A ‘Killer’ approach to growth

Paper products firm Accrol’s strategy to drive growth has an apt name. The business has christened it ‘Brand Killers’.

The aim is simple, to take market share from established brands by delivering “best value products” to consumers and” great service” to customers while also ensuring it is the lowest cost operator.

In pursuit of those goals, the Blackburn-headquartered group completed its first acquisition in November – a £41.8m deal to buy Leicester Tissue Company (LTC).

The deal, the latest milestone in AIM-listed Accrol’s turnaround journey, will increase its share of the total UK retail tissue market to around 16 per cent of the £1.7bn industry.

It will also consolidate its position in the private label retail tissue market. The group currently makes products for a host of big-name retailers.

LTC looks a perfect fit. The fast growing, independent tissue conversion business supplies private label and branded toilet rolls and kitchen towels to UK customers, including major supermarket multiples and value retailers.

In the 12 months to September 30, it generated revenues of £28m, a leap of 44 per cent on the previous year, and adjusted EBITDA of £4.5m.

LTC also secured “significant contract wins” at the end of the 2019 financial year and has “a strong pipeline” of new opportunities. Its customer portfolio contains one of the UK’s leading supermarket groups and one of the largest value retailers.

Accrol also estimates annualised run rate cost synergies in excess of £1m from procurement and operational efficiencies as a result of the deal.

Zeus Capital acted as nominated adviser and joint bookrunner on the transaction, which included an oversubscribed placing and open offer of around £45m.

Accrol chief executive Gareth Jenkins says: “The acquisition of LTC is fully aligned with our ‘Brand Killers’ growth strategy, adds significant capacity to our existing business and is a major step change that will enable the enlarged organisation to continue to grow ahead of the market.”

Executive chairman Dan Wright adds: “We have been very selective about Accrol’s first acquisition, and LTC’s scale and quality demonstrates the ambitions we have for the group.

“Accrol has a highly experienced senior management team with proven and relevant M&A integration skills, which is committed to building a world-class, operationally efficient business of size and scale and delivering substantial shareholder returns through organic and acquisitive growth.

“With around £25m having been invested in the LTC business since its foundation in 2014, it is equipped with top quality machines and has highly capable day-to-day operational leadership, on which we can build.”

Dan Bate, head of PLC advisory at Zeus Capital, says: “The fact that both the placing and the open offer were significantly oversubscribed highlights that investors recognise the outstanding job that the Accrol management team has done in restructuring the business, despite ongoing economic uncertainties.

“The enlarged group now has a huge opportunity to maximise growth over the coming months.”

Accrol’s turnaround journey began in 2017 and has included reorganisation, cost rationalisation, renegotiations with customers and refinancing. In September 2020 the business announced it has almost wiped out its annual losses with a strong year of sales.