THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE,
PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES OF AMERICA, CANADA,
JAPAN, THE REPUBLIC OF IRELAND, THE REPUBLIC OF SOUTH AFRICA, AUSTRALIA OR TRANSMITTED, DISTRIBUTED TO, OR SENT BY, ANY NATIONAL
OR RESIDENT OR CITIZEN OF ANY SUCH COUNTRIES OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION MAY
CONTRAVENE LOCAL SECURITIES LAWS OR REGULATIONS.
This announcement is an advertisement and not an admission document or a prospectus and does not
constitute or form part of an offer to sell or issue or a solicitation of an offer to subscribe for or buy any securities nor
should it be relied upon in connection with any contract or commitment whatsoever. Investors should not purchase or subscribe for
any transferable securities referred to in this announcement except on the basis of the information in the admission document
(the "Admission Document") intended to be published by Accrol Group Holdings Limited (to be renamed Accrol Group Holdings plc on
reregistration as a public limited company) (the "Company", "Accrol" or "Accrol Group Holdings plc") in due course in connection
with the proposed admission of its ordinary shares to trading on AIM, a market operated by London Stock Exchange plc
("Admission"). Copies of the Admission Document will, following publication, be available at the registered office of the
Company, subject to applicable securities laws or regulations.
26 May 2016
Accrol Group Holdings plc
Announcement of Intention to Float on AIM
Accrol Group Holdings plc, a leading independent tissue converter, today announces its intention
to apply for admission of its issued and to be issued ordinary shares to trading on the AIM market of the London Stock Exchange
("Admission") together with an associated fundraising. Dealings are expected to commence on AIM on 10 June 2016. Zeus
Capital Limited ("Zeus Capital") is acting as Nominated Adviser and Sole Broker to the Company.
Accrol imports industrial sized paper reels ("Parent Reels") from around the world and converts
them into toilet, kitchen, facial and other tissue products at the Company's 350,000 sq. ft. manufacturing, storage and
distribution facility in Blackburn, Lancashire. Accrol currently manufactures approximately 16 million units per week and
supplies some of the UK's largest retailers.
Accrol started converting operations in 1993 and has grown to become the leading supplier of
tissue products to the UK discount market, supplying both that market and some of the UK's largest retailers. Accrol has a
35 per cent. market share of the discount market and 7 per cent. of the overall UK tissue market. The Company's exposure to
retailers operating in the discount market sector ("Discounters") has driven continuous financial growth over the last seven
years and the directors and proposed directors of the Company ("Directors" and "Proposed Directors"
respectively) believe the business is well positioned to continue to benefit from growth in the discount market and the
market for 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 Company has sought to increase manufacturing capacity ahead of growth throughout its
development and this is reflected in 15 converting lines having been installed from 2004 to February 2016, with a combined
maximum production capacity of approximately 118,000 tonnes per annum. The Company has committed c.£18.2 million of capital expenditure in the last three years and has recently purchased two additional converting lines,
with c.25,000 tonnes per annum capacity, taking total capacity to c.143,000 tonnes per annum.
Highlights
· Leading independent tissue converter,
manufacturing toilet rolls, kitchen rolls, facial tissues and away from home ("AFH") products to UK retailers, manufacturing
approximately 17 million units a week
· Discount market growing at 10% per
annum
· Proven business model and strategic plan to
deliver future growth and returns
· Comparable quality at lower cost to
peers
· Experienced management team
· Sales CAGR of c.16.2% over the last three years
and EBITDA CAGR of c.13.7%, with strong cash generation
· Expected dividend yield of 6%
· IPO proceeds will be used to refinance the
business and provide platform for further growth
· Over 60% of Accrol's converting lines
less than five years old
Peter Cheung, Chairman of Accrol, commented: "We are delighted by the level of interest and
support we have received from high quality institutional investors. We are a very well invested company with an attractive and
progressive dividend policy and we look forward to creating value for all of our shareholders in this new and exciting stage in
Accrol's development."
Majid Hussain, the outgoing CEO of Accrol, added: "My father, Jawid Hussain, started this
business in 1993 and the family has built it into the successful company it is today. NorthEdge's investment in 2014 provided the
business with the funding to expand its offering and operations further and we believe that now is the right time for the
business to IPO to provide a platform to support further contract wins with new customers. The Hussain family will be stepping
back from their day to day roles in order to hand over to the new executive team and will remain with the Company as consultants
to facilitate a managed transition."
Steve Crossley, proposed Chief Executive Officer, said: "I am delighted to be joining
Accrol at such an exciting time in its development. The Company has developed very strong relationships with its suppliers
and customers and has invested significantly for continued growth. I look forward to working with the team at Accrol to
continue to build on its success."
Business Overview
Accrol manufactures toilet rolls, kitchen rolls and facial tissues as well as AFH products at its site in
Blackburn, supplying a range of retailers. The Group uses a converting process to manufacture and is able to provide both Accrol
branded and Private Label products.
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 and the Proposed Directors believe the Group obtains a
competitive advantage through its model of acquiring and converting 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 15 converting lines in operation providing capacity of approximately
118,000 tonnes per annum. Additional capacity of c.25,000 tonnes per annum has recently been obtained with the purchase of two
new machines, however these are yet to be installed. 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 (71 per cent. of
revenues in the year ended 30 April 2015) 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 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 AFH products, 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 and the Proposed 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 and the Proposed Directors believe Accrol is well
positioned to take advantage of the growth in the discount market and Multiples' increased focus on Private Label products.
Strategy
The Company has identified key areas of operation to focus on improving the Group's performance going forward:
· Organic Growth through Discounters
o The discount market is projected to grow at 10 per cent. per annum and represents
the fastest growing retail sector within the UK tissue market. Accrol has a 35 per cent. market share of the discount market.
· Increasing market share through Multiples
o Increase orders and win new contracts with some of the UK's largest retailers
through more focused customer service and a wider product set arising from planned new product development and innovation.
o Providing Private Label products to such Multiples.
· Operational improvements and capacity utilisation
o Increasing the efficiency of the current converting process through incremental
changes to production line management and techniques and running additional capacity through some of the newest machinery.
o Increasing capacity to service any new orders with immediate effect.
Reason for Admission
The Directors and the Proposed Directors believe that Admission will provide the business with an increased
reputation and profile and the ability to incentivise key employees, as well as providing a platform for the Group to execute its
strategy. On Admission the Group intends to repay all shareholder loan notes and refinance existing debt.
In addition, Admission is expected to allow incumbent shareholders in the Company to realise a proportion of the
value of their shareholdings in the Company.
Dividend Policy
The Directors and the Proposed Directors intend to implement a progressive dividend policy, subject to the
discretion of the board of directors of the Company from time to time ("Board") or a duly constituted committee thereof and
subject to the Company having distributable reserves. It is the Directors' and the Proposed Directors' intention to pay both an
interim dividend and a final dividend in respect of the financial year ending 30 April 2017 which, in total, is expected to
equate to a 6 per cent. dividend yield, calculated on the placing price.
DIRECTORS AND PROPOSED DIRECTORS
The Board on Admission will comprise:
Peter Cheung (Executive Chairman, aged 56)
Peter has a strong financial and operational background having accumulated over 30 years international experience
in blue chip manufacturing, fast moving consumer goods and retail environments, with c. 20 years as a main board director.
Peter has worked alongside private equity firms since 1997 and served on the board of AM Paper (SCA Soft Tissue) as
Corporate Development Director, TMD Friction as Chief Financial Officer, Jemella Group (ghd) as Chief Operating Officer and
Chairman of the Operating Board. He is a qualified CIMA accountant.
Peter was appointed Chairman of Accrol in November 2014. He has over 10 years' experience in the soft tissue
industry, including 8 years with Georgia Pacific.
Stephen Roy Crossley (Proposed Chief Executive Officer, aged
58)
Steve has over 30 years' experience in UK food manufacturing and distribution at senior management or board level,
including at Unigate plc and Northern Foods plc where Steve held various positions, including as Operating Board Director and
Divisional Managing Director of Chilled Foods.
Most recently, from September 2014 until May 2016, Steve was Chief Executive Officer at Bright Blue Foods, where he
helped restructure, transition and re-finance the Company with a new investor. Steve has also had roles as Group Executive Board
Director of Samworth Brothers (November 2010 to August 2014) and Managing Director of Grampian Country Pork (September 2006 to
September 2008).
In addition, Steve has experience working with venture capitalists and banks to raise capital for investment in new
business ventures.
Steve will be appointed to the Board on Admission.
James Paul Maurice Flude (Chief Financial Officer, aged 41)
James joined Accrol as Chief Financial Officer in January 2015 and is responsible for the Group's finance function.
He has over 13 years of industry experience in finance roles gained in blue chip and private equity backed businesses. This
included two years at Northern Foods plc in internal audit and financial reporting and six years at ghd in a number of senior
roles. Whilst at ghd, James was key in delivering the first private equity buyout with Lloyds Development Capital in July 2006
and the second buyout with Montagu Private Equity in July 2007.
James qualified as a Chartered Accountant with Arthur Andersen and holds a BSC Hons in Pure
Mathematics from Birmingham University and a PhD in Mathematical Physics from the University of
Nottingham.
Joanne Carolyn Lake (Proposed Independent Non-Executive Director,
aged 52)
Joanne has over 30 years' experience in accountancy and investment banking primarily with Panmure Gordon, Evolution
Securities, Williams de Broë and Price Waterhouse. She is Deputy Chairman of AIM quoted Mattioli Woods plc and Main Market listed
Henry Boot PLC and is also a non-executive director of AIM quoted Gateley (Holdings) Plc and Morses Club PLC.
Joanne will be appointed to the Board on Admission.
Stephen Hammett (Proposed Independent Non-Executive Director, aged
57)
Steve has over 25 years' experience with Tesco plc both in the UK as well as internationally. He has held various
CEO roles with Tesco in Turkey, Thailand, Czech Republic and Slovakia.
More recently, Steve was the President of Al Futtaim Private, and responsible for the growth of its retail brands,
through c.400 stores in nine Middle East and North Africa markets. Steve currently holds a position on the Food Board of the
Co-operative Group in the role of interim customer director, responsible for c.3,000 stores.
Steve will be appointed to the Board on Admission.
For further information please contact:
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Accrol Group Holdings
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Peter Cheung, Chairman
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Tel: +44 (0) 1254 278
844
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James Flude, Chief Financial Officer
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Zeus Capital Limited
(Nominated Adviser & Broker)
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Corporate Finance
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Tel: +44 (0) 161 831 1512
|
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Dan Bate / Jonathan Sharp
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Corporate Broking
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Tel: +44 (0) 20 7533 7727
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Dominic King / Adam Pollock / Mike Seabrook
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http://www.zeuscapital.co.uk/
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Media enquiries:
Camarco
|
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Billy Clegg
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Tel: +44 (0) 20 3757 4985
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Jennifer Renwick
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Tel: +44 (0) 20 3757 4994
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Important Notices
The contents of this announcement, which has been prepared by and is the sole responsibility of
the Company, have been approved by Zeus Capital solely for the purposes of section 21(2)(b) of the Financial Services and Markets
Act 2000 (as amended).
Neither this announcement nor any copy of it may be taken or transmitted, published or
distributed, directly or indirectly, in whole or in part, in, into or from the United States of America (including its
territories and possessions, any state of the United States of America (the "United States" or the "US")), Australia, Canada,
Japan, the Republic of Ireland or the Republic of South Africa or transmitted, distributed to, or sent by, any national or
resident or citizen of any such countries or any other jurisdiction where to do so would constitute a violation of the relevant
securities laws of such jurisdiction (each a "Restricted Jurisdiction"). Any failure to comply with this restriction may
constitute a violation of United States, Australian, Canadian, Japanese or South African securities laws.
This announcement does not constitute, or form part of, any offer or invitation to sell or issue,
or any solicitation of any offer to purchase or subscribe for any shares or other securities in any Restricted Jurisdiction. The
placing and vendor placing of Ordinary Shares ("Placing") and the distribution of this announcement and other information in
connection with the Placing and Admission in certain jurisdictions may be restricted by law and persons into whose possession
this announcement, any document or other information referred to herein comes should inform themselves about and observe any such
restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such
jurisdiction. Neither this announcement nor any part of it nor the fact of its distribution shall form the basis of or be relied
on in connection with or act as an inducement to enter into any contract or commitment whatsoever.
This announcement is directed only at persons whose ordinary activities involve them in acquiring,
holding, managing and disposing of investments (as principal or agent) for the purposes of their business and who have
professional experience in matters relating to investments and are: (i) if in a member state of the European Economic Area,
qualified investors within the meaning of article 2(1)(e) of the Prospectus Directive ("Qualified Investors"); or (ii) if in the
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Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "Order"); or (b) article 49(2)(a) to (d) (high net worth
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The term "Prospectus Directive" means Directive 2003/71/EC as amended and includes any relevant implementing measures in each
member state of the European Economic Area.
This announcement must not be acted on or relied on by persons who are not Relevant Persons.
Persons distributing this announcement must satisfy themselves that it is lawful to do so. Any investment or investment activity
to which this announcement relates is available only to Relevant Persons and will be engaged in only with Relevant Persons. This
announcement does not itself constitute an offer for sale or subscription of any securities in the Company.
The Ordinary Shares referred to in this Announcement have not been and will not be registered
under the United States Securities Act of 1933, as amended (the "US Securities Act") or under the securities laws of any state or
other jurisdiction of the United States, and may not be offered, sold or transferred within the United States except pursuant to
an exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act. The Ordinary
Shares have not been and will not be approved or disapproved by the US Securities and Exchange Commission, any state securities
commission or other regulatory authority in the United States, nor have any of the foregoing authorities passed upon or endorsed
the merits of the Placing or the accuracy or adequacy of this announcement. Any representation to the contrary is a criminal
offence in the United States.
Any subscription for or purchase of Ordinary Shares in the proposed Placing should be made solely
on the basis of the information contained in the final Admission Document to be published by the Company in connection with the
Placing and Admission. The information in this announcement is for background purposes only and does not purport to be full or
complete. No reliance may or should be placed for any purposes whatsoever on the information contained in this announcement or
its accuracy, completeness or fairness. The information in this announcement is subject to change. However, the Company does not
undertake to provide the recipient of this announcement with any additional information, or to update this announcement or to
correct any inaccuracies, and the distribution of this announcement shall not be deemed to be any form of commitment on the part
of the Company to proceed with the Placing or any transaction or arrangement referred to in this announcement. This announcement
has not been approved by any competent regulatory authority.
In connection with the Placing, Zeus Capital and/or any of their respective affiliates, acting as
investors for their own accounts, may subscribe for or purchase Ordinary Shares and in that capacity may retain, purchase, sell,
offer to sell or otherwise deal for their own accounts in such Ordinary Shares and other securities of the Company or related
investments in connection with the Placing or otherwise. Accordingly, references in the Admission Document, once published, to
the Ordinary Shares being offered, subscribed, acquired, placed or otherwise dealt in should be read as including any offer to,
or subscription, acquisition, placing or dealing by Zeus Capital and/or any of their respective affiliates acting as investors
for their own accounts. In addition, Zeus Capital and/or their respective affiliates may enter into financing arrangements and
swaps in connection with which Zeus Capital and/or their respective affiliates may from time to time acquire, hold or dispose of
Ordinary Shares. Zeus Capital has no intention to disclose the extent of any such investment or transactions otherwise than in
accordance with any legal or regulatory obligations to do so.
Zeus Capital which is authorised and regulated by the Financial Conduct Authority in the United
Kingdom is acting exclusively for the Company and no one else in connection with the Placing and Admission and will not be
responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in
relation to the Placing and Admission or any other matters referred to in this announcement.
Neither Zeus Capital nor any of their respective subsidiary undertakings, affiliates or any of
their respective partners, directors, officers, employees, advisers, agents or any other person accepts any responsibility or
liability whatsoever for, or makes any representation or warranty, express or implied, as to the truth, accuracy, completeness or
fairness of the information or opinions in this announcement (or whether any information has been omitted from the announcement)
or any other information relating to the Company, its subsidiaries or associated companies, whether written, oral or in a visual
or electronic form, and howsoever transmitted or made available or for any loss howsoever arising from any use of this
announcement or its contents or otherwise arising in connection therewith.
The anticipated timetable for Admission, including the publication of the Admission Document
and/or the date of Admission, may be influenced by a range of circumstances, including market conditions. There is no guarantee
that the Admission Document will be published or that Admission will occur and investors should not base their financial
decisions on the Company's intentions in relation to the Placing and Admission at this stage.
The price of shares and any income expected from them may go down as well as up and investors may
not get back the full amount invested upon disposal of the shares. Past performance is no guide to future performance, and
persons needing advice should consult an independent financial adviser.
Neither the content of the Company's website nor any website accessible by hyperlinks on the
Company's website is incorporated in, or forms part of, this announcement.
Certain figures in this announcement, including financial information, have been subject to
rounding adjustments. Accordingly, in certain instances, the sum or percentage change of the numbers contained in this
announcement may not conform exactly with the total figure given.