TIDMACRL
RNS Number : 7386X
Accrol Group Holdings PLC
02 September 2020
2 September 2020
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 YEARED 30 APRIL 2020
Building an infrastructure for growth
Accrol Group, the UK's leading independent tissue converter,
announces its audited Final Results for the year ended 30 April
2020 ("FY20" or the "Period").
Continuing progress
The Group has continued to perform well across all aspects of
the business, delivering accelerating monthly exit run-rates in
line with the Board's expectations. Accordingly, the results for
FY20 are ahead of market expectations.
With strong and experienced leadership across the business and a
now acceptable operational cost base, the Group has the right
foundations on which to begin building an organisation of size and
scale. The simple strategy of delivering great-value products with
consistent service is enabling the business to outperform the
tissue sector. Accrol's management team is now focused on expanding
in the Group's core markets and diversifying into new personal
hygiene and household products, where consumers would benefit
greatly from the application of the Accrol model, with great value
products delivered through world-class operational efficiency.
Accordingly, the Board is confident in the prospects for the
Group.
Key financials:
FY20 FY19 FY18
Underlying results
Core revenue(1) GBP133.6m GBP116.7m GBP115.3m
Adjusted gross profit(2) GBP30.5m GBP21.7m GBP24.5m
Adjusted gross margin 22.7% 18.2% 17.5%
Adjusted EBITDA(3) GBP10.6m GBP1.0m Loss (GBP5.8m)
Adjusted profit/(loss) before (GBP9.1m)
tax GBP4.7m (GBP2.8m)
Adjusted net debt(4) GBP17.9m GBP27.1m GBP33.8m
Adjusted earnings/(loss) per
share basic 1.9p (1.4p) (7.4p)
Reported results
Revenue GBP134.8m GBP119.1m GBP139.7m
Gross profit GBP29.5m GBP17.6m GBP24.5m
Gross margin 21.9% 14.7% 17.5%
Loss before tax (GBP1.9m) (GBP14.0m) (GBP24.1m)
Net debt GBP27.9m GBP27.1m GBP33.8m
Loss per share basic and diluted 0.8p 6.2p 18.7p
(1) Core Revenue comprises Toilet Tissue, Kitchen Towel and
Facial Tissue sales.
(2) Adjusted gross profit excludes separately disclosed items
reported in cost of sales.
(3) Adjusted EBITDA is defined as profit before finance costs,
tax, depreciation, amortisation, separately disclosed items
and share based payments, is a non-GAAP metric used by management.
IFRS 16 impact GBP2.3m giving GBP8.3m Adjusted EBITDA pre-IFRS
16.
(4) Adjusted net debt excludes operating type leases recognised
on balance sheet in current year in accordance with IFRS
16.
Highlights, current trading, and outlook:
-- Delivered core revenue growth of 14.5% in the year, compared
to sector growth of 7.7%*
-- Gross margin improvement accelerated, increasing by 49%
from FY19 to 21.9% (FY19: 14.7%) as the business continues
its expansion into higher quality and higher value products
-- Ongoing investment in operational efficiency and capacity
in FY21 to deliver and maintain a world-class business
-- Administration costs already reduced by 43% in last two
years, equating to reduction of c.GBP14.4m
-- Separately disclosed items, relating to further restructuring
in FY21, are expected to be less than GBP1.0m, down from
GBP2.2m in the year under review and GBP7.9m in FY19
-- All employees to be paid no less than the Real Living Wage
by H2 FY21 - operational efficiency is not driven by low
pay in a sustainable business
-- Continued focus on sustainability - intention to source
all the Group's energy requirement from renewables in the
short to mid-term, at a lower cost per unit of measure
-- On track to meet market expectations in FY21 but the Board
remains mindful of the continuing risk of operational disruption
posed by COVID-19
-- Opportunities to grow and develop the Group being explored
- clear focus on earnings enhancement and the continued
improvement of shareholder value
* Source: IRI data
Dan Wright, Executive Chairman of Accrol, said:
"The business has progressed enormously over the last three
years. Despite the many challenges, the management team has
simplified the business and created a strong foundation on which to
begin the next phase of the Group's development. I am excited for
the future. The team has the ambition, ability and drive to build a
much bigger business, applying Accrol's philosophies on great
products at great value and world-class operational efficiency
across a wider product range."
Gareth Jenkins, Chief Executive Officer of Accrol, added:
"After joining the organisation, almost three years ago, I
reported to shareholders that the core of our business was a good
one. Following the completion of the turnaround, this simplified
and strengthened organisation provides a firm base on which to
build a business of scale, by expanding in our core markets and
diversifying into new personal hygiene and household products.
"The opportunities for a relentlessly efficient business, which
delivers great-value products, are growing, as the world
recalibrates in the aftershock of COVID-19 and consumers move away
from brands which offer little value. Whilst the route to
improvement is not consistently upward and in a straight line, I
have no doubt that the rewards for shareholders looking at the long
term, will be significant."
For further information, please contact:
Accrol Group Holdings plc
Dan Wright, Executive Chairman Via Belvedere Communications
Gareth Jenkins, Chief Executive Officer
Zeus Capital Limited (Nominated Adviser
& Broker)
Dan Bate / Jordan Warburton Tel: +44 (0) 161 831 1512
Dominic King / John Goold 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
Llew Angus Tel: +44 (0) 7407 023 147
accrolpr@belvederepr.com
Notes to Editors
Accrol Group Holdings plc, based in Lancashire, is a leading
tissue converter and supplier of toilet tissues, kitchen rolls and
facial tissues, as well as other tissue products, to major
discounters and grocery retailers throughout the UK. The business
operates from four sites in Lancashire:
-- A manufacturing, storage, and distribution facility in Blackburn;
-- A storage and administrative centre in Blackburn;
-- A facial tissue plant, also in Blackburn; and
-- A manufacturing, storage, and distribution facility in Leyland.
For more information, please visit www.accrol.com .
CHAIRMAN'S STATEMENT
The team at Accrol has delivered a strong set of results,
demonstrating an improving performance as the year progressed and
the successful turnaround was concluded. Margins have continued to
recover to historical levels, delivering Adjusted EBITDA for the
year, after the adoption of IFRS 16, of GBP10.6m, comfortably ahead
of consensus market expectations.
Core revenue continued to strengthen, reaching a record level of
GBP133.6m, and the Group exited FY20 with incrementally improving
run rates. The Group increased its share of the total tissue market
during the year by circa 6.5% from 12.3% to 13.1%, with the total
market growing at 7.7% in the Period. We believe the consumer push
for value will be boosted in the COVID-19 shake-out, as consumers
seek greater value, as demonstrated in the last recession which
prompted a significant move away from higher cost brands.
As the full benefits of the turnaround and the simplification of
the business drop to the bottom line, we are able to turn our
attention to strengthening and broadening the business further, to
create a diversified business of size and scale, which delivers
substantial shareholder returns. Our relentless drive for
efficiency, however, is unabated and we will continue to set
ourselves challenging improvement targets to ensure that the
business never again becomes complacent.
Results
Total revenue in FY20 was c.GBP134.8m, with core revenues
increasing by 14.5% to GBP133.6m (FY19: GBP116.7m), compared with
overall market growth of circa 8%. Gross margin improved by 49% to
21.9% (FY19 14.7%). Adjusted EBITDA, following the adoption of IFRS
16 as detailed in the Financial Review, was GBP10.6m (GBP8.3m
pre-IFRS 16). Adjusted net debt continued to reduce ahead of market
expectations, ending the Period at GBP17.9m, compared with GBP24.8m
at 31 October 2019, GBP27.1m at 30 April 2019, and GBP33.8m at 30
April 2018.
New banking arrangements
The Company has recently improved and extended its banking
facilities to August 2023, providing greater accessibility,
flexibility, and headroom for the business, as it pursues its
growth strategy.
Simplify, Strengthen and Grow
Our vision is to build a diversified Group of size and scale,
which is less exposed to input cost fluctuations and is focused on
the broader private label personal hygiene and household products
markets.
Our focus in the year under review was on increasing production
capacity, normalising continuous improvement processes, managing
foreign exchange challenges, growing both new and existing
customers and preparing for the switch to a new IT system, which
went live in July 2020 and has transitioned successfully. The
considerable achievements of our outstanding team are detailed in
the CEO's Review, but it is important to note that each of these
actions, which were completed on budget and to timetable, have
strengthened the business and pave the way for the next stage of
Accrol's growth.
Our focus going forward is to increase capacity and diversify
the business. We have a five-year road map in place, which covers
our people, the markets in which we intend to compete, the
operational excellence standards we have set and expect, the
responsibility and actions we are taking in our environment and the
future-perfect vision we have for the Group. Details of the plan
are available in the FY20 Investor Presentation on the Group's
website www.accrol.com and in our Annual Report, which will be
posted to shareholders in late September. We believe that the
personal hygiene and household products markets presents exciting
growth opportunities. It is currently dominated by branded
products, with a high price to value ratio, and we have identified
significant potential to extend our consumer value philosophy to
all essential, daily-use tissue products.
Within our existing market there are further opportunities to
increase our market share, through greater penetration of the
luxury tissue segment. We have already made good progress on this,
supported by the strength of our relationships with existing
customers, coupled with successful R&D in tissue material and
processes.
We are confident that we can successfully expand in these areas
through a mix of R&D and selective acquisition.
Dividend
Whilst the Board is not proposing a final dividend for FY20,
should the Group's improving financial performance continue on its
current and expected trajectory the recommencement of dividend
payments is likely in the medium term.
Our people
People are key to us achieving our ambitions, and, during the
year, we have continued to strengthen the team below senior
management, adding further strength in depth, and increasing skill
levels across the Group. It is our intention to strengthen the
senior team further in the near-term, with the appointment of a
Chief Financial Officer to the Board.
We value all our people and strive to demonstrate this in
actions rather than words. As part of the turnaround process, wage
levels have been improving throughout the business. At 30 April
2018, the percentage of employees on or above the Real Living Wage,
as defined by the Living Wage Foundation, was just 35%. By 30 April
2020, this had risen to 94% and our intention is to reach 100% by
October 2020.
As automation of the business progresses, higher skills will be
required. We are building a highly capable workforce and plan to
implement a new grading structure later in the year, which will
clearly define responsibility, skills and reward and provides a
highly visible career path within the Group to attract and retain
more skilled and talented people.
COVID-19
The management team took rapid and timely steps to protect the
Group's people and the business in February, as information began
to flow through from China and Europe:
-- All at risk employees were self-isolated at home from 20
February 2020;
-- Social distancing was implemented for factory-based employees;
-- Increased cleansing facilities and protocols were established
across all sites;
-- All office-based staff were moved to working from home at
lockdown; and
-- Temperature checks and questionnaires are completed at every
entry point.
I would like to take this opportunity to thank all my colleagues
across the business for their unremitting hard work and commitment.
They have performed exceptionally throughout the COVID-19 crisis
and delivered against particularly demanding schedules created by
panic buying during the early stages of the lockdown period.
We are not complacent and remain highly vigilant, reviewing and
updating our strict COVID-19 procedures daily to ensure the ongoing
health of our team and the business. The confidence of the
organisation continues to flourish under the strong leadership of
our senior management team and its clear focus. I very much look
forward to working with the whole team as we enter an exciting
growth phase of our development.
Environmental, Social and Governance ("ESG")
Whilst there is increasing governmental, investor and media
attention on ESG, I am proud to say that ESG is genuinely important
to us at Accrol. It is an integral part of our improvement
programme and has been a key element since the early days of the
turnaround. We believe that protecting the environment is an
essential driver in our business and we consider it our duty to
ensure that our environmental impact is reduced year on year. It is
our intention to source all the energy needed for our sites from
renewables in the short to mid-term, as we continue our drive
towards zero emissions. We are also exploring an opportunity to
substantially reduce our transport requirements, which impact our
carbon footprint significantly.
Equally important is creating a sustainable, skilled workforce.
Despite the financial challenges which have faced the business
during the turnaround, we have never lost our focus on our people
and have made significant improvements on job security and
remuneration. There is, undoubtedly, more to do but the recent
results from our Employee Engagement Survey show outstanding levels
of engagement once again, with 91% of employees stating they are
proud to work for Accrol. In this year's Annual Report, we will
address the Gender Pay Gap performance of our business.
Interestingly, this shows that women at Accrol are paid more on
average. While this may seem pleasing on the surface, our aim is to
ensure underlying equality in the results.
We are proud of what we have achieved so far, but our culture is
for relentless improvement, which applies to all aspects of the
business. I look forward to reporting on our progress next
year.
FCA investigation closed
As reported on 20 January 2020, the Company was notified by the
FCA that it had closed its investigation and was not taking any
action. Further details are in Note 5 to the accounts.
Current Trading and Outlook
The Group entered the new financial year in a stronger position
than ever before. We are looking to the future with confidence, as
we build on the firm foundations created during the turnaround, to
build a larger and sustainable growth business in a rapidly
expanding market.
We have already successfully broadened our customer base, and
this is expected to continue over the next 12 months to include the
vast majority of major UK grocery retailers. Accrol remains unique
with its broad customer base in its ability to benefit across all
revenue streams wherever they materialise.
The Group continues to perform well and is on track to meet
market expectations for FY21, despite some fluctuations in consumer
shopping habits creating a short-term reduction in discounter
volumes in Q1 FY21, as detailed in the CEO's Review. Whilst mindful
of the ongoing risks of COVID-19, the Board is confident in the
prospects for the Group and its ability to capitalise on
opportunities in both its core markets, and the wider new personal
hygiene and household sector.
Dan Wright
Executive Chairman
2 September 2020
CHIEF EXECUTIVE OFFICER'S REVIEW
The turnaround of the business was completed during the year
under review and the organisation is in a much stronger position.
Through simplification and a clarity of focus in all aspects of the
Group, over the last two years, we have reduced administration and
distribution expenses by 37% from GBP47.9m to GBP30.3m, increased
gross margins by 49% (14.7% to 21.9%), grown core revenue by 15.9%,
from GBP115.3m to GBP133.6m, and almost halved adjusted net debt
from GBP33.8m down to GBP17.9m.
To be very clear, however, the leadership of the Group considers
this position to be the new start point: it gives the business good
foundations on which to build upon. Whilst it is an outstanding
improvement over a short period of time, and one of which the team
can be proud, there is always more to do. Whilst returns are
substantially better, they do not yet meet the expectations of the
Board or leadership team. The management's attention is now focused
on building a more diversified business, of size and scale, that
delivers significant consumer benefits through the supply of
great-value products, producing returns for shareholders in the top
quartile of any competitor in the wider household and personal
hygiene sectors.
The relentless drive for increasing efficiency throughout the
organisation will never cease. Over the first quarter of FY21, a
new IT system has successfully fulfilled the business' needs in
every area from finance, procurement, operations and stock
management. By the end of H1 FY21, the Blackburn tissue plant will
be fully automated, with robotization replacing all manual finished
goods movements, enabling us to reduce headcount to 310 in H2 FY21,
compared to a peak of 689 people in 2017.
Strategy - Brand Killers
Our growth strategy is simple: take market share from
established brands by providing consumers with the best-value
products and our customers with great service, whilst ensuring we
are the lowest cost operator.
Market overview
Whilst our business, thankfully, was largely unaffected by the
COVID-19 restrictions, because of timely social distancing actions,
demand for tissue products in our market rose rapidly in the early
stages of the lockdown. Accrol's sales benefitted slightly (up by
c.GBP3m) from this unprecedented rise in demand. However, we were
unable to capitalise further due to the strict controls we place on
stock levels. Our business operates primarily on a just in time
basis and, whilst we operated >100% capacity by making
short-term changes to get product on shelves during this unusual
period, the majority of demand for toilet tissue during this period
was satisfied by the brand manufacturers, who hold higher levels of
stock.
The combination of availability during the panic-buying period
and vastly increased promotional activity from the brands, created
a reduction in private label's share of the market for the first
time in 10 years, from 50.4% (52Weekly Average 2019) to 49% (52WA
20). The leading brands market share grew over the same period from
29.8% to 31%. Volume sold on promotion for the brands rose from 59%
to 80% (Source: IRI data). It is pleasing to note that Accrol's
toilet tissue sales grew by 21% in this Period and gross margin
increased by 49%. The promotional activity of brands in response to
the 10-year upward growth trend in private label products is not
unusual, as evidenced in other markets, as they try to address the
move of consumers to better-value products.
The short-term rise in demand for toilet tissue in Q4 has
unwound, with equal decline in volumes across the sector in the
first quarter of FY21. I am pleased to report that, as consumer
activity has normalised, sales returned to pre-lockdown levels as
we entered Q2 FY21. Notably, the Group has continued to deliver
further margin improvements throughout the new financial year to
date.
Customers
The fact that the Group has grown sales by 14.5%, increasing its
total tissue market share by 6.5% to 13.1% (to end April 20), shows
that our strategy of delivering great-value products with great
service is winning. The widening range of customers also ensured
that the Group has grown throughout FY20.
Over this time, we have secured UK exclusivity of a super-soft
tissue product, which has been produced using the latest machine
technology and which has come on stream in FY20. This constant
drive to source the latest, most advance materials has helped drive
growth and improve the margins for business.
The Group continues to win further new business and extend its
customer base. We have a very clear intention to increase our
customer base to include all major retailers in the UK. The recent
pandemic has highlighted the limitations of sole supply
arrangements for the consistent supply of significant volumes. I
believe that Accrol is well positioned to benefit from new
opportunities which arise, as retailers seek to resolve this
issue.
Pricing will always be a sensitive issue for all parties, but
what is clear is that delivering great products which add value
compared to the market command increasing margins. The Group's
gross margins over the period (FY19 to FY20) have improved by 49%
(14.7% to 21.9%). What is pleasing is that this improving-trend has
continued into the new financial year.
Suppliers
Throughout FY20, we continued to simplify our tissue types
further, with the Group now purchasing six major tissue types, down
from 12 at the end of FY19 and 75 in FY18. This programme of
relentless operational improvement has enabled the Group to drive
the quality and consistency of its supply to the high levels now
demanded to ensure the business has confidence that the quality of
its product consistently outperforms the market.
The Group continues to explore new supply options, as further
tissue mills are due to come on stream in FY21. Furthermore, Accrol
is exploring the merits of paper mill ownership in line with its
lowest cost operational efficient philosophy.
What is clear is that our simplification programme has delivered
significant cost reduction across the supply base, but the approach
requires a relentless attitude to the review of costs at all
times.
Operations
Significant operational progress has been delivered during the
year. Our external supply chains have been strengthened and
optimised, by working more closely with our chosen strategic
partners, and strong growth in production efficiencies have been
delivered across the business. A combination of improving reliable
capacity, through more proactive preventative maintenance, targeted
employee training, and a simplified planning cycle have delivered
fewer changeovers and less downtime. This increased average
efficiency by 22.8% (Q1 average to Q4 average FY20) and by 36.9%
over the two year cycle (Q1 FY18 to Q4 FY20), with average
efficiency being measured as pallets produced per day. Over this
same period, headcount reduced from a high of 691 to 410, with
output per head increasing by 243%.
The Group's shift patterns and working practices have been
reviewed and changed, generating ongoing cost savings throughout
the year which have helped drive the reduction in operating costs
achieved in FY20. Preparations are in place for a major investment
in further automation, which will transform a significant
proportion of the manufacturing footprint during the last quarter
of 2020.
Our people are key to our success and we continue to focus on
recruiting and promoting talented leaders, who are aligned with our
values, high standards and behavioural expectations. A flat
organisational structure, combined with capable leadership and
highly engaged employees, has ensured that throughout the height of
the COVID-19 situation, the performance of the business excelled
beyond expectations. The strength and depth of our culture and our
employees' commitment to the business have shone through, which is
very encouraging for the next phase of Accrol's growth. I reiterate
Dan's thanks to the whole team for continuing to demonstrate their
grit and ability under exceptional circumstances.
New systems
We invested GBP2.6m in infrastructure and systems during the
year. Planning for our new Warehouse Management System, HR system
and NetSuite Business system commenced early in the Period and are
now successfully implemented. The Group has also made significant
IT infrastructure changes to improve the resilience and security of
all Accrol systems. I am pleased to report that the transition to
four new operating systems has gone to plan in cost and timing.
IT and Systems are a key part of the infrastructure for growth,
which we have been putting in place over the last 12 months. The
Group now has full sight of all elements of the operational
process, giving our management and leadership groups across the
organisation the information required to make further improvements
throughout the business.
People and culture
Our Company values remain at the core of everything the business
does - we challenge, we are honest, we add value and we deliver.
Accrol's business model is unashamedly based on being the lowest
cost producer in the marketplace. However, this is not at the
expense of our employees' welfare or their ability to grow within
the organisation. The leadership of the business realises that in a
highly cost-conscious environment, the quality, capability and
performance of team members is absolutely critical. During FY20,
the Group has introduced several employee welfare benefits,
including an improved sick pay scheme, a life assurance scheme for
every employee, an employee assistance scheme, a baseline medical
process for all employees and a physiotherapy service.
As well as the ongoing development of specific employees, as
they are promoted within Accrol, the business has also developed a
new grading structure, which is currently in the roll-out phase.
This gives every employee in the business a clear growth path,
which is supported by a training programme. We see this, along with
a strong and positive culture, as a core requirement for talent
retention and recruitment.
Health and safety / COVID-19
Health and Safety is a business fundamental for Accrol and this
remains top of our agenda. During FY20, the business, after a
number of years of investing in fixing safety infrastructure, was
able to shift focus onto behavioural safety. This means we are
taking a more proactive, preventative approach to hazard
identification and rectification, prior to any issues occurring.
This has been embraced by the workforce and the response levels, in
terms of behavioural safety cards, have been impressive. There is
opportunity for further improvement, with the Group having recorded
five LTA's in the year, which is unchanged from FY19. However, the
focus and desire to improve is strong and will not diminish. The
level of focus and commitment from everyone in this business,
aligned with the depth of employee engagement, gives leadership
real confidence that continued improvement is assured.
Accrol was identified as an essential business within the
COVID-19 lockdown. The short-term spike in demand for toilet tissue
products in the early stages pre/post lockdown measures, outlined
above, presented challenges, in terms of gearing up production.
However, the more significant challenge was to ensure the safety of
our employees during this period, both in and outside of work. The
leadership of the business continues to have daily COVID-19 calls
and we have invested heavily in proactive measures to ensure that
the business can run at unusually high levels of productivity,
whilst ensuring any risk to our employees is minimal.
The achievements of the whole Accrol team throughout this period
have been humbling. Employees have adhered to the measures the
business has put in place; they have continued to work throughout
the whole period without question; and, when issues have arisen,
they have reacted positively and swiftly, taking tests through our
track and trace process and getting back to work as quickly as
possible. The Accrol leadership is very proud of the way our
employees have conducted themselves throughout the crisis, and we
thank them for their commitment and professionalism.
Outlook
The outlook for the business is a positive one, as we build on
the strong foundations put in place over the last 18 months. The
opportunity to increase our share in our core markets remains
significant. Whilst we continue to supply great-value products with
excellent service in this market, we are actively exploring
opportunities to scale the core business, as well as to diversify
into new markets and products, currently serviced by brands, where
we know our better-value offering will appeal to the consumer.
Volumes across the private label sector were impacted in Q1
FY21, as panic buying unwound. However, the Group's margins
increased ahead of our expectations in this period, as our product
mix has improved. Consumer shopping habits have normalised in Q2,
with private label sales bouncing back to pre-COVID levels. All
discounters are expected to address online shopping service
capability over the next 12 months, and the medium to long term
outlook for volumes in this market remains strong, with significant
expansion plans being accelerated, as the UK economy adjusts.
Our relentless approach to cost and value does not mean we
embrace a minimum wage culture. Good people are at the heart of a
successful business and we will continue to develop highly engaged,
skilled and appropriately paid employees, through training,
automation and efficiency. The sustainability of the business is
also paramount, and we will continue to seek new ways to fulfil
consumer and customer needs, whilst minimising the Group's
environmental impact.
With only 13% of the total UK tissue market and a strong
infrastructure for growth taking shape, Accrol is increasingly well
positioned to benefit in a value-conscious, post COVID-19 world. We
will continue to invest in our people, automation and our impact on
the environment to ensure the sustainability of the business
throughout its planned growth. With all this in mind, I view the
future of the business with increasing confidence.
Gareth Jenkins
Chief Executive Officer
2 September 2020
GROUP FINANCIAL REVIEW
Summary
This has been a year of significant financial improvement, with
greatly improved revenue and gross margin, due to continued work on
productivity and base operating cost. We have maintained our
efforts on reducing administration expenses and have tightly
managed distribution costs. These improvements have been
underpinned with investment in our new systems and operating
practices, removing unnecessary waste and enhancing our customer
service.
The net result of these improvements was an adjusted EBITDA of
GBP10.6m (GBP8.3m on a pre-IFRS16 basis), a GBP9.6m improvement on
the prior year, and bringing the business to breakeven at operating
profit level. This represents an improvement of GBP12.6m on the
prior year, as turnaround actions significantly improved exit run
rates in the second half.
Net working capital also improved significantly to GBP6.1m, a
GBP12.2m improvement on prior year, and a demonstration of improved
inventory management and debtor terms alongside strong creditor
terms all reflecting improvements within the businesses operating
model.
Basis of reporting
In these financial statements the Group has, with effect from 1
May 2019, adopted IFRS 16. Under the new standard, the distinction
between operating and finance leases has been removed and most
leases have been brought onto the statement of financial position,
as both a right-of-use asset and a largely offsetting lease
liability. The introduction of this standard has had no impact on
cashflow. The Group adopted IFRS 16 using the modified
retrospective transition approach, with the impact of GBP0.3m
reflected in retained earnings. The prior year financial
information has not been restated. The effects of IFRS 16 can be
found in note 2.
Income statement
2020 2019
GBP'000 GBP'000
Revenue 134,773 119,111
Cost of sales (105,239) (101,559)
---------- ----------
Gross profit 29,534 17,552
Administration expenses (18,810) (19,228)
Distribution costs (11,490) (11,066)
Other income 585 -
---------- ----------
Operating loss (181) (12,742)
Net finance costs (1,710) (1,276)
---------- ----------
Loss before tax (1,891) (14,018)
Tax credit 312 2,270
---------- ----------
Loss for the year attributable to equity
shareholders (1,579) (11,748)
---------- ----------
Loss per share (0.8)p (6.2)p
Basic (0.8)p (6.2)p
Diluted
Operating loss (181) (12,742)
Adjusted for:
Depreciation 4,201 2,488
Amortisation 2,040 2,040
Share based payment 2,351 1,316
Separately disclosed items 2,230 7,906
---------- ----------
Adjusted EBITDA(2) 10,641 1,008
---------- ----------
Revenue
Revenue grew organically by 13.2% to GBP134.8m, by following our
clear strategy to remove lower margin revenues and focus on our
core product base. This optimised output and productivity in the
plants and delivered high levels of customer service. Toilet tissue
revenues grew by 22% in a market in which private label declined by
2%, whilst the total toilet tissue market grew by c.8%,
representing an increase in our market share from 12.5% to 13.1%;
alongside which facial tissue revenue grew by 5% and kitchen towel
fell back by 9%, as we exited some low margin work and focused the
business on higher value lines which will positively impact the
business in FY21.
Revenue by product 2020 2019 Variance Variance
GBPm GBPm GBPm %
------ ------ --------- ---------
Toilet tissue 103.1 84.8 18.3 22%
Kitchen towel 20.1 22.0 (1.9) (9%)
Facial tissue 10.4 9.9 0.5 5%
------ ------ --------- ---------
Core revenue 133.6 116.7 16.9 15%
Away from Home 0.0 1.5 (1.5) (100%)
Other (waste) 1.2 0.9 0.3 33%
------ ------ --------- ---------
Total Revenue 134.8 119.1 15.7 13%
------ ------ --------- ---------
Gross margin
Gross margin improved from 14.7% to 21.9%, reflecting our focus
on productivity and optimisation of the production lines
underpinned by investment in our core production capabilities to
bring them back to optimum operating standards.
Administration Expenses
Administration expenses reduced, again, to 14.0% of revenue
(FY19: 16.1%), an absolute reduction of GBP0.4m year on year.
Foreign exchange charges within administration expenses amounted
to GBP1.2m (2019: GBP0.1m), of which GBP0.6m are the result of
losses on contracts for USD exchange no longer required as the
business continued to improve supplier payment terms.
The implementation of IFRS16 created an additional depreciation
charge of GBP2.3m, broadly offset by reduction in the rental
charges in the year.
Distribution costs
Distribution costs reduced from 9.3% of revenue in FY19 to 8.5%,
an absolute increase of GBP0.4m year on year, reflecting the
ongoing focus on optimising the movement of stock and product
through the business.
Separately disclosed items
Separately disclosed items reduced significantly from GBP7.9m in
FY19 to GBP2.2m, reflecting the completion of the stabilising
period. These costs included final turnaround costs of GBP1.0m,
comprising operational and management reorganisation, operational
improvements and cost reductions, and GBP0.6m relating to
termination costs of foreign currency contracts no longer
required.
The FCA investigation closed in the year. Costs amounted to
GBP0.1m in the year, with no further costs anticipated.
Other income
Other income relates to the disposal of fixed assets in the
normal course of operating business, delivering a gain of GBP0.6m.
In future periods we anticipate ongoing disposals of fixed assets
as part of normal operating business to enable deployment of new
machine technologies.
Net finance costs and taxation
Finance costs increased from GBP1.3m in FY19 to GBP1.7m,
reflecting an increase in lease costs in the year of GBP0.5m,
following the adoption of IFRS 16.
The Group recorded a deferred tax credit of GBP0.3m in the year
(FY19: GBP2.3m).
Balance sheet
Property, plant and equipment
Property, plant and equipment increased due to a number of
investments to enhance the productivity and efficiency of our core
machinery park, infrastructure and systems.
In the machinery park, we have enhanced the reliability and
capacity of our core lines by returning them to an improved OEM
standard or better, extending their useful lives whilst improving
output and up time. In addition, we have enhanced our rewinder
capacity. We have invested GBP3.2m in improving our reliable
capacity over the year.
Significant progress was also made during the year on
enhancements to IT infrastructure and critical business systems.
Implementations of a new Warehouse Management System, HR system and
NetSuite Business system were started during the year. These
started to successfully go live in early 2020 with completion of
all systems by June 2020. Overall, we invested GBP2.5m in
infrastructure and systems during the year.
Intangibles
Intangible assets represent mostly goodwill and customer
relationships. Under IFRS, goodwill is not amortised but is subject
to an impairment review on at least an annual basis. The Directors
performed a review during the period which involved making
assumptions about the future performance of the business. After
carefully considering various scenarios that could occur and after
looking at sensitivities on these scenarios, the Directors
concluded that no impairment was required. However, the position
will be monitored on a regular basis. It is worth noting however
that the profitability of the Group remains sensitive to parent
reel prices and FX rates. Movements in these have, however, been
managed well over the last two years, with increased costs being
passed on to customers as they impact the Group, with significantly
improving success.
During the year, the Group invested in product development to
create two new, innovative products, which have now been launched
to the market, 'Super Soft' and 'Oceans'. Together, they created an
intangible asset of GBP0.8m, which will be amortised over the
anticipated life of the products.
Working capital
2020 2019 Change
GBPm GBPm GBPm
----------------------------- ------- ------- -------
Inventories 9.4 11.2 (1.8)
Trade and other receivables 20.7 23.1 (2.4)
Trade and other payables (24.0) (16.0) (8.0)
----------------------------- ------- ------- -------
6.1 18.3 (12.2)
----------------------------- ------- ------- -------
The Group had great success in managing its working capital
during the year. The fall in inventory level was primarily driven
by raw materials, as a result of improved planning, a further
reduction in tissue types and enhanced procurement processes.
The decrease in receivables reflects improved terms secured from
a number of our customers, the majority of which have also paid
promptly throughout the year, with low levels of default.
Trade payables increased as improved credit terms were offered
across the supplier base.
Borrowings and cash flow
2020 2019 Change
GBPm GBPm GBPm
--------------------------- ------- ------ -------
Revolving credit facility 12.0 12.0 0.0
Factoring facility 11.8 13.7 (1.9)
Leases 18.6 3.6 15.0
Borrowings 42.4 29.3 13.1
Leases receivable (6.4) 0.0 (6.4)
Cash and cash equivalents (8.1) (2.2) (5.9)
--------------------------- ------- ------ -------
Net debt 27.9 27.1 0.8
--------------------------- ------- ------ -------
IFRS 16 adjustment (10.0) (0.0) (10.0)
--------------------------- ------- ------ -------
Adjusted net debt 17.9 27.1 (9.2)
--------------------------- ------- ------ -------
The Group achieved further improvements in adjusted net debt, a
GBP9.2m improvement on the prior year.
There was a GBP19.4m cash inflow from operations in the year
(FY19: GBP5.7m), due largely to the improved trading performance
and management of working capital. At the year end, cash balances
were GBP8.1m (FY19: GBP2.2m) with a further GBP1.0m available
through the factoring facility.
The Group adopted IFRS16 during the year which added GBP16.4m to
year-end lease liabilities and GBP6.4m to leases receivable.
COVID-19
The Group has not furloughed any employees during the COVID-19
situation to date, nor has it been in receipt of any government
loans. It has, however, taken the short-term VAT Payments Deferral
Scheme, which was launched in March 2020. This positively impacted
cash flow during the Period by c.GBP0.2m.
John Pilkington
Group Finance Director
2 September 2020
Consolidated income statement
For year ended 30 April 2020
2020 2019
Note GBP'000 GBP'000
----------------------------------------- ---- --------- ---------
Revenue 4 134,773 119,111
Cost of sales (105,239) (101,559)
----------------------------------------- ---- --------- ---------
Gross profit 29,534 17,552
Administration expenses (18,810) (19,228)
Distribution costs (11,490) (11,066)
Other income 585 -
----------------------------------------- ---- --------- ---------
Operating loss (181) (12,742)
Analysed as:
----------------------------------------- ---- --------- ---------
- Adjusted EBITDA(1) 10,641 1,008
- Depreciation 9 (4,201) (2,488)
- Amortisation of intangible assets 11 (2,040) (2,040)
- Share based payments (2,351) (1,316)
- Separately disclosed items 5 (2,230) (7,906)
----------------------------------------- ---- --------- ---------
Operating loss (181) (12,742)
Finance costs 7 (1,977) (1,276)
Finance income 7 267 -
----------------------------------------- ---- --------- ---------
Loss before tax (1,891) (14,018)
Tax credit 8 312 2,270
----------------------------------------- ---- --------- ---------
Loss for the year attributable to equity
shareholders (1,579) (11,748)
----------------------------------------- ---- --------- ---------
Earnings per share Note pence pence
----------------------- ---- ----- -----
Basic loss per share 6 (0.8) (6.2)
Diluted loss per share 6 (0.8) (6.2)
------------------------- ---- ----- -----
Consolidated Statement of Comprehensive Income
For year ended 30 April 2020
2020 2019
GBP'000 GBP'000
--------------------------------------------------- ------- --------
Loss for the year attributable to equity
shareholders (1,579) (11,748)
Other comprehensive income for the year
Revaluation of derivative financial instruments(2) (50) 50
Tax relating to components of other comprehensive
income 9 (9)
---------------------------------------------------- ------- --------
Total comprehensive loss attributable
to equity shareholders (1,620) (11,707)
---------------------------------------------------- ------- --------
The notes are an integral part of these consolidated financial
statements.
(1) Adjusted EBITDA, which is defined as profit 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).
(2) Items that could potentially be reclassified subsequently
to profit and loss.
Consolidated Statement of Financial Position
As at 30 April 2020
2020 2019
Note GBP'000 GBP'000
--------------------------------- ---- -------- --------
ASSETS
Non-current assets
Property, plant and equipment 9 39,740 29,302
Lease receivables 10 5,703 -
Intangible assets 11 26,877 25,661
Deferred tax assets 8 288 -
----------------------------------- ---- -------- --------
Total non-current assets 72,608 54,963
----------------------------------- ---- -------- --------
Current assets
Inventories 9,373 11,162
Trade and other receivables 20,680 23,057
Current tax asset 40 191
Lease receivables 10 649 -
Cash and cash equivalents 8,147 2,176
Derivative financial instruments 28 50
----------------------------------- ---- -------- --------
Total current assets 38,917 36,636
----------------------------------- ---- -------- --------
Total assets 111,525 91,599
----------------------------------- ---- -------- --------
Current liabilities
Borrowings 12 (18,157) (16,709)
Trade and other payables (23,988) (15,986)
Provisions (158) (571)
Total current liabilities (42,303) (33,266)
----------------------------------- ---- -------- --------
Total assets less current
liabilities 69,222 58,333
----------------------------------- ---- -------- --------
Non-current liabilities
Borrowings 12 (23,827) (11,838)
Deferred tax liabilities 8 - (33)
Provisions (383) (2,140)
----------------------------------- ---- -------- --------
Total non-current liabilities (24,210) (14,011)
----------------------------------- ---- -------- --------
Total liabilities (66,513) (47,277)
----------------------------------- ---- -------- --------
Net assets 45,012 44,322
----------------------------------- ---- -------- --------
Capital and reserves
Share capital 13 195 195
Share premium 68,015 68,015
Hedging reserve - 41
Capital redemption reserve 27 27
Retained earnings (23,225) (23,956)
----------------------------------- ---- -------- --------
Total equity shareholders'
funds 45,012 44,322
----------------------------------- ---- -------- --------
Consolidated Statement of Changes in Equity
For year ended 30 April 2020
Retained
Capital earnings/
Share Share Hedging redemption (accumulated Total
capital premium reserve reserve losses) equity
-------------------------------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- -------- -------- -------- ----------- ------------- --------
Balance at 30 April 2018 129 58,832 - 27 (13,362) 45,626
Comprehensive (expense)/income
Loss for the year - - - - (11,748) (11,748)
Revaluation of derivative
financial instruments - - 50 - - 50
Tax relating to components
of other comprehensive income - - (9) - - (9)
------------------------------- -------- -------- -------- ----------- ------------- --------
Total comprehensive income - - 41 - (11,748) (11,707)
------------------------------- -------- -------- -------- ----------- ------------- --------
Transactions with owners
recognised directly in equity
Proceeds from shares issued 66 9,869 - - - 9,935
Transaction costs - (686) - - - (686)
Share based payments (net
of tax) - - - - 1,154 1,154
------------------------------- -------- -------- -------- ----------- ------------- --------
Total transactions recognised
directly in equity 66 9,183 - - 1,154 10,403
------------------------------- -------- -------- -------- ----------- ------------- --------
Balance at 30 April 2019 195 68,015 41 27 (23,956) 44,322
------------------------------- -------- -------- -------- ----------- ------------- --------
Effect of adoption of IFRS
16 (net of tax) - - - - 314 314
------------------------------- -------- -------- -------- ----------- ------------- --------
Balance at 1 May 2019 195 68,015 41 27 (23,642) 44,636
------------------------------- -------- -------- -------- ----------- ------------- --------
Comprehensive (expense)/income
Loss for the year - - - - (1,579) (1,579)
Revaluation of derivative
financial instruments - - (50) - - (50)
Tax relating to components
of other comprehensive income - - 9 - - 9
------------------------------- -------- -------- -------- ----------- ------------- --------
Total comprehensive income - - (41) - (1,579) (1,620)
------------------------------- -------- -------- -------- ----------- ------------- --------
Transactions with owners
recognised directly in equity
Share based payments (net
of tax) - - - - 1,996 1,996
------------------------------- -------- -------- -------- ----------- ------------- --------
Total transactions recognised
directly in equity - - - - 1,996 1,996
------------------------------- -------- -------- -------- ----------- ------------- --------
Balance at 30 April 2020 195 68,015 - 27 (23,225) 45,012
------------------------------- -------- -------- -------- ----------- ------------- --------
Consolidated Cashflow Statement
For the year ended 30 April 2020
2020 2019
Note GBP'000 GBP'000
------------------------------------------- ---- --------- ---------
Cashflows from operating activities
Operating loss (181) (12,742)
Adjustment for:
Depreciation 9 4,201 2,488
(Profit)/loss on disposal of property,
plant and equipment (585) 117
Amortisation of intangible assets 11 2,040 2,040
Grant income (578) (118)
Separately disclosed items - 340
Share based payments 2,351 1,316
------------------------------------------- ---- --------- ---------
Operating cashflows before movements
in working capital 7,248 (6,559)
Decrease in inventories 1,789 2,554
Decrease in trade and other receivables 2,251 6,929
Increase in trade and other payables 8,176 1,971
Decrease in provisions (254) (501)
Decrease in derivatives 22 (668)
------------------------------------------- ---- --------- ---------
Cash generated from operations 19,232 3,726
Tax received 197 2,006
------------------------------------------- ---- --------- ---------
Net cashflows generated from operating
activities 19,429 5,732
------------------------------------------- ---- --------- ---------
Cashflows from investing activities
Purchase of property, plant and equipment (3,680) (3,581)
Proceeds from sale of property, plant
and equipment 650 358
Purchase of intangible assets (3,256) -
Receipt of capital element of leases 623 -
Lease interest received 267 -
------------------------------------------- ---- --------- ---------
Net cashflows used in investing activities (5,396) (3,223)
------------------------------------------- ---- --------- ---------
Cashflows from financing activities
Proceeds of issue of ordinary shares - 9,935
Cost of raising finance - (686)
Amounts received from factoring facility 161,650 141,352
Amounts paid to factoring facility (163,523) (146,339)
New leases (2019: finance leases) - 142
Repayment of capital element of leases
(2019: finance leases) (4,595) (1,011)
Repayment of bank loans - (3,000)
Transaction costs of RCF - (284)
Lease interest paid (2019: finance lease) (882) (167)
Other interest paid (712) (706)
Net cashflows used in financing activities (8,062) (764)
------------------------------------------- ---- --------- ---------
Net increase in cash and cash equivalents 5,971 1,745
Cash and cash equivalents at beginning
of the year 2,176 431
------------------------------------------- ---- --------- ---------
Cash and cash equivalents at year end 8,147 2,176
------------------------------------------- ---- --------- ---------
Notes to the Consolidated Financial Information
For the year ended 30 April 2020
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 and Accrol Papers 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
The consolidated financial statements of the Group have been
prepared in accordance with International Financial Reporting
Standards ('IFRS') as adopted for use in the EU, IFRS
Interpretation Committee ('IFRIC') interpretations and with those
parts of the Companies Act 2006 applicable to companies reporting
under IFRS.
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.
Application of new standards in the current year
The Group adopted IFRS 16 'Leases' and IFRIC 23 'Uncertainty
over Income Tax Treatments' with a transition date of 1 May 2019.
The Group has chosen not to restate comparatives on adoption of
both standards, and therefore, the revised requirements are not
reflected in the prior year financial statements. Rather, these
changes have been processed at the date of initial application
(i.e. 1 May 2019) and recognised in the opening equity balances.
Details of the impact these two standards have had are given below.
Other new and amended standards and Interpretations issued by the
IASB did not impact the Group as they are either not relevant to
the Group's activities or require accounting which is consistent
with the Group's current accounting policies.
IFRS 16 'Leases'
IFRS 16 introduces a single lessee accounting model, removing
the distinction between operating and finance leases. This results
in almost all leases being recognised on the Statement of Financial
Position as an asset (to recognise the right to use a leased item)
and a financial liability (requirement to make lease payments).
This standard replaced IAS 17 'Leases' and IFRIC 4 'Determining
whether an Arrangement Contains a Lease.' IFRS 16 substantially
carries forward the lessor accounting in IAS 17, with the
distinction between operating leases and finance leases being
retained. The Group also has leasing activities acting as a
lessor.
The Group has adopted IFRS 16 from 1 May 2019 using the modified
retrospective transition approach, under which the cumulative
effect of initial application is recognised in retained earnings at
initial adoption. The comparative information presented for the
period ended 30 April 2019 has not been restated. On transition,
the Group has elected to apply the following practical expedients
permitted by the standard
-- Excluding any operating leases with a remaining lease term
of less than 12 months.
-- Excluding any low value leases (less than GBP5,000).
For periods prior to 1 May 2019, the Group classified its
equipment leases as finance leases. These leases do not transfer
ownership to the Group on completion of the lease liability but are
on terms that transfer substantially all the risks and rewards of
ownership. The Group also holds assets under finance lease where
ownership does transfer on completion of the lease. The accounting
treatment for finance leases is similar to the accounting treatment
for leases under IFRS 16. The carrying amounts of the right-of-use
assets and the lease liabilities on transition at 1 May 2019 were
equal to the carrying amounts of the finance lease assets and
finance lease liabilities recognised at 30 April 2019.
The Group also has a number of property leases, previously
accounted for as operating leases. Under IFRS 16 there is no
distinction between operating and finance leases. As a result, the
operating leases have been remeasured on transition with future
lease payments discounted at the incremental borrowing rate
applicable on 1 May 2019. The weighted average incremental
borrowing rate applied to lease liabilities where a rate is not
included in the lease contract was 4.0%.
The Group accounts as a lessor when accounting for sub-leases.
Under IAS 17, the Group treated such leases as operating leases. On
transition to IFRS 16, the Group recorded a finance lease
receivable, with the corresponding amount netting against the
right-of-use asset arising from the head lease.
The following table presents the impact of adopting IFRS 16 on
the statement of financial position as at 1 May 2019:
30 April
Adjustments 2019 IFRS 16 1 May 2019
GBP'000 GBP'000 GBP'000
------------------------------ ------------ -------- -------- ----------
Assets
Property, Plant & Equipment (1) 29,302 11,002 40,304
Lease receivables (2) - 6,975 6,975
Prepayments and other debtors (3) 2,076 (126) 1,950
Liabilities
Accruals (3) (2,459) 121 (2,338)
Lease liabilities (4) (3,619) (19,518) (23,137)
Provisions (5) (2,711) 1,934 (777)
Deferred Tax (6) (33) (74) (107)
Equity
Retained Earnings (7) (23,956) 314 (23,642)
(1) Property, plant and equipment was adjusted for the creation
of right-of-use assets of GBP11,002,000 relating to operating type
leases.
(2) Asset recognised in respect of sub-leases.
(3) Prepaid and accrued rent at 30 April 2019 adjusted against right-of-use assets
(4) The following table reconciles the minimum lease commitments
disclosed in the Group's 30 April 2019 annual financial statements
to the amount of lease liabilities recognised on 1 May 2019:
1 May 2019
GBP'000
------------------------------------------------------------ ----------
Minimum operating lease commitment at 30 April 2019 22,417
Less: effect of discounting using the incremental borrowing
rate as at the date of initial application (2,899)
----------
Lease liabilities for leases classified as operating
type under IAS 17 19,518
Plus: leases previously classified as finance type
under IAS 17 3,619
----------
Lease liability as at 1 May 2019 23,137
----------
(5) Onerous lease provisions of GBP1,934,000 in respect of
sub-leases, netted against right-of-use assets in the Statement of
Financial Position.
(6) Deferred tax liabilities were adjusted to reflect the tax
effect of the other adjustments recorded.
(7) Retained earnings were adjusted to record the net effect of all other adjustments noted.
The impact on Adjusted EBITDA and Adjusted net debt as at 30
April 2020 is as follows:
GBP'000
------------------------------------ --------
Adjusted EBITDA as reported 10,641
Less: impact of IFRS 16 (2,300)
--------
Adjusted EBITDA (excluding IFRS 16) 8,341
Net debt as reported 27,882
Less: impact of IFRS 16 (10,012)
Adjusted net debt 17,870
--------
IFRIC 23 'Uncertainty over Income Tax Treatments'
IFRIC 23 provides guidance on the accounting for current and
deferred tax liabilities and assets in circumstances in which there
is uncertainty over income tax treatments. The Interpretation
requires:
-- The Group to determine whether uncertain tax treatments
should be considered separately, or together as a group,
based on which approach provides better predictions of the
resolution;
-- The Group to determine if it is probable that the tax authorities
will accept the uncertain tax treatment; and
-- If it is not probable that the uncertain tax treatment will
be accepted, measure the tax uncertainty based on the most
likely amount or expected value, depending on whichever
method better predicts the resolution of the uncertainty.
This measurement is required to be based on the assumption
that each of the tax authorities will examine amounts they
have a right to examine and have full knowledge of all related
information when making those examinations.
Following a review of the standard, the Group concluded that no
adjustment to the Group's Financial Statements were required.
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 following amendments are effective for the
period beginning 1 May 2020:
-- IAS 1 'Presentation of Financial Statements' and IAS 8 'Accounting
Policies, Changes in Accounting Estimates and Errors' (Amendment
- Definition of Material)
-- IFRS 3 'Business Combinations' (Amendment - Definition of
Business)
-- Revised Conceptual Framework for Financial Reporting
The Group is currently assessing the impact of these new
accounting standards and amendments but does not expect there to be
a material impact on the Financial Statements.
There are no other standards that are not yet effective and that
would be expected to have a material impact on the Group in the
current or future reporting periods and on foreseeable future
transactions.
Going concern
The Chairman's review 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. In summary, the Group generated
operating cash of GBP19.4m and reduced adjusted net debt from
GBP27.1m to GBP17.9m. The Directors recognise that as at 30 April
2020, the Group has net current liabilities of GBP3.4m (2019: net
current assets of GBP3.4m). This was considered in conjunction with
the review of future cashflows and available facilities. In August
2020, the Group secured improved bank facilities, which provide
greater accessibility, flexibility and headroom, extended to August
2023. Further details of the borrowing facilities are set out in
note 12.
In determining the appropriate basis of preparation, the impact
of the Covid-19 pandemic has been a major consideration. The Board
has undertaken an assessment of the financial forecasts with
specific consideration to the trading position of the Group in the
context of the current Covid-19 pandemic. Downside sensitivity
analysis was performed on the assumptions around sales volume,
parent reel prices and foreign exchange rate movements. Trading in
the first quarter is in line with expectations and does not
indicate a change to the underlying assumptions.
As in previous years, 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. Brexit is
likely to determine the scale of any foreign exchange risk, but
operational risk is expected to be limited as most purchases are
made from outside Europe, however there is a small risk arising
from administrative complexity at the docks. The Group is reassured
that the principal docks used have sufficient capacity to handle
any issues.
The Directors confirm that, after due consideration, they have a
reasonable expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future. 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.
Separately disclosed items
During the course of the year the Group incurred expenditure
that are 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 costs 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 sole 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. The additional factors of the Covid-19
pandemic and Brexit has increased the variability in this
calculation.
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.
A 1% difference in the borrowing rate used would impact the
right-of-use asset values and net lease liabilities by
cGBP0.2m.
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 analysis by geographical area of destination of the Group's
revenue is set out below:
2020 2019
GBP'000 GBP'000
--------------- ------- -------
United Kingdom 128,078 113,736
Europe 6,695 5,375
------------------ ------- -------
Total 134,773 119,111
------------------ ------- -------
5. Separately disclosed items
2020 2019
GBP'000 GBP'000
------------------------------------------------- ------- -------
Operational reorganisation and restructure 856 872
Loss on derivative financial instruments 639 -
Covid-19 costs 209 -
FCA investigation legal costs 125 179
Management reorganisation and restructure 118 724
Setting up and subsequent exit from Skelmersdale
site 90 3,174
Impairment of property, plant and equipment - 130
Raw materials waste - 2,308
Other 193 519
-------------------------------------------------- ------- -------
2,230 7,906
------------------------------------------------- ------- -------
A summary of the Separately disclosed items for the current year
are as follows.
Operational reorganisation and restructure GBP856,000 (2019:
GBP872,000)
The current year saw the final stages of the complex and
comprehensive turnaround activities completed. This included costs
associated principally with additional labour and material costs,
as legacy performance issues were corrected. The business undertook
a full review of the products the site manufactured and the way it
was planned, an assessment of the leadership capabilities and
reassignment, a skills assessment and training programme,
maintenance regimes and a capital investment plan for key upgrades.
Transportation and storage costs of GBP108,000 were also incurred
in supporting these activities.
Loss on derivative financial instruments GBP639,000 (2019:
GBPnil)
Costs of GBP639,000 were recorded in the period as the business
experienced significant positive changes to its supplier terms as a
result of improved trading / turnaround actions. This happened much
quicker than expected, giving an excess of contract requirements
which were subsequently cancelled.
Covid-19 GBP209,000 (2019: GBPnil)
The Group incurred incremental costs in March and April,
principally relating to overtime and temporary labour of
GBP119,000, to cover employees who were in isolation. Additional
logistics, PPE, cleaning and security costs of GBP90,000 were also
incurred.
FCA investigation legal costs GBP125,000 (2019: GBP179,000)
As previously disclosed, the FCA initiated an investigation into
statements made by the Company between 10 June 2016 and September
2018. Significant consultancy and legal costs associated with the
management of this investigation have been incurred, but the Group
is pleased to confirm that the FCA have closed their investigation
with no action to be taken.
Management reorganisation and restructure GBP118,000 (2019:
GBP724,000)
In the early part of the current financial year, final dual
resourcing and legal costs of GBP118,000 were incurred as
activities relating to financial planning/reporting and
procurement, started in the prior year, were concluded.
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.
2020 2019
GBP'000 GBP'000
----------------------------------------------- ------- --------
Loss for the year attributable to shareholders (1,579) (11,748)
------------------------------------------------ ------- --------
Number Number
Weighted average number of shares '000 '000
------------------------------------------- ------- -------
Issued ordinary shares at 1 May 195,247 129,012
Effect of shares issued in the year - 60,180
-------------------------------------------- ------- -------
Weighted average number of ordinary shares
at 30 April 195,247 189,192
Basic loss per share (pence) (0.8) (6.2)
-------------------------------------------- ------- -------
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.
2020 2019
GBP'000 GBP'000
----------------------------------------------- ------- --------
Loss for the year attributable to shareholders (1,579) (11,748)
------------------------------------------------ ------- --------
Number Number
'000 '000
------------------------------------------- ------- -------
Weighted average number of shares (basic) 195,247 189,192
Effect of conversion of Accrol Group
Holdings plc share options - -
------------------------------------------- ------- -------
Weighted average number of ordinary shares
at 30 April 195,247 189,192
-------------------------------------------- ------- -------
Diluted loss per share (pence) (0.8) (6.2)
-------------------------------------------- ------- -------
No adjustment has been made in 2020 and 2019 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
2020 2019
GBP'000 GBP'000
------------------------------------------------- ------- -------
Bank loans and overdrafts 712 706
Lease interest (2019: finance lease interest)(1) 882 167
Amortisation of finance fees 365 297
Unwind of discount on provisions 18 48
Other interest - 58
-------------------------------------------------- ------- -------
Total finance costs 1,977 1,276
-------------------------------------------------- ------- -------
2020 2019
GBP'000 GBP'000
------------------------- ------- -------
Lease interest income(1) 267 -
Total finance income 267 -
-------------------------- ------- -------
(1) The Group has initially applied IFRS 16 on 1 May 2019, using
the modified retrospective approach. Under this approach,
comparative information is not restated. Applying IFRS 16
in the current year, the Group recorded additional lease
interest costs of GBP723,000 and lease income of GBP267,000.
8. Income tax expense
Tax credited in the income statement
2020 2019
GBP'000 GBP'000
--------------------------------------- ------- -------
Current income tax
Current tax on losses for the year - -
Adjustment in respect of prior periods 6 -
---------------------------------------- ------- -------
Total current income tax credit 6 -
---------------------------------------- ------- -------
Deferred tax
Origination and reversal of temporary
differences 337 2,606
Adjustment in respect of prior periods (14) (175)
Change in tax rate (17) (161)
---------------------------------------- ------- -------
Total deferred tax credit 306 2,270
---------------------------------------- ------- -------
Tax credit in the income statement 312 2,270
---------------------------------------- ------- -------
During the year the Group recognised the following deferred tax
assets/(liabilities):
Accelerated Derivative Share-
capital Intangible financial based
allowances assets instruments Losses payments Other Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- ----------- ---------- ----------- ------- -------- ------- -------
30 April 2018 (1,143) (2,237) 127 901 - - (2,352)
Credit/(charge)
in year (768) 391 (127) 2,524 250 - 2,270
Credit/(charge)
to equity - - (9) - 58 - 49
---------------- ----------- ---------- ----------- ------- -------- ------- -------
30 April 2019 (1,911) (1,846) (9) 3,425 308 - (33)
---------------- ----------- ---------- ----------- ------- -------- ------- -------
Credit/(charge)
in year (88) 212 - (264) 446 - 306
Credit/(charge)
to equity - - 9 - 80 (74) 15
---------------- ----------- ---------- ----------- ------- -------- ------- -------
30 April 2020 (1,999) (1,634) - 3,161 834 (74) 288
---------------- ----------- ---------- ----------- ------- -------- ------- -------
A deferred tax asset of GBP3,161,000 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.
Following an announcement in the Budget on 11 March 2020, which
was substantively enacted on 17 March 2020, the UK corporation tax
rate applicable from 1 April 2020 now remains at 19%, rather than
the previously enacted reduction to 17%. 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 Fixtures Assets
Plant
land & & & Motor under Right-of-
buildings fittings machinery vehicles construction use assets Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- --------- -------- --------- -------- ------------ ---------- -------
Cost
At 30 April 2018 344 1,303 32,041 43 979 - 34,710
Additions - 608 6,640 - 294 - 7,542
Reclassification 101 - 878 - (979) - -
Disposals - - (2,084) (43) - - (2,127)
------------------------- --------- -------- --------- -------- ------------ ---------- -------
At 30 April 2019 445 1,911 37,475 - 294 - 40,125
------------------------- --------- -------- --------- -------- ------------ ---------- -------
Adjustment on
initial application
of IFRS 16 - - (5,619) - - 16,621 11,002
Additions 52 185 383 - 3,060 22 3,702
Reclassification - - - - - -
Disposals - - (5,052) - - (485) (5,537)
------------------------- --------- -------- --------- -------- ------------ ---------- -------
At 30 April 2020 497 2,096 27,187 - 3,354 16,158 49,292
------------------------- --------- -------- --------- -------- ------------ ---------- -------
Accumulated depreciation
At 30 April 2018 96 644 9,208 39 - - 9,987
Charge for the
year 40 354 2,090 4 - - 2,488
Disposals - - (1,609) (43) - - (1,652)
------------------------- --------- -------- --------- -------- ------------ ---------- -------
At 30 April 2019 136 998 9,689 - - - 10,823
Adjustment on
initial application
of IFRS 16 - - (727) - - 727 -
Charge for the
year 42 367 1,012 - - 2,780 4,201
Disposals - - (5,052) - - (420) (5,472)
------------------------- --------- -------- --------- -------- ------------ ---------- -------
At 30 April 2020 178 1,365 4,922 - - 3,087 9,552
------------------------- --------- -------- --------- -------- ------------ ---------- -------
Net book value
At 30 April 2020 319 731 22,265 - 3,354 13,071 39,740
------------------------- --------- -------- --------- -------- ------------ ---------- -------
At 30 April 2019 309 913 27,786 - 294 - 29,302
------------------------- --------- -------- --------- -------- ------------ ---------- -------
The Group has initially applied IFRS 16 on 1 May 2019, which
requires the recognition of right-of-use assets in relation to the
Group's lease liabilities. As a result, on 1 May 2019, the Group
created right-of-use assets of GBP11,002,000 relating to operating
type leases and transferred existing assets with a value of
GBP4,892,000 from plant and machinery to right-of-use assets. The
Group has applied IFRS 16 using the modified retrospective
approach, under which comparative information is not restated.
The depreciation charge for right-of-use assets includes
GBP2,300,000 in respect of operating type leases and GBP480,000 for
assets previously disclosed in plant and machinery.
Assets with a value of GBP39,740,000 (2019: GBP29,302,000) form
part of the security against the RCF as described in note 12.
10. Leases
Leases Receivable
Land &
Buildings Total
GBP'000 GBP'000
-------------------- ---------- -------
At 1 May 2019 6,975 6,975
Interest received 267 267
Lease payments (891) (891)
-------------------- ---------- -------
At 30 April 2020 6,352 6,352
-------------------- ---------- -------
Analysed as:
Receivable > 1 year 5,703 5,703
Receivable < 1 year 649 649
6,352 6,352
-------------------- ---------- -------
Lease liabilities
Plant
Land & &
Buildings Machinery Total
GBP'000 GBP'000 GBP'000
------------------ ---------- ---------- -------
At 1 May 2019 19,518 3,619 23,137
Additions - 22 22
Interest expense 723 159 882
Lease payments (3,877) (1,600) (5,477)
------------------ ---------- ---------- -------
At 30 April 2020 16,364 2,200 18,564
------------------ ---------- ---------- -------
Short-term lease expense for the year was GBPnil. Short-term
lease commitments at 30 April 2020 was GBPnil. Income from
sub-leases for the year totalled GBP267,000.
11. Intangible assets
Customer Development Computer
Goodwill relationships costs software Other Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- --------- ------------- ----------- --------- ------- -------
Cost
At 30 April
2018 14,982 20,427 - - 126 35,535
Additions - - - - - -
--------------- --------- ------------- ----------- --------- ------- -------
At 30 April
2019 14,982 20,427 - - 126 35,535
Additions - - 764 2,492 - 3,256
--------------- --------- ------------- ----------- --------- ------- -------
At 30 April
2020 14,982 20,427 764 2,492 126 38,791
--------------- --------- ------------- ----------- --------- ------- -------
Amortisation
At 30 April
2018 - 7,748 - - 86 7,834
Charge for the
year - 2,040 - - - 2,040
--------------- --------- ------------- ----------- --------- ------- -------
At 30 April
2019 - 9,788 - - 86 9,874
Charge for the
year - 2,040 - - - 2,040
--------------- --------- ------------- ----------- --------- ------- -------
At 30 April
2020 - 11,828 - - 86 11,914
--------------- --------- ------------- ----------- --------- ------- -------
Net book value
At 30 April
2020 14,982 8,599 764 2,492 40 26,877
--------------- --------- ------------- ----------- --------- ------- -------
At 30 April
2019 14,982 10,639 - - 40 25,661
--------------- --------- ------------- ----------- --------- ------- -------
The balance for goodwill and customer relationships arose on the
Group's acquisition of Accrol Holdings Limited and are attributed
to the sole cash-generating unit ('CGU').
The customer relationships are amortised over 10 years, with
approximately four years remaining.
Development costs
During the year, the Group developed two new innovative
products, 'Super Soft' and 'Oceans', both of which have now been
launched to the market. 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 incurred costs in the development
of a new ERP system, a warehouse management system and a HR/payroll
system.
Goodwill
Goodwill is tested for impairment on at least an annual basis,
or more frequently if events or changes in circumstance indicate
that the carrying value may be impaired.
Goodwill is monitored for internal management purposes at the
Group's sole CGU level. 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. Cashflows beyond this
period are extrapolated using the estimated growth rates stated in
the key assumptions. The estimated value in use as at 30 April 2020
exceeds the carrying value by c.GBP38m.
Key assumptions
The pre-tax discount rate used in the value in use calculations
is 14.0% (2019: 14.0%). This is derived from the Group's weighted
average cost of capital and is 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% (2019: 2%).
Significant capital expenditure was incurred in FY20, as the
Group delivered a step change upgrade to its machinery park and
business systems. It is assumed that reduced levels of capital cash
ouflow will be incurred going forward. The Group's share-based
payment charge has been added back to cashflows given they are not
considered a proxy to cash expense.
Management have based these cashflows on a basis which they
believe is achievable. The operational aspects of the complex and
comprehensive turnaround plan are now complete with significant
improvements in business performance. However, the Group's trading
performance remains sensitive to a number of key variables,
including parent reel pricing and the sterling/USD exchange rate,
which could have a significant effect (positive or negative) on the
Group's profitability. Should sterling weaken significantly, profit
recovery would need to be built on price increases. Without price
increases a 1 cent worsening in the sterling/USD exchange rate has
cGBP0.5m impact on operating profit. The Group has also considered
the potential impact of Covid-19 on consumer behaviour and in the
short term believe that it will not have a material impact on
performance. However, this will be closely monitored in the coming
months.
Sensitivity to changes in assumptions
There are a range of reasonably possible changes to the
assumptions, some of which may indicate a potential impairment.
Specifically, detrimental changes to any of the key assumptions on
the discount factor or EBIT performance could cause the carrying
amount to exceed the recoverable amount.
Impairment would be caused by the following: increase in pre-tax
discount rate by 6% or an average EBIT performance reduction of
GBP6m per annum between FY22 and FY25. A combination of increasing
the pre-tax discount rate by 3% and reducing the EBIT performance
by GBP3m per annum 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.
12. Borrowings
2020 2019
GBP'000 GBP'000
--------------------------------- ------- -------
Current
Revolving credit facility 1,636 1,636
Factoring facility 11,817 13,690
Leases (2019: finance leases)(1) 4,704 1,383
---------------------------------- ------- -------
18,157 16,709
--------------------------------- ------- -------
Non-current
Revolving credit facility 9,967 9,602
Leases (2019: finance leases)(1) 13,860 2,236
---------------------------------- ------- -------
23,827 11,838
--------------------------------- ------- -------
(1) The Group has initially applied IFRS 16 at 1 May 2019, using
the modified retrospective approach. Under this approach,
comparative information is not restated.
The changes in liabilities arising from financing activities,
from cash flows and non-cash changes is as follows:
Current Non- current
loans & loans &
borrowings borrowings Total
GBP'000 GBP'000 GBP'000
--------------------------------------- ---------- ------------ -------
At 1 May 2019 16,709 11,838 28,547
Cash flows (8,062) - (8,062)
Non-cash flows:
Lease adjustments (note 2) 3,154 16,364 19,518
New leases 4 18 22
Interest accrued 1,594 - 1,594
Amortisation of finance fees (note
7) - 365 365
Allocation from non-current to current
in the year 4,758 (4,758) -
--------------------------------------- ---------- ------------ -------
At 30 April 2020 18,157 23,827 41,984
--------------------------------------- ---------- ------------ -------
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 2020 are GBP397,000
(2019: GBP762,000).
Finance costs are not included in the loan maturity table
below.
2020 2019
GBP'000 GBP'000
--------------------------- ------- -------
Loan maturity analysis
Within one year 18,521 17,073
Between one and two years 13,351 11,438
Between two and five years 8,072 798
After five years 2,437 -
---------------------------- ------- -------
42,381 29,309
--------------------------- ------- -------
The following amounts remain undrawn and available:
2020 2019
GBP'000 GBP'000
-------------------------- ------- -------
Revolving credit facility - -
Factoring facility 1,012 1,203
--------------------------- ------- -------
1,012 1,203
-------------------------- ------- -------
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")
At 30 April 2020 the Group had drawn GBP12m against the RCF. The
original facility, dated 2 June 2016, was for a period of five
years. In August 2020, the facility was amended, increasing the
facility to GBP17m, expiring in August 2023. The facility requires
repayment of GBP2m on each of 30 April 2022 and 30 April 2023.
Interest charged on the facility is at LIBOR plus a margin of
2.20%-2.95%. 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 and Accrol Papers Limited.
HSBC GBP18m factoring credit facility ("factoring facility")
The Group has a GBP18m multi-currency factoring facility to
provide financing for general working capital requirements. 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 net 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
2020 2019
GBP'000 GBP'000
----------------------------------- ------- -------
Called up, allotted and fully paid
Ordinary shares of GBP0.001 each 195 195
------------------------------------ ------- -------
195 195
----------------------------------- ------- -------
The number of ordinary shares in issue is set out below:
2020 2019
Number Number
--------------------------------- ----------- -----------
Ordinary shares of GBP0.001 each 195,246,536 195,246,536
---------------------------------- ----------- -----------
14. Events after the balance sheet date
Subsequent to the year end, the Group successfully refinanced
its banking facilities, providing greater accessibility,
flexibility and headroom, with a revised maturity date of August
2023.
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.
2020 2019
GBP'000 GBP'000
-------------------------------------- ------- --------
Loss attributable to shareholders (1,579) (11,748)
Adjustment for:
Amortisation 2,040 2,040
Separately disclosed items 2,230 7,906
Share based payments 2,351 1,316
Tax effect of adjustments above (1,258) (2,140)
--------------------------------------- ------- --------
Adjusted earnings/(loss) attributable
to shareholders 3,784 (2,626)
--------------------------------------- ------- --------
Number Number
'000 '000
------------------------------------------ ------- -------
Basic weighted average number of shares 195,246 189,192
Dilutive share options 30,463 -
Diluted weighted average number of shares 225,709 189,192
------------------------------------------- ------- -------
pence pence
------------------------------------ ----- -----
Basic adjusted earnings per share 1.9 (1.4)
Diluted adjusted earnings per share 1.7 (1.4)
------------------------------------- ----- -----
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
The following table reconciles the Group's operating performance
to Adjusted EBITDA. On transition to IFRS 16, the Group adopted the
modified retrospective approach and comparatives are not restated.
To aid comparability to the prior year, an adjustment has been made
to the current year to represent accounting under the previous
standard (IAS 17).
2020 2019
GBP'000 GBP'000
------------------------------------- ------- --------
Adjusted EBITDA
Operating (loss)/profit (181) (12,742)
Adjusted for:
Depreciation 4,201 2,488
Amortisation 2,040 2,040
Separately disclosed items 2,230 7,906
Share based payments 2,351 1,316
-------------------------------------- ------- --------
Adjusted EBITDA 10,641 1,008
-------------------------------------- ------- --------
Less: Adjustment in current year for
IFRS 16 impact (2,300) -
-------------------------------------- ------- --------
Adjusted EBITDA (pre-IFRS 16 basis) 8,341 1,008
-------------------------------------- ------- --------
2020 2019
GBP'000 GBP'000
--------------------------- ------- -------
Adjusted Gross Profit
Gross Profit 29,534 17,552
Adjusted for:
Separately disclosed items 1,008 4,164
---------------------------- ------- -------
Adjusted Gross Profit 30,542 21,716
---------------------------- ------- -------
Revenue 134,773 119,111
Adjusted Gross Margin 22.7% 18.2%
---------------------------- ------- -------
2020 2019
GBP'000 GBP'000
---------------------------------- ------- --------
Adjusted profit/(loss) before tax
Reported (loss) before tax (1,891) (14,018)
Adjusted for:
Amortisation 2,040 2,040
Separately disclosed items 2,230 7,906
Share based payments 2,351 1,316
----------------------------------- ------- --------
Adjusted profit/(loss) before tax 4,730 (2,756)
----------------------------------- ------- --------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR EAPNFEALEEFA
(END) Dow Jones Newswires
September 02, 2020 02:03 ET (06:03 GMT)
Accrol (LSE:ACRL)
Historical Stock Chart
From Apr 2024 to May 2024
Accrol (LSE:ACRL)
Historical Stock Chart
From May 2023 to May 2024