Simplify Strengthen Grow Accrol Group Holdings Plc Results Presentation FY19 September 2019
FOUNDATIONS LAID FOR SUSTAINABLE GROWTH Simplify Strengthen Grow - 29% + 64% + 12% + £6.8M + £10.8M COST BASE OUTPUT PER TOILET TISSUE ADJUSTED HEADWINDS REDUCTION HEAD REVENUE EBITDA GROWTH MANAGED
CONTINUED IMPROVEMENTS Simplify Strengthen Grow +4% -£6.7m +1% -£17.6m FY20 *GROSS NET DEBT CORE COST BASE GUIDANCE MARGIN REDUCED REVENUE REDUCTION UNCHANGED 3 * Adjusted gross margin moved from 17.5% to 18.2%
THE MOST COMPLEX TURNAROUND: DELIVERED The downturn The turnaround Simplification Streamlining Operational Scale & Growth Future efficiency developments We are here Cost base Simplify Net Debt reduced by £6.7m Exited Skelmersdale Reduction of raw materials and finished goods Exiting Improved controls, releases space improves cash Logistics Industry leading team in place warehousing Leadership team right for growth Simplification Strengthen People Commissioned new £4m line in Leyland 589 to 340 Improved efficiency and capacity SKU 460 to 120 Fundraising and new bank facility Cost base Created cash headroom and time Reduced by £17.6m Material types 75 to 20 Grow Platform for growth New Board and team build begins World class team to build for the future Production lines 18 to 10 EBITDA Automation Head count reduction 4 2017 2018 2019
The turnaround costs 2019 Cost of sales Administration Total Simplify £’000 £’000 £’000 Turnaround costs 3,756 3,452 7,208 “Accrol is now a fundamentally different organisation, operationally, to that which A – Management reorganisation and restructure - 724 724 floated on AIM in June 2016. Every part of the organisation has been restructured B – Skelmersdale exit 605 2,569 3,174 or changed in some way, since February 2018.” Strengthen C – Operational reorganisation and restructure 854 18 872 D – Raw material and finished goods stock waste 2,298 10 2,308 It now has the right E – Impairment of property and equipment - 130 130 foundation to grow strongly Other non-recurring financial instruments 408 290 698 Grow F – Loss on derivative financial instruments - - - G - other 408 290 698 Total “turnaround costs” 4,164 3,742 7,906 5
A YEAR OF GREAT CHANGE OUR BUSINESS 340 42% Employees Customers Simplify Reduction driven by business Small profit achieved before simplification and increased charging £7.9m of turnaround costs Automation (589 to 340 like for like) Before charging £12.9m of exceptional costs 4 20% Sites Closure of the Skelmersdale Strengthen distribution centre 27 73% Representing the low point of the Core Customers turnaround cycle as issues identified and plans developed Simplification as we exited none Against foreign exchange and profitable customers and the paper price headwinds of £13.2m Grow AFH sector Operational efficiency & cost control 120 74% Stock Keeping Units (SKUs) Simplification of the business 6
Cash and debt “Our goal in the mid -term is to return the business to satisfactory profitability levels and normalised debt. It remains the Board’s intention to return to the FY19/FY18 dividend list at the earliest appropriate opportunity” Financial results Simplify FY 19 FY 18 Target Revenue £119.1m £139.7m Grow ahead of the Core revenue £116.3m £115.2m market Adjusted EBITDA £1.0m (£5.8m) Net debt £27.1m £33.8m EBITDA % Sales 0.9% -4.2% >10% Strengthen Net debt/EBITDA 27.1x -5.8x <2x Credit facility 9% 22% Headroom Grow RCF 31% ID Line Lease 38% 7
“Industry leading team now in place” People Make the Difference Simplify “I help Accrol turn our vision into reality in “I am passionate about maximising the “Engagement across the workforce has “ With the tough job of turnaround behind us, terms of our people, our equipment and our potential of our people to deliver profitable significantly improved following the completion I look forward to championing the continuous Strengthen product offering.” of the turnaround – and the teams throughout growth through setting aspiration targets in improvement culture throughout the our organisation remain key” organisation” both operational and commercial Mark Dewhurst Graham Cox Kathryn Robinson John Pilkington Chief Operating Officer Commercial Director HR Director Finance Director Previous Experience Previous Experience Previous Experience Previous Experience Ten years at DS Smith as UK 24 years at DS Smith PLC covering sales, 11 years spent in private label manufacturing ACA, trained at KPMG & Northern Europe Operations Director. commercial and operations. Last two years supplying the UK Grocery Sector. 14 years at technology company Promethean Ten years with Crown Packaging in senior as Managing Director, North America 9 years BBF Ltd leading teams through complex and challenging Operational & Commercial roles. Packaging Division. (previously McCambridge Group) reporting environments giving clarity to the key Grow Extensive operational leadership driving Previous three years as Sector Director 4 & 2 years at Sodexo Healthcare and drivers of a manufacturing business. manufacturing excellence across multiple UK Packaging. Alfred McAlpine respectively. Supports operational leaders and teams to make businesses. Extensive experience in delivering industry A dynamic individual with a clear understanding good commercial decisions as transformational An inspirational leader of people and leading levels of return, personally leading of how people at all levels with in an change happens at a rapid pace. businesses, who understand the commercial improvement programmes organisation make a difference to the An excellent understanding of the business complexity of driving strategy throughout delivering significant margin improvements. success of the wider business. and great fit with the team. organisations at every level. Delivered industry leading EBITDA A hands on leader who has delivered improvements over the last six years. significant EBITDA improvements over the last six years. 8
COMMITTED TO SUPERIOR PERFORMANCE 5 75% 64% Lost time accidents Employee Engagement Increase in Output per head Simplify THE RIGHT 30% reduction on prior year 42% reduction in head count on a like 74% feel that management 48% reduction in All accidents for like basis support them in their roles PEOPLE 15% reduction in near misses £5m investment in machinery and 64% of employees feel there simple automation are opportunities to grow £0.8m invested in training throughout 86% feel they have everything the operational workforce they need to full fil their roles 72% feel there is a clear common Strengthen goal 96% 12% 22% STRONG On time delivery Toilet Tissue Growth Growth with top customers CUSTOMER Percentage of deliveries on No one customer equates to more than Represents 70% of our total RELATIONSHIP time and in full over a calendar 20% of our total revenues revenue months Up from 11% growth FY18 Grow Down £6.7m £1.0m up 4% GENERATE Net Debt Adjusted EBITDA Adjusted Gross Margin SHAREHOLDER RETURNS Down £6.7m to £27.1m Up to 18.2% from 17.5% An improvement of £6.8m on FY18 9
STRONG POTENTIAL WITH A CONFIDENT MARKET SHARE Private Label Total UK soft tissue market 2.8% Branded Products £1.59 billion Simplify (2018: £1.54bn) Strengthen 46.80% 53.20% 49.60% 50.40% 50.30% 49.70% 43.8% 56.2% 46.5% 53.5% 47.0% 53.0% 2017 2018 2019 2017 2018 2019 Toilet Tissue Kitchen Towel Grow Accrol 24% • Largest Independent supplier growing at 12% (Toilet Tissue) • Largest range of customers (27 core customers) • Market grows at 8% per year • Market insight • First to offer a plastic free range 10 Private Label penetration Accrol market share Total UK market
Our progress “The turnaround work is behind us” Timeline 2019 2020 Simplify First phase automation completed Automation programme begins New machine operational New IT system in place Logistics tender Strengthen Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Grow Relentless on costs Quality, service, innovation Right people Consistent returns Delight our customers Right roles 11
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