Accrol Group Holdings plc (LON:ACRL) recently announced its H1 FY24 results. DirectorsTalk caught up with Tom Fraine, Equity Analyst at Shore Capital for his assessment of the results and Accrol’s outlook.
What were the results’ highlights?
Accrol reported very strong H1 FY24 results: Adjusted EBITDA grew 43.7% YoY to £10.2m with the margin increasing to 10.2% (H1 FY23A: 5.9%). Adjusted PBT was up 56% at £5.0m with adjusted diluted EPS being reported at 1.3p (H1 FY23A: 0.7p). There was strong volume growth in own branded offerings and increased market share. The Group remains on track to deliver FY24F results in line with both management and our expectations. We welcome confirmation of margin recovery.
What other points are of note?
The private label segment of the overall UK tissue market increased to 55% from 54% at H1 FY23A and 50% at H1 FY22A, continuing its gains against traditional proprietary brands.
Biodegradable wet wipe sales were up 33% YoY. Sales of this product have been exceptionally strong since the acquisition of John Dale in April 2021. Wet wipes are now expected to deliver an annualised sales run rate of c.£8m (c.4% of Group sales) by the end of FY24F, up from c.£2.4m at acquisition.
Post the period end, a new long-term agreement was signed with a global FMCG group to supply a well-known branded product. This licence agreement is due to launch in March 2024. We note management’s strategy to increase licence sales, which generate higher margins than the Group average. Over time this should more notably contribute.
How do you see the outlook?
We are pleased to see the strong margin performance that Accrol has reported in H1 has continued into H2 and management expects further volume growth. Adjusted net debt is still expected to be c.1x EBITDA at the year-end, even after the acquisition of Severn Delta.
Have your earnings forecasts changed in any way?
Our FY24F forecasts remain unchanged. We upgrade our FY25F EBITDA forecast by 2% to reflect the recent acquisition of Severn Delta, announced on 18 January 2024.
