Accrol Group Holdings PLC (LON:ACRL) shares plummeted by almost 60% in value on Monday after the toilet paper maker said it is likely to breach banking covenants as it warned of a greater than expected full-year adjusted underlying loss (LBITDA) due to increased costs.
In a trading update, the AIM-listed group said it expects to report an LBITDA of around £5mln for the financial year ending April 30, a turnaround from underlying earnings (EBITDA) of £16.1mln the year before.
The company added that cost increases for the year had been much higher than expected - circa 50% higher than the previous year - and pricing actions to mitigate margin pressure had been slower than expected.
Accrol also said it expects year-end net debt to be higher than previously anticipated at £34mln due to what it said were ‘principally higher capital fluctuations’.
It added that given the LBITDA expectations and expected increase in net debt, it was likely to breach one of its banking covenants and that discussions regarding debt headroom and resetting covenants had already been initiated by the group’s lender.
Despite this, the company said it sees forecasts for the year ending 30 April 2019 as ‘wholly achievable’, with important volume increases agreed with several key customers and agreement, in principle, for a longer-term relationship with one major customer to make a positive impact from the first quarter of financial 2019.
In late morning trading, Accrol shares were down 58% at 11.75p.