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Accrol Group Holdings plc
Roman Road
Blackburn
Lancashire
BB1 2LD
www.accrol.co.uk
Accrol Group Holdings Plc
Annual Report & Accounts 2022
Strategic Report
Highlights and overview of Accrol
Chairman’s Report
Investment case
Strategy, business model and the five-year plan
The five-year plan
Strategy in action
Looking after our People
Chief Executive Officer’s Review
Markets
ESG and carbon reporting
Progress since our ESG Report
Section 172
KPIs and business model
Chief Financial Officer’s Review
Managing our risk
Corporate Governance
Introduction to Governance
Board biographies
Corporate Governance Report
Audit Committee Report
Statement from the Chairman
of the Remuneration Committee
Directors’ report on remuneration
Directors’ Report
Director’s Statement of responsibility
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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 the 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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Accrol Group Holdings plc • Annual Report & Accounts 2022
The last four years have been
spent creating an innovative and
sustainable business, that is a
market leader in the UK. I believe
we have finally achieved this.
Gareth Jenkins, Chief Executive Officer
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 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.
The paper stock used in this report is manufactured at a mill
that is FSC accredited. The manufacture of the paper in this
report has been Carbon Balanced. The print factory is FSC
accredited and has the Environmental ISO 14001 accreditation.
Designed and printed by Perivan 264299
Highlights and overview
1
Accrol is the UK’s leading independent
tissue converter, producing toilet tissue,
kitchen towel, facial tissues, and wet wipes.
Key financial highlights
Total Revenue
£159.5m
2021: £136.6m / 2020: £134.8m
Adjusted EBITDA**
£9.1m
2021: £15.6m / 2020: £10.6m
Market Share*
16.0%
2021: 15.9% / 2020: 13.1%
Operating loss
£0.2m
2021: £1.2m loss / 2020: £0.2m loss
Gross Profit Margin
22.7%
2021: 27.7% / 2020: 21.9%
Adjusted Net Debt***
£27.5m
2021: £14.6m / 2020 :£17.9m
Increase in output per head
Reduction in total accidents
6.2%
2021: 9.4% / 2020: n/a
33%
Zero lost time
accidents
2021: 26%, 7 lost time accidents /
2020: n/a
Operational Highlights
• Accrol’s market share by volume increased to
19.5% (H1 FY22: 18.9%, FY21 20.0%), compared
to flat overall UK market
Current trading in FY22 and
outlook
• Strong market position and entered FY23 with
pricing fully aligned with higher input costs
• New customers secured through increasing
product diversity - notably Amazon, Unitas (30k
convenience stores), Boots, Ocado and Sainsbury’s
• Completion of automation at Blackburn and
Leicester sites – machine investment and full
automation at Leyland completed in Q1 FY23
• Leicester Tissue Company (“LTC”) and John Dale
acquisitions fully integrated, and all sites have
improved output (pallets per week) over the last
12 months
• Delivering on customers’ sustainability objectives
- development of smaller core products (reducing
logistics and packaging costs) and further
development of the Oceans brand (paper wrap)
• Optimising shareholder value: strategic review,
to capitalise on the strength of the Group’s
market position
• Private label volumes fully recovered from
impact of pandemic and market share growing
at an unprecedented rate against the traditional
brands - now 54% (Q1 FY22: 50%)
• Accrol revenue up 76% in Q1 FY23, compared
Q1 FY22, driven by price increases and volume
growth (28%)
• FY23 trading in line with market expectations
and the Board views year ahead and beyond
with increasing confidence
* Kantar retail sales value data (May 2021 – April 2022)
**
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.
Our Values
We
challenge
We
deliver
We are
honest
We add
value
Strategic ReportAccrol Group Holdings plc • Annual Report & Accounts 2022 2
Chairman’s Report
Total Revenue
£159.5m
2021: £136.6m / 2020: £134.8m
Adjusted EBITDA**
£9.1m
2021: £15.6m / 2020: £10.6m
Gross Profit Margin
22.7%
2021: 27.7% / 2020: 21.9%
Accrol Group Holdings plc • Annual Report & Accounts 2022
The work to automate,
rationalise and simplify the
business has put Accrol in a
very strong market position.
It is now one of the most
innovative, well-invested and
automated tissue converters
of scale in the UK.
Dan Wright, Executive Chairman
Strategic Report 3
The Group has delivered a set of results of which we
are proud, despite the enormous macro-inflationary
cost pressures faced during the year.
The team successfully recovered more than £70m
of annualised cost increase by the year end, quickly
and skilfully negotiating and implementing price
increases. This rapid action significantly mitigated
the unavoidable impact on the Group’s FY22
profitability. The management team simultaneously
delivered the full integration of LTC and John
Dale; finalised the automation of all four tissue
manufacturing sites, which completed in August
2022; delivered further internal efficiencies; and
increased Accrol’s market share.
The work to automate, rationalise and simplify the
business has put Accrol in a very strong market
position. It is now, one of the most innovative, well-
invested and automated tissue converters of scale
in the UK.
Our vision
From the outset, our vision has been
to build a diversified group of size and
scale, better positioned to manage
input cost fluctuations, focused on a
broader private label household and
personal hygiene market. We believe the
combination of capacity, efficiency and
the lowest cost base in its market is a
compelling proposition.
Diversification
We are focused on adding new customers,
expanding our product range, entering new
categories, and finding additional routes to market.
Fluctuations in market sub-sectors are smoothed
through diversity, removing reliance on any one
product, market, or customer.
While wet wipes sales represented only c.1% of
Group revenue in FY22, we expect this to grow
to £6m by the end of FY23 (representing c.3% of
Group revenue). From a modest capital investment
of c.£2m, we see a £20m plus revenue opportunity
(representing c.5% of the total market) and the
establishment of this product category as a new and
sustainable leg to the business.
Good progress was achieved in terms of new
category expansion, new customers, and deepened
penetration of existing customers in FY22. This is
detailed in the CEO’s Review.
Size and scale
The acquisition of LTC, coupled with automation of
the Group’s other manufacturing sites, has added
operational scale. Today, the Group has a core
tissue capacity of c.150k tonnes and the headroom
needed to deliver a market leading service to the
industry. With the addition of facial tissue and wet
wipes, the Group has the capacity and scale to
grow to beyond £300m revenue across multiple
categories.
Our addressable market, including wet wipes and
facial tissue, now totals c.£3.0bn, a significant step
change for the business from 18 months ago.
De-risking our business
Like many other sectors, the UK tissue market is
not alone in being exposed to input cost volatility.
However, a key focus for the team has been to
control what can be controlled and to act swiftly and
decisively to mitigate against the damaging effects
on issues which fall outside our immediate control.
The progress that has been made on this front
during the year has been especially pleasing and
is testament to the strength of Accrol’s products,
service offering and customer relationships, which
have been established in recent years. Price rises
in a cost-conscious industry are not easy to deliver
rapidly. They can only be achieved in partnership
with our retail customers and only when our retail
partners understand and value our proposition.
Managing cost volatility, however, is not just about
price increases but also about internal efficiencies,
flexibility and good capital allocation. Our historic
investments in process automation provide us with
more flexibility in product innovation and customer
delivery, as well as improving our overall capacity.
Although the Group is well invested, a major
differentiator for us relative to our competitors is
that we never stand still. We continually review our
options on capital investment opportunities. One
such area, which we have previously discussed, is
the investment in our own paper mill. The long-term
commercial and economic benefits of owning or
building a paper mill remain transformational for us.
However, against these material and longer-term
benefits, we must weigh the shorter-term costs to
deliver and the competing claims on our balance
sheet. We remain committed to our ambition to own
a paper mill but this will only be completed in a way
that maximises shareholder value and minimises risk.
We remain alert to any easing of the building cost
environment and normalisation of the supply chain
that will reduce working capital requirements. We
have a strengthening balance sheet but intend to
deploy it only when the time is right.
Strategic ReportAccrol Group Holdings plc • Annual Report & Accounts 2022 4
Maximising returns for shareholders
Environmental, Social and Governance
Strategic Review
The Strategic Review, which we announced earlier
this year, is ongoing. We see considerable value
within the Accrol Group, not least as a result of the
actions taken by management over the last four
years. Our market opportunity is substantial and
growing and our business is well invested and well
positioned relative to others. The Strategic Review
is focused on how best to deliver that value for all
our stakeholders.
Our short-term priority, however, remains on
the effective management of macro inflationary
pressures on the Group’s costs, as well as handling
other well-documented macro supply chain
challenges, which require the team’s full attention.
We expect to provide shareholders with a full
update on the Strategic Review early in 2023.
Dividend
When we issued our FY21 results in July last
year, the Board was delighted to announce
the restoration of dividend payments and a
progressive dividend policy. This demonstrated
our confidence in the business and was
made possible by continuous improvement
in operational efficiencies and strong cash
management.
The world has changed greatly since that
announcement and we have taken the difficult
but prudent decision not to propose a final
dividend for FY22. Capital allocation is an intrinsic
component of the Strategic Review and the Board
remains focused on determining the best use
of the Group’s free cashflow going forward, be it
acquisitions, share buy-backs, dividend payments,
increasing raw material stocks and or paying down
debt further. Effective capital allocation is about
weighing risk and return. The current market
environment favours a more risk averse approach,
especially around securing our supply chain and
access to raw material, and this remains our short-
term priority. Clearly, any easing of these pressures
will make a return to dividends much more likely.
We will provide an update on dividend policy as
part of the Strategic Review update in early 2023.
We were delighted to launch our maiden ESG report
in September 2021 with real and significant targets
on which to judge progress and performance, which
was well received by both internal and external
stakeholders. We pride ourselves on ensuring
that ESG is integrated throughout the business
and makes a valuable contribution to the Group,
as well helping us be better corporate citizens
and minimising our impact on the environment.
Since the publication of the report, we have made
significant strides against our environmental
and social aspirations, which have positively
contributed to the wider business in terms of further
improved employee engagement, energy and waste
reduction. With underlying absentee levels at record
lows, health and safety improvements, and cost and
material savings made, ESG integration is evident.
A by-product of our waste reduction is reduced
raw material usage. In the period since we last
reported, waste was reduced by 0.5% creating a
further reduction of raw material spend. In the
year under review, the Group continued to buy
all raw materials from FSC (Forest Stewardship
Council) accredited suppliers.
The Group also introduced the use of 38mm
cores to toilet rolls from 50mm in the Period.
The project, which involved a wide range of
internal and external stakeholders, has delivered
significant material savings and a 10% reduction
of vehicle movements for the business.
In addition, we are well on track to deliver our
target of 25% of women in leadership roles by
2025 – up to 22% in FY22 (FY21: 17%), which
aligns with the Group’s recent achievement as a
Living Wage Accredited Organisation. Both are key
elements of an operationally excellent business.
We will launch our second ESG report this autumn
and provide more detail on pages 18 to 21 of
this report.
Our people
Engaged, well trained people are a key element of
our business model and sustainability, with training
and wellbeing at the centre. I am proud to report that
Accrol is now an accredited Living Wage employer.
This is especially important to our people at this
time of heightened inflation and also allows Accrol
the advantage of being able to retain the best talent
from the communities in which it operates.
During the year, we appointed a Communications
Manager, Vikki Makinson, who has made
significant improvements to our internal
communications and improved the efficiency
and effectiveness of how we deliver training.
To support this, we use an online training hub
which delivered over 350 courses in its first three
months. Our employee engagement scores
remain high with an overall score of 84%.
I would like to thank all our people for their hard
work and contribution during what has been a
very challenging environment. I think the overall
result, the further operational advance, and the
level of costs recovered showcase the strength and
capability of the management team in the Group.
Outlook
The cost of living crisis is driving consumer demand
for great value products and Accrol has enjoyed a
strong start to the new financial year FY23, and is
fully on track to achieve market expectations. The
margin erosion experienced in FY22, created by the
rapid increase in input costs, has been rectified and
contained, with cost increases being passed on as
they arise.
The market share of the private label and tertiary
brand segment increased to 54% in Q1 FY23,
compared to 50% in the same period of the prior
year. Accrol revenue increased by 76% in Q1 FY23,
compared Q1 FY22, driven by price increases
(48%) and volume growth (28%). The team’s work
and the capital investment in Accrol undertaken
over the last four years have put the business in an
excellent position to benefit from, what we believe
will be, a sustained period of further growth for the
private label and tertiary brand segment.
We remain mindful of the current macro
challenges. The team leading Accrol, however, has
demonstrated its expertise and ability to manage
the business through multiple challenges and the
Board views the future with confidence.
Dan Wright
Executive Chairman
5 September 2022
Accrol Group Holdings plc • Annual Report & Accounts 2022
Strategic Report 5
Investment Case
From the outset, our vision has been
to build a diversified group of size and
scale, better positioned to manage input
cost fluctuations, focused on a broader
private label household and personal
hygiene market.
We believe the combination of
management delivery, commercial
execution and the lowest cost base in its
market is a compelling proposition.
Market opportunity - The addressable
market has grown significantly in the last
18 months, and now totals £3bn.
Size and Scale - The manufacturing
platform is well invested with the capacity
to deliver up to £300m revenue across
multiple categories (at current pricing).
Diversification - Growing new customers,
expanding product range, adding new
categories and additional routes to market.
De-risking - Strength and breadth of
customer partnerships, increasing internal
efficiencies through fully automated
manufacturing processes, flexible and
disciplined capital allocation.
The team’s work and the capital
investment in Accrol undertaken
over the last four years have
put the business in an excellent
position to benefit from, what we
believe will be, a sustained period
of further growth for the private
label and tertiary brand segment.
Dan Wright, Executive Chairman
Strategic Report 6
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
Strategic Report 7
Operational Excellence
Relentless focus on cost
Employ the right people
Consistent quality
Broad customer base
The right
people
Strong
customer
relations
Greater
shareholder
returns
Engaging our people at all
levels so they understand the
role they play in making the
business better every day.
Delighting our customers by
offering great service, quality and
innovations, delivering on our
promises and developing value
added products.
Delivering strong shareholder
returns by growing our market
share, investing in operational
excellence and being relentless
in our cost control.
Accredited Real Living
wage employer
Fully automated
manufacturing
Training to increase skills
Improved output
Multi-channel strategy: online,
wholesale and retail
Brand development: Elegance,
Oceans and wet wipes
Employee survey results
Improved safety
Expanded product range
Clear career paths
Waste reduction
New and deepened customer
relations
Mental health support
Smaller diameter cores
Category expansion
Currency hedging
New routes to market
Maintaining supply through
supplier relations
Accrol Group Holdings plc • Annual Report & Accounts 2022
Strategic Report
8
Strategy in action
Future perfect
Markets for growth
John Dale acquisition
In April John Dale celebrated a year in the Accrol
Group. The wet wipes business which proudly
manufactures a wide range of own-label and
branded products, was added as part of the
Group’s strategy to diversify its product range.
In September we achieved the first ‘Fine to
Flush’ accreditation on a range of wet wipe
products including our own brand, Elegance
toilet tissue wipes.
As an accreditation created and regulated by water
industry experts, it gives manufacturers and brands
greater confidence to clearly label products. In
turn, giving retailers and consumers complete
reassurance that they’re doing the right thing by
the environment.
A range of new business has been won, including
a contract to supply Ocado own-label wet wipes. In
addition, we launched Quantum Moist Toilet Tissue
with Poundland and deepened our relationship
with the award-winning ‘Kinder by nature’ wet
wipes brand, whose products we manufacture
under contract.
Accrol Brands
Accrol renewed its focus on brand sales launching
a host of new brands across the categories it
manufactures expanding its reach across the UK’s
retail network.
Elegance toilet tissue launched in the year,
achieving growing sales success. Launching the
brand into wholesale has been a highlight with the
products being sold in Unitas. Unitas represents
33,000 convenience retailers across the UK and
the agreement with Unitas made Accrol the only
other branded paper supplier to the wholesaler
other than Kimberley Clarke. The brand also went
on sale online via Amazon, becoming a top selling
brand on the UK’s leading online retail site.
Magnum kitchen roll has experienced continued
success in the year, with sales increasing by 19%
despite a market downturn in the category of over
6%*. The brand is listed with a major grocer as well
as a host of discount retailers. It also launched in
the wholesale channel alongside the Elegance
branded range.
Softy facial tissue experienced a sales uplift of
70%, outperforming the category market which
grew overall by 5.4%*. This was achieved through
new listings via major retailers.
Little Heroes baby and toddler wet wipes range
launched in April. The comprehensive range of wipes
includes toddler ‘fine to flush’ toilet training wipes
and biodegradable, plastic free wipes.
*Source: Kantar
Accrol Group Holdings plc • Annual Report & Accounts 2022
Strategic Report 9
Automation has supported the
Group’s improved pallet per week
output across all sites – Blackburn
increased by 27%, Leicester by
59% and Leyland by 32%.
Gareth Jenkins
Chief Executive Officer
Markets for growth
World-class basics
Oceans
Oceans is our sustainable direct to consumer brand.
Our Oceans plastic-free toilet roll is sold direct to
consumers on subscription, online through Amazon
and has been listed in a major grocer.
Fully automated
Full automation across Blackburn and Leicester
has resulted in headcount reduction on a like for
like basis. The final stage of machine investment in
Leyland is being completed in H1 FY23.
Being fully automated delivers improvements in
output capacity, packaging efficiency and product
quality as it requires product consistency for it to run
without incident or human intervention.
Automation significantly reduces plastic materials
used in pallet wrapping as the state-of-the-art
equipment precisely adjusts settings to optimise
pallet presentation thus reducing material
waste. It has helped during the year to mitigate
margin erosion and will help drive margins back
to the equivalent of pre-pandemic levels in the
medium term.
The product is sustainably sourced from FSC
certified fully traceable tissue paper. Being
manufactured in the UK, means that fewer miles are
travelled in its delivery. Accrol is also SEDEX certified,
a well-recognised standard for ethical business.
In addition, through the brand we support the work
of the Marine Conservation Society, a registered UK
charity working for seas full of life.
Investment in Oceans continued throughout the
year; the product range expanded with Oceans
kitchen roll launching online and received excellent
online consumer reviews.
The sustainable brand is also benefitting from a
new website which was launched to improve and
enhance the customer experience.
The brand is performing well with the brand run rate
approaching £1 million per annum and growing
strongly. This is despite a decline in online grocery
sales* across the wider market as consumers
returned to ‘normality’ following lockdown life.
*Source: NeilsenIQ report February 2022
Strategic ReportAccrol Group Holdings plc • Annual Report & Accounts 2022 10
Looking after our People
Living wage
Last year the Group made a commitment to ensure that everyone employed in Accrol is paid the real Living
Wage or above by the end of FY22. We are delighted to have achieved this across sites.
Gender diversity
Female representation continues to increase both in leadership and operational roles.
100%
of staff being paid the
Real Living Wage
Male
Female
Total
Female %
2022
2021*
2020
2019
367
58
425
388
61
449
377
43
420
544
32
576
13.65%
13.59%
10.24%
5.56%
*Figures for 2021 and 2022 include the acquisitions of LTC and John Dale
Females in leadership roles rose significantly this year coming closer to our
target for 2025, which is over 25%
2022
2021
2020
2019
5.4%
2018
5.4%
22.0%
16.4%
16.0%
22%
of females in leadership roles
Gender pay gap at 5 April 2021
Gender pay gap
Mean gender pay gap
Median gender pay gap
Mean Bonus pay gap
Median bonus pay gap
Male employees who received a bonus
Female employees who received a bonus
2021
11.8%
-3.4%
68.4%
0%
85.9%
97.2%
2020
7.7%
-5.7%
77.3%
0.4%
43.9%
19.5%
2019
-18.0%
5.7%
93.2%
-1.3%
53.2%
6.5%
Accrol’s aim
0%
Gender pay gap
Accrol remains well ahead of the national figures. In 2021, the UK’s gender pay gap (median) rose from 14.9%
to 15.4% (Office for National Statistics, ONS, 2021). This means that, on average in the UK, women earn just over
15% less than men per hour. Accrol’s negative 3.4% means that women earn 3.4% more than men per hour.
The 2021 figures include a bonus offered to all qualifying colleagues in recognition of their commitment and
efforts during the covid pandemic.
This report relates to Accrol Papers Ltd only. Other subsidiaries of the Accrol Group (Leicester Tissue Company
Ltd and John Dale Ltd) will be reported on from 2023 on a voluntary basis.
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 Group’s aim is to achieve 0%.
Strategic ReportAccrol Group Holdings plc • Annual Report & Accounts 2022
11
Employee survey
91%
of employees think Health
and safety is always a high
priority at Accrol
84%
of employees feel
comfortable voicing
their opinion at work
86%
of employees think Accrol
embraces diversity and
equal opportunities
89%
of employees feel
proud to work at Accrol
96%
of employees understand
how their role contributes
to the success of Accrol
Accrol Group Holdings plc • Annual Report & Accounts 2022
Strategic Report 12
Looking after our People
An accredited Living Wage employer
The Living Wage is independently calculated each
year based on living costs. In 2016 the government
introduced a rise in the minimum wage for over 25s, but
there’s a gap between the amount all employers have to
pay by law and the real Living Wage that meets the cost
of living. In addition, the real Living Wage recognises that
under 25s have the same living costs as everyone else.
At the heart of the Living Wage movement is the simple
idea that a hard day’s work deserves a fair day’s pay. As
well as it being the right thing to do, there is a growing
body of evidence demonstrating the business benefits
of becoming a Living Wage employer. With people at the
heart of our business operations it’s important to Accrol
that the effort of our people is rewarded fairly.
Accrol pays all colleagues across all of its sites the
real living wage or above. It is the only real living wage
accredited manufacturer in Flint and the South Ribble.
The Accrol Learning Hub
As part of our ongoing commitment to people
development and relentless drive for efficiency across
all aspects of the business, we launched our Learning
Hub. The hub is hosted online and supported by a
physical learning hub space. In its first three months
over 350 online courses were completed.
The hub creates a consistent approach to training
that is more easily cascaded through the business.
As well as empowering employees to steer their own
career paths, it helps management with onboarding
and induction for new employees, ensures
compliance with governance and statutory training.
In addition, it feeds into Accrol’s ongoing focus on
product and service improvement.
Developing skills
Accrol employs a wonderfully diverse workforce
representative of the communities in which it
operates. To support our colleagues, including those
for whom English isn’t a first language, we engaged
with Blackburn college and have launched English,
numeracy, and digital skills courses. The courses
are designed to develop personal skills and build
confidence to pursue professional aims, which
enables Accrol to develop and retain talent within
the business.
Courses are delivered on-site by specialist, experienced
tutors and 17 colleagues enrolled onto the first
programme. The feedback has been exceptional.
“This course will help me to talk to my daughter in
English and I will be able to support her with her
school-work.” (Colleague enrolled onto the English
as a second language course).
Strategic ReportAccrol Group Holdings plc • Annual Report & Accounts 2022 13
77%
Opportunity to grow
Average score
Supporting personal
development
Accrol is committed to empowering
employees to develop rewarding
careers and be the best they can be.
To meet this commitment, we fund a
range of courses and programmes to
support personal development.
Javid Mogradia, Quality Manager
After expressing a desire to develop his
management skills, Accrol funded Javid to study
for an ILM Level 3 Diploma in Team Leadership.
Studying over two years Javid was able to build
his management knowledge and capability. He
successfully completed the Diploma achieving
a Distinction!
Javid also completed, along with his colleague,
Quality Co-ordinator, Noman Mahmood, an
Internal Auditor course with Advanced Food
Safety. Both passed with flying colours!
I enjoy working at Accrol and
I plan to be here for a while.
Dominic Timms
Line Operative Trainee
Improving wellbeing
Accrol offers a broad range of
support and during the year has
increased its focus on mental health.
All colleagues are offered full training
in “Positive Mental Health at Work” to
help them learn how to help and support
others with mental health issues as well as
understand the habits they can develop to
take better care of their own mental health.
During the year Accrol launched:
85%
My manager, or someone
at work, seems to care
about me as a person
Dominic Timms, Line Operative
Trainee
As part of Accrol’s involvement with the
government’s Kickstart scheme, which
offers individuals valuable work experience,
Accrol recruited Dominic Timms in a
placement working at the Group’s facial tissue
manufacturing site in Blackburn.
Dominic impressed the operations leadership
team so much with his attitude and work
ethic that he successfully secured a full-time,
permanent position with the business.
He said of the role: “It can be an intense
environment working 12 hour shifts and you’re
always busy doing something. But the team
are really helpful, my manager says to me if
you need anything you only have to ask and
there’s a good team spirit, we all get along. I
enjoy working at Accrol and I plan to be here
for a while”
Mental Health First Aiders
A team of four employees were trained
as Mental Health First Aiders to support
their colleagues and signpost support and
further resources.
Employee Assistance
Programme
Provided by leading employee benefits
provider Unum Lifeworks, this service offers
around the clock support on all matters of
health and wellbeing, including telephone
and face to face support.
Tailored, specialist support
Given to colleagues to assist them through
personal crisis.
Accrol Group Holdings plc • Annual Report & Accounts 2022
Strategic Report 14
Chief Executive Officer’s Review
£159.5m
2021: £136.6m / 2020: £134.8m
In every aspect of our
manufacturing operations,
we have successfully
navigated unprecedented
inflationary pressures.
Gareth Jenkins
Chief Executive Officer
Accrol’s own branded products
18% of total sales
(2021: 10%)
Core paper capacity
c150k tonnes
Total revenue capacity
£300m
Accrol Group Holdings plc • Annual Report & Accounts 2022
The Group has delivered a strong
performance that is marginally ahead of
market expectations under extremely
challenging circumstances, having
successfully recovered over £70m of
annualised cost increases.
I am pleased to report that we generated substantial
volume growth of 7.5% in the year and increased
revenue by 17%. Given the unprecedented speed
and magnitude of the cost increases, there was an
unavoidable time lag in these passing on, which
impacted the Group’s underlying margin in the year.
These costs were passed on in full by the year end
and we now have mechanisms in place to pass on
any further increases, in a more timely manner.
In every aspect of our manufacturing operations,
we have successfully navigated unprecedented
inflationary pressures. Tissue prices have reached
their highest ever levels, driven by pulp, energy, and
sea freight costs, and this was exacerbated by the
weakening of sterling relative to the US Dollar and
the war in Ukraine.
We entered FY23 with more secure revenues,
underpinned by the right products, the biggest
range of customers in the sector and a fully
automated, well-invested business in a rapidly
growing market - private label volume has grown
10%, since the full year end, and is once again, out-
stripping the traditional brands, which declined by
5% in the same period. Market share for private label
now stands at 54% vs 46% for brands.
Momentum on volume growth and underlying
margin has been maintained. Accrol volumes in
Q1 FY23 increased by 28% and revenue by 76%,
compared to the same period in the prior year. This
volume growth is on track with market expectations
for FY23, which forecast YoY revenue and EBITDA
growth of 31% and 67% respectively, underpinning
our confidence for the year ahead.
Our business today
As a result of the extensive work done over the last
four years to build an operationally robust business,
we have continued to deliver on our vision to build a
diversified group of size and scale. Highlights during
the year included:
• New customer wins;
• Deeper penetration of existing customers;
• Product range expanded; and
• New routes to market opened.
Strategic Report 15
Product extensions will be a key driver behind further
volume and market share growth:
• The acquisition of John Dale in April 2021
gave the Group entry into the rapidly growing
biodegradable flushable wet wipes market. During
the Period, we achieved ‘Fine to Flush’ and BRCGS
(UK Retailers Accreditation – AA rating) on a range
of wet wipe products; and
• We developed and launched several new wet wipe
products, including ‘Little Heroes’, a brand-new
baby and toddler wipes range being sold through
a number of retailers and Quantum moist toilet
tissue, again being sold through a number of
retailers. In addition, we won a contract to supply
Ocado’s own-label biodegradable wet wipes and
deepened our relationship with the award-
winning ‘Kinder by Nature’ wet wipes brand.
We continue to expand our sales to retail customers,
either through adding new ones or deepening
existing relationships. The team also secured an
extended sole supply position with several retailers
for their paper category. In addition, we have
generated significant growth in volume sales of our
own brands, Elegance (toilet roll), Magnum (kitchen
towel) and Oceans (paper wrapped), which are all
now being sold through a number of major retailers.
Accrol’s own branded products, which stay close
to our mission to deliver quality and value to
consumers, have also made good progress. All
these products are now available on Amazon, and
all have grown in volume and revenue over the
last 12 months, now making up c.18% of our total
sales - up from c.10% in FY21. This range of products
commands a higher margin than private label
products in the main and increases the importance
of our supply relationship with the retailers.
Our Elegance toilet tissue is now the fastest growing
brand in cash and carries, and since its launch on
Amazon only six months ago, it is now in the top ten
toilet tissue brands on the site. Softy facial tissue,
which has sold through one of the top four Grocers
since February 2022, as well as Amazon, is the
now the second biggest box brand in the UK. Our
Magnum kitchen towel product, which is sold across
several retailers, has had an exceptional year, and is
now the fastest growing and currently fourth largest
brand in the UK.
The Oceans plastic-free brand sold direct to
consumers on subscription had a strong run early in
the Period, giving an overall growth rate of 30%. We
do not expect this rate of growth to be maintained,
as it benefited from Covid related consumer
behaviour change, which is now ‘normalising’ post-
pandemic. However, we continue to be excited by
the product’s potential. More recently, we added
Oceans kitchen towel to the range, which has
received excellent online consumer reviews.
Further capacity in the business has been added
with the final site, Leyland, becoming fully automated
from August this year. Further machine capacity
at the Leyland site will also be operational from
October. Accrol is a well invested platform with the
internal capacity to support further organic volume
growth without further material capital investment.
The Group now offers a core paper capacity of
c.150k tonnes, and a total revenue capacity in excess
of £300m when we include wet wipes and facial
tissue capacity. Utilisation of this capacity, as we
continue to execute commercially and build on our
impressive market share foundations, is a key driver
behind our future free cash flow generation.
The integration of the John Dale acquisition has been
completed, with facial tissue machinery and volumes
moving to our fully automated state of the art facial
plant in Blackburn. We now expect our facial value
run rate to double over the next 12 months from
c.£10m (FY21) to c.£20m in FY23. In addition, our
wet wipe business, which had annualised wet wipe
sales of c.£2.2m on acquisition, has won business
delivering a simplified flushable range that will deliver
c.£6m sales in FY23.
Market overview
The improved market conditions that began at
the start of the Period continued, strengthening
throughout the year. Shopping behaviours returned
to normal levels and the tissue market grew by 0.7%
to £2.1bn based on Retail Sales Value. Our market
share rose from 15.3% at the half year end to 16% at
the year end, reflecting the recovery of the discount
retailers. Private label grew by 1.5%, versus a small
decline of 0.2% across brands, bringing the ratio
back to 50:50.
Post year end, the private label sector has continued
to strengthen. We expect the private label sector to
grow at c.10% this year as consumers are driven to
best value products, as inflationary pressures bite.
In Q1 FY23, Accrol volumes grew by 28% versus
private label growth of 10% in an overall flat market
(when you exclude the inflationary price increases).
This success has been driven by supplying a broad
customer range with all in growth, as opposed to the
prior financial year. The market share of the traditional
brands segment fell by c.5% in Q1 FY23 to 46% of
the market. Accrol’s position at the same time last
year was exacerbated by a poor online presence, both
directly and through the retailers, both of which have
been addressed over the last 12 months.
Our market share growth has been further enhanced
by growth across our range of branded toilet and
kitchen towel products, as well as the new channel
development. Our branded range of toilet tissue
(Accrol Elegance) has grown by 14% FY22 vs FY21,
facial tissue (Accrol Softy) by 70% and kitchen towel
(Accrol Magnum) by 19%. We expect to see further
substantial gains against market leaders in kitchen
roll in FY23 from further product changes.
The facial tissue market, which was in decline during
Covid, due to increased mask wearing and the
reduction in common colds is back in growth. Over
this period, we have simplified the range further,
transferred machinery, moved volume from John
Dale and invested in low-cost automation. This has
more than doubled the Group’s facial tissue capacity
from £10m to £20m. Whilst there was a decline in
volumes for reasons outlined above, the Group now
expects its facial tissue business to double in size
over the next 12-18 months.
Finally, our move into wet wipes is starting to deliver
on our early expectations. The pipeline of new
customers is beginning to positively impact volumes
with revenue run rates expected to treble in size to
c.£6m per year by the end of FY23, up from £2.2m at
the point of acquisition. This has been delivered with
a much-simplified range of products with a particular
emphasis on a water industry approved flushable
wet wipe range. With modest capital (c.£2m), the
Group expects the wet wipe business to grow
revenue to c.£10m-£15m by 2024, with a particular
focus on higher value range of wipes. Our extensive
customer range has enabled the business to grow at
a pace with the business now expecting the revenue
growth to accelerate over the next two years.
Following the well-publicised inflationary pressure
in the UK, the retailer market is seeing a significant
shift in shopping habits, with an enormous shift
away from high-cost brands across every category.
Over the next 12 months, as further energy price
increases continue to impact shoppers’ budgets, we
expect to see the private label market grow further.
Accrol will continue to develop and bring to market
innovative solutions that meet customer needs.
The Group is well positioned to benefit from growth
in value products with no major capital required and
available capacity.
Strategic ReportAccrol Group Holdings plc • Annual Report & Accounts 2022 16
Chief Executive Officer’s Review continued
However, the operational strength of the business
and a supportive retailer customer base has
enabled us to recover cost increases and put in
place new index linked customer contracts to
ensure that costs and inflation are now aligned.
As a result, we do not anticipate a repeat of FY22
gross margin impact looking forward.
In addition, work carried out as part of the Group’s
commitment to ESG has seen initiatives to reduce
energy and waste having a positive financial
impact. Lorry journeys have reduced by 10% as
a result of smaller toilet roll core sizes; and waste
reduced by 0.5%, lowering raw material usage.
Despite the wider macro challenges, the Group
has performed strongly in the new financial year
to date, with volumes growing ahead of the total
market (28% compared to 10%) and the rapidly
recovering private label market. It is clear that
there is an economic shift away from high-cost
products to items that give great value to the
shopper and Accrol is extremely well placed to
capitalise on this opportunity.
Acquisitions, automation and operational
efficiency have given us the foundations with
which to expand the business. As the balance
sheet strengthens, the Group is well placed to take
advantage of the many opportunities that exist to
accelerate this growth.
The Board is pleased with the progress of the
Group and has continued confidence for FY23 and
beyond.
Gareth Jenkins
Chief Executive Officer
5 September 2022
Operations
The Group is benefiting significantly from the
full automation of all of its sites. This, together
with shift patterns that were changed last year
and further simplification of the business, has
helped mitigate margin erosion and will help drive
margins back to the equivalent of pre-pandemic
levels in the medium term.
Since all the automation programmes have
been completed, the Group has improved its
output significantly across all sites - the facial
plant output increased by 16%, the Blackburn
and Leyland sites improved by 27% and 32%
respectively, and Leicester rose by 59%. Like
for like headcount in the Group’s core tissue
businesses has reduced from 425 to 275 over the
last two years. All remaining employees are now
paid the living wage as a minimum and the Group
joined the Living Wage Foundation in May 2022.
In addition, the move to 38mm cores from 50mm
has increased the “rolls per lorry” by 15%. The
aspiration set as part of the ESG announcement
in 2021 was to increase this by 15% by 2025. The
Group is significantly ahead of this target in both
timescale and delivery.
Pulp prices over the Period increased significantly,
driven in the main by energy price increases.
Whilst there is further capacity coming on stream
globally, we do not expect to see any erosion in
the pricing of tissue and would not be surprised
to see further increases in the short-term. The
business remains well placed to pass on these
increase as they are encountered. The Group has
long-term supply relationships with all suppliers
and, due to the uncertainty in the supply chains
and the ongoing conflict in Ukraine, has doubled
the amount of raw material stocks it normally
carries. This will have a short-term impact
on adjusted net debt but, due to improved
performance elsewhere in the Group we expect
adjusted net debt to be less than 2x and in line
with market expectations for FY23.
Since the start of FY22, the Group has successfully
passed on over £70m of annualised cost increases
across three different price increases, with the
majority of its supply agreements now having in
place some form of index-linked pricing.
Whilst the war in Ukraine does not directly
impact the Group, the business has significantly
increased its raw material stocks to mitigate any
supply chain issues. With regard to energy costs
the Group has longer term hedging policies in
place and any increases are managed through
price increases in finished goods. In addition, the
group has in place a significant energy reduction
programme which has seen a 3% reduction in
usage over the last 12 months on a like for like
basis despite the full automation of two factories
in this period.
People and culture
As I have stated here before, our operational
efficiencies are not at the expense of our people.
Engaged people are a key part of our business
model and sustainability. Employee wellbeing
plays a crucial role in this. I am proud to report that
Accrol is now an accredited Living Wage employer,
which is especially important at this time. We have
also launched several initiatives this year around
caring for employees including, Mental Health
First Aiders, Employee Assistance program, and
training around dealing with mental health issues.
It therefore gives me pleasure to report that our
absentee levels are at 1.7% (Q1 FY23), which is
outstanding when compared to the UK average of
2.2% (source: FY21 – ONS data).
I would like to take this opportunity to thank
all our employees for their hard work and
determination in delivering a strong set of results
in what has been a very difficult environment.
Health and safety
The relentless focus on health and safety over
the last four years has resulted in a further 33%
reduction in total accidents, with the Group
delivering zero lost time accidents over the last
two years across all of its sites. In addition, we
have seen a 28% reduction in accident frequency
rates. These results are transformational and are
something of which we are all incredibly proud.
Outlook
We continue to see inflationary issues, not least
on account of sterling weakness, and do not
see these abating in the short to medium term.
Accrol Group Holdings plc • Annual Report & Accounts 2022
Strategic Report Markets
17
UK Tissue Market
Retail Sales Value (“RSV”)
£0.3bn
£0.4bn
Toilet Tissue
Kitchen Towel
Facial Tissue
£1.4bn
Source: Kantar (April ‘21 – Apr ‘22)
Overall market by RSV increased by 0.7% to £2.1bn
following a decline in 2021
Since the start of May 2022, private label comprises
of 54% of total sales in the UK
Discounters tissue sales regained as normal
shopping behaviours returned after the pandemic
and are anticipated to grow in the year ahead as
consumers chase value
Accrol’s market share by volume increased to
19.5% (H1 FY22: 18.9%, FY21 20.0%), compared to
flat overall UK market
Accrol’s market share of private label was 27.7%
Toilet Tissue
£1.4bn
market (RSV)
Accrol toilet tissue market share was 17.8% by RSV
and 19.5% by volume
Branded range ‘Elegance’ launched in July 21 is
now a top selling toilet tissue brand on Amazon
Plastic free Oceans brand sold direct to consumer
continued to grow in the year
Kitchen Towel
£0.4bn
market (RSV)
Accrol kitchen towel market share was 16.4%
Post pandemic, the category is returning to
normal levels
Accrol’s ‘Magnum’ brand, which is sold across
several retailers, is now the fourth largest UK brand
Facial Tissue
£0.3bn
market (RSV)
Accrol facial tissue share is c7%
Wet wipes
£0.5bn
market (RSV)
Product USP Fine to Flush Accreditation Achieved
Market category grew 5.4% following a decline
through pandemic due to reduced cold and flu
‘Little Heroes’ launched in April 2022 a brand-new
baby and toddler wipes range
Softy facial tissue, which has sold through
Sainsbury’s since February 2022, and is the 2nd
biggest brand in boxed facial
Transferred volume from John Dale to fully
automated, state of the art Blackburn site, and
invested in low-cost automation, to more than
double the Group’s facial tissue capacity from
£10m to £20m
Brand extension of Elegance and Quantum
launched to match brand leader
With modest capital (c.£2m), the Group expects the
wet wipe business to grow revenue to c.£10m-
£15m by 2024, with a particular focus on higher
value range of wipes
eCommerce
Accrol brands are now available on Amazon
Elegance toilet tissue, is a top selling toilet tissue
brand on Amazon
Oceans plastic-free brand sold direct to consumers
on subscription had a strong run early in the Period,
giving an overall growth rate of 30%
Oceans kitchen towel recently added to the range,
which has received excellent online consumer reviews
Strategic ReportAccrol Group Holdings plc • Annual Report & Accounts 2022 18
ESG and carbon reporting
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.
We launched our first ESG report in September
2021 and have made good progress since then.
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Supplier eng a g e m e
Social – K P I’ s
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nities Careers
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C arin g for C
ployees F
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100%
100% of packaging
plastic free
Environmental
100% FSC®
certified paper
100%
renewable energy
Social
Accrol today
50%
10.1% waste
8.2% waste
30% of packaging
materials from PCR
7.0% waste
50% of packaging
materials from PCR
50% of packaging
plastic free
5.0% waste
KgCO₂e
KgCO₂e
39.5 kgCO₂e
0% landfill
32.4 kgCO₂e
'Energy steering
team' formed
Baseline
water usage
ISO14001
certified
50% reduction
in water usage
Accrol today
500
5,000
68 Accidents/
annum 6 LTA
35% on real
living wage
66% on real
living wage
94% on real
living wage
100% on real
living wage
Lives impacted
Lives impacted
baseline
12 Accidents/
annum
0 Accidents/
annum
5.8% absence
77% employee
engagement
2.4% absence
48 Accidents/
annum 5 LTA
31 Accidents/
annum
Governance
Accrol today
<2% absence
Health age +2
Lives impacted
Health age
baseline
ISO9001
certified
ISO9001 upgraded
to BRC
Board attendance
93%
Supplier engagement
in ESG 25%
Supplier engagement
Supplier engagement
Risk management
in ESG 50%
in ESG 100%
RAG rating
Supplier (B)
Member
QCA Code
compliant
IT Penetration vulnerability
score baseline
75% of sites achieved highest
'AA' BRCGS accreditation
Annual Board
IT Penetration vulnerability
performance evaluation
score Medium
Buyer/Supplier
(AB) Member
IT Penetration
vulnerability score Low
Carbon
neutrality,
sustainable
products
KgCO₂e
<27.6 kgCO₂e
Positively
impact the
lives of our
people &
communities
10,000
Delivering
long-term
success
Strategic ReportAccrol Group Holdings plc • Annual Report & Accounts 2022
19
Carbon footprint
Reduction in accidents
30
KgC02e per tonnes of production
33%
Energy savings
Lost Time Accidents
0
Down from seven
3%
Waste
7%
A 0.5% reduction
since the last report
100%
100% of packaging
plastic free
Project to change toilet roll cores
from 50mm to 38mm delivered:
Rolls per lorry
+15%
Estimated number of lorries
removed from roads
300
Environmental
FSC
100% FSC
sourced paper
100%
renewable energy
Social
Accrol today
50%
10.1% waste
8.2% waste
30% of packaging
materials from PCR
7.0% waste
50% of packaging
materials from PCR
50% of packaging
plastic free
5.0% waste
KgCO₂e
KgCO₂e
39.5 kgCO₂e
0% landfill
32.4 kgCO₂e
'Energy steering
team' formed
Baseline
water usage
ISO14001
certified
50% reduction
in water usage
KgCO₂e
<27.6 kgCO₂e
Accrol today
500
5,000
68 Accidents/
annum 6 LTA
35% on real
living wage
66% on real
living wage
94% on real
living wage
100% on real
living wage
Lives impacted
baseline
Lives impacted
12 Accidents/
annum
0 Accidents/
annum
5.8% absence
77% employee
engagement
2.4% absence
48 Accidents/
annum 5 LTA
31 Accidents/
annum
Governance
Accrol today
<2% absence
Health age
baseline
Health age +2
Lives impacted
10,000
ISO9001
certified
ISO9001 upgraded
Board attendance
to BRC
93%
Supplier engagement
in ESG 25%
Supplier engagement
in ESG 50%
Supplier engagement
in ESG 100%
Risk management
RAG rating
Carbon
neutrality,
sustainable
products
Positively
impact the
lives of our
people &
communities
Delivering
long-term
success
Supplier (B)
Member
QCA Code
compliant
IT Penetration vulnerability
score baseline
75% of sites achieved highest
'AA' BRCGS accreditation
Annual Board
performance evaluation
IT Penetration vulnerability
score Medium
Buyer/Supplier
(AB) Member
IT Penetration
vulnerability score Low
Accrol Group Holdings plc • Annual Report & Accounts 2022
Strategic Report 20
Environmental, Social & Governance continued
We pride ourselves on
ensuring that ESG is integrated
throughout the business and
makes a valuable contribution
to the Group, as well helping
us be better corporate citizens
and minimising our impact on
the environment.
Dan Wright, Chairman
Sustainable platform
Energy steering team
We have made significant progress in the
challenge to reduce energy. Since the last report
we have made energy savings of 3% which has
been especially beneficial to help offset some of
the rising energy costs.
An energy steering team, chaired by Operations
Director Simon Nelson, was established to
identify and monitor energy saving initiatives
and drive continuous improvements. And the
engineering team, led by Andy James, undertook
a number of initiatives to minimise energy
consumption across all sites, using energy
observations to capture input and feedback from
all colleagues.
To date the team has been able to implement
a thoroughly structured approach to energy
reduction projects and identified and targeted
several areas to contribute to improving energy
efficiency, including:
• Finalisation of roll-out of LED lighting across all
Blackburn sites;
•
•
Installation of PIR sensors in Blackburn
warehouses;
Installation of daylight-saving sensors in
Blackburn warehouses; and
• Optimisation of Blackburn conveyors
Further engineering projects have been
identified and engagement across the teams
continues to gain momentum.
Waste reduction
We’re continuing to make gains in optimising
material utilisation, helping us to use less raw
material and save money. Waste has improved
reducing to 7%, all achieved through research,
test, trial and continual learning. It is strong
progress towards our 5% goal.
Marc Cragg, Continuous Improvement
Manager, is leading Accrol’s waste reduction,
he has been instrumental in accurately
identifying the most ‘wasteful’ parts of the
production process that exist across all sites.
Marc’s work has led to process improvements
quality controls, asset care procedures plus
cleaning and maintenance controls. Marc
Sustainable platform
explains, “I’ve spent hours on the production
floor observing how the teams work and
identifying waste hot spots along each
point of the production process. I’ve spoken
with teams to understand why they work in
the ways that they do, the challenges they
have and the opportunities they believe
exist. This has enabled Accrol to trial new
ways of working and explore opportunities
that team members have put forward as
well as identifying training needs to drive
more consistent levels of performance.”
Through his engagement with teams, Marc has
identified over 25 ideas to reduce waste, all of
which were fully reviewed and followed up on.
Strategic ReportAccrol Group Holdings plc • Annual Report & Accounts 2022 21
Sustainable platform
World-class basics
More rolls per journey
Accrol set an ambitious target to increase the
number of rolls per journey by 15%, which in
turn would remove an estimated 300 trucks
from the roads, reduce carbon emissions
and logistics costs. This was to be achieved
through improving net trailer loading.
Prior to 2021, Accrol’s toilet rolls had 50mm
cores, which were important to our retail
customers as consumers saw bigger rolls
as better value – a toilet roll typically being
assessed by its size and how soft or ‘squishy’
it is. Air, and a larger roll, can help with the
‘squish’ factor. However, larger cores mean
more transport and more material.
To move 50mm to 38mm was an intensive
project involving consultation with customers,
suppliers, and several teams across Accrol’s
manufacturing sites, commercial, engineering,
production, material and technical management.
Manufacturing capability converting lines
needed to be developed and tested. Through
collaboration and the support of our Leicester
teams, who had expertise and insights to enable
the transition, the capability was developed.
Commercial teams had fully engaged with
customers who bought into the environmental
benefits of the project. It was underway. At
the time of writing Accrol has successfully
transitioned 179 product Stock Holding Units
(‘SKU’s) from 50mm to 38mm cores.
Operations Director, Simon Nelson, explains,
“The scale of this project, the people involved,
and the complexities and challenges overcome
is of huge credit to Accrol. It’s a great example
of the organisation’s “can do” spirit.”
Engaging with suppliers
In the year, we launched a supplier code
of conduct outlining the principles we
expect our suppliers to follow, including:
Integrity and ethics
•
• Respect and human rights
• Environment sustainability
• Health and safety
• Management processes
• Governance
It’s Accrol’s aim to create mutual success
with all stakeholders built on trust,
sustainability, and a shared commitment to
our codes of conduct.
A wider procurement strategy has been
developed to enable the business to
achieve this aim in a clear, measurable
way; the launch of this supplier code of
conduct handbook marks the beginning
of implementing this approach.
Hearts and minds
Safety
Safety is our number one priority. It’s the top
agenda item at every business briefing, a key
part of every new starter induction and, proudly,
it’s become front and centre of every colleague
mindset when they come to work with hundreds
of safety observations submitted each week.
Safety observations are counts of the number of
safe and unsafe actions or conditions in a work area
for a given time. They’re a useful tool in helping us
understand employee engagement with health and
safety policies and procedures and play a critical
part in creating a pre-emptive culture.
Accrol introduced safety observations in 2019,
and through a combination of communications
to make safe working high profile and ensuring
safety observations are easy to access, and are
proactively tracked and managed, almost 10,000
observations were made during the year. This has
more than doubled within the last two years and
has resulted in the halving of accidents reported.
Another key measure of safety is Lost Time
Accidents (LTA’s) and during the year all sites
achieved zero LTA’s. Total accidents in the year
reduced 33% (see KPI’s on page 25).
Strategic ReportAccrol Group Holdings plc • Annual Report & Accounts 2022 22
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.
Other key decisions taken
in the year that were
influenced by engagement
with stakeholders:
• Full automation of Leyland
site – consultation with
employees throughout the
process to deliver a substantial
capital investment programme
and reduction in headcount
• New warehousing facility –
plans to build new warehousing
facility at Leyland site required
local community and supplier
consultation
• Price increases – consultation
across customer, employees
and supplier base in recouping
and effectively managing
unprecedented inflationary
costs pressures and raw material
supply
Our stakeholders,
and why we engage
Our People
People are at the heart
of our business and the
key to ensuring delivery
of our relentless drive
for world class basics.
Our
customers
Effective
communication and
meeting the needs
of our customers is
fundamental to our
success.
Our suppliers
The relationship
with our suppliers is
crucial to ensuring the
timeliness and security
of our raw material
supply and successful
delivery to customers
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 work to positively
impact the communities
that support our
business
Engagement, including topics of engagement and any feedback
We run an employee engagement survey
twice a year. The results are reviewed at
Board level and cascaded to all employees.
The feedback is used to inform employee
development and policies.
To engage with our diverse workforce, we
employ a multi-channel planned and real-
time communication approach. In-depth
colleague focus groups were held to establish
general colleague views and opinions of
the business they work for. Quarterly face
to face business briefings are held across all
sites with all employees and during the year
a colleague website was launched to enable
colleagues to stay abreast on all the latest
colleague news and information.
Training and development opportunities
for colleagues continue to expand. Most
significant being a Learning Management
system (the ‘Learning Hub’) which launched
to all colleagues; feedback on course content
plus the ability to request and suggest course
content is also sought from all colleagues.
Performance reviews in the form of job
chats were also introduced in the year as
an ongoing tool to support colleagues in
developing a clear personal pathway for
improvement and growth.
The Company engages in continuous
communication and reviews with customers
to understand their changing needs, align
plans, and develop collaborative partnerships.
The unprecedented energy costs and
inflationary pressures have led to further
engagement with customers as we sought to
recover increases in costs effectively.
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.
Investment in consumer and market insight
across each of our trading categories has also
been used to shape and inform the product
and brand offer delivered by the company.
We have also engaged with our customers on
moving to 38mm cores for toilet rolls as part
of our commitment to reducing our impact
on the environment by reducing the number
of lorry journeys (see page 19).
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 or consolidated agreements.
Engagement on ESG matters increased
during the year and we discussed how we
could support each other to meet respective
ESG commitments.
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. Feedback from investors is
reviewed by the Board.
Accrol is a founding member of the Blackburn
Youth Zone (“BYZ”) and continues to support
the funding of this local organisation.
During the year, Accrol’s HR Director -
Kathryn Robinson, joined the Board of BYZ
and the senior leadership team attend and
support events hosted by the charity as well
as volunteer at the venue.
areas in which we operate, supplying product
donations to assist in the services they provide.
Other charities have also been engaged
through fundraising initiatives by colleagues.
For example, employees at our Blackburn
facility contributed significantly to Secret
Santa, a local charity that distributes gift sacks
to under privileged children in the local area.
We hold a good relationship with the Trussell
Trust as well as other foodbanks in the local
Colleague donations to the Ukraine appeal
were also match funded by the company.
Strategic ReportAccrol Group Holdings plc • Annual Report & Accounts 2022 23
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 carbon footprint by 15% by 2025.
• 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 more 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.
The Accrol promise
Sustainability
We believe that responsible
business ensures sustainability
Transparency
Open and honest
communication with
all our stakeholders
Innovation
Relentless drive for
world class basics
Delivery
The best service to our
customers, the best products
to the consumer, great returns
to shareholders, giving
back to the community
Impact of the engagement and any actions taken
Our engagement scores remain high with
89.4% of colleagues saying they were proud to
work for Accrol. However, analysis by site shows
different challenges exist within each workplace.
Tailored detailed cascade of key issue,
challenges and opportunities to inform people
action plans by site have been introduced.
Internal communications have been
significantly strengthened in the
year following the recruitment of a
communications manager. A new internal
communications strategy was developed
which saw the introduction and ongoing
delivery of new channels to communicate
and engage with colleagues.
With the launch of the Learning Hub, a
steering group has been established to assess
and review progress and next steps including
prioritisation of course content in line with
colleague and business need. Colleagues
completed over 325 hours of online learning
since launch.
A lot of work has also been done to improve
mental health support (see page 13).
The unprecedented energy costs and
inflationary pressures have led to increased
engagement with customers as we sought to
recover price increases.
As a result of the ongoing engagement
with customers we have introduced index
linked customer contracts to ensure that
costs are linked to variables such as currency
fluctuations, pulp and energy prices.
We have also engaged with our customers on
moving to 38mm cores for toilet rolls as part
of our commitment to reducing our impact
on the environment by reducing the number
of lorry journeys, by increasing rolls per
journey by 15% (see page 19).
In the year we have deepened relations with
customers, becoming sole supplier of private
label toilet and kitchen to Morrison’s for
example. We’ve also secured new customers
and opportunities such as: manufacturing for
the popular Fabulosa brand, launching our
new branded products (Elegance, Magnum,
Softy and Oceans) into retailers including
the Unitas wholesaler group, securing the
Ocado wet wipes own-label business and
introducing Softy facial tissue into Sainsburys.
We understand the importance of learning
from our supplier base.
We launched a supplier handbook to make
clear the principles and standards Accrol
measures suppliers against, cementing
organisational transparency.
A wider procurement strategy is in
development with a supplier management
forum being formed and an enhanced risk
management of suppliers underway.
Engagement with suppliers throughout the
year has been critical in enabling cost savings
such as energy and insurance rates and
consolidation of pallet provider.
Positive customer outcomes have also been
achieved collaborating with logistics partners in
tackling issues such as driver shortages during
the year. As well as maintaining good supply of
raw materials during severe shortages of pulp
supply to meet customer demand.
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.
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.
The recent employee survey reflects this, with
89.4% of our employees stating that they
were proud to work for Accrol.
Through our work with BYZ, we’ve
attended careers fairs at the charity and
supported the launch of a new service
‘Youth Hub’. In turn this enables us to
promote careers in manufacturing to
young people in the area. We successfully
recruited two trainee placements in
the year.
Strategic Report 24
KPIs and business model
Our Business
Model
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.
How we measure our performance
The right
people
Our values are at the core of what we do, by engaging
our people at all levels so they clearly understand 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 innovation, 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
Strategic ReportAccrol Group Holdings plc • Annual Report & Accounts 2022 25
-33%
84%
+6.2%
Total Accidents
Employee Engagement
The number of accidents reported has declined
Comments:
The overall number of Lost Time Accidents (LTA’s)
have decreased from 7 to 0 year on year, whilst Total
Accidents for the same period have dropped by 33%.
Over the same period Safety Observations generated
by our employees increased by 59%. We believe
the continued focus on proactive observation and
action, will continue to drive down total accidents,
which will remain our primary measure going forwards
The measure as determined by the Employee
Engagement Survey which is conducted twice a
year (2021: 84%).
Comments:
Employee engagement has been maintained
despite the challenging external environment, as
training and development programmes benefit
the business.
Increase In Output Per Head
Pallets produced per head: FY22 v FY21
Comments:
Productivity levels continued to improve despite
volatile demand, particularly during H1, as the
impacts of COVID were still being felt.
Further investment in automation is now being
finalised in our Leyland facility, which will bring
further productivity improvements in FY23.
95%
16%
+8.4%
On time delivery
Market share
Growth in sales to top customers
Percentage of deliveries that are delivered on
time over a calendar month (2021: 92%).
Comments:
Despite supply chain disruption due to COVID and
constraints on haulage driver availability, service
levels improved, demonstrating the resilience of
the business.
Driven higher by stronger growth of private label
products and discount retailers in general
(2021: 15.9%)
Growth in sales of all products into our top six
customers. Target is for no one customer to
account for more than 25% of total revenue
Comments:
Comments:
With our market share now 16.0% (2021: 15.9%)
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 increasingly well
positioned to benefit in a value-conscious, post
COVID-19 world.
We sell to a broad concentration of customers,
each of whom is important to us. We can spend
more time servicing and understanding our
customers to help them grow and drive the best
value products to the consumer
£27.5m
£9.1m
Adjusted net debt
Adjusted EBITDA
Total borrowing less cash reserves (2021: £14.6m).
Comments:
This guides our decision making on the use of cash
generated from operations.
Working capital expanded in the year to manage
supply constraints and rising costs.
Investment continued in manufacturing assets and
product development.
Adjusted to exclude separately disclosed items and
Share Based Payments (2021: £15.6m).
Comments:
We believe that this measure is a truer indication of
the Group’s underlying trading performance.
22.7%
Gross margin
As reported (2021: 27.7%).
Comments:
From a low of 17.5% in FY18, the improvement
in gross margin reflects the overall operational
improvements effected over the last four years but
impacted by the significant rise in input costs in
FY22, and associated lag in price recovery.
Accrol Group Holdings plc • Annual Report & Accounts 2022
Strategic Report 26
Chief Financial Officer’s Review
The final automation of the
Leyland site was completed in
August 2022. Alongside a final
machine installation, this will
complete all major investments
into the tissue businesses.
This will result in the Group
having four state-of-the-art fully
automated factories.
Richard Newman, Chief Financial Officer
The overall performance of the Group
was resilient despite the challenges of
a volatile trading environment where
we have worked through the end of the
pandemic, rapidly rising commodity
costs, and significant supply chain
disruption. The business benefited from
its increased scale and diversity following
the acquisition of LTC, acquired in
November 2020, and John Dale, acquired
in April 2021, both of which have been
fully integrated with significant benefits
in line with our expectations.
Trading results
Group revenue increased by 16.7% to £159.5m (FY21:
£136.6m), with volumes bouncing back as the year
progressed from the subdued levels experienced
during lockdowns, reflecting changes in consumer
shopping habits as the impacts of the pandemic
receded. H1 volumes were strengthened by the
impact of the Group’s two acquisitions in the previous
year, whilst H2 showed strong organic growth as price
increases were implemented to recover significant
increases in input costs. The total tissue market
increased in value by 0.7% and our market share
increased to 16.0% from 15.9% in FY21. Many retailers
did not move shelf sales pricing, during the period
under review, despite record price increases. We are
now starting to see the price movements in stores.
Gross margins declined to 22.7% (FY21: 27.7%),
reflecting the significant impact of escalating pulp,
energy, and sea freight costs, exacerbated by the
weakening of sterling relative to the dollar. In line
with the wider market, pressures on the Group’s raw
material supply chains increased during the Period
and, whilst they have shown significant resilience,
considerable cost increases had to be absorbed in
the short-term. The Group has taken the necessary
actions to recover these cost increases from its
supportive retailer customer base, albeit with a lag
that impacted profitability in the year.
Administration and distribution costs decreased
by £2.6m, reflecting the unwinding of the deferred
consideration provision made during FY21. There
was a further £0.3m increase related to non-cash
items (depreciation, amortisation and share based
payments), reflecting an increase in the amortisation
of intangible assets (related to the acquisitions),
largely offset by a reduction in the charge for share-
based payments (reflecting the end of the three year
Management Incentive Plan).
Adjusted EBITDA declined to £9.1m (FY21: £15.6m),
whilst operating losses reduced to £0.2m (FY21: loss
of £1.2m), reflecting the reduction in administration
costs above.
Strategic ReportAccrol Group Holdings plc • Annual Report & Accounts 2022 27
Separately disclosed items
Separately disclosed income totalled £2.6m (net),
compared with a £5.3m cost in FY21.
Acquisition related items totalled income of £5.4m
(2021: cost of £2.9m). On 24 November 2020,
the Group acquired 100% of the issued share
capital of LTC Parent Limited and its subsidiaries,
whose principal activity is paper tissue converting.
An element of the consideration was contingent
upon 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. This consideration was
measured on a sliding scale with a maximum of
£6.8m payable to the vendors if EBITDA targets
were met, for which provision was made in the
prior year. Negotiations with the sellers in respect
of the contingent consideration and other matters
have been concluded with no payment made.
Therefore, contingent consideration of £6.3m has
been credited to the Income Statement after the
recognition of £0.5m of one-off contract related
costs that were incurred in the year. In concluding
negotiations with the sellers during the financial
year the Group also incurred professional fees of
£0.8m in respect of legal and accounting services.
Consultancy costs of £0.1m were also incurred in
finalising the integration of the businesses.
Supply chain disruption costs totalled £0.7m (2021:
£nil). In line with the wider market, pressures on
the Group’s supply chain have been considerable,
particularly over the autumn period when there was
significant disruption to shipping, container capacity
at ports, and haulage. Whilst the Group’s supply
chain demonstrated good resilience, we did incur
incremental costs in order to maintain service levels
to our customers. These incremental costs included
port charges of £0.4m, largely related to demurrage
costs incurred because of shipping container
congestion and a lack of capacity to manage
increased demand. Additional distribution costs
of £0.3m were also incurred, largely related to the
procurement of day rate vehicles at an incremental
cost, to ensure continuity of supply in the October
to December period, when haulage driver availability
was severely constrained. We do not expect any of
these costs to be repeated as we enter FY23.
Asset impairment costs totalled £1.0m (2021: £nil).
Significant progress has been made over previous
years to transform the manufacturing capability of
the business, with investment made in automation
and in the expansion of overall capacity and
capability. The final element of the manufacturing
re-organisation comprises investment in a new
manufacturing line (expected October 2022) and
automation of packing and palletisation (completed
August 2022) at the Leyland manufacturing site. To
enable this investment, the Leyland manufacturing
facility has been re-organised, involving the physical
movement of existing manufacturing lines and
the scrapping of a specific ‘re-wind’ asset that was
deemed surplus to requirement, and therefore
redundant. The removal of this asset has facilitated
the wider site re-organisation but has resulted in an
impairment charge.
COVID-19 related costs were £0.2m (2021: £0.7m),
as the COVID-19 pandemic continued to have an
impact on the business during the financial year
under review, although those impacts are now much
reduced and are again not expected to repeat. 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 due to COVID-19
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.
Accounting policy changes totalled £0.6m
(2021:£0.5m). The Group’s accounting policy has
historically been to capitalise all costs related to the
configuration or customisation of Software-as-a-
Service (SaaS) arrangements as intangible assets.
Following the agenda decision of The International
Financial Reporting Standards Interpretations
Committee (IFRIC) in April 2021 these previously
recognised intangible assets have been treated as
an expense, impacting both the current and prior
periods presented.
Other items totalling £0.4m (2021: £0.1m) largely
relate to redundancy costs related to consolidation
of activities across the Group following the
acquisitions made in the previous financial year.
Depreciation and amortisation
The total charge for the Period was £11.4m (FY21:
£8.3m), of which £5.5m (FY21: £3.5m) related to the
amortisation of intangible assets. The vast majority
of this increase reflects the full year impact of the
Group’s acquisitions of LTC and John Dale.
Share-based payments
The total charge for the Period under IFRS 2 “Share-
based payment” was £0.5m (FY21: £3.2m). This
charge related to the awards made under the 2021
Long Term Incentive Plan, that was approved on 5
March 2021.
Interest, tax and earnings per share
Net finance costs were £2.3m (FY21: £2.0m). The
Group also recorded a deferred tax credit of £0.8m
(FY21: charge of £0.1m). The loss before tax was
£2.5m (FY21: £3.1m), due to flow through of the
lower gross margin. Adjusted profit before tax of
£1.1m (FY21: £9.1m) was lower due to the decline
in adjusted operating profit. Basic losses per share
were 0.5 pence (FY21: 1.3 pence) reflecting higher
amortisation costs and adjusting items. Adjusted
diluted earnings per share were 0.3 pence (FY21: 2.7
pence), reflecting the decline in adjusted EBITDA.
Dividend
As noted in the Chairman’s Statement, the Board
favours a risk averse approach in the current market
conditions. Our balance sheet has continued
to strengthen, and we have increased our debt
facilities but our short-term priority remains focused
on securing our supply chain and access to raw
material stocks. In this context, the payment of a
final dividend would not be the best use of capital.
Payment of future dividends will be reviewed as part
of the Strategic Review. The proposed final dividend
is nil pence per share (FY21: 0.5 pence).
Cashflow
The Group’s adjusted net debt was £27.5m (FY21:
£14.6m). The net cash flow from operating activities
was £1.4m (FY21: £17.0m) with the reduction
reflecting a working capital outflow of £4.6m (FY21:
£6.6m inflow). This outflow provided the necessary
expansion in working capital to manage supply
constraints over the next 12 months to reduce
supply chain risks.
Capital expenditure (net of new finance leases) in the
Period was £6.2m (FY21: £8.6m), including £3.1m
(FY21: £1.2m) in respect of intangible assets that
principally relate to product development costs.
Lease payments of £5.5m (FY21: £5.8m) include
leases capitalised in accordance with IFRS 16.
The Group recently amended and extended its
existing banking arrangements, through to August
2024 providing additional facilities to support its
growth. These new facilities provide increased
headroom in both the scale, tenure and liquidity of
the facilities and the associated banking covenants.
The amended facilities provide an additional £8.5m
of funding headroom, an increase of c.25% over and
above the previous arrangements that would have
expired in August 2023.
Strategic ReportAccrol Group Holdings plc • Annual Report & Accounts 2022 28
Chief Financial Officer’s Review continued
Balance Sheet
Investment
The Group’s balance sheet reflects net assets
of £82.9m (FY21: £85.9m). Property, plant, and
equipment increased, reflecting the renewal of
property related leases, capitalised in accordance
with IFRS 16. We have significantly invested
in automation at our Blackburn and Leyland
manufacturing facilities, to improve productivity,
operational flexibility, and to enhance customer
service. Intangible assets represent mostly goodwill
and customer relationships.
Significant progress has also been made in
further improving the IT infrastructure and critical
manufacturing systems throughout the Group,
including the further enhancement of the ERP
system. All scheduled work has now successfully
been completed.
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 which will be amortised over the
anticipated life of the products.
The final automation of the Leyland site was
completed in August 2022. Alongside a final machine
installation, this will complete all major investments
into the tissue businesses. This will result in the Group
having four state-of-the-art fully automated factories
in Blackburn (x2), Leyland and Leicester.
Ownership of a paper mill would be transformational
for Accrol and the Group has continued develop its
plans in the Period. As detailed in the Chairman’s
Statement, however, such investment will only be
completed in a way that maximises shareholder
value and minimises risk.
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 had taken advantage of the
short-term VAT Payment Deferral Scheme, which was
launched in March 2020, which has now been repaid.
Richard Newman
Chief Financial Officer
5 September 2022
Strategic ReportAccrol Group Holdings plc • Annual Report & Accounts 2022 29
Restated
2021
£’000
136,594
(98,710)
37,884
(27,622)
(11,424)
(1,162)
(1,954)
(3,116)
(74)
(3,190)
(1.3)p
(1.3)p
(1,162)
4,786
3,520
3,245
5,255
15,644
2022
£’000
159,450
(123,211)
36,239
(23,687)
(12,778)
(226)
(2,306)
(2,532)
835
(1,697)
(0.5)p
(0.5)p
(226)
5,857
5,494
508
(2,577)
9,056
2022
£’m
116.3
32.0
8.8
2.0
159.1
0.4
159.5
2021
£’m
100.5
27.1
8.5
0.1
136.2
0.4
136.6
2022
£’m
3.0
18.7
40.2
61.9
(5.0)
(0.2)
56.7
(29.1)
27.5
Variance
£’m
Variance
£’m
15.8
4.9
0.3
1.9
22.9
0.0
22.9
2021
£’m
12.0
4.0
27.6
43.6
(5.7)
(7.6)
30.3
(15.6)
14.6
16%
18%
3%
N/A
17%
0%
17%
Change
£’m
(9.0)
14.7
12.6
18.3
0.7
7.4
26.4
(13.5)
12.9
Income statement
Revenue
Cost of sales
Gross profit
Administration expenses
Distribution costs
Operating loss
Net finance costs
Loss before tax
Tax credit/(charge)
Loss for the year attributable to equity shareholders
Loss per share
Basic
Diluted
Operating loss
Adjusted for:
Depreciation
Amortisation
Share based payment
Separately disclosed items
Adjusted EBITDA(1)
Revenue by product
Toilet tissue
Kitchen towel
Facial tissue
Wipes
Core revenue
Other (waste)
Total revenue
Borrowings and cashflow
Revolving credit facility
Factoring facility
Leases
Borrowings
Leases receivable
Cash and cash equivalents
Net debt
IFRS 16 adjustment
Adjusted net debt
(1) Adjusted EBITDA is defined as profit before finance costs, tax, depreciation, amortisation, separately disclosed items and share based payments, is a non-GAAP metric used by management.
Accrol Group Holdings plc • Annual Report & Accounts 2022
Strategic Report
30
Managing our risk
High
d
o
o
h
i
l
e
k
L
i
To gain an understanding of the risk
exposure of the Group, we conduct
an annual review of each area of our
business 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 to
control them and 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.
3
7
10
6
1
5
2
4
8
9
12
11
13
Low
High
Impact
1
2
3
4
5
6
7
8
9
Macro environment risk
Parent reel and pulp pricing
Foreign exchange rate volatility
Cyber attacks
Loss of a major customer contract
New market entrant
Winning a major customer contract
Sustainability commitments
Covid-19
10
Climate change
11
Failure to meet banking covenants
12
Key person dependency
13
Regulation and governance
Strategic ReportAccrol Group Holdings plc • Annual Report & Accounts 2022 31
1
2
3
4
Principal risk
Macro-economic
environment
Likelihood: High
Impact
Multiple geo-political factors
including the conflict in Ukraine,
COVID-19, and Brexit could further
impact the UK economy through
changes in consumer demand,
further supply chain disruption, and
continued inflationary pressures.
Mitigation
• Continued focus on low-cost,
efficient manufacturing to
maintain the supply of high
quality, value focused products.
• Ensure customer service levels
are high and responding rapidly to
any shortcomings.
Change
The outlook for the UK economy has
become more negative, impacted
by cost inflation, rising energy prices,
logistics and supply chain challenges,
amplified by the war in Ukraine and
the lingering impacts of COVID-19.
Parent reel and pulp
pricing
Likelihood: High
Volatile commodity prices, linked
to capacity and inflationary cost
pressures, can create short-term
challenges to recover costs through
customer pricing actions.
Foreign exchange
rate volatility
Likelihood: High
Most of our parent reel purchases
are in US$. Fluctuations in the
exchange rates could adversely
affect input costs and hence
profitability.
In the longer term, depreciation of
GBP against US$ adds costs to the
business.
Cyber attacks
Likelihood: High
Disruption in critical IT systems
would have a significant adverse
impact on production and important
business processes.
Pulp prices and other commodity
costs have increased significantly over
the last year, with strong recovery
through customer pricing actions.
Additional tissue mill capacity
has been announced in several
geographies.
Whilst macro conditions have been
volatile over the year, the use of
forward currency contracts has
enabled this risk to be managed.
• Nurture relationships with key
suppliers and remain flexible
regarding new suppliers.
• Remain close to market dynamics
on pulp price and capacity.
•
Increase knowledge of overall
capacity in the market to identify
new opportunities.
• Pass on significant cost changes
to customers as quickly as
possible.
• Review and adhere to our foreign
exchange 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.
• Ongoing monitoring of cyber
security threats and the
development of mitigating controls.
A more robust IT platform is now in
place providing improved information
to enable better decision making.
Investments have been made to
further strengthen IT security controls
to improve our capability to detect,
respond and prevent cyber-attacks.
• 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.
•
Integrated ERP system launched
in July 2020 with enhancements
implemented over the last two years.
Risk Change Key
Increased
Decreased
No change
New Risk
Strategic ReportAccrol Group Holdings plc • Annual Report & Accounts 2022 32
Managing our risk continued
Principal risk
Loss of a major
customer contract
Likelihood: Medium
Impact
The loss of a major customer and/
or being too dependent on a small
number of high value customers
could seriously impact the Group’s
revenue and profitability.
New market entrant
Likelihood: Medium
A new entrant into the market
creating extra capacity and
competition.
Winning a major
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.
Sustainability
commitments
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.
COVID-19
Likelihood: Medium
Loss of key employees across several
shifts impacting the Group’s ability
to manufacture and fulfil customer
orders.
5
6
7
8
9
10
Climate Change
Likelihood: Medium
Climate related risks could impact
the Group through increased
legislation, increasing cost of raw
materials, or physical disruption from
climatic events.
Mitigation
• Understand our customers’
business to identify further
growth opportunities.
• Ensure customer service levels
are high and we respond rapidly
to any shortcomings.
• Encourage customer audit and
respond to the feedback.
• Maintain diversification across a
broad customer base.
• Ensure that the Group remains
cost competitive, listens to
customer requirements and
delivers best value.
• Ensure that we optimise the
performance from existing
capacity by careful scheduling
of production and enhanced
training.
• Continuously search for low level
capital investments to enhance
the operation of existing lines.
• Add additional machine capacity.
• 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.
• Clear COVID protocols have been
established in the event of future
restrictions related to COVID.
• Additional sanitisation stations
and cleaning, together with
increased communication and
signage in multi-languages, all
remain in place.
• Focused action to reduce carbon
emissions and energy usage
across all sites.
• Ensuring we meet national
legislation requirements for
disclosing greenhouse gas
emissions.
Change
Strong relationships have been
maintained with top customers,
strengthened by recent acquisitions
and new product development.
Improved category and customer
focused teams.
High entry barriers remain but UK
market remains attractive.
Acquisitions, automation, training
and investment have all delivered
increases in capacity and output
over the last four years.
We continue to invest in further
machinery – positively impacting the
business in FY23.
The Group has established a
clear Environmental, Social and
Governance (ESG) framework to
ensure progress is monitored and
delivered across a variety of measures.
Over the last two years significant
investment has been made to
ensure the safety of our employees
and security of supply for our
customers.
As part of its wider ESG framework the
Group has established a number of
environmental targets and associated
measures to track progress.
Strategic ReportAccrol Group Holdings plc • Annual Report & Accounts 2022 33
11
Principal risk
Failure to meet
banking covenants
Likelihood: Low
Impact
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.
12
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.
13
Regulation and
governance
Likelihood: Low
Due to the flammable nature of
tissue and the dust created during
the converting process, the Group
is at a greater risk of fire than many
other industries. A major fire would
lead to production loss and even
factory loss.
Non-compliance to Data Protection
and Health and Safety regulations
could result in fines, litigation and
reputational damage.
Mitigation
• Regular monitoring of profit and
cash to ensure actions are taken
at the earliest moment to ensure
hurdles are cleared.
Change
Additional flexibility and headroom,
provided by amended banking
facilities, provide the funding to
grow the business.
New management structure
embedded, and employee
engagement relaunched.
All plans agreed with risk assessors
and insurers as required.
• 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 2024 providing
additional flexibility and headroom.
The Group uses a variety of
techniques to attract, retain and
motivate its staff, with particular
attention paid to those in key
roles to help ensure the long-
term success of the Group. These
techniques include:
• the regular review of
remuneration packages;
including longer term incentives
• establishment of employee
engagement techniques to re-
enforce 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 seek external
advice where relevant.
• The 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.
The strategic report, which includes the Chairman’s report, the Chief Executive Officers 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
5 September 2022
Strategic ReportAccrol Group Holdings plc • Annual Report & Accounts 2022 34
34
Governance
Introduction to Governance
Dear Shareholder
I am pleased to introduce the Corporate
Governance Report for Accrol Group Holdings
plc for the year ended 30 April 2022. 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. The Group
applies the governance principles of the Quoted
Companies Alliance Corporate Governance Code
2018 (“QCA Code”), on the basis that it is the
most appropriate governance code for the Group,
having regard to its strategy, size and resources.
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. The coming year will be one of
development for the Group in terms of strategy
and focus on our key markets.
Dan Wright
Executive Chairman
5 September 2022
The Directors place a significant
emphasis on ensuring that
Accrol has the appropriate
governance structures in place.
Dan Wright, Executive Chairman
GovernanceAccrol Group Holdings plc • Annual Report & Accounts 2022 35
The Board
The Board provides leadership to the Group as a
whole, as well as ensuring a framework of controls
exist which allow 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 met 10 times during the period
ended 30 April 2022.
Board meeting attendance
Daniel Wright
(10/10)
Gareth Jenkins
Euan Hamilton
Simon Allport
(10/10)
(10/10)
(10/10)
Richard Newman
(10/10)
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 met three times during the period
ended 30 April 2022 and has unrestricted access to
the Group’s external auditors.
Committee meeting attendance
Simon Allport (Chair), 3 meetings attended
Daniel Wright, 3 meetings attended
Euan Hamilton, 3 meetings attended
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. The Nomination Committee
did not meet during the period.
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 met two times
in the period ended 30 April 2022. 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), 2 meetings attended
Daniel Wright, 2 meetings attended
Simon Allport 2 meetings attended
GovernanceAccrol Group Holdings plc • Annual Report & Accounts 2022
36
Board of Directors
Daniel Wright
Executive Chairman
Gareth Jenkins
Chief Executive Officer
Richard Newman
Chief Financial Officer
Date appointed
Date appointed
• Non-Executive Director: 11 December 2017
• 11 September 2017
• Executive Chairman from 4 February 2018
Key strengths
Date appointed
• 1 February 2021
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
• 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
• Significant experience in business turnaround
• 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 - UK Finance Director for
Packaging
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
• Extensive senior leadership experience of
business turnaround and delivering industry
leading levels of return in cyclical paper
businesses
• NorthEdge Capital, Founder Partner, Chief
• Personally led over 10 business turnarounds
Operating Officer & Head of Portfolio
with a history of success over 20 years
• Accrol Group Holdings Limited, prior to IPO –
Director
• Delivered multi million pound EBITDA
improvement in the last six years
Previous experience
• DS Smith plc – 24 years most recently
• Managing Director UK & Ireland packaging
division
• Deutsche Morgan Grenfell Private Equity
Other commitments
• Uinsure Limited - Director
• SolasCure – Director
• Manchester & London Investment Trust plc -
Non-Executive Director
• Youth Zone – Non-Executive Director
Committee
A
R
N
GovernanceAccrol Group Holdings plc • Annual Report & Accounts 2022 37
Euan Hamilton
Independent Non-Executive
Director
Simon Allport
Independent Non-Executive
Director
Date appointed
• 27 August 2018
Key strengths
Date appointed
• 10 October 2018
Key strengths
• Restructuring and business turnarounds
• Extensive commercial & M&A experience
• Leverage finance and private equity
• Broad strategic experience throughout many
•
Investment banking worldwide
Previous experience
• Royal Bank of Scotland Group
• Bank of Cyprus Group
• Cramond Capital Partners Ltd
Other commitments
industries
• Business transformation
Previous experience
• 32 years in the professional services
• Formerly Managing Partner for the North of
England at Ernst & Young
• Cynergy Bank Ltd – Non-Exec Chairman
• Resolute Asset Management Holdings (Malta)
Ltd – Non-Exec Chairman
Other commitments
• Fitzallan Limited
• The Enterprise Fund Limited
Committee
A
R
N
• Etale Limited
Committee
A
R
N
Audit Committee
Nomination Committee
Remuneration Committee
Committee Key
A
N
R
Member
Chairman
GovernanceAccrol Group Holdings plc • Annual Report & Accounts 2022 38
Corporate Governance Report
The 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 5 September 2022
QCA Principles and Accrol Group
Holdings PLC approach
1.
Establish a strategy and business model
which promote long-term value for
shareholders.
In recent years, the Company has 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.
2.
3.
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.
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.
Twice each year, the Company carries out an
employee engagement survey. Twice each year,
the Company carries out an employee survey.
The level of employee engagement currently
stands at 84% (2021: 84%) which is 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.
4.
5.
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.
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 met 10 times
during the year during which business and
other risks were assessed. The Board will meet
at least six times in the coming year. There are
further 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.
Maintain the Board as a well-functioning,
balanced team led by the Chair.
The Board 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
in the most recent Annual Report on page 35.
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.
GovernanceAccrol Group Holdings plc • Annual Report & Accounts 2022 39
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.
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
6.
7.
8.
In accordance with the Company’s articles
of association, Independent Non-Executive
Director Simon Allport will be subject to re-
election at this year’s Annual General Meeting.
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.
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.
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.
9.
The Company communicates regularly with its
employees, both formally and informally, this
includes an employee engagement assessment
(see page 11 of this Annual Report and
Accounts) which helps to 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.
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.
Details of how the company engages with
its various stakeholders can be found in the
Section 172 Statement in this 2022 Annual
Report (see pages 22 to 23 of this report).
GovernanceAccrol Group Holdings plc • Annual Report & Accounts 2022 40
Audit Committee Report
Dear Shareholder,
I am pleased to present the Audit Committee Report
for the year ended 30 April 2022, 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 three occasions during
the year.
Responsibilities of the Audit
Committee
Significant matters considered in
relation to the financial statements
At the request of the Board, the Audit Committee
considered whether the 2022 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
2022 Annual Report and Accounts are fair, balanced,
and understandable.
The Audit Committee assess 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:
The terms of reference of the Committee are available
on the Company’s website. In accordance with these,
the Committee has primary responsibility, for:
• Revenue recognition
• Management override of controls
• 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.
• 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.
• Separately disclosed items
• Going concern review
• Goodwill impairment review
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 regarding 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 £170,000 (2021:
£169,000) of which £8,000 (2021: £17,000) 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 four
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’ Responsibilities on page 50 and the
Auditors’ Reports on pages 51 to 56.
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 considering 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, 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.
GovernanceAccrol Group Holdings plc • Annual Report & Accounts 2022 41
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 wholly of
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.
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
5 September 2022
Governance
42
Statement from the Chairman
of the Remuneration Committee
I am pleased to introduce the Directors’
Remuneration Report for Accrol Group Holdings
plc for the year ended 30 April 2022. 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.
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 consider the
levels of fixed remuneration for similar positions
with comparable status, responsibility and skills.
This will ensure Accrol can attract and retain
the individuals needed to build 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 and grocery
multiples;
•
increasing market share;
• recovery of significant input cost increases;
•
introduction of new products; 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.
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 2022, (page 43); and
• Directors’ remuneration policy setting out the
Company’s remuneration policy (pages 44 to 46).
Euan Hamilton
Chairman of the Remuneration Committee
5 September 2022
GovernanceAccrol Group Holdings plc • Annual Report & Accounts 2022 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 considers 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 2022 and 30 April 2021.
Executive Directors
Gareth Jenkins
Daniel Wright
Richard Newman
Non-Executive Directors
Euan Hamilton
Simon Allport
Salaries1
£
378,500
152,750
275,400
Benefits in kind2
£
15,737
-
11,560
Pension3
£
45,900
-
20,250
Bonus4
£
160,650
64,260
82,620
Total
remuneration
2022
£
Total
remuneration
2021
£
600,787
217,010
389,830
Total fees
2022
£
50,000
50,000
838,381
320,573
135,337
Total fees
2021
£
50,000
50,000
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 2022.
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 considered 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.
GovernanceAccrol Group Holdings plc • Annual Report & Accounts 2022 44
Directors’ report on remuneration continued
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 (including Chairman, CEO, CFO, COO, Managing Director) with those of the
shareholders. The MIP was designed to reflect the business context, performance, and associated awards for the period starting 1 May 2018 and ending 30 April 2021.
The remaining outstanding options were exercised during the year and this scheme is now closed.
The 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. Awards have been made under this scheme in FY21 and FY22.
The Company has also introduced an employee share plan for the broader employee base that was launched in May 2021.
MIP Awards FY22
Movement in the share options granted under the MIP are as follows:
Daniel Wright
Gareth Jenkins
Senior managers
Total
Exercise
price
(p)
0.1
0.1
0.1
Options at
30 April 2021
1,310,259
2,198,466
4,014,742
7,523,467
Options
transferred in
the period
-
-
-
-
Options
exercised
1,310,259
2,198,466
4,014,742
7,523,467
Options
lapsed
Options at
30 April 2022
-
-
-
-
-
-
-
-
LTIP Awards FY22
Movement in the share options granted under the LTIP are as follows:
Daniel Wright
Gareth Jenkins
Richard Newman
Senior managers
Total
Exercise
price
(p)
0.1
0.1
0.1
0.1
Options at
30 April 2021
362,903
907,258
554,435
1,327,224
3,151,820
Options
awarded in
the period
1,197,391
2,494,565
1,341,522
2,933,705
7,967,183
Options
exercised
Options
lapsed
Options at
30 April 2022
-
-
-
-
-
-
-
-
-
-
1,560,294
3,401,823
1,895,957
4,260,929
11,119,003
Remuneration policy summary – Executive Directors
Purpose and link to strategy
Base salary
Operation
To reflect market value of the role and individual’s performance
and contribution and enable the Group to recruit and retain
Directors of sufficient calibre required to support achievement of
both short and long-term value creation.
The salary of each Executive Director will be reviewed annually by the Remuneration Committee
without any obligation to increase such salary.
Base salaries are benchmarked against the AIM companies of a comparable size with a targeted
approach of median positioning against the market, subject to satisfactory performance.
Benefits
To attract and retain the right individuals and level of talent
required to support achievement of both short and long-term
value creation.
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.
GovernanceAccrol Group Holdings plc • Annual Report & Accounts 2022 45
Purpose and link to strategy
Operation
Pension
To attract and retain the right individuals and level of talent
required to support achievement of both short and long-term
value creation.
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, considering 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.
The maximum bonus available is 120% of base salary per annum.
Bonus awards can be reduced by up to 40% for failure to achieve financial objectives 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.
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 two awards (the “Awards”) based on the Company’s EBITDA
performance in FY23 and FY24 (“the Performance Periods”). The Awards will have a nominal value
exercise price.
The vesting criteria of each Award is based on the achievement of adjusted EBITDA targets for
FY23 and FY24 (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
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.
The MIP was a share option plan designed to attract and engage the right calibre of individual to
affect the turnaround required by the Company. The MIP was structured as a three-year plan that
has now concluded.
Management Incentive Plan (“MIP”)
To incentivise the delivery of key performance measures over the
initial turnaround period
To retain key Executives and ultimately increase their share
ownership in the Company, thus aligning their interests with those
of shareholders.
GovernanceAccrol Group Holdings plc • Annual Report & Accounts 2022 46
Directors’ report on remuneration continued
Termination of employment
Each Executive Director has a service agreement which may be terminated by either party serving twelve 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 LTIP 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 because 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
Non-Executive Directors’ fees
Operation
To attract and retain the right individuals required to support the
achievement of both short and long-term value creation.
Fees for Non-Executive Directors are based on market practice and are reviewed by the Board
each year.
All Non-Executive Directors receive a basic fee each year with an additional fee provided for each
Committee chairmanship and membership.
The maximum aggregate amount of fees that the Company may pay to all the Directors who do
not hold Executive office for their services as such is £120,000 per annum, or such larger amount
as the Company may by ordinary resolution decide.
These fees are to be divided among the Directors as the Board decides or, if no decision is made,
equally.
Euan Hamilton
Chairman of the Remuneration Committee
5 September 2022
GovernanceAccrol Group Holdings plc • Annual Report & Accounts 2022 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 2022.
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 1 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 2022 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
Euan Hamilton
Simon Allport
Details of the Directors’ remuneration are shown in the report of the Remuneration Committee on pages 43 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 to 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 2022, the Directors did not pay an interim dividend (2021: £nil) and have not recommended a final dividend (2021: 0.5 pence
per share). The Board currently considers that the short-term outlook remains too uncertain to commit to a dividend payment. However, recognising the importance
of dividends to all shareholders, the Board will actively consider the resumption of a dividend payment when there is greater clarity over the outlook.
Financial instruments
Details of the Group’s financial risk management objectives and policies are disclosed in note 21b 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 them 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.
GovernanceAccrol Group Holdings plc • Annual Report & Accounts 2022 48
Directors’ Report continued
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)
Energy Efficiency Measures
Unit
kgCO2e
kgCO2e
kgCO2e
kgCO2e
kWh
kWh
kgCO2e
tCO2e
t
2021/22
294,052
3,011,169
-
-
2020/21
86,462
2,768,501
-
-
15,458,862
12,265,597
-
-
3,311,906
2,854,962
3,312
111,984
0.030
2,855
98,425
0.029
% Variance
70.6%
8.1%
20.7%
13.8%
13.8%
12.1%
1.7%
The current year report shows an increase in energy consumption over last year, driven by a full year effect of the acquired businesses and the installation of additional
robotic equipment at the Blackburn site. This has been done whilst maintaining the carbon footprint of the business.
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.
The Group was able to implement a thoroughly structured approach to energy reduction projects and identified and targeted several areas to contribute to improving
energy efficiency, including:
• Finalisation of roll-out of LED lighting across all Blackburn sites;
•
•
Installation of PIR sensors in Blackburn warehouses;
Installation of daylight-saving sensors in Blackburn warehouses; and
• Optimisation of Blackburn conveyors
Corporate governance
A report on Corporate Governance and compliance with the QCA Corporate Governance Code is set out on pages 38 to 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 £23,655 (2021: £27,010) 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 further developed its entire branded product range including ‘Softy’, ‘Elegance’,
‘Magnum’ and ‘Little Heroes’, all of which have now been released to the market. The Group also developed a range of fragranced products under the ‘Fabulosa’
brand. Significant investment was also made in the development of smaller diameter cores across the toilet tissue range, delivering improved palletisation and cost
efficiencies in logistics.
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 adjusting 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 to 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.
GovernanceAccrol Group Holdings plc • Annual Report & Accounts 2022 49
Fostering relationships with key stakeholders
The business values its relationship with all key stockholders 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 to 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.
Directors’ interests
The interests in the shares of the Company of those Directors serving at 5 September 2022 and as at the date of approving of these financial statements, all of which
are beneficial, in the share capital of the Company were as follows:
Daniel Wright
Gareth Jenkins
Richard Newman
Euan Hamilton
Simon Allport
Substantial shareholders
Ordinary shares
% of issued share capital
12,515,543
5,422,929
5,000
-
-
3.90%
1.70%
-
-
-
As at 19 August 2022 the Company was aware of the following individual registered shareholdings of more than 3% of the Company’s issued share capital,
representing 68% of the issued share capital of the Company.
Investor
Lombard Odier Asset Management
Schroder Investment Management
Premier Miton Investors
NorthEdge Capital
Tellworth Investments
Momentum Global Investment Management
Killik Asset Management
Hargreaves Lansdown Asset Management
James Sharp & Co
Going concern
Details are disclosed in note 2 to the financial statements.
Disclosure of information to the auditors
Number of shares
Percentage
50,516,406
36,880,931
31,179,441
27,487,377
21,045,400
18,876,118
10,814,781
10,289,415
9.977,719
15.84
11.57
9.78
8.62
6.60
5.92
3.39
3.23
3.13
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 18 October 2022.
On behalf of the Board of Directors
Gareth Jenkins
Chief Executive Officer
5 September 2022
GovernanceAccrol Group Holdings plc • Annual Report & Accounts 2022
50
Director’s 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 judgments 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; and
• 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.
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position
and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;
• the Strategic Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in
the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and
• the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to
assess the Company’s position and performance, business model and strategy.
This responsibility statement was approved by the Board of Directors on 5 September 2022 and is signed on its behalf by:
Dan Wright
Executive Chairman
5 September 2022
GovernanceAccrol Group Holdings plc • Annual Report & Accounts 2022 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 2022 and of the Group’s
loss for the year then ended;
• the Group financial statements have been properly prepared in accordance with UK adopted international accounting standards;
• 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 2022
which comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position,
the Consolidated Statement of Changes in Equity, the Consolidated Cashflow Statement, the Company Statement of Financial Position, the 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 UK adopted international accounting
standards. 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. 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
is included in the key audit matters section of our report below.
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 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.
Overview
Coverage
Key audit matters
Materiality
Group loss before tax
Group revenue
Group total assets
Acquisition accounting
Going Concern
Classification of Separately Disclosable Items
2022
94%
97%
97%
2022
No
Yes
Yes
2021
100%
100%
100%
2021
Yes
Yes
Yes
Acquisition accounting is no longer considered to be a key audit matter as there were no
business acquisitions during FY22.
Group financial statements as a whole
£760,000 (2021: £685,000) based on 0.5% of revenue (2021: 0.5% of revenue).
Financial StatementsAccrol Group Holdings plc • Annual Report & Accounts 2022 52
Independent auditor’s report to the members of Accrol
Group Holdings Plc continued
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.
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 nine (2021: nine) entities of the Group, we determined that two (2021: two) components and the parent company 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. The Group audit team also performed analytical review procedures on all non-significant components.
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.
Key audit matter
Classification of Separately Disclosable Items
As described in Note 2 (significant 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 is a £2.6m credit (FY21 debit of £5.3m) of
separately disclosable items that are presented in
the statement of comprehensive income.
The Group has incurred acquisition, supply
chain disruption, operational reorganisation
and restructure, Covid-related and accounting
policy change costs which have been classified
as separately disclosable items in the financial
statements, offset by a release of a provision held for
deferred consideration no longer required following
settled negation with the vendors of the acquisition
of Leicester Tissue Company Limited completed in
the prior year.
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
classification of such items requires judgement by
the Directors and feed in to the adjusted EBITDA
which is an Alternative Performance Measure used
by the directors to measure performance through
the year.
How the scope of our audit
addressed the key audit matter
We challenged the designation of certain items as
separately disclosable items against the Group’s
accounting policy and consistency of treatment with
prior periods, taking into account significant changes
in the business that have occurred during the year.
We also challenged the appropriateness of those
items disclosed as separately disclosable items
with consideration to European Securities and
Markets Authority (‘ESMA’) guidelines on Alternative
Performance Measures, to assess whether the items
are outside of the ordinary course of business and as
such may distort comparability.
We considered the consistency of treatment for
separately disclosable items between debit and
credit items.
We tested both debit and credit items to third party
supporting documentation.
We assessed the extent to which separately
disclosable items relate to previous operating
business performance to evaluate whether they are
comparable.
Key observations
Based on the work performed, we consider that
those items disclosed as separately disclosable items
on the consolidated income statement have been
appropriately classified.
Financial StatementsAccrol Group Holdings plc • Annual Report & Accounts 2022 Key audit matter
Going Concern
The Directors use of the going concern assumption
is discussed in Note 2) (summary of significant
accounting policies)
The Group is facing ongoing challenges with
respect to rising raw material and energy costs and
the ability to pass these costs on to customers.
This requires careful management of working
capital within the group to remain compliant with
covenants in the forecast period and have sufficient
liquid cash to operate.
We focused on this area as the Directors exercise
significant judgement in determining the forecasted
future cash flows and the underlying business plan
required in both a base case and in ‘reverse stress’
scenarios as well as in the accuracy and completeness
of the disclosure of going concern. We therefore
considered this to be a key audit matter.
53
How the scope of our audit
addressed the key audit matter
We have challenged the business plan approved
by the Directors, including the forecasts, sensitised
stressed forecasts and reverse stress tests by
performing the following procedures:
• We inspected that the forecasts used in the going
concern assessment were consistent with those
used in the impairment assessment.
• With the assistance of our internal Business
Restructuring team, we tested the arithmetical
accuracy of the forecasts and the consistency and
accuracy of the formulas applied.
• We challenged the assumptions used in the
forecast period by considering available evidence,
including recent performance post year end, as
well as past trading performance, to support these
assumptions.
• We reviewed the Directors’ stress test scenarios
including levers identified by the Directors to
mitigate any adverse impacts. We challenged
the feasibility of these proposed mitigations by
obtaining evidence supporting the Directors’
ability to implement them.
• With the assistance of our internal Business
Restructuring team, we evaluated the forecast
compliance with covenants for at least the next
12 months, which included a sensitivity analysis.
• We reviewed the post year end renewal of
financing arrangements in relation to borrowings
from the banks, which have been extended to
August 2024; and
• We read the financing documents to assess
if all relevant terms and covenants have
been appropriately reflected in the Directors’
assessment as the group is reliant on the debt
factoring and ID facility.
• We reviewed the going concern disclosures and
assessed their consistency with the Directors
assessment.
Key observations
Refer above to the Conclusions relating to going
concern section of our report.
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.
Financial StatementsAccrol Group Holdings plc • Annual Report & Accounts 2022 54
Independent auditor’s report to the members of Accrol
Group Holdings Plc continued
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows:
Materiality
Group financial statements
Parent company financial statements
2022
2021
2022
2021
£760,000
£685,000
£680,000
£613,000
Basis for determining materiality
0.5% of revenue
0.5% of revenue
Rationale for the benchmark applied
Revenue is a stable measure reflecting
the operational growth of the business
and is not impacted by operational costs
which vary year on year as the Group has
not completed its turnaround strategies
but is still loss making. This is considered
to be the measure of most interest to the
users of the financial statements as the
turnaround comes to an end.
90% of Group
materiality.
90% of Group
materiality.
The materiality for the Parent company
has been limited to 90% of Group
materiality.
Performance materiality
£494,000
£445,000
£442,000
£398,000
Basis for determining performance materiality
65% of materiality
65% of materiality
This percentage was set after
the consideration of prior year
unadjusted misstatements, number of
accounts that includes amounts with
estimates and judgements involved
and our assessment of the control
environment.
This percentage was set after
the consideration of prior year
unadjusted misstatements, number of
accounts that includes amounts with
estimates and judgements involved
and our assessment of the control
environment.
Component materiality
We set materiality for the two significant components of the Group at 60% and 90% of Group materiality dependent on the size and our assessment of the risk of
material misstatement of that component. We applied a component materiality of £460,000 and £680,000. (2021: Component materiality was set at levels applicable to
each individual entity, which was lower than Group materiality, and ranged from £27,000 to £621,000). In the audit of each component, we further applied performance
materiality levels of 65% of the component materiality to our testing to ensure that the risk of errors exceeding component materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £20,000 (2021: £20,000). We also agreed to report
differences below this threshold that, in our view, warranted reporting on qualitative grounds.
Other information
The directors are responsible for the other information. The other information comprises the information included in the Annual Report & Accounts 2022 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.
Financial StatementsAccrol Group Holdings plc • Annual Report & Accounts 2022 55
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
In our opinion, based on the work undertaken in the course of the audit:
Matters on which we are required to report by exception
• 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 Director’s Statement of responsibility, 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.
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 were not limited to those that relate to the form and content of the financial statements, such as the
Group accounting policies, UK adopted international accounting standards, United Kingdom Generally Accepted Accounting Practice, the UK Companies Act 2006
and the AIM Rules; and industry related such as compliance with health and safety legislation, employment law and taxation legislation. All team members were briefed
to ensure they were aware of any relevant regulations in relation to their work.
We assessed the susceptibility of the financial statements to material misstatement as a result of fraud and believed that the areas in which fraud might occur were in
the inappropriate posting of journal entries, management bias in estimates and in the recording of revenue in the incorrect period. Our audit procedures in response to
irregularities, including fraud, included, but were not limited to:
• Obtaining an understanding of the control environment in monitoring compliance with laws and regulations.
• Agreeing the financial statement disclosures to underlying supporting documentation;
Financial StatementsAccrol Group Holdings plc • Annual Report & Accounts 2022 56
Independent auditor’s report to the members of Accrol
Group Holdings Plc continued
• 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 the goodwill impairment assessment as well
as the stock provision;
•
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 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;
• Discussing any instances of known or suspected fraud or known or suspected instances of non-compliance with laws and regulations with management, members
of the board and various individuals within the business;
• Reviewing the minutes of Board meetings and Audit Committee meetings held throughout the period for any instances of non-compliance with laws and
regulations and fraud;
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
5 September 2022
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
Financial StatementsAccrol Group Holdings plc • Annual Report & Accounts 2022 Consolidated Income Statement
For The Year Ended 30 April 2022
Revenue
Cost of sales
Gross profit
Administration expenses
Distribution costs
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 credit/(charge)
Loss for the year attributable to equity shareholders
Earnings per share
Basic loss per share
Diluted loss per share
57
Restated
2021
£’000
136,594
(98,710)
37,884
(27,622)
(11,424)
(1,162)
15,644
(4,786)
(3,520)
(3,245)
(5,255)
(1,162)
(2,196)
242
(3,116)
(74)
(3,190)
Pence
(1.3)
(1.3)
Note
4
5
11
13
26
6
9
9
10
7
7
2022
£’000
159,450
(123,211)
36,239
(23,687)
(12,778)
(226)
9,056
(5,857)
(5,494)
(508)
2,577
(226)
(2,522)
216
(2,532)
835
(1,697)
Pence
(0.5)
(0.5)
Consolidated Statement of Comprehensive Income
For The Year Ended 30 April 2022
Loss for the year attributable to equity shareholders
Other comprehensive income for the year
Total comprehensive loss attributable to equity shareholders
The notes are an integral part of these consolidated financial statements.
2022
£’000
(1,697)
-
(1,697)
Restated
2021
£’000
(3,190)
-
(3,190)
(1)
Adjusted EBITDA, which is defined as loss before finance costs and 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 29).
Financial StatementsAccrol Group Holdings plc • Annual Report & Accounts 2022
58
Consolidated Statement of Financial Position
As At 30 April 2022
ASSETS
Non-current assets
Property, plant and equipment
Lease receivables
Intangible assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Lease receivables
Cash and cash equivalents
Derivative financial instruments
Total current assets
Total assets
Current liabilities
Borrowings
Trade and other payables
Derivative 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
Accumulated losses
Total equity shareholders’ funds
The financial statements were approved by the Board of Directors on 5 September 2022.
Signed on behalf of the Board of Directors
Richard Newman
Chief Financial Officer
Company Registration Number 09019496
Note
2022
£’000
11
12
13
14
15
12
16
20
19
17
20
18
19
10
18
23
77,803
4,325
58,958
141,086
26,241
31,592
703
243
805
59,584
200,670
(26,482)
(52,367)
-
(300)
(33)
(79,182)
121,488
(35,169)
(3,100)
(275)
(38,544)
(117,726)
82,944
319
108,782
27
(26,184)
82,944
Restated
2021
£’000
63,341
5,027
61,213
129,581
23,185
26,480
675
7,604
-
57,944
187,525
(12,349)
(47,031)
(120)
(300)
(7,321)
(67,121)
120,404
(30,851)
(3,666)
-
(34,517)
(101,638)
85,887
311
108,782
27
(23,233)
85,887
Financial StatementsAccrol Group Holdings plc • Annual Report & Accounts 2022
Consolidated Statement of Changes in Equity
For The Year Ended 30 April 2022
59
Total
equity
£’000
45,012
(3,190)
(3,190)
42,610
(1,727)
3,163
19
44,065
85,887
(1,697)
(1,697)
Share
capital
£’000
195
Share
premium
£’000
68,015
Capital
redemption
reserve
£’000
Accumulated
losses/
(Retained
earnings)
£’000
27
(23,225)
(3,190)
(3,190)
-
-
3,163
19
3,182
(23,233)
(1,697)
(1,697)
-
-
116
-
-
-
116
311
-
-
8
-
-
-
8
-
-
42,494
(1,727)
-
-
40,767
108,782
-
-
-
-
-
-
-
-
-
-
-
-
-
-
27
-
-
-
-
-
-
-
319
108,782
27
-
8
(1,594)
(1,594)
321
19
(1,254)
(26,184)
321
19
(1,246)
82,944
Balance at 30 April 2020
Comprehensive (expense)
Loss for the year (restated)
Total comprehensive expense (restated)
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 (restated)
Comprehensive (expense)
Loss for the year
Total comprehensive expense
Transactions with owners recognised directly in equity
Proceeds from shares issued
Dividends
Share based payments (net of tax)
Other taxation
Total transactions recognised directly in equity
Balance at 30 April 2022
Financial StatementsAccrol Group Holdings plc • Annual Report & Accounts 2022
60
Consolidated Cashflow Statement
For The Year Ended 30 April 2022
Cashflows from operating activities
Operating loss
Adjustment for:
Depreciation
Impairment of property, plant and equipment
Profit on disposal of property, plant and equipment
Amortisation
Separately disclosed items – acquisition contingent consideration
Share based payments
Operating cashflows before movements in working capital
(Increase) in inventories
(Increase)/decrease in trade and other receivables
Increase in trade and other payables
(Decrease) in provisions
(Increase)/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
Loan advance in respect of property, plant and equipment
Repayment of capital element of leases
Advance on revolving credit facility
Repayment of revolving credit facility
Transaction costs of revolving credit facility
Dividends paid
Lease interest paid
Other interest paid
Net cashflows (used in)/generated from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at year end
Note
2022
£’000
Restated
2021
£’000
(226)
(1,162)
11
11
5
13
6
26
18
11
13
12
12
19
19
16
5,857
965
(296)
5,494
(6,277)
508
6,025
(3,056)
(5,112)
5,422
(934)
(925)
1,420
15
1,435
(4,987)
48
(3,145)
-
674
216
4,786
-
-
3,520
-
3,245
10,389
(8,553)
604
14,800
(418)
148
16,970
40
17,010
(9,112)
-
(1,152)
(32,235)
650
242
(7,194)
(41,607)
8
-
187,204
(172,436)
1,939
(5,463)
6,000
(15,000)
(115)
(1,594)
(1,354)
(791)
(1,602)
(7,361)
7,604
243
42,610
(1,727)
151,645
(161,489)
1,694
(5,764)
-
(997)
(413)
-
(844)
(661)
24,054
(543)
8,147
7,604
Financial StatementsAccrol Group Holdings plc • Annual Report & Accounts 2022
Notes to the Consolidated Financial Information
61
For The Year Ended 30 April 2022
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
These financial statements have been prepared in accordance with UK adopted International accounting standards in conformity with the requirements of the
Companies Act 2006. The preparation of financial statements requires the use of certain critical accounting estimates. It also requires Group management to exercise
judgment in applying the Group’s accounting policies. The areas where significant judgments and estimates have been made in preparing the financial statements and
their effect are disclosed in note 3.
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 2022, but have not had a significant impact on the Group are as follows:
•
Interest Rate Benchmark Reform – IBOR ‘phase 2’ (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)
• COVID-19-Related Rent Concessions beyond June 2021 (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 2022:
• Annual Improvements to IFRS Standards 2018-2020;
• Amendment to IAS 16 ‘Property, Plant & Equipment’;
• Amendment to IAS 37 ‘Provisions, Contingent Liabilities & Contingent Assets’; and
• Amendment to IFRS 3 ‘Business Combinations’
Effective for the period beginning 1 May 2023:
• Amendment to IAS 1 ‘Presentation of financial statements’
• Amendment to IAS 1 ‘Presentation of financial statements’ & IFRS Practice statement 2
• Amendment to IAS 8 ‘Accounting policies, Changes in Accounting Estimates and Errors’
• Amendment to IAS 12 ‘Income Taxes’
•
IFRS 17 ‘Insurance Contracts’
Accounting policy change
The Group’s accounting policy has historically been to capitalise all costs related to the configuration or customisation of Software-as-a-Service (SaaS) arrangements
as intangible assets. Following the agenda decision of The International Financial Reporting Standards Interpretations Committee (IFRIC) in April 2021 these previously
recognised intangible assets have been treated as an expense, impacting both the current and prior periods presented.
In the current year, administration expenses have increased by £637,000 (2021: £550,000), reducing retained earnings. The current year cumulative impact on
intangible fixed assets is a reduction of £1,187,000 (2021: £550,000).
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. The Group encountered enormous macro-
inflationary cost pressures during the year but has been successful in negotiating more than £70m of annualised price increases by the end of the year, with £11m of
this impacting FY22. In addition, the Group continued its investment in automation, infrastructure and product development, whilst also increasing working capital to
manage supply constraints over the coming 12 months.
Financial StatementsAccrol Group Holdings plc • Annual Report & Accounts 2022 62
Notes to the Consolidated Financial Information continued
For The Year Ended 30 April 2022
The acquired businesses, LTC and John Dale, have been fully integrated and the automation of all four manufacturing sites (which completed in August 2022) has been
finalised; delivering further efficiencies. The cost of living crisis is driving consumer demand for great value products and Accrol has enjoyed a strong start to the new
financial year (FY23). The margin erosion experienced in FY22, created by the rapid increase in input costs, has been rectified and contained, with cost increases being
passed on as they arise.
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’s forecasted performance has been tested for downside scenarios,
including reverse stress tests, relating to sales volume, price erosion and parent reel prices. 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, which may include further price
increases, further operational restructuring and a reduced or deferred capital expenditure programme, to maintain liquidity and continue its operations.
The Group is currently operating 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 2022, available funds were
£15.4m, 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 a period of at least 12 months from the date of signing the financial statements. For this reason, they continue to adopt the going concern basis in preparing
the financial statements.
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.
Financial StatementsAccrol Group Holdings plc • Annual Report & Accounts 2022 63
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.
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.
Software-as-a-Service (SaaS) arrangements
SaaS arrangements are service contracts providing the Group with the right to access the cloud provider’s application software over the contract period. The fees for
use of such software and any associated configuration or customisation costs are recognised as an operating expense over the term of the service contract. Costs
incurred for the development of software code that enhances or modifies existing on-premise systems, and meets the definition of and recognition criteria for an
intangible asset, are recognised as intangible software assets.
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 and retain new management and the income statement charge has been
historically volatile. 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.
Financial StatementsAccrol Group Holdings plc • Annual Report & Accounts 2022 64
Notes to the Consolidated Financial Information continued
For The Year Ended 30 April 2022
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
straight line over term of lease
• Plant and machinery
4% straight line, 20% residual value
• Motor vehicles
30% straight line
• Fixtures, fittings and office equipment
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.
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.
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.
Financial StatementsAccrol Group Holdings plc • Annual Report & Accounts 2022
65
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.
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
Upon receipt, government grants of a capital nature are credited to the asset category to which they relate and are release 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.
Financial StatementsAccrol Group Holdings plc • Annual Report & Accounts 2022 66
Notes to the Consolidated Financial Information continued
For The Year Ended 30 April 2022
The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities. Deferred income tax
assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates and tax
laws that have been enacted or substantively enacted at the balance sheet date.
Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event; it is probable that an outflow of resources will be
required to settle the obligation; and a reliable estimate can be made of the amount of the obligation.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market
assessments of the time value of money and risks specific to the obligation. The increase in the provision due to the passage of time is recognised as interest expense.
3. Significant accounting judgements, estimates and assumptions
The preparation of the financial information in accordance with IFRS requires estimates and assumptions to be made that affect the value at which certain assets
and liabilities are held at the balance sheet date and also the amounts of revenue and expenditure recorded in the year. The Directors believe the accounting policies
chosen are appropriate to the circumstances and that the estimates, judgements and assumptions involved in its financial reporting are reasonable.
Accounting estimates made by the Group’s management are based on information available to management at the time each estimate is made. Accordingly, actual
outcomes may differ materially from current expectations under different assumptions and conditions.
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
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. Further details are provided in
Note 13.
Separately disclosed items
During the course of the year the Group incurred income and 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 items 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 CGU. 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.
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.
Financial StatementsAccrol Group Holdings plc • Annual Report & Accounts 2022 67
4. Revenue
The Group’s country of domicile is the UK. Revenue from external customers is based on the customers location and arises entirely from the sale of goods.
The analysis by geographical area of destination of the Group’s revenue is set out below:
United Kingdom
Europe
Major customers
2022
£’000
149,914
9,536
159,450
2021
£’000
127,107
9,487
136,594
In 2022 there were four major customers that individually accounted for c.10% and above of total revenues (2021: five customers). The revenues relating to these
customers in 2022 were £33.8m, £24.5m, £24.1m and £19.7m (2021: £30.4m, £26.2m, £23.3m, £21.8m and £13.6m).
5. Operating loss
Operating loss is stated after charging/(crediting):
Employee benefit expense (note 8)
Depreciation
Amortisation
Profit on disposal of property, plant and equipment
Research and development expensed as incurred
Net foreign exchange losses/(gains)
Auditor’s remuneration
Audit services – Company
Audit services – Rest of Group
Non audit services:
Tax compliance services
6. Separately disclosed items
Acquisition contingent consideration
Acquisition professional fees
Acquisition integration costs
Acquisition related items
Supply chain disruption
Impairment of property, plant and equipment
Operational reorganisation and restructure
COVID-19 costs
Accounting policy change
Other items
Other items
2022
£’000
16,984
5,857
5,494
(296)
202
665
2022
£’000
13
149
8
170
2022
£’000
(6,277)
766
85
(5,426)
696
965
-
153
637
398
2,849
(2,577)
2021
£’000
19,702
4,786
3,520
-
191
(1,024)
2021
£’000
13
139
17
169
Restated
2021
£’000
-
2,150
724
2,874
-
-
1,034
670
550
127
2,381
5,255
Financial StatementsAccrol Group Holdings plc • Annual Report & Accounts 2022
68
Notes to the Consolidated Financial Information continued
For The Year Ended 30 April 2022
A summary of the separately disclosed items for the current year is as follows.
Acquisition related items credit of £5,426,000 (2021: charge of £2,874,000)
On 24 November 2020, the Group acquired 100% of the issued share capital of LTC Parent Limited and its subsidiaries, whose principal activity is paper tissue
converting. An element of the consideration was contingent upon 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. This consideration was measured on a sliding scale with a maximum of £6,800,000 payable to the
vendors if EBITDA targets were met, for which provision was made in the prior year.
Negotiations with the sellers in respect of the contingent consideration and other matters have been concluded during this financial year with no payment made.
Therefore, contingent consideration of £6,277,000 has been credited to the Income Statement after the recognition of £523,000 of one-off contract related costs that
were incurred in the year. In concluding negotiations with the sellers during the financial year, the Group also incurred professional fees of £766,000 in respect of legal
and accounting services. Consultancy costs of £85,000 were also incurred in finalising the integration of the businesses.
Supply chain disruption costs £696,000 (2021: £nil)
In line with the wider market, pressures on the Group’s supply chain have been considerable, particularly over the autumn period when there was significant disruption
to shipping, container capacity at ports, and haulage. Whilst the Group’s supply chain demonstrated significant resilience, considerable incremental costs were incurred
to maintain service to our customers.
These incremental costs included port charges of £398,000, largely related to demurrage costs incurred because of shipping container congestion and a lack of
capacity to manage increased demand. Additional distribution costs of £269,000 were also incurred, largely related to the procurement of day rate vehicles at an
incremental cost, to ensure continuity of supply in the October to December period, when haulage driver availability was severely constrained. External consultancy
costs of £29,000 were also incurred to support the supply chain planning of the business during this volatile period.
Impairment of property, plant and equipment £965,000 (2021: £nil)
Significant progress has been made over previous years to transform the manufacturing capability of the business, with investment made in automation and in the
expansion of overall capacity and capability. The final element of the manufacturing re-organisation comprises investment in a new manufacturing line (expected
September 2022) and automation of packing and palletisation (completed July 2022) at the Leyland manufacturing site.
To enable this investment, the Leyland manufacturing facility has been re-organised, involving the physical movement of existing manufacturing lines and the removal
of a specific ‘re-wind’ asset that was deemed surplus to requirement, and therefore redundant. The removal of this asset has facilitated the wider site re-organisation
but has resulted in an impairment charge of £965,000.
COVID-19 £153,000 (2021: £670,000)
The COVID-19 pandemic continued to have an impact on the business during the financial year, although those impacts are now much reduced and are being
absorbed as part of normal operational costs from January 2022. 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 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 £133,000. A further £20,000 of additional costs related to incremental cleaning, safety, and PPE equipment.
Accounting policy change £637,000 (2021: £550,000)
The Group’s accounting policy has historically been to capitalise all costs related to the configuration or customisation of Software-as-a-Service (SaaS) arrangements
as intangible assets. Following the agenda decision of The International Financial Reporting Standards Interpretations Committee (IFRIC) in April 2021 these previously
recognised intangible assets have been treated as an expense, impacting both the current and prior periods presented.
Other items £398,000 (2021: £127,000)
Other items largely relate to redundancy costs of £327,000 related to consolidation of activities across the Group following the acquisitions made in the previous
financial year; and other largely property related items of £71,000.
A summary of the separately disclosed items for the prior year is as follows:
Acquisition costs (£2,150,000)
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 2022, 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)
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.
Financial StatementsAccrol Group Holdings plc • Annual Report & Accounts 2022 69
Operational reorganisation and restructure (£1,034,000)
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)
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.
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)
Diluted loss per share
2022
£’000
(1,697)
Number
’000
311,355
5,792
317,147
(0.5)
Restated
2021
£’000
(3,190)
Number
’000
195,247
51,214
246,461
(1.3)
Diluted loss per share is calculated by dividing the loss after tax by the weighted average number of shares in issue 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)
2022
£’000
(1,697)
Number
’000
317,147
-
317,147
(0.5)
Restated
2021
£’000
(3,190)
Number
’000
246,461
-
246,461
(1.3)
No adjustment has been made in 2022 and 2021 to the weighted average number of shares for the purpose of the diluted earnings per share calculation as the effect
would be anti-dilutive.
Financial StatementsAccrol Group Holdings plc • Annual Report & Accounts 2022 70
Notes to the Consolidated Financial Information continued
For The Year Ended 30 April 2022
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 and income
Bank loans and overdrafts
Lease interest
Amortisation of finance fees
Unwind of discount on provisions
Total finance costs
Lease interest income
Total finance income
10. Taxation
Tax credit/(charged) 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 credit/(charge)
Tax credit/(charge) in the income statement
2022
£’000
14,520
1,646
310
508
16,984
2021
£’000
14,581
1,530
346
3,245
19,702
Number
Number
339
69
408
2022
£’000
791
1,354
179
198
2,522
2022
£’000
216
216
2022
£’000
-
15
15
1,551
73
(804)
820
835
334
82
416
2021
£’000
661
844
438
253
2,196
2021
£’000
242
242
2021
£’000
-
-
-
(28)
(46)
-
(74)
(74)
Financial StatementsAccrol Group Holdings plc • Annual Report & Accounts 2022
71
The tax credit for the year is higher than (2021: charge is higher than) the effective rate of corporation tax in the UK of 19% (2021: 19%). The differences are explained
below:
Loss before income tax
Effective rate
At the effective income tax rate
Expenses not deductible for tax purposes
Tax exempt income
Adjustment in respect of prior periods
Movement in unrecognised deferred tax assets
Change in rate
Total tax credit/(charge)
During the year the Group recognised the following deferred tax assets/(liabilities):
Accelerated
capital
allowances
£’000
(1,999)
(1,030)
(542)
-
(3,571)
(1,842)
-
(5,413)
Intangible
assets
£’000
(1,634)
(4,154)
552
-
(5,236)
(338)
-
(5,574)
Losses
£’000
3,161
177
949
-
4,287
3,550
-
7,837
Share
based
payments
£’000
834
-
(990)
999
843
(505)
(273)
65
30 April 2020
Acquired on business
combinations
Credit/(charge) in year
Credit/(charge) to equity
30 April 2021
(Charge)/credit in year
(Charge)/credit to equity
30 April 2022
2022
£’000
(2,532)
19%
481
(123)
1,193
88
-
(804)
835
Other
£’000
(74)
109
(43)
19
11
(45)
19
(15)
Restated
2021
£’000
(3,116)
19%
592
(516)
-
(46)
(104)
-
(74)
Total
£’000
288
(4,898)
(74)
1,018
(3,666)
820
(254)
(3,100)
A deferred tax asset of £7,837,000 (2021: £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 £328,000 (2021: £2,177,000).
Deferred tax assets and liabilities have been measured at the rate expected to be in effect when the deferred tax asset or liability reverses.
Financial StatementsAccrol Group Holdings plc • Annual Report & Accounts 2022 72
Notes to the Consolidated Financial Information continued
For The Year Ended 30 April 2022
11. Property, plant and equipment
Leasehold
land &
buildings
£’000
497
1,043
31
-
1,571
69
(68)
-
1,572
178
70
248
142
-
-
-
Fixtures &
fittings
£’000
Plant and
machinery
£’000
Assets under
construction
£’000
Right-of-use
assets
£’000
2,096
164
149
-
2,409
136
39
-
2,584
1,365
337
1,702
317
84
-
-
27,187
9,545
733
8,335
45,800
1,050
1,268
(95)
48,023
4,922
879
5,801
1,895
347
(95)
965
8,913
39,110
39,999
3,354
-
8,199
(10,457)
1,096
3,732
(94)
-
4,734
-
-
-
-
-
-
-
-
4,734
1,096
16,158
8,046
477
2,122
26,803
21,713
(1,239)
(9,803)
37,474
3,087
3,500
6,587
3,503
(431)
(4,481)
-
5,178
32,296
20,216
390
2,103
1,182
1,323
481
707
Cost
At 30 April 2020
Acquired through business
combinations
Additions
Reclassification
At 30 April 2021
Additions
Reclassification
Disposals
At 30 April 2022
Accumulated depreciation
At 30 April 2020
Charge for the year
At 30 April 2021
Charge for the year
Reclassification
Disposals
Impairment
At 30 April 2022
Net book value
At 30 April 2022
At 30 April 2021
Total
£’000
49,292
18,798
9,589
-
77,679
26,700
(94)
(9,898)
94,387
9,552
4,786
14,338
5,857
-
(4,576)
965
16,584
77,803
63,341
Assets with a value of £77,803,000 (2021: £63,341,000) form part of the security against the RCF as described in note 19.
As part of the reorganisation of the Leyland manufacturing facility, a specific ‘re-wind’ asset was deemed surplus to requirement, resulting in an impairment charge of
£965,000. See note 6.
12. Leases
Leases receivable
At 1 May 2021
Interest received
Lease receipts
At 30 April 2022
Analysed as:
Receivable > 1 year
Receivable < 1 year
Land & buildings
£’000
5,702
216
(890)
5,028
4,325
703
Total
£’000
5,702
216
(890)
5,028
4,325
703
Financial StatementsAccrol Group Holdings plc • Annual Report & Accounts 2022
Lease liabilities
At 1 May 2021
New leases in the year
Leases terminated in the year
Interest expense
Lease payments
At 30 April 2022
Land & buildings
£’000
Plant & machinery
£’000
21,195
21,242
(5,570)
1,124
(3,925)
34,066
6,402
2,410
-
230
(2,892)
6,150
73
Total
£’000
27,597
23,652
(5,570)
1,354
(6,817)
40,216
Short-term lease expense for the year was £nil. Short-term lease commitment at 30 April 2022 was £nil. Income from sub-leases for the year totalled £216,000.
13. Intangible assets
Cost
At 30 April 2020
Acquired through business
combinations
Internally developed
additions (restated)
At 30 April 2021
(restated)
Internally developed
additions
Reclassification
At 30 April 2022
Amortisation
At 30 April 2020
Charge for the year
At 30 April 2021
Charge for the year
At 30 April 2022
Net book value
At 30 April 2022
At 30 April 2021 (restated)
Goodwill
£’000
Customer
relationships
£’000
Development
costs
£’000
Computer
software
£’000
14,982
14,812
-
20,427
21,864
-
29,794
42,291
-
-
-
-
29,794
42,291
-
-
-
-
-
29,794
29,794
11,828
2,903
14,731
4,299
19,030
23,261
27,560
764
-
684
1,448
2,974
-
4,422
-
273
273
332
605
3,817
1,175
2,492
28
468
2,988
171
94
3,253
-
344
344
863
1,207
2,046
2,644
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 Group Holdings plc
Accrol
Leicester Tissue Company (“LTC”)
John Dale (“JD”)
Other
£’000
126
-
-
Total
£’000
38,791
36,704
1,152
126
76,647
-
-
126
86
-
86
-
86
40
40
2022
£’000
29,794
-
-
-
29,794
3,145
94
79,886
11,914
3,520
15,434
5,494
20,928
58,958
61,213
2021
£’000
-
17,917
11,742
135
29,794
Financial StatementsAccrol Group Holdings plc • Annual Report & Accounts 2022 74
Notes to the Consolidated Financial Information continued
For The Year Ended 30 April 2022
As disclosed in the prior year financial statements, as anticipated, the acquired operations have become fully integrated within the Group. The performance of the Group
provided to the Chief Operating Decision Maker (the AGH plc Board) does not split between the above CGUs, therefore the Group has decided to return to a sole CGU.
The recoverable amount of the 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 cash flows and the determination of a discount rate in
order to calculate the present value of the cash flows. Cashflows beyond this period are extrapolated using the estimated growth rates stated below.
The recoverable amounts of the CGUs have been determined from value-in-use calculations. At 30 April 2022, the impairment tests concluded that the estimated
value in use at 30 April 2022 exceeds the carrying value by £50m (2021: £100m).
Key assumptions
The calculations of value-in-use are inherently judgemental and require management to make a series of estimates and assumptions.
The cash flow forecasts have been derived from the most recent forecast presented to the Board for the year ending 30 April 2023. The cash flows 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 12.4% (2021: 13.0%) and is derived from the Group’s weighted average cost of capital, 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 is 2.4% (2021: 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 the CGU to exceed
its recoverable amount, although the headroom would decrease. Therefore, at 30 April 2022 no impairment charge is required against the carrying value of goodwill.
Impairment would be caused by either increasing the pre-tax discount rate by 4% or reducing the average EBIT performance by £5m. A combination of increasing the
pre-tax discount rate by 2% and reducing average EBIT performance by £2.6m results in an impairment.
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.
Development costs
During the year, the Group developed a number of new innovative products including ‘Softy’, ‘Elegance’, ‘Magnum’ and ‘Little Heroes’. It also developed a range of
fragranced products under the ‘Fabulosa’ brand and transitioned the majority of the product range to a 38mm core. 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 its IT structure.
Customer relationships
Customer relationships are amortised over their useful economic life of 6-10 years.
14. Inventories
Raw materials
Finished goods and goods for resale
2022
£’000
13,490
12,751
26,241
2021
£’000
13,363
9,822
23,185
Inventories recognised as an expense during the year and included in cost of sales amounted to £106,401,000 (2021: £87,198,000). There are £588,000 of provisions
held against inventories (2021: £804,000).
Financial StatementsAccrol Group Holdings plc • Annual Report & Accounts 2022 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
2022
£’000
26,677
(18)
26,659
4,933
31,592
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
2022
£’000
243
2022
£’000
38,036
7,639
6,692
52,367
Trade payables are non-interest bearing and are paid on average within 70 days at 30 April 2022 (2021: 70 days).
18. Provisions
Onerous contracts
Contingent consideration
Other
As at 1 May
2021
£’000
Credited to
profit/loss
£’000
Utilised in
the year
£’000
Discount
unwind
£’000
As at 30 April
2022
£’000
358
6,608
355
7,321
-
(6,277)
-
(6,277)
(331)
(523)
(80)
(934)
6
192
-
198
33
-
275
308
Current
£’000
33
-
-
33
The onerous contract provisions relate to the decision to exit from the Skelmersdale facility and logistics agreements.
The contingent consideration relates to the acquisition of Leicester Tissue Company in the prior year.
Other provisions arose on the Group’s acquisition of Leicester Tissue Company and John Dale and relate to dilapidation and other compliance provisions.
2021
£’000
7,604
2021
£’000
34,128
5,729
7,174
47,031
Non-
current
£’000
-
-
275
275
Financial StatementsAccrol Group Holdings plc • Annual Report & Accounts 2022
76
Notes to the Consolidated Financial Information continued
For The Year Ended 30 April 2022
19. Borrowings
Current
Revolving credit facility
Factoring facility
Leases
Non-current
Revolving credit facility
Leases
2022
£’000
2,692
18,743
5,047
26,482
-
35,169
35,169
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 2021
Cashflows
Non-cashflows:
New leases
Leases terminated on disposal of Right of Use assets
Interest accrued
Amortisation of finance fees (note 9)
Allocation from non-current to current in the year
At 30 April 2022
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
12,349
(16)
159
(1,658)
2,145
179
13,324
26,482
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
30,851
-
21,554
(3,912)
-
-
(13,324)
35,169
Non-current
loans &
borrowings
£’000
23,827
-
2021
£’000
1,821
3,975
6,553
12,349
9,807
21,044
30,851
Total
£’000
43,200
(16)
21,713
(5,570)
2,145
179
-
61,651
Total
£’000
41,984
(16,829)
10,610
12,626
-
-
-
-
-
(3,586)
30,851
477
997
2,002
1,505
438
-
43,200
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 2022 are £308,000 (2021: £372,000).
Financial StatementsAccrol Group Holdings plc • Annual Report & Accounts 2022
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
77
2021
£’000
12,528
7,666
18,986
4,392
43,572
2021
£’000
5,000
7,128
12,128
2022
£’000
26,790
7,622
8,003
19,544
61,959
2022
£’000
14,000
1,179
15,179
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”)
During the year, the Group extended its £17m multi-currency revolving credit facility, which now expires in August 2024. Previously required repayments of £2m on
each of 30 April 2022 and 30 April 2023 have now been removed.
Interest charged on the facility is at SONIA plus a margin of 2.20%-3.20%. 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”)
During the year, the Group increased its multi-currency factoring facility, used to provide financing for general working capital requirements, from £22.5m to £27m.
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 gross 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.
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
2022
£’000
805
-
805
2021
£’000
-
(120)
(120)
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 forward contracts 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 2022, the notional principal amount of the outstanding derivative contracts that are held to hedge the Group’s transaction exposures was £25m. 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.
Financial StatementsAccrol Group Holdings plc • Annual Report & Accounts 2022
78
Notes to the Consolidated Financial Information continued
For The Year Ended 30 April 2022
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:
Fair values and carrying values
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
2022
£’000
26,659
243
805
26,482
52,367
-
2021
£’000
23,286
7,604
-
12,349
47,031
120
35,169
30,851
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 to aid comparability with prior years.
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
2022
£’000
61,959
(5,028)
(243)
56,688
(29,142)
27,546
2021
£’000
43,572
(5,702)
(7,604)
30,266
(15,628)
14,638
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.
Financial StatementsAccrol Group Holdings plc • Annual Report & Accounts 2022
79
(i) Foreign currency risk
The Group has transactional currency exposures arising from purchases in currencies other than the Group’s functional currency.
These exposures are forecast on a monthly basis and are monitored by the Finance Department. Under the Group’s foreign currency policy, such exposures are
hedged on a reducing percentage basis over a number of forecast time horizons using forward foreign currency contracts.
The Group’s largest exposures are the US Dollar and Euro forward contracts. The derivative analysis below had been prepared by re-performing the calculations used to
determine the balance sheet values assuming a 1% strengthening of sterling:
EUR – loss
USD – loss
2022
£’000
-
251
251
(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 1.5% (2021: 0.5%) increase in interest rates on (loss)/profit before tax is shown below:
Change in interest rate
2022
£’000
322
2021
£’000
-
215
215
2021
£’000
78
(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 2022
Borrowings
Trade and other payables
Total financial liabilities
As at 30 April 2021
Borrowings
Trade and other payables
Total financial liabilities
Due within
1 year
£’000
26,790
52,367
79,157
Due within
1 year
£’000
12,528
47,031
59,559
Due between
1 and 2 years
£’000
Due between
2 and 5 years
£’000
7,622
-
7,622
8,003
-
8,003
Due between
1 and 2 years
£’000
Due between
2 and 5 years
£’000
7,667
-
7,667
18,986
-
18,986
Due in more
than 5 years
£’000
19,544
-
19,544
Due in more
than 5 years
£’000
4,391
-
4,391
Total
£’000
61,959
52,367
114,326
Total
£’000
43,572
47,031
90,603
(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.
Financial StatementsAccrol Group Holdings plc • Annual Report & Accounts 2022
80
Notes to the Consolidated Financial Information continued
For The Year Ended 30 April 2022
At 30 April 2022 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%
471
-
1%
137
1
4%
128
5
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
5%
243
12
2022
£’000
(70)
-
(18)
70
(18)
Total
979
18
2021
£’000
(9)
(48)
(22)
9
(70)
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.
22. Capital commitments
Contracted for but not provided
2022
£’000
4,614
2021
£’000
301
The capital commitments principally relate to Leyland investments (automation and a new converting line) and are expected to be settled in the following financial
year. The majority of this cost is expected to be funded by lease financing.
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 July 2021, 7,523,465 £0.001 ordinary shares were issued.
2022
£’000
319
319
2021
£’000
311
311
2022
Number
2021
Number
318,878,097
311,354,632
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 (2021: £nil).
The Company does not propose a final dividend (2021: £1,594,000), therefore the total dividend for the year is £nil (2021: £1,594,000).
Financial StatementsAccrol Group Holdings plc • Annual Report & Accounts 2022
25. Related party disclosures
(a) Identity of related parties
The subsidiaries of the Group are as follows:
Company
Accrol UK Limited
Accrol Holdings Limited
Accrol Papers Limited
LTC Parent Limited
John Dale Limited
Principal activity
Holding company
Holding company
Soft tissue paper converter
Holding company
Country of incorporation
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Manufacturer of wet wipes and facial tissue
United Kingdom
Leicester Tissue Company Limited
Soft tissue paper converter
John Dale (Holdings) Ltd
Holding company
Art Tissue Ltd
*Indirect holding.
Distributor of soft tissue products
United Kingdom
United Kingdom
United Kingdom
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.
(b) Directors’ emoluments
Short-term employment benefits
Share based payments
2022
£’000
1,308
268
1,576
81
Holding
%
100%
*100%
*100%
100%
*100%
*100%
100%
*100%
2021
£’000
1,394
1,784
3,178
During the year retirement benefits were accruing to no Directors under defined contribution schemes (2021: £nil). The aggregate amount of emoluments paid to the
highest paid Director was £601,000 (2021: £838,000).
(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 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 2 years.
The Group operated 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. Following the exercise of
remaining options during the year, this scheme is now closed.
Further details of the schemes are provided in the Directors’ Remuneration Report on pages 43 to 46.
Movements in the year
In February 2022, the Group issued 7,967,183 options under the LTIP.
In July 2021, 7,523,465 options were exercised under the MIP.
Terms and conditions of the share option schemes
The LTIP options granted are subject to the achievement of certain adjusted EBITDA performance conditions as disclosed further in the Remuneration Report on
page 44.
Financial StatementsAccrol Group Holdings plc • Annual Report & Accounts 2022
82
Notes to the Consolidated Financial Information continued
For The Year Ended 30 April 2022
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:
FV 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 £508,000 (2021: £3,245,000), all of which relates to equity-settled awards.
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 2021
Granted in the year
Exercised in the year
Lapsed in the year
In issue as at 30 April 2022
Exercisable as at 30 April 2022
LTIP
3,152
7,967
-
-
11,119
-
MIP Option 2
MIP Option 3
863
-
(863)
-
-
-
6,660
-
(6,660)
-
-
-
27. Events after the balance sheet date
There are no adjusting or non-adjusting events subsequent to the year end.
28. Contingent liabilities
As at 30 April 2022, the Group has no disclosable contingent liabilities.
29. Alternative performance measures
LTIP
20.90
21.00
0.1
47.71%
0.00%
1.21%
Total
10,675
7,967
(7,523)
-
11,119
-
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 holder 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
2022
£’000
(1,697)
5,494
(2,577)
508
192
(832)
1,088
Restated
2021
£’000
(3,190)
3,520
5,255
3,245
239
(2,225)
6,844
Financial StatementsAccrol Group Holdings plc • Annual Report & Accounts 2022
83
Number
’000
246,461
10,675
257,136
pence
2.7
2.7
Number
’000
317,147
11,119
328,266
pence
0.3
0.3
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
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
2022
£’000
Restated
2021
£’000
(226)
(1,162)
5,857
5,494
(2,577)
508
9,056
2022
£’000
4,786
3,520
5,255
3,245
15,644
2021
£’000
36,239
37,884
905
37,144
159,450
23.3%
2022
£’000
1,220
39,104
136,594
28.6%
Restated
2021
£’000
(2,532)
(3,116)
5,494
(2,577)
508
192
1,085
3,520
5,255
3,245
239
9,143
Financial StatementsAccrol Group Holdings plc • Annual Report & Accounts 2022
84
Company Statement of Financial Position
As At 30 April 2022
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
Note
2022
£’000
2021
£’000
5
6
7
52,569
52,569
64,301
-
64,301
116,870
(15)
(15)
116,855
116,855
319
108,782
27
7,727
116,855
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 profit for the year of £1,000 (2021: loss of £45,000).
The financial statements were approved by the Board of Directors on 5 September 2022.
Signed on behalf of the Board of Directors
Richard Newman
Chief Financial Officer
Company Registration Number 09019496
Financial StatementsAccrol Group Holdings plc • Annual Report & Accounts 2022
Company Statement of Changes in Equity
For The Year Ended 30 April 2022
Balance at 30 April 2020
Transactions with owners recognised directly in equity
Proceeds from shares issued
Transaction costs
Share based payments
Share
capital
£’000
195
116
-
-
Share
premium
£’000
68,015
42,494
(1,727)
-
Total transactions recognised directly in equity
116
40,767
Comprehensive expense
Loss for the year
Total comprehensive income
Balance at 30 April 2021
Transactions with owners recognised directly in equity
Proceeds from shares issued
Transaction costs
Dividends
Share based payments
Total transactions recognised directly in equity
Comprehensive income
Loss for the year
Total comprehensive income
Balance at 30 April 2022
85
Total
equity
£’000
74,829
42,610
(1,727)
2,177
43,060
(45)
(45)
Capital
redemption
reserve
£’000
27
Retained
earnings
£’000
6,592
-
-
-
-
-
-
-
-
2,177
2,177
(45)
(45)
-
-
-
-
311
108,782
27
8,724
117,844
8
-
-
-
8
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8
-
(1,594)
(1,594)
596
(998)
1
1
596
(990)
1
1
319
108,782
27
7,727
116,855
Financial StatementsAccrol Group Holdings plc • Annual Report & Accounts 2022
86
Notes to the Company Financial Information
For The Year Ended 30 April 2022
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’; and
(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) 10(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. The Group encountered enormous
macro- inflationary cost pressures during the year but has been successful in negotiating more than £70m of annualised price increases by the end of the year, with
£11m of this impacting FY22. In addition, the Group continued its investment in automation, infrastructure and product development, whilst also increasing working
capital to manage supply constraints over the coming 12 months.
The acquired businesses, LTC and John Dale, have been fully integrated and the automation of all four manufacturing sites (which completed in August 2022) has been
finalised; delivering further efficiencies. The cost of living crisis is driving consumer demand for great value products and Accrol has enjoyed a strong start to the new
financial year (FY23). The margin erosion experienced in FY22, created by the rapid increase in input costs, has been rectified and contained, with cost increases being
passed on as they arise.
Financial StatementsAccrol Group Holdings plc • Annual Report & Accounts 2022
87
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’s forecasted performance has been tested for downside scenarios,
including reverse stress tests, relating to sales volume, price erosion and parent reel prices. 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, which may include further price
increases, further operational restructuring and a reduced or deferred capital expenditure programme, to maintain liquidity and continue its operations.
The Group is currently operating 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 2022, available funds were
£15.4m, 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 a period of at least 12 months from the date of signing the financial statements. 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.
Financial StatementsAccrol Group Holdings plc • Annual Report & Accounts 2022 88
Notes to the Company Financial Information continued
For The Year Ended 30 April 2022
4. Directors’ Emoluments
Short-term employment benefits
Share based payments
2022
£’000
1,308
268
1,576
2021
£’000
1,394
1,784
3,178
During the year retirement benefits were accruing to no Directors under defined contribution schemes (2021: none). The aggregate amount of emoluments paid to
the highest paid Director was £601,000 (2021: £838,000). The Company does not have any employees (2021: none).
5. Investments in subsidiaries
Cost
30 April 2021
Additions in the year in respect of Share based payments
30 April 2022
The Company’s subsidiary undertakings are shown in note 25 to the consolidated financial statements.
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.
7. Issued 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 July 2021, 7,523,465 £0.001 ordinary shares were issued.
Group
undertakings
£’000
51,973
596
52,569
2021
£’000
66,102
66,102
2021
£’000
311
311
2022
£’000
64,301
64,301
2022
£’000
319
319
Number
Number
318,878,097
311,354,632
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 (2021: £nil).
The Company does not propose a final dividend (2021: £1,594,000), therefore the total dividend for the year is £nil (2021: £1,594,000).
9. Dividend receivable
Dividends received by the Company from its subsidiaries in the year were £nil (2021: £nil).
Financial StatementsAccrol Group Holdings plc • Annual Report & Accounts 2022
89
Company Information
Directors
Daniel Wright (Executive Chairman)
Gareth Jenkins (Chief Executive Officer)
Richard Newman (Chief Financial Officer)
Euan Hamilton (Independent Non-Executive Director)
Simon Allport (Independent Non-Executive Director)
Secretary
Richard Almond
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 Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
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
Atlas House
1 King Street
London
EC2V 8AU
Financial StatementsAccrol Group Holdings plc • Annual Report & Accounts 2022 90
Notes
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Accrol Group Holdings plc
Roman Road
Blackburn
Lancashire
BB1 2LD
www.accrol.co.uk
Accrol Group Holdings Plc
Annual Report & Accounts 2022