Accrol Group Holdings (LON:ACRL) H1 FY24 has delivered positive trading momentum with continued volume growth and an acceleration in margin recovery back to pre-pandemic levels. Zeus Capital confirms that FY24E EBITDA guidance is upgraded once again, with its revised adj. EBITDA forecast of £21.0m 16.7% ahead of the £18.0m they forecast a year ago. Accrol’s strong relationship with retailers and its strengthened supply model leaves it well placed to continue to execute profitable growth.
H1 FY24 trading update: Accrol has released a half year trading update for the six months ended 31 October 2023 (H1 FY24) confirming positive trading and an upgrade to FY24E profitability. Performance in H1 has been robust, with volume growth continuing throughout the period, and margins returning to pre-pandemic levels more quickly than previously forecast, driven by higher sales volumes, positive business mix and operating efficiencies. CEO Gareth Jenkins said “We are clearly very pleased with this performance. We continue to deliver by having great quality and value products which meet every consumers budget. Our strong relationship with the retailers and our robust supply model are ensuring we can continue to deliver a strong set of results in a changing market environment.” Interim results are scheduled for release in late January 2024.
Profitability upgraded for the second time in two months: Management now expect FY24E adjusted EBITDA to be “at least £21.0m”. This is the Group’s second upgrade to guidance in as many months, following the 6.0% increase to our FY24E adjusted EBITDA forecasts (from £18.8m to £19.3m) published on 26 September and is 16.7% ahead of the £18.0m FY24E adjusted EBITDA we forecast a year ago. Consecutive upgrades to profitability reflect the Group’s robust market position, strong customer relationships, positive trading momentum and tight control of costs. This is an impressive performance versus the wider consumer backdrop over the past 12 months.
Forecasts: FY24E revenue is unchanged from our last published forecasts (26 September) at £205.0m. FY24E gross margin is increased 25 basis points to 24.5%, reflecting margins returning to pre-pandemic levels faster than anticipated. This improvement in gross margin reflects the Group’s strong customer relationships and tight cost control. Increased gross margin drives a 2.5% or £0.5m increase in our adjusted EBITDA forecast to £21.0m, in line with revised company guidance of “at least £21.0m”. We leave our interest and tax assumptions unchanged, with adjusted PBT 4.5% higher at £12.0m, driving a 4.5% upgrade to adjusted EPS of 2.8p per share. FY24 Adjusted net debt (excluding lease liabilities) of £20.3m
is left unchanged, in line with management expectations of c.1.0x EBITDA. This is a notable improvement on the 1.7x and 3.0x leverage reported at the FY23A and FY22A year ends respectively, driven by improved profitability and a step down in capex following the conclusion of capital investment in automation of the core tissue line in FY23. FY25E forecasts are unchanged.
The Group’s planned paper mill continues to progress and should be operational by mid-2025. A vertically integrated paper mill will reduce volatility in tissue input costs, give security and visibility of supply, further waste efficiency gains and deliver material earnings accretion within its first full year of operations.
Accrol Group Holdings is the UK’s leading independent tissue converter, producing toilet tissue, kitchen towels, facial tissue and biodegradable wet wipes.
