Trading on track ahead of interims early January
​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. Its existing portfolio of major discount customers includes Bookers, Aldi, Lidl, Home Bargains, B&M and Poundstretcher, plus leading multiples such as Tesco, Morrison’s and Asda.
November’s pre-close statement confirmed that trading was in line with expectations in the first half, with new business momentum building and installation of additional production capacity well underway.
The stand out news during H1 (to end October 2016) was the £10m contract from Lidl. Accrol is building capacity to deliver those orders and meet further demand from its new business pipeline, with the installation of two new high-speed converting lines in its recently acquired manufacturing facility in Leyland, Lancashire. That will increase total capacity to 143,000 tonnes pa (from 118,000 tonnes).
A flexible business model is a key component of the group’s competitive advantages, but potentially exposes it to forex shifts on the price of imported parent reels. It hedges its exposure to adverse shifts in Sterling vs USD or EUR, was very well covered ahead of the referendum vote and has since increased its foreign currency facilities.
The recent update expressed confidence for the full year, with the business expected to generate strong cash flows to support its strategic growth plans and commitment to progressive dividends. The shares’ rating appears attractive, combining a well-covered 4.6% prospective yield underpinned by strong cash generation with a 10.8 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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