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Toilet paper company Accrol on a roll thanks to Brexit hedging

Investors in Accrol Group were feeling flush after the toilet and kitchen paper manufacturer declared a maiden interim dividend thanks to its hedging against Brexit currency effects and a contract with Lidl that adds to its growing roll call of larger retailers.

As it continues its strategy of organic growth through discounters and supplying private label products to large retailers, revenue increased 8.8% to £63.9m for the six months ended 31 October, which resulted in a 5.6% increase in profit to £18.2m.

Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) rose 1.5% to £7.1m, while the adjusted gross margin improved by 1.1 percentage points to 28.4% due to significant currency hedging before and after June’s EU referendum and strong negotiations on parent reel pricing.

The company declared a maiden interim dividend of 2p per share.

Net debt narrowed to £19.9m from £23.1m at flotation, when the company raised £63.5m.

To mitigate against adverse movements in the dollar and euro exchange rates, the company entered into forward currency contracts either side of the EU referendum, which limited the decrease in the average pound to dollar exchange rate from the 15% to 6%.

It also negotiated pricing for parent reels - the large reels of tissue paper from which smaller rolls are produced - as a similar level to the first half of 2016 exit run rate, which delivered a 7% reduction in parent reel pricing from first half of 2016 to the first half of 2017.

The company, which floated on AIM in June 2016, increased its shares of the discount market sector to 50% during the period while it won supply contracts with Booker, Pound Stretcher and Lidl, which is expected to generate more than £10m in sales a year.