REG - Accrol Group Hldgs - Trading Update - FY22 in line with expectations

Accrol groupAnnouncement

17/05/2022 07:00

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RNS Number : 6876L  Accrol Group Holdings PLC  17 May 2022

 

17 May 2022

 

This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the Company's obligations under Article 17 of
MAR.

 

Accrol Group Holdings plc

("Accrol, the "Group" or the "Company")

 

TRADING UPDATE

FY22 in line with market expectations

 

Accrol (AIM: ACRL), the UK's leading independent tissue converter, announces
the following trading update ahead of its Final Results for the year ended 30
April 2022 ("FY22" or the "Period"), which are scheduled to be released in
September 2022.

 

In the period since the Company's last trading update of 12 January 2022, the
Group has continued to demonstrate resilience against a challenging backdrop
of rapid cost inflation. As a result, revenue, adjusted EBITDA, and adjusted
profit before tax for FY22 are expected to be in line with market
expectations(1).

 

The Group has successfully navigated the substantial inflationary pressures on
input costs, including pulp, energy, and supply chain, by engaging
constructively with its customers to pass-on these additional costs, through
significant price increases and further process efficiencies.

 

Highlights

 

FY22

 ●    Revenue, adjusted EBITDA, and adjusted profit before tax for FY22 in line with
      market expectations(1)
 ●    Successful recovery of all increased input costs secured by the end of Q4 FY22
 ●    Market share by revenue increased to 16.0% (H1 FY22: 15.3%) and by volume to
      19.5% (H1 FY22: 18.9%)
 ●    New customers secured and deeper penetration of key accounts, through
      increasing product diversity - notably Amazon, Unitas (30k convenience stores)
      and Ocado
 ●    Final elements of the extensive automation programme and machine investment in
      the Tissue business completing in Q1 FY23. Only planned modest levels of
      maintenance investment capital required going forward

 

Outlook

 ●    Revenue for the year ending 30 April 2023(1) ("FY23") now expected to be in
      the range of £200m to £220m, as a result of the successful recovery of all
      input cost increases
 ●    The Group is well positioned to benefit from its product range and its supply
      positions across the discount retailers as their growth accelerates following
      the pandemic and the inflationary pressures now impacting consumers
 ●    Increasing Board confidence in FY23 outcome

 

(1) For the purposes of this announcement, the Group believes market consensus
for the year ended April 2022 to be revenue of £160m, adjusted EBITDA of £9m
and adjusted PBT of £1m, and the for the year ended April 2023, revenue of
£185m, adjusted EBITDA of £15m and adjusted PBT of £7m.

 

FY22 Financials

 

The overall UK tissue market has grown by 0.7% to £2.1bn(2) based on retail
sale value, reflecting the inflationary pressures within the market.
Accrol's market share growth has returned, increasing to 16.0%(2) from
15.3%(2) at H1 FY22 (FY21: 15.9%)(2), reflecting the strong recovery of the
discounter retailers in recent months. ((2) Source: Kantar)

 

Total revenues in FY22 increased by 17% to £159.4m (FY21: £136.6m).  Market
conditions continued to improve throughout the year with shopping behaviours
becoming more normalised as COVID related restrictions were eased and then
removed completely.

 

Net debt (pre-IFRS16) at 30 April 2022 was £27.5m, (31 October 2021:
£21.6m), following the Group's accelerated investment in automation and the
necessary expansion in working capital to manage supply constraints and rising
costs.

 

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. Given the breadth and depth of the Group's historic automation
and machine investment programme, any material future capital investment will
be capacity and earnings enhancing.

 

Foreign exchange

 

The majority of the Group's tissue requirement is fulfilled through the
purchase of parent reels in US dollars. Forward foreign currency contracts are
used in the purchase process for this product. The nature of these contracts
allows time for the Company to manage any significant and unforeseen movements
in the exchange rate through pricing agreements with its customers.

 

Strategic review

 

The Strategic Review, announced on 12 January 2022, is ongoing and the Board
intends to provide a full update in the FY22 results announcement in
September.

 

Outlook

 

Whilst remaining mindful of the extremely challenging external environment,
the Board views the prospects for Accrol with increasing confidence, given the
strong recovery of input cost rises, strengthened customer relationships,
improved levels of service and quality, and its higher value product range.

 

The Group expects volumes across the UK tissue sector to return to
pre-pandemic levels and that its main market, the discount retailers, will
grow strongly, as consumers seek value and quality, given tighter household
budgets.

 

Gareth Jenkins, Chief Executive Officer of Accrol, said:

 

"This has been the most challenging period in the industry that I have
experienced, with tissue pricing reaching unprecedented levels, driven by
energy prices and supply constraints. We have successfully recovered these
increased input costs to date and are confident we can continue to recover any
further rises through innovation, efficiency and our supportive retailer
customer base.

 

"We have a well invested business and exit the year in a strong position both
operationally and commercially."

 

Dan Wright, Executive Chairman of Accrol, added:

 

"The new improved banking arrangements demonstrate continued confidence in
the Group's operating performance and ongoing support for our development
plans. The investments we have already made into the efficiency of our
operations have served us well through these incredibly challenging times and
we are confident that they will bear considerable fruit in FY23 and beyond."

 

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 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/) .

 

Link for Accrol Today video: https://www.accrol.co.uk/our-business/
(https://www.accrol.co.uk/our-business/)

 

 

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