Accrol Group Holdings plc Investor presentation - January 2019 Half - PowerPoint PPT Presentation

Accrol Group Holdings plc Investor presentation - January 2019 Half f Year Results s fo for the e six months s endi ding 31 October ober 2018

Introduction “The turnaround has been complex, revenues are growing again, costs out and cash in control” Dan Wright – Executive Chairman “The business has changed beyond recognition since February 2018 and will exit Simplify the current financial year in a much stronger position operationally than it has ever been in before. We have delivered a highly complex restructuring, whilst absorbing a 29% increase in average tissue prices and now expect to deliver profit for the full year to 30 April 2019. “Knowing the scale and complexities of the task in hand, I am very pleased with Strengthen the outcomes achieved internally to date. My only disappointment is that, as previously announced, we are, in effect, three months behind where we expected to be on the financial recovery. Thank you to everyone who has been involved in the turnaround; your contribution is highly valued. I believe Accrol has a bright future; one in which the Group delivers better levels of return throughout fluctuating macro-economic cycles. Whilst I recognise the ongoing macro- Grow economic challenges, I am confident that we are through the main challenges that the business faced in this difficult period and the signs going forward look positive.” Dan Wright, Chairman 2

People Make the Difference “We continue to find the best people and build the strongest team possible” The team we are building Dan Wright Other new appointments Mark Dewhurst Gareth Jenkins Simplify Chief Executive Officer Chief Operating Officer Head of Manufacturing Executive Chairman September 2017 September 2018 Factory Management February 2018 UK Managing Director DS Northern European Operations HR Director Smith Packaging - 35 units - Previously founder partner, Director, DS Smith Packaging - £0.6billion of revenue. Chief Operating Officer and 45 units - £1.0 billion of Procurement head of portfolio at NorthEdge revenue. Extensive senior leadership Strengthen Capital and currently Executive experience of business Commercial Structure Extensive operational Chairman of Vision Group. turnaround and delivering leadership driving industry leading levels of return Extensive experience in Sales Structure manufacturing excellence in cyclical paper businesses. turnaround. across multiple businesses. Technical Support Hannah Argo Euan Hamilton Simon Allport Grow Interim Chief Financial Officer Independent Non Exec Director Independent Non Exec Director January 2019 August 2018 October 2018 Extensive Blue Chip experience Extensive career with The Royal 32 years experience in the within FMCG including Alliance Bank of Scotland Group (RBS). professional services industry, Boots, Robert McBride and latterly Experience in Credit, Private rising to managing partner for Tulip UK. Equity, Portfolio Management the North of England at Ernst & and Non Core. Young. 3

Financial results “Improvements but revenue and margins are improving into H2 19” Unaudited H1 19 Simplify • Consumer Revenue down £2m to £53.9m (H1 18: £55.8m) The business exited the loss making AFH business beginning Q1 19 • Core customer (top 10) growth up 11% £52.5m (H1 18: £47.3m) New business beginning to flow through positively impacting H2 19 and beyond • 33% improvement in gross margin now 17.2% (H2 18: 12%) on like for like basis Strengthen Despite raw material increases of 29% - continued improving trend • Adjusted EBITDA improved by £0.4m to a loss of £1.1m (H1 18: loss of £1.5m) (H2 18: loss of £4.5m) The turnaround is making an impact but we are in effect 3 months behind where we would expect • Budget rate £1.00:$1.40 - EBITDA improved to profit of £1.0m (H2 18: loss of £4.1m) on a like for like basis Grow • Net debt reduced by £11.2m to £22.6m (H2 18: £33.8m) • Cash head room improving • Unchanged guidance for FY 20: Adjusted EBITDA c.£1m on revenue of c.£126m 4

Financial results “Much achieved but more to do” H1 19 H1 19 vs H1 19 vs Profit headwinds H1 19 Simplify H2 18 H1 18 H1 19 H2 18 H1 18 change change Reported Results Tissue price vs Increases cost the Revenue £57.6m £67.5m £72.3m (14.7%) (20.3%) business in H1 £2.6m Gross Profit £6.9m £12.6m £11.9m (45.3%) (41.8%) FX weakness costs the business Gross Margin 12.0% 18.7% 16.4% £2.1m Loss before Tax (£9.0m) (£18.1m) (£6.0m) Net Debt £22.6m £33.8m £29.3m (£11.2m) (£6.7m) Strengthen H1 Total headwinds £4.7m Underlying Results Revenue £57.6m £67.5m £72.3m (14.7%) (20.3%) FY 19 profit headwinds Adjusted gross profit 1 £9.9m £8.3m £12.9m 19.8% (23.5%) Adjusted gross margin 17.2% 12.2% 17.9% Adjusted EBITDA 2 (£1.1m) (£4.5m) (£1.5m) £3.4m £0.4m Full year tissue price increase will impact the business £3.1m Grow Full year FX weakness will cost the business £5.5m 1 Adjusted gross profit which is defined as gross profit before exceptional items and includes losses on derivatives contracts is a non GAAP metric used by management and is not an IFRS disclosure. Total full year headwinds are 2 Adjusted EBITDA which is defined as profit before finance costs, tax, depreciation, amortisation, share based payments and £8.6m exceptional items is a non GAAP metric used by management and is not an IFRS disclosure 5

Cash and debt “Our goal in the mid -term is to return the business to reasonable levels of profitability and normalised debt” H1 19 Financial results Simplify H1 19 H1 18 FY 18 Target Revenue £57.6m Grow ahead £72.3m £140m of the market Consumer revenue £53.9m £55.8m £113m Adjusted EBITDA (£1.1m) (£1.5m) (£6.0m) Net debt £22.6m £29.3m £34.0m EBITDA % Sales -1.9% -2.1% -4.2% >10% Strengthen Net Debt/EBITDA -20.5x -19.5x -5.6x <1.5x We said We did What next Credit facility Creditor days 30 Improved terms with 50% of Ongoing supply base 9% Grow 22% Debtor days 60 Improved terms with major Ongoing Headroom discounter RCF 31% Improve supplier terms Increase supply base Introduced 5 new suppliers ID Line Lease 38% Exert cost pressure on suppliers Create supplier partnerships $100 reduction from Jan & $65 from March 6

Current trading and business update “Challenging but a great deal has been achieved ” Simplify “This is one of the most challenging business turnarounds in which the leadership team and I have ever been involved. Whilst most of the issues we have faced are familiar to the team, it is highly unusual to face so many issues in a single business, at the same time and at such a pace. I am Strengthen pleased to say that the major actions are now behind us and we are beginning to see results. We will never become complacent; ongoing success in the tissue conversion sector requires nothing less than operational excellence. As a Board, we are convinced that we have created a more robust business with strong foundations on which to build and, whilst I am sure there will be challenges ahead, the Group is on a significantly improved Grow path.” Gareth Jenkins, CEO 7

“Complex turnaround - all operational aspects were Current trading & business update substantially completed by 31 October 2018” We said We did Head room & net debt payment Reset covenants £5m (annualised) savings from Current trading Simplify Exit Skelmersdale Oct 18 Simplification & efficiency Exit AFH AV’s at +24% up from 19% at end of October c£30m Profitable growth (Grocers & Discounters) SKU’s from 460 to <120 74% reduction H1 (gross margin 17.2% up from 12%) 73% reduction Tissue types from 75 to <20 29% increase in tissue cost impacted the business 43% reduction Reduce headcount 589 to <340 Strengthen Done New Board appointed Tissue prices falling $165 (Jan 19 & April 19) Substantial improvement Margin improvement Strengthening Revenue run rate (January 19) Productivity up 76% since Sept New major production line installation Output up 76% from September 18 to January 19 1ppt improvement Waste programme begun Grow Led by ex-head of Diageo Procurement team structure begun Full year expected Exceptional costs of up to £8m (previous Done Substantial inventory reduction £4.2m) Ongoing Re-train a work force $165 reduction (Jan & March) Reduced paper prices Done Reduced net debt Done Recruited a full leadership team S&OP process – halved stock Done 8 Done Recruited a full ops team (including shift management)