Accsys Technologies : 22/11/2017 - Interim results for the 6 months ending 30 September 2017

AIM: AXS

Euronext Amsterdam: AXS

Accsys, the chemical technology group, focused on the acetylation of wood, today announces interim results for the consolidated group for the six months ended 30 September 2017.

*Excludes exceptional costs and other adjustments. See note 4 for details and note 2 for reconciliation

• Accoya revenue growth of 16% reflects continued growth in demand worldwide;

• Sales volumes up 13% with Accoya plant running at full capacity;

• Lower underlying EBITDA reflects one-off matters, during significant expansion of manufacturing capacity;

• Net cash balance of €23.1m at 30 September 2017 reflects funds raised from shareholders and industry partners to fund expansion of manufacturing of both Accoya and Tricoya.

  Operational highlights

• Expansion of Arnhem Accoya plant progressing; 50% (20,000 cubic metres) of additional capacity operational from early in next financial year as expected;

• With Arnhem plant currently operating at full capacity, we are working with customers to manage demand in the short term;

• Accoya customer price increase in second half of the year reflecting demand and higher raw material costs;

• Construction successfully underway of new Tricoya plant in Hull;

• Sales of Tricoya panels by Medite up by 24% compared to same period last year.

Paul Clegg, Chief Executive commented: "We continue to see good global demand for both Accoya and Tricoya in an important year for Accsys. We are making transformational changes to our manufacturing capacity to meet this demand, having secured significant support from shareholders and our industrial and financial partners."

There will be a presentation relating to these results at 10:00 GMT on 22 November 2017. The presentation will take the form of a web-based conference call, details of which are below:

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I am pleased to report a solid first half of the financial year in which we have made significant progress in our ambition to take advantage of a potential global market in excess of 2.6 million cubic metres of Accoya and Tricoya annually. We have secured significant support from shareholders, our industry and financial partners to make transformational changes to our manufacturing capacity for both Accoya and Tricoya. We have two crucial capital projects underway in Arnhem and Hull, which will provide additional capacity to more than double revenue from today's level.

Our results for the period are underpinned by continued revenue growth around the world with Accoya sales volumes increasing by 13%. We are now operating at full capacity at our Accoya plant, as such further sales growth will be constrained until early in our next financial year once the additional capacity comes on stream. We have therefore had to put our customers on allocation until then and remain grateful for their patience, loyalty and commitment.

Total revenue grew by 13% to €28.3m (2016: €25.1m) driven by the 13% increase in Accoya sales volumes to 19,826 cubic metres in the six months ended 30 September 2017 compared to the same period last year. Demand remains strong in all regions. We are working with our customers to manage demand until the Accoya manufacturing capacity expansion is completed later this financial year. As a result further growth will be constrained in the second half of the financial year.

Group underlying EBITDA loss of €2.8m compares to €1.6m loss last year due to lower licence income as expected and with the benefit of additional sales offset by a lower margin. The gross manufacturing margin decreased from 25% to 20%, more comparable to the second half of last year (21%). The reduction was due to a 5% increase in the proportion of lower priced sales to Medite and Rhodia reflecting our long term commitment to these strategic partners, an increase in raw material costs and an additional maintenance stop. We also took the opportunity in the period to significantly reduce our inventory of B grade raw material, which cost us €0.5m but will assist with the move into our new warehousing operation.

We have announced a price increase to be implemented in the second half of the financial year, which will pass on the increase in raw material prices. We expect a gross manufacturing margin of approximately 30% when we fully benefit from the current construction projects through increased capacity and meeting Tricoya demand from the Hull plant.

We have invested a total of €7.4m in the period in the Arnhem and Hull plants. We commenced construction work in respect of the new 30,000 metric tonne Tricoya plant in Hull and during the period ground clearance has been completed, extensive ground works and detailed engineering work are progressing and initial key equipment orders have been placed.

The first phase of the expansion of the Accoya plant in Arnhem to approximately 60,000 cubic metres annual capacity continues to progress well although the construction of the plant will be completed approximately three months later than previously expected due to the impact of delays in receiving some items of equipment. However, following a period of commissioning we continue to expect the benefit from the additional capacity to be available early in the next financial year.

Our cash balance increased to €46.9m at 30 September 2017 from €41.2m as at 31 March 2017, with net cash of

€23.1m (March 2017: €18.0m). In addition to capital expenditure of €7.2m in the period, a €4.1m cash out-flow was attributable to the operating loss before changes in working capital. A further €5.0m cash out-flow was attributable to changes in working capital, primarily due to an increase in inventory which is in a large part expected to reverse in the second half of the year. We issued new shares to raise €23.8m with €12.3m net proceeds from the Firm Placing and Open Offer completed in April 2017 and €11.5m from BP Chemicals and Medite.

The continued demand for our products means that we are very well positioned to take advantage of the new Accoya production capacity when it becomes available in the next financial year. I believe the overall increase in the Group's production capacity for Accoya and Tricoya from approximately 40,000 cubic metres now to the equivalent of approximately 100,000 cubic metres by the first half of 2019 represents a substantial and exciting opportunity for us.

I am confident that the increase in Accoya volumes coupled with price increases will result in an increase in our overall profitability when the capacity becomes available in the next financial year. Sales growth will be constrained until then and we will continue to work closely with our customers to manage this demand. Since the period end we have continued to make good progress with the expansion our Accoya plant, however we anticipate some limited additional costs associated with the ramp up of operations ahead of the additional capacity becoming available and the transition to our new warehouse facilities.

Overall we are in strong position for future growth and we look forward to taking advantage of our unique offering over the next few years.