Accrol emerges from turnround in confident mood

Blackburn toilet roll maker Accrol Group was in confident mood with the release of its latest interim results today, claiming it “is more fit for purpose than it has ever been”.

The troubled firm has suffered sustained losses and regulatory probes over the past two years.

But it says a new management team has stopped the rot and offered the promise of brighter prospects going forward.

In the six months to October 31, 2019, Accrol recorded revenues of £65.1m, compared with £57.6m the previous year, a 13% improvement, while pre-tax losses again narrowed from £9m in 2018 to £3m.

The board said it is pleased to report that the operational aspects of the complex and comprehensive turnaround plan, initiated by the new management team in February 2018, are now fully complete.

It added that the financial benefits of these changes are now flowing through to the bottom line at an accelerating rate and these first half results show the improving monthly run rate being achieved by the business.

It said: “With the turnaround complete and a strong management team in place, the board is now focusing on further automation of the group’s operations and strategic opportunities to diversify, scale and grow the business.

“Whilst there will always be improvements to make and sector challenges to address, the board believes that Accrol is more fit for purpose than it has ever been.

“Net debt is reducing at an accelerating rate and the company remains on track to meet market expectations for the full year ending 30 April 2020.”

Exceptional costs relating to the turnaround also reduced considerably to £600,000, from £7.9m previously.

Margins have continued to strengthen post-period end, as new agreements come into effect and additional production efficiencies through increasing automation are being introduced, with benefits expected in the second half of this year.

Total exceptional costs at financial year 2020, including costs associated with the FCA investigation over misstatements in its accounts, are expected to be around £1m, against £7.9m last year.

Net debt, on a like-for-like basis, is expected to reduce at an accelerating rate to no more than £20m at April 30, 2020, following credit insurance approval expected in the second half.

The group said it is on track to meet market expectations for 2020 and the board is increasingly confident in the prospects for the group.

Chairman, Dan Wright, said: “Accrol has been completely transformed by the new leadership team and is now a very different organisation.

“I am proud to say that our talented and experienced people have proved that it is possible to make good returns from tissue conversion, which has historically been viewed as a low margin sector.

“Group margins are returning to pre-IPO levels, as more robust commercial management programmes and operational efficiencies offset substantially higher comparative input costs. What is particularly pleasing is seeing volume growth at over 20% during this transformational business period.”

He added: “The future for the business is promising.

“With the turnaround behind us and an ambitious leadership team experienced in running much larger organisations in place, we are focusing on the medium to long term prospects for the group and strategic opportunities that exist to diversify and scale up the business.”

Chief executive Gareth Jenkins said: “We are assembling an exceptional team of highly-experienced industry professionals, focused on growth and capable of delivering substantial commercial and operational improvements.

“The team we have already put in place has achieved a margin increase of 770bp in H1 20 and adjusted EBITDA growth of £4.3m.

“Gross profit has been increased by 86% in the period and net debt reduced to less than £25m (c.£34m at 30 April 2018).

“The improved quality and service levels, which Accrol now delivers to a broadened customer base, also resulted in consumer revenue growth of c.20%.

“Now the turnaround phase is complete, our vision is to build a diversified group of size and scale, which encompasses both the tissue market and personal hygiene.

“Personal hygiene product manufacture is less exposed to macro-economic fluctuations in input costs than tissue conversion.

“We estimate the personal hygiene market in the UK, excluding tissue, to be worth c.£1bn with forecast overall CAGR (compound annual growth rate) of 6.5% and private label CAGR of 10%.

“I am confident that our people will continue to deliver as the group seeks to diversify into this new market and grow its operations substantially.”