The operational aspects of the comprehensive turnaround initiated in February 2018 were substantially completed by the Period end. The financial benefits of the changes we have implemented are beginning to accrue and are starting to flow through to the bottom line. This return to profitability on a monthly basis, positions the Group well to deliver the Board's revised performance expectations for FY 19 and beyond, as detailed in the announcement titled “Trading Update” which was announced on 8 January 2019, RNS Number: 4372M (the “8 January 2019 Trading Update”).
Key financials:
|
|
H1 19 |
H2 18 |
H1 18 |
H1 19 vs H2 18 change |
H1 19 vs H1 18 change |
|
Reported results |
|
|
|
|
|
|
Revenue |
£57.6m |
£67.5m |
£72.3m |
(14.7%) |
(20.3%) |
|
Gross profit |
£6.9m |
£12.6m |
£11.9m |
(45.3%) |
(41.8%) |
|
Gross margin |
12.0% |
18.7% |
16.4% |
|
|
|
Loss before tax |
(£9.0m) |
(£18.1m) |
(£6.0m) |
|
|
|
Net debt |
£22.6m |
£33.8m |
£29.3m |
(£11.2m) |
(£6.7m) |
|
Loss per share basic and diluted |
(£0.04) |
– |
(£0.05) |
– |
25.2% |
|
|
|
|
|
|
|
|
Underlying results |
|
|
|
|
|
|
Revenue |
£57.6m |
£67.5m |
£72.3m |
(14.7%) |
(20.3%) |
|
Adjusted gross profit1 |
£9.9m |
£8.3m |
£12.9m |
19.8% |
(23.5%) |
|
Adjusted gross margin |
17.2% |
12.2% |
17.9% |
|
|
|
Adjusted EBITDA2 |
(£1.1m) |
(£4.5m) |
(£1.5m) |
£3.4m |
£0.4m |
1 Adjusted gross profit which is defined as gross profit before exceptional items and includes losses on derivatives contracts is a non GAAP metric used by management and is not an IFRS disclosure.
2 Adjusted EBITDA which is defined as profit before finance costs, tax, depreciation, amortisation, share based payments and exceptional items is a non GAAP metric used by management and is not an IFRS disclosure.
Analysis of consumer revenue:
Consumer revenue comprises retail sales of Toilet Tissue, Kitchen Towel and Facial Tissue. It excludes discontinued operations, namely Accrol's “Away From Home (AFH)” business
|
|
H1 19 |
H2 18 |
H1 18 |
H1 19 vs H2 18 change |
H1 19 vs H1 18 change |
|
Consumer revenue |
£53.9m |
£56.9m |
£55.8m |
(5.2%) |
(3.4%) |
H1 19 Highlights:
|
· |
Highly complex turnaround substantially completed |
|
· |
Exit from lower margin Away From Home (“AFH”) operations to focus on core business |
|
· |
Adjusted gross margin broadly consistent with prior period despite the absorption of a 29% increase in average tissue prices |
|
· |
Net debt reduced by £6.7m to £22.6m |
|
· |
Top 10 customer revenue grew 11% to £52.5m (H1 18: £47.3m) |
Current trading and outlook:
|
· |
Margins post Period end have strengthened as price increases achieved across the business have begun to make full impact in the day to day trading |
|
· |
Production efficiencies have improved by more than 70% |
|
· |
Most of the exceptional costs have already been incurred in the Period with many having ended or due to end in Q4 19 |
|
· |
The Board is positive about the outlook for the Group and expects to deliver profit for the full year to 30 April 2019, all things remaining equal, of c.£1.0 million at Adjusted EBITDA level |
Dan Wright, Chairman of Accrol, said:
“The business has changed beyond recognition since February 2018 and will exit the current financial year in a much stronger position operationally than it has ever been in before. We have delivered a highly complex restructuring, whilst absorbing a 29% increase in average tissue prices and now expect to deliver profit for the full year to 30 April 2019.
“Knowing the scale and complexities of the task in hand, I am very pleased with the outcomes achieved internally to date. My only disappointment is that, as previously announced, we are, in effect, three months behind where we expected to be on the financial recovery. Thank you to everyone who has been involved in the turnaround; your contribution is highly valued. I believe Accrol has a bright future; one in which the Group delivers better levels of return throughout fluctuating macro-economic cycles. Whilst I recognise the ongoing macro-economic challenges, I am confident that we are through the main challenges that the business faced in this difficult period and the signs going forward look positive.”
Our markets
The UK tissue market is worth c.£1.5 billion and it continues to increase in line with population growth. The private label element of the industry, however, continues to take market share from the best-known brands, delivering 8% growth year on year (Source: Kantar). With the leading discounters outperforming the market further with reported tissue sales growth in excess of 12% year on year (Source: Kantar).
Accrol remains the largest independent supplier of Toilet Roll and Kitchen Towel in the UK, supplying three of the top four retailers and all the major discounters. The business is in a strong position to deliver further growth, profitably, in the UK market.