- Full year results to be ‘at least’ in line with forecasts
- Gaining market share as shoppers switch to cheaper products
- Accrol’s net debt is falling
Shares in Accrol (ACRL:AIM) rallied 8% to 27.7p after the Blackburn-based toilet rolls, kitchen rolls and wet wipes supplier said it is on track to deliver results for the year to April 2023 ‘at least in line’ with market expectations.
The cost-of-living crisis is driving growth in Accrol’s main market, the discount retailers, and private label products.
Management is confident the volume growth seen in a strong six months to October 2022 can continue as cash-strapped consumers ‘move away from high cost, low value branded products in search of best-value’, while the tissue converter said year-end net debt reduction will be ahead of expectations.
ON A ROLL, AT LAST
Shares in Accrol were previously beaten to a pulp by profit warnings triggered by soaring energy, paper pulp and supply chain costs, yet more recent news flow has been positive.
In today’s update, Accrol said it delivered ‘substantial’ growth in volume, sales and profits in the first half to October while ‘further strengthening its market position’.
As a result, full year sales and adjusted pre-tax profits will be at least in line with the £213.5 million and £7.1 million called for by consensus respectively, with net debt below the £26.3 million the market was looking for.
Not only has Accrol successfully passed through all its cost inflation to customers, the company has taken volume market share with private label volumes now higher than pre-pandemic levels as hard-pressed shoppers switch to cheaper products in the current high inflation environment.
OUTPERFORMING THE MARKET
Chief executive Gareth Jenkins highlighted volume growth of 14% against a flat overall UK market over the six-month period, which sent Accrol’s sales up 64% to £121.1 million.
Accrol increased its volume share to around 21.5% from 19.5% at the end of its previous financial year.
Jenkins said Accrol delivered this outperformance by having ‘great quality and value products that meet every consumer’s budget. Our strong relationship with the retailers and our robust supply model is ensuring we can continue to deliver a strong set of results in a difficult market environment.’
WHAT ARE THE BROKERS SAYING?
Shore Capital described Accrol’s latest update as ‘most positive, highlighting its well-invested base, excellent management and strong operational capabilities’.
The broker reminded clients that Accrol has ‘had the kitchen sink thrown at it in recent years and it is excellent to see its resilience and base to make progress for all stakeholders here on. The first-half performance is an excellent base from which to build.’
Liberum Capital pointed out that ‘private label market share is growing at an unprecedented rate against that of the traditional brands’ and sees Accrol as a strong structural growth story. ‘Revenue growth is accompanied by rising margins and with an improving free cash flow profile, we see the shares as offering very good value,’ it adds.
