REG - Accrol Group Hldgs - Audited Final Results
06/09/2022 07:00
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RNS Number : 3477Y Accrol Group Holdings PLC 06 September 2022
6 September 2022
The information communicated within this announcement is deemed to constitute
inside information as stipulated under the Market Abuse Regulations (EU) No.
596/2014. Upon the publication of this announcement, this inside information
is now considered to be in the public domain.
Accrol Group Holdings plc
("Accrol", the "Group" or the "Company")
AIM: ACRL
AUDITED FINAL RESULTS FOR THE YEAR ENDED 30 APRIL 2022
Accelerating growth in private label volumes post year end, fuelling
confidence
Accrol Group Holdings plc, the UK's leading independent tissue converter,
announces its audited Final Results for the year ended 30 April 2022 ("FY22"
or the "Period"), which show a resilient performance, delivered under
extremely challenging macro conditions, marginally ahead of market
expectations(1).
The new financial year ending 30 April 2023 ("FY23") has started well, with
volumes, revenues and margins in line with market expectations.
Key financials
FY22 FY21 FY20
Revenue £159.5m £136.6m £134.8m
Gross margin 22.7% 27.7% 21.9%
Adjusted EBITDA(2) £9.1m £15.6m £10.6m
Adjusted profit before tax(3) £1.1m £9.1m £4.7m
Loss before tax(4) (£2.5m) (£3.1m) (£1.9m)
Adjusted diluted earnings per share 0.3p 2.7p 1.7p
Diluted earnings/(loss) per share(4) (0.5p) (1.3p) (0.8p)
Adjusted net debt(5) £27.5m £14.6m £17.9m
Financial highlights
● Further strong revenue growth in line with expectations - up c.17% YoY
● Full recovery of over £70m of unprecedented, annualised input cost increases
achieved by end of Q4 FY22
● Short term reduction in gross margin in H1 due to timing differences across
period ends, as price increases to recover the rapid leap in input costs in H2
were actioned and secured
● Adjusted EBITDA and Adjusted profit before tax in line with expectations
● Upward movement in adjusted net debt, funding the concluding investment in
automation, further market-leading product development and additional working
capital required to manage supply constraints over the next 12 months
● Amended and extended banking arrangements to Aug 2024, providing 25%
additional headroom, demonstrate continued confidence in the Group's operating
performance and support the Board's growth ambitions
Operational and sustainability highlights
● Accrol's market share by volume increased to 19.5% (H1 FY22: 18.9%), compared
to a flat overall UK market
● New customers secured through increasing product diversity - notably Amazon,
Unitas (c.30,000 convenience stores), Spar, Ocado and Sainsbury's
● Completion of automation at Blackburn and Leicester sites - machine investment
and full automation at Leyland completed in Q1 FY23
● Leicester Tissue Company ("LTC") and John Dale acquisitions were fully
integrated, with outputs at the sites increasing by 60% and 270% respectively
in volume terms on an annualised basis
● Delivering on customers' sustainability objectives - development of smaller
core products (reducing logistics and packaging costs) and further development
of the Oceans brand (paper wrap)
● Business continued to operate safely throughout the Period with zero lost time
accidents and a 33% reduction in all accidents
● Continued focus on operational efficiency, reducing both waste and energy
consumption
● First Environmental, Social and Governance ("ESG") Report published in
September 2021
Current trading in FY23 and outlook
● The Group entered FY23 with pricing fully aligned with higher input costs
● Private label sector strengthening further post year end - Accrol volumes
increased by 28% vs private label growth of 10% in Q1 FY23, while the overall
market has remained flat(6)
● Private label volumes now higher than pre-pandemic levels - market share
growing at an unprecedented rate against the traditional brands (Q1 FY23: 54%
vs Q1 FY22: 50%)(6)
● Group revenue up 76% in Q1 FY23, compared to Q1 FY22, driven by price
increases (48%) and volume growth (28%)
● Revenue and EBITDA on track to increase in line with market expectations for
FY23(7) (+31% and +68% respectively)
● The Group is well positioned to benefit from the rapid rise in demand for best
value tissue products
● While cognisant of ongoing macro inflationary dynamics, Accrol's strong market
position, well invested manufacturing facilities and available capacity, give
the Board confidence for FY23 and beyond
(1) Market expectations are derived from the latest published equity research on
the Company, as of 5 September 2022. For FY22, market revenue expectations
were £159.1m and Adjusted EBITDA of £9.0m.
(2) Adjusted EBITDA is defined as profit before finance costs, tax, depreciation,
amortisation, separately disclosed items and share based payments
(3) Adjusted profit before tax is defined as loss before tax, amortisation,
separately disclosed items and share based payments
( )
FY21 restated due to an accounting policy change in FY22 in respect of the
(4) costs of configuration and customisation of cloud based software
(5) Adjusted net debt excludes operating type leases recognised on balance sheet
in accordance with IFRS 16
(6) Source Kantar
(7) For FY23, market revenue expectations at 5 September 2022 were £208.5m and
adjusted EBITDA of £15.1m
Dan Wright, Executive Chairman of Accrol, added:
"Whilst remaining mindful of the extremely challenging macro environment, the
Board views the prospects for Accrol with confidence, given the strong and
rapid recovery of input cost rises in the second half of this year after the
delay in the first half, our strengthened customer relationships, improved
levels of service and quality, and its great value product range.
The Group's new banking arrangements demonstrate continued confidence in its
operating performance and provide support for our development plans. The
investments we have already made into the efficiency of our operations have
served us well through incredibly challenging times and we are confident they
will bear considerable fruit in FY23 and beyond.
Our markets are strengthening, our products are gaining share and our
operations demonstrate leading efficiencies. The business is in a strong
position to benefit considerably from the changing market dynamics over the
next two to three years."
Gareth Jenkins, Chief Executive Officer of Accrol, said:
"Our goal, over the last four years, has been to create an innovative,
sustainable and market-leading business, which I believe we have finally
achieved. This has been delivered through the hard work and dedication of our
team and never have their skills and commitment been more clearly demonstrated
than in the year under review.
Accrol is unrecognisable from the business which floated in 2016. It is
resilient, agile, and strong. The cost of living crisis, being faced by UK
consumers, is driving demand for great value products across the board. The
demand for private label tissue, which started to rebound in FY22, has
accelerated rapidly since our financial year end. Private label comprised 50%
of total UK sales volumes in FY22, and this has continued to grow since the
start of May 2022 with private label now holding a 54% market share. Accrol
volumes currently comprise over 32% of this private label market. The index
linked pricing agreements we have put in place over the last 12 months,
combined with the quality of our products, the efficiency of our operations
and the capacity we have built into the business, have ensured Accrol is best
placed in its market to capitalise on the opportunities.
While remaining conscious of the very significant ongoing macro uncertainties,
we look forward to FY23 and beyond with continued confidence."
Online investor presentation
The management team is hosting an online investor presentation with Q&A at
12.30pm on Wednesday, 7 September 2022. To participate, please register with
PI World at: https://bit.ly/ACRL_FY22 (https://bit.ly/ACRL_FY22) .
For further information, please contact:
Accrol Group Holdings plc
Dan Wright, Executive Chairman Via Belvedere Communications
Gareth Jenkins, Chief Executive Officer
Richard Newman, Chief Financial Officer
Zeus (Nominated Adviser & Broker)
Dan Bate / Jordan Warburton (Investment banking) Tel: +44 (0) 161 831 1512
Dominic King (Corporate Broking) Tel: +44 (0) 203 829 5000
Liberum Capital Limited (Joint Broker) Tel: +44 (0) 20 3100 2222
Clayton Bush / Edward Thomas
Belvedere Communications Limited
Cat Valentine Tel: +44 (0) 7715 769 078
Keeley Clarke Tel: +44 (0) 7967 816 525
accrolpr@belvederepr.com
Overview of Accrol
Accrol Group Holdings plc is a leading tissue converter and supplier of toilet
tissues, kitchen rolls, facial tissues, and wet wipes to many of the UK's
leading discounters and grocery retailers across the UK. The Group now
operates from six manufacturing sites, including four in Lancashire, which now
supplies 19% (volume) of the UK tissue market valued at £2.1bn at retail
sales value.
The Group has produced a short video to showcase its operations and investment
in the extensive automation of the business. Click here: Accrol Today
(https://vimeo.com/manage/videos/708603995/privacy) .
For more information, please visit www.accrol.co.uk (http://www.accrol.co.uk)
Chairman's Report
The Group has delivered a set of results of which we are proud, despite the
enormous macro-inflationary cost pressures faced during the year. The team
successfully recovered more than £70m of annualised cost increase by the year
end, quickly and skilfully negotiating and implementing price increases. This
rapid action significantly mitigated the unavoidable impact on the Group's
FY22 profitability. The management team simultaneously delivered the full
integration of LTC and John Dale; finalised the automation of all four tissue
manufacturing sites, which completed in August 2022; delivered further
internal efficiencies; and increased Accrol's market share.
The work to automate, rationalise and simplify the business has put Accrol in
a very strong market position. It is now, one of the most innovative,
well-invested and automated tissue converters of scale in the UK.
Our vision
From the outset, our vision has been to build a diversified group of size and
scale, better positioned to manage input cost fluctuations, focused on a
broader private label household and personal hygiene market. We believe the
combination of capacity, efficiency and the lowest cost base in its market is
a compelling proposition.
Diversification
We are focused on adding new customers, expanding our product range, entering
new categories, and finding additional routes to market. Fluctuations in
market sub-sectors are smoothed through diversity, removing reliance on any
one product, market, or customer.
While wet wipes sales represented only c.1% of Group revenue in FY22, we
expect this to grow to £6m by the end of FY23 (representing c.3% of Group
revenue). From a modest capital investment of c.£2m, we see a £20m plus
revenue opportunity (representing c.5% of the total market) and the
establishment of this product category as a new and sustainable leg to the
business.
Good progress was achieved in terms of new category expansion, new customers,
and deepened penetration of existing customers in FY22. This is detailed in
the CEO's Review.
Size and scale
The acquisition of LTC, coupled with automation of the Group's other
manufacturing sites, has added operational scale. Today, the Group has a core
tissue capacity of c.150k tonnes and the headroom needed to deliver a market
leading service to the industry. With the addition of facial tissue and wet
wipes, the Group has the capacity and scale to grow to beyond £300m revenue
across multiple categories.
Our addressable market, including wet wipes and facial tissue, now totals
c.£3.0bn, a significant step change for the business from 18 months ago.
De-risking our business
Like many other sectors, the UK tissue market is not alone in being exposed to
input cost volatility. However, a key focus for the team has been to control
what can be controlled and to act swiftly and decisively to mitigate against
the damaging effects on issues which fall outside our immediate control.
The progress that has been made on this front during the year has been
especially pleasing and is testament to the strength of Accrol's products,
service offering and customer relationships, which have been established in
recent years. Price rises in a cost-conscious industry are not easy to
deliver rapidly. They can only be achieved in partnership with our retail
customers and only when our retail partners understand and value our
proposition.
Managing cost volatility, however, is not just about price increases but also
about internal efficiencies, flexibility and good capital allocation. Our
historic investments in process automation provide us with more flexibility in
product innovation and customer delivery, as well as improving our overall
capacity.
Although the Group is well invested, a major differentiator for us relative to
our competitors is that we never stand still. We continually review our
options on capital investment opportunities. One such area, which we have
previously discussed, is the investment in our own paper mill. The long term
commercial and economic benefits of owning or building a paper mill remain
transformational for us. However, against these material and longer-term
benefits, we must weigh the shorter-term costs to deliver and the competing
claims on our balance sheet. We remain committed to our ambition to own a
paper mill but this will only be completed in a way that maximises shareholder
value and minimises risk. We remain alert to any easing of the building cost
environment and normalisation of the supply chain that will reduce working
capital requirements. We have a strengthening balance sheet but intend to
deploy it only when the time is right.
Maximising returns for shareholders
Strategic Review
The Strategic Review, which we announced earlier this year, is ongoing. We
see considerable value within the Accrol Group, not least as a result of the
actions taken by management over the last four years. Our market opportunity
is substantial and growing and our business is well invested and well
positioned relative to others. The Strategic Review is focused on how best
to deliver that value for all our stakeholders.
Our short-term priority, however, remains on the effective management of macro
inflationary pressures on the Group's costs, as well as handling other
well-documented macro supply chain challenges, which require the team's full
attention. We expect to provide shareholders with a full update on the
Strategic Review early in 2023.
Dividend
When we issued our FY21 results in July last year, the Board was delighted to
announce the restoration of dividend payments and a progressive dividend
policy. This demonstrated our confidence in the business and was made possible
by continuous improvement in operational efficiencies and strong cash
management.
The world has changed greatly since that announcement and we have taken the
difficult but prudent decision not to propose a final dividend for FY22.
Capital allocation is an intrinsic component of the Strategic Review and the
Board remains focused on determining the best use of the Group's free cashflow
going forward, be it acquisitions, share buy-backs, dividend payments,
increasing raw material stocks and or paying down debt further. Effective
capital allocation is about weighing risk and return. The current market
environment favours a more risk averse approach, especially around securing
our supply chain and access to raw material, and this remains our short-term
priority. Clearly, any easing of these pressures will make a return to
dividends much more likely. We will provide an update on dividend policy as
part of the Strategic Review update in early 2023.
Environmental, Social and Governance
We were delighted to launch our maiden ESG report in September 2021 with real
and significant targets on which to judge progress and performance, which was
well received by both internal and external stakeholders. We pride ourselves
on ensuring that ESG is integrated throughout the business and makes a
valuable contribution to the Group, as well helping us be better corporate
citizens and minimising our impact on the environment. Since the publication
of the report, we have made significant strides against our environmental and
social aspirations, which have positively contributed to the wider business in
terms of further improved employee engagement, energy and waste reduction.
With underlying absentee levels at record lows, health and safety
improvements, and cost and material savings made, ESG integration is evident.
A by-product of our waste reduction is reduced raw material usage. In the
period since we last reported, waste was reduced by 0.5% creating a further
reduction of raw material spend. In the year under review, the Group continued
to buy all raw materials from FSC (Forest Stewardship Council) accredited
suppliers.
The Group also introduced the use of 38mm cores to toilet rolls from 50mm in
the Period. The project, which involved a wide range of internal and external
stakeholders, has delivered significant material savings and a 10% reduction
of vehicle movements for the business.
In addition, we are well on track to deliver our target of 25% of women in
leadership roles by 2025 - up to 22% in FY22 (FY21: 17%), which aligns with
the Group's recent achievement as a Living Wage Accredited Organisation. Both
are key elements of an operationally excellent business.
We will launch our second ESG report this autumn and provide a more detailed
update in our annual report, which will be posted to shareholders towards the
end of September.
Our people
Engaged, well trained people are a key element of our business model and
sustainability, with training and wellbeing at the centre. I am proud to
report that Accrol is now an accredited Living Wage employer. This is
especially important to our people at this time of heightened inflation and
also allows Accrol the advantage of being able to retain the best talent from
the communities in which it operates.
During the year, we appointed a Communications Manager, Vikki Makinson, who
has made significant improvements to our internal communications and improved
the efficiency and effectiveness of how we deliver training. To support this,
we use an online training hub which delivered over 350 courses in its first
three months. Our employee engagement scores remain high with an overall score
of 84%.
I would like to thank all our people for their hard work and contribution
during what has been a very challenging environment. I think the overall
result, the further operational advance, and the level of costs recovered
showcase the strength and capability of the management team in the Group.
Outlook
The cost of living crisis is driving consumer demand for great value products
and Accrol has enjoyed a strong start to the new financial year FY23, and is
fully on track to achieve market expectations. The margin erosion experienced
in FY22, created by the rapid increase in input costs, has been rectified and
contained, with cost increases being passed on as they arise.
The market share of the private label and tertiary brand segment increased to
54% in Q1 FY23, compared to 50% in the same period of the prior year. Accrol
revenue increased by 76% in Q1 FY23, compared Q1 FY22, driven by price
increases (48%) and volume growth (28%). The team's work and the capital
investment in Accrol undertaken over the last four years have put the business
in an excellent position to benefit from, what we believe will be, a sustained
period of further growth for the private label and tertiary brand segment.
We remain mindful of the current macro challenges. The team leading Accrol,
however, has demonstrated its expertise and ability to manage the business
through multiple challenges and the Board views the future with confidence.
Dan Wright
Executive Chairman
Chief Executive Officer's Review
The Group has delivered a strong performance that is marginally ahead of
market expectations under extremely challenging circumstances, having
successfully recovered over £70m of annualised cost increases.
I am pleased to report that we generated substantial volume growth of 7.5% in
the year and increased revenue by 17%. Given the unprecedented speed and
magnitude of the cost increases, there was an unavoidable time lag in these
passing on, which impacted the Group's underlying margin in the year. These
costs were passed on in full by the year end and we now have mechanisms in
place to pass on any further increases, in a more timely manner.
In every aspect of our manufacturing operations, we have successfully
navigated unprecedented inflationary pressures. Tissue prices have reached
their highest ever levels, driven by pulp, energy, and sea freight costs, and
this was exacerbated by the weakening of sterling relative to the US Dollar
and the war in Ukraine.
We entered FY23 with more secure revenues, underpinned by the right products,
the biggest range of customers in the sector and a fully automated,
well-invested business in a rapidly growing market - private label volume has
grown 10%, since the full year end, and is once again, out-stripping the
traditional brands, which declined by 5% in the same period. Market share
for private label now stands at 54% vs 46% for brands.
Momentum on volume growth and underlying margin has been maintained. Accrol
volumes in Q1 FY23 increased by 28% and revenue by 76%, compared to the same
period in the prior year. This volume growth is on track with market
expectations for FY23, which forecast YoY revenue and EBITDA growth of 31% and
67% respectively, underpinning our confidence for the year ahead.
Our business today
As a result of the extensive work done over the last four years to build an
operationally robust business, we have continued to deliver on our vision to
build a diversified group of size and scale. Highlights during the year
included:
● New customer wins;
● Deeper penetration of existing customers;
● Product ranged expanded; and
● New routes to market opened.
Product extensions will be a key driver behind further volume and market share
growth:
● The acquisition of John Dale in April 2021 gave the Group entry into the
rapidly growing biodegradable flushable wet wipes market. During the Period,
we achieved 'Fine to Flush' and BRCGS (UK Retailers Accreditation - AA rating)
on a range of wet wipe products; and
● We developed and launched several new wet wipe products, including 'Little
Heroes', a brand-new baby and toddler wipes range being sold through a number
of retailers and Quantum moist toilet tissue, again being sold through a
number of retailers. In addition, we won a contract to supply Ocado's
own-label biodegradable wet wipes and deepened our relationship with the
award-winning 'Kinder by Nature' wet wipes brand.
We continue to expand our sales to retailer customers, either through adding
new ones or deepening existing relationships. The team also secured an
extended sole supply position with several retailers for their paper category.
In addition, we have generated significant growth in volume sales of our own
brands, Elegance (toilet roll), Magnum (kitchen towel) and Oceans (paper
wrapped), which are all now being sold through a number of major retailers.
Accrol's own branded products, which stay close to our mission to deliver
quality and value to consumers, have also made good progress. All these
products are now available on Amazon, and all have grown in volume and revenue
over the last 12 months, now making up c.18% of our total sales - up from
c.10% in FY21. This range of products commands a higher margin than private
label products in the main and increases the importance of our supply
relationship with the retailers.
Our Elegance toilet tissue is now the fastest growing brand in cash and
carries, and since its launch on Amazon only six months ago, it is now in the
top ten toilet tissue brands on the site. Softy facial tissue, which has
sold through one of the top four Grocers since February 2022, as well as
Amazon, is the now the second biggest box brand in the UK. Our Magnum kitchen
towel product, which is sold across several retailers, has had an exceptional
year, and is now the fastest growing and currently fourth largest brand in the
UK.
The Oceans plastic-free brand sold direct to consumers on subscription had a
strong run early in the Period, giving an overall growth rate of 30%. We do
not expect this rate of growth to be maintained, as it benefited from Covid
related consumer behaviour change, which is now 'normalising' post-pandemic.
However, we continue to be excited by the product's potential. More
recently, we added Oceans kitchen towel to the range, which has received
excellent online consumer reviews.
Further capacity in the business has been added with the final site, Leyland,
becoming fully automated from August this year. Further machine capacity at
the Leyland site will also be operational from October. Accrol is a well
invested platform with the internal capacity to support further organic volume
growth without further material capital investment. The Group now offers a
core paper capacity of c.150k tonnes, and a total revenue capacity in excess
of £300m when we include wet wipes and facial tissue capacity. Utilisation of
this capacity, as we continue to execute commercially and build on our
impressive market share foundations, is a key driver behind our future free
cash flow generation.
The integration of the John Dale acquisition has been completed, with facial
tissue machinery and volumes moving to our fully automated state of the art
facial plant in Blackburn. We now expect our facial value run rate to double
over the next 12 months from c.£10m (FY21) to c.£20m in FY23. In addition,
our wet wipe business, which had annualised wet wipe sales of c.£2.2m on
acquisition, has won business delivering a simplified flushable range that
will deliver c.£6m sales in FY23.
Market overview
The improved market conditions that began at the start of the Period
continued, strengthening throughout the year. Shopping behaviours returned to
normal levels and the tissue market grew by 0.7% to £2.1bn based on Retail
Sales Value. Our market share rose from 15.3% at the half year end to 16% at
the year end, reflecting the recovery of the discount retailers. Private label
grew by 1.5%, versus a small decline of 0.2% across brands, bringing the ratio
back to 50:50.
Post year end, the private label sector has continued to strengthen. We
expect the private label sector to grow at c.10% this year as consumers are
driven to best value products, as inflationary pressures bite. In Q1 FY23,
Accrol volumes grew by 28% versus private label growth of 10% in an overall
flat market (when you exclude the inflationary price increases). This
success has been driven by supplying a broad customer range with all in
growth, as opposed to the prior financial year. The market share of the
traditional brands segment fell by c.5% in Q1 FY23 to 46% of the market.
Accrol's position at the same time last year was exacerbated by a poor
online presence, both directly and through the retailers, both of which have
been addressed over the last 12 months.
Our market share growth has been further enhanced by growth across our range
of branded toilet and kitchen towel products, as well as the new channel
development. Our branded range of toilet tissue (Accrol Elegance) has grown
by 14% FY22 vs FY21, facial tissue (Accrol Softy) by 70% and kitchen towel
(Accrol Magnum) by 19%. We expect to see further substantial gains against
market leaders in kitchen roll in FY23 from further product changes.
The facial tissue market, which was in decline during Covid, due to increased
mask wearing and the reduction in common colds is back in growth. Over this
period, we have simplified the range further, transferred machinery, moved
volume from John Dale and invested in low-cost automation. This has more
than doubled the Group's facial tissue capacity from £10m to £20m. Whilst
there was a decline in volumes for reasons outlined above, the Group now
expects its facial tissue business to double in size over the next 12-18
months.
Finally, our move into wet wipes is starting to deliver on our early
expectations. The pipeline of new customers is beginning to positively
impact volumes with revenue run rates expected to treble in size to c.£6m per
year by the end of FY23, up from £2.2m at the point of acquisition. This has
been delivered with a much-simplified range of products with a particular
emphasis on a water industry approved flushable wet wipe range. With modest
capital (c.£2m), the Group expects the wet wipe business to grow revenue to
c.£10m-£15m by 2024, with a particular focus on higher value range of wipes.
Our extensive customer range has enabled the business to grow at a pace with
the business now expecting the revenue growth to accelerate over the next two
years.
Following the well-publicised inflationary pressure in the UK, the retailer
market is seeing a significant shift in shopping habits, with an enormous
shift away from high-cost brands across every category. Over the next 12
months, as further energy price increases continue to impact shoppers'
budgets, we expect to see the private label market grow further. Accrol will
continue to develop and bring to market innovative solutions that meet
customer needs.
The Group is well positioned to benefit from growth in value products with no
major capital required and available capacity.
Operations
The Group is benefiting significantly from the full automation of all of its
sites. This, together with shift patterns that were changed last year and
further simplification of the business, has helped mitigate margin erosion and
will help drive margins back to the equivalent of pre-pandemic levels in the
medium term.
Since all the automation programmes have been completed, the Group has
improved its output significantly across all sites - the facial plant output
increased by 16%, the Blackburn and Leyland sites improved by 25% and 30%
respectively, and Leicester rose by 60%. Like for like headcount in the
Group's core tissue businesses has reduced from 425 to 275 over the last two
years. All remaining employees now paid the living wage as a minimum and the
Group joined the Living Wage Foundation in May 2022.
In addition, the move to 38mm cores from 50mm has increased the "rolls per
lorry" by 15%. The aspiration set as part of the ESG announcement in 2021 was
to increase this by 15% by 2025. The Group is significantly ahead of this
target in both timescale and delivery.
Pulp prices over the Period increased significantly, driven in the main by
energy price increases. Whilst there is further capacity coming on stream
globally, we do not expect to see any erosion in the pricing of tissue and
would not be surprised to see further increases in the short term. The
business remains well placed to pass on these increase as they are
encountered. The Group has long term supply relationships with all suppliers
and, due to the uncertainty in the supply chains and the ongoing conflict in
Ukraine, has doubled the amount of raw material stocks it normally carries.
This will have a short-term impact on adjusted net debt but, due to improved
performance elsewhere in the Group we expect adjusted net debt to be less than
2x and in line with market expectations for FY23.
Since the start of FY22, the Group has successfully passed on over £70m of
annualised cost increases across three different price increases, with the
majority of its supply agreements now having in place some form of
index-linked pricing.
Whilst the war in Ukraine does not directly impact the Group, the business has
significantly increased its raw material stocks to mitigate any supply chain
issues. With regard to energy costs the group has longer term hedging
policies in place and any increases are managed through price increases in
finished goods. In addition, the group has in place a significant energy
reduction programme which has seen a 3% reduction in usage over the last 12
months on a like for like basis despite the full automation of 2 factories in
this period.
People and culture
As I have stated here before, our operational efficiencies are not at the
expense of our people. Engaged people are a key part of our business model and
sustainability. Employee wellbeing plays a crucial role in this. I am proud to
report that Accrol is now an accredited Living Wage employer, which is
especially important at this time. We have also launched several initiatives
this year around caring for employees including, Mental Health First Aiders,
Employee Assistance program, and training around dealing with mental health
issues. It therefore gives me pleasure to report that our absentee levels are
at 1.7% (Q1 FY23), which is outstanding when compared to the UK average of
2.2% (source: FY21 - ONS data)
I would like to take this opportunity to thank all our employees for their
hard work and determination in delivering a strong set of results in what has
been a very difficult environment.
Health and safety
The relentless focus on health and safety over the last four years has
resulted in a further 33% reduction in total accidents, with the Group
delivering zero lost time accidents over the last two years across all of its
sites. In addition, we have seen a 28% reduction in accident frequency
rates. These results are transformational and are something of which we are
all incredibly proud.
Outlook
We continue to see inflationary issues, not least on account of sterling
weakness, and do not see these abating in the short to medium term. However,
the operational strength of the business and a supportive retailer customer
base has enabled us to recover cost increases and put in place new index
linked customer contracts to ensure that costs and inflation are now aligned.
As a result, we do not anticipate a repeat of FY22 gross margin impact looking
forward.
In addition, work carried out as part of the Group's commitment to ESG has
seen initiatives to reduce energy and waste having a positive financial
impact. Lorry journeys have reduced by 10% as a result of smaller toilet roll
core sizes; and waste reduced by 0.5%, lowering raw material usage.
Despite the wider macro challenges, the Group has performed strongly in the
new financial year to date, with volumes growing ahead of the total market
(28% compared to 10%) and the rapidly recovering private label market. It is
clear that there is an economic shift away from high-cost products to items
that give great value to the shopper and Accrol is extremely well placed to
capitalise on this opportunity.
Acquisitions, automation and operational efficiency have given us the
foundations with which to expand the business. As the balance sheet
strengthens, the Group is well placed to take advantage of the many
opportunities that exist to accelerate this growth.
The Board is pleased with the progress of the Group and has continued
confidence for FY23 and beyond.
Gareth Jenkins
Chief Executive Officer
Chief Financial Officer's Review
Summary
The overall performance of the Group was resilient despite the challenges of a
volatile trading environment where we have worked through the end of the
pandemic, rapidly rising commodity costs, and significant supply chain
disruption. The business benefited from its increased scale and diversity
following the acquisition of LTC, acquired in November 2020, and John Dale,
acquired in April 2021, both of which have been fully integrated with
significant benefits in line with our expectations.
Trading results
Group revenue increased by 16.7% to £159.5m (FY21: £136.6m), with volumes
bouncing back as the year progressed from the subdued levels experienced
during lockdowns, reflecting changes in consumer shopping habits as the
impacts of the pandemic receded. H1 volumes were strengthened by the impact
of the Group's two acquisitions in the previous year, whilst H2 showed strong
organic growth as price increases were implemented to recover significant
increases in input costs. The total tissue market increased in value by
0.7% and our market share increased to 16.0% from 15.9% in FY21. Many
retailers did not move shelf sales pricing, during the period under review,
despite record price increases. We are now starting to see the price
movements in stores.
Gross margins declined to 22.7% (FY21: 27.7%), reflecting the significant
impact of escalating pulp, energy, and sea freight costs, exacerbated by the
weakening of sterling relative to the dollar. In line with the wider market,
pressures on the Group's raw material supply chains increased during the
Period and, whilst they have shown significant resilience, considerable cost
increases had to be absorbed in the short term. The Group has taken the
necessary actions to recover these cost increases from its supportive retailer
customer base, albeit with a lag that impacted profitability in the year.
Administration and distribution costs decreased by £2.6m, reflecting the
unwinding of the deferred consideration provision made during FY21. There
was a further £0.3m increase related to non-cash items (depreciation,
amortisation and share based payments), reflecting an increase in the
amortisation of intangible assets (related to the acquisitions), largely
offset by a reduction in the charge for share-based payments (reflecting the
end of the three year Management Incentive Plan).
Adjusted EBITDA declined to £9.1m (FY21: £15.6m), whilst operating losses
reduced to £0.2m (FY21: loss of £1.2m), reflecting the reduction in
administration costs above.
Separately disclosed items
Separately disclosed income totalled £2.6m (net), compared with a £5.3m cost
in FY21.
Acquisition related items totalled income of £5.4m (2021: cost of £2.9m).
On 24 November 2020, the Group acquired 100% of the issued share capital of
LTC Parent Limited and its subsidiaries, whose principal activity is paper
tissue converting. An element of the consideration was contingent upon the
incremental EBITDA performance of contracts secured prior to the acquisition
that had yet to be delivered, measured over a four-month period from 1 March
2021. This consideration was measured on a sliding scale with a maximum of
£6.8m payable to the vendors if EBITDA targets were met, for which provision
was made in the prior year. Negotiations with the sellers in respect of the
contingent consideration and other matters have been concluded with no payment
made. Therefore, contingent consideration of £6.3m has been credited to the
Income Statement after the recognition of £0.5m of one-off contract related
costs that were incurred in the year. In concluding negotiations with the
sellers during the financial year the Group also incurred professional fees of
£0.8m in respect of legal and accounting services. Consultancy costs of
£0.1m were also incurred in finalising the integration of the businesses.
Supply chain disruption costs totalled £0.7m (2021: £nil). In line with
the wider market, pressures on the Group's supply chain have been
considerable, particularly over the autumn period when there was significant
disruption to shipping, container capacity at ports, and haulage. Whilst the
Group's supply chain demonstrated good resilience, we did incur incremental
costs in order to maintain service levels to our customers. These
incremental costs included port charges of £0.4m, largely related to
demurrage costs incurred because of shipping container congestion and a lack
of capacity to manage increased demand. Additional distribution costs of
£0.3m were also incurred, largely related to the procurement of day rate
vehicles at an incremental cost, to ensure continuity of supply in the October
to December period, when haulage driver availability was severely constrained.
We do not expect any of these costs to be repeated as we enter FY23.
Asset impairment costs totalled £1.0m (2021: £nil). Significant progress has
been made over previous years to transform the manufacturing capability of the
business, with investment made in automation and in the expansion of overall
capacity and capability. The final element of the manufacturing
re-organisation comprises investment in a new manufacturing line (expected
October 2022) and automation of packing and palletisation (completed August
2022) at the Leyland manufacturing site. To enable this investment, the
Leyland manufacturing facility has been re-organised, involving the physical
movement of existing manufacturing lines and the scrapping of a specific
're-wind' asset that was deemed surplus to requirement, and therefore
redundant. The removal of this asset has facilitated the wider site
re-organisation but has resulted in an impairment charge.
COVID-19 related costs were £0.2m (2021: £0.7m), as the COVID-19 pandemic
continued to have an impact on the business during the financial year under
review, although those impacts are now much reduced and are again not expected
to repeat. The Group plans on a certain level of resource, factoring in normal
levels of absence and holiday, to maintain a 24/7 manufacturing operation that
is as efficient as possible. High levels of absence due to COVID-19 illness or
self-isolation, required incremental labour resources to be deployed to
maintain service levels to our customers through additional overtime,
additional temporary labour and the deferment of holidays, all of which
resulted in additional costs.
Accounting policy changes totalled £0.6m (2021:£0.5m). The Group's
accounting policy has historically been to capitalise all costs related to the
configuration or customisation of Software-as-a-Service (SaaS) arrangements as
intangible assets. Following the agenda decision of The International
Financial Reporting Standards Interpretations Committee (IFRIC) in April 2021
these previously recognised intangible assets have been treated as an expense,
impacting both the current and prior periods presented.
Other items totalling £0.4m (2021: £0.1m) largely relate to redundancy costs
related to consolidation of activities across the Group following the
acquisitions made in the previous financial year.
Depreciation and amortisation
The total charge for the Period was £11.4m (FY21: £8.3m), of which £5.5m
(FY21: £3.5m) related to the amortisation of intangible assets. The vast
majority of this increase reflects the full year impact of the Group's
acquisitions of LTC and John Dale.
Share-based payments
The total charge for the Period under IFRS 2 "Share-based payment" was £0.5m
(FY21: £3.2m). This charge related to the awards made under the 2021 Long
Term Incentive Plan, that was approved on 5 March 2021.
Interest, tax and earnings per share
Net finance costs were £2.3m (FY21: £2.0m). The Group also recorded a
deferred tax credit of £0.8m (FY21: charge of £0.1m). The loss before tax
was £2.5m (FY21: £3.1m), due to flow through of the lower gross margin.
Adjusted profit before tax of £1.1m (FY21: £9.1m) was lower due to the
decline in adjusted operating profit. Basic losses per share were 0.5 pence
(FY21: 1.3 pence) reflecting higher amortisation costs and adjusting items.
Adjusted diluted earnings per share were 0.3 pence (FY21: 2.7 pence),
reflecting the decline in adjusted EBITDA.
Dividend
As noted in the Chairman's Statement, the Board favours a risk averse approach
in the current market conditions. Our balance sheet has continued to
strengthen, and we have increased our debt facilities but our short term
priority remains focused on securing our supply chain and access to raw
material stocks. In this context, the payment of a final dividend would not
be the best use of capital. Payment of future dividends will be reviewed as
part of the Strategic Review. The proposed final dividend is nil pence per
share (FY21: 0.5 pence).
Cashflow
The Group's adjusted net debt was £27.5m (FY21: £14.6m). The net cash flow
from operating activities was £1.4m (FY21: £17.0m) with the reduction
reflecting a working capital outflow of £4.6m (FY21: £6.6m inflow). This
outflow provided the necessary expansion in working capital to manage supply
constraints over the next 12 months to reduce supply chain risks.
Capital expenditure (net of new finance leases) in the Period was £6.2m
(FY21: £8.6m), including £3.1m (FY21: £1.2m) in respect of intangible
assets that principally relate to product development costs. Lease payments of
£5.5m (FY21: £5.8m) include leases capitalised in accordance with IFRS 16.
The Group recently amended and extended its existing banking arrangements,
through to August 2024 providing additional facilities to support its growth.
These new facilities provide increased headroom in both the scale, tenure and
liquidity of the facilities and the associated banking covenants. The amended
facilities provide an additional £8.5m of funding headroom, an increase of
c.25% over and above the previous arrangements that would have expired in
August 2023.
Balance Sheet
The Group's balance sheet reflects net assets of £82.9m (FY21: £85.9m).
Property, plant, and equipment increased, reflecting the renewal of property
related leases, capitalised in accordance with IFRS 16. We have
significantly invested in automation at our Blackburn and Leyland
manufacturing facilities, to improve productivity, operational flexibility,
and to enhance customer service. Intangible assets represent mostly goodwill
and customer relationships.
Significant progress has also been made in further improving the IT
infrastructure and critical manufacturing systems throughout the Group,
including the further enhancement of the ERP system. All scheduled work has
now successfully been completed.
Goodwill is not amortised but is subject to an annual impairment review. After
considering various scenarios and sensitivities, the Directors concluded that
no impairment is required. During the year, the Group invested further in
product development and innovation which will be amortised over the
anticipated life of the products.
Investment
The final automation of the Leyland site was completed in August 2022.
Alongside a final machine installation, this will complete all major
investments into the tissue businesses. This will result in the Group having
four state-of-the-art fully automated factories in Blackburn (x2), Leyland and
Leicester.
Ownership of a paper mill would be transformational for Accrol and the Group
has continued develop its plans in the Period. As detailed in the Chairman's
Statement, however, such investment will only be completed in a way that
maximises shareholder value and minimises risk.
COVID-19
The Group has not furloughed any employees during the financial year, nor
during any stage of the pandemic. The Group has not been in receipt of any
COVID-19 loans although it had taken advantage of the short-term VAT Payment
Deferral Scheme, which was launched in March 2020, which has now been repaid.
Richard Newman
Chief Financial Officer
CONSOLIDATED INCOME STATEMENT FOR YEAR ENDED 30 APRIL 2022
Restated
2022 2021
Note £'000 £'000
Revenue 4 159,450 136,594
Cost of sales (123,211) (98,710)
Gross profit 36,239 37,884
Administration expenses (23,687) (27,622)
Distribution costs (12,778) (11,424)
Operating loss (226) (1,162)
Analysed as:
- Adjusted EBITDA((1)) 9,056 15,644
- Depreciation 9 (5,857) (4,786)
- Amortisation 11 (5,494) (3,520)
- Share based payments (508) (3,245)
- Separately disclosed items 5 2,577 (5,255)
Operating loss (226) (1,162)
Finance costs 7 (2,522) (2,196)
Finance income 7 216 242
Loss before tax (2,532) (3,116)
Tax credit/(charge) 8 835 (74)
Loss for the year attributable to equity shareholders (1,697) (3,190)
Earnings per share Pence Pence
Basic loss per share 6 (0.5) (1.3)
Diluted loss per share 6 (0.5) (1.3)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR YEAR ENDED 30 APRIL 2022
Restated
2022 2021
£'000 £'000
Loss for the year attributable to equity shareholders (1,697) (3,190)
Other comprehensive income for the year - -
Total comprehensive loss attributable to equity shareholders (1,697) (3,190)
The notes are an integral part of these consolidated financial statements.
((1)) Adjusted EBITDA, which is defined as loss before finance costs and
income, tax, depreciation, amortisation, share based payments and separately
disclosed items, is a non-GAAP metric used by management and is not an IFRS
disclosure (see note 15).
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 APRIL 2022
Restated
2022 2021
Note £'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 9 77,803 63,341
Lease receivables 10 4,325 5,027
Intangible assets 11 58,958 61,213
Total non-current assets 141,086 129,581
Current assets
Inventories 26,241 23,185
Trade and other receivables 31,592 26,480
Lease receivables 10 703 675
Cash and cash equivalents 243 7,604
Derivative financial instruments 805 -
Total current assets 59,584 57,944
Total assets 200,670 187,525
Current liabilities
Borrowings 12 (26,482) (12,349)
Trade and other payables (52,367) (47,031)
Derivative financial instruments - (120)
Income taxes (300) (300)
Provisions (33) (7,321)
Total current liabilities (79,182) (67,121)
Total assets less current liabilities 121,488 120,404
Non-current liabilities
Borrowings 12 (35,169) (30,851)
Deferred tax liabilities 8 (3,100) (3,666)
Provisions (275) -
Total non-current liabilities (38,544) (34,517)
Total liabilities (117,726) (101,638)
Net assets 82,944 85,887
Capital and reserves
Share capital 13 319 311
Share premium 108,782 108,782
Capital redemption reserve 27 27
Accumulated losses (26,184) (23,233)
Total equity shareholders' funds 82,944 85,887
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR YEAR ENDED 30 APRIL 2022
Accumulated
Capital losses/
Share Share Redemption (Retained Total
capital premium Reserve earnings) equity
£'000 £'000 £'000 £'000 £'000
Balance at 30 April 2020 195 68,015 27 (23,225) 45,012
Comprehensive (expense)
Loss for the year (restated) - - - (3,190) (3,190)
Total comprehensive expense (restated) - - - (3,190) (3,190)
Transactions with owners recognised directly in equity
Proceeds from shares issued 116 42,494 - - 42,610
Transaction costs - (1,727) - - (1,727)
Share based payments (net of tax) - - - 3,163 3,163
Other taxation - - - 19 19
Total transactions recognised directly in equity 116 40,767 - 3,182 44,065
Balance at 30 April 2021 (restated) 311 108,782 27 (23,233) 85,887
Comprehensive (expense)
Loss for the year - - - (1,697) (1,697)
Total comprehensive expense - - - (1,697) (1,697)
Transactions with owners recognised directly in equity
Proceeds from shares issued 8 - - - 8
Dividends - - - (1,594) (1,594)
Share based payments (net of tax) - - - 321 321
Other taxation - - - 19 19
Total transactions recognised directly in equity 8 - - (1,254) (1,246)
Balance at 30 April 2022 319 108,782 27 (26,184) 82,944
CONSOLIDATED CASHFLOW STATEMENT FOR THE YEAR ENDED 30 APRIL 2022
Restated
2022 2021
Note £'000 £'000
Cashflows from operating activities
Operating loss (226) (1,162)
Adjustment for:
Depreciation 9 5,857 4,786
Impairment of tangible fixed assets 9 965 -
Profit on disposal of property, plant and equipment (296) -
Amortisation 11 5,494 3,520
Separately disclosed items - acquisition contingent consideration 5 (6,277) -
Share based payments 508 3,245
Operating cashflows before movements in working capital 6,025 10,389
(Increase) in inventories (3,056) (8,553)
(Increase)/decrease in trade and other receivables (5,112) 604
Increase in trade and other payables 5,422 14,800
(Decrease) in provisions (934) (418)
(Increase)/decrease in derivatives (925) 148
Cash generated from operations 1,420 16,970
Tax received 15 40
Net cashflows generated from operating activities 1,435 17,010
Cashflows from investing activities
Purchase of property, plant and equipment 9 (4,987) (9,112)
Proceeds from sale of property, plant and equipment 48 -
Purchase of intangible assets 11 (3,145) (1,152)
Acquisition of subsidiaries net of cash acquired - (32,235)
Receipt of capital element of leases 10 674 650
Lease interest received 10 216 242
Net cashflows used in investing activities (7,194) (41,607)
Cashflows from financing activities
Proceeds of issue of ordinary shares 8 42,610
Cost of raising equity - (1,727)
Amounts received from factoring facility 12 187,204 151,645
Amounts paid to factoring facility 12 (172,436) (161,489)
Loan advance in respect of property, plant and equipment 1,939 1,694
Repayment of capital element of leases (5,463) (5,764)
Advance on revolving credit facility 6,000 -
Repayment of revolving credit facility (15,000) (997)
Transaction costs of revolving credit facility (115) (413)
Dividends paid (1,594) -
Lease interest paid (1,354) (844)
Other interest paid (791) (661)
Net cashflows (used in)/generated from financing activities (1,602) 24,054
Net increase in cash and cash equivalents (7,361) (543)
Cash and cash equivalents at beginning of the year 7,604 8,147
Cash and cash equivalents at year end 243 7,604
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION FOR THE YEAR ENDED 30 APRIL
2022
1. General information
Accrol Group Holdings plc (the "Company") was incorporated with Company number
09019496. It is a public company limited by shares and is domiciled in the
United Kingdom. The registered address of the Company is Delta Building, Roman
Road, Blackburn, Lancashire, BB1 2LD.
The Company's subsidiaries are Accrol UK Limited, Accrol Holdings Limited,
Accrol Papers Limited, LTC Parent Limited, Leicester Tissue Company Limited,
Art Tissue Limited, John Dale (Holdings) Limited and John Dale Limited which
together with the Company form the Accrol Group Holdings Plc Group (the
"Group").
2. Summary of significant accounting policies
A summary of the significant accounting policies is set out below. These have
been applied consistently in the financial statements.
Basis of preparation
These financial statements have been prepared in accordance with UK adopted
International accounting standards in conformity with the requirements of the
Companies Act 2006. The preparation of financial statements requires the use
of certain critical accounting estimates. It also requires Group management to
exercise judgment in applying the Group's accounting policies. The areas where
significant judgments and estimates have been made in preparing the financial
statements and their effect are disclosed in note 3.
The consolidated financial statements have been prepared on a going concern
basis under the historical cost convention, as modified by financial
liabilities (including derivative instruments) at fair value through profit or
loss. The consolidated financial statements are presented in pounds sterling
and all values are rounded to the nearest thousand pounds, except where
otherwise indicated.
New standards, interpretations and amendments effective in the year
New standards that have been adopted in the financial statements for the year
ended 30 April 2022, but have not had a significant impact on the Group are as
follows:
· Interest Rate Benchmark Reform - IBOR 'phase 2' (Amendments to IFRS 9,
IAS 39, IFRS 7, IFRS 4 and IFRS 16)
· COVID-19-Related Rent Concessions beyond June 2021 (Amendments to IFRS
16)
New standards, interpretations and amendments not yet effective
There are a number of standards, amendments to standards, and interpretations
which have been issued by the IASB that are effective in future accounting
periods that the group has decided not to adopt early. The Group will
undertake an assessment of the impact of the following standards and
interpretations in due course, although they are not expected to have a
material impact on the consolidated financial statements in the year of
applications when the relevant standards come into effect.
Effective for the period beginning 1 May 2022:
· Annual Improvements to IFRS Standards 2018-2020;
· Amendment to IAS 16 'Property, Plant & Equipment';
· Amendment to IAS 37 'Provisions, Contingent Liabilities &
Contingent Assets'; and
· Amendment to IFRS 3 'Business Combinations'
Effective for the period beginning 1 May 2023:
· Amendment to IAS 1 'Presentation of financial statements'
· Amendment to IAS 1 'Presentation of financial statements' & IFRS
Practice statement 2
· Amendment to IAS 8 'Accounting policies, Changes in Accounting
Estimates and Errors'
· Amendment to IAS 12 'Income Taxes'
· IFRS 17 'Insurance Contracts'
Accounting policy change
The Group's accounting policy has historically been to capitalise all costs
related to the configuration or customisation of Software-as-a-Service (SaaS)
arrangements as intangible assets. Following the agenda decision of The
International Financial Reporting Standards Interpretations Committee (IFRIC)
in April 2021 these previously recognised intangible assets have been treated
as an expense, impacting both the current and prior periods presented.
In the current year, administration expenses have increased by £637,000
(2021: £550,000), reducing retained earnings. The current year cumulative
impact on intangible fixed assets is a reduction of £1,187,000 (2021:
£550,000).
Going concern
The Chairman's Statement and the Chief Executive's Review outline the business
activities of the Group along with the factors which may affect its future
development and performance. The Financial Review discusses the Group's
financial position, along with details of cashflow and liquidity. The Group
encountered enormous macro-inflationary cost pressures during the year but has
been successful in negotiating more than £70m of annualised price increases
by the end of the year, with £11m of this impacting FY22. In addition, the
Group continued its investment in automation, infrastructure and product
development, whilst also increasing working capital to manage supply
constraints over the coming 12 months.
The acquired businesses, LTC and John Dale, have been fully integrated and the
automation of all four manufacturing sites (which completed in August 2022)
has been finalised; delivering further efficiencies. The cost of living
crisis is driving consumer demand for great value products and Accrol has
enjoyed a strong start to the new financial year (FY23). The margin erosion
experienced in FY22, created by the rapid increase in input costs, has been
rectified and contained, with cost increases being passed on as they arise.
As in previous years, the Group's forecasted performance is dependent on a
number of market and macroeconomic factors particularly the sensitivity to the
price of parent reels and the sterling/USD exchange rate which are inherently
difficult to predict. The Group's forecasted performance has been tested for
downside scenarios, including reverse stress tests, relating to sales volume,
price erosion and parent reel prices. The Group considered the likelihood of
such events occurring together with the relevant impact thereof and were
satisfied that if a scenario partly or fully takes place the Group has
mitigating options available, which may include further price increases,
further operational restructuring and a reduced or deferred capital
expenditure programme, to maintain liquidity and continue its operations.
The Group is currently operating within its covenants. It also considered
the impact of the above downside scenarios on covenant headroom. The
directors were satisfied that after evaluating the probability of events and
available mitigating actions, covenant breaches would be unlikely. At 30
April 2022, available funds were £15.4m, with further details of the
borrowing facilities set out in note 12.
The Directors confirm that, after due consideration, they have a reasonable
expectation that the Group has adequate resources to continue in operational
existence for a period of at least 12 months from the date of signing the
financial statements. For this reason, they continue to adopt the going
concern basis in preparing the financial statements.
3. Significant accounting judgements, estimates and assumptions
The preparation of the financial information in accordance with IFRS requires
estimates and assumptions to be made that affect the value at which certain
assets and liabilities are held at the balance sheet date and also the amounts
of revenue and expenditure recorded in the year. The Directors believe the
accounting policies chosen are appropriate to the circumstances and that the
estimates, judgements and assumptions involved in its financial reporting are
reasonable.
Accounting estimates made by the Group's management are based on information
available to management at the time each estimate is made. Accordingly, actual
outcomes may differ materially from current expectations under different
assumptions and conditions.
The estimates and assumptions for which there is a significant risk of a
material adjustment to the financial information within the next financial
year are set out below.
Critical accounting judgements in applying the entity's accounting policies
Development costs
The Group exercises judgement in determining whether development costs
incurred meet the criteria of IAS 38 'Intangible Assets' and hence
capitalised. The criteria where judgement is most required is around
determining the technical feasibility of completing the project, the
availability of adequate technical, financial, and other resources to complete
and the existence of the market. Not meeting the criteria would result in
these costs being expensed as incurred. Further details are provided in Note
11.
Separately disclosed items
During the course of the year the Group incurred income and expenditure that
is material and considered worthy of being separately disclosed. In order to
better explain the underlying performance of the business, management makes a
judgement as to which items should be separately disclosed. Separately
disclosing costs that are not appropriate to do so leads to a risk of
mis-stating the Group's underlying performance.
Critical accounting estimates in applying the entity's accounting policies
Goodwill and intangible asset impairment
The Group is required to test, on an annual basis, whether goodwill has
suffered any impairment based on the recoverable amount of its CGU. The
recoverable amount is determined based on value in use calculations. The use
of this method requires the estimation of a number of key variables in order
to calculate the present value of the cashflows, including:
· future underlying cashflows;
· the determination of a pre-tax discount rate; and
· long-term growth rates.
The future underlying cashflows remain sensitive to a number of key variables,
including the sterling/USD exchange rate and parent reel pricing, both of
which are inherently difficult to predict, and which could have a significant
effect (positive or negative) on the Group's cashflows.
More information including carrying values is included in note 11.
Right-of-use assets
Significant judgement is exercised in determining the incremental borrowing
rate. IFRS 16 requires the borrowing rate should represent what the lessee
would have to pay to borrow over a similar term and with similar security, the
funds necessary to obtain an asset of similar value in a similar economic
environment.
Deferred taxation
The Group has recognised deferred tax assets in respect of losses incurred in
the current and prior year. This requires the estimation of future
profitability in determining the recoverability of these assets. Specifically,
a range of assumptions underpin the profit and cashflow forecasts for the next
12 months, including those around parent reel prices, the successful
management of any foreign exchange downside and the maintenance of the current
strong customer relations. As described above, the Group's trading performance
remains sensitive to a number of key variables which could have a significant
effect (positive or negative) on the Group's cashflows.
4. Revenue
The Group's country of domicile is the UK. Revenue from external customers is
based on the customers location and arises entirely from the sale of goods.
The analysis by geographical area of destination of the Group's revenue is set
out below:
2022 2021
£'000 £'000
United Kingdom 149,914 127,107
Europe 9,536 9,487
159,450 136,594
5. Separately disclosed items
Restated
2022 2021
£'000 £'000
Acquisition contingent consideration (6,277) -
Acquisition professional fees 766 2,150
Acquisition integration costs 85 724
Acquisition related items (5,426) 2,874
Supply chain disruption 696 -
Impairment of property, plant and equipment 965 -
Operational reorganisation and restructure - 1,034
COVID-19 costs 153 670
Accounting policy change 637 550
Other items 398 127
Other items 2,849 2,381
(2,577) 5,255
A summary of the separately disclosed items for the current year is as
follows.
Acquisition related items credit of £5,426,000 (2021: charge of £2,874,000)
On 24 November 2020, the Group acquired 100% of the issued share capital of
LTC Parent Limited and its subsidiaries, whose principal activity is paper
tissue converting. An element of the consideration was contingent upon the
incremental EBITDA performance of contracts secured prior to the acquisition
that had yet to be delivered, measured over a four-month period from 1 March
2021. This consideration was measured on a sliding scale with a maximum of
£6,800,000 payable to the vendors if EBITDA targets were met, for which
provision was made in the prior year.
Negotiations with the sellers in respect of the contingent consideration and
other matters have been concluded during this financial year with no payment
made. Therefore, contingent consideration of £6,277,000 has been credited to
the Income Statement after the recognition of £523,000 of one-off contract
related costs that were incurred in the year. In concluding negotiations
with the sellers during the financial year, the Group also incurred
professional fees of £766,000 in respect of legal and accounting services.
Consultancy costs of £85,000 were also incurred in finalising the
integration of the businesses.
Supply chain disruption costs £696,000 (2021: £nil)
In line with the wider market, pressures on the Group's supply chain have been
considerable, particularly over the autumn period when there was significant
disruption to shipping, container capacity at ports, and haulage. Whilst
the Group's supply chain demonstrated significant resilience, considerable
incremental costs were incurred to maintain service to our customers.
These incremental costs included port charges of £398,000, largely related to
demurrage costs incurred because of shipping container congestion and a lack
of capacity to manage increased demand. Additional distribution costs of
£269,000 were also incurred, largely related to the procurement of day rate
vehicles at an incremental cost, to ensure continuity of supply in the October
to December period, when haulage driver availability was severely constrained.
External consultancy costs of £29,000 were also incurred to support the
supply chain planning of the business during this volatile period.
Impairment of property, plant and equipment £965,000 (2021: £nil)
Significant progress has been made over previous years to transform the
manufacturing capability of the business, with investment made in automation
and in the expansion of overall capacity and capability. The final element
of the manufacturing re-organisation comprises investment in a new
manufacturing line (expected September 2022) and automation of packing and
palletisation (completed July 2022) at the Leyland manufacturing site.
To enable this investment, the Leyland manufacturing facility has been
re-organised, involving the physical movement of existing manufacturing lines
and the removal of a specific 're-wind' asset that was deemed surplus to
requirement, and therefore redundant. The removal of this asset has
facilitated the wider site re-organisation but has resulted in an impairment
charge of £965,000.
COVID-19 £153,000 (2021: £670,000)
The COVID-19 pandemic continued to have an impact on the business during the
financial year, although those impacts are now much reduced and are being
absorbed as part of normal operational costs from January 2022. The Group
plans on a certain level of resource, factoring in normal levels of absence
and holiday, to maintain a 24/7 manufacturing operation that is as efficient
as possible. High levels of absence due to illness or self-isolation, required
incremental labour resources to be deployed to maintain service levels to our
customers through additional overtime, additional temporary labour and the
deferment of holidays, all of which resulted in additional costs of £133,000.
A further £20,000 of additional costs related to incremental cleaning,
safety, and PPE equipment.
Accounting policy change £637,000 (2021: £550,000)
The Group's accounting policy has historically been to capitalise all costs
related to the configuration or customisation of Software-as-a-Service (SaaS)
arrangements as intangible assets. Following the agenda decision of The
International Financial Reporting Standards Interpretations Committee (IFRIC)
in April 2021 these previously recognised intangible assets have been treated
as an expense, impacting both the current and prior periods presented.
Other items £398,000 (2021: £127,000)
Other items largely relate to redundancy costs of £327,000 related to
consolidation of activities across the Group following the acquisitions made
in the previous financial year; and other largely property related items of
£71,000.
A summary of the separately disclosed items for the prior year is as follows:
Acquisition costs (£2,150,000)
In November 2020, the Group acquired Leicester Tissue Company, whose principal
activity is paper tissue converting. Professional fees of £1,925,000 arose as
a result of the transaction.
In April 2022, the Group acquired John Dale, whose principal activity is the
manufacture of wet wipes and facial tissue. Professional fees of £225,000
arose as a result of the transaction.
Integration (£724,000)
Upon completion of the acquisition of LTC and JD, the Group immediately
commenced a structured integration programme. This covered all key areas of
the business including external relationships with customers and suppliers, as
well as internal functional reviews to consolidate or integrate activities
where appropriate.
Project management costs of £314,000 included expert consultancy advice to
support the integration process. Other incremental costs to support this
activity included £218,000 of labour and £162,000 of operational costs,
largely relating to transportation and short-term paper transfers. Incremental
audit fees of £30,000 have been necessary due to added complexity.
Operational reorganisation and restructure (£1,034,000)
Following the significant progress made during FY20 to transform the
manufacturing capability of the business, it was appropriate to review the
whole organisation to ensure it was aligned with Accrol's future growth
strategy and to deliver world class standards in safety and performance every
day. The final elements of the business turnaround plan were completed
during the year with significant capital investment in automation at our
Blackburn manufacturing site. The complexity of maintaining a 24/7 operation
during the implementation of this substantial project resulted in an element
of incremental labour costs as service levels needed to be maintained despite
the inevitable disruption to normal operations during the period of
transition. Once the project had been completed a number of redundancies
were incurred as the overall headcount reduced, reflecting the benefits from
the automation investment. The total labour cost of the above was £948,000,
with associated fees of £86,000.
COVID-19 (£670,000)
The COVID-19 pandemic has continued to have a significant impact on how the
Group conducts its operations, and on the availability of resource and
personnel, to continue to function as an essential provider of products to UK
retailers. The Group plans on a certain level of resource, factoring in
normal levels of absence and holiday, to maintain a 24/7 manufacturing
operation that is as efficient as possible. High levels of absence during
the pandemic, due to illness or self-isolation, required incremental labour
resources to be deployed to maintain service levels to our customers through
additional overtime, additional temporary labour and the deferment of holidays
- all of which resulted in additional costs of £292,000.
Additional labour costs of £153,000 were incurred as a dedicated team of
people worked on the practical changes that were required in each of our
factories, warehouses, and offices to ensure we maintained fully compliant
working environments and to protect our employees. Extra logistics, PPE,
cleaning and security costs of £225,000 were also incurred.
6. Loss per share
Basic loss per share
The basic loss per share is calculated by dividing the loss attributable to
ordinary equity holders of the Parent by the weighted average number of
ordinary shares outstanding during the year.
Restated
2022 2021
£'000 £'000
Loss for the year attributable to equity shareholders (1,697) (3,190)
Number Number
Weighted average number of shares '000 '000
Issued ordinary shares at 1 May 311,355 195,247
Effect of shares issued in the year 5,792 51,214
Weighted average number of ordinary shares at 30 April 317,147 246,461
Basic loss per share (pence) (0.5) (1.3)
Diluted loss per share
Diluted loss per share is calculated by dividing the loss after tax by the
weighted average number of shares in issue during the year, adjusted for
potentially dilutive share options.
Restated
2022 2021
£'000 £'000
Loss for the year attributable to equity shareholders (1,697) (3,190)
Number Number
'000 '000
Weighted average number of shares (basic) 317,147 246,461
Effect of conversion of Accrol Group Holdings plc share options - -
Weighted average number of ordinary shares at 30 April 317,147 246,461
Diluted loss per share (pence) (0.5) (1.3)
No adjustment has been made in 2022 and 2021 to the weighted average number of
shares for the purpose of the diluted earnings per share calculation as the
effect would be anti-dilutive.
7. Finance costs and income
2022 2021
£'000 £'000
Bank loans and overdrafts 791 661
Lease interest 1,354 844
Amortisation of finance fees 179 438
Unwind of discount on provisions 198 253
Total finance costs 2,522 2,196
2022 2021
£'000 £'000
Lease interest income 216 242
Total finance income 216 242
8. taxATION
Tax credit/(charged) in the income statement
2022 2021
£'000 £'000
Current income tax
Current tax on losses for the year - -
Adjustment in respect of prior periods 15 -
Total current income tax credit 15 -
Deferred tax
Origination and reversal of temporary differences 1,551 (28)
Adjustment in respect of prior periods 73 (46)
Change in tax rate (804) -
Total deferred tax credit/(charge) 820 (74)
Tax credit/(charge) in the income statement 835 (74)
The tax credit for the year is higher than (2021: charge is higher than) the
effective rate of corporation tax in the UK of 19% (2021: 19%). The
differences are explained below:
Restated
2022 2021
£'000 £'000
Loss before income tax (2,532) (3,116)
Effective rate 19% 19%
At the effective income tax rate 481 592
Expenses not deductible for tax purposes (123) (516)
Tax exempt income 1,193 -
Adjustment in respect of prior periods 88 (46)
Movement in unrecognised deferred tax assets - (104)
Change in rate (804) -
Total tax credit/(charge) 835 (74)
During the year the Group recognised the following deferred tax
assets/(liabilities):
Accelerated Share
capital Intangible based
allowances assets Losses payments Other Total
£'000 £'000 £'000 £'000 £'000 £'000
30 April 2020 (1,999) (1,634) 3,161 834 (74) 288
Acquired on business combinations (1,030) (4,154) 177 - 109 (4,898)
Credit/(charge) in year (542) 552 949 (990) (43) (74)
Credit/(charge) to equity - - - 999 19 1,018
30 April 2021 (3,571) (5,236) 4,287 843 11 (3,666)
(Charge)/credit in year (1,842) (338) 3,550 (505) (45) 820
(Charge)/credit to equity - - - (273) 19 (254)
30 April 2022 (5,413) (5,574) 7,837 65 (15) (3,100)
A deferred tax asset of £7,837,000 (2021: £4,287,000) relating to current
and prior year losses has been recognised in the year, on the basis that
forecasts show sufficient taxable profits in the foreseeable future to utilise
these losses.
Deferred tax expected to be settled within 12 months of the reporting date is
approximately £328,000 (2021: £2,177,000).
Deferred tax assets and liabilities have been measured at the rate expected to
be in effect when the deferred tax asset or liability reverses.
9. Property, plant and equipment
Leasehold Assets Right-
land & Fixtures & Plant and under of-use
buildings fittings machinery construction assets Total
£'000 £'000 £'000 £'000 £'000 £'000
Cost
At 30 April 2020 497 2,096 27,187 3,354 16,158 49,292
Acquired through business combinations 1,043 164 9,545 - 8,046 18,798
Additions 31 149 733 8,199 477 9,589
Reclassification - - 8,335 (10,457) 2,122 -
At 30 April 2021 1,571 2,409 45,800 1,096 26,803 77,679
Additions 69 136 1,050 3,732 21,713 26,700
Reclassification (68) 39 1,268 (94) (1,239) (94)
Disposals - - (95) - (9,803) (9,898)
At 30 April 2022 1,572 2,584 48,023 4,734 37,474 94,387
Accumulated depreciation
At 30 April 2020 178 1,365 4,922 - 3,087 9,552
Charge for the year 70 337 879 - 3,500 4,786
At 30 April 2021 248 1,702 5,801 - 6,587 14,338
Charge for the year 142 317 1,895 - 3,503 5,857
Reclassification - 84 347 - (431) -
Disposals - - (95) - (4,481) (4,576)
Impairment - - 965 - - 965
At 30 April 2022 390 2,103 8,913 - 5,178 16,584
Net book value
At 30 April 2022 1,182 481 39,110 4,734 32,296 77,803
At 30 April 2021 1,323 707 39,999 1,096 20,216 63,341
Assets with a value of £77,803,000 (2021: £63,341,000) form part of the
security against the RCF as described in note 12.
As part of the reorganisation of the Leyland manufacturing facility, a
specific 're-wind' asset was deemed surplus to requirement, resulting in an
impairment charge of £965,000. See note 5.
10. Leases
Leases receivable
Land & buildings Total
£'000 £'000
At 1 May 2021 5,702 5,702
Interest received 216 216
Lease receipts (890) (890)
At 30 April 2022 5,028 5,028
Analysed as:
Receivable > 1 year 4,325 4,325
Receivable < 1 year 703 703
Lease liabilities
Land & buildings Plant & machinery Total
£'000 £'000 £'000
At 1 May 2021 21,195 6,402 27,597
New leases in the year 21,242 2,410 23,652
Leases terminated in the year (5,570) - (5,570)
Interest expense 1,124 230 1,354
Lease payments (3,925) (2,892) (6,817)
At 30 April 2022 34,066 6,150 40,216
Short-term lease expense for the year was £nil. Short-term lease commitment
at 30 April 2022 was £nil. Income from sub-leases for the year totalled
£216,000.
11. Intangible assets
Customer Development Computer
Goodwill relationships costs software Other Total
£'000 £'000 £'000 £'000 £'000 £'000
Cost
At 30 April 2020 14,982 20,427 764 2,492 126 38,791
Acquired through business combinations 14,812 21,864 - 28 - 36,704
Internally developed additions (restated) - - 684 468 - 1,152
At 30 April 2021 (restated) 29,794 42,291 1,448 2,988 126 76,647
Internally developed additions - - 2,974 171 - 3,145
Reclassification - - - 94 - 94
At 30 April 2022 29,794 42,291 4,422 3,253 126 79,886
Amortisation
At 30 April 2020 - 11,828 - - 86 11,914
Charge for the year - 2,903 273 344 - 3,520
At 30 April 2021 - 14,731 273 344 86 15,434
Charge for the year - 4,299 332 863 - 5,494
At 30 April 2022 - 19,030 605 1,207 86 20,928
Net book value
At 30 April 2022 29,794 23,261 3,817 2,046 40 58,958
At 30 April 2021 (restated) 29,794 27,560 1,175 2,644 40 61,213
Goodwill
The Group tests goodwill annually for impairment, or more frequently if there
are indications that goodwill may be impaired.
Goodwill is allocated to the cash generating units (CGUs) as follows:
2022 2021
£'000 £'000
Accrol Group Holdings plc 29,794 -
Accrol - 17,917
Leicester Tissue Company ("LTC") - 11,742
John Dale ("JD") - 135
29,794 29,794
As disclosed in the prior year financial statements, as anticipated, the
acquired operations have become fully integrated within the Group. The
performance of the Group provided to the Chief Operating Decision Maker (the
AGH plc Board) does not split between the above CGUs, therefore the Group has
decided to return to a sole CGU.
The recoverable amount of the CGU has been determined based on a value in use
calculation using cashflow projections based on internal forecasts covering a
five-year period, reviewed and approved by the Board. The use of this method
requires the estimation of future cash flows and the determination of a
discount rate in order to calculate the present value of the cash flows.
Cashflows beyond this period are extrapolated using the estimated growth rates
stated below.
The recoverable amounts of the CGUs have been determined from value-in-use
calculations. At 30 April 2022, the impairment tests concluded that the
estimated value in use at 30 April 2022 exceeds the carrying value by £50m
(2021: £100m).
Key assumptions
The calculations of value-in-use are inherently judgemental and require
management to make a series of estimates and assumptions.
The cash flow forecasts have been derived from the most recent forecast
presented to the Board for the year ending 30 April 2023. The cash flows
utilised are based upon forecast sales volumes and product mix, anticipated
movements in tissue prices and input costs and known changes and expectations
of current market conditions.
The pre-tax discount rate used in the value in use calculations is 12.4%
(2021: 13.0%) and is derived from the Group's weighted average cost of
capital, calculated with reference to latest market assumptions for the
risk-free rate, equity market risk premium and the cost of debt. The values
reflect both past experience and external sources of information. The
long-term growth rate assumed is 2.4% (2021: 2%).
Sensitivity to changes in assumptions
To support their assertions, the Directors have conducted sensitivity analyses
to determine the impact that would result from changes in the above
assumptions. Based on this analysis, the Directors believe that a reasonably
possible change in any of the key assumptions detailed above would not cause
the carrying value of the CGU to exceed its recoverable amount, although the
headroom would decrease. Therefore, at 30 April 2022 no impairment charge is
required against the carrying value of goodwill.
Impairment would be caused by either increasing the pre-tax discount rate by
4% or reducing the average EBIT performance by £5m. A combination of
increasing the pre-tax discount rate by 2% and reducing average EBIT
performance by £2.6m results in an impairment.
Notwithstanding the above sensitivities, the Directors are satisfied that they
have applied reasonable and supportable assumptions based on their best
estimate of the range of future economic conditions that are forecast and
consider that an impairment is not required in the current year. However,
the position will be monitored on a regular basis.
Development costs
During the year, the Group developed a number of new innovative products
including 'Softy', 'Elegance', 'Magnum' and 'Little Heroes'. It also
developed a range of fragranced products under the 'Fabulosa' brand and
transitioned the majority of the product range to a 38mm core. The development
costs capitalised are to be amortised over the life of the products (typically
three years).
Computer software
During the year, the Group has continued in the development of its IT
structure.
Customer relationships
Customer relationships are amortised over their useful economic life of 6-10
years.
12. Borrowings
2022 2021
£'000 £'000
Current
Revolving credit facility 2,692 1,821
Factoring facility 18,743 3,975
Leases 5,047 6,553
26,482 12,349
Non-current
Revolving credit facility - 9,807
Leases 35,169 21,044
35,169 30,851
The changes in liabilities arising from financing activities, from cashflows
and non-cash changes for the current and prior year are as follows:
Non-
Current current
loans & loans &
borrowings borrowings Total
£'000 £'000 £'000
At 1 May 2021 12,349 30,851 43,200
Cashflows (16) - (16)
Non-cashflows:
New leases 159 21,554 21,713
Leases terminated on disposal of Right of Use assets (1,658) (3,912) (5,570)
Interest accrued 2,145 - 2,145
Amortisation of finance fees (note 7) 179 - 179
Allocation from non-current to current in the year 13,324 (13,324) -
At 30 April 2022 26,482 35,169 61,651
Non-
Current current
loans & loans &
borrowings borrowings Total
£'000 £'000 £'000
At 1 May 2020 18,157 23,827 41,984
Cashflows (16,829) - (16,829)
Non-cashflows:
New leases acquired through business combinations 2,016 10,610 12,626
New leases 477 - 477
Loans acquired through business combinations 997 - 997
Factoring facility acquired through business combinations 2,002 - 2,002
Interest accrued 1,505 - 1,505
Amortisation of finance fees (note 7) 438 - 438
Allocation from non-current to current in the year 3,586 (3,586) -
At 30 April 2021 12,349 30,851 43,200
Finance costs incurred to arrange the revolving credit facility have been
capitalised and are being amortised through interest payable. Unamortised
finance costs at 30 April 2022 are £308,000 (2021: £372,000).
Finance costs are not included in the loan maturity table below.
2022 2021
£'000 £'000
Loan maturity analysis
Within one year 26,790 12,528
Between one and two years 7,622 7,666
Between two and five years 8,003 18,986
After five years 19,544 4,392
61,959 43,572
The following amounts remain undrawn and available:
2022 2021
£'000 £'000
Revolving credit facility 14,000 5,000
Factoring facility 1,179 7,128
15,179 12,128
The Group's bank borrowings are secured by way of fixed and floating charge
over the Group's assets.
HSBC revolving credit facility agreement ("RCF")
During the year, the Group extended its £17m multi-currency revolving credit
facility, which now expires in August 2024. Previously required repayments of
£2m on each of 30 April 2022 and 30 April 2023 have now been removed.
Interest charged on the facility is at SONIA plus a margin of 2.20%-3.20%. A
commitment fee of 40% of applicable margin on any undrawn RCF is also payable.
The Obligors are Accrol Group Holdings plc, Accrol UK Limited, Accrol Holdings
Limited, Accrol Papers Limited, LTC Parent Limited, Leicester Tissue Company
Limited, Art Tissue Limited, John Dale (Holdings) Limited and John Dale
Limited.
HSBC factoring credit facility ("factoring facility")
During the year, the Group increased its multi-currency factoring facility,
used to provide financing for general working capital requirements, from
£22.5m to £27m. Under the terms of this facility the drawdown is based upon
gross debtors less a retention (typically 15%), with the remaining debt
funded. Each drawing under the facility is repayable within a maximum of 90
days from date of invoice for jurisdictions within the United Kingdom and 120
days for other countries.
Covenants
The Group is subject to financial covenants in relation to the RCF and the
factoring facility. The RCF covenants are interest cover and gross leverage
ratios. The covenants in relation to the factoring facility cover debt
dilution and disputed debt. Breach of the covenants would render any
outstanding borrowings subject to immediate settlement. The Group is currently
operating within its covenants.
13. Share capital and reserves
2022 2021
£'000 £'000
Called up, allotted and fully paid
Ordinary shares of £0.001 each 319 311
319 311
The number of ordinary shares in issue is set out below:
2022 2021
Number Number
Ordinary shares of £0.001 each 318,878,097 311,354,632
In July 2021, 7,523,465 £0.001 ordinary shares were issued.
Each holder of the £0.001 Ordinary Shares is entitled to vote at the general
meetings of the Company. Every holder of an Ordinary Share shall have one vote
for each Ordinary Share held.
14. Events after the balance sheet date
There are no adjusting or non-adjusting events subsequent to the year end.
15. Alternative performance measures
The Group uses a number of alternative performance measures to assess business
performance and provide additional useful information to shareholders about
the underlying performance of the Group.
Adjusted earnings per share
The adjusted earnings per share is calculated by dividing the adjusted
earnings attributable to ordinary equity holder of the parent by the weighted
average number of ordinary shares outstanding during the year. Diluted
earnings per share adjusts the above for potentially dilutive share options.
The following reflects the income and share data used in the adjusted earnings
per share calculation.
Restated
2022 2021
£'000 £'000
Loss attributable to shareholders (1,697) (3,190)
Adjustment for:
Amortisation 5,494 3,520
Separately disclosed items (2,577) 5,255
Share based payments 508 3,245
Discount unwind on contingent consideration 192 239
Tax effect of adjustments above (832) (2,225)
Adjusted earnings attributable to shareholders 1,088 6,844
Number Number
'000 '000
Basic weighted average number of shares 317,147 246,461
Dilutive share options 11,119 10,675
Diluted weighted average number of shares 328,266 257,136
pence pence
Basic adjusted earnings per share 0.3 2.7
Diluted adjusted earnings per share 0.3 2.7
Reconciliation from GAAP-defined reporting measures to the Group's alternative
performance measures
Management use these measurements to better understand the underlying business
of the Group.
Consolidated income statement
Restated
2022 2021
£'000 £'000
Adjusted EBITDA
Operating loss (226) (1,162)
Adjusted for:
Depreciation 5,857 4,786
Amortisation 5,494 3,520
Separately disclosed items (2,577) 5,255
Share based payments 508 3,245
Adjusted EBITDA 9,056 15,644
2022 2021
£'000 £'000
Adjusted Gross Profit
Gross Profit 36,239 37,884
Adjusted for:
Separately disclosed items 905 1,220
Adjusted Gross Profit 37,144 39,104
Revenue 159,450 136,594
Adjusted Gross Margin 23.3% 28.6%
Restated
2022 2021
£'000 £'000
Adjusted profit before tax
Reported (loss) before tax (2,532) (3,116)
Adjusted for:
Amortisation 5,494 3,520
Separately disclosed items (2,577) 5,255
Share based payments 508 3,245
Discount unwind on contingent consideration 192 239
Adjusted profit before tax 1,085 9,143
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. END FR EANNSESAAEFARecent news on Accrol group
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