Accsys Technologies : 23 Nov - Half Year Results 2021/22

Company

TIDM

Headline

Released Number

Accsys Technologies PLC AXS

Interim results for the six months ended 30 September 2021

23 November 2021

AIM: AXS

Euronext Amsterdam: AXS

23 November 2021

Accsys Technologies PLC

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

Interim Results for the six months ended 30 September 2021

Strong revenue growth - delivering on expansion strategy

Accsys, the fast-growing and eco-friendly company that combines chemistry and technology to create high performance, sustainable wood building products, announces its interim results for the six months ended 30 September 2021 ("H1 FY 22").

	H1 FY 22	H1 FY 21	Change
Total Group revenue	€56.2m	€42.9m	31%
Underlying gross profit	€17.2m	€14.3m	20%
Accoya® Manufacturing margin1	31.0%	33.5%	(250bps)
Underlying EBITDA2	€4.5m	€4.3m	5%
Underlying EBIT3	€1.5m	€1.6m	(6%)
Underlying (loss) before tax	(€0.3m)	(€0.1m)
(Loss)/profit before tax	(€0.2m)	€1.0m
Period end net cash/ (debt)4	€2.4m	(€16.3m)
Accoya® sales volume	29,555m3	26,422m3	12%

Key highlights:

• Group revenue and Accoya® sales volumes up 31% and 12% respectively versus the prior year comparative period, which was impacted by COVID-19.
• Maintaining good profitability with underlying gross profit up 20%:
  o Improvement in gross profit supported by Accoya® sales price increases substantially offsetting higher raw material costs.
  o 31% Accoya® manufacturing margin with 250bps decline due to changes in product sales mix.
• 5% growth in underlying EBITDA2 with planned investment in group organisation capability to support growth and the expected production capacity increases in 2022.
• Strategic growth projects under our '5x' production capacity expansion target by 2025 are progressing well:
  o World-first Tricoya® (Hull) plant - on track to commence operations by July 2022.
  o Accoya® (Arnhem) plant - addition of a fourth reactor (+33% new capacity to 80,000m3) on track to be complete by around the end of Q1 calendar year 2022.
  o Accoya® USA JV - further project work progressing; final investment expected in coming months upon completion of financing workstream.

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• 4% increase in operating cash flow5 with continuing good cash generation from Accoya® segment; Net cash of €2.4m includes cash of €60.9m at period-end to fund expansion projects including planned US JV investment; Recent Group debt refinance improving debt cost and structure.

Notes

1. Accoya® Manufacturing margin is defined as Accoya® segmental underlying gross profit (excluding Licence income and marketing services) divided by Accoya® segmental revenue (excluding Licence income and marketing services) (See note 2 to the financial statements)
2. Underlying EBITDA is defined as Operating profit/(loss) before Exceptional items and other adjustments, depreciation and amortisation, and includes the Group's attributable share of our USA joint venture's underlying EBITDA. (See note 2 to the financial statements).
3. Underlying EBIT is defined as Operating profit/(loss) before Exceptional items and other adjustments, and includes the Group's attributable share of our USA joint venture's underlying EBIT. (See note 2 to the financial statements).
4. Net cash/(debt) is defined as short term and long-term borrowings (including lease obligations) less cash and cash equivalents. (See note 12 to the financial statements).
5. Group operating cashflow is Cash inflows from operating activities before changes in working capital and exceptional items.

Robert Harris, CEO, commented:

"We are pleased to report our first half results, delivering strong growth in both revenue and gross profits. This performance demonstrates further progress on our strategy and the hard work of our employees to deliver for our customers.

There is continuing high demand for our Accoya® and Tricoya® products as customers focus on higher performance materials as well as on sustainability. It is this demand, which continues to exceed supply, that has enabled us to substantially offset the wider market pressures from raw materials costs and supply chain disruption through price increases.

We are progressing our strategic growth projects to increase production capacity five-fold by 2025. The construction of a fourth Accoya® reactor in Arnhem is progressing well and our US Accoya® JV with Eastman is approaching its final investment decision. With Accsys now directly project-managing the completion of our Hull Tricoya® facility, we have made good progress towards the plant being commercially operational by July 2022. Our expansion at Arnhem and the new Hull plant will together see Accsys double its present operating production capacity of 60,000m3 to 120,000m3 by July 2022.

Looking ahead we remain confident in delivering on market expectations. Longer term we believe there will be significant further demand for Accsys' higher performance, lower maintenance and more sustainable products as the world focuses on decarbonisation."

Analyst presentation

There will be a presentation relating to these results for analysts at 10:00am UK time (11:00am CET) today. 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/nbrgpb82

Conference call details (audio only - not recommended for use in conjunction with the webcast link): Event Passcode: 3673829

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

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For further information, please contact:
Accsys Technologies PLC	[e-mail]
Sarah Ogilvie, Investor Relations
Numis Securities (London)
Oliver Hardy (NOMAD), Ben Stoop	+44	(0) 20 7260 1000
Investec Bank plc (London)
Carlton Nelson, Alex Wright	+44	(0) 20 7597 5970
ABN Amro (Amsterdam)
Richard van Etten, Dennis van Helmond	+31	20 344 2000
FTI Consulting (UK)
Matthew O'Keeffe, Alex Le May	+44	(0) 20 3727 1340
Off the Grid (The Netherlands)
Frank Neervoort, Yvonne Derske	+31	681 734 236

Notes to editors:

Accsys (Accsys Technologies PLC) is a fast-growing business with a purpose: changing wood to change the world. The company combines chemistry, technology and ingenuity to make Accoya® wood and Tricoya® wood elements: high performance wood products that are extremely durable and stable, opening new opportunities for the built environment and giving the world a choice to build sustainably. Accsys transforms fast-growing, certified sustainable wood into building materials with an up to 50-year warranty, locking carbon stored in the wood into useful products for decades, with performance characteristics that match or better those of non-renewable,resource-depleting and polluting alternatives. Accsys is listed on the London Stock Exchange AIM market and on Euronext Amsterdam, under the symbols 'AXS'. Visit www.accsysplc.com

Accoya® solid wood is sustainable, durable, and stable with exceptional performance, finish and sustainability. Accsys' proprietary acetylation process makes the wood more dimensionally stable and because it is no longer easily digestible, extremely durable. It is one of very few building materials to be Cradle to Cradle Certified™ at the Gold level, with a Platinum rating for Material Health, confirming that no harmful or toxic additives or chemicals are present to leach out into the environment. Primary applications for Accoya® wood include windows, doors, cladding and decking, where the combination of performance and sustainability benefits compete favorably against hardwoods, plastics, metals and concrete. Visit www.accoya.com

Tricoya® acetylated wood elements are produced for use in the fabrication of panel products such as medium density fibreboard (MDF). Panel products made with Tricoya® wood elements are truly durable and stable enough for use outdoors and in wet environments, unlocking new possibilities for design and construction. They have been lauded as the first major innovation in the wood composites industry in more than 30 years and bring the flexibility of traditional panel products and sustainability benefits of wood to a whole new range of applications. Visit www.tricoya.com

Any references in this announcement to agreements with Accsys shall mean agreements with either Accsys or its subsidiary entities unless otherwise specified. 'Accsys' and 'Accsys Technologies' are trading names of Titan Wood Limited ("TWL"), a wholly-owned subsidiary of Accsys Technologies PLC. Accoya®, Tricoya® and the Trimarque Device are registered trademarks owned by TWL, and may not be used or reproduced without written permission from TWL, or in the case of the Tricoya® registered brand trademark, from Tricoya Technologies Limited, a subsidiary of TWL with exclusive rights to exploit the Tricoya® brand.

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Accsys Technologies PLC

Chief executive's statement

Introduction

Accsys has delivered strong revenue growth in the first half of the 2022 financial year, reflecting the continuing significant demand for our products while also investing in our manufacturing and organisational capability to deliver the growth opportunity ahead of us.

In the period we have made good strategic progress under our long-term plan to increase production capacity five-fold to 200,000 m3 per annum in 2025. Work to expand our Arnhem plant capacity by 33% continued, and we successfully completed the equity funding and made key preparations for our planned JV to build an Accoya® production facility in North America. Despite challenges in the completion of the Hull Tricoya® plant, we have successfully taken control of the site, and are now directly managing the final completion ourselves towards commercial operations by July 2022.

This has also been an important period of investing in our business and people. New colleagues have joined bringing expertise in functional areas to help lead and deliver our growth ambitions and we have begun to increase our operating teams ready to operate our new facilities. In H1 FY22 we have continued to develop our safety culture and processes and were free of lost-time incidents in the period.

Despite wider market pressures around raw materials and supply chains across many industries in this period, Accsys has delivered a robust performance and delivered further growth in underlying EBITDA. While we have seen increases in raw material costs, we have been able to substantially offset this through increased sales prices. This resilience has been supported by the strength of our supply contracts and nature of our raw materials with a partial natural hedge created by the conversion back into acetic anhydride or sale of valuable acetyl by-product.

Summary of results

The Group has delivered strong revenue and sales volume growth while remaining capacity constrained at our Arnhem plant. Total revenue for the 6 months ended 30 September 2021 increased by 31% to €56.2m (H1 FY21: €42.9m). Accoya® sales volumes of 29,555 cubic metres represent a 12% increase compared to the equivalent period last year which was impacted by COVID-19. We also grew revenues through an increase in average selling prices for our high- performance wood products.

In the period manufacturing margin was 31%, just above our target 30% level, with good cash generation. Higher average sales prices were the result of product price increases that took effect during the period and in H2 FY21, which helped to substantially offset increased raw material prices and reflect the continuing strong demand in the market for our products. A change in the mix of products sold year on year also impacted the percentage margin, where sales of lower priced Accoya® for Tricoya® and tolling (where we process the wood but are not responsible for the raw wood purchase and as a result are lower priced) were higher in the prior year due to the supply chain dislocation experienced in the early stages of the pandemic.

Group underlying EBITDA increased 5% against the prior year to €4.5m, despite higher Group operating costs in the period through planned investment in Group organisational capabilities and people with increased headcount to support our future growth. We have closed the period with a robust balance sheet with €2.4m net cash, with cash of €60.9m including the funds raised ready for investment in our US Accoya® JV.

COVID-19

During the first 6 months of the 2022 financial year, we have not seen the same level of direct impact from COVID-19 on our revenue and sales as we did in the prior year. However, as with many businesses, the pandemic continues to affect the business indirectly. It has also contributed to the additional delay and challenges in completing construction and bringing production online at our Hull plant where the EPC lead contractor's agreement was terminated as previously announced.

We are continuing to operate in a more COVID-safe way to protect our people and those who we do business with. We continue to manage some supply chain effects which have impacted industries more broadly, which we detail later in these reports.

Last year during the 2021 financial year we received some government support in the Netherlands and the UK for our operations in the initial stages of the pandemic. At that time, Directors and other senior staff accepted a 20% reduction in their pre-tax salary for four months as part of our mitigation measures. Relative to many other organisations around the world, the effects of the pandemic on Accsys' financial performance has been limited by virtue of the strong underlying demand for our products and the rapid recovery in sales volumes. In H1 FY 22, after the scope of impacts and resilience became clear, we paid back in full the government grants received. In May 2021 while the Board and senior management team retained the 20% salary reduction, we paid back the salary difference to all employees below the senior-management team level, reflecting their hard work throughout that challenging period.

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Accsys Technologies PLC

Chief executive's statement continued

Accoya® - Global performance

	Six months	Six months
Accoya® segment - summary	ended 30	ended 30	Change
of results	September	September
	2021	2020
Accoya® sales volume - cubic	29,555	26,422	12%
metres
Underlying Accoya® segmental	€55.4m	€41.8m	33%
revenue
Accoya® wood revenue	€48.5m	€38.7m	25%
Licence income	€nil	€0.4m	-100%
Acetic acid sales	€6.8m	€2.6m	162%
Manufacturing margin - %	31.0%	33.5%	-2.5% pts
Underlying EBITDA	€10.3m	€9.2m	12%
Underlying EBIT	€8.0m	€7.0m	14%

The Accoya® business delivered good growth in volumes in the first half of FY22, despite remaining at capacity production levels and with customer demand for our product continuing to exceed supply. A 12% increase in sales volumes was the combined result of our ongoing efficiency programme to improve productivity, lower production volumes in the prior year in Q1 due to the initial stronger effects of the COVID-19 pandemic, and the deferral of our scheduled maintenance stop at Arnhem into the second half of FY22 to coincide with planned tie-ins for the fourth reactor project.

Accoya® revenue growth of 33% reflects these same factors driving the sales volume growth, and further supported by increased average sales prices in the period. These price increases reflect both the continuing strong demand from customers and higher raw material and logistics costs in our supply chain in the period. Price rises were implemented in the last financial year for all customers and have continued to benefit the first half of the 2022 financial year. In addition, we have put through further price increases in the period in June 2021 and September 2021. Average prices were also higher than the prior year period due to changes to the product mix, which included a lower proportion of material sold to Tricoya® customers and lower tolling sales.

Overall, we have continued to see strong underlying demand for Accoya® across our regions and with our Tricoya® panel manufacturing partners.

Our H1 FY22 regional sales trend on a period-on-period basis, primarily reflects the impact of the early stages of the pandemic on prior year sales in our different regions in H1 FY21. The strong growth in H1 FY22 sales to the UK & Ireland compares against the significant negative decline in H1 FY21 sales volume to UK & Ireland which was more acutely impacted by supply chain dislocation in the early stages of the pandemic. By comparison H1 FY21 sales volumes were stronger in Europe as we redirected volume around the UK disruption, and in this period's results this appears as a negative movement in Rest of Europe. Excluding the one-off nature of COVID-19 comparative impacts from the 2021 financial year, over-all we believe that the regional demand and sales volumes flow in our geographic markets is steady period-on-period. The exception to this is the Americas, where we are actively increasing our allocation of product volumes available to customers as we develop this market ahead of our planned US capacity expansion.

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