TIDMACRL
RNS Number : 1432F
Accrol Group Holdings PLC
14 July 2021
14 July 2021
The information communicated within this announcement is deemed
to constitute inside information as stipulated under the Market
Abuse Regulations (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
Accrol Group Holdings plc
("Accrol", the "Group" or the "Company")
AIM: ACRL
AUDITED FINAL RESULTS FOR THE YEARED 30 APRIL 2021
A transformed business, delivering further performance
improvements, increased scale through acquisition and restoration
of dividend
Accrol Group Holdings plc, the UK's leading independent tissue
converter, announces its audited Final Results for the year ended
30 April 2021 ("FY21" or the "Period"), which show a transformed
business, delivering further strong improvement in margins and a
return to dividend payments.
Despite the challenges of the pandemic, the Group was able to
deliver on its strategic objectives. The business was successfully
scaled, through the acquisition of Leicester Tissue Company ("LTC")
and diversified via the John Dale ("JD") wet wipes acquisition.
The team's continued focus on operational efficiency delivered
an overall improvement in reported gross margin of 580ppt to 27.7%
and a tripling of initial expectations on LTC synergies. Adjusted
EBITDA rose by 47% in the year to GBP15.6m.
Despite the volatility created in the tissue market by the
pandemic limiting the Group's revenue growth to 1.4% in the Period,
Accrol outperformed its peers and increased its market share to
15.9% from 13.1% in FY21. Over the last 2 years the like for like
sales (excluding Away from Home) have grown by 16% from GBP117.6m
to GBP136.6m and market share growth for the Group has risen from
12% to 15.9%.
With the business in excellent operational shape, scalable
foundations for growth in place, and a strong market position, the
Group is very well placed to benefit from the anticipated recovery
in tissue volumes, as the effects of the pandemic unwind.
Key financials
FY21 FY20 Change FY19 FY18
Revenue GBP136.6m GBP134.8m 1.4% GBP119.1m GBP139.7m
---------- ---------- -------- ----------- -----------
Gross margin 27.7% 21.9% 26.5% 14.7% 17.5%
---------- ---------- -------- ----------- -----------
Adjusted EBITDA(1) GBP15.6m GBP10.6m 47.0% GBP1.0m (GBP5.8m)
---------- ---------- -------- ----------- -----------
Adjusted profit/(loss)
before tax(2) GBP9.1m GBP4.7m 93.3% (GBP2.8m) (GBP9.1m)
---------- ---------- -------- ----------- -----------
Loss before tax (GBP2.6m) (GBP1.9m) (35.7%) (GBP14.0m) (GBP24.1m)
---------- ---------- -------- ----------- -----------
Adjusted diluted earnings/(loss)
per share 2.7p 1.7p 58.8% (1.4p) (7.4p)
---------- ---------- -------- ----------- -----------
Diluted earnings/(loss)
per share (1.1p) (0.8p) (37.5%) (6.2p) (18.7p)
---------- ---------- -------- ----------- -----------
Adjusted net debt(3) GBP14.6m GBP17.9m (18.1%) GBP27.1m GBP33.8m
---------- ---------- -------- ----------- -----------
(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 loss before tax,
amortisation, separately disclosed items and share based
payments
(3) Adjusted net debt excludes operating type leases recognised
on balance sheet in accordance with IFRS 16
Financial highlights
-- Revenue of GBP136.6m reflecting third consecutive year of
growth (FY20: GBP134.8m)
-- Gross profits up 28% to GBP37.9m (FY20: GBP29.5m)
-- Gross margin improved for the third consecutive year to
27.7%, up 5.8% (FY20: 21.9%)
-- Adjusted EBITDA of GBP15.6m, an increase of 47% (FY20: GBP10.6m)
-- Adjusted EBITDA margin improved by 3.5% to 11.4%
-- Adjusted PBT almost doubled at GBP9.1m (FY20: GBP4.7m) -
the third consecutive year of improvement
-- Adjusted net debt reduced to GBP14.6m (FY20: GBP17.9m) -
the third consecutive year of adjusted net debt reduction,
despite the GBP3.4m cash acquisition of JD
-- Adjusted net debt now equal to c.0.9x Adjusted EBITDA (FY20:
1.7x)
-- Dividend payments restored with a proposed final dividend
of 0.5p (FY20: nil), demonstrating the Board's confidence
in the future prospects of the business
Operational highlights
-- Increasingly strong market position - market share up 2.8%
to 15.9%
-- Headcount reduced further and output per head increased
for the third consecutive year
-- Blackburn and LTC sites fully automated with no operational
impact
-- New fully integrated IT system installed throughout the
business without interruption
-- 11% reduction in CO(2) emissions per tonne of production
(FY20: 25% reduction) with almost all energy requirements
now sourced from renewables
Acquisitions
-- LTC acquired with cash raised via a placing and open offer,
bringing scale to the tissue operations - now fully integrated
delivering an estimated GBP3m of annualised synergies compared
to the GBP1m anticipated at the time of the acquisition
-- JD acquired with existing cash resources, bringing a new
product range, including fully flushable wet wipes, and
the footprint and assets to build a business of scale
Current trading in FY22 and outlook
-- Strong progress being made on the recovery of higher input
costs, driven by rising global pulp prices, through prompt
pricing actions post-year end
-- Tissue market showing strong but steady signs of recovery
as panic buying unwinds, with increased sales month on
month and improvement in year on year sales
-- Automation of tissue business to complete in FY22 with
the installation of a new machine at Leyland, providing
three fully invested, state-of-the-art operations in geographically
pertinent locations
-- Tissue operation capacity rising to GBP210m in revenue
terms, following final element of automation at Leyland
-- Investment in wet wipes planned for FY22 with material
growth expected from FY23
-- Longer term growth supported by major discounters' acceleration
of planned new store openings
-- Significant advancement made on UK paper mill
-- The Group expects to see FY22 exit run rates to be significantly
improved with the major discounters expecting uplift in
tissue volumes and Accrol's recently secured additional
new business has increased confidence for FY23 revenues
and returns
-- Trading in line with forecasts in FY22 to date and the
Board remains confident in the long-term prospects for
Accrol
Dan Wright, Executive Chairman of Accrol, said:
"This is the third straight year of strong improvements across
many aspects of the business. Gross margins have improved again,
and the business is even better placed to take advantage of the
planned growth of the discounters. Whilst there may yet be some
further short-term fluctuations in demand, as the effects of the
pandemic unwind, I am more excited for the future of this business
than ever. The growth opportunities for the Group over the next two
years remain very strong."
Gareth Jenkins, Chief Executive Officer of Accrol, added:
"The opportunities for a relentlessly efficient business, which
delivers great-value products, are growing, as the world
recalibrates in the aftershock of COVID-19 and consumers continue
to move away from brands which offer little value.
The discounters are recovering and Accrol is well positioned to
take full advantage of this. Given this combination I am confident
about the long-term prospects of the Group."
For further information, please contact:
Accrol Group Holdings plc
Dan Wright, Executive Chairman Via Belvedere Communications
Gareth Jenkins, Chief Executive Officer
Richard Newman, Chief Financial Officer
Zeus Capital Limited (Nominated Adviser
& Broker)
Dan Bate / Jordan Warburton Tel: +44 (0) 161 831 1512
Dominic King / 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, facial tissues, and wet
wipes to many of the UK's leading discounters and grocery retailers
across the UK. Following the recent acquisitions of LTC in
Leicester and JD in Flint, North Wales, the Group now operates from
six manufacturing sites, including four in Lancashire, which
generate revenues totalling c.16% of the GBP2.1bn UK retail tissue
market.
For more information, please visit www.accrol.co.uk
CHAIRMAN'S STATEMENT
The team at Accrol has delivered another strong set of results,
against a backdrop of unprecedented disruptions brought about by
the COVID-19 global pandemic, and successfully transformed the
business through a major acquisition and a major automation
programme.
The foundations for our growth ambitions are now laid and our
vision to build a diversified Group of size and scale, which is
focused on the broader private label personal hygiene and household
products markets and less exposed to input cost fluctuations, moves
ever closer.
During the year we completed two acquisitions, creating scale
and diversity, the Leicester Tissue Company ("LTC") in November
2020 (scale) and the John Dale ("JD") wet wipes business
(diversity) in April 2021. In addition, we further improved
efficiency with the completion of the automation of our Blackburn
facility; and have advanced significantly towards our ambition to
develop a UK paper mill, which will help to reduce the Group's
exposure to cost fluctuations and increase supply security as the
business grows.
The simplification measures executed over the last four years
are now bearing fruit with gross margins recovered to historical
levels, delivering adjusted EBITDA growth of 47%. Our relentless
drive for efficiency, however, is unabated and we will continue to
set ourselves challenging improvement targets.
With our market share now 15.9% (FY20: 13.1%) of the total UK
tissue market and a strong infrastructure for growth in place,
Accrol is increasingly well positioned to benefit in a
value-conscious, post COVID-19 world. We will continue to invest in
our people, automation and to reduce our impact on the environment
to ensure the sustainability of the business throughout its planned
growth. With all this in mind, I view the future of the business
with increasing confidence.
Results
Total revenues increased by 1.4% to GBP136.6m (FY20: GBP134.8m),
compared with an overall market decline of 1.2% as buying patterns
were disrupted by the pandemic; a combination of stockpiling in
early 2020 and the closure of many small businesses that would have
purchased toilet rolls from grocery retailers. Gross margin
improved significantly, rising to 27.7% (FY20: 21.9%) and despite
lower turnover growth in the period, adjusted EBITDA, rose by 47.0%
to GBP15.6m (FY20: GBP10.6m), largely due to continued improvements
in efficiency and further automation. Adjusted net debt reduced
again, ending the Period at GBP14.6m (FY20: GBP17.9m) compared with
GBP27.1m at 30 April 2019, and GBP33.8m at 30 April 2018.
Acquisitions
The Group made its first major acquisition in November 2020,
acquiring LTC for an initial consideration of GBP35.0m, funded via
a placing and open offer which raised GBP38.5m, and a maximum
contingent consideration of GBP6.8m which is subject to new
contractual earnings. LTC is a well invested business, delivering
revenue of GBP28.0m in the year ended 30 September 2020. The
acquisition was immediately earnings enhancing and increased
Accrol's share of the tissue market significantly. LTC has brought
scale to the Group, expanding overall capacity to above GBP210m in
revenue terms and providing a geographical advantage for more
efficient logistics.
In April 2021, the Group diversified with the acquisition of JD,
a flushable and biodegradable wet wipes business for GBP3.9m. This
strategic move into a high growth product has provided a well
invested platform from which the Group intends to build a sizable
business. In addition, it brings incremental volume to Accrol's
facial tissue business. The business operates from its owned
premises in Flint, North Wales, generating annualised revenue of
c.GBP6.0m.
Both LTC and JD are integrating well and further details are
given in the CEO statement.
Dividend
I am delighted to report that the Group is restoring its
dividend and returning to a progressive dividend policy, which has
been made possible by the continuous improvement in operational
efficiency and strong cash management. The proposed dividend per
share is 0.5 pence (FY20: nil).
The final dividend, which is subject to the approval of the
Company's shareholders, will be paid on 30 September 2021 to
shareholders on the register on 20 August 2021. The Company's
ordinary shares will become ex-dividend on 19 August 2021.
Our people
People are key to us achieving our ambitions, and, during the
year, we have continued to strengthen the team below senior
management, adding further strength in depth, and increasing skill
levels across the Group.
In February 2021, we strengthened the senior team further with
the appointment to the Board of Richard Newman as Chief Financial
Officer. Richard is a highly accomplished executive with 30 years'
experience in senior finance roles at FTSE 100 and FTSE 250
companies, Cadbury PLC, National Express Group PLC and DS Smith
PLC. The Board considers that Richard's proven leadership skills,
knowledge, and breadth of experience in M&A, FX Management and
FMCG, gained during his career with large PLCs, will significantly
strengthen the Group's finance function and be invaluable in the
delivery of the Group's significant expansion plans over the coming
years.
We value all our people and strive to demonstrate this in
actions rather than words. Through our operational efficiency
programme, we have seen output per head increase again by 9.4%. By
attracting the best operational talent to drive the Group, we have
reduced our cost base further (on a like for like basis). At 30
April 2018, the percentage of employees on or above the Real Living
Wage, as defined by the Living Wage Foundation, was only 35%. By 30
April 2020, we had increased this to 94%, primarily through
automation and rising skills throughout the business. The recent
acquisitions have reduced this figure, but we will continue to
strive to achieve 100%.
As automation of the business progresses higher skills are
required and, to support the building of a highly capable
workforce, we have implemented a new grading and training structure
that provides a highly visible career path within the Group and
ensures we attract and retain more skilled and talented people.
COVID-19
I would like to take this opportunity to thank all our
colleagues across the business for their unremitting hard work and
commitment. They have performed exceptionally throughout the
COVID-19 pandemic and delivered consistently despite the disruptive
backdrop.
As an essential supplier to critical supply chains, all sites
across the Group have remained fully operational throughout the
COVID-19 pandemic, with clear and effective procedures in place. To
help ensure that we managed the day-to-day safety of our employees
and were sensitive to their needs and concerns, we established a
COVID-19 Steering Group putting employees at the centre.
More recently, we have engaged a mental health professional
provider to offer support to employees across the Group, enhancing
awareness of the importance of self-care and developing mental
resilience.
Environmental, Social and Governance ("ESG")
I am delighted to report that we will launch our first
Sustainability Programme in September 2021. Our vision for ESG is
to be a carbon neutral business that improves the lives of its
people and communities, while working in partnership with suppliers
to deliver sustainable products to customers and consumers, and
consistent results to our investors. To achieve this, we have
created a reporting framework aligned to clear targets, KPIs and
guided by a key principle in each segment:
Environmental: Carbon neutrality, plastic free, sustainable
products.
Social: Positively impact the lives of our people and
communities.
Governance: Delivering long-term success.
The publication of the report, which will be posted on our
website, will be announced via RNS.
Current Trading and Outlook
We are pleased with the progress of the Group during the year,
which is on track to achieving its ambition to build a diversified
and efficient Group of size and scale in the broader private label
personal hygiene and household products markets. With our market
share at 15.9% and the management team's ability to deliver strong
returns, Accrol is increasingly well positioned to benefit in a
value-conscious world, post-pandemic, and to capitalise on the
recovery in tissue volumes and improving Discounter sales.
The Board's confidence is demonstrated by the Group's return to
dividend payments and the directors remains very positive about the
Group's strategy, markets and prospects, both in FY22 and
beyond.
Dan Wright
Executive Chairman
14 July 2021
CHIEF EXECUTIVE OFFICER'S REVIEW
Accrol has completed its transformation into a business that is
both capable of, and well positioned to, take significant advantage
of the recovering market as the UK exits lockdown. For the third
year in a row, the Group increased its market share, and for three
years in a row, it has improved gross margins and reduced net debt,
which now stands at below 1x FY21 adjusted EBITDA.
The Board is delighted with the improvement of the business over
a relatively short period of time and proud of what has been
achieved. However, we consider this to represent a new starting
point, which gives the business the right foundations on which to
build. Returns are substantially better, but there are still
further improvements to be made. Management's attention continues
to be focused on building a more diversified business, of size and
scale, that delivers significant consumer benefits through the
supply of great value products, and produces better returns for
shareholders.
The acquisitions of LTC and JD are helping deliver this
diversity and adding scale.
The relentless drive for increasing efficiency throughout the
organisation will continue. Over the first quarter of FY21, a new
IT system has successfully fulfilled every aspect of the business'
needs, from finance, procurement and operations, to stock
management. The full automation of the Blackburn tissue plant has
been completed, with robotization replacing all manual finished
goods movements. With a small element of automation to be completed
in Leyland in FY22, as a new machine arrives, the Group will have
three fully automated greenfield sites to achieve the lowest
possible operational cost base in the UK.
Strategy
Following the acquisition of LTC and a review of our full range
of products, we have simplified our ranges further. We have also
developed new products for toilet tissue, kitchen towel and facial
tissue, which, under independent testing, outperform the market
leaders for softness for toilet tissue and absorbency for kitchen
towel. We intend to launch a plastic free range in H1 FY22. The
Board believe this will be a game changer in the industry and is
fully supported by our customers. We will use this range to target
the major brands further and improve our e-commerce offering
significantly.
Our direct-to-consumer environmentally friendly product, Oceans
has sold at a rate well in advance of any other similar product in
its first year. It will be expanded to include a wider range of
paper-wrapped and environmentally friendly products. With its
accelerating rates of sale, we believe Oceans is on target to
become the market leader in its space in the next three years. Over
the next 12 months, we intend to invest in driving this range
further.
In addition, we have recently agreed an online strategy with a
large e-retail supplier in the UK. We expect this to grow over the
next three years to being one of our largest customers, supporting
their expectations of growth in the sector.
Market overview
Tissue sales have been volatile throughout the pandemic and
FY21.
As previously reported, Accrol sales for FY20 saw a benefit of
cGBP3m sales uplift as lockdown began, which unwound in FY21. The
UK market experienced a 1.3% reduction in total tissue sales for
FY21 with brands performing better than private label, due to
higher stock levels and a consumer move to the major retailers.
Private label sales were down 1.8% year on year although market
volumes, between brands and private label, remained broadly in line
with previous years with a 50:50 split between them.
Most retailers over FY21 have reported volatile sales revenues
with many showing a decline in sales revenue for FY21 compared to
FY20, with the exceptions of note coming from those businesses with
significant online capabilities, who have generally outperformed
the market during this Period. Accrol has the largest range of
retailer customers in the UK industry which enabled the Group to
benefit overall.
Customers
Over the two-year period from FY19 to FY21 Accrol revenues,
excluding Away from Home, have increased by 16.2% and market share
has grown by 390ppts, from 12% to 15.9%. This shows that our
strategy of delivering great-value products with great service
continues to be the right one. The widening range of customers also
ensured that the Group has again grown ahead of the market
throughout FY21 - the third year of growth for the Group.
With shoppers returning to instore purchasing, we and the major
discounters expect to see a significant uplift in tissue volumes in
H2 of FY22 with their confidence being demonstrated by the
acceleration of new store openings in FY22 and into FY23.
In FY21, we relaunched our toilet tissue range, which has seen
our sales in this part of the business outperformed the private
label market and maintained our overall market share of the total
tissue market at 18% despite an overall market decline of 2.5%.
This is as a result of the significant improvements in our
simplified range.
Within kitchen towel, our volumes grew 8% in line with the
industry again maintaining our market share at 15.8%. We have
recently completed the redesign and relaunch of a new kitchen towel
range which has been tested against and outperforms the leading
brand. Over the course of FY22, we expect this much simplified and
improved range to gain significant traction, in a similar way to
the Group's toilet tissue range in FY21.
Operations
The full automation of the Blackburn factory has been
transformational, having removed all manual movements of pallets
throughout the organisation.
Following the acquisition of LTC in November 2020, the Group
completed the full automation of this site. The new geographical
footprint of the enlarged Group has created more efficiencies,
enabling the Group to reduce its logistics costs significantly by
allocating production to maximise the supply chain efficiently for
its UK wide customer base.
The Group's shift patterns and working practices were also
reviewed and changed. This generated ongoing cost savings, which
helped drive the reduction in operating costs achieved in FY21. The
changes also give the Group "sprint" capacity, enabling it to
benefit further from the promotional demands of the industry going
forward.
The final automation of the Leyland factory, planned for FY22,
and a further machine investment at this site will give the Group
further headroom capacity. This will complete the major investment
requirements for the tissue converting business, which will then
require very limited capital going forward. The result for the
organisation will be four toilet tissue productions sites in total
(two in Blackburn; one in Leyland and one in Leicester) that have a
geographical advantage compared to our UK competitors. They are, in
effect, greenfield site operations and with the latest consistent
machine technology and an overall capacity above GBP230m, in
revenue terms, including the facial tissue plant.
Our paper mill development continues at pace with significant
advancement across all aspects. This is a major project and we will
update the market as our plans progress. We have finalised the
specifications of the machine and the building and we are currently
running a selection process for the mill's location. This machine
will be a UK leader in efficiency, quality and carbon neutrality.
No additional funding is expected to be required from shareholders
to deliver this investment.
Acquisitions & Integrations
Following the acquisition of LTC in November 2020, we have
completed the integration of the business and expect to deliver
annualised synergy benefits of GBP3.0m - three times greater than
originally anticipated at the time of the acquisition. These are
being driven through operational improvements across the wider
group, including logistics, operational simplification, and
procurement. The revenue synergies, which are measured over an
agreed period of time, will be lower during this Period, due to the
impact of the pandemic, but are expected to benefit the Group in
the longer term
In April 2021, the Group acquired the JD business in North
Wales, a highly scalable flushable and bio-degradable wet wipe
business. Early integration activities have progressed ahead of
schedule and initial synergies are expected to be cGBP1m in the
first full year of ownership. These will be delivered through
operational synergies with the Group's existing facial tissue
business, procurement benefits of the enlarged Group,
simplification of organisation, and revenue growth opportunities,
as the product offering to Accrol's existing customer base now
includes its range of wet wipes. The Group's expectation with
additional capital investment is to build a wet wipe business of
significant scale by 2024.
People and culture
Our Company values remain at the core of everything the business
does - we challenge, we are honest, we add value, and we deliver.
Accrol's business model is based on being the lowest cost producer
in the marketplace. However, this is not at the expense of our
employees' welfare or their ability to grow within the
organisation. Building on welfare changes already made in FY21, the
Group has just launched an employee share save scheme to enable all
employees to benefit from the Group's future success. Whilst
take-up is expected to be modest, the positive reaction throughout
the organisation continues to add to the quality of business we are
building.
Health and safety / COVID-19
Health and Safety is a business fundamental for Accrol and this
remains top of our agenda. Following the relentless work and focus
that has gone into this area we are starting to see improvements
through the sites. In FY21, we have seen total accidents levels
drop by 26% to an all-time low. In addition, safety observations
are up 42%.
The achievements of all our employees at every site is something
we are incredibly proud of. They have responded magnificently
during the pandemic, keeping all our operations open and
maintaining the highest standards in service and product quality
for our customers. The pandemic is one of the biggest challenges
ever to hit the UK. To help transform a business, build the
foundations for a great one, and be part of a team that has
performed throughout this COVID-19 crisis is humbling.
Outlook
The long-term outlook for the business is strong and the
opportunity to increase our share in our core markets remains
significant. The Group we have built over the last four years has
firm foundations from which we can accelerate growth and,
importantly, deliver strong shareholder returns. Whilst we continue
to supply great-value products with excellent service in this
market, we are continuing to actively explore opportunities to
scale the core business, as well as to diversify into new markets
and products, currently serviced by brands, in which we know our
better-value offering will appeal to the consumer.
The Group is well positioned for the long-term future. With no
further significant capital requirements for the Tissue Converting
division and the Group able to use its own resources for its
planned investment in a state-of-the-art mill, due to be
operational by 2024, the Group is in a very strong position to
continue to grow.
FY22 has begun well with increased sales month-on-month and an
improvement in year-on-year sales. The Group has also recently
secured additional new volume, which will impact H2 FY22
positively. With the tissue market showing strong but steady signs
of recovery as panic buying unwinds, the Board is confident that
Group will deliver forecast revenue growth for FY22, albeit with an
increased H2 weighting, which also co-ordinates with the
installation of our final machine in Leyland. These exit run rates
give the board increased confidence for the FY23 revenues and
returns.
We look to the long-term future with increasing confidence.
Gareth Jenkins
Chief Executive Officer
14 July 2021
CHIEF FINANCIAL OFFICER'S REVIEW
Summary
The overall performance of the Group continued to improve and
strengthen in FY21. Whilst this COVID-19 pandemic required
significant changes to working practices for factory and
office-based employees, the business continued without interruption
to provide essential products to our customers.
The integration of Leicester Tissue Company ("LTC"), acquired in
November 2020, and John Dale ("JD"), acquired in April 2021,
continue to make excellent progress, benefitting from the Group's
established manufacturing and commercial best practice
programmes.
Trading results
Group revenue increased by 1.4% to GBP136.6m (FY20: GBP134.8m),
although volumes were more volatile than normal, reflecting changes
in consumer shopping habits during the pandemic. Short-term panic
buying in March and April 2020, during the first national lockdown,
strengthened FY20 volumes leading to a weaker H1 as demand
normalised. H2 volumes were strengthened by the impact of the
Group's two acquisitions. The total tissue market declined by 1.2%
and our market share increased to 15.9% from 13.1% in FY20.
Gross margins improved again to 27.7% reflecting the ongoing
work to improve productivity and reduce operating costs,
underpinned by our investment in new systems and operating
processes.
Administration costs have increased by GBP8.3m and include
specific one-off costs of GBP2.9m related to acquisitions made
during the year. There was a further GBP3.0m increase related to
non-cash items (depreciation, amortisation and share based
payments). Other cost increases reflect the larger scale of the
business following the acquisitions during the year. Distribution
costs were similar to last year and represented 8.4% of total
revenues (FY20 8.5%).
Adjusted EBITDA improved by 47% to GBP15.6m (FY20: GBP10.6m)
whilst operating losses increased to GBP0.6m (FY20: loss of
GBP0.2m), reflecting the increase in operating costs above.
Separately disclosed items
Separately disclosed items totalled GBP4.7m, compared with
GBP2.2m in FY20.
In November 2020, the Group acquired Leicester Tissue Company,
whose principal activity is paper tissue converting. Professional
fees of GBP1,925,000 arose as a result of the transaction.
In April 2021, the Group acquired John Dale, whose principal
activity is the manufacture of wet wipes and facial tissue.
Professional fees of GBP225,000 arose as a result of the
transaction.
Upon completion of the acquisition of LTC and JD, the Group
immediately commenced a structured integration programme. This
covered all key areas of the business including external
relationships with customers and suppliers, as well as internal
functional reviews to consolidate or integrate activities where
appropriate. Project management costs of GBP314,000 included expert
consultancy advice to support the integration process. Other
incremental costs to support this activity included GBP218,000 of
labour and GBP162,000 of operational costs, largely relating to
transportation and short-term paper transfers. Incremental audit
fees of GBP30,000 have been necessary due to added complexity.
Following the significant progress made during FY20 to transform
the manufacturing capability of the business, it was appropriate to
review the whole organisation to ensure it was aligned with
Accrol's future growth strategy and to deliver world class
standards in safety and performance every day. The final elements
of the business turnaround plan were completed during the year with
significant capital investment in automation at our Blackburn
manufacturing site. The complexity of maintaining a 24/7 operation
during the implementation of this substantial project resulted in
an element of incremental labour costs as service levels needed to
be maintained despite the inevitable disruption to normal
operations during the period of transition. Once the project had
been completed a number of redundancies were incurred as the
overall headcount reduced, reflecting the benefits from the
automation investment. The total labour cost of the above was
GBP948,000, with associated fees of GBP86,000.
The COVID-19 pandemic has continued to have a significant impact
on how the Group conducts its operations, and on the availability
of resource and personnel, to continue to function as an essential
provider of products to UK retailers. The Group plans on a certain
level of resource, factoring in normal levels of absence and
holiday, to maintain a 24/7 manufacturing operation that is as
efficient as possible. High levels of absence during the pandemic,
due to illness or self-isolation, required incremental labour
resources to be deployed to maintain service levels to our
customers through additional overtime, additional temporary labour
and the deferment of holidays - all of which resulted in additional
costs of GBP292,000.
Additional labour costs of GBP153,000 were incurred as a
dedicated team of people worked on the practical changes that were
required in each of our factories, warehouses, and offices to
ensure we maintained fully compliant working environments and to
protect our employees. Extra logistics, PPE, cleaning and security
costs of GBP225,000 were also incurred.
Interest, tax and earnings per share
Net finance costs were GBP1.9m (FY20: GBP1.7m). The Group also
recorded a deferred tax charge of GBP0.1m (FY20: credit of
GBP0.3m).
The loss before tax was GBP2.6m (FY20: GBP1.9m), due to flow
through of higher acquisition related costs. Adjusted profit before
tax of GBP9.1m (FY20: GBP4.7m) was higher due to the growth in
adjusted operating profit.
Basic losses per share were 1.1 pence (FY20: 0.8 pence)
reflecting higher amortisation costs and adjusting items. Adjusted
diluted earnings per share were 2.7 pence (FY20: 1.7 pence), an
increase of 59% driven by the growth in adjusted EBITDA. Earnings
per share were impacted in the period by the equity issue in
November 2020 which raised funds for the LTC acquisition.
Dividend
The proposed final dividend is 0.5 pence (FY20: nil).
Acquisitions
This year the Group made significant strategic steps with the
acquisition of LTC in November 2020 and JD in April 2021.
The acquisition of LTC, following a successful placing of
ordinary shares in the market and an open offer, added valuable new
assets and capacity to the Group and new and complementary
customers. The initial consideration for LTC was GBP35.0m, with a
maximum contingent consideration of GBP6.8m, which is subject to
new contractual earnings.
The acquisition of JD provides an established and scalable
platform on which to enter the wet wipes market, a high growth and
complementary sector of the tissue market. The total net
consideration of GBP3.4m was funded from the Group's cash
resources.
Cashflow
The Group achieved a further improvement in its adjusted net
debt position of GBP14.6m, an improvement of GBP3.3m on the prior
year (FY20: GBP17.9m). There was a GBP17.6m cashflow from
operations (FY20: GBP19.4m) reflecting the improved trading
performance and a continued improvement in working capital, despite
an increase in raw material and finished good stock levels to
support service responsiveness.
Balance sheet
Property, plant and equipment all increased, reflecting the
acquisitions during the year and continued investment in our core
machines and supporting infrastructure. We have significantly
invested in automation at our Blackburn manufacturing facility, to
improve productivity, operational flexibility, and to enhance
customer service.
Significant progress has also been made in further improving the
IT infrastructure and critical manufacturing systems including the
implementation of NetSuite, which went live in July 2020.
Intangible assets represent mostly goodwill and customer
relationships that have both increased because of the acquisitions
of LTC and JD.
Goodwill is not amortised but is subject to an annual impairment
review. After considering various scenarios and sensitivities, the
Directors concluded that no impairment is required. During the year
the Group invested further in product development and innovation
including 'Magnum' and 'Oceans'. Together they created an
intangible asset of GBP0.7m (FY20: GBP0.8m) which will be amortised
over the anticipated life of the products.
COVID-19
The Group has not furloughed any employees during the financial
year, nor during any stage of the pandemic. The Group has not been
in receipt of any COVID-19 loans although it has taken advantage of
the short-term VAT Payment Deferral Scheme, which was launched in
March 2020, which is now being repaid.
Richard Newman
Chief Financial Officer
14 July 2021
CONSOLIDATED INCOME STATEMENT FOR YEARED 30 APRIL 2021
2021 2020
Note GBP'000 GBP'000
------------------------------------------ ----- --------- ----------
Revenue 4 136,594 134,773
----- --------- ----------
Cost of sales (98,710) (105,239)
------------------------------------------ ----- --------- ----------
Gross profit 37,884 29,534
----- --------- ----------
Administration expenses (27,072) (18,810)
----- --------- ----------
Distribution costs (11,424) (11,490)
----- --------- ----------
Other income - 585
------------------------------------------ ----- --------- ----------
Operating loss (612) (181)
------------------------------------------ ----- --------- ----------
Analysed as:
----- --------- ----------
- Adjusted EBITDA(1) 15,644 10,641
------------------------------------------ ----- --------- ----------
- Depreciation 9 (4,786) (4,201)
------------------------------------------ ----- --------- ----------
- Amortisation 11 (3,520) (2,040)
------------------------------------------ ----- --------- ----------
- Share based payments (3,245) (2,351)
------------------------------------------ ----- --------- ----------
- Separately disclosed items 5 (4,705) (2,230)
------------------------------------------ ----- --------- ----------
Operating loss (612) (181)
----- --------- ----------
Finance costs 7 (2,196) (1,977)
----- --------- ----------
Finance income 7 242 267
------------------------------------------ ----- --------- ----------
Loss before tax (2,566) (1,891)
----- --------- ----------
Tax (charge)/credit 8 (74) 312
------------------------------------------ ----- --------- ----------
Loss for the year attributable to equity
shareholders (2,640) (1,579)
------------------------------------------ ----- --------- ----------
Earnings per share Pence Pence
------------------------------------------ ----- --------- ----------
Basic loss per share 6 (1.1) (0.8)
----- --------- ----------
Diluted loss per share 6 (1.1) (0.8)
------------------------------------------ ----- --------- ----------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR YEARED 30
APRIL 2021
2021 2020
GBP'000 GBP'000
------------------------------------------------------- -------- --------
Loss for the year attributable to equity shareholders (2,640) (1,579)
-------- --------
Other comprehensive income for the year
-------- --------
Revaluation of derivative financial instruments
(2) - (50)
-------- --------
Tax relating to components of other comprehensive
income - 9
------------------------------------------------------- -------- --------
Total comprehensive loss attributable to equity
shareholders (2,640) (1,620)
------------------------------------------------------- -------- --------
The notes are an integral part of these consolidated financial
statements.
(1) Adjusted EBITDA, which is defined as profit before finance
costs and income, tax, depreciation, amortisation, share based
payments and separately disclosed items, is a non-GAAP metric used
by management and is not an IFRS disclosure (see note 16).
(2) Items that could potentially be reclassified subsequently to profit and loss.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 APRIL
2021
2021 2020
Note GBP'000 GBP'000
--------------------------------------- ----- ----------- ---------
ASSETS
----- ----------- ---------
Non-current assets
----- ----------- ---------
Property, plant and equipment 9 63,341 39,740
----- ----------- ---------
Lease receivables 10 5,027 5,703
----- ----------- ---------
Intangible assets 11 61,763 26,877
----- ----------- ---------
Deferred tax assets 8 - 288
--------------------------------------- ----- ----------- ---------
Total non-current assets 130,131 72,608
--------------------------------------- ----- ----------- ---------
Current assets
----- ----------- ---------
Inventories 23,185 9,373
----- ----------- ---------
Trade and other receivables 26,480 20,680
----- ----------- ---------
Current tax asset - 40
----- ----------- ---------
Lease receivables 10 675 649
----- ----------- ---------
Cash and cash equivalents 7,604 8,147
----- ----------- ---------
Derivative financial instruments - 28
--------------------------------------- ----- ----------- ---------
Total current assets 57,944 38,917
--------------------------------------- ----- ----------- ---------
Total assets 188,075 111,525
--------------------------------------- ----- ----------- ---------
Current liabilities
----- ----------- ---------
Borrowings 12 (12,349) (18,157)
----- ----------- ---------
Trade and other payables (47,031) (23,988)
----- ----------- ---------
Financial instruments (120) -
----- ----------- ---------
Income taxes (300) -
----- ----------- ---------
Provisions (7,321) (158)
--------------------------------------- ----- ----------- ---------
Total current liabilities (67,121) (42,303)
--------------------------------------- ----- ----------- ---------
Total assets less current liabilities 120,954 69,222
--------------------------------------- ----- ----------- ---------
Non-current liabilities
----- ----------- ---------
Borrowings 12 (30,851) (23,827)
----- ----------- ---------
Deferred tax liabilities 8 (3,666) -
----- ----------- ---------
Provisions - (383)
--------------------------------------- ----- ----------- ---------
Total non-current liabilities (34,517) (24,210)
--------------------------------------- ----- ----------- ---------
Total liabilities (101,638) (66,513)
--------------------------------------- ----- ----------- ---------
Net assets 86,437 45,012
--------------------------------------- ----- ----------- ---------
Capital and reserves
----- ----------- ---------
Share capital 13 311 195
----- ----------- ---------
Share premium 108,782 68,015
----- ----------- ---------
Capital redemption reserve 27 27
----- ----------- ---------
Retained earnings (22,683) (23,225)
--------------------------------------- ----- ----------- ---------
Total equity shareholders' funds 86,437 45,012
--------------------------------------- ----- ----------- ---------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR YEARED 30 APRIL
2021
Retained
Capital earnings/
-------------------------------- -------- -------- -------- ----------- ------------- --------
Share Share Hedging redemption (accumulated Total
-------------------------------- -------- -------- -------- ----------- ------------- --------
capital premium reserve reserve losses) equity
-------------------------------- -------- -------- -------- ----------- ------------- --------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- -------- -------- -------- ----------- ------------- --------
Balance at 30 April 2019 195 68,015 41 27 (23,956) 44,322
--------------------------------- -------- -------- -------- ----------- ------------- --------
Effect of adoption of
IFRS 16 (net of tax) - - - - 314 314
--------------------------------- -------- -------- -------- ----------- ------------- --------
Balance at 1 May 2019 195 68,015 41 27 (23,642) 44,636
--------------------------------- -------- -------- -------- ----------- ------------- --------
Comprehensive (expense)/income
-------------------------------- -------- -------- -------- ----------- ------------- --------
Loss for the year - - - - (1,579) (1,579)
--------------------------------- -------- -------- -------- ----------- ------------- --------
Revaluation of derivative
financial instruments - - (50) - - (50)
--------------------------------- -------- -------- -------- ----------- ------------- --------
Tax relating to components
of other comprehensive
income - - 9 - - 9
--------------------------------- -------- -------- -------- ----------- ------------- --------
Total comprehensive expense - - (41) - (1,579) (1,620)
--------------------------------- -------- -------- -------- ----------- ------------- --------
Transactions with owners
recognised directly in
equity
-------------------------------- -------- -------- -------- ----------- ------------- --------
Share based payments (net
of tax) - - - - 1,996 1,996
--------------------------------- -------- -------- -------- ----------- ------------- --------
Total transactions recognised
directly in equity - - - - 1,996 1,996
--------------------------------- -------- -------- -------- ----------- ------------- --------
Balance at 30 April 2020 195 68,015 - 27 (23,225) 45,012
--------------------------------- -------- -------- -------- ----------- ------------- --------
Comprehensive (expense)/income
-------------------------------- -------- -------- -------- ----------- ------------- --------
Loss for the year - - - - (2,640) (2,640)
--------------------------------- -------- -------- -------- ----------- ------------- --------
Total comprehensive expense - - - - (2,640) (2,640)
--------------------------------- -------- -------- -------- ----------- ------------- --------
Transactions with owners
recognised directly in
equity
-------------------------------- -------- -------- -------- ----------- ------------- --------
Proceeds from shares issued 116 42,494 - - - 42,610
--------------------------------- -------- -------- -------- ----------- ------------- --------
Transaction costs - (1,727) - - - (1,727)
--------------------------------- -------- -------- -------- ----------- ------------- --------
Share based payments (net
of tax) - - - - 3,163 3,163
--------------------------------- -------- -------- -------- ----------- ------------- --------
Other taxation - - - - 19 19
--------------------------------- -------- -------- -------- ----------- ------------- --------
Total transactions recognised
directly in equity 116 40,767 - - 3,182 44,065
--------------------------------- -------- -------- -------- ----------- ------------- --------
Balance at 30 April 2021 311 108,782 - 27 (22,683) 86,437
--------------------------------- -------- -------- -------- ----------- ------------- --------
CONSOLIDATED CASHFLOW STATEMENT FOR THE YEARED 30 APRIL 2021
2021 2020
Note GBP'000 GBP'000
----------------------------------------------------- ----- ---------- ----------
Cashflows from operating activities
----- ---------- ----------
Operating loss (612) (181)
----- ---------- ----------
Adjustment for:
----- ---------- ----------
Depreciation 9 4,786 4,201
----- ---------- ----------
Profit on disposal of property, plant and equipment - (585)
----- ---------- ----------
Amortisation 11 3,520 2,040
----- ---------- ----------
Grant income - (578)
----- ---------- ----------
Share based payments 3,245 2,351
----------------------------------------------------- ----- ---------- ----------
Operating cashflows before movements in working
capital 10,939 7,248
----- ---------- ----------
(Increase)/decrease in inventories (8,553) 1,789
----- ---------- ----------
Decrease in trade and other receivables 604 2,251
----- ---------- ----------
Increase in trade and other payables 14,800 8,176
----- ---------- ----------
Decrease in provisions (418) (254)
----- ---------- ----------
Decrease in derivatives 148 22
----------------------------------------------------- ----- ---------- ----------
Cash generated from operations 17,520 19,232
----- ---------- ----------
Tax received 40 197
----------------------------------------------------- ----- ---------- ----------
Net cashflows generated from operating activities 17,560 19,429
----------------------------------------------------- ----- ---------- ----------
Cashflows from investing activities
----- ---------- ----------
Purchase of property, plant and equipment (9,112) (3,680)
----- ---------- ----------
Proceeds from sale of property, plant and equipment - 650
----- ---------- ----------
Purchase of intangible assets (1,702) (3,256)
----- ---------- ----------
Acquisition of subsidiaries net of cash acquired (32,235) -
----- ---------- ----------
Receipt of capital element of leases 650 623
----- ---------- ----------
Lease interest received 242 267
----------------------------------------------------- ----- ---------- ----------
Net cashflows used in investing activities (42,157) (5,396)
----------------------------------------------------- ----- ---------- ----------
Cashflows from financing activities
----- ---------- ----------
Proceeds of issue of ordinary shares 42,610 -
----- ---------- ----------
Cost of raising equity (1,727) -
----- ---------- ----------
Amounts received from factoring facility 151,645 161,650
----- ---------- ----------
Amounts paid to factoring facility (161,489) (163,523)
----- ---------- ----------
New leases in year 1,694 -
----- ---------- ----------
Repayment of capital element of leases (5,764) (4,595)
----- ---------- ----------
Repayment of bank loans (997) -
----- ---------- ----------
Transaction costs of RCF (413) -
----- ---------- ----------
Lease interest paid (844) (882)
----- ---------- ----------
Other interest paid (661) (712)
----------------------------------------------------- ----- ---------- ----------
Net cashflows used in financing activities 24,054 (8,062)
----------------------------------------------------- ----- ---------- ----------
Net increase in cash and cash equivalents (543) 5,971
----- ---------- ----------
Cash and cash equivalents at beginning of the
year 8,147 2,176
----------------------------------------------------- ----- ---------- ----------
Cash and cash equivalents at year end 7,604 8,147
----------------------------------------------------- ----- ---------- ----------
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION FOR THE YEARED
30 APRIL 2021
1. General information
Accrol Group Holdings plc (the "Company") was incorporated with
Company number 09019496. It is a public company limited by shares
and is domiciled in the United Kingdom. The registered address of
the Company is Delta Building, Roman Road, Blackburn, Lancashire,
BB1 2LD.
The Company's subsidiaries are Accrol UK Limited, Accrol
Holdings Limited, Accrol Papers Limited, LTC Parent Limited,
Leicester Tissue Company Limited, Art Tissue Ltd, John Dale
(Holdings) Ltd and John Dale Limited which together with the
Company form the Accrol Group Holdings plc Group (the "Group").
2. Summary of significant accounting policies
A summary of the significant accounting policies is set out
below. These have been applied consistently in the financial
statements.
Basis of preparation
The consolidated financial statements of the Group have been
prepared in accordance with International Accounting Standards in
conformity with the requirements of the Companies Act 2006.
The consolidated financial statements have been prepared on a
going concern basis under the historical cost convention, as
modified by financial liabilities (including derivative
instruments) at fair value through profit or loss. The consolidated
financial statements are presented in pounds sterling and all
values are rounded to the nearest thousand pounds, except where
otherwise indicated.
New standards, interpretations and amendments effective in the
year
New standards that have been adopted in the financial statements
for the year ended 30 April 2021, but have not had a significant
impact on the Group are as follows:
-- IAS 1 'Presentation of Financial Statements' and IAS 8
'Accounting Policies, Changes in Accounting Estimates and Errors'
(Amendment - Definition
of Material)
-- IFRS 3 'Business Combinations' (Amendment - Definition of Business)
-- Revised Conceptual Framework for Financial Reporting
-- IBOR Reform and its Effects on Financial Reporting - Phase 1
-- COVID-19-Related Rent Concessions (Amendments to IFRS 16)
New standards, interpretations and amendments not yet
effective
There are a number of standards, amendments to standards, and
interpretations which have been issued by the IASB that are
effective in future accounting periods that the group has decided
not to adopt early. The Group will undertake an assessment of the
impact of the following standards and interpretations in due
course, although they are not expected to have a material impact on
the consolidated financial statements in the year of applications
when the relevant standards come into effect.
Effective for the period beginning 1 May 2021:
-- Interest Rate Benchmark Reform - IBOR 'phase 2' (Amendments
to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)
Effective for the period beginning 1 May 2022:
-- Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37);
-- Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16);
-- Annual Improvements to IFRS Standards 2018-2020 (Amendments
to IFRS 1, IFRS 9, IFRS 16 and IAS 41); and
-- References to Conceptual Framework (Amendments to IFRS 3)
Going concern
The Chairman's Statement and the Chief Executive's Review
outline the business activities of the Group along with the factors
which may affect its future development and performance. The
Financial Review discusses the Group's financial position, along
with details of cashflow and liquidity. In summary, the Group
generated operating cash of GBP17.6m and reduced adjusted net debt
from GBP17.9m to GBP14.6m, whilst significantly investing in
automation and manufacturing infrastructure. The Directors
recognise that as of 30 April 2021, the Group has net current
liabilities of GBP9.2m (2020: net current liabilities of GBP3.4m),
which was considered as part of this review. However, this includes
GBP6.6m of contingent consideration that is likely to be settled by
the issue of equity.
As in previous years, the Group's forecasted 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 did experience some minor operational disruption
resulting from Brexit, but this is not expected to impact the
business going forward. The Group's forecasted performance has been
tested for downside scenarios, including reverse stress tests,
relating to sales volume, parent reel prices and foreign exchange
rate movements. It also considered the impact of the COVID-19
pandemic on forecasted performance. The Group considered the
likelihood of such events occurring together with the relevant
impact thereof and were satisfied that if a scenario partly or
fully takes place the Group has mitigating options available to
maintain liquidity and continue its operations.
The Group is currently operating comfortably within its
covenants. It also considered the impact of the above downside
scenarios on covenant headroom. The directors were satisfied that
after evaluating the probability of events and available mitigating
actions, covenant breaches would be unlikely. At 30 April 2021,
available funds were GBP12.1m, with further details of the
borrowing facilities set out in note 12.
The Directors confirm that, after due consideration, they have a
reasonable expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future. For
this reason, they continue to adopt the going concern basis in
preparing the financial statements.
3. Significant accounting judgements, estimates and
assumptions
The preparation of the financial information in accordance with
IFRS requires estimates and assumptions to be made that affect the
value at which certain assets and liabilities are held at the
balance sheet date and also the amounts of revenue and expenditure
recorded in the year. The Directors believe the accounting policies
chosen are appropriate to the circumstances and that the estimates,
judgements and assumptions involved in its financial reporting are
reasonable.
Accounting estimates made by the Group's management are based on
information available to management at the time each estimate is
made. Accordingly, actual outcomes may differ materially from
current expectations under different assumptions and
conditions.
The estimates and assumptions for which there is a significant
risk of a material adjustment to the financial information within
the next financial year are set out below.
Critical accounting judgements in applying the entity's
accounting policies
Business combinations
Significant judgement is exercised in determining the forecasted
performance targets used to calculate the contingent consideration
and the discount rates and weighted average cost of capital to
calculate the fair value of the contingent consideration.
The Group exercised judgement in identifying and valuing
intangible assets such as customer relationships. This involved
calculating discounted cash flows, applying appropriate attrition
rates and discount rates.
Development costs
The Group exercises judgement in determining whether development
costs incurred meet the criteria of IAS 38 'Intangible Assets' and
hence capitalised. The criteria where judgement is most required is
around determining the technical feasibility of completing the
project, the availability of adequate technical, financial, and
other resources to complete and the existence of the market. Not
meeting the criteria would result in these costs being expensed as
incurred.
Separately disclosed items
During the course of the year the Group incurred expenditure
that is material and considered worthy of being separately
disclosed. In order to better explain the underlying performance of
the business, management makes a judgement as to which costs should
be separately disclosed. Separately disclosing costs that are not
appropriate to do so leads to a risk of mis-stating the Group's
underlying performance.
Critical accounting estimates in applying the entity's
accounting policies
Goodwill and intangible asset impairment
The Group is required to test, on an annual basis, whether
goodwill has suffered any impairment based on the recoverable
amount of its three CGUs. The recoverable amount is determined
based on value in use calculations. The use of this method requires
the estimation of a number of key variables in order to calculate
the present value of the cashflows, including:
-- future underlying cashflows;
-- the determination of a pre-tax discount rate; and
-- long-term growth rates.
The future underlying cashflows remain sensitive to a number of
key variables, including the sterling/USD exchange rate and parent
reel pricing, both of which are inherently difficult to predict,
and which could have a significant effect (positive or negative) on
the Group's cashflows. COVID-19 pandemic has increased the
variability in this calculation.
More information including carrying values is included in note
11.
Right-of-use assets
Significant judgement is exercised in determining the
incremental borrowing rate. IFRS 16 requires the borrowing rate
should represent what the lessee would have to pay to borrow over a
similar term and with similar security, the funds necessary to
obtain an asset of similar value in a similar economic
environment.
Deferred taxation
The Group has recognised deferred tax assets in respect of
losses incurred in the current and prior year. This requires the
estimation of future profitability in determining the
recoverability of these assets. Specifically, a range of
assumptions underpin the profit and cashflow forecasts for the next
12 months, including those around parent reel prices, the
successful management of any foreign exchange downside and the
maintenance of the current strong customer relations. As described
above, the Group's trading performance remains sensitive to a
number of key variables which could have a significant effect
(positive or negative) on the Group's cashflows.
4. Revenue
The analysis by geographical area of destination of the Group's
revenue is set out below:
2021 2020
GBP'000 GBP'000
---------------- -------- --------
United Kingdom 127,107 128,078
-------- --------
Europe 9,487 6,695
---------------- -------- --------
136,594 134,773
---------------- -------- --------
5. Separately disclosed items
2021 2020
GBP'000 GBP'000
-------------------------------------------------- -------- --------
Acquisition professional fees 2,150 -
--------------------------------------------------- -------- --------
Acquisition integration costs 724 -
--------------------------------------------------- -------- --------
Acquisition related items 2,874 -
--------------------------------------------------- -------- --------
Operational reorganisation and restructure 1,034 856
--------------------------------------------------- -------- --------
Loss on derivative financial instruments - 639
--------------------------------------------------- -------- --------
COVID-19 costs 670 209
--------------------------------------------------- -------- --------
FCA investigation legal costs 22 125
--------------------------------------------------- -------- --------
Management reorganisation and restructure - 118
--------------------------------------------------- -------- --------
Setting up and subsequent exit from Skelmersdale
site 12 90
--------------------------------------------------- -------- --------
Other items 93 193
--------------------------------------------------- -------- --------
Other items 1,831 2,230
--------------------------------------------------- -------- --------
4,705 2,230
-------------------------------------------------- -------- --------
A summary of the separately disclosed items for the current year
is as follows.
Acquisition costs GBP2,150,000 (2020: GBPnil)
In November 2020, the Group acquired Leicester Tissue Company,
whose principal activity is paper tissue converting. Professional
fees of GBP1,925,000 arose as a result of the transaction.
In April 2021, the Group acquired John Dale, whose principal
activity is the manufacture of wet wipes and facial tissue.
Professional fees of GBP225,000 arose as a result of the
transaction.
Integration GBP724,000 (2020: GBPnil)
Upon completion of the acquisition of LTC and JD, the Group
immediately commenced a structured integration programme. This
covered all key areas of the business including external
relationships with customers and suppliers, as well as internal
functional reviews to consolidate or integrate activities where
appropriate. Project management costs of GBP314,000 included expert
consultancy advice to support the integration process. Other
incremental costs to support this activity included GBP218,000 of
labour and GBP162,000 of operational costs, largely relating to
transportation and short-term paper transfers. Incremental audit
fees of GBP30,000 have been necessary due to added complexity.
Operational reorganisation and restructure GBP1,034,000 (2020:
GBP856,000)
Following the significant progress made during FY20 to transform
the manufacturing capability of the business, it was appropriate to
review the whole organisation to ensure it was aligned with
Accrol's future growth strategy and to deliver world class
standards in safety and performance every day. The final elements
of the business turnaround plan were completed during the year with
significant capital investment in automation at our Blackburn
manufacturing site. The complexity of maintaining a 24/7 operation
during the implementation of this substantial project resulted in
an element of incremental labour costs as service levels needed to
be maintained despite the inevitable disruption to normal
operations during the period of transition. Once the project had
been completed a number of redundancies were incurred as the
overall headcount reduced, reflecting the benefits from the
automation investment. The total labour cost of the above was
GBP948,000, with associated fees of GBP86,000.
COVID-19 GBP670,000 (2020: GBP209,000)
The COVID-19 pandemic has continued to have a significant impact
on how the Group conducts its operations, and on the availability
of resource and personnel, to continue to function as an essential
provider of products to UK retailers. The Group plans on a certain
level of resource, factoring in normal levels of absence and
holiday, to maintain a 24/7 manufacturing operation that is as
efficient as possible. High levels of absence during the pandemic,
due to illness or self-isolation, required incremental labour
resources to be deployed to maintain service levels to our
customers through additional overtime, additional temporary labour
and the deferment of holidays - all of which resulted in additional
costs of GBP292,000.
Additional labour costs of GBP153,000 were incurred as a
dedicated team of people worked on the practical changes that were
required in each of our factories, warehouses, and offices to
ensure we maintained fully compliant working environments and to
protect our employees. Extra logistics, PPE, cleaning and security
costs of GBP225,000 were also incurred.
A summary of the separately disclosed items for the prior year
is as follows:
Operational reorganisation and restructure
The prior year saw the final stages of the complex and
comprehensive turnaround activities completed. This included costs
of GBP748,000 associated principally with additional labour and
material costs, as legacy performance issues were corrected. The
business undertook a full review of the products the site
manufactured and the way it was planned, an assessment of the
leadership capabilities and reassignment, a skills assessment and
training programme, maintenance regimes and a capital investment
plan for key upgrades. Transportation and storage costs of
GBP108,000 were also incurred in supporting these activities.
Loss on derivative financial instruments
Costs of GBP639,000 were recorded in the period as the business
experienced significant positive changes to its supplier terms as a
result of improved trading / turnaround actions. This happened much
quicker than expected, giving an excess of contract requirements
which were subsequently cancelled.
COVID-19
The Group incurred incremental costs in March and April 2020,
principally relating to overtime and temporary labour of
GBP119,000, to cover employees who were in isolation. Additional
logistics, PPE, cleaning and security costs of GBP90,000 were also
incurred.
FCA investigation legal costs
As previously disclosed, the FCA initiated an investigation into
statements made by the Company between 10 June 2016 and September
2018. Significant consultancy and legal costs associated with the
management of this investigation have been incurred, and the
investigation was closed with no action to be taken.
Management reorganisation and restructure
In the early part of the previous financial year, final dual
resourcing and legal costs of GBP118,000 were incurred as
activities relating to financial planning/reporting and procurement
were concluded.
6. Loss per share
Basic loss per share
The basic loss per share is calculated by dividing the loss
attributable to ordinary equity holders of the Parent by the
weighted average number of ordinary shares outstanding during the
year.
2021 2020
GBP'000 GBP'000
------------------------------------------------ -------- --------
Loss for the year attributable to shareholders (2,640) (1,579)
------------------------------------------------- -------- --------
Number Number
Weighted average number of shares '000 '000
-------------------------------------------- -------- --------
Issued ordinary shares at 1 May 195,247 195,247
-------- --------
Effect of shares issued in the year 51,214 -
-------------------------------------------- -------- --------
Weighted average number of ordinary shares
at 30 April 246,461 195,247
-------- --------
Basic loss per share (pence) (1.1) (0.8)
--------------------------------------------- -------- --------
Diluted loss per share
Diluted loss per share is calculated by dividing the loss after
tax by the weighted average number of shares in issue during the
year, adjusted for potentially dilutive share options.
2021 2020
GBP'000 GBP'000
------------------------------------------------ -------- --------
Loss for the year attributable to shareholders (2,640) (1,579)
------------------------------------------------- -------- --------
Number Number
'000 '000
----------------------------------------------- -------- --------
Weighted average number of shares (basic) 246,461 195,247
-------- --------
Effect of conversion of Accrol Group Holdings -
plc share options -
----------------------------------------------- -------- --------
Weighted average number of ordinary shares
at 30 April 246,461 195,247
------------------------------------------------ -------- --------
Diluted loss per share (pence) (1.1) (0.8)
------------------------------------------------ -------- --------
No adjustment has been made in 2021 and 2020 to the weighted
average number of shares for the purpose of the diluted earnings
per share calculation as the effect would be anti-dilutive.
7. Finance costs
2021 2020
GBP'000 GBP'000
---------------------------------- -------- --------
Bank loans and overdrafts 661 712
-------- --------
Lease interest 844 882
-------- --------
Amortisation of finance fees 438 365
-------- --------
Unwind of discount on provisions 253 18
-------- --------
Total finance costs 2,196 1,977
----------------------------------- -------- --------
2021 2020
GBP'000 GBP'000
----------------------- -------- --------
Lease interest income 242 267
------------------------ -------- --------
Total finance income 242 267
------------------------ -------- --------
8. Income tax expense
Tax (charged)/credited in the income statement
2021 2020
GBP'000 GBP'000
--------------------------------------------------- -------- --------
Current income tax
-------- --------
Current tax on losses for the year - -
-------- --------
Adjustment in respect of prior periods - 6
---------------------------------------------------- -------- --------
Total current income tax credit - 6
---------------------------------------------------- -------- --------
Deferred tax
-------- --------
Origination and reversal of temporary differences (28) 337
-------- --------
Adjustment in respect of prior periods (46) (14)
-------- --------
Change in tax rate - (17)
---------------------------------------------------- -------- --------
Total deferred tax (charge)/credit (74) 306
---------------------------------------------------- -------- --------
Tax (charge)/credit in the income statement (74) 312
---------------------------------------------------- -------- --------
During the year the Group recognised the following deferred tax
assets/(liabilities):
Accelerated Derivative Share
capital Intangible financial based
------------ ----------- ------------ -------- --------- -------- --------
allowances assets instruments Losses payments Other Total
------------ ----------- ------------ -------- --------- -------- --------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ------------ ----------- ------------ -------- --------- -------- --------
30 April 2019 (1,911) (1,846) (9) 3,425 308 - (33)
------------ ----------- ------------ -------- --------- -------- --------
Credit/(charge) in
year (88) 212 - (264) 446 - 306
------------ ----------- ------------ -------- --------- -------- --------
Credit/(charge) to
equity - - 9 - 80 (74) 15
---------------------- ------------ ----------- ------------ -------- --------- -------- --------
30 April 2020 (1,999) (1,634) - 3,161 834 (74) 288
---------------------- ------------ ----------- ------------ -------- --------- -------- --------
Acquired on business
combinations (1,030) (4,154) - 177 - 109 (4,898)
------------ ----------- ------------ -------- --------- -------- --------
Credit/(charge) in
year (542) 552 - 949 (990) (43) (74)
------------ ----------- ------------ -------- --------- -------- --------
Credit/(charge) to
equity - - - - 999 19 1,018
---------------------- ------------ ----------- ------------ -------- --------- -------- --------
30 April 2021 (3,571) (5,236) - 4,287 843 11 (3,666)
---------------------- ------------ ----------- ------------ -------- --------- -------- --------
A deferred tax asset of GBP4,287,000 relating to current and
prior year losses has been recognised in the year, on the basis
that forecasts show sufficient taxable profits in the foreseeable
future to utilise these losses.
Deferred tax expected to be settled within 12 months of the
reporting date is approximately GBP2,177,000 (2020:
GBP563,000).
Deferred tax assets and liabilities have been measured at the
rate expected to be in effect when the deferred tax asset or
liability reverses.
An increase in the corporation tax rate to 25% with effect from
1 April 2023 was substantively enacted on 24 May 2021, therefore
has not been reflected in these consolidated financial statements.
If this rate had been substantively enacted this would have
increased the deferred tax liability at 30 April 2021 by
GBP2,335,000.
9. Property, plant and equipment
Leasehold
land Fixtures Plant Assets Right-of-use
& & and under
---------- --------- ---------- ------------- ------------- --------
buildings fittings machinery construction assets Total
---------- --------- ---------- ------------- ------------- --------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- ---------- --------- ---------- ------------- ------------- --------
Cost
---------- --------- ---------- ------------- ------------- --------
At 30 April 2019 445 1,911 37,475 294 - 40,125
---------- --------- ---------- ------------- ------------- --------
Adjustment on initial
application of IFRS
16 - - (5,619) - 16,621 11,002
---------- --------- ---------- ------------- ------------- --------
Additions 52 185 383 3,060 22 3,702
---------- --------- ---------- ------------- ------------- --------
Reclassification - - - - - -
---------- --------- ---------- ------------- ------------- --------
Disposals - - (5,052) - (485) (5,537)
--------------------------- ---------- --------- ---------- ------------- ------------- --------
At 30 April 2020 497 2,096 27,187 3,354 16,158 49,292
--------------------------- ---------- --------- ---------- ------------- ------------- --------
Acquired through business
combinations 1,043 164 9,545 - 8,046 18,798
---------- --------- ---------- ------------- ------------- --------
Additions 31 149 733 8,199 477 9,589
---------- --------- ---------- ------------- ------------- --------
Reclassification - - 8,335 (10,457) 2,122 -
---------- --------- ---------- ------------- ------------- --------
At 30 April 2021 1,571 2,409 45,800 1,096 26,803 77,679
--------------------------- ---------- --------- ---------- ------------- ------------- --------
Accumulated depreciation
---------- --------- ---------- ------------- ------------- --------
At 30 April 2019 136 998 9,689 - - 10,823
---------- --------- ---------- ------------- ------------- --------
Adjustment on initial
application of IFRS
16 - - (727) - 727 -
---------- --------- ---------- ------------- ------------- --------
Charge for the year 42 367 1,012 - 2,780 4,201
---------- --------- ---------- ------------- ------------- --------
Disposals - - (5,052) - (420) (5,472)
--------------------------- ---------- --------- ---------- ------------- ------------- --------
At 30 April 2020 178 1,365 4,922 - 3,087 9,552
--------------------------- ---------- --------- ---------- ------------- ------------- --------
Charge for the year 70 337 879 - 3,500 4,786
---------- --------- ---------- ------------- ------------- --------
At 30 April 2021 248 1,702 5,801 - 6,587 14,338
--------------------------- ---------- --------- ---------- ------------- ------------- --------
Net book value
---------- --------- ---------- ------------- ------------- --------
At 30 April 2021 1,323 707 39,999 1,096 20,216 63,341
--------------------------- ---------- --------- ---------- ------------- ------------- --------
At 30 April 2020 319 731 22,265 3,354 13,071 39,740
--------------------------- ---------- --------- ---------- ------------- ------------- --------
Assets with a value of GBP63,341,000 (2020: GBP39,740,000) form
part of the security against the RCF as described in note 12.
10. Leases
Leases receivable
Land & buildings Total
GBP'000 GBP'000
--------------------- ----------------- --------
At 1 May 2020 6,352 6,352
---------------------- ----------------- --------
Interest received 242 242
---------------------- ----------------- --------
Lease payments (892) (892)
---------------------- ----------------- --------
At 30 April 2021 5,702 5,702
---------------------- ----------------- --------
Analysed as:
--------------------- ----------------- --------
Receivable > 1 year 5,027 5,027
---------------------- ----------------- --------
Receivable < 1 year 675 675
---------------------- ----------------- --------
Lease liabilities
Land & Plant & Total
buildings machinery
GBP'000 GBP'000 GBP'000
-------------------------------------- ------------ ----------- --------
At 1 May 2020 16,364 2,200 18,564
------------ ----------- --------
Acquired under business combinations 8,457 4,169 12,626
------------ ----------- --------
New leases in the year - 2,171 2,171
------------ ----------- --------
Interest expense 731 113 844
------------ ----------- --------
Lease payments (4,357) (2,251) (6,608)
-------------------------------------- ------------ ----------- --------
At 30 April 2021 21,195 6,402 27,597
-------------------------------------- ------------ ----------- --------
Short-term lease expense for the year was GBPnil. Short-term
lease commitment at 30 April 2021 was GBPnil. Income from
sub-leases for the year totalled GBP242,000.
11. Intangible assets
Customer Development Computer
Goodwill relationships costs software Other Total
---------- -------------- ------------ --------- -------- --------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ---------- -------------- ------------ --------- -------- --------
Cost
---------- -------------- ------------ --------- -------- --------
At 30 April 2019 14,982 20,427 - - 126 35,535
---------- -------------- ------------ --------- -------- --------
Internally developed additions - - 764 2,492 - 3,256
-------------------------------- ---------- -------------- ------------ --------- -------- --------
At 30 April 2020 14,982 20,427 764 2,492 126 38,791
---------- -------------- ------------ --------- -------- --------
Acquired through business
combinations 14,812 21,864 - 28 - 36,704
---------- -------------- ------------ --------- -------- --------
Internally developed additions - - 684 1,018 - 1,702
-------------------------------- ---------- -------------- ------------ --------- -------- --------
At 30 April 2021 29,794 42,291 1,448 3,538 126 77,197
-------------------------------- ---------- -------------- ------------ --------- -------- --------
Amortisation
---------- -------------- ------------ --------- -------- --------
At 30 April 2019 - 9,788 - - 86 9,874
---------- -------------- ------------ --------- -------- --------
Charge for the year - 2,040 - - - 2,040
-------------------------------- ---------- -------------- ------------ --------- -------- --------
At 30 April 2020 - 11,828 - - 86 11,914
---------- -------------- ------------ --------- -------- --------
Charge for the year - 2,903 273 344 - 3,520
-------------------------------- ---------- -------------- ------------ --------- -------- --------
At 30 April 2021 - 14,731 273 344 86 15,434
-------------------------------- ---------- -------------- ------------ --------- -------- --------
Net book value
---------- -------------- ------------ --------- -------- --------
At 30 April 2021 29,794 27,560 1,175 3,194 40 61,763
-------------------------------- ---------- -------------- ------------ --------- -------- --------
At 30 April 2020 14,982 8,599 764 2,492 40 26,877
-------------------------------- ---------- -------------- ------------ --------- -------- --------
Goodwill
The Group tests goodwill annually for impairment, or more
frequently if there are indications that goodwill may be
impaired.
Goodwill is allocated to the cash generating units (CGUs) as
follows:
2021 2020
GBP'000 GBP'000
---------------------------------- -------- --------
Accrol 17,917 14,982
-------- --------
Leicester Tissue Company ("LTC") 11,742 -
-------- --------
John Dale ("JD") 135 -
----------------------------------- -------- --------
29,794 14,982
---------------------------------- -------- --------
The recoverable amount of each CGU has been determined based on
a value in use calculation using cashflow projections based on
internal forecasts covering a five-year period, reviewed and
approved by the Board. The use of this method requires the
estimation of future cash flows and the determination of a discount
rate in order to calculate the present value of the cash flows.
Cashflows beyond this period are extrapolated using the estimated
growth rates stated below.
At 30 April 2021, the impairment tests concluded that there was
headroom across each of the CGUs. At a Group level the estimated
value in use at 30 April 2021 exceeds the carrying value by GBP100m
(Accrol GBP81m, LTC GBP17m, JD GBP2m). The recoverable amounts of
the CGUs have been determined from value-in-use calculations.
Key assumptions
The calculations of value-in-use are inherently judgemental and
require management to make a series of estimates and
assumptions.
The cash flow forecasts have been derived from the most recent
forecast presented to the Board for the year ending 30 April 2022.
The cash flows utilised are based upon forecast sales volumes and
product mix, anticipated movements in tissue prices and input costs
and known changes and expectations of current market
conditions.
The pre-tax discount rate used in the value in use calculations
is 13.0% (2020: 14.0%) and this has been used consistently across
each CGU. This is derived from the Group's weighted average cost of
capital and is calculated with reference to latest market
assumptions for the risk-free rate, equity market risk premium and
the cost of debt. The values reflect both past experience and
external sources of information. The long-term growth rate assumed
across all CGUs is 2% (2020: 2%).
Sensitivity to changes in assumptions
To support their assertions, the Directors have conducted
sensitivity analyses to determine the impact that would result from
changes in the above assumptions. Based on this analysis, the
Directors believe that a reasonably possible change in any of the
key assumptions detailed above would not cause the carrying value
of CGU groups to exceed their recoverable amounts, although the
headroom would decrease. Therefore, at 30 April 2021 no impairment
charge is required against the carrying value of goodwill.
At a Group level impairment would be caused by either increasing
the pre-tax discount rate by 11% or reducing the average EBIT
performance by GBP11m. A combination of increasing the pre-tax
discount rate by 5% and reducing average EBIT performance by GBP6m
results in an impairment.
At a CGU level the equivalent sensitives are Accrol (16%
increase in pre-tax discount rate or GBP9m reduction in EBIT); LTC
(5% increase in pre-tax discount rate or GBP2m reduction in EBIT)
and JD (7% increase in pre-tax discount rate or GBP0.2m reduction
in EBIT).
Notwithstanding the above sensitivities, the Directors are
satisfied that they have applied reasonable and supportable
assumptions based on their best estimate of the range of future
economic conditions that are forecast and consider that an
impairment is not required in the current year. However, the
position will be monitored on a regular basis. Going forward, as
the acquired operations become fully integrated, it is likely that
the Group will return to a sole CGU.
Development costs
During the year, the Group developed new innovative products
'Magnum' and 'Oceans'. The development costs capitalised are to be
amortised over the life of the products (typically three
years).
Computer software
During the year, the Group has continued in the development of a
new ERP system and warehouse management system.
Customer relationships
During the year, customer relationships of GBP21,864,000 arose
on the Group's acquisition of Leicester Tissue Company and John
Dale. Customer relationships have a useful economic life of 6-10
years.
12. Borrowings
2021 2020
GBP'000 GBP'000
--------------------------- -------- --------
Current
-------- --------
Revolving credit facility 1,821 1,636
-------- --------
Factoring facility 3,975 11,817
-------- --------
Leases 6,553 4,704
---------------------------- -------- --------
12,349 18,157
--------------------------- -------- --------
Non-current
-------- --------
Revolving credit facility 9,807 9,967
-------- --------
Leases 21,044 13,860
---------------------------- -------- --------
30,851 23,827
--------------------------- -------- --------
The changes in liabilities arising from financing activities,
from cashflows and non-cash changes for the current and prior year
are as follows:
Current Non-current
loans loans
& &
----------- ------------ ---------
borrowings borrowings Total
----------- ------------ ---------
GBP'000 GBP'000 GBP'000
--------------------------------------------------- ----------- ------------ ---------
At 1 May 2020 18,157 23,827 41,984
----------- ------------ ---------
Cashflows (16,829) - (16,829)
----------- ------------ ---------
Non-cashflows:
----------- ------------ ---------
New leases acquired through business combinations 2,016 10,610 12,626
----------- ------------ ---------
New leases 477 - 477
----------- ------------ ---------
Loans acquired through business combinations 997 - 997
----------- ------------ ---------
Factoring facility acquired through business
combinations 2,002 - 2,002
----------- ------------ ---------
Interest accrued 1,505 - 1,505
----------- ------------ ---------
Amortisation of finance fees (note 7) 438 - 438
----------- ------------ ---------
Allocation from non-current to current in the
year 3,586 (3,586) -
--------------------------------------------------- ----------- ------------ ---------
At 30 April 2021 12,349 30,851 43,200
--------------------------------------------------- ----------- ------------ ---------
Finance costs incurred to arrange the revolving credit facility
have been capitalised and are being amortised through interest
payable. Unamortised finance costs at 30 April 2021 are GBP372,000
(2020: GBP397,000).
Finance costs are not included in the loan maturity table
below.
2021 2020
GBP'000 GBP'000
---------------------------- -------- --------
Loan maturity analysis
-------- --------
Within one year 12,528 18,521
-------- --------
Between one and two years 7,666 13,351
-------- --------
Between two and five years 18,986 8,072
-------- --------
After five years 4,392 2,437
----------------------------- -------- --------
43,572 42,381
---------------------------- -------- --------
The following amounts remain undrawn and available:
2021 2020
GBP'000 GBP'000
--------------------------- -------- --------
Revolving credit facility 5,000 -
-------- --------
Factoring facility 7,128 1,012
---------------------------- -------- --------
12,128 1,012
--------------------------- -------- --------
The Group's bank borrowings are secured by way of fixed and
floating charge over the Group's assets.
HSBC revolving credit facility agreement ("RCF")
The Group has a GBP17m multi-currency revolving credit facility
that expires in August 2023. The facility requires repayment of
GBP2m on each of 30 April 2022 and 30 April 2023.
Interest charged on the facility is at LIBOR plus a margin of
2.20%-2.95%. A commitment fee of 40% of applicable margin on any
undrawn RCF is also payable.
The Obligors are Accrol Group Holdings plc, Accrol UK Limited,
Accrol Holdings Limited, Accrol Papers Limited, LTC Parent Limited,
Leicester Tissue Company Limited, Art Tissue Limited, John Dale
(Holdings) Limited and John Dale Limited.
HSBC factoring credit facility ("factoring facility")
The Group has a GBP22.5m multi-currency factoring facility to
provide financing for general working capital requirements. Under
the terms of this facility the drawdown is based upon gross debtors
less a retention (typically 15%), with the remaining debt funded.
Each drawing under the facility is repayable within a maximum of 90
days from date of invoice for jurisdictions within the United
Kingdom and 120 days for other countries.
Covenants
The Group is subject to financial covenants in relation to the
RCF and the factoring facility. The RCF covenants are interest
cover and net leverage ratios. The covenants in relation to the
factoring facility cover debt dilution and disputed debt. Breach of
the covenants would render any outstanding borrowings subject to
immediate settlement. The Group is currently operating within its
covenants.
13. Share capital and reserves
2021 2020
GBP'000 GBP'000
------------------------------------ -------- --------
Called up, allotted and fully paid
-------- --------
Ordinary shares of GBP0.001 each 311 195
------------------------------------- -------- --------
311 195
------------------------------------ -------- --------
The number of ordinary shares in issue is set out below:
2021 2020
Number Number
---------------------------------- ------------ ------------
Ordinary shares of GBP0.001 each 311,354,632 195,246,536
----------------------------------- ------------ ------------
In November 2020, 116,108,096 GBP0.001 ordinary shares were
issued. Transaction costs of GBP1,727,000 were incurred in relation
to the above share issues.
Each holder of the GBP0.001 Ordinary Shares is entitled to vote
at the general meetings of the Company. Every holder of an Ordinary
Share shall have one vote for each Ordinary Share held.
14. ACQUISITION OF GROUP COMPANIES
Acquisition of Leicester Tissue Company
In November 2020, the Group acquired 100% of the issued share
capital of Leicester Tissue Company ("LTC"), whose principal
activity is soft paper tissue converting. LTC qualifies as a
business as defined in IFRS 3 'Business Combinations'. This
acquisition represents another milestone on our journey to build a
world-class operationally efficient business of size and scale. It
is well invested, ideally located in central England and its
product mix and customer base are complementary to our existing
business.
Details of the fair value of identifiable assets acquired and
liabilities assumed, purchase consideration and resulting goodwill
are as follows:
GBP'000
---------------------------------------------------- ---------
Property, plant and equipment 9,739
------------------------------------------------------ ---------
Right-of-use assets 7,911
------------------------------------------------------ ---------
Intangible assets 20,269
------------------------------------------------------ ---------
Inventories 4,008
------------------------------------------------------ ---------
Trade & other receivables 5,605
------------------------------------------------------ ---------
Cash 683
------------------------------------------------------ ---------
Trade & other payables (6,376)
------------------------------------------------------ ---------
Borrowings (2,999)
------------------------------------------------------ ---------
Lease liabilities (12,491)
------------------------------------------------------ ---------
Provisions (550)
------------------------------------------------------ ---------
Corporation tax liability (200)
------------------------------------------------------ ---------
Deferred tax liability (4,436)
------------------------------------------------------ ---------
Total identifiable assets acquired and liabilities
assumed 21,163
------------------------------------------------------ ---------
Goodwill 14,677
------------------------------------------------------ ---------
Total consideration 35,840
------------------------------------------------------ ---------
Satisfied by:
---------------------------------------------------- ---------
Cash 29,471
------------------------------------------------------ ---------
Contingent consideration 6,369
------------------------------------------------------ ---------
Total consideration transferred 35,840
------------------------------------------------------ ---------
Net cash outflow arising on acquisition
---------------------------------------------------- ---------
Cash consideration 29,471
------------------------------------------------------ ---------
Less: Cash and cash equivalent balances acquired (683)
------------------------------------------------------ ---------
28,788
---------------------------------------------------- ---------
On acquisition Leicester Tissue Group held trade receivables
with a book and fair value of GBP4,805,000 representing contractual
receivables of GBP4,853,000. Whilst the Group will make every
effort to collect all contractual receivables, it considers it
unlikely that GBP48,000 will ultimately be received.
The contingent consideration can be settled in cash or Accrol
Group Holdings plc shares (at the Group's discretion) and is
calculated on the incremental EBITDA performance of contracts
secured prior to the acquisition that had yet to be delivered,
measured over a four-month period from 1 March 2021. Consideration
is measured on a sliding scale with a maximum of GBP6,800,000
payable to the vendors if EBITDA targets are met. The calculation
of the contingent consideration liability has been based upon the
Group's forecast, both at acquisition and at the reporting date, of
the contract performance over the four-month period. It has been
discounted at acquisition date using the Group's short term WACC of
9% and is recognised in provisions less than one year. The unwind
of the discount is charged to interest payable.
The main factors leading to the recognition of goodwill are the
presence of certain intangible assets, such as the assembled
workforce of the acquired entity, which do not qualify for separate
recognition and the anticipation of significant synergies,
particularly in material, operational and logistics costs.
The goodwill recognised will not be deductible for tax
purposes.
Acquisition costs of GBP1,925,000 arose as a result of the
transaction. These have been recognised as part of administrative
expenses in the Statement of Comprehensive Income.
Since the acquisition date, LTC has contributed GBP18,053,000 to
Group revenues and GBP2,561,000 to Group profit before tax.
Acquisition of John Dale
In April 2021, the Group acquired 100% of the issued share
capital of John Dale ("JD"), whose principal activity is the
manufacturer of wet wipes and facial tissue. JD qualifies as a
business as defined in IFRS3 'Business Combinations'. This
acquisition further advances Accrol's reach into the soft tissue
market whilst also moving into an adjacent sector to diversify the
business.
Details of the fair value of identifiable assets acquired and
liabilities assumed, purchase consideration and resulting goodwill
are as follows:
GBP'000
---------------------------------------------------- --------
Property, plant and equipment 1,013
------------------------------------------------------ --------
Right-of-use assets 135
------------------------------------------------------ --------
Intangible assets 1,623
------------------------------------------------------ --------
Inventories 1,252
------------------------------------------------------ --------
Trade & other receivables 798
------------------------------------------------------ --------
Cash 1,674
------------------------------------------------------ --------
Trade & other payables (787)
------------------------------------------------------ --------
Borrowings -
---------------------------------------------------- --------
Lease liabilities (135)
------------------------------------------------------ --------
Provisions (25)
------------------------------------------------------ --------
Corporation tax liability (100)
------------------------------------------------------ --------
Deferred tax liability (462)
------------------------------------------------------ --------
Total identifiable assets acquired and liabilities
assumed 4,986
------------------------------------------------------ --------
Goodwill 135
------------------------------------------------------ --------
Total consideration 5,121
------------------------------------------------------ --------
Satisfied by:
---------------------------------------------------- --------
Cash 5,121
------------------------------------------------------ --------
Total consideration transferred 5,121
------------------------------------------------------ --------
Net cash outflow arising on acquisition
---------------------------------------------------- --------
Cash consideration 5,121
------------------------------------------------------ --------
Less: Cash and cash equivalent balances acquired (1,674)
------------------------------------------------------ --------
3,447
---------------------------------------------------- --------
On acquisition John Dale held trade receivables with a book and
fair value of GBP522,000 representing contractual receivables of
GBP539,000. Whilst the Group will make every effort to collect all
contractual receivables, it considers it unlikely that GBP17,000
will ultimately be received.
The main factors leading to the recognition of goodwill are, the
presence of certain intangible assets, such as the assembled
workforce of the acquired entity, which do not qualify for separate
recognition and the anticipation of significant synergies,
particularly in material, operational and logistics costs.
The goodwill recognised will not be deductible for tax
purposes.
Acquisition costs of GBP225,000 arose as a result of the
transaction. These have been recognised as part of administrative
expenses in the Statement of Comprehensive Income.
Since the acquisition date, John Dale has contributed GBP335,000
to Group revenues and GBP54,000 to Group profit before tax.
15. Events after the balance sheet date
There are no adjusting or non-adjusting events subsequent to the
year end.
16. Alternative performance measures
The Group uses a number of alternative performance measures to
assess business performance and provide additional useful
information to shareholders about the underlying performance of the
Group.
Adjusted earnings per share
The adjusted earnings per share is calculated by dividing the
adjusted earnings attributable to ordinary equity holder of the
parent by the weighted average number of ordinary shares
outstanding during the year. Diluted earnings per share adjusts the
above for potentially dilutive share options. The following
reflects the income and share data used in the adjusted earnings
per share calculation.
2021 2020
GBP'000 GBP'000
------------------------------------------------ -------- --------
Loss attributable to shareholders (2,640) (1,579)
-------- --------
Adjustment for:
-------- --------
Amortisation 3,520 2,040
-------- --------
Separately disclosed items 4,705 2,230
-------- --------
Share based payments 3,245 2,351
-------- --------
Discount unwind on contingent consideration 239 -
-------- --------
Tax effect of adjustments above (2,225) (1,258)
------------------------------------------------- -------- --------
Adjusted earnings attributable to shareholders 6,844 3,784
------------------------------------------------- -------- --------
Number Number
'000 '000
------------------------------------------- -------- --------
Basic weighted average number of shares 246,461 195,247
-------- --------
Dilutive share options 10,675 30,463
-------------------------------------------- -------- --------
Diluted weighted average number of shares 257,136 225,710
-------------------------------------------- -------- --------
pence pence
------------------------------------- ------ ------
Basic adjusted earnings per share 2.7 1.9
------ ------
Diluted adjusted earnings per share 2.6 1.7
-------------------------------------- ------ ------
Reconciliation from GAAP-defined reporting measures to the
Group's alternative performance measures
Management use these measurements to better understand the
underlying business of the Group.
Consolidated income statement
2021 2020
GBP'000 GBP'000
--------------------------------------------- -------- --------
Adjusted EBITDA
-------- --------
Operating loss (612) (181)
-------- --------
Adjusted for:
-------- --------
Depreciation 4,786 4,201
-------- --------
Amortisation 3,520 2,040
-------- --------
Separately disclosed items 4,705 2,230
-------- --------
Share based payments 3,245 2,351
---------------------------------------------- -------- --------
Adjusted EBITDA 15,644 10,641
---------------------------------------------- -------- --------
2021 2020
-------- --------
GBP'000 GBP'000
--------------------------------------------- -------- --------
Adjusted Gross Profit
-------- --------
Gross Profit 37,884 29,534
-------- --------
Adjusted for:
-------- --------
Separately disclosed items 1,220 1,008
---------------------------------------------- -------- --------
Adjusted Gross Profit 39,104 30,542
---------------------------------------------- -------- --------
Revenue 136,594 134,773
-------- --------
Adjusted Gross Margin 28.6% 22.7%
---------------------------------------------- -------- --------
2021 2020
-------- --------
GBP'000 GBP'000
--------------------------------------------- -------- --------
Adjusted profit before tax
-------- --------
Reported (loss) before tax (2,566) (1,891)
-------- --------
Adjusted for:
-------- --------
Amortisation 3,520 2,040
-------- --------
Separately disclosed items 4,705 2,230
-------- --------
Share based payments 3,245 2,351
-------- --------
Discount unwind on contingent consideration 239 -
--------------------------------------------- -------- --------
Adjusted profit before tax 9,143 4,730
---------------------------------------------- -------- --------
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