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Successful expansion of its established Accoya facility at Arnhem should pave the way for Accsys to become EBITDA positive at the group level during FY19. A dedicated Tricoya facility (construction underway, first production expected from mid-2019) provides another clear platform for further profit growth. As this becomes more apparent, we believe it will be a catalyst for positive share price performance.
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Accsys Technologies |
Clear strategic progress
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General industrials |
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21 June 2018 |
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Successful expansion of its established Accoya facility at Arnhem should pave the way for Accsys to become EBITDA positive at the group level during FY19. A dedicated Tricoya facility (construction underway, first production expected from mid-2019) provides another clear platform for further profit growth. As this becomes more apparent, we believe it will be a catalyst for positive share price performance.
Laying growth foundations in FY18
Accsys made significant progress in executing its well-flagged expansion strategy in FY18. This included a 50% increase in its Arnhem Accoya capacity (now ramping up) and getting site development for its first Tricoya facility in Hull underway. Arnhem has effectively operated at capacity for the last 12 months and expansion means that broadly based and growing Accoya customer demand internationally can be serviced. It has also processed wood for Tricoya market development; there are now two significant licence partners who will provide the baseload demand for the new dedicated facility when it comes on stream. Headline financials showed an increased trading loss – we note a much reduced EBITDA loss in H2 however – and moved into a modest net debt position (€3.8m) in FY18, as expected. Strategic progress made far outweighs this near-term performance, in our view.
Business development to drive financial performance
Net debt will become a more prominent feature during this investment phase and we expect progress against project milestones to be clearly reported. Business development has continued despite capacity constraints and the benefits of this should become increasingly apparent; in a double benefit, the Hull plant is expected to produce Tricoya more efficiently and divert lower-margin volume from Arnhem to improve that facility’s financial performance. Other positive future markers may include further licensing and/or partnership arrangements in other international markets as product availability and penetration rises.
Valuation: Moving into a growth phase
The Accsys share price has largely traded within the 76–80p range over the last 12 months and has rallied back to the middle of this following a dip around the end of FY18. Tangible progress made in FY18 validates the group strategy and its execution, increasing investor confidence in the transition to future profitability. Becoming EBITDA positive in FY19 will be seen as a significant marker and we believe growth aspirations beyond this are likely to rapidly compress current valuation multiples as the company moves out of a development phase.
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Consensus estimates
Source: Bloomberg |
Accsys Techologies is a client of Edison Investment Research Limited.
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Disclaimer
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Celyad has reached the potentially crucial three billion natural killer receptor (NKR) CAR T-cell dose (CYAD-01) in acute myeloid leukaemia (AML) with the first patient showing no signs of toxicity. If responses are seen in several patients, an expansion phase could start; a strong response was seen in November at the 300 million cell dose. Interim data are promised by Celyad in late 2018, probably at ASH. There are now several studies running or starting including using two courses of CYAD-01 in AML (after an initial response), evaluation of conditioning therapy with AML and combinations of CYAD-01 with chemotherapy in colorectal cancer. The indicative value remains at €1,040m, €84 per share.