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Accrol – bailout fundraising… at half of IPO price of only 17 months ago!

By Steve Moore | Monday 20 November 2017

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

With it shares having been suspended in early October “pending clarification of its financial circumstances”, today a “Proposed Placing of £18m and Lifting of Suspension” announcement from Accrol Group (ACRL). Good news then? Well…

It reports it “has, in the last few weeks, made tangible progress on agreeing price increases with its customers and the board is confident of a positive outcome to these negotiations”. This offers encouragement, but final agreement still clearly needs to be reached. The placing is with there currently “short-term funding problems” - this though a company which was only listed in June of last year!

The listing was at 100p per share, and the shares were 132p prior to suspension – but this is bailout funding and thus it’s deep discount ahoy; “proposed placing… at a price of 50 pence per share”. Cue the share price crash. And there’s worse;

Firstly, “there can be no guarantees that the funds raised pursuant to the placing, together with the available bank and other facilities that will be in place following Admission, will be sufficient for the group's requirements for the next 12 months” and also;

“Since January 2016 (to the date of this announcement) Accrol Papers Limited has submitted a total of 11 reportable incidents to the HSE… Accrol Papers Limited cannot guarantee that there will be no further investigations or prosecutions made by the HSE in respect of such reported incidents. The company is aware that the Local Authority is intending to inspect the company's Skelmersdale warehouse which is operated by a third party on the company's behalf. This is as a result of previous HSE concerns relating to the stacking of pallets at that site. Therefore, further investigations or enforcement actions cannot be discounted.”

Despite abundant uncertainties, including pulp price volatility, it is stated “the board expects that the group will break even or make a marginal loss in the year to 30 April 2018 at the adjusted EBITDA level... The directors expect the company to return to a small profit at adjusted EBITDA level in the year to 30 April 2019”.

Adjusted EBITDA is though bullshit earnings and so, despite being floated as a high yielding opportunity by Zeus Capital (yep, another one of those), it’s already “the board will not be proposing a final dividend for the current year”, with it added “it is the board's intention to return to the dividend list at the earliest appropriate opportunity”. That may be so, but with it currently uncertain of even 12 months of going concern I wish new CEO Gareth Jenkins good luck with that and elsewhere here. Looks like he’s going to need it! Natch, currently this further tale of AIM IPO shame is a sell/bargepole.

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