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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