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Accrol Group warns of Brexit hit as weak pound undermines operational ‘transformation’

The Blackburn based tissue manufacturer expects some £8.5mln of additional costs due to the '‘macroeconomic headwinds’ in the current financial year
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After an £8.5mln hit to profitability, Accrol expects to earn £1mln from £126mln of revenue

Continuing weakness in the pound, brought on largely by Brexit uncertainty, has put a dent in the business of Lancashire-based tissue firm Accrol Group Holdings PLC (LON:ACRL).

The company, in a stock market statement, told investors that although it “transformed operationally” during 2018 the group’s profitability was impacted considerably by external forces.

Accrol shares shed 29% of their value in Tuesday’s early deals on the London Stock Exchange.

Rising input costs and a weaker pound caused a £5mln negative impact to profitability in the first half of its financial year (six months ended October 30), Accrol said, and, it expects a further £3.5mln hit in the second half if conditions remain the same.

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Moreover, the group warned that as the ‘macroeconomic headwinds’ will potentially contribute to £8.5mln of additional costs, notwithstanding increasing sales, it is now expecting earnings (adjusted EBITDA) of around £1mln for the full financial year.

Accrol noted also that its turnaround plan is expected to have added £8mln of exceptional costs during 2019. 

It emphasised that the fundamentals of its business are now stronger, that like-for-like sales are at record levels, and that group revenue will have increased by around 8% in the year, currently forecast at £126mln.

The company added that it remained confident of delivering further revenue growth whilst continuing to exit low margin work.

Chief executive Gareth Jenkins highlighted that Accrol’s strategic plan remains on track and it expects to exit the financial year in a “significantly stronger operational position."

"Whilst the ongoing macro headwinds encountered by the UK tissue converter industry as a whole in FY19 to date are beyond our control, we are building a more robust business which is increasingly resilient and agile under adverse macro conditions.

“We are confident that we can create a solid business which delivers acceptable levels of return even under difficult macro conditions and additional upside for shareholders given fair winds.”

Accrol noted that it ended the first half with £22.6mln of net debt and it expects to owe no more than £30mln by year end. It added that the anticipated level of full-year earnings will fall within existing covenants and its bank remains supportive.

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