REG - Accrol Group Hldgs - Half Year Results
18/01/2022 07:05
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RNS Number : 7367Y Accrol Group Holdings PLC 18 January 2022
18 January 2022
Accrol Group Holdings plc
("Accrol, the "Group" or the "Company")
HALF YEAR RESULTS
Continued progress in a challenging environment
Accrol (AIM: ACRL), the UK's leading independent tissue converter, announces
its unaudited results for the six months ended 31 October 2021 ("H1 22" or the
"Period").
Gareth Jenkins, Chief Executive Officer of Accrol, said:
"This has been one of the most challenging periods in the industry that I have
experienced in my 25-year career. Tissue pricing has reached unprecedented
levels, driven by escalating energy costs (rising as much as 500% for certain
suppliers) and global sea freight charges, combined with increased UK
transport costs, resulting from HGV driver shortages.
"Despite the challenges, the Group is on track to recover the cost increases
that it has absorbed, as a result of these challenging market dynamics, from
its supportive retailer customer base. Whilst the profitability of the Group
will be impacted in the short-term, due to the time-lag on price increase
implementation (averaging 2-3 months), we expect to exit the year in a strong
position both operationally and commercially.
"Improving market conditions during the period did, however, result in
month-on-month growth throughout H1 22, as shopping behaviours started to
normalise. Q2 revenues were 17% higher than Q1 and market share was 15.3%,
as we entered H2 22. We have also seen pleasing progress at John Dale, our
biodegradable wet wipe business. The flushable range of products has been well
received by retailers and wet wipe sales were up 33% in the first six months
of ownership. In addition, our new direct to consumer markets, supplied by
our Oceans brand (revenues up c.140% in last six months, compared to prior six
months) and our recently launched Amazon offering."
Key financials
H1 22 H1 21 Change
Revenue £73.7m £62.3m 18.3%
Gross margin 24.7% 23.7% 4.2%
Adjusted EBITDA(1) £5.0m £5.4m -6.7%
Adjusted profit before tax(2) £0.7m £2.6m (£1.9m)
Loss before tax (£3.5m) (£0.5m) (£3.0m)
Adjusted diluted earnings/(loss) per share 0.2p 0.9p (0.7p)
Diluted (loss) per share (0.8p) (0.2p) (0.6p)
Adjusted net debt(3) £21.6m £18.1m 19.4%
(1) Adjusted EBITDA is defined as profit before finance costs, tax, depreciation,
amortisation, separately disclosed items and share based payments
(2) Adjusted profit before tax is defined as loss before tax, amortisation,
separately disclosed items and share based payments
(3) Adjusted net debt excludes operating type leases recognised on balance sheet
in accordance with IFRS 16
Highlights
● Revenue growth of 18.3% to £73.7m, reflecting the successful scaling and
diversification of the business since the acquisitions of Leicester Tissue
Company ("LTC") and John Dale ("JD")
● Improving trend throughout the Period with Q2 revenues (£39.8m) 17% higher
than Q1 (£33.9m)
● Gross margins improved versus H1 21, despite raw material cost increases
● Adjusted EBITDA of £5.0m achieved, despite increased operational costs caused
by supply chain issues
● Significant price increases delivered in the Period with a supportive retail
customer base
● Strong performance from JD with a 33% increase in its biodegradable wet wipe
sales in the first six months of ownership
● Strong market position maintained, despite a 1% reduction in market size and
ongoing impacts of the pandemic in Q1
● LTC and JD acquisitions fully integrated and synergies being realised, as
anticipated
● Business continued to operate safely throughout the Period with zero lost time
accidents
Current trading and outlook
● Stronger volume momentum, as the Group entered H2 22
● Operational improvements on track with the final automation of the Leyland
site to complete by the end of March 2022, which, alongside the final machine
installation, will complete the major investment into the Group's Tissue
business
● Despite a slower than anticipated recovery from the discount retailers, many
discounters have announced accelerated store openings over the next 12 months,
from which the Group is well positioned to benefit
● Following another uplift in energy costs impacting all parent reel suppliers,
a further product price increase is being implemented. A successful outcome to
this process is supported by Accrol's strong position in a tightening market
for finished tissue products and parent reels.
● A full strategic review is being initiated to capitalise on the evident
strength of the business' market position, its balance sheet, and its
solvency, underpinned by significant banking support, to ensure that
shareholder value is optimised
● Group on track to deliver revenue growth of 17% to c.£160m and Adjusted
EBITDA of c.£9.0m, despite an annualised increase in costs of c.£50m
Dan Wright, Executive Chairman of Accrol, said:
"On 12 January, we issued a trading update as unavoidable surcharges to parent
reel prices, relating to exceptional energy price increases, were levied on
the Company, and this, together with further inflationary pressure on input
costs since the end of H1 22, will impact growth in the current year.
"To mitigate these further significant cost increases, the Group is engaged
with all its customers to achieve further substantial price increases, over
and above those secured in mid-2021. This is an ongoing process but the
initial response from all our customers has been very supportive. These
price increases will start to impact from February onwards.
"Despite facing short-term price recovery challenges in H2 22, the Group
continues to strengthen its market position with the operational foundations
in place to enable future growth. The Board is confident that the strong
pricing actions taken in FY22, to recover unprecedented cost increases, will
ensure a strong recovery of margins and profitability in FY23."
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 Capital Limited (Nominated Adviser & Broker)
Dan Bate / Jordan Warburton Tel: +44 (0) 161 831 1512
Dominic King 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. Following the recent
acquisitions of LTC in Leicester and JD in Flint, North Wales, the Group now
operates from six manufacturing sites, including four in Lancashire, which
generate revenues totalling c.16% of the c£2.1bn UK retail tissue market.
For more information, please visit www.accrol.co.uk
(http://www.accrol.co.uk/) .
OPERATIONAL REVIEW
Summary of progress
The Group's progress has continued strongly despite the ongoing well-reported
macro challenges. We have built a UK business with scale, geographic footprint
and innovation, which is able to continue volume and market share growth. We
are well positioned to benefit from the significant growth expected across our
sector with many of the discount retailers having announced accelerated store
openings over the next 12 months.
Group revenues increased by 18.3% versus H1 21, reflecting the successful
scaling and diversification of the business since the acquisitions of LTC and
JD, with month-on-month growth throughout the Period and into H2 22. Our
market share reduced slightly in the Period to 15.3% (FY 21: 15.9%), in a
market that showed an overall decline of 1%, reflecting a weaker performance
in Q1. Revenues in Q2 showed a strong recovery, as the impacts of the
pandemic started to fully unwind. Post Period end, our market share has
continued to grow month on month, as revenues continued to increase.
However, much of our hard work and achievement has been overshadowed by the
short-term impact of the significant increases in raw material costs, UK
supply chain costs, as well as global sea freight charges, which are currently
dominating the narrative.
I would like to take this opportunity to thank our employees across the Group,
who have been fantastic, working relentlessly to meet the challenges
presented. Our absence rate has been less than 3%, which is outstanding for
our industry, and even more notable considering the continued high levels of
COVID-19 in the areas in which we operate. I am particularly proud that our
lost time accident rate dropped to zero in the Period and it is thanks to our
team that our service record to our retailer base continues to be strong,
despite the challenging environment.
The challenges
Whilst the Group's supply chain has shown significant resilience in H1 22,
considerable raw material cost increases were absorbed and shortages managed
with the usual 3-month time lag between the impact of the costs and being able
to pass them on to customers. I am pleased to report that cost increases
passed on though price increases to date amount to over £40 million on an
annualised basis.
To better understand what has been happening, it is worth detailing the events
and performance on a quarterly basis.
Q1 22
In Q1, tissue prices began to increase, with the usual 3-month time horizon,
and Accrol was engaging successfully with its customer base to pass on these
additional costs. Over the last 18 months, the Group has put in place
indexation agreements with many customers to enable it to better manage these
fluctuations. To help mitigate the supply chain challenges, the Group
actively increased its raw material and finished goods stock positions to
ensure its supply positions. Logistics bottlenecks in incoming parent reels
and UK transportation had significant impact in the quarter but the Group's
careful management of this ensured service levels to all customers remained
high, albeit with significant related on-costs to the business.
Q2 22
In Q2, the recovery of the cost increases incurred in Q1 progressed well
across all retailers. Further increases of c.20% on tissue prices were
forecast across the industry, with additional increases across all other raw
materials including cartons, corrugated, plastic wrap, paper wrap and core
board. Many of these cost increases were being driven by significant upward
movements in energy cost, impacting all aspects of the supply chain. The total
cost to the business of the first two tissue price increases was c.£40
million on an annualised basis. Significant recovery of these increased
costs was achieved from retailers, with many price increases being agreed that
would positively impact in Q3 and fully across Q4, given the usual 3-month
time lag. Margins in H1 showed an improvement on the same period in the
prior financial year, showing the robustness of the business model and the
improved relationships the business has with its customer base.
Q3 22
As the Group entered Q3, accelerating energy costs were impacting the paper
reel supply, which, over a short period of time (c.5 months) saw energy costs
for some suppliers increase by up to 500%, as hedging positions came to a
close. Several suppliers in different regions globally ceased trading. As a
percentage of the overall selling price of paper, energy costs currently
comprise as much as 50% (previously 10%), meaning that without significant
paper price increases the industry was unsustainable. As announced in the
Group's Trading Update on 12 January 2022, these sharp and rapid (the average
time horizon reduced significantly) price rises in paper costs have materially
impacted Accrol in the short term. As with previous paper price increases,
however, these are in the process of being recovered from customers. A
successful outcome to this process is supported by Accrol's strong position in
a tightening market for finished tissue products and parent reels.
The Board expects significant margin recovery by the end of Q4 22 and Accrol
is expected to enter FY23 with good margins and an operationally well-placed
business to take advantage of the UK market, which is forecast to grow
significantly as the planned new store openings across many discounters begin
to take effect.
Commercial Development
We continue to make good progress to develop our product range and add new
sales channels. The Group has secured an extended sole supply position with
Morrisons for its paper category and increased its own brands, Magnum and
Oceans, into an initial 100 stores. The Magnum brand is also in Poundland,
Wilko, Iceland and other independents and continues to grow strongly with a
current Retail Sales Value of c.£20 million pa.
We have secured our Softy facial tissue brand with Sainsburys, from February
2022 and other Accrol branded ranges now being supplied into Unitas, which
represents 33,000 independent retailers.
Oceans, which is the Group's plastic free brand sold direct to consumers,
continues to gain traction, growing 143% in the Period. It is now available in
a retail pack and on Amazon, where all of Accrol's other branded products are
also now available.
The development of wet wipes is making good progress. Further accreditation
has been achieved, including Fine to Flush and BRCGS (UK Retailers
Accreditation), which will help to drive growth further across all retailers.
In addition, the Group has secured business with Ocado, across all
biodegradable wet wipes, and we are actively cross selling wipes into existing
retailers offering a 'one stop shop' for paper products.
CURRENT TRADING AND OUTLOOK
Despite continued supply chain disruption, particularly at ports around the
world and specifically in the UK, the business continues to manage customer
supply well, having secured and maintained additional stocks in paper and
finished goods.
Whilst short-term profitability has been unavoidably impacted by these
significant prices increases, despite having recovered c.£40 million from
customer price increases to date, the Group is confident in its ability to
recover the further cost increases, albeit with an approximately 3-month time
lag.
As previously announced, FY22, revenue is now expected to grow by 17% to
c.£160m (FY21: £136.6m), generating adjusted EBITDA(1) of c.£9.0m (FY21:
£15.6m) with margin recovery anticipated in FY23. The Group continues to
operate well within its existing banking covenants and has more than
sufficient liquidity to meet its existing and future needs.
Accrol continues to strengthen its market position with the operational
foundations in place to enable future growth. Volumes are continuing to
strengthen with overall Tissue sales from Q1 to Q2 rising by 17% - Toilet
Tissue up 16%, the newly improved kitchen towel range up 18%, and facial
tissue up 1%, with our newly acquired JD business growing by 8% and our
biodegradable wet wipes sales up 33%. The Board is confident that the strong
pricing actions, taken to recover unprecedented cost increases, will ensure a
strong recovery of margins and profitability in FY23.
STRATEGIC REVIEW
Notwithstanding the resilient performance of the Group under exceptional macro
pressures, in light of the short-term but inherent volatility of earnings
experienced in the current year, as announced in the Group's Trading Update on
12 January 2022, the Board has concluded that it is appropriate for Accrol to
conduct a full strategic review of its business. Such review will be designed
to capitalise on the evident strength of the business' market position, its
balance sheet, and its solvency, underpinned by significant banking support,
to ensure that shareholder value is optimised, and the Company will provide an
update on progress in due course.
Gareth Jenkins
Chief Executive Officer
FINANCIAL REVIEW
Revenue
Revenue for the Period to 31 October was £73.7m (H1 21: £62.3m), an increase
of £11.4m (18.3%) compared to H1 21, reflecting the increased scale and
diversification of the Group following the acquisition of LTC in November 2020
and JD in April 2021. Month on month revenues increased steadily during the
Period as volumes strengthened and price increases started to impact.
Gross profit
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 and supply shortages, considerable cost increases had to be
absorbed in the short term.
Gross profit as a percentage of revenue at 24.6% (H1 21: 23.7%) was lower than
FY21 exit rates, as higher input costs were only partially mitigated by
pricing increases in the Period, given the lag in timing of implementation
with retail customers.
Adjusted EBITDA
Adjusted EBITDA(1) declined slightly to £5.0m (H1 21: £5.4m), reflecting an
increase in operating costs driven by distribution pressures, notably the
availability of HGV drivers, and the increased scale of the operational cost
base following the acquisitions of LTC and JD.
Separately disclosed items
Separately disclosed items totalled £0.7m (H1 21: £0.6m) of which £0.4m
related to incremental costs of supply chain disruption, particularly at ports
and in securing additional vehicles to ensure continuity of service to our
customers. Other items largely related to operational restructuring measures
and specific COVID-19 related costs within the manufacturing environment.
Depreciation and amortisation
The total charge for the Period was £6.1m (H1 21: £3.2m) of which £2.7m (H1
21: £1.2m) related to the amortisation of intangible assets. This increase
reflects the Group's acquisitions of LTC and JD.
Share-based payments
The total charge for the Period under IFRS 2 "Share-based payments" was £0.6m
(H1 21: £1.3m). This charge related to the awards made under the 2021 Long
Term Incentive Plan, that was approved on 5 March 2021.
Operating profit and earnings per share
Net finance costs were £1.1m (H1 21: £0.8m), resulting in a loss before
taxation of £3.5m (H1 21: £0.5m). Basic losses per share were 0.8 pence
(H1 21: 0.2 pence). Adjusted diluted earnings per share were 0.2 pence (H1
21: 0.9 pence)
Dividends
A payment of £1.6m (equating to 0.5 pence per share) was made on 30 September
2021, in respect of the final dividend for the year ended 30 April 2021. No
interim dividend will be paid and the payment of a final dividend for FY22
will be considered by the Board as part of the Company's strategic review.
Cashflow
The Group's adjusted net debt was £21.6m (H1 21: 18.1m). The net cash flow
from operating activities was £0.9m (H1 21: £8.7m) with the reduction
reflecting a working capital outflow of £3.4m (H1 21: £4.0m inflow). This
outflow reflected a reduction in trade payables over the Period, as payments
were made for incremental raw materials stocks that were purchased at the end
of FY21 in order to reduce supply chain risks.
Capital expenditure in the Period was £3.4 m (H1 21: £6.4m) including £1.2m
(H1 21: £1.1m) in respect intangible assets that include IT infrastructure
and product development costs. Lease payments of £3.4m (H1 21: £2.2m)
include leases capitalised in accordance with IFRS 16. The increase arises as
results of the acquisitions of LTC and JD.
Balance Sheet
The Group's balance sheet reflects the acquisitions of LTC and JD with net
assets increasing to £82.7m (H1 21: £46.0m). The increase in intangible
assets represent mostly goodwill and customer relationships arising upon
acquisition.
Investment
The final automation of the Leyland site is due to be completed by the end of
March 22, notably on time and to budget. Alongside a final machine
installation, this will complete all major investments into the Tissue
businesses with only c.£3m investment required in existing machinery per year
going forward for general maintenance capital. This will result in the Group
having four state-of-the-art fully automated factories in Blackburn (x2),
Leyland and Leicester operating at significantly lower cost levels.
The Group has continued to develop its mill plans but, in light of the current
spike in energy costs and building material cost inflation, investment in a
mill will form a part of the strategic review announced in the Trading Update
on 12 January 2022.
Richard Newman
Chief Financial Officer
HALF YEAR CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Interim Income Statement
For six months ended 31 October 2021
Unaudited Unaudited Audited
Six months ended 31 October 2021 Six months ended 31 October 2020 Year
ended 30 April
2021
Continuing operations Note £'000 £'000 £'000
Revenue 4 73,709 62,306 136,594
Cost of sales (55,526) (47,532) (98,710)
Gross profit 18,183 14,774 37,884
Administration costs (14,480) (10,221) (27,072)
Distribution costs (6,083) (4,262) (11,424)
Group operating (loss)/profit (2,380) 291 (612)
Finance costs 7 (1,198) (918) (2,196)
Finance income 7 111 124 242
Loss before taxation (3,467) (503) (2,566)
Tax credit/(charge) 8 795 94 (74)
Loss for the period attributable to equity shareholders (2,672) (409) (2,640)
Loss per share (pence)
Basic 6 (0.8) (0.2) (1.1)
Diluted 6 (0.8) (0.2) (1.1)
Group Operating (loss)/profit (2,380) 291 (612)
Adjusted for:
Depreciation & Amortisation 6,072 3,176 8,306
Share based payments 638 1,250 3,245
Separately disclosed items 5 675 649 4,705
Adjusted EBITDA 5,005 5,366 15,644
Consolidated Interim Statement of Comprehensive Income
For six months ended 31 October 2021
Unaudited Unaudited Audited
Six months ended 31 October 2021 Six months ended 31 October 2020 Year
ended 30 April 2021
£'000 £'000 £'000
Loss for the period attributable to equity shareholders (2,672) (409) (2,640)
Total comprehensive expense attributable to equity shareholders (2,672) (409) (2,640)
Consolidated Interim Balance Sheet
As at 31 October 2021
Unaudited Unaudited Audited
31 October 2021 31 October 2020 30 April
2021
Note £'000 £'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 65,207 43,131 63,341
Intangible assets 60,408 26,754 61,763
Lease receivables 4,680 5,368 5,027
Deferred tax asset - 895 -
Total non-current assets 130,295 76,148 130,131
Current assets
Inventories 20,787 12,830 23,185
Trade and other receivables 24,487 17,550 26,480
Lease receivables 689 662 675
Derivative financial instruments - 203 -
Cash and cash equivalents 3,074 5,791 7,604
Total current assets 49,037 37,036 57,944
Total assets 179,332 113,184 188,075
Current liabilities
Borrowings 9 (17,488) (14,102) (12,349)
Trade and other payables (39,593) (28,531) (47,031)
Derivative financial instruments (2) - (120)
Income taxes - - (300)
Provisions 10 (7,327) (368) (7,321)
Total current liabilities (64,410) (43,001) (67,121)
Total assets less current liabilities 114,922 70,183 120,954
Non-current liabilities
Borrowings 9 (29,310) (24,024) (30,851)
Deferred tax liabilities (2,886) - (3,666)
Provisions 10 - (186) -
Total non-current liabilities (32,196) (24,210) (34,517)
Total liabilities (96,606) (67,211) (101,638)
Net assets 82,726 45,973 86,437
Capital and reserves
Share capital 319 195 311
Share premium 108,782 68,015 108,782
Capital redemption reserve 27 27 27
Retained earnings (26,402) (22,264) (22,683)
Total equity shareholders' funds 82,726 45,973 86,437
Consolidated Interim Statement of Changes in Equity
For six months ended 31 October 2021
Capital redemption reserve Retained earnings/ (deficit) Total
Share capital Share premium
£'000 £'000 £'000 £'000 £'000
Balance at 30 April 2021 (audited) 311 108,782 27 (22,683) 86,437
Comprehensive income
Loss for the period - - - (2,672) (2,672)
Total comprehensive expense - - - (2,672) (2,672)
Transactions with owners recognised directly in equity
Proceeds from shares issued 8 - - - 8
Share-based payment (inc. tax) - - - (1,047) (1,047)
Total transactions recognised directly in equity 8 - - (1,047) (1,039)
Balance at 31 October 2021 (unaudited) 319 108,782 27 (26,402) 82,726
Consolidated Interim Cash Flow Statement
For six months ended 31 October 2021
Unaudited Unaudited Audited
Six months ended 31 October 2021 Six months ended 31 October 2020 Year
ended 30 April 2021
£'000 £'000 £'000
Cash flows from operating activities
Operating (loss)/profit (2,380) 291 (612)
Adjustment for:
Depreciation 3,401 1,940 4,786
Amortisation of intangible assets 2,671 1,236 3,520
Share based payments 638 1,250 3,245
Operating cash flows before movements in working capital 4,330 4,717 10,939
Decrease/(increase) in inventories 2,398 (3,457) (8,553)
Decrease in trade and other receivables 1,994 3,130 604
(Decrease)/increase in trade and other payables (7,688) 4,467 14,800
Increase/(decrease) in provisions 6 13 (418)
(Increase)/decrease in derivatives (118) (175) 148
Cash generated from operations 922 8,695 17,520
Tax received 15 40 40
Net cash flows from operating activities 937 8,735 17,560
Cash flows from investing activities
Purchase of property, plant and equipment (2,300) (5,331) (9,112)
Purchase of intangible assets (1,222) (1,114) (1,702)
Acquisition of subsidiaries net of cash acquired - - (32,235)
Receipt of capital element of leases 334 321 650
Lease interest received 111 124 242
Net cash flows used in investing activities (3,077) (6,000) (42,157)
Cash flows from financing activities
Proceeds of issue of ordinary shares 8 - 42,610
Cost of raising equity - - (1,727)
Amounts received from factors 76,284 69,995 151,645
Amounts paid to factors (74,391) (75,221) (161,489)
New finance leases 1,940 131 1,694
Repayment of capital element of leases (3,404) (2,241) (5,764)
Advance/(repayment) of bank loans - 3,266 (997)
Transaction costs of bank facility - (306) (413)
Dividends paid (1,594) - -
Interest paid (1,233) (715) (1,505)
Net cash flows used in financing activities (2,390) (5,091) 24,054
Net decrease in cash and cash equivalents (4,530) (2,356) (543)
Cash and cash equivalents at beginning of the period 7,604 8,147 8,147
Cash and cash equivalents at period end 3,074 5,791 7,604
The notes below form part of these condensed interim financial statements.
Notes to the Interim Financial Statements
For six months ended 31 October 2021
1. General Information
Accrol Group Holdings plc (the "Company") and its subsidiaries (together "the
Group") is incorporated in the United Kingdom with company number 09019496.
The registered address of the Company is the Delta Building, Roman Road,
Blackburn, United Kingdom, BB1 2LD.
The Company's shares are quoted on the Alternative Investment Market.
The principal activity of the Company and its subsidiaries (together the
'Group') is soft paper tissue conversion.
The condensed consolidated interim financial information was approved and
authorised for issue by a duly appointed and authorised committee of the Board
of Directors on 18 January 2022.
This condensed interim financial information has not been audited or reviewed
by the Company's auditor.
Forward looking statements
Certain statements in this results announcement are forward looking. The terms
"expect", "anticipate", "should be", "will be" and similar expressions
identify forward-looking statements. Although the Board of Directors believes
that the expectations reflected in these forward-looking statements are
reasonable, such statements are subject to a number of risks and uncertainties
and events could differ materially from these expressed or implied by these
forward-looking statements.
2. Basis of preparation
This condensed consolidated interim financial information for the six months
ended 31 October 2021 should be read in conjunction with the Group's Annual
Report and Accounts for the year ended 30 April 2021, prepared and approved by
the Directors in accordance with International Financial Reporting Standards
as adopted by the EU ('Adopted IFRSs'), IFRIC Interpretations and the
Companies Act 2006.
The interim financial statements included in this report are not audited and
do not constitute statutory accounts within the meaning of the Companies Act
2006. The Annual Report and accounts for the year ended 30 April 2021 have
been filed with Companies House. The Group's auditor, BDO LLP have reported on
those accounts and their report was unqualified.
The interim financial statements have been prepared on a going concern basis
and on the historical cost convention modified for the revaluation of certain
financial instruments.
In assessing the Group's ability to continue as a going concern, the Board has
reviewed the Group's cash flow and profit forecasts. The impact of potential
risks and related sensitivities to the forecasts were considered, whilst
assessing the available mitigating actions.
The Group's 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 continues to monitor the impact of the COVID-19 pandemic on performance
along with the ongoing disruption of the supply chain, particularly at ports,
exacerbated by the national shortage of haulage drivers.
The Board has formed a judgement that there is reasonable expectation that the
Group has adequate resources to continue in operational existence for the
foreseeable future. For this reason, the going concern basis has been adopted
in preparing the interim financial statements.
3. Accounting Policies
The accounting policies applied in preparing the unaudited interim financial
statements are consistent with those used in preparing the statutory financial
statements for the year ended 30 April 2021 as set out in the Group's Annual
Report and Accounts.
4. Revenue
The Group has one type of revenue and class of business.
The analysis of geographical area of destination of the Group's revenue is set
out below:
Unaudited Unaudited Audited
Six months Six months ended 31 October 2020 Year
ended 31 ended 30 April 2021
October 2021
£'000 £'000 £'000
United Kingdom 71,855 57,874 127,107
Europe 1,854 4,432 9,487
Total 73,709 62,306 136,594
5. Separately disclosed items
Unaudited Unaudited Audited
Six months ended 31 October 2021 Six months ended 31 October 2020 Year
ended 30 April 2021
£'000 £'000 £'000
Acquisition professional fees - - 2,150
Acquisition integration costs - - 724
Acquisition related items - - 2,874
Operational restructure 145 327 ,1,034
COVID-19 costs 43 245 670
Set up & exit costs relating to Skelmersdale warehouse 5 6 12
FCA investigation legal costs - - 22
Supply chain disruption 430 - -
Other 52 71 93
Other items 675 649 1,831
Total 675 649 4,705
Operational restructure costs - £145,000 (31 October 2020: £327,000)
Salary and settlement costs due to the reorganising and restructuring of its
operations to improve the long-term profitability and efficiencies.
COVID-19 - £43,000 (31 October 2020: £245,000)
The Group incurred incremental costs principally relating to overtime and
temporary labour, to cover employees who were in isolation during this period.
There were additional costs for COVID safety representatives and also
PPE/cleaning costs.
Supply chain disruption - £430,000 (31 October 2020: £nil)
The Group has incurred additional costs due to ongoing disruption of the
supply chain, particularly at ports, exacerbated by the national shortage of
haulage drivers.
6. 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 period.
Diluted loss per share is calculated by dividing the loss above by the
weighted average number of shares in issue during the year, adjusted for
potentially dilutive shares.
Unaudited Unaudited Audited
Six months ended 31 October 2021 Six months ended 31 October 2020 Year
ended 30 April 2021
£'000 £'000 £'000
Loss for the period attributable to equity shareholders (2,672) (409) (2,640)
Number Number Number
'000 '000 '000
Issued ordinary shares at beginning of period 311,355 195,247 195,247
Effect of shares issued in the period 4,088 - 51,214
Basic weighted average number of shares at end of period 315,443 195,247 246,461
Effect of conversion of Accrol Group Holdings plc share options - - -
Diluted weighted average number of shares at end of period 315,443 195,247 246,461
Basic loss per share (pence) (0.8) (0.2) (1.1)
Diluted loss per share (pence) (0.8) (0.2) (1.1)
For the periods above, no adjustment has been made to the weighted average
number of shares for the purpose of the diluted loss per share calculation as
the effect would be anti-dilutive.
7. Finance costs
Unaudited Unaudited Audited
Six months ended 31 October 2021 Six months ended 31 October 2020 Year
ended 30 April 2021
£'000 £'000 £'000
Bank loans and overdrafts 375 402 661
Finance lease interest 521 313 844
Amortisation of finance fees 106 196 438
Unwind of discount on provisions 196 7 253
Total finance costs 1,198 918 2,196
Lease interest income 111 124 242
Total finance income 111 124 242
Net finance costs 1,087 794 1,954
8. Taxation
The taxation credit recognised is based on management's best estimate of the
weighted average annual tax rate expected for the full financial year.
The tax credit for the period has been calculated at an effective rate of
22.9% (half year ended 31 October 2020: 18.6%; year ended 30 April 2021: 19%).
9. Borrowings
Unaudited Unaudited Audited
31 October 2021 31 October 2020 30 April
2021
£'000 £'000 £'000
Current
Bank facility 1,854 2,949 1,821
Factoring facility 5,869 6,591 3,975
Leases 9,765 4,562 6,553
Total current 17,488 14,102 12,349
Non-current
Bank facility 9,880 11,810 9,807
Leases 19,430 12,214 21,044
Total non-current 29,310 24,024 30,851
Total current & non-current 46,798 38,126 43,200
31 October 2021 31 October 2020 30 April
2021
£'000 £'000 £'000
Total borrowings (excluding finance fees) 47,064 38,633 43,572
Less: lease receivables (5,369) (6,030) (5,702)
Less: cash and cash equivalents (3,074) (5,791) (7,604)
Net debt 38,621 26,812 30,266
Less: leases recognised on adoption of IFRS16 (17,008) (8,709) (15,628)
Adjusted net debt (excl leases recognised on adoption of IFRS16) 21,613 18,103 14,638
10. Provisions
Unaudited Unaudited Audited
31 October 2021 31 October 2020 30 April Current Non-current
2021
£'000 £'000 £'000 £'000 £'000
Onerous contracts 172 554 358 172 -
Contingent consideration 6,800 - 6,608 6,800 -
Other 355 - 355 355 -
Total provisions 7,327 554 7,321 7,327 -
The onerous contract provision of £172,000 relates to a logistics agreement
resulting from the decision to exit from the Skelmersdale facility.
Other provisions of £355,000 arose on the Group's acquisition of Leicester
Tissue Company and John Dale, relating to dilapidation and other compliance
provisions.
The contingent consideration relates to the acquisition of Leicester Tissue
Company.
11. Dividends
On 30 September 2021, the Company paid a final dividend of 0.5p per share for
the year ended 30 April 2021, totalling £1,594,000.
12. Non-GAAP measures
Adjusted profit before tax
Unaudited Unaudited Audited
Six months ended 31 October 2021 Six months ended 31 October 2020 Year
ended 30 April 2021
£'000 £'000 £'000
Reported (loss) before tax (3,467) (503) (2,566)
Adjustment for:
Amortisation 2,671 1,236 3,520
Separately disclosed items 675 649 4,705
Share based payment 638 1,250 3,245
Discount unwind on contingent consideration 192 - 239
Adjusted profit before tax 709 2,632 9,143
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. The following
reflects the income and share data used in the adjusted earnings per share
calculation.
Unaudited Unaudited Audited
Six months ended 31 October 2021 Six months ended 31 October 2020 Year
ended 30 April 2021
£'000 £'000 £'000
Earnings attributable to shareholders (2,672) (409) (2,640)
Adjustment for:
Amortisation 2,671 1,236 3,520
Separately disclosed items 675 649 4,705
Share based payment 638 1,250 3,245
Discount unwind on contingent consideration 192 - 239
Tax effect of adjustments above (961) (596) (2,225)
Adjusted earnings attributable to shareholders 543 2,130 6,844
Number Number Number
£'000 £'000 £'000
Basic weighted average number of shares 315,443 195,247 246,461
Dilutive share options 3,152 30,463 10,675
Diluted weighted average number of shares 318,595 225,710 257,136
pence pence pence
Adjusted earnings per share 0.2 1.1 2.7
Diluted adjusted earnings per share 0.2 0.9 2.6
For the periods above, no adjustment has been made to the weighted average
number of shares for the purpose of the diluted earnings per share calculation
as the effect would be anti-dilutive.
13. Events after the balance sheet date
There are no subsequent events after the reporting date which require
disclosure other than those already announced in the trading update of 12(th)
January 2022.
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