Accrol Group Holdings Annual Report 2017

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FY2017 Annual Report · Accrol Group Holdings

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Accrol Group Holdings plc
Annual Report and Accounts 2017

CONVERTING
OPPORTUNITY
INTO GROWTH

Introduction and Highlights

CONVERTING
POTENTIAL INTO
PERFORMANCE

Accrol is a leading independent tissue converter manufacturing toilet rolls,
kitchen rolls, facial tissues and away from home products (AFH). We supply a
range of Independents, Discounters and Multiples as well as a variety of AFH
customers throughout the UK. Accrol imports Parent Reels from around the
world and converts them into finished goods at its manufacturing, storage
and distribution facilities in Blackburn and Leyland, Lancashire.

Strategic Report

Introduction and Highlights

What We Do

Chairman’s Statement

Chief Executive Officer’s Review

Market Overview

Business Model

Strategy

Strategy in Action

Chief Financial Officer’s Report

Risk and Mitigation

Governance

Board of Directors

Corporate Governance Statement

Remuneration Committee

Directors’ Report

Statement of Directors’ Responsibilities
in Respect of the Financial Statements

Financial Statements

Independent Auditor’s Report Consolidated

Consolidated Income Statement

Consolidated Statement of Comprehensive Income 38

Consolidated Statement of Financial Position

Consolidated Statement of Changes in Equity

Consolidated Cash Flow Statement

Notes to the Consolidated Financial Information

Independent Auditor’s Report

Company Statement of Financial Position

Company Statement of Changes in Equity

Company Cash Flow Statement

Notes to the Company Financial Information

Company Information

Strategic Report

Financial Statements

Financial highlights

Revenue

£135.1m
+14%

Adjusted EBITDA (Note 25)

£16.1m
+7%

2017

2016

2015

£135.1m

£118.2m

£81.9m

2017

2016

2015

£16.1m

£15.0m

£12.3m

Profit after tax

£7.4m
+29%

Net debt (Note 18)

£19.0m
+68.7%

2017

2016

2015 £2.3m

£7.4m

£5.7m

£19.0m

2017

2016

2015

£60.7m

£61.7m

Operational highlights

• Successful maiden full year as a publicly listed company, with a solid

trading performance.

• New contract wins have seen market share grow to over 50% of the

Discount Sector.

• Good progress made in building a platform for future growth.

• Key new hires to operations and management functions.

• Opened new 168,000 sq ft. manufacturing facility at Leyland,

Lancashire, with two tissue converting lines commissioned and
a third line expected in FY18.

• Supply Chain Optimisation plan implemented to improve and simplify
warehousing and logistics through a 368,000 sq ft. central warehouse
at Skelmersdale and managed by NFT Distribution.

Accrol Group Holdings plc / Annual Report and Accounts

GovernanceWhat We Do

CONVERTING
OUR ADVANTAGE

The Group’s competitive advantage
lies in its market positioning,
operational process and flexibility.

Our sales
The Discount market represents 16% of the overall tissue market and is the
fastest growing sector at over 10% per annum. Accrol’s decision to focus
on this sector in 2008, has delivered sales CAGR of 15.9% since 2013.
Accrol is the market leader in the Discount segment with 50% share by
market value.

Technology and converting lines
The Group currently has 17 converting lines in operation which includes
2 recently commissioned lines at Leyland. This provides a total converting
capacity of approximately 143,000 tonnes per annum. The Group’s
operating machinery allows conversion of a wide variety of tissue grades,
adding flexibility to the Parent Reel sourcing process and allowing
manufacture of a wide range of product types.

Accrol Group Holdings plc / Annual Report and Accounts

Strategic Report

Financial Statements

£18.2m

investment over
3 years

17.7m

products manufactured
per week

converting lines
in total

Sales by product

Toilet tissue revenue1

£67.5m
+28% YoY

Kitchen towels revenue1

£27.3m
+3% YoY

Facial tissue revenue1

£12.6m
+17% YoY

Away from home (AFH) revenue1

£23.3m
+1% YoY

1. Revenues are for current year ended 30 April 2017 but exclude bought in products of £4.4 million

Product range
Accrol is able to manufacture toilet rolls, kitchen rolls, facial tissue and AFH
products, providing a ‘one stop shop’ solution for customers. We believe the
ability to produce all 4 key segments is a competitive advantage.

Discounters’ tissue offerings are skewed towards Private Label and this is driving
the growth of Private Label in the market as a whole. Discounters typically look
for lower prices and suppliers that offer high, sustainable volumes. Discounters
typically dedicate 3% of their shelf space to tissue products, compared to 2% in
the Multiples. The majority of Accrol’s products are Private Label.

Accrol Group Holdings plc / Annual Report and Accounts

GovernanceChairman’s Statement

CONVERTING
INVESTMENT
INTO GROWTH

Peter Cheung
Executive Chairman

Overview of the year
I am delighted to report that FY17 was another successful
year for the Group. Our revenue grew to £135.1 million,
increasing 14% compared to FY16 and in line with market
expectations.

site, and £250 million in aggregate. We currently have 2
lines installed and recently announced the addition of a
3rd line which will be installed towards the end of 2018 as
we seek to extend our reach into the Major Multiples.

Adjusted EBITDA increased to 16.1 million, up 7%, and
adjusted profit before tax increased £4.8 million to £13.0
million, up 58%. Profit after tax has risen to £7.4 million,
up 29%.

With Grocery inflation rising during the year, consumer
footfall in the Discount Sector showed no signs of
slowing down as shoppers continued to look for ways of
offsetting rising household prices and switching to lower
cost alternatives. As a result of new contract wins starting
in late 2016, our value market share in the Discount
Sector grew to over 50%, firmly endorsing Accrol as the
soft tissue supplier of choice for the sector.

The year was not without its challenges. In anticipation
of Sterling weakness and volatility following the UK’s
decision to leave the European Union, we moved to
protect ourselves from adverse exchange rate
fluctuations by significantly hedging our exposure to help
mitigate raw material cost price increases. However, we
have continued to look ahead, positioning ourselves for
growth, investing in both our facilities and our team to
help us capitalise on the market opportunity.

During the year, we opened our new production facility
at Leyland, Lancashire, which gives us the opportunity to
install a total of 6 tissue converting lines and the potential
to generate revenues in excess of £100 million from the

We also embarked on an ambitious plan to reorganise
our warehousing and logistics operations, creating a
centralised finished goods hub next to the M58 in
Skelmersdale, Lancashire. This will enable us to better
service our customers and prepare for future growth.

Accrol’s founders, the Hussain family, have now fully
exited the business in line with the strategy we set out at
IPO, and we have made a number of new senior
management hires across the business. I would like to
thank the Hussain family for a smooth and successful
transition to new management.

Strategy and outlook
The continued oversupply of Parent Reels shows no sign
of abating and as of January 2017, a further 111 tissue
mills were on order or in their final stages, keeping
pricing competitive and supporting our strategy to
procure Parent Reels versus own manufacture. We will
continue to source reels from around the globe, taking
advantage of new technology and spare capacity.

The majority of Private Label retail shelf prices for soft
tissue are still at pre-EU referendum levels. There are
positive signs that this is changing, albeit slower than we
expected, and we expect the industry as a whole to pass
on the effects of the weaker pound as currency
contracts unwind.

Accrol Group Holdings plc / Annual Report and Accounts

CONVERTING

INVESTMENT

INTO GROWTH

Strategic Report

Financial Statements

Dividend policy

Progressive yield
at IPO placing
price

Final dividend proposed

per ordinary
share

Key to our expansion will be to strengthen
our relationships in the growing Discount
Sector, the continued consumer shift
towards Private Label tissue products and
winning new business in the Premium Retail
Sector. Our recent investment in new
production capacity, logistics and
warehousing facilities will allow us to build
on our strong market position.

Dividend policy
The Board remains committed to a
progressive dividend policy. The interim
dividend of 2.0p per share was paid in
February 2017. The Board has proposed a
final dividend of 4.0p per share, which
together with the interim dividend represents
a 6% yield at the IPO listing price.

The final dividend is subject to the approval
of the Company’s shareholders and will be
paid on 26 September 2017 to shareholders
on the register on 1 September 2017. The
Company’s Ordinary shares will become
ex-dividend on 31 August 2017.

Peter Cheung
Executive Chairman
10 July 2017

Shareholder analysis

 Institutional

 Non-institutional

 Private individuals

 Other

81%

16%

UK tissue

market share

Accrol Group Holdings plc / Annual Report and Accounts

GovernanceChief Executive Officer’s Review

POSITIONING
FOR FUTURE
GROWTH

Steve Crossley
Chief Executive Officer

Market overview
FY17 has been a year of delivery and positioning for
future growth of Accrol, with the UK tissue market
currently worth £2.2 billion at retail selling price.

Although there has been a small decline, due to
promotional activity, in the value of consumer sales
through Multiples and Discounters, down 1.5% to £1.5
billion, the Discount Sector continues to demonstrate
the most significant growth at over 10% per annum.
Brands continue to be slowly eroded with Own-Label
within the Major Multiples reaching 47% of the total
market by March 2017. Inflation, driven by a fall in the
value of Sterling following the EU referendum, first
appeared in the tissue category in early 2017 and is
expected to accelerate as the year continues.

In anticipation of exchange rate volatility immediately
ahead of, and following, the EU Referendum, Accrol
entered into a significant number of forward contracts
to hedge its currency exposure. This, along with
favourable Parent Reel pricing dynamics, enabled Accrol
to minimise the impact of foreign exchange rate volatility
on its financial performance through FY17. As exchange
rates continue to be weak in favour of the US Dollar,
tissue manufacturers and convertors are facing rising raw
material prices as pulp is traded in US Dollars on global
markets. Accrol is well advanced in conversations with
customers regarding inflation recovery but they are
challenging and will take time to conclude.

Accrol Group Holdings plc / Annual Report and Accounts

Strategy
Throughout the year we have focused on our long-term
strategy of increasing our share of the Discount Sector as
increasing inflation encourages UK shoppers to search out
quality and value and further accelerates the growth of the
Discount Sector. Evidence of this can already be seen with
Aldi and Lidl both recently reporting market share growth
of almost 20%. Increasing product prices will also see
further moves in sales from brands into Own-Label within
the Major Multiples as they all seek to re-set their ranges
and shopper offering. Our aim of gaining further Own-
Label business with the Major Multiples therefore remains
a key strategic objective.

Our sourcing strategy of purchasing Parent Reels globally
from partner paper mills will continue to be a key point of
difference. Leveraging strong commercial terms, flexibility
on sourcing new technologies and better use of cash
remain the key advantages of this sourcing strategy as
opposed to a vertically-integrated model. There is still
significant over capacity in the world pulp and tissue
markets, as new paper mills come online, which appears
set to continue through to 2019.

Contracts
We won a number of new contracts in FY17, the most
significant being the launch of Lidl’s Floralys range in
November 2016. The account has continued to trade
above the original expected levels of circa £10 million
per annum.

Relationships with key customers remain positive and
our investment for future growth by increasing capacity
and improving our supply chain has been well-received.
Our relationship with Booker, Accrol’s largest customer,
continues to be strong and we have recently signed a
new supply agreement.

Conversations with the Major Multiples continued
throughout the year and all outlined the need for an
increase in Accrol’s manufacturing capacity in order
to move major tranches of volume, underlying the
importance of our continued investment in the business.

Increased input costs driven by exchange rates have
prompted inflation recovery conversations and,
subsequently, more tender processes across the
industry.

Strategic Report

Financial Statements

New manufacturing site

Leyland

168,000 sq. ft.

New finished goods warehouse

Skelmersdale

Capacity to service sales
up to £200m

Market opportunities/outlook
The Directors believe that Accrol’s strategy
remains relevant for the marketplace and that
there continue to be opportunities for further
growth. The move toward Discounters and
Own-Label will be accelerated as shoppers
try to reduce the inevitable impact of inflation
without compromising on quality. Despite
the exchange rate driven inflationary
pressures and the slower than expected
consumer price increases which the whole
industry faces, the Directors remain confident
that when price increases do come through,
our sourcing policy and investment in
capacity, supply chain efficiency and people
has positioned Accrol to take advantage of
the marketplace dynamics.

Steve Crossley
Chief Executive Officer
10 July 2017

Investment
Significant progress has been made on
building a platform for future growth during
the year. A suitable 168,000 sq ft site was
quickly identified and secured at Leyland,
Lancashire. From moving into the building
in late October 2016, the premises were
modified for manufacturing use with the 2
converting lines installed from January 2017
onwards. Commissioning on the first line
was completed in April 2017 and on the
second line in June 2017. Ramp up of
volume has continued with the addition of
new shift patterns and will continue into
FY18. We recently announced the purchase
of a further tissue conversion line which will
take the total business capacity to 158,000
tonnes for FY18 or circa £200 million per
annum sales. The Leyland site has space for
a further 3 conversion lines in addition to the
3 lines that will be in place.

In addition to laying down new capacity,
an investment programme commenced in
the year on the existing Blackburn sites to
improve operational efficiency, and hence
overall capacity. This includes staff training
and a new rotating shift pattern that is more
employee friendly.

The final part of the investment for growth
strategy in FY17 was the implementation of
a Supply Chain Optimisation plan to improve
and simplify warehousing and logistics,

creating additional capacity for growth.
A more efficient single ‘big shed’ solution
was adopted and a site quickly identified
on the M58 at Skelmersdale in Lancashire.
This 368,000 sq ft warehouse is newly
refurbished and will house finished goods
and provide central distribution facilities to
all UK customers. Warehouse management
and national logistics will be contracted
out to a 3rd-party provider, NFT, enabling
the Accrol management team to focus
on its core competencies of sourcing and
manufacturing.

People
Following our IPO in June 2016, a new PLC
Board was put in place and a review of our
organisational structure was undertaken. Key
gaps were identified and have subsequently
been filled with highly experienced industry
experts. The new team helped transition
the Hussain family out of the business by
October 2016 as agreed in a collaborative
and controlled manner.

People remain our most important asset
and further investment continues to be
made into their working environment
through a focus on equipment and health
and safety, into their welfare through more
employee-friendly rotating shift patterns,
and into respecting their views and opinions
through employee engagement.

Accrol Group Holdings plc / Annual Report and Accounts

GovernanceMarket Overview

WE ARE A
LEADING
MARKET
PLAYER

Accrol represents 9% of the UK tissue
market share by revenue and is the
5th largest operator by capacity.

Discounters forecast growth

c.10%

per annum

Focus on Discounters

50%

market share

Accrol Group Holdings plc / Annual Report and Accounts

The UK tissue market
The total UK tissue market is worth c. £2.2bn at retail selling
price with c. £1.5bn attributable to consumers sales through the
Multiples and Discounters. The consumer sector of the market is
dominated by the Multiples with a 72% share by value*. Discounters
represent 16% of the consumer sector which is the fastest growing
sector at over 10% per annum*.

The total market value is in slight decline by 1.5% pa* due to
promotional activity and growth from the Discounters with
volume of rolls down 1.2%* largely due to migration to bigger
rolls.Brands continue to be eroded with Private label products
reaching 47% of the overall market by March 2017*.

* Kantar to March 2017

Our focus
Changes in consumer attitudes towards Discounters have driven
the rise in their market share in the overall grocery sector in the
last 5 years, at the expense of the big 4 Multiples, all of which have
lost revenues directly to Discounters such as Aldi and Lidl.

Management’s decision in 2008 to focus on the Discount market
has driven contract wins in the sector and has led to Accrol
becoming the market leader, holding 50% share of the
Discount market.

Future growth
We are under-represented in the biggest sector of the market
where Multiples have invested into Private Label and offer a greater
range of such products compared to other retailers. Multiples are
expected to continue to increase their Private Label offerings and
Private Label market share.

Opportunity in Multiples

72%

Multiples total UK revenue market share

Strategic Report

Financial Statements

Range of customers

We have established long-term relationships with many
leading retailers in a range of market sectors.

Tissue market by customer mix

 Multiples

 Others

 Discounters

72%

12%

16%

Accrol customer mix

 Multiples

 Others

 Discounters

18%

74%

Accrol Group Holdings plc / Annual Report and Accounts

GovernanceBusiness Model

OUR
MODEL

Our vision is to be the leading
independent supplier of Private
Label tissue products to both the
Discount and Multiples sectors.

KEY STRENGTHS

Dynamic Sourcing
The UK consumes 1.2 million
tonnes of tissue paper per
annum, of which c. 0.3 million
tonnes is imported. Accrol does
not operate a paper mill and
instead it imports Parent Reels
from around the world. As such,
the UK is a net importer of Parent
Reels, of which Accrol takes 32%
of all imports.

Low capital model
Our model of purchasing
and converting Parent Reels
(as opposed to manufacturing
the Parent Reels from pulp
and recycled fibre), requires
lower fixed overhead and
provides flexibility in sourcing to
capitalise on favourable pricing
opportunities and production
technology advancements.

There is a global over-supply of
both pulp and Parent Reels and
additional capacity is forecast to
be brought on stream through
to 2019. Parent Reel prices are
driven by pulp prices and excess
capacity in both the pulp and
Parent Reel production. Excess
global supply has suppressed
Parent Reel prices allowing
Accrol to compete on price
compared to those competitors
that operate mills.

Modern, efficient machinery
Investment in state-of-the-art
lines (>60% of the lines are less
than five years old) has reduced
our operating cost per unit to
a market leading position.

Production flexibility
Our operating machinery allows
conversion of a variety of input
tissue grades, adding flexibility to
the Parent Reel sourcing process
and allowing manufacture of a
wide range of product types.

BASIS FOR GROWTH

Developing sales channels

• Increasing share
with Discounters

• Building relations
with Multiples

• Expanding our offering to
customers to supply the
full range of products

Adding capacity

• Our new manufacturing

facility at Leyland

• Investment in line

refurbishment at Blackburn

Increasing capability

• 7 new senior management

• Increased training and a
changed employee shift
pattern to improve skills

• Utilisation of third-party
expertise to manage
warehouse and logistics
at Skelmersdale

Accrol Group Holdings plc / Annual Report and Accounts

Strategic Report

Financial Statements

WHO BENEFITS

Shareholders

• Long-term capital growth.

• Progressive dividend

payments.

Customers

• Competitive independent

supplier.

• Focused on Private label/

Discounters.

Employees

• Quality local employer
providing long-term
security, training and
development.

Suppliers

• Growing business

requiring additional
services.

Accrol Group Holdings plc / Annual Report and Accounts

GovernanceStrategy

OUR
STRATEGY

We have identified key areas of operation to focus on
to improve the Group’s performance going forward.

GROW THE TOP LINE

PROTECT THE MARGIN

Ambition to achieve £250m+ p.a. sales through
building on our core business with the Discounters,
gaining new Own-Label business with the Multiples
and complementary acquisitions.

Protecting our margin whilst delivering a quality
product is key to retaining our customers, building
our sales and ultimately creating shareholder value.

OBJECTIVE

• Protect our customer base in the growing Discount Sector.

• Continue to source quality Parent Reels at the best value from

• Drive new sales in the Discount Sector.

• Gain new sales in the growing Private Label sector of

the Multiples.

• Explore complementary acquisitions that drive sales

and PBT.

our unique worldwide sourcing model.

• Continue to protect where possible our raw material purchasing

through hedging currency movements.

• Work with our customers to recover inflationary costs whilst

protecting sales value and volume.

PROGRESS TO DATE

• Our share of the Discounter segment has grown
to c. 50% during FY17 following contract gains
with Lidl, Booker and Poundstretcher.

• We hedged significantly pre & post EU referendum and this

coupled with lower paper pricing year on year has underpinned
the financial performance for FY17.

• Lidl contract started October 2016 and delivered £8.8m

• Tissue sourcing is under constant review to optimise pricing

in year – NTT supported our commercial case.

and quality.

• Branded gains in Major Multiples include Morrisons

• Inflation recovery discussions started with our customers in

(£0.5m) and Tesco (£1.5m).

• We believe inflation recovery in the marketplace will accelerate
consumers moving to Discount Sector. Furthermore, it will
increase volatility in sales to Discounters and Multiples as price
inflation discussions will drive more business to being tendered.

December 2016 and continued through FY17. Whilst we have
had some success, further recovery of adverse exchange rate
movements will be a significant element of achieving FY18.

KPIs

• 14.2% or £16.8m sales growth year on year

(FY16: 17.0% growth).

• Underlying gross profit increased £4.5m

or 13.4% to £37.7m (FY16: £33.2m).

• 50% share of Discount market (FY16: 35% share).

• Underlying gross margin 27.9% (FY16: 28.1%).

• 9% share of total tissue market

(FY16: 7% share).

• Adjusted EBITDA increased £1.1m or 6.8%

to £16.1m (FY16: £15.0m).

• Adjusted profit before tax increased £4.8m

or 57.5% to £13.0m (FY16: 8.3m).

Accrol Group Holdings plc / Annual Report and Accounts

Strategic Report

Financial Statements

BEST IN CLASS SUPPLY CHAIN
AND CUSTOMER SERVICE

BUILD A PLATFORM
FOR GROWTH

Deliver market-leading service levels through an
optimised Supply Chain that is efficient and provides
capacity for future growth.

We are investing in infrastructure for growth as
inflation drives shoppers towards good value
products through Discounters and retail own label.

OBJECTIVE

• Supply Chain Optimisation Review to ensure the solution takes

• Increase capacity at Blackburn through efficiency

into consideration future sales growth and exit existing leasehold
warehouses where appropriate.

• Improve the link between sales and manufacturing to optimise

warehousing and manufacturing.

• Improve our customer experience through better information

and systems.

improvements.

• Create a new facility at Leyland that can facilitate significant
growth which will include investment in new machinery.

PROGRESS TO DATE

• ‘Single Big Shed’ solution recommended. A suitable

• Blackburn Manufacturing Optimisation Plan includes spend

368,000 sq ft. facility was identified at Skelmersdale, Lancashire.

• Outsourcing of the warehouse management to a third party and

to provide an integrated, optimised logistics solution. NFT
identified as the most suitable partner and they were appointed in
April 2017.

• Full transition to Skelmersdale expected to be completed

in August 2017.

• NFT have brought into our business a world-class warehouse
and logistics system which will ultimately allow us to enhance
the customer experience and to save cost.

• Sales and Operations Planning resource introduced to improve

the link between sales and manufacturing.

on machine enhancements, staff training and the introduction
of a new rotating shift pattern from May 2017 onwards with
commissioning on line 1 completed by April 2017 and line 2 by
June 2017. Leyland has space for a further 4 lines giving 6 in total.
One more new line ordered in May 2017 for Leyland which will
add 15,000 tonnes p.a.

• In both sites we have hired first-class management with relevant
industry experience. We have also engaged support services in
Engineering, HR, Procurement, and Planning.

KPIs

• Service level on volume fill improved from 90.0% to 99.6%

• Increase total capacity to 143,000 tonnes p.a.

at year end after a challenging 6 months of growth.

(FY16: 118,000 tonnes).

• On Time In Full (OTIF) will be introduced from August 2017.

• Increase total capacity to 170,000 tonnes being 143,000 base

above plus 15,000 tonnes new Leyland line plus 12,000 tonnes
efficiency improvement at Blackburn.

Accrol Group Holdings plc / Annual Report and Accounts

GovernanceStrategy in Action

GROW THE
TOPLINE

New Lidl contract

£10m+
per annum

Winning new contracts – Lidl

• Drawing on our experience in the Discount Sector, we pitched
for the Lidl own-label tissue contract. The Lidl team visited our
Blackburn site to review our credentials and facilities, and reassure
themselves we had available capacity for growth.

• We were awarded supply contracts for 10 products (3 promotional)
with deliveries to commencing in September 2016. Design, artwork
and pack formats were agreed and capacity booked to ensure
successful delivery of this significant contract win.

• We carried out a marketplace review and made recommendations
to Lidl on range and price points. We also presented a variety of
embossing options for the product tiers (good/ better/ best) and
made recommendations for each tier. Our new NTT toilet tissue
was proposed for their Supersoft products on an exclusive basis.

• Following a tender process and approval of samples we made
a value-added proposal to reconfigure Lidl’s current pallets to
become front facing, maximising product visibility – making them
more shopper-friendly and potentially boosting sell through.

• This win accelerated the need for new capacity which would

require new factory space – our Leyland site.

• The contract kicked off with a four week, 18 pack toilet roll
promotion, followed in November 2016 by the full range.

Accrol Group Holdings plc / Annual Report and Accounts

Strategic Report

Financial Statements

BUILDING A PLATFORM
FOR GROWTH

NFT awarded a

£60.0m
5 year
contract

Enhancing our supply chain – Leyland and Skelmersdale

• A review was undertaken to determine the requirements to deliver
our £250m revenue ambition. We identified the need to increase
capacity and optimise our supply chain to meet delivery criteria
required to win potential large Multiple contracts.

• We have also invested further in our Blackburn sites to enhance
key lines, train staff and implement a new, employee friendly,
rotating shift system. This will increase our existing capacity by
12,000 tonnes pa by October 2017.

CAPACITY

CAPABILITY

• Following the review, we accelerated the search for suitable

premises to house 2 converting lines purchased in April 2016 and
provide space for future expansion. Our new Leyland site is able
to house up to 6 converting lines, providing a potential of
60,000 tonnes or over £100m in sales pa.

• Our Supply Chain Review was challenged with finding an optimal
solution to match the growth ambitions and a ‘Big Shed’ solution
was presented to the Board in November 2016. The plan was to
exit our current 6 warehouses and move to a simpler, more
efficient central distribution system.

• Works began in October 2016, with commissioning in January

2017. Line 1 is dedicated to toilet rolls and Line 2, which came on
stream in April, will produce kitchen roll. Both lines will be fully
manned on a rotating shift pattern, employing 80 new staff and
management.

• A 368,000 sq ft. warehouse was found near Skelmersdale and NFT
awarded a 5 year, £60m contract in March 2017 to provide world
class logistics and warehouse management. The transition of
stock and distribution commenced during April and will be
complete for August 2017.

• A third line has been ordered and will be commissioned in March
2018, adding a further 15,000 tonnes pa capacity. This creates
significant spare capacity allowing Accrol to bid for further Multiple
contracts.

• A combination of investment in new capacity at Leyland,

improving efficiency at Blackburn, and adopting the ‘Big Shed’
solution in Skelmersdale provides a robust platform for growth
which matches the sales opportunity.

Accrol Group Holdings plc / Annual Report and Accounts

GovernanceChief Financial Officer’s Report

CONTINUED
STRONG
SALES,
PROFIT
AND CASH
GROWTH

Growth in adjusted profit
after tax

57.3%

Key performance indicators

2017
£’000

2016
£’000

Revenue
Adjusted gross margin(1)
Adjusted EBITDA(2)
Finance costs
Adjusted profit before tax(3)
Adjusted profit after tax(4)
Free cash flow(5)
Net debt
Net debt/adjusted EBITDA
EPS – basic

135,053
27.9%
16,061
1,129
13,022
10,999
7,384
18,988

118,219
28.1%
15,038
4,941
8,266
6,992
4,696
60,656
1.18 times 4.03 times
£576.26

£0.09

Change

+14.2%

+6.8%
-77.2%
+57.5%
+57.3%
+57.2%
-68.7%

• Revenues increased by 14.2% to £135.1m.
• Gross profit increased 9.3% to £37.7m (FY16: £34.5m).
• Adjusted gross margin was 27.9% (FY16: 28.1%) supported by

favourable Parent Reel pricing and significant currency hedging.

• Adjusted EBITDA increased by 6.8% year on year to £16.1m

(FY16: £15.0m).

• Adjusted profit before tax increased 57.5% year on year to £13.0m.
• Adjusted profit after tax increased 57.3% year on year to £11.0m.
• Continued strong cash generation which included a £3.6m

repayment of loan note interest in the current year.

• Net debt reduced £41.7m year on year to £19.0m with net debt
to adjusted EBITDA reducing from 4.0 times to 1.2 times in the
current year.

• Basic EPS of 9p (FY16: 57,626p).

• Final dividend proposed of 4p per Ordinary share giving a total of

6p per Ordinary share for the full year.

2017

2016

 Multiple

 Other

 Discounter

18%

74%

 Multiple

 Other

 Discounter

22%

69%

James Flude
Chief Financial Officer

Sales of Private Label products into
Discounters and Multiples delivered year
on year a 14% growth in revenues and a
58% growth in adjusted profit before tax.
Net debt reduced by 69% to £19.0m.

Growth in revenue

14%

Growth in adjusted profit
before tax

58%

Accrol Group Holdings plc / Annual Report and Accounts

Strategic Report

Financial Statements

Income statement

Revenue

Cost of sales before gain/(loss) on derivative financial instruments
Gain on derivative instruments

Cost of sales

Gross profit
Administration expenses
Distribution costs

Operating profit

Analysed as:
– Adjusted EBITDA(2)
– Depreciation
– Amortisation
– Gain on derivative financial instruments
– Exceptional items

Operating profit

Finance costs

Profit before tax
Tax charge

Profit for the year attributable to equity shareholders

Gross margin %
Adjusted gross margin % (1)

Statutory

2016
£’000

2017
£’000

135,053

118,219

(97,374)
–

(84,996)
1,266

(97,374)

(83,730)

37,679
(15,698)
(11,453)

34,489
(13,138)
(9,431)

Change

+14%

+9%

10,528

11,920

(12%)

+7%

16,061
(1,910)
(2,042)
–
(1,581)

15,038
(1,831)
(2,060)
1,266
(493)

10,528

11,920

(12%)

(1,129)

(4,941)

9,399
(2,023)

7,376

27.9%
27.9%

6,979
(1,274)

5,705

29.2%
28.1%

+35%

+29%

Note 1: Adjusted gross margin, which is defined as gross profit excluding the (loss)/gain on derivative financial instruments is a non-GAAP metric used by management
and is not an IFRS disclosure.
Note 2: Adjusted EBITDA, which is defined as profit before finance costs, tax, depreciation, amortisation, (loss)/gain on derivative financial instruments and exceptional
items, is a non-GAAP metric used by management and is not an IFRS disclosure.
Note 3: Adjusted profit before tax, which is defined as profit before tax, amortisation, (loss)/gain on derivative financial instruments and exceptional items, is a non-GAAP
metric used by management and is not an IFRS disclosure.
Note 4: Adjusted profit after tax, which is defined as profit after tax, amortisation, (loss)/gain on derivative financial instruments and exceptional items, is a non-GAAP metric
used by management and is not an IFRS disclosure
Note 5: Free cash flow, which is net cash flow from operating activities is a GAAP measure used by management.

Key performance indicators

Revenue

2017

2016

Finance costs

2017

£1.1m

Adjusted gross margin(1)

Adjusted EBITDA(2)

£135.1m

2017

£118.2m

2016

27.9%

2017

28.1%

2016

£16.1m

£15.0m

2016

£4.9m

Adjusted profit before tax(3)

Adjusted profit after tax(4)

2017

2016

£13.0m

2017

£11.0m

£8.3m

2016

£7.0m

Free cash flow(5)

Net debt

Net debt/adjusted EBITDA

2017

2016

£7.4m

2017

£19.0m

2017

1.18 times

£4.7m

2016

£60.7m

2016

4.03 times

Accrol Group Holdings plc / Annual Report and Accounts

GovernanceChief Financial Officer’s Report continued

Revenues
Revenues grew by 14.2% or £16.8m year on year with the majority
of the growth coming from the Discounters. The Discount segment
of the UK tissue market has increased from 14% to 16%, taking share
from the Multiples. In terms of products, toilet tissue revenues
showed the highest year on year growth of 27.3% or £14.6m. As a
proportion of revenue, toilet tissue has increased from 44% in the
prior year to 49% in the current year.

Gross margin
Adjusted gross margin decreased marginally by 0.2% from 28.1% for
the year ended 30 April 2016 to 27.9% for the year ended 30 April
2017. Adjusted gross margin excludes the impact of unrealised gains
and losses on outstanding forward foreign currency contracts valued
at the Balance Sheet date. The decrease of 0.2% is mainly due to:

• In order to reduce the impact of the adverse movements in both
the US$ and Euro exchange rates, we entered into a significant
volume of forward currency contracts ahead of, and following,
the EU referendum, selling Sterling and purchasing both US$
and Euros. This coupled with favourable Parent Reel pricing
delivered a 0.3% improvement in adjusted gross margin.

• We have continued to invest in production head count to support

the sales growth at a cost of 0.5% of adjusted gross margin.

Administration costs
Administrative costs have increased year on year by £2.6m to £15.6m
mainly due a £1.1m increase in exceptional costs, £0.6m due to
increased wage costs as we continue to invest in people to support
the sales growth, £0.3m due to plc related running costs
and £0.6m due to insurance, depreciation and utilities.

Exceptional costs of £1.6m in the current year relate to AIM flotation
costs of £0.2m (balance of £1.6m is included in the share premium
account), consulting costs of £0.6m, an early settlement fee on
finance leases of £0.4m and the write-off of previous deal related
costs attached to the previous debt structure of £0.4m.

Distribution costs
Distribution costs as a percentage of revenue has increased year on
year by 0.5% to 8.5%. The increase is mainly due to destination mix
change with an increased number of southern depots coupled with
an increased usage of packaging materials.

Finance costs
Finance costs have decreased significantly year on year by £3.8m
to £1.1m mainly due to the restructuring of the debt at listing on
AIM in June 2016. The 10% fixed rate secured manager loan notes,
the 10% fixed rate secured investor loan notes and the majority
of the finance leases were repaid at listing. A new Revolving Credit
Facility of £18.0m was put in place at IPO with a drawdown at IPO
of £13.0m.

Taxation
The effective tax rate for the year was 21.5% which is higher
than both the standard rate of taxation and the prior year (18.3%)
primarily as a result of non-deductible expenses which largely
relate to professional fees and to an element of interest charges
on loan notes which are not deductible for tax purposes. The
change in the statutory tax rate to 19.92% (2016: 20%) is due to
the reduction in the main rate of corporation tax from 20% 1 April
2016 to 19% from 1 April 2017.

Balance sheet
Property, plant and equipment
In the previous financial year, we acquired 2 further converting
lines at a cost of £3.2m. In the current year, we have installed
both of these machines in our new production facility at Leyland.
Start-up costs of £3.4m are included in assets under construction
with deprecation of the 2 lines and the start-up costs starting from
May 2017.

Intangibles
Intangibles comprise mainly of goodwill and customer relationships.
Under IFRS, goodwill is not amortised but is subject to an impairment
review on at least an annual basis. Consequently, during the year, the
Directors performed a review, which involved making assumptions
about the future performance of the business. After carefully
considering various scenarios that could occur and after looking at
sensitivities on these scenarios, the Directors concluded that no
impairment was required. Customer relationships have been
recognised at fair value and are amortised over 10 years.

Working capital

Inventories
Trade and other receivables
Trade and other payables

2017
£’m

14.4
24.7
(18.8)

20.3

Actual

2016
£’m

9.4
21.3
(15.5)

15.2

Var
£’m

5.0
3.4
(3.3)

5.1

Raw material stocks have increased by £2.1m with the majority of the
increase supporting the sales growth with a smaller element due to
us taking spot deals to take advantage of lower Parent Reel pricing.
Finished goods stocks have increased by £2.9m year on year with
last year significantly lower than expected due to higher sales
demand around year end. Finished goods stock levels at 30 April
2017 are of an appropriate level to ensure we provide good service
to our customers.

Trade receivables have increased by £3.4m in line with the sales
growth, showing our continued tight control of cash collection.

Trade payables have increased £3.3m as we are choosing to take
advantage of favourable credit terms on Parent Reels.

Accrol Group Holdings plc / Annual Report and Accounts

Strategic Report

Financial Statements

Borrowings and cash flow

Bank loan facility
Finance leases
Shareholder loans
Factoring facility

Borrowings
Cash and cash equivalents

Net debt

2017
£’m

12.8
0.5
-
9.5

22.8
(3.8)

19.0

Actual

2016
£’m

3.7
10.9
41.1
7.5

63.2
(2.5)

60.7

Var
£’m

(9.1)
10.4
41.1
(2.0)

40.4
1.3

41.7

As part of the AIM flotation process, shareholder loan notes, bank
loan facility and the majority of finance leases were repaid. A new
Revolving Credit Facility of £18.0m was put in place with a day
1 draw down of £13.0m. The opening day net debt position following
flotation was £23.1m with the above position representing a
reduction of £4.1m to 1.18 times the FY17 adjusted EBITDA.

Net cash flows from operating activities increased £2.7m or 57.2%
to £7.4m mainly due to higher adjusted EBITDA year on year, lower
relative investment in working capital and lower interest paid
following the debt restructuring noted above.

Looking forward
After completing our first year on AIM, we are looking forward to
consolidating the investments in our new production facility in
Leyland and our new distribution centre in Skemersdale. As before,
our goal is to provide shareholder value through the provision of
quality products and services to our existing and new customers.
The Board has proposed a final dividend of 4p per Ordinary share
giving a total of 6p per Ordinary share for the full year. The Board
remains committed to a progressive dividend policy.

James Flude
Chief Financial Officer
10 July 2017

Accrol Group Holdings plc / Annual Report and Accounts

GovernanceRisk and Mitigation

In order to gain an understanding of the risk exposure of the Group
we review each area of our business annually and use a methodology
that will assist the Group in measuring, evaluating, documenting and
monitoring its risks within all areas of its operations.

We use our risk management process as described to identify, monitor, evaluate and escalate risks as they emerge, enabling
management to take appropriate action wherever possible in order to control them and also enabling the Board to keep risk
management under review. The risk factors addressed below are those which we believe to be the most material to our business
model, which could adversely affect the operations, revenue, profit, cash flow or assets of the Group and which may prevent us
from achieving the Group’s strategic objectives. Additional risks and uncertainties currently unknown to us, or which we currently
believe are immaterial, may also have an adverse effect on the Group.

Principal risk

Impact

Mitigation

Customer concentration

The loss of a major customer.

Cost of input goods and
materials

Parent Reel and pulp capacity
and pricing.

• The loss of a major customer and/or being
too dependent on a small number of high
value customers could seriously impact
the sales revenue and hence profitability
of the business.

• Nurture relationships with key customers.

• Understand our customers’ business in

order to identify opportunities.

• Ensure customer service levels are high.

• Be ready to take advantage of market

opportunities to take on new customers.

• If prices rise above management

• Nurture relationships with key suppliers.

expectations this could have a material
adverse effect on the Group’s ability
to achieve strategic objectives.

• Buy ahead.

• Take favourable spot opportunities when

available.

• Remain close to market dynamics on

pulp price and capacity.

• Increase knowledge of overall capacity
in market to identify new opportunities.

• Remain flexible with regard to new

suppliers.

Market and production capacity

New entrant into Market.

• A new entrant into the market creating

• Ensure that Group remains cost

extra capacity and competition.

competitive, delivering best quality
and service to customers.

Winning a large
customer contract.

• The winning of a large contract could
absorb all capacity headroom and
could lead to supply issues if not
managed closely.

Installation of new
converting capacity.

• As the Group grows it needs to install new
converting capacity to supply customers.

• Ensure that we optimise the

performance from our current
production capacity and have clear
plans to establish new production lines
in line with business growth/winning
new contracts.

• We have done this on numerous

occasions, most recently on the 2 new
machines purchased in the previous
financial year.

Accrol Group Holdings plc / Annual Report and Accounts

Strategic Report

Financial Statements

Increasing

Decreasing

No movement

Principal risk

Financial

Volatility of foreign exchange rates.

Impact

Mitigation

• The majority of our Parent Reel purchases
are in US$ or Euros. Fluctuations in the
exchange rates could adversely affect
input costs and hence profitability.

• We have a hedging policy.

• Currency purchased in line with hedging

policy and budgets/forecasts.

• Flex purchasing towards US$, Euro or

Sterling where appropriate.

• Significant adverse weakening of Sterling

will impact the entire market with a market
price increase most likely required.

• A recent detailed IT review and mapping
exercise has been undertaken. The IT
Strategy is in place and is reviewed on
an ongoing basis.

• Critical business continuity plans and
Disaster recovery contingencies are
in place.

Information technology
dependency

The Group relies on IT systems in
its day to day operations.

• Disruption in critical IT systems could

have a negative impact on production and
important business processes.

Human resources

Key person dependency.

Regulatory

Failure to adhere to regulatory
requirements such as taxation,
the Data Protection Act, Health
and Safety and Fire safety
regulations in particular.

• Loss of key individuals could impact
the Company’s ability to deliver its
strategic goals and, resulting in declining
performance and loss of investor
confidence.

The Group uses a variety of techniques to
attract, retain and motivate its staff, with
particular attention paid to those in key roles
to help ensure the long-term success of the
Group. These techniques include:

• The regular review of remuneration
packages, including share incentive
schemes,

• Regular communication with staff; and

• An annual performance review process.

• A major fire would lead to production
loss and even factory loss. Due to the
inflammable nature of tissue and the dust
created during the converting process; the
Group is at a greater risk of fire than many
other industries.

• Non-compliance to Data Protection and

Health & Safety regulations could result in
fines, litigation and reputational damage.

• The Board has oversight over the

management of regulatory risk and
compliance and designates specific
responsibilities to senior management who
will seek external advice where relevant.

• Ensure Group have robust operational
policies, procedures, risk assessments
and contingencies around fire safety
regulations.

• Update and test the Disaster Recovery

Plan annually.

Accrol Group Holdings plc / Annual Report and Accounts

GovernanceBoard of Directors

Peter Cheung

Steve Crossley

James Flude

Joanne Lake

Steve Hammett

Position

Executive Chairman

Chief Executive Officer

Chief Financial Officer

Independent Non-Executive

Director

Key strengths

Over 30 years of operational and financial
experience in blue-chip manufacturing,
FMCG and retail.

Over 35 years of experience in UK food
manufacturing and distribution at
senior management or Board level.

Extensive experience in managing

finance functions and financial

Extensive Board experience gained

in a plc environment and also with

reporting.

AIM companies.

Range of retail experience.

Extensive experience in the soft tissue industry.

Date joined the Board

Chairman since November 2014.

June 2016.

January 2015.

June 2016.

Previous experience

20 years as a main Board Director.

Peter has worked alongside private equity
firms since 1997 and served on the Board
of AM Paper (SCA Soft Tissue) as Corporate
Development Director, TMD Friction as
Chief Financial Officer, Jemella Group (ghd)
as Chief Operating Officer and Chairman
of the Operating Board. He is a qualified
CIMA accountant.

Steve spent 27 years at Unigate plc and
Northern Foods plc latterly as an Operating
Board Director and Divisional Managing
Director of Chilled Foods.

Most recently, as Chief Executive Officer at
Bright Blue Foods, he helped restructure,
transition and re-finance the Company
with a new investor. Steve has also had
roles as Group Executive Board Director
of Samworth Brothers (November 2010
to August 2014) and Managing Director of
Grampian Country Pork (September 2006
to September 2008).

Steve has experience working with venture
capitalists and banks to raise capital for
investment.

James has 13 years of industry

experience in finance roles gained

in blue-chip and private equity-

backed businesses.

He held various financial reporting

and internal audit roles at Northern

Foods plc.

James spent 6 years at ghd where

he was key in delivering the first

private equity buyout with Lloyds

Development Capital in July 2006

and the second buyout with Montagu

Private Equity in July 2007.

James qualified as a Chartered

Accountant with Arthur Andersen and

holds a BSc Hons in Pure Mathematics

from Birmingham University and a

PhD in Mathematical Physics from

the University of Nottingham.

Joanne has over 30 years’ experience

Steve has held a number of CEO

in accountancy and investment

banking primarily with Panmure

Gordon, Evolution Securities, Williams

de Broë and Price Waterhouse.

roles with Tesco in Turkey, Thailand,

Czech Republic and Slovakia.

He was President of Al Futtaim Private

and responsible for the growth of its

retail brands, through c.400 stores in 9

Middle East and North Africa markets.

Other commitments

Appointed Non-Executive Chairman of
Clearly Drinks, a private equity backed
soft drinks business, in April 2017.

Accrol Group Holdings plc / Annual Report and Accounts

Deputy Chairman of AIM-quoted

Mattioli Woods plc and main market

listed Henry Boot PLC and is also

a Non-Executive Director of AIM-

quoted Gateley (Holdings) Plc and

Morses Club PLC.

Interim Customer Director and a

member of the Food Board of the

Co-operative Group. Responsible

for c.3,000 stores.

Strategic Report

Financial Statements

Extensive experience in the soft tissue industry.

Previous experience

20 years as a main Board Director.

Peter has worked alongside private equity

firms since 1997 and served on the Board

of AM Paper (SCA Soft Tissue) as Corporate

Development Director, TMD Friction as

as Chief Operating Officer and Chairman

of the Operating Board. He is a qualified

CIMA accountant.

Chief Financial Officer, Jemella Group (ghd)

Bright Blue Foods, he helped restructure,

Steve spent 27 years at Unigate plc and

Northern Foods plc latterly as an Operating

Board Director and Divisional Managing

Director of Chilled Foods.

Most recently, as Chief Executive Officer at

transition and re-finance the Company

with a new investor. Steve has also had

roles as Group Executive Board Director

of Samworth Brothers (November 2010

to August 2014) and Managing Director of

Grampian Country Pork (September 2006

to September 2008).

Steve has experience working with venture

capitalists and banks to raise capital for

investment.

Other commitments

Appointed Non-Executive Chairman of

Clearly Drinks, a private equity backed

soft drinks business, in April 2017.

Peter Cheung

Steve Crossley

James Flude

Joanne Lake

Steve Hammett

Position

Executive Chairman

Chief Executive Officer

Chief Financial Officer

Independent Non-Executive
Director

Key strengths

Over 30 years of operational and financial

experience in blue-chip manufacturing,

FMCG and retail.

Over 35 years of experience in UK food

manufacturing and distribution at

senior management or Board level.

Extensive experience in managing
finance functions and financial
reporting.

Extensive Board experience gained
in a plc environment and also with
AIM companies.

Range of retail experience.

Date joined the Board

Chairman since November 2014.

June 2016.

January 2015.

June 2016.

Joanne has over 30 years’ experience
in accountancy and investment
banking primarily with Panmure
Gordon, Evolution Securities, Williams
de Broë and Price Waterhouse.

Steve has held a number of CEO
roles with Tesco in Turkey, Thailand,
Czech Republic and Slovakia.

He was President of Al Futtaim Private
and responsible for the growth of its
retail brands, through c.400 stores in 9
Middle East and North Africa markets.

James has 13 years of industry
experience in finance roles gained
in blue-chip and private equity-
backed businesses.

He held various financial reporting
and internal audit roles at Northern
Foods plc.

James spent 6 years at ghd where
he was key in delivering the first
private equity buyout with Lloyds
Development Capital in July 2006
and the second buyout with Montagu
Private Equity in July 2007.

James qualified as a Chartered
Accountant with Arthur Andersen and
holds a BSc Hons in Pure Mathematics
from Birmingham University and a
PhD in Mathematical Physics from
the University of Nottingham.

Deputy Chairman of AIM-quoted
Mattioli Woods plc and main market
listed Henry Boot PLC and is also
a Non-Executive Director of AIM-
quoted Gateley (Holdings) Plc and
Morses Club PLC.

Interim Customer Director and a
member of the Food Board of the
Co-operative Group. Responsible
for c.3,000 stores.

Accrol Group Holdings plc / Annual Report and Accounts

GovernanceCorporate Governance Statement

THE CHAIRMAN’S
INTRODUCTION
TO CORPORATE
GOVERNANCE

Peter Cheung
Executive Chairman

I am pleased to introduce the second
Corporate Governance Report for Accrol
Group Holdings plc for the year ended
30 April 2017. This report includes my
statement, an introduction to the
members of the Accrol Board and the
Corporate Governance Report.

The Directors place a significant emphasis on ensuring
that Accrol has the appropriate governance structures
in place. The Board recognise that the structure for a
publicly listed entity looks very different to that required
for an entrepreneurial business. As part of the preparatory
work that was undertaken prior to our Initial Public
Offering (IPO) on the AIM market in June 2016, a review
of the kind of governance structure that was required and
appropriate for Accrol, was undertaken and implemented.

This process is ongoing and will be continued by a
Board that is committed to upholding the appropriate
standards of corporate governance to ensure that there
is an effective and efficient approach to managing the
Group for the benefit of all shareholders.

The Committees noted below were formed upon our
IPO and therefore commenced operating during the
current April 2017 year end.

Peter Cheung
Executive Chairman
10 July 2017

Accrol Group Holdings plc / Annual Report and Accounts

Strategic Report

Financial Statements

Governance statement
As an AIM listed business, the Group is not required to comply with the provisions or report in accordance with the UK Corporate
Governance Code. The Board is, however, committed to the principles of good corporate governance and applies the Quoted Companies
Alliance (QCA) Corporate Governance Code for Small and Mid-Size Quoted Companies 2013, as far as is practicable and appropriate for a
public company of the Group’s size and nature.

Role of the Board
The role of the Board is to establish the vision and strategy for the Group, to deliver shareholder value and be responsible for the long-term
success of the Group. Individual members of the Board have equal responsibility for the overall stewardship, management and performance
of the Group and for the approval of its long-term objectives and strategic plans.

Division of responsibilities
There is a clear division of responsibilities between the role of the Executive Chairman and that of the Chief Executive Officer of the Group
and the roles are clearly set out in writing and reviewed by the Board.

Board responsibilities

Role

Name

Responsibility

Executive Chairman

Peter Cheung

Chief Executive Officer

Steve Crossley

Chief Financial Officer

James Flude

Non-Executive Directors

Steve Hammett
and Joanne Lake

P Lead and manage the Board
P Set the Board’s agenda, style and tone of discussions
P Ensure the Board’s effectiveness in all aspects of its role
P Work closely with the Chief Executive Officer on developing the Group’s

strategy, and providing general advice and support

P Facilitate active engagement by all members
P Participate in shareholder communications
P Promote high standards of corporate governance

P Manage the Group’s business
P Develop Group strategy for consideration and approval by the Board
P Lead the Senior Management Team in delivering the Group’s strategic

and day-to-day operational objectives

P Lead and maintain communications with all stakeholders

P Manage the Group’s finances
P Develop financial budgets and reports and communicate those budgets

and reports to the Board

P Lead the finance team

P Be available to meet with shareholders and aid communication of
shareholder concerns when normal channels of communication
are inappropriate

P Constructively challenge and contribute to the development of

Group strategy

P Monitor the integrity of financial information, financial controls and

systems of risk management to ensure they are robust
P Review the performance of the Senior Management Team
P Assist in formulating Director remuneration

The Non-Executive Directors
Each of the Non-Executive Directors are free from any relationship with the Executive Management of the Group and are free from
any business or other relationship that could affect or appear to affect the exercise of their independent judgment.

Accordingly, the Non-Executive Directors are each considered by the Board to be independent, in both character and judgement.

The operation of the Board
The Board has the authority for ensuring that the Group is appropriately managed and achieves the strategic objectives it sets. To achieve
this, the Board reserves certain matters for its own determination including matters relating to Group strategy, approval of interim and annual
financial results, dividend policy, major capital expenditure, budgets, monitoring performance, treasury policy, risk management, corporate
governance and the effectiveness of its internal control systems. It has a schedule of matters specifically reserved for its approval. The Board
performs its responsibilities through an annual programme of meetings and by continuous monitoring of the performance of the Group.

Matters considered by the Board during the year ended 30 April 2017
included:

• Finance and operations review

• Annual budget and forecasts

• Risk review

• Strategic plans

• Health & safety

• Potential merger and acquisition targets

• Reports from the Board Committees

• Board evaluation

• Impact of Brexit

• Market Abuse Regulations (MAR)

• Major capital expenditure

Accrol Group Holdings plc / Annual Report and Accounts

GovernanceCorporate Governance Statement continued

Board Committees
The Board has delegated specific authority to the Audit Committee,
Remuneration Committee and the Nomination Committee.

Joanne Lake is Chairman of the Audit Committee which also
comprises Peter Cheung and Steve Hammett. The Audit Committee
has the primary responsibility for monitoring the quality of internal
controls, ensuring that the financial performance of the Group
is properly measured and reported on, and reviewing reports
from the Group’s auditors relating to the Group’s accounting and
internal controls, in all cases having due regard to the interests of
shareholders. The Audit Committee meets at least 3 times a year.

Peter Cheung is Chairman of the Nomination Committee which
also comprises Joanne Lake and Steve Hammett. The Nomination
Committee will identify and nominate, for the approval of the Board,
candidates to fill Board vacancies as and when they arise. The
Nomination Committee meets as required given the infrequency
of senior appointments.

Steve Hammett is Chairman of the Remuneration Committee which
also comprises Peter Cheung and Joanne Lake. The Remuneration
Committee reviews the performance of the Executive Directors and
determines their terms and conditions of service, including their
remuneration and the grant of options, having due regard to the
interests of shareholders. The Remuneration Committee meets at
least once a year.

Diversity
Vacancies on the Board will be filled following a rigorous evaluation
of candidates who possess the required balance of skills, knowledge
and experience, using recruitment consultants where appropriate.
The process for the appointment of Non-Executive Directors is
managed by the Nomination Committee. The Group recognises
the importance of diversity at Board level and the Board comprises
individuals with a wide range of skills and experiences from a variety
of business backgrounds. The current female representation on the
Board is 20%.

Appointment of Non-Executive Directors
Non-Executive Directors are appointed to the Board following
a formal, rigorous and transparent process, involving external
recruitment agencies, to select individuals who have a depth and
breadth of relevant experience, thus ensuring that the selected
candidates will be capable of making an effective and relevant
contribution to the Board. The process for the appointment of
Non-Executive Directors is managed by the Nomination Committee.

Terms of appointment and time commitment
All Non-Executive Directors are appointed for an initial term of
6 months after which the appointments are terminable by either
the Group or the Non-Executive Director on 1 month’s notice. All
Non-Executive Directors are expected to devote such time as is
necessary for the proper performance of their duties. Directors are
expected to attend all Board meetings and committee meetings of
which they are members and any additional meetings as required.

Board and Committee meetings
The Board meets on a formal basis regularly and met formally 8 times
in the year ended 30 April 2017. Members are supplied with financial
and operational information in good time for review in advance of
the meetings.

Further details of their terms and conditions are summarised in
the Remuneration Report on pages 29 to 33 and the terms and
conditions of appointment of the Non-Executive Directors are
available at the Company’s Registered Office.

The Directors attended the following meeting in the year ended
30 April 2017:

Peter Cheung
Steve Crossley
James Flude
Steve Hammett
Joanne Lake

Total meetings

Board

Audit Remuneration

Nomination

8
8
8
7
8

3
n/a
3
–
3

–
–
–
–
–

–

–
–
–
–
–

–

The Remuneration and Nomination Committees have not met in
the current financial year as the recent IPO process had already
determined the placement and remuneration of the Executive
Directors and other members of the Board.

All Directors have access to the advice and services of the Company
Secretary. The Board approves the appointment and removal of the
Company Secretary. The Non-Executive Directors are able to contact
the Executive Directors, Company Secretary or Senior Managers at
any time for further information.

Effectiveness
Board composition
The Board comprises the Executive Chairman, the Chief Executive
Officer, the Chief Financial Officer and 2 Non-Executive Directors.
The Directors’ profiles appear on pages 22 to 23 and detail their
experience and suitability for leading and managing the Group.
Together they bring a valuable range of expertise and experience to
the Group. No individual or group of individuals dominate the Board’s
decision-making process. The Executive Chairman fosters an
atmosphere of debate and challenge in the boardroom, built on his
challenging but supportive relationship with the Chief Executive
Officer which sets the tone for Board interaction and discussions.

Accrol Group Holdings plc / Annual Report and Accounts

Induction and professional development
New Directors are given a formal induction process including
details of how the Board and Committees operate, meetings with
Senior Management and information on Group strategy, products
and performance. Training and development needs of Directors are
reviewed regularly. The Directors are kept appraised of developments
in legal, regulatory and financial matters affecting the Group from
the Company Secretary, the Chief Financial Officer and the Group’s
external auditors and advisers.

Professional advice, indemnities and insurance
There is provision for Directors to take independent professional
advice relating to the discharge of their responsibilities should they
feel they need it. The Group has arranged Directors’ and Officers’
liability insurance against certain liabilities and defence costs.
However, the Directors’ insurance does not provide protection
in the event of a Director being found to have acted fraudulently
or dishonestly.

Board and Committee evaluation
The performance evaluation of the Board, its Committees and
Directors is undertaken by the Executive Chairman annually and
implemented in collaboration with the Committee Chairmen.

Election and re-election of Directors
At each Annual General Meeting the shareholders shall vote on
resolutions to both elect any Director who has been appointed
since the last Annual General Meeting and also to re-elect any
Director who has not been appointed, elected or re-elected at
one of the 2 previous Annual General Meetings.

Strategic Report

Financial Statements

Remuneration Committee
The Remuneration Committee comprises Steve Hammett, Peter
Cheung and Joanne Lake. The Committee has Terms of Reference
that are reviewed at least annually.

The Audit Committee provides advice to the Board on whether
the Annual Report is fair, balanced and provides the necessary
information shareholders require to assess the Group’s performance,
business model and strategy. In doing so, the following issues have
been addressed:

The role of the Committee is to:

• Set the remuneration policy for all Executive Directors and the

Chairman.

• Recommend and monitor the level and structure of senior

management remuneration.

• Ensure that the remuneration payments made to any Director

are consistent with the approved policy.

• Oversee incentives-based remuneration for Senior Management

or employees.

In carrying out these duties the Committee shall ensure the
appropriateness, relevance and market practice in respect of
such remuneration policy.

• Review of key strategic risks – the Audit Committee conducts
a review of the key strategic risks every 6 months. The review
highlights the key risks based on a combination of likelihood and
impact and then also considers what appropriate mitigation has
been and should be implemented. The key risks are included in
the Strategic Review.

• Review of judgements made by management, including the
discount rate used in determining whether there has been an
impairment of goodwill and any other key considerations such
as the accounting for the IPO.

• Going Concern – the conclusion of the review of the going

concern assessment is included below.

Nomination Committee
The Nomination Committee comprises Peter Cheung, Joanne Lake
and Steve Hammett and will meet as and when it is necessary to do
so. The Committee has Terms of Reference that are reviewed at least
annually.

The Board is confident that the collective experience of the
Audit Committee enables them to continue to act as an effective
committee. The Audit Committee has access to the financial
expertise of the Group and its auditors and can seek professional
advice at the Group’s expense if required.

The Committee’s role is to:

• Ensure that appropriate procedures are in place for the nomination

and selection of candidates for appointment to the Board
considering the balance of skills, knowledge and experience
of the Board.

• Make recommendations to the Board regarding re-election
of Directors, succession planning and Board composition,
having due regard for diversity, including gender.

• Consider succession planning for Senior Management and
membership of the Audit and Remuneration Committees.

Audit Committee
The Chief Executive Officer, Chief Financial Officer and external audit
partner attend a number of these meetings. The Audit Committee
also meets with the external audit partner without the Executives
present. The role of the Committee is to:

• Consider the appointment, fees, independence and effectiveness
of the auditor and the audit process, and discuss the scope of the
audit and its findings.

• Review audit and non-audit services and fees.

• Monitor the Group’s accounting policies.

• Review and challenge the Group’s assessment of business risks

and internal controls to mitigate these risks.

• Review the annual and interim statements prior to their submission

for approval by the Board.

• Review and challenge the going concern assumptions for the

Group.

• Review the Group’s whistle-blowing policy.

• Annually assess the performance of the external auditor.

It is the task of the Audit Committee to ensure that auditor
objectivity and independence is safeguarded when non-audit
services are provided by the auditor. To ensure auditor objectivity
and independence there is a process in place to approve any
non-audit work.

Risk management
The Group’s corporate objective is to maximise long-term
shareholder value. In doing so, the Directors recognise that creating
value is the reward for taking and accepting risk. The Directors
consider risk management to be crucial to the Group’s success and
give a high priority to ensuring that adequate systems are in place to
evaluate and limit risk exposure.

Management reports to the Audit Committee regularly on their
review of risks, how the risks are managed and monitored, and
what actions have been assigned in relation to those risks. The Audit
Committee reviews the inherent risks, including the key risks and
the system of control necessary to manage such risks. The Audit
Committee reviews the effectiveness of the Group’s procedures in
managing risk. The business risks and controls to mitigate the risks
are formally reviewed by the Audit Committee and the Board at least
twice a year. The Board are satisfied that this process identifies,
evaluates and manages the significant risks faced by the Group.

Internal control
The Board are responsible for the Group’s system of internal control
and for reviewing its effectiveness, taking guidance from the Audit
Committee. In the context of the Group’s business any such system
can only reasonably be expected to manage rather than eliminate
risks arising from its operations. It can therefore only provide
reasonable and not absolute assurance against material loss
or misstatement.

Key features of the internal control system are as follows:

• The Group has an organisational structure with clear

responsibilities and lines of accountability. The Group promotes
the values of integrity and professionalism. The members of
the Board are available to hear, in confidence, any individual’s
concerns about improprieties.

• The Board has a schedule of matters expressly reserved for its
consideration. This schedule includes potential acquisitions,
major capital projects, treasury, risk management policies,
approval of budgets and health & safety.

• The Board monitors the activities of the Group through the

management accounts, monthly forecasts and other reports
on current activities and plans. The Senior Management Team
regularly monitors financial and operational performance in detail.

Accrol Group Holdings plc / Annual Report and Accounts

GovernanceAnnual General Meeting
This year’s Annual General Meeting includes a presentation by
the Chief Executive on the current progress of the business and
allows the opportunity for questions on this or any of the resolutions
before the meeting. The Company proposes separate resolutions
for each issue and specifically relating to the Reports and Financial
Statements. The Company ensures all proxy votes are counted and
indicates the level of proxies on each resolution along with the
abstentions after it has been dealt with on a show of hands.

After the meeting, shareholders have the opportunity to talk
informally to the Board and raise any further questions or issues they
may have. The outcome of the Annual General Meeting, a copy of
the Annual General Meeting presentation and details of the poll
results will be posted on the Group’s website after the meeting.

Richard Almond
Company Secretary
10 July 2017

Corporate Governance Statement continued

• The Group has set appropriate levels of authorisation which must

be adhered to as the Group concludes its business.

• The Group operates a whistle-blowing policy which is

communicated to all employees via the Employee Handbook.

Going concern
In carrying out their duties in respect of going concern, the Directors
have carried out a review of the Group’s financial position and cash
flow forecasts for the forseeable future. These have been based on
a comprehensive review of revenue, expenditure and cash flows,
taking into account specific business risks and the current economic
environment and financial covenants.

With regard to the Group’s financial position, it had cash and cash
equivalents at the year end of £3.9m (2016: £2.5m). Net debt was
£19.0m (2016: £60.6m).

Having taken the above into consideration, the Directors have
reached the conclusion that the Group is well placed to manage its
business risks in the current economic environment. Accordingly,
they continue to adopt the going concern basis in preparing the
financial statements.

Remuneration
The level of remuneration of the Directors is set out in the
Remuneration Report on page 30.

Relations with shareholders
The Board appreciates that effective communication with the
Group’s shareholders and the investment community as a whole
is a key objective. The Chairman’s Statement, the Chief Executive’s
Statement and the Strategic Report and Financial Review, together
with the information in the Annual Report of the Group, provides a
detailed review of the business. The views of both institutional and
private shareholders are important, and these can be varied and
wide-ranging, as is their interest in the Group’s strategy, reputation
and performance. The Executive Directors have overall responsibility
for ensuring effective communication and the Group maintains
a regular dialogue with its shareholders, mainly in the periods
following the announcement of the interim and final results, but
also at other times during the year. The views of shareholders are
sought through direct contact and via feedback from advisers and
are communicated to the Board as a whole. The Board encourages
the participation of shareholders at its Annual General Meeting,
notice of which is sent to shareholders at least 14 working days
before the meeting. The Group’s website ‘www.accrol.co.uk’ is
regularly updated and provides additional information on the Group
including information on the Group’s products and technology.

Accrol Group Holdings plc / Annual Report and Accounts

Strategic Report

Financial Statements

Remuneration Committee

STATEMENT FROM THE
CHAIRMAN OF THE
REMUNERATION
COMMITTEE

Steve Hammett
Chairman of the
Remuneration Committee

I am pleased to introduce the Directors’
Remuneration Report for Accrol Group
Holdings plc for the year ended
30 April 2017. This report includes
my statement, the Annual Report on
remuneration for the year and sets out
our Directors’ remuneration policy which
has been in place since the Group’s
Admission onto AIM on 10 June 2016.

The Directors acknowledge the importance of the
principles set out in the Quoted Companies Alliance
(QCA) Corporate Governance Code and we intend to
apply this Code as far as we consider appropriate given
the size of the Company. As part of this we have chosen
to include information in this report which we believe
is important to shareholders, notwithstanding that this
goes beyond what we are required to disclose.

Our Directors’ remuneration policy
In the current financial year, the remuneration policy
has not altered from that described in our previous
Annual Report when we undertook a forward-looking
and thorough review of the underlying policy and
remuneration structures of companies in the competitive
marketplace in which we operate. We considered the
approach necessary to attract and retain individuals with
the relevant experience and skills to help drive future
value creation and the achievement of our strategic
goals and objectives.

Our overall goal is to have a remuneration strategy which
stimulates sustainable value creation for the business and
rewards the performance of management accordingly.

Accrol Group Holdings plc / Annual Report and Accounts

GovernanceRemuneration Committee continued

The policy is set out in the following pages, with a summary of key
principles provided below:

In addition to these key areas, the Board will also consider
complementary acquisitions.

• Fixed levels of remuneration will be set at an appropriate level

for each individual and in doing so the Remuneration Committee
will take into account the levels of fixed remuneration for similar
positions with comparable status, responsibility and skills. This will
ensure we can attract and retain the individuals needed to grow
the Company.

• Recognising our growth aspirations and the need to deliver
ongoing superior returns for shareholders, the Executive
Directors are eligible to participate in market competitive
incentive arrangements. They will have the opportunity to
receive appropriate levels of remuneration based on achievement
of quantitative and qualitative objectives and measures as relevant
for their role.

Business context and Remuneration Committee decisions
on remuneration
The following factors have been identified as key areas of focus
for improving the Group’s performance going forward:

• organic growth through Discounters;

• increasing market share through multiples; and

• operational improvements and capacity utilisation.

It is intended that our remuneration policy reflects, and is aligned
to, the Company’s long-term strategy and facilitates the achievement
of the objectives set out above.

During the previous financial year, the Board considered and
approved the implementation of an annual bonus plan and
management incentive plan to incentivise key management
to generate growth in line with our long-term strategies. There
have been no revisions to these plans in the current financial year.
Further details on these are set out in the remuneration policy
section of this report.

The remainder of this report is split out into the following 2 sections:

• Annual Report on remuneration providing details of the payments
made to Directors in the year ending 30 April 2017, pages 30 to 31.

• Directors’ remuneration policy setting out the Company’s

remuneration policy, pages 31 to 33.

Steve Hammett
Chairman of the Remuneration Committee
10 July 2017

Annual remuneration report for 2017
Remuneration Committee
On Admission, the Company established a Remuneration Committee comprising of the following members:
– Steve Hammett
– Peter Cheung
– Joanne Lake

The Remuneration Committee has responsibility for setting the remuneration policy for all Executive Directors and the Chairman of the Board,
including pension rights and any compensation payments. This includes reviewing the performance of the Executive Directors and determining
their terms and conditions of service, their remuneration and the grant of any options, having due regard to the interests of shareholders. Where
the Executive Chairman’s remuneration is reviewed, he will not be present for these considerations.

In setting the remuneration policy, the Remuneration Committee takes into account the objective to attract, retain and motivate executive
management of the quality required to run the Company successfully without paying more than is necessary. The remuneration policy also
has regard to the risk appetite of the Company and alignment to the Company’s long-term strategic goals.

The Remuneration Committee also recognises that a significant proportion of remuneration should be structured so as to link rewards to
corporate and individual performance, and designed to promote the long-term success of the Company.

The Remuneration Committee meets at least once a year and otherwise as required. In the current financial year, the Remuneration Committee
has met nil times as the Committee met twice just prior to the commencement of this financial year and in preparation for the IPO.

Directors’ remuneration
The tables below set out the total remuneration for Executive and Non-Executive Directors for the financial year ending 30 April 2017 and
30 April 2016.

Executive Directors

Majid Hussain(1)
Jawid Hussain(1)
John Flanagan(1)
Gary Earle(1)
Colin Platt(1)
James Flude(2)
Steve Crossley
Peter Cheung(3)

Accrol Group Holdings plc / Annual Report and Accounts

Benefits in
kind
£

Share based
payments
£

Post
employment
benefits
£

Total
remuneration
2017
£

Total
remuneration
2016
£

–
–
–
–
–
860
1,236
1,404

–
–
–
–
–
65,333
65,333
65,333

–
–
–
–
–
20,445
–
11,138

9,584
12,323
11,353
21,958
10,666
266,638
305,131
166,642

84,000
108,000
102,180
204,804
96,000
114,000
–
–

Salaries
£

9,584
12,323
11,353
21,958
10,666
180,000
238,562
88,767

Strategic Report

Financial Statements

Non-Executive Directors

Name

Peter Cheung(2)(3)
Steve Hammett(4)
Joanne Lake(4)

Total fees
2017
£

62,000
35,507
37,282

Total fees
2016
£

72,000
–
–

(1) On 10 June 2016, Majid Hussain, Jawid Hussain, John Flanagan, Gary Earle and Colin Platt resigned as Directors of the Company as part of the Admission process.
(2) James Flude purchased 100 C Shares and 572 D Shares and Peter Cheung purchased 250 C Shares and 572 D Shares in June 2015. 50% of the shares were sold on

Admission and the remaining 50% are subject to a lock-in which expired on 10 June 2017. There are no performance conditions or other conditions attaching to these
shares which are fully vested to the individuals.

(3) At the time of Admission, Peter Cheung took on an Executive Chairman role. It is expected that he will continue this role for a short period post-Admission before

moving back into a Non-Executive role.

(4) Steve Hammett and Joanne Lake became Non-Executive Directors on 10 June 2016,

Remuneration policy
The remuneration policy has been applied from the time of Admission. The Remuneration Committee will periodically review the policy
to confirm the remuneration framework continues to align with the strategy and objectives of the business.

In developing the policy, the Remuneration Committee has taken into account the best interests of the business and the agreed terms
and conditions of employment for each Director of the Company. The overall remuneration philosophy aims to:

• recognise the importance of ensuring that employees of the Group are effectively and appropriately incentivised;

• operate a remuneration policy that is a mix of fixed and variable pay. Variable pay is both short term and long term;

• align Directors’ interests with those of the Company;

• have a pay for performance approach; and

• provide a market competitive level of remuneration to enable the Company to attract and retain high-performing individuals, to support

the ongoing success of the Company.

As part of this an annual bonus plan has been introduced which took effect from the start of this financial year. The Company has also
adopted a Management Incentive Plan (“MIP”), to align the interests of Senior Management with those of the shareholders. There are no
other employee share plans currently in place, however, the Company may, in the future, look to introduce an employee share plan for the
broader employee base.

Remuneration policy summary – Executive Directors

Purpose and link to strategy

Base salary

Operation

To reflect market value of the role and individual’s performance
and contribution and enable the Group to recruit and retain
Directors of sufficient calibre required to support achievement
of both short- and long-term value creation.

The salary of each Executive Director will be reviewed annually by
the Remuneration Committee without any obligation to increase
such salary.

Base salaries are benchmarked against the AIM companies of a
comparable size with a targeted approach of median positioning
against the market, subject to satisfactory performance.

There may be reviews and changes to base salary during the year
if considered appropriate by the Remuneration Committee.

The Remuneration Committee will take account of relevant
comparator group data as well as pay increases awarded to
other groups of employees within the Company.

Benefits

To attract and retain the right individuals and level of talent
required to support achievement of both short- and long-term
value creation.

Benefits include but may not be limited to private medical
insurance, cash car allowance and life assurance cover.

Other benefits may be provided to the Directors if considered
appropriate by the Committee.

Accrol Group Holdings plc / Annual Report and Accounts

GovernanceRemuneration Committee continued

Purpose and link to strategy

Operation

Pension

To attract and retain the right individuals and level of talent
required to support achievement of both short- and long-term
value creation.

Annual Bonus Plan

To incentivise delivery of the Group’s annual financial and
strategic goals.

An annual pension allowance equivalent to 12.5% of base salary
which is paid either into a pension scheme operated by the
Company or a personal pension held by the individual, with the
balance paid as an additional cash payment through payroll.

Consideration of the new rules applying to pensions, taking into
account the individual lifetime and annual allowances, are made
when determining the most appropriate mix of pension and cash
contributions for each individual on an annual basis.

The annual bonus payment will depend on the level of
performance delivered against specific targets, with a threshold
level being set below which no bonus will be paid. The
performance range is outlined below:

• Threshold performance – achieving 90% of the relevant target –

payout of 25% of the relevant part of the award.

• Budget performance – achieving 100% of the relevant target –

pay out of 60% of the relevant part of the award.

• Maximum performance – achieving 110% of the relevant target

– payout of 100% of the relevant part of the award.

In measuring performance, the following performance measures
will be used:

• Profit before tax – 80% of award.

• Cash generation – 20% of the award.

The maximum bonus available is 100% of base salary per annum.
This would only be paid out if the maximum targets are met.

The Remuneration Committee will review the bonus plan each
year and may amend the terms of the plan to ensure it remains fit
for purpose.

Management Incentive Plan (“MIP”)

To incentivise the delivery of key performance measures over
the long term.

The MIP is a one-off award in connection with the Admission;
there is no intention to make ongoing annual awards.

To retain key executives and ultimately increase their share
ownership in the Company, thus aligning their interests with
those of shareholders.

The MIP involves the use of shares (“MIP Shares”) which entitles
the holders to a proportion of the value of the business above a
pre-determined hurdle level. The hurdle has been set at a premium
of 30% to the share price of the Company on Admission.

The MIP has a 3-year vesting period after which a participant can
choose to sell their MIP Shares to the Company (or the Company
could choose to call for their MIP Shares).

MIP participants will also be able to sell their MIP Shares prior to
the end of the vesting period should the Company be acquired
by a third party.

The Company may, at its discretion, purchase the MIP Shares for
cash or by way of the issue of Ordinary shares in the Company
as consideration. The number of Company shares that can
be acquired in exchange for the vested growth shares will be
calculated based on the value of the growth shares held by an
individual at the time of the exchange and the share price of the
Company on that date.

Footnotes to the remuneration policy
• Ancillary benefits include private medical insurance expenses, life assurance cover (at 4 times basic salary), provision of a £10,000 per annum car allowance
(Steve Crossley only) and the reimbursement of all reasonable and authorised expenses (including, for Peter Cheung only, the reimbursement of reasonable
travel expenses to and from the Company’s offices in Blackburn).

Accrol Group Holdings plc / Annual Report and Accounts

Strategic Report

Financial Statements

Termination of employment
Each Executive Director has a service agreement which may be terminated by either party serving 12 months written notice. However,
payment of remuneration during the notice period will be made monthly and terminated at the discretion of the Company should the
individual take-up alternative employment.

Annual bonus plan
Payment of the bonus is conditional upon notice to terminate the employment not having been served by either party for any reason on
or prior to the relevant bonus payment date.

MIP
During the vesting period, if a participant ceases to be a Director or employee of a member of the Group other than in certain ‘Good Leaver’
circumstances, participants can be required to transfer their MIP shares at the lower of fair value and the cost value of the MIP shares (subject
to a minimum amount of £2,000).

A Good Leaver is someone who ceases employment as a result of death, ill health, injury or disability evidenced to the satisfaction of the
Board with Remuneration Committee consent; retirement at the normal retirement age in accordance with the Group’s internal policies; or
any other reason the Board (acting with Remuneration Committee consent) permits.

If the participant’s employment is deemed to have ceased in any of these ‘Good Leaver’ circumstances, they will be permitted to retain
their MIP Shares until the expiry of the normal vesting period. They will then be able to transfer their MIP shares to the Company at their
fair value, pro-rated by reference to the period of employment as a proportion of the vesting period. The Company will have flexibility to
buy back the relevant proportion of MIP Shares that have not vested, at cost (subject to a minimum amount of £2,000), at the end of the
vesting period or at an earlier date.

Remuneration policy table – Non-Executive Directors

Purpose and link to strategy

Non-Executive Directors’ fees

Operation

To attract and retain the right individuals required to support the
achievement of both short- and long-term value creation.

Fees for Non-Executive Directors are based on market practice
and are reviewed by the Board each year.

All Non-Executive Directors receive a basic fee each year with an
additional fee provided for each committee chairmanship and
membership.

The maximum aggregate amount of fees that the Company may
pay to all the Directors who do not hold executive office for their
services as such is £120,000 per annum, or such larger amount
as the Company may by ordinary resolution decide.

These fees are to be divided among the Directors as the Board
decides or, if no decision is made, equally.

Accrol Group Holdings plc / Annual Report and Accounts

GovernanceDirectors’ Report

The Directors present their report together with the audited
consolidated financial statements, along with the Auditor’s Report
for the year ended 30 April 2017.

As a consequence, the Directors believe that the Company is in a
strong financial position to continue in operational existence for the
foreseeable future.

Corporate structure
In anticipation of Admission, Accrol Group Holdings Limited,
completed a capital restructuring on 1 June 2016 in which all
existing A, B, C and D Ordinary shares were converted into Ordinary
and Deferred shares only. Following the capital restructuring, on the
same day, 1 June 2016, Accrol Group Holdings Limited re-registered
as Accrol Group Holdings plc, a public company limited by shares.
On 10 June 2016, Accrol Group Holdings plc was admitted to the
AIM market of the London Stock Exchange.

The Board
The Directors who served during the year under review and up to the
date of approving the Annual Report and Financial Statements were:

Peter Cheung
Steve Roy Crossley (appointed 10 June 2016)
James Paul Maurice Flude
Joanne Carolyn Lake (appointed 10 June 2016)
Steve Hammett (appointed 10 June 2016)
Dan Wright (resigned 10 June 2016)
Majid Hussain MBE (resigned 10 June 2016)
Jawid Hussain (resigned 10 June 2016)
John Flanagan (resigned 10 June 2016)
Gary Earle (resigned 10 June 2016)
Colin Platt (resigned 10 June 2016)

Details of the Directors’ remuneration are shown in the report of the
Remuneration Committee on pages 29 to 33. Details of the
Directors’ interests in the share capital of the Company are set out on
page 35. The roles and biographies of the Directors as at the date of
this report are on pages 22 to 23.

Directors’ indemnity and insurance
The Company has granted a third-party indemnity to each of its
Directors against any liability that attaches to them in defending
proceedings brought against them, to the extent permitted by English
law. This third party indemnity was in place during the financial
year and also at the date of approval of the financial statements. In
addition, Directors and officers of the Company and its subsidiaries
are covered by Directors’ and Officers’ liability insurance.

Dividends
In respect of the year ended 30 April 2017, the Directors have
approved and paid an interim dividend of 2p per share (2016: £nil).
The Directors intend to approve a final dividend of 4p per share
which is subject to approval at the Annual General meeting on
22 September 2017.

Financial instruments
Details of the Group’s financial risk management objectives and
policies are disclosed in Note 18 to the financial statements.

Admission to AIM
On Admission, the net proceeds of the Placing receivable by the
Company were £41.4m being the gross proceeds of £43.3m less
estimated fees and expenses related to the Placing of £1.9m.

The Directors believe that this has:

• strengthened the Company’s capital structure and positioned
it for the continued implementation of its growth strategy;

• given the Company access to a wider range of capital-raising

options which may be of use in the future; and

• further improved the ability of the Company to recruit, retain

and incentivise its key management and staff.

Accrol Group Holdings plc / Annual Report and Accounts

Future developments in the business of the Company
The likely future developments in respect of the business of the
Company can be found in the Strategic Report on pages 1 to 21
and forms part of this report by reference.

Corporate governance
A report on Corporate Governance and compliance with the QCA
Corporate Governance Code is set out on pages 24 to 28, and forms
part of this report by reference.

Health and safety
The Group is committed to providing a safe working environment for
all employees. Group polices are reviewed regularly to ensure that
policies relating to training, risk assessment and accident
management are appropriate. Health and safety issues are reported
at all Operations and Board meetings.

Charitable and political donations
Charitable donations of £24,390 (2016: £35,230) were made during
the year. There were no political donations during the year.

Employee involvement and policy regarding disabled
persons
The Company operates an equal opportunities policy that aims
to treat individuals fairly and not to discriminate on the basis of sex,
race, ethnic origin, disability or on any other basis. The Company’s
policy and procedures are designed to provide for full and fair
consideration and selection of disabled applicants, to ensure
they are properly trained to perform safely and effectively and to
provide career opportunities that allow them to fulfil their potential.
Where a member of staff becomes disabled in the course of their
employment the Company will actively seek to retain them wherever
possible by making adjustments to their work content and
environment or by retraining them to undertake new roles.

The Group provides staff with information on the Group’s
performance and on matters concerning them on a regular
basis. Considerable value is placed on the involvement of its staff;
regular, open, fair and respectful communication; zero tolerance
for human rights violations; fair remuneration and, above all, a safe
working environment.

In the current year we have improved and formalised our
communications to all employees. These communications ensure
that all have an awareness of the major economic and financial
factors that impact upon the performance of the business. We are
currently undertaking our first employee engagement survey which
will help shape our future strategy with regards to employee
involvement.

Share capital
The details of the issued share capital at the beginning of the
financial year can be found in Note 20 to the consolidated financial
statements. On the 1 June 2016 the Company completed a capital
restructuring of the Group in which all existing A, B, C and D
Ordinary shares were converted into 1 class of Ordinary and Deferred
shares. The rights attached to the Company’s Ordinary and Deferred
shares are set out in the Articles of Association.

As a condition of the Placing agreement, each of the Directors and
the pre-Admission shareholders undertook not to dispose of any
Ordinary shares (without the consent of Zeus Capital), for a period
of 12 months from the date of Admission. Additionally, shareholders
have agreed for a further 6 months to comply with certain conditions
prior to any disposal.

Strategic Report

Financial Statements

Significant agreements
The Company is not a party to any significant agreements that
would take effect, alter or terminate on a change of control of
the Company.

Going concern
The Chairman’s review and the Chief Executive’s Review on
pages 4 and 6, outline the business activities of the Group along
with the factors which may affect its future development and
performance. The financial review discusses the Group’s financial
position, along with details of its cash flow and liquidity. Note 18 to
the financial statements sets out the Group’s financial risks and the
management of those risks.

Having prepared management forecasts and made appropriate
enquiries, the Directors are satisfied that the Group has adequate
resources for the foreseeable future. Accordingly, they have
continued to adopt the going concern basis in preparing the
Group and Company financial statements.

Disclosure of information to the auditors
Each of the persons who is a Director at the date of approval of
this Annual Report confirms that:

(a) So far as each Director is aware, there is no relevant audit

information of which the Company’s Auditors are unaware.
(b) Each of the Directors has taken all the steps that he/she ought
to have taken as a Director in order to make himself/herself
aware of any relevant audit information and to establish that
the Company’s Auditors are aware of that information.

PricewaterhouseCoopers LLP have expressed their willingness to
continue in office as Auditors and a resolution to reappoint them
will be proposed at the forthcoming Annual General Meeting.

Annual General Meeting
Your attention is drawn to the Notice of Annual General Meeting
accompanying this Annual Report which sets out the resolutions
to be proposed at the forthcoming Annual General Meeting. The
meeting will be held at Accrol Group Holdings plc (formerly Accrol
Group Holdings Limited), Delta Building, Roman Road, Lancashire,
BB1 2LD on 22 September 2017 at 2pm.

On behalf of the Board of Directors

Steve Crossley
Chief Executive Officer
10 July 2017

James Flude
Chief Financial Officer

Authority for the Company to purchase its own shares
On 1 June 2016, the Company passed resolutions and entered into
a share buyback contract with each member of the Company to buy
back, on 11 July 2016, all of the Deferred shares of £0.001 each held
by each member, buying back in aggregate, 27,476,142 deferred
shares of £0.001 each for an aggregate consideration price of £1.

Authority to allot shares
Powers related to the issue and buy-back of the Company’s shares
are included in the Company’s Articles of Association and such
authorities are reviewed annually by shareholders at the Annual
General Meeting.

Directors’ interests
The interests in the shares of the Company of those Directors
serving at 30 April 2017, and as at the date of approving of these
financial statements, all of which are beneficial, in the share capital
of the Company were as follows:

Number of
£.001
Ordinary
shares
As at 30 April
2017

611,683
100,000
244,680
25,000

% of issued
share capital
As at 30 April
2017

0.66%
0.11%
0.26%
0.03%

Class of share
As at 30 April
2017

Ordinary
Ordinary
Ordinary
Ordinary

Peter Cheung
Steve Crossley
James Flude
Joanne Lake

Substantial shareholders
As at 30 April 2017, the Company was aware of the following
interests representing 3% or more of the issued share capital of the
Company, correct as at the date of notification.

Investor

Number of shares

Percentage

Majid Hussain
Wajid Hussain
Mozam Hussain
NorthEdge Capital
Miton Asset Management plc
Schroder Investment Management
Majedie Asset Management Limited
Ruffer LLP (for its discretionary
clients of the Ruffer Group)
Premier Fund Managers Limited
Axa Investment Managers SA

4,652,590
4,652,590
4,646,621
13,987,377
10,075,698
6,847,693
5,730,265

4,409,200
3,600,000
2,850,000

5.0%
5.0%
5.0%
15.0%
10.8%
7.4%
6.2%

4.7%
3.9%
3.1%

As at 7 July 2017, the Company was aware of the following interests
representing 3% or more of the issued share capital of
the Company, correct as at the date of notification. It should be
noted that these holdings may have changed since notified to the
Company, however, notification of any change is not required until
the next applicable threshold is crossed.

Investor

Number of shares

Percentage

Majid Hussain
Wajid Hussain
Mozam Hussain
NorthEdge Capital
Miton Asset Management plc
Majedie Asset Management Limited
Schroder Investment Management
Ruffer LLP (for its discretionary
clients of the Ruffer Group)

Hargreave Hale
Premier Fund Managers Limited
Axa Investment Managers SA

4,652,590
4,652,590
4,646,621
13,987,377
10,075,698
5,730,265
5,153,508

3,626,400
3,200,766
3,082,000
2,850,000

5.0%
5.0%
5.0%
15.0%
10.8%
6.2%
5.5%

3.9%
3.4%
3.3%
3.1%

Accrol Group Holdings plc / Annual Report and Accounts

GovernanceStatement of Directors’ Responsibilities in Respect of the Financial Statements

Each of the Directors, whose names and functions are listed in the
Directors’ Report confirm that, to the best of their knowledge:

• the Company financial statements, which have been prepared in

accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, comprising FRS
101 “Reduced Disclosure Framework”, and applicable law), give
a true and fair view of the assets, liabilities, financial position and
profit of the Company;

• the Group financial statements, which have been prepared in

accordance with IFRSs as adopted by the European Union, give
a true and fair view of the assets, liabilities, financial position and
profit of the Group; and

• the Directors’ Report includes a fair review of the development
and performance of the business and the position of the Group
and Company, together with a description of the principal risks
and uncertainties that it faces.

In the case of each Director in office at the date the Directors’ Report
is approved:

• so far as the Director is aware, there is no relevant audit

information of which the Group and Company’s auditors are
unaware; and

• they have taken all the steps that they ought to have taken as a

Director in order to make themselves aware of any relevant audit
information and to establish that the Group and Company’s
auditors are aware of that information.

Signed on behalf of the Board of Directors

Steve Crossley
Chief Executive Officer
10 July 2017

James Flude
Chief Financial Officer

The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law
and regulation.

Company law requires the Directors to prepare financial statements
for each financial year. Under that law the Directors have prepared
the Group financial statements in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the European
Union and Company financial statements in accordance with United
Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards, comprising FRS 101 “Reduced Disclosure
Framework”, and applicable law). Under company law the directors
must not approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs of the Group
and Company and of the profit or loss of the Group and Company
for that period. In preparing the financial statements, the Directors
are required to:

• select suitable accounting policies and then apply them

consistently;

• state whether applicable IFRSs as adopted by the European Union
have been followed for the Group financial statements and United
Kingdom Accounting Standards, comprising FRS 101, have been
followed for the Company financial statements, subject to any
material departures disclosed and explained in the financial
statements;

• make judgements and accounting estimates that are reasonable

and prudent; and

• prepare the financial statements on the going concern basis

unless it is inappropriate to presume that the Group and Company
will continue in business.

The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group and
Company’s transactions and disclose with reasonable accuracy
at any time the financial position of the Group and Company and
enable them to ensure that the financial statements comply with the
Companies Act 2006 and, as regards the Group financial statements,
Article 4 of the IAS Regulation.

The Directors are also responsible for safeguarding the assets of
the Group and Company and hence for taking reasonable steps
for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of
the Company’s website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.

The Directors consider that the Annual Report and Accounts, taken
as a whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Group and
Company’s performance, business model and strategy.

Accrol Group Holdings plc / Annual Report and Accounts

Strategic Report

Financial Statements

Independent Auditor’s Report to the Members of Accrol Group Holdings plc
(formerly Accrol Group Holdings Limited)
For year ended 30 April 2017

Report on the group financial statements
Our opinion
In our opinion, Accrol Group Holdings plc’s group financial
statements (the “financial statements”):

• give a true and fair view of the state of the group’s affairs as at 30
April 2017 and of its profit and cash flows for the year then ended;

• have been properly prepared in accordance with International

Financial Reporting Standards (“IFRSs”) as adopted by the European
Union; and

• have been prepared in accordance with the requirements of the

Companies Act 2006.

What we have audited
The financial statements, included within the Annual Report and
Accounts (the “Annual Report”), comprise:

• the Consolidated Statement of Financial Position as at 30 April

2017;

• the Consolidated Income Statement and Consolidated Statement

of Comprehensive Income for the year then ended;

• the Consolidated Cash Flow Statement for the year then ended;

• the Consolidated Statement of Changes in Equity for the year then

ended; and

• the notes to the financial statements, which include a summary of
significant accounting policies and other explanatory information.

Responsibilities for the financial statements and the audit
Our responsibilities and those of the directors
As explained more fully in the Statement of Directors’
Responsibilities, the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true
and fair view.

Our responsibility is to audit and express an opinion on the financial
statements in accordance with applicable law and International
Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”). Those
standards require us to comply with the Auditing Practices Board’s
Ethical Standards for Auditors.

This report, including the opinions, has been prepared for and only
for the company’s members as a body in accordance with Chapter 3
of Part 16 of the Companies Act 2006 and for no other purpose. We
do not, in giving these opinions, accept or assume responsibility for
any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly
agreed by our prior consent in writing.

What an audit of financial statements involves
We conducted our audit in accordance with ISAs (UK & Ireland). An
audit involves obtaining evidence about the amounts and disclosures
in the financial statements sufficient to give reasonable assurance
that the financial statements are free from material misstatement,
whether caused by fraud or error. This includes an assessment of:

The financial reporting framework that has been applied in the
preparation of the financial statements is IFRSs as adopted by the
European Union, and applicable law.

• whether the accounting policies are appropriate to the group’s

circumstances and have been consistently applied and adequately
disclosed;

In applying the financial reporting framework, the directors have
made a number of subjective judgements, for example in respect of
significant accounting estimates. In making such estimates, they
have made assumptions and considered future events.

Opinions on other matters prescribed by the Companies
Act 2006
In our opinion, based on the work undertaken in the course of the
audit:

• the information given in the Strategic Report and the Directors’

Report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and

• the Strategic Report and the Directors’ Report have been prepared

in accordance with applicable legal requirements.

In addition, in light of the knowledge and understanding of the group
and its environment obtained in the course of the audit, we are
required to report if we have identified any material misstatements in
the Strategic Report and the Directors’ Report. We have nothing to
report in this respect.

Other matters on which we are required to report
by exception
Adequacy of information and explanations received
Under the Companies Act 2006 we are required to report to you if, in
our opinion, we have not received all the information and
explanations we require for our audit. We have no exceptions to
report arising from this responsibility.

• the reasonableness of significant accounting estimates made by

the directors; and

• the overall presentation of the financial statements.

We primarily focus our work in these areas by assessing the directors’
judgements against available evidence, forming our own
judgements, and evaluating the disclosures in the financial
statements.

We test and examine information, using sampling and other auditing
techniques, to the extent we consider necessary to provide a
reasonable basis for us to draw conclusions. We obtain audit
evidence through testing the effectiveness of controls, substantive
procedures or a combination of both.

In addition, we read all the financial and non-financial information in
the Annual Report to identify material inconsistencies with the
audited financial statements and to identify any information that is
apparently materially incorrect based on, or materially inconsistent
with, the knowledge acquired by us in the course of performing the
audit. If we become aware of any apparent material misstatements
or inconsistencies we consider the implications for our report. With
respect to the Strategic Report and Directors’ Report, we consider
whether those reports include the disclosures required by applicable
legal requirements.

Other matter
We have reported separately on the company financial statements of
Accrol Group Holdings plc for the year ended 30 April 2017.

Directors’ remuneration
Under the Companies Act 2006 we are required to report to you if, in
our opinion, certain disclosures of directors’ remuneration specified
by law are not made. We have no exceptions to report arising from
this responsibility.

Hazel Macnamara (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Manchester

10 July 2017

Accrol Group Holdings plc / Annual Report and Accounts

GovernanceConsolidated Income Statement
For year ended 30 April 2017

Continuing operations

Revenue

– Cost of sales before gain on derivative financial instruments
– Gain on derivative financial instruments

Cost of sales

Gross profit
Administration expenses
Distribution costs

Operating profit
Analysed as:

– Adjusted EBITDA1
– Depreciation
– Amortisation
– Gain on derivative financial instruments
– Exceptional items

Operating profit
Finance costs
Analysed as:

– Finance costs on pre-IPO debt structure
– Finance costs on post-IPO debt structure

Finance costs

Profit before tax
Tax charge

Profit for the year attributable to equity shareholders

Consolidated Statement of Comprehensive Income
For the year ended 30 April 2017

Profit for the year attributable to equity shareholders
Other comprehensive (expense)/income for the year
Revaluation of derivative financial instruments2
Tax relating to components of other comprehensive income

Total comprehensive income attributable to equity shareholders

Earnings per share

Basic and diluted
Adjusted

Note

2017
£’000

2016
£’000

135,053

118,219

(97,374)
–

(84,996)
1,266

(97,374)

(83,730)

37,679
(15,698)
(11,453)

34,489
(13,138)
(9,431)

10,528

11,920

10
11

8
8

16,061
(1,910)
(2,042)
–
(1,581)

10,528
(1,129)

15,038
(1,831)
(2,060)
1,266
(493)

11,920
(4,941)

(478)
(651)

(4,456)
(485)

(1,129)

(4,941)

9,399
(2,023)

6,979
(1,274)

7,376

5,705

2017
£’000

7,376

(2,868)
545

2016
£’000

5,705

–
–

5,053

5,705

0.09
0.12

576.26
680.20

6
25

The notes on pages 42 to 61 are an integral part of these consolidated financial statements.

Note 1: Adjusted EBITDA, which is defined as profit before finance costs, tax, depreciation, amortisation, gain/(loss) on derivative financial instruments and exceptional
items, is a non-GAAP metric used by management and is not an IFRS disclosure.
Note 2: Items that could potentially be reclassified subsequently to profit and loss.

Accrol Group Holdings plc / Annual Report and Accounts

Strategic Report

Financial Statements

Consolidated Statement of Financial Position
As at 30 April 2017

ASSETS
Non-current assets
Property, plant and equipment
Intangible assets

Total non-current assets

Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Deferred tax asset
Derivative financial instruments

Total current assets

Total assets

Non-current liabilities
Borrowings
Deferred tax liabilities
Derivative financial instruments

Total non-current liabilities

Current liabilities
Borrowings
Trade and other payables
Income taxes payable
Derivative financial instruments

Total current liabilities

Total liabilities

Net assets

Capital and reserves
Share capital
Share premium
Hedging reserve
Capital redemption reserve
Retained earnings

Total equity shareholders’ funds

The financial statements on page 38 to 41 were approved by the Board of Directors on 10 July 2017.

Signed on behalf of the Board of Directors

Steve Crossley
Chief Executive Officer

James Flude
Chief Financial Officer

Company Registration Number 09019496

Note

2017
£’000

2016
£’000

10
11

12
13
14

16
9
17

16
15

26,914
29,742

56,656

14,358
24,670
3,867
545
841

24,407
31,744

56,151

9,361
21,277
2,456
–
–

44,281

33,094

100,937

89,245

13,146
4,336
474

50,919
4,478
–

17,956

55,397

9,709
18,840
920
3,235

12,193
15,454
909
190

32,704

28,746

50,660

84,143

50,277

5,102

93
41,597
(2,323)
27
10,883

50,277

13
84
–
–
5,005

5,102

Accrol Group Holdings plc / Annual Report and Accounts

Governance

Consolidated Statement of Changes in Equity
For year ended 30 April 2017

Note

Share
capital
£’000

Share
premium
£’000

Hedging
reserve
£’000

Capital
redemption
reserve
£’000

–

–
–
–

–

(64)
43,285
–
(1,708)
–
–

41,513

–

–
(2,868)
545

(2,323)

–
–
–
–
–
–

–

41,597

(2,323)

–

–
–
–

–

–
–
27
–
–
–

(Accumulated
losses)/
retained
earnings
£’000

(700)

–

5,705

5,005

7,376
–
–

7,376

–
–
–
166
(1,860)
196

Total
equity
£’000

(640)

5,705

5,102

7,376
(2,868)
545

5,053

–
43,328
–
(1,542)
(1,860)
196

(1,498)

40,122

10,883

50,277

–

–
–
–

–

64
43
(27)
–
–
–

Balance at 1 May 2015
Transactions with owners
Issue of Ordinary shares

Total for transactions with owners

Comprehensive income
Profit for the year

Total comprehensive income

Balance at 30 April 2016 and at 1 May 2016

Comprehensive income/(expense)
Profit for the year
Revaluation of derivative financial instruments
Tax relating to components of other comprehensive income

Total comprehensive income

Transactions with owners recognised directly in equity
Bonus issue of shares
Proceeds from shares issued
Buy-back of Deferred shares for consideration of £1
Transaction costs
Dividends
Share-based payments

Total transactions recognised directly in equity

Balance at 30 April 2017

20
20
20

Accrol Group Holdings plc / Annual Report and Accounts

Strategic Report

Financial Statements

Consolidated Cash Flow Statement
For the year ended 30 April 2017

Cash flows from operating activities
Operating profit
Adjustment for:
Depreciation
Amortisation
(Gain) on derivative financial instruments
Grant income
Exceptional items
Share-based payments
Profit on disposal of property, plant and equipment

Operating cash flows before movements in working capital
(Increase)/decrease in inventories
Increase in trade and other receivables
Increase/(decrease) in trade and other payables

Cash generated from operations
Tax paid
Interest paid

Net cash flows from operating activities

Cash flows from investing activities
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment

Net cash flows used in investing activities

Cash flows from financing activities
Proceeds of issue of Ordinary shares
Cost of raising finance
Increase in amounts due to factors
Repayment of capital element of finance leases
Repayment of bank loans
Receipt of new bank loans
Repayment of shareholder loans/loan notes
Drawdown of shareholder loans/loan notes
Dividend paid to Ordinary shareholders

Net cash flows from financing activities

Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year

Cash and cash equivalents at year end

Notes

2017
£’000

2016
£’000

10,528

11,920

5,10
5,11

1,910
2,042
–
(212)
1,016
196
(26)

15,454
(4,997)
(3,224)
6,431

13,664
(2,149)
(4,131)

1,831
2,060
(1,266)
(61)
–
–
(22)

14,462
20
(1,975)
(1,433)

11,074
(1,460)
(4,918)

7,384

4,696

(4,417)
56

(4,361)

43,328
(1,971)
2,038
(10,737)
(3,900)
12,730
(41,240)
–
(1,860)

(683)
48

(635)

37
–
1,656
(3,082)
(1,200)
–
–
249
–

(1,612)

(2,340)

1,411
2,456

3,867

1,721
735

2,456

Accrol Group Holdings plc / Annual Report and Accounts

Governance
Notes to the Consolidated Financial Information
For the year ended 30 April 2017

IFRS 16 ‘Leases’ is a new standard that has been published and is
effective from 1 January 2019 but has not been early adopted by
the Group and could have a material impact on the Group financial
information. At the time of preparing this financial information, the
Group continues to assess the possible impact of the adoption of
this standard in future years.

The Company’s subsidiaries are listed in Note 22, which together
with the Company form the Accrol Group Holdings plc Group
(the “Group”).

2. Summary of significant accounting policies
A summary of the significant accounting policies is set out below.
These have been applied consistently in the financial statements.

Basis of preparation
The consolidated financial statements of the Company have been
prepared in accordance with International Financial Reporting
Standards (‘IFRS’) as adopted for use in the EU, IFRS Interpretation
Committee (‘IFR IC’) interpretations and with those parts of the
Companies Act 2006 applicable to companies reporting under IFRS.

The consolidated financial statements have been prepared on
a going concern basis under the historical cost convention, as
modified by financial liabilities (including derivative instruments)
at fair value through profit or loss. The consolidated financial
statements are presented in pounds Sterling and all values are
rounded to the nearest thousand pounds, except where
otherwise indicated.

Standards issued not yet effective
At the date of authorisation of this financial information, the
following new standards and interpretations which have not
been applied in this financial information were in issue but not yet
effective (and in some cases, had not yet been adopted by the EU):

Going concern
The Directors have made appropriate enquiries and formed a
judgement at the time of approving the financial information that
there is a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable
future. For this reason, the Directors continue to adopt the going
concern basis in preparing the financial information.

Consolidation
Subsidiaries
A subsidiary is an entity controlled, either directly or indirectly, by
the Company. Control is achieved when the Group is exposed, or
has rights, to variable returns from its involvement with the investee
and has the ability to affect those returns through its power over the
investee. Specifically, the Group controls an investee if and only if
the Group has:

• power over the investee (i.e. existing rights that give it the current

ability to direct the relevant activities of the investee);

• exposure, or rights, to variable returns from its involvement with

the investee; and

• the ability to use its power over the investee to affect its returns.

When the Group has less than a majority of the voting or similar
rights of an investee, the Group considers all relevant facts and
circumstances in assessing whether it has power over an investee,
including:

• the contractual arrangement with the other vote holders of the

investee;

• IAS 16 and IAS 38 amendments – Clarification of Acceptable

• rights arising from other contractual arrangements; and

Methods of Depreciation and Amortisation (effective 1 January
2016)

• IFRS 11 amendments – Accounting for Acquisitions of Interests

in Joint Operations (effective 1 January 2016)

• IAS 16 and IAS 41 amendments – Agriculture: Bearer Plants

(effective 1 January 2016)

• IAS 27 amendments – Equity Method in Separate Financial

Statements (effective 1 January 2016)

• IFRS 10 and IAS 28 amendments – Sale or Contribution of Assets
between an Investor and its Associate or Joint Venture (effective
1 January 2016)

• IAS 1 amendments – Disclosure Initiative (effective 1 January 2016)

• Annual Improvements 2012-2014 Cycle (effective 1 January 2016)

• IFRS 15 – Revenue from Contracts with Customers (effective

1 January 2018)

• IFRS 9 Financial Instruments (effective 1 January 2018)

The adoption of these standards and interpretations is not expected
to have a material impact on the consolidated financial statements
of the Group in the year of initial application when the relevant
standards come into effect.

• the Group’s voting rights and potential voting rights.

The Group re-assesses whether or not it controls an investee if facts
and circumstances indicate that there are changes to one or more of
the 3 elements of control. Consolidation of a subsidiary begins when
the Group obtains control over the subsidiary and ceases when the
Group loses control of the subsidiary. Assets, liabilities, income and
expenses of a subsidiary acquired or disposed of during the year are
included in the statement of comprehensive income from the date
the Group gains control until the date the Group ceases to control
the subsidiary.

When necessary, adjustments are made to the financial
information of subsidiaries to bring their accounting policies into
line with the Group’s accounting policies. All intra-group assets
and liabilities, equity, income, expenses and cash flows relating to
transactions between members of the Group are eliminated in full
on consolidation.

Subsidiaries are all entities (including special purpose entities)
over which the Group has the power to govern the financial and
operating policies generally accompanying a shareholding of more
than one half of the voting rights. Subsidiaries are fully consolidated
from the date on which control is transferred to the Group. They are
de-consolidated from the date that control ceases.

Accrol Group Holdings plc / Annual Report and Accounts

Strategic Report

Financial Statements

The acquisition method of accounting is used to account for the
acquisition of subsidiaries by the Group. The cost of an acquisition
is measured as the fair value of the assets given, equity instruments
issued and liabilities incurred or assumed at the date of exchange.
Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their
fair values at the acquisition date, irrespective of the extent of any
minority interest. The excess of the cost of acquisition over the fair
value of the Group’s share of the identifiable net assets acquired is
recorded as goodwill. If the cost of acquisition is less than the fair
value of the net assets of the subsidiary acquired, the difference is
recognised directly in the income statement.

Segments
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision maker.
The chief operating decision maker, who is responsible for allocating
resources and assessing performance of the operating segment,
has been identified as the Board of Directors. The Group’s activities
consist solely of the conversion of paper products, primarily within
the United Kingdom. It is managed as one entity and management
have consequently determined that there is only one
operating segment.

Segment results are measured using adjusted earnings before
interest, tax, depreciation, amortisation, gain/(loss) on derivative
financial instruments and exceptional items. Segment assets are
measured at cost less any recognised impairment. Revenue is
attributed to geographical regions based on the country of residence
of the customer. All revenue arises in and all non-current assets are
located in the United Kingdom. The accounting policies used for
segment reporting reflects those used for the Group.

Revenue
Revenue representing sales to external customers, which is stated
excluding Value Added Tax and trade discounts, is measured at the
fair value of the consideration receivable for goods supplied.

Revenue from the sale of goods is recognised at the point of
dispatch of goods from the warehouse as this reflects the transfer
of risks and rewards of ownership.

Revenue is presented net of trade spend, including customer
rebates, which consists primarily of customer pricing allowances,
listing fees and promotional allowances (overriders) which are
governed by agreements with our trade customers. Accruals are
recognised under the terms of these agreements, to reflect the
expected promotional activity and our historical experience.
These accruals are reported within trade and other payables.

Cost of sales
Cost of sales comprise costs arising in connection with the
conversion of paper products. Cost is based on the cost of a
purchase on a first in, first out, basis and includes all direct costs
and an appropriate portion of fixed and variable overheads where
they are directly attributable to bringing the inventories into their
present location and condition.

Exceptional items
Items that are material in size or unusual or infrequent in nature
are included within operating profit and disclosed separately as
exceptional items in the consolidated income statement.

The separate reporting of exceptional items, which are presented as
exceptional within the relevant category in the consolidated income
statement, helps provide an indication of the Group’s underlying
business performance.

EBITDA and Adjusted EBITDA
Earnings before Interest, Taxation, Depreciation and Amortisation
(EBITDA) and Adjusted EBITDA are non-GAAP measures used by
management to assess the operating performance of the Group.
EBITDA is defined as profit before finance costs, tax, depreciation
and amortisation. Depreciation is the write-down of fixed assets
and amortisation of the write-down of customer relationships held
in intangibles. Exceptional items and gains/(losses) on derivative
financial instruments are excluded from EBITDA to calculate
Adjusted EBITDA.

The Directors primarily use the Adjusted EBITDA measure when
making decisions about the Group’s activities. As these are
non-GAAP measures, EBITDA and Adjusted EBITDA measures
used by other entities may not be calculated in the same way
and hence are not directly comparable.

Foreign currency
Functional and presentation currency
Items included in the financial information are measured using
the currency of the primary economic environment in which the
Group operates (‘the functional currency’). The financial information
is presented in Sterling, which is the functional currency of all
companies in the Group.

Transactions and balances
Transactions in foreign currencies are initially recorded in the
functional currency by applying the spot exchange rate ruling at the
date of the transaction. Monetary assets and liabilities denominated
in foreign currencies are retranslated at the functional currency rate
of exchange ruling at the statement of financial position date. All
differences are taken to the income statement.

Non-monetary items that are measured in terms of historical cost in
a foreign currency are translated using the exchange rates as at the
dates of the initial transactions. Non-monetary items measured at fair
value in a foreign currency are translated using the exchange rates at
the date when the fair value was determined.

Property, plant and equipment
Property, plant and equipment are included at cost less accumulated
depreciation and any recognised impairment loss. Depreciation is
calculated to write-down the cost of the assets on a straight-line
or reducing balance basis over the estimated useful lives on the
following bases:

• Leasehold land and Buildings

• Plant and Machinery

• Motor vehicles

straight line over term
of lease

10% straight line,
40% residual value

30% straight line

• Fixtures, fittings and office

25% reducing balance

equipment

Assets under construction are not depreciated, but transferred
into the appropriate asset class when they are ready for use. The
estimated useful lives are reviewed at the end of each reporting
period and adjusted if appropriate. The carrying values of tangible
fixed assets are reviewed for impairment if events or changes in
circumstances indicate the carrying value may not be recoverable.

Accrol Group Holdings plc / Annual Report and Accounts

Governance

Notes to the Consolidated Financial Information continued
For the year ended 30 April 2017

2. Summary of significant accounting policies continued
Intangible assets
Goodwill
Goodwill represents the excess of the cost of an acquisition
over the fair value of the Group’s share of the net identifiable
assets of the acquired subsidiary at the date of acquisition. Goodwill
on acquisitions of subsidiaries is included in ‘intangible assets’.
Goodwill is tested annually for impairment and carried at cost less
accumulated impairment losses. Impairment losses on goodwill are
not reversed. Gains and losses on the disposal of an entity include
the carrying amount of goodwill relating to the entity sold.

Customer relationships, customer order books and other
Customer relationships are shown at fair value as part of acquisition
accounting. Customer relationships have finite useful lives and are
carried at cost less accumulated amortisation. Amortisation is
calculated using the straight-line method to allocate the cost of
customer relationships over their estimated useful lives of 10 years.

Financial liabilities
The Group initially recognises its financial liabilities at fair value net
of transaction costs where applicable and subsequently they are
measured at amortised cost using the effective interest method.
Transaction costs are amortised using the effective interest rate
method over the maturity of the loan.

Derivative financial instruments and cash flow hedges
The Group holds derivative financial instruments to hedge its
foreign currency exposures. These derivatives, classified as cash
flow hedges, are initially recognised at fair value and then re-
measured at fair value at the end of each reporting date. Hedging
instruments are documented at inception and effectiveness is
tested throughout their duration. Changes in the value of cash flow
hedges are recognised in other comprehensive income and any
ineffective portion is immediately recognised in the statement of
comprehensive income. Amounts deferred in other comprehensive
income are recognised in the statement of comprehensive income
in the same period in which the hedged items affect profit.

Customer order books relate to orders for goods awaiting dispatch
at the date of acquisition on 14 July 2014. Amortisation is calculated
using the straight-line method to allocate the cost of customer
order books over their estimated useful lives up to 1 year.

All derivative financial instruments are initially measured at fair
value on the contract date and are also measured at fair value at
subsequent reporting dates.

The other intangible asset relates to a Management Services
Agreement between Accrol Papers Limited and Accrol Group
Holdings Plc (formerly Accrol Group Holdings Limited). This
agreement has an infinite life and therefore is not amortised.

Impairment of non-financial assets
Goodwill is tested for impairment annually and when circumstances
indicate that the carrying value may be impaired. Assets that
are subject to depreciation and amortisation are reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment
loss is recognised for the amount by which the asset’s carrying
amount exceeds its recoverable amount. The recoverable amount is
the higher of an asset’s fair value less costs to sell and value in use.
Where the asset does not generate cash flows that are independent
from other assets, the Group estimates the recoverable amount of
the cash-generating unit (“CGU”) to which the asset belongs. All
tangibles and intangibles are allocated to the Group’s sole CGU
(see Note 11).

Any impairment charge is recognised in the income statement in
the period in which it occurs. Impairment losses relating to goodwill
cannot be reversed in future periods. Where an impairment loss on
other assets, subsequently reverses due to a change in the original
estimate, the carrying amount of the asset is increased to the revised
estimate of its recoverable amount.

Financial instruments
Financial assets
The Group classifies its financial assets as loans and receivables.
Loans and receivables are non-derivative financial assets with fixed
or determinable payments that are not quoted in an active market.
They are included in current assets, except for maturities greater than
12 months after the end of the reporting date, which are classified
as non-current assets. The Group’s loans and receivables comprise
‘trade and other receivables’ and cash and cash equivalents in the
balance sheet. Subsequent to initial recognition, these assets are
carried at amortised cost using the effective interest method.
Income from these financial assets is calculated on an effective
yield basis and is recognised in the income statement.

Share-based payments
The Group may issue equity-settled share-based payments in the
Parent Company to certain employees in exchange for services
rendered. These awards are measured at fair value on the date of the
grant using an option pricing model and expensed in the statement
of comprehensive income on a straight-line basis over the vesting
period after making an allowance for the number of shares that it
is estimated will not vest. The level of vesting is reviewed and
adjusted annually.

Leases
Finance leases
Assets funded through finance leases are capitalised as property,
plant and equipment, and are depreciated over their estimated useful
lives or the lease term, whichever is shorter. The amount capitalised
is the lower of the fair value of the asset or the present value of the
minimum lease payments during the lease term at the inception of
the lease. The resulting lease obligations are included in liabilities
net of finance charges. Finance costs on finance leases are charged
directly in the income statement on an effective interest rate basis.

Material lease arrangements do not include any contingent rental
conditions, options to purchase or escalation clauses. There are no
restrictions imposed by these lease arrangements.

Operating leases
Leases in which a significant portion of the risks and rewards of
ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases (net of any incentives
received from the lessor) are charged to the income statement on a
straight-line basis over the period of the lease.

Government grants
Government grants relating to tangible fixed assets are treated as
deferred income and released to the income statement over the
expected useful lives of the assets concerned. Other grants are
credited to the profit and loss account as the related expenditure
is incurred.

Accrol Group Holdings plc / Annual Report and Accounts

Strategic Report

Financial Statements

Inventories
Inventories are valued at the lower of cost and net realisable
value. Cost is based on the purchase on a first in, first out, basis
and includes all direct costs and an appropriate portion of fixed
and variable overheads. Net realisable value is the estimated selling
price reduced by all costs of completion, marketing, selling and
distribution. Supplier rebates are credited to the carrying value of
inventory to which they relate. Once the inventory is sold, the rebate
amount is then recognised in the income statement.

Trade and other receivables
Trade and other receivables relate mainly to the sale of paper
products to trade customers.

Cash and cash equivalents (excluding bank overdraft)
Cash and cash equivalents in the balance sheet comprise cash
at bank, short-term deposits held at call with banks and other
short-term highly liquid investments with original maturities of
3 months or less, excluding any bank overdrafts which are
disclosed separately within borrowings within current liabilities.

Trade payables
Trade payables are obligations to pay for goods or services that
have been acquired in the ordinary course of business from
suppliers. Accounts payable are classified as current liabilities if
payment is due within 1 year or less. If not, they are presented
as non-current liabilities.

Current taxation
Current tax assets and liabilities for the current and prior periods are
measured at the amount expected to be recovered from or paid to
the taxation authorities. The tax rates and tax laws used to compute
the amount are those that are enacted or substantively enacted by
the balance sheet date.

The amount of deferred tax provided is based on the expected
manner of realisation or settlement of the carrying amount of assets
and liabilities. Deferred income tax assets and liabilities are measured
at the tax rates that are expected to apply to the period when the
asset is realised or the liability is settled, based on tax rates and tax
laws that have been enacted or substantively enacted at the balance
sheet date.

Provisions
Provisions are recognised when the Group has a present legal or
constructive obligation as a result of a past event; it is probable that
an outflow of resources will be required to settle the obligation; and
a reliable estimate can be made of the amount of the obligation.

Provisions are measured at the present value of the expenditures
expected to be required to settle the obligation using a pre-tax rate
that reflects current market assessments of the time value of money
and risks specific to the obligation. The increase in the provision due
to the passage of time is recognised as interest expense.

3. Significant accounting judgements, estimates
and assumptions
The preparation of the financial information in accordance with IFRS
requires estimates and assumptions to be made that affect the value
at which certain assets and liabilities are held at the balance sheet
date and also the amounts of revenue and expenditure recorded in
the year. The Directors believe the accounting policies chosen are
appropriate to the circumstances and that the estimates, judgements
and assumptions involved in its financial reporting are reasonable.

Accounting estimates made by the Group’s management are based
on information available to management at the time each estimate
is made. Accordingly, actual outcomes may differ materially from
current expectations under different assumptions and conditions.

Income tax relating to items recognised in comprehensive income
or directly in equity is recognised in comprehensive income or equity
and not in the income statement.

The estimates and assumptions for which there is a significant risk
of a material adjustment to the financial information within the next
financial year are set out below.

Deferred taxation
Deferred income tax is provided using the liability method on all
temporary differences at the balance sheet date between the tax
bases of assets and liabilities and their carrying amounts for financial
reporting purposes, with the following exceptions:

• where the temporary difference arises from the initial recognition
of goodwill or of an asset or liability in a transaction that is not a
business combination that at the time of the transaction affects
neither accounting nor taxable profit or loss;

• in respect of taxable temporary differences associated with

investments in subsidiaries, where the timing of the reversal of the
temporary differences can be controlled and it is probable that the
temporary differences will not reverse in the foreseeable future;
and

• deferred income tax assets are recognised only to the extent that
it is probable that taxable profit will be available against which
deductible temporary differences, carried forward tax credits or
tax losses can be utilised.

The carrying amount of deferred income tax assets is reviewed
at each balance sheet date and reduced to the extent that it is no
longer probable that sufficient taxable profit will be available to
allow all or part of the deferred income tax asset to be utilised.

Critical accounting estimates and judgements in applying
the entity’s accounting policies
Goodwill and intangible asset impairment
The Group is required to test, on an annual basis, whether goodwill
has suffered any impairment based on the recoverable amount of
its sole CGU. The recoverable amount is determined based on value
in use calculations. The use of this method requires the estimation
of future cash flows and the determination of a pre-tax discount
rate in order to calculate the present value of the cash flows. More
information including carrying values is included in Note 11.

Customer rebates
The Group provides for amounts payable to customers in relation
to rebates and promotional activity. Whilst the Directors do not
consider the Group’s rebates to be highly complex as they are
predominantly volume related, there is judgement required in
calculating amounts due, as terms vary by customer.

Accounting for IPO
The successful completion of the IPO has resulted in a significant
change in the Group’s financing structure, both in terms of equity
and debt and has had a significant impact upon the Group financial
statements. Accounting for the IPO and, in particular, for the
transaction fees incurred requires an element of judgement as costs
determined to be directly related to the IPO are deducted from
the share premium account. Non directly related are expensed
as incurred.

Accrol Group Holdings plc / Annual Report and Accounts

GovernanceNotes to the Consolidated Financial Information continued
For the year ended 30 April 2017

4. Revenue
The analysis of geographical area of destination of the Group’s revenue is set out below:

United Kingdom
Europe

Total

2017
£’000

2016
£’000

132,184
2,869

118,041
178

135,053

118,219

Major customers
In 2017 there were 4 major customers that individually accounted for at least 10% of total revenues (2016: 4 customers). The revenues
relating to these customers in 2017 were £31,597,000, £14,532,000, £13,981,000, £12,602,000 (2016: £25,369,000, £14,300,000,
£13,769,000 and £12,375,000).

5. Operating profit
Operating profit is stated after charging/(crediting):

Employee benefit expense
Depreciation of property, plant and equipment (included in administration expenses)
Amortisation of intangible assets (included in administration expenses)
Profit on disposal of property, plant and equipment
Operating lease rentals
Net foreign exchange losses/(gains)
Grants income
Auditors’ remuneration
Inventories recognised as expenses

Exceptional items
Professional fees relating to the AIM flotation
Early settlement charges on finance leases
Acquisition deal fees
Consultancy fees
Other

The exceptional items are described below:

2017
£’000

11,857
1,910
2,042
(26)
1,957
27
(212)
311
75,947

208
454
352
567
–

1,581

2016
£’000

9,927
1,831
2,060
(22)
1,946
(1,332)
(61)
59
66,807

–
–
–
334
159

493

Year ended 30 April 2017
Professional fees of £208,000 incurred as part of the IPO process have been classified as exceptional as they do not directly relate to the
raising of the equity for the AIM flotation so cannot be charged against share premium. In addition, part of the funds raised in the IPO were
used to reduce the debt in the business with the majority of the finance leases being repaid which attracted an early redemption charge of
£454,000.

Fees totalling £352,000 relating to the acquisition of the Accrol Group in July 2014 by Accrol Group Holdings Limited, were also required to
be written-off as part of the accounting for the IPO.

Consultancy costs totalling £567,000 were incurred as part of the restructuring. These related mainly to the Hussain family consultancy,
manufacturing consultancy and human resourcing consultancy.

Year ended 30 April 2016
One-off consultancy fees totalling £334,000 were incurred in relation to a market, competitor, customer and working capital review to
support the growth strategy following the acquisition in July 2014.

In September 2015, there was a fire within the embossing unit of one of the converting lines. The line was back up and running within one
week with no disruption to customer orders. The cost of repair was £159,000.

Accrol Group Holdings plc / Annual Report and Accounts

Strategic Report

Financial Statements

Auditor’s remuneration

Audit services – Company
Audit services – Rest of Group
Non-audit services:
Tax compliance services
Tax advisory services
Advice upon IPO

2017
£’000

13
53

11
9
225

311

2016
£’000

7
29

10
13
–

6. Earnings per share
The basic earnings per share is calculated by dividing the profit attributable to Ordinary equity holders of the Parent by the weighted average
number of Ordinary shares outstanding during the year. The following reflects the income and share data used in the basic earnings per
share calculation:

Profit for the year attributable to shareholders

Basic weighted average number of shares1

Dilutive share options
Diluted weighted average number of shares

Basic earnings per share
Diluted earnings per share

2017
£’000

7,376

2016
£’000

5,705

Number

85,113,194

9,900

Number

1,321,025
86,434,219

0.09
0.09

–
–

576.26
576.26

Note 1: In the year ended 30 April 2016 and 2017, the basic weighted average number of shares was calculated by excluding the D class of shares (see Note 20) as this class
is subject to a dividend cap that does not materially impact upon the profit due to the remaining Ordinary equity shareholders.

The share option scheme in operation post flotation is dependent upon share price movements and could therefore result in future dilution
of earnings per share.

7. Employee costs

Employee costs during the year amounted to:
Wages and salaries
Social security costs
Other pension costs
Cost of employee share schemes (Note 23)

The average number of employees (including the Executive Directors) during the year were:

Production
Administration

2017
£’000

2016
£’000

10,748
801
112
196

11,857

9,171
684
72
–

9,927

Number

462
46

508

431
29

460

Accrol Group Holdings plc / Annual Report and Accounts

Governance
Notes to the Consolidated Financial Information continued
For the year ended 30 April 2017

8. Finance costs

Finance costs on pre-IPO debt structure
Shareholder loans
Finance lease interest
Amortisation of finance fees

Finance costs on post-IPO debt structure
Bank loans and overdrafts
Finance lease interest
Interest on factoring facility
Amortisation of finance fees

2017
£’000

478
–
–

478

368
80
160
43

651

2016
£’000

4,099
214
143

4,456

158
144
183
–

485

Total finance costs

1,129

4,941

9. Income tax expense
Tax charged in the income statement

Current income tax
Current tax on profits for the year

Total current income tax

Deferred tax
Origination and reversal of temporary differences
Change in tax rate

Total deferred tax

Tax charge in the income statement

2017
£’000

2,165

(163)
21

(142)

2016
£’000

1,780

(31)
(475)

(506)

2,023

1,274

The tax charge for the year is higher (2016: lower) than the effective rate of Corporation Tax in the UK of 19.92% (2016: 20%). The differences
are explained below:

Profit before income tax
Effective rate
At the effective income tax rate
Expenses not deductible for tax purposes
Change in rate

Total tax charge

During the year the Group recognised the following deferred tax (assets)/liabilities:

30 April 2015
Credit/(charge) in year
Change in deferred tax rate

30 April 2016

Credit/(charge) in year
Change in deferred tax rate
Credit to equity

30 April 2017

Accrol Group Holdings plc / Annual Report and Accounts

2017
£’000

9,399
19.92%
1,872
130
21

2,023

Other
£’000

(326)
254
7

(65)

65
–
–

–

2016
£’000

6,979
20%
1,396
353
(475)

1,274

Total
£’000

4,984
(31)
(475)

4,478

(163)
21
(545)

3,791

Accelerated
capital
allowances
£’000

Derivative
financial
instruments
£’000

Intangibles
£’000

1,576
127
(176)

1,527

186
(18)
–

3,734
(412)
(306)

3,016

(414)
39
–

1,695

2,641

–
–
–

–

–
–
(545)

(545)

Strategic Report

Financial Statements

During the year the Group recognised the following deferred tax (assets)/liabilities:

Deferred tax assets
Deferred tax liabilities

2017
£’000

(545)
4,336

3,791

2016
£’000

–
4,478

4,478

The deferred tax asset was recognised on the loss on cash flow hedges and the credit has been taken to the hedging reserve.

Deferred tax expected to be settled within 12 months of the reporting date is approximately £58,000 (2016: £186,000).

The Finance Act 2016 reduced the main rate of corporation tax to 20% from 1 April 2016 and to 19% from 1 April 2017. A future rate reduction
to 18% from 1 April 2020, was substantively enacted on 26 October 2015. A further change to reduce the rate from 1 April 2020 from 18% to
17% was announced on 16 March 2016. This change was substantively enacted as part of the Finance Bill 2016 on 15 September 2016.
Therefore, the rate of 20% (2016: 20%) has been reflected in the consolidated financial statements and deferred tax assets and liabilities have
been measured at the rate expected to be in effect when the deferred tax asset or liability reverses. Deferred tax has been provided at the
rate of 18% as at 30 April 2017 (2016: 18%)

10. Property, plant and equipment

Leasehold
land &
buildings
£’000

Fixtures &
fittings
£’000

Plant and
machinery
£’000

Motor
vehicles
£’000

Assets under
construction
£’000

Cost
At 30 April 2015
Transfer
Additions
Disposals

At 30 April 2016
Additions
Disposals

At 30 April 2017

Accumulated depreciation
At 30 April 2015
Charge
Disposals

At 30 April 2016
Charge
Disposals

At 30 April 2017

Net book value
At 30 April 2017

At 30 April 2016

156
–
–
–

156
–
–

156

39
10
–

49
10
–

532
–
173
–

705
344
–

19,013
4,417
162
(49)

23,543
684
–

1,049

24,227

86
119
–

205
140
–

345

1,335
1,626
(23)

2,938
1,739
(18)

4,659

107

704

500

19,568

20,605

133
–
37
(35)

135
46
(138)

51
76
(35)

92
21
(90)

Total
£’000

24,251
–
3,524
(84)

27,691
4,447
(138)

4,417
(4,417)
3,152
–

3,152
3,373
–

6,525

32,000

–
–
–

–

1,511
1,831
(58)

3,284
1,910
(108)

5,086

6,525

26,914

3,152

24,407

The net book value of tangible fixed assets includes an amount of £538,000 (2016: £16,052,000) in respect of plant and machinery assets
held under finance leases and £nil (2016: £3,152,000) in respect of assets under construction held under finance leases.

Accrol Group Holdings plc / Annual Report and Accounts

GovernanceNotes to the Consolidated Financial Information continued
For the year ended 30 April 2017

11. Intangible assets

Cost
30 April 2015
Additions

At 30 April 2016
Additions

At 30 April 2017

Amortisation
30 April 2015
Charge

At 30 April 2016
Charge

At 30 April 2017

Net book value
At 30 April 2017

At 30 April 2016

Goodwill
£’000

Customer
lists
£’000

Order book
£’000

Other
£’000

Total
£’000

14,982
–

20,427
–

14,982

20,427

–
–

–

1,623
2,042

3,665
2,042

5,707

14,982

14,720

14,982

16,762

86
–

68
18

86
–

–

–
–

–
40

–
–

–

35,495
–

35,495
40

35,535

1,691
2,060

3,751
2,042

5,793

–

29,742

31,744

The balance for goodwill, customer relationships and order book arose on the Group’s acquisition of Accrol Holdings Limited and are
attributed to the sole cash-generating unit (CGU).

The intangible addition during the year, relates to a Management Services Agreement between Accrol Papers Limited and Accrol Group
Holdings Plc which provides a mechanism for a recharge of salary costs between the 2 entities.

Impairment test for goodwill
Goodwill is monitored for internal management purposes at the Group’s sole CGU level. The recoverable amount of the CGU has been
determined based on a value in use calculation using cash flow projections based on financial budgets approved by the Board covering
a 5-year period. Cash flows beyond this period are extrapolated using the estimated growth rates stated in the key assumptions.

The key assumptions used in the value in use calculations are a pre-tax discount rate of 13% (2016: 16%) and a long-term growth rate of 2%
(2016: 2%). The discount rate is derived from the Group’s weighted average cost of capital and is calculated with reference to latest market
assumptions for the risk free rate, equity market risk premium and the cost of debt. The values reflect both past experience and external
sources of information.

Goodwill is tested for impairment on at least an annual basis, or more frequently if events or changes in circumstance indicate that the
carrying value may be impaired. In the years under review management’s value in use calculations have indicated no requirement to impair.

Sensitivity to changes in assumptions
The estimates of the recoverable amounts associated with these CGU affords significant headroom over the carrying value, consequently
only significant adverse changes in these key assumptions would cause the Group to recognise an impairment loss.

12. Inventories

Raw materials
Finished goods and goods for resale

There are £nil provisions held against inventories (2016: £nil).

2017
£’000

9,090
5,268

14,358

2016
£’000

6,996
2,365

9,361

Accrol Group Holdings plc / Annual Report and Accounts

Strategic Report

Financial Statements

13. Trade and other receivables

Trade receivables
Less: provision for impairment of trade receivables

Trade receivables – net of provisions
Prepayments

The trade receivables balance is aged as follows:

Less than 1 month
Between 1 and 2 months
Between 2 and 3 months
Between 3 and 6 months

2017
£’000

23,751
(85)

23,666
1,004

2016
£’000

20,793
(85)

20,708
569

24,670

21,277

2017
£’000

14,048
8,267
988
448

2016
£’000

12,831
7,120
383
459

23,751

20,793

Trade and other receivables which are less than 3 months past due are not considered impaired unless specific information indicates
otherwise. Trade and other receivables greater than 3 months past due are considered for recoverability, and where appropriate, a provision
against bad debt is recognised. There are no trade receivables’ amounts more than 6 months past due.

Included in the Group’s trade receivables balance are debtors which are past due at the reporting date for which the Group has not provided
as there has not been a significant change in the credit quality and the amounts are considered recoverable.

The Directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value.

The movement in the provision for trade and other receivables is analysed below:

At the beginning of the year
Provisions made for receivables impairment

2017
£’000

(85)
–

(85)

2016
£’000

(62)
(23)

(85)

The creation and release of the provision for impaired receivables has been included in administrative expenses in the income statement.
Amounts charged to the allowance account are generally written-off when there is no expectation of recovering additional cash.

14. Cash and cash equivalents

Cash and cash equivalents

2017
£’000

2016
£’000

3,867

2,456

Cash and cash equivalents earn interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods
of between 1 day and 1 month depending on the immediate cash requirements of the Group, and earn interest at the respective short-term
deposit rates.

Accrol Group Holdings plc / Annual Report and Accounts

GovernanceNotes to the Consolidated Financial Information continued
For the year ended 30 April 2017

15. Trade and other payables

Trade payables
Social security and other taxes
Accruals and deferred income
Deferred government grant income

Trade payables are non-interest bearing and are paid on average within 30 days at 30 April 2017 (2016: 29 days).

Deferred government grant income relates to grants received for purchase of plant and machinery.

16. Borrowings

Non-current
Bank facility
Finance leases
Shareholder loans

Current
Bank facility
Factoring facility
Finance leases

Loan maturity analysis:
Within 1 year
Between 1 and 2 years
Between 2 and 5 years
After 5 years

The following amounts remain undrawn and available:

Revolving credit facility
Factoring facility

2017
£’000

14,892
1,558
1,576
814

2016
£’000

7,868
1,947
4,613
1,026

18,840

15,454

2017
£’000

2016
£’000

12,778
368
–

2,600
7,232
41,087

13,146

50,919

–
9,523
186

9,709

9,709
185
13,183
–

1,103
7,485
3,605

12,193

12,294
4,164
5,768
41,240

23,077

63,466

2017
£’000

3,000
13,043

16,043

2016
£’000

–
9,879

9,879

The Group’s bank borrowings are secured by way of fixed and floating charge over the Group’s assets.

HSBC Revolving Credit Facility agreement (‘Bank facility’)
At 30 April 2016, the Group had borrowings under a committed bank loan facility of £4m provided by HSBC plc, a factoring facility of £20m
and finance leases of £8m. Subsequent to the year end, on 13 June 2016, the bank loan facility and the finance leases have been repaid from
a new Revolving Credit Facility (‘RCF’). The RCF is a 5 year £18m facility with a day 1 drawdown of £13m. The RCF reduces to £10m subject to
the following profile
30 April 2017: £16m
30 April 2018: £14m
30 April 2019: £12m
30 April 2020: £10m

The minimum drawing is: £500,000 with the maximum number of outstanding drawings at any one time being 10. Interest is charged on
the RCF at LIBOR plus a margin of 2.0% subject to the below ratchet:
≥2.0x Net Debt: EBITDA = 2.25 basis points
≥1.5x Net Debt: EBITDA = 2.00 basis points
≥1.0x Net Debt: EBITDA = 1.75 basis points
<1.0x Net Debt: EBITDA = 1.50 basis points

Accrol Group Holdings plc / Annual Report and Accounts

Strategic Report

Financial Statements

An arrangement fee of 1.5% of the RCF is payable at inception. An annual commitment fee of 40% of applicable margin on any undrawn
RCF commitment is also payable. There is no commitment fee or ticking fee arising between signing and Admission. The facility is subject
to financial covenants and each of Accrol Group Holdings plc (formerly Accrol Group Holdings Limited), Accrol UK Limited, Accrol Holdings
Limited and Accrol Papers Limited will enter into a guarantee and the security each have previously granted in favour of HSBC shall remain in
respect of all liabilities arising under the RCF agreement.

HSBC £20m factoring credit facility (‘Factoring facility’)
On 8 August 2014 the Group entered into a £20.0m multi-currency revolving credit facility to provide factoring financing for general
working capital requirements for a minimum period of 3 years. Under the terms of this facility the drawdown is based upon gross debtors
less a retention with 90% of the remaining debt funded. Each drawing under the facility is repayable within a maximum of 90 days from date
of invoice for jurisdictions within the United Kingdom and 120 days for other countries.

Covenants
The Group is subject to financial covenants in relation to the Bank facility and the Factoring facility. The covenants in relation to the Bank
facility cover the following ratios: a) interest cover; and b) leverage. The covenants in relation to the Factoring facility cover the following: a)
debt dilution; b) disputed debt; and c) tangible net worth. The Group has been in compliance with all of the covenants during the year under
review. Breach of the covenants would render any outstanding borrowings subject to immediate settlement.

Finance fees
Finance fees are not included in the Loan Maturity Analysis table. As at 30 April 2017, finance fees relating to the arrangement of the
Revolving Credit Facility have been capitalised and are being amortised. As at the 30 April 2016, the finance fees were incurred upon the
arrangement of the shareholder loans by the Group’s lenders.

The finance fees after amortisation are as follows:

Finance fees

2017
£’000

222

2016
£’000

354

17. Financial instruments
Derivative financial instruments
Derivative financial instruments represent the Group’s forward foreign exchange contracts. The assets and liabilities representing the
valuations of the forward foreign exchange contracts at the year end are:

Foreign currency contracts

Current assets
Current liabilities
Non-current liabilities

2017
£’000

841
(3,235)
(474)

(2,868)

2016
£’000

–
(190)
–

(190)

The fair value of a derivative financial instrument is split between current and non-current depending on the remaining maturity of the
derivative contract and its contractual cash flows. The foreign currency swaps are designated as fair value through profit or loss at initial
recognition. The fair value of the Group’s foreign currency derivatives is calculated as the difference between the contract rates and the
mark to market rates which are current at the balance sheet date. This valuation is obtained from the counterparty bank and at each year
end is categorised as a Level 2 valuation, see below. The maximum exposure to credit risk is the fair value of the derivative as a financial asset.

Fair value hierarchy
IFRS 7 requires fair value measurements to be recognised using a fair value hierarchy that reflects the significance of the inputs used in the
value measurements:

Level 1: inputs are quoted prices in active markets.

Level 2: a valuation that uses observable inputs for the asset or liability other than quoted prices in active markets.

Level 3: a valuation using unobservable inputs i.e. a valuation technique.

There were no transfers between levels throughout the years under review.

Accrol Group Holdings plc / Annual Report and Accounts

GovernanceNotes to the Consolidated Financial Information continued
For the year ended 30 April 2017

17. Financial instruments continued
Fair values
The fair values of the Group’s financial instruments approximates closely with their carrying values, which are set out in the table below:

Financial assets
Current
Trade and other receivables
Cash and short-term deposits
Derivative financial instruments

Financial liabilities
Current
Borrowings
Trade and other payables
Derivative financial instruments

Non-current
Borrowings
Derivative financial instruments

Fair values and
Carrying values

2017
£’000

2016
£’000

23,666
3,867
841

20,708
2,456
–

9,709
18,840
3,235

12,193
15,454
190

13,146
474

50,919
–

18. Capital and financial risk management objectives and policies
(a) Capital risk management
The Group’s objective when managing capital is to safeguard the Group’s ability to continue as a going concern in order to provide returns
for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to
maintain or adjust capital the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new
shares or sell assets to reduce debt.

Consistent with others in the industry, the Group monitors net debt. Net debt is calculated as total borrowings less cash and cash
equivalents.

Total borrowings
Less: cash and cash equivalents

Net debt

(b) Financial risk management
The Group has exposure to the following risks from its use of financial instruments:

• Foreign currency risk

• Interest rate risk

• Liquidity risk

• Credit risk

2017
£’000

22,855
(3,867)

2016
£’000

63,112
(2,456)

18,988

60,656

This note presents information about the Group’s exposure to each of the above risks, and the Group’s objectives, policies and procedures
for measuring and managing risk. The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk
management framework.

Accrol Group Holdings plc / Annual Report and Accounts

Strategic Report

Financial Statements

(i) Foreign currency risk
The Group has transactional currency exposures arising from purchases in currencies other than the Group’s functional currency. These
exposures are forecast on a monthly basis and are monitored by the Finance Department. Under the Group’s foreign currency policy, such
exposures are hedged on a reducing percentage basis over a number of forecast time horizons using forward foreign currency contracts.

The Group’s largest exposures are the US dollar and Euro forward contracts. The derivative analysis below had been prepared by
reperforming the calculations used to determine the balance sheet values assuming a 1% strengthening of Sterling:

Euro – (loss)
USD – (loss)/gain

2017
£’000

(79)
(844)

(923)

2016
£’000

–
135

135

(ii) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest
rates. The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s Factoring facility and Bank facility,
both of which have floating interest rates.

The Group manages its interest rate risk by holding the majority of borrowings in fixed rate secured loan notes. The exposure to the
remaining risk is deemed to be manageable and is reviewed on a continual basis. The Group are not expecting any reduction in interest rates
over the next 12 months, the impact of 0.5% increase in interest rates on profit before tax is shown below:

Change in interest rate

2017
£’000

2016
£’000

(iii) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. Ultimate responsibility for liquidity risk
management rests with the Board of Directors. The Group manages liquidity risk by continuously monitoring forecast and actual cash flows,
matching the maturity profiles of financial assets and operational liabilities and by maintaining adequate cash reserves.

The table below summarises the maturity profile of the Group’s financial liabilities:

As at 30 April 2017

Borrowings
Trade and other payables
Derivative financial instruments

Total financial liabilities

As at 30 April 2016

Borrowings
Trade and other payables
Derivative financial instruments

Total financial liabilities

Due within
1 year
£’000

Due between
1 and 2 years
£’000

Due between
2 and 5 years
£’000

Due in more
than 5 years
£’000

9,709
18,840
3,235

31,784

185
–
474

659

13,183
–
–

13,183

–
–
–

–

Due within
1 year
£’000

Due between
1 and 2 years
£’000

Due between
2 and 5 years
£’000

Due in more
than 5 years
£’000

12,295
15,454
190

27,939

4,163
–
–

4,163

5,768
–
–

41,240
–
–

5,768

41,240

79,110

Total
£’000

23,077
18,840
3,709

45,626

Total
£’000

63,466
15,454
190

(iv) Credit risk
The Group’s principal financial assets are bank balances and cash, trade and other receivables and investments. The Group’s credit risk is low.
The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit ratings
assigned by international credit-rating agencies.

Accrol Group Holdings plc / Annual Report and Accounts

GovernanceNotes to the Consolidated Financial Information continued
For the year ended 30 April 2017

19. Commitments and contingencies
Operating lease commitments
The Group has entered into leases on commercial real estate. These leases have an average life of 9 years with no renewal option included in
the contracts. There are no restrictions placed upon the Group by entering into these leases. The lease expenditure charged
to the income statement during the year is disclosed in Note 5.

Future minimum rentals payable under non-cancellable operating leases as at the year end, analysed by the period in which they fall due,
are as follows:

Within 1 year
Between 1 and 2 years
Between 2 and 5 years
Greater than 5 years

2017
£’000

2,821
3,614
10,879
17,191

2016
£’000

1,740
1,740
5,220
6,516

34,505

15,216

Finance lease commitments
Future minimum lease payments under finance leases and hire purchase contracts together with the present value of the net minimum lease
payments are, as follows:

2017
£’000

198
192
190

580
(29)

551

2017
£’000

184
184
183

551

2017
£’000

–

2016
£’000

3,989
3,228
4,617

11,834
(997)

10,837

2016
£’000

3,605
2,963
4,269

10,837

2016
£’000

–

Within 1 year
Between 1 and 2 years
Between 2 and 5 years

Future finance charges

Present value

The present value of finance lease liabilities is as follows:

Within 1 year
Between 1 and 2 years
Between 2 and 5 years

Capital commitments

Contracted for but not provided

Accrol Group Holdings plc / Annual Report and Accounts

Strategic Report

Financial Statements

20. Share capital and reserves
Called up, allotted and fully paid

Ordinary shares of £0.001 each
Class A Ordinary shares of £1 each
Class B Ordinary shares of £1 each
Class C Ordinary shares of £1 each
Class D Ordinary shares of £1 each

The number of Ordinary shares in issue is set out below:

Ordinary shares of £0.001 each
Class A Ordinary shares of £1 each
Class B Ordinary shares of £1 each
Class C Ordinary shares of £1 each
Class D Ordinary shares of £1 each

The movements in shares occurred on the following dates set out below:

31 May 2016
Issue of A Ordinary shares of £1 each
Issue of B Ordinary shares of £1 each
1 June 2016
Bonus issue of shares 5:1
Bonus issue of A Ordinary shares of £1 each
Bonus issue of B Ordinary shares of £1 each
Bonus issue of C Ordinary shares of £1 each
Bonus issue of D Ordinary shares of £1 each
Subdivision of shares
Subdivided A Ordinary shares of £0.001 each
Subdivided B Ordinary shares of £0.001 each
Subdivided C Ordinary shares of £0.001 each
Subdivided D Ordinary shares of £0.001 each
Re-organisation of shares into one class
Ordinary shares of one class of £0.001 each
Deferred shares of one class of £0.001 each
10 June 2016
Issue of Ordinary shares of £0.001 each
11 July 2016
Purchase of Deferred shares of £0.001 each

2017
£

93,012
–
–
–
–

93,012

2017
Number

93,012,002
–
–
–
–

2016
£

–
4,625
4,625
650
2,860

12,760

2016
Number

–
4,625
4,625
650
2,860

Number

50
50

23,375
23,375
3,250
14,300

28,050,000
28,050,000
3,900,000
17,160,000

49,683,858
27,476,142

43,328,144

27,476,142

On 1 June 2016, a 5:1 bonus issue of shares occurred and subsequent to this, all shares were subdivided into shares of £0.001 each. On the
same day, all shares were re-organised into one class of share and then were reassigned to either Ordinary or Deferred class.

On 10 June 2016, further Ordinary shares of £0.001 were issued.

On 11 July 2016, all Deferred shares were purchased by Accrol Group Holdings plc (formerly Accrol Group Holdings Limited) for £1.

Each holder of the £0.001 Ordinary shares are entitled to vote at general meetings of the Company. Every holder of an Ordinary share shall
have one vote for each Ordinary share held.

Accrol Group Holdings plc / Annual Report and Accounts

GovernanceNotes to the Consolidated Financial Information continued
For the year ended 30 April 2017

21. Dividends

Amounts recognised as distributions to the owners of the Parent in the year:
Interim dividend for the year ended 30 April 2017 of 2 pence (2016: £nil) per share

Total distributions to the owners of the Parent in the year

Proposed final dividend for the year ended 30 April 2017 of 4 pence (2016: £nil) per share

2017
£’000

2016
£’000

1,860

3,720

–

The proposed final dividend is subject to approval of the shareholders at the Annual General Meeting and has not been included as a liability
in these financial statements. It will be recognised in the shareholders’ equity in the year ending 30 April 2018.

22. Related party disclosures
(a) Identity of related parties
The Company’s significant shareholders include NorthEdge Capital LP and members of the Hussain family. Phoenix Court Blackburn
Limited is a Company under the control of the Hussain family providing commercial premises for letting. Alklar Limited is an entity under the
common directorship of Peter Cheung, to which payments for Peter Cheung’s services as a Director for Accrol UK Limited were made. Post
the AIM listing, Peter Cheung is now remunerated for his services via payroll. Nisiac Limited is a Company under the control of the Hussain
family, to which payments for the consulting services of the Hussain family were made.

The subsidiaries of the Group are as follows:

Company

Accrol UK Limited
Accrol Holdings Limited
Accrol Papers Limited

Principal activity

Country of incorporation

Holding company
Holding company
Paper convertor

United Kingdom
United Kingdom
United Kingdom

The registered address of all subsidiaries in the Group is the Delta Building, Roman Road, Blackburn, Lancashire, BB1 2LD.

(b) Transactions with related parties
The following table provides the total amounts owed to/(due from) related parties as at the end of each year:

NorthEdge Capital LP
NorthEdge Capital – GP
The Hussain family
Alklar Limited
Nisiac Limited

Owed to related parties

Opening balance
Loans advanced during year
Interest charged
Purchases
Repayments

Owed to related parties

Borrowings
Trade & other payables

Owed to related parties

2017
£’000

–
–
–
–
–

–

44,560
–
478
2,003
(47,041)

–

–
–

–

Holding
%

100%
100%
100%

2016
£’000

21,704
460
22,126
270
–

44,560

44,262
249
4,099
1,898
(5,948)

44,560

41,240
3,320

44,560

Note 16 details loan notes net of financing fees.

The following table provides the total amounts of purchases and interest charged from related parties for the relevant financial year:

Accrol Group Holdings plc / Annual Report and Accounts

Strategic Report

Financial Statements

Transactions

NorthEdge Capital LP
The Hussain family
Phoenix Court Blackburn Limited
Alklar Limited
Nisiac Limited

Total

2017
£’000

259
241
1,744
62
175

2,481

2016
£’000

2,129
2,050
1,740
78
–

5,997

Terms and conditions of transactions with related parties
The purchases and loans from related parties are made at normal market prices. Outstanding balances at the year end are unsecured,
interest free and settlement occurs in cash. There have been no guarantees provided for any related party payables. Loans from related
parties in comparative periods carried interest at 10%. Payments to Phoenix Court Blackburn Limited are in respect of the provision of
services. Payments to Nisiac Limited are in respect of the provision of consultancy services.

Directors’ fees
Salaries
Share-based payments
Post employment benefit

2017
£’000

62
649
196
32

939

2016
£’000

72
709
–
–

781

During the year retirement benefits were accruing to nil Directors under defined contribution schemes (2016: nil). The aggregate amount of
emoluments paid to the highest paid Director was £305,000 (2016: £204,000).

(d) Key management personnel
Key management personnel are considered to be the Executive and Non-Executive Directors of the Company. The remuneration of all
Directors who have been identified as the key management personnel of the Group is set out above in aggregate for each of the categories
specified in IAS 24 Related Party Disclosures:

(e) Company transactions with its subsidiaries
The Company received dividends from and charged management fees to its subsidiaries in the current year as summarised in the
table below:

Dividends received
Management fees charged

2017
£’000

10,000
620

10,620

2016
£’000

–
–

–

23. Share-based payments
The charge for share-based payments under IFRS 2 arises under the Management Incentive Plan (“MIP”). The total expense recognised for
the year arising from share-based payment was £196,503 (2016: £nil). All of the total share-based payments expense arises from transactions
accounted for as equity-settled share-based payment transactions.

Movements in the number of share options outstanding and their relative weighted average exercise prices are as follows:

At 1 May
Granted
Forfeited
Exercised
Expired

At 30 April

2017

2016

Average exercise
price in £ per
share option

Options
(Number)

Average exercise
price in £ per
share option

Options
(Number)

–
1.30
–
–
–

1.30

–
3,052
–
–
–

3,052

–
–
–
–
–

–

–
–
–
–
–

–

Accrol Group Holdings plc / Annual Report and Accounts

Governance
Notes to the Consolidated Financial Information continued
For the year ended 30 April 2017

23. Share-based payments continued
Out of the 3,052 outstanding options, (2016: nil), nil options (2016: nil) were exercisable. No options were exercised in 2017 (2016: nil).

Share options outstanding at the end of the year have the following expiry date and exercise prices:

Grant – vest

2016–19

Expiry date

10-Jun-23

Exercise price in £
per share option

1.30

Share options

2017

3,052

2016

The weighted average fair value of options granted during the period determined using the Black-Scholes-Merton model valuation was
£217.5. The significant inputs into the model were the underlying equity value (taken to be the total market capitalisation of Accrol Group
Holdings plc on Admission), the exercise price of an option (shown above), volatility of 26.95%, divided yield of 6%.

The volatility is based on statistical analysis of the volatility of comparable companies over a 5-year period as the historical data is not
available due to Accrol Group Holdings plc’s recent listing on AIM.

See Note 7 for the total expense recognised in the income statement for share options granted to Directors and employees.

24. Events after the balance sheet date
Details of the proposed final dividend are given in Note 21. There are no other significant events that have occurred after the balance
sheet date.

25. Alternative performance measures
The Group makes use of a number of alternative performance measures to assess business performance and provide additional useful
information to shareholders about the underlying performance of the Group.

Adjusted earnings per share
The adjusted earnings per share is calculated by dividing the adjusted earnings attributable to Ordinary equity holder of the Parent by the
weighted average number of Ordinary shares outstanding during the year. The following reflects the income and share data used in the
adjusted earnings per share calculation.

Earnings attributable to shareholders
Adjustment for:
Amortisation
Gain on derivatives
Exceptional items
Tax effect of adjustments above

Adjusted earnings attributable to shareholders

Basic weighted average number of shares1
Dilutive share options
Diluted weighted average number of shares

Basic adjusted earnings per share
Diluted adjusted earnings per share

2017
£’000

7,376

2,042
–
1,581
(524)

10,475

2016
£’000

5,705

2,060
(1,266)
493
(258)

6,734

Number

85,113,194
1,321,025
86,434,219

9,900
–
–

0.12
0.12

680.20
680.20

Note 1: In the year ended 30 April 2016 and 2017, the basic weighted average number of shares was calculated by excluding the D class of shares as this class is subject to a
dividend cap that does not materially impact upon the profit due to the remaining Ordinary equity shareholders.

Accrol Group Holdings plc / Annual Report and Accounts

Strategic Report

Financial Statements

Reconciliation from GAAP - defined reporting measures to the Group’s alternative performance measures
Management use these measurements to better understand the underlying business of the Group.

Consolidated income statement

(a) Adjusted gross margin
Revenue
Gross profit

Gross margin

Revenue
Gross profit
Less: gain on derivative financial instruments

Adjusted gross profit

Adjusted gross margin

(b) Adjusted EBITDA
Operating profit
Adjusted for:
Depreciation
Amortisation
Gain on derivative financial instruments
Exceptional items

Adjusted EBITDA

(c) Adjusted PBT and adjusted PAT
Profit before tax
Adjusted for:
Amortisation
Gain on derivative financial instruments
Exceptional items

Adjusted PBT

Taxation

Adjusted PAT

2017
£’000

2016
£’000

135,053
37,679

118,219
34,489

27.9%

29.2%

135,053
37,679
–

118,219
34,489
(1,266)

37,679

33,223

27.9%

28.1%

10,528

11,920

1,910
2,042
–
1,581

1,831
2,060
(1,266)
493

16,061

15,038

9,399

6,979

2,042
–
1,581

2,060
(1,266)
493

13,022

8,266

(2,023)

10,999

(1,274)

6,992

Accrol Group Holdings plc / Annual Report and Accounts

Governance

Independent Auditor’s Report to the Members of Accrol Group Holdings plc

Report on the company financial statements
Our opinion
In our opinion, Accrol Group Holdings plc’s company financial
statements (the “financial statements”):

• give a true and fair view of the state of the company’s affairs as at

30 April 2017 and of its cash flows for the year then ended;

• have been properly prepared in accordance with International

Financial Reporting Standards (“IFRSs”) as adopted by the European
Union and as applied in accordance with the provisions of the
Companies Act 2006; and

• have been prepared in accordance with the requirements of the

Companies Act 2006.

What we have audited
• The financial statements, included within the Annual Report and

Accounts (the “Annual Report”), comprise:

• the Company Statement of Financial Position as at 30 April 2017;

• the Company Cash Flow Statement for the year then ended;

• the Company Statement of Changes in Equity for the year then

ended; and

• the notes to the financial statements, which include a summary of
significant accounting policies and other explanatory information.

The financial reporting framework that has been applied in the
preparation of the financial statements is IFRSs as adopted by the
European Union, and applicable law, and as applied in accordance
with the provisions of the Companies Act 2006.

Opinions on other matters prescribed by the Companies
Act 2006
In our opinion, based on the work undertaken in the course of the
audit:

• the information given in the Strategic Report and the Directors’

Report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and

• the Strategic Report and the Directors’ Report have been prepared

in accordance with applicable legal requirements.

• whether the accounting policies are appropriate to the company’s
circumstances and have been consistently applied and adequately
disclosed;

• the reasonableness of significant accounting estimates made by

the directors; and

• the overall presentation of the financial statements.

We primarily focus our work in these areas by assessing the directors’
judgements against available evidence, forming our own
judgements, and evaluating the disclosures in the financial
statements.

In addition, in light of the knowledge and understanding of the
company and its environment obtained in the course of the audit,
we are required to report if we have identified any material
misstatements in the Strategic Report and the Directors’ Report. We
have nothing to report in this respect.

Other matters on which we are required to report
by exception
Adequacy of accounting records and information and
explanations received
Under the Companies Act 2006 we are required to report to you if, in
our opinion:

• we have not received all the information and explanations we

require for our audit; or

• adequate accounting records have not been kept by the company,
or returns adequate for our audit have not been received from
branches not visited by us; or

• the financial statements are not in agreement with the accounting

records and returns.

Other matter
We have reported separately on the group financial statements of
Accrol Group Holdings plc for the year ended 30 April 2017.

We have no exceptions to report arising from this responsibility.

Hazel Macnamara (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Manchester
10 July 2017

Accrol Group Holdings plc / Annual Report and Accounts

Strategic Report

Financial Statements

Company Statement of Financial Position
As at 30 April 2017

ASSETS
Non-current assets
Investments in subsidiaries

Total non-current assets

Current assets
Trade and other receivables
Cash and cash equivalents

Total current assets

Total assets

Current liabilities
Trade and other payables

Total current liabilities

Total liabilities

Net assets

Capital and reserves
Share capital
Share premium
Capital redemption reserve
Retained earnings – opening
Profit for the year

Total equity

The financial statements on pages 63 to 65 were approved by the Board of Directors on 10 July 2017.

Signed on behalf of the Board of Directors

Steve Crossley
Chief Executive Officer

James Flude
Chief Financial Officer

Company Registration Number 09019496

Note

2017
£’000

2016
£’000

41,437

7,904
287

8,191

49,628

–

49,628

93
41,597
27
–
7,911

49,628

25
262

287

297

200

13
84
–
–
–

Accrol Group Holdings plc / Annual Report and Accounts

Governance

Share
premium
£’000

Capital
redemption
reserve
£’000

Retained
earnings
£’000

Total
equity
£’000

Note

Share
capital
£’000

–

64
43
(27)
–
–

–

(64)
43,285
–
(1,708)
–

41,513

–

41,597

–

–
–
27
–
–

–

–
–
–
–
(1,860)

–
43,328
–
(1,708)
(1,860)

(1,860)

39,760

9,771

7,911

9,771

49,628

Company Statement of Changes in Equity
For the year ended 30 April 2017

Balance at 1 May 2015
Transactions with owners
Issue of Ordinary shares

Total for transactions with owners

Comprehensive income
Result for the year

Total comprehensive income

Balance at 30 April 2016 and at 1 May 2016

Transactions with owners
Bonus issue of Ordinary shares
Proceeds from shares issued
Buy-back of deferred share for consideration of £1
Transaction costs
Dividends

Total for transactions with owners

Comprehensive income
Profit for the year

Total comprehensive income

Balance at 30 April 2017

Accrol Group Holdings plc / Annual Report and Accounts

Strategic Report

Financial Statements

Company Cash Flow Statement
For the year ended 30 April 2017

Cash flows from operating activities
Operating profit
Adjustment for:
Exceptional items

Operating cash flows before movement in working capital
(Increase)/decrease in trade and other receivables
(Decrease)/increase in trade and other payables

Cash generated from operations

Net cash flows from operating activities

Cash flows from financing activities
Proceeds of issue of Ordinary shares
Dividends paid to Ordinary shareholders

Net cash flows (used in)/from financing activities

Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year

Cash and cash equivalents at year end

Note

2017
£’000

9,771

193

9,964
(7,879)
(200)

1,885

–
(1,860)

(1,860)

25
262

287

2016
£’000

–

–
25
200

225

37
–

262
–

262

Accrol Group Holdings plc / Annual Report and Accounts

Governance
Notes to the Company Financial Information
For the year ended 30 April 2017

1. General information
Accrol Group Holdings plc (formerly Accrol Group Holdings Limited), (the “Company”) was incorporated in England 30 April 2014 with
company number 09019496. It is a public company limited by shares and it is domiciled in England in the United Kingdom. The registered
address of the Company is the Delta Building, Roman Road, Blackburn, Lancashire, BB1 2LD The Company’s subsidiaries are listed in Note 22
to the consolidated financial statements, which together with the Company form the Accrol Group Holdings plc Group (the “Group”). The
Company acts as a holding company for the remainder of the Accrol Group.

2. Summary of significant accounting policies
A summary of the significant accounting policies is set out below. These have been applied consistently during the financial year.

Basis of preparation
The financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (‘IFRS’) as
adopted for use in the EU, International Financial Reporting Interpretations Committee (‘IFRIC’) interpretations and with those parts of the
Companies Act 2006 applicable to companies reporting under IFRS.

The financial statements have been prepared on a going concern basis under the historical cost convention. The financial statements are
presented in pounds Sterling and all values are rounded to the nearest thousand pounds, except where otherwise indicated.

The Company has taken advantage of the exemption in Section 408(3) of the Companies Act 2006 not to present its individual profit and
loss account and related notes that form part of the approved Company financial statements. The retained profit of the Company is shown
in the statement of changes in equity.

Standards issued not yet effective
At the date of authorisation of this financial information, the following new standards and interpretations which have not been applied in
this financial information were in issue but not yet effective (and in some cases, had not yet been adopted by the EU):

• IAS 16 and IAS 38 amendments – Clarification of Acceptable Methods of Depreciation and Amortisation (effective 1 January 2016)

• IFRS 11 amendments – Accounting for Acquisitions of Interests in Joint Operations (effective 1 January 2016)

• IAS 16 and IAS 41 amendments – Agriculture: Bearer Plants (effective 1 January 2016)

• IAS 27 amendments – Equity Method in Separate Financial Statements (effective 1 January 2016)

• IFRS 10 and IAS 28 amendments – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (effective

1 January 2016)

• IAS 1 amendments – Disclosure Initiative (effective 1 January 2016)

• Annual Improvements 2012-2014 Cycle (effective 1 January 2016)

• IFRS 15 – Revenue from Contracts with Customers (effective 1 January 2018)

• IFRS 9 Financial Instruments (effective 1 January 2018)

The adoption of these standards and interpretations is not expected to have a material impact on the financial statements of the Company
in the year of initial application when the relevant standards come into effect.

IFRS 16 ‘Leases’ is a new standard that has been published and is effective from 1 January 2019 but has not been early adopted by the
Company. It is unlikely to have a material impact on the Company. At the time of preparing this financial information, the Company
continues to assess the possible impact of the adoption of this standard in future years.

Going concern
The Directors have made appropriate enquiries and formed a judgement at the time of approving the financial statements that there is a
reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. For this
reason, the Directors continue to adopt the going concern basis in preparing the financial statements.

Exceptional items
Items that are material in size or unusual or infrequent in nature are included within operating profit and disclosed separately as exceptional
items in the consolidated income statement.

The separate reporting of exceptional items, which are presented as exceptional within the relevant category in the consolidated income
statement, helps provide an indication of the Group’s underlying business performance.

Accrol Group Holdings plc / Annual Report and Accounts

Strategic Report

Financial Statements

2. Summary of significant accounting policies continued
Investments
On initial recognition, investments in subsidiaries are recorded at cost, which is the fair value of the consideration paid. Where consideration
is paid by way of shares, the excess of fair value of the shares over nominal value of those shares is recorded in share premium. Investments
in subsidiaries are reviewed for impairment at each balance sheet date with any impairment charged to the income statement.

Financial instruments
Financial assets
The Company classifies its financial assets as loans and receivables. Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They are included in current assets. The Company’s loans and receivables
comprise debtors and cash and cash equivalents in the balance sheet. Subsequent to initial recognition, these assets are carried at amortised
cost using the effective interest method. Income from these financial assets is calculated on an effective yield basis and is recognised in the
income statement.

Financial liabilities
The Company initially recognises its financial liabilities at fair value and subsequently they are measured at amortised cost using the effective
interest method.

3. Exceptional items

Professional fees relating to the AIM flotation

2017
£’000

208

2016
£’000

–

Professional fees of £193,000 incurred as part of the IPO process have been classified as exceptional as they do not directly relate to the
raising of the equity for the AIM flotation.

4. Directors’ emoluments

Emoluments

2017
£’000

590

2016
£’000

–

Directors’ emoluments are recharged by Accrol Papers Limited. This arrangement has been in place since listing on AIM in June 2016. During
the year, management recharges related to 3 Directors (2016: £nil). The Company does not have any employees (2016: nil),

5. Investments in subsidiaries

Cost
30 April 2016
Additions in the year

30 April 2017

Group
undertakings
£’000

10
41,427

41,437

On 10 June 2017, the Company subscribed for 2,000 new shares in Accrol UK Limited for a consideration of £41,388,000.

The Company’s subsidiary undertakings are shown in Note 22 to the consolidated financial statements.

6. Trade and other receivables

Prepayments and accrued income
Amounts owed by Group undertakings

2017
£’000

10
7,894

7,904

2016
£’000

25
–

Amounts owed by Group undertakings and falling due within 1 year are unsecured, interest free and repayable on demand.

Accrol Group Holdings plc / Annual Report and Accounts

GovernanceNotes to the Company Financial Information continued
For the year ended 30 April 2017

7. Trade and other payables

Amounts owed to Group undertakings

2017
£’000

–

2016
£’000

200

Amounts owed to Group undertakings and falling due within one year are unsecured, interest free and repayable on demand.

8. Issued capital and reserves
Called up, allotted and fully paid

Ordinary shares of £0.001 each
Class A Ordinary shares of £1 each
Class B Ordinary shares of £1 each
Class C Ordinary shares of £1 each
Class D Ordinary shares of £1 each

The number of Ordinary shares in issue is set out below:

Ordinary shares of £0.001 each
Class A Ordinary shares of £1 each
Class B Ordinary shares of £1 each
Class C Ordinary shares of £1 each
Class D Ordinary shares of £1 each

The movements in shares occurred on the following dates set out below:

2017
£

93,012
–
–
–
–

93,012

2016
£

–
4,625
4,625
650
2,860

12,760

Number

93,012,002
–
–
–
–

–
4,625
4,625
650
2,860

Number

50
50

23,375
23,375
3,250
14,300

28,050,000
28,050,000
3,900,000
17,160,000

49,683,858
27,476,142

43,328,144

27,476,142

Accrol Group Holdings plc / Annual Report and Accounts

Strategic Report

Financial Statements

On 10 June 2016, further Ordinary shares of £0.001 were issued.

On 11 July 2016, all Deferred shares were purchased by Accrol Group Holdings plc (formerly Accrol Group Holdings Limited) for £1.

Each holder of the £0.001 Ordinary shares are entitled to vote at general meetings of the Company. Every holder of an Ordinary share shall
have one vote for each Ordinary share held.

9. Dividend payable

Amounts recognised as distributions to the owners of the Parent in the year:
Interim dividend for the year ended 30 April 2017 of 2 pence (2016: nil pence) per share

Total distributions to the owners of the Parent in the year

Proposed final dividend for the year ended 30 April 2017 of 4 pence (2016: nil pence) per share

2017
£’000

2016
£’000

1,860

3,720

–

10. Dividend receivable
The Company received dividends from its subsidiaries in the current year as summarised in the table below:

Dividends received

2017
£’000

10,000

2016
£’000

–

Accrol Group Holdings plc / Annual Report and Accounts

Governance
Company Information

Directors
Peter Cheung
Steve Crossley
James Flude
Joanne Lake
Steve Hammett

Secretary
Richard Almond

(Executive Chairman)
(Chief Executive Officer)
(Chief Financial Officer)
(Independent Non-Executive Director)
(Independent Non-Executive Director)

Registered office
Delta Building
Roman Road
Blackburn
Lancashire
BB1 2LD

Registered number
09019496

Share capital
The Ordinary share capital of Accrol Group Holdings Limited plc is
listed on AIM, a market operated by London Stock Exchange plc.
The shares are listed under the trading ticker ACRL. The ISIN
number is GB00BZ6VT592 and SEDOL number is BZ6VT59.

Registrars
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU

Auditors
PricewaterhouseCoopers LLP
101 Barbirolli Square
Lower Mosley Street
Manchester
M2 3PW

Nominated adviser and broker
Zeus Capital Limited
82 King Street
Manchester
M2 4WQ

41 Conduit Street
London
W1S 2YQ

Solicitors
Addleshaw Goddard LLP
100 Barbirolli Square
Manchester
M2 3AB

Accrol Group Holdings plc / Annual Report and Accounts

Strategic Report

Financial Statements

Notes

Accrol Group Holdings plc / Annual Report and Accounts

GovernanceNotes

Accrol Group Holdings plc / Annual Report and Accounts

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Accrol Group Holdings plc
Roman Road
Blackburn
Lancashire
BB1 2LD