Pre-close trading statement

RNS Number : 4344O

Accrol Group Holdings PLC

07 November 2016

 

This announcement contains inside information

7 November 2016

Accrol Group Holdings plc ("Accrol" or "the Company")

Pre-close trading statement

Accrol Group Holdings plc, the AIM listed leading independent tissue converter, is pleased to provide the following update on trading.   

The business has made good progress since the start of this financial year and trading has been in line with our expectations. During the six months ended 31 October 2016, the Company has continued to win new business with existing customers in addition to the previously announced new £10m contract gain, which we can now confirm is Lidl.

Installation of two high-speed converting lines in our new 168,000 sq. ft. manufacturing facility in Leyland is well underway and will increase our total capacity to 143,000 tonnes per annum. The premises will initially house the two high speed tissue converting lines we purchased in April 2016 and the increased capacity will support our continued growth with both Discounters and Major Multiples in the UK.

We continue to follow our hedging policy to mitigate adverse movements in Sterling against the US$ and Euro. Following our significant purchase of dollars pre-Brexit, we have increased our facilities and we continue to closely monitor the Company's forward currency positions.

We remain confident in the outlook for the full year and that the strong cash flows generated by the business will support our progressive dividend policy and underpin our continued growth.

The Company's interim results will be announced on Thursday 5th January, 2017.

Steve Crossley, Accrol's CEO, commented:

"Since the start of this financial year we have made good progress on our strategic aims and we are increasing our production capacity to enable us to take advantage of new opportunities as they arise.

"We are pleased with the new business that we have won since the start of the financial year and with progress on the manufacturing facility in Leyland, Lancashire and look forward to the future with confidence."

Ends

For further information please contact:

Zeus Capital Limited (Nominated Adviser & Broker)
Dan Bate / Jonathan Sharp	Tel: [phone]
Dominic King / Adam Pollock / Mike Seabrook	Tel: [phone]
Camarco (Media enquiries)
Jennifer Renwick / Billy Clegg	Tel: [phone]

Notes to Editors

Accrol manufactures toilet rolls, kitchen rolls and facial tissues as well as other tissue products at the Company's 350,000 sq. ft. manufacturing, storage and distribution facility in Blackburn, Lancashire. Accrol currently manufactures approximately 16 million units per week and supplies some of the UK's largest retailers, providing both Accrol branded and private label products (being goods produced under a customer's own brand or under a non-branded or less well-known brand name ("private label")).

The Group's competitive advantage lies in its market positioning, operational process and flexibility. Key components of the business model are:

Production process - The Directors believe the Group obtains a competitive advantage through its model of acquiring and converting the large tissue reels that are Accrol's raw materials ("Parent Reels") as opposed to manufacturing Parent Reels from pulp and recycled fibre and subsequently converting. This requires a lower fixed overhead and provides flexibility in Parent Reel sourcing which allows the Group to take advantage of favourable pricing opportunities and production technology advancements.

Technology and converting lines - Accrol has committed capital expenditure of c.£18.2 million in the last three years. The Group currently has 15 converting lines in operation providing capacity of approximately 118,000 tonnes per annum. Additional capacity of c.25,000 tonnes per annum has recently been obtained with the purchase of two new machines, however these are yet to be installed. The Group's operating machinery allows conversion of a wide variety of tissue grades, adding flexibility to the Parent Reel sourcing process and allowing manufacture of a wide range of product types.

Manufacturing private label products - The majority of Accrol's products (71 per cent. of revenues in the year ended 30 April 2015) are private label and whilst the Group also develops and supplies branded products, the ability to supply customers with goods under its own brand has allowed penetration into retailers operating in the discount market ("Discounters") and the UK's largest retailers ("Multiples"). Accrol can launch a new private label product within six weeks of instruction from a retailer.

Production flexibility - Accrol is able to manufacture toilet rolls, kitchen rolls, facial tissue and certain products used outside a consumer's home ("AFH"), providing a "one-stop shop" solution for customers in the tissue market. The ability to produce these goods and supply Multiples, Discounters, local retailers and wholesalers ("Independents") and the AFH market is a competitive advantage and the Directors do not believe any competitors can offer the same flexibility across all of these market channels.

Macro-economic impact on raw material prices - There is currently a global over-supply of both pulp and Parent Reels, with additional capacity forecast to be brought on stream through to 2019. As such, Parent Reel prices are currently relatively low and are expected to remain so for the foreseeable future. Low Parent Reel prices allow Accrol to manufacture at a lower cost, enhancing margin and providing pricing flexibility to win new orders. Overcapacity drives increased flexibility of supply and provides Accrol with a choice of pricing and technology when sourcing Parent Reels.

Market positioning - Having won a number of contracts with Discounters in recent years and benefitting from the organic growth within this market, the Directors believe Accrol is well positioned to take advantage of the growth in the discount market and Multiples' increased focus on private label products.

 

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