Accsys Technologies PLC

 

Notes to the financial statements for the year ended 31 March 2022

 

1.         Accounting Policies

 

General Information

 

The financial information set out in these preliminary results does not constitute the company's statutory accounts for the years ended 31 March 2022 or 31 March 2021. Statutory accounts for the year ended 31 March 2021 have been filed with the Registrar of Companies and those for the year ended 31 March 2022 will be delivered to the Registrar in due course; both have been reported on by the auditors. The auditors' report on the Annual Report and Financial Statements for the year ended 31 March 2021 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006. The auditors' report on the Annual Report and Financial Statements for the year ended 31 March 2022 is unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

 

Basis of accounting

 

The Group's financial statements have been prepared under the historical cost convention (except for certain financial instruments and equity investments which are measured at fair value), in accordance with UK-adopted international accounting standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards. In addition, the financial statements are also prepared in accordance with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union and the Dutch Financial Markets Supervision Act.

On 31 December 2020, IFRS as adopted by the European Union at that date, was brought into UK law and became UK-adopted International Accounting Standards, with future changes being subject to endorsement by the UK Endorsement Board. The Group transitioned to UK-adopted International Accounting Standards in its consolidated financial statements on 1 April 2021. This change constitutes a change in accounting framework. However, there is no impact on recognition, measurement or disclosure in the period reported as a result of the change in framework.

Going Concern

 

These consolidated financial statements are prepared on a going concern basis, which assumes that the Group will continue in operational existence for the foreseeable future, and at least 12 months from the date these financial statements are approved.

 

As part of the Group's going concern review, the Directors have assessed the Group's trading forecasts, working capital requirements and covenant compliance for the foreseeable future under a base case scenario, taking into account the Group's financial resources including the current cash position and banking and finance facilities which are currently in place (see note 29 for details of these facilities) and the possible further impact of supply chain disruption. 

 

The Directors have also assessed a severe but plausible downside scenario with reduced sales volumes, lower gross margin and a delay in the timing of production from R4 in Arnhem beyond the current expected operational date of Q2, FY23. These forecasts indicate that, in order to continue as a going concern, the Group is dependent on achieving certain operating performance measures relating to the production and sales of Accoya^® wood from the plant in Arnhem with the collection of on-going working capital items in line with internally agreed budgets.

 

The Directors' have also considered the possible amount and timing of capital expenditure required to complete the Tricoya^® plant in Hull, noting that should additional funding be required beyond what has been committed by the Tricoya^® consortium partners to date, further consent would be required by the Tricoya^® consortium partners for funding to be contributed. There are a sufficient number of alternative actions and measures within the control of the Group that can and would be taken in order to ensure on-going liquidity including reducing/deferring costs in some discretionary areas as well as larger capital projects if necessary.

 

The Directors believe that while some uncertainty always inherently remains in achieving the budget, in particular in relation to market conditions outside of the Group's control, under both the base scenario and severe but plausible downside scenario, there is sufficient liquidity and covenant headroom such that there is no material uncertainty with respect to going concern and have prepared the financial statements on this basis.

 

Exceptional Items

 

Exceptional items are events or transactions that fall outside the ordinary activities of the Group and which by virtue of their size or incidence, have been separately disclosed in order to improve a reader's understanding of the financial statements. These include items relating to the restructuring of a significant part of the Group, impairment losses (or the reversal of previously recorded exceptional impairments), expenditure relating to the integration and implementation of significant acquisitions and other one-off events or transactions, such as re-financing of Group borrowings. See note 5 for details of exceptional items.

 

Business combinations

 

Where the Company has the power, either directly or indirectly, to govern the financial and operating policies of another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary. The consolidated financial statements present the results of the Group as if they formed a single entity. Inter-company transactions and balances between Group companies are therefore eliminated in full.

 

The consolidated financial statements incorporate the results of business combinations using the purchase method.  In the consolidated statement of financial position, the acquirer's identifiable assets, liabilities, and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained.

 

As allowed under IFRS 1, some business combinations effected prior to transition to IFRS, were accounted for using the merger method of accounting. Under this method, assets and liabilities are included in the consolidation at their book values, not fair values, and any differences between the cost of investment and net assets acquired were taken to the merger reserve.  The majority of the merger reserve arose from a corporate restructuring in the year ended 31 March 2006 which introduced Accsys Technologies PLC as the new holding company.

 

Further details concerning the Tricoya^® Consortium are included in note 9.

 

Revenue from contracts with customers

 

Revenue is measured at the fair value of the consideration receivable. Revenue is recognised to the extent that it is highly probable that a significant reversal will not occur based on the consideration in the contract. The following specific recognition criteria must also be met before revenue is recognised.

 

Manufacturing revenue

Revenue is recognised from the sale of goods at a point in time and is measured at the amount of the transaction price received in exchange for transferring goods. The transaction price is the expected consideration to be received, to the extent that it is highly probable that there will not be a significant reversal of revenue in the future. Revenue is recognised when the Group's performance obligations under the relevant customer contract have been satisfied. Manufacturing revenue includes the sale of Accoya^® wood, Tricoya^® panels and other revenue, principally relating to the sale of acetic acid.

 

Licensing fees and Marketing income

Licence fees and marketing income are recognised over the period of the relevant agreements according to the specific terms of each agreement or the quantities and/or values of the licensed product sold. The accounting policy for the recognition of licence fees is based upon satisfaction of the performance obligations set out in the contract such as an assessment of the work required before the licence is signed and subsequently during the design, construction and commissioning of the licensees' plant, with an appropriate proportion of the fee recognised upon signing and the balance recognised as the project progresses to completion. Marketing revenue, when the Company acts as principal, is recognised based on the actual work completed in the period. The amount of any cash or billings received but not recognised as income is included in the financial statements as deferred income and shown as a liability.

 

Finance income

 

Interest accrues using the effective interest method, i.e. the rate that discounts estimated future cash receipts through the expected life of the financial instrument to the net carrying amount of the financial asset.

 

Finance expenses and borrowing costs

 

Finance expenses include the fees, interest and other finance charges associated with the Group's loan notes and credit facilities, which are expensed over the period that the Group has access to the loans and facilities.

 

Foreign exchange gains or losses on the loan notes are included within finance expenses.

 

Interest on borrowings directly relating to the construction or production of qualifying assets are capitalised until such time as the assets are substantially ready for their intended use or sale. Where funds have been borrowed specifically to finance a project, the amount capitalised represents the actual borrowing costs incurred. Where the funds used to finance a project form part of general borrowings, the amount capitalised is calculated using a weighted average of rates applicable to relevant general borrowings of the Group during the construction period.

 

Share based payments

 

The Company awards nil cost options to acquire ordinary shares in the capital of the Company to certain Directors and employees. The Company has also previously awarded bonuses to certain employees in the form of the award of deferred shares of the Company.

 

In addition the Company has established an Employee Share Participation Plan under which employees subscribe for new shares which are held by a trust for the benefit of the subscribing employees. The shares are released to employees after one year, together with an additional, matching share on a 1 for 1 basis.

 

The fair value of options and deferred shares granted are recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and is charged to the consolidated statement of comprehensive income over the vesting period during which the employees become unconditionally entitled to the options or shares.

 

The fair value of share options granted is measured using a modified Black Scholes model, taking into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of share options that vest only where vesting is dependent upon the satisfaction of service and non-market vesting conditions.

 

Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options which eventually vest.  Market vesting conditions are factored into the fair value of the options granted.  The cumulative expense is not adjusted for failure to achieve a market vesting condition.

 

Dividends

 

Equity dividends are recognised when they become legally payable. Interim equity dividends are recognised when paid. Final equity dividends are recognised when approved by the shareholders at an annual general meeting.

 

Pensions

 

The Group contributes to certain defined contribution pension and employee benefit schemes on behalf of its employees. These costs are charged to the consolidated statement of comprehensive income on an accruals basis.

 

Taxation

 

Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the consolidated statement of comprehensive income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

 

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date together with any adjustment to tax payable in respect of previous years. Current tax includes the expected impact of claims submitted by the Group to tax authorities in respect of enhanced tax relief for expenditure on research and development.

 

Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for:

 

·      the initial recognition of goodwill;

·      the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination;

·      differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future.

 

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date. Recognition of deferred tax assets is restricted to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised.

Foreign currencies

 

The individual financial statements of each Group company are presented in the currency of the primary economic environment in which it operates (the functional currency). For the purposes of the consolidated financial statements, the results and financial position of each Group company are expressed in Euro, which is the functional currency of the parent Company, and the presentation currency of the consolidated financial statements.

 

In preparing the financial statements of the individual companies, transactions in currencies other than the entity's functional currencies are recognised at the rates of exchange prevailing on the dates of the transactions.  At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at that date.  Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

 

Exchange differences are recognised in profit or loss in the period in which they arise.

 

For the purposes of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated at exchange rates prevailing on the reporting date.  Income and expense items are translated at the average monthly exchange rates prevailing in the month in which the transaction took place.  Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in the foreign currency translation reserve. Such translation differences are reclassified to profit and loss only on disposal or partial disposal of the overseas operation.

 

Foreign exchange hedging

 

The Group has adopted IFRS 9 hedge accounting in respect of the cash flow hedging instruments that it uses to manage the risk of foreign exchange movements impacting on future cash flows and profitability.

 

The Group has prospectively assessed the effectiveness of its cash flow hedging using the 'hedge ratio' of quantities of cash held in the same currency as future foreign exchange cash flow quantities related to committed investment in plant and equipment. The Group has undertaken a qualitative analysis to confirm that an 'economic relationship' exists between the hedging instrument and the hedged item. It is also satisfied that credit risk will not dominate the value changes that result from that economic relationship.

 

At the end of each reporting period the Group measures the effectiveness of its cash flow hedging and recognises the effective cash flow hedge results in Other Comprehensive Income and the Hedging Effectiveness Reserve within Equity, together with its ineffective hedge results in Profit and Loss. Amounts are reclassified from the Hedging Effectiveness Reserve to Profit and Loss when the associated hedged transaction affects Profit and Loss. Further details are included in note 5.

 

 

 

Government grants

 

Government grants are recognised at their fair value where there is reasonable assurance that the grant will be received and the Group will comply with the attached conditions. When the grant relates to an expense item, it is recognised as income over the period necessary to match the grant on a systematic basis to the costs that it is intended to compensate. Where the grant relates to an asset they are credited to a deferred income account and released to the statement of comprehensive income over the expected useful life of the relevant asset on a straight line basis.

 

Goodwill

 

Goodwill arising on the acquisition of a subsidiary undertaking is the difference between the fair value of the consideration paid and the fair value of the identifiable assets and liabilities acquired. It is capitalised, and is subject to annual impairment reviews by the Directors. Any impairment arising is charged to the consolidated statement of comprehensive income. Where the fair value of the identifiable assets and liabilities acquired is greater than the fair value of consideration paid, the resulting amount is treated as a gain on a bargain purchase and is recognised in the consolidated statement of comprehensive income.

 

Joint venture

 

The Group has entered into a joint venture agreement with Eastman Chemical Company, forming Accoya USA LLC. The Group applies IFRS 11 for this joint arrangement, and following assessment of the nature of this joint arrangement, has determined it to be a joint venture. Interest in the joint venture is accounted for using the equity method, after initially being recognised at cost.

 

Further details concerning the Accoya USA LLC joint venture with Eastman Chemical Company are included in note 28.

 

Other intangible assets

 

Intellectual property rights, including patents, which cover a portfolio of novel processes and products, are shown in the financial statements at cost less accumulated amortisation and any amounts by which the carrying value is assessed during an annual review to have been impaired. At present, the useful economic life of the intellectual property is considered to be 20 years. 

 

Internal development costs are incurred as part of the Group's activities including new processes, process improvements, identifying new species and improving the Group's existing products. Research costs are expensed as incurred. Development costs are capitalised when all of the criteria set out in IAS 38 'Intangible Assets' (including criteria concerning technical feasibility, ability and intention to use or sell, ability to generate future economic benefits, ability to complete the development and ability to reliably measure the expenditure) have been met. These internal development costs are amortised on a straight line basis over their useful economic life, between 8 and 20 years.

 

Property, plant and equipment

 

Property, plant and equipment are stated at cost less accumulated depreciation and any impairment charged. Cost includes the original purchase price of the asset as well as costs of bringing the asset to the working condition and location of its intended use. Depreciation is provided at rates calculated to write off the cost less estimated residual value of each asset, except freehold land, over its expected useful life on a straight line basis, as follows:

 

Plant and machinery                           These assets comprise pilot plants and production facilities.  These facilities are depreciated from the date they become available for use over their useful lives of between 5 and 20 years

Office equipment                                Useful life of between 3 and 5 years

Leased land and buildings                Land held under a finance lease is depreciated over the life of the lease

Freehold land                                     Freehold land is not depreciated

 

Impairment of non-financial assets

 

The carrying amount of non-current non-financial assets of the Group is compared to the recoverable amount of the assets whenever events or changes in circumstances indicate that the net book value may not be recoverable, or in the case of goodwill, annually.  The recoverable amount is the higher of value in use and the fair value less cost to sell. In assessing the value in use, the expected future cash flows from the assets are determined by applying a discount rate to the anticipated pre-tax future cash flows.  An impairment charge is recognised in the consolidated statement of comprehensive income to the extent that the carrying amount exceeds the assets' recoverable amount.  The revised carrying amounts are amortised or depreciated in line with Group accounting policies. A previously recognised impairment loss, other than on goodwill, is reversed if the recoverable amount increases as a result of a reversal of the conditions that originally resulted in the impairment.  This reversal is recognised in the consolidated statement of comprehensive income and is limited to the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised in prior years. Assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units) for purposes of assessing impairment. 

 

Leases

 

To the extent that a right-of-control exists over an asset subject to a lease, a right-of-use asset, representing the Group's right to use the underlying leased asset, and a lease liability, representing the Group's obligation to make lease payments, are recognised in the consolidated statement of financial position at the commencement of the lease.

 

The right-of-use asset is measured initially at cost and includes the amount of initial measurement of the lease liability, any initial direct costs incurred, including advance lease payments, and an estimate of the dismantling, removal and restoration costs required in terms of the lease. Depreciation is charged to the consolidated income statement so as to depreciate the right-of-use asset from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The lease term shall include the period of an extension option where it is reasonably certain that the option will be exercised. Where the lease contains a purchase option the asset is written off over the useful life of the asset when it is reasonably certain that the purchase option will be exercised.

 

The lease liability is measured at the present value of the future lease payments, including variable lease payments that depend on an index and the exercise price of purchase options where it is reasonably certain that the option will be exercised, discounted using the interest rate implicit in the lease, if readily determinable. If the implicit interest rate cannot be readily determined, the lessee's incremental borrowing rate is used. Finance charges are recognised in the consolidated income statement over the period of the lease.

 

Lease expenses for leases with a duration of one year or less and low-value assets are not recognised in the consolidated statement of financial position, and are charged to the consolidated income statement when incurred. Low-value assets are determined based on quantitative criteria.

 

The Group has used the following practical expedients permitted by the standard:

-      The use of a single discount rate to a portfolio of leases with reasonably similar characteristics

-      Reliance on previous assessments on whether leases are onerous

-      The use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.

 

Inventories

 

Raw materials, which consist of unprocessed timber and chemicals used in manufacturing operations, are valued at the lower of cost and net realisable value. The basis on which cost is derived is a first-in, first-out basis.

 

Finished goods, comprising processed timber, are stated at the lower of weighted average cost of production or net realisable value.  Costs include direct materials, direct labour costs and production overheads (excluding the depreciation/depletion of relevant property and plant and equipment) absorbed at an appropriate level of capacity utilisation.  Net realisable value represents the estimated selling price less all expected costs to completion and costs to be incurred in selling and distribution.

 

Fair value measurement

Assets and liabilities that are measured at fair value, or where the fair value of financial instruments has been disclosed in notes to the

financial statements, are based on the following fair value measurement hierarchy:

- level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;

- level 2 - inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as  prices) or indirectly (that is, derived from prices); and

- level 3 - inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).

 

Specific valuation methodologies used to value financial instruments include:

- the fair values of foreign exchange contracts are calculated as the present value of expected future cash flows  based on observable yield curves and exchange rates; and

- other techniques, including discounted cash flow analysis, are used to determine the fair values of other financial instruments

 

Financial assets

 

Financial assets and financial liabilities are recognised in the Group's consolidated statement of financial position when the Group becomes party to the contractual provisions of the instrument.

Financial assets are initially measured at fair value and in the case of investments not at fair value through profit or loss, fair value plus directly attributable transaction costs.

 

Except where a reliable fair value cannot be obtained, unlisted shares held by the Group are classified as fair value through other comprehensive income and are stated at fair value. Gains and losses arising from changes in fair value are recognised directly in other comprehensive income, with dividends recognised in profit or loss. Where it is not possible to obtain a reliable fair value, these investments are held at cost less provision for impairment.

 

Loans and receivables, which comprise non-derivative financial assets with fixed and determinable payments that are not quoted on an active market, are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.

 

Trade and other receivables

Trade receivables are initially recognised at fair value and are subsequently measured at amortised cost using the effective interest rate method, less allowance for impairments. The Group has elected to apply the IFRS 9 practical expedient option to measure the value of its trade receivables at transaction price, as they do not contain a significant financing element. The Group applies IFRS 9's 'simplified' approach that requires companies to recognise the lifetime expected losses on its trade receivables. At the date of initial recognition, the credit losses expected to arise over the lifetime of a trade receivable are recognised as an impairment and are adjusted, over the lifetime of the receivable, to reflect objective evidence reflecting whether the Group will not be able to collect its debts.

 

Cash and cash equivalents

Cash and cash equivalents in the consolidated statement of financial position comprise cash at bank and in hand and short-term deposits, including liquidity funds, with an original maturity of three months or less. For the purpose of the statement of consolidated cash flow, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. Cash and cash equivalents includes cash pledged to ABN Amro as collateral for the $20million Letter of credit provided to FHB. See note 29.

Financial liabilities

 

Other financial liabilities

Trade payables and other financial liabilities are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method.

 

Loans and other borrowings are initially recognised at the fair value of amounts received net of transaction costs and subsequently measured at amortised cost using the effective interest method. There have been no modifications to the terms of the Group's loan agreements requiring disclosure under IFRS 9.

 

Financial guarantee contracts

Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued.

The liability is initially measured at fair value, which is determined based on the present value of the difference in cash flows between the contractual payments required under the FHB borrowing (provided to the Company's joint venture - Accoya USA) and the payments that are estimated to be required without the guarantee being provided by Accsys to FHB. To calculate the fair value of the guarantee, the present value calculation is then weighted by the probability of the guarantee being called by FHB.

Where guarantees in relation to loans or other payables of associates are provided for no compensation, the fair values are accounted for as contributions and recognised as part of the cost of the investment.

 

Share capital

 

Financial instruments issued by the Group are treated as equity only to the extent that they do not meet the definition of a financial liability. The Group's shares are classified as equity instruments.

 

Segmental Reporting

 

Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Executive Officer. The Chief Executive Officer is responsible for allocating resources and assessing performance of the operating segments and has been identified as steering the committee that makes strategic decisions.

 

Alternative Performance Measures

 

The Group presents certain measures of financial performance, position or cash flows in the Annual Report and financial statements that are not defined or specified according to IFRS (International financial reporting standards). These measures, referred to as Alternative Performance Measures (APMs), are prepared on a consistent basis for all periods presented in this report, with the addition of adjusted cash and adjusted net debt in the year.

 

The most significant APMs are:

 

Net debt

A measure comprising short term and long-term borrowings (including lease obligations) less cash and cash equivalents. Net debt provides a measure of the Group's net indebtedness or overall leverage.

 

Underlying EBITDA

Operating profit/(loss) before Exceptional items and other adjustments, depreciation and amortisation and includes the Group's attributable share of our USA joint venture's underlying EBITDA. Underlying EBITDA provides a measure of the cash-generating ability of the business that is comparable from year to year.

 

Underlying EBIT

Operating profit/(loss) before Exceptional items and other adjustments and includes the Group's attributable share of our USA joint venture's underlying EBIT. Underlying EBIT provides a measure of the operating performance that is comparable from year to year.

 

Effective interest rate

Net interest expense (excluding capitalisation of interest) expressed as a percentage of trailing 13-month average net debt provides a measure of the cost of borrowings.

 

Net Debt / Underlying EBITDA

Net debt divided by trailing 12-month underlying EBITDA. A measure of the Group's net indebtedness relative to its cash-generating ability.

 

Accoya^® Manufacturing margin

Accoya^® segmental underlying gross profit excluding Accoya^® underlying licence revenue and marketing services expressed as a percentage over Accoya^® segmental total revenue excluding Accoya^® underlying licence revenue and marketing services. Accoya^® Manufacturing margin provides a measure of the profitability of the Accoya^® operations relative to revenue.

 

Adjusted cash

Cash & cash equivalents less remaining cash committed to be invested into Accoya USA Joint Venture and restricted cash. See note 29.

 

Adjusted Net Debt

Net Debt less remaining cash committed to be invested into Accoya USA Joint Venture. See note 29.

 

2.         Accounting judgements and estimates

 

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

 

Accounting estimates

 

Goodwill

The Group tests annually whether goodwill has suffered any impairment in accordance with the accounting policy stated above. The recoverable amounts of cash-generating units have been determined based on value in use calculations. These calculations require the use of judgements in relation to discount rates and future forecasts (See note 16 & 17). The recoverability of these balances is dependent upon the level of future licence fees and manufacturing revenues. While the scope and timing of the production facilities to be built under the Group's existing and future agreements remains uncertain, the Directors remain confident that revenue from own manufacturing, existing licensees, new licence or consortium agreements will be generated, demonstrating the recoverability of these balances.

 

Intellectual property rights (IPR) and property, plant and equipment

The Group tests the carrying amount of the intellectual property rights and property, plant and equipment whenever events or changes in circumstances indicate that the net book value may not be recoverable. These calculations require the use of estimates in respect of future cash flows from the assets by applying a discount rate to the anticipated pre-tax future cash flows. Within this process, the Group makes a number of key assumptions including operating margins, discount rates, terminal growth rates and forecast cash flows. Additional information is disclosed in note 16 & 17, which highlights the estimates applied in the value-in-use calculations for those CGUs that are considered most susceptible to changes in key assumptions and the sensitivity of these estimates. The Group also reviews the estimated useful lives at the end of each annual reporting period (See note 16 & 17). The price of Accoya^® wood and the raw materials and other inputs vary according to market conditions outside of the Group's control.  Should the price of the raw materials increase greater than the sales price or in a way which no longer makes Accoya^® competitive, then the carrying value of the property, plant and equipment or IPR may be in doubt and become impaired. The Directors consider that the current market and best estimates of future prices mean that this risk is limited.

 

Commercial negotiations

The Group is party to a number of commercial negotiations in the ordinary course of business. Management consults with internal and external experts, and utilises its best estimate to account for any relevant financial effect from these negotiations (including the value of amounts to be capitalised and any payables or provisions required to settle such negotiations), when they become apparent.

 

Accounting judgements

 

In preparing the Consolidated Financial Statements, management has to make judgments on how to apply the Group's accounting policies and make estimates about the future. The critical judgements that have been made in arriving at the amounts recognised in the Consolidated Financial Statements and the key sources of uncertainty that have a significant risk of causing a material adjustment to the carrying value of assets and liabilities in the next financial year are discussed below:

 

Revenue recognition

The Group has considered the criteria for the recognition of fee income from licensees over the period of the agreement and is satisfied that the recognition of such revenue is appropriate. The recognition of fees is based upon satisfaction of the performance obligations set out in the contract such as an assessment of the work required before the licence is signed and subsequently during the construction and commissioning of the licensees' plant, with an appropriate proportion of the fee recognised upon signing and the balance recognised as the project progresses to completion. The Group also considers the recoverability of amounts before recognising them as income. Revenue is recognised to the extent that it is highly probable that a significant reversal will not occur.

 

 

Financial asset at fair value through profit or loss

The Group has an investment in listed equity shares carried at nil fair value as a reliable fair value cannot be obtained since there is no active market for the shares and there is currently uncertainty around the future funding of the business. The Group makes appropriate enquiries and considers all of the information available to it in order to determine the fair value (See note 19).

 

Consolidation of subsidiaries

The Group considers all relevant facts and circumstances when assessing whether it meets the IFRS 10 requirements to consolidate Tricoya Technologies Limited (TTL) and Tricoya UK Limited (Tricoya UK). The Group has consolidated the results of TTL and Tricoya UK as subsidiaries, as it exercises the power to govern the entities in accordance with IFRS 10. See note 9.

 

Joint venture

The Group considers all relevant facts and circumstances when assessing whether it meets the IFRS 11 requirements to account for Accoya USA LLC as a joint venture. The Group has equity accounted for Accoya USA LLC within these financial statements. See note 28.

  

New standards and interpretations in issue at the date of authorisation of these financial statements:

New standards, amendments and interpretations

The following amendments to Standards and a new Interpretation have been adopted for the financial year beginning on 1 April 2021:

 

•              Covid-19-Related Rent concessions - Amendments to IFRS16;

•              Interest Rate Benchmark Reform - Amendments to IFRS 9, IAS 39 and IFRS 7; and

•              Property, plant and equipment under construction and proceeds from sales - Amendments to IAS16;

 

The amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods.

 

New standards, amendments and interpretations not yet adopted

Certain new accounting standards and interpretations have been published that are not mandatory for 31 March 2022 reporting periods and have not been early adopted by the Group. These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

 

3.         Segmental reporting

 

The Group's business is the manufacturing of and development, commercialisation and licensing of the associated proprietary technology for the manufacture of Accoya^® wood, Tricoya^® wood elements and related acetylation technologies. Segmental reporting is divided between corporate activities, activities directly attributable to Accoya^®, to Tricoya^® or research and development activities.

Accoya^®

	Accoya® Segment
	Year ended 31 March 2022 Underlying	Year ended 31 March 2022 Exceptional items & Other Adjustments	Year ended 31 March 2022 TOTAL	Year ended 31 March 2021 Underlying	Year ended 31 March 2021 Exceptional items & Other Adjustments	Year ended 31 March 2021 TOTAL
	€'000	€'000	€'000	€'000	€'000	€'000
Accoya® wood revenue	105,053	-	105,053	91,095	-	91,095
Licence revenue	400	-	400	400	-	400
Other revenue	13,879	-	13,879	6,142	-	6,142
Total Revenue	119,332	-	119,332	97,637	-	97,637
Cost of sales	(83,435)	-	(83,435)	(64,713)	-	(64,713)
Gross profit	35,897	-	35,897	32,924	-	32,924
Other operating costs	(19,116)	(133)	(19,249)	(15,725)	-	(15,725)
Profit from operations	16,781	(133)	16,648	17,199	-	17,199
Profit from operations	16,781	(133)	16,648	17,199	-	17,199
Accoya® USA EBITDA	(261)	-	-	(144)	-	-
EBIT	16,520	(133)	16,648	17,055	-	17,199
Depreciation and amortisation	4,787	-	4,787	4,371	-	4,371
EBITDA	21,307	(133)	21,435	21,426	-	21,570

 

 

Revenue includes the sale of Accoya^®, licence income and other revenue, principally relating to the sale of acetic acid and other licensing related income. Revenue also includes sales of lower visual grade Accoya^® to Tricoya^® customers for the purposes of producing Tricoya^® panels as a temporary work-around until the dedicated Tricoya^® Hull plant is operational.

 

All costs of sales are allocated against manufacturing activities in Arnhem and in Barry (Wales) unless they can be directly attributable to a licensee. Other operating costs include all costs associated with the operation of the Arnhem and Barry manufacturing sites, including directly attributable administration, sales and marketing costs. 

 

See note 5 for explanation of Exceptional items and other adjustments.

 

Average headcount = 162 (2021: 140)

The below table shows details of reconciling items to show both Accoya^® EBITDA and Accoya^® Manufacturing gross profit, both including and excluding licence and licensing related income, which has been presented given the inclusion of items which can be more variable or one-off.

					2022	2021
					€'000	€'000
Accoya® segmental underlying EBITDA					21,307	21,426
Accoya® underlying Licence revenue					(400)	(400)
Accoya® segmental underlying EBITDA (excluding. Licence Income)					20,907	21,026
Accoya® segmental underlying gross profit					35,897	32,924
Accoya® underlying Licence revenue					(400)	(400)
Accoya® manufacturing gross profit					35,497	32,524
Accoya® Manufacturing Margin					29.8%	33.4%
					2022	2021
					€'000	€'000
Accoya® Manufacturing gross profit - €'000					35,497	32,524
Accoya® sales volume - m3					59,649	60,466
Accoya® manufacturing gross profit per m3					595	538

 

 

Tricoya^®

	Tricoya® Segment
	Year ended 31 March 2022 Underlying	Year ended 31 March 2022 Exceptional items & Other Adjustments	Year ended 31 March 2022 TOTAL	Year ended 31 March 2021 Underlying	Year ended 31 March 2021 Exceptional items & Other Adjustments	Year ended 31 March 2021 TOTAL
	€'000	€'000	€'000	€'000	€'000	€'000
Tricoya® panel revenue	1,459	-	1,459	2,091	-	2,091
Licence revenue	16	-	16	19	-	19
Other revenue	45	-	45	56	-	56
Total Revenue	1,520	-	1,520	2,166	-	2,166
Cost of sales	(1,417)	-	(1,417)	(2,001)	-	(2,001)
Gross profit	103	-	103	165	-	165
Other operating costs	(3,811)	(3)	(3,814)	(3,668)	103	(3,565)
Loss from operations	(3,708)	(3)	(3,711)	(3,503)	103	(3,400)
Loss from operations	(3,708)	(3)	(3,711)	(3,503)	103	(3,400)
Depreciation and amortisation	505	-	505	563	-	563
EBITDA	(3,203)	(3)	(3,206)	(2,940)	103	(2,837)

 

Revenue and costs are those attributable to the business development of the Tricoya^® process and establishment of Tricoya^® Hull Plant.

 

Other operating costs includes pre-operating costs for the Tricoya^® Hull Plant.

 

See note 5 for explanation of Exceptional items and other adjustments.

 

Average headcount = 36 (2021: 22), noting a substantial proportion of the costs to date have been incurred via recharges from other parts of the Group or have resulted from contractors.

Corporate 

	Corporate Segment
	Year ended 31 March 2022 Underlying	Year ended 31 March 2022 Exceptional items & Other Adjustments	Year ended 31 March 2022 TOTAL	Year ended 31 March 2021 Underlying	Year ended 31 March 2021 Exceptional items & Other Adjustments	Year ended 31 March 2021 TOTAL
	€'000	€'000	€'000	€'000	€'000	€'000
Accoya® wood revenue	-	-	-	-	-	-
Licence revenue	-	-	-	-	-	-
Other revenue	-	-	-	-	-	-
Total Revenue	-	-	-	-	-	-
Cost of sales	-	-	-	-	-	-
Gross result	-	-	-	-	-	-
Other operating costs	(7,430)	-	(7,430)	(8,048)	-	(8,048)
Loss from operations	(7,430)	-	(7,430)	(8,048)	-	(8,048)
Loss from operations	(7,430)	-	(7,430)	(8,048)	-	(8,048)
Depreciation and amortisation	805	-	805	715	-	715
EBITDA	(6,625)	-	(6,625)	(7,333)	-	(7,333)

 

Corporate costs are those costs not directly attributable to Accoya^®, Tricoya^® or Research and Development activities. This includes management and the Group's corporate and general administration costs including the head office in London.  See note 5 for explanation of Exceptional items and other adjustments.

Average headcount = 37 (2021: 29)

 

Research and Development

	Research & Development Segment
	Year ended 31 March 2022 Underlying	Year ended 31 March 2022 Exceptional items & Other Adjustments	Year ended 31 March 2022 TOTAL	Year ended 31 March 2021 Underlying	Year ended 31 March 2021 Exceptional items & Other Adjustments	Year ended 31 March 2021 TOTAL
	€'000	€'000	€'000	€'000	€'000	€'000
Accoya® wood revenue	-	-	-	-	-	-
Licence revenue	-	-	-	-	-	-
Other revenue	-	-	-	-	-	-
Total Revenue	-	-	-	-	-	-
Cost of sales	-	-	-	-	-	-
Gross result	-	-	-	-	-	-
Other operating costs	(1,184)	-	(1,184)	(1,118)	-	(1,118)
Loss from operations	(1,184)	-	(1,184)	(1,118)	-	(1,118)
Loss from operations	(1,184)	-	(1,184)	(1,118)	-	(1,118)
Depreciation and amortisation	68	-	68	88	-	88
EBITDA	(1,116)	-	(1,116)	(1,030)	-	(1,030)

Research and Development costs are those associated with the Accoya^® and Tricoya^® processes. Costs exclude those which have been capitalised in accordance with IFRS (see note 16). 

 

Average headcount = 9 (2021: 9)

 

Total

	Total
	Year ended 31 March 2022 Underlying	Year ended 31 March 2022 Exceptional items & Other Adjustments	Year ended 31 March 2022 TOTAL	Year ended 31 March 2021 Underlying	Year ended 31 March 2021 Exceptional items & Other Adjustments	Year ended 31 March 2021 TOTAL
	€'000	€'000	€'000	€'000	€'000	€'000
Accoya®/Tricoya® revenue	106,512	-	106,512	93,186	-	93,186
Licence revenue	416	-	416	419	-	419
Other revenue	13,924	-	13,924	6,198	-	6,198
Total Revenue	120,852	-	120,852	99,803	-	99,803
Cost of sales	(84,852)	-	(84,852)	(66,714)	-	(66,714)
Gross profit	36,000	-	36,000	33,089	-	33,089
Other operating costs	(31,541)	(136)	(31,677)	(28,559)	103	(28,456)
Profit from operations	4,459	(136)	4,323	4,530	103	4,633
Finance income	-	-	-	1	-	1
Finance expense	(2,893)	544	(2,349)	(3,250)	(900)	(4,150)
Investment in joint venture	(261)	-	(261)	(144)	-	(144)
Profit/(Loss) before taxation	1,305	408	1,713	1,137	(797)	340

 

 

See note 5 for details of Exceptional items and other adjustments.

 

Reconciliation of underlying EBIT and EBITDA

				Year ended 31 March 2022 Underlying		Year ended 31 March 2022 Exceptional items & Other Adjustments		Year ended 31 March 2022   TOTAL		Year ended 31 March 2021 Underlying		Year ended 31 March 2021 Exceptional items & Other Adjustments	Year ended 31 March 2021   TOTAL
				€'000		€'000		€'000		€'000		€'000	€'000
Profit from operations				4,459		(136)		4,323		4,530		103	4,633
Accoya® USA EBITDA				(261)		-		-		(144)		-	-
EBIT				4,198		(136)		4,323		4,386		103	4,633
Depreciation and amortisation				6,164		-		6,164		5,737		-	5,737
EBITDA				10,362		(136)		10,487		10,123		103	10,370

 

 

Analysis of Revenue by geographical area of customers:			2022	2021
			€'000	€'000
UK and Ireland			43,053	41,890
Rest of Europe			45,980	36,888
Americas			21,069	13,170
Rest of World			10,750	7,855
			120,852	99,803

 

 

Revenue generated from two customers exceeded 10% of Group revenue of 2022. These two customers represented 37% & 34% of the revenue from the United Kingdom and Ireland, relating to Accoya^® revenue. Revenue generated from two customers exceeded 10% of Group revenue of 2021. This included 36% & 40% of the revenue from the United Kingdom and Ireland, relating to Accoya^® revenue.

 

 

 

Assets and liabilities on a segmental basis:

 

	Accoya®	Tricoya®	Corporate	R&D	TOTAL		Accoya®	Tricoya®	Corporate	R&D	TOTAL
	2022	2022	2022	2022	2022		2021	2021	2021	2021	2021
	€'000	€'000	€'000	€'000	€'000		€'000	€'000	€'000	€'000	€'000
Non-current assets	91,278	99,718	4,119	228	195,343		64,994	85,696	4,620	297	155,607
Current assets	36,899	4,425	33,452	5,021	79,797		34,752	13,134	19,567	5,038	72,491
Current liabilities	(19,399)	(21,112)	(5,156)	(75)	(45,742)		(16,706)	(18,933)	(6,576)	(70)	(42,285)
Net current assets/(liabilities)	17,500	(16,687)	28,296	4,946	34,055		18,046	(5,799)	12,991	4,968	30,206
Non-current liabilities	(2,826)	(1,252)	(52,339)	(111)	(56,528)		(21,798)	(9,990)	(17,262)	(160)	(49,210)
Net assets/(liabilities)	105,952	81,779	(19,924)	5,063	172,870		61,242	69,907	349	5,105	136,603

 

 

Analysis of non-current assets (Other than financial assets and deferred tax):					2022	2021
					€'000	€'000
UK					107,861	90,344
Other countries					83,251	61,032
Un-allocated - Goodwill					4,231	4,231
					195,343	155,607

 

 

The segmental assets in the current year were predominantly held in the UK and mainland Europe (Prior Year UK and mainland Europe). Additions to property, plant, equipment and intangible assets in the current year were predominantly incurred in the UK and mainland Europe (Prior Year UK and mainland Europe). There are no significant intersegment revenues.

 

4.         Other operating costs

 

Other operating costs consist of the operating costs, other than the cost of sales, associated with the operation of the plant in Arnhem, Barry, the offices in Dallas and London and certain pre-operating costs associated with the plant in Hull:

 

			2022	2021
			€'000	€'000
Sales and marketing			5,121	3,847
Research and development			1,116	1,030
Other operating costs			6,856	6,013
Administration costs			12,284	11,932
Exceptional Items and other adjustments			136	(103)
Other operating costs excluding depreciation and amortisation			25,513	22,719
Depreciation and amortisation			6,164	5,737
Total other operating costs			31,677	28,456

 

 

Administrative costs include costs associated with Business Development and Legal departments, Intellectual Property as well as Human Resources, IT, Finance, Management and General Office and includes the costs of the Group's head office costs in London and the US Office in Dallas.

 

The total cost of €25,513,000 in the current period includes €3,309,000 in respect of the Tricoya® segment, compared to €3,002,000 in the previous year.

 

Group average headcount increased from 199 in the year to 31 March 2021, to 244 in the year to 31 March 2022.

 

During the period, €714,000 (2021: €682,000) of internal development & patent related costs were capitalised and included in intangible fixed assets, including €488,000 (2021: €524,000) which were capitalised within Tricoya Technologies Limited ('TTL'). In addition €375,000 of internal costs have been capitalised in relation to our current Arnhem Accoya^® plant expansion project (2021: €336,000) and €739,000 of internal costs have been capitalised in relation to our plant build in Hull, UK (2021: €38,000). Both are included within tangible fixed assets.

 

5.         Exceptional items and other adjustments

 

		2022	2021
		€'000	€'000
Redundancy costs in relation to purchase of assets to grow Accoya® Color production		(133)	-
Early termination of loans -  redemption fee & accelerated amortisation of transaction costs		(1,619)	-
Total exceptional items		(1,752)	-
Foreign exchange differences arising on Tricoya® & Corporate cash held - Operating costs		(3)	103
Foreign exchange differences arising on Loan Notes - incl. in Finance expense		231	(900)
Foreign exchange differences on Tricoya® - Other comprehensive income/(loss)		8	18
Foreign exchange differences on Corporate USD cash held for investment in to USA JV- incl. in Finance expense		2,080	-
Revaluation of USD cash pledged to ABN Amro - incl. in Finance expense		(148)	-
Revaluation of FX forwards used for cash-flow hedging - Other comprehensive income/(loss)		58	174
Total other adjustments		2,226	(605)
Tax on exceptional items and other adjustments		-	-
Total exceptional items and other adjustments		474	(605)

 

Exceptional Items

 

In July 2021, Accsys entered into a sale and purchase agreement with Lignia Wood Company Limited and its administrators, to acquire certain assets, equipment and technology along with its manufacturing plant in Barry, Wales for a consideration of €1.2m, including €0.5m for raw wood inventory (see note 34). The purchased assets will enable Accsys to grow production and availability of Accoya^® Color more rapidly, accelerating the launch of the product into more geographic markets and for more product applications. As part of this purchase, redundancy costs of €133,000 were incurred in relation to staff at the Barry site.

 

In October 2021, Accsys completed the refinance of its Group debt facilities, with a new bilateral agreement with ABN Amro. Loans previously held with ABN Amro, Cerdia Produktions GmbH, Bruil, Volantis and Business Growth Fund (BGF) where repaid. In addition to simplifying our debt arrangements, this has helped significantly reduce our cost of debt going forward. Early redemption fees totalling €1.4m were paid, and the amortisation of previously capitalised transaction fees related to these repaid loans was accelerated.

 

Other Adjustments

 

Foreign exchange differences in the Tricoya^® segment have occurred due to pounds sterling held within the consortium for the ongoing Hull plant build and to a lesser extent, pounds sterling held within the Corporate segment for future sterling corporate costs. The effective portion of the foreign exchange movement is recognised in other comprehensive income, with the ineffective portion recognised in Operating costs. Foreign exchange differences in the Corporate segment have also occurred due to US dollars held for investment into the Accoya USA Joint Venture. Following the May 2021 equity raise, the amount raised to invest into Accoya USA was translated into US dollars and held in cash ensuring that foreign exchange movements did not decrease the amount raised below the future US dollar investment into Accoya USA. This treatment did not meet the requirements for hedge accounting under IFRS 9, Financials instruments, and therefore the foreign exchange gain on the revaluation of the US dollars has been accounted for in Finance expenses.

 

Foreign exchange differences also arise on the pounds sterling denominated loan notes, entered into in a prior period (see note 29). These exchange rate differences are included as finance expenses.

 

6.         Employees

				2022	2021
				€'000	€'000
Staff costs (including Directors) consist of:
Wages and salaries				17,007	14,394
Social security costs				2,620	2,206
Other pension costs				1,381	1,008
Share based payments				140	869
				21,148	18,477

 

 

Pension costs relate to defined contribution plan contributions.

 

The average monthly number of employees, including Executive Directors, during the year was as follows:
			2022	2021
Sales and marketing, administration, research and engineering			134	112
Operating			110	87
			244	199

 

 

7.         Directors' remuneration

			2022	2021
			€'000	€'000
Directors' remuneration consists of:
Directors' emoluments			931	1,187
Company contributions to money purchase pension schemes			43	41
			974	1,228

 

 

Compensation of key management personnel included the following amounts:

 

	Salary, bonus and short term benefits		Share based payments charge
				2022	2021
		Pension		Total	Total
	€'000	€'000	€'000	€'000	€'000
Rob Harris	492	27	49	568	612
William Rudge	301	16	(9)	308	390
	793	43	40	876	1,002

 

 

The Group made contributions to one (2021: one) Director's personal pension plan, with Robert Harris receiving cash in lieu of pension.

 

The figures in the above table are impacted by foreign exchange noting that the remuneration for R Harris and W Rudge are denominated in Pounds Sterling.

 

8.         Operating profit

 

		2022	2021
		€'000	€'000
This has been arrived at after charging/(crediting):
Staff costs		21,148	18,477
Depreciation of property, plant and equipment, and right of use assets		5,419	4,934
Amortisation of intangible assets		745	803
Operating lease rentals		103	32
Foreign exchange (gains)/ losses		(171)	110
Research & Development (excluding staff costs)		416	524
Fees payable to the Company's auditors for the audit of the Group's annual financial statements		145	73
Fees payable to the Company's auditors for other services:
- audit of the Company's subsidiaries pursuant to legislation		110	84
- audit related assurance services		36	34
Fees payable to Component auditor for audit of subsidiaries:		117	98
- other audit related services		-	14
Total audit and audit related services:		408	303

 

9.         Tricoya Technologies Limited

 

Tricoya Technologies Limited ("TTL") was incorporated in order to develop and exploit the Group's Tricoya^® technology for use within the worldwide panel products market, which is estimated to be worth more than €60 billion annually.

 

The Tricoya^® Consortium was formed on 29th March 2017, with its members currently comprising Accsys Technologies, INEOS Acetyls Investments Ltd, MEDITE Europe DAC, BGF & Volantis (Lombard Odier) and with project finance debt provided by NatWest.

 

Tricoya UK Limited is constructing and will own and operate the world's first Tricoya^® wood elements acetylation plant in Hull (UK), which will have a targeted production capacity of 30,000 metric tonnes per annum (sufficient to manufacture 40,000 cubic metres of panels) and scope to expand.

 

INEOS Acetyls Investments Limited ("INEOS") acquired BP Ventures' share capital of TTL and BP Chemicals share capital of Tricoya UK on 31 December 2020.

 

INEOS (through acquiring BP's share of TTL & Tricoya UK) have invested €31.8 million in the Tricoya^® Project, including €23.3 million as equity in Tricoya UK and €8.5 million as equity in TTL. All funding was received by 31 March 2021, with no funding received during the year ended 31 March 2022.

 

MEDITE have invested €15.0 million in the Tricoya^® Project, including €8.4 million as equity in TTL and €6.6 million as equity in Tricoya UK. All funding was received by 31 March 2021, with no funding received during the year ended 31 March 2022.

 

In the period to 31 March 2022, the Group's shareholding in TTL remained unchanged at 76.5%.

 

Tricoya UK entered a six-year €17.2 million finance facility agreement with Natwest Bank plc in March 2017 in respect of the construction and operation of the Hull Plant. As at 31 March 2022 the Group has utilised €9.9m (2021: €9.3m) of the facility.

 

In November 2021, Accsys agreed a new €17m loan to Tricoya UK to be used towards the Hull plant construction project alongside existing funding in place for Tricoya UK. The loan accrues interest, which is rolled up, at a rate between 5.25 and 6.75% above EURIBOR. The loan is secured and is repayable by 30 September 2023. At 31 March 2022, the Group had lent to Tricoya UK €8.8m under the facility. As Accsys consolidates Tricoya UK, this loan is eliminated within the Accsys Group balance sheet.

 

The Group has consolidated the results of TTL and Tricoya UK as subsidiaries, as it exercises the power to govern the entities in accordance with IFRS 10. The non-controlling interests in both entities have been recognised in these Group financial statements.

 

The "TTL Group" income statement and balance sheet, consisting of TTL and its subsidiary Tricoya UK, are set out below:

 

TTL Group income statement:

	2022	2021
	€'000	€'000
Revenue	1,552	2,178
Cost of sales	(1,449)	(1,999)
Gross profit	103	179
Operating costs:
Staff costs	(2,592)	(2,582)
Research & development (excluding staff costs)	(207)	(217)
Intellectual Property	(214)	(255)
Sales & marketing	(639)	(122)
Depreciation & Amortisation	(505)	(563)
EBIT	(4,054)	(3,560)
EBIT attributable to Accsys shareholders	(2,414)	(2,172)

 

TTL Group balance sheet:

	2022	2021
	€'000	€'000
Non-current assets
Intangible assets	4,534	4,376
Property, plant and equipment	94,061	79,999
Right of use assets	1,232	1,321
	99,827	85,696
Current assets
Receivables due within one year	1,088	1,232
Cash and cash equivalents	912	11,464
FX Derivative Asset	3	134
	2,003	12,830
Current liabilities
Trade and other payables	(17,646)	(20,159)
Net current liabilities	(15,643)	(7,329)
Non-current liabilities
Other long term borrowing	(18,585)	(8,955)
	(18,585)	(8,955)
Net assets	65,599	69,412
Value attributable to Accsys Technologies	30,073	32,246
Value attributable to Non-controlling interest	35,526	37,166

 

 

TTL Group cash flows:
	2022	2021
	€'000	€'000
Cash flows from operating activities	2,618	(841)
Cash flows from investing activities	(21,860)	(6,400)
Cash flows from financing activities	8,691	10,306
Net (decrease)/ increase in cash and cash equivalents	(10,551)	3,065

 

 

10.       Finance income

 

				2022	2021
				€'000	€'000
Interest receivable on bank and other deposits*				-	1

 

 

 

*€8,000 interest received in the year ended 31 March 2022 (31 March 2021: €5,000) in relation to cash balances held in Tricoya UK Ltd was netted off with borrowing costs incurred, with the net borrowing cost amount related to the Hull project capitalised and included within property, plant and equipment.

 

11.       Finance expense

		2022	2021
		€'000	€'000
Arnhem land and buildings lease finance charge		183	187
Interest on loans		2,282	2,767
Interest on lease liabilities		139	144
Other finance expenses		289	152
Total underlying finance expenses		2,893	3,250
Exceptional items and other adjustments
Foreign exchange (gain)/loss on loan notes		(231)	900
Revaluation of USD cash pledged to ABN Amro		148	-
Early termination of loans -  redemption fee & accelerated amortisation of transaction costs		1,619	-
Foreign exchange (gain)/loss on Corporate USD cash held for investment in to USA JV		(2,080)	-
Total Finance expense		2,349	4,150

 

 

12.       Tax expense

			2022	2021
			€'000	€'000
(a) Tax recognised in the statement of comprehensive income comprises:
Current tax charge
UK Corporation tax on losses for the year			-	-
Research and development tax (credit)/ expense in respect of current year			(314)	24
			(314)	24
Overseas tax at rate of 15%			24	11
Overseas tax at rate of 25%			1,305	1,216
Deferred Tax
Utilisation of deferred tax asset			-	-
Total tax charge reported in the statement of comprehensive income			1,015	1,251
			2022	2021
			€'000	€'000
(b) The tax charge for the period is higher than the standard rate of
corporation tax in the UK (2022 & 2021: 19%) due to:
Profit/(Loss) before tax			1,713	340
Expected tax charge at 19% (2021 - 19%)			325	65
Expenses not deductible in determining taxable profit			142	153
Over provision in respect of prior years			-	-
Tax losses for which no deferred income tax asset was recognised			541	880
Effects of overseas taxation			320	130
Research and development tax charge in respect of prior years			(190)	79
Research and development tax (credit) in respect of current year			(123)	(56)
Total tax charge reported in the statement of comprehensive income			1,015	1,251

 

 

In March 2021, the UK Government announced that from 1 April 2023 the corporation tax rate will increase to 25% from 1 April 2023.

There is no material impact on the Group's current and deferred taxation balances.

 

 

Deferred tax
		Deferred tax assets		Deferred tax liabilities
€ '000		2022	2021	2022	2021
At 1 April		-	-	-	-
Credited/ (charged) to the consolidated income statement		484	-	(484)	-
At 31 March		484	-	(484)	-

 

 

Deferred taxes at the balance sheet date have been measured using these enacted tax rates and reflected in these financial statements.

 

 

13.       Dividends Paid

		2022	2021
		€'000	€'000
Final Dividend €Nil (2021: €Nil) per Ordinary share proposed
and paid during year relating to the previous year's results		-	-

 

 

14.       Basic and diluted profit/(loss) per ordinary share

 

The calculation of profit per ordinary share is based on profit after tax and the weighted average number of ordinary shares in issue during the year.      

 

	2022	2022		2021	2021
	Underlying	Total		Underlying	Total
Basic earnings per share
Weighted average number of Ordinary shares in issue ('000)	190,446	190,446		164,890	164,890
Profit/(Loss) for the year attributable to owners of Accsys Technologies PLC (€'000)	1,930	2,338		1,274	477
Basic profit/(loss) per share	€ 0.01	€ 0.01		€ 0.01	€ 0.00
Diluted earnings per share
Weighted average number of Ordinary shares in issue ('000)	190,446	190,446		164,890	164,890
Equity options attributable to BGF	8,449	8,449		8,449	8,449
Weighted average number of Ordinary shares in issue and potential ordinary shares ('000)	198,895	198,895		173,339	173,339
Profit/(Loss) for the year attributable to owners of Accsys Technologies PLC (€'000)	1,930	2,338		1,274	477
Diluted profit/(loss) per share	€ 0.01	€ 0.01		€ 0.01	€ 0.00

 

 

15.       Share based payments

 

The Group operates a number of share schemes which give rise to a share based payment charge. The Group operates a Long Term Incentive Plan ('LTIP') in order to reward certain members of staff including the Senior Management team and the Executive Directors.

 

Options - total

 

The following figures take into account options awarded under the LTIP, together with share options awarded in previous years under the 2008 Share Option schemes.

 

Outstanding options granted are as follows:

 

 

	Number of outstanding		Weighted average remaining
	options at 31 March		contractual life, in years
Date of grant	2022	2021	2022	2021
1 August 2011	-	90,000	-	0.3
19 September 2013 (LTIP)	599,880	918,226	1.5	2.5
24 June 2016 (LTIP)	183,320	494,433	4.3	5.3
20 June 2017 (LTIP)	326,999	326,999	5.3	6.3
18 June 2018 (LTIP)	185,840	185,840	6.3	7.3
25 June 2019 (LTIP)1	475,258	541,049	7.3	8.3
20 November 2019 (LTIP)1	105,699	105,699	7.7	8.7
23 December 2019 (LTIP)1	41,468	41,468	7.8	8.8
15 July 2020 (LTIP)	1,172,290	1,267,657	8.3	9.3
23 June 2021 (LTIP)	868,889	-	9.3	-
Total	3,959,643	3,971,371	6.8	6.5

 

 

1 - 622,425 nil cost options are outstanding in the 2019 LTIP award at 31 March 2022 but no options are estimated to vest on the relevant vesting dates in the 2022 calendar year.

 

Movements in the weighted average values are as follows:

				Weighted
				average
				exercise
				price	Number
Outstanding at 01 April 2020				€ 0.01	4,670,808
Granted during the year				€ 0.00	1,326,966
Forfeited during the year				€ 0.00	(766,954)
Exercised during the year				€ 0.00	(1,259,449)
Expired during the year				€ 0.00	-
Outstanding at 31 March 2021				€ 0.01	3,971,371
Granted during the year				€ 0.00	918,659
Forfeited during the year				€ 0.00	(210,928)
Exercised during the year				€ 0.00	(629,459)
Expired during the year				€ 0.50	(90,000)
Outstanding at 31 March 2022				€ 0.00	3,959,643

 

 

The exercise price of options outstanding at the end of the year was €nil (for LTIP options) (2021: €nil and €0.50) and their weighted average contractual life was 6.8 years (2021: 6.5 years).

 

Of the total number of options outstanding at the end of the year 1,296,039 (2021: 1,829,658) had vested and were exercisable at the end of the year.

 

Long Term Incentive Plan ('LTIP')

 

In 2013, the Group established a Long Term Incentive Plan, the participants of which are key members of the Senior Management Team, including Executive Directors. The establishment of the LTIP was approved by the shareholders at the AGM in September 2013.

 

2013 LTIP Award performance conditions and 2016 outcome

 

The LTIP in 2013 awarded 4,103,456 nil cost options and 2,472,550 vested in the financial year end 31 March 2017. 599,880 nil cost options remain as at 31 March 2022 after allowing for forfeitures and options exercised in the year.

 

2016 LTIP Award performance conditions and 2019 outcome

 

The LTIP in 2016 awarded 1,070,255 nil cost options and 494,433 vested in the financial year end 31 March 2020. 183,320 nil cost options remain as at 31 March 2022 after allowing for forfeitures and options exercised in the year.

 

2017 LTIP Award performance conditions and 2020 outcome

 

The LTIP in 2017 awarded 1,087,842 nil cost options and 326,999 vested in the financial year end 31 March 2021. 326,999 nil cost options remain as at 31 March 2022 after allowing for forfeitures and options exercised in the year.

 

2018 LTIP Award performance conditions and 2021 outcome

 

The LTIP in 2018 awarded 1,170,160 nil cost options and 185,840 vested in the financial year end 31 March 2022. 185,840 nil cost options remain as at 31 March 2022 after allowing for forfeitures and options exercised in the year.

 

Awards made in year ended 31 March 2020 and LTIP Award performance conditions

 

During the year ended 31 March 2020, a total of 810,520 LTIP awards were made primarily to members of the Senior Management team including the Executive Directors:

 

The performance targets for 686,049 of these awards are as follows:

 

Metric	Weighting (% of award)	Threshold	Target	Maximum
Vesting (% of maximum)		25%	70%	100%
EBITDA per share in FY22	60%	€0.10	€0.14	€0.22
Total sales volume in FY22 (m3)	40%	82,000	86,000	100,000

 

·             Vesting is on a straight-line basis between the above points.

·             Appropriate adjustments may be made to ensure fair and consistent performance measurement over the performance period in line with the business plan and intended stretch of the targets at the point of award.

·             EBITDA per share targets are set and determined so as to exclude licensing income.

·             Sales Volume is defined as combined sales volume (in cubic metres, or equivalent) of Accoya^® and Tricoya^®.

 

Element	Element A (EBITDA per share)	Element B (Sales volume growth)
Grant date	25 Jun 19	25 Jun 19
Share price at grant date (€)	1.32	1.32
Exercise price (€)	0.00	0.00
Expected life (years)	3	3
Contractual life (years)	10	10
Vesting conditions (Details set out above)	EBITDA	Sales volume growth
Risk free rate	-0.74%	-0.74%
Expected volatility	20%	20%
Expected dividend yield	0%	0%
Fair value of option	€ 1.221	€ 1.221

 

 

On 20^th November 2019 and 23^rd December 2019, a total of 147,167 LTIP awards (included in the 686,049 LTIP awards above) were made to 2 new employees with the same performance targets as illustrated above. The fair value of these awards were €1.05 per option.

 

The remaining 124,471 of the awards made in summer 2019 were specific to individuals dedicated to the Tricoya^® consortium with performance measures linked to progress and development of the Tricoya^® plant and its subsequent operation.

The fair value of these options were €1.221 on their Grant date.

 

All of the above awards, made in the year ended 31 March 2020 are subject to a three year performance period (i.e. year end March 2022) and a further two year holding period. In addition, awards are also subject to malus/ claw-back provisions. As at 31 March 2022, no share options are estimated to vest.

 

Awards made in July 2020 and LTIP Award performance conditions

 

During the prior year, a total of 1,326,966 LTIP awards were made primarily to members of the Senior Management team including the Executive Directors:

 

The performance targets for 1,255,829 of these awards are as follows:

 

Metric	Weighting (% of award)	Threshold	Stretch	Maximum
Vesting (% of maximum)		25%	70%	100%
EBITDA per share in FY23	60%	€0.14	€0.19	€0.24
Total sales volume in FY 23 (m3)	40%	90,000	105,000	112,720

 

·          Vesting is on a straight-line basis between points in the schedule.

·          Appropriate adjustments may be made to ensure fair and consistent performance measurement over the performance period in line with the business plan and intended stretch of the targets at the point of award.

·          EBITDA per share targets are set and determined so as to exclude licensing income.

·          Sales Volume is defined as combined sales volume (in cubic metres, or equivalent) of Accoya^® and Tricoya^®.

·          Vesting of the Sales Volume component will be subject to the achievement of a threshold level of EBITDA

 

Element	Element A (EBITDA per share)	Element B (Sales volume growth)
Grant date	15 July 20	15 July 20
Share price at grant date (€)	1.00	1.00
Exercise price (€)	0.00	0.00
Expected life (years)	3	3
Contractual life (years)	10	10
Vesting conditions (Details set out above)	EBITDA	Sales volume growth
Risk free rate	-0.69%	-0.69%
Expected volatility	20%	20%
Expected dividend yield	0%	0%
Fair value of option	€ 0.998	€ 0.998

 

 

The remaining 71,137 of the awards made in summer 2020 were specific to individuals dedicated to the Tricoya^® consortium with performance measures linked to progress and development of the Tricoya^® plant and its subsequent operation.

The fair value of these options were €0.998 on their Grant date.

 

All of the above awards, made in summer 2020 are subject to a three year performance period (i.e. year end March 2023) and a further two year holding period. In addition, awards are also subject to malus/ claw-back provisions.

 

Awards made in July 2021 and LTIP Award performance conditions

 

During the year, a total of 918,659 LTIP awards were made primarily to members of the Senior Management team including the Executive Directors:

 

The performance targets for 863,624 of these awards are as follows:

 

Metric	Weighting (% of award)	Threshold	Maximum
Vesting (% of maximum)		25%	100%
EBITDA per share in FY24	60%	€0.15	€0.24
Cumulative Sales Volume (FY22 to FY24) (m3)	30%	267,000	297,000
ESG - improvement in reporting ratings	10%	33% on attaining each of the 3 year milestones: Y1 - Attain investor ESG external rating/score Y2 - Improve or at least maintain ESG external rating/score Y3 - Improve or at least maintain ESG external rating/score

 

·          Vesting is on a straight-line basis between points in the schedule.

·          Appropriate adjustments may be made to ensure fair and consistent performance measurement over the performance period in line with the business plan and intended stretch of the targets at the point of award.

·          EBITDA per share targets are set and determined so as to exclude licensing income.

·          Sales Volume is defined as combined sales volume (in cubic metres, or equivalent) of Accoya^® and Tricoya^®.

 

Element	Element A (EBITDA per share)	Element B (Sales volume growth)	Element C (ESG Reporting Metrics)
Grant date	23 Jun 21	23 Jun 21	23 Jun 21
Share price at grant date (€)	2.06	2.06	2.06
Exercise price (€)	0.00	0.00	0.00
Expected life (years)	3	3	3
Contractual life (years)	10	10	10
Vesting conditions (Details set out above)	EBITDA	Sales volume growth	ESG reporting metrics
Risk free rate	-0.67%	-0.67%	-0.67%
Expected volatility	20%	20%	20%
Expected dividend yield	0%	0%	0%
Fair value of option	€ 2.060	€ 2.060	€ 2.060

 

The remaining 55,035 of the awards made in summer 2021 were specific to individuals dedicated to the Tricoya^® consortium with performance measures linked to progress and development of the Tricoya^® plant and its subsequent operation.

The fair value of these options were €2.06 on their Grant date.

 

All of the above awards, made in summer 2021 are subject to a three year performance period (i.e. year end March 2024) and a further two year holding period. In addition, awards are also subject to malus/ claw-back provisions.

 

2008 Share Option schemes

 

Awards made in earlier years had no impact on the income statement in the current or prior year and with the smaller number of options remaining at the beginning of the current financial year, expiring during the year, no further details have been disclosed.

 

Employee Benefit Trust - Share bonus award

 

Following a share issue on 23 June 2020 as part of the annual bonus, in connection with the employee remuneration and incentivisation arrangements for the period from 1 April 2019 to 31 March 2020, 629,217 Ordinary shares awarded in the prior year vested. No similar award was made during the year ended 31 March 2022.

 

Employee Share Participation Plan

The Employee Share Participation Plan (the 'Plan') is intended to promote the long term growth and profitability of Accsys by providing employees with an opportunity to acquire an ownership interest in new Ordinary shares ('Shares') in the Company as an additional benefit of employment. Under the terms of the Plan, the Company issues these Shares to a trust for the benefit of the subscribing employees. The Shares are released to employees after one year, together with an additional Share on a 1 for 1 matched basis provided the employee has remained in the employment of Accsys at that point in time (subject to good leaver provisions). The Plan is in line with industry approved employee share plans and is open for subscription by employees once a year following release of the interim financial results. The maximum amount available for subscription by any employee is €5,000 per annum. In January 2022 various employees subscribed for a total of 193,424 Shares at an acquisition price of €2.02 per Share.

Also during the year, 1 for 1 Matching shares were awarded in respect of subscriptions that were made in the previous year as a result of the participants continuing to remain in employment at the point of vesting. 189,931 matching shares were issued to employees in January 2022.

 

 

16.       Intangible assets

 

		Internal	Intellectual
		Development	property
		costs	rights	Goodwill	Total
		€'000	€'000	€'000	€'000
Cost
At 1 April 2020		7,187	74,051	4,231	85,469
Additions		277	405	-	682
At 31 March 2021		7,464	74,456	4,231	86,151
Additions		178	536	-	714
At 31 March 2022		7,642	74,992	4,231	86,865
Accumulated amortisation
At 1 April 2020		2,146	72,337	-	74,483
Amortisation		364	439	-	803
At 31 March 2021		2,510	72,776	-	75,286
Amortisation		384	361	-	745
At 31 March 2022		2,894	73,137	-	76,031
Net book value
At 31 March 2022		4,748	1,855	4,231	10,834
At 31 March 2021		4,954	1,680	4,231	10,865
At 31 March 2020		5,041	1,714	4,231	10,986

 

 

Refer to note 17 for the recoverability assessment of these intangible assets.

 

 

17.       Property, plant and equipment

		Land and	Plant and	Office
		buildings	machinery	equipment	Total
		€'000	€'000	€'000	€'000
Cost or valuation
At 1 April 2020		17,976	125,691	3,243	146,910
Additions		-	20,742	651	21,393
Foreign currency translation (loss)		-	-	(9)	(9)
At 31 March 2021		17,976	146,433	3,885	168,294
Additions		-	41,012	461	41,473
Foreign currency translation (loss)		-	-	7	7
At 31 March 2022		17,976	187,445	4,353	209,774
Accumulated depreciation
At 1 April 2020		637	22,696	1,454	24,787
Charge for the year		358	3,249	351	3,958
Foreign currency translation (loss)		-	-	(8)	(8)
At 31 March 2021		995	25,945	1,797	28,737
Charge for the year		358	3,550	461	4,369
Foreign currency translation (loss)		-	-	7	7
At 31 March 2022		1,353	29,495	2,265	33,113
Net book value
At 31 March 2022		16,623	157,950	2,088	176,661
At 31 March 2021		16,981	120,488	2,088	139,557
At 1 April 2020		17,339	102,995	1,789	122,123

 

Plant and machinery assets with a net book value of €93,560,000 are held as assets under construction and are not depreciated, relating to the Hull Plant, and €30,593,000 relating to the further expansion of the Arnhem Plant (31 March 2021: €80,853,000 relating to the Hull Plant, €5,716,000 relating to the Arnhem Plant).

 

The carrying value of the property, plant and equipment, internal development costs and intellectual property rights are split between two cash generating units (CGUs), representing the Accoya^® and Tricoya^® segments and the carrying value of Goodwill is allocated to the Accoya^® segment. The recoverable amount of these CGUs are determined based on a value-in-use calculations which uses cash flow projections based on latest board approved financial budgets. Cash flows have been projected for a period of 5 years plus a terminal value discounted at a pre-tax discount rate of 10.5% (2021: 10.5%) and a 1.8% growth rate to determine their present value.

The key assumptions used in the value in use calculations are:

-       the manufacturing revenues, operating margins & future licence fees estimated by management,

-       the completion of construction of additional facilities on time (and associated output),

-       the long term growth rate and

-       the discount rate.

The Directors have determined that there has been no impairment to either CGU. The Directors have considered whether a reasonably possible change in assumptions may result in an impairment.  The CGU most susceptible to an impairment given a change in assumptions is the Tricoya^® CGU. Key assumptions applied to this CGU were as follows:

-       a discount rate of 10.5%,

-       a long-term sales growth rate of 1.8%, and

-       Gross margin of approximately 40%.

The headroom in the value-in-use model for this CGU would be reduced to nil if the following adverse changes to those key assumptions were made in isolation:

-       a 1.3% increase to the discount rate,

-       a 1.8% reduction in the long-term sales growth rate and

-       a 3% decrease to Gross margin.

-       an increase of 84% above assumed remaining costs to complete the plant

 

18.       Leases

 

(i) Amounts recognised in the statement of financial position

 

The statement of financial position shows the following amounts relating to leases:

				Right-of-use assets
				2022	2021
				€'000	€'000
Right-of-use assets
Properties				4,023	4,113
Equipment				569	671
Motor Vehicles				40	75
				4,632	4,859

 

				Minimum lease payments
				2022	2021
				€'000	€'000
Amounts payable under lease liabilities:
Within one year				1,250	1,208
In the second to fifth years inclusive				2,390	2,631
After five years				3,972	4,369
Less: future finance charges				(2,395)	(2,676)
Present value of lease obligations				5,217	5,532

 

 

Additions to the right-of-use assets during the financial year were €801,000 (2021: €1,303,000).

 

(ii) Amounts recognised in the statement of profit and loss

 

The statement of profit and loss shows the following amounts relating to leases:

 

			2022	2021
			€'000	€'000
Depreciation charge of right-of-use assets
Properties			807	664
Equipment			209	279
Motor Vehicles			34	33
			1,050	976
Interest expense (included in finance cost)			322	331
Expense relating to short-term leases (included in cost of goods sold and administrative expenses)			83	30
Expense relating to leases of low-value assets that are not shown above as short-term leases (included in administrative expenses)			20	2
Expense relating to variable lease payments not included in lease liabilities (included in administrative expenses)			-	-
The total cash outflow for leases in 2022 was €1,089,000 (2021: €1,308,000)

 

The Group's leasing activities and how these are accounted for:

 

The Group leases various offices, land, equipment and cars. Rental contracts are typically made for fixed periods of 1-10 years, although, if appropriate, a longer term may be entered into. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes. Lease extension options and lease termination options are only included in the calculation of the lease liability if there is reasonable certainty that they will be exercised. Some of the Group's leases have extension and termination options attached to them. Lease extension options and lease termination options are only included in the calculation of the lease liability if there is reasonable certainty that they will be exercised.

 

Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the statement of comprehensive income over the lease period to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right of use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.

 

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:

-      Fixed payments (including in-substance fixed payments), less any lease incentives receivable;

-      Variable lease payments that are based on an index or a rate;

-      Amounts expected to be payable by the lessee under residual value guarantees;

-      The exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and

-      Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.

 

The lease payments are discounted using the Group's incremental borrowing rate, being the rate that the Group would have to pay to borrow the funds necessary to obtain an asset of similar economic environment within similar terms and conditions.

Right of use assets are measured at cost comprising the following:

-      The amount of initial measurement of lease liability;

-      Any lease payments made at or before the commencement date less any lease incentives received;

-      Any initial direct costs; and

-      Restoration costs.

 

Payments associated with short-term leases and leases of low value are recognised on a straight-line basis as an expense in the statement of comprehensive income. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise of small items of office furniture and equipment.

 

19.       Financial asset at fair value through profit or loss

				2022	2021
				€'000	€'000
Shares held in Cleantech Building Materials PLC				-	-

 

Accsys Technologies PLC has previously purchased a total of 21,666,734 unlisted ordinary shares in Diamond Wood China. On 23 December 2016, Cleantech Building Materials PLC acquired Diamond Wood China. On 19 April 2017 Cleantech Building Materials acquired the 21,666,734 shares previously owned by the Company and in return the Company has been issued with 520,001 shares in Cleantech Building Materials PLC, a listed company trading on the Nasdaq First North market in Copenhagen.

 

There continues to be no active market for these shares as at 31 March 2022, and there is significant uncertainty over the future of Cleantech Building Materials PLC. As such a reliable fair value cannot be calculated and the investment is carried at a nil fair value (2021: nil).                                                                                                                                                                                                                                                                                                                         

 

A total of 498,522 shares were held at 31 March 2022.

 

 

20.       Deferred taxation

 

The Group has a recognised deferred tax asset of €484,000 (2021: €nil) offsetting a recognised deferred tax liability of €484,000 (2021: €nil). See note 12.

 

The Group also has an unrecognised deferred tax asset of €42m (2021: €30m) which is largely in respect of trading losses of the UK subsidiaries and has been calculated using the tax rate which is expected to be applicable when the tax losses are expected to be utilised (see note 12 for the announced increase in UK tax rates to 25% from 1 April 2023). The deferred tax asset has been recognised only to the extent of the deferred tax liability, due to the uncertainty of the timing of future expected profits of the related legal entities which is dependent on the profits attributable to licensing and future manufacturing income.

 

 

21.       Subsidiaries

 

A list of subsidiary investments, including the name, country of incorporation and proportion of ownership interest is given in note 4 to the Company's separate financial statements.

 

22.       Inventories

				2022	2021
				€'000	€'000
Raw materials and work in progress				16,978	7,339
Finished goods				3,393	4,923
				20,371	12,262

 

 

The amount of inventories recognised as an expense during the year was €67,697,839 (2021: €60,907,693). The cost of inventories recognised as an expense includes a net credit of €20,212 (2021: credit of €2,739) in respect of the inventories sold in the period which had previously been written down to net realisable value.

 

 

23.       Trade and other receivables

				2022	2021
				€'000	€'000
Trade receivables				13,162	9,836
Other receivables				736	575
VAT receivable				2,203	1,013
Prepayments				833	890
				16,934	12,314

 

 

The Directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value. Trade and other receivables in the above table are stated net of provision for doubtful debts. The majority of trade and other receivables is denominated in Euros, with €3,342,000 of the trade and other receivables denominated in US Dollars (2021: €1,597,000).

 

 

The age of receivables past due but not impaired is as follows:

				2022	2021
				€'000	€'000
Up to 30 days overdue				1,248	409
Over 30 days and up to 60 days overdue				-	6
Over 60 days and up to 90 days overdue				-	-
Over 90 days overdue				24	49
				1,272	464

 

 

In determining the recoverability of a trade receivable the Group considers any change in the credit quality of the trade receivables from the date credit was initially granted up to the reporting date. Included in the provision are trade receivables and accrued income with a balance of €25,002,000 (2021: €25,002,000).

 

Movement in provision for doubtful debts:

				2022	2021
				€'000	€'000
Balance at the beginning of the year				25,002	25,239
Net (decrease)/increase of impairment				-	(237)
Balance at the end of the year				25,002	25,002

 

 

24.       Trade and other payables

				2022	2021
				€'000	€'000
Trade payables				16,655	9,451
Other taxes and social security payable				1,754	1,104
Accruals and deferred income				11,471	19,255
				29,880	29,810

 

 

The increase in Trade and other payables primarily relates to the timing of accruals associated with the construction of the Hull plant with actual cash payments being lower, reflecting the timing of milestone payments in relation to construction.

 

25.       Share capital

 

		2022	2021
		€'000	€'000
Allotted - Equity share capital
192,761,322 Ordinary shares of €0.05 each (2021: 169,324,264 Ordinary shares of €0.05 each)		9,638	8,466
		9,638	8,466

All ordinary shares are called up, allotted and fully paid.

 

In the year ended 31 March 2021:

 

1,259,449 shares were issued on 12 May 2020 following the exercise of nil cost options, granted under the Company's 2013 Long Term Incentive Plan ('LTIP').

 

727,250 shares were issued to an Employee Benefit Trust ('EBT') on 29 June 2020 at nominal value, in lieu of cash bonuses for the year ended 31 March 2020. These shares will vest on 1 July 2021, subject to the employees continuing employment within the Group.

 

In February 2021, following the subscription by employees in the prior year for shares under the Employee Share Participation Plan (the 'Plan'), 198,219 shares were issued as "Matching Shares" at nominal value under the Plan.

 

In addition, various employees newly subscribed under the Plan for 195,524 Shares at an acquisition price of €1.43 per share, with these shares issued to a trust, to be released to the employees after one year, together with an additional share on a matched basis (subject to continuing employment within the Group).

 

On 26 March 2021, the Company announced that Lombard Odier Asset Management (USA) Corp on behalf of 1798 Volantis Catalyst Fund II Ltd ('Volantis') exercised options over a total of 4,655,667 ordinary shares in the Company for a total consideration of £2,779,898.77 (exercise price of £0.5971 per ordinary share) (see note 30 to the financial statements).

 

In the year ended 31 March 2022:

 

In May 2021, 20,005,325 Placing Shares and 2,418,918 Open Offer Shares were issued as part of the capital raise to fund the Company's investment in expanding its Accoya^® business into North America through the construction of a new Accoya^® plant in the USA through its joint venture, Accoya USA LLC, with Eastman Chemical Company (see note 28), as well as to provide additional capital to support the Company's continued growth. The Shares were issued at a price of €1.65 (£1.40) per ordinary share, raising gross proceeds of €36.7 million (before expenses).

 

Between June and September 2021, a total of 629,460 shares were issued following the exercise of nil cost options, granted under the Company's 2013 Long Term Incentive Plan ('LTIP').

 

In February 2022, following the subscription by employees in the prior year for shares under the Employee Share Participation Plan (the 'Plan'), 189,931 shares were issued as "Matching Shares" at nominal value under the Plan.

 

In addition, various employees newly subscribed under the Plan for 193,424 Shares at an acquisition price of €2.015 per share, with these shares issued to a trust, to be released to the employees after one year, together with an additional share on a matched basis (subject to continuing employment within the Group).

 

 

26. Other reserves

	Capital redemp- tion reserve	Merger reserve	Hedging Effective-ness reserve	Other reserve	Total Other reserves
	€000	€000	€000	€000	€000
Balance at 01 April 2020	148	106,707	37	5,659	112,551
Total comprehensive income for the period	-	-	192	-	192
Issue of subsidiary shares to non-controlling interests	-	-	-	1,892	1,892
Balance at 31 March 2021	148	106,707	229	7,551	114,635
Total comprehensive income for the period	-	-	66	-	66
Balance at 31 March 2022	148	106,707	295	7,551	114,701

 

 

The closing balance of the capital redemption reserve represents the amounts transferred from share capital on redemption of deferred shares in a previous year.

 

The merger reserve arose prior to transition to IFRS when merger accounting was adopted.

 

The hedging effectiveness reserve reflects the total accounted for under IFRS 9 in relation to the Tricoya^® & Corporate segments (see note 1).

 

The other reserve represents the amounts received for subsidiary share capital from non-controlling interests net with the carrying amount of non-controlling interests issued (see note 27).

 

27.       Transactions with non-controlling interests

 

 

In the year ended 31 March 2021:

 

On 15 June 2020, TTL issued 281,919 shares to Titan Wood Limited for a consideration of €0.6m. An additional 68,081 shares were issued to non-controlling interests for a consideration of €0.1m.  On 2 July 2020, TTL issued 90,956 shares to Titan Wood Limited for a consideration of €0.2m. An additional 416,694 shares were issued to non-controlling interests for a consideration of €0.8m and an additional 495,310 shares were issued in consideration for continued provision of discounted Accoya^® to MEDITE for market seeding purposes. On 29 October 2020, TTL issued 1,862,356 shares to Titan Wood Limited for a consideration of €3.7m. An additional 498,987 shares were issued to non-controlling interests for a consideration of €1.0m. On 31 December 2020, BP Ventures' share capital of TTL was acquired by INEOS Acetyls Investments Limited ("INEOS"). As a result the non-controlling interests' shareholdings were amended to:

               

INEOS (8.5%), MEDITE (11.3%), BGF (2.6%), Volantis (1.1%)

 

On 17 July 2020, Tricoya UK issued 486,572 Ordinary shares to Tricoya Technologies Ltd for a consideration of €1.0m. An additional 1,600,530 shares were issued to non-controlling interests for consideration of €1.6m. On 29 October 2020, Tricoya UK issued 3,972,686 Ordinary shares to Tricoya Technologies Ltd for a consideration of €4.0m. An additional 2,452,798 shares were issued to non-controlling interests for consideration of €2.5m. On 31 December 2020, BP Chemicals' share capital of Tricoya UK was acquired by INEOS. As a result the non-controlling interests' shareholdings were amended to:

 

                               INEOS (30.0%, MEDITE 8.2%)

 

In the year ended 31 March 2022:

 

No shares were issued in the year ended 31 March 2022.

 

The total carrying amount of the non-controlling interests in TTL and Tricoya UK at 31 March 2022 was €35.53m (2021: €37.17m). 

 

In November 2021, Accsys agreed a new €17m loan to Tricoya UK to be used towards the Hull plant construction project alongside existing funding in place for Tricoya UK. The loan accrues interest, which is rolled up, at a rate between 5.25 and 6.75% above EURIBOR. The loan is secured and is repayable by 30 September 2023. At 31 March 2022, the Group had lent to Tricoya UK €8.8m under the facility.

 

The Group recognised an increase in other reserves as summarised below.

				2022	2021
				€'000	€'000
Opening Balance				8,127	6,235
Carrying amount of non-controlling interests issued				-	(4,112)
Consideration paid by non-controlling interests				-	6,004
Excess of consideration paid recognised in Group's equity				8,127	8,127

 

 

28.       Investment in Joint Venture

 

In August 2020, Accsys together with Eastman Chemical Company formed a new company, Accoya USA LLC, with the intention to construct and operate an Accoya^® wood production plant to serve the North American market.

 

The new company has been formed with Accsys having a 60% equity interest and Eastman having a 40% equity interest, with the two parties assessed to jointly control the entity as defined under IFRS 11 - Joint arrangements. Accoya USA is accounted for as a joint venture and equity accounted for within the financial statements. A technology licence has also been entered into with Accoya USA LLC so that front-end engineering and design for the proposed plant in the USA can be completed.

 

The plant is designed to initially produce approximately 40,000 cubic metres of Accoya^® per annum and to allow for cost-effective expansion.

 

In March 2022, the final investment decision was made to proceed with the construction of the US facility.

The total construction and start-up costs for the facility, including the initial two reactors, are expected to be approximately $136 million ('Total project cost').

 

$66 million of the Total Project cost will be funded by equity contributions from Accsys (60%) and Eastman (40%). Accsys' pro-rata share is $39.6 million (€34.9 million) of which $5.6 million (€4.8 million) has already been contributed to Accoya USA by 31 March 2022. Eastman has contributed $3.8 million to Accoya USA by 31 March 2022.

 

$70 million of the Total Project cost, will be funded through an eight-year term loan to Accoya USA, LLC from First Horizon Bank ('FHB') of Tennessee, USA. FHB are also providing a further $10 million revolving line of credit to be utilised to fund working capital. The FHB term loan is secured on the assets of Accoya USA and will be supported by Accoya USA's shareholders, including $50 million through a limited guarantee provided on a pro-rata basis, with Accsys' 60% share representing $30 million (see note 31). The interest rate varies between 1.3% to 2.1% over USD LIBOR . Principal repayments commence one year following the completion and start-up of the facility, and are calculated on a ten-year amortisation period.

 

The carrying amount of the equity-accounted investment is as follows:

 

				2022	2021
				€'000	€'000
Opening balance				326	-
Investment in Accoya® USA				3,751	1,070
Less: Accsys proportion (60%) of Licence fee received				(600)	(600)
Loss for the year				(261)	(144)
Closing balance				3,216	326

 

 

29.       Commitments under loan agreements

				2022	2021
				€'000	€'000
Amounts payable under loan agreements:
Within one year				11,654	9,664
In the second to fifth years inclusive				52,335	44,626
In greater than five years				-	-
Present value of loan obligations				63,989	54,290
Within one year				12,973	12,012
In the second to fifth years inclusive				59,506	49,714
After five years				-	-
Less future finance charges				(8,490)	(7,436)
Present value of loan obligations				63,989	54,290

 

Refinancing of Group Debt Facilities

 

In October 2021 Accsys completed the refinance of its Group debt facilities through a new bilateral agreement with ABN AMRO, one of Accsys' existing relationship banks. The new €60m 3-year bilateral facilities agreement with ABN AMRO comprised a

-           €45m Term Loan Facility and,

-           €15m Revolving Credit Facility ('RCF') .

The €45m Term Loan was fully utilised to repay all of the Group's existing debt, with the exception of the NatWest facility held by the Tricoya^® consortium which remains in place.

-        The Term Loan is partially amortising, with 5% of the principal repayable per annum after 18 months.

-        The applicable interest rate for the Term Loan varies between an all in cost of 1.75% and 3.25% depending on net leverage, resulting in a significant improvement compared to the previous facilities which had a weighted average cost of approximately 6%.

-  The RCF interest rate will similarly vary, but between 2.0% and 3.5% above EURIBOR.

The RCF was subsequently increased to €25 million as part of the Accoya USA financing referred to below, with approximately €20 million utilised for the Letter of credit provided by ABN Amro to FHB in support of the Accoya USA JV funding arrangements, leaving approximately €5 million available as headroom on the facility. The €5m remaining headroom was undrawn at 31 March 2022.

The new facilities are secured against the assets of the Group which are 100% owned by the Company and include customary covenants such as net leverage and interest cover which are based upon the results and assets which are 100% owned by the Company.

 

Tricoya^® facility:

 

In March 2017 the Company's subsidiary, Tricoya UK Limited entered into a six-year €17.2 million finance facility agreement with Natwest Bank plc in respect of the construction and operation of the Hull Plant. The facility is secured by fixed and floating charges over all assets of Tricoya UK Limited. At 31 March 2022, the Group had €9.9m (2021: €9.3m) borrowed under the facility. The facility is to be drawn down as required, and facility repayments will commence 12 months after practical completion of the Hull Plant. Interest will accrue at Euribor plus a margin, with the margin ranging from 325 to 475 basis points.

The facility will require re-financing with its term running until 31 March 2023.

A €3m increase to the quantum of the facility is being sought given the additional costs identified for the Hull project but has not yet been agreed. As a result, while Natwest remains supportive of the project, the facility is in technical default given the unfunded cost overrun within Tricoya UK.

 

 

Accoya USA facility & De Engh facility:

 

In March 2022 the Company's joint venture, Accoya USA agreed an eight-year $70 million loan from First Horizon Bank ('FHB') of Tennessee, USA in respect of the construction and operation of the Accoya^® USA plant. FHB are also providing a further $10 million revolving line of credit to be utilised to fund working capital. The FHB term loan is secured on the assets of Accoya USA and is supported by Accoya USA's shareholders, including $50 million through a limited guarantee provided on a pro-rata basis, with Accsys' 60% share representing US$30 million (see note 28 & 31). The interest rate varies between 1.3% to 2.1% over USD LIBOR. Principal repayments commence one year following the completion and start-up of the facility, and are calculated on a ten-year amortisation period. Accoya USA is equity accounted for in these financial statements, therefore this Borrowing in not included in the Group's borrowings. (See note 28)

 

To support Accsys' limited guarantee, Accsys provided a $20 million Letter of Credit ('LC') to FHB. The LC is issued by ABN AMRO, utilising part of the revolving credit facility agreed in October 2021. To further support the LC, Accsys agreed a €10 million convertible loan with De Engh BV Limited ('De Engh'), an investment company based in the Netherlands (the 'Convertible Loan'). The Convertible Loan proceeds were placed with ABN AMRO solely as cash collateral to enable ABN AMRO to grant the $20 million LC to FHB.

 

The Convertible Loan is unsecured and carries an interest margin of 6.75% above Euribor. Accsys expects to fully repay the Convertible Loan within two years. If the Convertible Loan is not repaid within this period, De Engh has an option (from the end of year two) to convert the outstanding loan balance to ordinary shares in Accsys at €2.30 per share (representing a 31% premium to the closing share price on 3 March 2022), otherwise the interest rate increases by 2% in year three and by a further 2% the following year if the loan has not been repaid or converted after 3 years. The maximum term of the Convertible Loan is 3.5 years.

 

Reconciliation to net debt:

				2022	2021
				€'000	€'000
Cash and cash equivalents				42,054	47,598
Less:
Amounts payable under loan agreements				(63,989)	(54,290)
Amounts payable under lease liabilities (note 18)				(5,217)	(5,532)
Net debt				(27,152)	(12,224)

 

 

Restricted cash

The cash and cash equivalents disclosed above and in the Consolidated statement of cash flow includes $10 million which is pledged to ABN Amro as collateral for the $20million Letter of credit provided to FHB (see note 28 & 31).

 

Reconciliation to adjusted cash and adjusted net debt:

 

			2022	2021
			€'000	€'000
Cash and cash equivalents			42,054	47,598
Less: Remaining cash committed to be contributed to Accoya USA			(27,857)	-
Less: Cash pledged to ABN for Letter of Credit			(9,852)	-
Adjusted Cash			4,345	47,598
Net Debt			(27,152)	(12,224)
Less: Remaining cash committed to be contributed to Accoya USA			(27,857)	-
Adjusted Net Debt			(55,009)	(12,224)

 

	Liabilities from financing activities			Other assets
	Borrowings	Leases	Sub-total	Cash	Total
	€'000	€'000	€'000	€'000	€'000
Net debt as at 01 April 2020	(57,313)	(5,121)	(62,434)	37,238	(25,196)
Cash flows	2,474	1,308	3,782	10,294	14,076
Decrease in Cerdia Loan from Termination fee	3,200	-	3,200	-	3,200
New leases	-	(1,303)	(1,303)	-	(1,303)
Foreign exchange adjustments	(900)	(76)	(976)	66	(910)
Other changes	(1,751)	(340)	(2,091)	-	(2,091)
Net debt as at 31 March 2021	(54,290)	(5,532)	(59,822)	47,598	(12,224)
Cash flows	(7,561)	1,089	(6,472)	(7,879)	(14,351)
New leases	-	(801)	(801)	-	(801)
Foreign exchange adjustments	231	(7)	224	2,335	2,559
Other changes	(2,369)	34	(2,335)	-	(2,335)
Net debt as at 31 March 2022	(63,989)	(5,217)	(69,206)	42,054	(27,152)

 

 

 

30.       Equity options

 

On the 29 March 2017, the Company announced the formation of the Tricoya® Consortium and as part of this, funding was agreed with BGF and Volantis. In addition to the issue of the Loan Notes, which have since been repaid as part of the Group re-finance in October 2021 (see note 29), the Company granted options over Ordinary Shares of the Company to BGF and Volantis exercisable at a price of £0.62 per Ordinary Share at any time until 31 December 2026 (the 'Options').

 

5,838,954 Options were issued to BGF and 3,217,383 Options were issued to Volantis. In addition, the Company agreed to use its reasonable endeavours to obtain shareholder authority at the subsequent General Meeting to grant to BGF a further option in respect of 2,610,218 Ordinary Shares and to grant to Volantis a further option in respect of 1,438,284 Ordinary Shares (the ''Additional Options'').

 

The necessary resolutions were passed at the General Meeting held on 21 April 2017 and accordingly the Additional Options were converted to Options.

 

On 26 March 2021, the Company announced the Options issued to Volantis had been exercised in full for a total consideration of £2,779,898.77 payable to the Company, representing an exercise price per Ordinary Share of £0.62 as agreed on 29 March 2017 (adjusted to £0.5971 following a subsequent share issuance in April 2017).

 

At 31 March 2022 a total 8,449,172 Options exist attributable to BGF. This represents 4.4% (2021: 5%) of the issued share capital of the Company as at 31 March 2022.

 

See notes 29 & 35 for details on the convertible loan agreed with De Engh BV Limited.

 

31.       Guarantee provided to FHB

 

In March 2022 the Company's joint venture, Accoya USA agreed an eight-year $70million loan from First Horizon Bank ('FHB') of Tennessee, USA in respect of the construction and operation of the Accoya^® USA plant and a further $10 million revolving line of credit to be utilised to fund working capital (see note 28 & 29). The FHB term loan is supported by Accoya USA's shareholders, including US$50 million through a limited guarantee provided on a pro-rata basis, with Accsys' 60% share representing $30 million (see note 28).

 

To support Accsys' limited guarantee, Accsys provided a US$20 million Letter of Credit, issued by ABN Amro, to FHB (see note 29).

 

The $30 million limited guarantee provided to FHB is held at a fair value of € nil, representing a present value calculation of €8.8 million  weighted by the estimated probability of FHB calling on the guarantee being 0%.

 

32.       Financial instruments

 

Financial instruments

 

Lease liabilities

 

Lease creditors of €5,217,000 as at 31 March 2022 (2021: €5,532,000) relates to various offices, land, equipment and cars that the Group leases (see note 18).

 

Capital risk management

 

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders.

 

The capital structure of the Group consists of cash and cash equivalents and equity attributable to owners of the parent Company, comprising share capital, reserves and accumulated losses.

 

The Board reviews the capital structure on a regular basis.  As part of that review, the Board considers the cost of capital and the risks associated with each class of capital.  Based on the review, the Group will balance its overall capital structure through new share issues and the raising of debt if required.

 

The Group's strategy is to lower Net Debt / EBITDA ratio to approximately 2.5x over the longer term while remaining within covenant levels set in its ABN Amro and Natwest loan facilities.   One of the key covenants under the ABN Amro facility is the Net Debt/EBITDA ratio based upon the results and assets which are 100% owned by the Company, with the covenant test reducing over time from an initial maximum of 4x to 2.5x.  On this basis, Net Debt/EBITDA ratio was calculated at 2.93 for the year ending 31 March 2022.

 

No final dividend is proposed in 2022 (2021: €nil). The Board deems it prudent for the Company to protect as strong a statement of financial position as possible during the current phase of the Company's growth strategy. 

 

Financial Instruments by category
2022/ € '000	Fair value hierarchy	At amortised cost	At fair value though profit or loss	At fair value through OCI	Total
Financial assets
Trade and other receivables		13,898	-	-	13,898
Financial asset investments	Level 2	-		-	-
Derivative financial instruments (FX forward)	Level 2	-	3	-	3
Cash and cash equivalents		42,054	-	-	42,054
Total		55,952	3	-	55,955
2021/ € '000	Fair value hierarchy	At amortised cost	At fair value though profit or loss	At fair value through OCI	Total
Financial assets
Trade and other receivables		10,411	-	-	10,411
Financial asset investments	Level 2	-	-	-	-
Derivative financial instruments (FX forward)	Level 2	-	134	-	134
Cash and cash equivalents		47,598	-	-	47,598
Total		58,009	134	-	58,143
2022/ € '000	Fair value hierarchy	At amortised cost	At fair value though profit or loss	At fair value through OCI	Total
Financial liabilities
Borrowings - loans		(63,989)	-	-	(63,989)
Lease liabilities		(5,217)	-	-	(5,217)
Trade and other payables		(16,655)	-	-	(16,655)
Derivative financial instruments (FX forward)	Level 2	-	-	-	-
Total		(85,861)	-	-	(85,861)
2021/ € '000	Fair value hierarchy	At amortised cost	At fair value though profit or loss	At fair value through OCI	Total
Financial liabilities
Borrowings - loans		(54,290)	-	-	(54,290)
Lease liabilities		(5,532)	-	-	(5,532)
Trade and other payables		(9,451)	-	-	(9,451)
Derivative financial instruments (FX forward)	Level 2	-	-	-	-
Total		(69,273)	-	-	(69,273)

 

 

Money market deposits are held at financial institutions with high credit ratings (Standard & Poor's rating of A).

 

All assets and liabilities mature within one year except for the lease liabilities, for which details are given in note 18 and loans, for which details are given in note 29.

 

Trade payables are payable on various terms, typically not longer than 30 to 60 days with the exception of some major capex items.

 

Market risk

 

The Group's activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates.

 

Financial risk management objectives

 

The Group's treasury policy is structured to ensure that adequate financial resources are available for the development of its business whilst managing its currency, interest rate, counterparty credit and liquidity risks. The Group's treasury strategy and policy are developed centrally and approved by the Board.

 

Foreign currency risk management

 

The Group's functional currency is the Euro with the majority of operating costs and balances denominated in Euros. An increasing proportion of costs will be incurred in pounds sterling as the Group's activities associated with the Tricoya^® plant in Hull increase, although future revenues will be in Euros or other currencies. The Group's Loan Notes, which were issued to fund these UK based operations, are denominated in pounds sterling. A smaller proportion of expenditure is incurred in US dollars and pounds sterling. In addition some raw materials, while priced in Euros, are sourced from countries which are not within the Eurozone. The Group monitors any potential underlying exposure to other exchange rates. The Group holds a proportion of the cash associated with the Tricoya^® Consortium in pounds sterling and has purchased fx forward contracts with a nominal amount of £5.85m (2021: nominal amount of £5.85m) to reflect the expected costs associated with the construction of the plant in Hull and are accordingly accounted for as a cash flow hedge. The Group also holds US Dollar Cash which is committed to be contributed into Accoya USA. Following the May 2021 equity raise, the amount raised to invest into Accoya USA was translated into US dollars and held in cash ensuring that foreign exchange movements did not decrease the amount raised below the future US dollar investment into Accoya USA. This treatment did not meet the requirements for hedge accounting under IFRS 9, Financials instruments, and therefore the foreign exchange gain on the revaluation of the US dollars has been accounted for in Finance expenses. (see note 5).

 

If exchange rates changed by 5% from exchange rates at 31 March 2022, the effect on the P&L from the revaluation of:

-       Trade Receivables - P&L impact would not be material. The details of the Trade receivables per Currency is disclosed in note 23 with the US Dollar receivables held in Titan Wood Inc, which has a US Dollar reporting currency.

-       Trade payables - P&L impact would be approximately €260,000.

 

Interest rate risk management

 

The Group's borrowings have variable interest rates based on a relevant benchmark (ie. EURIBOR) plus an agreed margin. Surplus funds are invested in short term interest rate deposits to reduce exposure to changes in interest rates. The Group does not currently enter into any interest rate hedging arrangements, although will review the need to do so in respect of the variable interest rate loan facilities.

 

Credit risk management

 

The Group is exposed to credit risk due to its trade receivables receivable from customers and cash deposits with financial institutions. The Group's maximum exposure to credit risk is limited to their carrying amount recognised at the balance sheet date.

 

The Group ensures that sales are made to customers with an appropriate credit history to reduce the risk where this is considered necessary. The Directors consider the trade receivables at year end to be of good credit quality including those that are past due (see note 23). The Group is not exposed to any significant credit risk exposure in respect of any single counterparty or any group of counterparties with similar characteristics other than the balances which are provided for as described in note 23.

 

The Group has credit risk from financial institutions. Cash deposits are placed with a group of financial institutions with suitable credit ratings in order to manage credit risk with any one financial institution. All Financial institutions utilised by the Group, and with which the Group holds cash balances have investment grade credit ratings.

 

 

Liquidity risk management

 

Ultimate responsibility for liquidity risk management rests with the Board, which has built an appropriate liquidity risk management framework for the management of the Group's short, medium and long term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves and banking facilities by continuously monitoring forecast and actual cash flows and matching the maturity profile of financial assets and liabilities. See note 18 & 29.

 

Fair value of financial instruments

 

In the opinion of the Directors, there is no material difference between the book value and the fair value of all financial assets and financial liabilities.

 

33.       Capital Commitments

 

		2022	2021
		€'000	€'000
Contracted but not provided for in respect of property, plant and equipment		8,327	10,808

 

 

Included in the above, are amounts relating to the Tricoya^® plant under construction in Hull and committed items related to the Reactor 4 expansion project in Arnhem.

 

The above table excludes the remaining cash committed to be contributed to Accoya USA. See note 28 & 29.

 

34.       Purchase of assets to grow Accoya^® Color production

 

In July 2021, Accsys entered into a sale and purchase agreement with Lignia Wood Company Limited and its administrators, to acquire certain assets, equipment and technology along with its manufacturing plant in Barry, Wales. The purchased assets will enable Accsys to grow production and availability of Accoya^® Color more rapidly, accelerating the launch of the product into more geographic markets and for more product applications. The following assets were purchased:

 

	2022
	€'000
Intellectual property	55
Equipment	695
Inventory	486
	1,236

 

 

35.       Related party transactions

 

Loan from De Engh BV Limited

 

As part of the Accoya USA JV funding arrangements, Accsys provided a $20 million Letter of Credit ('LC') to FHB. (see note 29 & 31) To support the LC, Accsys agreed a €10 million convertible loan with De Engh BV Limited ('De Engh'), an investment company based in the Netherlands (the 'Convertible Loan') and a Accsys shareholder holding 10.4% of Accsys' issued share capital at 31 March 2022. The Convertible Loan proceeds were placed with ABN AMRO solely as cash collateral to enable ABN AMRO to grant the $20 million LC to FHB.

 

The Convertible Loan is unsecured and carries an interest margin of 6.75% above Euribor. Accsys expects to fully repay the Convertible Loan within two years. If the Convertible Loan is not repaid within this period, De Engh has an option (from the end of year two) to convert the outstanding loan balance to ordinary shares in Accsys at €2.30 per share (representing a 31% premium to the closing share price on 3 March 2022), otherwise the interest rate increases by 2% in year three and by a further 2% the following year if the loan has not been repaid or converted after 3 years. The maximum term of the Convertible Loan is 3.5 years

 

36.       Events occurring after 31 March 2022

 

Capital raise

 

In May 2022, Accsys completed a successful Placing for an issue of shares in the Company, raising gross proceeds of approximately €20 million. The net proceeds of the Issue will be used to strengthen the Company's balance sheet, increase liquidity headroom and fund additional costs to complete the Arnhem Plant Reactor 4 ("R4") capacity expansion. The Issue will also provide increased working capital in FY23 to support the wider Accsys organisation in what is a pivotal year, as the equivalent of an additional 60,000m³ of new capacity projects are due to come online, increasing the total capacity at Group level to 120,000m³