ACRL.L Regulatory News (ACRL)

16 May, 2017

This announcement contains inside information

Accrol Group Holdings plc (the "Company" or "Accrol")

Trading Update, New Warehousing and Distribution Facilities and Notice of Results

Accrol Group Holdings plc, the AIM-listed leading independent tissue converter, provides the following trading update for the twelve-month period ended 30 April 2017.

The Company has had a strong year of growth in its first year as a publicly listed business following its successful IPO on AIM in June 2016, and is pleased to announce that it has performed in line with market expectations despite some challenging macro-economic factors.

Over the last twelve months, Accrol has consolidated its position as the leading supplier of tissue products to the Discount sector and has continued to invest in its growth plans with the opening of a new 168,000 sq. ft. manufacturing facility in Leyland, Lancashire in January 2017, increasing production capacity to 143,000 tonnes per annum.

The Company is also pleased to announce today that it has agreed a 10-year lease with Orbit Developments on a 368,000 sq. ft. warehouse in West Lancashire. The warehouse will store finished goods and provide central distribution facilities to all UK customers, enabling Accrol to simplify and consolidate its existing warehouse facilities. Warehouse management and national logistics will be contracted out to NFT.

Steve Crossley, Accrol's CEO, commented:

"We are pleased to announce that, despite a less favourable macro-economic environment, we have performed in line with expectations in our maiden year as a publicly-listed business. We have continued to make progress with our growth plans, extending our relationships with both new and existing customers and investing in our infrastructure for the future.

Final results for the year ended 30 April 2017 will be announced on 10 July 2017.

Today, the Company will be holding an Investor Day at its Head Office in Blackburn, Lancashire. There will be no material information disclosed that is not already in the public domain.

Notes to Editors

Accrol manufactures toilet rolls, kitchen rolls and facial tissues as well as other tissue products. The Company operates out of c 900,000 sq. ft. of manufacturing, storage and distribution facilities across Lancashire. Accrol currently manufactures approximately 18 million units per week and supplies some of the UK's largest retailers, providing both Accrol branded and Private Label products (being goods produced under a customer's own brand or under a non-branded or less well-known brand name ("private label")).

The Group's competitive advantage lies in its market positioning, operational process and flexibility. Key components of the business model are:

Production process - The Directors believe the Group obtains a competitive advantage through its model of acquiring and converting the large tissue reels that are Accrol's raw materials ("Parent Reels") as opposed to manufacturing Parent Reels from pulp and recycled fibre and subsequently converting. This requires a lower fixed overhead and provides flexibility in Parent Reel sourcing which allows the Group to take advantage of favourable pricing opportunities and production technology advancements.

Technology and converting lines - Accrol has committed capital expenditure of c.£18.2 million in the last three years. The Group currently has 17 converting lines in operation providing capacity of approximately 143,000 tonnes per annum. The Group's operating machinery allows conversion of a wide variety of tissue grades, adding flexibility to the Parent Reel sourcing process and allowing manufacture of a wide range of product types.

Manufacturing private label products - The majority of Accrol's products (75 per cent. of revenues in the year ended 30 April 2016) are private label and whilst the Group also develops and supplies branded products, the ability to supply customers with goods under its own brand has allowed penetration into retailers operating in the discount market ("Discounters") and the UK's largest retailers ("Multiples"). Accrol can launch a new private label product within six weeks of instruction from a retailer.

Production flexibility - Accrol is able to manufacture toilet rolls, kitchen rolls, facial tissue and certain products used outside a consumer's home ("Away from Home" or "AFH"), providing a "one-stop shop" solution for customers in the tissue market. The ability to produce these goods and supply Multiples, Discounters, local retailers and wholesalers ("Independents") and the AFH market is a competitive advantage and the Directors do not believe any competitors can offer the same flexibility across all of these market channels.

Macro-economic impact on raw material prices - There is currently a global over-supply of both pulp and Parent Reels, with additional capacity forecast to be brought on stream through to 2019. As such, Parent Reel prices are currently relatively low and are expected to remain so for the foreseeable future. Low Parent Reel prices allow Accrol to manufacture at a lower cost, enhancing margin and providing pricing flexibility to win new orders. Overcapacity drives increased flexibility of supply and provides Accrol with a choice of pricing and technology when sourcing Parent Reels.

Market positioning - Having won a number of contracts with Discounters in recent years and benefitting from the organic growth within this market, the Directors believe Accrol is well positioned to take advantage of the growth in the discount market and Multiples' increased focus on private label products.