Accrol Group Holdings plc (LON:ACRL) Chief Executive Officer Gareth Jenkins caught up with DirectorsTalk to discuss their agreement with Unilever, validation of strategy, how the deal will contribute to the overall success of the business, outlook and what investors should be looking out for.
Q1: Gareth, straight to the point, the agreement with Unilever plc (LON:ULVR), you must be thrilled with the deal. Can you just update listeners on what this incredible agreement entails?
A1: As you say, we’re really really pleased with the agreement we’ve set up with Unilever.
What it allows us to do is to produce, under licence, a kitchen towel product under the Lifebuoy brand range, and clearly that then allows us to enter the UK retail and grocery market with a market-leading, well known global brand, manufactured here in the UK.
So, we’re really really pleased about the opportunity this new agreement with Unilever gives us.
Q2: Now, you’ve made an enormous investment in the business over the last 4 years. Do you see this deal as a successful validation of your strategy?
A2: I think we do, we’ve spent almost £20 million over the last 4/5 years in new machinery, fully automating all of our sites.
Clearly, the confidence that Unilever had in us delivering this type of product for them is absolutely a real endorsement of the work that many people in Accrol Group have been working on over the past 5 years. It really marks a real step change for the group in how it’s positioned in the UK.
So, absolutely, we’re really pleased with the endorsement from Unilever.
Q3: This is your first licensing deal and it’s a major success story, how do you see this licensed business model approach contributing to sales and the overall success of the business?
A3: We’ve said already that we see this part of our business growing quite considerably, we’re in discussion with a number of different parties on other potential licencing agreements that we could bring to market.
We see this as being around about 20% of our business in the future so it’s a real important part of our business and the reaction that we’ve had from retailers, as we’ve taken the Lifebuoy product to them, has been fantastic.
So, we’re really excited about what a difference it will make to the group going forward.
Q4: Given the cost pressures consumers and retailers are under, do you see the drivers of demand for your products continuing and how do you view the outlook?
A4: I think with regard to the agreement we’ve got with Unilever and Lifebuoy, we see this positioning really nicely in the market, slightly above our private label product, in price point, but significantly lower than the traditional brand.
The reason why we’re able to bring that to market, at such a competitive price, is the low cost base that Accrol Group has positioned itself and the investment that we’ve made over the last 5 years.
So, we see this giving people a real alternative if someone wants a brand at very competitive price then they’ve now got an alternative. The reality about our products is they are clearly everyday items, they are items that people can’t live without and what we’ve got to make sure is we bring options for all consumers in the UK, no matter what their price point is.
Q5: Finally, what should investors be looking our for in terms of news flow over the coming year?
A5: Our year-end finishes at the end of April, we will give a post-close statement quite soon after that with some more updates that we’ll give to the market in regard to our mill investment that we announced in our half-year results. We’ll also update the market in Q1 of next year so from May/June/July onwards, we’ll give a further update around the mill, and our full-year results will be due out around September of this year.
So, quite a lot of information coming out but a really exciting time for the group.