Accsys Technologies : Halfjaarlijkse financiële verslaggeving

Company	Accsys Technologies PLC
TIDM	AXS
Headline	Interim results for the six months ended
30 September 2023
Released	21 November 2023
Number	1164U

AIM: AXS

Euronext Amsterdam: AXS

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

21 November 2023

Accsys Technologies PLC

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

Interim results for the six months ended 30 September 2023

Accsys, the fast-growing company that enhances the natural properties of wood to make high performance and sustainable building products, today announces its unaudited interim results for the six months to 30 September 2023 (H1 FY24).

	Six months to	Six months to	% Change
	30 Sep 2023	30 Sep 2022
Revenue	€71.2m	€58.9m	21%
Gross profit	€20.3m	€18.1m	12%
Underlying EBITDA1	€1.6m	€4.5m	(64%)
Period end net debt3	(€48.2m)	(€61.4m)
Adjusted cash4	€10.8m	€7.2m

Highlights

• 21% growth in revenue at €71.2m, driven by good product demand, higher average sales prices and increased production capacity following reactor 4 start-up in September 2022
• 20% growth in Accoya sales volumes at 28,807m3:
  o Strong growth of Accoya in Rest of World and Rest of Europe markets, up 42% and 28% respectively
  o 30% growth in Accoya for Tricoya production at 8,393m3, supporting our belief in Tricoya market potential
• 2 percentage points decline in gross profit margin to 29%, reflecting higher raw material costs and wood inventory optimisation
• 64% decrease in underlying EBITDA at €1.6m: volume growth and higher average Accoya prices offset by:
  o Increased pre-operational costs in Accoya plant in Kingsport, US, ahead of completion in mid-2024 and Tricoya UK plant operating costs, due to a change in accounting treatment5
  o Increased operating expenditure on sales & marketing, executive recruitment and engineering costs
• Strategic growth projects:
  o Arnhem - plant performing well; efficiency improvements ongoing
  o Accoya plant in Kingsport, US - construction of new 43,000m3 plant progressing well and in line with plan; on- track for completion and commercial operation in mid-2024
• Tricoya UK plant project - while Accsys continues to believe in the market potential for Tricoya, in view of the current operating environment and shift of Company focus on the Accoya plant in Kingsport, US, the Board is undertaking a review of the viability, strategic interest and financial capabilities of its Tricoya UK plant in Hull. The review will be conducted in early calendar year 2024
• Exceptional item2 of €1.2m in relation to organisational re-alignment and cost savings initiatives: Actions being taken to deliver annual cost savings of €3.0m+. Impairment loss (non-cash)of €7.0m recognised in the period

1

relating to the Tricoya segment due to an increase in the discount rate used following an increase in market interest rates and the Company specific market volatility factor

• Net debt at 30 September 2023 of €48.2m, an increase of €4.1m since the FY23 year end, reflecting capex of €2.0m, increase in working capital and inventory position and scheduled loan interest payments partially offset by EBITDA generation during the period
• Fundraising: The Company today announces a fundraising to raise gross new proceeds of approximately €24m and an extension of its debt facilities. The proceeds of the fundraising will allow Accsys to complete the delivery of its Accoya plant in Kingsport, US, in mid-2024, strengthen its balance sheet and increase working capital headroom in the face of a challenging macro trading environment. Decisive action has been taken to secure the fundraising and a debt extension package to ensure the Company has the funding platform necessary to execute its growth strategy

Notes

1. 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).
2. Other exceptional items recognised in the prior year include €58m for the impairment of Tricoya segment assets and €0.5m related to advisor fees related to the Tricoya consortium reorganisation.
3. Net debt at 31 March 2023 was €44.1m.
4. Adjusted cash excludes cash pledged for the Letter of Credit provided to FHB of €10m.
5. Tricoya UK's ongoing running costs are being treated as operating expenditure in the first half of FY24 following the introduction of Tricoya UK's hold period in H2 FY23.

Dr. Jelena Arsic Van Os, Chief Executive Officer of Accsys, commented:

"In navigating the challenging macro-economic conditions of the first half of the year, our new management team has shown unwavering commitment in reshaping Accsys towards a less complex business model with increased execution focus. As we reflect on our business performance, we acknowledge and proactively address short-term obstacles. However, our confidence in our innovative product range remains unshaken, with the conviction that our Accoya and Tricoya premium offerings set us apart in the market, representing substantial untapped potential. To ensure delivery on this potential, the Company has raised today approximately €24m of new proceeds from our shareholders to improve near-term liquidity and enable us to finalise the construction of our Accoya plant in Kingsport, US, which alongside our wider operations, strengthens Accsys's position for growth in both the medium and longer term."

Current trading and outlook

Current market conditions remain challenging, reflecting ongoing difficult macro conditions across our markets, with sales volumes under continued pressure as distributors reduce their inventory levels ahead of the upcoming holiday period. Sales performance by region remains mixed. Despite the economic environment, we have continued to maintain our premium price point on both our Accoya and Tricoya products, reflecting their sustainable, durable and high-performance qualities.

The Board does not expect trading conditions to improve materially until the middle of the 2024 calendar year. The second half of the financial year is typically stronger than H1, due to increased sales in the Northern Hemisphere in anticipation of the peak construction season. Accordingly, the Board believes there will be an improvement in product demand in Q4 FY24, aided by the unwind of distributor destocking that has taken place in recent months. However, despite these factors, given the current market backdrop and expected sales volume for the remainder of this financial year, the Board believes that the FY24 results will be below current market expectations.

The remainder of the current financial year will see continued focus on completion of the Kingsport plant and on building demand for Accoya globally, as FY24 will see an increase in Company's capacity in conjunction with the transfer of volumes from Arnhem to Kingsport. The Company will also focus on delivering continuous operational improvements at Arnhem. With its unique product portfolio set in a growth industry, increased capacity at Arnhem and future capacity coming from the new plant in Kingsport, we believe Accsys is well positioned for future growth. We are broadening our global distributor network, developing our Approved Manufacturers Programme ("AMP") and accelerating sales & marketing activity, particularly in the US, which will support our regional growth. While Accsys continues to believe in the attractive market and growth potential for Tricoya, in view of the current operating environment and shift of company focus on the Accoya plant in Kingsport, US, the Board is undertaking a review of the viability, strategic interest and financial capabilities of its Tricoya UK plant in Hull.

This announcement comprises inside information for the purposes of EU MAR and UK MAR. The person responsible for making this announcement is Nick Hartigan, General Counsel and Company Secretary, Accsys Technologies PLC.

Enquiries:
Investor Relations / Analysts: Katharine Rycroft, Accsys Technologies PLC	[e-mail]
Media: Matthew O'Keeffe, Alex Le May, FTI Consulting (UK)	+44	(0)	20 3727 1340
Media: Clemens Sassen, Tessa Nelissen, Huijskens Sassen Communications (NL)	+31	(0)	20 68 55 955
Deutsche Numis (London): Oliver Hardy (NOMAD), Ben Stoop	+44	(0)	20 7260 1000
ABN AMRO (Amsterdam): Julie Wakkie, Diederik Berend	+31	20 628 5789

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Accsys Technologies PLC

Chief Executive's Report

Overview of H1 FY24

Revenue and volumes in H1 FY24 were 20% ahead of the prior year. However, demand for our products softened in some of our markets towards the end of the half, reflecting exceptionally difficult trading conditions in the building materials, construction and residential housing markets globally.

Demand for Accsys' premium wood products has, up until the late summer of this year, always exceeded supply. The quality and desirability of Accoya and Tricoya continues to be widely recognised throughout the industry and has allowed us to implement a disciplined pricing strategy. With increased capacity at Arnhem, we have been able to give our customers and distributors the opportunity to purchase and hold more products than in recent years. As the global construction industry has slowed, customers have been holding inventory and experiencing slowing order books. Correspondingly, new orders for our products began to slow over the summer as distributors worked down their stock levels.

In view of this trading environment, we announced on 1 September 2023 that sales volumes and revenues for FY24 were likely to be below market expectations. We took immediate and decisive steps to reduce operating costs, optimise working capital and implement cost saving initiatives and have made good progress on this over the last few months, details of which can be found on page 5. In parallel, we are taking actions to accelerate our sales approach to stimulate demand and achieve greater market penetration.

Our plant in Arnhem performed well in H1 FY24. During the period we have continued to focus on its efficiency, including further work on optimising reactor 4 to reduce cycle times and deliver more capacity and also implement other operational improvement programmes across the site, focusing on cost, safety and reliability.

We have also made good progress with our Accoya USA JV in Kingsport, Tennessee. Construction is now c.78% complete and equipment setting c.87% complete. The project remains on track for commercial operation in mid-2024.

Accsys continues to believe in the attractive market and growth potential for Tricoya, with product demand remaining strong. In view of the current operating environment and shift of company focus on the Accoya USA project, the Board is undertaking a review of the viability, strategic interest and financial capabilities of its Tricoya UK plant in Hull.

Summary of financial performance

Accsys delivered revenues of €71.2m in H1 FY24, a 21% increase on the prior year, driven by good product demand, higher average sales prices and increased production capacity following the start-up of reactor 4 in September 2022.

Despite good revenue growth, Underlying EBITDA decreased by €2.9m to €1.6m. Volume growth and higher average Accoya prices were offset by higher average wood prices, partially offset by lower net acetyls cost. Increased pre-operational costs in the Kingsport plant ahead of completion, higher Tricoya UK plant operating costs due to a change in accounting treatment5, and increased operating expenditure on sales & marketing, executive recruitment and engineering costs also contributed.

Gross margin weakened by two percentage points to 29% (H1 FY23: 31%), reflecting higher raw material costs and wood inventory optimisation.

Underlying loss before tax was €5.0m (H1 FY23: loss of €0.6m). Statutory loss before tax was €13.1m (H1 FY23: €56.3m).

Net debt increased by €4.1m to €48.2m since the FY23 year end, reflecting capex payments of €2.0m, an increase in working capital and scheduled loan interest payments, partially offset by EBITDA generation during the period.

An exceptional operating cost of €1.2m has been recognised in the period in relation to organisational realignment and cost savings initiatives, including headcount reductions, which are expected to deliver annual savings of more than €3.0m. An impairment loss (exceptional non-cash item) of €7.0m has been recognised in the period relating to the Tricoya segment (H1 FY23: €58.0m) due to an increase in the discount rate used following an increase in market interest rates and the Company specific market volatility factor.

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Accsys Technologies PLC

Chief Executive's Report continued

Summary of product financial performance - Accoya and Tricoya

	H1 FY24	Growth on PY
Accoya revenue	€68.2m	+16%
Accoya sales	28,807m3	+20%
volumes
Sales volume by	H1 FY24	Growth on PY
end market	m3
UK & Ireland	6,165	+6%
Rest of Europe	7,385	+28%
North America	4,218	+4%
Rest of World	2,646	+42%
Tricoya	8,393	+30%

Revenues from Accoya grew by 16% in the first half of FY24 to €68.2m, driven by good product demand and increased production capacity following the commercial start-up of reactor 4 in Arnhem in September 2022. Accoya volumes grew by 20% to 28,807m3. Sales volumes in all our end markets grew year on year, with particularly strong performances recorded in the Rest of World (+42%) and Rest of Europe (+28%) regions.

Revenues from Accoya for Tricoya as a percentage of total sales volumes increased in H1 FY24 and now represent 29% of total sales volumes, versus 24% at the end of the FY23. Accoya for Tricoya revenues in H1 FY24 grew by 31% to €11.4m, driven by continued strong product demand. Our Accoya for Tricoya partners remain committed and supportive. Tricoya panel revenue also increased to €2.9m in H1 FY24.

Update on strategic growth projects - Accoya and Tricoya

Accoya

In September 2022, we completed the expansion of our plant in Arnhem, adding a new fourth reactor with capacity for an additional 20,000 cubic metres, and enabling the site's maximum annual capacity to increase to 80,000 cubic metres. A large proportion of current capacity is being used to seed the US market, with 16% of FY23 sales volumes going to North America.

In addition to the aforementioned operational improvement programmes across the plant, other self-help measures to reduce costs and improve manufacturing quality include improved target operating models that will drive simplification within operations. As we look to minimise wastage, we will also introduce new scanning technology which will allow us to identify any material flaws in Accoya wood prior to being converted into Accoya Color.

Under our joint venture with Eastman, a world leader in the production of acetyls, we are building an Accoya plant in the US at Eastman's Kingsport, Tennessee site. The plant has been designed with scalability in mind and is being built to enable future rapid expansion. Under the joint venture, Accsys holds a 60% interest and Eastman a 40% interest. Both joint venture partners continue to be fully engaged in delivering this strategically important project, which will replicate the proven technology of our successful plant in Arnhem but with additional improvements, most notably relating to integration of Eastman's acetyls supply to the new plant - not only is this a safer process, but it will significantly reduce logistical expense, storage costs and working capital.

We have continued to make good progress with the construction of the plant during H1 FY24. Key milestones include the completion of ground works, ongoing steelwork and main warehouse construction, installation of the reactors on site, placement of multiple large sub-contracts and procurement of major equipment. As we move towards completion of the plant, we have commenced execution of the resourcing plan along with increasing operational readiness activities which will, in the short term, lead to increased costs being incurred. The total cost of completion of Kingsport is now estimated to be c.15% higher than previously communicated at approximately $160m.

Our Accoya Color manufacturing plant in Barry, Wales, has increased our ability to convert Accoya wood into Accoya Color. In H1 FY24 we produced 2,434m3 of Accoya Color (H1 FY23: 2,937m3), with volumes impacted by current market weakness. Average sales prices were, however, c.10% higher than in the prior year - a highly credible performance given the current market backdrop. Although sales fell by 16% in the Germany, Switzerland and Austria region (DACH) in H1 FY24, our other

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Accsys Technologies PLC

Chief Executive's Report continued

markets - including North America - delivered sales growth of 10% on the prior year. Post 30 September 2023, product sales have continued to gain momentum in North America, with current orders indicating higher volume growth in H2 FY24 than in H1 FY24.

As we increase our Accoya production capacity, we continue to expect increased Accoya Color sales in the medium term. In addition to the product's existing markets, Accoya Color was launched in the UK in November 2023 with further market launches in development.

Tricoya

Demand for our Tricoya products remains strong despite limited production and we are continuing to grow the market with both existing and new customers. In addition, we will continue our R&D on sourcing alternative wood species for Tricoya which have a shorter supply chain.

Accsys stopped site activity at the Tricoya UK plant in Hull in November 2022, placing the project into a hold period to mitigate the risk of weaker economics on start-up and to allow the Board time to assess the economics and capability of the plant and its potential returns on investment. The Company is using modest levels of internally generated cash (c.€0.5m per month) to maintain the plant and progress certain pre-construction works. These include mechanical preservation works, detailed construction work scoping, planning and cost estimating, completion of minor construction packages, software programming and documentation validation. The remaining costs relate to employee & office, landlord and insurance costs.

Accsys continues to believe in the attractive market and growth potential for Tricoya, with product demand remaining strong. In view of the current operating environment and shift of company focus to the Kingsport project in the US, the Board is undertaking a review of the viability, strategic interest and financial capabilities of its Tricoya UK plant in Hull.

Reducing operating costs and optimising working capital

In our trading statement on 1 September 2023, we announced that we are taking immediate and decisive actions to reduce operating costs and optimise working capital. Our aim is to re-set and implement a lean operating business model and to right- size the business, delivering annual cost savings of more than €3.0m. This is being achieved through organisational alignment, including headcount reductions - all of which are in non-operational areas - both centrally (London head office) and locally across our international operations. In this way Accsys is creating cleaner reporting lines and a simplified business structure. In addition, we have reduced the use of interim labour and manual stacking in our Arnhem plant and have significantly scaled back on the use of third party consultants. Other actions taken during the period include implementing additional cost controls across all of our operations, cutting non-discretionary spend and eventually moving to automated functions and controls.

Going forward, a key focus for the Company will be the effective management of our supply chain. We are in the process of reducing our wood buying to return to normalised inventory levels and are looking at options in respect of anhydride supply to reduce costs.

Accelerating our sales approach

In our September statement, we stated that we would accelerate our sales approach to stimulate demand and achieve greater market penetration in our core and emerging markets. Since then, we have accelerated our sales & marketing activity by adding necessary distribution in key markets. During the period we appointed six new distributors; two in Belgium, and one each in Greece, Italy, the UK and the USA. The Company now has 67 distributors of its products and 661 AMPs worldwide, of which 111 AMPs and eight distributors are in the Americas. In H1 FY24, the Company added 56 AMPs to its global network, bringing a total of 85 AMPs in the year to date.

With room to progress further and develop new markets to help build further global product demand, Accsys continues to establish key window, door, decking and cladding manufacturing partners through its AMPs and broad network. Lead generation and brand awareness campaigns continue to promote Accoya to its key audiences and support the sell through of materials downstream.

As part of the organisational alignment, the Company is appointing additional heads in the US and France and engaging with multiple partners in the growing Middle East region. This year we appointed our first Marketing Coordinator and Sales Manager in France to execute our sales & marketing strategy. The new team is focusing on developing the AMP programme in France as well as working on an Approved Installer Programme. It has made significant progress this year to date, on-boarding 22 new AMPs with training and best practice in the production and use of Accoya, to help guarantee high-quality products for end users. During the period we also appointed a new Marketing Manager in the DACH region.

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Accsys Technologies PLC

Chief Executive's Report continued

Capital Raise

We have today announced a fundraising to raise gross new proceeds of approximately €24m and an extension of our debt facilities. The proceeds of the fundraising allow us to complete the delivery of our US plant in Kingsport in mid-2024, strengthen our balance sheet and increase working capital headroom in the face of a challenging macro trading environment.

Dr. Jelena Arsic Van Os

Chief Executive Officer

21 November 2023

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Accsys Technologies PLC

Finance Review

Statement of comprehensive income

H1 FY24 revenue increased by 21% to €71.2m in H1 FY24 (H1 FY23: €58.9m), driven by continuing demand for our products, higher average sales prices and increased production capacity following the start-up of reactor 4 in Arnhem in September 2022.

Accoya sales volumes increased by 20% to 28,807m3, reflecting additional capacity and also a weaker comparable period last year following production downtime in Arnhem during the tie-in and installation of reactor 4 in 2022. While demand for both Accoya and Tricoya has been good in H1, demand has softened across some of our regions towards the end of H1 FY24 and into H2 FY24 as our distributors began to experience a softening in the global construction and building materials markets.

Accoya for Tricoya sales volumes increased by 30%, with revenues increasing by 31% to €11.4m. Accoya sales to our customers for the manufacture of Tricoya panels are currently used to develop the market for Tricoya products and now represent 29% of total Accoya sales volumes (H1 FY23: 27%).

Other Revenue, which predominantly relates to the sale of our acetic acid by-product into the acetyls market, decreased by 36% to €4.9m (H1 FY23: €7.6m), reflecting lower acetic acid sales prices. These sales act as a partial hedge to acetic anhydride costs which also decreased during the period. Net acetyls costs decreased on the prior year.

Raw wood input costs were higher year on year, with higher wood mix costs in addition to moderately higher average wood prices.

Cost of sales increased by 25%, with 20% higher sales volumes and higher raw wood costs being partially offset by lower acetic anhydride costs.

While gross profit of €20.3m was 12% higher than in the prior year (H1 FY23: €18.1m), gross profit margin fell by two percentage points to 29%. This reflects our use of higher-cost appearance grade wood for Accoya for Tricoya production during H1 FY24 as we have sought to continue to lower inventory levels which increased during 2022 in anticipation of the start-up of reactor 4. In H2 FY24 we will return to using less expensive Spanish radiata pine and other wood chip grade wood for Accoya for Tricoya production.

Underlying other operating costs (excluding depreciation and amortisation) increased from €13.3m to €17.7m. This is due to Tricoya UK's ongoing running costs being treated as operating expenditure in the first half following the introduction of Tricoya UK's hold period in H2 FY23. It is also the result of increased investment in sales & marketing, higher engineering costs and greater spend on executive recruitment.

Depreciation and amortisation charges increased by €1.3m to €4.8m following commercial production from reactor 4 in September 2022.

Underlying finance expenses increased €0.1m to €1.6m following the interest on Tricoya UK's NatWest facility not being capitalised post the introduction of the hold period for Tricoya UK in H2 FY23, higher market interest rates on the variable rate borrowings held partially offset by a foreign exchange gain on the cash pledged to ABN AMRO which is held in US dollars (see note 11).

An impairment loss (exceptional non-cash item) of €7.0m has been recognised in the period relating to the Tricoya segment (H1 FY23: €58.0m) due to an increase in the discount rate used following an increase in market interest rates and the Company specific market volatility factor.

An exceptional operating cost of €1.2m has been recognised in the period for restructuring costs relating to reducing Accsys' administrative operating cost base.

No other adjustments have been recognised in the current period which were previously also excluded from underlying results. These other adjustments related to foreign exchange differences on the US dollar cash pledged to ABN AMRO and other foreign exchange differences on cash held in the prior year period. See note 4 for further details.

Accsys' share of its US joint venture (Accoya USA LLC) net loss, which is accounted for using the equity method, increased by €0.8m to €1.2m (H1 FY23: €0.4m) as the entity increases its pre-operating activity as it progresses towards completion in mid-2024.

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Accsys Technologies PLC

Financial review (continued)

Underlying loss before tax increased by €4.4m to €5.0m (H1 FY23: €0.6m). After taking into account exceptional items (including the impairment loss and restructuring cost) and other adjustments in the prior year period, loss before tax amounted to €13.1m (FY23: €56.3m).

The tax charge of €0.4m in the first half was in line with the prior year.

Underlying loss per share increased to €0.02 per share (H1 FY23: € nil per share). A statutory loss per share was

recognised of €0.06 per share (H1 FY23: €0.13 per share).

Cash flow

Cash flows generated from operating activities before changes in working capital decreased by €2.9m to €1.8m (H1 FY23: €4.7m), reflecting the operational cash flow generated by our plant in Arnhem, partly offset by the change in treatment on operating costs for the Tricoya UK plant following the introduction of the hold period in H2 FY23.

Inventory levels increased by €1.9m during the period with higher finished good levels partially offset by lower raw material levels which are being closely managed.

At 30 September 2023, the Group held cash balances of €20.8m, a €5.8m decrease in the period, attributable to capex payments of €2.0m, the first scheduled loan repayment of €2.25m on the Group's ABN AMRO term loan, and the increase in inventory referred to above. This was partially offset by cash flow generated from operating activities. When adjusting for the cash pledged to ABN AMRO of $10.0m (see note 11), adjusted cash decreased by €6.0m during the period to €10.8m.

Financial position

Plant and machinery additions of €1.1m (H1 FY23: €20.5m) consisted primarily of maintenance capex for the Arnhem plant.

Trade and other receivables increased to €13.6m (H1 FY23: €11.3m), primarily due to higher sales than in H1 FY23.

Trade and other payables reduced by €5.2m to €21.4m (H1 FY23: €26.6m), attributable to a decrease in creditors following the completion of the Arnhem expansion project and lower activity at the Tricoya UK plant in Hull.

Amounts payable under loan agreements decreased to €64.2m during the period (FY23: €65.9m) following the first scheduled loan repayment of €2.25m on the Group's ABN AMRO term loan partially offset by interest capitalised on the Tricoya NatWest €6.0m facility (€0.3m) and interest accrued on the ABN AMRO and De Engh loans payable in October 2023.

Net debt increased by €4.1m in the period to €48.2m (FY23: €44.1m) due to capex investments of €2.0m and the increase in inventory and loan interest payments partially offset by EBITDA generation during the period.

Risks and uncertainties

As described on page 50 to 55 of the Accsys 2023 Annual Report, the business, financial condition or results of operations of the Group could be adversely affected by a number of risks. The Group's systems of control and protection are designed to help manage and control risks to an appropriate level rather than to eliminate them. These specific principal risks and related mitigations - as currently identified by Accsys' risk management process - have not changed significantly since the publication of the 2023 Annual Report in July of this year.

These risks relate to the following areas: finance, health, safety & environment; Tricoya UK plant; Kingsport plant; licensing/partnering and protection of intellectual property; market and supply chain disruption; manufacturing; talent; sale of products; environmental, social & governance (ESG) and sustainability; IT; reputational risk and governance, compliance & law.

Going concern

The condensed 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 for the 12 months from the date these financial statements are approved (the 'going concern period'). As part of the Group's going concern review, the Directors have assessed the Group's trading forecasts, working capital and liquidity requirements, and bank facility covenant compliance for the going concern period under a base case scenario and a severe but plausible downside scenario.

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Accsys Technologies PLC

Financial review (continued)

The cash flow forecasts used for the going concern assessment represent the Directors' best estimate of trading performance and cost implications in the market based on current agreements, market experience and consumer demand expectations. The economic environment has remained challenging throughout the financial year (explained further in the management discussion of the results) and it is not known how long this will continue to directly impact the business and customer behaviour. For the purposes of the Group's going concern assessment, the Directors have therefore made assumptions on the likely future cash flows. These forecasts indicate that, in order to continue as a going concern, the Group is dependent on achieving a certain level of performance relating to the production and sale of Accoya, and the management of its working capital.

In both scenarios, the Directors have assumed no commitment will be made to complete the construction and start-up of the Tricoya UK plant in Hull unless the Board definitively determines to proceed with the project and appropriate levels of funding arrangements are obtained to do so. In the downside scenario, it is assumed that the Group discontinues its financial support in relation to the Tricoya UK plant.

The Directors' have also considered the possible quantum and timing of funding required to complete the plant currently under construction by Accoya USA LLC, and for the initial operational working capital requirements of the entity. Notwithstanding that the construction project benefits from certain contractual measures in place with the lead engineering, construction and procurement contractor, Accsys has a contractual obligation to fund its 60% share of Accoya USA LLC on a pro rata basis with its joint venture partner (Eastman Chemicals Company).

The Group is also dependent on the Group's financial resources including its existing cash position, banking and finance facilities, and the proceeds from the fundraise, and the amended bank facilities announced today (see note 14 for details) which are assumed in both scenarios.

Capital Raise

The gross proceeds from the fundraise of approximately €34m (which includes approximately €24m of gross new proceeds for the Company) include:

1. An equity Placing of between approximately €13m and €15m which will be settled on 23 November 2023.
   Certain of the Company's major shareholders have committed to provide approximately €13m of new equity through the equity Placing.
2. The issue of between approximately €9m and €11m new 6 year term convertible loan notes and the repricing and reissue of the existing €10m De Engh convertible loan note (see note 11) have also been arranged on 21 November 2023, subject to the completion of the equity cash Placing.

On 21 November 2023, ABN AMRO and the Company agreed to amend the ABN AMRO debt facilities referenced in note 11 and extend these by a further 18 months to March 2026. The facilities have also been amended to provide for the release of €10m of cash collateral held by ABN AMRO, €7.5m of which will be used to repay a portion of the term loan with the balance providing the Group with additional liquidity. The amendment of the facilities also allows for an 18- month amortisation holiday. The extension is subject to the completion of the equity Placing (see note 14 for further details).

The Directors have also considered a severe but plausible downside scenario against the base case with reduced Accoya sales volumes. The Directors do not expect the assumptions in the severe but plausible downside scenario to materialise, but should they unfold, the Group has several mitigating actions it can implement to manage its going concern risk, such as deferring discretionary capital expenditure and implementing further cost reductions to maintain a sufficient level of liquidity and covenant headroom during the going concern period. The combined impact of the above downside scenarios and mitigations does not trigger a minimum liquidity breach or covenant breach at any point in the going concern period.

The Directors are confident that the equity Placing will be completed on 21 November 2023. However, in the unlikely situation that the capital raise was not to be completed, the Group would need to obtain alternate financing in an expedited fashion, in order to be able to discharge its liabilities. It is not certain that the Group would be able to obtain any such financing on commercially acceptable terms. This would give rise to a material uncertainty which may cast significant doubt on the Group's ability to continue as a going concern.

After carefully considering all the factors explained in this statement, the Directors believe that it is most appropriate to prepare these financial statements on the going concern basis. These financials statements therefore do not include the adjustments that would result if the Group was unable to continue as a going concern.

Steven Salo

Chief Financial Officer

21 November 2023

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Accsys Technologies PLC

Condensed consolidated statement of comprehensive income for the six months ended 30 September 2023

	Note	Unaudited	Unaudited	Unaudited	Unaudited	Unaudited	Unaudited	Audited	Audited	Audited
		6 months	6 months	6 months	6 months	6 months	6 months	Year	Year	Year
		ended	ended	ended	ended	ended	ended	ended	ended	ended
		30 Sept	30 Sept	30 Sept	30 Sept	30 Sept	30 Sept	31 March	31 March	31 March
		2023	2023	2023	2022	2022	2022	2023	2023	2023
		€'000	€'000	€'000	€'000	€'000	€'000	€'000	€'000	€'000
			Exceptional			Exceptional			Exceptional
		Underlying	items &		Underlying	items &		Underlying	items &
			other	Total		other	Total		other	Total
			adjustments*			adjustments*			adjustments*
Accoya wood revenue		63,313	-	63,313	51,088	-	51,088	143,493	-	143,493
Tricoya panel revenue		2,918	-	2,918	201	-	201	1,374	-	1,374
Licence revenue		46	-	46	11	-	11	329	-	329
Other revenue		4,930	-	4,930	7,584	-	7,584	16,822	-	16,822
Total revenue	2	71,207	-	71,207	58,884	-	58,884	162,018	-	162,018
Cost of sales		(50,865)	-	(50,865)	(40,742)	-	(40,742)	(106,852)	-	(106,852)
Gross profit		20,342	-	20,342	18,142	-	18,142	55,166	-	55,166
Other operating costs	3	(22,482)	(8,200)	(30,682)	(16,773)	(58,481)	(75,254)	(39,878)	(87,453)	(127,331)
Operating (loss)/profit		(2,140)	(8,200)	(10,340)	1,369	(58,481)	(57,112)	15,288	(87,453)	(72,165)
Net finance expense		(1,610)	89	(1,521)	(1,530)	2,699	1,169	(3,224)	9,350	6,126
Share of net loss of joint venture
accounted for using the equity
method	13	(1,211)	-	(1,211)	(403)	-	(403)	(1,036)	-	(1,036)
(Loss)/profit before taxation		(4,961)	(8,111)	(13,072)	(564)	(55,782)	(56,346)	11,028	(78,103)	(67,075)
Tax expense	5	(420)	-	(420)	(357)	-	(357)	(2,787)	-	(2,787)
(Loss)/profit for the period		(5,381)	(8,111)	(13,492)	(921)	(55,782)	(56,703)	8,241	(78,103)	(69,862)

Items that may be reclassified to profit or loss

Gain/(loss) arising on translation of foreign operations Gain arising on foreign currency cash flow hedges

Total other comprehensive income/(expense)

Total comprehensive (loss)/gain for the period

Total comprehensive (loss)/gain for the year is attributable to:

Owners of Accsys Technologies

PLC Non-controlling interests

Total comprehensive (loss)/gain for the period

22	-	22	67	-	67	(61)	-	(61)
-	-	-	-	90	90	42	-	42
22	-	22	67	90	157	(19)	-	(19)
(5,359)	(8,111)	(13,470)	(854)	(55,692)	(56,546)	8,222	(78,103)	(69,881)
(5,359)	(8,111)	(13,470)	(214)	(26,155)	(26,369)	9,509	(48,566)	(39,057)
-	-	-	(640)	(29,537)	(30,177)	(1,287)	(29,537)	(30,824)
(5,359)	(8,111)	(13,470)	(854)	(55,692)	(56,546)	8,222	(78,103)	(69,881)

Basic (loss)/profit per ordinary
share	6	€(0.02)	€(0.06)	€(0.00)	€(0.13)	€0.05	€(0.19)
Diluted (loss)/profit per
ordinary share	6	-	-	-	-	€0.04	-

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

* See note 4 for details of exceptional items and other adjustments.

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