Positive debut
​Accrol is a leading independent tissue converter, one of the UK's leading manufacturers of tissue products including toilet rolls, kitchen towels and facial tissues and AFH products. It imports parent reels and converts them into finished goods at its manufacturing, storage and distribution facility in Blackburn, Lancs.
A strong performance for the year to end April 2016 included 17% underlying sales growth (vs 2014/15 proforma figures), at an increased gross margin and 22% higher adjusted EBITDA at £15m. That's an impressive performance in a relatively mature, competitive market, driven by a strategic focus on supplying own-label products to both discounters and multiples, the fastest growing elements as own-label progressively takes share from top end 'luxury' brands.
This is Accrol's sweet spot and its strongest position (35% share of the discount sector) which contributed 69% of FY15/16 (6% up y-o-y) revenue; sales to multiples were up 15%. A confident outlook pivots on anticipated orders from new and existing customers, which it can deliver from spare manufacturing capacity post recent £3.2m investment in state-of-the-art machinery.
The most material change in the outlook since IPO is sterling weakness post the EU referendum. Accrol imports its raw materials (parent reels) and negotiates prices in mainly USD, or EUR but is near fully hedged this year. Although 2017/18 and thereafter are sensitive to further forex volatility it is in a strong position to deal with this via supplier relationships and its competitive positioning relative to other manufacturers.
Growth prospects are supported by strong competitive positioning and Accrol's proven ability to pick-up market share as it capitalises upon growing demand for private-label tissue products.
At the current price the shares combine a well-covered 5.2% prospective yield backed by strong cash generation with a PER of just 10x falling to 8.6x in FY17/18.
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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