UK-based Tissue Converter Accrol Releases Full Year 2022 Results: Revenue Up 17 percent

Accrol Group Holdings plc, the UK's leading independent tissue converter, announces its audited Final Results for the year ended 30 April 2022 ("FY22" or the "Period"), which show a resilient performance, delivered under extremely challenging macro conditions, marginally ahead of market expectations¹.

The new financial year ending 30 April 2023 ("FY23") has started well, with volumes, revenues and margins in line with market expectations.

Financial highlights

Further strong revenue growth in line with expectations - up c.17 percent YoY
Full recovery of over £70m of unprecedented, annualised input cost increases achieved by end of Q4 FY22
Short term reduction in gross margin in H1 due to timing differences across period ends, as price increases to recover the rapid leap in input costs in H2 were actioned and secured
Adjusted EBITDA and Adjusted profit before tax in line with expectations
Upward movement in adjusted net debt, funding the concluding investment in automation, further market-leading product development and additional working capital required to manage supply constraints over the next 12 months
Amended and extended banking arrangements to Aug 2024, providing 25 percent additional headroom, demonstrate continued confidence in the Group's operating performance and support the Board's growth ambitions

Operational and sustainability highlights

Accrol's market share by volume increased to 19.5 percent (H1 FY22: 18.9 percent), compared to a flat overall UK market
New customers secured through increasing product diversity - notably Amazon, Unitas (c.30,000 convenience stores), Spar, Ocado and Sainsbury's
Completion of automation at Blackburn and Leicester sites - machine investment and full automation at Leyland completed in Q1 FY23
Leicester Tissue Company ("LTC") and John Dale acquisitions were fully integrated, with outputs at the sites increasing by 60 percent and 270 percent respectively in volume terms on an annualized basis
Delivering on customers' sustainability objectives - development of smaller core products (reducing logistics and packaging costs) and further development of the Oceans brand (paper wrap)
Business continued to operate safely throughout the Period with zero lost time accidents and a 33 percent reduction in all accidents
Continued focus on operational efficiency, reducing both waste and energy consumption
First Environmental, Social and Governance ("ESG") Report published in September 2021

Current trading in FY23 and outlook

The group entered FY23 with pricing fully aligned with higher input costs
Private label sector strengthening further post year end - Accrol volumes increased by 28 percent vs private label growth of 10 percent in Q1 FY23, while the overall market has remained flat⁶
Private label volumes now higher than pre-pandemic levels - market share growing at an unprecedented rate against the traditional brands (Q1 FY23: 54 percent vs Q1 FY22: 50 percent)⁶
Group revenue up 76 percent in Q1 FY23, compared to Q1 FY22, driven by price increases (48 percent) and volume growth (28 percent)
Revenue and EBITDA on track to increase in line with market expectations for FY23⁷ (+31 percent and +68 percent respectively)
The group is well positioned to benefit from the rapid rise in demand for best value tissue products
While cognisant of ongoing macro inflationary dynamics, Accrol's strong market position, well invested manufacturing facilities and available capacity, give the Board confidence for FY23 and beyond

¹ Market expectations are derived from the latest published equity research on the company, as of 5 September 2022. For FY22, market revenue expectations were £159.1m and Adjusted EBITDA of £9.0m.

⁶ Source Kantar

⁷ For FY23, market revenue expectations at 5 September 2022 were £208.5m and adjusted EBITDA of £15.1m

Dan Wright, executive chairman of Accrol, added:

"Whilst remaining mindful of the extremely challenging macro environment, the board views the prospects for Accrol with confidence, given the strong and rapid recovery of input cost rises in the second half of this year after the delay in the first half, our strengthened customer relationships, improved levels of service and quality, and its great value product range.

The group's new banking arrangements demonstrate continued confidence in its operating performance and provide support for our development plans. The investments we have already made into the efficiency of our operations have served us well through incredibly challenging times and we are confident they will bear considerable fruit in FY23 and beyond.

Our markets are strengthening, our products are gaining share and our operations demonstrate leading efficiencies. The business is in a strong position to benefit considerably from the changing market dynamics over the next two to three years."

Gareth Jenkins, Chief Executive Officer of Accrol, said:

"Our goal, over the last four years, has been to create an innovative, sustainable and market-leading business, which I believe we have finally achieved. This has been delivered through the hard work and dedication of our team and never have their skills and commitment been more clearly demonstrated than in the year under review.

Accrol is unrecognizable from the business which floated in 2016. It is resilient, agile, and strong. The cost of living crisis, being faced by UK consumers, is driving demand for great value products across the board. The demand for private label tissue, which started to rebound in FY22, has accelerated rapidly since our financial year end. Private label comprised 50 percent of total UK sales volumes in FY22, and this has continued to grow since the start of May 2022 with private label now holding a 54 percent market share. Accrol volumes currently comprise over 32 percent of this private label market. The index linked pricing agreements we have put in place over the last 12 months, combined with the quality of our products, the efficiency of our operations and the capacity we have built into the business, have ensured Accrol is best placed in its market to capitalize on the opportunities.

While remaining conscious of the very significant ongoing macro uncertainties, we look forward to FY23 and beyond with continued confidence."

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