Accsys Technologies — Second Accoya plant operational

Accsys Technologies (AIM: AXS)

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Research: Industrials

Accsys Technologies — Second Accoya plant operational

Accsys Technologies has achieved the milestone of starting commercial operations at its Accoya USA plant (the second in the world). The company also reported that the improved momentum of Q424 has continued into Q125 and that Accsys has returned to revenue growth after last year’s decline. Supported by a good order book, Accsys is positive about its outlook despite the current challenging markets. There was no update on the Tricoya project, for which an external adviser has been hired and a final decision is expected before the end of September. On slightly higher revenue and EBITDA forecasts, our discounted cash flow (DCF) points to an unchanged value of €0.98 per share.

Johan van den Hooven

Written by

Johan van den Hooven

Analyst

Industrials

Accsys Technologies

Second Accoya plant operational

Q125 trading update

General industries

9 September 2024

Price

52p/€0.65

Market cap

£130m/€156m

€1.19/£

Net debt (€m) at 31 March 2024

37.1

Shares in issue

240.4m

Free float

60%

Code

AXS

Primary exchange

LSE

Secondary exchange

Euronext Amsterdam

Share price performance

%

1m

3m

12m

Abs

10.1

(2.5)

(22.2)

Rel (local)

8.2

(1.3)

(29.5)

52-week high/low

74p

48p

Business description

Accsys Technologies is a chemical technology company focused on the development and commercialisation of a range of transformational technologies based on the acetylation of solid wood and wood elements for use as high-performance, environmentally sustainable construction materials.

Next events

H125 results

November 2024

Analyst

Johan van den Hooven

+44 (0)20 3077 5700

Accsys Technologies is a research client of Edison Investment Research Limited

Accsys Technologies has achieved the milestone of starting commercial operations at its Accoya USA plant (the second in the world). The company also reported that the improved momentum of Q424 has continued into Q125 and that Accsys has returned to revenue growth after last year’s decline. Supported by a good order book, Accsys is positive about its outlook despite the current challenging markets. There was no update on the Tricoya project, for which an external adviser has been hired and a final decision is expected before the end of September. On slightly higher revenue and EBITDA forecasts, our discounted cash flow (DCF) points to an unchanged value of €0.98 per share.

Year end

Revenue
(€m)

EBITDA*
(€m)

Net profit*
(€m)

EPS*
(€)

EV/sales
(x)

EV/EBITDA
(x)

03/23

162.0

22.9

9.5

0.05

1.1

7.6

03/24

136.2

4.8

(10.2)

(0.04)

1.3

20.8

03/25e

137.4

8.5

(7.5)

(0.03)

1.1

14.1

03/26e

152.4

15.3

2.6

0.01

1.0

8.9

Note: *EBITDA, net profit and EPS are normalised, excluding amortisation of acquired intangibles and exceptional items. EBITDA includes 60% share of Accoya US joint venture.

Good start to the year despite challenging markets

In June, management commented that Accsys had a good start to the financial year (ending March 2025) and now it reports to have returned to growth, with revenues increasing 3% y-o-y in Q125. This is better than we had anticipated, given the relatively strong comparison base and still weak construction markets. According to management, destocking is over and sold volumes are directly ending up in the market, which is a clear improvement on last year. There is no news yet regarding profitability, but Accsys will benefit from the improving trading conditions (supported by its good order book) and the annualised cost savings of €3m, which supports our expected increase in EBITDA for FY25.

Accoya USA plant started commercial operations

Accsys announced that the new Accoya USA plant has started commercial operations, with the first batches being delivered to clients, which is in line with the latest guidance in June of being operational by the end of the summer. This is an important milestone for Accsys as there now are two Accoya plants in the world: one with capacity up to 80,000m³ in Arnhem, the Netherlands and one with capacity up to 43,000m³ in the US, which has the largest wood market globally. The plant in the US is owned by the 60/40 joint venture (JV) of Accsys and Eastman Chemical Company and will be, therefore, not fully consolidated but equity accounted. Management reiterated that Accsys is on track to reach 100,000m³ in volumes by FY27, with a gradual ramp up at the new plant in the US.

Valuation shows undervaluation

Following the good start of the year, we have slightly raised our revenue forecasts for FY25 and FY26 by 2% y-o-y and our EBITDA forecast by 3–5% y-o-y. Our DCF model is based on specific forecasts for the Arnhem plant and we add a separate value for the Accoya USA JV, pointing to a value per share of €0.91. The option value for Hull adds €0.07, bringing Accsys’s value to €0.98 per share (unchanged).

Revenue estimates slightly raised

Management did not provide specific guidance for FY25 but mentioned that Q2 has started well with a healthy order book across the regions, after the 3% y-o-y revenue growth to €35.9m in Q1 of FY25. This gives management confidence that Accsys has returned to a growth trajectory, despite the current challenging market conditions. During H224, Accsys invested in sales and marketing and this is reflected in the more positive volume trend even though the global wood market is moderately declining. Accsys will also benefit from the greater economies of scale associated with the ramp-up of the Accoya USA plant. In Q125, Accsys experienced solid growth in the North American market, which bodes well for a gradual ramp up of capacity at the new plant.

There was no update on the Tricoya project in the UK, which has been on hold since November 2022. In June, Accsys hired an external adviser and management will make a decision on Hull before the end of September 2024.

Accsys reiterated its goal to reach around 100,000m3 in sales volume by the end of FY27, reflecting around 80% growth compared to FY24. This includes the volumes of Accoya USA, although this JV is equity accounted for, thus the P&L will only show the volumes from the Arnhem plant.

We slightly raised our revenue forecasts by 2% for the next two financial years after the return to growth in Q125, as we had anticipated a small decline in Q1 with a return to growth later in the year (particularly in Q3, which compares to the weakest quarter by far in FY24). With these slightly better revenue trend we also have modestly increased our EBITDA forecasts by 3–5% for FY25e and FY26e.

Exhibit 1: Change in P&L estimates

€m

FY24

FY25e

FY26e

Actual

Old

New

Change

Old

New

Change

Sales

136.2

134.6

137.4

2.1%

149.9

152.4

1.7%

Gross margin

30.0%

29.8%

29.8%

31.4%

31.3%

EBITDA normalised*

4.8

8.1

8.5

5.1%

14.9

15.3

2.6%

EBITDA margin

6.3%

8.0%

8.1%

10.9%

11.0%

Net profit (reported)

(17.9)

(7.9)

(7.5)

N/A

2.2

2.6

16.0%

Net profit (normalised)

(10.2)

(7.9)

(7.5)

N/A

2.2

2.6

16.0%

Source: Edison Investment Research. Note: *EBITDA normalised for amortisation and exceptional items and includes the 60% share in the Accoya USA JV plant.

Our new estimates assume a revenue increase of 1% y-o-y in FY25. Starting in Q2, the North American sales will gradually transition from being supplied by the Arnhem plant to the new plant in the US. We do not expect the plant in Arnhem to fully absorb these lost volumes but we now anticipate better pricing levels than previously. For FY26, we still expect stronger revenue growth of 11% y-o-y, driven by improving market conditions and the contribution of new clients due to increased sales and marketing efforts.

Valuation

We value Accsys by using a DCF model as a peer group comparison does not make sense in the absence of other listed companies with comparable business profiles. We base our model on specific forecasts for the four reactors in Arnhem and we add a separate DCF value for the Accoya USA plant, as this is owned by the 60/40 JV with Eastman Chemical Company (therefore not fully consolidated).

Our DCF indicates a value per share of €0.91, with an option value for Hull of €0.07 per share, which brings Accsys’s total value per share to €0.98 (unchanged).

Exhibit 2: Financial summary

€m

FY22

FY23

FY24

FY25e

FY26e

Year end 31 March

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue (reported)

120.9

162.0

136.2

137.4

152.4

Gross Profit

36.0

55.2

40.9

40.9

47.7

EBITDA underlying, Accsys definition (incl share Accoya USA JV)

10.4

22.9

4.8

8.5

15.3

EBITDA underlying, excl share Accoya USA JV

10.6

23.6

8.5

11.2

16.8

EBITDA reported

10.3

22.1

7.3

11.2

16.8

Depreciation & Amortisation

(6.2)

(8.3)

(9.6)

(9.6)

(9.1)

EBIT normalised

4.2

15.3

(1.0)

1.6

7.6

Exceptionals (Edison definition)

(0.1)

(87.5)

(8.2)

0.0

0.0

EBIT reported

4.1

(-72.2)

(-9.2)

1.6

7.6

Net Interest

(2.3)

6.1

(3.8)

(4.3)

(3.5)

Results of associates/Accoya USA JV

0.0

(1.0)

(4.1)

(5.1)

(1.1)

Profit Before Tax

1.8

(67.1)

(17.1)

(7.8)

3.0

Reported tax

(1.0)

(2.8)

(0.8)

0.3

(0.4)

Profit After Tax

0.7

(69.9)

(17.9)

(7.5)

2.6

Minority interests

1.6

30.8

0.0

0.0

0.0

Net profit (normalised)

1.9

9.5

(10.2)

(7.5)

2.6

Net profit (reported)

2.4

(39.0)

(17.9)

(7.5)

2.6

Average number of shares (m)

190.4

210.7

227.9

239.9

240.4

Average number of shares, diluted (m)

198.9

219.1

234.9

246.9

247.4

EPS normalised (€)

0.01

0.05

(0.04)

(0.03)

0.01

EPS normalised diluted (€)

0.01

0.04

(0.04)

(0.03)

0.01

EPS reported (€)

0.01

(0.19)

(0.08)

(0.03)

0.01

DPS (€)

0.00

0.00

0.00

0.00

0.00

Revenue growth

21.1%

34.1%

-16.0%

0.9%

10.9%

Gross margin

29.8%

34.0%

30.0%

29.8%

31.3%

Normalised EBITDA margin

8.8%

14.6%

6.3%

8.1%

11.0%

Normalised operating margin

3.5%

9.4%

-0.8%

1.2%

5.0%

Reported EBIT margin

3.4%

-44.5%

-6.8%

1.2%

5.0%

BALANCE SHEET

Fixed Assets

195.3

151.4

138.9

140.9

136.5

Intangible Assets

10.8

10.5

10.0

9.6

9.2

Tangible Assets

181.3

110.1

97.2

91.6

86.5

Investments & other

3.2

30.9

31.7

39.7

40.7

Current Assets

79.8

75.1

71.0

68.4

80.3

Stocks

20.4

29.9

25.7

26.0

28.8

Debtors

13.2

14.4

14.0

14.9

16.5

Other current assets

4.2

4.1

3.8

4.0

4.5

Cash & cash equivalents

42.1

26.6

27.4

23.5

30.5

Current Liabilities

45.7

42.5

26.2

25.7

27.4

Creditors

16.7

17.9

11.8

11.9

12.9

Other current liabilities

16.4

14.0

13.7

13.1

13.8

Short term borrowings

12.7

10.5

0.7

0.7

0.7

Long Term Liabilities

56.5

61.6

65.0

65.0

65.0

Long term borrowings

56.5

60.2

63.9

63.9

63.9

Other long term liabilities

0.0

1.4

1.1

1.1

1.1

Shareholders' equity

172.9

122.5

118.8

118.6

124.4

Minority interests

35.5

0.0

0.0

0.0

0.0

Balance sheet total

275.1

226.5

210.0

209.3

216.7

CASH FLOW

Op Cash Flow before WC and tax

7.3

28.2

3.6

11.2

16.8

Working capital

(9.2)

(6.1)

(1.8)

(1.8)

(3.2)

Exceptional & other

1.4

0.6

1.5

1.5

1.5

Tax

0.1

0.1

0.1

0.3

(0.4)

Net interest

2.9

(6.1)

3.8

(3.5)

(3.0)

Net operating cash flow

2.5

16.6

7.1

7.6

11.6

Capex

(45.3)

(30.2)

(3.5)

(3.6)

(3.7)

Investments in financial assets/joint ventures

(3.8)

(29.0)

(4.9)

(8.0)

(1.0)

Equity financing

34.9

19.2

12.7

0.0

0.0

Dividends

0.0

0.0

0.0

0.0

0.0

Other

(3.3)

6.6

(4.5)

0.0

0.0

Net Cash Flow

(15.0)

(16.8)

6.9

(3.9)

7.0

Opening net debt/(cash), including lease liabilities

12.2

27.3

44.1

37.1

41.0

Closing net debt/(cash), including lease liabilities

27.3

44.1

37.1

41.0

34.1

Source: Accsys Technologies, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by Accsys Technologies and prepared and issued by Edison, in consideration of a fee payable by Accsys Technologies. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by Accsys Technologies and prepared and issued by Edison, in consideration of a fee payable by Accsys Technologies. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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