Accsys Technologies — Tricoya project to be discontinued

Accsys Technologies (AIM: AXS)

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Research: Industrials

Accsys Technologies — Tricoya project to be discontinued

Accsys will discontinue the Tricoya project in Hull, England, as it has not found a financial or strategic partner to finalise the construction of the plant. The project started in 2017 and was put on hold in November 2022 after several problems during construction. Accsys will write down the remaining book value of €20m and will need €4.5m for the discontinuation and winding up of the plant. Although this is a setback for the company’s strategy to boost Tricoya sales, Accsys will continue to supply Accoya material to produce Tricoya panels. Our discounted cash flow (DCF) comes in lower at €0.92 as we have taken out the option value for Hull, which is not fully compensated for by the absence of running costs for this plant.

Johan van den Hooven

Written by

Johan van den Hooven

Analyst

Industrials

Accsys Technologies

Tricoya project to be discontinued

Project update

General industries

25 September 2024

Price

50p/€0.62

Market cap

£121m/€148m

€1.20/£

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

(2.3)

(18.6)

(31.0)

Rel (local)

(1.6)

(18.7)

(36.3)

52-week high/low

73.0p

48.4p

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 will discontinue the Tricoya project in Hull, England, as it has not found a financial or strategic partner to finalise the construction of the plant. The project started in 2017 and was put on hold in November 2022 after several problems during construction. Accsys will write down the remaining book value of €20m and will need €4.5m for the discontinuation and winding up of the plant. Although this is a setback for the company’s strategy to boost Tricoya sales, Accsys will continue to supply Accoya material to produce Tricoya panels. Our discounted cash flow (DCF) comes in lower at €0.92 as we have taken out the option value for Hull, which is not fully compensated for by the absence of running costs for this plant.

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

10.0

(4.8)

(0.02)

1.1

11.8

03/26e

152.4

18.3

5.3

0.02

0.9

7.0

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

Tricoya product range will continue

Accsys will discontinue the Tricoya project in Hull, in line with previous guidance that a decision would be made before the end of September. This project has been on hold since November 2022 and the company has been investigating financial solutions to continue the project. More recently, the company hired a financial adviser, but no strategic or financial partner has been found to fund the estimated additional capex of around €35m to finalise the project over a period of nine to 12 months. With no specific Tricoya production capacity in place, Accsys will now continue to supply Accoya material from its Arnhem plant to produce Tricoya panels, thus the decision does not mean the end of the Tricoya product range. Offtake partners Medite and Finsa will continue to develop demand for Tricoya and a Tricoya plant sometime in the future cannot be ruled out.

Financial impact

Accsys will write down the remaining value of the Tricoya project of €20m (non-cash) and will need €4.5m for the discontinuation and winding up of the Tricoya plant, which it will take as an exceptional charge in H125. This amount includes the remaining running costs, thereby saving €1.5m in H225 and €3m in FY26. Accsys will now be fully focused on realising its goal of reaching 100,000m³ in FY27 in Accoya sales volumes in Arnhem, the Netherlands, and Kingsport, US, combined.

Valuation now leaving out option value for Hull

We do not make any adjustments to our revenue forecasts as we did not include specific forecasts for Hull in our model. We did, however, include the annual operational running costs up to FY26, which now will disappear from H225. Our DCF model is based on specific forecasts for the Arnhem plant and we add a separate value for the Accoya USA joint venture (JV), pointing to a value per share of €0.92 (previously €0.91). The option value for Hull of €0.07/share has been taken out, leaving Accsys’s value per share at €0.92 (previously €0.98).

EBITDA estimates raised

Following the company’s decision to discontinue the Tricoya project in Hull, we have left our revenue estimates unchanged as these did not include any contribution from the project, which has been on hold since November 2022. Since the decision to put the project on hold, Accsys has incurred running costs to keep the project viable until a decision had been made on whether to continue. Accsys will take an exceptional charge of €4.5m in H125 for the discontinuation and winding up of the Tricoya plant, including the remaining running costs. This means that from H225 there will no longer be any running costs in the company’s underlying EBITDA, which saves Accsys €1.5m in H225 and €3m in FY26. We have raised our normalised EDITDA forecasts for FY25 and FY26 accordingly (see Exhibit 1) as we had previously included running costs up to FY26. The reported figures will include the write down of the book value of the Tricoya project of €20m.

The company’s full focus will now be on realising its goal of reaching 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.

Exhibit 1: Change in P&L estimates

€m

FY24

FY25e

FY26e

Actual

Old

New

Change

Old

New

Change

Sales

136.2

137.4

137.4

0.0%

152.4

152.4

0.0%

Gross margin

30.0%

29.8%

29.5%

31.3%

31.1%

EBITDA normalised

4.8

8.5

10.0

18.0%

15.3

18.3

19.8%

EBITDA margin

6.3%

8.1%

9.3%

11.0%

13.0%

Net profit (reported)

(17.9)

(7.5)

(28.2)

N/A

2.6

5.3

104.8%

Net profit (normalised)

(10.2)

(7.5)

(4.8)

N/A

2.6

5.3

104.8%

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

Our new estimates still assume a revenue increase of 1% y-o-y in FY25, followed by stronger growth of 11% y-o-y in FY26, driven by improving market conditions and the contribution of new clients following increased sales and marketing efforts. EBITDA growth is now much stronger due to the absence of the running costs related to the Tricoya project.

Valuation

For the valuation of Accsys we use a DCF model, as a peer group comparison is not useful 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 plant in the US, as this is owned by the 60%/40% JV with Eastman Chemical Company and as such is not fully consolidated.

We previously added an option value for the Tricoya project in Hull of €0.07/share, but that has now been taken out. On the other hand, due to the decision to discontinue the Tricoya project the company saves the running costs for this project, which we had previously included up to FY26. This lifts the value for the continuing businesses by €0.01, resulting in a total value per share for Accsys of €0.92 (previously €0.98).

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

40.5

47.5

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

10.4

22.9

4.8

10.0

18.3

EBITDA underlying, excl share Accoya USA JV

10.6

23.6

8.5

12.7

19.8

EBITDA reported

10.3

22.1

7.3

8.2

19.8

Depreciation & Amortisation

(6.2)

(8.3)

(9.6)

(9.6)

(9.2)

EBIT normalised

4.2

15.3

(1.0)

3.1

10.6

Exceptionals (Edison definition)

(0.1)

(87.5)

(8.2)

(24.5)

0.0

EBIT reported

4.1

(72.2)

(9.2)

(21.4)

10.6

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)

(30.7)

6.0

Reported tax

(1.0)

(2.8)

(0.8)

2.6

(0.7)

Profit After Tax

0.7

(69.9)

(17.9)

(28.2)

5.3

Minority interests

1.6

30.8

0.0

0.0

0.0

Net profit (normalised)

1.9

9.5

(10.2)

(4.8)

5.3

Net profit (reported)

2.4

(39.0)

(17.9)

(28.2)

5.3

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)

(0.02)

0.02

EPS normalised diluted (€)

0.01

0.04

(0.04)

(0.02)

0.02

EPS reported (€)

0.01

(0.19)

(0.08)

(0.12)

0.02

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%

29.5%

31.1%

Normalised EBITDA Margin

8.8%

14.6%

6.3%

9.3%

13.0%

Normalised Operating Margin

3.5%

9.4%

-0.8%

2.3%

7.0%

Reported EBIT margin

3.4%

-44.5%

-6.8%

-15.5%

7.0%

BALANCE SHEET

Fixed Assets

195.3

151.4

138.9

120.9

116.4

Intangible Assets

10.8

10.5

10.0

9.6

9.2

Tangible Assets

181.3

110.1

97.2

71.6

66.5

Investments & other

3.2

30.9

31.7

39.7

40.7

Current Assets

79.8

75.1

71.0

67.7

82.3

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

22.8

32.5

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

98.0

106.4

Minority interests

35.5

0.0

0.0

0.0

0.0

Balance sheet total

275.1

226.5

210.0

188.7

198.8

CASH FLOW

Op Cash Flow before WC and tax

7.3

28.2

3.6

8.2

19.8

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

2.6

(0.7)

Net interest

2.9

(6.1)

3.8

(3.5)

(3.0)

Net operating cash flow

2.5

16.6

7.1

7.0

14.4

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

(4.6)

9.7

Opening net debt/(cash), including lease liabilities

12.2

27.3

44.1

37.1

41.7

Closing net debt/(cash), including lease liabilities

27.3

44.1

37.1

41.7

32.0

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.

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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

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United Kingdom

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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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United States

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London │ New York │ Frankfurt

20 Red Lion Street

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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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