Don’t stockpile loo rolls – buy shares in them instead!
WHEN we look back on 2020 some images will remain fixed in our mind, among them denuded supermarket shelves as anxious shoppers stocked up for l ockdown round one. Toilet roll was top of their minds. Sales rocketed, black markets developed and supplies vanished.
Lancashire-based Accrol Group was in the eye of the storm. One of the leading manufacturers of loo roll, kitchen roll and facial tissues, it supplies grocers including Tesco, Morrisons, Waitrose, Aldi and Lidl with so- called private label products. They look as if they are made by the supermarkets themselves. In fact they are made by Accrol.
Production soared in the spring by 40 per cent as Accrol strove to cope with soaring demand. Activity has levelled off since but the company continues to focus on growth, under chief executive Gareth Jenkins.
The shares are 52p and should increase considerably as Jenkins rolls out his plans.
A former executive at packaging giant, DS Smith, Jenkins has made significant progress since taking the helm in September 2017. Back then, Accrol was in a mess. Having floated at £1 in the summer of 2016, the business fell into difficulties the following year and the shares tumbled. Jenkins was brought in to bring the business back to life. Of the 21 senior managers in place when he arrived, 19 have been replaced. Accrol’s range has been slimmed, costs have been cut and employee numbers reduced. In 2017, however, three- quarters of workers earned the minimum wage. Now, no one earns less than the living wage and Jenkins is keen to ensure that staff feel valued and can make progress within the group.
A division selling paper towels to restaurants and bars was sold before the pandemic erupted and, last month, Accrol made its first acquisition under Jenkins, buying Leicester- based family business, LTC.
Both Accrol and LTC make most of their money from loo roll. It may not be glamorous but, as became apparent with lockdown, it is essential to everyday life. That is what attracted Accrol’s founders when they established the business in the 1990s and that was one of the key attractions for Jenkins when he took the helm.
Today, An dr exist he UK’s number one loo roll manufacturer, responsible for around a third of the market. But private label products are catching up fast. Accrol and LTC between them have about 22 per cent of the market, a figure that should increase over the next few years.
Annual sales of kitchen and loo roll already amount to 1.2 billion, there is capacity to go to 1.7 billion rolls from existing factories, and Jenkins has every intention to reach that figure and go beyond it.
Cost-conscious consumers tend to stick with own- label items once they make the switch and Accrol’s supermarket customers are supportive of Jenkins’ efforts, praising the quality.
Accrol is keenly aware of environmental concerns too. All its energy is renewable and no waste goes to landfill.
Products’ plastic covers are entirely recyclable, paper wraps are offered to every supermarket the group supplies and all tissue paper comes from sustainable sources.
Looking ahead, the company hopes to grow by increasing market share, driving economies of scale and moving into related areas such as biodegradable wet wipes and feminine hygiene. There is also talk of acquiring a paper mill over time.
Tissue paper is currently sourced from third parties, which allows Accrol to benefit from the latest developments as and when they happen. Having one mill in-house will drive down costs, however.
Analysts expect profits to surge by 80 percent to £8.5 million in the year to April 2021, more than doubling to £17.5 million in 2022.
Dividends were suspended in 2017 but Jenkins hopes to reinstate payments as soon as practically possible.
Traded on: AIM Ticker: ACRL Contact: accrol.co.uk or 01254 278844