Accrol Group Holdings plc Turnaround delivering profitability on a monthly basis post half year end

Dan Wright, Chairman of Accrol, said:

“The business has changed beyond recognition since February 2018 and will exit the current financial year in a much stronger position operationally than it has ever been in before. We have delivered a highly complex restructuring, whilst absorbing a 29% increase in average tissue prices and now expect to deliver profit for the full year to 30 April 2019.

“Knowing the scale and complexities of the task in hand, I am very pleased with the outcomes achieved internally to date. My only disappointment is that, as previously announced, we are, in effect, three months behind where we expected to be on the financial recovery. Thank you to everyone who has been involved in the turnaround; your contribution is highly valued. I believe Accrol has a bright future; one in which the Group delivers better levels of return throughout fluctuating macro-economic cycles. Whilst I recognise the ongoing macro-economic challenges, I am confident that we are through the main challenges that the business faced in this difficult period and the signs going forward look positive.”

Accrol Group Holdings plc (LON: ACRL), the UK’s leading independent tissue converter, announces its Half Year Results for the six months to 31 October 2018.

The operational aspects of the comprehensive turnaround initiated in February 2018 were substantially completed by the Period end. The financial benefits of the changes we have implemented are beginning to accrue and are starting to flow through to the bottom line. This return to profitability on a monthly basis, positions the Group well to deliver the Board’s revised performance expectations for FY 19 and beyond, as detailed in the announcement titled “Trading Update” which was announced on 8 January 2019, RNS Number: 4372M (the “8 January 2019 Trading Update”).

Key financials:

1 Adjusted gross profit which is defined as gross profit before exceptional items and includes losses on derivatives contracts is a non GAAP metric used by management and is not an IFRS disclosure.

2 Adjusted EBITDA which is defined as profit before finance costs, tax, depreciation, amortisation, share based payments and exceptional items is a non GAAP metric used by management and is not an IFRS disclosure.

Analysis of consumer revenue:

Consumer revenue comprises retail sales of Toilet Tissue, Kitchen Towel and Facial Tissue. It excludes discontinued operations, namely Accrol’s “Away From Home (AFH)” business.

H1 19 Highlights:

·Highly complex turnaround substantially completed

·Exit from lower margin Away From Home (“AFH”) operations to focus on core business

·Adjusted gross margin broadly consistent with prior period despite the absorption of a 29% increase in average tissue prices

·Net debt reduced by £6.7m to £22.6m

·Top 10 customer revenue grew 11% to £52.5m (H1 18: £47.3m)

Current trading and outlook:

·Margins post Period end have strengthened as price increases achieved across the business have begun to make full impact in the day to day trading

·Production efficiencies have improved by more than 70%

·Most of the exceptional costs have already been incurred in the Period with many having ended or due to end in Q4 19

·The Board is positive about the outlook for the Group and expects to deliver profit for the full year to 30 April 2019, all things remaining equal, of c.£1.0 million at Adjusted EBITDA level

Gareth Jenkins, Chief Executive Officer of Accrol, said:

“This is one of the most challenging business turnarounds in which the leadership team and I have ever been involved. Whilst most of the issues we have faced are familiar to the team, it is highly unusual to face so many issues in a single business, at the same time and at such a pace. I am pleased to say that the major actions are now behind us and we are beginning to see results. We will never become complacent; ongoing success in the tissue conversion sector requires nothing less than operational excellence. As a Board, we are convinced that we have created a more robust business with strong foundations on which to build and, whilst I am sure there will be challenges ahead, the Group is on a significantly improved path.”