Accrol Group Holdings plc (LON:ACRL) Chief Executive Officer Gareth Jenkins caught up with DirectorsTalk for an exclusive interview to discuss maximising medium term tangible shareholder returns, more acquisitions, licencing agreement Unilever’s Lifebuoy brand, and progress of Oceans and other tertiary brands.
Q1: Gareth, in your strategic review, you stated that the Group aimed to maximise medium term tangible shareholder returns through a combination of dividends and potentially share buybacks. What will you do with the cash that the Accrol Group is generating?
A1: The key point is we’re really pleased with the increased level of cash generation that we’ve seen flowing through in the first half of this year.
As we said to shareholders a number of months ago, we will use that in a variety of different ways, wherever we feel that we can give the best possible returns to our shareholders. Clearly, as our share price improves then potential share buybacks might well decline.
We’ve clearly seen some opportunities for the right acquisition and the John Dale business that we bought two years ago has shown some fantastic levels of return. We’re starting to see a level of improvement in that business that really excites us.
Our intention is still to return to the dividend list in the short to medium term. Clearly, we still have on the table, whether we think it’s the right thing to do, to look at share buybacks if we feel the share price is depressed and/or the right acquisition that comes along that we can then utilise our cash in that way.
So, there’s still a variety of things that we think we could do with the cash, nothing’s off the table, we’re just really pleased with the improvement in the group over the last six months.
Q2: Talking of acquisitions, do you have anything in your sights as things that you’re looking at?
A2: I’ve said this regularly before, we look at a lot of businesses, we meet a lot with owners and we look at a lot of potential acquisitions. From my experience, in my time at DS Smith, it’s really important that you view a lot of businesses, I know from experience that it’s really easy to buy organisations, it’s a little bit more tricky to make sure you buy the right ones.
We’re clearly pleased, as I said, with our acquisition of John Dale and the return on investment that we’ve delivered on that business has been significant.
You’re right, there are a number that we’re looking at today that make a lot of sense to us and we’re excited about potentially how we develop that. To be clear, the acquisitions will all come from our existing cash headroom and won’t be requiring any fundraisers from existing shareholders.
So, a lot of things on the table, and we’re really excited about what the next six months looks like.
Q3: Licencing agreements, they’re part of your growth strategy and you signed with Unilever’s Lifebuoy brand in February this year. How’s that going and should we expect any more agreements in the near term to mid-term?
A3: Again, we’re really pleased with that agreement, it’s taken some time to get hold into some of the retailers but we’re really pleased with how that’s progressing.
The easy answer to your question is yes. Again, we’re in discussions with a number of different parties, we see it as a real opportunity for the group to be able to bring well-known brands at a price point that we feel that the consumer can really benefit.
We’re not naive enough to think that the consumer isn’t going to stop buying brands but we feel that with our cost base, we can bring options for consumers that really give them a choice, a price point that works for them.
So, yes, we see brands and licence agreements as a key part of the organisation and they’ll be more in the near future.
Q4: Talking of brands, how are your plastic-free brand Oceans, and other tertiary brands performing?
A4: Oceans, we’re really pleased with it. It’s growing now at a faster rate than I believe any other direct to consumer product is, we’re putting a little bit more resource behind that particular part of the business.
We’ve certainly seen some significant growth with consumers and the increase in subscriptions in that particular part of our business.
As you said, we’re also seeing a significant growth in our tertiary brands. We’ve always said we see that part of our business being between 30-40% of our overall turnover in the next three years and we’re on track to deliver that.
We’re really excited about our kitchen towel brand, Magnum, which has grown substantially over the last two years since its launch. It’s now the number 3 three kitchen towel brand in the UK which is exceptional from a standing start.
Our Elegance toilet roll brand, again, is growing at a great pace and we’re excited about where we can take that particular product as well.
So, we see it as part of the portfolio, Oceans, and the other tertiary brands, and it’s certainly an area that’s been strengthening in our business over the last twelve months.
