Accrol – gains a Lifebuoy deal with Unilever
The UK’s leading independent tissue converter, Accrol, has announced a mega deal with Unilever, which is one of the world’s largest consumer brands groups.
Accrol Group Holdings (LON:ACRL) is a leading tissue converter and supplier of toilet tissues, kitchen rolls, facial tissues, and wet wipes to many of the UK's leading discounters and grocery retailers across the UK.
The Group operates from six manufacturing sites, including four in Lancashire, which generate volumes totalling some 21.5% of the £2.5bn UK retail tissue market.
The step change deal with Unilever is to exclusively produce and sell a kitchen towel product under its Lifebuoy brand.
Lifebuoy is the third most-chosen FMCG brand globally, being picked by consumers more than a billion times a year.
With over 70% brand awareness amongst consumers in the UK, the Lifebuoy kitchen towel product is expected to expand Accrol's offering to include those consumers who prefer to buy global brands but are seeking best-value.
Production of the Lifebuoy kitchen towel product requires no additional capital investment by Accrol.
Gareth Jenkins, Chief Executive Officer of Accrol, said:
"Last month, we laid out our strategic plans for the business, which included the expansion of the Group's activities into higher margin, third party licensed brands.
That Unilever has chosen Accrol to bring Lifebuoy kitchen towel to market is testament to the capability of our business and our increasingly strong reputation in the market."
Analyst Opinion – Target Price of 60p
Wayne Brown at Liberum Capital rates the group’s shares as a Buy, with a 60p Target Price.
His estimates for the current year to end April are for £230m (£159m) sales and a pre-tax profit of £7.6m (£1.1m), worth 1.8p (0.3p) in earnings and enabling a 0.4p (nil) dividend per share.
For the coming year he goes for a sales standstill at £230m, but with £13.8m profits, 3.1p earnings and a 0.9p dividend.
Mike Allen and Rachel Birkett at Zeus Capital have £7.0m current year profit estimates and earnings of 1.8p.
For the 2024 year they go for £240.3m sales, £10.4m profits and 2.5p earnings per share.
Conclusion – a higher profile, a higher price
This is a clever deal and could well be highly impactive for the group over the next few years, especially if it is the first of a number of similarly high-profile licencing deals.
It really could help to lift the group’s profile significantly and hopefully seeing a corresponding rise in the shares which are now up 5% on the news at 32.5p.