A C C R O L G R O U P H O L D I N G S P LC
A N N U A L R E P O R T & A C C O U N T S 2 0 2 1
G R O W T H I N S C A L E
A N D S C O P E
“This is the third straight year of strong
improvements across many aspects
of the business. Gross margins have
improved again, and the business is
even better placed to take advantage
of the planned growth of the discounters.
Whilst there may yet be some further
short-term fluctuations in demand, as
the effects of the pandemic unwind,
I am more excited for the future of
this business than ever. The growth
opportunities for the Group over the
next two years remain very strong.”
DAN WRIGHT
Executive Chairman
Accrol Group Holdings plc // Annual Report & Accounts 2021
Strategic report
Strategic report
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“The opportunities for a relentlessly
efficient business, which delivers
great-value products, are growing, as
the world recalibrates in the aftershock
of COVID-19 and consumers continue
to move away from brands which
offer little value. The discounters
are recovering and Accrol is well
positioned to take full advantage
of this. Given this combination I am
confident about the long-term
prospects of the Group.”
GARETH JENKINS
Chief Executive Officer
IN THIS REPORT
STRATEGIC REPORT
Highlights and Overview
Chairman’s Statement
Strategy, Business Model and the Five-Year Plan
Strategy in Action
Our People
Chief Executive Officer’s Review
Markets
Environmental, Social & Governance
Section 172
KPIs and Business Model
Chief Financial Officer’s Review
Principal Risks and Uncertainties
GOVERNANCE
Introduction to Governance
Board of Directors
Corporate Governance Report
Audit Committee Report
Remuneration Report
Directors’ Report on Remuneration
Directors’ Report
Directors’ Statement of Responsibility
02
04
06
10
14
16
19
20
22
24
26
30
34
36
38
40
42
43
47
50
FINANCIAL STATEMENTS
Independent Auditor’s Report
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Cashflow Statement
Notes to Consolidated Financial Information
Company Statement of Financial Position
Company Statement of Changes in Equity
Notes to the Company Financial Information
Company Information
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57
57
58
59
60
61
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88
89
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Strategic report
Accrol Group Holdings plc // Annual Report & Accounts 2021
HIGHLIGHTS AND OVERVIEW
WHAT WE DO
Accrol is the UK’s leading
independent tissue converter,
producing toilet tissue, kitchen
towel, facial tissue and
biodegradable wet wipes.
KEY FINANCIAL
HIGHLIGHTS
CEO’s review
pages 16 to 18
CFO’s review
pages 26 to 29
KPIs
pages 24 and 25
£136.6m
£15.6m
£14.6m
TOTAL REVENUE
ADJUSTED EBITDA**
ADJUSTED NET DEBT***
2021
2020
£136.6m
£134.8m
2021
2020
£15.6m
2021
2020
£10.6m
£14.6m
£17.9m
15.9%
MARKET SHARE*
27.7%
GROSS PROFIT MARGIN
2021
2020
15.9%
13.1%
2021
2020
* Kantar retail sales data (May 2020 – April 2021).
0.5p
27.7%
DIVIDEND PAYMENT RESTORED
2021
0.5p
21.9%
2020
Nil
** Adjusted EBITDA is a non-GAAP metric used by management defined as loss before finance costs, tax, depreciation, amortisation, separately disclosed items
and share based payments.
*** Adjusted net debt excludes operating type leases recognised on balance sheet in accordance with IFRS 16.
LTC
page 10
John Dale
page 11
OPERATIONAL
HIGHLIGHTS
›
Increasingly strong market position – market share up 2.8%
to 15.9%
› Headcount reduced further and output per head increased
for the third consecutive year
› Blackburn and LTC sites fully automated with no operational
impact
› New fully integrated IT system installed throughout the
business without interruption
› 11% reduction in CO2 emissions per tonne of production
(FY20: 25% reduction) with almost all energy requirements
now sourced from renewables
ACQUISITIONS
› Leicester Tissue Company (“LTC”) acquired with cash raised
via a placing and open offer, bringing scale to the tissue
operations – now fully integrated delivering an estimated
£3m of annualised synergies compared to the £1m
anticipated at the time of the acquisition
›
John Dale Ltd (“JD”) acquired with existing cash resources,
bringing a new product range, including fully flushable wet
wipes, and the footprint and assets to build a business of scale
Accrol Group Holdings plc // Annual Report & Accounts 2021
Strategic report
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Our vision
is to build a diversified group of size
and scale, which is less exposed
to input cost fluctuations and is
focused on the broader private
label household and personal
hygiene market.
Our mission
is to deliver the best possible value
to the UK consumer on essential
everyday tissue, household and
personal hygiene products, shaking
up traditional brands by delivering
the quality the consumer wants for
the price they want to pay.
Our strategy
to achieve this is simple: take
market share from established
brands by providing consumers
with the best value products and
our customers with great service,
whilst ensuring we are the lowest
cost operator.
84%
EMPLOYEE ENGAGEMENT
-26%
TOTAL ACCIDENTS
PERFORMANCE
OVER THE LAST
THREE YEARS
KPIs
pages 24 and 25
+16.8%
+1020bps
TOTAL REVENUES*
GROSS PROFIT MARGINS
Managing our risk
pages 30 to 33
FY2021
FY2018
£136.6m
FY2021
27.7%
£116.9m
FY2018
17.5%
+£21.4m
-£19.2m
ADJUSTED EBITDA
NET DEBT
FY2021
£15.6m
FY2021
£14.6m
-£5.8m
FY2018
FY2018
£33.8m
*
Excluding Away from Home.
CURRENT TRADING IN
FY22 AND OUTLOOK
PAPER MILL
INVESTMENT
page 12
INVESTMENT IN
AUTOMATION
page 13
› Strong progress being made on the recovery of higher
input costs, driven by rising global pulp prices, through
prompt pricing actions post-year end
› Tissue market showing strong but steady signs of
recovery as panic buying unwinds, with increased
sales month on month and improvement in year
on year sales
› Automation of tissue business to complete in FY22
with the installation of a new machine at Leyland,
providing three fully invested, state-of-the-art
operations in geographically pertinent locations
› Tissue operation capacity rising to £210m in revenue
terms, following final element of automation at Leyland
›
Investment in wet wipes planned for FY22 with material
growth expected from FY23
› Longer-term growth supported by major discounters’
acceleration of planned new store openings
› Significant advancement made on UK paper mill
OUR VALUES
Our people
pages 14 and 15
ESG pages 20 and 21
WE CHALLENGE
WE ADD VALUE
WE ARE HONEST
WE DELIVER
04
CHAIRMAN’S STATEMENT
CONFIDENCE DEMONSTRATED BY
A RETURN TO DIVIDEND PAYMENTS
T he team at Accrol has
delivered another strong set of
results, against a backdrop of
unprecedented disruptions brought about
by the COVID-19 global pandemic, and
successfully transformed the business
through a major acquisition and a major
automation programme.
The foundations for our growth ambitions
are now laid and our vision to build a
diversified group of size and scale, which
is focused on the broader private label
personal hygiene and household products
markets and less exposed to input cost
fluctuations, moves ever closer.
During the year we completed two
acquisitions, creating scale and diversity;
the Leicester Tissue Company (“LTC”) in
November 2020 (scale) and the John Dale
(“JD”) wet wipes business (diversity) in April
2021. In addition, we further improved
efficiency with the completion of the
automation of our Blackburn facility; and
have advanced significantly towards our
ambition to develop a UK paper mill, which
will help to reduce the Group’s exposure
to cost fluctuations and increase supply
security as the business grows.
The simplification measures executed
over the last four years are now bearing
fruit with gross margins recovered to
historical levels, delivering adjusted EBITDA
growth of 47%. Our relentless drive for
efficiency, however, is unabated and we
will continue to set ourselves challenging
improvement targets.
With our market share now 15.9% (FY20:
13.1%) of the total UK tissue market and
a strong infrastructure for growth in place,
Accrol is increasingly well positioned
to benefit in a value-conscious, post
COVID-19 world. We will continue to
invest in our people, automation and to
reduce our impact on the environment to
ensure the sustainability of the business
throughout its planned growth. With
all this in mind, I view the future of the
business with increasing confidence.
RESULTS
Total revenues increased by 1.4% to
£136.6m (FY20: £134.8m), compared
with an overall market decline of 1.2% as
buying patterns were disrupted by the
pandemic; a combination of stockpiling in
early 2020 and the closure of many small
businesses that would have purchased
toilet rolls from grocery retailers. Gross
margin improved significantly, rising to
Daniel Wright Executive Chairman
27.7% (FY20: 21.9%) and despite lower
turnover growth in the period, adjusted
EBITDA rose by 47.0% to £15.6m (FY20:
£10.6m), largely due to continued
improvements in efficiency and further
automation. Adjusted net debt reduced again,
ending the Period at £14.6m (FY20: £17.9m)
compared with £27.1m at 30 April 2019, and
£33.8m at 30 April 2018.
ACQUISITIONS
The Group made its first major acquisition
in November 2020, acquiring LTC for an
initial consideration of £35.0m, funded
via a placing and open offer which raised
£38.5m, and a maximum contingent
consideration of £6.8m which is subject
to new contractual earnings. LTC is a well
invested business, delivering revenue of
£28.0m in the year ended 30 September
2020. The acquisition was immediately
earnings enhancing and increased Accrol’s
share of the tissue market significantly.
LTC has brought scale to the Group,
expanding overall capacity to above
£210m in revenue terms and providing
a geographical advantage for more
efficient logistics.
In April 2021, the Group diversified with
the acquisition of JD, a flushable and
biodegradable wet wipes business for
£3.9m. This strategic move into a high
growth product has provided a well
invested platform from which the Group
intends to build a sizable business. In
addition, it brings incremental volume
to Accrol’s facial tissue business. The
business operates from its owned
premises in Flint, North Wales, generating
annualised revenue of c.£6.0m.
Both LTC and JD are integrating well
and further details are given in the CEO
statement.
DIVIDEND
I am delighted to report that the Group
is restoring its dividend and returning to
a progressive dividend policy, which has
been made possible by the continuous
improvement in operational efficiency and
strong cash management. The proposed
dividend per share is 0.5 pence (FY20: nil).
The final dividend, which is subject to the
approval of the Company’s shareholders,
will be paid on 30 September 2021 to
shareholders on the register on 20 August
2021. The Company’s ordinary shares will
become ex-dividend on 19 August 2021.
OUR PEOPLE
People are key to us achieving our
ambitions, and, during the year, we have
continued to strengthen the team below
senior management, adding further
strength in depth, and increasing skill
levels across the Group.
In February 2021, we strengthened the
senior team further with the appointment
to the Board of Richard Newman as
Chief Financial Officer. Richard is a highly
accomplished executive with 30 years’
experience in senior finance roles at FTSE
100 and FTSE 250 companies, Cadbury
PLC, National Express Group PLC and DS
Smith PLC.
Find out more
Business Model
Accrol Five-Year
Plan
Governance
06
08
34
“The simplification measures executed
over the last four years are now bearing
fruit with gross margins recovered to
historical levels.”
Accrol Group Holdings plc // Annual Report & Accounts 2021Strategic report 05
ENVIRONMENTAL, SOCIAL AND
GOVERNANCE (“ESG”)
I am delighted to report that we will
launch our first Sustainability Programme
in September 2021. Our vision for ESG
is to be a carbon neutral business that
improves the lives of its people and
communities, while working in partnership
with suppliers to deliver sustainable
products to customers and consumers,
and consistent results to our investors.
To achieve this, we have created a
reporting framework aligned to clear
targets, KPIs and guided by a key principle
in each segment.
Environmental
Carbon neutrality, plastic free, sustainable
products.
Social
Positively impact the lives of our people
and communities.
Governance
Delivering long-term success.
The publication of the report, which will be
posted on our website, will be announced
via RNS.
CURRENT TRADING AND OUTLOOK
We are pleased with the progress of
the Group during the year, which is on
track to achieving its ambition to build a
diversified and efficient Group of size and
scale in the broader private label personal
hygiene and household products markets.
With our market share at 15.9% and the
management team’s ability to deliver
strong returns, Accrol is increasingly well
positioned to benefit in a value-conscious
world, post-pandemic, and to capitalise
on the recovery in tissue volumes and
improving discounter sales.
The Board’s confidence is demonstrated
by the Group’s return to dividend payments
and the Directors remain very positive
about the Group’s strategy, markets and
prospects, both in FY22 and beyond.
DAN WRIGHT
Executive Chairman
13 July 2021
The Board considers that Richard’s proven
leadership skills, knowledge and breadth
of experience in M&A, FX Management
and FMCG, gained during his career with
large PLCs, will significantly strengthen the
Group’s finance function and be invaluable
in the delivery of the Group’s significant
expansion plans over the coming years.
We value all our people and strive to
demonstrate this in actions rather than
words. Through our operational efficiency
programme, we have seen output per
head increase again by 9.4%. By attracting
the best operational talent to drive the
Group, we have reduced our cost base
further (on a like for like basis). At 30 April
2018, the percentage of employees on
or above the Real Living Wage, as defined
by the Living Wage Foundation, was only
35%. By 30 April 2020, we had increased
this to 94%, primarily through automation
and rising skills throughout the business.
The recent acquisitions have reduced this
figure, but we will continue to strive to
achieve 100%.
As automation of the business progresses
higher skills are required and, to support
the building of a highly capable workforce,
we have implemented a new grading and
training structure that provides a highly
visible career path within the Group and
ensures we attract and retain more skilled
and talented people.
COVID-19
I would like to take this opportunity
to thank all our colleagues across the
business for their unremitting hard work
and commitment. They have performed
exceptionally throughout the COVID-19
pandemic and delivered consistently
despite the disruptive backdrop.
As an essential supplier to critical supply
chains, all sites across the Group have
remained fully operational throughout
the COVID-19 pandemic, with clear and
effective procedures in place. To help
ensure that we managed the day-to-
day safety of our employees and were
sensitive to their needs and concerns, we
established a COVID-19 Steering Group
putting employees at the centre.
More recently, we have engaged a mental
health professional provider to offer
support to employees across the Group,
enhancing awareness of the importance of
self-care and developing mental resilience.
“The Board’s confidence is demonstrated
by the Group’s return to dividend
payments.”
£136.6m
TOTAL REVENUE
+47%
ADJUSTED EBITDA
OF £15.6M
0.5p
FINAL DIVIDEND
INVESTMENT CASE
Market leader
Accrol is the market leader in the
fastest growing segment of UK
consumer soft tissue market, private
label (also known as own label).
Private label
Private label comprises 50% of the
total UK consumer soft tissue market,
which is worth £2.1bn (retail sales).
Customer base
Accrol has a broad customer base,
focused on all retailers in the UK, with
no one customer representing more
than 20% of revenue.
The UK
The UK consumer soft tissue market
is consolidating, improving the
opportunity and returns for the
strongest players.
Management
The management has a keen
understanding of consumer behaviour,
enabling the Group to react quickly
and capitalise on changing trends.
Experienced
Accrol has a very experienced and
invested management team with
a proven track record in transformational
change, operational excellence and
commercial leadership that delivers
the best possible levels of return
consistently.
Relentless drive
A relentless drive on operational
efficiency and input cost management
has created the strongest foundations
on which to grow.
Invested and efficient
Accrol is well invested and operationally
efficient with significant headroom
for growth.
Cash generative
The Group is cash generative.
Accrol Group Holdings plc // Annual Report & Accounts 2021 Strategic report
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Strategic report
Accrol Group Holdings plc // Annual Report & Accounts 2021
STRATEGY, BUSINESS MODEL AND THE FIVE-YEAR PLAN
Our vision is to build a diversified group of size and scale, which is less exposed
to input cost fluctuations and is focused on the broader private label household
and personal hygiene market.
Our strategy to achieve this is simple: take market share from established brands
by providing consumers with the best value products and our customers with great
service, whilst ensuring we are the lowest cost operator.
The five-year plan
Future perfect
Step change, innovation and relentless improvement
World-class basics
Doing every part of the process, especially the basics, consistently well
Hearts and minds
Getting the most out of our people and our people getting the most out of us
Markets for growth
Picking winning products for expanding market segments
Sustainable platform
Ensuring long-term growth and security
Accrol Group Holdings plc // Annual Report & Accounts 2021
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Strategic report
Accrol Group Holdings plc // Annual Report & Accounts 2021
STRATEGY, BUSINESS MODEL AND THE FIVE-YEAR PLAN CONTINUED
POSITIONED TO CREATE
AND ACHIEVE BETTER
OUR BUSINESS
MODEL
THE FIVE-YEAR
PLAN
The right people
+
Strong customer relationships
=
Greater shareholder returns
Achieved through
Integrated business
systems
Future perfect
EMPLOYING THE RIGHT PEOPLE
Simplification
Lowest cost
producer
World-class
basics
OPERATIONAL EXCELLENCE
Health &
wellbeing
One Accrol
Employee
survey
Employee
engagement
Hearts &
minds
RELENTLESS FOCUS ON COST
Great service
CONSISTENT QUALITY
A BROAD CUSTOMER BASE
Markets for
growth
Sustainable
platform
Great value
Brand challenger strategy
Age
Great product
Diversity
Gender
›
KEY
In progress
Partially achieved
Achieved
Accrol Group Holdings plc // Annual Report & Accounts 2021
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“We have developed new products for toilet
tissue, kitchen towel and facial tissue, which,
under independent testing, outperform the
market leaders for softness for toilet tissue
and absorbency for kitchen towel.”
Process automation
Career development/
Talent retention
Tissue M&A
Product R&D
Product diversification
Lean tool box
Vertical
integration
Expansion
of product
portfolio
Active risk
management
2025
Reliable capacity
Performance
management system
Personal
development plans
Accrol Way
Leadership
Programme
Customer innovation
process
Multi-channel
strategy
Consumer insight/retail environment
Reward &
recognition
Green agenda
Community
support
Living wage
100% renewables
Zero to landfill
Gender pay gap
5
2
0
2
R
O
F
Y
D
A
E
R
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Strategic report
Accrol Group Holdings plc // Annual Report & Accounts 2021
STRATEGY IN ACTION
ACQUISITIONS HAVE CREATED
SCALE AND DIVERSITY
£25m
INVESTED SINCE 2014
£3.0m
ANNUALISED SYNERGY
BENEFITS
15.9%
ACCROL SHARE OF UK
RETAIL TISSUE MARKET
During the year, Accrol has
made significant strides
towards achieving its vision
and fulfilling its five-year plan.
The acquisitions completed
in the year have expanded
capacity and provided
entry into new markets.
Investment in automation
has further improved
efficiency and driven down
costs, delivering further
margin improvement in
the year.
Link to strategy – Building a
diversified group of size and
scale – adds size and scale
Link to five-year plan – Future
perfect: Tissue M&A
page 09
ACQUISITION OF
LEICESTER TISSUE
GROUP (“LTC”)
BUILDING A DIVERSIFIED GROUP
OF SIZE AND SCALE
In November 2020, Accrol completed its
first major acquisition, buying Leicester
Tissue Company (“LTC”), an independent
supplier of private label toilet tissue and
kitchen towel to supermarket multiples
and value retailers across the UK. Like
Accrol, LTC converts parent reels to toilet
tissue and kitchen towel, using conversion
plant machinery, and delivers its finished
goods through third party logistics providers.
LTC has invested over £25m in its
operations since its incorporation in
2014, including a purpose-built 110,000
sq. ft. facility into which the company
relocated in 2018. A further 50,000 sq. ft.
warehouse facility was added in 2019.
The site operates four fully automated
converting lines with a combined capacity
of £68 million in revenue terms. LTC is
strategically located in central England,
in Leicester, just nine miles from the M1
motorway, to facilitate efficient logistics.
Its core products include a luxury range
and products are sold with either LTC
branding or as private label for the retailer
to add its own branding. The toilet tissue
range includes 2 and 3 ply rolls, luxury,
super-soft, quilted and fragranced. LTC’s
own brands comprise Soooo, Quantum
and Quilted Softpockets.
THE ACQUISITION
› Has increased Accrol’s share of the
UK retail tissue market to 15.9%
› Consolidates Accrol’s leading position
in the private label market, boosting
Accrol’s position as one of the leaders
in the private label retail tissue market
›
Is expected to deliver annualised
synergy benefits of £3.0m - three times
greater than originally anticipated at the
time of the acquisition
› Has strengthened Accrol’s logistics
network with its central location
providing an opportunity to optimise
the Group’s UK logistics network
– c.48 %. of Accrol sales are delivered
south of Leicester
› Has strengthened the Group’s
customer base, adding new and
complementary customers
› Has added significant quality capacity
via its four modern converting lines
Accrol Group Holdings plc // Annual Report & Accounts 2021Strategic report
Accrol Group Holdings plc // Annual Report & Accounts 2021
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11
ACQUISITION OF
JOHN DALE
BUILDING A DIVERSIFIED GROUP
OF SIZE AND SCALE
In April 2021, Accrol acquired John
Dale, a highly scalable, flushable and
biodegradable wet wipes business.
The business has a long-established and
unrivalled reputation as a privately-owned
manufacturer of high quality, own branded
and private label, environmentally friendly
wet wipes and facial tissues for the UK
retail market. The product range includes
flushable and biodegradable moist toilet
wipes, anti-bacterial and anti-viral wipes,
facial cleansing wipes, baby and toddler
wipes and feminine hygiene wipes.
It operates from an owned 47,000 sq. ft.
property in Flint, North Wales.
This was a strategic move for Accrol
into high growth products within the
attractive wet wipes segment of the
tissue market, providing a well invested,
ready-made platform on which to build
a sizeable business. When identifying an
appropriate wet wipes acquisition, Accrol
had strict criteria to find a converter with
a disruptive and environmentally friendly
product, which could be scaled through
investment. Wet wipes are a natural
extension of the Group’s product range
and the acquisition is wholly in line with
the Board’s growth strategy which is
focused on the household and personal
hygiene sectors.
During the integration of John Dale,
Accrol’s primary areas of focus are the
expansion of the anti-bacterial and anti-
viral wet wipe ranges, the optimisation of
the production facilities, and exploitation
of the Group’s distribution strengths.
In addition, the facial tissues produced by
John Dale will provide incremental volume
to Accrol’s existing facial tissue business
and will serve to leverage the Group’s
existing production facility in Blackburn.
Link to strategy
– Building a diversified
group of size and scale:
creates diversity
page 06
Link to five-year
plan – Future
perfect: Product
diversification
– Markets for growth:
expansion of product
portfolio page 09
“We are confident that, with our wide customer
base, market and operational know-how and a
modest investment in additional machine assets,
we can scale this business significantly, while
generating strong margins, over the next two
to three years.”
GARETH JENKINS
CHIEF EXECUTIVE OFFICER
Accrol Group Holdings plc // Annual Report & Accounts 2021 Strategic report 12
STRATEGY IN ACTION CONTINUED
INVESTMENT IN A PAPER MILL
Link to strategy:
control over cost
fluctuations to maintain
lowest cost producer
and take market share
page 06
Risk management:
2 Parent Reel and pulp
capacity and pricing
page 31
Link to five-year plan
– Future perfect:
Vertical integration.
World -class basics:
Reliable capacity
page 09
EMPLOYING WORLD LEADING
TECHNOLOGY TO ENSURE ENERGY
AND WATER EFFICIENCY
Accrol is addressing environmental
concerns over the mill’s potential energy
and water use by employing world leading
engineering. Power and heat for the mill
will be generated via a combined heat and
power process (CHP). The system will be
able to use natural gas, hydrogen gas and
biogas with the intention to use renewable
sources as they become available.
Accrol’s overarching environmental
focus is to be carbon neutral and the
technology employed will ensure the mill’s
infrastructure supports this.
The mill will use technology that is 50%
more water efficient than standard
mills, with minimal impact on the local
community water supply. In addition, the
mill will have water harvesting systems,
which will enable the facility to re-use this
water in a variety of ways.
Local community employment
The mill will have a positive effect on the
local community bringing around 50 high
skilled jobs and creating a variety of roles
to support the running of this large facility
and associated supply chain.
IMPROVING SUSTAINABILITY
The mill, when completed, will produce
around 70,000 tonnes of tissue, reducing
supply risk from transportation delays and
cost fluctuations and contributing to the
ongoing reduction of the Group’s carbon
footprint by meeting its increased material
requirement from within the UK.
SCALABLE SOLUTIONS TO MEET
GROWTH AMBITIONS
Accrol has advanced significantly towards
its ambition to develop a UK paper mill
to help meet its growth aspirations and
manage its supply chain risks as its raw
material demands increase.
Currently Accrol procures its tissue reels
(c.100,000 tonnes) from around the EU,
Turkey, Egypt and Asia. To ensure supply
chain security, volumes are currently
spread across a number of suppliers.
Accrol is exploring scalable solutions to
support its growth ambitions, that will
improve security of supply and provide
greater control on input costs as it
increases its capacity and product range.
Cost control enables Accrol to improve
its product quality and remain the lowest
cost producer, fulfilling its mission to
deliver the best possible value to the UK
consumer on essential everyday tissue,
household and personal hygiene products,
shaking up traditional brands by delivering
the quality the consumer wants for the
price they want to pay.
Accrol Group Holdings plc // Annual Report & Accounts 2021Strategic report
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INVESTMENT
IN AUTOMATION
Around £5m has been invested in
the automation of Accrol’s Blackburn
manufacturing site. This is a key element
of the Group’s strategy to take market
share from established brands by
providing consumers with the best value
products and our customers with great
service, whilst ensuring we are the lowest
cost operator.
The manufacturing process at Blackburn
is now completely automated and from
the loading of a tissue reel to the finished
pallet being stored in the warehouse is zero
touch* removing several low skilled jobs,
reducing headcount significantly. However,
the automation system requires a more
highly skilled workforce which has generated
new career progression opportunities for the
employees in the business.
£5m
INVESTED IN THE
AUTOMATION
OF BLACKBURN
MANUFACTURING SITE
68%
INCREASE IN
EMPLOYEE
PRODUCTIVITY AT
BLACKBURN SITE
70%
REDUCTION IN
STRETCH WRAP
CONSUMPTION
Output capacity, packaging efficiency
and product quality have improved
significantly, as automation requires
product consistency for it to run without
incident or human intervention. Plastics
used in pallet wrapping have been
significantly reduced as a result of the
automation including new state of the art
equipment that precisely adjusts settings
to optimise pallet presentation and reduce
material waste.
Link to our strategy:
Providing consumers
with the best value
products and our
customers with great
service, whilst ensuring
we are the lowest cost
operator
page 06
Future perfect:
Process automation
page 09
* Zero touch means that it had no human touch
on any part of the product or process.
Accrol Group Holdings plc // Annual Report & Accounts 2021 Strategic report 14
OUR PEOPLE
LOOKING AFTER OUR
GREATEST RESOURCE
86%
OF EMPLOYEES THINK
ACCROL EMBRACES
DIVERSITY
91%
OF EMPLOYEES PROUD
TO WORK FOR ACCROL
92%
HEALTH AND SAFETY
IS ALWAYS A HIGH
PRIORITY
LIVING WAGE
The Group is committed to ensuring that
everyone employed in Accrol is paid the
Real Living Wage or above. Within the core
Accrol business this now stands at 99%,
however, with the acquisitions of two new
businesses during the second half of the
year this figure is now reduced for the
enlarged Group, but we are committed to
returning this to 100% by the end of FY22.
EMPLOYEE SURVEY
› Health and safety is always a high
priority at Accrol: 92% (up from 89%
in 2020)
› Feel comfortable about voicing their
opinion at work: 86%
› Accrol embraces diversity and equal
opportunities 86%: (up from 81%
in 2020)
› Proud to work for Accrol: maintained
at 91%
› Understand how their role contributes
to the success of Accrol: 95%
GENDER DIVERSITY
Year on year increase of female
representation
1 4 %
1 0 %
6 %
2
2
0
2
0
2
0
2
1
0
1
9
%
9 4
9 0 %
8 6 %
Key
Male: 388 (2020: 377)
Female: 61 (2020: 43)
› Females in leadership roles also rose
albeit only slightly this year. The target
for 2025 is over 25%
GENDER PAY GAP
Mean gender pay gap
Median gender pay gap
Mean gender pay gap
Median gender pay gap
Male employees who received a bonus
Female employees who received a bonus
*
At 5 April 2020.
2020*
7.7%
-5.7%
77.7%
0.4%
43.9%
19.5%
2019
-18.0%
5.7%
93.2%
-1.3%
53.2%
6.5%
Key to understanding the table: A positive percentage indicates
that men are paid more than women and a negative percentage
indicates that women are paid more than men. The target for the
mean gender pay gap is 0%.
FEMALE LEADERSHIP
%
4
5
1
.
%
4
5
1
.
%
6
1
%
4
6
1
.
THE TARGET
FOR 2025 IS
OVER 25%
*
2021 figures include the acquisitions of LTC
and John Dale.
2018
2019
2020
2021
Accrol Group Holdings plc // Annual Report & Accounts 2021Strategic report
15
CAREER CASE STUDIES
MATT JACKSON AND DAVE CROFT
Investing in the skills and abilities of
colleagues is critical when building a
diversified group of size and scale. Many
colleagues have benefitted from training
opportunities including Matt Jackson,
Developed Operator, who completed
Level 2 Engineering, and Dave Croft,
Engineering Supervisor, who completed
his ILM Qualification.
SCOTT MORLEY
Managing the installation of the new robot
equipment in Blackburn was a significant
undertaking, capably led by Scott Morley.
The project was delivered on time and to
budget during the pandemic and Accrol
proudly retained Scott’s talents as he
continued as Operations Manager at the
Blackburn facility.
“Not a single shift missed during the pandemic as a detailed
assessment of the entire workplace meant highly effective
measures were in place – from sanitising stations
to face masks to clear signage and communications.”
UMAIR SHAFIQUE AND GRACE HARTLEY, CHAIRS OF THE ACCROL COVID-19 STEERING GROUP
Find out more
To find out more about
our response please
watch our COVID
Awareness Film at:
https://vimeo.
com/485906754/
360621c2a0
KEEPING EVERYONE
SAFE DURING COVID-19
As an essential supplier to critical supply
chains, all sites across the Group have
remained fully operational throughout
the COVID-19 pandemic. From the start
clear and effective procedures were put
in place, with most remaining.
› All at risk employees were self-isolated
at home from February 2020
› Social distancing was implemented for
factory-based employees
›
Increased cleansing facilities and
protocols were established across
all sites
› All office-based staff were moved to
working from home at lockdown
› Temperature checks and questionnaires
are completed at every entry point
The work done by the Group has been
recognised externally and the Directors
were asked by Blackburn with Darwen
Borough Council to give presentations
to local businesses, after its video on the
importance of staying safe during the
pandemic was published.
More recently, a selection of employees
were surveyed to obtain feedback on how
they felt Accrol had performed. The overall
feedback was positive with staff feeling
safe and communications clear.
To help ensure that we managed the
safety of our employees and were
sensitive to their needs and concerns we
established a COVID-19 Steering Group
putting employees at the centre. Grace
Hartley from the Blackburn engineering
team and Umair Shafique, a health and
safety adviser, chaired the steering group.
“Not a single shift missed during the
pandemic as a detailed assessment of the
entire workplace meant highly effective
measures were in place – from sanitising
stations to face masks to clear signage
and communications.”
More recently Accrol has engaged a
mental health professional provider to
offer support to employees across the
Group, enhancing awareness of the
importance of self-care and developing
mental resilience. Accrol’s Employee
Assistance Programme has also been
promoted as a source of individual support
for individuals suffering from anxiety or
personal bereavement.
Accrol Group Holdings plc // Annual Report & Accounts 2021 Strategic report
16
CHIEF EXECUTIVE OFFICER’S REVIEW
THREE YEARS OF CONTINUED
IMPROVEMENTS
STRATEGY
Following the acquisition of LTC and a
review of our full range of products, we
have simplified our ranges further.
We have also developed new products
for toilet tissue, kitchen towel and facial
tissue, which, under independent testing,
outperform the market leaders for
softness for toilet tissue and absorbency
for kitchen towel. We intend to launch a
plastic free range in H1 FY22. The Board
believe this will be a game changer in
the industry and is fully supported by our
customers. We will use this range to target
the major brands further and improve our
e-commerce offering significantly.
Our direct-to-consumer environmentally
friendly product Oceans has sold at a
rate well in advance of any other similar
product in its first year. It will be expanded
to include a wider range of paper-wrapped
and environmentally friendly products.
With its accelerating rates of sale, we
believe Oceans is on target to become the
market leader in its space in the next three
years. Over the next 12 months, we intend
to invest in driving this range further.
In addition, we have recently agreed
an online strategy with a large e-retail
supplier in the UK. We expect this to grow
over the next three years to being one of
our largest customers, supporting their
expectations of growth in the sector.
Gareth Jenkins Chief Executive Officer
A ccrol has completed its
transformation into a business
that is both capable of and well
positioned to take significant advantage
of the recovering market as the UK exits
lockdown. For the third year in a row, the
Group increased its market share, and for
three years in a row, it has improved gross
margins and reduced net debt, which now
stands at below 1x FY21 adjusted EBITDA.
The Board is delighted with the
improvement of the business over a
relatively short period of time and proud
of what has been achieved. However, we
consider this to represent a new starting
point, which gives the business the right
foundations on which to build. Returns
are substantially better, but there are
still further improvements to be made.
Management’s attention continues to be
focused on building a more diversified
business, of size and scale, that delivers
significant consumer benefits through
the supply of great value products and
produces better returns for shareholders.
The acquisitions of LTC and JD are helping
deliver this diversity and adding scale.
The relentless drive for increasing
efficiency throughout the organisation will
continue. Over the first quarter of FY21,
a new IT system has successfully fulfilled
every aspect of the business’s needs, from
finance, procurement and operations, to
stock management. The full automation
of the Blackburn tissue plant has been
completed, with robotisation replacing
all manual finished goods movements.
With a small element of automation to be
completed in Leyland in FY22, as a new
machine arrives, the Group will have three
fully automated greenfield sites to achieve
the lowest possible operational cost base
in the UK.
Find out more
Business Model
Accrol Five-Year
Plan
Governance
06
08
34
“The Group is well
positioned for the
long-term and in a
very strong position to
continue to grow.”
GARETH JENKINS
CHIEF EXECUTIVE OFFICER
Accrol Group Holdings plc // Annual Report & Accounts 2021Strategic report 17
Find out more
Acquisitions
Environmental,
Social & Governance 20
10
COMMITTED TO
CREATING
LONG-TERM VALUE
OUR FIVE-YEAR PLAN
pages 06 to 09
OUR STAKEHOLDERS
pages 22 and 23
RESPONSIBLE AND
SUSTAINABLE BUSINESS
pages 20 and 21
PERFORMANCE REVIEW
pages 16 to 18
KEY PERFORMANCE
INDICATORS
pages 24 and 25
MARKET OVERVIEW
Tissue sales have been volatile throughout
the pandemic and FY21.
As previously reported, Accrol sales for
FY20 saw a benefit of c£3m sales uplift
as lockdown began, which unwound in
FY21. The UK market experienced a 1.3%
reduction in total tissue sales for FY21
with brands performing better than private
label, due to higher stock levels and a
consumer move to the major retailers.
Private label sales were down 1.8% year on
year although market volumes, between
brands and private label, remained broadly
in line with previous years with a 50:50
split between them.
Most retailers over FY21 have reported
volatile sales revenues with many showing
a decline in sales revenue for FY21
compared to FY20, with the exceptions of
note coming from those businesses with
significant online capabilities, who have
generally outperformed the market during
this Period. Accrol has the largest range of
retailer customers in the UK industry which
enabled the Group to benefit overall.
CUSTOMERS
Over the two-year period from FY19 to
FY21 Accrol revenues, excluding Away
from Home, have increased by 16.2%
and market share has grown by 390ppts,
from 12% to 15.9%. This shows that
our strategy of delivering great-value
products with great service continues to
be the right one. The widening range of
customers also ensured that the Group
has again grown ahead of the market
throughout FY21 – the third year of
growth for the Group.
With shoppers returning to instore
purchasing, we and the major discounters
expect to see a significant uplift in
tissue volumes in H2 of FY22 with their
confidence being demonstrated by the
acceleration of new store openings in
FY22 and into FY23.
In FY21, we relaunched our toilet tissue
range, which has seen our sales in this part
of the business outperformed the private
label market and maintained our overall
market share of the total tissue market at
18% despite an overall market decline of
2.5%. This is as a result of the significant
improvements in our simplified range.
Within kitchen towel, our volumes
grew 8% in line with the industry again,
maintaining our market share at 15.8%.
We have recently completed the redesign
and relaunch of a new kitchen towel
range which has been tested against and
outperforms the leading brand.
Over the course of FY22, we expect this
much simplified and improved range to
gain significant traction, in a similar way to
the Group’s toilet tissue range in FY21.
OPERATIONS
The full automation of the Blackburn
factory has been transformational, having
removed all manual movements of pallets
throughout the organisation.
Following the acquisition of LTC in
November 2020, the Group completed
the full automation of this site. The new
geographical footprint of the enlarged
Group has created more efficiencies,
enabling the Group to reduce its logistics
costs significantly by allocating production
to maximise the supply chain efficiently
for its UK wide customer base.
The Group’s shift patterns and working
practices were also reviewed and
changed. This generated ongoing cost
savings, which helped drive the reduction
in operating costs achieved in FY21.
The changes also give the Group ‘sprint’
capacity, enabling it to benefit further from
the promotional demands of the industry
going forward.
The final automation of the Leyland
factory, planned for FY22, and a further
machine investment at this site will give
the Group further headroom capacity.
This will complete the major investment
requirements for the tissue converting
business, which will then require very
limited capital going forward. The result
for the organisation will be four tissue
productions sites in total (two in Blackburn,
one in Leyland and one in Leicester) that
have a geographical advantage compared
to our UK competitors. They are, in effect,
greenfield site operations and with the
latest consistent machine technology
and an overall capacity above £230m,
in revenue terms, including the facial
tissue plant.
Accrol Group Holdings plc // Annual Report & Accounts 2021 Strategic report 18
18
Strategic report
Strategic report
Accrol Group Holdings plc // Annual Report & Accounts 2021
Accrol Group Holdings plc // Annual Report & Accounts 2021
CHIEF EXECUTIVE OFFICER’S REVIEW CONTINUED
OPERATIONAL
HIGHLIGHTS
15.9%
MARKET SHARE
27.7%
GROSS PROFIT MARGIN
-26%
TOTAL ACCIDENTS NOW
AT ALL TIME LOW
84%
EMPLOYEE
ENGAGEMENT
Our paper mill development continues
at pace with significant advancement
across all aspects. This is a major project
and we will update the market as our
plans progress. We have finalised the
specifications of the machine and the
building and we are currently running a
selection process for the mill’s location. This
machine will be a UK leader in efficiency,
quality and carbon neutrality. No additional
funding is expected to be required from
shareholders to deliver this investment.
ACQUISITIONS & INTEGRATIONS
Following the acquisition of LTC in
November 2020, we have completed
the integration of the business and
expect to deliver annualised synergy
benefits of £3.0m – three times greater
than originally anticipated at the time of
the acquisition. These are being driven
through operational improvements
across the wider Group, including
logistics, operational simplification, and
procurement. The revenue synergies,
which are measured over an agreed
period of time, will be lower during this
Period, due to the impact of the pandemic,
but are expected to benefit the Group in
the longer term.
In April 2021, the Group acquired the JD
business in North Wales, a highly scalable
flushable and bio-degradable wet wipe
business. Early integration activities have
progressed ahead of schedule and initial
synergies are expected to be c£1m in
the first full year of ownership. These
will be delivered through operational
synergies with the Group’s existing facial
tissue business, procurement benefits
of the enlarged Group, simplification
of organisation, and revenue growth
opportunities, as the product offering
to Accrol’s existing customer base now
includes its range of wet wipes. The
Group’s expectation with additional capital
investment is to build a wet wipe business
of significant scale by 2024.
PEOPLE & CULTURE
Our Company values remain at the core
of everything the business does - we
challenge, we are honest, we add value,
and we deliver. Accrol’s business model is
based on being the lowest cost producer
in the marketplace. However, this is
not at the expense of our employees’
welfare or their ability to grow within the
organisation. Building on welfare changes
already made in FY21, the Group has just
launched an employee share save scheme
to enable all employees to benefit from
the Group’s future success. Whilst take-up
is expected to be modest, the positive
reaction throughout the organisation
continues to add to the quality of business
we are building.
HEALTH & SAFETY/COVID-19
Health and Safety is a business
fundamental for Accrol and this remains
top of our agenda. Following the relentless
work and focus that has gone into this
area we are starting to see improvements
through the sites. In FY21, we have seen
total accident levels drop by 26% to an all-
time low. In addition, safety observations
are up 42%.
The achievements of all our employees
at every site are something we are
incredibly proud of. They have responded
magnificently during the pandemic,
keeping all our operations open and
maintaining the highest standards in
service and product quality for our
customers. The pandemic is one of the
biggest challenges ever to hit the UK.
To help transform a business, build the
foundations for a great one, and be part
of a team that has performed throughout
this COVID-19 crisis is humbling.
OUTLOOK
The long-term outlook for the business
is strong and the opportunity to increase
our share in our core markets remains
significant. The Group we have built over
the last four years has firm foundations
from which we can accelerate growth and,
importantly, deliver strong shareholder
returns. Whilst we continue to supply
great-value products with excellent service
in this market, we are continuing to actively
explore opportunities to scale the core
business, as well as to diversify into new
markets and products, currently serviced by
brands, in which we know our better-value
offering will appeal to the consumer.
The Group is well positioned for the long-
term future. With no further significant
capital requirements for the Tissue
Converting division and the Group able
to use its own resources for its planned
investment in a state-of-the-art mill, due to
be operational by 2024, the Group is in a
very strong position to continue to grow.
FY22 has begun well with increased sales
month-on-month and an improvement
in year-on-year sales. The Group has also
recently secured additional new volume,
which will impact H2 FY22 positively. With
the tissue market showing strong but
steady signs of recovery as panic buying
unwinds, the Board is confident that
the Group will deliver forecast revenue
growth for FY22, albeit with an increased
H2 weighting, which also co-ordinates
with the installation of our final machine
in Leyland. These exit run rates give the
Board increased confidence for the FY23
revenues and returns.
We look to the long-term future with
increasing confidence.
GARETH JENKINS
Chief Executive Officer
13 July 2021
Accrol Group Holdings plc // Annual Report & Accounts 2021
Strategic report
19
MARKETS
TISSUE SALES HAVE BEEN VOLATILE
THROUGHOUT THE PANDEMIC AND FY21
› Overall market declined by -1.2% in value
(-1.3% volume) £2.3bn down to £2.2bn
› Brands declined by -0.7%; private label
declined by -1.8%
› Brands represent 51% of the market; Private
label 49%
› Discounters tissue sales declined by -5%;
grocers grew by 2%
TOILET TISSUE
£1.4BN MARKET (RSV)
Quality and simplification
› Accrol toilet tissue market share c18%
› +16% volume growth in premium category
driven by “super soft” development FY20
› Developed a simplified new branded range
‘Elegance’ – launches July 21
› SKU reduction from 43 to 9 (-79%) in FY21
UK TISSUE MARKET
RETAIL SALES VALUE
(“RSV”)
Source: Kantar (May ‘20-Apr ‘21)
£0.3bn
£0.5bn
£1.4bn
Toilet Tissues
Kitchen Towels
Facial Tissues
KITCHEN TOWEL
£0.5BN MARKET (RSV)
FACIAL TISSUE
£0.3BN MARKET (RSV)
FLUSHABLE WET WIPES
£0.5BN (RSV)
Growth category, new product and brand
Brand refresh ready for rebound in demand
Wet Wipes – growth market in flushable
› Accrol kitchen towel market share c16%
› Accrol facial tissue share is c7%
› Flushable wet wipes market forecast to grow
› Category growing at 7.8%
› Market declined through pandemic due to
› Platform to grow a £40m business of scale
› Developed PL product to match the leading
reduced cold and flu
brand ‘Plenty’
› Market launch of first 4-ply product ‘Magnum’
› New ‘own brand’ development launches July
21 to cover all tiers
› SKU reduction from 32 to 9 (-72%) in FY21
› Compact man-size to target the brand leader
– only alternative supplier in UK
› Modern & refreshed brand ready for August
launch pre cold and flu season
› Modest investment (c£3m) to deliver growth
›
‘Fine to Flush’ Accreditation will be product
USP
› Brand extension of Elegance & Quantum
(Poundland) to match brand leader
E-COMMERCE
Rapidly expanding route to market
› Launched sustainable, plastic free brand
‘Oceans’
› Subscription model growing at 30% per
month
› Now expanding range to kitchen towel and
facial products
› Amazon - paper category worth £80m,
introducing our Elegance, Magnum & Softy
brands
20
ENVIRONMENTAL, SOCIAL & GOVERNANCE
COMMITTED TO SUSTAINABILITY
Accrol will launch its first ESG
sustainability report in September
Our vision for ESG is to be a carbon neutral business
that improves the lives of its people and communities,
while working in partnership with our suppliers to deliver
sustainable products to customers and consumers and
consistent results to our investors. To achieve our vision,
we have created a reporting framework aligned to clear
targets and KPIs.
Environmental
Guiding principle: Carbon neutrality,
plastic free, sustainable products.
Social
Guiding principle: Positively
impact the lives of our people
and communities.
Governance
Guiding principle: Delivering
long-term success.
TARGETS AND KPIS
Environmental
10.1% waste
8.2% waste
30% of packaging
materials from PCR
7.0% waste
KgCO2e
KgCO2e
100% renewable energy
39.5 kgCO2e
0% landfill
32.4 kgCO2e
Accrol today
Baseline water usage
Social
68 Accidents/
annum 6 LTA
35% on real
living wage
66% on real
living wage
94% on real
living wage
45 Accidents/
annum 5 LTA
Health age
baseline
5.8% absence
77% employee engagement
2.4% absence
Accrol today
Governance
N
68 Accidents/
annum 6 LTA
!
ISO9001 upgraded
to BRC
Board attendance
93%
Supplier engagement
in ESG 25%
N
Supplier (B)
Member
QCA Code compliant
Accrol today
IT Penetration vulnerability
score baseline
Accrol Group Holdings plc // Annual Report & Accounts 2021Strategic report 21
4
FRAMEWORK FOR ESG
26
25
27
1
2
u
s
a
e
r e d
k
24
ustainable M
ply chain ri s
nce – K P Is
p
u
s
S
23
22
3
Waste
reduction
Enviro
r
p
S
u
s
t
o
d
a
i
n
a
5
n
m
u
c
b
t
l
e
s
6
a
n
r
e
v
o
G
21
20
d
e
c
i
s
i
o
n
T
r
a
n
s
p
m
a
r
e
a
n
k
i
t
n
g
19
S
u
p
c
p
o
o
m
m
u
18
17
s
rtin
Social – K P I
g local Sustainabl e
nities careers
16
7
8
9
e
n
t
a
l
–
K
P
I
s
n
o
b
r
a
t
n
i
r
p
t
o
arin g for C
ployees fo
10
11
C
e
m
12
TARGETS AND KPIS
15
14
13
Supplier engage m e n t
50%
100%
50% of packaging
materials from PCR
50% of packaging
plastic free
100% of packaging
plastic free
5.0% waste
N
KgCO2e
ISO14001 certified
50% reduction in water usage
<27.6 kgCO2e
Carbon neutrality,
plastic free,
sustainable products
100% on real
living wage
36 Accidents/
annum
Health age +2
500
1000
12 Accidents/
annum
10,000
Positively impact
the lives of our people
& communities
Lives impacted
baseline
Lives impacted
<2% absence
Lives impacted
Supplier engagement
in ESG 50%
Supplier engagement
in ESG 100%
Risk management
RAG rating
Delivering long-term
success
Annual Board
performance evaluation
IT Penetration vulnerability
score Medium
Supplier (B)
Member
IT Penetration
vulnerability score Low
Accrol Group Holdings plc // Annual Report & Accounts 2021 Strategic report
22
SECTION 172
ACTING FOR EVERY STAKEHOLDER
SECTION 172
In compliance with sections 172 and
414CZA of the Companies Act 2006, the
Board makes the following statement in
relation to the financial period ended
30 April 2021:
Engagement with the Company’s
stakeholders is a key aspect of the
business and strategy of the Company.
The Board recognises that its long-term
success will necessitate the maintenance
of effective working relationships across
a wide range of stakeholders. We have
identified our key stakeholders as follows:
Our people
Our customers
Our suppliers
Our investors
Our community
The Executive Directors maintain an
ongoing and collaborative dialogue with
such stakeholders and take all feedback
into consideration as part of the decision-
making process and day-to-day running
of the business.
OUR STAKEHOLDERS,
AND WHY WE ENGAGE
ENGAGEMENT, INCLUDING TOPICS OF ENGAGEMENT
AND ANY FEEDBACK
OUR PEOPLE
People are at the heart of our
business and the key to ensuring
delivery of our relentless drive
for world class basics.
We run a multi-language Employee
Engagement Survey twice a year.
The results are reviewed at Board
level and feedback is used to
inform employee development and
policies. To engage with our diverse
workforce, we employ a multi-
channel, real-time communication
approach.
This ensures relevant and effective
two-way dialogue. A rapid response
to the COVID-19 pandemic to
ensure the safety and wellbeing of
our employees was implemented.
As a non-unionised business we
train employees in representation
which enables the best possible
interactions.
OUR CUSTOMERS
Effective communication with
our customers is fundamental
to our success.
The Company engages in
continuous communication
and reviews with customers to
understand their changing needs,
align our plans, and develop
collaborative partnerships.
The Company has senior national
account managers for its
customers, and their role is
to understand the customer’s
organisation, strategy and vision
for their business, which has been
of critical importance given the
recent pandemic. Armed with
this information we can align our
offering and organisation to mirror
their needs, ensuring we grow
together.
OUR SUPPLIERS
The relationship with our
suppliers is crucial to ensuring
the timeliness and security
of our raw material supply.
Through our supplier performance
management programme, we have
been able to develop stronger
relationships and drive meaningful
benefits for both parties as part of
longer-term agreements.
OUR INVESTORS
We have a strong and supportive
investor base whose ongoing
support is key to realising the
growth ambitions of the Company.
OUR COMMUNITIES
We believe that it’s important to
support the communities that
support our businesses.
The Chairman and Chief Executive
Officer meet regularly with
institutional investors and analysts
to ensure that objectives and
any business developments are
clearly communicated, and that
they are available to respond to
any enquiries following Company
announcements.
Accrol is a founding member of the
Blackburn Youth Zone (“BYZ”) and
continues to support the funding of
this local organisation. The CEO and
other members of staff are active
in raising awareness of the BYZ
by attending and participating in
speaking events.
Feedback from investors is
reviewed by the Board.
We regularly supply products to
local foodbanks, and during the
COVID-19 pandemic supplied local
charities and the Royal Blackburn
NHS hospital with large volumes
of product.
The employees at our Blackburn
facility contribute significantly to
Secret Santa, a local charity that
distributes gift sacks to under-
privileged children in the local area.
Accrol Group Holdings plc // Annual Report & Accounts 2021Strategic report 23
IMPACT OF ENGAGEMENT AND ACTIONS TAKEN
THE ACCROL PROMISE
Whilst our engagement scores were
very high with 91% of people saying
they are proud to work for Accrol,
the survey in FY20 highlighted that
we were not providing enough
performance feedback to individuals
and how they could progress. Based
on this feedback we introduced a new
Company-wide operational grading
system that gives employees a clear
path for improvement and growth.
The COVID-19 measures implemented
created a safe environment which
gave employees the confidence to
continue at work 24/7 throughout the
pandemic. Measures such as staggered
start time, face covering and extra
sanitisation and cleaning coupled with
multilingual communication have
resulted in strong attendance and
positive feedback.
There are numerous examples where
engagement with Customers has
deepened our understanding of their
needs and that of the consumer, which
has enabled us to win and supply
improved products, which result in
greater consumer satisfaction and
increased sales.
We understand the importance of
learning from our supplier base.
Over the year our market share has
grown demonstrating that the actions
we have taken, and the understanding
developed through the pandemic, are
valued by our customers.
Through a transparent and
collaborative approach, we have
developed several new products
and materials which will be critical
in supporting the business to meet
consumers’ changing needs coming
out of the pandemic.
SUSTAINABILITY
We believe that
responsible business
ensures sustainability.
TRANSPARENCY
Open and honest
communication with all
our stakeholders.
The Executive Board values shareholder
input and believes that the meetings
with shareholders offer a valuable
opportunity to not only share financial
data and results, but also share the
vision for the business and to test the
direction of travel with the experience
of our investor community.
This is a very valuable process and
allows the leadership of the business
to understand the economic and
macro trading environment, which can
provide visibility of both challenges and
opportunities.
INNOVATION
Relentless drive for
world class basics.
The recent employee survey reflects this,
with 91% of our employees stating that
they were proud to work for Accrol.
We are a significant employer in
Lancashire, Leicester and Flint and we
have an acute sense of the importance
of community to our employees. It
is very important for Accrol to have
strong local standing due to its historical
ownership and its diverse cultural
heritage. It is also important that our
employees feel a sense of pride working
for Accrol.
DELIVERY
The best service to
our customers, the
best products to the
consumer, great returns
to shareholders, giving
back to the community.
COMMITMENT TO THE
ENVIRONMENT
› We are committed to reducing our
impact on the environment and have
established our own in-house energy
reduction team in partnership with
our energy provider. We are using
100% renewable electricity and have
a commitment to reduce our energy
usage by 10% over the next five years.
› We strive to get the best possible quality
and performance from our tissue
fibre and are working in tandem with
our suppliers to achieve this, even if
it does mean buying more expensive
tissue to deliver better performance
characteristics.
› We continue to reduce packaging
waste for our Customers, by optimising
material usage, and we are at the
forefront of packaging design in terms of
new environmentally friendly materials
including recycled films and paper for
wrapping product.
› We are constantly looking for ways to
further reduce our carbon footprint
across all aspects of our business.
› We plan to set demanding reduction
targets over the next five years with
reductions planned every year.
ESG pages 20 and 21
Carbon reporting page 47
OTHER KEY DECISIONS TAKEN IN THE
YEAR THAT WERE INFLUENCED BY
ENGAGEMENT WITH STAKEHOLDERS
Fundraising and acquisitions of LTC
and John Dale
Significant consultation with major
shareholders to support our vision to build
a diverse business of size and scale.
Full automation of the Blackburn site
Consultation with employees throughout
the process in order to deliver a substantial
capital investment programme and
reduction in headcount.
Investment in a paper mill
Plans to build the mill under consultation
with local communities and developers.
Accrol Group Holdings plc // Annual Report & Accounts 2021 Strategic report 24
Strategic report
Accrol Group Holdings plc // Annual Report & Accounts 2021
KPIS AND BUSINESS MODEL
MEASURING OUR PERFORMANCE
OUR BUSINESS
MODEL
HOW WE MEASURE
PERFORMANCE
We measure our performance
against the business model
to ensure we are delivering
to our key stakeholders. All our targets
are stretch targets which support our
relentless drive for operational excellence.
Sometimes the targets we set are not
attainable, but they ensure we never
become complacent.
THE RIGHT
PEOPLE
Our values are at the core of what we do,
by engaging our people at all levels so they
understand clearly the role they play in making
the business better every day.
We do this by:
› Ensuring safety for all
› Having a working environment that allows people
to be part of the improvement
› Having a personal development plan to help
people understand how they can help improve
the organisation
› Paying everyone in the organisation the Real Living
Wage or higher
STRONG
CUSTOMER
RELATIONSHIPS
We strive to delight our customers by offering great
service, quality and innovations, delivering on our
promises and developing value adding products.
We do this by:
› Bringing new innovations to the industry which give
best value, informed by our broad customer base
› Delivering on our commitments
GREATER
SHAREHOLDER
RETURNS
We aim to deliver strong shareholder returns by
growing our market share, investing in operational
excellence and being relentless in our cost control.
We do this by:
› Growing with our customers
› Building on the platform created by the turnaround
› Seeking new opportunities to extend our offer
Accrol Group Holdings plc // Annual Report & Accounts 2021
Strategic report
25
-26%
TOTAL ACCIDENTS
The number of accidents reported has declined.
COMMENTS
The overall number of Lost Time Accidents (LTAs) has
increased from five to seven year on year, however
this includes five months of newly acquired LTC. The
positive news is that Total Accidents for the same period
have dropped by 26% . Over the same period Safety
Observations generated by our employees increased
by 42%. We believe the continued focus on proactive
observation and action, will continue to drive down
Total Accidents, which will now become our primary
measure going forwards.
84%
EMPLOYEE ENGAGEMENT
The measure as determined by the Employee
Engagement Survey which is conducted twice a year
(2020: 77%).
COMMENTS
Employee engagement continues to improve as
the training and development programmes benefit
the business.
9.4%
INCREASE IN OUTPUT PER HEAD
Pallets per head per month produced: FY20 v FY21.
COMMENTS
Further progress has been made in productivity levels
across the organisation with an overall Group wide
increase of 9.4%, however, even more pleasing was
the increase in productivity in our Blackburn facility
which was automated during FY21, where the Q4
run rates on pallets per head increased by 68%. This
improvement only impacted the last three months of
this financial year, so we look forward to enjoying the
full benefit of this during FY22.
92%
ON TIME DELIVERY
Percentage of deliveries that are delivered on time
over a calendar month (2020: 97%; 2019: 96%).
COMMENTS
Changes in consumer buying behaviour due to
COVID-19 restrictions, together with disruption during
the Brexit transition period impacted service levels.
15.9%
MARKET SHARE
driven higher by organic growth and acquisitions
(2020: 13.1%).
COMMENTS
With our market share now 15.9% (2020: 13.1%) of
the total UK tissue market and a strong infrastructure
for growth in place, Accrol is increasingly well
positioned to benefit in a value-conscious, post
COVID-19 world.
-2.4%
GROWTH IN SALES TO TOP CUSTOMERS
Growth in sales of all products into our top six
customers. Our target is for no one customer to
account for more than 20% of total revenue.
COMMENTS
The fall in growth this year is a result of a further
widening of our customer base as we continue to
grow our market share and the disruption to buying
patterns as a result of COVID-19.
£14.6m
ADJUSTED NET DEBT
Total borrowing less cash reserves (2020: £17.9m).
COMMENTS
This guides our decision making on the use of cash
generated from operations.
£15.6m
ADJUSTED EBITDA
Adjusted to exclude separately disclosed items
and share based payments (2020: £10.6m).
COMMENTS
We believe that this measure is a truer indication of
the Group’s underlying trading performance.
27.7%
GROSS MARGIN
as reported (2020: 21.9%).
COMMENTS
From a low of 17.5% in FY18, the improvement in
gross margin reflects the operational improvements
effected over the last three years.
26
CHIEF FINANCIAL OFFICER’S REVIEW
IMPROVED GROSS MARGINS UNDERPINNED
BY INVESTMENT IN NEW SYSTEMS
AND OPERATING PROCESSES
RICHARD NEWMAN Chief Financial Officer
Upon completion of the acquisition
of LTC and JD, the Group immediately
commenced a structured integration
programme. This covered all key areas
of the business including external
relationships with customers and suppliers,
as well as internal functional reviews to
consolidate or integrate activities where
appropriate. Project management costs
of £314,000 included expert consultancy
advice to support the integration process.
Other incremental costs to support this
activity included £218,000 of labour and
£162,000 of operational costs, largely
relating to transportation and short-term
paper transfers. Incremental audit fees
of £30,000 have been necessary due
to added complexity.
Following the significant progress
made during FY20 to transform the
manufacturing capability of the business,
it was appropriate to review the whole
organisation to ensure it was aligned with
Accrol’s future growth strategy and to
deliver world class standards in safety and
performance every day. The final elements
of the business turnaround plan were
completed during the year with significant
capital investment in automation at
our Blackburn manufacturing site.
The complexity of maintaining a 24/7
operation during the implementation
of this substantial project resulted in an
element of incremental labour costs as
service levels needed to be maintained
despite the inevitable disruption to normal
operations during the period of transition.
Once the project had been completed a
number of redundancies were incurred as
the overall headcount reduced, reflecting
the benefits from the automation
investment. The total labour cost of the
above was £948,000, with associated fees
of £86,000.
Find out more
Key Performance
Indicators
24
Risk Management 30
Financial
Statements
51
SEPARATELY DISCLOSED ITEMS
Separately disclosed items totalled £4.7m,
compared with £2.2m in FY20.
In November 2020, the Group acquired
Leicester Tissue Company, whose principal
activity is paper tissue converting.
Professional fees of £1,925,000 arose
as a result of the transaction.
In April 2021, the Group acquired John Dale,
whose principal activity is the manufacture
of wet wipes and facial tissue. Professional
fees of £225,000 arose as a result of the
transaction.
SUMMARY
The overall performance of the Group
continued to improve and strengthen
in FY21. Whilst this COVID-19 pandemic
required significant changes to working
practices for factory and office-based
employees, the business continued
without interruption to provide essential
products to our customers.
The integration of Leicester Tissue
Company (“LTC”), acquired in November
2020, and John Dale (“JD”), acquired in
April 2021, continue to make excellent
progress, benefitting from the Group’s
established manufacturing and
commercial best practice programmes.
TRADING RESULTS
Group revenue increased by 1.4% to
£136.6m (FY20: £134.8m), although
volumes were more volatile than normal,
reflecting changes in consumer shopping
habits during the pandemic. Short-term
panic buying in March and April 2020,
during the first national lockdown,
strengthened FY20 volumes leading to
a weaker H1 as demand normalised. H2
volumes were strengthened by the impact
of the Group’s two acquisitions. The total
tissue market declined by 1.2% and our
market share increased to 15.9% from
13.1% in FY20.
Gross margins improved again to 27.7%
reflecting the ongoing work to improve
productivity and reduce operating costs,
underpinned by our investment in new
systems and operating processes.
Administration costs have increased by
£8.3m and include specific one-off costs
of £2.9m related to acquisitions made
during the year. There was a further
£3.0m increase related to non-cash items
(depreciation, amortisation and share
based payments). Other cost increases
reflect the larger scale of the business
following the acquisitions during the year.
Distribution costs were similar to last year
and represented 8.4% of total revenues
(FY20; 8.5%).
Adjusted EBITDA improved by 47% to
£15.6m (FY20: £10.6m) whilst operating
losses increased to £0.6m (FY20: loss
of £0.2m), reflecting the increase in
operating costs above.
Accrol Group Holdings plc // Annual Report & Accounts 2021Strategic report 27
2021
£’000
2020
£'000
136,594
(98,710)
134,773
(105,239)
37,884
(27,072)
(11,424)
–
(612)
(1,954)
(2,566)
(74)
29,534
(18,810)
(11,490)
585
(181)
(1,710)
(1,891)
312
INCOME STATEMENT
Revenue
Cost of sales
Gross profit
Administration expenses
Distribution costs
Other income
Operating loss
Net finance costs
Loss before tax
Tax credit
Loss for the year attributable to equity shareholders
(2,640)
(1,579)
Loss per share
Basic
Diluted
Operating loss
Adjusted for:
Depreciation
Amortisation
Share based payment
Separately disclosed items
Adjusted EBITDA(1)
(1.1)p
(1.1)p
(612)
4,786
3,520
3,245
4,705
(0.8)p
(0.8)p
(181)
4,201
2,040
2,351
2,230
15,644
10,641
(1) Adjusted EBITDA is defined as loss before finance costs, tax, depreciation, amortisation, separately disclosed items and share based
payments, is a non-GAAP metric used by management and is not an IFRS disclosure.
REVENUE BY PRODUCT
Toilet tissue
Kitchen towel
Facial tissue
Wipes
Core revenue
Other (waste)
Total revenue
2021
£’M
100.5
27.1
8.5
0.1
136.2
0.4
136.6
2020 VARIANCE VARIANCE
%
£'M
£'M
103.1
20.1
10.4
–
133.6
1.2
134.8
(2.6)
7.0
(1.9)
0.1
2.6
(0.8)
1.8
(3%)
35%
(19%)
0%
2%
(65%)
1%
The COVID-19 pandemic has continued
to have a significant impact on how the
Group conducts its operations, and on the
availability of resource and personnel, to
continue to function as an essential provider
of products to UK retailers. The Group plans
on a certain level of resource, factoring in
normal levels of absence and holiday, to
maintain a 24/7 manufacturing operation
that is as efficient as possible. High levels of
absence during the pandemic, due to illness
or self-isolation, required incremental labour
resources to be deployed to maintain service
levels to our customers through additional
overtime, additional temporary labour and
the deferment of holidays – all of which
resulted in additional costs of £292,000.
Additional labour costs of £153,000 were
incurred as a dedicated team of people
worked on the practical changes that
were required in each of our factories,
warehouses, and offices to ensure we
maintained fully compliant working
environments and to protect our
employees. Extra logistics, PPE, cleaning
and security costs of £225,000 were
also incurred.
INTEREST, TAX AND EARNINGS
PER SHARE
Net finance costs were £1.9m (FY20:
£1.7m). The Group also recorded a
deferred tax charge of £0.1m (FY20:
credit of £0.3m).
The loss before tax was £2.6m (FY20:
£1.9m), due to flow through of higher
acquisition related costs. Adjusted profit
before tax of £9.1m (FY20: £4.7m) was
higher due to the growth in adjusted
operating profit.
Basic losses per share were 1.1 pence
(FY20: 0.8 pence) reflecting higher
amortisation costs and adjusting items.
Adjusted diluted earnings per share were
2.7 pence (FY20: 1.7 pence), an increase
of 59% driven by the growth in adjusted
EBITDA. Earnings per share were impacted
in the period by the equity issue in
November 2020 which raised funds
for the LTC acquisition.
Accrol Group Holdings plc // Annual Report & Accounts 2021 Strategic report
28
28
Strategic report
Strategic report
Accrol Group Holdings plc // Annual Report & Accounts 2021
Accrol Group Holdings plc // Annual Report & Accounts 2021
CHIEF FINANCIAL OFFICER’S REVIEW CONTINUED
2021
£’M
12.0
4.0
27.6
43.6
(5.7)
(7.6)
30.3
(15.6)
14.6
2020
£'M
CHANGE
£'M
12.0
11.8
18.6
42.4
(6.4)
8.1
27.9
(10.0)
17.9
–
(7.8)
9.0
1.2
0.7
0.5
2.4
(5.6)
(3.3)
BORROWINGS AND CASHFLOW
Revolving credit facility
Factoring facility
Leases
Borrowings
Leases receivable
Cash and cash equivalents
Net debt
IFRS 16 adjustment
Adjusted net debt
Intangible assets represent mostly
goodwill and customer relationships
that have both increased because of the
acquisitions of LTC and JD.
Goodwill is not amortised but is subject
to an annual impairment review. After
considering various scenarios and
sensitivities, the Directors concluded that
no impairment is required. During the
year the Group invested further in product
development and innovation including
‘Magnum’ and ‘Oceans’. Together they
created an intangible asset of £0.7m
(FY20: £0.8m) which will be amortised
over the anticipated life of the products.
COVID-19
The Group has not furloughed any
employees during the financial year, nor
during any stage of the pandemic. The
Group has not been in receipt of any
COVID-19 loans although it has taken
advantage of the short-term VAT Payment
Deferral Scheme, which was launched in
March 2020, which is now being repaid.
RICHARD NEWMAN
Chief Financial Officer
13 July 2021
DIVIDENDS
The proposed final dividend is 0.5 pence
(FY20: nil).
ACQUISITIONS
This year the Group made significant
strategic steps with the acquisition of LTC
in November 2020 and JD in April 2021.
The acquisition of LTC, following a
successful placing of ordinary shares
in the market and an open offer, added
valuable new assets and capacity to the
Group and new and complementary
customers. The initial consideration for LTC
was £35.0m, with a maximum contingent
consideration of £6.8m, which is subject
to new contractual earnings.
The acquisition of JD provides an
established and scalable platform on
which to enter the wet wipes market,
a high growth and complementary
sector of the tissue market. The total net
consideration of £3.4m was funded from
the Group’s cash resources.
CASHFLOW
The Group achieved a further
improvement in its adjusted net debt
position of £14.6m, an improvement of
£3.3m on the prior year (FY20: £17.9m).
There was a £17.6m cashflow from
operations (FY20: £19.4m) reflecting
the improved trading performance and
a continued improvement in working
capital, despite an increase in raw material
and finished good stock levels to support
service responsiveness.
BALANCE SHEET
Property, plant and equipment all
increased, reflecting the acquisitions
during the year and continued investment
in our core machines and supporting
infrastructure. We have significantly
invested in automation at our Blackburn
manufacturing facility, to improve
productivity, operational flexibility, and
to enhance customer service.
Significant progress has also been made in
further improving the IT infrastructure and
critical manufacturing systems including
the implementation of NetSuite, which
went live in July 2020.
Accrol Group Holdings plc // Annual Report & Accounts 2021
Accrol Group Holdings plc // Annual Report & Accounts 2021
Strategic report
Strategic report
29
29
30
PRINCIPAL RISKS AND UNCERTAINTIES
MANAGING OUR RISKS
I n 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, cashflow 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.
RISK HEAT MAP
HIGH
D
O
O
H
I
L
E
K
I
L
LOW
5
4
10
3
12
2
6
1
8
7
11
9
IMPACT
W
O
L
RISK
1. The loss of a major customer
2. Parent reel and pulp capacity and pricing
3. New entrant into market
4. Winning a large customer contract
5. Volatility of foreign exchange rates
6. The Group relies on IT systems in its day
to day operations
7. Key person dependency
H
G
H
I
8. Failure to adhere to regulatory requirements
such as taxation, the Data Protection Act,
Health and Safety and Fire safety regulations
in particular
9. Failure to meet bank covenants and loss
of facility
10. Risk of COVID-19 pandemic impacts workforce
and production
11. Brexit – Risk of disruption to supply chain
12. Failure to meet sustainability expectations
of consumers and wider stakeholders
Accrol Group Holdings plc // Annual Report & Accounts 2021Strategic report 31
RISK CHANGE KEY
:
;
_
INCREASED
DECREASED
NO CHANGE
NEW
NEW RISK
PRINCIPAL RISK
IMPACT
MITIGATION
CHANGE
1
THE LOSS OF A MAJOR
CUSTOMER.
Likelihood: Medium
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.
2
PARENT REEL AND PULP
CAPACITY AND PRICING.
Likelihood: Medium
If prices rise above
management expectations this
could have a material adverse
effect on the Group’s ability to
achieve strategic objectives.
3 NEW ENTRANT INTO MARKET.
Likelihood: Medium
A new entrant into the market
creating extra capacity and
competition.
4 WINNING A LARGE CUSTOMER
CONTRACT.
Likelihood: Medium
The winning of a large contract
could absorb all capacity
headroom and could lead to
supply issues if not managed
closely.
5
VOLATILITY OF FOREIGN
EXCHANGE RATES.
Likelihood: High
The majority of our parent
reel purchases are in US$.
Fluctuations in the exchange
rates could adversely affect
input costs and hence
profitability.
› Nurture relationships with key customers
› Understand our customers’ business in
order to identify further opportunities.
Ensure customer service levels are high and
we respond rapidly to any shortcomings
› Continuously monitor the market for
opportunities to open up new customers
› We encourage customer audit and respond
to the feedback
› Maintain diversification across a broad
customer base
› Longer-term contract
› Nurture relationships with key suppliers
› 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
› Pass on significant changes to customers
_ Strong relationships
maintained with top
customers, strengthened by
the acquisitions of Leicester
Tissue Company and John
Dale, and new product
development.
Improved category and
customer focused teams.
: Strong procurement team
in place to support the
larger scale of the business.
Pulp prices and other
commodity costs have
started to increase but
additional tissue mill
capacity announced.
› Ensure that Group remains cost competitive,
: High entry barrier
listens to customer requirements and
delivers best value
› Ensure that we optimise the performance
from existing capacity by careful scheduling
and enhanced training to create spare
capacity from existing lines
› Continuously search for low level capital
investments to enhance the operation
of existing lines
› Add additional machine capacity
maintained despite
challenges of turnaround,
but UK market remains
attractive.
; Acquisitions, automation,
training and investment
have all delivered increases
in capacity and output over
the last three years.
We intend to invest in
further machinery –
positively impacting the
business in FY22.
› Review and adhere to our foreign exchange
_ Whilst macro conditions
have been volatile over the
year, management of risk
has improved.
policy
› Monitor short-term purchasing forecasts
to ensure appropriate exposure to risk
› Look for opportunity to source across
multiple currencies
› Recognise that a significant adverse
weakening of Sterling will impact the entire
market with a market price increase most
likely required
Accrol Group Holdings plc // Annual Report & Accounts 2021 Strategic report 32
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
PRINCIPAL RISK
IMPACT
MITIGATION
CHANGE
6
THE GROUP RELIES ON IT
SYSTEMS IN ITS DAY TO DAY
OPERATIONS.
Likelihood: Medium
Disruption in critical IT systems
would have a significant adverse
impact on production and
important business processes.
› Manage an upgrade plan to ensure
hardware is fit for purpose
› Seek opportunities to upgrade or de-risk
software systems
› Ensure critical business continuity plans and
disaster recovery contingencies are in place
› Maintain a clear IT policy to ensure users do
not put the operation at risk
›
Implementation of warehouse management
system and HR/payroll system completed
in the year. Integrated ERP system went live
in July 2020
_ A more robust IT platform is
now in place with improved
information to enable better
decision making.
Investments will be made
to further strengthen IT
security controls to improve
our capability to detect,
respond to and prevent
cyber-attacks.
7
KEY PERSON DEPENDENCY.
Likelihood: Low
Loss of key individuals could
impact the Company’s ability
to deliver its strategic goals and,
result 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:
_ New management
structure created, and
employee engagement
relaunched.
8
FAILURE TO ADHERE TO
REGULATORY REQUIREMENTS
SUCH AS TAXATION, THE DATA
PROTECTION ACT, HEALTH
AND SAFETY AND FIRE SAFETY
REGULATIONS IN PARTICULAR.
Likelihood: Medium
9
FAILURE TO MEET BANK
COVENANTS AND LOSS
OF FACILITY.
Likelihood: Low
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 and
Safety regulations could
result in fines, litigation and
reputational damage.
The Group is dependent upon
its Revolving Credit Facility and
Invoice Discounting Facility
provided by the bank, without
which it would be unable to
meet its payment obligations.
›
the regular review of remuneration
packages, including longer-term
incentives;
› establishment of employee engagement
techniques to reinforce their commitment
to the Company; and
› an annual performance review process
› 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 has robust operational
policies, procedures, risk assessments and
contingencies around fire safety regulations
› Update and test the Disaster Recovery Plan
annually
› Work with our insurers to understand
physical or procedural mitigation strategies
to reduce the likelihood or scope of an
incident
› Careful management of profit and cash
with regular reforecasts to ensure actions
are taken at the earliest moment to ensure
hurdles are cleared
› Regular dialogue with the bank to explain
Company performance and the risks and
opportunities of short to mid-term trading
› Facilities amended and extended to August
2023 providing additional flexibility and
headroom
_ All plans agreed with risk
assessors and insurers as
required.
_ Additional flexibility and
headroom provided by
amended banking facilities
provide the backing to grow
the business.
Accrol Group Holdings plc // Annual Report & Accounts 2021Strategic report 33
RISK CHANGE KEY
:
;
_
INCREASED
DECREASED
NO CHANGE
NEW
NEW RISK
PRINCIPAL RISK
IMPACT
MITIGATION
CHANGE
10 RISK OF COVID-19 PANDEMIC
IMPACTING WORKFORCE AND
PRODUCTION.
Likelihood: Medium
Loss of key employees across
a number of shifts impacting
ability to manufacture and fulfil
customer orders.
› Full screening questionnaire including
temperature checks in place for all
employees, visitors and contractors
› Company specified face coverings for all
11 BREXIT – RISK OF DISRUPTION
TO SUPPLY CHAIN.
Likelihood: Low
Shortage of key raw materials
to meet customer orders.
12 FAILURE TO MEET
SUSTAINABILITY
EXPECTATIONS OF CONSUMERS
AND WIDER STAKEHOLDERS
Likelihood: Medium
We fail to deliver against
growing expectations on
organisations to play a positive
role in society, balancing the
needs of our business, our
environment and our people
employees to eliminate potential ‘contact’
including those office staff that can’t work
from home. Social distancing measures in
place including one way systems, staggered
clock in and C19 safety reps to ensure
compliance
› Additional sanitisation stations and cleaning,
increased communication and signage in
multi-language
›
Internal track and trace process in place
with measures implemented across both
Blackburn and Leyland locations
› All key materials are dual sourced as
a minimum. Tissue being the major
component is supplied from multiple
locations (Turkey, Portugal, Egypt) and
can be brought into multiple ports
› Majority comes in via Port of Liverpool with
Accrol being the second largest customer
of the port
› Multiple shipments are received each week
with appropriate levels of stocks held
› Focused action to reduce carbon emissions
across all sites
› Ensuring we meet national legislation
requirements for disclosing greenhouse gas
emissions
› Ensuring we meet the growing consumer
demand for sustainable products
› Continually reviewing our sustainability
priorities to ensure they align with the
expectations of stakeholders and wider
society
; Significant investment has
been made to ensure the
safety of our employees and
security of supply for our
customers.
; The Brexit transition process
caused some short-term
disruption that has now
been alleviated.
N
E
W
Risk added because
of increased focus on
sustainability and climate
change.
The Strategic Report, which includes the Chairman’s Statement, the Chief Executive Officer’s review, the business model and strategy, the Group financial review and
the principal risks and uncertainties, was approved by the Board and signed on its behalf by:
GARETH JENKINS
Chief Executive Officer
13 July 2021
Accrol Group Holdings plc // Annual Report & Accounts 2021 Strategic report 34
34
Governance
Financial Statements
Accrol Group Holdings plc // Annual Report & Accounts 2021
Accrol Group Holdings plc // Annual Report & Accounts 2021
INTRODUCTION TO GOVERNANCE
AN ACTIVE APPROACH TO
LEADERSHIP AND MANAGEMENT
NOMINATION COMMITTEE
The Nomination Committee leads the
process for Board appointments and
makes recommendations to the Board.
The Nomination Committee shall
evaluate the balance of skills, experience,
independence and knowledge on the
Board and, in the light of this evaluation,
prepare a description of the role and
capabilities required for a particular
appointment. The Nomination Committee
meets as and when necessary.
Committee meeting attendance
Daniel Wright (Chair), 1 meeting attended
Euan Hamilton, 1 meeting attended
Simon Allport, 1 meeting attended
REMUNERATION COMMITTEE
The Remuneration Committee reviews
the performance of the Executive
Directors and makes recommendations
to the Board on matters relating to their
remuneration and terms of service. The
Remuneration Committee meets as and
when necessary, but at least once each
year. In exercising this role, the Directors
shall have regard to the recommendations
put forward in the QCA Code and, where
appropriate, the Remuneration Committee
Guide for Small and Mid-Size Quoted
Companies published by the QCA and
associated guidance.
Committee meeting attendance
Euan Hamilton (Chair), 3 meetings
attended
Daniel Wright, 3 meetings attended
Simon Allport 3 meetings attended
Daniel Wright Executive Chairman
D ear Shareholder. I am pleased
to introduce the Corporate
Governance Report for Accrol
Group Holdings plc for the year ended
30 April 2021. This report includes the
Board structure, an introduction to the
members of the Accrol Board and the
Corporate Governance Statement.
The Directors place a significant
emphasis on ensuring that Accrol has
the appropriate governance structures
in place. This year, we appointed an
experienced Chief Financial Officer,
Richard Newman, to support the planned
growth of the business.
The Board 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.
DAN WRIGHT
Executive Chairman
13 July 2021
THE AUDIT COMMITTEE
The Audit Committee has the primary
responsibility of monitoring the quality
of internal controls to ensure that the
financial performance of the Group is
properly measured and reported on.
It receives and reviews reports from
the Group’s management and external
auditors relating to the interim and annual
accounts and the accounting and internal
control systems in use throughout the
Group. The Audit Committee meets not
less than two times in each financial year
and has unrestricted access to the Group’s
external auditors.
Committee meeting attendance
Simon Allport (Chair), 4 meetings attended
Daniel Wright, 4 meetings attended
Euan Hamilton, 4 meetings attended
THE BOARD
The Board provides leadership to the Group as a whole, as well as
ensuring a framework of controls exists which allows for the identification,
assessment and management of risk. The Board sets the Group’s
strategic goals; ensuring obligations to shareholders are met. Matters
reserved for the decision of the Board include approval of Group strategy,
annual budgets and business plans, acquisitions, disposals, business
development, annual reports, interim statements and any significant
funding and capital plans. The Board meets regularly, usually monthly.
BOARD MEETING ATTENDANCE
Daniel Wright
Gareth Jenkins
Euan Hamilton
Simon Allport
Richard Newman
13/13
13/13
13/13
13/13
3/13*
* Richard Newman joined the Board on 1 February 2021 and attended
all Board meetings available to him.
Accrol Group Holdings plc // Annual Report & Accounts 2021
Accrol Group Holdings plc // Annual Report & Accounts 2021
Governance
35
36
BOARD OF DIRECTORS
EXPERIENCED AND EFFECTIVE
DANIEL WRIGHT
GARETH JENKINS
RICHARD NEWMAN
EXECUTIVE CHAIRMAN
A N R
CHIEF EXECUTIVE OFFICER
Date appointed:
›
11 September 2017
CHIEF FINANCIAL OFFICER
Date appointed:
› 1 February 2021
Date appointed:
› Non-Executive Director: 11 December 2017
› Executive Chairman from 4 February 2018
Key strengths
› Financial development
› Portfolio development
› Operating matters
› With over 15 years’ experience in PE backed
acquisition, 50 transactions, he has a UK wide
reputation of delivering exceptional returns
› A dynamic leader who brings great teams
together
Previous experience
› NorthEdge Capital, Founder Partner, Chief
Operating Officer & Head of Portfolio
Key strengths
› Extensive strategy, commercial, M&A and
operational experience, UK and in Europe
› Retail, FMCG and industrial markets
› An extensive track record of delivering
industry leading levels of return in
manufacturing and paper based operations
› Significant experience in business
turnaround
› Extensive senior leadership experience of
business turnaround and delivering industry
leading levels of return in cyclical paper
businesses
› Personally led over 10 business turnarounds
with a history of success over 20 years
› Delivered multi million-pound EBITDA
› Accrol Group Holdings Limited, prior to IPO
improvement in the last six years
– Director
› Deutsche Morgan Grenfell Private Equity
Previous experience
› DS Smith plc – 24 years
› Vision Support Services Group – Chairman
› Managing Director UK & Ireland packaging
Key strengths
› Highly accomplished executive with 30 years’
experience in senior finance roles at FTSE
100 and FTSE 250 companies
› Extensive knowledge and breadth of
experience in M&A, FX Management
and FMCG
› Proven leadership skills
› Commercial and operational experience
Previous experience
› PwC – qualified as a Chartered Accountant
› Cadbury PLC – Finance and IT Director,
Ireland, and, latterly, Group Financial
Controller
› National Express Group PLC – Divisional
Finance Director
› DS Smith PLC – Regional Finance Director
for North Europe Packaging
Other commitments
› SolasCure – Director
› Manchester & London Investment Trust plc –
Non-Executive Director
› Youth Zone – Non-Executive Director
division
Accrol Group Holdings plc // Annual Report & Accounts 2021Governance 37
EUAN HAMILTON
SIMON ALLPORT
COMMITTEE KEY
A Audit Committee
N Nomination Committee
R Remuneration Committee
Member
Chairman
INDEPENDENT NON-EXECUTIVE DIRECTOR
INDEPENDENT NON-EXECUTIVE DIRECTOR
A N R
Date appointed:
› 27 August 2018
A N R
Date appointed:
› 10 October 2018
Key strengths
› Restructuring and business turnarounds
Key strengths
› Extensive commercial & M&A experience
› Leverage finance and private equity
› Broad strategic experience throughout
›
Investment banking worldwide
Previous experience
› Royal Bank of Scotland Group
› Bank of Cyprus Group
› Cramond Capital Partners Ltd
Other commitments
› Cynergy Bank Ltd – Non Exec Chairman
› Resolute Asset Management Holdings
(Malta) Ltd – Non Exec Chairman
many industries
› Business transformation
Previous experience
› 32 years in the professional sector
› Formerly Managing Partner for the North
of England at Ernst & Young
Other commitments
› Fitzallan Limited
›
The Enterprise Fund Limited
› Etale Limited
Accrol Group Holdings plc // Annual Report & Accounts 2021 Governance 38
CORPORATE GOVERNANCE REPORT
T he Directors acknowledge the
importance of high standards of
corporate governance and have
chosen to comply with the principles
set out in the Corporate Governance
Code for Small and Mid-size Quoted
Companies, as issued by the QCA
(the QCA Code). A summary of how
the Company currently complies
with the QCA Code is set out below
and is updated at least annually in
the manner recommended by the
QCA Code. There is also a summary
on the Company’s website corporate
governance page.
The Chairman’s role is to lead
the Board of Directors and to be
responsible for ensuring that the
Company adheres to and applies the
standards of corporate governance.
The Board and the Committees meet
regularly as described above. The
executive team are directed to day-to-
day management and are accountable
to the rest of the Board.
Many of the disclosures relevant to
the Code are already made in this
Annual Report and Accounts. In the
application of this Code the Board has
sought input from the auditors, the
Company’s advisers, and a review by
the Company’s lawyer. The Board is
tasked with continuing to return the
business to profit and seeking a path
to long-term growth for shareholders
and the importance of corporate
governance is to oversee the division
of ownership and stewardship. The
Executive Directors have the day-to-
day responsibility of stewardship and
the Chairman and Non-Executives
monitor and evaluate this on behalf
of the owners.
The disclosures below were last
reviewed and approved by the Board
on 13 July 2021.
QCA PRINCIPLES AND ACCROL
GROUP HOLDINGS PLC APPROACH
1. Establish a strategy and
business model which promote
long-term value for shareholders.
The Company has now completed
its turnaround, which focused on
improving operational efficiency,
winning new business and clear
pricing to customers. This strategy
is shared by the Board and the
senior operational team and has
been expressed clearly through
recent circulars to shareholders,
announcements through RNS and
is explained fully within the Strategic
Report section in our Annual Report
and Accounts each financial year.
Key risks and mitigating factors to
our business are also detailed in this
Annual Report and Accounts.
The Company’s vision is to build
a diversified Group of size and scale,
which is less exposed to input cost
fluctuations and is focused on the
broader private label personal hygiene
and household products markets.
The acquisitions made within the
year were consistent with this vision
with Leicester Tissue Company
increasing scale and John Dale
increasing diversity.
2. Seek to understand and
meet shareholder needs
and expectations.
The Board is committed to an open
and ongoing engagement with its
shareholders and it also reviews and
discusses changes in the Company’s
shareholder base at Board meetings.
The main methods of communication
with shareholders are the Annual
Report and Accounts, the interim
and full-year results announcements,
the Annual General Meeting and the
Company’s website.
In addition, the Chairman and Chief
Executive Officer meet regularly with
institutional investors and analysts
to ensure that objectives and any
business developments are clearly
communicated, and that they are
available to respond to any enquiries
following Company announcements,
together with other Company advisers.
The Non-Executive Directors are also
available to discuss any matters that
shareholders wish to raise and discuss.
The Company does not have
a dedicated investor relations
department given its size but has
engaged an external investor relations
adviser to act as another point of
contact for shareholders, details of
which are on the Company’s website.
Questions from individual shareholders
are typically referred to the Chairman or
CEO for written answers.
3. Take into account wider
stakeholder and social
responsibilities and their
implications for long-term
success.
The Board recognises that its
long-term success will necessitate
the maintenance of effective
working relationships across a wide
range of stakeholders as well as its
shareholders; being primarily its
employees, customers and suppliers.
The Executive Directors maintain an
ongoing and collaborative dialogue
with such stakeholders and take all
feedback into consideration as part
of the decision-making process and
day-to-day running of the business.
Last year the Company carried out its
first employee engagement survey,
which now repeats twice each year.
The level of employee engagement
has improved every year and currently
stands at 84% (2020: 77%), which
is a testament to the teamwork
throughout the organisation. The
survey covers all aspects of the
business and drives immediate change
and improvement at all levels.
The Company takes corporate social
responsibility very seriously and whilst
the nature of the business limits the
risk of it having a negative impact on
society and the environment, it is well
understood that the behaviour of the
Company and its employees should
always be carefully monitored from
this perspective.
Communication with our customers
is fundamental to our success. The
Company engages in continuous
communication with them to
understand their needs, share our
plans, and nurture the collaborative
partnership. The Company has key
account managers for its customers.
Similarly, strong relationships with our
key suppliers of materials and third-
party services are maintained through
regular reviews and site visits.
4. Embed effective risk
management, considering
both opportunities and threats,
throughout the organisation.
Risk management is reported in this
Annual Report and Accounts (pages
30 to 33) along with how those risks
are mitigated and how they change
over time. The Board typically meets
at least ten times a year during which
business and other risks are assessed.
There are also formal and informal
communication routes that allow for
risks to be communicated to Board
members in a timely manner from all
areas of the business.
5. Maintain the Board as a
well-functioning, balanced team
led by the Chair.
The Board now comprises five
Directors: the Executive Chairman,
two Non-Executive Directors and two
Executive Directors. The CEO is the
longest serving Executive Director,
having been appointed in September
2017. The appointment of Richard
Newman as Chief Financial Officer has
strengthened the Board further. Both
Non-Executive Directors, Simon Allport
and Euan Hamilton, are considered
by the Board to be independent.
Over the period the Board has met as
frequently as governance required but
now meets regularly with processes in
place to ensure that each Director is
always provided with such information
as is necessary to discharge their
duties. The Board is also supported by
the Committees (Audit, Remuneration
and Nomination) each with specific
remits. The detail of the number of
meetings and attendance by Directors
is noted on page 34.
Accrol Group Holdings plc // Annual Report & Accounts 2021Governance 39
AIM RULES COMPLIANCE REPORT
Accrol Group Holdings plc is quoted
on AIM and as a result the Company
has complied with AIM Rule 31 which
requires the following:
› Have in place sufficient procedures,
resources and controls to enable its
compliance with the AIM Rules;
› Seek advice from its Nominated
Advisor (“Nomad”) regarding
its compliance with the Rules
whenever appropriate and take
that advice into account;
› Provide the Company’s Nomad
with any information it reasonably
requests in order for the Nomad
to carry out its responsibilities
under the AIM Rules for Nominated
Advisors, including any proposed
changes to the Board and Provision
of draft notifications in advance;
› Ensure that each of the Company’s
Directors accepts full responsibility,
collectively and individually, for
compliance with the AIM Rules; and
› Ensure that each Director discloses
without delay all information
which the Company needs in
order to comply with AIM Rule
17 (Disclosure of Miscellaneous
Information) insofar as that
information is known to the
Director or could with reasonable
diligence be ascertained by
the Director.
RICHARD ALMOND
Company Secretary
13 July 2021
The Non-Executive Directors were
selected with the objective of
increasing the breadth of skills and
experience of the Board and to bring
independent judgement to the Board.
The Company believes that the
makeup of the Board represents a
suitable balance of independence and
detailed knowledge of the business
to ensure that it can fulfil its roles
and responsibilities as effectively as
possible. Please see page 37 of this
Annual Report and the website for the
profiles of the Non-Executive Directors.
All Directors are subject to re-election
by shareholders at the Annual General
Meeting and any Directors appointed
during a financial year must be
formally elected at the Annual General
Meeting following their appointment.
No Directors are subject to re-election
at this year’s Annual General Meeting.
6. Ensure that between them
the Directors have the necessary
up-to-date experience, skills
and capabilities.
The Board evaluates consistently
those skills that are required and
whether they are adequately provided
for across the Board and executive
team. In doing so, and where relevant,
it will consider guidance available on
appointment and training of Board
members. The Company Secretary
has the responsibility to make the
Board aware of legal changes and will
advise on the Company’s approach.
Where vacancies arise or gaps are
identified that must be addressed,
the Nomination Committee receives
recommendations from the Chief
Executive Officer and appraises the
candidates. Appointments are made
on merit against objective criteria
and considering the benefits that
will be brought to the Board and the
Company.
The Board has access to external
advice, including the Company’s
solicitors where required. The Board
receives ongoing training as part of its
annual Board meeting cycle.
7. Evaluate Board performance
based on clear and relevant
objectives seeing continuous
improvement.
The Chairman is responsible for
ensuring an effective Board. He
regularly reviews the operations
of the Board to ensure that the
members of the Board are committed,
independent and provide a relevant
and effective contribution.
The Company is not required to
undertake a formal independent
evaluation and, given the changes
and pressures faced by the Company,
has not yet voluntarily undertaken to
do so.
8. Promote a corporate culture
that is based on ethical values
and behaviours.
The Board places significant
importance on the promotion of
ethical values and good behaviour
within the Company and takes
ultimate responsibility for ensuring
these are promoted and maintained
throughout the organisation and that
they guide the Company’s business
objectives and strategy. The Company
has documented procedures with
respect to its responsibilities regarding
ethical behaviour, specifically bribery
and corrupt practices and modern
slavery, and these are applicable
across its operations including the
supply chain and customer chain.
The Company communicates
regularly with its employees, both
formally and informally, and has
recently implemented an employee
engagement assessment (see page 14
of this Annual Report and Accounts) to
help monitor the impact of its people
related processes.
The questions in the employee
engagement assessment focused on a
range of areas, including happiness at,
and enjoyment with, work, expected
standards and personal development.
The Company is an equal
opportunities employer and highly
values its people. It is committed
to delivering products with as little
environmental impact as possible.
Promotion of the right ethical values
and behaviours is built into the
remuneration plans of the Board.
9. Maintain governance structures
and processes that are fit for
purpose and support good
decision making by the Board.
The Chairman leads the Board and
is responsible for its governance
structures, performance and
effectiveness. The Chairman is
also responsible for ensuring the
links between the Board and the
shareholders are strong and efficient.
The Chief Executive Officer, Chief
Operating Officer and Group Finance
Director are responsible for the day-to-
day management of the business and
for implementing the strategic goals
agreed by the Board.
The Board has also established an
Audit Committee, Remuneration
Committee and Nomination
Committee. From time to time,
separate committees may be set up
by the Board in order to consider and
address specific issues, when and if
the need arises.
Corporate governance disclosures are
assessed at least annually, including
whether the structures and processes
are fit for purpose.
10. Communicate how the
Company is governed and is
performing by maintaining a
dialogue with shareholders and
other relevant stakeholders.
The Company places a strong
emphasis on the standards of
good corporate governance and
maintaining an effective engagement
with its shareholders and key
stakeholders, which it considers
to be integral to longer-term growth
and success.
The Company is pleased to present
its first Audit Committee Report in this
2021 Annual Report.
The Company’s reports and
presentations and notices of Annual
General Meetings are made available
on the website, as are the results of
voting at shareholder meetings.
Accrol Group Holdings plc // Annual Report & Accounts 2021 Governance 40
AUDIT COMMITTEE REPORT
REPORT FROM THE CHAIRMAN
OF THE AUDIT COMMITTEE
Simon Allport Chairman of the Audit Committee
EXTERNAL AUDIT
The Audit Committee has
responsibility for the recommendation
for re-appointment and deciding the
remuneration of the Group’s external
auditors and satisfying itself that
they maintain their independence
regardless of any non-audit work
performed by them. The Group
has been monitoring the impact of
the FRC Revised Ethical Standard
2019 governing the performance
of non-audit work by the auditors
with regard to the provision of
such services and where required,
changes to ensure compliance with
the recommendations have been
implemented. The total fees payable
to the external auditors in respect
of the year under review amount to
£169,000 (2020: £84,000) of which
£17,000 (2020: £4,000) related to non-
audit services.
One of the principal duties of
the Audit Committee is to make
recommendations to the Board in
relation to the appointment of the
external auditors. BDO have been the
Company’s external auditors for three
years and in line with best practice
guidance as a listed plc are required
to rotate the Senior Statutory Auditor
(engagement partner) responsible for
the Group and subsidiary audits every
five years. It is our intention to comply
with this.
The respective responsibilities of the
Directors and external auditors in
connection with the Group financial
statements are explained in the
Statement of Directors’ Responsibility
on page 50 and the Auditor’s Report
on pages 51 to 56.
› Advising on the clarity of disclosures
and information contained in the
Annual Report and Accounts and
giving an opinion to the Board on
whether the Annual Report and
Accounts are fair, balanced and
understandable.
› Ensuring consistency in application
of and compliance with applicable
accounting standards.
› Overseeing the relationship with
the external auditors including,
recommending approval of their
appointment and approving
their remuneration, reviewing
their reports and ensuring their
independence is maintained.
The Audit Committee will report to the
Board on all these matters.
SIGNIFICANT MATTERS
CONSIDERED IN RELATION TO
THE FINANCIAL STATEMENTS
At the request of the Board, the
Audit Committee considered
whether the 2021 Annual Report
and Accounts were fair, balanced and
understandable and whether they
provided the necessary information
for shareholders to assess the
Group’s performance, business model
and strategy. The Committee was
satisfied that, taken as a whole, the
2021 Annual Report and Accounts are
fair, balanced and understandable.
The Audit Committee assesses
whether suitable accounting policies
have been adopted and whether
appropriate estimates and judgements
have been made by management.
The Committee also reviews
accounting papers prepared by
management, and reviews reports
by the external auditors. The specific
areas reviewed by the Committee
during the year were:
› Revenue recognition
› Management override of controls
› Separately disclosed items
› Appropriateness of the carrying
value of goodwill, intangibles and
other assets arising on acquisition
› Going concern review
› Goodwill impairment review
Dear Shareholder,
I am pleased to present the Audit
Committee Report for the year ended
30 April 2021, describing our work
during the past year.
COMPOSITION AND EXPERIENCE
OF THE AUDIT COMMITTEE
The Audit Committee consists of two
Non-Executive Directors, including
myself as chair, and the Executive
Chairman. All three have considerable
industry experience in senior financial
and operational roles and all are
therefore regarded as having recent
and relevant experience.
The Audit Committee met on four
occasions during the year.
RESPONSIBILITIES OF THE
AUDIT COMMITTEE
The terms of reference of the
Committee are available on the
Company’s website. In accordance
with these, the Committee has primary
responsibility for:
› Reviewing the effectiveness of the
Group’s internal controls, including
review of the scope and adequacy
of the Company’s processes
and controls in respect of
Whistleblowing and Anti-Bribery.
› Monitoring the integrity of the
Group’s financial statements and
the external announcements of the
Group’s results.
Accrol Group Holdings plc // Annual Report & Accounts 2021Governance 41
ANTI-BRIBERY AND CORRUPTION
The Group’s commitment to act
professionally, fairly and with integrity
at all times is reflected in our zero-
tolerance approach to all forms of
bribery, corruption, fraud and theft.
It has in place appropriate Board
approved policies and procedures
designed to ensure adherence to the
principles of the Bribery Act 2010 and
to take account of ‘Business Principles
for Countering Bribery’ published by
Transparency International, these
also cover corporate hospitality and
gifts, and appropriate business ethics.
Compliance with these policies is
confirmed annually by the Group’s
management teams.
SIMON ALLPORT
Chairman of the Audit Committee
13 July 2021
REVIEW OF EXTERNAL
AUDITORS’ EFFECTIVENESS
The Committee reviewed the
external auditors’ performance and
independence, by considering the
qualifications, expertise and resources
of BDO and its objectivity on an
ongoing basis throughout the year.
This was done by taking into account
the following:
› The views of the Executive Directors
› Consideration of responses
from BDO to questions from the
Committee
› The audit findings reported to the
Committee, including BDO’s report
on internal quality procedures
› The relationship with BDO as a
whole, including the provision of
any non-audit services, to confirm
there are no relationships between
the auditors and the Company
other than in the ordinary course
of business which could adversely
affect independence and objectivity
Based on this information the
Committee is satisfied that the
external audit process has operated
effectively, and BDO continued to
bring independence and prove
effective in its role as external auditors.
INTERNAL CONTROL AND RISK
MANAGEMENT
The Audit Committee supports the
Board in reviewing the Group’s risk
management methodology and
the effectiveness of internal control.
Regular internal control updates are
provided to the Audit Committee,
which include reviewing and updating
the risk register and assessing the
mitigating actions in place and
updates to action plans agreed in
previous meetings. No significant
issues were identified.
INTERNAL AUDIT
The Group does not currently have
a formal internal audit function
but targeted reviews and visits to
operations are performed by senior
members of the Finance team which
comprises qualified accountants.
The team is responsible for reviewing
and reporting on the effectiveness of
internal controls and risk management
systems. This approach is considered
appropriate and proportionate for
the size of the Group’s operations
and does not affect the work of the
external auditors.
MODERN SLAVERY ACT
We are committed to implementing
and enforcing systems and controls
to ensure there is no modern slavery
or human trafficking taking place
within our businesses or supply
chains. Adherence to these principles
is addressed through staff induction,
ongoing training and communications
to address the importance of a
zero-tolerance attitude. Suppliers are
required to comply with our code
of conduct on these matters with
compliance enforced through robust
vendor audits, supplier visits and
ongoing training.
WHISTLEBLOWING
The Group culture is committed
to honesty, openness, integrity
and accountability and considers
it fundamental that any concerns
our employees have about the
Company can be raised without fear
of recrimination or victimisation.
In support of this, the Group has in
place a whistleblowing policy which
encourages employees to report
any areas of concern that they may
have in respect of conduct within
the organisation that could fall below
these expected standards.
Any matters raised through the
whistleblowing process are reported
to the Chief Executive Officer. Where
a matter is raised, a proportionate
investigation is undertaken by
independent management with
support and guidance from the
Committee as necessary. The Group
is pleased to report that no incidents
have been reported during the year.
Accrol Group Holdings plc // Annual Report & Accounts 2021 Governance 42
REMUNERATION REPORT
STATEMENT FROM THE CHAIRMAN OF
THE REMUNERATION COMMITTEE
Euan Hamilton Chairman of the Remuneration Committee
The remainder of this report is split out
into the following two sections:
› Annual Report on remuneration
providing details of the payments
made to Directors in the year
ending 30 April 2021 (page 43); and
› Directors’ remuneration policy setting
out the Company’s remuneration
policy (pages 44 to 46).
EUAN HAMILTON
Chairman of the Remuneration
Committee
13 July 2021
The policy is set out in the following
pages, with a summary of key
principles provided below:
› 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 Accrol is capable
of attracting and retaining the
individuals needed to rebuild and
grow the Company; and
›
recognising our growth aspirations
and the need to deliver ongoing
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;
›
introduction of new product; 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.
I am pleased to introduce the
Directors’ Remuneration Report
for Accrol Group Holdings plc for
the year ended 30 April 2021. This
report includes my statement, the
Annual Report on remuneration for
the year and sets out our Directors’
remuneration policy.
OUR DIRECTORS’
REMUNERATION POLICY
In the reported financial year, the
remuneration policy has not altered
from that described in our previous
Annual Report, which followed
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.
Accrol Group Holdings plc // Annual Report & Accounts 2021Governance DIRECTORS’ REPORT ON REMUNERATION
43
REMUNERATION COMMITTEE
Euan Hamilton (chair)
Daniel Wright
Simon Allport
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 the terms and conditions of their service,
appropriate remuneration and the grant of any share 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 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 three times.
DIRECTORS’ REMUNERATION
The tables below set out the total remuneration for Executive and Non-Executive Directors for the financial years ending 30 April 2021 and 30 April 2020.
Executive Directors
Gareth Jenkins
Daniel Wright
Richard Newman*
Non-Executive Directors
Euan Hamilton
Simon Allport
Salaries(1)
£
375,000
160,000
67,500
Benefits
in kind(2)
£
13,381
–
2,024
Pension(3)
£
45,000
–
5,063
Total
remuneration
2021
£
Total
remuneration
2020
£
838,381
320,573
135,337
612,735
210,000
–
Bonus(4)
£
405,000
162,000
60,750
Total fees
2021
50,000
50,000
Total fees
2020
49,583
49,583
(1) Full base salary paid during the relevant financial year.
(2) Benefits consist of the provision of a company car (or cash equivalent) and private healthcare.
(3) The pension figure represents the value of the Company’s contribution to the individual’s pension scheme and/or the cash value of payments in lieu of pension contribution.
(4) The annual bonus is the cash value of the bonus in respect of the year ended 30 April 2021.
*
Richard Newman was appointed to the Board on 1 February 2021.
Accrol Group Holdings plc // Annual Report & Accounts 2021 Governance
44
DIRECTORS’ REPORT ON REMUNERATION CONTINUED
REMUNERATION POLICY
The Remuneration Committee will periodically review the policy to confirm the remuneration framework continues to align with the strategy and objectives
of the business. During the year the Committee received advice from an independent external consulting firm concerning market facing reward packages for
Executive Directors and senior management.
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 in place since April 2016. The Company has also adopted and subsequently refined a Management Incentive Plan
(“MIP”), and a long-term incentive plan (“LTIP”) to align the interests of senior management (Chairman, CEO, CFO, COO, Commercial Director) with those of the
shareholders. The MIP was designed to reflect the business context and awards cover the performance period starting 1 May 2018 and ending 30 April 2021.
No further grants of options have been made under the MIP since those made in May 2018, and no further awards will be made under the MIP.
A new LTIP was approved on 5 March 2021 based on market standard annual awards and is designed to incentivise the senior management team after the MIP ceased
in April 2021.
The Company has also introduced an employee share plan for the broader employee base that was launched in May 2021.
MIP Awards FY21
Movement in the share options granted under the MIP are as follows:
Daniel Wright
Gareth Jenkins
Senior managers
Total
Exercise price
(p)
Options at
30 April 2020
Options
transferred
in the period
0.1
0.1
0.1
7,488,067
12,218,238
10,757,116
30,463,421
–
–
–
–
Options
exercised
(5,700,738)
(9,396,545)
(4,213,359)
Options
lapsed
Options at
30 April 2021
(477,070)
(623,227)
(2,529,017)
1,310,259
2,198,466
4,014,740
(19,310,642)
(3,629,314)
7,523,465
LTIP Awards FY21
Movement in the share options granted under the LTIP are as follows:
Daniel Wright
Gareth Jenkins
Richard Newman
Senior managers
Total
Exercise price
(p)
Options at
30 April 2020
0.1
0.1
0.1
0.1
–
–
–
–
–
Options
awarded
in the period
362,903
907,258
554,435
1,327,224
3,151,820
Options
exercised
Options
lapsed
Options at
30 April 2021
–
–
–
–
–
–
–
–
–
–
362,903
907,258
554,435
1,327,224
3,151,820
Accrol Group Holdings plc // Annual Report & Accounts 2021Governance
45
REMUNERATION POLICY SUMMARY – EXECUTIVE DIRECTORS
PURPOSE AND LINK TO STRATEGY
OPERATION
Base salary
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.
Benefits
To attract and retain the right individuals and level
of talent required to support achievement of both
short and long-term value creation.
Pension
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 Group.
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 Remuneration Committee.
To attract and retain the right individuals and level
of talent required to support achievement of both
short and long-term value creation.
An annual pension allowance up to 12.5% of base salary, which is paid either into a pension scheme
operated by the Group 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, is made when determining the most appropriate mix of pension and cash contributions for
each individual on an annual basis.
Annual Bonus Plan
To incentivise delivery of the Group’s annual
financial and strategic goals.
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.
Management Incentive Plan (“MIP”)
To incentivise the delivery of key performance
measures over the long term.
To retain key Executives and ultimately increase
their share ownership in the Company, thus
aligning their interests with those of shareholders.
The maximum bonus available is 120% of base salary per annum.
Bonus awards can be reduced by up to 40% for failure to achieve TSR and personal performance targets.
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.
The MIP is a share option plan designed to attract and engage the right calibre of individual to effect the
turnaround required by the Company. The MIP is structured as a three-year plan; there is no intention to
extend the MIP beyond its current timeframe.
The MIP comprises three individual awards (the “Awards”), each one being conditional on performance
targets based on the Company’s EBITDA performance in FY19, FY20 and FY21 (together “the Performance
Period”). The Awards will have a nominal value exercise price.
The vesting criteria of each of the Awards is based on the achievement of adjusted EBITDA targets for
FY19, FY20 and FY21 (the “EBITDA Targets”) (as relevant) and the Company not being in any material
breach of any of its banking covenants.
Following the Remuneration Committee’s determination as to whether the relevant EBITDA Targets have
been met, and provided the banking covenants are not materially breached, the Awards vest, with 30% of
the shares issued on exercise of options subject to lock-in arrangements.
Upon a takeover, depending on the price per ordinary share at which a takeover offer is accepted, a
proportion of the Awards will immediately vest on the occurrence of the takeover. Any Awards not vesting
on a takeover will generally lapse six months following this event.
Accrol Group Holdings plc // Annual Report & Accounts 2021 Governance 46
DIRECTORS’ REPORT ON REMUNERATION CONTINUED
REMUNERATION POLICY SUMMARY – EXECUTIVE DIRECTORS CONTINUED
PURPOSE AND LINK TO STRATEGY
OPERATION
Long Term Incentive Plan (“LTIP”)
To incentivise the delivery of key performance
measures over the long term.
The LTIP is a share option plan designed to attract and engage the right calibre of individual beyond
the initial turnaround period of the Company. The LTIP is structured as a five-year plan.
To retain key Executives and ultimately increase
their share ownership in the Company, thus
aligning their interests with those of shareholders.
The LTIP currently comprises a single award (the “Award”) based on the Company’s EBITDA performance
in FY23 (“the Performance Period”). The Award will have a nominal value exercise price.
The vesting criteria of the Award is based on the achievement of adjusted EBITDA targets for FY23
(the “EBITDA Target”) (as relevant) and the Company not being in any material breach of any of its
banking covenants.
Following the Remuneration Committee’s determination as to whether the relevant EBITDA Target
has been met, and provided the banking covenants are not materially breached, the Awards vest,
(subject to lock-in arrangements).
Upon a takeover, depending on the price per ordinary share at which a takeover offer is accepted,
a proportion of the Award will immediately vest on the occurrence of the takeover. Any Awards not
vesting on a takeover will generally lapse six months following this event.
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.
Payment of the annual bonus plan 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.
During the MIP 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, their
unvested Awards shall cease to become exercisable on the date of cessation of employment and lapse in full 30 days following this date.
A Good Leaver is someone who ceases employment as a result of death, ill health, injury or disability evidenced to the satisfaction of the Remuneration Committee;
retirement at the normal retirement age in accordance with the Group’s internal policies; or any other reason the Remuneration Committee permits.
REMUNERATION POLICY – NON-EXECUTIVE DIRECTORS
PURPOSE AND LINK TO STRATEGY
OPERATION
Non-Executive Directors’ fees
To attract and retain the right individuals required
to support the achievement of both short and long-
term value creation.
EUAN HAMILTON
Chairman of the Remuneration Committee
13 July 2021
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 & Accounts 2021Governance DIRECTORS’ REPORT
47
The Directors present their report together with the audited consolidated financial statements, along with the auditors’ report for the year ended 30 April 2021.
PRINCIPAL ACTIVITIES
The principal activity of the Group is that of soft tissue paper converters, supplying private label toilet tissue, kitchen towel, facial tissue and wet wipes to major
discounters and major grocery retailers.
BUSINESS REVIEW AND FUTURE DEVELOPMENTS
The Strategic Report on pages 2 to 33, including the Chairman’s Statement, Chief Executive Officer’s Review and Finance Review, report on the performance of the
Group for the year ended 30 April 2021 and the likely future developments, which forms part of this report by reference.
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:
Daniel Wright
Gareth Jenkins
Richard Newman (appointed 1 February 2021)
Euan Hamilton
Simon Allport
Details of the Directors’ remuneration are shown in the report of the Remuneration Committee on pages 42 to 46. Details of the Directors’ interests in the share capital
of the Company are set out below. The roles and biographies of the Directors are set out on pages 36 and 37.
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 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 2021, the Directors did not pay an interim dividend (2020: £nil) but recommend a final dividend of 0.5 pence per share (2020: £nil)
consistent with the Board’s previously stated intention to return to the dividend list at the earliest appropriate opportunity.
FINANCIAL INSTRUMENTS
Details of the Group’s financial risk management objectives and policies are disclosed in note 21 to the financial statements.
ENVIRONMENTAL REPORTING
Under the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018, we are mandated to disclose our UK energy
use and associated greenhouse gas (GHG) emissions. Specifically, and as a minimum, we are required to report those GHG emissions relating to natural gas, electricity
and transport fuel, as well as an intensity ratio, under the SECR Regulations.
EMISSIONS DATA
The Group has called on the expertise and support of an energy specialist to guide it to compliance. This has involved a detailed understanding of the Accrol business
and the extensive gathering and analysis of energy and transport data to produce a set of auditable reports.
Standard conversion rates used in this report were obtained from the UK Government. The energy data used in this report relates to invoiced consumption against
specific meter points for the specified period and has been qualified by the suppliers of the invoices. Transport and supplementary fuel data was provided directly by
the Company, together with the selected intensity ratio metric and the supporting intensity ratio data.
EMISSIONS KEY PERFORMANCE INDICATORS (KPI’S)
KPI
(Scope 1) CO2 emissions
(Scope 2) CO2 emissions
Emissions from energy exports
Total CO2e (net energy export)
Energy consumption
Energy exported
Total carbon emissions
Total carbon emissions
Total production
Group intensity ratio (tCO2e per tonnes of production)
Unit
kgCO2e
kgCO2e
kgCO2e
kgCO2e
kWh
kWh
kgCO2e
tCO2e
t
2020/21
86,462
2,768,501
0
0
12,265,597
0
2,854,962
2,855
98,425
0.029
2019/20
% Variance
68,810
2,702,606
0
0
10,888,057
0
2,771,415
2,771
84,781
0.033
25.6%
2.4%
0%
0%
12.6%
0%
3.0%
3.0%
16.1%
-11.3%
Accrol Group Holdings plc // Annual Report & Accounts 2021 Governance
48
DIRECTORS’ REPORT CONTINUED
ENERGY EFFICIENCY MEASURES
Below is a narrative of principal measures that have been taken within the reported financial year that have had a direct impact on the energy efficiency
of the organisation.
For the current financial year, it had been planned to implement a thoroughly structured approach to energy reduction projects, however, the COVID-19 pandemic
prevented this being fulfilled. Despite this, the Group was able to identify and target a number of areas to contribute to improving energy efficiency, including:
› Continued roll-out of removal of halogen lighting in Blackburn and replacing with LED lights
› Replacement of all external lights with LED
› Programme of air leak detection and repair
› New controls on air compressors to aid efficient running
› Removal of additional extraction ducting in Blackburn
› Fixing of fast acting doors to reduce heat loss in winter months
›
Increase in line efficiency through the extension of run lengths and reduction of change-overs, hence more consistent running of machine motors
› As part of the automation projects in Blackburn and Leyland, the Group has invested in new energy efficient stretch-wrapping equipment.
CORPORATE GOVERNANCE
A report on Corporate Governance and compliance with the QCA Corporate Governance Code is set out on pages 38 and 39, 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 policies 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 £27,010 (2020: £29,417) were made during the year. There were no political donations during the year.
RESEARCH AND DEVELOPMENT
Research and development activities remain a priority. During the year, the Group developed two innovative new products, ‘Magnum’ and ‘Oceans’, both of which
have now been released to the market.
POST BALANCE SHEET EVENTS
There are no adjusting or non-adjusting events subsequent to the year end.
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.
Further information can be found in the Section 172 statement on pages 22 and 23.
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.
FOSTERING RELATIONSHIPS WITH KEY STAKEHOLDERS
The business values its relationship with all key stakeholders and places great emphasis on maintaining regular reviews to develop and foster business relationship
which are integral to longer-term growth and success.
Please see pages 22 and 23 of the Strategic Report, the Section 172 statement.
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.
Accrol Group Holdings plc // Annual Report & Accounts 2021Governance 49
DIRECTORS’ INTERESTS
The interests in the shares of the Company of those Directors serving at 13 July 2021 and as at the date of approving these financial statements, all of which are
beneficial, in the share capital of the Company were as follows:
Daniel Wright
Gareth Jenkins
Richard Newman
Euan Hamilton
Simon Allport
Ordinary shares
% of issued
share capital
9,972,726
4,265,632
5,000
–
–
3.20%
1.37%
–
–
–
SUBSTANTIAL SHAREHOLDERS
As at 30 June 2021 the Company was aware of the following individual registered shareholdings of more than 3% of the Company’s issued share capital, representing
60.97% of the issued share capital of the Company.
Investor
Schroder Investment Management
Premier Miton Investors
NorthEdge Capital
Canaccord Genuity Wealth Management
Tellworth Investments
Killik Asset Management
Gresham House
Lombard Odier Asset Management
James Sharp & Co
Number of shares
Percentage
36,980,931
31,521,104
27,487,377
22,790,646
20,423,505
15,231,331
13,855,260
11,834,020
9,717,214
11.88
10.12
8.83
7.32
6.56
4.89
4.45
3.80
3.12
GOING CONCERN
Details are disclosed in note 2 to the 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.
AUDITORS
BDO 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 Delta Building, Roman Road, Blackburn BB1 2LD at 10:00am on 24 September 2021.
On behalf of the Board of Directors
GARETH JENKINS
Chief Executive Officer
13 July 2021
Accrol Group Holdings plc // Annual Report & Accounts 2021 Governance
50
DIRECTORS’ STATEMENT OF RESPONSIBILITY
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the Group financial
statements in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006. 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 for that period. The Directors are also required to prepare financial statements in accordance with the rules of the London Stock Exchange for
companies trading securities on AIM.
In preparing these financial statements, the Directors are required to:
› select suitable accounting policies and then apply them consistently;
› make judgements and accounting estimates that are reasonable and prudent;
› state whether they have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006,
subject to any material departures disclosed and explained in the financial statements;
› prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with
reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the requirements of the
Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The Directors are responsible for ensuring the Annual Report and the financial statements are made available on a website. Financial statements are published on the
Company’s website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity of the Company’s website is the responsibility of the Directors. The Directors’ responsibility also extends
to the ongoing integrity of the financial statements contained therein.
Accrol Group Holdings plc // Annual Report & Accounts 2021Governance INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF ACCROL GROUP HOLDINGS PLC
51
OPINION ON THE FINANCIAL STATEMENTS
In our opinion:
›
›
›
›
the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s financial position as at 30 April 2021 and of the Group’s
loss for the year then ended;
the Group financial statements have been properly prepared in accordance with international accounting standards in conformity with the requirements of the
Companies Act 2006;
the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006
We have audited the financial statements of Accrol Group Holdings plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the year ended 30 April 2021 which
comprise the Group Statement of Comprehensive Income, the Group and Parent Company Statement of Financial Position, the Group Statement of Cash flows, the
Group and Parent Company Statement of Changes in Equity and notes to the financial statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and international accounting standards
in conformity with the requirements of the Companies Act 2006. The financial reporting framework that has been applied in the preparation of the Parent Company
financial statements is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 101 Reduced Disclosure Framework
(United Kingdom Generally Accepted Accounting Practice).
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our opinion.
Independence
We remain independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of the financial statements
in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
CONCLUSIONS RELATING TO GOING CONCERN
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements
is appropriate.
We consider going concern to be a key audit matter as a result of the Group continuing to report losses. In addition, the inputs to the forecasts are highly judgemental,
with changes potentially having a material impact on the conclusion below.
Our evaluation of the Directors’ assessment of the Group and the Parent Company’s ability to continue to adopt the going concern basis of accounting and in
response to the key audit matter included the following procedures:
› Examining the Directors’ business plan covering the period to 31 July 2022, which is also used as a basis for the discounted cashflow model in the impairment
assessment of goodwill and other non-current assets. We examined the cashflow forecasts for key judgements as well as considering downside sensitivities
to these
› We challenged the Directors’ stress test scenarios including levers available to the Directors to mitigate the impacts
› We challenged the Directors on the key assumptions included in the scenarios and confirmed the Directors’ mitigating actions are within their control. For each
scenario we recalculated the key covenants to check that there was still sufficient headroom
› The forecast includes key assumptions in respect of (1) the sterling to US dollar foreign exchange rate; (2) parent reel pricing; and (3) the efficiencies from the
operational and commercial turnaround which the Directors have put in place over the last three years. We have challenged each area by considering whether
the assumptions put in place were realistic based on third party sources and historic trends. We also corroborated each assumption to supporting third party
documentation
› We re-calculated the covenants both at the year end and quarterly within the forecast period to check there was sufficient headroom
› We checked the availability of financing through the going concern period back to loan documentation and agreed the renewal of the rolling credit facility
subsequent to the year-end through third party documentation
› We assessed the adequacy of the disclosure within the financial statements relating to the Directors’ assessment of the going concern basis of preparation
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast
significant doubt on the Group’s and the Parent Company’s ability to continue as a going concern for a period of at least twelve months from when the financial
statements are authorised for issue.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.
Accrol Group Holdings plc // Annual Report & Accounts 2021 Financial Statements 52
INDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF ACCROL GROUP HOLDINGS PLC
OVERVIEW
COVERAGE
KEY AUDIT MATTERS
Group profit before tax
Group revenue
Group total assets
Acquisition accounting
Classification of Separately Disclosable Items
Going Concern
MATERIALITY
Group financial statements as a whole
£685,000 (2020: £672,000), being 0.5% of revenue (2020: 0.5% of revenue)
2021
100%
100%
100%
2021
Yes
Yes
Yes
2020
100%
100%
100%
2020
No
Yes
Yes
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system of internal control, and assessing the risks
of material misstatement in the financial statements. We also addressed the risk of management override of internal controls, including assessing whether there was
evidence of bias by the Directors that may have represented a risk of material misstatement.
The Group manages its operations from two principal locations in the UK.
In assessing the risk of material misstatement to the Group financial statements, and to ensure we had adequate quantitative coverage of significant accounts in the
financial statements, of the eight (2020: four) entities of the Group, we determined that two (2020: one) components represented the principal business units within
the Group and these were identified as significant components.
The audit of all significant components was performed by the Group audit team. For these two significant components, we performed a full scope audit of the
complete financial information. For the remaining components, the Group audit team have performed specified audit procedures on specific accounts within that
component that we considered had the potential for the greatest impact on the Group financial statements, either because of the size of these accounts or their
risk profile.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and
include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified, including those which had the greatest effect
on: the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters were addressed in the context
of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to
the matters described in the Conclusions related to going concern section of our report, we have determined the matters below to be the key audit matters to be
communicated in our report.
Accrol Group Holdings plc // Annual Report & Accounts 2021Financial Statements
53
KEY AUDIT MATTER
Business combinations
As described in note 27 (business
combinations), the Group acquired
two new subsidiaries during the year.
The accounting policy note
for business combinations
is detailed under Consolidation
in note 2 (Summary of Significant
Accounting Policies).
Classification of Separately
Disclosable Items
As described in note 2
(accounting policies), note 3
and note 6 (Separately Disclosable
Items), the Group has items which
are disclosed separately on the
Statement of Comprehensive
Income and are excluded from the
Directors’ reporting of the underlying
performance of the Group.
There were £21.9m of separable
intangibles identified, and £14.8m
of goodwill recognised.
The valuation of the intangibles
is dependent on a number of
key assumptions, in particular
relating to earn out clauses, discount
rate, fair value adjustments and
expected returns.
The setting of these assumptions
is complex and requires the
exercise of significant management
judgement with the support of third
party experts. A small change in the
assumptions and estimates used
to calculate the valuation of the
intangibles could have a significant
effect on the Statement of
Financial Position.
As such, the acquisition accounting
and the resulting valuation of the
intangible assets is considered
a key audit matter.
There were £4.7m of separately
disclosable items that are presented
in the Statement of Comprehensive
Income. The Group has incurred
acquisitions, integration, COVID-related
and operational re-organisation
and restructure costs which have
been accounted for as separately
disclosable items in the financial
statements.
We focused on this area, specifically
to assess whether the items
identified by the Directors meet
the definition within the Group’s
accounting policy and have been
treated consistently, because the
identification of such items requires
judgement by the Directors.
HOW WE ADDRESSED THE KEY AUDIT MATTER IN THE AUDIT
We tested a sample of items from the acquisition balance sheet to ensure
cut off between the pre-acquisition and post acquisition period had been
correctly performed. For example we agreed a sample of transactions from the
acquisition balance sheet to share purchase agreements and valuation reports,
to gain assurance over the opening position.
We checked that the treatment of deal fees and acquisition costs had been
correctly allocated to the Statement of Comprehensive Income not capitalised
as debt or equity.
We checked that the amount of contingent consideration (earn outs)
had been calculated correctly by discussing the basis of the calculation with
management and considered the total contribution as stated in the share
purchase agreement and the discount rate to be the key assumptions and
judgements in determining the contingent consideration. We performed
sensitivity analysis on the earn out scenarios to determine the impact of
material changes to assumptions and agreed that the earn out had been
included in the cost of the investment.
We tested and challenged the inputs to the purchase price allocation exercise
performed to determine the existence and valuation of any separable
intangibles acquired as part of the transaction.
We used an internal valuations specialist to assist us with the challenge
on the discount rate and the model used; they compared the methodology
used to industry guidelines and the outputs to other comparable transactions.
We re-performed the calculation of the resulting investment and goodwill
balance to ensure in line with IFRS 3.
Key observations
No issues were identified from our testing.
We challenged the Directors’ rationale for the designation of certain items
such as Turnaround and Operational costs and assessed these against the
Group’s accounting policy. We also considered the consistency of the treatment
of these items with prior periods, taking into account the significant changes
in the business that have occurred during the year.
We assessed management’s classification of acquisitions, integration,
COVID-related and operational re-organisation and restructure costs to check
the levels reported in non-recurring expenditure are indeed one-off and not
expected in future periods. We also checked these costs back to third party
supporting documentation.
We also challenged the narrative in the front end of the financial statements
to check equal prominence was given to both normal and adjusted measures
to the financial statements.
Key observations
The results of our testing were satisfactory.
Accrol Group Holdings plc // Annual Report & Accounts 2021 Financial Statements 54
INDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF ACCROL GROUP HOLDINGS PLC
OUR APPLICATION OF MATERIALITY
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality to be the
magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the
financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance materiality,
to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account
of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Materiality
Basis for determining
materiality
Rationale for the
benchmark applied
GROUP FINANCIAL STATEMENTS
PARENT COMPANY FINANCIAL STATEMENTS
2021
£
685,000
2020
£
672,000
2021
£
613,000
2020
£
£404,000
0.5% of revenue
0.5% of revenue
3.5% of net assets
3.5% of net assets
Entity does not trade and
only holds an investment
and some IC balances and
therefore, net assets is used
to calculate materiality.
Entity does not trade and
only holds an investment
and some IC balances and
therefore, net assets is used
to calculate materiality.
Revenue is a stable measure
reflecting the operational
growth of the business
and is not impacted by
turnaround and operational
costs which vary year
on year as the Group
completes its turnaround,
whilst it is still loss making
and is considered to be
the measure of most
interest to the users of the
financial statements as the
turnaround comes to
an end.
Revenue is a stable measure
reflecting the operational
growth of the business
and is not impacted by
turnaround and operational
costs which vary year
on year as the Group
completes its turnaround,
whilst it is still loss making
and is considered to be
the measure of most
interest to the users of the
financial statements as the
turnaround comes to
an end.
Performance materiality
£445,000
£432,000
£398,000
£243,000
Basis for determining
performance materiality
65% of materiality
65% of materiality
65% of materiality
65% of materiality
In considering individual account balances and classes of transactions we apply a lower level of materiality in order to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected misstatements exceeds materiality. Performance materiality was set at £445,000 (2020: £432,000),
representing 65% (2020: 65%) of materiality. The level reflects the aggregation risk of errors in the Group. No specific materiality was applied to defined areas of the
financial statements.
Component materiality
Our audit work on each significant component was executed at levels of materiality applicable to each individual entity which was lower than Group materiality.
Component materiality ranged from £27,000 to £621,000 (2020: £399,000 to £598,000). Parent Company materiality was £613,000 (2020: £399,000).
Reporting threshold
We agreed with the Audit Committee that we would report to the Committee all individual audit differences identified during the course of our audit in excess
of £20,000 (2020: £20,000). We also agreed to report differences below these thresholds that, in our view, warranted reporting on qualitative grounds.
Accrol Group Holdings plc // Annual Report & Accounts 2021Financial Statements 55
OTHER INFORMATION
The Directors are responsible for the other information. The other information comprises the information included in the annual report and accounts other than
the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise
appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives
rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact.
We have nothing to report in this regard.
OTHER COMPANIES ACT 2006 REPORTING
Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies Act 2006 and ISAs (UK)
to report on certain opinions and matters as described below.
Strategic report and
Directors’ report
Matters on which we are
required to report by
exception
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 the light of the knowledge and understanding of the Group and Parent Company and its environment obtained in the course
of the audit, we have not identified material misstatements in the Strategic report or the Directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report
to you if, in our opinion:
› adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been
received from branches not visited by us; or
›
the Parent Company financial statements are not in agreement with the accounting records and returns; or
› certain disclosures of Directors’ remuneration specified by law are not made; or
› we have not received all the information and explanations we require for our audit
RESPONSIBILITIES OF 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, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group
or the Parent Company or to cease operations, or have no realistic alternative but to do so.
Accrol Group Holdings plc // Annual Report & Accounts 2021 Financial Statements 56
INDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF ACCROL GROUP HOLDINGS PLC
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud
or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted
in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above,
to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including
fraud, is detailed below:
Based on our understanding and accumulated knowledge of the Group and Parent Company and the sector in which it operates we considered the risks of acts
by the Group and Parent Company which were contrary to applicable laws and regulations, including fraud, and whether such actions or non-compliance might have
a material effect on the financial statements. These included but are not limited to those that relate to the form and content of the financial statements, such as Group
accounting policies, UK GAAP, ISA (UK), the Companies Act 2006, relevant taxation legislation, Health and Safety and the Bribery Act 2010.
We determined that the principal risks were related to posting inappropriate journal entries, management bias in accounting estimates, and revenue cut off. Our audit
procedures included, but were not limited to:
› Obtaining an understanding of the control environment in monitoring compliance with laws and regulations
› Agreement of the financial statement disclosures to underlying supporting documentation;
› Challenging assumptions and judgements made by management in their significant accounting estimates, in particular in relation to the share based payments,
incremental borrowing rate for the right of use assets under IFRS 16, cashflow forecasts and the discount rate used in goodwill impairment assessment, stock
provision, the discount rate and forecasted EBITDA used in the purchase price allocation exercise;
›
Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations or including specific keywords;
› Testing a sample of revenue transactions within a specified cut off window pre and post year end to determine if they have been recorded in the correct period;
› Communicating relevant identified laws and regulations and potential fraud risks to all engagement team members and remained alert to any indications of fraud
or non-compliance with laws and regulations throughout the audit;
› Discussions with management, including consideration of known or suspected instances of non-compliance with laws and regulation and fraud;
› Review of minutes of Board meetings and Audit Committee meetings throughout the period; and
Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a material
misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery,
misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws
and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditor’s report.
USE OF OUR REPORT
This report is made solely to the Parent Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the Parent Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Parent Company and the Parent Company’s members
as a body, for our audit work, for this report, or for the opinions we have formed.
STUART WOOD (SENIOR STATUTORY AUDITOR)
For and on behalf of BDO LLP, Statutory Auditor
Manchester, UK
13 July 2021
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
Accrol Group Holdings plc // Annual Report & Accounts 2021Financial Statements CONSOLIDATED INCOME STATEMENT
FOR YEAR ENDED 30 APRIL 2021
Revenue
Cost of sales
Gross profit
Administration expenses
Distribution costs
Other income
Operating loss
Analysed as:
– Adjusted EBITDA(1)
– Depreciation
– Amortisation
– Share based payments
– Separately disclosed items
Operating loss
Finance costs
Finance income
Loss before tax
Tax (charge)/credit
Loss for the year attributable to equity shareholders
Earnings per share
Basic loss per share
Diluted loss per share
57
2020
£’000
134,773
(105,239)
29,534
(18,810)
(11,490)
585
(181)
10,641
(4,201)
(2,040)
(2,351)
(2,230)
(181)
(1,977)
267
(1,891)
312
(1,579)
Pence
(0.8)
(0.8)
Note
4
5
11
13
26
6
9
9
10
7
7
2021
£’000
136,594
(98,710)
37,884
(27,072)
(11,424)
–
(612)
15,644
(4,786)
(3,520)
(3,245)
(4,705)
(612)
(2,196)
242
(2,566)
(74)
(2,640)
Pence
(1.1)
(1.1)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR YEAR ENDED 30 APRIL 2021
Loss for the year attributable to equity shareholders
Other comprehensive income for the year
Revaluation of derivative financial instruments(2)
Tax relating to components of other comprehensive income
Total comprehensive loss attributable to equity shareholders
The notes are an integral part of these consolidated financial statements.
2021
£’000
(2,640)
–
–
(2,640)
2020
£’000
(1,579)
(50)
9
(1,620)
(1) Adjusted EBITDA, which is defined as loss before finance costs, income tax, depreciation, amortisation, share based payments and separately disclosed items, is a non-GAAP metric used by management
and is not an IFRS disclosure (see note 30).
Items that could potentially be reclassified subsequently to profit and loss.
(2)
Accrol Group Holdings plc // Annual Report & Accounts 2021 Financial Statements
58
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 APRIL 2021
ASSETS
Non-current assets
Property, plant and equipment
Lease receivables
Intangible assets
Deferred tax assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Current tax asset
Lease receivables
Cash and cash equivalents
Derivative financial instruments
Total current assets
Total assets
Current liabilities
Borrowings
Trade and other payables
Financial instruments
Income taxes
Provisions
Total current liabilities
Total assets less current liabilities
Non-current liabilities
Borrowings
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Capital and reserves
Share capital
Share premium
Capital redemption reserve
Retained earnings
Total equity shareholders’ funds
The financial statements were approved by the Board of Directors on 13 July 2021.
Signed on behalf of the Board of Directors
RICHARD NEWMAN
Chief Financial Officer
Company Registration Number 09019496
Note
11
12
13
10
14
15
12
16
20
19
17
20
18
19
10
18
23
2021
£’000
63,341
5,027
61,763
–
130,131
23,185
26,480
–
675
7,604
–
57,944
2020
£’000
39,740
5,703
26,877
288
72,608
9,373
20,680
40
649
8,147
28
38,917
188,075
111,525
(12,349)
(47,031)
(120)
(300)
(7,321)
(67,121)
120,954
(30,851)
(3,666)
–
(34,517)
(101,638)
86,437
311
108,782
27
(22,683)
86,437
(18,157)
(23,988)
–
–
(158)
(42,303)
69,222
(23,827)
–
(383)
(24,210)
(66,513)
45,012
195
68,015
27
(23,225)
45,012
Accrol Group Holdings plc // Annual Report & Accounts 2021Financial Statements
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR YEAR ENDED 30 APRIL 2021
Balance at 30 April 2019
Effect of adoption of IFRS 16 (net of tax)
Balance at 1 May 2019
Comprehensive (expense)/income
Loss for the year
Revaluation of derivative financial instruments
Tax relating to components of other
comprehensive income
Total comprehensive expense
Transactions with owners recognised directly in equity
Share based payments (net of tax)
Total transactions recognised directly in equity
Balance at 30 April 2020
Comprehensive (expense)/income
Loss for the year
Total comprehensive expense
Transactions with owners recognised directly in equity
Proceeds from shares issued
Transaction costs
Share based payments (net of tax)
Other taxation
Total transactions recognised directly in equity
Balance at 30 April 2021
Note
Share
capital
£’000
195
–
195
Share
premium
£’000
68,015
–
68,015
–
–
–
–
–
–
–
–
–
–
–
–
195
68,015
–
–
116
–
–
–
116
311
–
–
42,494
(1,727)
–
–
40,767
108,782
Capital
redemption
reserve
£’000
Retained
earnings/
(accumulated
losses)
£’000
Hedging
reserve
£’000
41
–
41
–
(50)
9
(41)
–
–
–
–
–
–
–
–
–
–
–
(23,956)
314
(23,642)
(1,579)
–
–
9
(1,579)
(1,620)
27
–
27
–
–
–
–
–
–
1,996
1,996
27
(23,225)
–
–
–
–
–
–
–
(2,640)
(2,640)
–
–
3,163
19
3,182
27
(22,683)
86,437
59
Total
equity
£’000
44,322
314
44,636
(1,579)
(50)
1,996
1,996
45,012
(2,640)
(2,640)
42,610
(1,727)
3,163
19
44,065
Accrol Group Holdings plc // Annual Report & Accounts 2021 Financial Statements
CONSOLIDATED CASHFLOW STATEMENT
FOR THE YEAR ENDED 30 APRIL 2021
60
CONSOLIDATED CASHFLOW STATEMENT
FOR THE YEAR ENDED 30 APRIL 2021
Cashflows from operating activities
Operating loss
Adjustment for:
Depreciation
Profit on disposal of property, plant and equipment
Amortisation
Grant income
Share based payments
Operating cashflows before movements in working capital
(Increase)/decrease in inventories
Decrease in trade and other receivables
Increase in trade and other payables
Decrease in provisions
Decrease in derivatives
Cash generated from operations
Tax received
Net cashflows generated from operating activities
Cashflows from investing activities
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Purchase of intangible assets
Acquisition of subsidiaries net of cash acquired
Receipt of capital element of leases
Lease interest received
Net cashflows used in investing activities
Cashflows from financing activities
Proceeds of issue of ordinary shares
Cost of raising equity
Amounts received from factoring facility
Amounts paid to factoring facility
New leases in year
Repayment of capital element of leases
Repayment of bank loans
Transaction costs of RCF
Lease interest paid
Other interest paid
Net cashflows used in 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
11
13
16
2021
£’000
(612)
4,786
–
3,520
–
3,245
10,939
(8,553)
604
14,800
(418)
148
17,520
40
17,560
(9,112)
–
(1,702)
(32,235)
650
242
(42,157)
42,610
(1,727)
151,645
(161,489)
1,694
(5,764)
(997)
(413)
(844)
(661)
24,054
(543)
8,147
7,604
2020
£’000
(181)
4,201
(585)
2,040
(578)
2,351
7,248
1,789
2,251
8,176
(254)
22
19,232
197
19,429
(3,680)
650
(3,256)
–
623
267
(5,396)
–
–
161,650
(163,523)
–
(4,595)
–
–
(882)
(712)
(8,062)
5,971
2,176
8,147
Accrol Group Holdings plc // Annual Report & Accounts 2021Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION
FOR THE YEAR ENDED 30 APRIL 2021
61
1. GENERAL INFORMATION
Accrol Group Holdings plc (the “Company”) was incorporated with company number 09019496. It is a public company limited by shares and is domiciled in the
United Kingdom. The registered address of the Company is Delta Building, Roman Road, Blackburn, Lancashire, BB1 2LD.
The Company’s subsidiaries are listed in note 25, 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 Group have been prepared in accordance with International Accounting Standards in conformity with the Companies
Act 2006.
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.
NEW STANDARDS, INTERPRETATIONS AND AMENDMENTS EFFECTIVE IN THE YEAR
New standards that have been adopted in the financial statements for the year ended 30 April 2021, but have not had a significant impact on the Group, are as follows:
›
›
IAS 1 ‘Presentation of Financial Statements’ and IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’ (Amendment – Definition of Material)
IFRS 3 ‘Business Combinations’ (Amendment – Definition of Business)
› Revised Conceptual Framework for Financial Reporting
›
IBOR Reform and its Effects on Financial Reporting – Phase 1
› COVID-19-Related Rent Concessions (Amendments to IFRS 16)
NEW STANDARDS, INTERPRETATIONS AND AMENDMENTS NOT YET EFFECTIVE
There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in future accounting
periods that the Group has decided not to adopt early. The Group will undertake an assessment of the impact of the following standards and interpretations in due
course, although they are not expected to have a material impact on the consolidated financial statements in the year of applications when the relevant standards
come into effect.
Effective for the period beginning 1 May 2021:
›
Interest Rate Benchmark Reform – IBOR ‘phase 2’ (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)
Effective for the period beginning 1 May 2022:
› Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37);
› Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16);
› Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41); and
› References to Conceptual Framework (Amendments to IFRS 3)
GOING CONCERN
The Chairman’s Statement and the Chief Executive’s Review 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 cashflow and liquidity. In summary, the Group generated operating
cash of £17.6m and reduced adjusted net debt from £17.9m to £14.6m, whilst significantly investing in automation and manufacturing infrastructure. The Directors
recognise that as of 30 April 2021, the Group has net current liabilities of £9.2m (2020: net current liabilities of £3.4m), which was considered as part of this review.
However, this includes £6.6m of contingent consideration that is likely to be settled by the issue of equity.
As in previous years, the Group’s forecasted performance is dependent on a number of market and macroeconomic factors particularly the sensitivity to the price
of parent reels and the sterling/USD exchange rate which are inherently difficult to predict. The Group did experience some minor operational disruption resulting
from Brexit, but this is not expected to impact the business going forward. The Group’s forecasted performance has been tested for downside scenarios, including
reverse stress tests, relating to sales volume, parent reel prices and foreign exchange rate movements. It also considered the impact of the COVID-19 pandemic on
forecasted performance. The Group considered the likelihood of such events occurring together with the relevant impact thereof and was satisfied that if a scenario
partly or fully takes place the Group has mitigating options available to maintain liquidity and continue its operations.
The Group is currently operating comfortably within its covenants. It also considered the impact of the above downside scenarios on covenant headroom. The
Directors were satisfied that after evaluating the probability of events and available mitigating actions, covenant breaches would be unlikely. At 30 April 2021, available
funds were £12.1m, with further details of the borrowing facilities set out in note 19.
The Directors confirm that, after due consideration, they have a reasonable expectation that the Group has adequate resources to continue in operational existence
for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.
Accrol Group Holdings plc // Annual Report & Accounts 2021 Financial Statements
62
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION CONTINUED
FOR THE YEAR ENDED 30 APRIL 2021
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
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;
rights arising from other contractual arrangements; and
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 three 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 cashflows 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.
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 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 finance costs, tax, depreciation, amortisation, share based payments and separately disclosed 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 reflect those used
for the Group.
REVENUE
Performance obligations and timing of revenue recognition
The Group’s revenue is recognised at a point in time when control of the goods has transferred to the customer. This is when the goods are delivered to the customer.
There is limited judgement needed in identifying the point control passes: once physical delivery of the products to the agreed location has occurred, the Group no
longer has physical possession, usually will have a present right to payment (as a single payment on delivery) and retains none of the significant risks and rewards of
the goods in question.
Determining the transaction price
The transaction price equates to the invoice amount less an estimate of any applicable rebates and promotional allowances that are due to the customer. Rebate
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.
Allocating amounts to performance obligations
The Group has identified one performance obligation (delivery of product to the customer), therefore the entire transaction price is allocated to the identified
performance obligation.
Accrol Group Holdings plc // Annual Report & Accounts 2021Financial Statements 63
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.
SEPARATELY DISCLOSED ITEMS
Items that are material in size or unusual or infrequent in nature are included within operating profit and reported as separately disclosed items in the consolidated
income statement.
The separate reporting of these items, which are presented within the relevant category in the consolidated income statement, helps provide an indication of the
Group’s underlying business performance.
OTHER INCOME
Other income represents profit on sale of property, plant and equipment.
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 property,
plant and equipment. Amortisation is the write down of intangible assets.
The Group’s share based payment charge represents incremental incentives to attract new management as part of the turnaround process. Separately disclosed items
are material in size or unusual or infrequent in nature. Therefore, to aid comparability between periods and understand the underlying performance of the Group these
items 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
› Fixtures, fittings and office equipment
straight line over term of lease
4% straight line, 20% residual value
30% straight line
25% reducing balance
Assets under construction are not depreciated until 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 & Accounts 2021 Financial Statements 64
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION CONTINUED
FOR THE YEAR ENDED 30 APRIL 2021
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 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 relationships are recognised on business combinations if they are separable from the acquired entity or give rise to other contractual/legal rights.
Customer relationships are amortised on a straight-line basis over their useful economic life, typically 6-10 years.
Development costs
Research expenditure is recognised as an expense as incurred. Costs incurred on development projects (relating to the design and testing of new or improved
products) are recognised as intangible assets when the IAS 38 conditions are met. Development costs with a finite useful life that have been capitalised are amortised
on a straight-line basis over the period of its expected benefit.
Computer software
Computer software with a finite useful life that have been capitalised are amortised on a straight-line basis over the period of its expected benefit.
Other intangible assets
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 cashflows that are independent from other assets, the Group estimates the recoverable amount
of the cash-generating unit (“CGU”) to which the asset belongs.
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 either amortised cost, fair value through comprehensive income or fair value through profit or loss depending on the
purpose for which the asset was acquired. The Group does not currently have any assets categorised as fair value through profit or loss.
Amortised cost
These assets arise principally from the provision of goods to customers (trade receivables). They are initially recognised at fair value plus transaction costs that are
directly attributable to their acquisition or issue and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.
Impairment provisions for trade receivables are recognised based on the simplified approach within IFRS 9 to determine lifetime expected credit losses. Expected credit
losses are recognised within administration expenses in the consolidated statement of comprehensive income. The Group has applied a hold to collect business model.
The Group’s financial assets measured at amortised cost comprise trade and other receivables and cash and cash equivalents in the consolidated statement
of financial position.
Cash and cash equivalents comprise cash at bank, short-term deposits held at call with banks and other short-term highly liquid investments with original maturities
of three months or less. Bank overdrafts are disclosed separately within borrowings within current liabilities.
Financial liabilities
The Group classifies its financial liabilities as either fair value through profit or loss or other financial liabilities depending on the purpose for which the liability was
acquired. The Group does not currently have any liabilities categorised as fair value through profit or loss.
Other financial liabilities
Bank borrowings (including amounts owed under the factoring facility) are initially recognised at fair value net of transaction costs where applicable. They are
subsequently measured at amortised cost using the effective interest method. Transaction costs are amortised using the effective interest rate method over the life
of the loan. Trade receivables, to which the borrowings under this facility are related, are recognised in the statement of financial position as the Group continues
to hold the risk and reward.
Trade payables and other short-term monetary liabilities are initially recognised at fair value and subsequently carried at amortised cost using the effective
interest method.
Accrol Group Holdings plc // Annual Report & Accounts 2021Financial Statements 65
SHARE BASED PAYMENTS
The Group issues equity settled share options 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
All leases are accounted for by recognising a right-of-use asset and a lease liability except for:
›
›
leases of low value assets; and
leases with a duration of 12 months or less
Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference
to the rate inherent in the lease unless this is not readily determinable, in which case the Group’s incremental borrowing rate on commencement of the lease is used.
Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease
payments made. Right-of-use assets are typically amortised on a straight-line basis over the remaining term of the lease.
Assets that have a useful economic life longer than the lease term are depreciated over the useful economic life and are transferred out of right-of-use assets at the
end of the lease term.
The Group accounts as a lessor when accounting for sub-leases. In these instances, the Group records a lease receivable, with the corresponding amount netting
against the right-of-use asset arising from the head lease.
Subsequent to initial measurement lease assets increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease
payments received. Income from leases is presented within investing activities in the cashflow statement.
GOVERNMENT GRANTS
Government grants of a capital nature are treated as deferred income and released to the income statement over the expected useful lives of the assets concerned.
Revenue grants are credited to administrative expenses in the income statement in the period to which they relate.
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.
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.
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.
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.
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.
Accrol Group Holdings plc // Annual Report & Accounts 2021 Financial Statements 66
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION CONTINUED
FOR THE YEAR ENDED 30 APRIL 2021
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.
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.
CRITICAL ACCOUNTING JUDGEMENTS IN APPLYING THE ENTITY’S ACCOUNTING POLICIES
Business combinations
Significant judgement is exercised in determining the forecasted performance targets used to calculate the contingent consideration and the discount rates and
weighted average cost of capital to calculate the fair value of the contingent consideration.
The Group exercised judgement in identifying and valuing intangible assets such as customer relationships. This involved calculating discounted cashflows, applying
appropriate attrition rates and discount rates.
Development costs
The Group exercises judgement in determining whether development costs incurred meet the criteria of IAS 38 ‘Intangible Assets’ and hence capitalised. The criteria
where judgement is most required is around determining the technical feasibility of completing the project, the availability of adequate technical, financial, and other
resources to complete and the existence of the market. Not meeting the criteria would result in these costs being expensed as incurred.
Separately disclosed items
During the course of the year the Group incurred expenditure that is material and considered worthy of being separately disclosed. In order to better explain the
underlying performance of the business, management makes a judgement as to which costs should be separately disclosed. Separately disclosing costs that are not
appropriate to do so leads to a risk of mis-stating the Group’s underlying performance.
CRITICAL ACCOUNTING ESTIMATES 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 three CGUs. The recoverable
amount is determined based on value in use calculations. The use of this method requires the estimation of a number of key variables in order to calculate the present
value of the cashflows, including:
›
›
›
future underlying cashflows;
the determination of a pre-tax discount rate; and
long-term growth rates
The future underlying cashflows remain sensitive to a number of key variables, including the sterling/USD exchange rate and parent reel pricing, both of which are
inherently difficult to predict, and which could have a significant effect (positive or negative) on the Group’s cashflows. The COVID-19 pandemic has increased the
variability in this calculation.
More information including carrying values is included in note 13.
Right-of-use assets
Significant judgement is exercised in determining the incremental borrowing rate. IFRS 16 requires the borrowing rate should represent what the lessee would have
to pay to borrow over a similar term and with similar security, the funds necessary to obtain an asset of similar value in a similar economic environment.
Deferred taxation
The Group has recognised deferred tax assets in respect of losses incurred in the current and prior year. This requires the estimation of future profitability in
determining the recoverability of these assets. Specifically, a range of assumptions underpin the profit and cashflow forecasts for the next 12 months, including
those around parent reel prices, the successful management of any foreign exchange downside and the maintenance of the current strong customer relations.
As described above, the Group’s trading performance remains sensitive to a number of key variables which could have a significant effect (positive or negative)
on the Group’s cashflows.
Accrol Group Holdings plc // Annual Report & Accounts 2021Financial Statements 4. REVENUE
The analysis by geographical area of destination of the Group’s revenue is set out below:
United Kingdom
Europe
67
2021
£’000
127,107
9,487
136,594
2020
£’000
128,078
6,695
134,773
MAJOR CUSTOMERS
In 2021 there were five major customers that individually accounted for c.10% and above of total revenues (2020: five customers). The revenues relating to these
customers in 2021 were £30.4m, £26.2m, £23.3m, £21.8m and £13.6m (2020: £34.6m, £26.1m, £20.8m, £17.1m and £13.8m).
5. OPERATING LOSS
Operating loss is stated after (crediting)/charging:
Employee benefit expense (note 8)
Depreciation
Amortisation
Profit on disposal of property, plant and equipment
Research and development expensed as incurred
Net foreign exchange (gains)/losses
Grant income
AUDITOR’S REMUNERATION
Audit services – Company
Audit services – Rest of Group
Non audit services:
Tax compliance services
2021
£’000
19,702
4,786
3,520
–
191
(1,024)
–
2021
£’000
13
139
17
169
2020
£’000
15,952
4,201
2,040
(585)
242
1,174
(578)
2020
£’000
13
67
4
84
Accrol Group Holdings plc // Annual Report & Accounts 2021 Financial Statements
68
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION CONTINUED
FOR THE YEAR ENDED 30 APRIL 2021
6. SEPARATELY DISCLOSED ITEMS
Acquisition professional fees
Acquisition integration costs
Acquisition related items
Operational reorganisation and restructure
Loss on derivative financial instruments
COVID-19 costs
FCA investigation legal costs
Management reorganisation and restructure
Setting up and subsequent exit from Skelmersdale site
Other items
Other items
2021
£’000
2,150
724
2,874
1,034
–
670
22
–
12
93
1,831
4,705
2020
£’000
–
–
–
856
639
209
125
118
90
193
2,230
2,230
A summary of the separately disclosed items for the current year is as follows.
ACQUISITION COSTS £2,150,000 (2020: £NIL)
In November 2020, the Group acquired Leicester Tissue Company, whose principal activity is paper tissue converting. Professional fees of £1,925,000 arose as a result
of the transaction.
In April 2021, the Group acquired John Dale, whose principal activity is the manufacture of wet wipes and facial tissue. Professional fees of £225,000 arose as a result
of the transaction.
INTEGRATION £724,000 (2020: £NIL)
Upon completion of the acquisition of LTC and JD, the Group immediately commenced a structured integration programme. This covered all key areas of the business
including external relationships with customers and suppliers, as well as internal functional reviews to consolidate or integrate activities where appropriate.
Project management costs of £314,000 included expert consultancy advice to support the integration process. Other incremental costs to support this activity
included £218,000 of labour and £162,000 of operational costs, largely relating to transportation and short-term paper transfers. Incremental audit fees of £30,000
have been necessary due to added complexity.
OPERATIONAL REORGANISATION AND RESTRUCTURE £1,034,000 (2020: £856,000)
Following the significant progress made during FY20 to transform the manufacturing capability of the business, it was appropriate to review the whole organisation
to ensure it was aligned with Accrol’s future growth strategy and to deliver world class standards in safety and performance every day. The final elements of the
business turnaround plan were completed during the year with significant capital investment in automation at our Blackburn manufacturing site. The complexity of
maintaining a 24/7 operation during the implementation of this substantial project resulted in an element of incremental labour costs as service levels needed to be
maintained despite the inevitable disruption to normal operations during the period of transition. Once the project had been completed a number of redundancies
were incurred as the overall headcount reduced, reflecting the benefits from the automation investment. The total labour cost of the above was £948,000, with
associated fees of £86,000.
COVID-19 £670,000 (2020: £209,000)
The COVID-19 pandemic has continued to have a significant impact on how the Group conducts its operations, and on the availability of resource and personnel,
to continue to function as an essential provider of products to UK retailers. The Group plans on a certain level of resource, factoring in normal levels of absence and
holiday, to maintain a 24/7 manufacturing operation that is as efficient as possible. High levels of absence during the pandemic, due to illness or self-isolation, required
incremental labour resources to be deployed to maintain service levels to our customers through additional overtime, additional temporary labour and the deferment
of holidays – all of which resulted in additional costs of £292,000.
Additional labour costs of £153,000 were incurred as a dedicated team of people worked on the practical changes that were required in each of our factories,
warehouses, and offices to ensure we maintained fully compliant working environments and to protect our employees. Extra logistics, PPE, cleaning and security
costs of £225,000 were also incurred.
A summary of the separately disclosed items for the prior year is as follows:
Accrol Group Holdings plc // Annual Report & Accounts 2021Financial Statements
69
OPERATIONAL REORGANISATION AND RESTRUCTURE
The prior year saw the final stages of the complex and comprehensive turnaround activities completed. This included costs of £748,000 associated principally with
additional labour and material costs, as legacy performance issues were corrected. The business undertook a full review of the products the site manufactured and the
way it was planned, an assessment of the leadership capabilities and reassignment, a skills assessment and training programme, maintenance regimes and a capital
investment plan for key upgrades. Transportation and storage costs of £108,000 were also incurred in supporting these activities.
LOSS ON DERIVATIVE FINANCIAL INSTRUMENTS
Costs of £639,000 were recorded in the period as the business experienced significant positive changes to its supplier terms as a result of improved trading/turnaround
actions. This happened much quicker than expected, giving an excess of contract requirements which were subsequently cancelled.
COVID-19
The Group incurred incremental costs in March and April 2020, principally relating to overtime and temporary labour of £119,000, to cover employees who were in
isolation. Additional logistics, PPE, cleaning and security costs of £90,000 were also incurred.
FCA INVESTIGATION LEGAL COSTS
As previously disclosed, the FCA initiated an investigation into statements made by the Company between 10 June 2016 and September 2018. Significant consultancy
and legal costs associated with the management of this investigation have been incurred, and the investigation was closed with no action to be taken.
MANAGEMENT REORGANISATION AND RESTRUCTURE
In the early part of the previous financial year, final dual resourcing and legal costs of £118,000 were incurred as activities relating to financial planning/reporting
and procurement were concluded.
7. LOSS PER SHARE
BASIC LOSS PER SHARE
The basic loss per share is calculated by dividing the loss attributable to ordinary equity holders of the Parent by the weighted average number of ordinary shares
outstanding during the year.
Loss for the year attributable to equity shareholders
Weighted average number of shares
Issued ordinary shares at 1 May
Effect of shares issued in the year
Weighted average number of ordinary shares at 30 April
Basic loss per share (pence)
2021
£’000
(2,640)
Number
’000
195,247
51,214
246,461
(1.1)
2020
£’000
(1,579)
Number
’000
195,247
–
195,247
(0.8)
DILUTED LOSS PER SHARE
Diluted loss per share is calculated by dividing the loss attributable to ordinary equity holders of the Parent by the weighted average number of ordinary shares
outstanding during the year, adjusted for potentially dilutive share options.
Loss for the year attributable to equity shareholders
Weighted average number of shares (basic)
Effect of conversion of Accrol Group Holdings plc share options
Weighted average number of ordinary shares at 30 April
Diluted loss per share (pence)
2021
£’000
(2,640)
Number
’000
246,461
–
246,461
(1.1)
2020
£’000
(1,579)
Number
’000
195,247
–
195,247
(0.8)
No adjustment has been made in 2021 and 2020 to the weighted average number of shares for the purpose of the diluted earnings per share calculation as the effect
would be anti-dilutive.
Accrol Group Holdings plc // Annual Report & Accounts 2021 Financial Statements
70
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION CONTINUED
FOR THE YEAR ENDED 30 APRIL 2021
8. EMPLOYEE COSTS
Employee costs during the year amounted to:
Wages and salaries
Social security costs
Other pension costs
Share based payments (note 26)
The monthly average numbers of employees (including the Executive Directors) during the year were:
Production
Administration
9. FINANCE COSTS
Bank loans and overdrafts
Lease interest
Amortisation of finance fees
Unwind of discount on provisions
Total finance costs
Lease interest income
Total finance income
2021
£’000
14,581
1,530
346
3,245
19,702
2020
£’000
12,096
1,218
287
2,351
15,952
Number
Number
334
82
416
2021
£’000
661
844
438
253
2,196
2021
£’000
242
242
372
46
418
2020
£’000
712
882
365
18
1,977
2020
£’000
267
267
Accrol Group Holdings plc // Annual Report & Accounts 2021Financial Statements
71
2021
£’000
2020
£’000
–
–
–
(28)
(46)
–
(74)
(74)
–
6
6
337
(14)
(17)
306
312
2020
£’000
(1,891)
19%
359
(22)
(8)
(17)
312
Total
£’000
(33)
306
15
288
(4,898)
(74)
1,018
(3,666)
10. INCOME TAX EXPENSE
TAX (CHARGED)/CREDITED IN THE INCOME STATEMENT
Current income tax
Current tax on losses for the year
Adjustment in respect of prior periods
Total current income tax credit
Deferred tax
Origination and reversal of temporary differences
Adjustment in respect of prior periods
Change in tax rate
Total deferred tax (charge)/credit
Tax (charge)/credit in the income statement
The tax charge for the year is higher than (2020 credit: is lower than) the effective rate of corporation tax in the UK of 19% (2020: 19%). The differences are
explained below:
Loss before income tax
Effective rate
At the effective income tax rate
Expenses not deductible for tax purposes
Adjustment in respect of prior periods
Change in rate
Total tax (charge)/credit
2021
£’000
(2,566)
19%
488
(516)
(46)
–
(74)
During the year the Group recognised the following deferred tax assets/(liabilities):
Accelerated
capital
allowances
£’000
Intangible
assets
£’000
Derivative
financial
instruments
£’000
30 April 2019
Credit/(charge) in year
Credit/(charge) to equity
30 April 2020
Acquired on business combinations
Credit/(charge) in year
Credit/(charge) to equity
(1,911)
(88)
–
(1,999)
(1,030)
(542)
–
(1,846)
212
–
(1,634)
(4,154)
552
–
30 April 2021
(3,571)
(5,236)
(9)
–
9
–
–
–
–
–
Share
based
payments
£’000
308
446
80
834
–
(990)
999
843
Losses
£’000
3,425
(264)
–
3,161
177
949
–
4,287
Other
£’000
–
–
(74)
(74)
109
(43)
19
11
A deferred tax asset of £4,287,000 relating to current and prior year losses has been recognised in the year, on the basis that forecasts show sufficient taxable profits
in the foreseeable future to utilise these losses.
Deferred tax expected to be settled within 12 months of the reporting date is approximately £2,177,000 (2020: £563,000).
Deferred tax assets and liabilities have been measured at the rate expected to be in effect when the deferred tax asset or liability reverses.
An increase in the corporation tax rate to 25% with effect from 1 April 2023 was substantively enacted on 24 May 2021, therefore has not been reflected in these
consolidated financial statements. If this rate had been substantively enacted this would have increased the deferred tax liability at 30 April 2021 by £2,335,000.
Accrol Group Holdings plc // Annual Report & Accounts 2021 Financial Statements
72
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION CONTINUED
FOR THE YEAR ENDED 30 APRIL 2021
11. PROPERTY, PLANT AND EQUIPMENT
Leasehold
land &
buildings
£’000
Fixtures &
fittings
£’000
Plant & Assets under
machinery construction
£’000
£’000
Right-of-use
assets
£’000
Cost
At 30 April 2019
Adjustment on initial application of IFRS 16
Additions
Disposals
At 30 April 2020
Acquired through business combinations
Additions
Reclassification
At 30 April 2021
Accumulated depreciation
At 30 April 2019
Adjustment on initial application of IFRS 16
Charge for the year
Disposals
At 30 April 2020
Charge for the year
At 30 April 2021
Net book value
At 30 April 2021
At 30 April 2020
445
–
52
–
497
1,043
31
–
1,571
136
–
42
–
178
70
248
1,323
319
Total
£’000
40,125
11,002
3,702
(5,537)
49,292
18,798
9,589
–
1,911
–
185
–
2,096
164
149
–
37,475
(5,619)
383
(5,052)
27,187
9,545
733
8,335
294
–
3,060
–
3,354
–
8,199
(10,457)
–
16,621
22
(485)
16,158
8,046
477
2,122
2,409
45,800
1,096
26,803
77,679
998
–
367
–
1,365
337
1,702
707
731
9,689
(727)
1,012
(5,052)
4,922
879
5,801
–
–
–
–
–
–
–
–
727
2,780
(420)
3,087
3,500
10,823
–
4,201
(5,472)
9,552
4,786
6,587
14,338
39,999
22,265
1,096
3,354
20,216
13,071
63,341
39,740
Assets with a value of £63,341,000 (2020: £39,740,000) form part of the security against the RCF as described in note 19.
12. LEASES
LEASES RECEIVABLE
At 1 May 2020
Interest received
Lease payments
At 30 April 2021
Analysed as:
Receivable > 1 year
Receivable < 1 year
Land & buildings
£’000
6,352
242
(892)
5,702
5,027
675
Total
£’000
6,352
242
(892)
5,702
5,027
675
Accrol Group Holdings plc // Annual Report & Accounts 2021Financial Statements
73
LEASE LIABILITIES
At 1 May 2020
Acquired under business combinations
New leases in the year
Interest expense
Lease payments
At 30 April 2021
Land & buildings Plant & machinery
£’000
£’000
16,364
8,457
–
731
(4,357)
21,195
2,200
4,169
2,171
113
(2,251)
6,402
Total
£’000
18,564
12,626
2,171
844
(6,608)
27,597
Short-term lease expense for the year was £nil. Short-term lease commitment at 30 April 2021 was £nil. Income from sub-leases for the year totalled £242,000.
13. INTANGIBLE ASSETS
Cost
At 30 April 2019
Internally developed additions
At 30 April 2020
Acquired through business combinations
Internally developed additions
At 30 April 2021
Amortisation
At 30 April 2019
Charge for the year
At 30 April 2020
Charge for the year
At 30 April 2021
Net book value
At 30 April 2021
At 30 April 2020
Goodwill
£’000
Customer Development
costs
£’000
relationships
£’000
Computer
software
£’000
14,982
–
14,982
14,812
–
20,427
–
20,427
21,864
–
–
764
764
–
684
29,794
42,291
1,448
–
–
–
273
273
–
–
–
–
–
29,794
14,982
9,788
2,040
11,828
2,903
14,731
27,560
8,599
1,175
764
3,194
2,492
–
2,492
2,492
28
1,018
3,538
–
–
–
344
344
Other
£’000
126
–
126
–
–
Total
£’000
35,535
3,256
38,791
36,704
1,702
126
77,197
86
–
86
–
86
40
40
9,874
2,040
11,914
3,520
15,434
61,763
26,877
2020
£’000
14,982
–
–
14,982
2021
£’000
17,917
11,742
135
29,794
GOODWILL
The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill may be impaired.
Goodwill is allocated to the cash generating units (CGUs) as follows:
Accrol
Leicester Tissue Company (“LTC”)
John Dale (“JD”)
The recoverable amount of each CGU has been determined based on a value in use calculation using cashflow projections based on internal forecasts covering
a five-year period, reviewed and approved by the Board. The use of this method requires the estimation of future cashflows and the determination of a discount rate
in order to calculate the present value of the cashflows. Cashflows beyond this period are extrapolated using the estimated growth rates stated below.
At 30 April 2021, the impairment tests concluded that there was headroom across each of the CGUs. At a Group level the estimated value in use at 30 April 2021
exceeds the carrying value by £100m (Accrol £81m, LTC £17m, JD £2m). The recoverable amounts of the CGUs have been determined from value in use calculations.
Accrol Group Holdings plc // Annual Report & Accounts 2021 Financial Statements
74
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION CONTINUED
FOR THE YEAR ENDED 30 APRIL 2021
13. INTANGIBLE ASSETS CONTINUED
GOODWILL CONTINUED
Key assumptions
The calculations of value in use are inherently judgemental and require management to make a series of estimates and assumptions.
The cashflow forecasts have been derived from the most recent forecast presented to the Board for the year ending 30 April 2022. The cashflows utilised are based
upon forecast sales volumes and product mix, anticipated movements in tissue prices and input costs and known changes and expectations of current market
conditions.
The pre-tax discount rate used in the value in use calculations is 13.0% (2020: 14.0%) and this has been used consistently across each CGU. This 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. The long-term growth rate assumed across all CGUs is 2% (2020: 2%).
Sensitivity to changes in assumptions
To support their assertions, the Directors have conducted sensitivity analyses to determine the impact that would result from changes in the above assumptions.
Based on this analysis, the Directors believe that a reasonably possible change in any of the key assumptions detailed above would not cause the carrying value
of CGU groups to exceed their recoverable amounts, although the headroom would decrease. Therefore, at 30 April 2021 no impairment charge is required against
the carrying value of goodwill.
At a Group level impairment would be caused by either increasing the pre-tax discount rate by 11% or reducing the average EBIT performance by £11m.
A combination of increasing the pre-tax discount rate by 5% and reducing average EBIT performance by £6m results in an impairment.
At a CGU level the equivalent sensitivities are Accrol (16% increase in pre-tax discount rate or £9m reduction in EBIT); LTC (5% increase in pre-tax discount rate
or £2m reduction in EBIT); and JD (7% increase in pre-tax discount rate or £0.2m reduction in EBIT).
Notwithstanding the above sensitivities, the Directors are satisfied that they have applied reasonable and supportable assumptions based on their best estimate
of the range of future economic conditions that are forecast and consider that an impairment is not required in the current year. However, the position will be
monitored on a regular basis. Going forward, as the acquired operations become fully integrated, it is likely that the Group will return to a sole CGU.
DEVELOPMENT COSTS
During the year, the Group developed new innovative products ‘Magnum’ and ‘Oceans’. The development costs capitalised are to be amortised over the life of the
products (typically three years).
COMPUTER SOFTWARE
During the year, the Group has continued in the development of a new ERP system and warehouse management system.
CUSTOMER RELATIONSHIPS
During the year, customer relationships of £21,864,000 arose on the Group’s acquisition of Leicester Tissue Company and John Dale. Customer relationships have
a useful economic life of 6-10 years.
14. INVENTORIES
Raw materials
Finished goods and goods for resale
2021
£’000
13,363
9,822
23,185
2020
£’000
5,517
3,856
9,373
Inventories recognised as an expense during the year and included in cost of sales amounted to £87,198,000 (2020: £90,379,000). There are £804,000 provisions held
against inventories (2020: £32,000).
Accrol Group Holdings plc // Annual Report & Accounts 2021Financial Statements
15. TRADE AND OTHER RECEIVABLES
Trade receivables
Less: provision for impairment of trade receivables
Trade receivables – net of provisions
Prepayments and other debtors
75
2021
£’000
23,356
(70)
23,286
3,194
26,480
2020
£’000
16,918
(9)
16,909
3,771
20,680
The carrying value of trade and other receivables classified at amortised cost approximates fair value.
The Group does not hold any collateral as security.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for trade receivables. To measure
expected credit losses on a collective basis, trade receivables are grouped based on similar credit risk and ageing. The expected loss rates are based on the Group’s
historical credit losses experienced. The historical loss rates are then adjusted for current and forward-looking information on macroeconomic factors affecting the
Group’s customers. The Group has identified the current state of the economy and industry specific factors as the key macroeconomic factors in the countries where
the Group operates.
16. CASH AND CASH EQUIVALENTS
Cash and cash equivalents
17. TRADE AND OTHER PAYABLES
Trade payables
Social security and other taxes
Accruals
Trade payables are non-interest bearing and are paid on average within 70 days at 30 April 2021 (2020: 53 days).
2021
£’000
7,604
2021
£’000
34,128
5,729
7,174
47,031
2020
£’000
8,147
2020
£’000
17,099
3,094
3,795
23,988
Accrol Group Holdings plc // Annual Report & Accounts 2021 Financial Statements
76
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION CONTINUED
FOR THE YEAR ENDED 30 APRIL 2021
18. PROVISIONS
Onerous contracts
Contingent consideration
Other
(1) Arising on business combinations in the year.
As at 1 May
2020
£’000
Acquired in
the year(1)
£’000
Utilised in
the year
£’000
Discount
unwind
£’000
541
–
–
541
–
6,369
575
6,944
(197)
–
(220)
(417)
14
239
–
253
As at
30 April
2021
£’000
358
6,608
355
7,321
Current
£’000
358
6,608
355
7,321
Non-
current
£’000
–
–
–
–
The onerous contract provisions relate to the decision to exit from the Skelmersdale facility and logistics agreements.
During the year, £575,000 arose on the Group’s acquisition of Leicester Tissue Company and John Dale, relating to dilapidation and other compliance provisions.
The contingent consideration relates to the acquisition of Leicester Tissue Company (see note 27).
19. BORROWINGS
Current
Revolving credit facility
Factoring facility
Leases
Non-current
Revolving credit facility
Leases
2021
£’000
1,821
3,975
6,553
12,349
9,807
21,044
30,851
The changes in liabilities arising from financing activities, from cashflows and non-cash changes for the current and prior year are as follows:
At 1 May 2020
Cashflows
Non-cashflows:
New leases acquired through business combinations
New leases
Loans acquired through business combinations
Factoring facility acquired through business combinations
Interest accrued
Amortisation of finance fees (note 9)
Allocation from non-current to current in the year
At 30 April 2021
Current
loans &
borrowings
£’000
18,157
(16,829)
2,016
477
997
2,002
1,505
438
3,586
12,349
Non-current
loans &
borrowings
£’000
23,827
–
10,610
–
–
–
–
–
(3,586)
30,851
2020
£’000
1,636
11,817
4,704
18,157
9,967
13,860
23,827
Total
£’000
41,984
(16,829)
12,626
477
997
2,002
1,505
438
–
43,200
Accrol Group Holdings plc // Annual Report & Accounts 2021Financial Statements
77
Total
£’000
28,547
(8,062)
19,518
22
1,594
365
–
41,984
Current
loans &
borrowings
£’000
Non-current
loans &
borrowings
£’000
16,709
(8,062)
3,154
4
1,594
–
4,758
18,157
11,838
–
16,364
18
–
365
(4,758)
23,827
At 1 May 2019
Cashflows
Non-cashflows:
Lease adjustments (note 2)
New leases
Interest accrued
Amortisation of finance fees (note 9)
Allocation from non-current to current in the year
At 30 April 2020
Finance costs incurred to arrange the revolving credit facility have been capitalised and are being amortised through interest payable. Unamortised finance costs
at 30 April 2021 are £372,000 (2020: £397,000).
Finance costs are not included in the loan maturity table below.
Loan maturity analysis
Within one year
Between one and two years
Between two and five years
After five years
The following amounts remain undrawn and available:
Revolving credit facility
Factoring facility
2021
£’000
12,528
7,666
18,986
4,392
43,572
2021
£’000
5,000
7,128
12,128
2020
£’000
18,521
13,351
8,072
2,437
42,381
2020
£’000
–
1,012
1,012
The Group’s bank borrowings are secured by way of fixed and floating charge over the Group’s assets.
HSBC REVOLVING CREDIT FACILITY AGREEMENT (“RCF”)
The Group has a £17m multi-currency revolving credit facility that expires in August 2023. The facility requires repayment of £2m on each of 30 April 2022 and
30 April 2023.
Interest charged on the facility is at LIBOR plus a margin of 2.20%-2.95%. A commitment fee of 40% of applicable margin on any undrawn RCF is also payable.
The Obligors are Accrol Group Holdings plc, Accrol UK Limited, Accrol Holdings Limited, Accrol Papers Limited, LTC Parent Limited, Leicester Tissue Company Limited,
Art Tissue Limited, John Dale (Holdings) Limited and John Dale Limited.
HSBC FACTORING CREDIT FACILITY (“FACTORING FACILITY”)
The Group has a £22.5m multi-currency factoring facility to provide financing for general working capital requirements. Under the terms of this facility the drawdown
is based upon gross debtors less a retention (typically 15%), with 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 RCF and the factoring facility. The RCF covenants are interest cover and net leverage ratios. The covenants
in relation to the factoring facility cover debt dilution and disputed debt. Breach of the covenants would render any outstanding borrowings subject to immediate
settlement. The Group is currently operating within its covenants.
Accrol Group Holdings plc // Annual Report & Accounts 2021 Financial Statements
78
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION CONTINUED
FOR THE YEAR ENDED 30 APRIL 2021
20. FINANCIAL INSTRUMENTS
DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments comprise 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
2021
£’000
–
(120)
(120)
2020
£’000
28
–
28
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 cashflows. 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).
At 30 April 2021, the notional principal amount of the outstanding derivative contracts that are held to hedge the Group’s transaction exposures was £21m.
Cashflows in respect of these contracts are due within 12 months of the reporting date.
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.
FAIR VALUES
The fair values of the Group’s financial instruments approximate closely with their carrying values, which are set out in the table below:
Financial assets
Current
Trade receivables
Cash and short-term deposits
Derivative financial instruments
Financial liabilities
Current
Borrowings
Trade and other payables
Derivative financial instruments
Non-current
Borrowings
Fair values and
carrying values
2021
£’000
23,286
7,604
–
12,349
47,031
120
30,851
2020
£’000
16,909
8,147
28
18,157
23,988
–
23,827
Accrol Group Holdings plc // Annual Report & Accounts 2021Financial Statements
79
21. 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. The Group has also
shown adjusted net debt which excludes operating type leases recognised under IFRS 16.
Total borrowings (excluding finance fees)
Less: lease receivables
Less: cash and cash equivalents
Net debt
Less: leases recognised on adoption of IFRS 16
Adjusted net debt (excluding leases recognised on adoption of IFRS 16)
(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
2021
£’000
43,572
(5,702)
(7,604)
30,266
(15,628)
14,638
2020
£’000
42,381
(6,352)
(8,147)
27,882
(10,012)
17,870
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.
(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 has been prepared by re-performing the calculations used
to determine the balance sheet values assuming a 1% strengthening of sterling:
Euro – loss
USD – loss
2021
£’000
–
215
215
2020
£’000
–
98
98
(ii) Interest rate risk
Interest rate risk is the risk that the fair value or future cashflows 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 RCF, both of which have floating interest rates.
The exposure to risk is deemed to be manageable and is reviewed on a continual basis. The Group is not expecting any reduction in interest rates over the next
12 months; the impact of a 0.5% increase in interest rates on (loss)/profit before tax is shown below:
Change in interest rate
2021
£’000
78
2020
£’000
119
Accrol Group Holdings plc // Annual Report & Accounts 2021 Financial Statements
80
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION CONTINUED
FOR THE YEAR ENDED 30 APRIL 2021
21. CAPITAL AND FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES CONTINUED
(B) FINANCIAL RISK MANAGEMENT CONTINUED
(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 cashflows, 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 (excluding finance fees).
As at 30 April 2021
Borrowings
Trade and other payables
Total financial liabilities
As at 30 April 2020
Borrowings
Trade and other payables
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
12,528
47,031
59,559
7,667
–
7,667
18,986
–
18,986
4,391
–
4,391
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
18,521
23,988
42,509
13,351
–
13,351
8,072
–
8,072
2,437
–
2,437
Total
£’000
43,572
47,031
90,603
Total
£’000
42,381
23,988
66,369
(iv) Credit risk
The Group’s principal financial assets are bank balances and cash, trade and other receivables. 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.
The Group’s major customers (including those disclosed in note 4) are established retailers and therefore management do not deem there to be significant associated
credit risk.
The Group manages credit risk by allocating customers a credit limit and ensures the Group’s exposure is within this limit. This approach is strengthened with the use
of credit insurance where deemed appropriate.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for trade receivables and contract
assets. To measure expected credit losses on a collective basis, trade receivables and contract assets are grouped based on similar credit risk and ageing.
The expected loss rates are based on the Group’s historical credit losses experienced over the four-year period prior to the period end. The historical loss rates are then
adjusted for current and forward-looking information on macroeconomic factors affecting the Group’s customers.
At 30 April 2021 the lifetime expected loss provision for trade receivables is as follows:
<1 month
1-2 months
2-3 months
>3 months
Expected loss rate
Gross carrying amount of overdue debt (£000)
Loss provision (£000)
0%
–
–
5%
222
11
15%
77
12
The movement in the provision for trade and other receivables is analysed below:
At the beginning of the year
Acquired through business combinations
Impairment losses recognised
Utilisation of provision
25%
189
47
2021
£’000
(9)
(48)
(22)
9
(70)
Total
488
70
2020
£’000
(15)
–
(1)
7
(9)
Impairment losses recognised are included in the administrative expenses in the income statement, unless otherwise stated. Amounts charged to the allowance
account are generally written off when there is no expectation of recovering additional cash.
Accrol Group Holdings plc // Annual Report & Accounts 2021Financial Statements
81
2020
£’000
2,583
2020
£’000
195
195
2021
£’000
301
2021
£’000
311
311
2021
Number
2020
Number
311,354,632
195,246,536
22. CAPITAL COMMITMENTS
Contracted for but not provided
The capital commitments above are expected to be settled in the following financial year.
23. SHARE CAPITAL AND RESERVES
Called up, allotted and fully paid
Ordinary shares of £0.001 each
The number of ordinary shares in issue is set out below:
Ordinary shares of £0.001 each
In November 2020, 116,108,096 £0.001 ordinary shares were issued. Transaction costs of £1,727,000 were incurred in relation to the above share issues.
Each holder of the £0.001 Ordinary Shares is entitled to vote at the general meetings of the Company. Every holder of an Ordinary Share shall have one vote for each
Ordinary Share held.
24. DIVIDENDS
The Company did not pay an interim dividend (2020: £nil).
The proposed final dividend for the year ended 30 April 2021 of 0.5p per share is subject to approval by the shareholders at the Annual General Meeting and hence has
not been included as a liability in the financial statements as at 30 April 2021.
25. RELATED PARTY DISCLOSURES
(A) IDENTITY OF RELATED PARTIES
The subsidiaries of the Company are as follows:
Company
Accrol UK Limited
Accrol Holdings Limited
Accrol Papers Limited
LTC Parent Limited
John Dale Limited
Leicester Tissue Company Limited
John Dale (Holdings) Ltd
Art Tissue Ltd
*
Shares held by a subsidiary.
Principal activity
Country of incorporation
Holding company
Holding company
Soft tissue paper converter
Holding company
Manufacturer of wet wipes and facial tissue
Soft tissue paper converter
Holding company
Distributor of soft tissue products
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Parent Company
interest
%
100%
100%
100%
100%
*100%
*100%
100%
*100%
The registered address of all subsidiaries in the Group is Delta Building, Roman Road, Blackburn, Lancashire, BB1 2LD.
The Group has taken advantage of the exemption not to disclose intra-group transactions that are eliminated on consolidation.
Accrol Group Holdings plc // Annual Report & Accounts 2021 Financial Statements
82
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION CONTINUED
FOR THE YEAR ENDED 30 APRIL 2021
25. RELATED PARTY DISCLOSURES CONTINUED
(B) DIRECTORS’ EMOLUMENTS
Short-term employment benefits
Share based payments
2021
£’000
1,394
1,784
3,178
2020
£’000
902
1,793
2,695
During the year retirement benefits were accruing to no Directors under defined contribution schemes (2020: £nil). The aggregate amount of emoluments paid to the
highest paid Director was £838,000 (2020: £613,000).
(C) 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’.
26. SHARE BASED PAYMENTS
DESCRIPTION OF SHARE OPTION SCHEMES
The Group operates a Management Incentive Plan, namely the Accrol Group Holdings plc Unapproved Share Option Plan (“MIP”). The MIP provides for the grant,
to eligible employees, of options to acquire shares in the Company at a nominal exercise price. The contractual life of the options is 10 years.
The Group operates a Long Term Incentive Plan, namely the Accrol Group Holdings Long Term Incentive Plan 2021 (“LTIP”). The LTIP provides for the grant, to eligible
employees, of options to acquire shares in the Company at a nominal exercise price. The contractual life of the options is ten years.
Further details of the schemes are provided in the Directors’ Remuneration Report on pages 43 to 46.
MOVEMENTS IN THE YEAR
In March 2021, the Group issued 3,151,820 options under the LTIP.
In November 2020, 19,310,642 options were exercised under the MIP.
TERMS AND CONDITIONS OF THE SHARE OPTION SCHEMES
The MIP options granted are subject to the achievement of certain Adjusted EBITDA performance conditions as disclosed further in the Remuneration Report
on pages 44 and 45.
In addition, vested shares are subject to a hold condition, whereby 70% can be exercised on vesting and the remaining 30% can only be exercised from the one-year
anniversary of original vesting.
The LTIP options granted are subject to the achievement of certain EBITDA performance conditions as disclosed further in the Remuneration Report on page 46.
INPUT FOR MEASUREMENT OF GRANT DATE FAIR VALUES
The grant date fair values of the share options are measured based on the Black-Scholes model. The expected volatility has been calculated using historical share price
data over a term commensurate with the expected terms of the awards (or for the term of available share price history, if shorter). The inputs used in measuring the fair
value of the current year share option grants were as follows:
Fair value at grant date (p)
Share price at grant date (p)
Exercise price (p)
Expected volatility
Dividend yield
Risk-free rate
INCOME STATEMENT CHARGE
The share based payment charge for the year was £3,245,000 (2020: charge of £2,351,000), all of which relates to equity-settled awards.
LTIP
61.4
61.5
0.1
61.71%
0%
0.13%
Accrol Group Holdings plc // Annual Report & Accounts 2021Financial Statements
83
MOVEMENTS IN SHARE OPTIONS
Movements in the number of share options outstanding are as follows:
in thousands of shares
In issue as at 1 May 2020
Granted in the year
Exercised in the year
Lapsed in the year
In issue as at 30 April 2021
Exercisable as at 30 April 2021
LTIP
–
3,152
–
–
3,152
–
MIP Option 1
MIP Option 2
MIP Option 3
12,911
–
(12,370)
(541)
–
–
8,716
–
(6,941)
(912)
863
–
8,836
–
–
(2,176)
6,660
–
Total
30,463
3,152
(19,311)
(3,629)
10,675
–
27. ACQUISITION OF GROUP COMPANIES
ACQUISITION OF LEICESTER TISSUE COMPANY
In November 2020, the Group acquired 100% of the issued share capital of Leicester Tissue Company (“LTC”), whose principal activity is soft paper tissue converting.
LTC qualifies as a business as defined in IFRS 3 ‘Business Combinations’. This acquisition represents another milestone on our journey to build a world-class
operationally efficient business of size and scale. It is well invested, ideally located in central England and its product mix and customer base are complementary
to our existing business.
Details of the fair value of identifiable assets acquired and liabilities assumed, purchase consideration and resulting goodwill are as follows:
Property, plant and equipment
Right-of-use assets
Intangible assets
Inventories
Trade & other receivables
Cash
Trade & other payables
Borrowings
Lease liabilities
Provisions
Corporation tax liability
Deferred tax liability
Total identifiable assets acquired and liabilities assumed
Goodwill (note 13)
Total consideration
Satisfied by:
Cash
Contingent consideration
Total consideration transferred
Net cash outflow arising on acquisition
Cash consideration
Less: Cash and cash equivalent balances acquired
£’000
9,739
7,911
20,269
4,008
5,605
683
(6,376)
(2,999)
(12,491)
(550)
(200)
(4,436)
21,163
14,677
35,840
29,471
6,369
35,840
29,471
(683)
28,788
On acquisition Leicester Tissue Group held trade receivables with a book and fair value of £4,805,000 representing contractual receivables of £4,853,000. Whilst the
Group will make every effort to collect all contractual receivables, it considers it unlikely that £48,000 will ultimately be received.
Accrol Group Holdings plc // Annual Report & Accounts 2021 Financial Statements
84
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION CONTINUED
FOR THE YEAR ENDED 30 APRIL 2021
27. ACQUISITION OF GROUP COMPANIES CONTINUED
The contingent consideration can be settled in cash or Accrol Group Holdings plc shares (at the Group’s discretion) and is calculated on the incremental EBITDA
performance of contracts secured prior to the acquisition that had yet to be delivered, measured over a four-month period from 1 March 2021. Consideration
is measured on a sliding scale with a maximum of £6,800,000 payable to the vendors if EBITDA targets are met. The calculation of the contingent consideration
liability has been based upon the Group’s forecast, both at acquisition and at the reporting date, of the contract performance over the four-month period. It has been
discounted at acquisition date using the Group’s short-term WACC of 9% and is recognised in provisions less than one year. The unwind of the discount is charged
to interest payable.
The main factors leading to the recognition of goodwill are the presence of certain intangible assets, such as the assembled workforce of the acquired entity,
which do not qualify for separate recognition and the anticipation of significant synergies, particularly in material, operational and logistics costs.
The goodwill recognised will not be deductible for tax purposes.
Acquisition costs of £1,925,000 arose as a result of the transaction. These have been recognised as part of administrative expenses in the Statement of
Comprehensive Income.
Since the acquisition date, LTC has contributed £18,053,000 to Group revenues and £2,561,000 to Group profit before tax. If the acquisition had occurred on
1 May 2020, Group revenue would have been £153,303,000 and Group loss before tax for the year would have been £131,000.
ACQUISITION OF JOHN DALE
In April 2021, the Group acquired 100% of the issued share capital of John Dale (“JD”), whose principal activity is the manufacturer of wet wipes and facial tissue.
JD qualifies as a business as defined in IFRS 3 ‘Business Combinations’. This acquisition further advances Accrol’s reach into the soft tissue market whilst also moving
into an adjacent sector to diversify the business.
Details of the fair value of identifiable assets acquired and liabilities assumed, purchase consideration and resulting goodwill are as follows:
Property, plant and equipment
Right-of-use assets
Intangible assets
Inventories
Trade & other receivables
Cash
Trade & other payables
Borrowings
Lease liabilities
Provisions
Corporation tax liability
Deferred tax liability
Total identifiable assets acquired and liabilities assumed
Goodwill (note 13)
Total consideration
Satisfied by:
Cash
Total consideration transferred
Net cash outflow arising on acquisition
Cash consideration
Less: Cash and cash equivalent balances acquired
£’000
1,013
135
1,623
1,252
798
1,674
(787)
–
(135)
(25)
(100)
(462)
4,986
135
5,121
5,121
5,121
5,121
(1,674)
3,447
On acquisition John Dale held trade receivables with a book and fair value of £522,000 representing contractual receivables of £539,000. Whilst the Group will make
every effort to collect all contractual receivables, it considers it unlikely that £17,000 will ultimately be received.
The main factors leading to the recognition of goodwill are the presence of certain intangible assets, such as the assembled workforce of the acquired entity,
which do not qualify for separate recognition and the anticipation of significant synergies, particularly in material, operational and logistics costs.
Accrol Group Holdings plc // Annual Report & Accounts 2021Financial Statements
85
The goodwill recognised will not be deductible for tax purposes.
Acquisition costs of £225,000 arose as a result of the transaction. These have been recognised as part of administrative expenses in the Statement of
Comprehensive Income.
Since the acquisition date, John Dale has contributed £335,000 to Group revenues and £54,000 to Group profit before tax. If the acquisition had occurred
on 1 May 2020, Group revenue would have been £153,303,000 and Group loss before tax for the year would have been £131,000.
28. EVENTS AFTER THE BALANCE SHEET DATE
There are no adjusting or non-adjusting events subsequent to the year end.
29. CONTINGENT LIABILITIES
As at 30 April 2021, the Group has no disclosable contingent liabilities.
30. ALTERNATIVE PERFORMANCE MEASURES
The Group uses 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 holders of the Parent by the weighted average number
of ordinary shares outstanding during the year. Diluted earnings per share adjusts the above for potentially dilutive share options. The following reflects the income
and share data used in the adjusted earnings per share calculation.
Loss attributable to shareholders
Adjustment for:
Amortisation
Separately disclosed items
Share based payments
Discount unwind on contingent consideration
Tax effect of adjustments above
Adjusted earnings attributable to shareholders
Basic weighted average number of shares
Dilutive share options
Diluted weighted average number of shares
Basic adjusted earnings per share
Diluted adjusted earnings per share
2021
£’000
(2,640)
3,520
4,705
3,245
239
(2,225)
6,844
Number
’000
246,461
10,675
257,136
pence
2.7
2.6
2020
£’000
(1,579)
2,040
2,230
2,351
–
(1,258)
3,784
Number
’000
195,247
30,463
225,710
pence
1.9
1.7
Accrol Group Holdings plc // Annual Report & Accounts 2021 Financial Statements
86
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION CONTINUED
FOR THE YEAR ENDED 30 APRIL 2021
30. ALTERNATIVE PERFORMANCE MEASURES CONTINUED
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
Adjusted EBITDA
Operating loss
Adjusted for:
Depreciation
Amortisation
Separately disclosed items
Share based payments
Adjusted EBITDA
Adjusted Gross Profit
Gross Profit
Adjusted for:
Separately disclosed items
Adjusted Gross Profit
Revenue
Adjusted Gross Margin
Adjusted profit before tax
Reported (loss) before tax
Adjusted for:
Amortisation
Separately disclosed items
Share based payments
Discount unwind on contingent consideration
Adjusted profit before tax
2021
£’000
(612)
4,786
3,520
4,705
3,245
15,644
2021
£’000
37,884
1,220
39,104
136,594
28.6%
2021
£’000
2020
£’000
(181)
4,201
2,040
2,230
2,351
10,641
2020
£’000
29,534
1,008
30,542
134,773
22.7%
2020
£’000
(2,566)
(1,891)
3,520
4,705
3,245
239
9,143
2,040
2,230
2,351
–
4,730
Accrol Group Holdings plc // Annual Report & Accounts 2021Financial Statements
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 30 APRIL 2021
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 assets less current liabilities
Net assets
Capital and reserves
Share capital
Share premium
Capital redemption reserve
Retained earnings
Total equity shareholders’ funds
87
2020
£’000
44,450
44,450
30,378
1
30,379
74,829
–
–
74,829
74,829
195
68,015
27
6,592
74,829
Note
5
6
7
2021
£’000
51,973
51,973
66,102
–
66,102
118,075
(231)
(231)
117,844
117,844
311
108,782
27
8,724
117,844
As permitted by Section 408(3) of the Companies Act 2006, the income statement of the Company is not presented with these financial statements. The Company
recorded a loss for the year of £45,000 (2020: profit of £22,970,000).
The financial statements were approved by the Board of Directors on 13 July 2021.
Signed on behalf of the Board of Directors
RICHARD NEWMAN
Chief Financial Officer
Company Registration Number 09019496
Accrol Group Holdings plc // Annual Report & Accounts 2021 Financial Statements
88
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 APRIL 2021
Balance at 30 April 2019
Transactions with owners recognised directly in equity
Share based payments
Total transactions recognised directly in equity
Comprehensive income
Profit for the year
Total comprehensive income
Balance at 30 April 2020
Transactions with owners recognised directly in equity
Proceeds from shares issued
Transaction costs
Share based payments
Total transactions recognised directly in equity
Comprehensive (expense)/income
Loss for the year
Total comprehensive income
Balance at 30 April 2021
Share
capital
£’000
Share
premium
£’000
Note
Capital
redemption
reserve
£’000
Retained
earnings
£’000
195
68,015
27
(18,294)
–
–
–
–
–
–
–
–
195
68,015
116
–
–
116
–
–
42,494
(1,727)
–
40,767
–
–
–
–
–
–
27
–
–
–
–
–
–
1,916
1,916
22,970
22,970
6,592
–
–
2,177
2,177
(45)
(45)
Total
equity
£’000
49,943
1,916
1,916
22,970
22,970
74,829
42,610
(1,727)
2,177
43,060
(45)
(45)
311
108,782
27
8,724
117,844
Accrol Group Holdings plc // Annual Report & Accounts 2021Financial Statements
NOTES TO THE COMPANY FINANCIAL INFORMATION
FOR THE YEAR ENDED 30 APRIL 2021
89
1. GENERAL INFORMATION
Accrol Group Holdings plc (formerly Accrol Group Holdings Limited), (the “Company”) was incorporated with Company number 09019496. It is a public company
limited by shares and is domiciled in the United Kingdom. The registered address of the Company is Delta Building, Roman Road, Blackburn, Lancashire, BB1 2LD.
The Company’s subsidiaries are listed in note 25 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 Company financial statements of Accrol Group Holdings plc have been prepared in accordance with Financial Reporting Standard 101, ‘Reduced Disclosure
Framework’ (FRS 101). The financial statements have been prepared under the historical cost convention and in accordance with the Companies Act 2006.
The entity satisfies the criteria of being a qualifying entity as defined in FRS 101. Its financial statements are consolidated into the Group financial statements
of Accrol Group Holdings plc, which are included within this Annual Report.
The preparation of financial statements in conformity with FRS 101 requires the use of certain critical accounting estimates. It also requires management to exercise
its judgement in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the financial statements, are disclosed below.
The following exemptions from the requirements of IFRS have been applied in the preparation of these financial statements, in accordance with FRS 101:
› Paragraphs 45(b) and 46 to 52 of IFRS 2 ‘Share based payments’ (details of the number and weighted average exercise prices of share options, and how the fair
value of goods or services received was determined);
›
IFRS 7 ‘Financial Instruments: Disclosures’;
› Paragraphs 91 to 99 of IFRS 13 ‘Fair Value Measurement’ (disclosure of valuation techniques and inputs used for fair value measurement of assets and liabilities);
› Paragraph 38 of IAS 1 ‘Presentation of Financial Statements’ comparative information requirements in respect of:
(i) paragraph 79(a)(iv) of IAS 1;
(ii) paragraph 73(e) of IAS 16 ‘Property, Plant and Equipment’;
(iii) paragraph 118(e) of IAS 38 ‘Intangible Assets’ (reconciliations between the carrying amount at the beginning and end of the period);
› The following paragraphs of IAS 1 ‘Presentation of Financial Statements’:
(i) (d) (statement of cashflows);
(ii) 16 (statement of compliance with all IFRS);
(iii) 38A (requirement for minimum of two primary statements, including cashflow statements);
(iv) 38B-D (additional comparative information);
(v) 111 (cashflow statement information); and
(vi) 134-136 (capital management disclosures);
›
IAS 7 ‘Statement of Cashflows’;
› Paragraph 17 of IAS 24 ‘Related Party Disclosures’ (key management compensation); and
› The requirements in IAS 24 ‘Related Party Disclosures’ to disclose related party transactions entered into between two or more members of a group
GOING CONCERN
The going concern status of the Parent Company is intrinsically linked to the success of the Group, which, as disclosed in note 2 of the consolidated financial
statements, is dependent on certain key assumptions being achieved.
The Chairman’s Statement and the Chief Executive’s Review 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 cashflow and liquidity. In summary, the Group generated operating
cash of £17.6m and reduced adjusted net debt from £17.9m to £14.6m, whilst significantly investing in automation and manufacturing infrastructure. The Directors
recognise that as of 30 April 2021, the Group has net current liabilities of £9.2m (2020: net current liabilities of £3.4m), which was considered as part of this review.
However, this includes £6.6m of contingent consideration that is likely to be settled by the issue of equity.
As in previous years, the Group’s forecasted performance is dependent on a number of market and macroeconomic factors particularly the sensitivity to the price of
parent reels and the sterling/USD exchange rate which are inherently difficult to predict. The Group did experience some minor operational disruption resulting from
Brexit, but this is not expected to impact the business going forward. The Group’s forecasted performance has been tested for downside scenarios, including reverse
stress tests, relating to sales volume, parent reel prices and foreign exchange rate movements. It also considered the impact of the COVID-19 pandemic on forecasted
performance. The Group considered the likelihood of such events occurring together with the relevant impact thereof and were satisfied that if a scenario partly or
fully takes place the Group has mitigating options available to maintain liquidity and continue its operations.
Accrol Group Holdings plc // Annual Report & Accounts 2021 Financial Statements
90
NOTES TO THE COMPANY FINANCIAL INFORMATION CONTINUED
FOR THE YEAR ENDED 30 APRIL 2021
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
GOING CONCERN CONTINUED
The Group is currently operating comfortably within its covenants. It also considered the impact of the above downside scenarios on covenant headroom.
The Directors were satisfied that after evaluating the probability of events and available mitigating actions, covenant breaches would be unlikely. At 30 April 2021,
available funds were £12.1m, with further details of the borrowing facilities set out in note 19 to the consolidated financial statements.
The Directors confirm that, after due consideration, they have a reasonable expectation that the Group has adequate resources to continue in operational existence
for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements of the Company.
INVESTMENTS
On initial recognition, investments in subsidiaries are recorded at cost, which is the fair value of the consideration paid plus directly attributable acquisition costs.
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. Carrying values of investments that have
previously been impaired are also reviewed at each balance sheet date. If there are indicators that previous impairment losses might have reversed (generally the
opposite of the indicators that gave rise to the original impairment) the recoverable amounts are estimated again.
FINANCIAL INSTRUMENTS
Financial assets
The Company classifies its financial assets as either amortised cost, fair value through comprehensive income or fair value through profit or loss depending on the
purpose for which the asset was acquired. The Company currently has assets classified as amortised cost.
Amortised cost
Assets classified as amortised cost are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue and are
subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.
Impairment provisions for receivables from Group undertakings are recognised based on a forward-looking expected credit loss model. The methodology used to
determine the amount of the provision is based on whether there has been a significant increase in credit risk since initial recognition of the financial asset. For those
where the credit risk has not increased significantly since initial recognition of the financial asset, 12 month expected credit losses along with gross interest income are
recognised. For those for which credit risk has increased significantly, lifetime expected credit losses along with the gross interest income are recognised. For those that
are determined to be credit impaired, lifetime expected credit losses along with interest income on a net basis are recognised.
The Group’s financial assets measured at amortised cost comprise receivables from Group undertakings and cash and cash equivalents in the consolidated statement
of financial position.
Cash and cash equivalents comprise cash at bank.
3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the financial information in accordance with FRS 101 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 Company’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.
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.
CRITICAL ACCOUNTING ESTIMATES IN APPLYING THE ENTITY’S ACCOUNTING POLICIES
Investment carrying values
In determining whether the carrying value of the investment in subsidiaries is recoverable, the Company considers the performance of the Group based on value
in use calculations. The use of this method requires the estimation of future cashflows and the determination of a pre-tax discount rate in order to calculate the
present value of the cashflows. The Group’s trading performance remains sensitive to a number of key variables, including the sterling/USD exchange rate and parent
reel pricing, which could have a significant effect (positive or negative) on the Group’s cashflows and hence the carrying value of the investment.
For assets that have previously been impaired, similar estimates would be required to determine whether the reversal of prior impairments should be reversed.
The Group will consider the above alongside other factors such as the Company share price.
Accrol Group Holdings plc // Annual Report & Accounts 2021Financial Statements 4. DIRECTORS’ EMOLUMENTS
Short-term employment benefits
Share based payments
91
2021
£’000
1,394
1,784
3,178
2020
£’000
902
1,793
2,695
During the year retirement benefits were accruing to no Directors under defined contribution schemes (2020: none). The aggregate amount of emoluments paid
to the highest paid Director was £838,000 (2020: £613,000). The Company does not have any employees (2020: none).
5. INVESTMENTS IN SUBSIDIARIES
Cost
At 30 April 2020
Additions in the year in respect of share based payments
Acquisition of subsidiaries in the year
At 30 April 2021
Group
undertakings
£’000
44,450
2,177
5,346
51,973
The Company’s subsidiary undertakings are shown in note 25 to the consolidated financial statements.
In November 2020, the Company acquired 100% of the issued share capital of LTC Parent Limited and its subsidiaries, Leicester Tissue Company Limited and
Art Tissue Limited.
In April 2021, the Company acquired 100% of the issued share capital of John Dale Holdings Limited and its subsidiary, John Dale Limited.
The resulting carrying value is consistent with the Group’s estimated value in use.
6. TRADE AND OTHER RECEIVABLES
Amounts owed by Group undertakings
Amounts owed by Group undertakings and falling due within one year are unsecured, interest free and repayable on demand.
2021
£’000
66,102
66,102
2020
£’000
30,378
30,378
Accrol Group Holdings plc // Annual Report & Accounts 2021 Financial Statements
92
NOTES TO THE COMPANY FINANCIAL INFORMATION CONTINUED
FOR THE YEAR ENDED 30 APRIL 2021
7. SHARE CAPITAL AND RESERVES
CALLED UP, ALLOTTED AND FULLY PAID
Ordinary shares of £0.001 each
The number of ordinary shares in issue is set out below:
Ordinary shares of £0.001 each
2021
£’000
311
311
2020
£’000
195
195
2021
Number
2020
Number
311,354,632
195,246,536
In November 2020, 116,108,096 £0.001 ordinary shares were issued. Transaction costs of £1,727,000 were incurred in relation to the above share issues.
Each holder of the £0.001 Ordinary Shares is entitled to vote at general meetings of the Company. Every holder of an Ordinary Share shall have one vote for each
Ordinary Share held.
8. DIVIDEND PAYABLE
The Company did not pay an interim dividend (2020: £nil).
The proposed final dividend for the year ended 30 April 2021 of 0.5p per share is subject to approval by the shareholders at the Annual General Meeting and hence has
not been included as a liability in the Financial Statements as at 30 April 2021.
9. DIVIDEND RECEIVABLE
Dividends received by the Company from its subsidiaries in the year were £nil (2020: £nil).
Accrol Group Holdings plc // Annual Report & Accounts 2021Financial Statements
COMPANY INFORMATION
93
DIRECTORS
Daniel Wright
Gareth Jenkins
Richard Newman
Euan Hamilton
Simon Allport
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 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
the SEDOL number is BZ6VT59.
REGISTRARS
Link Group
10th Floor Central Square
29 Wellington Street
Leeds
LS1 4DL
AUDITORS
BDO LLP
3 Hardman Street
Spinningfields
Manchester
M3 3AT
NOMINATED ADVISER AND BROKER
Zeus Capital Limited
82 King Street
Manchester
M2 4WQ
10 Old Burlington Street
London
W1S 3AG
JOINT BROKER
Liberum Capital Limited
Ropemaker Place
25 Ropemaker Street
London
EC2Y 9LY
SOLICITORS
Addleshaw Goddard LLP
1 St Peters Square
Manchester
M2 3DE
FINANCIAL PR
Belvedere Communications Ltd
25 Finsbury Circus
London
EC2M 7EE
Design and Production
www.carrkamasa.co.uk
Accrol Group Holdings plc // Annual Report & Accounts 2021 Financial Statements Accrol Group Holdings plc
Roman Road
Blackburn
Lancashire
BB1 2LD
www.accrol.co.uk