Accsys Technologies : 23 Jun - Preliminary Results 2019/20

Company	Accsys Technologies PLC
TIDM	AXS
Headline	Preliminary results
Released	23 June 2020
Number	7667Q
23 June 2020

AIM: AXS

Euronext Amsterdam: AXS

Accsys Technologies PLC

("Accsys",the "Group" or the "Company")

Preliminary Results for the year ended 31 March 2020

Continued strategic progress-strong revenue and profitability growth

Accsys, the fast-growing and eco-friendly company that combines chemistry and technology to create high performance, sustainable wood building products, announces its preliminary results for the financial year ended 31 March 2020 ("FY 20").

Year to

Year to

31 March 20205

31 March 2019

Underlying	Statutory	Underlying	Statutory
Total Group Revenue1	€90.9m	€94.1m	€75.2m	€75.2m
Gross profit	€27.5m	€30.7m	€18.6m	€18.6m
EBITDA2	€7.0m	€10.0m	€0.9m	€0.9m
EBIT3	€1.4m	€4.4m	(€3.1m)	(€3.0m)
(Loss)/profit before tax	(€2.2m)	€1.5m	(€6.2m)	(€7.7m)
Period end net (debt)4	(€25.2m)	(€50.1m)
Accoya®sales volume	57,842m3	49,716m3

• 1Underlying revenue excludes €3.2mCerdia licence termination fee payable to Accsys. (See note 5 to the financial statements)

• 2Underlying EBITDA is defined as Operating profit/(loss) before Exceptional items and other adjustments, depreciation and amortisation. (See note 5 to the financial statements).

• 3Underlying EBIT is defined as Operating profit/(loss) before Exceptional items and other adjustments. (See note 5 to the financial statements).

• 4Net debt is defined as short term and long term borrowings (including lease obligations) less cash and cash equivalents. (See note 28 to the financial statements).

5FY 20 results reflect the adoption of IFRS 16, which resulted in an increase inUnderlying EBITDA by €0.9m and a corresponding increase in depreciation of€0.9m and finance expense of€0.1m. (See note 27 to the financial statements).

Key highlights:

• •Underlying group revenues up 21% with continued strong demand from existing customers for our Accoya®and Tricoya®products;

• •Underlying gross margin up to 30% (2019: 25%) as a result of higher sales volumes, an improved product mix and higher selling prices;

• •Third sequential half year period of EBITDA growth and Group now also profitable at EBIT level;

• •Accoya®segment underlying EBIT increased by 130%to €12.6m (EBIT margin of 14% (2019: 7%));

• •Cash-flow generated from operations continued to improve with a positive cash inflow for the year of€2.4m (FY19: €0.3m);

• •€25mreduction in net debt to €25.2mresulting from proceeds from December 2019 equity issue offset by€22m strategic investment in property, plant and equipment.

Operational update

• •16% increase in Accoya®volume sold, to 57,842 cubic meters, with the increase due to ongoing demand in the year being met by the expanded Accoya®plant being operational for the full year.

• •Progressing Arnhem expansion by addition of fourth reactor:

  • oInitial engineering and design work completed;

  • oCommenced the detailed engineering and procurement phases;

  • oFurther milestones and timing of capital commitment being monitored in light of continued COVID-19 uncertainty.

• •Continued progress with our other strategic projects: working towards the construction of an Accoya®plant in the USA in a joint venture with Eastman, and a Tricoya®plant in Malaysia with PETRONAS Chemicals Group Berhad.

COVID-19 - update

Health and safety of our people:

• •Accsys remains committed to the health and well-being of the Group's staff and the wider communities in which we operate. We continue to follow government guidelines to keep workplaces safe for our employees and contractors.

Accoya®sales:

• •As previously announced, the Group saw a significant reduction in demand at the start of the new financial year as a result of the restrictions affecting our customers'operations. Sales volumes in April were nearly half our original expectations.

• •We have seen differences in demand between regions, with the UK being most impacted, and we are actively adjusting our Accoya®production output to meet demand as necessary.

• •More recently, we have seen orders start to increase again as government restrictions are eased and as we reallocate resources to meet the increasing activity levels across our geographic markets in particular the USA and mainland Europe.

• •These improvements are at an early stage however, and we continue to monitor the on-going situation closely and take appropriate measures to carefully manage our cash balance and inventory during this uncertain time;

• •We remain confident of the strong underlying demand for Accoya®wood despite current market difficulties.

Tricoya®Hull plant construction:

• •All work has safely resumed on the construction site following the easing of restrictions by the UK government and the implementation of new protective work procedures.

• •The combination of time lost together with new working practices means that the plant is now expected to be completed in the first quarter of the new calendar year.

• •The delay caused by COVID-19 is also likely to result in some additional costs however these have not yet been fully quantified and we are working to ensure the additional costs and delays are minimised and do not become material in the context of the project as a whole.

Robert Harris, CEO commented:

"We made excellent progress in FY 20 with increased Accoya®production capacity matched with increased sales, driven by continuing strong demand for our products. By combining outstanding sustainability credentials with performance that matches or improves on the alternatives, we provide a compelling value proposition for our distributors, manufacturers, specifiers, architects and end users. As sustainability continues to grow in importance across markets and societies, so does the strong appetite and enthusiasm for Accoya®andTricoya®.

The COVID-19 pandemic had a very limited impact on the FY 20 financial year. We realised almost all of the benefits of our expansion of the Arnhem plant over the course of the year, achieving record production andsales. Our customers' ability to operate at the beginning of the new financial year was affected however, and we have managed our operations to preserve resources while still supporting our customers. We are well-positioned to resume growth plans and strategic advancement as and when market conditions further improve.

Our Accoya®expansion plan has progressed well, with planning and engineering design for the fourth reactor at an advanced stage. Progress in our Tricoya®Hull facility had accelerated in the latter part of FY2019/20. Some unavoidable delays were caused by working restrictions to prevent the spread of COVID-19, however careful planning and prioritisation allowed us to quickly restart full construction operations and will help minimise impacts on our timeline. Demand for Tricoya®, and the unique benefits it offers in design and building, remains very strong as reflected in continued sales growth to our Tricoya®panel manufacturing partners MEDITE andFINSA.

In addition to our UK and Netherlands operations, progress in our work with Eastman Chemicals in the USA and PETRONAS Chemicals Group Berhad in Malaysia continue to show the promising, scalable and global potentialfor our growth ambitions.

We remain excited about the future long-term prospects for the Group and are endeavouring to come out ofCOVID-19 as a stronger and better placed business."

There will be a presentation relating to these results at 10:00am UK time on 23 June 2020. The presentation will take the form of a webcast and conference call, details of which are below:

Webcast link(for audio and visual presentation):

Click on the link below or copy and paste ALL of the following text into your browser:https://edge.media-server.com/mmc/p/jzoic72u

Conference call details(audio only-not recommended for use in conjunction with the webcast link):

Event Passcode: 1246057

Local - United Kingdom: [phone]

National free phone - United Kingdom:0800 279 6619

Local - Amsterdam, Netherlands: [phone]

National free phone - Netherlands:0800 023 5015

Local - USA: [phone]

National free phone - USA: 18 778 709 135

Ends

For further information, please contact:

Accsys Technologies PLCRobert Harris, CEO

via FTI Consulting

Will Rudge, FD

Numis Securities-Nominated Adviser and Joint BrokerOliver Hardy (NOMAD)

[phone]

Ben Stoop

Investec Bank plc-Joint BrokerCarlton Nelson

[phone]

James Rudd Alex Wright

FTI ConsultingMatthewO'KeeffeAlex Le May

[phone]

Off the Grid (The Netherlands)

Frank Neervoort

Yvonne Derske

[phone] [phone]

Chairman's Statement

I am pleased to report on a year which has seen Accsys make continued strong progress towards our long-term objectives, and specifically we have moved into positive EBIT territory. However, we have also had our challenges and I will openly explain where we have encountered these.

We are delighted to report record financial results following the continued strong demand for our Accoya®product and the full year of benefits from the third reactor in Arnhem. The fourth reactor is progressing well and is already beyond the design phase. We have also seen progress towards adding Tricoya®manufacturing capacity in Hull although, as previously announced, this project saw some notable challenges in the period under review. We have had to overcome significant construction issues which resulted in a delay to the project and additional funding being required from our shareholders in November 2019 alongside funds to further the expansion of our Accoya®plant given the strong demand for this product.

Since the year-end, the Coronavirus pandemic has resulted in a very different set of challenges for the entire business and our overarching priority has been to ensure the safety of our people and business continuity. I am pleased with the way the entire organisation has adapted and addressed these challenges while continuing our focus on improving our health and safety performance. While a significant amount of uncertainty remains concerning on-going COVID-19 restrictions and the impact on the economy, I am increasingly confident we will come through this period in a robust position. Our sales channels were particularly affected during this period but there are signs of the market improving. The biggest disappointment is further delays to the Tricoya®investment in Hull where the project was delayed during the lock down and social distancing measures will result in further delays with the project now expected to be complete in the first quarter of next calendar year.

We welcomed Rob Harris to the Board in November 2019 and have been encouraged by the immediate positive impact he has driven with his focus on our people, capital deployment effectiveness and operational progress. We remain grateful to Paul Clegg for the stellar groundwork he put into the Company particularly in those early years of his tenure - without his drive we would not be where we are today.

More recently, we have also announced that Stephen Odell will be taking over from me as Chairman in September 2020 following our AGM. I believe Stephen will be stepping into this role at an incredibly exciting time and the Group will benefit from his extensive operational and international experience as we continue into our next phase of growth.

Demand for Accoya®and Tricoya®remained strong throughout the financial year and as a result our financial results benefitted from the third Accoya®reactor being at capacity for the full year, enabling underlying group revenue to increase by 21% to €90.9mfor the year ended 31 March 2020. The economies of scale associated with operating at these higher levels together with improved pricing also helped the Accoya®segment underlying EBIT to increase 130%to €12.6m. In turn, this enabled the Group to report a positive Underlying EBIT of

€1.4m (2019: loss of €3.1m).

The financial position of the Group improved with net debt decreasing from €50.1m to €25.2m as at 31 March 2020. While the cash in-flow from operations improved, the decrease in net debt was due to the successful completion of the equity capital raise completed in December 2019, resulting in netproceeds of €43m. The majority of these proceeds are earmarked for the completion of the Tricoya®plant in Hull and the further expansion of our Accoya®plant in Arnhem.

The speed of construction of the Tricoya®plant in Hull increased in the second half of the financial year following resolution of the previously reported construction issues. Much of the site is now at an advanced state of construction with some areas being prepared for commissioning. However, as noted above, the restrictions in place concerning the construction industry as a consequence of COVID-19 resulted in a significant proportion of construction workers temporarily stopping work for two months into the new financial year.

While they have now resumed work, new working protocols means the productivity is much reduced and the remaining construction work will take longer to complete such that it is now anticipated the plant will be operational in the first quarter of the new calendar year. Some additional construction and project costs are expected however these have not yet been fully quantified and we are working to ensure the additional costs and delays are minimised and do not become material in the context of the project as a whole.

The preliminary design and engineering work for the fourth Accoya®reactor in Arnhem has been completed and we are now progressing with the next stage of the project which will include detailed engineering and procurement of key items of equipment. The€22m capital project continues on budget and as scheduled with completion expected by the end of the financial year ending 31 March 2022. Given that some uncertainty remains concerning COVID-19 and its impact, we will continue to monitor the progress of the expansion project and will retain control over as much of the project expenditure and timing as possible in order to ensure the Group maintains necessary liquidity.

The new financial year has been impacted by COVID-19, with sales volumes to our Accoya®customers in April nearly half of our previous expectations. More recently we have seen signs of orders beginning to increase again as some of the government restrictions are eased and markets reopen. We are regularly adjusting our production volumes to ensure we meet this increasing order volume while managing our inventory levels as efficiently as possible. We remain cautiously optimistic that sales volumes will continue to increase during the remainder of the financial year driven by the highly compelling attributes of the product in the market place and the previous demand profile.

In the short term we will continue to mitigate the effects of lower sales volumes by limiting non-essential expenditure and staff costs, although we anticipate easing these actions as order levels increase. We will do this because we remain confident that the medium and long-term opportunities for Accoya®and Tricoya®remain very strong and we will therefore continue our targeted investment into sales, marketing and engineering to support our growth.

I believe the fundamental strengths of the Company remain unchanged and as a result we have continued to progress our projects assessing the feasibility of constructing Accoya®and Tricoya®plants in the USA and Malaysia respectively, with a view to increasing our total construction capacity from 60,000m3today to a potential equivalent of 200,000m3within five years.

Chairman's Statement continued

As we look forward, I am also pleased to report that we have commenced a full review of how we assess Environmental Social and Governance (ESG) criteria. Over the past number of years everyone at Accsys has been immensely proud to be associated with manufacturing and selling highly sustainable building materials. This has enabled us to attain a number of sustainability accolades, including being awarded a Green Economy mark by the London Stock Exchange in October 2019. However we also understand the importance of ensuring this mindset is not limited to our products but is embedded in our organisation in a way which will also support our on-going growth and success, and that of all our stakeholders. We look forward to reporting on the outcome of this review and subsequent progress in future periods. We have provided some initial indications of the outcome of the first stages of this review in this Annual Report.

Finally, it has been a pleasure to serve the Company for over 9 years. We now sell more in a month than in the first year I joined. Equally we now have our future in our own hands and we are more than capable of delivering on 200,000m3of production capacity within five years. These are exciting times for our management, employees, shareholders and key partners. Execution of our plans is critical but I have confidence in our ability to deliver.

Patrick Shanley Non-Executive Chairman

22 June 2020