A PAPER company has seen its shares more than halve in value after it issued a profit warning.

In a trading update, Accrol Group Holdings PLC, which has facilities in Blackburn and Leyland, announced it is likely to breach banking covenants due to a greater than expected income adjusted loss of around £5million.

Accrol shares were down 57 per cent at 12p when trading opened this morning.

It caps a troubling few months for the paper tissue manufacturer.

In November, the company announced 89 job losses at its Blackburn facility and, the month before, the company suspended dealings on the junior AIM stock market because of ‘more challenging trading conditions’ and a potential fine of up to £2.9million over an employee suffering a serious finger injury.

Accrol said that given the new underlying earnings (EBITDA) expectations and an expected increase in net debt at the year-end, expected to be £34million, it was likely to breach one of its banking covenants and that discussions regarding debt and resetting covenants had already been initiated by the group’s bank.

The company added that cost increases for the year had been much higher than expected — 50 per cent higher than the previous year — and pricing actions to mitigate margin pressure had been slower than expected.

The statement said: “As previously reported, the group’s trading performance in the current financial year has been significantly impacted by three major issues — an escalation in costs has only, very recently, become fully apparent to the board.

“Also, the pace of progress in pricing actions to mitigate margin pressure has been slower than forecast but is now picking up pace.

“The increased impact of these issues is expected to affect the performance of the group materially in the year to 30 April 2018.

“Some of the corrective, business critical remedial activities have been hampered while the board transitioned to its new supportive composition.

“The new management team believes firmly that the challenges facing the group are resolvable, given time and experienced handling.”

The statement said that the group was reviewing its logistics operation, a move that could save more than £5million a year, and upskilling workers would lead to further efficiencies.