of Andrex) prices for key volume products (e.g. 9-packs of Andrex) have remained stagnant for an extended period of time. While price increases are not fundamental to our original investment thesis, the more challenging trading environment post Brexit has made passing increased costs on to customers more difficult.

Investment view: On revised forecasts the shares are currently trading on a 2018E P/E of 11.4x and an EV/EBITDA of 8.7x, which we believe remains attractive for a business with a rising post tax ROCE approaching 16%. Given the continued investment in growth and capacity, we remain comfortable with our original thesis that this should be a £30m+ EBITDA business based on 200,000 tonnage capacity.

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