ACCSYS TECHNO : 22/11/2016 - Interim Results for 6 months to 30 September 2016

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 2016.

See note 2 of the Group financial statements for reconciliation of Operating loss to EBITDA

• Demand for Accoya continues to grow with sales volumes increasing by 4% to 17,506m3 and with growth accelerating into the second half of the financial year;

• Group revenue decreased by 5% due to an expected reduction in licence related income and an unexpected supply chain bottleneck which has now been resolved;

• Further licensing income expected in the second half of the financial year;

• A number of factors contributed to a lower EBITDA including lower licence related income, timing of annual plant maintenance stop, a new pricing regime with Solvay and higher costs associated with the proposed Tricoya consortium; and

• A cash balance of €7.9m at 30 September 2016 (31 March 2016: €8.2m) reflects operating loss in the period and new plant investment, off-set by €4.2m proceeds from the sale of land in Arnhem.

  Operational highlights

• Building work commenced on the expansion of Accoya manufacturing plant in Arnhem;

• We remain on track to increase manufacturing capacity by 20,000m3 by December 2017;

• Significant progress has been made towards completion of the proposed Tricoya consortium with BP and Medite with final agreements, including funding from third parties, expected later this year; and

• Detailed planning progressing in respect of the wood chip acetylation plant to be located in Hull.

Paul Clegg, Chief Executive commented: "In this financial period we have made further significant strategic and operational progress to increase our Accoya and Tricoya manufacturing capacity which will be transformational for the Group. The expansion of the Accoya plant in Arnhem and the formation of the Tricoya consortium are both fundamental for the future of the Company. Despite results being down on the previous half year, we remain confident of the results for the full year and beyond."

There will be a presentation relating to these results at 10:00 GMT on 22 November 2016. The presentation will take the form of a web based conference call, details of which are below:

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We have made good progress in the period, in particular with two major projects intended to significantly increase manufacturing capacity for Accoya and Tricoya. These will ultimately enable us to substantially increase our revenue, through additional capacity and generate profitability whilst enabling us to exploit our products and technologies in what we continue to believe is a very significant market.

Sales of Accoya continued to grow with total sales volumes increasing by 4% to 17,506m3. We experienced supply bottleneck issues in the period which, although these have now been resolved, will necessitate further investment in inventory going forward. Further sales growth is expected in the second half of the year. This will continue to be constrained until the expansion of our manufacturing facility in Arnhem is completed. Total revenue decreased by 5% to €25.1m (2015: €26.3m) largely as result of an expected reduction in lower income associated with our licensing contract with Solvay.

Group EBITDA was a loss of €1.3m for the period with the reduction from last year primarily resulting from the lower licence related income noting that the prior year included €1.8m of one-off licensing related income. In addition, profitability was impacted by the timing of our annual maintenance stop moving back to September compared to October last year, together with a proportion of Accoya sales sold at lower prices to Solvay from January 2016 following their assumption of responsibility for sales and marketing and the commencement of the 76,000m3 five year off-take agreement. Operating costs increased by 9% in the period to €10.2m largely as a result of business development activities as we actively pursued long term opportunities and incurred one-off advisory fees.

Our cash balance decreased to €7.9m at 30 September 2016 from €8.2m at 31 March 2016. A €2.7m cash out- flow was partly attributable to the loss in the period, and also impacted by a €1.1m working capital out-flow.

€1.8m was invested during the period in our existing manufacturing operations together with the initial stages and planning work associated with the Arnhem expansion and the proposed Tricoya plant. This was off-set by

€4.2m proceeds from the sale of our land adjacent to our plant in Arnhem, which also resulted in a gain on disposal of €0.6m.

We have commenced construction work in respect of the expansion of our Accoya manufacturing plant in Arnhem. We have obtained all necessary permits, completed the sale and leaseback of our land and placed orders for key long lead time items of equipment. Work has commenced on site and we appointed Fabricom B.V. as the Engineering, Procurement and Construction contractor enabling the third reactor to be built by the end of 2017, increasing our manufacturing capacity by 50% to approximately 60,000m3.

We have also made significant progress towards the completion of the proposed Tricoya consortium with BP and Medite, to build and operate the world's first wood chip acetylation plant on the Saltend Chemicals Park in Hull. The parties expect to finalise the detailed agreements associated with the site and the consortium by the end of this year. In addition, substantial progress has been made in respect of the remaining funding, with term sheets obtained in respect of bank debt and non-binding heads of terms agreed with third party funders which are expected to enable the consortium to proceed. Under these arrangements Accsys is expected to retain the majority ownership of the consortium and consolidate its results.

I am pleased by the progress made towards achieving additional manufacturing capacity for both Accoya and Tricoya. I believe these represent key milestones in our ambition to maximise the value associated with our technologies, and will enable us to meet the demand for our products, with significant benefits to our profitability.

Demand for Accoya and Tricoya remains strong and we were disappointed that we could not satisfy demand in the first half due to the supply bottleneck issues. These are now resolved and we expect sales volumes to continue to grow in the immediate term, although such growth will be limited until our new manufacturing capacity comes on stream.

Overall, I continue to be confident that we are in a strong position and look forward to reporting further progress in respect of the Tricoya consortium in the near future.