Accsys Technologies PLC

Executive Chair's Report

Introduction

Accsys has made significant progress in the 2023 financial year as it moves forward with its ambitious plans for growth, despite particularly challenging macro-economic conditions, which include the ongoing war in Ukraine, an energy crisis, rising inflation, supply chain disruption and the pressing need to address climate change. The resilience of our business against this difficult backdrop is testament to the attractiveness of our products, the strength of our business model and the talent and the commitment of our people. 

Overview of the year 

The successful completion and startup of reactor 4 in Arnhem, together with reactors 1-3 returning to production after the plant's shutdown in April and May 2022, has led to 6% growth in volumes this year, and our highest ever volume production in Q4. Demand for our Accoya and Tricoya wood has been strong (and in excess of our capacity) as customers continue to seek products that deliver outstanding performance, durability and sustainability. 

The Company delivered very strong  revenue growth for the year, underpinned by strong product demand and increases in average sales prices, despite the production outages linked to the completion of reactor 4 highlighted above. Underlying EBITDA more than doubled year on year, ahead of our original expectations, reflecting the increased average sales prices and an energy price surcharge mechanism which have successfully offset raw material cost increases, including the impact of volatile and elevated acetyl and energy prices in Europe. The core Accoya business is trading well, has momentum and is cash generative after a period of investment made to get reactors 1-4 installed and operating well.  

The year has not been without its challenges. In November we announced that while we had taken 100% control of the world-first Tricoya project in Hull, we also put the project into a hold period to assess future capability and funding options. While further work is required to prove the working capabilities of the plant, we have made good progress on this review over the past six months. We have also been assessing the cost to complete the project, developing extensive and detailed work packages in order to do so. This work stream has confirmed our original assessment of the costs to complete the project as up to €35m.

Over the period, we have also continued to sell Accoya to our off-take partners, MEDITE and FINSA, both of which convert Accoya wood into Tricoya and help seed the market.  We continue to see good levels of market demand for the product, which reaffirms our view of the long-term market potential for Tricoya. Ongoing discussions with both partners about future arrangements following completion of the plant remain positive. 

We have also been in discussions with certain strategic partners with a view to providing appropriate funding necessary to complete the Hull plant's construction. To date, the Company has been unable to reach acceptable terms with any of these strategic partners. 

In view of the strong market dynamics underpinning Tricoya, the Board of Accsys continues to believe in the underlying attractive economics and margins associated with completing the construction of Hull and therefore will continue to explore funding options to support the plant's construction, including strategic partners and lending institutions. Absent the availability of third-party funding, the Company will use modest levels of internally generated cash to maintain the plant and progress certain pre-construction works. The Board will continue to engage with stakeholders in respect of Hull and its future prospects. Despite its belief in the future potential for Tricoya, the Board is clear that the base Accsys business must not be compromised to find a solution for Hull. In the meantime, we will continue to work with our partners to further develop the Tricoya market using Accoya, including exploring the expansion of dedicated capacity for greater volume production within our existing facilities.  

We have made good progress with our Accoya USA JV with Eastman. However, as previously communicated, the project has experienced some delays and cost inflation. Both Accsys and Eastman remain fully committed to delivering the project, which will replicate the proven technology of our successful plant in Arnhem.

FY23 has been another important year for customer relationships, during which we have had to manage inflationary cost increases through higher prices, ongoing disruption to supply chains post the COVID-19 pandemic and our own production capacity limit in the face of strong customer demand. We are grateful to our customers for their continued support and have engaged in regular dialogue with them as we navigate these challenging market conditions.   

During the year Accoya's high level of performance and sustainability was recognised in various prestigious global industry awards. Accolades include the EmiratesGBC 'Green Building Product of the year' and the 'Best of Products' award from The Architect's Newspaper, USA for Accoya Color Grey. We have been delighted to see Accoya installed and specified on some flagship architectural projects from London to Rome to the Red Sea, including Google, where Accoya has been specified on its new HQ 'landscraper' building in Kings Cross, London.

Summary of financial performance  

Accsys delivered revenues of €162.0m, a 34% increase on the FY22, reflecting continuing strong demand for our products, higher average sale prices and the implementation of an Energy Price Premium to mitigate higher gas prices.

Underlying EBITDA was €22.9m, an increase of 120% on the prior year, and ahead of our previous market guidance of nearly doubling last year's EBITDA of €10.4m.  

Group gross margin increased by 4% to 34%, aided by the higher average sales prices outlined above. Underlying profit before tax increased by €9.7m to €11.0m. Statutory loss before tax was €67.1m.

Net debt increased by €16.9m in the year to €44.1m due to the planned investment into Accoya USA (€29m), capex investments of €29.8m into the Arnhem reactor 4 and Tricoya Hull projects (partially offset by a placing in May 2022 which raised net proceeds of approximately €19.0m), the reduction in the NatWest loan (€9.4m) and EBITDA generation during the year. 

Strategic update

Accoya

During the period we were pleased to complete the expansion of our plant in Arnhem which adds a new 20,000 cubic metres reactor, enabling the site's maximum annual capacity to increase to 80,000 cubic metres.

As previously reported, we experienced some unexpected delays in the final installation, tie-ins and supply of certain equipment for reactor 4, which resulted in an unexpected second shutdown across the plant in April and May 2022. In addition, during the commissioning and testing period in June 2022, we identified a number of defects to equipment which were repaired over the following eight weeks.   

As a result, reactor 4 commenced commercial operation in September 2022. Further work on optimising reactor 4 - to reduce cycle times and deliver more capacity - is planned for the coming year.  In addition, investment in new stacking technology is ongoing which will provide efficiency improvements across the plant's work centres.  

North America represents the largest potential regional market for our product.  Under our joint venture with Eastman, a world leader in the production of acetyls, we are building an Accoya plant in the USA with an initial approximate 43,000 cubic metres capacity at Eastman's Kingsport, Tennessee site. Under the joint venture, Accsys holds a 60% interest and Eastman a 40% interest.

We have made good progress with the construction of the plant, which commenced in April 2022. Key milestones include the completion of ground works, ongoing steelwork and main warehouse construction, installation of the reactors on site, placement of multiple large sub-contracts and procurement of more than 80% of major equipment.  As we move towards completion of the plant, we will increase our investment in people and infrastructure in readiness of start-up and as a result, the project will incur higher costs in the coming year. As announced in May, the project has experienced some delays and cost inflation, which is being experienced throughout the construction industry. Both joint venture partners continue to be fully engaged in delivering this strategically important project, which will replicate the proven technology of our successful plant in Arnhem. In line with our group commitment to Health & Safety, this has been established as a key priority at the site and by the 2023-year end we were able to celebrate over 150,000 hours worked with only one minor first aid injury. 

Our 50,000 square foot Accoya Color manufacturing plant in Barry, Wales, has increased our ability to convert Accoya wood into Accoya Color - a product which combines the benefits of Accoya wood with colour all the way through the wood from surface to core.  The site has a maximum capacity of 12,500 cubic metres per annum. During the year we made operational improvements to the site which have enabled us to increase production by 140% to 4,010 cubic metres.  More importantly, this will allow us to further increase future production in FY24 and to support growing customer demand.    

Accoya Color's unique proposition is proving to be very attractive to customers in our target markets, particularly in the decking category where the surface-to-core grey colour requires less maintenance to retain over the long term. In addition to the product's existing markets of Germany, Switzerland, Austria and the US, Accoya Color was launched this year into the new markets of Australia, New Zealand and France.  

Accoya Color generates a higher gross profit per cubic metre than Accoya and will enhance our product margins over time.  As we increase our Accoya production capacity, we continue to expect increased Accoya Color sales in the medium term. 

At the end of FY23, Accsys launched a new UK national advertising campaign, "Lasts a Lifetime", highlighting the high performance of Accoya wood to homeowners. The campaign launched with a commercial on Sky TV targeting a subset of the homeowner market audience, supported by digital advertisements running through the European spring months.

Tricoya

Accsys and its former consortium partners in Tricoya UK Limited (TUK) have been building the world's first Tricoya plant in Hull. In November 2022 Accsys agreed with its partners - Ineos, MEDITE, BGF and Volantis - to acquire 100% ownership of the plant and the Tricoya group entities (Tricoya Technologies Limited and TUK), in exchange for 11.9m new shares in Accsys, representing 5.74% of its issued share capital at that date. Ineos and MEDITE remain commercial partners with Accsys, retaining their respective acetyls supply and acetylated wood chip off-take agreements. The reorganisation gives Accsys the option to take the Tricoya Hull Project forward on its own terms and to benefit from 100% of the long-term returns from Tricoya, including any future licencing in respect of the global Tricoya market opportunity.

At the same time, the Company announced the restructuring of the debt arrangements between TUK and NatWest, resulting in the principal debt being reduced by €9.4m to €6.0m with a new seven-year term, and no capital repayments during this period.

The Company stopped site activity in November, placing the project into a hold period to mitigate the risk of weaker economics on start-up (due to the high and volatile acetyls raw material prices in Europe) and to allow the Board time to assess the economics and capability of the plant and its potential returns on investment.

While further work is required to prove the working capabilities of the plant, we have made significant and positive progress on this review over the past six months. Please see further details on progress with the Board's review in the Executive Chair's Report.  

Building organisational capability

We are making good progress in developing our people and organisational capabilities to manage growth. Post the year end, the Company boosted its expertise in the areas of large capital project management, cost management and financial forecasting through the appointments of Dr. Jelena Arsic van Os as CEO and Steven Salo as CFO, both of whom have significant experience in these areas.  As we increase our manufacturing output, we are strongly focused on strengthening our manufacturing expertise and leadership. Key senior management appointments during the year include a Group Manufacturing and Projects Director, a newly created role which will support Accsys as we expand our operations and develop our global reach. Management has also been strengthened by the appointments of new Managing Directors of Tricoya UK and Accoya Color.   

We rely on the skills, experience and commitment of our people to meet our business goals and to that end, are committed to investing in their careers. During the year we increased the number of training and development opportunities for our colleagues around the group, providing 8,579 total training hours in FY23, representing 32.5 training hours per colleague. This year's performance is an increase of 526 hours on the prior year and 4,619 hours since FY21. Together with new leadership training programmes and talent mapping, this is an ongoing process to ensure we have the right skills and talent in place to grow our business effectively.     

Innovation & Technology 

We conduct regular strategic reviews of our engineering and technology capabilities and other actions to drive improved delivery of capital and innovation projects. This has led to the creation in FY22 of a Global Engineering Centre and Project Management Office, and further development of our R&D function. During the year we increased our skills and talent in key areas including project and portfolio management in addition to engineering, wood (modification) science and analytical capabilities.

Our R&D team is focused on both process and product innovation which impact the short, medium and long-term future of the business. With production capacity recently expanded in Arnhem, process optimisation and reliability remain core areas of focus. Our R&D team works closely with our Sales & Marketing teams to understand evolving consumer needs and to assess where innovation can meet those needs.

To build resilience and mitigate risk in our supply chain our R&D and Supply Chain teams have been exploring alternative wood species to Radiata pine. The properties of Radiata pine from certain regions make it well suited to our proprietary acetylation process. It is also fast growing and available from certified sources, making it a sustainable choice. However, we want to broaden our wood supply, both in terms of species and source location to de-risk our operations as we grow.

This year we were pleased to see positive results from long-term trials of Accoya made from fast growing Taeda pine from Argentina and Uruguay with ideal growing conditions and forestry practices and mills that can meet our requirements. For example, Accoya cladding made from Taeda has been used to clad the Starbucks building in Wakefield, UK. Installed in 2020, it has shown the same durability and performance as Radiata pine. Being able to source Taeda from South America also makes it an ideal option for supply to the Kingsport, Tennessee plant. Over the coming year we will be continuing this work with the view to beginning official commercial production of Accoya with Taeda.

Intellectual Property

Accsys continues to invest in developing and protecting its valuable portfolio of intellectual property and confidential information. Our technology covers not only the physical equipment and engineering that underpins our manufacturing and production, but also the processes and methodology we follow in our supply and production chain: from the way we source our wood, through our wood modification process, to the way we market and sell Accoya and Tricoya. 

Accsys' holds c.388 patent family members covering 28 distinct inventions in 45 countries with 75% of the patent family members now granted. The core technologies associated with our current and future plants for the production of Accoya and Tricoya wood products are protected by using a combination of patenting and branding and trade secrets to maintain our differentiation in the marketplace and interest to potential licencing partners. Our principal trademark portfolio covers our Accoya and Tricoya brands, the Trimarque device and the Accsys company name, protected by registrations in over 60 countries.

ESG

With its stated purpose of 'Changing wood to change the world', Accsys is committed to growing and operating its business in a responsible and sustainable way. Aligned with our values and business strategy, our ESG framework outlines 10 key material issues and impact areas on which we are primarily focused.

Having completed Stage One of our 2020 sustainability strategy roadmap, we are now in Stage Two and are focused on establishing specific development plans, including setting Science Based Targets (SBTs) to reduce our emissions intensity per cubic metre of Accoya produced.

Building on our commitment to transparency, Accsys participated for a second consecutive year in the S&P Global Corporate Sustainability Assessment.  Accsys scored 43/100 - an improvement of five points (13%) on the prior year, placing the Company in the top quintile in the 'Paper & Forest Products' industry category.    

Through our expanding safety programme which includes increased monitoring, a defined strategy and increasing awareness, we are building a stronger safety culture across the organisation. During the year the Company rolled out a number of dedicated safety learning programmes and initiatives, including a Health & Safety month in February 2023 which gave our colleagues the opportunity to participate in group discussions on safety improvement, training sessions and guest speaker events.

During the year we completed a Board performance evaluation and internal review which complements our three-yearly cycle of external evaluations. The results of the evaluation confirmed the individual and collective commitment and effectiveness of Directors. The evaluation also supports the Board in understanding areas of focus as part of its continuous improvement.

Health & Safety (HSE)

Health & Safety is a top priority for the Board and for Accsys, and the Board-level HSE Committee established in 2022 has helped support the Board's focus on this key area. Accsys has set 'Zero Harm' as a key target for our operations and is committed to developing best practice HSE across the Company.   

During FY23 we held regular safety briefings for all colleagues and have issued monthly communications to encourage greater awareness of safety. As awareness around safety grows, we have seen corresponding improvements in key HSE performance metrics. During the year we introduced a digital version of our safety observation card, submissions of which grew from 1,060 in FY22 to 1,316 this year. In addition, we have maintained our momentum in leadership safety tours, holding almost 700 tours over the year. We are pleased to report that our Total Recordable Incidence Rates improved from 5.2 to 3.6 per 200,000 hours worked. Our Lost Time Incident Rate per 200,000 hours worked, however, increased from 0.52 to 0.96 (versus our target 0.5).

Energy & Climate Change

Our approach to Energy & Climate includes a focus on energy efficiency and process optimisation, assessing the carbon impact of our products and integrated climate considerations and activities (e.g. risks and opportunities) across multi-functions across the business.

We are innovating to minimise our environmental impact across our operations, in accordance with our Climate Change Policy, whilst sourcing our raw materials responsibly. In 2023 we established a steering committee at our Arnhem site to focus on carbon intensity reduction per cubic metre of Accoya produced. Additionally, we are using our Scope emissions data to set carbon reduction targets in alignment with the Science Based Targets Initiative (SBTi).

Society & Communities

Accsys has developed a more structured approach to charitable and community support and its environmental impact through tools such as charitable giving and colleague engagement. During the year our colleagues chose three official charity partners to support. In total Accsys pledged total donations of €72,219 towards charitable activities as well as participating in our chosen charities' missions through a number of activities, events and presentations. 

In January we organised a colleague volunteering day with our charity partner Trees4All. Accsys colleagues were invited to join volunteers from across The Netherlands to plant trees in the Groene Woud, NL. The day resulted in around 2,000 trees going into the ground and gave our colleagues the opportunity to give back to the local community and learn about reforestation.

A one-off donation was also approved by our Charities Committee to support the Turkey/Syria Earthquake appeal in support of several colleagues who had relatives and friends in affected areas.

Sustainable & Quality Products

We are committed to a more sustainable world and use abundantly available wood sources, certified as sustainable by the Forest Stewardship Council® (FSC®). Our commitment to responsible sourcing and manufacturing is recognised by leading accreditation bodies. This year we achieved Cradle to Cradle® (C2C) gold certification for Accoya Color Grey, as well as being awarded 'Platinum' level (the highest level) for both 'Material Health' and 'Water Stewardship'. Our core product, Accoya has held C2C certified status since 2010. C2C certified is the global standard for products that are safe, circular, and responsibly made. Accoya wood is one of the very few building products to have acquired C2C certification on the stringent Gold-level. This represents very high standards of sustainability, alongside the recognised high performance and durability credentials of the brand.

Capital Raise

In May 2022 the Company completed a €19m net capital raise from shareholders to support the completion of current capital projects and increase working capital and cashflow headroom. We extend our thanks to shareholders for their continuing support and investment in Accsys.

Board Update

The Board's composition brings depth and a range of experience to Accsys, both supporting and challenging the Executive team in the execution of the Company's strategy. Post the year end there has been considerable change, with Rob Harris, Accsys' Chief Executive Officer, stepping down after three years, and Will Rudge deciding to leave the Company after 12 years as Chief Financial Officer.

Rob Harris is succeeded by Dr Jelena Arsic van Os, who will join the Board as CEO on 1 July 2023, at which point I will return to my prior role as independent Non-Executive Chair of Accsys. Jelena has over 20 years' experience in senior executive leadership roles in large-cap multinational companies and has a proven track record in transforming and driving complex businesses, delivering on profitable growth targets and successfully delivering large capital projects.  We are grateful to Rob Harris and wish him success in his future endeavours.

Will Rudge is succeeded by Steven Salo, who joined Accsys on 1 April 2023. Steven brings significant experience in senior financial leadership roles, executing high-value corporate and business development transactions, and driving and shaping businesses for profitable growth.  We take this opportunity to thank Will Rudge for staying on to support Accsys and transition his responsibilities to Steven and wish him all the best with the next step in his career.

Post the year end, in May 2023 we announced that as they reach the end of their nine-year terms, Sue Farr and Sean Christie, who chairs the Audit Committee, will step down from the Board at the conclusion of the AGM in September 2023. In addition, due to increases in his executive commitments, Alexander Wessels, who chairs the Company's Remuneration Committee, will also step down from the Board at the upcoming AGM at the end of his current three year term. 

The Board is seeking to appoint two new high-quality and experienced independent Non-Executive Directors, with the intention of one acting as Chair of the Audit Committee, and the second as Chair of the Remuneration Committee. The search for both these roles is well underway and the Company plans to give further updates ahead of the AGM in September.   

The Board would like to thank Sue and Sean for their significant contribution to Accsys over the last nine years and for the support and guidance they have given to newer members of the board. The Board also thanks Alexander for his invaluable input to Accsys over the last three years through his experiences as a CEO.  We look forward to adding two new high-quality Non-Executive Directors to the Board in due course as we look to deliver on Accsys' significant potential. 

Outlook

In the coming year we expect to leverage the benefits from greater economies of scale associated with higher production volumes at our plants. FY24 will also be a year during which we will implement actions to ensure the future sustainable growth of the business and to drive value creation for our shareholders. These actions include moving towards completion of the Kingsport plant, which will incur higher costs this year as we invest in people and infrastructure in readiness for start-up and making key investments in the core business to support higher volume production.  In view of our increased capacity from the expansion of Arnhem and future capacity from Kingsport, and in light of the softening of price and demand in the global construction industry, we are dedicating more resource to our sales and marketing activity globally, particularly in the US, to prepare for a greater level of supply as this project comes online.

We have made a good start to FY24, with performance in line with our expectations. With our new executive management team in place to drive the business forward in its next phase of growth, we are confident in delivering further financial and operational progress in the coming year, and in the longer-term demand and growth opportunity for Accoya and Tricoya.

Stephen Odell

Executive Chair

26 June 2023

Accsys Technologies PLC

Finance Review

Introduction

Accsys has delivered a good performance in the year, with 34% revenue growth and a 120% increase in Underlying EBITDA to €22.9m, driven by increased sales prices and strong ongoing demand for our products.

Net debt increased by €16.9m in the year to €44.1m due to the planned investment into Accoya USA (€29m), capex investments of €29.8m into the Arnhem reactor 4 and Tricoya Hull projects (partially offset by a successful placing in May 2022 which raised net proceeds of approximately €19m), the reduction in the NatWest loan (€9.4m) and EBITDA generation during the year.

In November 2022 Accsys agreed to acquire full ownership of the Tricoya entities, including the Tricoya Hull plant from its consortium partners for a consideration in Accsys shares (valued at €9.5m). At the same time, the debt facility between TUK and NatWest was restructured, resulting in the principal debt being reduced to €6m, with a new seven-year term and no capital repayments during this period.

Following these events, an impairment assessment was required to be performed under IAS 36 (Impairment of Assets) on the Tricoya segment's gross assets with an impairment loss of €86m being recognised as a non-cash exceptional item. The calculated impairment was impacted by:

1)    A previously reported increase in the capex to complete the construction of the Tricoya Hull plant of €35m, commencing in 2 years;

2)    A higher pre-tax WACC rate (used for the discount rate) increasing by 3.0% to 13.5%, principally due to higher market interest rates; and

3)    A decrease in the production volume forecast for the plant to 24,000MT (from 30,000MT).

Statement of comprehensive income

Group revenue increased by 34% to €162.0m for the year (FY22: €120.9m), driven by continuing strong market demand for Accoya and Tricoya and an increase in average sales prices during the year and prior year implemented to address rising raw material costs. An energy price premium (surcharge) was also successfully added to customer sales prices in H1 to offset a significant increase in acetyl costs.  

Accoya sales volumes increased 6% to 63,344m³ following the successful commissioning and operation of reactor 4 in September 2022. We have continued to see strong underlying demand for Accoya across our regions and with our Tricoya panel manufacturing partners. The FY23 regional sales trend on a year-on-year basis reflects a 10% increase in sales volumes in North America where we continue to increase marketing, sales, and allocation of product volumes available to customers as we develop this market ahead of our US capacity expansion.

Sales volumes increased by 18% to our Tricoya customers (MEDITE and FINSA) following a drop in allocation in FY22. These sales to MEDITE and FINSA for the manufacture of Tricoya panels are used to develop the market for Tricoya products and represent 24% of Accoya sales volumes (FY22: 22%).

Other Revenue, which predominantly relates to the sale of our acetic acid by-product, increased by 21% to €16.8m   (FY22: €13.9m) due to higher acetic acid sales volume following the ramp up of production from reactor 4 in Arnhem. Accsys' sales of its acetic acid by-product back into the same acetyls market continued to act as a partial hedge to the higher acetic anhydride costs. The net acetyls cost increased by 19% compared to the prior year.

Raw wood input costs were moderately higher although more stable than the wider lumber market as we purchase appearance-grade wood under long-term supply contracts with many of our partners.

Cost of sales increased by 26%, on 6% higher sales volumes and higher cost of raw materials, primarily in higher raw wood and acetic anhydride costs.

Group gross profit of €55.2m was 53% higher than the prior year (FY22: €36.0m) and gross profit margin increased 4% to 34%.

Underlying other operating costs (excluding depreciation and amortisation) increased from €25.4m to €31.6m. This is due to Tricoya's ongoing running costs being treated as operating expenditure in the second half following the introduction of Tricoya UK's hold period and increased legal, insurance and staff costs during the year.

Depreciation and amortisation charges increased by €2.1m to €8.3m following commercial production from reactor 4 in September 2022.

Underlying finance expenses increased €0.3m to €3.2m following the interest on Tricoya UK's NatWest facility not being capitalised post the introduction of the hold period for Tricoya UK and a full year of interest cost on the De Engh €10m loan which was entered into March 2022.

An impairment loss (exceptional item) of €86.0m has been recognised in the year relating to the Tricoya segment. The calculated impairment is described in the Introduction and has been recognised as a non-cash exceptional item.

In regard to the Tricoya Consortium reorganisation completed during the year, the following exceptional items have been recognised:

-       €1.5m expense for advisory fees incurred;

-       €9.4m income related to the restructuring of the NatWest loan, decreasing the principal debt from €15.4m to €6m; and

-       €1.4m expense related to the value recovery instrument provided to NatWest, allowing NatWest to recover up to approximately €9.4m, on a contingent basis, depending on the profitability of the Tricoya Hull plant once operational (see note 23).

An exceptional foreign exchange gain of €1.4m was recognised related to US dollars held as cash for investment into Accoya USA, which were invested into the joint venture in the first half. Following the May 2021 capital 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, Financial Instruments, and therefore the foreign exchange gain on the revaluation of the US dollars has been accounted for in Finance Expenses as an Exceptional item.

In the prior year, redundancy costs of €0.1m were recognised in relation to the purchase of assets in Barry, UK and €1.6m early termination costs related to the refinance of the Group debt facilities in October 2021, with both classified as exceptional items.

No other adjustments have been recognised in the current year, which were previously also excluded from underlying results. These other adjustments related to foreign exchange differences on the US dollar cash pledged to ABN Amro for the Letter of Credit provided to First Horizon Bank ('FHB') as part of the Accoya USA funding arrangements and pound sterling loan notes repaid in the October 2021 Group refinance. See note 5 for further details.

Underlying profit before tax increased by €9.7m to €11.0m (FY22: €1.3m). After taking into account exceptional items (including the impairment loss) and other adjustments, loss before tax amounted to €67.1m (FY22 profit: €1.7m).

The tax charge increased by €1.8m to €2.8m (FY22: €1.0m).

Underlying earnings per share increased to €0.05 per share (FY22: €0.01 per share). A statutory loss per share was recognised of €0.19 per share (FY22: profit of €0.01 per share).

Cash flow

Cash flows generated from operating activities before changes in working capital increased by €11.3m to €22.7m (FY22: €11.4m), reflecting continued good operational cash flow generated by our plant in Arnhem.

Inventory levels increased by €9.6m during the year with higher raw material levels held due to the ramp-up of the fourth reactor, which increases production capacity by 33% but which was also partially impacted by the delay in start-up of reactor 4 and the long lead time for raw material purchases from New Zealand. Inventory balances started to decrease in H2 and are expected to continue to decrease further in the next financial year.

In May 2022 Accsys completed a successful placing for an issue of shares in the Company, raising net proceeds of approximately €19.0 million which have been used to strengthen the Group's balance sheet, increase liquidity headroom and provide additional working capital and fund additional costs to complete Arnhem's expansion project.

At 31 March 2023 the Group held cash balances of €26.6m, a €15.5m decrease in the year, attributable to construction costs relating to the Arnhem plant expansion project (€7.9m), Tricoya Hull project (€20.1m), the planned investment into Accoya USA (€29m) and the increase in inventory referred to above. This was partially offset by the placing, €10.0m of proceeds from loans (explained further below), and cash flow generated from operating activities. When adjusting for the cash pledged for the Letter of Credit provided to FHB of $10.0m (see note 30), and in the prior year adjusting for the remaining cash raised in the May 2021 equity raise to be invested into Accoya USA, Adjusted Cash increased during the year to €16.8m (see note 30).

Financial position

Plant and machinery additions of €21.4m (FY22: €41.0m) consisted of the construction of reactor 4 in Arnhem and the Tricoya plant in Hull.  

Trade and other receivables increased to €18.1m (FY22: €16.9m), primarily due to higher sales following the ramp up of reactor 4. 

Trade and other payables decreased €4.0m to €25.9m (FY22: €29.9m), with a decrease in accruals following the completion of the Arnhem expansion project and the decrease in activity on the Tricoya plant in Hull.

Amounts payable under loan agreements increased to €65.9m (FY22: €64.0m) due to the drawdown of €5.0m on the ABN Revolving credit facility and €5.0m on the Tricoya NatWest €17.2m facility, capitalisation of interest on the Tricoya NatWest loan before the Tricoya NatWest facility was restructured, decreasing the principal debt from €15.4m to €6.0m.

Net debt increased by €16.9m in the year to €44.1m (FY22: €27.2m) due to capex investments of €29.8m, investment into Accoya USA (€29m) and the increase in inventory partially offset by the successful placing (net proceeds of €19.0m), cash flow generated from operating activities and the restructuring of the Tricoya NatWest facility, decreasing the principal debt on the facility by €9.4m to €6.0m.

Going concern

The 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 30 for details of these facilities). The Directors have also assessed a severe but plausible downside scenario with reduced sales volumes and lower gross margin, also reflecting the possible impact of volatile raw material costs.

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. In both scenarios, the Directors have assumed no commitment will be made to complete the construction and start-up of the Tricoya plant in Hull until appropriate funding arrangements have been put in place.

The Directors' have taken into account the reorganisation of the Tricoya consortium and restructuring of its bank debt completed in November 2022 which resulted in Accsys becoming the 100% owner of the Tricoya Hull plant and the commitment to fund ongoing working capital during the hold period. The Directors' have also considered the possible amount and timing of capital expenditure required to complete the Accoya plant in the USA, noting that notwithstanding that the construction project benefits from certain contractual measures in place with the lead construction contractor, Accsys has committed to fund its 60% share of cost overruns, should they arise.

The Directors believe 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.

Steven Salo

Chief Financial Officer

26 June 2023

Accsys Technologies PLC

Consolidated statement of comprehensive income for the year ended 31 March 2023

The notes on form an integral part of these financial statements.

* See note 5 for details of exceptional items and other adjustments.

Accsys Technologies PLC

Consolidated statement of financial position at 31 March 2023

Registered Company 05534340

The financial statements were approved by the Board of Directors on 26 June 2023 and signed on its behalf by

Stephen Odell                                                                      

Steven Salo                                                                                      Directors

The notes form an integral part of these financial statements.

Accsys Technologies PLC

Consolidated statement of changes in equity for the year ended 31 March 2023

Share capital is the amount subscribed for shares at nominal value (note 25).

Share premium account represents the excess of the amount subscribed for share capital over the nominal value of these shares, net of share issue expenses. Share issue expenses comprise the costs in respect of the issue by the Company of new shares.

See note 26 for details concerning Other reserves.

Non-controlling interests relate to the previous investment of various parties into Tricoya Technologies Limited and Tricoya UK Limited. The Group purchased the remaining shareholding in the Tricoya entities in the year (see notes 27 and 28).

Foreign currency translation reserve arises on the re-translation of the Group's USA subsidiary's net assets which are denominated in a different functional currency, being US dollars.

Accumulated losses represent the cumulative loss of the Group attributable to the owners of the parent.

The notes form an integral part of these financial statements.