Preliminary Results for the year ended 31 March 20

Accsys Technologies PLC

 

Consolidated statement of cash flow for the year ended 31 March 2020

 

		2020	2019
		€'000	€'000
Loss before taxation before exceptional items and other adjustments		(2,153)	(6,179)
Adjustments for:
Amortisation of intangible assets		664	611
Depreciation of property, plant and equipment, and right of use assets		4,939	3,354
Net finance expense		3,352	3,117
Equity-settled share-based payment expenses		614	382
Currency translation (gains)		(78)	(38)
Cash inflows from operating activities before changes in working capital and exceptional items		7,338	1,247
Exceptional Items in operating activities (see note 5)		3,200	-
Cash inflows from operating activities before changes in working capital		10,538	1,247
(Increase) in trade and other receivables		(2,427)	(3,693)
Increase in deferred income		190	994
(Increase) in inventories		(2,924)	(882)
(Decrease)/Increase in trade and other payables		(3,164)	960
Net cash generated from/(used in) operating activities before tax		2,213	(1,374)
Tax received		165	1,674
Net cash from operating activities		2,378	300
Cash flows from investing activities
Interest received		19	70
Investment in property, plant and equipment		(22,040)	(48,166)
FX deal settlement related to hedging of Hull Capex		307	-
Investment in intangible assets		(861)	(749)
Net cash (used in) investing activities		(22,575)	(48,845)
Cash flows from financing activities
Proceeds from loans		4,500	26,000
Other finance costs		(79)	(93)
(Repayment of)/Proceeds from trade facility draw down		(1,825)	1,825
Interest Paid		(2,370)	(1,157)
Repayment of lease liabilities		(1,022)	(12,209)
Repayment of loans/rolled up interest		(2,942)	(3,208)
Proceeds from issue of share capital		46,504	5,747
Proceeds from issue of subsidiary shares to non-controlling interests		9,167	900
Share issue costs		(3,320)	(28)
Net cash from financing activities		48,613	17,777
Net increase/(decrease) in cash and cash equivalents		28,416	(30,768)
Effect of exchange rate changes on cash and cash equivalents		(35)	(73)
Opening cash and cash equivalents		8,857	39,698
Closing cash and cash equivalents		37,238	8,857

 

 

The notes form an integral part of these financial statements.

 

 

Accsys Technologies PLC

 

Notes to the financial statements for the year ended 31 March 2020

 

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 2020 or 31 March 2019. Statutory accounts for the period ended 31 March 2019 have been filed with the Registrar of Companies and those for the period ended 31 March 2020 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 2019 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 2020 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 28 for details of these facilities) and the possible further impact of COVID-19. These forecasts indicate that, in order to continue as a going concern, the Group is dependent on achieving certain operating performance measures relating to the production and sales of Accoya^® wood from the plant in Arnhem with the collection of on-going working capital items in line with internally agreed budgets. The Directors' have also considered the 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 noting that the full forecast project cost has not yet been committed to.

 

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 and on this occasion with the heightened risk that COVID-19 entails, 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 ensure on-going liquidity including reducing / deferring costs in some discretionary areas as well as larger capital projects if necessary.

 

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.

 

Borrowing costs

 

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

 

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

 

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

 

Share based payments

 

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

 

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

 

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

 

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

 

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

 

Dividends

 

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

 

Pensions

 

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

 

Taxation

 

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

 

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

 

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

 

·      the initial recognition of goodwill;

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

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

 

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

Foreign currencies

 

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

 

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

 

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

 

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

 

Foreign exchange hedging

 

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

 

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

 

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

 

Government grants

 

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

 

Goodwill

 

Goodwill arising on the acquisition of a subsidiary undertaking is the difference between the fair value of the consideration paid and the fair value of the identifiable assets and liabilities acquired. It is capitalised, and is subject to annual impairment reviews by the Directors. Any impairment arising is charged to the consolidated statement of comprehensive income. Where the fair value of the identifiable assets and liabilities acquired is greater than the fair value of consideration paid, the resulting amount is treated as a gain on a bargain purchase and 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 3 and 5 years

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

Freehold land                                     Freehold land is not depreciated

 

Impairment of non-financial assets

 

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

 

Leases

 

As explained in note 2 below, the Group has changed its accounting policy for leases where the Group is the lessee.

 

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

 

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

 

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

 

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

 

Until 31 March 2019 (Prior year):

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

 

o  Assets held under finance leases were 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 was included in the consolidated statement of financial position as a finance lease obligation. Lease payments were 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 Officer. The Chief Executive Officer is responsible for allocating resources and assessing performance of the operating segments and has been identified as steering the committee that makes strategic decisions.

 

Alternative Performance Measures

 

The Group presents certain measures of financial performance, position or cash flows in the Annual Report and financial statements that are not defined or specified according to IFRS. 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 lease obligations) less cash and cash equivalents. Net debt provides a measure of the Group's net indebtedness or overall leverage.

 

Underlying EBITDA

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

 

Underlying EBIT

Operating profit/(loss) before Exceptional items and other adjustments. 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 reassessed 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 judgements that have been made in arriving at the amounts recognised in the Consolidated Financial Statements and the key sources of uncertainty that have a significant risk of causing a material adjustment to the carrying value of assets and liabilities in the next financial year are discussed below:

 

 

Revenue recognition

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

 

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 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).

 

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 2019:

 

•              IFRS 16 - Leases

•              Prepayments Features with Negative Compensation - Amendments to IFRS 9

•              Long-term interests in Associates and Joint Ventures - Amendments to IAS 28

•              Annual Improvements to IFRS Standards 2015 - 2017 Cycle

•              Amendments to IAS 19 - Employees Benefits

•              IFRIC 23 - Uncertainty over income tax treatments

 

The Group had to change its accounting policies as a result of adopting IFRS 16. The Group elected to adopt the new rules retrospectively but recognised the cumulative effect of initially applying the new standard on 1 April 2019. This is disclosed in note 27. The other amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods.

 

New standards, amendments and interpretations not yet adopted

Certain new accounting standards and interpretations have been published that are not mandatory for 31 March 2020 reporting periods and have not been early adopted by the Group. These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

 

3.         Segmental reporting

 

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

 

 

Accoya^®

	Accoya® Segment
	Year ended 31 March 2020     Underlying	Year ended 31 March 2020 Exceptional items & Other Adjustments	Year ended 31 March 2020 TOTAL		Year ended 31 March 2019   Underlying	Year ended 31 March 2019 Exceptional items & Other Adjustments	Year ended 31 March 2019 TOTAL
	€'000	€'000	€'000		€'000	€'000	€'000
Accoya® wood revenue	82,836	-	82,836		66,949	-	66,949
Licence revenue	5	3,200	3,205		1,043	-	1,043
Other revenue	7,187	-	7,187		5,916	-	5,916
Total Revenue	90,028	3,200	93,228		73,908	-	73,908
Cost of sales	(62,878)	-	(62,878)		(55,960)	-	(55,960)
Gross profit	27,150	3,200	30,350		17,948	-	17,948
Other operating costs excluding depreciation and amortisation	(10,204)	-	(10,204)		(8,955)	-	(8,955)
EBITDA	16,946	3,200	20,146		8,993	-	8,993
Depreciation and amortisation	(4,323)	-	(4,323)		(3,508)	-	(3,508)
Profit from operations	12,623	3,200	15,823		5,485	-	5,485

 

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 = 130 (2019: 117)

 

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.

					2020	2019
					€'000	€'000
Accoya® segmental underlying EBITDA					16,946	8,993
Accoya® underlying Licence revenue					(5)	(1,043)
Other income, predominantly for marketing services					(168)	(172)
Accoya® segmental underlying EBITDA (excluding. Licence Income)					16,773	7,778
Accoya® segmental underlying gross profit					27,150	17,948
Accoya® underlying Licence revenue					(5)	(1,043)
Other income, predominantly for marketing services					(168)	(172)
Accoya® manufacturing gross profit					26,977	16,733
Gross Accoya® Manufacturing Margin					30.0%	23.0%

 

 

Tricoya^®

	Tricoya® Segment
	Year ended 31 March 2020   Underlying	Year ended 31 March 2020 Exceptional items & Other Adjustments	Year ended 31 March 2020 TOTAL		Year ended 31 March 2019   Underlying	Year ended 31 March 2019 Exceptional items & Other Adjustments	Year ended 31 March 2019   TOTAL
	€'000	€'000	€'000		€'000	€'000	€'000
Tricoya® panel revenue	512	-	512		634	-	634
Licence revenue	288	-	288		571	-	571
Other revenue	81	-	81		40	-	40
Total Revenue	881	-	881		1,245	-	1,245
Cost of sales	(524)	-	(524)		(557)	-	(557)
Gross profit	357	-	357		688	-	688
Other operating costs excluding depreciation and amortisation	(3,210)	(165)	(3,375)		(2,586)	24	(2,562)
EBITDA	(2,853)	(165)	(3,018)		(1,898)	24	(1,874)
Depreciation and amortisation	(397)	-	(397)		(242)	-	(242)
Profit/(Loss) from operations	(3,250)	(165)	(3,415)		(2,140)	24	(2,116)

 

 

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 = 17 (2019: 12), noting a substantial proportion of the costs to date have been incurred via recharges from other parts of the Group or have resulted from contractors.

 

 

Corporate 

	Corporate Segment
	Year ended 31 March 2020 Underlying	Year ended 31 March 2020 Exceptional items & Other Adjustments	Year ended 31 March 2020   TOTAL		Year ended 31 March 2019 Underlying	Year ended 31 March 2019 Exceptional items & Other Adjustments	Year ended 31 March 2019   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	(6,055)	-	(6,055)		(5,119)	-	(5,119)
EBITDA	(6,055)	-	(6,055)		(5,119)	-	(5,119)
Depreciation and amortisation	(731)	-	(731)		(175)	-	(175)
Loss from operations	(6,786)	-	(6,786)		(5,294)	-	(5,294)

 

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 = 23 (2019: 21)

 

Research and Development

	Research & Development Segment
	Year ended 31 March 2020   Underlying	Year ended 31 March 2020 Exceptional items & Other Adjustments	Year ended 31 March 2020 TOTAL		Year ended 31 March 2019     Underlying	Year ended 31 March 2019 Exceptional items & Other Adjustments	Year ended 31 March 2019 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	(1,071)	-	(1,071)		(1,073)	-	(1,073)
EBITDA	(1,071)	-	(1,071)		(1,073)	-	(1,073)
Depreciation and amortisation	(152)	-	(152)		(41)	-	(41)
Loss from operations	(1,223)	-	(1,223)		(1,114)	-	(1,114)

 

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 (2019: 9)

 

Total

	Total
	Year ended 31 March 2020 Underlying	Year ended 31 March 2020 Exceptional items & Other Adjustments	Year ended 31 March 2020 TOTAL		Year ended 31 March 2019 Underlying	Year ended 31 March 2019 Exceptional items & Other Adjustments	Year ended 31 March 2019   TOTAL
	€'000	€'000	€'000		€'000	€'000	€'000
Accoya®/Tricoya® revenue	83,348	-	83,348		67,583	-	67,583
Licence revenue	293	3,200	3,493		1,614	-	1,614
Other revenue	7,268	-	7,268		5,956	-	5,956
Total Revenue	90,909	3,200	94,109		75,153	-	75,153
Cost of sales	(63,402)	-	(63,402)		(56,517)	-	(56,517)
Gross profit	27,507	3,200	30,707		18,636	-	18,636
Other operating costs excluding depreciation and amortisation	(20,540)	(165)	(20,705)		(17,733)	24	(17,709)
EBITDA	6,967	3,035	10,002		903	24	927
Depreciation and amortisation	(5,603)	-	(5,603)		(3,965)	-	(3,965)
Profit/(Loss) from operations	1,364	3,035	4,399		(3,062)	24	(3,038)
Finance income	-	-	-		-	-	-
Finance expense	(3,517)	626	(2,891)		(3,117)	(1,529)	(4,646)
Profit/(Loss) before taxation	(2,153)	3,661	1,508		(6,179)	(1,505)	(7,684)

 

 

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

 

Analysis of Revenue by geographical area of customers:

 

	2020	2019
	€'000	€'000
UK and Ireland	39,208	32,099
Rest of Europe	24,962	19,487
Americas	10,949	9,316
Benelux	8,510	7,982
Asia-Pacific	6,293	6,099
Rest of World	987	170
	90,909	75,153

 

Revenue generated from three customers exceeded 10% of Group revenue of 2020. This included 62% 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 33% and 35% 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 2019 (73% of the revenue from the rest of Europe, and 34% and 34% 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
	2020	2020	2020	2020	2020	2019	2019	2019	2019	2019
	€'000	€'000	€'000	€'000	€'000	€'000	€'000	€'000	€'000	€'000
Non-current assets	62,143	70,638	4,773	91	137,645	62,648	49,949	3,421	44	116,062
Current assets	38,777	10,896	15,330	4,758	69,761	25,504	9,288	(3,184)	4,916	36,524
Current liabilities	(11,692)	(9,407)	(2,833)	(29)	(23,961)	(17,251)	(8,358)	(771)	(39)	(26,419)
Net current assets/ (liabilities)	27,085	1,489	12,497	4,729	45,800	8,253	930	(3,955)	4,877	10,105
Non-current liabilities	(27,740)	(8,727)	(19,843)	-	(56,310)	(30,336)	(3,316)	(18,856)	-	(52,508)
Net assets/ (liabilities)	61,488	63,400	(2,573)	4,820	127,135	40,565	47,563	(19,390)	4,921	73,659

 

 

Analysis of non-current assets (Other than financial assets and deferred tax):		2020	2019
		€'000	€'000
UK		75,435	53,679
Other countries		57,979	58,152
Un-allocated - Goodwill		4,231	4,231
		137,645	116,062

 

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:

 

	2020	2019
	€'000	€'000
Sales and marketing	3,295	3,286
Research and development	1,071	1,073
Other operating costs	6,742	4,922
Administration costs	9,432	8,452
Exceptional Items and other adjustments	165	(24)
Other operating costs excluding depreciation and amortisation	20,705	17,709
Depreciation and amortisation	5,603	3,965
Total other operating costs	26,308	21,674

 

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

 

The total cost of €20,705,000 in the current period includes €3,375,000 in respect of the Tricoya® segment, compared to €2,562,000 in the previous year.

 

Group average headcount increased from 159 in the year to 31 March 2019, to 179 in the year to 31 March 2020.

 

During the period, €861,000 (2019: €748,000) of internal development & patent related costs were capitalised and included in intangible fixed assets, including €701,000 (2019: €600,000) which were capitalised within Tricoya Technologies Limited ('TTL'). In addition €204,000 of internal costs have been capitalised in relation to our current Arnhem Accoya^® plant expansion project (2019: €395,000 - relating to third reactor expansion) and €44,000 of internal costs have been capitalised in relation to our plant build in Hull, UK (2019: €46,000). Both are included within tangible fixed assets.

 

5.         Exceptional items and other adjustments

 

	2020	2019
	€'000	€'000
Cerdia contract termination fee - Licence revenue	3,200	-
Termination of finance lease on acquisition of land and buildings - Finance expense	-	(1,140)
Total exceptional items	3,200	(1,140)
Foreign exchange differences arising on Tricoya® cash held - Operating costs	(165)	24
Foreign exchange differences arising on Loan Notes - incl. in Finance expense	626	(389)
Foreign exchange differences on Tricoya® cash held - Other comprehensive (loss)	(96)	(132)
Revaluation of FX forwards used for cash-flow hedging - Other comprehensive (loss)/income	(184)	143
Total other adjustments	181	(354)
Tax on exceptional items and other adjustments	(177)	-
Total exceptional items and other adjustments	3,204	(1,494)

 

 

Exceptional Items

 

The exceptional licence fee revenue of €3.2m results from the early termination of the Cerdia commercial agreements. This amount currently included in receivables will be recorded as a reduction to net debt from 1st April 2020, with the fee being offset against our loan held with Cerdia which continues.

 

An exceptional finance charge of €1.1m was recognised in the prior year 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.

 

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 (see note 28). These exchange rate differences are included as finance expenses.

 

 

 

6.         Employees

	2020	2019
	€'000	€'000
Staff costs (including Directors) consist of:
Wages and salaries	12,249	11,119
Social security costs	1,768	1,747
Other pension costs	894	731
Share based payments	537	454
	15,448	14,051

 

The average monthly number of employees, including Executive Directors, during the year was as follows:
		2020	2019
Sales and marketing, administration, research and engineering		99	90
Operating		80	69
		179	159

 

 

7.         Directors' remuneration

 

		2020	2019
		€'000	€'000
Directors' remuneration consists of:
Directors' emoluments		1,443	1,307
Company contributions to money purchase pension schemes		49	47
		1,492	1,354

 

 

Compensation of key management personnel included the following amounts:

 

	Salary, bonus and short term benefits			Share based payments charge
		Payment in Lieu of Notice
					2020	2019
			Pension		Total	Total
	€'000	€'000	€'000	€'000	€'000	€'000
Paul Clegg	320	309	23	28	680	627
Rob Harris	206	-	10	8	224	-
William Rudge	262	-	16	28	306	313
Hans Pauli 1	-	-	-	-	-	238
	788	309	49	64	1,210	1,178

 

 

The Group made contributions to 1 (2019: 2) Director's personal pension plan, with Paul Clegg and Robert Harris receiving cash in lieu of pension.

 

The figures in the above table are impacted by foreign exchange noting that the remuneration for P Clegg, R Harris and W Rudge are denominated in Pounds Sterling. P Clegg's remuneration included a payment in lieu of his notice period of 12 months.

 

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 profit/(loss)

 

		2020	2019
		€'000	€'000
This has been arrived at after charging/(crediting):
Staff costs		15,448	14,051
Depreciation of property, plant and equipment, and right of use assets		4,939	3,354
Amortisation of intangible assets		664	611
Operating lease rentals		28	966
Foreign exchange (gains)		(81)	(62)
Research & Development (excluding staff costs)		624	606
Fees payable to the Company's auditors for the audit of the Company's annual financial statements		78	74
Fees payable to the Company's auditors for other services:
- audit of the Company's subsidiaries pursuant to legislation		71	71
- audit related assurance services		26	19
Fees payable to Group auditors for audit of subsidiaries:		93	98
Total audit and audit related services:		268	262

 

 

In addition to the above, during the year ended 31 March 2020, fees of €273,000 relating to the working capital review for the December 2019 equity fundraise were paid to the Company's auditors (2019: nil). These fees were accounted for in Share Premium as Share issue costs.

 

 

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 a targeted production capacity of 30,000 metric 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 €29.4 million in the Tricoya^® Project, including €21.4 million as equity in TVUK by BP Chemicals and €8.0 million as equity in TTL by BP Ventures. All funding was received by 31 March 2020, with €8.2m being received in the year ended 31 March 2020.

 

MEDITE have invested €12.0 million in the Tricoya^® Project, including €7.5 million as equity in TTL and €4.5 million as equity in TVUK. All funding was received by 31 March 2020, with €1.0m being received in the year ended 31 March 2020.

 

In the year to 31 March 2020, the Group increased its shareholding in TTL from 76.0% to 77.8% with the investment of €9.7m and the further issue of 1,653,987 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 (€14.6 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 2020 the Group have utilised €8.7m (2019: €3.6m) 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
	2020	2019
	€'000	€'000
Revenue	881	1,246
Cost of sales	(538)	(590)
Gross profit	343	656
Operating costs:
Staff costs	(2,879)	(1,959)
Research & development (excluding staff costs)	(228)	(204)
Intellectual Property	(203)	(210)
Sales & marketing	(388)	(486)
Depreciation & Amortisation	(397)	(242)
EBIT	(3,752)	(2,445)
EBIT attributable to Accsys shareholders	(2,214)	(1,439)

 

TTL Group balance sheet:

	2020	2019
	€'000	€'000
Non-current assets
Intangible assets	4,216	3,773
Property, plant and equipment	65,557	46,176
Right of use assets	865	-
	70,638	49,949
Current assets
Receivables due within one year	2,378	2,256
Inventory	53	-
Cash and cash equivalents	8,399	6,890
FX Derivative Asset	-	143
	10,830	9,289
Current liabilities
Trade and other payables	(18,703)	(11,674)
FX Derivative Liability	(330)	-
Net current assets	(8,203)	(2,385)
Net assets	62,435	47,564
Value attributable to Accsys Technologies	27,993	17,441
Value attributable to Non-controlling interest	34,442	30,123

 

 

10.       Finance income

 

				2020	2019
				€'000	€'000
Interest receivable on bank and other deposits*				-	-

 

 

*€19,000 interest received in the year ended 31 March 2020 (31 March 2019: €70,000) 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

		2020	2019
		€'000	€'000
Arnhem land and buildings lease finance charge		200	274
Foreign exchange (gain)/loss on loan notes		(626)	389
Interest on loans		3,108	2,739
Interest on lease liabilities		101	9
Other finance expenses		108	95
Unwinding of Arnhem finance lease charge - exceptional item		-	1,140
		2,891	4,646

 

12.       Tax expense

	2020	2019
	€'000	€'000
(a) Tax recognised in the statement of comprehensive income comprises:
Current tax charge/(credit)
UK Corporation tax on losses for the year	-	-
Research and development tax expense in respect of current year	28	55
	28	55
Overseas tax at rate of 15%	(30)	26
Overseas tax at rate of 25%	633	(863)
Deferred Tax
Utilisation of deferred tax asset	-	-
Total tax charge/(credit) reported in the statement of comprehensive income	631	(782)
	2020	2019
	€'000	€'000
(b) The tax charge (credit) for the period is lower than the standard rate of
corporation tax in the UK (2020 & 2019: 19%) due to:
Profit/(Loss) before tax	1,508	(7,684)
Expected tax charge/(credit) at 19% (2019 - 19%)	287	(1,460)
Expenses not deductible in determining taxable profit	116	115
Over provision in respect of prior years	(41)	(863)
Tax losses for which no deferred income tax asset was recognised	135	1,468
Effects of overseas taxation	106	(97)
Research and development tax charge in respect of prior years	129	194
Research and development tax (credit) in respect of current year	(101)	(139)
Total tax charge/(credit) reported in the statement of comprehensive income	631	(782)

 

 

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

 

13.       Dividends Paid

	2020	2019
	€'000	€'000
Final Dividend €Nil (2019: €Nil) per Ordinary share proposed
and paid during year relating to the previous year's results	-	-

 

 

 

 

14.       Profit/(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	2020	2020	2019	2019
	Underlying	Total	Underlying	Total
Weighted average number of Ordinary shares in issue ('000)	132,721	132,721	116,343	116,343
Profit/(Loss) for the year attributable to owners of Accsys Technologies PLC (€'000)	(1,069)	2,415	(4,391)	(5,896)
Basic and diluted gain/(loss) per share	€ (0.01)	€ 0.02	€ (0.04)	€ (0.05)

 

 

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 29, 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 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	2020	2019	2020	2019
1 August 2011	90,000	90,000	1.3	2.3
19 September 2013 (LTIP)	2,177,675	2,177,675	3.5	4.5
24 June 2016 (LTIP)	482,827	482,827	6.3	7.3
20 June 2017 (LTIP)	338,275	1,046,076	7.3	8.3
18 June 2018 (LTIP)	829,882	1,138,843	8.3	9.3
25 June 2019 (LTIP)	593,376	-	9.3	-
20 November 2019 (LTIP)	105,699	-	9.7	-
23 December 2019 (LTIP)	41,468	-	9.8	-
Total	4,659,202	4,935,421	5.8	6.6

 

Movements in the weighted average values are as follows:

				Weighted
				average
				exercise
				price	Number
Outstanding at 1 April 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
Granted during the year				€ 0.00	810,520
Forfeited during the year				€ 0.00	(1,086,739)
Exercised during the year				€ 0.00	-
Expired during the year				€ 0.00	-
Outstanding at 31 March 2020				€ 0.10	4,659,202

 

 

The exercise price of options outstanding at the end of the year ranged between €nil (for LTIP options) and €0.50 (2019: €nil and €0.50) and their weighted average contractual life was 5.8 years (2019: 6.6 years).

 

Of the total number of options outstanding at the end of the year, 2,750,502 (2019: 2,267,675) 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 2020 after allowing for forfeitures and options exercised in the year.

 

2016 LTIP Award performance conditions and 2016 outcome

 

The LTIP in 2016 awarded 1,070,255 nil cost options and 482,827 vested in the financial year end 31 March 2020. 482,827 nil cost options remain as at 31 March 2020 after allowing for forfeitures and options exercised in the year.

 

Awards made in June 2017 and LTIP Award performance conditions

 

During the year ended March 2018, 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. As at 31 March 2020, the expected vesting amount is estimated to be 338,275 share options.

 

Awards made in June 2018 and LTIP Award performance conditions

 

During the prior 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.

 

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

 

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

 

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

 

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

 

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

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

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

 

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

 

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

 

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

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

 

All of the above awards, made in summer 2019 are subject to a three year performance period (i.e. year end March 2022) and a further two year holding period. In addition, awards are also subject to malus/ claw-back provisions.

 

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, 145,918 Ordinary shares awarded in the prior year vested. No similar award were made during the year ended 31 March 2020.

 

Employee Share Participation Plan

During the year, the Company re-introduced the Employee Share Participation Plan (the 'Plan') for subscription that was initiated in a prior year and was last offered in December 2015. The Plan is intended to promote the long term growth and profitability of Accsys by providing employees with an opportunity to acquire an ownership interest in new Ordinary shares ('Shares') in the Company as an additional benefit of employment. Under the terms of the Plan, the Company issues these Shares to a trust for the benefit of the subscribing employees. The Shares are released to employees after one year, together with an additional Share on a 1 for 1 matched basis provided the employee has remained in the employment of Accsys at that point in time (subject to good leaver provisions). The Plan is in line with industry approved employee share plans and is open for subscription by employees once a year following release of the interim financial results. The maximum amount available for subscription by any employee is €5,000 per annum. In February 2020 various employees subscribed for a total of 204,612 Shares at an acquisition price of €1.095 per Share.

 

16.       Intangible assets

		Internal	Intellectual
		Development	property
		costs	rights	Goodwill	Total
		€'000	€'000	€'000	€'000
Cost
At 1 April 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
Additions		391	469	-	860
At 31 March 2020		7,187	74,051	4,231	85,469
Accumulated amortisation
At 1 April 2018		1,470	71,738	-	73,208
Amortisation		326	285	-	611
At 31 March 2019		1,796	72,023	-	73,819
Amortisation		350	314	-	664
At 31 March 2020		2,146	72,337	-	74,483
Net book value
At 31 March 2020		5,041	1,714	4,231	10,986
At 31 March 2019		5,000	1,559	4,231	10,790
At 31 March 2018		4,868	1,554	4,231	10,653

 

 

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 five year forecast and seven years of 1.8% growth plus assumptions concerning a terminal value and based on a pre-tax discount rate of 10% per annum (2019: 10%). The key assumptions used in the value in use calculations are:

-       the level of future licence fees and manufacturing revenues estimated by management,

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

-       the discount rate.

The Directors have considered whether a reasonably possible change in assumptions may result in an impairment. The CGU most susceptible to an impairment given a change in assumptions is the Tricoya^® CGU.

The impact on the value in use determined is:

-                                     Reduction in sales growth rate by 1% = €16m

-                                     Increase in discount rate by 1% = €13m

 

 

17.       Property, plant and equipment

 

		Land and	Plant and	Office
		buildings	machinery	equipment	Total
		€'000	€'000	€'000	€'000
Cost or valuation
At 1 April 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
Adjustment for IFRS 16 implementation		-	(1,932)	(344)	(2,276)
Adjusted opening balance at 01 April 2019		17,976	103,676	2,685	124,337
Additions		-	22,015	555	22,570
Foreign currency translation profit		-	-	3	3
At 31 March 2020		17,976	125,691	3,243	146,910
Accumulated depreciation
At 1 April 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
Adjustment for IFRS 16 implementation		-	(201)	(208)	(409)
Adjusted opening balance at 01 April 2019		279	19,409	1,244	20,932
Charge for the year		358	3,287	207	3,852
Foreign currency translation profit		-	-	3	3
At 31 March 2020		637	22,696	1,454	24,787
Net book value
At 31 March 2020		17,339	102,995	1,789	122,123
At 31 March 2019		17,697	85,998	1,577	105,272
At 31 March 2018		11,145	49,405	285	60,835

 

Assets adjusted due to the implementation of the IFRS 16 standard are explained further in note 27. These relate to assets with an initial cost at 1 April 2019 of €2,276,000 and a net book value of €1,867,000 which were previously accounted for as a finance lease. During the prior year, the previously leased land and buildings in Arnhem 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 €66,409,000 are held as assets under construction and are not depreciated, relating to the Hull Plant, and €725,000 relating to the further expansion of the Arnhem Plant (31 March 2019: €47,136,000 relating to the Hull Plant).

 

18.       Financial asset at fair value through profit or loss

				2020	2019
				€'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 2020, 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 (2019: nil).                                                                                                                                                                                                                                                                                    The historical cost of the listed shares held at 31 March 2020 is €10m (2019: €10m). However, a provision for the impairment of the entire balance of €10m continues to be recorded as at 31 March 2020.

 

A total of 498,522 shares were held at 31 March 2020.

 

 

19.       Deferred taxation

 

The Group has a deferred tax asset of €nil (2019: €nil) relating to trading losses brought forward.

 

The Group also has an unrecognised deferred tax asset of €26m (2019: €27m) 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

		2020	2019
		€'000	€'000
Raw materials and work in progress		10,660	9,733
Finished goods		6,272	4,275
		16,932	14,008

 

 

The amount of inventories recognised as an expense during the year was €57,167,975 (2019: €50,174,355). The cost of inventories recognised as an expense includes a net credit of €47,982 (2019: credit of €87,090) in respect of the inventories sold in the period which had previously been written down to net realisable value.

 

 

22.       Trade and other receivables

		2020	2019
		€'000	€'000
Trade receivables		8,611	10,725
Other receivables		3,520	839
VAT receivable		2,552	910
Prepayments		625	564
		15,308	13,038

 

 

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 €1,246,000 of the trade and other receivables denominated in US Dollars (2019: €798,000).

 

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

	2020	2019
	€'000	€'000
Up to 30 days overdue	806	2,287
Over 30 days and up to 60 days overdue	18	766
Over 60 days and up to 90 days overdue	-	1
Over 90 days overdue	5	2
	829	3,056

 

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 (2019: €25,002,000) due from Diamond Wood.

 

Movement in provision for doubtful debts:

	2020	2019
	€'000	€'000
Balance at the beginning of the year	25,002	25,002
Net increase of impairment	237	-
Balance at the end of the year	25,239	25,002

 

23.       Trade and other payables

	2020	2019
	€'000	€'000
Trade payables	7,827	7,936
Other taxes and social security payable	779	338
Accruals and deferred income	8,261	11,689
	16,867	19,963

 

24.       Share capital

		2020	2019
		€'000	€'000
Allotted - Equity share capital
162,288,155 Ordinary shares of €0.05 each (2019: 117,988,305 Ordinary shares of €0.05 each)		8,114	5,900
		8,114	5,900

In year ended 31 March 2019:

 

On 18 July 2018, 6,231,070 ordinary shares in the capital of the Company ("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 Shares which had been issued to the EBT in the previous year, 295,874 Shares vested on 01 July 2018. Of these beneficiaries elected to sell 128,213 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").

 

In year ended 31 March 2020:

 

On 23 December 2019, 27,239,764 Firm Placing Shares and 16,855,474 Open Offer Shares were issued as part of the capital raise to fund the Arnhem plant expansion, completion of the Tricoya^® plant in Hull, preliminary work in the United States and working capital requirements related to these activities. The Shares were issued at a price of €1.05 per Ordinary share, raising gross proceeds of €46.3 million (before expenses).

 

During the year, the Group re-introduced the Employee Share Participation Plan (see note 15 for further details). In February 2020 various employees subscribed for a total of 204,612 Shares at an acquisition price of €1.095 per Share, with these shares issued to a trust, to be released to the employees after one year, together with an additional share on a matched basis (subject to continuing employment within the Group).

In the prior year, 173,915 Shares were issued to the Employee Benefit Trust ('EBT') with these vesting on 1 July 2019. Of these Shares, beneficiaries elected to sell 106,448 Shares in the market, with a sale date of 31 July 2019.

 

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 1 April 2018	148	106,707	306	2,264	109,425
Total comprehensive income 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
Total comprehensive (expense) for the period	-	-	(280)	-	(280)
Issue of subsidiary shares to non-controlling interests	-	-	-	3,310	3,310
Balance at 31 March 2020	148	106,707	37	5,659	112,551

 

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 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%)

 

In the year ended 31 March 2020:

 

On 25 May 2019, TTL issued 252,464 shares to Titan Wood Limited. On 25 November 2019, TTL issued 238,024 shares to Titan Wood Limited for a consideration of €0.5m. An additional 61,976 shares were issued to non-controlling interests for a consideration of €0.1m. On 23 December 2019, TTL issued 4,620,156 shares to Titan Wood Limited for a consideration of €9.2m, and an additional 1,401,523 shares were issued in consideration for continued provision of discounted Accoya^® to MEDITE for market seeding purposes. 887,643 shares were issued to non-controlling interests for a consideration of €1.8m. As a result the non-controlling interests' shareholdings were amended to:

               

BP Ventures (8.6%), MEDITE (10.2%), BGF (2.2%), Volantis (1.2%)

 

On 23 December 2019, TVUK issued 11,015,599 Ordinary shares to Tricoya Technologies Ltd for a consideration of €11.0m, and an additional 4,322,394 shares were issued in consideration for continued provision of discounted Accoya^® to MEDITE for market seeding purposes. 7,268,573 shares were issued to non-controlling interests for consideration of €7.3 million. As a result the non-controlling interests' shareholdings were amended to:

 

                               BP Chemicals (30.9%, MEDITE 6.2%)

 

The total carrying amount of the non-controlling interests in TTL and TVUK at 31 March 2020 was €34.42 million (2019: €30.12 million).

 

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

 

		2020	2019
		€'000	€'000
Opening Balance		2,925	2,840
Carrying amount of non-controlling interests issued		(5,857)	(815)
Consideration paid by non-controlling interests		9,167	900
Share issue costs relating to non-controlling interests		-	-
Excess of consideration paid recognised in Group's equity		6,235	2,925

 

27.       Change in accounting policy

 

This note explains the effect of the adoption of IFRS 16 Leases on the Group's financial statements and discloses the new accounting policies that have been applied from 1 April 2019. The Group has adopted IFRS 16 retrospectively from 1 April 2019 but has not restated comparatives for the year ended 31 March 2019, as permitted under the specific transitional provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules are therefore recognised in the opening balance sheet on 1 April 2019.

 

a) Adjustments recognised on adoption of IFRS 16:

 

On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as 'operating leases' under the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee's banking borrowing rate as at 1 April 2019. The weighted average lessee's incremental borrowing rate applied to the lease liabilities on 1 April 2019 was 3.7%.

 

For leases previously classified as finance leases, the Group recognised the carrying amount of the lease asset and lease liability immediately before transition as the carrying amount of the right of use asset and lease liability at the date of initial application. The measurement principles of IFRS 16 are only applied after that date.

 

	€'000
Operating lease commitments disclosed as at 31 March 2019	2,570
Discounted using the lessee's incremental borrowing rate at the date of initial application	2,156
Add: finance lease liabilities recognised as at 31 March 2019	2,021
(Less): short term leases recognised on a straight-line basis as an expense	-
(Less): low value leases recognised on a straight-line basis as an expense	(1)
(Less): contracts reassessed as service agreements	(64)
Add: adjustments as a result of a different treatment of extension and termination options	156
Lease liability recognised as at 01 April 2019	4,268
of which are:
Current lease liabilities	684
Non-current lease liabilities	3,584
	4,268

 

Right of use assets were measured at the amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the statement of financial position as at 31 March 2019. There were no onerous lease contracts that would have required an adjustment to the right of use assets at the date of initial application. The recognised right of use assets relate to the following types of assets:

	At 31 March 2020	At 01 April 2019
	€'000	€'000
Properties	3,708	2,987
Equipment	745	1,072
Motor vehicles	83	4
Total right of use assets:	4,536	4,063

 

The change in accounting policy affected the following items in the Consolidated statement of financial position on 1 April 2019:

-      Property, plant and equipment - decreased by €1,867,000

-      Right of use assets - increased by €4,063,000

-      Prepayments - decreased by €148,000

-      Accruals - decreased by €123,000

-      Lease liabilities - increased by €2,247,000.

 

The net impact on retained earnings on 1 April 2019 was a decrease of €76,000.

 

The change in accounting policy affected the following items in the Consolidated Statement of Comprehensive income in the year ended 31 March 2020:

-      Cost of sales - decreased by €234,000

-      Other operating costs - decreased by €671,000

-      Depreciation - increased by €909,000

-      Finance expense - increased by €107,000

 

a (i) Impact on segment disclosures:

Segment assets and segment liabilities at 31 March 2020 increased as a result of the change in accounting policy. Lease

liabilities are now included in segment liabilities. The following segments are affected by the change in policy:

 

	Adjusted EBITDA	Segment Assets	Segment Liabilities
	€'000	€'000	€'000
Accoya®	306	1,044	1,159
Tricoya®	87	848	858
Corporate	366	854	1,020
R&D	145	(3)	-
	904	2,743	3,037

 

a (ii) Practical expedients applied:

 

In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:

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

-      Reliance on previous assessments on whether leases are onerous

-      The accounting for operating leases with a remaining lease term of less than 12 months as at 1 April 2019 as short term leases, and

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

 

The Group has also elected not to reassess whether a contract is, or contains a lease at the date of initial application. Instead, for contracts entered into before the transition date the Group relied on its assessment made applying IAS 17 and IFRIC 4 Determining whether an Arrangement contains a Lease.

 

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

 

The Group leases various offices, land, equipment and cars. Rental contracts are typically made for fixed periods of 1-10 years, although, if appropriate, a longer term may be entered into. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes.

 

Until the 2020 financial year, leases of property, plant and equipment were classified as either finance or operating leases. Payments made under operating leases (net of any incentives received from the lessor) were charged to the profit and loss statement on a straight-line basis over the period of the lease. From 1 April 2019, leases are recognised as a right of use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the statement of comprehensive income over the lease period to produce a constant periodic rate of interest on

the remaining balance of the liability for each period. The right of use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.

 

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

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

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

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

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

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

 

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

 

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

-      The amount of initial measurement of lease liability;

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

-      Any initial direct costs; and

-      Restoration costs.

 

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

	Minimum lease payments
	2020	2019
	€'000	€'000
Amounts payable under lease liabilities:
Within one year	1,044	257
In the second to fifth years inclusive	2,787	890
After five years	3,441	2,706
Less: future finance charges	(2,151)	(1,832)
Present value of lease obligations	5,121	2,021

 

 

28.       Commitments under loan agreements

	2020	2019
	€'000	€'000
Amounts payable under loan agreements:
Within one year	5,644	7,485
In the second to fifth years inclusive	61,855	60,366
After five years	1,120	2,713
Less future finance charges	(11,306)	(13,655)
Present value of loan obligations	57,313	56,909

 

 

The change in total borrowings in the period of €0.4m consisted of an increase of a €4.5m drawdown of the Tricoya^® RBS facility, offset by €1.8m repayment of the working capital facility, and other repayments in the year of €2.9m, principally €1.4m repayment on the Cerdia loan, and €1.0m repayment on the ABN loan.

 

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:

 

The €9.5 million term loan facility with Cerdia Production GmbH was used to design, procure and build the Arnhem plant's third reactor. 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 2020, the Group had €8.3m (2019: €9.7m) borrowed under this facility. Quarterly repayments of the loan commenced on 21 December 2018 until November 2025, with €1.4 million repaid in the year ended 31 March 2020 (2019: €0.9 million).

The Group has entered into an agreement with Cerdia Producktions GmbH ("Cerdia") under which Accsys will take on responsibility for commercial activities under agreements with Cerdia relating to Accoya^® wood, which terminates as of 1 April 2020 (the "Termination Agreement"). Under the terms of the Termination Agreement, payments to Accsys include fees of €3.2 million, which has been recognised as an exceptional item in the year ended 31 March 2020. The €3.2 million will be deducted from the loan balance on 1 April 2020, with subsequent repayments for the remaining term of the loan being reduced accordingly.

 

Tricoya^® facility:

 

On 29 March 2017 the Company's subsidiary, Tricoya Ventures UK Limited entered into a six-year €17.2 million (€14.6 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 2020, the Group had €8.7m (2019: €3.6m) borrowed under the facility. Three drawdowns of the loans were undertaken in the period, totalling €4.5m. 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

The working capital facility with ABN Commercial Finance is 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 2020, the facility was undrawn (2019: €1.8m drawn).

 

Bank guarantee facility

The facility with ABN AMRO Bank N.V. 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:

	2020	2019
	€'000	€'000
Cash and cash equivalents	37,238	8,857
Less:
Amounts payable under loan agreements	(57,313)	(56,909)
Amounts payable under lease liabilities (note 27)	(5,121)	(2,021)
Net debt	(25,196)	(50,073)

 

 

29.       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 28). 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 2020 a total 13,104,839 Options exist (with 8,449,172 attributable to BGF and 4,655,667 attributable to Volantis). This represents 8.1% of the enlarged issued share capital of the Company as at 31 March 2020.

 

30.       Financial instruments

 

Financial instruments

 

Lease liabilities

 

Lease creditors of €5,121,000 as at 31 March 2020 (2019: €2,021,000) relates to various offices, land, equipment and cars that the Group leases (see note 27).

 

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 2020 (2019: €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	2020	2019
	€'000	€'000
Financial asset at fair value through profit or loss	-	-
Loans and receivables
Trade receivables	8,611	10,725
Other receivables	3,520	839
FX derivative liability	(330)	-
FX derivative asset	-	143
Money market deposits in Euro	52	52
Money market deposits in Sterling	3,744	3,526
Money at call in Euro	24,372	3,308
Money at call in US dollars	892	864
Money at call in Sterling	8,178	1,107
Financial liabilities at amortised cost
Trade payables	(7,827)	(7,936)
Lease liabilities	(5,121)	(2,021)
Loan notes and other long term borrowings	(57,313)	(56,909)
	(21,222)	(46,302)

 

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

All assets and liabilities mature within one year except for the lease liabilities, for which details are given in note 27 and loans, for which details are given in note 28.

 

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 and has purchased fx forward contracts with a nominal amount of £5.85m (2019: nominal amount of £8m) to reflect the expected costs associated with the construction of the plant in Hull and are accordingly 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.

 

31.       Capital Commitments

	2020	2019
	€'000	€'000
Contracted but not provided for in respect of property, plant and equipment	10,859	15,049

 

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

 

32.       Events occurring after 31 March 2020

 

The start of the new financial year has been impacted by COVID-19.  The impact has included a reduction in our Accoya^® sales compared to our previously anticipated levels and a delay in the construction of the Tricoya^® plant in Hull, as explained above.

 

As soon as the likely impact became apparent we have worked to put in place a number of mitigating actions.  Management's priorities have been to ensure the safety and well-being of all our people, to maintain the liquidity of the Company and, as far as possible, preserve the capital raised in December 2019 to enable our current expansion projects to be completed.

 

Our Arnhem production site has remained operational throughout the entire COVID-19 period, successfully balancing supply with market demand. We have significantly reduced the non-essential staff present at the location and introduced new working protocols. Our London head office has effectively been closed throughout the period with all staff productively working remotely.  The Hull construction site saw a reduction in activity levels, as set out above.

 

The key mitigating actions have included the Board of Directors, the Senior Management team and other senior and mid-level staff reducing their salaries by 20%.  In the UK a number of employees have been furloughed, principally those relating to the Tricoya^® project in Hull, given the delay in the construction.  We have also applied for compensation for payroll costs in the Netherlands under the NOW scheme, with the quantum of this benefit dependent upon the relative reduction in revenue for the first quarter.

 

In the short term we have also sought to reduce and minimise other third party costs including sales and marketing and research and development costs. We have also frozen non-essential hires and increased focus on managing working capital.