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Did anyone watch this?
It's left me confused. On the one hand, management come across as sensible fellows who are aware the issues and are addressing them, and I appreciated their bravery in facing the music and taking questions under these circumstances. This gives me confidence.
On the other hand, the share price continues its unremitting decline and I don't see management buying into this weakness.
What to think?
ACRL H1 results presentation given by management shortly after publication of results.
Video: Https://www.piworld.co.uk/company-videos/accrol-group-holdings-acrl-interim-results-presentation-january-2022/
Podcast: Https://piworld.podbean.com/e/accrol-group-holdings-acrl-interim-results-presentation-january-2022/
Worth a listen to hear how they see the challenges, what they're doing about them, and a discussion on the strategic review.
Lol ! Sensible idea - Toilet Tissue prices will be increasing by rather a lot over the next six months I would imagine ! I am on board too with some more shares.
Will be interesting to see what happens over the next few week
Lombard Odier increased their holding marginally yesterday.
Well I have made my investment......
After reading the RNS, I instructed her who does the shopping to go long on toilet roll. We are now hedged against inflation for at least 6 months here.
They do come across as a bit desperate, for example in their use of invoice factoring.
I had another quick look regarding your comment, they claim the margin is 24%, yet that doesn't account for distribution costs at 6M, and then administration at 14M. Once you remove those 2 costs, you are left with negative already, that is before the finace costs etc.
"distribution pressures, notably the availability of HGV drivers, and the increased scale of the operational cost base following the acquisitions"
The administration costs have jumped from 10M to 14M, and there is no real explanation about this in the report as far as I can see. This feels a bit like, there may be issues with the companies they have purchased?
I bet who ever sold them those companies might be glad to be rid of them.
I think the price would need to be lower for me to buy here.
Good summary Dartron, I am thinking along similar lines. What gives me confidence to buy is that they have such a decent share of the market, particularly on Private Label, that the grocery trade cannot afford to let them go to the wall, as they cannot replace the 80k tonnes they have with someone else in the UK, there is not enough capacity, so the trade have to support them with large price increases, and it's a slow slog back to profitability and a share price rise. The other scenario is that the shares fall a bit more, and someone buys them, and has to pay a premium for the shares. Remember they have been here before back in 2018 when the shares fell as low as 7p, and they recovered from that. Part of their problem though is that a tissue industry insider tells me they have been taking Private Label contracts from the likes of Wepa & Sofidel at stupid prices to gain volume, and have now been hit with a tsunami of higher costs. I don't think the aforementioned suppliers would let profitable contracts go ?
First of all, I think this such a great example of how inflation will impact us all. The story told across the whole supply chain, of why the product requires steep price increases. However, I cant get my head around the fact that the finished product is itself a commodity, and surely people will pay as much as they need to for toilet paper? I think this is how the RNS reads, in that the prices will increase when agreements are renewed.
However, these guys have taken on a lot of debt. The investments sound like sensible things to do, but it strikes me that they have over reached in doing so? (Also sounds like the Mill and the Div are on hold). Really shouldn't be seeing a loss per share on something so basic as toilet paper?
Not sure whether to take a punt here, logic says that they are needed and will survive, but results paint quite a dark picture, and the issues out of their control aren't going to improve any time soon.
"As a percentage of the overall selling price of paper, energy costs currently comprise as much as 50%"
I will be loathed to subsidise the good folks of Poundlands toilet roll via a placing!
Are there any more superior brains here that can share their take on the current proposition? Perhaps it is still too expensive to enter yet?
Choice extracts from the RNS:
"In Q2, the recovery of the cost increases incurred in Q1 progressed well across all retailers. Further increases of c.20% on tissue prices were forecast across the industry, with additional increases across all other raw materials including cartons, corrugated, plastic wrap, paper wrap and core board. Many of these cost increases were being driven by significant upward movements in energy cost, impacting all aspects of the supply chain. The total cost to the business of the first two tissue price increases was c.£40 million on an annualised basis. Significant recovery of these increased costs was achieved from retailers, with many price increases being agreed that would positively impact in Q3 and fully across Q4"
"As the Group entered Q3, accelerating energy costs were impacting the paper reel supply, which, over a short period of time (c.5 months) saw energy costs for some suppliers increase by up to 500%, as hedging positions came to a close. Several suppliers in different regions globally ceased trading. As a percentage of the overall selling price of paper, energy costs currently comprise as much as 50% (previously 10%).."
"The Group has continued to develop its mill plans but, in light of the current spike in energy costs and building material cost inflation, investment in a mill will form a part of the strategic review announced in the Trading Update on 12 January 2022."
Bad scene today. Must be mad, but I've added on the price weakness. With this share it's a total punt, I freely admit.
I think the wording of the SR announcement is pointing towards a trade sale, that said they talk about good financials and banking facilities.
They've got a highly automated manufacturing operation, they've got good market presence, but the weakness apart from energy which is affecting many industries is their reliance on parent reels.
Nothing we didn't know already.
Trading performance is as previously highlighted on 12th January and, as predicted, no further news on the recently announced 'full strategic review'.
TR1. Institutional investors snapped up 5% today. The unremitting decline in the share price reversed on a sixpence this afternoon. Tomorrow's results day - let's see what it brings.
It's Poohey bum time unhooked .time ******s out there thinking something else be needing plenty of rolls. time to up, share price be up !
Further thoughts on fredintheshed's post.
On reflection, if the purpose of the announced full strategic review really is to "ensure that the shareholder value is optimised", it could be encouraging. I mean it's exactly the sort of thing a major shareholder or activist investor might insist on and I wouldn't be surprised if that's what's going on behind the scenes here. I can't imagine they'll be providing any further details on Tuesday, if the review has just started.
Per the update, the board seem v confident they can pass on the cost increases (and quickly). I believe them. Leaving aside stocking/de-stocking, demand is reliable and alternative suppliers will be facing their own margin issues.
I feel better about Accrol than I did yesterday... and that's despite today's further drop. Although I've invested more than I should've, I might shove some more into this share. Possible recovery situation.
lol
not looking good for the divi
You could well be right there.... but after this period of poor trading, I hope they don't contemplate a fire sale of the business.
I was hoping to hear that they were successfully managing costs and even beginning to see inflationary pressures abate... couldn't have got that more wrong. Suppose you need loads of electricity in the production of bog rolls!
It usually means they will look for a buyer. If they find one then could be good news (bought out at a decent premium). If not, we will see a slow grind back to expected profitability. This company does seem to keep getting caught up in cost rises which it hasn't learned to anticipate. But - it couldn't be a more basic product, there will always be demand.
Yes. The chilling phrase is that they say they need this strategic review due to short-term "but inherent" volatility in earnings over the past year...
What does that even mean? Are they saying they've just realised that there are earnings issues which are intrinsic and fundamental to this sort of business?
Yes, I'll certainly be looking for clues.
By my reckoning from the October update t/o is £10m less than expected and EBITDA c £9m less than expected in the Autumn. Which suggests the extra costs are c £6m more. Not surprising given fuel and shipping costs. Not much management can do in the short term other than ride it out and push the costs on as far as quickly as possible. Tricky to pass on costs in the short term that were not expected. But if they can get back on track by my rough jottings the various updates imply EBITDA (and positive cash flow) of £20m plus next year.
What is more interesting is the “strategic review”. That can cover all sorts of things. Does the RNS imply more detail next week? In my experience these things take months….unless there is some unknown pressure than means the unscheduled update was required. So yes, why, is a good question. But maybe next week will just be more detail on trading. Must remember to get up early next Tuesday.
Maybe we will see some research next week that will give a few more clues.
In the update they claim that "the underlying business is in good shape and the Board remains confident in the medium-term prospects for the Group".
But then say "In light of the above and the short-term but inherent volatility of earnings experienced in the current year, the Board has concluded that it is now appropriate for Accrol to conduct a full strategic review of its business"....
Eh? Which is it?
...and reliability is exactly what we didn't get from today's Trading Update. More pain.
Whether for a bog roll or Accrol, I'm looking for reliability not excitement!
Executive chairman holds 3.5%.
These only so much excitement you can get with bog roll. If the management had a decent holding, maybe this would have maintained confidence.
Have a look at TRAKM8,£10M MCAP, 90% INSTITUTION and INSIDER OWNED
Specialises in telematics and working with insurance companies to offer pay as you go insurance policies for a world where people are working from home and commutes are less
The company is supposed to be some way through a turnaround under new management, therefore it should be above where it was pre-covid. This means that at 37p today, it's substantially undervalued... in my opinion.