Lancashire tissue maker sounds warning over losses

Troubled Lancashire toilet roll manufacturer Accrol Group has warned it is on course to make a post-tax loss of £13m, as it grapples with soaring costs and restructures its management.

Trading in the Blackburn company’s shares was suspended late in 2017,  before being readmitted to the AIM in January following an £18m share placing and it now says it is carrying out “constructive discussions” with its bank on headroom and resetting covenants.

EBITDA for the year to end on April 30 is now expected to be in the region of £5m. Despite the £18m input from shareholders, the company’s net debt stands at £31m.

Accrol’s shares are now trading at 12.5p, representing an 87.5% decline since the company joined the stock market in June 2016.

The firm said its performance in the current financial year had been significantly impacted by escalating internal costs, input costs and adverse foreign exchange hedging.

A statement said: “The magnitude of the escalation in costs – about 50% higher than in the year ended April 30, 2017 – has only, very recently, become fully apparent to the board.

“Also, the slow pace of progress in pricing actions to mitigate margin pressure has been slower than forecast but is now picking up pace.

“The increased impact of these issues is expected to affect the performance of the group materially in the year to 30 April 2018.

“Some of the corrective, business critical remedial activities have been hampered while the board transitioned to its new supportive composition.

“The new management team believes firmly that the challenges facing the group are resolvable, given time and experienced handling. The successful resolution of these issues, however, will be a demanding task and one not without execution risk.”

The company’s board has been surprised by effects of the opening of the warehousing facility in Skelmersdale, the additional infrastructure and labour costs at the new plant in Leyland and labour cost increases at Blackburn following changes to shift patterns as well as reduced efficiencies due to a loss of skilled labour.

The company announced 89 job losses in November.