Accrol Group Holdings Strong revenue growth, improving profitability and increasingly cash generative

Accrol Group Holdings plc

Accrol Group Holdings (LON: ACRL), the UK’s leading independent tissue converter, has announced its Half Year Results for the six months ended 31 October 2019.

Summary of progress

The Board is pleased to report that the operational aspects of the complex and comprehensive turnaround plan, initiated by the new management team in February 2018, are now fully complete.

The financial benefits of these changes are now flowing through to the bottom line at an accelerating rate and these H1 results show the improving monthly run rate being achieved by the business. With the turnaround complete and a strong management team in place, the Board is now focusing on further automation of the Group’s operations and strategic opportunities to diversify, scale and grow the business.

Whilst there will always be improvements to make and sector challenges to address, the Board believes that Accrol is more fit for purpose than it has ever been. Net debt is reducing at an accelerating rate and the Company remains on track to meet market expectations for the full year ending 30 April 2020 (“FY20”).

H1 20 vs
H1 20H1 19FY 19FY 18H1 19
Reported results
Gross profit£12.8m£6.9m£17.5m£24.5m+ £5.9m
Gross margin19.70%12.00%14.70%17.50%+ 770bp
Loss before tax£3.0m£9.0m£14.0m£24.1m+ £5.9m
Net debt£24.8m£22.6m£27.1m£33.8m+ £2.2m
Underlying results
Consumer Revenue2£64.5m£53.9m£116.7m£115.3m20%
Adjusted gross profit3£13.0m£9.9m£21.7m£24.5m+ £3.1m
Adjusted gross margin20.00%17.20%18.20%17.50%+ 280bp
Adjusted EBITDA4£3.2m(£1.1m)£1.0m(£5.8m)+ £4.3m

1 Includes revenue from discontinued “Away From Home” operations

2 Excludes revenue from discontinued “Away From Home” operations

3 Defined as gross profit before exceptional items. This is a non GAAP metric used by management and is not an IFRS disclosure

4 Defined as profit before finance costs, tax, depreciation, amortisation, share based payments, IFRS 16 changes (£1.3m) and exceptional items. This is a non GAAP metric used by management and is not an IFRS disclosure


· Strong growth in consumer revenue2 of 20%, significantly ahead of market growth at 8% (source: Kantar)

· Gross margin up 770bp at 19.7% (H1 19: 12%)

· Further operational cost reduction of £1.1m or 11% (H1 19 to H1 20)

· Senior management team strengthened further to facilitate growth

· Exceptional costs relating to the turnaround reduced considerably to £0.6m (FY19: £7.9m)*

*This excludes the £1.3m exceptional costs in FY19 that related to share based payments

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Current trading and outlook:

· Margins have continued to strengthen post Period end, as new agreements come into effect

· Additional production efficiencies through increasing automation is being introduced, with benefits expected in H2 of this year

· Strategic focus on continued automation of the Group’s operations and opportunities to diversify, scale and grow the business

· Total exceptional costs at FY20, including costs associated with the FCA investigation, expected to be c.£1.0m (FY19: £7.9m), as forecast in the Final Results announced on 3 September 2019

· Net debt (on a like-for-like basis) expected to reduce at an accelerating rate to no more than £20m at 30 April 2020 following credit insurance approval expected in H2

· On track to meet market expectations for FY20 and the Board is increasingly confident in the prospects for the Group

Dan Wright, Chairman of Accrol Group Holdings, said:

“Accrol has been completely transformed by the new leadership team and is now a very different organisation. I am proud to say that our talented and experienced people have proved that it is possible to make good returns from tissue conversion, which has historically been viewed as a low margin sector. Group margins are returning to pre-IPO levels, as more robust commercial management programmes and operational efficiencies offset substantially higher comparative input costs. What is particularly pleasing is seeing volume growth at over 20% during this transformational business period.”

“The future for the business is promising. With the turnaround behind us and an ambitious leadership team experienced in running much larger organisations in place, we are focusing on the medium to long term prospects for the Group and strategic opportunities that exist to diversify and scale up the business.”

Gareth Jenkins, Chief Executive Officer of Accrol, said:

“We are assembling an exceptional team of highly experienced industry professionals, focused on growth and capable of delivering substantial commercial and operational improvements. The team we have already put in place has achieved a margin increase of 770bp in H1 20 and adjusted EBITDA growth of £4.3m. Gross profit has been increased by 86% in the Period and net debt reduced to less than £25m (c.£34m at 30 April 2018). The improved quality and service levels, which Accrol now delivers to a broadened customer base, also resulted in consumer revenue growth of c.20%.

“Now the turnaround phase is complete, our vision is to build a diversified Group of size and scale, which encompasses both the tissue market and personal hygiene. Personal hygiene product manufacture is less exposed to macro-economic fluctuations in input costs than tissue conversion. We estimate the personal hygiene market in the UK, excluding tissue, to be worth c.£1bn with forecast overall CAGR of 6.5% and private label CAGR of 10%.

“I am confident that our people will continue to deliver as the Group seeks to diversify into this new market and grow its operations substantially.”

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