We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Accrol Group Holdings Plc | LSE:ACRL | London | Ordinary Share | GB00BZ6VT592 | ORD GBP0.001 |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.40 | 1.05% | 38.60 | 38.60 | 38.70 | 40.70 | 37.70 | 38.30 | 15,310,225 | 16:29:41 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Convrt Paper,paperbd Pds,nec | 241.91M | -5.7M | -0.0179 | -21.56 | 123.09M |
TIDMACRL
RNS Number : 0671I
Accrol Group Holdings PLC
19 March 2018
The information contained within this announcement is deemed by the Company to constitute inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.
19 March 2018
Accrol Group Holdings plc
("Accrol", the "Company" or the "Group")
AIM: ACRL
TRADING UPDATE
Year ending 30 April 2018 results impacted materially but Group on track for FY19
Further to the information provided in the Half Year Results announced on 22 January 2018, the Board of Accrol provides the following update.
Financial key points
-- Adjusted EBITDA loss for year ending 30 April 2018 ("FY18") now expected to be in the region of GBP5 million
-- Net debt at 30 April 2018 expected to be circa GBP34 million -- Constructive discussion with the Group's bank on headroom and resetting covenants -- Outlook for year ending 30 April 2019 ("FY19") remains in line with market expectations
-- New volume growth positively impacting Q1 for year ending 30 April 2019 along with strengthening margins across customer portfolio
-- FY18 Profit after tax, before any asset impairment charges, expected to be a loss of GBP13 million
-- Non-cash impairments likely due to restructuring plans and potential related intangibles write downs
As previously reported, the Group's trading performance in the current financial year has been significantly impacted by three major issues - an escalation in internal costs, input costs and adverse foreign exchange hedging. The magnitude of the escalation in costs (circa 50% higher than in year ended 30 April 2017 ("FY17") has only, very recently, become fully apparent to the Board. Also, the pace of progress in pricing actions to mitigate margin pressure has been slower than forecast but is now picking up pace. The increased impact of these issues is expected to affect the performance of the Group materially in the year to 30 April 2018. Some of the corrective, business critical remedial activities (outlined below) have been hampered while the Board transitioned to its new supportive composition. The new management team believes firmly that the challenges facing the Group are resolvable, given time and experienced handling. The successful resolution of these issues, however, will be a demanding task and one not without execution risk.
Commercially, the Group is continuing to make important progress both in terms of new quality business and pricing. Since the beginning of Q4 FY18 the business has secured two major pieces of business from existing retailers that will have a material impact from Q1 FY19. It has, in addition, agreed in principle the basis of a longer-term contract with a top three account.
Given all these factors, the executive team believes that, once the targeted structural and operational cost reductions have been executed, the Group will be on track to achieve market forecasts for FY19 and the new leadership team looks forward to providing more guidance on the positive outlook for FY19 post the year end.
Operational progress
-- Restructuring of logistics with expected full year savings in excess of GBP5 million
-- Planned exit from underperforming areas of the business, via disposal - discussions underway
-- Ongoing simplification of product portfolio through major reduction in SKUs with consequent improvements in efficiency and profitability
-- Rationalisation of manufacturing capacity facilitated by the focus on a narrower SKU range and with the installation of a new production line in Leyland
-- Discussions with customers on the introduction of input cost indexation on future contract pricing
-- Important volume increases agreed with several key customers and agreement, in principle, for a longer-term relationship with one major customer - all positively impacting from Q1 FY19
-- New processes in place which evaluate profitability of each business segment to drive margin improvement
Review of recent performance
In recent weeks, the new leadership team has gained a much fuller understanding of the nature and scale of the issues that need to be addressed. The Group's new financial analysis and reporting processes have revealed that internal costs actually rose by circa 50% as a consequence of decisions implemented in May, June and July 2017, impacting the performance of the business more dramatically than was previously understood.
Progress is being made in addressing the three identified issues with internal cost reductions and sales margin improvement being the management's primary objectives. The adverse FX hedging contracts, whilst continuing to affect the Group's results in the short term, expire over coming months and are, therefore, transitory in nature.
Reducing internal costs
Due largely to the impact of the changes implemented during early summer 2017, the annualised cost base of the Group, excluding input costs, increased by close to 50% on the prior year. Whilst the key contributory factors to this were identified in the Half Year Results, announced in January 2018, the full magnitude of their impact on trading performance was not clear at that time.
These changes involved:
-- the opening of the warehousing facility in Skelmersdale -- additional infrastructure and labour costs at the new plant at Leyland -- increased labour cost increases at Blackburn, following changes to shift patterns
-- reduced plant efficiencies due to loss of skilled labour following the changes to shift patterns
Resolving the cost issues will inevitably take time. The new management's objective is to reverse at least half the recent cost growth by the end of this calendar year and progress is already being made:
Issue Progress ---------------------------------- --------------------------------- Restructuring the Group's Discussions underway logistics arrangements with expectations of new arrangements in place during 2018 ---------------------------------- --------------------------------- Upgrading of skills in Experienced operators factory workforce with joining throughout Q4 resulting improvements FY18 which will continue in efficiency into H1 FY19 ---------------------------------- --------------------------------- Planned exit from underperforming Discussion in progress areas of the business, via disposal ---------------------------------- --------------------------------- Closure of old production New line on order. Commissioning lines in Blackburn, replacing expected in Q2 FY19 lost capacity with a new line at the Leyland plant ---------------------------------- --------------------------------- Simplification of business Over 400 SKUs in early portfolio by major reduction 2017. Currently 225 with in SKU proliferation plans to reduce to less with consequent improvements than 125 in coming months in efficiency and profitability ---------------------------------- --------------------------------- Simplification of paper Improvement from 75 different purchasing portfolio types to less than 30 to improve pricing and working capital efficiencies ---------------------------------- ---------------------------------
Managing input cost pressures
Parent reel input costs have been increasing since last summer and, contrary to earlier market forecasts, are continuing to increase. The scale of tissue paper cost increases over the past 12 months is now in excess of 20%. The business has partially offset this cost pressure through price increases with its customers. Product redesign, in conjunction with customers, has also helped mitigate these increased costs.
Given a lack of accurate pulp price forecasting, the management is focusing on areas over which it has control.
An important step towards improving the Group's performance has been the introduction by the new management team of processes which provide insight on profitability at both a customer and product level in each segment of the business. This is driving remedial action in low margin segments and provides clarity on pricing. This level of detailed focus is critical in the current trading environment. The Group has already exited some low margin contracts. In addition, the manufacturing of napkins has been terminated due both its small scale and unsatisfactory financial returns.
Foreign Exchange
Adverse foreign exchange contracts, albeit transitory, have continued to impact the Group's results. This has been addressed in recent weeks by the progressive termination of out-of-the-money US Dollar purchase commitments. To illustrate the impact that foreign exchange hedging has had on the Group's reported results, pre-tax profit in FY17 benefitted by circa GBP5 million against spot market FX rates, whereas pre-tax profit in FY18 is expected to suffer by close to GBP4 million against spot market FX rates. The Group's foreign exchange hedging commitments will have been substantially eliminated by the end of the current financial year.
Effective margin risk management requires consideration of (1) customer and supplier pricing arrangements (2) tissue pricing and (3) FX exposures. A hedging strategy that focuses on only FX can exacerbate risks rather than mitigate them. The new management team intends to develop appropriate margin risk mitigation processes in conjunction with customer and supplier trading arrangements.
Outlook
The magnitude of internal cost increases in 2017, combined with ongoing margin pressures, has impacted the Group's financial results and cash flow in the short term. As a consequence, the Group's profit outlook for the current financial year is now expected to be materially below market expectations with an expected adjusted EBITDA loss of circa GBP5 million.
Net debt, currently at GBP31 million, is also expected to be higher at the year-end than previously expected, despite a gross GBP18 million having been raised from shareholders in early December 2017. The scale of the creditor stretch which had taken place prior to the fundraise was not apparent before new financial disciplines and processes were put in place by the new management team in Q4. Of the net GBP17 million raise, over GBP10 million was paid out to creditors to reduce overdue balances and to reflect new terms of supply. In addition, further funds were absorbed by a recovery in inventory levels, cash costs incurred to break FX contracts, a reduced capacity for invoice discounting and further EBITDA losses. Net debt at 30 April 2018 is expected to be circa GBP34 million, which is slightly higher than current levels due principally to working capital fluctuations.
Given the new EBITDA and debt expectations for FY18, the Group is likely to breach one of its banking covenants. Constructive discussions about debt headroom and resetting covenants have already been initiated with the Group's bank.
Notwithstanding the foregoing, the new executive management team believes that there is a clear opportunity to improve the Group's current performance materially through their structural and cost reduction plans. Whilst this improvement will not be realised without hard work and close focus and involves negotiations with third parties to exit current logistics arrangements, the Board views the year ending 30 April 2019 forecast as wholly achievable.
For further information, please contact: Accrol Group Holdings plc Gareth Jenkins, Chief Executive Officer +44 (0) 1254 278 844 Martin Leitch, Interim Chief Finance Officer +44 (0) 1254 278 844 Zeus Capital Limited (Nominated Adviser & Broker) Dan Bate / Andrew Jones +44 (0) 161 831 1512 Dominic King / John Goold +44 (0) 203 829 5000 Belvedere Communications Limited Cat Valentine (cvalentine@belvederepr.com) +44 (0) 7715 769 078
Notes to Editors
Accrol Group Holdings plc, based in Lancashire, is a leading tissue converter and supplier of toilet rolls, kitchen rolls and facial tissues as well as other tissue products to the UK's largest retailers.
Accrol operates from three sites:
-- A manufacturing, storage and distribution facility in Blackburn; -- A facial tissue plant, also in Blackburn; and -- A manufacturing, storage and distribution facility in Leyland.
In addition, the business has a storage and distribution facility in Skelmersdale, Lancashire.
This information is provided by RNS
The company news service from the London Stock Exchange
END
TSTFKFDKBBKBFND
(END) Dow Jones Newswires
March 19, 2018 03:01 ET (07:01 GMT)
1 Year Accrol Chart |
1 Month Accrol Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions