Profit warning at Accrol
Troubled Lancashire-based tissue manufacturer Accrol has issued a profit warning as its new management team continues to battle “major issues” affecting the business.In a statement today it revealed its adjusted EBITDA loss for year ending April 30 is now expected to be in the region of £5m.
Net debt, currently at £31m, is also expected to be higher at the year-end than previously expected, despite a £18m having been raised from shareholders in December.As well as the profit warning, the statement also revealed that the group is likely to breach one of its banking covenants.
And it says it is in “constructive discussion” with its bank on headroom and resetting covenants.”The business, which has its headquarters in Blackburn and operations in Leyland and Skelmersdale, is listed on the AIM.
The statement said the group’s trading performance has been “significantly impacted” by three major issues - an escalation in internal costs, input costs and adverse foreign exchange hedging.And it added: “The new management team believes firmly that the challenges facing the group are resolvable, given time and experienced handling.
“The successful resolution of these issues, however, will be a demanding task and one not without execution risk.”The business also says the outlook for the year ending April 2019 remains “in line with market expectation”.
Accrol says the magnitude of the escalation in costs – around 50 per cent higher than at the end of the previous financial year has “only very recently become fully apparent to the board.”It says it is making operational progress to address issues including the restructuring of logistics, with expected full year savings of more than £5m.
Discussions are also underway on a planned exit from underperforming areas of the business through disposal.Work is also going on to rationalise the business’ manufacturing capacity and there is also on-going work to simplify its product portfolio.
Important volume increases have been agreed with several key customers and agreement, in principle, for a longer-term relationship with one major customer.The statement said: “In recent weeks, the new leadership team has gained a much fuller understanding of the nature and scale of the issues that need to be addressed.” It added: “Resolving the cost issues will inevitably take time. The new management’s objective is to reverse at least half the recent cost growth by the end of this calendar year and progress is already being made.”