Accsys Technologies — Stronger than expected revenue growth in Q3

Accsys Technologies (AIM: AXS)

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Accsys Technologies — Stronger than expected revenue growth in Q3

Accsys showed strong revenue growth of 32% in 9M23, driven by higher sales prices (to mitigate input pressure) and a recovery in volumes in Q323 compared to H123. The company remains positive about its outlook for the remainder of the financial year, with continued good demand for both of its products. Accsys expects volumes to be c 50% higher in H223 versus H123 (or 36,000m³, with 17,000m³ in Q4) and a near doubling of underlying EBITDA for the full year (FY22 EBITDA was €10.4m). We have raised our estimates, resulting in a discounted cash flow (DCF) value of €1.15 per share (previously €1.00).

Johan van den Hooven

Written by

Johan van den Hooven

Analyst

Accsys-Technologies_resized

Industrials

Accsys Technologies

Stronger-than-expected revenue growth in Q3

Q3 trading update

General industries

8 February 2023

Price

86p/€0.96

Market cap

£188m/€210m

€1.12/£

Net debt (€m) at 31 December 2022

52

Shares in issue

218.8m

Free float

60%

Code

AXS

Primary exchange

LSE

Secondary exchange

Euronext Amsterdam

Share price performance

%

1m

3m

12m

Abs

33.9

39.7

(46.0)

Rel (local)

31.0

29.9

(47.2)

52-week high/low

165p

55p

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

FY23 results

June 2023

Analyst

Johan van den Hooven

+44 (0)20 3077 5700

Accsys Technologies is a research client of Edison Investment Research Limited

Accsys showed strong revenue growth of 32% in 9M23, driven by higher sales prices (to mitigate input pressure) and a recovery in volumes in Q323 compared to H123. The company remains positive about its outlook for the remainder of the financial year, with continued good demand for both of its products. Accsys expects volumes to be c 50% higher in H223 versus H123 (or 36,000m³, with 17,000m³ in Q4) and a near doubling of underlying EBITDA for the full year (FY22 EBITDA was €10.4m). We have raised our estimates, resulting in a discounted cash flow (DCF) value of €1.15 per share (previously €1.00).

Year

end

Revenue
(€m)

EBITDA*
(€m)

Net profit*
(€m)

EPS*
(€)

EV/sales
(x)

EV/EBITDA
(x)

03/21

99.8

10.1

1.3

0.01

3.7

36.8

03/22

120.9

10.4

2.1

0.01

3.3

38.2

03/23e

153.3

19.2

7.6

0.04

1.7

13.8

03/24e

185.7

27.7

13.3

0.06

1.4

9.4

Note: *EBITDA, net profit and EPS are normalised, excluding amortisation of acquired intangibles and exceptional items.

Higher prices are supporting strong revenue growth

In 9M23, which ended 31 December 2022, revenues strongly increased 32% y-o-y to €109m after the modest increase of 5% in H123. Growth was driven by higher average sales prices (to mitigate input pressure and with a further small price increase in Q3) and 1% higher volumes at 42,972m³. Compared to H123, this is a significant improvement, with the first three reactors in Arnhem at full capacity again after earlier plant shutdowns and the fourth reactor ramping up since September 2022. The unwinding of higher inventory levels also fuelled volumes in Q3, which were up 46% y-o-y to 19,015m³ (-19% in H123). Another positive is that the price increases and scale benefits resulted in a higher profit per cubic meter of Accoya sold in Q3. Net debt was €52m, €9m lower than at end-September 2022, mainly because of the reduction in the NatWest loan balance after the Tricoya restructure.

No additional news on strategic projects

There was no news about the two strategic growth projects, with the construction of the Accoya plant in the US on track to be operational in March 2024 (adding 43,000m³ capacity). The Tricoya plant in Hull is in, at least, a six-month hold period; Accsys will consider all commercial factors to decide whether to proceed with the project. This includes the final costs, for which there are no indications, according to Accsys, that they will exceed the up to €35m previously communicated. We still assume that the Hull project will be continued, but it is unlikely to be operational before March 2024. Accsys also reported that it is making good progress in the search for a new CEO, and that the process to appoint a new CFO is ongoing.

Higher valuation on raised estimates

We have raised our FY23 revenue and EBITDA estimates by 4–6% for the higher than anticipated price increases, which also have a positive impact on profitability. Accsys is trading on EV/sales of 1.7x and EV/EBITDA of 13.8x in FY23e. Our DCF model is based on four reactors in Arnhem and one in Hull, while we add a separate value for the Accoya US joint venture, which is under construction. On our higher estimates, the DCF value now is €1.15 per share (previously €1.00).

Estimates raised

We have raised our estimates after the better-than-expected Q3 revenues and the confirmation by management of its expectation that underlying EBITDA will nearly double for the full year. We have raised our FY23 revenue forecast by 4% to incorporate the higher-than-expected average sales prices. Without being more specific, management commented in its trading update that profit per cubic meter of Accoya has further increased throughout Q323, fuelled also by a further small price increase during the quarter. We therefore raise our EBITDA forecast, from €18.1m to €19.2m, which brings it closer to management guidance.

Accsys also mentioned that its energy price premium (introduced in May 2022) has worked well to compensate for the higher and volatile energy prices. These have come down recently and we already anticipated 5% lower average prices for FY24, which we leave unchanged for now. We have also increased our estimates for FY24 and FY25, mainly because of the raised estimates for FY23.

These higher estimates represent revenue growth of 27% in FY23, 21% in FY24 and 23% in FY25, driven by additional capacity and pricing, while EBITDA margins are expected to improve towards 16% in FY25, driven by scale benefits and pricing.

Exhibit 1: Change in P&L estimates

€m

FY23e

FY24e

FY25e

Old

New

Change

Old

New

Change

Old

New

Change

Sales

147.7

153.3

3.8%

178.9

185.7

3.8%

221.4

228.6

3.3%

Gross margin

31.0%

31.1%

31.1%

31.2%

31.2%

31.3%

EBITDA normalised

18.1

19.2

5.8%

26.3

27.7

5.4%

34.9

36.6

4.8%

EBITDA margin

12.3%

12.5%

14.7%

14.9%

15.8%

16.0%

Net profit (reported)

-19.7

-18.7

-5.3%

12.0

13.3

10.5%

19.0

20.5

7.8%

Net profit (normalised)

6.6

7.6

15.8%

12.0

13.3

10.5%

19.0

20.5

7.8%

Source: Edison Investment Research

Higher valuation on increased estimates

We use a DCF model as there are no other listed companies with a business profile close to Accsys’s. The company is trading at 1.7x EV/sales and 13.8x EV/EBITDA in FY23e.

Our DCF model is based on four reactors in Arnhem and one in Hull. We still assume that the project in Hull will be continued but it is unlikely to be operational before March 2024 at the earliest. We add a separate value for the Accoya plant in the US, which is expected to be operational in mid-2024 after construction started in April 2022. On our higher estimates and unchanged assumptions (with a WACC of 10%), our DCF indicates a value per share of €1.15 (previously €1.00).

Exhibit 2: Financial summary

€m

FY21

FY22

FY23e

FY24e

FY25e

31-March

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue (reported)

99.8

120.9

153.3

185.7

228.6

Gross Profit

33.1

36.0

47.6

57.9

71.5

EBITDA normalised

10.1

10.4

19.2

27.7

36.6

EBITDA reported

10.2

10.3

19.2

27.7

36.6

Depreciation & Amortisation

(5.7)

(6.2)

(7.8)

(8.6)

(8.9)

EBIT normalised

4.4

4.2

11.4

19.1

27.6

Exceptionals (Edison definition)

0.1

(0.1)

(58.5)

0.0

0.0

EBIT reported

4.5

4.1

(-47.1)

19.1

27.6

Net Interest

(4.1)

(2.3)

(0.3)

(3.5)

(4.0)

Results of associates

(0.1)

0.0

(0.8)

(0.8)

(0.8)

Profit Before Tax

0.3

1.8

(47.4)

15.6

23.7

Reported tax

(1.3)

(1.0)

(0.6)

(1.6)

(2.4)

Profit After Tax

(0.9)

0.7

(48.0)

14.1

21.3

Minority interests

1.4

1.6

30.2

0.0

0.0

Net profit (normalised)

1.3

2.1

7.6

13.3

20.5

Net profit (reported)

0.3

2.4

(18.7)

13.3

20.5

Average number of shares (m)

164.9

178.9

211.6

218.8

218.8

Average number of shares, diluted (m)

173.3

185.9

218.6

225.8

225.8

EPS normalised (€)

0.01

0.01

0.04

0.06

0.09

EPS normalised diluted (€)

0.00

0.01

0.03

0.06

0.09

EPS reported (€)

0.00

0.01

(0.09)

0.06

0.09

DPS (€)

0.00

0.00

0.00

0.00

0.02

Revenue growth

9.8%

21.1%

26.9%

21.1%

23.2%

Gross Margin

33.2%

29.8%

31.1%

31.2%

31.3%

Normalised EBITDA Margin

10.1%

8.6%

12.5%

14.9%

16.0%

Normalised Operating Margin

4.4%

3.5%

7.4%

10.3%

12.1%

Reported EBIT margin

4.5%

3.4%

-30.7%

10.3%

12.1%

BALANCE SHEET

Fixed Assets

155.6

195.3

189.4

222.4

218.6

Intangible Assets

10.9

10.8

6.8

6.6

6.4

Tangible Assets

144.4

181.3

151.4

184.6

181.1

Investments & other

0.3

3.2

31.2

31.2

31.2

Current Assets

72.5

79.8

70.5

86.0

122.8

Stocks

12.3

20.4

26.9

32.6

40.1

Debtors

9.8

13.2

12.5

13.6

16.8

Other current assets

2.8

4.2

4.0

4.7

5.7

Cash & cash equivalents

47.6

42.1

27.1

35.1

60.1

Current Liabilities

42.3

45.7

47.0

52.5

59.7

Creditors

9.5

16.7

14.8

17.6

21.2

Other current liabilities

22.2

16.4

14.6

17.3

20.9

Short term borrowings

10.6

12.7

17.7

17.7

17.7

Long Term Liabilities

49.2

56.5

61.5

66.5

66.5

Long term borrowings

49.2

56.5

61.5

66.5

66.5

Other long-term liabilities

0.0

0.0

0.0

0.0

0.0

Shareholders' equity

136.6

172.9

151.4

189.4

215.2

Minority interests

37.2

35.5

5.5

5.5

5.5

Balance sheet total

228.1

275.1

260.0

308.5

341.4

CASH FLOW

Op Cash Flow before WC and tax

10.2

10.3

15.7

27.7

36.6

Working capital

8.3

(9.2)

(9.4)

(2.0)

(4.4)

Exceptional & other

(1.9)

(1.5)

3.5

4.0

4.5

Tax

0.1

0.1

(0.6)

(1.6)

(2.4)

Net interest

3.4

2.9

(3.0)

(3.5)

(4.0)

Net operating cash flow

20.1

2.6

6.1

24.6

30.2

Capex

(12.4)

(45.3)

(31.9)

(41.6)

(5.1)

Investments in financial assets/joint ventures

(1.1)

(3.8)

(28.0)

0.0

0.0

Equity financing

9.4

34.9

28.8

20.0

0.0

Dividends

0.0

0.0

0.0

0.0

0.0

Other

(3.9)

(3.3)

0.0

0.0

0.0

Net Cash Flow

12.1

(14.9)

(25.0)

3.0

25.1

Opening net debt/(cash), including lease

24.3

12.2

27.2

52.1

49.2

Closing net debt/(cash), including lease

12.2

27.2

52.1

49.2

24.1

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.

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Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

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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.

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Frankfurt +49 (0)69 78 8076 960

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London +44 (0)20 3077 5700

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New York +1 646 653 7026

1185 Avenue of the Americas

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United States of America

Sydney +61 (0)2 8249 8342

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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 2023 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.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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