Preliminary results for year ended 31 March 2019

Accsys Technologies PLC

 

Notes to the financial statements for the year ending 31 March 2019

 

1.         Accounting Policies

 

General information

 

The financial information set out in these preliminary results does not constitute the company's statutory accounts for the periods ended 31 March 2019 or 31 March 2018. Statutory accounts for the period ended 31 March 2018 have been filed with the Registrar of Companies and those for the period ended 31 March 2019 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 period ended 31 March 2018 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 period ended 31 March 2019 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 International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board as endorsed by the European Union, interpretations issued by the IFRS Interpretations Committee (IFRS IC) and with those parts of the Companies Act 2006 applicable to companies preparing their financial statements under adopted IFRS.

 

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 reviewed the Group's trading forecasts and working capital requirements for the foreseeable future taking into account the banking and finance facilities which are currently in place (see note 29 for details of these facilities). These forecasts indicate that, in order to continue as a going concern, the Group is dependent on the achievement of 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 level and timing of capital expenditure required in relation to the new plant in Hull which is currently being built and further expansion of the Arnhem operation (with further details of the required capital expenditure and how this is to be financed to be confirmed as the detailed planning progresses).

 

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, that there is no material uncertainty. 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 achieve the Group's medium and long term objectives including reducing / deferring costs in some discretionary areas.

 

Therefore the Directors believe that the going concern basis is the most appropriate on which to prepare the financial statements.

 

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. 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 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. When a customer provides untreated wood to be processed by the Group in order to produce Accoya^®, revenue is recognised when the Group's performance obligations under the relevant customer contract have been satisfied, which is before the finished Accoya^® has been collected by the customer. 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 expense

 

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 is 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.

 

Finance expense also includes an allocation of finance charges in respect of the sale and leaseback of the Arnhem land and buildings (the majority of the land and buildings were repurchased during the year, with finance charges being incurred up to the purchase date, further details on this repurchase are included in note 5 and 28), and the lease of London Office fit out and furniture, accounted for as a finance lease. The total finance charge (calculated as the difference between the total minimum lease payments and the liability at the inception of the lease) is allocated over the life of the lease using the sum-of-digits method.

 

Share based payments

 

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

 

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, and

·      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 profit 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 has been recognised in the consolidated statement of comprehensive income.

 

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 2 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

 

Operating lease payments are recognised as an expense in the consolidated statement of comprehensive income on a straight-line basis over the lease term.

 

Assets held under finance leases are recognised as assets of the Group at their fair value or, if lower, at the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the consolidated statement of financial position as a finance lease obligation. Lease payments are apportioned between finance expenses and reduction of lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability.

 

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.

 

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.

 

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.

 

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. The Chief Executive 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. These measures, referred to as Alternative Performance Measures (APMs), are prepared on a consistent basis for all periods presented in this report.

The most significant APMs are:

 

Net debt

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

 

Underlying EBITDA

Operating (loss)/gain before Exceptional items and other adjustments, depreciation and amortisation. Underlying EBITDA provides a measure of the cash-generating ability of the business that is comparable from year to year.

 

Underlying EBIT

Operating (loss)/gain before Exceptional items and other adjustments. 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.

 

 

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

 

Useful economic lives of property, plant and equipment

The annual depreciation charge for property, plant and equipment is sensitive to changes in the estimated useful economic lives and residual values of the assets. The useful economic lives and residual values are re-assessed annually. They are amended when necessary to reflect current estimates, based on technological advancement, future investments, economic utilisation and the physical condition of the assets. See note 17 for the carrying amount of the property plant and equipment, and note 1 for the useful economic lives for each class of assets.

 

Inventories

The Group reviews the net realisable value of, and demand for, its inventory on a monthly basis to provide assurance that recorded inventory is stated at the lower of cost and net realisable value after taking into account the age and condition of inventory.

 

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 judgments 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.

 

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). 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. The Group also reviews the estimated useful lives at the end of each annual reporting period (See note 16 & 17). The price of the 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.

 

Financial asset at fair value through profit or loss

The Group has an investment in listed equity shares carried at nil value.  The investment is valued at cost less any impairment 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 assess whether any impairment has occurred (See note 18).

 

Taxation

 

The tax charge for the year ended 31 March 2019 has reduced compared to the prior year as a result of a change to the group's transfer pricing policy to more accurately reflect the business model.

 

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 Ventures UK Limited (TVUK). The Group has consolidated the results of TTL and TVUK as subsidiaries, as it exercises the power to govern the entities in accordance with IFRS 10. See note 9.

 

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 2018 and have had no significant impact on the Group or parent company's results:

 

•              IFRS 15 - Revenue from contracts with customers

•              Annual improvements 2014 - 2016 cycle

•              Amendments to IAS 40 - Investment property

•              Amendments to IFRS 2 - Share based payments

•              Amendments to IFRS 4 - Insurance contracts

•              IFRIC 22 - Foreign currency transactions and advance consideration

 

IFRS 9 - Financial instruments was early adopted in the previous financial year beginning 1 April 2017.

 

New standards, amendments and interpretations not yet adopted

At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective (and in some cases had not yet been adopted by the EU):

 

•              Annual improvements 2015 - 2017 cycle

•              Amendments to IAS 19 - Employees Benefits

•              Amendments to IAS 28 - Investments in associates and joint ventures

•              Amendments to IFRS 9 - Financial instruments

•              IFRIC 23 - Uncertainty over income tax treatments

 

The above standards are expected to be adopted when they become mandatorily effective.

The Group continues to assess the impact of IFRS 16 Leases which will be effective for periods beginning 1 January 2019, and will be adopted by the Group in the financial year beginning 1 April 2019. The standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset is of low value. The most significant impact of IFRS 16 will be that the Group's leased properties, which are currently classified as operating leases, will be recognised as a lease liability with a corresponding "Right of use" asset in the Consolidated Statement of Financial Position. The Group expects to adopt the modified retrospective approach to transition. Our initial estimated impact is to recognise right-of-use assets and associated lease liabilities of between €1.8 million to €2.2 million.

The Directors do not expect that the adoption of any of the remaining Standards and Interpretations listed above to have a material impact on the financial statements of the Group in future periods.

 

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 ending 31 March 2019 Underlying	Year ending 31 March 2019 Exceptional items & Other Adjustments	Year ending 31 March 2019 TOTAL		Year ending 31 March 2018 Underlying	Year ending 31 March 2018 Exceptional items & Other Adjustments	Year ending 31 March 2018 TOTAL
	€'000	€'000	€'000		€'000	€'000	€'000
Accoya® wood revenue	66,949	-	66,949		56,331	-	56,331
Licence revenue	1,043	-	1,043		-	-	-
Other revenue	5,916	-	5,916		4,380	-	4,380
Total Revenue	73,908	-	73,908		60,711	-	60,711
Cost of sales	(55,960)	-	(55,960)		(47,270)	-	(47,270)
Gross profit	17,948	-	17,948		13,441	-	13,441
Other operating costs excluding depreciation and amortisation	(8,955)	-	(8,955)		(8,797)	(348)	(9,145)
EBITDA	8,993	-	8,993		4,644	(348)	4,296
Depreciation and amortisation	(3,508)	-	(3,508)		(2,661)	-	(2,661)
Profit/(Loss) from operations	5,485	-	5,485		1,983	(348)	1,635

 

Revenue includes the sale of Accoya^®, licence income and other revenue, principally relating to the sale of acetic acid and other licensing related income.

 

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

 

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

 

Average headcount = 117 (2018: 105)

 

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.

						2019	2018
						€'000	€'000
Accoya® segmental underlying EBITDA						8,993	4,644
Accoya® Licence Income						(1,043)	-
Other income, predominantly for marketing services						(172)	(253)
Accoya® segmental underlying EBITDA (excluding. Licence Income)						7,778	4,391
Accoya® segmental gross profit						17,948	13,441
Accoya® Licence Income						(1,043)	-
Other income, predominantly for marketing services						(172)	(253)
Accoya® manufacturing gross profit						16,733	13,188
Gross Accoya® Manufacturing Margin						23.0%	21.8%

 

 

 

 

Tricoya^®

 

	Tricoya® Segment
	Year ending 31 March 2019 Underlying	Year ending 31 March 2019 Exceptional items & Other Adjustments	Year ending 31 March 2019 TOTAL		Year ending 31 March 2018 Underlying	Year ending 31 March 2018 Exceptional items & Other Adjustments	Year ending 31 March 2018 TOTAL
	€'000	€'000	€'000		€'000	€'000	€'000
Tricoya® panel revenue	634	-	634		-	-	-
Licence revenue	571	-	571		200	-	200
Other revenue	40	-	40		-	-	-
Total Revenue	1,245	-	1,245		200	-	200
Cost of sales	(557)	-	(557)		-	-	-
Gross profit	688	-	688		200	-	200
Other operating costs excluding depreciation and amortisation	(2,586)	24	(2,562)		(2,456)	(763)	(3,219)
EBITDA	(1,898)	24	(1,874)		(2,256)	(763)	(3,019)
Depreciation and amortisation	(242)	-	(242)		(197)	-	(197)
Profit/(Loss) from operations	(2,140)	24	(2,116)		(2,453)	(763)	(3,216)

 

 

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

 

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

 

Average headcount = 12 (2018: 4), 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 ending 31 March 2019 Underlying	Year ending 31 March 2019 Exceptional items & Other Adjustments	Year ending 31 March 2019 TOTAL		Year ending 31 March 2018 Underlying	Year ending 31 March 2018 Exceptional items & Other Adjustments	Year ending 31 March 2018 TOTAL
	€'000	€'000	€'000		€'000	€'000	€'000
Accoya® wood revenue	-	-	-		-	-	-
Licence revenue	-	-	-		-	-	-
Other revenue	-	-	-		-	-	-
Total Revenue	-	-	-		-	-	-
Cost of sales	-	-	-		-	-	-
Gross result	-	-	-		-	-	-
Other operating costs excluding depreciation and amortisation	(5,119)	-	(5,119)		(4,537)	(918)	(5,455)
Other Gain	-	-	-		-	32	32
EBITDA	(5,119)	-	(5,119)		(4,537)	(886)	(5,423)
Depreciation and amortisation	(175)	-	(175)		(166)	-	(166)
Loss from operations	(5,294)	-	(5,294)		(4,703)	(886)	(5,589)

 

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 = 21 (2018: 19)

 

Research and Development

	Research & Development Segment
	Year ending 31 March 2019   Underlying	Year ending 31 March 2019   Exceptional items & Other Adjustments	Year ending 31 March 2019   TOTAL		Year ending 31 March 2018   Underlying	Year ending 31 March 2018 Exceptional items & Other Adjustments	Year ending 31 March 2018   TOTAL
	€'000	€'000	€'000		€'000	€'000	€'000
Accoya® wood revenue	-	-	-		-	-	-
Licence revenue	-	-	-		-	-	-
Other revenue	-	-	-		-	-	-
Total Revenue	-	-	-		-	-	-
Cost of sales	-	-	-		-	-	-
Gross result	-	-	-		-	-	-
Other operating costs excluding depreciation and amortisation	(1,073)	-	(1,073)		(1,350)	(155)	(1,505)
EBITDA	(1,073)	-	(1,073)		(1,350)	(155)	(1,505)
Depreciation and amortisation	(41)	-	(41)		(54)	-	(54)
Loss from operations	(1,114)	-	(1,114)		(1,404)	(155)	(1,559)

 

 

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 (2018: 10)

 

Total

 

	TOTAL
	Year ending 31 March 2019 Underlying	Year ending 31 March 2019 Exceptional items & Other Adjustments	Year ending 31 March 2019 TOTAL		Year ending 31 March 2018 Underlying	Year ending 31 March 2018 Exceptional items & Other Adjustments	Year ending 31 March 2018 TOTAL
	€'000	€'000	€'000		€'000	€'000	€'000
Accoya®/Tricoya® revenue	67,583	-	67,583		56,331	-	56,331
Licence revenue	1,614	-	1,614		200	-	200
Other revenue	5,956	-	5,956		4,380	-	4,380
Total Revenue	75,153	-	75,153		60,911	-	60,911
Cost of sales	(56,517)	-	(56,517)		(47,270)	-	(47,270)
Gross profit	18,636	-	18,636		13,641	-	13,641
Other operating costs excluding depreciation and amortisation	(17,733)	24	(17,709)		(17,140)	(2,184)	(19,324)
Other Gain	-	-	-		-	32	32
EBITDA	903	24	927		(3,499)	(2,152)	(5,651)
Depreciation and amortisation	(3,965)	-	(3,965)		(3,078)	-	(3,078)
Profit/(Loss) from operations	(3,062)	24	(3,038)		(6,577)	(2,152)	(8,729)
Finance income	-	-	-		-	-	-
Finance expense	(3,117)	(1,529)	(4,646)		(2,174)	502	(1,672)
Loss before taxation	(6,179)	(1,505)	(7,684)		(8,751)	(1,650)	(10,401)

 

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

 

Analysis of Revenue by geographical area of customers:					2019	2018
					€'000	€'000
UK and Ireland					32,099	25,799
Rest of Europe					19,487	15,273
Americas					9,316	8,153
Benelux					7,982	5,998
Asia-Pacific					6,099	5,252
Rest of World					170	436
					75,153	60,911

 

Revenue generated from three customers exceeded 10% of Group revenue of 2019. This included 73% of the revenue from the rest of Europe and relates to a mixture of Accoya^®, Licensing, and Other Revenue. In addition, two other customers represented 34% and 34% respectively, of the revenue from the United Kingdom and Ireland and relate to Accoya^® revenue. Revenue generated from three customers exceeded 10% of Group revenue in 2018 (79% of the revenue from the rest of Europe, and 37% and 30% respectively, of the revenue from the United Kingdom and Ireland).

 

 

Assets and liabilities on a segmental basis:

 

	Accoya®	Tricoya®	Corporate	R&D	TOTAL		Accoya®	Tricoya®	Corporate	R&D	TOTAL
	2019	2019	2019	2019	2019		2018	2018	2018	2018	2018
	€'000	€'000	€'000	€'000	€'000		€'000	€'000	€'000	€'000	€'000
Non-current assets	62,648	49,949	3,421	44	116,062		46,411	21,521	3,485	71	71,488
Current assets	25,504	9,288	(3,184)	4,916	36,524		25,112	36,095	(2,084)	4,382	63,505
Current liabilities	(17,251)	(8,358)	(771)	(39)	(26,419)		(14,034)	(8,318)	983	(45)	(21,414)
Net current assets	8,253	930	(3,955)	4,877	10,105		11,078	27,777	(1,101)	4,337	42,091
Non-current liabilities	(30,336)	(3,316)	(18,856)	-	(52,508)		(21,974)	(334)	(17,776)	-	(40,084)
Net assets	40,565	47,563	(19,390)	4,921	73,659		35,515	48,964	(15,392)	4,408	73,495

 

Analysis of non-current assets (Other than financial assets and deferred tax):						2019	2018
						€'000	€'000
UK						53,679	26,782
Other countries						58,152	40,475
Un-allocated - Goodwill						4,231	4,231
						116,062	71,488

 

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, the offices in Dallas and London and certain pre-operating costs associated with the plant in Hull:

			2019	2018
			€'000	€'000
Sales and marketing			3,286	3,967
Research and development			1,073	1,404
Other operating costs			4,591	4,134
Administration costs			8,783	7,635
Exceptional Items and other adjustments			(24)	2,184
Other operating costs excluding depreciation and amortisation			17,709	19,324
Depreciation and amortisation			3,965	3,078
Total other operating costs			21,674	22,402

 

Administrative costs include cost 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 €17,709,000 in the current period includes €2,562,000 in respect of the Tricoya® segment, compared to €3,219,000 in the previous period.

 

Group average headcount increased from 138 in the period to 31 March 2018, to 159 in the period to 31 March 2019.

 

During the period, €748,000 (2018: €396,000) of internal development & patent related costs were capitalised and included in intangible fixed assets, including €600,000 (2018: €337,000) which were capitalised within Tricoya Technologies Limited ('TTL'). In addition €395,000 of internal costs have been capitalised in relation to the expansion of our plant in Arnhem, Netherlands (2018: €446,000) and €46,000 of internal costs have been capitalised in relation to our plant build in Hull, UK (2018: €109,000). Both are included within tangible fixed assets.

 

 

5.         Exceptional items and other adjustments

 

			2019	2018
			€'000	€'000
Termination of finance lease on acquisition of land and buildings - Finance expense			(1,140)	-
Bonuses paid relating to year ending 31 March 2017			-	(1,386)
Restructuring costs			-	(231)
Gain from disposal of assets			-	32
Total exceptional items			(1,140)	(1,585)
Foreign exchange differences arising on Tricoya® cash held - Operating costs			24	(567)
Foreign exchange differences arising on Loan Notes - incl. in Finance expense			(389)	502
Foreign exchange differences on Tricoya® cash held - Other comprehensive income			(132)	202
Revaluation of FX forwards used for cash-flow hedging - Other comprehensive income			143	-
Total other adjustments			(354)	137
Tax on exceptional items and other adjustments			-	-
Total exceptional items and other adjustments			(1,494)	(1,448)

 

Exceptional Items

 

An exceptional finance charge of €1.1m has been recognised as an exceptional finance expense in respect of the acquisition of the land and buildings in Arnhem from Bruil. The non-cash charge reflects the difference between the assets held under the finance lease and the finance lease liability which was terminated at the point the acquisition was completed.

 

In the prior year, €1.4m annual bonus paid in July 2017, which was attributable to the year ended 31 March 2017, was recorded in the year ended 31 March 2018 as an exceptional cost with the accrual for the financial year ended 31 March 2018 attributable bonus included in underlying operating costs. The double charge in the prior period resulted from a re-alignment of the timing of recognition of bonuses reflecting the more structured annual bonus scheme now in place compared to previous years. In addition the bonus paid in the year ended 31 March 2018 relating to the year ended 31 March 2017 included one-off targets relating to the formation of the Tricoya^® consortium.

 

Other restructuring costs in the prior year related to changes required following the completion of the Tricoya^® consortium in March 2017.

 

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. The Group has mitigated this currency exchange risk by adopting hedge accounting in respect of the Tricoya^® plant construction under IFRS 9, Financial Instruments. 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 also arise on the pounds sterling denominated loan notes, entered into in a prior period. These exchange rate differences are included as finance expenses.

 

 

 

6.         Employees

 

				2019	2018
				€'000	€'000
Staff costs (including Directors) consist of:
Wages and salaries				11,119	11,293
Social security costs				1,747	1,509
Other pension costs				731	739
Share based payments				454	258
				14,051	13,799

 

 

 

The average monthly number of employees, including Executive Directors, during the year was as follows:
				2019	2018
Sales and marketing, administration, research and engineering				90	85
Operating				69	53
				159	138

 

 

 

7.         Directors' remuneration

 

 

				2019	2018
				€'000	€'000
Directors' remuneration consists of:
Directors' emoluments				1,307	1,291
Company contributions to money purchase pension schemes				47	49
				1,354	1,340

 

 

Compensation of key management personnel included the following amounts:

 

		Salary, bonus and short term benefits		Share based payments charge
					2019	2018
			Pension		Total	Total
		€'000	€'000	€'000	€'000	€'000
Paul Clegg		527	30	70	627	516
Hans Pauli 1		210	9	19	238	351
William Rudge		280	8	25	313	272
		1,017	47	114	1,178	1,139

 

The Group made contributions to 2 (2018: 2) Directors' personal pension plans, with Paul Clegg receiving cash in lieu of pension from 1 April 2016.

 

The figures in the above table are impacted by foreign exchange noting that the remuneration for P Clegg and W Rudge are denominated in Pounds Sterling. Their total remuneration increased by 21% and 14% respectively, when excluding the impact of foreign exchange.

 

¹ Hans Pauli amounts above for 2019 represent the remuneration received for the period to 31 December 2018, when he resigned as a Director.

 

 

 

8.         Operating (loss)/gain

 

 

				2019	2018
				€'000	€'000
This has been arrived at after charging:
Staff costs				14,051	13,799
Depreciation of property, plant and equipment				3,354	2,496
Amortisation of intangible assets				611	582
Operating lease rentals				966	1,306
Foreign exchange (gains)/losses				(62)	834
Research & Development (excluding staff costs)				606	997
Loss on disposal of property, plant and equipment				-	3
Fees payable to the Company's auditors for the audit of the Company's annual financial statements				74	85
Fees payable to the Company's auditors for other services:
- audit of the Company's subsidiaries pursuant to legislation				169	147
- audit related assurance services				19	25
Total audit and audit related services:				262	257

 

No other services were provided by the Company's auditors in the year (2018: nil).

 

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.

 

On 29 March 2017 the Group announced the entry into and successful completion of its agreements for the financing, construction and operation of the world's first Tricoya® wood elements acetylation plant in Hull with its TTL consortium investors, being BP, MEDITE, BGF and Volantis.

 

The Hull plant will have an initial production capacity of 30,000 tonnes per annum (sufficient to manufacture 40,000 cubic metres of panels) and scope to expand.

 

Structurally, Accsys, BP Ventures, MEDITE, BGF and Volantis have invested into TTL in 2017. TTL has then invested, alongside BP Chemicals and MEDITE, in Tricoya Ventures UK Limited ("TVUK"), a special purpose subsidiary of TTL that will construct, own and operate the Hull Plant.

 

BP have invested €21.2 million in the Tricoya® Project, including €14.6 million as equity in TVUK by BP Chemicals and €6.6 million as equity in TTL by BP Ventures. All funding was received by 31 March 2019, with €0.9m being received in the year ended 31 March 2019.

 

MEDITE have invested €11.0 million in the Tricoya® Project, including €7.0 million as equity in TTL and €4.0 million as equity in TVUK. All funding was received by 31 March 2018, with €nil being received in the year ended 31 March 2019.

 

During the year the Group increased its shareholding from 75.1% to 76.0% from the issue of 1,320,970 shares as a result of its continued supply of lower priced Accoya® to MEDITE, to enable continued market development ahead of the completion of the Hull Plant. 

 

In the year ended 31 March 2017, BGF and Volantis invested an aggregate of £19.0 million as financial investors into both the Group and TTL. BGF and Volantis invested on similar terms but are investing separately, with BGF accounting for 65% of the £19.0 million total.

 

In the year ended 31 March 2017, TVUK entered a six-year €17.2 million (€15.0 million net) finance facility agreement with The Royal Bank of Scotland PLC in respect of the construction and operation of the Hull Plant. As at 31 March 2019 the Group have utilised €3.6m (2018: €0.3m) of the facility.

 

The Group has consolidated the results of TTL and TVUK 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 TVUK, are set out below:

 

 

 

TTL Group income statement:

	Consolidated	Consolidated
	2019	2018
	€'000	€'000
Revenue	1,246	200
Cost of sales	(590)	-
Gross Margin	656	200
Operating costs:
Staff costs	(1,959)	(1,898)
Research & development (excluding staff costs)	(204)	(223)
Intellectual Property	(210)	(381)
Sales & marketing	(486)	(376)
Depreciation & Amortisation	(242)	(197)
EBIT	(2,445)	(2,875)
EBIT attributable to Accsys shareholders	(1,439)	(1,911)

 

TTL Group balance sheet:

	2019	2018
	€'000	€'000
Non-current assets
Intangible assets	3,773	3,390
Property, plant and equipment	46,176	18,119
	49,949	21,509
Current assets
Receivables due within one year	2,256	1,340
Cash and cash equivalents	6,890	34,754
FX Derivative Asset	143	-
	9,289	36,094
Current liabilities
Trade and other payables	(11,674)	(8,639)
Net current assets	(2,385)	27,455
Net assets	47,564	48,964
Value attributable to Accsys Technologies	17,441	18,650
Value attributable to Non-controlling interest	30,123	30,314

 

 

10.       Finance income

 

 

Finance Income
				2019	2018
				€'000	€'000
Interest receivable on bank and other deposits*				-	-

 

 

*€70,000 interest received in the year ended 31 March 2019 (31 March 2018: €45,000) in relation to cash balances held in Tricoya Ventures 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

 

				2019	2018
				€'000	€'000
Arnhem land and buildings lease finance charge				274	575
Unwinding of Arnhem finance lease charge - exceptional item				1,140	-
Foreign exchange loss/(gain) on loan notes				389	(502)
Interest on loans				2,739	1,540
Other finance expenses				104	59
				4,646	1,672

 

12.       Tax credit

				2019	2018
				€'000	€'000
(a) Tax recognised in the statement of comprehensive income comprises:
Current tax credit
UK Corporation tax on profits for the year				-	-
Research and development tax expense / (credit) in respect of current year				55	(248)
				55	(248)
Overseas tax at rate of 15%				26	(9)
Overseas tax at rate of 25%				(863)	6
Deferred Tax
Utilisation of deferred tax asset				-	-
Total tax credit reported in the statement of comprehensive income				(782)	(251)
				2019	2018
				€'000	€'000
(b) The tax credit for the period is lower than the standard rate of
corporation tax in the UK (2018 & 2019: 19%) due to:
Loss before tax				(7,684)	(10,401)
Expected tax credit at 19% (2018 - 19%)				(1,460)	(1,976)
Expenses not deductible in determining taxable profit				115	110
(Over)/Under provision in respect of prior years				(863)	(29)
Tax losses for which no deferred income tax asset was recognised				1,468	1,860
Effects of overseas taxation				(97)	34
Other temporary differences				-	(2)
Research and development tax credit in respect of prior years				194	15
Research and development tax credit in respect of current year				(139)	(263)
Total tax credit reported in the statement of comprehensive income				(782)	(251)

 

The standard rate of corporation tax in the UK changed from 20% to 19% with effect from 1 April 2017. Deferred taxes at the balance sheet date have been measured using these enacted tax rates and reflected in these financial statements. The UK corporation tax rate is due to be reduced to 17% in April 2020.

 

13.       Dividends Paid

				2019	2018
				€'000	€'000
Final Dividend €Nil (2018: €Nil) per Ordinary share proposed
and paid during year relating to the previous year's results				-	-

 

 

14.       Loss per share

 

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

 

Basic and diluted earnings per share			2019	2019	2018	2018
			Underlying	Total	Underlying	Total
Weighted average number of Ordinary shares in issue ('000)			116,343	116,343	111,250	111,250
Loss for the year attributable to owners of Accsys Technologies PLC (€'000)			(4,391)	(5,896)	(7,536)	(9,186)
Basic and diluted loss per share			€ (0.04)	€ (0.05)	€ (0.07)	€ (0.08)

 

Basic and diluted losses per share are based upon the same figures. IAS 33 "Earning per share" defines Dilutive share options as share options which would decrease profit per share or increase loss per share. Equity options are disclosed in note 30, which if exercised, would decrease loss per share.

 

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. As part of the award of nil costs options under the LTIP in 2013, the recipients relinquished all share options that they held which had been awarded under the 2005 and 2008 Share Option plans. Other employees continue to hold options awarded under these earlier schemes.

 

Options - total

 

The following figures take into account options awarded under the LTIP, together with share options awarded in previous years under the 2005 and 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	2019	2018	2019	2018
18 June 2008	-	8,498	-	0.3
8 December 2008	-	25,211	-	0.7
1 August 2011	90,000	115,000	2.3	3.3
19 September 2013 (LTIP)	2,177,675	2,247,850	4.5	5.5
24 June 2016 (LTIP)	482,827	1,015,030	7.3	8.3
20 June 2017 (LTIP)	1,046,076	1,087,842	8.3	9.3
18 June 2018 (LTIP)	1,138,843	-	9.3	-
Total	4,935,421	4,499,431	6.6	6.9

 

 

Movements in the weighted average values are as follows:

 

				Weighted
				average
				exercise
				price	Number
Outstanding at 31 March 2017				€ 0.31	3,929,279
Granted during the year				€ 0.00	1,087,842
Forfeited during the year				€ 2.15	(245,044)
Exercised during the year				€ 0.00	(249,700)
Expired during the year				€ 0.00	(22,946)
Outstanding at 31 March 2018				€ 0.15	4,499,431
Granted during the year				€ 0.00	1,170,159
Forfeited during the year				€ 0.02	(630,285)
Exercised during the year				€ 0.00	(70,175)
Expired during the year				€ 6.12	(33,709)
Outstanding at 31 March 2019				€ 0.10	4,935,421

 

The exercise price of options outstanding at the end of the year ranged between €nil (for LTIP options) and €0.50 (2018: €nil and €9.90) and their weighted average contractual life was 6.6 years (2018: 6.9 years).

 

Of the total number of options outstanding at the end of the year, 2,267,675 (2018: 126,236) 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. 2,177,675 nil cost options remain as at 31 March 2019 after allowing for forfeitures and options exercised in the year.

 

Awards made in June 2016 and LTIP Award performance conditions

 

Following the vesting of the LTIPs awarded in September 2013, a further award was made to members of the Senior Management Team, including Executive Directors. A total of 1,070,255 nil cost options were awarded.

 

The LTIP plan rules were amended in November 2015 such that awards made in summer 2016 are subject to a 3 year performance period (i.e. year end March 2019) and a further 2 year holding period. In addition, awards are also subject to malus/ claw-back provisions. The 2016 LTIP EBITDA award performance metrics are measured to 31 March 2019, with the award set to vest in June 2019. As at 31 March 2019 the expected vesting amount is estimated to be 482,827 share options.

 

Metric	Weighting (% of award)	Threshold	Target	Maximum
Vesting (% of maximum)		25%	50%	100%
EBITDA per share in FY19	50%	€0.06	€0.08	€0.10
Share Price Growth vs Comparator Group	50%	Median	N/A	Upper Quartile

 

·          Vesting is on a straight-line basis between points in the schedule. There is no vesting for performance below Threshold. 

·          EBITDA based on total group EBITDA including licensing income. Appropriate adjustments may be made to the EBITDA per share metric 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.

·          Comparator Group is the constituent companies of the FTSE AIM All Share Index (excluding the Resource and Financial Services Sectors)

 

 

 

 

 

 

Element	Element A (Share price growth)	Element B (EBITDA per Share)
Grant date	27 Jun 16	27 Jun 16
Share price at grant date (€)	0.81	0.81
Exercise price (€)	0.00	0.00
Expected life (years)	3	3
Contractual life (years)	10	10
Vesting conditions (Details set out above)	Share Price	EBITDA
Risk free rate	-0.64%	-0.64%
Expected volatility	20%	20%
Expected dividend yield	0%	0%
Fair value of option	€ 0.187	€ 0.749

 

 

Awards made in June 2017 and LTIP Award performance conditions

 

During the prior year, a total of 1,087,842 LTIP awards were made primarily to members of the senior management team including the executive directors:

 

The performance targets for 937,014 of these awards are as follows:

 

Metric	Weighting (% of award)	Threshold	Target	Maximum
Vesting (% of maximum)		25%	50%	100%
EBITDA per share in FY20	50%	€0.04	€0.06	€0.08
Share Price Growth vs Comparator Group	50%	Median	N/A	Upper Quartile

 

·          Vesting is on a straight-line basis between points in the schedule. There is no vesting for performance below Threshold. 

·          EBITDA based on total group EBITDA including licensing income. Appropriate adjustments may be made to the EBITDA per share metric 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.

·          Comparator Group is the constituent companies of the FTSE AIM All Share Index (excluding the Resource and Financial Services Sectors)

 

Element	Element A (Share price growth)	Element B (EBITDA per Share)
Grant date	20 Jun 17	20 Jun 17
Share price at grant date (€)	0.88	0.88
Exercise price (€)	0.00	0.00
Expected life (years)	3	3
Contractual life (years)	10	10
Vesting conditions (Details set out above)	Share Price	EBITDA
Risk free rate	-0.60%	-0.60%
Expected volatility	20%	20%
Expected dividend yield	0%	0%
Fair value of option	€ 0.203	€ 0.814

 

The remaining 150,828 of the awards made in summer 2017 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 €0.814 on their Grant date.

 

All of the above awards, made in summer 2017 are subject to a three year performance period (i.e. year end March 2020) and a further two year holding period. In addition, awards are also subject to malus/ claw-back provisions.

 

Awards made in June 2018 and LTIP Award performance conditions

 

During the year, a total of 1,170,160 LTIP awards were made primarily to members of the senior management team including the executive directors:

 

The performance targets for 993,220 of these awards are as follows:

 

Metric	Weighting (% of award)	Threshold	Maximum
Vesting (% of maximum)		25%	100%
EBITDA per share in FY21	60%	€0.05	€0.13
Total sales volume (subject to Group EBITDA being breakeven or positive)	40%	70,000	85,000

 

·          Vesting is on a straight-line basis between points in the schedule. There is no vesting for performance below Threshold. 

·          EBITDA based on total group EBITDA including licensing income. Appropriate adjustments may be made to the EBITDA per share metric 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.

 

Element	Element A (EBITDA per share)	Element B (Sales volume growth)
Grant date	19 Jun 18	19 Jun 18
Share price at grant date (€)	0.91	0.91
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	-0.55%	-0.55%
Expected volatility	20%	20%
Expected dividend yield	0%	0%
Fair value of option	€ 0.842	€ 0.842

 

 

The remaining 176,940 of the awards made in summer 2018 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 €0.842 on their Grant date.

 

All of the above awards, made in summer 2018 are subject to a three year performance period (i.e. year end March 2021) and a further two year holding period. In addition, awards are also subject to malus/ claw-back provisions.

 

2005 and 2008 Share Option schemes

 

Awards made in earlier years had no impact on the income statement in the current or prior period and given the smaller number of options remaining, no details have been disclosed.

 

Employee Benefit Trust - Share bonus award

 

Following a share issue on 25 June 2018 as part of the annual bonus, in connection with the employee remuneration and incentivisation arrangements for the period from 1 April 2017 to 31 March 2018, 173,915 (2018: 295,874) new Ordinary shares were held by an Employee Benefit Trust, the beneficiaries of which are primarily other senior employees. Such new Ordinary shares vest if the employees remain in employment with the Company at the vesting date, being 1 July 2019 (subject to certain other provisions including regulations, good-leaver, take-over and Remuneration Committee discretion provisions). As at 31 March 2019, the Employment Benefit Trust was consolidated by the Company and the 173,915 shares are recorded as Own Shares within equity. During the period, 295,874 Ordinary shares awarded in the prior year vested.

 

 

 

16.       Intangible assets

               

 

		Internal	Intellectual
		Development	property
		costs	rights	Goodwill	Total
		€'000	€'000	€'000	€'000
Cost
At 31 March 2017		5,942	73,292	4,231	83,465
Additions		396	-	-	396
At 31 March 2018		6,338	73,292	4,231	83,861
Additions		458	290	-	748
At 31 March 2019		6,796	73,582	4,231	84,609
Accumulated amortisation
At 31 March 2017		1,163	71,463	-	72,626
Amortisation		307	275	-	582
At 31 March 2018		1,470	71,738	-	73,208
Amortisation		326	285	-	611
At 31 March 2019		1,796	72,023	-	73,819
Net book value
At 31 March 2019		5,000	1,559	4,231	10,790
At 31 March 2018		4,868	1,554	4,231	10,653
At 31 March 2017		4,779	1,829	4,231	10,839

 

 

The carrying value of internal development costs, intellectual property rights and goodwill on consolidation are split between two cash generating units, representing the Accoya^® and Tricoya^® segments. The recoverable amount of internal development costs, intellectual property rights and goodwill relating to each unit is determined based on a value in use calculation which uses cash flow projections based on Board approved financial budgets. Cash flows have been projected for a period of 12 years, including a six year forecast and six years of 2% growth plus assumptions concerning a terminal value and based on a pre-tax discount rate of 10% per annum (2018: 12%). The key assumption used in the value in use calculations is the level of future licence fees and manufacturing revenues estimated by management over the budget period. These have been based on past experience and expected future revenues. The Directors have considered whether a reasonably possible change in assumptions may result in an impairment. An impairment would arise if the total volume of forecast Accoya^® and Tricoya^® manufactured is significantly lower than projected sales in future years.

 

 

 

17.       Property, plant and equipment

 

 

		Land and	Plant and	Office
		buildings	machinery	equipment	Total
		€'000	€'000	€'000	€'000
Cost or valuation
At 31 March 2017		1,645	37,756	1,379	40,780
Additions		10,433	31,104	116	41,653
Foreign currency translation loss		-	-	(19)	(19)
At 31 March 2018		12,078	68,860	1,476	82,414
Additions		17,997	41,490	1,541	61,028
Termination of finance lease		(12,099)	(4,742)	-	(16,841)
Foreign currency translation profit		-	-	12	12
At 31 March 2019		17,976	105,608	3,029	126,613
Accumulated depreciation
At 31 March 2017		658	17,428	1,013	19,099
Charge for the year		275	2,024	197	2,496
Disposals		-	3	-	3
Foreign currency translation loss		-	-	(19)	(19)
At 31 March 2018		933	19,455	1,191	21,579
Charge for the year		299	2,806	249	3,354
Termination of finance lease		(953)	(2,651)	-	(3,604)
Foreign currency translation profit		-	-	12	12
At 31 March 2019		279	19,610	1,452	21,341
Net book value
At 31 March 2019		17,697	85,998	1,577	105,272
At 31 March 2018		11,145	49,405	285	60,835
At 31 March 2017		987	20,328	366	21,681

 

Included within property, plant and equipment are assets with an initial cost of €2,276,000 (2018: €18,962,000) and a net book value at 31 March 2019 of €1,847,000 (2018: €15,141,000) which has been accounted for as a finance lease. (See note 28). During the period the land and buildings in Arnhem which were previously subject to a finance lease were purchased from the landlord resulting in the finance lease, and related operating lease being terminated. The net impact of the above transaction was to increase fixed assets by €9.8m with net debt increasing by €10.9m.

 

In addition, plant and machinery assets with a net book value of €47,136,000 are held as assets under construction and are not depreciated, relating to the Hull Plant (31 March 2018: €19,326,000 relating to the Hull Plant, and €14,768,000 relating to the Arnhem plant expansion).

 

 

18.       Financial asset at fair value through profit or loss

 

				2019	2018
				€'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 and the Wiener Boise of the Vienna Stock Exchange.

 

There continues to be no active market for these shares as at 31 March 2019, 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 value (2018: nil).                                                                                                                                                                                                                                                                                                                         

 

The historical cost of the listed shares held at 31 March 2019 is €10m (2018: €10m). However, a provision for the impairment of the entire balance of €10m continues to be recorded as at 31 March 2019.

 

During the prior year Accsys sold 21,479 shares at €1.50 per share resulting in a gain of €32,000. A total of 498,522 shares were held at 31 March 2019.

 

19.       Deferred taxation

 

The Group has a deferred tax asset of €nil (2018: €nil) relating to trading losses brought forward.

 

The Group also has an unrecognised deferred tax asset of €27m (2018: €25m) which is largely in respect of trading losses of the UK subsidiaries. The deferred tax asset has not been recognised 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.

 

20.       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.

 

21.       Inventories

 

				2019	2018
				€'000	€'000
Raw materials and work in progress				9,733	10,285
Finished goods				4,275	2,840
				14,008	13,125

 

 

The amount of inventories recognised as an expense during the year was €50,174,355 (2018: €42,893,599). The cost of inventories recognised as an expense includes a net credit of €87,090 (2018: credit of €31,402) in respect of the inventories sold in the period which had previously been written down to net realisable value.

 

22.       Trade and other receivables

 

				2019	2018
				€'000	€'000
Trade receivables				10,725	6,659
Other receivables				839	157
Prepayments				1,474	2,519
				13,038	9,335

 

 

The Directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value. The majority of trade and other receivables is denominated in Euros, with €798,000 of the trade and other receivables denominated in US Dollars (2018: €714,000).

 

 

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

 

				2019	2018
				€'000	€'000
Up to 30 days overdue				2,287	350
Over 30 days and up to 60 days overdue				766	-
Over 60 days and up to 90 days overdue				1	-
Over 90 days overdue				2	3
				3,056	353

 

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 for doubtful debts are individually impaired trade receivables and accrued income with a balance of €25,002,000 (2018: €25,002,000) due from Diamond Wood.

 

Movement in provision for doubtful debts:

 

				2019	2018
				€'000	€'000
Balance at the beginning of the year				25,002	25,001
Net increase/(release) of impairment if not required				-	1
Balance at the end of the year				25,002	25,002

 

 

23.       Trade and other payables

 

				2019	2018
				€'000	€'000
Trade payables				7,936	9,458
Other taxes and social security payable				338	228
Accruals and deferred income				11,689	8,326
				19,963	18,012

 

24.       Share capital

 

				2019	2018
				€'000	€'000
Allotted - Equity share capital
117,988,305 Ordinary shares of €0.05 each (2018: 111,513,145 Ordinary shares of €0.05 each)				5,900	5,576
				5,900	5,576

 

In year ended 31 March 2018:

 

On 24 April 2017 a total of 20,323,986 of €0.05 Ordinary shares were issued at €0.69 per share, in accordance with the Company's capital raise announced on the 29 March 2017.

 

97,720 shares were issued on 23 June 2017 to an Employee Benefit Trust ('EBT') at nominal value.

 

198,154 shares were issued on 27 September 2017 to an Employee Benefit Trust ('EBT') at nominal value.

 

106,189 shares were issued on 27 September 2017 to an employee following the exercise of nil cost options, granted in 2013 under the Company's 2013 Long Term Incentive Plan ("LTIP").

 

143,511 shares were issued on 26 February 2018 to an ex-employee. 118,511 of these Shares were issued and allotted following the exercise of nil cost options, granted in 2013 under the Company's 2013 Long Term Incentive Plan ("LTIP"), with the balance of 25,000 Shares issued as part of the individual's severance terms.

 

 

In year ended 31 March 2019:

 

On 18 July 2018, 6,231,070 ordinary shares were issued to VP Participaties BV, the investment company of the Van Puijenbroek family, at a price of €0.92 per share. Proceeds of €5,704,000 were received net of expenses of €28,000.

173,915 shares were issued on 25 June 2018 to an Employee Benefit Trust ('EBT') at nominal value. In addition, of the Ordinary Shares which had been issued to the EBT in the previous year, 295,874 Ordinary Shares vested on 01 July 2018. Of these beneficiaries elected to sell 128,213 Ordinary Shares in the market, with sale date of 02 August 2018.

 

70,175 shares were issued on 18 February 2019 for the benefit of an employee following the exercise of nil cost options, granted in 2013 under the Company's 2013 Long Term Incentive Plan ("LTIP").

 

25. Other reserves

 

	Capital redemp- tion reserve	Merger reserve	Hedging Effective-ness reserve	Other reserve	Total Other reserves
	€000	€000	€000	€000	€000
Balance at 31 March 2018	148	106,707	306	2,264	109,425
Total comprehensive income/(expense) for the period	-	-	11	-	11
Issue of subsidiary shares to non-controlling interests	-	-	-	85	85
Balance at 31 March 2019	148	106,707	317	2,349	109,521

 

 

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^® segment (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 26).

 

 

26.       Transactions with non-controlling interests

 

In the year ended 31 March 2018:

 

On 5 September 2017, TTL issued 284,716 shares to Titan Wood Limited. On 9 February 2018, TTL issued 495,571 shares to Titan Wood Limited. As a result the non-controlling interests' shareholdings were amended to:

 

BP Ventures (8.8%), MEDITE (11.9%), BGF (2.7%), Volantis (1.5%)

 

On 20 September 2017, Tricoya Ventures UK Limited ('TVUK') issued Ordinary shares to non-controlling interests for consideration of €11.50 million. In addition on the 6 October 2017, Tricoya Ventures UK Limited ('TVUK') issued Ordinary shares to non-controlling interests for consideration of €2.92 million. As a result the non-controlling interests' shareholdings remained unchanged at:

               

BP Chemicals (30%), MEDITE (8.2%)

 

In the year ended 31 March 2019:

 

On 4 June 2018, TTL issued 339,940 shares to Titan Wood Limited. On 20 September 2018, TTL issued 289,140 shares to Titan Wood Limited. On 22 March 2019, TTL issued 691,890 shares to Titan Wood Limited. As a result the non-controlling interests' shareholdings were amended to:

               

BP Ventures (8.5%), MEDITE (11.5%), BGF (2.6%), Volantis (1.5%)

 

On 27 December 2018, TVUK issued Ordinary shares to non-controlling interests for consideration of €0.90 million. As a result the non-controlling interests' shareholdings were amended to:

 

                               BP Chemicals (31.3%, MEDITE 8.0%)

 

The total carrying amount of the non-controlling interests in TTL and TVUK at 31 March 2019 was €30.12 million (2018: €30.31 million).

 

 

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

 

Transactions with non-controlling interests
				2019	2018
				€'000	€'000
Opening Balance				2,840	7,077
Carrying amount of non-controlling interests issued				(815)	(18,658)
Consideration paid by non-controlling interests				900	14,420
Share issue costs relating to non-controlling interests				-	1
Excess of consideration paid recognised in Group's equity				2,925	2,840

 

27.       Commitments under operating leases

 

The Group leases land, buildings and machinery under non-cancellable operating lease agreements.  The total future value of the minimum lease payments that are due is as follows:

 

				2019	2018
				€'000	€'000
Operating lease payments due
Within one year				755	1,063
In the second to fifth years inclusive				785	2,428
In greater than five years				1,030	5,339
				2,570	8,830

 

The majority of commitments under operating leases relate to the Group's offices in UK, U.S.A. and Arnhem, together with the land in Hull used for the Tricoya^® plant.

 

The decrease in operating lease commitments in the year includes €5.7m relating to the cancellation of the Bruil operating lease associated with the land and buildings purchase in Arnhem.  

 

28.       Commitments under finance leases

 

During the prior periods various agreements were reached relating to the sale and leaseback of the land and buildings in Arnhem, of which a large portion of these were accounted for as a finance lease. In April 2018, agreements were reached to purchase the land and buildings associated with the Accoya^® plant and logistics centre in Arnhem from the landlord, Bruil, for the purchase price of €23m. In the prior year, a finance lease liability of €12.0m was recorded as at 31 March 2018. This was terminated following the purchase, therefore reducing the present value of the lease obligations in the current year.

 

A further lease agreement with Bruil was entered into in the prior period relating directly to infrastructure work associated with the expansion of the chemical plant. This continues to be accounted for as a finance lease for a total of €1.7m as at 31 March 2019 (2018: €1.9m).

 

In addition, during a prior period, agreements were entered into for the lease of office fit-out and furniture for the London head office for a total of €0.1m (2018: €0.2m).

 

These transactions have resulted in a finance lease creditor of €2.0m as at 31 March 2019.

				Minimum lease payments
				2019	2018
				€'000	€'000
Amounts payable under finance leases:
Within one year				257	1,390
In the second to fifth years inclusive				890	5,317
After five years				2,706	15,702
Less: future finance charges				(1,832)	(8,237)
Present value of lease obligations				2,021	14,172

 

 

 

29.       Commitments under loan agreements

				2019	2018
				€'000	€'000
Amounts payable under loan agreements:
Within one year				7,485	2,581
In the second to fifth years inclusive				60,366	26,816
After five years				2,713	10,717
Less future finance charges				(13,655)	(10,817)
Present value of loan obligations				56,909	29,297

 

The change in total borrowings in the period of €27.6m principally consisted of an increase of a €23.0m cash flow arising from new financing arrangements in respect of the Arnhem property sale, explained further below, €3.0m drawdown of the Tricoya^® RBS facility, €1.8m drawdown on the working capital facility, net with repayments in the year of €0.2m.

 

Facilities relating to purchase of Arnhem land and buildings:

 

On 1 August 2018 the Group entered into a package of facilities to fully finance the purchase of the land and buildings in Arnhem. The partially amortising package of loans includes the following:

-       €14.0m loan with ABN Amro Bank. The loan is partially repayable over a five year term with a final payment of €9.25m. Interest is fixed at 3% and the loan is secured on the land and buildings.

-       €5.0m lease loan with ABN Asset Based Finance is repayable over a five year term with an implied interest rate of approximately 3%. The loan is secured on the first two Accoya® reactors.

-       €4.0m loan with Bruil, the seller and previous landlord. The balance is repayable from July 2021 to July 2023 with interest fixed at 5%. The loan is unsecured.

 

Loan Notes:

 

On 29 March 2017 the Group issued £16.3 million (€18.4 million) of unsecured fixed rate loan notes, due 2021. £10.5 million of Loan Notes in principal were issued to Business Growth Fund ('BGF'), with £5.8 million in principal issued to Volantis. The BGF loan notes are subject to a 7% fixed interest rate for the duration of their term and the Volantis loan notes are subject to a 7% fixed interest rate until 31 December 2018, with the interest rate fixed at 9% thereafter. Interest is rolled up until 31 December 2018 on both loans, with further roll up of interest on the Volantis loan until six-monthly redemption payments of both loans commence on 31 December 2021 and end on 30 June 2023.

 

BGF is an investment company that provides long-term equity funding to growing UK companies to enable them to execute their strategic plans. Volantis is a global asset management firm specialising in alternative investment strategies and is owned by Lombard Odier.

 

Cerdia Production Facility:

 

On 29 December 2016 the Group drew down €2.0 million of its €9.5 million term loan facility with Cerdia Production GmBH. The Group has since drawn down €5.5m on 03 November 2017 and €2.0 million on 29 March 2018. The facility was used to design, procure and build the third reactor of the Arnhem Plant. This facility is secured against the third reactor of the Arnhem chemical plant and associated assets and is subject to interest at 7.5% per annum. At 31 March 2019, the Group had €9.7m (2018: €9.9m) borrowed under this facility. Quarterly repayments of the loan commenced on 21 December 2018 until November 2025, with €916,000 repaid in the year ended 31 March 2019.

 

Tricoya^® facility:

 

On 29 March 2017 the Company's subsidiary, Tricoya Ventures UK Limited entered into a six-year €17.2 million (€15.0 million net) finance facility agreement with the Royal Bank of Scotland 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 Ventures UK Limited. At 31 March 2019, the Group had €3.6m (2018: €0.3m) borrowed under the facility. Two drawdowns of the loans were undertaken in the period, totalling €3.0m. 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.

 

Trade receivable and inventory facilities:

 

Working capital facility

In May 2018 the Group amended its working capital facility with ABN Commercial Finance, initially agreed in 2011. The facility is now a €6.0m credit facility secured upon the receivables and inventory of the Accoya^® manufacturing business committed for a period of 5 years. At 31 March 2019, the Group had used €1.8m (2018: €nil) of this facility.

 

Bank guarantee facility

In August 2016 the Group amended its credit facility agreement with ABN AMRO Bank N.V., which had been initially agreed in 2013. The facility is a contingent liability facility enabling the Group to issue bank guarantees in order to support the working capital and other operational commitments of the Group with a limit of €1.5m.

Both facilities are subject to interest at 2% above the ABN AMRO base rate.

 

Reconciliation to net debt:

 

				2019	2018
				€'000	€'000
Cash and cash equivalents				8,857	39,698
Less:
Amounts payable under loan agreements				(56,909)	(29,297)
Amounts payable under finance leases (note 28)				(2,021)	(14,172)
Net debt				(50,073)	(3,771)

 

30.       Equity options

 

On 2 February 2016 the Company's subsidiary, Tricoya Technologies Limited, issued Warrants to subscribe for up to 175,000 of its Series A Preference Shares in favour of BP Ventures Limited (100,000) and Titan Wood Limited (75,000) at a price of €2.00 per Warrant Share during the "Exercise Period", which started on 2 February 2016 and runs to the earlier of either (i) 2 February 2021; (ii) the date of an Exit; and (iii) exercise of the Option.

 

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 (see note 29). In addition to the issue of the Loan Notes 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 have been converted to Options, such that at 31 March 2019 a total 13,104,839 Options exist (with 8,449,172 attributable to BGF and 4,655,667 attributable to Volantis). This represents 11.1% of the enlarged issued share capital of the Company as at 31 March 2019.

 

 

31.       Financial instruments

 

Financial instruments

 

Finance lease

 

Finance lease creditors of €2,021,000 as at 31 March 2019 (2018: €14,172,000) largely relates to the infrastructure work for the chemical plant in Arnhem, which has a 20 year lease period with the ability to extend further. (See note 28)

 

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.

 

No final dividend is proposed in 2019 (2018: €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. 

 

 

Categories of financial instruments				2019	2018
				€'000	€'000
Financial asset at fair value through profit or loss				-	-
Loans and receivables
Trade receivables				10,725	6,659
Other receivables				839	157
FX derivative asset				143	-
Money market deposits in Euro				52	1,325
Money market deposits in Sterling				3,526	17,067
Money at call in Euro				3,308	7,506
Money at call in US dollars				864	165
Money at call in Sterling				1,107	13,635
Financial liabilities at amortised cost
Trade payables				(7,936)	(9,458)
Finance lease payable				(2,021)	(14,172)
Other Payables				-	-
Loan notes and other long term borrowings				(56,909)	(29,297)
				(46,302)	(6,413)

 

Money market deposits have interest rates fixed for less than three months at a weighted average rate of 0.19% (2018: 0.36%). 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 finance leases, for which details are given in note 28 and loans, for which details are given in note 29.

 

Trade payables are payable on various terms, typically not longer than 30 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 to reflect the expected costs associated with the construction of the plant in Hull and accordingly is accounted for as a cash flow hedge (see note 5).

 

Interest rate risk management

 

The Group's borrowings are limited to fixed rate loans with BGF, Volantis, Cerdia, ABN Amro and Bruil, together with the remaining Arnhem finance lease and the lease of the office fit out and furniture in London. The interest rate in respect of the loan facility agreed with RBS Bank is variable, based on Euribor plus a variable margin. Therefore the Group is not significantly exposed to interest rate risk in relation to financial liabilities. 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 facility with RBS Bank.

 

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 22). 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 22.

 

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.

 

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.

 

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.

 

32.       Capital Commitments

 

				2019	2018
				€'000	€'000
Contracted but not provided for in respect of property, plant and equipment				15,049	34,461

 

Included in the above, are amounts relating to the Engineering, Procurement and Construction contracts relating to the Tricoya^® plant under construction in Hull.

 

33.       Post Balance Sheet Events

 

There have been no material reportable events since 31 March 2019.

 

 

 

Ends