REG - Accrol Group Hldgs - Half Year Results
30/01/2024 07:15
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RNS Number : 2868B Accrol Group Holdings PLC 30 January 2024
30 January 2024
Accrol Group Holdings plc
("Accrol, the "Group" or the "Company")
HALF YEAR RESULTS
Strong performance, with margins and volume continuing to grow,
and uplift in FY25 expectations
Accrol (AIM: ACRL), the UK's leading independent tissue converter, announces
its results for the six months ended 31 October 2023 ("H1 FY24" or the
"Period").
The Board is pleased to report that the Group performed strongly in H1 FY24.
While revenue reduced as expected, as prices eased following the significant
inflationary-led increases in FY23, branded volumes continued to grow in our
key markets, rising by 45% in H1 FY24, and margins returned to pre-pandemic
levels rising by 930bp to 27.3%.
The Group is firmly on track to deliver FY24 results in line with the Board's
expectations and, following the acquisition of Severn Delta Limited ("Severn
Delta"), now expects to outperform its previous expectations for FY25.
Key Financials H1 FY24 H1 FY23 Change
Revenue £100.3m £121.1m (17.2%)
Adjusted Gross margin(1) 27.3% 18.0% 930bps
Adjusted EBITDA(2) £10.2m £7.1m 43.7%
Adjusted profit before tax(3) £5.0m £3.2m £1.8m
Profit/(loss) before tax £0.4m (£0.9m) £1.3m
Adjusted diluted earnings per share 1.2p 0.7p 0.5p
Diluted earnings per share 0.2p (0.2p) 0.4p
Adjusted net debt(5) £25.5m £30.5m (£5.0m)
Market expectations (Shore Capital & Zeus) as at 29 January 2024 for FY24
and FY25 respectively - Revenue £205.0m EBITDA £21.0m and Revenue £211.1m
EBITDA £21.9m.
Gareth Jenkins, Chief Executive Officer of Accrol, said:
"We are pleased with the Group's performance which has come in ahead of our
initial expectations at the start of the financial year. We continue to
deliver by producing great quality and value products, which meet every
consumer's budget. Our unrivalled retail relationships and robust supply model
ensure that we can continue to deliver strong results in this dynamic market
environment. The Group is delivering on its strategy and is well positioned to
deliver further growth, as it builds upon its broad customer base and
market-leading products."
H1 FY24 highlights:
· Private label market share increased to 55% in the Period (H1 FY23: 54%, H1
FY22: 50%) and is still growing against the traditional brands.
· Strong EBITDA performance of £10.2m (H1 FY23: £7.1m), as margins returned to
pre-pandemic levels quicker than expected, and inflationary pressures ease
compared to FY23.
· Return to profit before tax - £0.4m, an improvement of £1.3m.
· Margin enhancing volume growth achieved throughout the Period in core
products.
· Adjusted net debt(2) at 31 October 2023 reduced by £5m to £25.5m (H1 FY23:
£30.5m), as a result of strong cash generation driven by the operational
efficiencies of the business.
· Strong performance in wet wipe business with a 33% increase in biodegradable
sales - annualised sales run rate of c.£8m anticipated by FY24 end, up from
c.£1.5m at acquisition.
· Capital expenditure in core tissue business has normalised, driving improved
free cash flow generation, following completion of investment in automation
and capacity to achieve of one of the lowest cost bases in the industry.
· Pocket-pack line introduced into facial tissue facility, driven by customer
demand, further widening the product range.
Post period end
· Acquisition of Severn Delta in January 2024, a £5m revenue wet wipe and
tumble dryer sheets business, in line with strategy to broaden product
offering. Severn Delta will be integrated into the Group's fast-growing wet
wipes business in H2 FY24.
· The acquisition brings significant increased scale in wet wipes and brings new
products to the Group by producing household, disinfectant wipes and tumble
dryer sheets.
· New long-term agreement signed with a global FMCG group to supply a well-known
branded product under licence - due to launch in March 2024.
Current trading and outlook
· Strong margin performance in H2 FY24 to date - driven by continued delivery of
high quality, best-value products to our customer base.
· Further volume growth expected, driven by the Group's strong private label
supply position, great brands, the new licenced products, which are benefiting
from the cost-of-living pressures impacting consumers.
· Adjusted net debt on track to reduce to c.1x EBITDA by year end, even after
the acquisition of Severn Delta.
· The Group on track to deliver FY24 revenue c.£205m and adjusted EBITDA in
line with the Board's expectations of at least £21m in - up 34% year-on-year.
· Severn Delta expected to positively impact adjusted EBITDA in FY25.
Dan Wright, Executive Chairman of Accrol, said:
"Over the last four years, Accrol has been transformed as an organisation into
a leading manufacturer of private label, own branded and now licensed tissue
products to the UK market. Our state-of-the-art businesses are in an
incredibly strong position to benefit from the rapid and significant growth in
the in these markets, and we have considerable further capacity to drive these
opportunities. The growth in our branded range and the partnerships we are
developing, to bring high quality valued licensed products with global brands,
continues to strengthen our pricing and margin improvement. We look forward
with increased confidence to the continued growth of the business."
(1) Adjusted Gross margin is defined as gross margin after direct depreciation
(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 profit before amortisation, share
based payments and gains/(losses) on derivative instruments
(5) Adjusted net debt excludes operating type leases recognised on the balance
sheet in accordance with IFRS 16
For further information, please contact:
Accrol Group Holdings plc
Dan Wright, Executive Chairman Via Belvedere Communications
Gareth Jenkins, Chief Executive Officer
Christopher Welsh, Chief Financial Officer
Zeus (Nominated Adviser & Broker)
Dan Bate / Jordan Warburton Tel: +44 (0) 161 831 1512
Dominic King Tel: +44 (0) 203 829 5000
Shore Capital Stockbrokers (Joint Broker) Tel: +44 (0) 20 7408 4090
Malachy McEntyre/ Mark Percy / James Thomas / Isobel Jones
Belvedere Communications Limited
Cat Valentine Tel: +44 (0) 7715 769 078
Keeley Clarke Tel: +44 (0) 7967 816 525
accrolpr@belvederepr.com
(https://url.avanan.click/v2/___mailto:accrolpr@belvederepr.com___.YXAxZTpzaG9yZWNhcDphOm86M2MwYTQzNTFkNjBlNWI1NDY2ZDFlOGIzNGQ3MTQ2NTk6NjplZDQ5Ojk3ZmU0NGJlODE2ZDNiMDY2MTFjZmNmNjcyYWE3MDMwY2YzZWU3MGQxNjlkOGFkMzY3ZmE4NzA1ZGEyNWY4MmU6cDpU)
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 five manufacturing sites suppling the UK tissue wet wipes market
valued at c£3.0bn at retail sales value.
For more information, please visit www.accrol.co.uk
(https://url.avanan.click/v2/___http:/www.accrol.co.uk/___.YXAxZTpzaG9yZWNhcDphOm86M2MwYTQzNTFkNjBlNWI1NDY2ZDFlOGIzNGQ3MTQ2NTk6Njo0YzVkOmEwY2Q0OTZhMWE2YTM0NjE1YjlkMjAyNGQ1ZmI2M2FhNjlmZTFkZjE5Mzk5OTdiNjA3Zjk3MzBkMTBmOTU4ZWM6cDpU)
.
Link for Accrol Today video: https://www.accrol.co.uk/our-business/
(https://url.avanan.click/v2/___https:/www.accrol.co.uk/our-business/___.YXAxZTpzaG9yZWNhcDphOm86M2MwYTQzNTFkNjBlNWI1NDY2ZDFlOGIzNGQ3MTQ2NTk6NjoxZGMxOmJjYmM3OTRhZjZiZGRhOTUxZmJiZDU4YmUwYmMzYzgxOTBlZDlkMTVkMzkxMDIzMWI0NDNiMTEwZGExMTg1ZDg6cDpU)
OPERATIONAL REVIEW
Summary of progress
The Group has performed well in the Period, despite the ongoing volatility in
global supply chains, due to our robust long-term supply arrangements and our
simplified material requirements. We continue to benefit both from the
strength of our key customer relationships and the extensive work undertaken
over the last few years in building a highly-automated business of scale,
efficiency, and product diversity.
The Group has made strong progress in returning gross margins back to
pre-pandemic levels. In H1 FY24, adjusted gross margins improved materially
to 27.3% up from 18% in H1 FY23, up 930 basis points. Revenue normalised in
line with our expectations, as the benefits of lower input costs were passed
on to our customers.
The Group's strategic move into higher value private label and own branded
products helped to drive margins higher. In the Period, the Group grew its
own brands significantly with sales in this area now accounting for 20% of
revenue. In addition, the business recently signed a long-term agreement with
another major global FMCG business to produce under licence a range of
tissue-based products. The initial reaction from retailers has been
extremely positive and we look forward to the launch of the product which is
expected in March 2024. As stated in the Group strategy review, we expect this
part of our business to form at least 20% of revenue in the next three years.
Operationally, the Group has made significant progress across all parts of the
business:
· All major capital investment and restructuring completed;
· Leyland site improved output per head by 12% (excluding the new line);
· Wipes business output per head up 24%;
· Service level remains strong with on time delivery at more than 98.0%;
· Customer Survey score of 8.34 vs industry norm of 7.75 - Accrol's highest ever
score;
· Flint site is now three years accident free, while Leicester is almost four
years accident free;
· Absentee levels continue to be sector leading at 1.3% in the year to date; and
· The Group has achieved the highest Retailer Manufacturing Auditor scores with
all sites achieving an AA rating.
The market
The market for the Group remains very strong; the cost-of-living crisis is
pushing consumers to review their everyday essential items. Accrol's growth in
its own brands over the last 12 months is clear evidence of this. In H1 FY24,
we have seen our Magnum Kitchen towel range volumes grow by 27%, our Elegance
toilet roll range by 78% and our Softy Facial Tissue range by 34%. This part
of our business now equates to 20% of revenue and carries a higher margin and
stronger price position.
The Group's total addressable market, following the acquisitions of John Dale
(2021) and Severn Delta (2024), has expanded considerably to exceed £3.0bn.
The Group expects to grow the Severn Delta business significantly and intends
to roll out its broader product offering of tumble dryer towels and
disinfectant wipes to its extensive UK customer base.
In addition, the Group is seeing new growth opportunities to sell toilet roll
and disinfectant wipes into the hotel, restaurant, and pubs markets, currently
dominated by Essity and Kimberley Clark. Group sales volumes in this area have
grown by 42% when compared to H1 FY23.
Capital allocation
As the Group embarks on its next stage of strategic growth, as outlined in the
Strategic Review Outcomes announced on 24 January 2023, and taking into
consideration the higher interest rate levels, we continue to review our
capital allocation policy and decisions.
In the Strategic Review Outcomes announcement, we outlined our core medium
term ambitions:
· Continue to focus on our core toilet and kitchen towel business;
· Grow our facial and wet wipe business;
· Develop a licensed business model and grow direct to consumer Oceans brand;
· Build a sustainable paper mill;
· Acquire selectively to strengthen and extend our product offering; and
· Maximise medium term tangible shareholder returns, through a combination of
dividends and, potentially, share buybacks.
A disciplined and regular review of our capital allocation priorities is an
essential part of our decision-making process. The Board undertakes a rigorous
approach to assessing all incremental investment decisions, including capital
expenditure relating to the increase in Group capacity and efficiency.
Underpinning all our decision making is an internal rate of return ("IRR")
hurdle today of in excess of 20%.
In line with our medium-term ambitions, the Group has also made a number of
acquisitions; two in FY 2021, Leicester Tissue Company ("LTC") and John Dale,
and, most recently, Severn Delta. LTC and John Dale have enabled us to
further transform and grow the Group and their financial performance has been
excellent.
The acquisition of LTC in November 2020 was for a total cash outlay of £29.5m
on a debt and cash free basis. The deal was prudently structured with a
deferred contingent element which never became payable. At the time, the
business had revenues totalling £31.5m and an adjusted EBITDA of £5.4m,
equating to an EBITDA multiple of 5.6x, reducing to 4.6x post synergies.
After allowing for incremental capital expenditure and the charging of an
appropriate element of Group overhead, the acquisition has delivered a return
on invested capital of 77%.
John Dale, the wet wipe business, was purchased in April 2021 for a
consideration of £3.4m on a debt and cash free basis. Total revenues at the
time were £6.4m and adjusted EBITDA was £0.6m. The split of sales was £3.9m
for facial tissue and £2.4m for wet wipes. This gave an initial multiple of
5.7x EBITDA, reducing to 3.1x post synergies.
The subsequent outcome has far exceeded our projected returns, largely driven
by our ability to leverage our existing customer relationships to drive sales
growth. By the FY24 year end, our wet wipes sales are projected to have a
run rate of £8.0m. After allowing for incremental capital expenditure and the
charging of an appropriate element of Group overhead, the wet wipes element of
the John Dale business alone has delivered a return on invested capital of
57%.
The facial tissue business of John Dale was moved into our state-of-the-art
facility in Blackburn, and, over the same period, this part of our business
has doubled in size from £10m to £20m - with John Dale facial tissue volumes
accounting for £3.9m of this growth. Whilst it is not possible to accurately
identify the returns relating to the John Dale facial tissue business in
isolation, the Blackburn site has a generated a return on invested capital in
excess of 50% over this period.
We have recently announced the acquisition of Severn Delta, a £5m revenue wet
wipe business, predominately supplying and manufacturing industrial cleaning
type wipes into a market worth c.£500m in the UK. The amount paid is
confidential but, based on current EBITDA performance, it amounts to a
multiple of less than 3x, which is expected to reduce to less than 1.5x post
synergies. More importantly, it opens up significant new customers and
markets to the Group. We anticipate a similar trajectory here to the John Dale
experience, where we successfully imported our broader base of customer
relationships to drive incremental sales growth. In a similar fashion to John
Dale, we anticipate delivering a very healthy return on invested capital and
an overall IRR significantly ahead of our internal benchmark. Severn Delta is
expected to positively impact earnings in FY25.
There is no change anticipated to the Group's year end net debt position for
the year end FY24 with an already announced expectation that leverage will be
c.1x EBITDA.
Environmental, Social and Governance ("ESG")
A number of UK businesses have recently warned about significant costs
increases to the labour element of their operations, as minimum wage levels
have increased materially. Accrol already pays more than the new minimum wage
rates and is an accredited Living Wage Employer. We have, over the last three
years, invested significantly in automation, mitigating the wage inflation we
expected would impact the Group and as a result have seen headcount reduce by
26% and output increase by 24%. Whilst we are not complacent in this area and
believe people should be appropriately rewarded, we expect and have
consistently delivered operational improvements that more than offset wage
rate increases.
The business has delivered the following key improvements in the last six
months:
· Ahead of schedule to achieve 50% PCR film objective during 2024;
· Waste down to 6% (from 6.4%) and on track to deliver 5% which would be
industry leading;
· The only UK tissue company who is a "Living Wage" accredited member; and
· Donated 320,000 toilet rolls to charity.
A summary of the Group's progress is available in our ESG Report, which was
published in our Annual Report in October 2023. This is available to view on
the Group's website:
https://www.accrol.co.uk/app/uploads/2023/10/Annual-Report-2023.pdf.
(https://www.accrol.co.uk/app/uploads/2023/10/Annual-Report-2023.pdf)
Current Trading and Outlook
Accrol's main markets in toilet roll, kitchen towel, facial tissue and
flushable wet wipes continue to grow strongly, driven by the ongoing
cost-of-living crisis. We continue to trade strongly and the Group is
maintaining pre-pandemic margins.
Our increasingly strong market position and customer relationships position us
very well to continue to capitalise on the structural change in consumers'
buying behaviour, moving away from high-cost brands into better value everyday
products. The Group is focused on volume growth which delivers the right
levels of return and expects to deliver further growth in its own branded
range. The long-term agreement with a global FMCG group, to manufacturer a
tissue-based product, which we have announced today, adds a further
significant leg to growth.
Whilst always mindful of the wider economic uncertainties, the Group's model
is robust, and the Board is confident that the business is firmly on track to
deliver FY24 revenue of £205m and at least £21m of EBITDA, with the
acquisition of Severn Delta also positively impacting earnings in FY25.
Gareth Jenkins,
Chief Executive Officer
FINANCIAL REVIEW
Revenue
Revenue for the Period was £100.3m (H1 FY23: £121.1m), a decrease of £20.8m
(17.2%) compared to H1 FY23. This decrease in revenue represents an easing of
prices offered to customers following significant inflationary pressures in
FY23. The Group remains on course to deliver FY24 revenue in line with the
Board's expectations at £205m.
Gross profit
Gross profit performance for the Period was strong at £27.4m (H1 FY23:
£21.7m), a notable increase of £5.7m (26.3%), compared to H1 FY23. Adjusted
gross profit as a percentage of revenue at 27.3% (H1 FY23: 18.0%) was higher
than H1 FY23, as margins recovered to pre-pandemic levels following a partial
settling of challenging inflationary input costs in FY23 and these have now
stabilised as we move through FY24.
The business continues to manage customer supply effectively; having invested
in both working capital and securing additional key raw material products to
maintain consistent supply.
Adjusted EBITDA
Adjusted EBITDA increased to £10.2m (H1 FY23: £7.1m), an increase of £3.1m
(43.7%), compared to H1 FY23, largely reflecting the strong recovery in
adjusted gross profit margin performance. Operating costs remain a key focus
of the Group and, following the successful investments in automation and
capacity, provide a solid base for the business to continue to be one of the
lowest cost operators in its market.
Depreciation and amortisation
The total charge for the Period was £6.2m (H1 FY23: £5.3m) of which £3.3m
(H1 FY23: £3.1m) related to the amortisation of intangible assets. This
increase represents the unwinding of a higher capital base following
investments to operating facilities.
Share-based payments
The total charge for the Period under IFRS 2 "Share-based payments" was £0.4m
(H1 FY23: £0.6m).
Operating profit and earnings per share
Net finance costs were £3.3m (H1 FY23: £1.6m), with the increase
attributable to the growth in underlying UK base rates resulting in a profit
before taxation of £0.4m (H1 FY23: loss £0.9m). Basic earnings per share was
0.2 pence (H1 FY23: loss 0.2 pence). Adjusted diluted earnings per share was
1.2 pence (H1 FY23: 0.7 pence), representing the growth in profitability
year-on-year as operating margins continued to improve.
Capital allocation and dividends
The Group intends to resume dividend payments, as soon as is practicable, with
a prudent and sustainable dividend cover of c.2.5x - 3.5x. Furthermore, the
Board, albeit mindful of liquidity constraints, continues to see significant
value in the current Accrol equity valuation and seeks the flexibility to act
accordingly in terms of potential share buybacks. Current operating
performance is expected to continue to drive strong free cash-flow, through
both margin recovery and the step down in capital expenditure requirements in
the core business moving forward. The increasing visibility over free
cash-flow generation increases the range of options in front of the Board,
when it comes to broader capital allocation, and the balance between organic
and inorganic growth investment.
Cashflow
The net cash flow from operating activities was £7.1m (H1 FY23: £6.1m) with
the increase reflecting improved operating margins and an anticipated release
of working capital of £0.8m (H1 FY23: £1.0m).
Capital expenditure in the Period was £1.8m (H1 FY23: £5.8m), which included
the purchase and implementation of a pocket-pack line into our facial tissue
facility bringing in-house a wider product range to offer to our valued
customers. Lease payments of £3.6m (H1 FY23: £3.0m) include leases
capitalised in accordance with IFRS 16.
Balance Sheet
The Group had net assets of £78.6m (H1 FY23: £82.7m) as 31 October 2023 and
adjusted net debt had improved to £25.5m (H1 FY23: 30.5m), representing 1.4x
leverage down from 2.7x H1 FY23. The Group has strong liquidity with cash and
equivalents totalling £3.3m (H1 FY23: £7.6m). The Group maintains a £24.0m
revolving credit facility, of which £10.0m (H1 FY23: £10.0m) was drawn at
the balance sheet date. The Group continues to operate within the associated
covenants attached to this facility and access to liquidity remains available.
The Group maintained its £30.0m multi-currency factoring facility, used to
provide financing for general working capital requirements; of which £12.8m
(H1 FY23: £25.5m) was drawn at the balance sheet date.
The Group is well invested with net debt on track to be c.1.0x EBITDA by the
current year end (FY23: 1.7x).
Post Period end acquisition
In January 2024, the Group completed the acquisition of Severn Delta, a £5m
revenue wet wipe and tumble dryer sheets business based in Somerset, which
will be integrated in to the Accrol Group in H2 FY24. Consideration was funded
from cash generation with no further contingent or deferred considerations.
This acquisition offers significant increased scale for our already growing
wet wipes business, as well as the ability to enhance our product offering to
our broad range of customers.
Outlook
The Group has continued to perform well in to H2 FY24 with gross profit
margins having stabilised and returned to pre-pandemic levels quicker than
originally anticipated. The Group is continuing to trade in line with the
market expectations of at least £21m of adjusted EBITDA.
Following the recent acquisition, the Group looks forward to integrating
Severn Delta in to our already growing wet wipes business and, therefore,
expects FY25 adjusted EBITDA to be positively impacted.
Christopher Welsh,
Chief Financial Officer
Consolidated Interim Income Statement
For six months ended 31 October 2023
Unaudited Unaudited Audited
Six months ended Six months ended Year
31 October 2023 31 October 2022 ended
30 April 2023
Continuing operations Note £'000 £'000 £'000
Revenue 4 100,316 121,072 241,914
Cost of sales (72,946) (99,332) (196,749)
Gross profit 27,370 21,740 45,165
Administration costs (17,473) (13,429) (28,459)
Distribution costs (6,161) (7,651) (14,284)
Group operating profit 3,736 660 2,422
Finance costs 7 (3,390) (1,770) (10,505)
Finance income 7 91 166 265
Profit/(loss) before taxation 437 (944) (7,818)
Tax (charge)/credit 8 102 179 2,123
Profit/(loss) for the period attributable to equity shareholders 539 (765) (5,695)
Earnings per share (pence)
Basic 6 0.2 (0.2) (1.8)
Diluted 6 0.2 (0.2) (1.7)
Group Operating profit 3,736 660 2,422
Adjusted for:
Depreciation and amortisation 6,152 5,348 11,666
Share based payments 354 565 459
Separately disclosed items 5 - 487 1,003
Adjusted EBITDA 10,242 7,060 15,550
Consolidated Interim Statement of Comprehensive Income
For six months ended 31 October 2023
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
31 October 2023 31 October 2022 30 April 2023
£'000 £'000 £'000
Profit/(loss) for the period attributable to equity shareholders 539 (765) (5,695)
Total comprehensive expense attributable to equity shareholders 539 (765) (5,695)
Consolidated Interim Balance Sheet
As at 31 October 2023
Unaudited Unaudited Audited
As at As at As at
31 October 2023 31 October 2022 30 April 2023
Note £'000 £'000 £'000
ASSETS
Non-current assets
Property, plant, and equipment 86,900 87,276 87,420
Intangible assets 51,308 56,782 54,254
Lease receivables 2,988 4,233 3,617
Total non-current assets 141,196 148,291 145,291
Current assets
Inventories 22,312 36,767 32,132
Trade and other receivables 29,895 31,868 30,900
Lease receivables 1,244 888 1,097
Cash and cash equivalents 3,262 7,590 3,460
Derivative financial instruments 171 - -
Total current assets 56,884 77,113 67,589
Total assets 198,080 225,404 212,880
Current liabilities
Borrowings 9 (31,023) (37,886) (31,849)
Trade and other payables (53,927) (62,498) (63,882)
Derivative financial instruments - (154) (2,973)
Provisions - - -
Total current liabilities (84,950) (100,538) (98,704)
Total assets less current liabilities 113,130 124,866 114,176
Non-current liabilities
Borrowings 9 (33,808) (34,274) (35,605)
Deferred tax liabilities (743) (2,922) (863)
Provisions - - -
Total non-current liabilities (34,551) (42,196) (36,468)
Total liabilities (119,501) (142,734) (135,172)
Net assets 78,579 82,670 77,708
Capital and reserves
Share capital 319 319 319
Share premium 108,782 108,782 108,782
Capital redemption reserve 27 27 27
Retained earnings (30,549) (26,458) (31,420)
Total equity shareholders' funds 78,579 82,670 77,708
Consolidated Interim Statement of Changes in Equity
For six months ended 31 October 2023
Capital redemption reserve Retained earnings/ (deficit) Total
Share capital Share premium
£'000 £'000 £'000 £'000 £'000
Balance at 31 October 2022 (audited) 319 108,782 27 (26,458) 82,670
Comprehensive income
Loss for the period - - - (4,930) (4,930)
Total comprehensive expense - - - (4,930) (4,930)
Transactions with owners recognised directly in equity
Share-based payment (inc. tax) - - - (32) (32)
Total transactions recognised directly in equity - - - (32) (32)
Balance at 30 April 2023 (audited) 319 108,782 27 (31,420) 77,708
Comprehensive income
Profit for the period - - - 539 539
Total comprehensive income - - - 539 539
Transactions with owners recognised directly in equity
Share-based payment (inc. tax) - - - 332 332
Total transactions recognised directly in equity - - - 332 332
Balance at 31 October 2023 (unaudited) 319 108,782 27 (30,549) 78,579
Consolidated Interim Cash Flow Statement
For six months ended 31 October 2023
Unaudited Unaudited Audited
Six months ended 31 October 2023 Six months ended 31 October 2022 Year ended 30 April 2023
£'000 £'000 £'000
Cash flows from operating activities
Operating profit 3,736 660 2,422
Adjustment for:
Depreciation 2,836 2,248 4,964
(Profit)/loss on disposal of property, plant, and equipment (2) (10) 4
Amortisation of intangible assets 3,316 3,100 6,702
Share based payments 354 565 459
Mark to market movement in derivatives (4,019) - 805
Operating cash flows before movements in working capital 6,221 6,563 15,356
Decrease/(increase) in inventories 9,818 (10,525) (5,891)
Decrease/(increase) in trade and other receivables 1,005 (277) 692
(Decrease)/increase in trade and other payables (9,989) 9,944 10,941
Increase/(decrease) in provisions - 350 (608)
Cash generated from operations 7,055 6,055 20,490
Net cash flows from operating activities 7,055 6,055 20,490
Cash flows from investing activities
Purchase of property, plant, and equipment (1,458) (3,867) (8,701)
Proceeds from sale of property, plant, and equipment - 10 10
Purchase of intangible assets (371) (1,938) (1,918)
Receipt of capital element of leases 482 536 776
Lease interest received 91 166 265
Net cash flows used in investing activities (1,256) (5,093) (9,568)
Cash flows from financing activities
Amounts paid to / (received from) factoring facility (4,977) 2,606 (981)
Loan advance in respect of property, plant, and equipment - 1,691 4,255
Repayment of capital element of leases (3,583) (3,039) (5,642)
Advance of bank loans 5,000 7,000 2,000
Transaction costs of bank facility - (98) -
Profit/(loss) on foreign currency derivatives 181 - (3,149)
Lease interest paid (969) (819) (1,818)
Other interest paid (1,649) (956) (2,370)
Net cash flows (used)/from in financing activities (5,997) 6,385 (7,705)
Net (decrease)/increase in cash and cash equivalents (198) 7,347 3,217
Cash and cash equivalents at beginning of the period 3,460 243 243
Cash and cash equivalents at period end 3,262 7,590 3,460
The notes below form part of these condensed interim financial statements.
Notes to the Interim Financial Statements
For six months ended 31 October 2023
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 AIM market of the London Stock
Exchange.
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 30 January 2024.
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 2023 should be read in conjunction with the Group's Annual
Report and Accounts for the year ended 30 April 2023, 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 2023 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 2023 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 2022 Year
ended 31 ended 30 April 2023
October 2023
£'000 £'000 £'000
United Kingdom 96,069 114,086 229,784
Europe 4,247 6,986 12,130
Total 100,316 121,072 241,914
5. Separately disclosed items
Unaudited Unaudited Audited
Six months ended 31 October 2023 Six months ended 31 October 2022 Year
ended 30 April 2023
£'000 £'000 £'000
Operational reorganisation and restructure - - 413
Supply chain disruption - 465 590
Other - 22 -
Other items - 487 1,003
Total - 487 1,003
A summary of the separately disclosed items for the prior year is as follows:
Operational reorganisation and restructure £413,000
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 was completed in FY23 reflecting investment
in a new manufacturing line and automation of packing and palletisation at the
Leyland manufacturing site.
Supply chain disruption costs £590,000
In line with the wider market, pressures on the Group's supply chain were
considerable, particularly in the early part of FY23 when there was
significant disruption at several UK ports due to industrial strike action.
This disruption caused severe shipping container congestion at the Liverpool
port resulting in incremental demurrage costs being incurred for a period,
until the industrial dispute was resolved. In addition, the Group incurred
further incremental costs related to a period where inbound shipping
containers were diverted to unaffected ports (e.g. London Gateway) in order to
maintain service to our customers.
6. Earnings/(loss) per share
The basic earnings/(loss) per share is calculated by dividing the
profit/(loss) attributable to ordinary equity holders of the parent by the
weighted average number of ordinary shares outstanding during the period.
Diluted profit/(loss) per share is calculated by dividing the profit/(loss)
after tax 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 2023 Six months ended 31 October 2022 Year
ended 30 April
2023
£'000 £'000 £'000
Earnings/(loss) for the period attributable to shareholders 539 (765) (5,695)
Number Number Number
'000 '000 '000
Issued ordinary shares at beginning of period 318,878 318,878 318,878
Effect of shares issued in the period - - -
Basic weighted average number of shares at end of period 318,878 318,878 318,878
Effect of conversion of Accrol Group Holdings plc share options 13,971 11,119 9,044
Diluted weighted average number of shares at end of period 332,849 329,997 327,922
Basic earnings/(loss) per share (pence) 0.2 (0.2) (1.8)
Diluted earnings/(loss) per share (pence) 0.2 (0.2) (1.7)
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 2023 Six months ended 31 October 2022 Year
ended 30 April
2023
£'000 £'000 £'000
Bank loans and overdrafts 1,627 852 2,370
Other interest 787 820 1,818
Amortisation of finance fees 101 98 195
Unrealised Foreign currency losses on derivatives 875 - 2,973
Realised Foreign currency (gains)/losses on derivatives - - 3,149
Total finance costs 3,390 1,770 10,505
Lease interest income 91 166 265
Total finance income 91 166 265
Net finance costs 3,299 1,604 10,240
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 21%
(half year ended 31 October 2022: 19%; year ended 30 April 2023: 19%).
9. Borrowings
Unaudited Unaudited Audited
As at 31 October 2023 As at 31 October 2022 As at 30
April 2023
£'000 £'000 £'000
Current
Bank facility 9,966 9,790 4,887
Factoring facility 12,785 21,348 17,762
Leases 8,272 6,748 9,200
Total current 31,023 37,886 31,849
Non-current
Bank facility - - -
Leases 33,808 39,274 35,605
Total non-current 33,808 39,274 35,605
Total current & non-current 64,831 77,160 67,454
Unaudited Unaudited Audited
As at 31 October 2023 As at 31 October 2022 As at 30
April 2023
£'000 £'000 £'000
Total borrowings (excluding finance fees) 64,865 77,371 67,454
Less: lease receivables (4,232) (5,121) (4,714)
Less: cash and cash equivalents (3,262) (7,590) (3,460)
Net debt 57,371 64,660 59,280
Less: leases recognised on adoption of IFRS16 (31,909) (34,142) (32,462)
Adjusted net debt (excl. leases recognised on adoption of IFRS16) 25,462 30,518 26,818
10. Dividends
The Company did not pay a final dividend for the year ending 30 April 2023 nor
does it propose an interim dividend for the period ending 31 October 2023.
11. Non-GAAP measures
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 2023 Six months ended 31 October 2022 Year
ended 30 April
2023
£'000 £'000 £'000
Earnings attributable to shareholders 539 (765) (5,695)
Adjusted for:
Amortisation 3,316 3,100 6,702
Separately disclosed items - 487 1,003
Share based payment 354 565 459
Net loss on foreign currency derivatives 875 - 6,122
Tax effect of adjustments above (829) (954) (2,714)
Adjusted earnings attributable to shareholders 4,255 2,433 5,877
Number Number Number
£'000 £'000 £'000
Basic weighted average number of shares 318,878 318,878 318,878
Dilutive share options 13,971 11,119 9,044
Diluted weighted average number of shares 332,849 329,997 327,922
Pence Pence Pence
Adjusted earnings per share 1.3 0.8 1.8
Diluted adjusted earnings per share 1.2 0.7 1.8
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.
12. Events after the balance sheet date
Subsequent to the balance sheet date, in January 2024, the Group acquired the
share capital of Severn Delta Limited for cash consideration. Severn Delta is
a £5m revenue wet wipe manufacturer based in Somerset, UK and will be
integrated in to the Accrol Group moving forward.
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