Accrol Group: Well placed for future growth

Accrol Group Holdings plc (LON:ACRL) has delivered a solid set of FY results, which were well flagged at the adjusted EBITDA level, but outperformed our adjusted EPS by 1.7%. We are maintaining our FY22 estimates, upgrading FY23 forecasts and introducing our FY24 numbers for the first time. We believe Accrol will emerge as a £45m+ EBITDA business with a self-funded papermill, and we believe the Group is well positioned to deliver strong growth in shareholder value from here.

  • Final results: Group revenues were +1.4% at £136.6m, and reflected volatile sales volumes impacted by changing consumer shopping habits during the pandemic. This was flagged in the trading update in May, with H2 volumes strengthening due to the impact of acquisitions. Whilst the total tissue market contracted by 1.3% YOY, Accrol’s market share has increased from 13.1% to 15.9% during the period. Gross margin progression is a key positive in these results, with underlying gross margin (excluding exceptional costs) +590bps to 28.6%. The progress made in margins was driven by productivity gains, underpinned by new systems and operating processes. Adjusted PBT of £9.1m is +93.6% YOY and 7.1% ahead of ZC estimate (£8.5m). Net debt of £14.6m (ex IFRS 16 leases) is in line with ZC expectations (£14.7m) and is £3.3m lower YOY, despite the £3.9m cash acquisition of Jon Dale. Today’s announcement also confirms the restoration of the dividend.
  • Outlook: Current trading for FY22 is in line with expectations, with an improving trend in sales MoM and YoY.Increased input costs, driven by pulp price inflation, are being mitigated through prompt pricing action. Significant investment is planned in wet wipes in FY22, which should drive material growth into FY23.  Longer term growth is backed by an acceleration in discounters planned new store openings. Overall, and with a self-funded paper mill in the offering, we believe Accrol is in a strong position to deliver significant shareholder value.
  • Forecasts: Our FY22E P&L forecasts are unchanged, with current trading in line with management expectations. FY22E net debt moves higher reflecting investment in working capital. FY23E revenue and PBT forecasts increase 2.2% and 3.2% respectively to reflect investment in automation and wet wipes which should drive growth beyond FY23E. FY24E numbers are introduced for the first time with EBITDA approaching £35m in line with our investment thesis.
  • Investment view: At current levels, Accrol Group trades on an FY22E PE of 10.5x, falling to 9.0x in FY23E, a material discount to its quoted peers. A re-rating towards peer average of 18-20x FY22E P/E would imply 78.2p -86.9p, representing upside of 72% to 91% versus current levels. Intrinsically, we believe the Group can generate revenue of c.£250m, with the addition of a paper mill driving gross margins towards 33% and EBITDA margin towards 18%. On this basis the Group could deliver EBITDA in excess of £45.0m, driving significant uplift in shareholder value.
Click to view all articles for the EPIC: ,
Or click to view the full company profile:
Facebook
Twitter
LinkedIn
Accrol Group Holdings plc

More articles like this

Accrol Group

Ambitious goals and long-term strategies

If there is one aspect of the pandemic that will be remembered, it is the mass hoarding of toilet paper. Fortunately for Accrol Group (Accrol), the bathroom basic was in great supply, according to Graham Cox,

Accrol Group

Accrol Group Unilever licensing agreement

Accrol announced that it has entered an agreement with one of the world’s largest consumer goods companies, Unilever plc, to exclusively produce and sell a kitchen towel product under its Lifebuoy brand.  Lifebuoy is the third most-chosen

Accrol Group

Accrol Group’s Oceans on paper manufacturing & supply chains

Vandita Vaidya, Technical Manager at Accrol Group’s paper manufacturer Oceans, discusses gender diversity in manufacturing & how she educates stakeholders Vandita Vaidya, Technical Manager at Accrol Group’s paper manufacturer Oceans, has always viewed her Mother as her

Accrol Group

Accrol appoints Shore Capital as joint broker

Accrol Group Holdings plc (LON:ACRL), the UK’s leading independent tissue converter, has announced the appointment of Shore Capital Stockbrokers as Joint Broker, to work alongside Zeus, the Company’s Nominated Adviser and Joint Broker, with immediate effect.

Accrol Group

Learn and grow on the job using an apprenticeship

Elysha has recently kick started her career by doing an apprenticeship in PR and Communications at the age of 18. After leaving college, she was unsure whether to continue to university or to find an apprenticeship.

Accrol Group

Accrol Group Holdings Interim results presentation

Accrol, CEO Gareth Jenkins, CFO, Richard Newman & Group Financial Controller (and CFO designate), Chris Welsh, present the interim results for the six months ended 31 October 2022. “There was strong progress across all businesses and

Accrol Group

Accrol colleague uses apprenticeship to upskill

Amy has been working in Learning & Development for 5 years and joined Accrol in 2021 as the group’s Learning & Development Coordinator. She began as a training coordinator and has worked her way up over

Accrol Group

Valuable skills gained through apprenticeships

Javid joined Accrol in 2015 as a Shift Quality Controller and was promoted to Quality Supervisor in 2018. He was then the Quality Lead in 2019 and as of last year, he secured a promotion to

Accrol Group

Accrol announces construction of paper mill in the UK

Accrol announced that it will proceed with the construction of a sustainable paper mill, following a strategic review conducted with the help of the professional services network Deloitte Touche Tohmatsu Ltd, putting the company’s development plans