I Read The News Today Oh Boy! 5-Oct-2017

Thursday, Oct 05 2017 by

Morning All!

Accrol Group (ACRL)

Trading Update (Full Year To End April 2018) and Temporary Suspension Of Trading – This is bad news indeed...


I looked back and read thelast SCVR update on this company and it seems Paul may get his chance – He stated “Will probably get more interesting when something goes wrong and the shares can be bought for a recovery!” - How did he know!!!!!!!

Condolences to holders here - Anyone spot this coming, red flags anywhere?

DFS Furniture (DFS)

Preliminary Results For The 52 Weeks Ended 29 July 2017 – This doesn’t look good to me (even taking into account the Special Dividend)…


I would expect some downside here this morning.

Intercede (IGP)

Trading Update For The 6 Months To End March 2018 – First half revenues increased by approximately 30% compared to the previous period to more than £3.6m, £2.8m previously - Cash balance also improved. This seems generally positive - Stockopedia classes it as “Speculative” and one could even be tempted to take a punt here. I think it’s worth keeping an eye on future updates – Until there is a confirmed return to profitability.

Morses Club (MCL)

Interim Results For The 26 Weeks Ended 26 August 2017 Revenue up 14.8% to £54.2m (£47.2m last time), Net loan book growth of 16.0% to £65.2m (£56.2m last time) and a 12.6% increase in customer numbers to 233,000. This sounds great until...

Adjusted PBT is only slightly up from £8.6m to £8.7m and the interim Dividend is up just 0.1p, from 2.1p to 2.2p.

A so-so update for me which seems to disappoint. The Adjusted PBT and interim Dividend increase don’t seem to support even a low PER of 11.7.

Redcentric (RCN)

Appointment of CEO and Trading Update (for the 6 months to end September 2017) – New CEO announced and trading confirmed as “in-line with management expectations”. Net debt is down to £33.3m (from £39.5m according to Stockopedia), which is ahead of management's expectations. This may help the depressed share price here somewhat, not tempting enough for me though.

Will certainly be interested to see how the market treats DFS, IGP and MCL...

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Accrol Group Holdings plc, formerly Accrol Group Holdings Limited, is an independent tissue converter manufacturing toilet rolls, kitchen rolls, facial tissues and away from home products (AFH). Its AFH products include Centrefeeds, Hand Towels, Hygiene Rolls, Toilet Tissue, Wiping Rolls, Standard Jumbo and Mini Jumbo. Its Consumer Paper Products include Envirosoft, Facial Tissues, Handy, Mega, Mighty, Sofcell, Softy, Thirsty Bubbles and Triple Softy. The Company supplies a range of Independents, Discounters and Multiples, as well as a range of AFH customers throughout the United Kingdom. It imports Parent Reels from around the world and converts them into finished goods at its manufacturing, storage and distribution facility in Blackburn, Lancashire. The Company has 15 converting lines in operation providing capacity of approximately 118,000 tons per annum. Its subsidiaries include Accrol UK Limited, Accrol Holdings Limited and Accrol Papers Limited. more »

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DFS Furniture plc is an upholstery retailer in the United Kingdom. The Company is engaged in designing, manufacturing, selling, delivering and installing a range of sofas, and other upholstered and furniture products. The Company's segment is engaged in the retailing of upholstered furniture and related products. Its other segments comprise the manufacture and distribution of upholstered furniture. The Company offers approximately 10 unit types per range, and a range of materials with approximately 50 colors available. Its branded upholstery ranges include Capsule Collection and Grand Tour. The Company operates approximately 100 retail stores in the United Kingdom, the Republic of Ireland and the Netherlands, an online channel, and approximately three upholstery factories in the United Kingdom. The Company's subsidiaries include Diamond Holdco 2 Limited, Diamond Holdco 7 Limited, DFS Furniture Holdings plc, DFS Furniture Company Limited and Coin Retail Limited (Jersey). more »

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Intercede Group plc is a United Kingdom-based software and service company. The Company is engaged in developing and supplying of identity and credential management software. The Company provides MyID software, which is an identity and credential management system that enables organizations to create and assign trusted digital identities to employees, citizens and machines. Its MyID software protects the networks, facilities and intellectual property of governments, agencies and other enterprise customers. In addition, it provides MyTAM, which is a cloud-based service that provides Android application developers and service providers to deploy trusted applications to the trusted execution environment (TEE) on mobile devices. It offers its solutions to various sectors, including aerospace and defense, finance and telecommunications; governments and federal agencies, and mobile developers. The Company operates in the United States and the United Kingdom. more »

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  Is LON:ACRL fundamentally strong or weak? Find out More »

17 Posts on this Thread show/hide all

Ramridge 5th Oct '17 1 of 17

Hi matylda Re. Accrol Group (LON:ACRL) I am not invested but feel a lot of sympathy for those who are.
This has come totally out of blue for me, as I had seriously considered investing earlier this year. Gervais Williams has mentioned favourably this share a number of times since January this year.

I already have a cast iron rule. When an FD resigns, sell. No ifs, no buts. Just do it

I am now adding another cast iron rule to my list. Do the same when a CEO resigns. With ACRL, the previous CEO had resigned early Sept without a convincing reason.

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matylda 5th Oct '17 2 of 17

In reply to post #225253

Thanks Ramridge for that - Going to add that to my list too.

Was actually a bit of a surprise to me too!

Blog: Briefed Up
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Fegger 5th Oct '17 3 of 17

In reply to post #225263

I hadn't looked at Accrol before but I would have wondered re this -maybe pink flag:

The Board has recently been advised that a Health and Safety incident, which occurred prior to the Company's AIM IPO, may now result in a more significant fine being imposed by the Health and Safety Executive (HSE) than was previously anticipated. Whilst this is not expected to impact on trading, based on advice received by the Company's legal advisers, any resulting fine may have a material impact on the Company's cash position.

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timarr 5th Oct '17 4 of 17

In reply to post #225273

I do hold Accrol Group (LON:ACRL) so not the happiest start to the day. And there was me feeling smug about my returns to date this year ... but leaving aside the odd resignation of the CEO there weren't any warning flags here, so it's hard to beat myself up about it. The HSE incident, as far as I know, has never been raised before.

The suspension is a double whammy - not only does it prevent holders from exiting, which I certainly would have done - it also raises the possibility of something worse. Either they don't know what the real financial state of the company is or they do and they're likely to be in breach of banking covenants. Either way I've mentally written this down to zero.

When this kind of thing happens everyone gets a tad annoyed, but the truth is that if you play around in the junior markets this kind of thing will happen from time to time. You lie down with wolves you will occasionally get bitten. It just serves to re-emphasise the importance of diversification and getting position sizes right.

Enough of that, time to go earn some of the losses back.


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Graham Ford 5th Oct '17 5 of 17

I don't hold Accrol Group (LON:ACRL). I looked at it earlier in the year and couldn't understand what was driving their success. They make a budget product with no differentiation (as far as I could tell) selling to buyers who are principally interested in cost rather than value who in turn have a customer base that are buying on price. They don't have economies of scale that are better than the big competitors so do not have a sustainable competitive advantage on price. So sooner or later their growth will falter or profits come under pressure. So, in my view, it was a stock for traders only not long term investors and so not for me.

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MrContrarian 5th Oct '17 6 of 17

My morning smallcap tweet:

Spectra Systems (LON:SPSY), Datatec (LON:DTC), Accrol Group (LON:ACRL), Revolution Bars (LON:RBG)

Spectra Systems (SPSY) "New Opportunity in Consumer Products". Contract to incorporate Spectra Systems authentication technology into coffee lids. Allows mfr to lock consumer into sole supplier.
Datatec (DTC) warns on H1. Will return about $500m of recent disposal cash to holders.
Accrol Group (ACRL) Big warning & suspension due to debt increasing. Mkt for bog rolls tight, cost pressure, higher than anticipated costs from operational changes and possible larger fne from historic Health and Safety incident. They didn't discover all thsee factors yesterday did they? Avoid commoditised unbranded product mfrs.
Revolution Bars (RBG) Suitor Deltic sets out its merger offer. All their talk of considering a cash offer was hot air. I've gone from long to temporarily short at 209.

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Beginner 5th Oct '17 7 of 17

Accrol Group (LON:ACRL) are a processor, not a producer. They simply buy in tissue and cut and roll it. They are totally at the mercy of their supliers, many of whom operate their own processing plants. There were two real red flags here for me: at the IPO the founding family exited almost entirely, and a similar business used to operate near where I live. It became a car park in the late-1990s!

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simoan 5th Oct '17 8 of 17

In reply to post #225338

RE: Accrol Group (LON:ACRL) - who floated it? It looks like Zeus Capital from a quick Google. About time someone did a "Where are they now?" piece for recent Zeus IPO's. Is that not a red flag in itself? How many have crashed and burned within a couple of years of listing on AIM?

All the best, Si

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matylda 5th Oct '17 9 of 17

In reply to post #225278


A balanced view on a quite annoying situation - I think the thing that annoys me a little about this is this update https://www.stockopedia.com/share-prices/accrol-group-LON:ACRL/news/accrol-group-hldgs-appointment-of-chief-executive-and-trading-update-urn:newsml:reuters.com:20170907:nRSG0409Qa/

It states "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."

Just a month ago!

Just makes me think - The "Board" as a collective are damned stupid or something even worse.

Good luck with making up for it.

Blog: Briefed Up
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stepone 5th Oct '17 10 of 17

Accrol. On the FT Alphaville column this morning, they quoted the following from the AIM admission document ;

11. Litigation There are no governmental, legal or arbitration proceedings in which any Group Company is involved or (so far as the Directors and the Proposed Directors are aware) which are pending or threatened by or against any Group Company, in each case which may have, or have had in the twelve months immediately preceding the date of this Document, a significant effect on the Company’s and/or the Group’s financial position or profitability

And now, there's the increased HSE fine, from a pre-IPO incident.


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Ramridge 5th Oct '17 11 of 17

In reply to post #225393

matylda - Re. Accrol Group (LON:ACRL) The update link you have posted dated 7 sept is revealing in hindsight.

What it says is, the CEO is resigning for personal reasons, a new CEO has been appointed, and by the way folks, don't worry the company's future performance is in line with expectations.

The point is that they must have been searching for a new CEO for some weeks/ months. Why? Well we know now that things were not all rosy. So the board was aware of the serious shortcomings for some time. Yet they go ahead and issue an " in line" statement.
This is more than just misleading the investors. It borders on plain lying.

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matylda 5th Oct '17 12 of 17

In reply to post #225493

Indeed, I was trying to be polite...

"Just makes me think - The "Board" as a collective are damned stupid or something even worse."

Lying b**tards is more appropriate.

stepone's recent post is most interesting too!

Soon we will all be too scared to invest in AIM at all.

Blog: Briefed Up
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Beginner 5th Oct '17 13 of 17

In reply to post #225363

It was indeed Zeus. Another red flag!!!

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timarr 5th Oct '17 14 of 17

In reply to post #225518

Obviously when this kind of thing happens there's some kind of failure at the company but it's rare that it's completely deliberate - Globo and the various AIM-listed Chinese companies excepted - more often it's a combination of incompetence and wishful thinking. It's easy to cast around looking for someone else to blame - crooked management, incompetent regulators, stupid tipsters, etc - but it won't bring the capital back.

In any case rule #1 is to only invest in companies with a sustainable competitive advantage, so who should I blame here? By what kind of twisted logic did I conclude that an unbranded supplier of a commodity product would be able to defend its margins against obvious pricing pressures and notoriously predatory customers? (Answer: I don't know, which is negligent to say the least).

In fact, looking back at the various disasters I've experienced in my 30 years investing the only common factor I can find is myself. And that's the truth of it: my capital, my risk and finding someone else to blame won't change that, ever.


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matylda 5th Oct '17 15 of 17

In reply to post #225548

Yes, in my experience there is no solace in finding anyone else to blame - Only I am responsible for my investment decisions and indeed most other decisions in life. So the consequences are on my part, if the outcome is good or bad, best to try and learn from it and move on.

Anyway, I am sure you've heard talk enough on the subject - Great to hear sober and sensible thoughts where I have witnessed, many times in the past, much the opposite in similar situations.

Blog: Briefed Up
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stepone 5th Oct '17 16 of 17

In reply to post #225548

You don't think it's possible that they decided to IPO just at the point that the future was starting to look a bit uncertain? I'm not claiming fraud, or anything like it, just that people run the company, fluff the figures as far as they legally can, take as much in dividends as they can. Then they look around, see competitor pressure, costs pressure, brexit issues, whatever, and they think 'Let's sell this thing on and let someone else worry about the future' ?It's a point that Paul Scott has been making about private equity for a while.

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Alexgedla 5th Oct '17 17 of 17

Accrol - the founders and PE investor wanted out. It was a cash out Ipo. Simple as that. They will probably now take it private again

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