Accrol Papers – A Catastrophic Loss From A Small Cap 1


Every Investor, through the course of their investment lifetime, will experience a negative setback in the form of a bad investment decision. No investor has a perfect record. And if any of them were to ever tell you otherwise, you can be sure that they are giving you ‘alternative facts.’ Even the greatest investor of all time, Warren Buffet, has made bad decisions. Most notably of these was the purchase of Dexter Shoes which has cost Berkshire Hathaway an estimated £7.2 billion and growing to date – as the purchase was made using Berkshire Hathaway shares!





Ever since I launched my income focussed portfolio over two years ago, it has pretty much been smooth sailing. Yes, many companies have had share price weakness such as Imperial Brands and Shire, but I believe these weaknesses are temporary as there has not been a change in the underlying economic engine of the business. And even the positions in companies which have issued profit warnings such Cobham are proving to be profitable when considering both the dividend and capital appreciation. But recently, this smooth ride has come to an end courtesy of Accrol Papers.

Accrol Papers which only listed on the stock exchange in June last year had a compelling investment case. The company was a boring tissue paper manufacturer with an asset light capital model trading at a discount valuation and offering an attractive dividend yield – all of which I like. To add to this, the businesses financials were heading in the right direction as sales and profitability were improving and debt was going down.Furthermore, some heavy hitting funds were shareholders of the company which gave the impression that this company was the real deal as opposed to some phantom company messaging the accounts.

As such, I bought into the company in August this year. And what a mistake this has turned out to be. A few month into purchasing my ownership stake, the CEO of the company left to ‘pursue other interest.’ This should have been the first warning sign. Whenever a CEO leaves to ‘pursue other interest’ alarm bells need to start ringing that all is not well. A few weeks later, news came to light that the company was hit by a lawsuit due to a health and safety incident which carried a a fine of up to £2.9 million For a company of Accrols size which makes £13m in profit for the year, this amount was certainly material. As such the trading of shares in the company were halted.

This past week, the company delivered further bad news which entailed that the profits for the year will be significantly below expectations and the company could also end the year with a loss. Talk about a triple whammy! When share started trading again, they dropped from 138p to 45p, a massive drop of 67%. And that is not the end of it. The shares over the past week have drifted even lower and are now changing hands at 37.50p.

Accrol has certainly been a nightmare purchase. What makes it even worse is that I bought into the company thinking it would be boring, consistent and a decent compounder of wealth over time. So far, it has been anything but! I am still holding onto the shares I bought but I am currently in the process of analysing what to do. For full disclosure, my total loss on this purchase currently stands at 70%. Ouch!





Whilst Accrol has certainly left a sour taste in my mouth, it certainly won’t put me off investing in companies at the smaller end of the spectrum. My other much bigger purchase of Zambeef in the small cap space is up over 100% so my total return across my two smaller cap shares is still in the positive! But lessons will have to be learned from this failed Accrol Papers investment and my investment thesis for purchases of small cap companies will need to be altered. For one, the due diligence will have to be even more thorough, Another thing I will be doing is only investing in companies that have been listed on the market for at least 5 years. So whilst Accrol has been a catastrophic failure, I just hope this experience will make me a better investor.

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  • https://www.smartpolak.co.uk/ Paweł Kłosiński

    Hi Moneygrower, I appreciate you sharing this. I am also not too successful to be honest. A couple of months ago I dipped my toes into investing and bought first shares of 4 companies. All of them are down, anything between 10-23%. I suppose it is a part of “learning process”. I am certainly not quitting, I will try to educate myself further and keep investing.