Gearing up for a strong second half
​Accrol is the UK’s leading independent tissue converter. It manufactures toilet rolls, kitchen rolls and facial tissues, as well as other tissue products at its manufacturing, storage and distribution facility in Blackburn, Lancashire.
A strong first half was reported today with revenues 8.8% higher y-o-y to £63.9m, at an improved 28.4% (H1 15/16: 27.3%) underlying gross margin (excluding derivative gains). That reflects an ability to negotiate parent reel prices underpinned by currency hedges put in place before and since the EU referendum. Adjusted EBITDA was 1.5% up y-o-y at £7.1m; positive cashflow is reflected in £3.2m lower net debt at £19.9m vs just after the June 2016 IPO.
The outlook appears underpinned by new business wins in H1, including Lidl which is expected to provide more than the initially anticipated £10m pa of sales. That built on previous discount sector wins (Booker - £6.5m, Poundstretcher - £5.0m). Capacity and output will benefit from investment in production facilities and operational improvements.
Potential earnings and dividend growth over the new few years should benefit from operational gearing, with spare capacity ready to meet demand from discounters and multiples. That highlights competitive positioning and an undemanding valuation considering the prospective yield of 4.8% this year, strategic positioning and 8.1x PER for FY16/17.
Accrol Group Holdings is a holding company. Through its subsidiaries, Co. is a tissue converter manufacturing toilet rolls, kitchen rolls, facial tissues and away from home products (AFH). Co. supplies a range of independents, discounters and multiples as well as a variety of AFH customers throughout the U.K. Co. imports Parent Reels from around the world and converts them into finished goods at its manufacturing, storage and distribution facilities in Blackburn and Leyland, Lancashire.
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