TIDMACRL

RNS Number : 3071L

Accrol Group Holdings PLC

12 January 2021

12 January 2021

The information contained within this announcement is deemed by the Group to constitute inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

Accrol Group Holdings plc

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

HALF YEAR RESULTS

Ongoing improvement in financial returns and restoration of dividend in FY21

Accrol (AIM: ACRL), the UK's leading independent tissue converter, announces its results for the six months ended 31 October 2020 ("H1 21" or the "Period").

Summary of progress

The Group's progress continues with all aspects of the business performing well. Margins are continuing to improve, and further improvements are expected, generating increasingly strong cash flows and reducing net debt at a faster rate than anticipated.

The integration of Leicester Tissue Company ("LTC"), acquired in November 2020 for a total maximum consideration of GBP41.8m, is progressing better than expected and the Board looks forward to providing more details on the positive impact of the acquisition on the Group as the year progresses.

With margins continuing to improve, LTC contributing positively and the business continuing to deliver strong organic growth, the Board is confident that the Group is fully on track to deliver a strong H2 performance and results for FY21 will be at least in line with market expectations.

As a result, the Board is delighted to announce its intention to restore dividend payments earlier than it anticipated and expects to propose a final dividend of no less than 0.5p per ordinary share for the year ending 30 April 2021 ("FY21"). Net debt (pre IFRS 16) 30 April 2021 is expected to be below consensus market forecasts (currently GBP12.2m), even after the intended dividend payment.

As announced in December 2020, Accrol's senior management team has been strengthened further with Richard Newman joining as Chief Financial Officer ("CFO") on 1 February 2021. Richard joins the Group from DS Smith Plc, where he is currently Finance Director for North Europe. The Group now has a leadership team of significant experience, capable of executing an ambitious growth strategy to deliver a diversified business of scale focused on the household and personal hygiene sectors.

 
                                 H1 21       H1 20         H1 19        H1 21 
                                                                           vs 
                                                                        H1 20 
 Reported results 
 Revenue                      GBP62.3m    GBP65.1m   GBP57.6m(1)        -4.3% 
 
 Gross profit                 GBP14.8m    GBP12.8m       GBP6.9m    + GBP2.0m 
 Gross margin                    23.8%       19.7%         12.0%      + 410bp 
 Loss before tax             (GBP0.5m)   (GBP3.0m)     (GBP9.0m)    + GBP2.5m 
 Net debt (pre IFRS 16        GBP18.1m    GBP24.8m      GBP22.6m    + GBP6.7m 
  impact) 
 Net debt (post IFRS 16       GBP26.8m    GBP37.4m             -   + GBP10.6m 
  impact) 
 
 Underlying results 
 Consumer Revenue(2)          GBP62.3m    GBP64.5m      GBP53.9m        -3.4% 
 Adjusted gross profit(3)     GBP15.4m    GBP13.0m       GBP9.9m    + GBP2.4m 
 Adjusted gross margin           24.7%       20.0%         17.2%      + 470bp 
 Adjusted EBITDA(4)            GBP5.4m     GBP3.2m     (GBP1.1m)    + GBP2.2m 
 
 
 (1)   Includes revenue from discontinued "Away From Home" operations 
 (2)   Excludes revenue from discontinued "Away From Home" operations 
 (3)   Defined as gross profit before exceptional items. This is 
        a non-GAAP metric used by management and is not an IFRS 
        disclosure 
 (4)   Defined as profit before finance costs, tax, depreciation, 
        amortisation, share based payments, IFRS 16 changes and 
        exceptional items. This is a non-GAAP metric used by management 
        and is not an IFRS disclosure 
 

H1 21 highlights:

 
 --   All aspects of the business operated safely and successfully 
       throughout the pandemic with no furloughing or government 
       support being accessed in any way 
 --   Adjusted EBITDA increased by 69%, compared with H1 20, with 
       returns improving to 8.7% of Group revenue 
 --   Margin improvement driven by more selective product mix, 
       resulting adjusted gross profit 18% ahead of H1 20 
 --   The Group's share of the total UK tissue market rose by 
       just under 1%* in the Period 
 
 
 *   After adjustment for reduction in brands sold at a discount 
      and the increase in retailer margin during the Period 
 

Post H1 21 highlights:

 
 --   Strategic ambition demonstrated with a successful placing 
       and open offer to fund the acquisition of LTC in November 
       2020 for a total maximum consideration of GBP41.8m: 
      - Well invested modern machine asset base providing transformational 
       step change in Group capacity (now c.GBP220m including facial 
       tissue) 
      - Initial EBITDA multiple paid for LTC will fall from 7.8x 
       to 5.5x, if LTC achieves criteria for payment of maximum 
       deferred consideration 
      - Central UK location provides significant logistic cost 
       advantages for the enlarged group 
 --   Richard Newman appointed as the Group's new CFO from 1 February 
       2021 
 --   Full automation of the Blackburn site delivered on time 
       and to budget, completing the final major operational change 
       at the site 
 

Current trading and outlook:

 
 --   The integration of LTC has begun well with no issues to 
       report and volumes across the Group strengthening further 
       in H2 21 as expected 
 --   Margins and cash generation are continuing to strengthen, 
       as new products are rolled out across the wider customer 
       base 
 --   Net debt reducing at a faster rate than anticipated, as 
       a result of ongoing margin improvement and cash generation, 
       and is expected to be below consensus market expectations 
       for FY21, even after the intended dividend payment 
 --   The Board is confident that the Group is fully on track 
       to deliver FY21 results at least in line with market expectations 
       with the business continuing to deliver strong organic growth 
 --   The Board intends to restore dividend payments and expects 
       to propose a final dividend for FY21 of no less than 0.5p 
       per ordinary share 
 

Dan Wright, Executive Chairman of Accrol, said:

"I am particularly proud of the professionalism, commitment and flexibility our employees have demonstrated, in the face of the many and diverse challenges, both personal and work-related, which have been thrust upon us by the COVID-19 pandemic. Throughout everything, our operations have performed exceptionally well without any disruption to supply.

The margin improvement, that we have continued to deliver in the Period, is a result of our determination to deliver great products, that the consumer wants, on a consistent basis, and builds on our key partnerships. Our strategy to supply the widest possible group of retailers, furthered by our acquisition of LTC in November 2020, gives us the strongest opportunity to grow profitably and deliver double digit EBITDA margins.

In our Final Results for the year ended 30 April 2020, announced in September 2020, we stated that it was our plan to return to dividend payments in the medium term, should the Group's financial performance continue on its current and expected trajectory. We deliver on our promises and, as a result of our relentless drive on operational efficiency and our ability to deliver product innovation the consumer wants to buy, we are announcing our intention to return to dividend payments earlier than expected. Our shareholders, old and new, have been incredibly supportive of our strategy and ambitions and to announce this gives us an enormous amount of satisfaction.

The Group's recent acquisition of LTC and the announcement of a high calibre Chief Financial Officer puts the enlarged business in an even stronger position to grow into adjacent markets and through vertical integration. The expectations and ambitions of the Board and the senior management team are high, and we move into 2021 with confidence."

Gareth Jenkins, Chief Executive Officer of Accrol, said:

"I would like to thank our people for delivering another strong performance, continuing to deliver improvement across every aspect of the business and building further on the achievements of FY20.

Our relentless approach to efficiency remains at the core of everything that we do, and we will continue to deliver margin improvement in all areas of the business. Our team remains focused on delivering great products and great service and we are not afraid to churn the mix of our work further, as we target the leading brands for our growth. Sales to the Group's top four customers have continued to grow and I feel very confident, as the UK emerges from this pandemic, that the growth of the discounters, the private label brands and great value products will accelerate.

The long-term structural growth in the sector is significant and our recent acquisition of LTC, with its outstanding modern machine assets and capabilities, provides a significant opportunity to accelerate the switch to best value products and place increasing pressure on the leading luxury brands.

Our team's capability and ambitions are strong, and we will continue to explore opportunities to deliver yet more value to the consumer and our investors, through acquisition, new product development and vertical integration."

 
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 
 

Overview of Accrol

Accrol Group Holdings plc is a leading tissue converter and supplier of toilet tissues, kitchen rolls and facial tissues to many of the UK's leading discounters and grocery retailers across the UK. Following the recent acquisition of a state-of-the-art tissue converter based in Leicester, the Group now operates from five sites, including four in Lancashire, which generate revenues totalling c.16% of the GBP1.7bn UK retail tissue market.

OPERATIONAL REVIEW

Overview

The Group has continued to build on the progress achieved in FY20, delivering a further sizeable improvement in financial performance in the Period under review and an acceleration of margin growth in the early stages of H2 21.

We focused on keeping our people safe during the pandemic and continue to operate the business without disruption, successfully delivering essential everyday products to fulfil the UK consumer's needs. Accrol has demonstrated that its products are resilient, even in difficult social and economic circumstances, and we will continue to focus on great value everyday essentials, as we pursue our strategy to build a diversified personal hygiene and household products business of scale.

Results

In the six months to 31 October 2020, the Group generated slightly reduced revenue of GBP62.3m (H1 20: GBP64.5m). This was a result of the short-term change in consumer shopping habits, driven by panic buying in March and April 2020 in the first national lockdown. Gross margin, however, rose by 410bp to 23.8% (H1 20: 19.7%), as the drive to deliver higher value products to the consumers accelerated throughout the Period. As a result, Adjusted EBITDA increased by 69% to GBP5.4m (H1 20: GBP3.2m).

Free cashflow improved by GBP5.5m, as cash management and margins continued to improve throughout the Period. Net debt (pre IFRS 16) at 31 October 2020 was GBP18.1m, down substantially from GBP24.8m at 31 October 2020 and GBP27.9m at 30 April 2020. This strong cash flow has continued to accelerate in H2 21. Net debt (pre IFRS 16) at 30 April 2021 is now expected to be below consensus market expectations (currently GBP12.2m) on a like for like basis, a multiple to EBITDA of less than 1x, comfortably beating the Group's medium-term target of less than 2x. With improvements in terms with suppliers and customers and credit insurance continuing to return, the Group's strengthened balance sheet will allow us to continue delivering on our strategy to build a personal hygiene and household products business of scale and accelerate our investment programme as appropriate.

Acquisition of LTC and progress update

The acquisition of LTC, which completed on 25 November 2020 following a successful placing and open offer, added valuable new assets with significant capacity, complementary customers, and substantial synergies across both businesses. Whilst we are only seven weeks in, the integration has progressed incredibly well. With multiple different synergy work streams underway, our team is increasingly confident of delivering cost synergies in excess of GBP1m. A full update on the integration of LTC will be provided no later than May 2021. No issues have been encountered since completion and the positive reaction of customers gives the Group confidence of delivering the revenue expectations already announced.

The initial consideration paid for LTC was GBP35.0 million, representing an enterprise value / FY20 adjusted EBITDA* multiple of 7.8x before synergies and 5.5x when combined with the maximum deferred consideration of GBP6.8m, which is subject to new contract incremental EBITDA contributions of GBP3.1m. Deferred consideration w ill be satisfied in cash and/or by the issue of new Ordinary Shares, at the Group's discretion.

People and the Board

As announced in December 2020, Richard Newman will join the Board on 1 February 2021 as Chief Financial Officer. He is currently with DS Smith where he is Finance Director for North Europe, a c.GBP2billion revenue division. Richard brings an enormous amount of experience to the team and his decision to join Accrol is indicative of the Group's ambitions. We have high expectations for the Group and Richard is clear on how he will help the achievement of those goals. Following this key appointment, the assembled leadership team is now more than capable of running and growing a business of scale, delivering the returns the management expect and shareholders appreciate.

Dividend

At the end of 2017, when the business found itself in an untenable financial position, the Board had no options but to suspend dividend payments. Following a highly complex and successful turnaround of the Group and an acceleration in margin improvements and cash generation, the Board is able to announce its intention to return to dividend payments, and that it expects to propose a final dividend of no less than 0.5p per ordinary share for FY21 in the announcement of the Group's Audited Final Results.

The Board considers a progressive dividend policy to be an important component of shareholder returns. In considering future payments, the Board will be mindful of the Group's earnings growth potential, future expansion plans and leverage. As previously stated, net debt after the dividend payment will be lower than current consensus market expectations for FY21 and FY22 on a like for like basis.

COVID-19 and Brexit

The Board is pleased that the Group is continuing to operate safely, despite the challenges of the pandemic, but remains mindful of the short-term challenges facing the retail sector as new lockdowns are imposed.

Whilst each location in which the Group now operates has been affected by different levels of lockdown, all sites have remained fully operational, as an essential supplier to critical supply chains. In the first quarter, volumes were negatively impacted as the panic buying that positively impacted the Q4 FY20 unwound. During the first national lockdown, branded products saw a short-lived resurgence in market share as the greater stock positions of the major brands fulfilled rising demand with no need for promotional discounting to generate sales. The balance of private label to branded sales has now reverted to the pre-pandemic position with brands now back to +80% on promotion and private label sales taking more than 50% share.

The Group's performance in H1 21 exceeded management expectations, despite incurring a modest amount of exceptional costs related to the additional personal protection measures implemented to ensure the ongoing health and safety of our employees. Whilst there remains some uncertainty in the economic outlook, the Group remains confident in achieving its short-term and medium-term targets. The Board's intention to resume dividend payments highlights the Group's confidence in its improving financial position and future ability to deliver on its business model.

With regard to Brexit, the Group had robust contingency plans for every potential outcome and is well positioned to manage in the new environment. As experienced by many UK businesses in the build up to Brexit, the Group incurred some additional one-off logistics costs. Further one-off costs, relating to logistics, are expected to be minimal, as the Central UK location of our recent acquisition, LTC, will help significantly with the Group's distribution going forward. The Group has a number of supply chains positions in place, outside the European Union, for most of its major materials. In addition, we continue to explore the benefits of vertical integration for a percentage of our material requirements, which will continue to strengthen our supply position and reduce risks further in the medium to long-term.

Environment, Social and Governance ("ESG")

Whilst there is increasing governmental, investor and media attention on ESG, we are proud to say that it is genuinely important to us at Accrol. ESG is an integral part of our relentless improvement programme and has been a key element of our strategy since the early days of the turnaround. We believe that protecting the environment, looking after our employees and our communities, and monitoring our supply chain, whilst ensuring that our business is well managed through a strong governance framework, is the only way to ensure Accrol meets it ambitious growth plans and is sustainable for the long term.

We are in the process of producing our first ESG report, in which we will demonstrate precisely what we are doing and how that benefits both our business and our stakeholders. This report, which we expect to publish soon, will be made readily available to shareholders.

Current trading and outlook

The Board looks to the future with increased confidence but is, of course, mindful that the challenges resulting from the pandemic will remain in the short-term. The enlarged Accrol Group, with its broad range of customers and high added value products, is very well positioned to benefit from the continued growth in the private label sector where every consumer pound spent will be on products that add real value to people's everyday costs. The Group's ability to deliver products which outperform the competition on a quality and value basis gives the Board confidence in delivering its target growth of +8% over the cycle and furthering the demise of the major brands.

With margins continuing to improve and further operational synergies being generated from the integration of LTC, the Board is confident that the Group is fully on track to deliver results for FY21 at least in line with expectations. The longer-term prospects for the enlarged Group remain strong, with further growth in the private label market forecast and a strong pipeline of opportunities identified for additional complementary acquisitions in the household and personal hygiene markets.

The Group will continue to target improvements in its product mix and grow the business with a clear focus on quality revenue, generated through the delivery of excellent products and service.

Gareth Jenkins

Chief Executive Officer

CONSOLIDATED INTERIM INCOME STATEMENT

For six months ended 31 October 2020

 
                                             Unaudited    Unaudited     Audited 
                                            Six months   Six months        Year 
                                              ended 31     ended 31    ended 30 
                                               October      October       April 
                                                  2020         2019        2020 
 Continuing operations               Note      GBP'000      GBP'000     GBP'000 
 
 Revenue                              4         62,306       65,067     134,773 
 Cost of sales                                (47,532)     (52,230)   (105,239) 
----------------------------------  -----  -----------  -----------  ---------- 
 Gross profit                                   14,774       12,837      29,534 
 Administration costs                         (10,221)      (9,481)    (18,810) 
 Distribution costs                            (4,262)      (5,494)    (11,490) 
 Other income                                        -            -         585 
 Group operating profit/(loss)                     291      (2,138)       (181) 
 Finance costs                        7          (794)        (911)     (1,710) 
----------------------------------  -----  -----------  -----------  ---------- 
 Loss before taxation                            (503)      (3,049)     (1,891) 
 Tax credit                           8             94          572         312 
----------------------------------  -----  -----------  -----------  ---------- 
 Loss for the period attributable 
  to equity shareholders                         (409)      (2,477)     (1,579) 
----------------------------------  -----  -----------  -----------  ---------- 
 Loss per share (pence) 
 Basic                                6          (0.2)        (1.3)       (0.8) 
 Diluted                                         (0.2)        (1.3)       (0.8) 
----------------------------------  -----  -----------  -----------  ---------- 
 Group Operating profit/(loss)                     291      (2,138)       (181) 
 Adjusted for: 
 Depreciation & Amortisation                     3,176        3,256       6,241 
 Share based payments                            1,250        1,177       2,351 
 Separately disclosed items           5            649          921       2,230 
 Adjusted EBITDA                                 5,366        3,216      10,641 
----------------------------------  -----  -----------  -----------  ---------- 
 

CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME

For six months ended 31 October 2020

 
                                               Unaudited    Unaudited       Audited 
                                              Six months   Six months 
                                                   ended     ended 31          Year 
                                              31 October      October      ended 30 
                                                    2020         2019    April 2020 
                                                 GBP'000      GBP'000       GBP'000 
 
 Loss for the period attributable 
  to equity shareholders                           (409)      (2,477)       (1,579) 
 Revaluation of derivative financial 
  instruments                                          -        (918)          (50) 
 Tax relating to components of 
  other comprehensive income                           -          175             9 
------------------------------------------  ------------  -----------  ------------ 
 Total comprehensive expense attributable 
  to equity shareholders                           (409)      (3,220)       (1,620) 
------------------------------------------  ------------  -----------  ------------ 
 

CONSOLIDATED INTERIM BALANCE SHEET

For six months ended 31 October 2020

 
                                             Unaudited    Unaudited       Audited 
                                            Six months   Six months 
                                              ended 31     ended 31          Year 
                                               October      October      ended 30 
                                                  2020         2019    April 2020 
                                     Note      GBP'000      GBP'000       GBP'000 
 ASSETS 
 Non-current assets 
 Property, plant and equipment                  43,131       40,899        39,740 
 Intangible assets                              26,754       24,641        26,877 
 Lease receivables                               5,368        6,030         5,703 
 Deferred tax asset                                895          790           288 
----------------------------------  -----  -----------  -----------  ------------ 
 Total non-current assets                       76,148       72,360        72,608 
----------------------------------  -----  -----------  -----------  ------------ 
 
 Current assets 
 Inventories                                    12,831       13,033         9,373 
 Trade and other receivables                    17,550       21,443        20,680 
 Current tax asset                                   -            -            40 
 Lease receivables                                 662          636           649 
 Derivative financial instruments                  203            -            28 
 Cash and cash equivalents                       5,791          282         8,147 
----------------------------------  -----  -----------  -----------  ------------ 
 Total current assets                           37,037       35,384        38,917 
----------------------------------  -----  -----------  -----------  ------------ 
 Total assets                                  113,184      107,744       111,525 
----------------------------------  -----  -----------  -----------  ------------ 
 
 Current liabilities 
 Borrowings                           9       (14,102)     (16,348)      (18,157) 
 Trade and other payables                     (28,531)     (19,823)      (23,988) 
 Provisions                           10         (368)        (155)         (158) 
 Derivative financial instruments                    -        (868)             - 
----------------------------------  -----  -----------  -----------  ------------ 
 Total current liabilities                    (43,001)     (37,194)      (42,303) 
----------------------------------  -----  -----------  -----------  ------------ 
 Total assets less current 
  liabilities                                   70,183       70,550        69,222 
----------------------------------  -----  -----------  -----------  ------------ 
 Non-current liabilities 
 Borrowings                           9       (24,024)     (27,510)      (23,827) 
 Provisions                           10         (186)        (462)         (383) 
 Total non-current liabilities                (24,210)     (27,972)      (24,210) 
----------------------------------  -----  -----------  -----------  ------------ 
 Total liabilities                            (66,806)     (65,166)      (66,513) 
----------------------------------  -----  -----------  -----------  ------------ 
 Net assets                                     45,973       42,588        45,012 
----------------------------------  -----  -----------  -----------  ------------ 
 
 Capital and reserves 
 Share capital                                     195          195           195 
 Share premium                                  68,015       68,015        68,015 
 Hedging reserve                                     -        (702)             - 
 Capital redemption reserve                         27           27            27 
 Retained earnings                            (22,264)     (24,947)      (23,225) 
 Total equity shareholders' funds               45,973       42,588        45,012 
-----------------------------------------  -----------  -----------  ------------ 
 

CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

For six months ended 31 October 2020

 
                                                                          Capital     Retained 
                                      Share       Share     Hedging    redemption    earnings/ 
                                    capital     premium     reserve       reserve    (deficit)     Total 
                                    GBP'000     GBP'000     GBP'000       GBP'000      GBP'000   GBP'000 
 
 Balance at 30 April 
  2020 (audited)                        195      68,015           -            27     (23,225)    45,012 
 Comprehensive income 
 Loss for the period                      -           -           -             -        (409)     (409) 
 Total comprehensive 
  expense                                 -           -           -             -        (409)     (409) 
-------------------------------  ----------  ----------  ----------  ------------  -----------  -------- 
 Transactions with owners 
  recognised directly 
  in equity 
 Share-based payment 
  (inc. tax)                              -           -           -             -        1,370     1,370 
 Total transactions recognised 
  directly in equity                      -           -           -             -        1,370     1,370 
-------------------------------  ----------  ----------  ----------  ------------  -----------  -------- 
 Balance at 31 October 
  2020 (unaudited)                      195      68,015           -            27     (22,264)    45,973 
-------------------------------  ----------  ----------  ----------  ------------  -----------  -------- 
 

CONSOLIDATED INTERIM CASH FLOW STATEMENT

For six months ended 31 October 2020

 
                                                     Unaudited     Unaudited 
                                                    Six months    Six months       Audited 
                                                      ended 31      ended 31          Year 
                                                       October       October      ended 30 
                                           Note           2020          2019    April 2020 
                                                       GBP'000       GBP'000       GBP'000 
 Cash flows from operating activities 
 Operating profit/(loss)                                   291       (2,138)         (181) 
 Adjustment for: 
 Depreciation                                            1,940         2,236         4,201 
 Amortisation of intangible 
  assets                                                 1,236         1,020         2,040 
 Grant income                                                -          (59)         (578) 
 Profit on disposal of fixed 
  assets                                                     -         (598)         (585) 
 Share based payments                                    1,250         1,177         2,351 
------------------------------------------------  ------------  ------------  ------------ 
 Operational cash flows before 
  movements in working capital                           4,717         1,638         7,248 
 
 (Increase)/decrease in inventories                    (3,457)       (1,871)         1,789 
 Decrease in trade and other 
  receivables                                            3,130         1,488         2,251 
 Increase in trade and other 
  payables                                               4,467         3,798         8,176 
 Increase/(decrease) in provisions                          13         (159)         (254) 
 (Increase)/decrease in derivatives                      (175)             -            22 
------------------------------------------------  ------------  ------------  ------------ 
 Cash generated from operations                          8,695         4,894        19,232 
 Tax received                                               40           197           197 
------------------------------------------------  ------------  ------------  ------------ 
 Net cash flows from operating 
  activities                                             8,735         5,091        19,429 
------------------------------------------------  ------------  ------------  ------------ 
 Cash flows from investing activities 
 Purchase of property, plant 
  and equipment                                        (5,331)       (1,397)       (3,680) 
 Proceeds from sale of property, 
  plant and equipment                                        -           598           650 
 Purchase of intangible assets                         (1,114)             -       (3,256) 
 Receipt of capital element 
  of leases                                                321             -           623 
 Lease interest received                                   124             -           267 
 Net cash flows used in investing 
  activities                                           (6,000)         (799)       (5,396) 
------------------------------------------------  ------------  ------------  ------------ 
 Cash flows from financing activities 
 Amounts received from factors                          69,995        76,100       161,650 
 Amounts paid to factors                              (75,221)      (79,631)     (163,523) 
 New finance leases                                        131            22             - 
 Repayment of capital element 
  of finance leases                                    (2,241)       (1,949)       (4,595) 
 Receipt of bank loans                                   3,266             -             - 
 Transaction costs of bank facility                      (306)             -             - 
 Interest paid                                           (715)         (728)       (1,594) 
------------------------------------------------  ------------  ------------  ------------ 
 
   Net cash flows used in financing 
   activities                                          (5,091)       (6,186)       (8,062) 
------------------------------------------------  ------------  ------------  ------------ 
 Net (decrease) / increase in 
  cash and cash equivalents                            (2,356)       (1,894)         5,971 
 Cash and cash equivalents at 
  beginning of the period                                8,147         2,176         2,176 
------------------------------------------------  ------------  ------------  ------------ 
 Cash and cash equivalents at 
  period end                                             5,791           282         8,147 
------------------------------------------------  ------------  ------------  ------------ 
 

The notes below form part of these condensed interim financial statements.

NOTES TO THE INTERIM FINANCIAL STATEMENTS

For six months ended 31 October 2020

   1.      General Information 

Accrol Group Holdings plc (the "Company") and its subsidiaries (together "the Group") is incorporated in the United Kingdom with company number 09019496.

The registered address of the Company is the Delta Building, Roman Road, Blackburn, United Kingdom, BB1 2LD.

The Company's shares are quoted on the Alternative Investment Market.

The principal activity of the Company and its subsidiaries (together the 'Group') is soft paper tissue conversion.

The condensed consolidated interim financial information was approved and authorised for issue by a duly appointed and authorised committee of the Board of Directors on 12 January 2021.

This condensed interim financial information has not been audited or reviewed by the Company's auditor.

Forward looking statements

Certain statements in this results announcement are forward looking. The terms "expect", "anticipate", "should be", "will be" and similar expressions identify forward-looking statements. Although the Board of Directors believes that the expectations reflected in these forward-looking statements are reasonable, such statements are subject to a number of risks and uncertainties and events could differ materially from these expressed or implied by these forward-looking statements.

   2.      Basis of preparation 

This condensed consolidated interim financial information for the six months ended 31 October 2020 should be read in conjunction with the Group's Annual Report and Accounts for the year ended 30 April 2020, prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted by the EU ('Adopted IFRSs'), IFRIC Interpretations and the Companies Act 2006.

The interim financial statements included in this report are not audited and do not constitute statutory accounts within the meaning of the Companies Act 2006. The Annual Report and accounts for the year ended 30 April 2020 have been filed with Companies House. The Group's auditor, BDO LLP have reported on those accounts and their report was unqualified.

The interim financial statements have been prepared on a going concern basis and on the historical cost convention modified for the revaluation of certain financial instruments.

In assessing the Group's ability to continue as a going concern, the Board has reviewed the Group's cash flow and profit forecasts. The impact of potential risks and related sensitivities to the forecasts were considered, whilst assessing the available mitigating actions.

The Group's performance is dependent on a number of market and macroeconomic factors particularly the sensitivity to the price of parent reels and the sterling/USD exchange rate which are inherently difficult to predict. 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 outside of 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 Board has formed a judgement that there is reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, the going concern basis has been adopted in preparing the interim financial statements.

   3.      Accounting Policies 

The accounting policies applied in preparing the unaudited interim financial statements are consistent with those used in preparing the statutory financial statements for the year ended 30 April 2020 as set out in the Group's Annual Report and Accounts.

   4.      Revenue 

The Group has one type of revenue and class of business.

The analysis of geographical area of destination of the Group's revenue is set out below:

 
                    Unaudited    Unaudited       Audited 
                   Six months   Six months 
                     ended 31     ended 31          Year 
                      October      October      ended 30 
                         2020         2019    April 2020 
                      GBP'000      GBP'000       GBP'000 
 United Kingdom        57,874       61,722       128,078 
 Europe                 4,432        3,345         6,695 
----------------  -----------  -----------  ------------ 
 Total                 62,306       65,067       134,773 
----------------  -----------  -----------  ------------ 
 
   5.      Separately disclosed items 
 
                                      Unaudited    Unaudited       Audited 
                                                  Six months 
                                     Six months     ended 31          Year 
                                       ended 31      October      ended 30 
                                   October 2020         2019    April 2020 
                                        GBP'000      GBP'000       GBP'000 
 
 Operational restructure                    327            -           856 
 COVID-19 costs                             245            -           209 
 Set up & exit costs relating 
  to Skelmersdale warehouse                   6          112            90 
 Management reorganisation and 
  restructure                                 -          113           118 
 Loss on derivative financial 
  instruments                                 -          302           639 
 Other                                       71          394           318 
------------------------------- 
  Total                                     649          921         2,230 
-------------------------------  --------------  -----------  ------------ 
 

Operational restructure costs - GBP327,000 (31 October 2019: GBPnil)

The current period saw the final stages of salary and settlement costs due to the reorganising and restructuring of its operations to improve the long-term profitability and efficiencies .

COVID-19 - GBP245,000 (31 October 2019: GBPnil)

The Group incurred incremental costs principally relating to overtime and temporary labour of GBP87,000, to cover employees who were in isolation during this period. There were additional costs for COVID safety representatives of GBP78,000 and also PPE/cleaning costs of GBP80,000.

Other - GBP71,000 (31 October 2019: GBP394,000)

Principal items include GBP44,000 relating to M&A activity and GBP27,000 in respect of the new line improvement programme.

   6.      Loss per share 

The basic loss per share is calculated by dividing the loss attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period.

Diluted loss per share is calculated by dividing the loss after tax by the weighted average number of shares in issue during the year, adjusted for potentially dilutive shares.

 
                                         Unaudited    Unaudited       Audited 
                                        Six months   Six months 
                                          ended 31     ended 31          Year 
                                           October      October      ended 30 
                                              2020         2019    April 2020 
                                           GBP'000      GBP'000       GBP'000 
 
 Loss for the period attributable 
  to shareholders                            (409)      (2,477)       (1,579) 
 
 
                                            Number       Number        Number 
                                              '000         '000          '000 
 Issued ordinary shares at beginning 
  of period                                195,247      195,247       195,247 
 
 Effect of shares issued in the 
  period                                         -            -             - 
                                       -----------  -----------  ------------ 
 Basic weighted average number of 
  shares at end of period                  195,247      195,247       195,247 
 Effect of conversion of Accrol 
  Group Holdings plc share options               -            -             - 
 Diluted weighted average number 
  of shares at end of period               195,247      195,247       195,247 
 
 Basic loss per share (pence)                (0.2)        (1.3)         (0.8) 
 Diluted loss per share (pence)              (0.2)        (1.3)         (0.8) 
 

For the periods above, no adjustment has been made to the weighted average number of shares for the purpose of the diluted loss per share calculation as the effect would be anti-dilutive.

   7.       Finance costs 
 
                                      Unaudited    Unaudited       Audited 
                                     Six months   Six months 
                                       ended 31     ended 31          Year 
                                        October      October      ended 30 
                                           2020         2019    April 2020 
                                        GBP'000      GBP'000       GBP'000 
 
 
 Bank loans and overdrafts                  402          362           712 
 Finance lease interest                     313          357           882 
 Amortisation of finance fees               196          183           365 
 Unwind of discount on provisions             7            9            18 
  Total finance costs                       918          911         1,977 
----------------------------------  -----------  -----------  ------------ 
 
 Lease interest income                      124            -           267 
  Total finance income                      124            -           267 
----------------------------------  -----------  -----------  ------------ 
 
 
  Net finance costs    794   911        1,710 
--------------------  ----  ----  ----------- 
 
   8.      Taxation 

The taxation credit recognised is based on management's best estimate of the weighted average annual tax rate expected for the full financial year.

The tax credit for the period has been calculated at an effective rate of 18.6% (half year ended 31 October 2019: 18.8%; year ended 30 April 2020: 16.5%).

   9.      Borrowings 
 
                                           Unaudited   Unaudited       Audited 
                                            As at 31    As at 31 
                                             October     October      As at 30 
                                                2020        2019    April 2020 
                                             GBP'000     GBP'000       GBP'000 
 Current 
 Bank facility                                 2,949       1,636         1,636 
 Factoring facility                            6,591      10,159        11,817 
 Finance leases                                4,562       4,553         4,704 
----------------------------------------  ----------  ----------  ------------ 
  Total current                               14,102      16,348        18,157 
----------------------------------------  ----------  ----------  ------------ 
 Non-current 
 Bank facility                                11,810       9,785         9,967 
 Finance leases                               12,214      17,725        13,860 
----------------------------------------  ----------  ----------  ------------ 
  Total non-current                           24,024      27,510        23,827 
----------------------------------------  ----------  ----------  ------------ 
 
 Total current & non-current                  38,126      43,858        41,984 
----------------------------------------  ----------  ----------  ------------ 
 
 Total borrowings as above                    38,126      43,858        41,984 
 Unamortised finance fees                        507         579           397 
----------------------------------------  ----------  ----------  ------------ 
 Total borrowings excluding unamortised 
  finance fees                                38,633      44,437        42,381 
 Less: lease receivables                     (6,030)     (6,666)       (6,352) 
 Less: cash and cash equivalents             (5,791)       (282)       (8,147) 
----------------------------------------  ----------  ----------  ------------ 
  Net debt                                    26,812      37,489        27,882 
 Less: leases recognised on adoption 
  of IFRS16                                  (8,709)    (12,695)      (10,012) 
 Adjusted net debt                            18,103      24,794        17,870 
----------------------------------------  ----------  ----------  ------------ 
 
 
 
   10.   Provisions 

The onerous contract provision of GBP554,000 as at 31 October 2020 relates to a logistics agreement resulting from the decision to exit from the Skelmersdale facility. At the period end, GBP368,000 is due in less than one year and GBP186,000 is due greater than one year.

   11.   Dividends 

The Board is recommending a return to the dividend list for the year ended 30 April 2021. The dividend will be finalised following the approval of the FY21 Annual Report but it is intended that this first payment will be no less than 0.5p per share and paid no later than September 2021.

   12.   Non-GAAP measures 

Adjusted earnings per share

The adjusted earnings per share is calculated by dividing the adjusted earnings attributable to ordinary equity holder of the parent by the weighted average number of ordinary shares outstanding during the year. The following reflects the income and share data used in the adjusted earnings per share calculation.

 
                                           Unaudited    Unaudited       Audited 
                                          Six months   Six months 
                                            ended 31     ended 31          Year 
                                             October      October      ended 30 
                                                2020         2019    April 2020 
                                             GBP'000      GBP'000       GBP'000 
 Earnings attributable to shareholders         (409)      (2,477)       (1,579) 
 Adjustment for: 
 Amortisation                                  1,236        1,020         2,040 
 Separately disclosed items                      649          921         2,230 
 Share based payment                           1,250        1,177         2,351 
 Tax effect of adjustments above               (596)        (592)       (1,256) 
---------------------------------------  -----------  -----------  ------------ 
 Adjusted earnings attributable 
  to shareholders                              2,130           49         3,784 
---------------------------------------  -----------  -----------  ------------ 
 
 
                                              Number       Number        Number 
                                             GBP'000      GBP'000       GBP'000 
 Basic weighted average number of 
  shares                                     195,247      195,247       195,247 
 Dilutive share options                       30,463            -        30,463 
 Diluted weighted average number 
  of shares                                  225,710      195,247       225,710 
 
                                               pence        pence         pence 
 Adjusted earnings per share                     1.1          0.0           1.9 
 Diluted adjusted earnings per share             0.9          0.0           1.7 
 
   13.   Events after the balance sheet date 

In November 2020, the Group acquired Leicester Tissue Company Limited, a Leicester based toilet tissue and kitchen towel business for initial cash consideration of GBP35m.

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