The problems at Accrol deepened yesterday when the struggling toilet paper maker said that it had tumbled into the red at the year’s halfway point and that its chief financial officer had resigned.
Although revenues in the six months to the end of October rose by 13.1 per cent to £72.3 million, it sank from an operating profit of £3.9 million to a loss of £5.7 million, while underlying earnings fell by £8.7 million to a loss of £1.6 million.
Gareth Jenkins, chief executive, cited factors including a leap in pulp costs and the Brexit-related weakness of the pound. Accrol revealed that it had taken an £891,000 loss on foreign exchange hedging contracts.
However, Mr Jenkins, who was brought in from DS Smith in September, said that while recent performance was “disappointing”, he was optimistic over its medium-term prospects.
The Lancashire-based Accrol is a leading supplier of toilet paper to retailers including Tesco and Wm Morrison under its Sofcell and Softy brands. It also makes Softy tissues and Thirsty Bubbles kitchen towel and hand towels and hygiene rolls for industry, schools and hospitals.
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It has suffered a torrid time since it warned investors of a series of challenges in October, including a £120,000 fine from the Health and Safety Executive related to an accident in which an employee lost part of a finger when it became caught in machinery. The Aim-listed company, which floated at 100p in June 2016, was forced to ask for its shares to be suspended — yesterday they were up a penny at 37p — and held an £18 million fundraising, while HSBC had to revise its loan covenants.
Its flotation crystallised a windfall of about £30 million for the Blackburn-based Hussain family. Jawid Hussain set up Accrol in 1993 and was bought out in 2009 by his sons Wajid, Mozam and Majid. In 2014, they secured backing from Northedge Capital.
Mr Jenkins said that although it had not managed to push through price rises during the recent results period to offset cost inflation, since then Accrol had held talks with customers and had increased prices across its portfolio. It also has launched a comprehensive restructuring. Over the next 12 months, it expects to cut almost 100 jobs, reduce waste levels and rationalise its product portfolio and supply lines.
He said that Accrol expected to return to positive underlying earnings in the year to the end of April 2019, and added: “It remains the board’s intention to return to the dividend list at the earliest appropriate opportunity.”
Separately, Accrol said that James Flude had resigned as chief financial officer to “pursue other interests”. Martin Leitch will take on the role on an interim basis.