TIDMACRL

RNS Number : 6143N

Accrol Group Holdings PLC

24 January 2023

24 January 2023

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

Accrol Group Holdings plc

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

HALF YEAR RESULTS

Strong progress across all businesses and products

Accrol (AIM: ACRL), the UK's leading independent tissue converter, announces its unaudited results for the six months ended 31 October 2022 ("H1 23" or the "Period").

Gareth Jenkins, Chief Executive Officer of Accrol, said :

" The Board is pleased to report that the Group performed strongly in H1 FY23, delivering substantial growth in volume, revenue, and profit, as well as further strengthening its market position. The Group continues to demonstrate its resilience against the challenges of input cost inflation, and we successfully leveraged our supply position with customers to recover all additional costs incurred in the Period.

"The Group delivered a notable 14% volume growth in the Period, against an overall market which grew by just 1%. This was achieved by offering the consumer great value products which suit every budget. Our strengthened supply model and established relationships with the retailers will ensure that the Group is well positioned to deliver strong results in difficult market conditions.

"As announced in our trading update on 21 November, adjusted net debt at 31 October 2022 was lower than anticipated at c.GBP30.5m. This was achieved despite a significant increase in tissue stocks, as the Group continued to manage uncertainty in its supply chains and the effect of strikes at UK ports. This working capital position is unwinding, as we progress through H2 and trading conditions normalise. Adjusted net debt at the full year end remains on track with market forecasts, which were lowered at the time of the trading update to less than 1.5x EBITDA.

"The Group has performed well in H2 to date and is on track to achieve revenue and adjusted EBITDA growth for the year ending 30 April 2023 ("FY23") marginally ahead of expectations at GBP230m and GBP15.5m respectively."

 
 Key Financials                       H1 23       H1 22      Change 
 Revenue                          GBP121.1m    GBP73.7m       64.3% 
 Gross margin                         18.0%       24.7%      (6.7%) 
 Adjusted EBITDA(1)                 GBP7.1m     GBP5.0m       42.0% 
 Adjusted profit before tax(2)      GBP3.2m     GBP0.5m     GBP2.7m 
 Loss before tax                  (GBP0.9m)   (GBP3.5m)     GBP2.6m 
 Adjusted diluted earnings per 
  share                                0.7p        0.2p        0.5p 
 Diluted loss per share              (0.2p)      (0.8p)        0.6p 
 Adjusted net debt(3)              GBP30.5m    GBP21.6m   (GBP8.9m) 
 

[1] Adjusted EBITDA is defined as profit before finance costs, tax, depreciation, amortisation, separately disclosed items and share based payments.

2 Adjusted profit before tax is defined as profit before amortisation, separately disclosed items and share based payments.

3 Adjusted net debt excludes operating type leases recognised on the balance sheet in accordance with IFRS 16.

H1 23 highlights:

 
 --   Accrol's market share by volume increased further to 21.5% 
       (FY22: 19.5%), compared to a flat overall UK market 
 --   Private label sector strengthened in the Period with Accrol's 
       volumes continuing to outpace the sector - the Group's 
       share of private label now totals 46% (FY22: 44%) 
 --   Private label volumes ahead of pre-pandemic levels and 
       growing at an unprecedented rate against those of the traditional 
       brands (Q1 FY23: 54% vs Q1 FY22: 50%) 
 --   Strong EBITDA performance of GBP7.1m, despite considerable 
       inflation driven input cost rises and supply chain issues, 
       which impacted margin in the short term as additional costs 
       were recovered 
 --   Significant price increases implemented in the Period through 
       a supportive retail customer base 
 --   Strong performance from John Dale with a 33% increase in 
       biodegradable wet wipe sales - this business has grown 
       sales from c.GBP1.5m at acquisition in 2021 to exit FY23 
       with anticipated sales of c.GBP6m 
 --   Final investment in automation and capacity concluded in 
       Q1 on time and in budget - major investment programme into 
       the Group's tissue business now completed 
 

People

 
 --   Richard Newman, Chief Financial Officer, to step down at 
       the end of April but will stay with the Group until the 
       full year results which are expected by September 2023. 
       He will be succeeded by Chris Welsh, who joined the Group 
       from Ineos Chemicals in October 2022 
 

Current trading and outlook

 
 --   Strong volume performance in H2 to date, driven by continued 
       strengthening of private label 
 --   Gross margins expected to continue to improve in H2 and 
       into FY24, as time lag impact on price increases works 
       through - any further input cost increases will be mitigated 
       in the main by new index linked contracts 
 --   Group on track to deliver revenue growth of 50% to c.GBP230m 
       and Adjusted EBITDA marginally ahead of market expectations 
       in FY23, despite an annualised increase in costs of over 
       GBP80m 
 

Strategic Review update

The Group has today announced the outcomes of its strategic review, which defines the Group's medium-term ambitions:

 
 --   Continued focus on core toilet and kitchen towel business; 
 --   To grow the facial and wet wipes business; 
 --   To develop a licensed business model and grow direct to 
       consumer Oceans brand; 
 --   Build a sustainable paper mill; 
 --   Acquire selectively to strengthen and extend Accrol's product 
       offering; and 
 --   Maximise medium term tangible shareholder returns through 
       a combination of dividends and, potentially, share buybacks. 
 

Dan Wright, Executive Chairman of Accrol, said:

" Over the last four years, Accrol has been transformed as an organisation to one that currently supplies c.21.5% of the UK market's tissue volumes and has considerable further capacity. Our state-of-the-art businesses are in an incredibly strong position to benefit in a private label market, which is growing rapidly and significantly. Our customer base is strong and varied and the ability to pass-on cost increases swiftly has been evidenced in the Group's Half Year Results, also announced today. We look forward with increased confidence, having clearly identified where we can grow the business."

The Strategic Review Outcomes announcement is available on the Company's website: https://www.accrol.co.uk/investors/regulatory-news/ .

 
For further information, please contact: 
 
Accrol Group Holdings plc 
Dan Wright, Executive Chairman            Via Belvedere Communications 
Gareth Jenkins, Chief Executive Officer 
Richard Newman, Chief Financial Officer 
 
Zeus (Nominated Adviser & Broker) 
Dan Bate / Jordan Warburton                  Tel: +44 (0) 161 831 1512 
Dominic King                                 Tel: +44 (0) 203 829 5000 
 
Liberum Capital Limited (Joint Broker)       Tel: +44 (0) 20 3100 2222 
Clayton Bush / Edward Thomas 
 
Belvedere Communications Limited 
Cat Valentine                                Tel: +44 (0) 7715 769 078 
Keeley Clarke                                Tel: +44 (0) 7967 816 525 
                                              accrolpr@belvederepr.com 
 

Overview of Accrol

Accrol Group Holdings plc is a leading tissue converter and supplier of toilet tissues, kitchen rolls, facial tissues, and wet wipes to many of the UK's leading discounters and grocery retailers across the UK. Following the recent acquisitions of LTC in Leicester and JD in Flint, North Wales, the Group now operates from six manufacturing sites, including four in Lancashire, which generate volumes totalling c.21.5% of the cGBP2.5bn UK retail tissue market.

For more information, please visit www.accrol.co.uk.

OPERATIONAL REVIEW

Summary of progress

The Group made strong progress in the Period, successfully navigating the ongoing well-reported macro challenges. Over the last four years, we have built a business with increased scale, operational efficiency, and product diversity, which has enabled sustainable growth in both volume and market share. We are well positioned to benefit from the significant further growth expected from private label and discount retailers, as consumers seek greater value given the ongoing cost-of-living pressures.

Group revenues increased by 64.3% in the Period, when compared to H1 FY22, due to a strengthening in volume demand of 14% and the successful recovery of input price increases from all customers. Our market share in volume terms also increased in the Period to 21.5% (FY22: 19%), in a market that showed an overall increase of 1%.

The success of Accrol's simplified range is demonstrated by this increase in market share and increase in customers, which has grown from c.6% to 21.5% since 2017. No one customer represents more than 20% of total revenue. The Group has also made progress on the development of higher margin, third party licensed brands, which are a part of the Group's mid to long-term growth ambitions for revenue growth in its core toilet and kitchen towel business.

Key performance improvements in the Period included:

 
 --   Production increased by 57 million rolls in H1 FY23 compared 
       to H1 FY22; 
 --   Wet wipes sales doubled in the Period and volumes have more 
       than tripled since John Dale was acquired 24 months ago. 
       Sales in FY23 expected to be c.GBP6m, compared to GBP1.5m 
       on acquisition; 
 --   Two new lines installed in the Blackburn facial tissue business, 
       which was transferred from the John Dale site, reducing 
       our cost base there and driving increased outputs in Blackburn; 
 --   Automation programme completed with installation of one 
       new line, which went operational in the New Year; 
 --   New warehouse opened in Leyland to improve supply chain 
       efficiency and further reduce inbound costs; 
 --   Attained and retained our Living Wage employer accreditation; 
 --   Relationships with all our key customers strengthened and 
       Accrol's position as the UK's leading private-label supplier 
       consolidated further; 
 --   Successfully delivered major price increases recovering 
       over GBP80 million in additional costs to the business; 
       and 
 --   Transitioned all toilet roll products to 38mm core, significantly 
       increasing rolls per journey and taking 12% of the Group's 
       lorries off the road. 
 

The market

The Group's markets are covered in detail with a full update in the Strategic Review Outcomes announcement, published today.

People

Engaged, well-trained people are a key part of our business model and sustainability. We have an outstanding team and I would like to thank everyone for their continued hard work and commitment, which has enabled the Group to perform so well in these challenging economic conditions.

Richard Newman, the Group's Chief Financial Officer, has informed the Company of his intention to step down from the Board and his role as Chief Financial Officer ("CFO") at the end of April 2023. He will remain in the business until the FY23 audit process is completed and the FY23 Final Results are released, no later than September 2023.

Richard joined Accrol in early in 2021 with the remit to professionalise and transform the finance function of the Group and has established a finance infrastructure capable of serving a much larger business. Richard has strengthened the finance team through the recruitment of high-quality people and has helped to lead the business through a challenging period of significant cost inflation.

Chris Welsh, Group Financial Controller, who joined Accrol from Ineos Chemicals in October 2022 as part of the Board's succession planning, will step up into the role of Chief Financial Officer from the start of May 2023. Chris is a highly skilled and experienced financial executive, who has held several senior roles at Ineos in the last seven years, latterly as Head of Financial Reporting at its Enterprises Division. Chris is a Chartered Accountant, who qualified with PwC in 2015.

Environmental, Social and Governance ("ESG")

The business has delivered the following key improvements in the last 12 months:

 
 --   15% reduction in tissue waste; 
 --   15% more rolls per journey, resulting is a 12% reduction 
       in vehicles used; 
 --   Zero waste to landfill; 
 --   7% less plastic packaging; 
 --   3% energy reduction; 
 --   8% reduction in carbon emissions, despite the business 
       growing 14%; 
 --   22% females in leadership roles up from 6% in 2020; 
 --   Sedex membership; 
 --   All sites BRCGS accredited to A or AA; 
 --   89% of employees are "proud to work at Accrol"; and 
 --   Living Wage Accredited Employer. 
 

A full update on the Group's progress is available in our second ESG Report, which was published in November 2022. This is available to view on the Group's website: https://www.accrol.co.uk/esg/ .

Current Trading and Outlook

The outcomes of the Strategic Review announced today showcase the Group's strengths and the market opportunity. Accrol's main markets, the discount retailers and private label products, continue to grow strongly, driven by the ongoing cost-of-living crisis. The latest industry data is demonstrating a continuation of the consumer shift away from the traditional tissue brands into best value, private label alternatives.

The Group's increasingly strong market position and customer relationships, combined with its plans for a paper mill, mean Accrol is very well positioned to capitalise on this forecast market growth. The business has delivered substantial increases in volumes in the Period, significantly ahead of the wider market, and the Board is increasingly confident that the growth trajectory of the business, as set out in the strategic review, is both attainable and sustainable. The volume growth seen in the first half is expected to continue, following a strong start to H2.

Whilst always mindful of the wider economic uncertainties, the Group's model is robust, and the Board is confident the Group to be on track to deliver results for FY23 marginally ahead of market expectations.

Gareth Jenkins

Chief Executive Officer

FINANCIAL REVIEW

Revenue

Revenue in the Period was GBP121.1m (H1 22: GBP73.7m), an increase of GBP47.4m (64.3%) compared to H1 22. This increase in revenue represents a growth in volume of 14% as demand in the private label market strengthened to above pre-pandemic levels. The Group also successfully delivered significant price increases to demonstrate resilience against the pressures of rising cost price inflation.

Gross profit

Gross profit for the Period was GBP21.7m (H1 22: GBP18.2m), an increase of GBP3.5m (19.2%) compared to H1 22. Gross profit as a percentage of revenue at 18.0% (H1 22: 24.7%) was lower than H1 22, as higher input costs were only partially mitigated by pricing increases in the Period, given the relative time lag of implementing pricing pass throughs with retail customers.

In line with the wider market, the Group continued to experience supply chain disruption around the world and specifically at shipping ports in the UK. The business continues to manage customer supply well; having invested into working capital and secured additional key raw material products to maintain consistent supply.

Adjusted EBITDA

Adjusted EBITDA increased to GBP7.1m (H1 22: GBP5.0m), an increase of GBP2.1m (42.0%), compared to H1 22; largely reflecting the robust gross margin performance. Operating costs remain a key focus of the Group and, despite general price inflationary pressures, have largely remained flat to maintain EBITDA profit margin.

Separately disclosed items

Separately disclosed items totalled GBP0.5m (H1 22: GBP0.7m), all of which related to exceptional incremental costs of supply chain disruption, particularly at ports.

Depreciation and amortisation

The total charge for the Period was GBP5.3m (H1 22: GBP6.1m), of which GBP3.1m (H1 22: GBP2.9m) related to the amortisation of intangible assets.

Share-based payments

The total charge for the Period under IFRS 2 "Share-based payments" was GBP0.6m (H1 22: GBP0.6m). This charge related to the awards made under the 2022 Long Term Incentive Plan, that was approved on 5 March 2021.

Operating profit and earnings per share

Net finance costs were GBP1.6m (H1 22: GBP1.1m), resulting in a loss before taxation of GBP0.9m (H1 22: GBP3.5m). Basic losses per share were 0.2 pence (H1 22: 0.8 pence). Adjusted diluted earnings per share were 0.7 pence (H1 22: 0.2 pence).

Dividends

The Group intends to resume dividend payments, as soon as is practicable, with a prudent and sustainable dividend cover of c.2.5x - 3.5x. In addition, the Group also intends to request from shareholders the authority to buy back its ordinary shares. The Board is mindful of liquidity constraints but sees significant value in the current Accrol equity valuation and seeks the flexibility to act accordingly.

Cashflow

The Group's adjusted net debt was GBP30.5m (H1 22: GBP21.6m). The net cash flow from operating activities was GBP6.1m (H1 22: GBP0.9m) with the increase reflecting improved operating margins offset by an investment into working capital of GBP1.0m (H1 22: GBP3.4m outflow). This net working capital outflow primarily represented an investment into building inventory, securing additional key raw material products to maintain consistent supply during supply chain disruptions at UK ports.

Capital expenditure in the Period was GBP5.8m (H1 22: GBP3.5m), which primarily related to the continued automation of production facilities. Lease payments of GBP3.0m (H1 22: GBP3.4m) include leases capitalised in accordance with IFRS 16.

Balance Sheet

The Group had net assets of GBP82.7m (H1 22: GBP82.7m), as at 31 October 2022. Property, plant and equipment increased reflecting the renewal of property related leases, capitalised in accordance with IFRS16. During the Period, the Group increased its multi-currency factoring facility, used to provide financing for general working capital requirements, from GBP27.0m to GBP35.0m to recognise the significant growth in revenue. The Group also maintains a GBP17.0m revolving credit facility and continues to operate within the associated covenants attached to this facility.

Investment

The final automation of the Leyland site was completed in the Period, notably on time and to budget which, alongside a final machine installation, completed all major investments into the Tissue businesses with only c.GBP3m investment required in existing machinery per year going forward for general maintenance capital. This now positions the Group well with four state-of-the-art fully automated factories in Blackburn (x2), Leyland and Leicester operating at significantly lower cost levels.

Outlook

The Group is well invested with adjusted net debt on track to be less than 1.5x EBITDA by the current year end (FY22: 3.0x). The Group's margins, which were impacted by the time-lag on price increases, are recovering in H2 FY23 and we are confident that this recovery to continue throughout FY24.

Richard Newman

Chief Financial Officer

olidated Interim Income Statement

For six months ended 31 October 2022

 
                                             Unaudited    Unaudited     Audited 
                                            Six months   Six months        Year 
                                              ended 31     ended 31    ended 30 
                                               October      October       April 
                                                  2022         2021        2022 
 Continuing operations               Note      GBP'000      GBP'000     GBP'000 
 
 Revenue                              4        121,072       73,709     159,450 
 Cost of sales                                (99,332)     (55,526)   (123,211) 
----------------------------------  -----  -----------  -----------  ---------- 
 Gross profit                                   21,740       18,183      36,239 
 Administration costs                         (13,429)     (14,480)    (23,687) 
 Distribution costs                            (7,651)      (6,083)    (12,778) 
 Group operating profit/(loss)                     660      (2,380)       (226) 
 Finance costs                        7        (1,770)      (1,198)     (2,522) 
----------------------------------  -----  -----------  -----------  ---------- 
 Finance income                       7            166          111         216 
----------------------------------  -----  -----------  -----------  ---------- 
 Loss before taxation                            (944)      (3,467)     (2,532) 
 Tax credit                           8            179          795         835 
----------------------------------  -----  -----------  -----------  ---------- 
 Loss for the period attributable 
  to equity shareholders                         (765)      (2,672)     (1,697) 
----------------------------------  -----  -----------  -----------  ---------- 
 Loss per share (pence) 
 Basic                                6          (0.2)        (0.8)       (0.5) 
 Diluted                              6          (0.2)        (0.8)       (0.5) 
----------------------------------  -----  -----------  -----------  ---------- 
 Group Operating (loss)/profit                     660      (2,380)       (226) 
 Adjusted for: 
 Depreciation & Amortisation                     5,348        6,072      11,351 
 Share based payments                              565          638         508 
 Separately disclosed items           5            487          675     (2,577) 
 Adjusted EBITDA                                 7,060        5,005       9,056 
----------------------------------  -----  -----------  -----------  ---------- 
 

Consolidated Interim Statement of Comprehensive Income

For six months ended 31 October 2022

 
                                               Unaudited    Unaudited       Audited 
                                              Six months   Six months 
                                                   ended     ended 31          Year 
                                              31 October      October      ended 30 
                                                    2022         2021    April 2022 
                                                 GBP'000      GBP'000       GBP'000 
 
 Loss for the period attributable 
  to equity shareholders                           (765)      (2,672)       (1,697) 
 Total comprehensive expense attributable 
  to equity shareholders                           (765)      (2,672)       (1,697) 
------------------------------------------  ------------  -----------  ------------ 
 

Consolidated Interim Balance Sheet

As at 31 October 2022

 
                                         Unaudited   Unaudited       Audited 
                                          As at 31    As at 31 
                                           October     October      As at 30 
                                              2022        2021    April 2022 
                                  Note     GBP'000     GBP'000       GBP'000 
 ASSETS 
 Non-current assets 
 Property, plant and 
  equipment                                 87,276      65,207        77,803 
 Intangible assets                          56,782      60,408        58,958 
 Lease receivables                           4,233       4,680         4,325 
-------------------------------  -----  ----------  ----------  ------------ 
 Total non-current assets                  148,291     130,295       141,086 
-------------------------------  -----  ----------  ----------  ------------ 
 Current assets 
 Inventories                                36,767      20,787        26,241 
 Trade and other receivables                31,868      24,487        31,592 
 Lease receivables                             888         689           703 
 Derivative financial 
  instruments                                    -           -           805 
 Cash and cash equivalents                   7,590       3,074           243 
-------------------------------  -----  ----------  ----------  ------------ 
 Total current assets                       77,113      49,037        59,584 
-------------------------------  -----  ----------  ----------  ------------ 
 Total assets                              225,404     179,332       200,670 
-------------------------------  -----  ----------  ----------  ------------ 
 Current liabilities 
 Borrowings                        9      (37,886)    (17,488)      (26,482) 
 Trade and other payables                 (62,498)    (39,593)      (52,367) 
 Financial instruments                       (154)         (2)             - 
 Income taxes                                    -           -         (300) 
 Provisions                        10            -     (7,327)          (33) 
 Total current liabilities               (100,538)    (64,410)      (79,182) 
-------------------------------  -----  ----------  ----------  ------------ 
 Total assets less current 
  liabilities                              124,866     114,922       121,488 
-------------------------------  -----  ----------  ----------  ------------ 
 Non-current liabilities 
 Borrowings                        9      (39,274)    (29,310)      (35,169) 
 Deferred tax liabilities                  (2,922)     (2,886)       (3,100) 
 Provisions                        10            -           -         (275) 
 Total non-current liabilities            (42,196)    (32,196)      (38,544) 
-------------------------------  -----  ----------  ----------  ------------ 
 Total liabilities                       (142,734)    (96,606)     (117,726) 
-------------------------------  -----  ----------  ----------  ------------ 
 Net assets                                 82,670      82,726        82,944 
-------------------------------  -----  ----------  ----------  ------------ 
 Capital and reserves 
 Share capital                                 319         319           319 
 Share premium                             108,782     108,782       108,782 
 Capital redemption reserve                     27          27            27 
 Retained earnings                        (26,458)    (26,402)      (26,184) 
 Total equity shareholders' funds           82,670      82,726        82,944 
--------------------------------------  ----------  ----------  ------------ 
 

Consolidated Interim Statement of Changes in Equity

For six months ended 31 October 2022

 
                                                                Capital     Retained 
                                        Share       Share    redemption    earnings/ 
                                      capital     premium       reserve    (deficit)     Total 
                                      GBP'000     GBP'000       GBP'000      GBP'000   GBP'000 
 
 Balance at 30 April 2022 
  (audited)                               319     108,782            27     (26,184)    82,944 
 Comprehensive income 
 Loss for the period                        -           -             -        (765)     (765) 
 Total comprehensive expense                -           -             -        (765)     (765) 
---------------------------------  ----------  ----------  ------------  -----------  -------- 
 Transactions with owners 
  recognised directly in equity 
                                   ----------  ----------  ------------  ----------- 
 Share-based payment (inc. 
  tax)                                      -           -             -          491       491 
 Total transactions recognised 
  directly in equity                        -           -             -          491       491 
---------------------------------  ----------  ----------  ------------  -----------  -------- 
 Balance at 31 October 2022 
  (unaudited)                             319     108,782            27     (26,458)    82,670 
---------------------------------  ----------  ----------  ------------  -----------  -------- 
 

Consolidated Interim Cash Flow Statement

For six months ended 31 October 2022

 
                                                     Unaudited       Unaudited       Audited 
                                                    Six months      Six months          Year 
                                              ended 31 October        ended 31      ended 30 
                                                          2022    October 2021    April 2022 
                                                       GBP'000         GBP'000       GBP'000 
 Cash flows from operating 
  activities 
 Operating profit/(loss)                                   660         (2,380)         (226) 
 Adjustment for: 
 Depreciation                                            2,248           3,401         5,857 
 Impairment of property, plant 
  and equipment                                              -               -           965 
 Amortisation of intangible 
  assets                                                 3,100           2,671         5,494 
 Loss on disposal of property, plant 
  and equipment                                           (10)               -         (296) 
 Acquisition contingent consideration                        -               -       (6,277) 
 Share based payments                                      565             638           508 
------------------------------------------  ------------------  --------------  ------------ 
 Operating cash flows before movements 
  in working capital                                     6,563           4,330         6,025 
 (Increase)/decrease in inventories                   (10,525)           2,398       (3,056) 
 (Increase)/decrease in trade and 
  other receivables                                      (277)           1,994       (5,112) 
 Increase/(decrease) in trade and 
  other payables                                         9,944         (7,688)         5,422 
 (Decrease)/increase in provisions                       (608)               6         (934) 
 Decrease/(increase) in derivatives                        958           (118)         (925) 
------------------------------------------  ------------------  --------------  ------------ 
 Cash generated from operations                          6,055             922         1,420 
 Tax received                                                -              15            15 
------------------------------------------  ------------------  --------------  ------------ 
 Net cash flows from operating 
  activities                                             6,055             937         1,435 
------------------------------------------  ------------------  --------------  ------------ 
 Cash flows from investing 
  activities 
 Purchase of property, plant 
  and equipment                                        (3,867)         (2,300)       (4,987) 
 Proceeds from sale of property, 
  plant and equipment                                       10               -            48 
 Purchase of intangible assets                         (1,938)         (1,222)       (3,145) 
 Receipt of capital element 
  of leases                                                536             334           674 
 Lease interest received                                   166             111           216 
 Net cash flows used in investing 
  activities                                           (5,093)         (3,077)       (7,194) 
------------------------------------------  ------------------  --------------  ------------ 
 Cash flows from financing 
  activities 
 Proceeds of issue of ordinary 
  shares                                                     -               8             8 
 Amounts received from factors                         145,251          76,284       187,204 
 Amounts paid to factors                             (142,645)        (74,391)     (172,436) 
 New finance leases                                      1,691           1,940         1,939 
 Repayment of capital element 
  of leases                                            (3,039)         (3,404)       (5,463) 
 Advance/(repayment) of bank 
  loans                                                  7,000               -       (9,000) 
 Transaction costs of bank facility                       (98)               -         (115) 
 Dividends paid                                              -         (1,594)       (1,594) 
 Interest paid                                         (1,775)         (1,233)       (1,354) 
------------------------------------------  ------------------  --------------  ------------ 
 Net cash flows from/(used) in 
  financing activities                                   6,385         (2,390)       (1,602) 
-----------------------------------------   ------------------  --------------  ------------ 
 Net increase/(decrease) in cash and 
  cash equivalents                                       7,347         (4,530)       (7,361) 
 Cash and cash equivalents at beginning 
  of the period                                            243           7,604         7,604 
------------------------------------------  ------------------  --------------  ------------ 
 Cash and cash equivalents 
  at period end                                          7,590           3,074           243 
------------------------------------------  ------------------  --------------  ------------ 
 
 

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

Notes to the Interim Financial Statements

For six months ended 31 October 2022

   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 20 January 2023.

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 2022 should be read in conjunction with the Group's Annual Report and Accounts for the year ended 30 April 2022, 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 2022 have been filed with Companies House. The Group's auditor, BDO LLP have reported on those accounts and their report was unqualified.

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

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

The Group's performance is dependent on a number of market and macroeconomic factors particularly the sensitivity to the price of parent reels and the sterling/USD exchange rate which are inherently difficult to predict. The Group continues to monitor the impact of the COVID-19 pandemic on performance along with the ongoing disruption of the supply chain, particularly at ports, exacerbated by the national shortage of haulage drivers.

The Board has formed a judgement that there is reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, the going concern basis has been adopted in preparing the interim financial statements.

   3.      Accounting Policies 

The accounting policies applied in preparing the unaudited interim financial statements are consistent with those used in preparing the statutory financial statements for the year ended 30 April 2022 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 
                         2022         2021    April 2022 
                      GBP'000      GBP'000       GBP'000 
 United Kingdom       114,086       71,855       149,914 
 Europe                 6,986        1,854         9,536 
----------------  -----------  -----------  ------------ 
 Total                121,072       73,709       159,450 
----------------  -----------  -----------  ------------ 
 
   5.      Separately disclosed items 
 
                                          Unaudited    Unaudited       Audited 
                                         Six months   Six months 
                                           ended 31     ended 31          Year 
                                            October      October      ended 30 
                                               2022         2021    April 2022 
                                            GBP'000      GBP'000       GBP'000 
 Acquisition contingent consideration             -            -       (6,277) 
 Acquisition professional fees                    -            -           766 
 Acquisition integration costs                    -            -            85 
--------------------------------------  -----------  -----------  ------------ 
 Acquisition related items                        -            -       (5,426) 
--------------------------------------  -----------  -----------  ------------ 
 COVID-19 costs                                   -           43           153 
 Impairment of property, plant and 
  equipment                                       -            -           965 
 Accounting policy change                         -            -           637 
 Supply chain disruption                        465          430           696 
 Other                                           22          202           398 
--------------------------------------  -----------  -----------  ------------ 
 Other items                                    487          675         2,849 
-------------------------------------- 
  Total                                         487          675       (2,577) 
--------------------------------------  -----------  -----------  ------------ 
 

Supply chain disruption - GBP465,000 (31 October 2021: GBP430,000)

The Group has incurred additional costs primarily in the form of demurrage due to ongoing disruption of the supply chain, particularly at UK ports.

   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 
                                              2022         2021    April 2022 
                                           GBP'000      GBP'000       GBP'000 
 
 Loss for the period attributable 
  to shareholders                            (765)      (2,672)       (1,697) 
 
 
                                            Number       Number        Number 
                                              '000         '000          '000 
 Issued ordinary shares at beginning 
  of period                                318,878      311,355       311,355 
 
 Effect of shares issued in the 
  period                                         -        4,088         5,792 
                                       -----------  -----------  ------------ 
 Basic weighted average number of 
  shares at end of period                  318,878      315,443       317,147 
 Effect of conversion of Accrol 
  Group Holdings plc share options               -            -             - 
 Diluted weighted average number 
  of shares at end of period               318,878      315,443       317,147 
 
 Basic loss per share (pence)                (0.2)        (0.8)         (0.5) 
 Diluted loss per share (pence)              (0.2)        (0.8)         (0.5) 
 

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 
                                           2022         2021    April 2022 
                                        GBP'000      GBP'000       GBP'000 
 
 
 Bank loans and overdrafts                  852          375           791 
 Lease interest                             820          521         1,354 
 Amortisation of finance fees                98          106           179 
 Unwind of discount on provisions             -          196           198 
  Total finance costs                     1,770        1,198         2,522 
----------------------------------  -----------  -----------  ------------ 
 
 
 
 
 Lease interest income    166   111        216 
  Total finance income    166   111        216 
-----------------------  ----  ----  --------- 
 
 
  Net finance costs    1,604   1,087        2,306 
--------------------  ------  ------  ----------- 
 
   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 19% (half year ended 31 October 2021: 23%; year ended 30 April 2022: 19%).

   9.      Borrowings 
 
                                          Unaudited   Unaudited       Audited 
                                           As at 31    As at 31 
                                            October     October      As at 30 
                                               2022        2021    April 2022 
                                            GBP'000     GBP'000       GBP'000 
 Current 
 Bank facility                                9,790       1,854         2,692 
 Factoring facility                          21,348       5,869        18,743 
 Leases                                       6,748       9,765         5,047 
-------------------------------------  ------------  ----------  ------------ 
  Total current                              37,886      17,488        26,482 
-------------------------------------  ------------  ----------  ------------ 
 Non-current 
 Bank facility                                    -       9,880             - 
 Leases                                      39,274      19,430        35,169 
-------------------------------------  ------------  ----------  ------------ 
  Total non-current                          39,274      29,310        35,169 
-------------------------------------  ------------  ----------  ------------ 
 
 Total current & non-current                 77,160      46,798        61,651 
-------------------------------------  ------------  ----------  ------------ 
                                          Unaudited   Unaudited         Audited 
                                              As at    As at 31 
                                         31 October     October        As at 30 
                                               2022        2021      April 2022 
 
 
 Total borrowings (excluding finance 
  fees)                                      77,371      47,064          61,959 
 Less: lease receivables                    (5,121)     (5,369)         (5,028) 
 Less: cash and cash equivalents            (7,590)     (3,074)           (243) 
 Net debt                                    64,660      38,621          56,688 
-------------------------------------  ------------  ----------  -------------- 
 
 
 
 
 Less: leases recognised on adoption 
  of IFRS16                             (34,142)   (17,008)      (29,142) 
 Adjusted net debt (excl leases 
  recognised on adoption of IFRS16)       30,518     21,613        27,546 
-------------------------------------  ---------  ---------  ------------ 
 
   10.   Provisions 
 
                               Unaudited    Unaudited       Audited 
                              Six months   Six months 
                                ended 31     ended 31          Year 
                                 October      October      ended 30 
                                    2022         2021    April 2022   Current   Non-current 
                                 GBP'000      GBP'000       GBP'000   GBP'000       GBP'000 
 
 Onerous contracts                     -          172            33         -             - 
 Contingent consideration              -        6,800             -         -             - 
 Other                                 -          355           275         -             - 
  Total provisions                     -        7,327           308         -             - 
--------------------------  ------------  -----------  ------------  --------  ------------ 
 

The contingent consideration relates to the acquisition of Leicester Tissue Company in 2021 which has subsequently been fully resolved.

   11.   Dividends 

The Company did not pay a final dividend for the year ending 30 April 2022 nor does it propose an interim dividend for the period ending 31 October 2022.

   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 
                                                      2022         2021    April 2022 
                                                   GBP'000      GBP'000       GBP'000 
 Earnings attributable to shareholders               (765)      (2,672)       (1,697) 
 Adjusted for: 
 Amortisation                                        3,100        2,671         5,494 
 Separately disclosed items                            487          675       (2,577) 
 Share based payment                                   565          638           508 
 Discount unwind on contingent consideration             -          192           192 
 Tax effect of adjustments above                     (954)        (961)         (832) 
---------------------------------------------  -----------  -----------  ------------ 
 Adjusted earnings attributable 
  to shareholders                                    2,433          543         1,088 
---------------------------------------------  -----------  -----------  ------------ 
 
 
                                                    Number       Number        Number 
                                                   GBP'000      GBP'000       GBP'000 
 Basic weighted average number of 
  shares                                           318,878      315,443       317,147 
 Dilutive share options                             11,119        3,152        11,119 
 Diluted weighted average number 
  of shares                                        329,997      318,595       328,266 
 
                                                     Pence        pence         Pence 
 Adjusted earnings per share                           0.8          0.2           0.3 
 Diluted adjusted earnings per share                   0.7          0.2           0.3 
 

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

   13.   Events after the balance sheet date 

There have been no material events after the balance sheet date.

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January 24, 2023 02:00 ET (07:00 GMT)

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