REG - Accsys Technologies - Preliminary Results <Origin Href="QuoteRef">ACCS.L</Origin> - Part 2

Accsys TechnologiesAnnouncement

20/06/2017 07:06

- Part 2: For the preceding part double click  ID:nRST5354Ia 

                                                                                                                                                                                                                                                                                                                       
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   improve our sustainability accreditations and recognition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
 
 
Further considerations of Risks can be found in the Directors report. 
 
Accsys Technologies PLC 
 
Chief Executive's report 
 
Introduction 
 
I am very pleased to report upon what has been a truly transformational year for Accsys which I believe has put us in an
excellent position to continue to grow and take advantage of our unique assets. 
 
The new Tricoya Consortium agreed on 29 March 2017, which will lead to the Group's second commercial acetylation plant,
marks a major step forward in our objective in establishing acetylated wood as the leading modified wood technology in the
building materials sector. 
 
Our focus on safety remains our top priority and during the year we commenced an extensive new safety awareness programme
involving all of our employees. 
 
I would like to thank all of our staff for their hard work and continued dedication, which has helped make last year a
truly transformational year. I would also like to welcome Martin Robinson, who joined our Senior Management Team in April
2017 as Head of Group Operations. I believe his wealth of experience from a career at BP will be invaluable during our next
period of growth. 
 
Accoya sales growth 
 
Total Accoya sales volume for the year ended March 2017 increased by 18% to 39,790 cubic meters (2016: 33,847 cubic meters)
and total Accoya revenue increased by 17% to E50.7m (2016: E43.4m). The smaller increase in revenue compared to volume was
attributable to the full year impact of sales to Rhodia Acetow (formerly Solvay Acetow) which are at a discount, reflecting
Rhodia Acetow's marketing and sales commitment and responsibility for their region. Excluding sales to Medite for Tricoya,
sales volumes increased by 18% to 31,532 cubic meters (2016: 26,789 cubic meters). 
 
The overall increase in sales volume in the year reflects the continued increase in demand for our products. The strength
of demand has reconfirmed the need for additional manufacturing capacity and until the additional capacity becomes
available early next calendar year, we are operating at or near capacity utilisation. As a result we are seeking to manage
demand and our customers' expectations during this challenging period, during which we have seen an increase in forward
orders. 
 
The increase in sales, particularly in the second half of the year which saw an increase of 31% compared to the same period
the year before, continues to be very encouraging. We expect growth to be effected by the timing of the commissioning of
the third reactor. We are increasingly focussed on the longer term market and new opportunities expected to result from the
increased capacity. We also expect to benefit from potential customers gaining greater confidence of Accoya's enduring
position in the market place. 
 
The overall increase in sales is largely due to repeat business driven by the joinery industry's need for high performance
material, by greater acceptance of Accoya in our target markets as well as resulting from the direct activities undertaken
by our sales and marketing teams where our resources are relatively limited compared to the overall market opportunity. 
 
Sales growth has also continued to vary in different regions due either to specific circumstances or as a result of an
allocation of our sales and marketing resources. 
 
UK and Ireland remains our largest region, with sales volumes increasing by 24% to 12,021 cubic meters, excluding sales to
Medite for Tricoya. All of this growth has been driven through existing distributors.  Over the last few years we have
developed a successful model of working with these distributors to develop marketing campaigns together with indirect sales
methods such as architect briefings and a detailed and on-going campaign to target and inform the fragmented joinery
market. This success has led us to estimate Accoya now represents approximately 12% of the UK joinery market. Demand was
unaffected by the strengthening of the Euro against sterling following the Brexit vote, noting also that the weakening of
sterling also impacted all timber imports. 
 
We sold 8,531 cubic meters to Rhodia Acetow in the financial year, following Rhodia Acetow assuming responsibility for
their exclusive region in January 2016. This represented a 17% increase compared to sales to customers in the equivalent
region in the previous year.  The increase masks that sales in their region decreased immediately following the transition
and therefore I am very pleased that the transition has progressed well since with the deployment of Rhodia Acetow's sales
team and I look forward to further future growth. As a reminder, Rhodia Acetow agreed a five year, 76,000 cubic meter
off-take agreement effective from January 2016, with the annual minimum volumes increasing each calendar year and in total
representing approximately E100m of Accoya. 
 
Sales in the Americas increased by 38% to 3,846 cubic meters. North America in particular represents the largest potential
market for Accoya, and I am pleased that the changes made to the sales team over the last two years has resulted in an
increase in momentum ahead of the new manufacturing capacity becoming available. We will continue to focus on this region
applying where possible the same successful sales and marketing techniques that we have developed in the UK market. 
 
Sales to the Benelux area increased 10% to 3,682 cubic meters, however sales in the Netherlands were disappointing,
recording a decrease compared to the prior year. As a result, we have reviewed our approach to the Netherlands and have
made changes to the sales team, launched a new marketing campaign and commenced a new approach to the key housing
association market. As a result, I am confident that we will be in a good position to take advantage of the additional
Accoya manufacturing capacity when it becomes available. 
 
Sales to the Asia-Pacific region decreased by 16% to 2,812 cubic meters. Within this, sales to customers within Diamond
Wood's exclusive region decreased by 31% and sales outside of this, including to Japan, Australia, New Zealand and India
decreased by 7%, reflecting several larger projects in the previous year, noting that we continue to believe this region
has the potential for substantial sales growth in the longer term. 
 
Sales to customers elsewhere, including Eastern Europe and the Middle East remain relatively small at this time, however we
continue to develop relationships with distributors so as to increase awareness of Accoya generally, ahead of additional
capacity becoming available and with a belief that many of these regions also represent excellent longer term markets. 
 
Accoya sold to Medite for the manufacture of Medite Tricoya® increased by 17% to E7.8m (2016: E6.6m). The margin for this
material continues to be below that achieved for the majority of Accoya we sell, reflecting our investment in the Tricoya
project and that the current manufacturing process is in place only until the first dedicated Tricoya plant is operational.
We continue to expect volumes sold to Medite for the manufacture of Tricoya panels to increase marginally in the new
financial year, given temporary capacity limitations in Arnhem, noting that sales by Medite of Tricoya panels increased by
31% to 5,806 cubic meters in the year to 31 March 2017. 
 
We have 61 Accoya distributor, supply and agency agreements in place covering most of Europe, Australia, Canada, Chile,
China, India, Israel, Mexico, Morocco, New Zealand, South Africa, parts of South-East Asia and Middle-East and the USA. 
 
Accoya pricing and margin 
 
The marginally smaller increase in Accoya revenue (17%) compared to volume (18%) reflects a full year of sales to Rhodia
Acetoc, who receive a discount as a result of its obligations under the committed off-take agreement and to reflect the
sales and marketing expenditure that it incurs directly. This was partly off-set by a small increase in prices to UK
customers earlier in the year. A similar price increase to the majority of remaining customers is being implemented in the
first half of the new financial year. 
 
The Accoya gross margin, excluding licencing income, decreased from 27% to 23% as a result of full year impact of the
Rhodia Acetow discount, the volume of lower margin material sold to Medite and the higher cost of raw wood. Part of this
higher raw wood cost was due to an increase in prices from New Zealand suppliers and part was attributable to short term
changes to the product mix used in production resulting from supply chain issues but which enabled us to maintain
production volumes. 
 
Expansion of Accoya manufacturing plant 
 
I am very pleased by the progress made in the year in respect of our project to expand the production capacity of the
Arnhem plant from the current levels of approximately 40,000 cubic meters per annum to 80,000 cubic meters in a two-stage
expansion programme. We expect to invest approximately E22m towards the capital costs of the first stage, which includes
the installation of a third reactor, increasing the capacity to 60,000 cubic meters, together with the back-bone
infrastructure for a fourth reactor. 
 
Work has progressed well in respect of the first stage of the expansion which comprises two key phases: the first, which
involved the reconfiguring of chemical infrastructure stations, has been completed. Significant work has also been
completed in respect of detailed engineering and ground works, and all key items of equipment have been ordered. The third
reactor itself was delivered on 8 June 2017 enabling the remainder of the chemical construction work to progress. Detailed
engineering is now underway by the Engineering, Procurement and Construction contractor Fabricom with the construction due
to be completed by the end of 2017 calendar year, ahead of a period of commissioning. 
 
During the year we also completed the sale and leaseback of the remaining freehold land in Arnhem to Bruil, the same group
to which we sold land and buildings in 2011. Bruil in turn, have made excellent progress in the construction of a
significant new warehouse and office facilities which will be adjacent to the chemical plant and are due to be completed in
the same timeframe. These facilities, which will improve and contribute to better logistics and should improve
productivity, will be leased to Accsys once the expansion is complete. 
 
The fourth reactor is expected to be added at a later date, as demand requires. As this will use the same back-bone
infrastructure as is currently being constructed for the third reactor, it is expected to be added at relatively low cost,
funded from internal resources. 
 
Tricoya® Consortium 
 
Introduction 
 
I was delighted that we announced in March 2017 the completion of agreements in respect of the construction, operation and
financing of the world's first dedicated Tricoya wood chip acetylation plant, to be located in Hull. Under the new
agreements, Accsys owns 74.6% of Tricoya Technologies Limited which in turn owns 62% of the Hull plant. 
 
We have established the Tricoya Consortium to exploit Tricoya globally and to fund, build and operate the Hull plant. This
is expected to have an initial capacity of 30,000 metric tonnes of acetylated Tricoya chips per annum, enough to produce
approximately 40,000 cubic meters of Tricoya panels. 
 
Sales of Tricoya to date have been relatively small scale for market development and based upon Accoya manufactured in
Arnhem. The new plant will produce acetylated wood chips as feedstock for Tricoya panels which will be approximately 35%
cheaper than the current market seeding production from Arnhem. 
 
The total funding requirements for the Tricoya project are expected to be approximately E68m. Pre-construction engineering
work was completed in 2016, land clearance of the plot at the Saltend Chemicals Park is expected to be shortly completed
and detailed engineering work has commenced. The plant is expected to be completed in early 2019. 
 
The Hull plant is expected to reach EBITDA breakeven at approximately 40% of its capacity and to take approximately four
years to reach full capacity following completion. The designs and the plot allow for expansion at a later date. 
 
Tricoya Consortium structure 
 
The Tricoya Consortium members and funding is set out below. 
 
The investment into the Tricoya Consortium has been split between two entities, Tricoya Technologies Limited ('TTL') and
Tricoya Ventures UK Limited ('TVUK'). TVUK will own and operate the Hull plant and TTL will continue to exploit all Tricoya
related intellectual property and benefit from any future Tricoya related revenues outside of the Hull plant. 
 
a)     BP has been a key supplier of acetic anhydride, the key chemical raw material for acetylation, for a number of
years. Under the Consortium arrangements, they will be the sole supplier to the Hull plant from its adjacent acetic
anhydride production facility under a minimum six year supply agreement. 
 
BP will invest a total of E20.3m, with BP Chemicals investing E13.7m into TVUK aligning its interest with the plant it is
supplying. BP Ventures, BP's venture capital arm, has invested E6.6m into TTL to benefit from the long term Tricoya
opportunity. 
 
b)     Medite, part of the Coillte group, has been working with Accsys on Tricoya since 2009 and has been successfully
selling Tricoya panels since 2012. Sales to date exceed 17,200 cubic meters. 
 
Medite has agreed an off-take agreement which includes a minimum obligation to purchase 20% of the plant capacity in the
first year of production, ramping up to 40% after the fourth year of production. 
 
Medite will invest E11m of equity into the Tricoya Consortium, with E7m having been invested into TTL in the year and E4m
to be invested in total into TVUK, aligning its interests with the manufacturing and longer term success of Tricoya. 
 
c)     Accsys has contributed all of the Tricoya intellectual property and work undertaken previously, which has been
attributed a pre-money value of E35m under the Tricoya Consortium arrangements. 
 
In addition, Accsys has contributed E18.4m of equity into TTL, which was achieved by issuance of E18.9m of Loan Notes to
the Business Growth Fund and Volantis, details of which are set out below. 
 
Together the pre-money value and cash investment has resulted in Accsys retaining a 74.6% equity interest in TTL and
therefore Accsys has continued to control and fully consolidate TTL, and in turn TVUK. 
 
d)     Business Growth Fund ('BGF') and Volantis have invested a total of E22m as financial investors. 
 
BGF and Volantis have in aggregate subscribed for a total of E18.9m of Loan Notes in Accsys Technologies PLC (the 'Loan
Notes'). In turn, E18.4m of the proceeds, after fees, has been invested by Accsys as equity into TTL, as described above.
The Loan Notes are unsecured and with no interest repayments due until January 2019 
 
In addition BGF and Volantis have invested a total of E3.2m directly as equity into TTL.  As part of the overall financing
package (which has been divided 65%/35% between BGF and Volantis respectively), BGF and Volantis have also been granted
options over 14% of the issued share capital of Accsys. 
 
In addition, the Tricoya Consortium has agreed a six year, E17.2m (E15m net) finance facility with The Royal Bank of
Scotland ('RBS'). Interest payments due under the facility are rolled up until the Hull plant is expected to be cash-flow
generative. 
 
Global exploitation 
 
TTL has granted TVUK an sub-licence to manufacture Tricoya at the Hull plant and sell the same on an exclusive basis in the
UK and non-exclusive basis in certain other countries (the 'Production Licence'), but only when customers have also first
entered a licence agreement with TTL for the use of Tricoya in the production and marketing of panels (the 'User
Licence'). 
 
TTL will therefore receive up-front licence fees and on-going royalties from TVUK under the Production Licence as well as
royalties under the User Licence from third party customers buying Tricoya chips from TVUK. 
 
TTL is expected to agree additional licence agreements in the future elsewhere in the world to exploit the market which is
believed to be in excess of 1.6 million cubic meters per annum. 
 
Intellectual Property 
 
We continue to focus on and invest heavily in the generation and protection of intellectual property relating to the
innovation associated with our acetylation processes and products to ensure ongoing differentiation and competitive
advantage in the market place. Whilst each new innovation is carefully considered, patenting and/or maintaining valuable
know-how as a trade secret remains the typical route through which our innovation is protected. 
 
Accsys has an extensive and growing patent portfolio with over 60 granted patents in various countries throughout the world
and over 170 pending patent applications across more than 20 patent families covering all major markets, with particular
emphasis having recently been placed on extending the geographic spread of the Tricoya® patent portfolio. Significant R&D
resources are employed to maximise the scope of our patent rights to not only cover the products we and our distributors
and licensees sell, and the processes by which these products are made, but also to prevent competitors from
commercialising similar products and processes. 
 
Management of Company know-how remains an essential element of safeguarding our innovation, with confidentiality protocols
in place to prevent unauthorised access to such know-how and to place strict contractual obligations on third parties
collaborating with Accsys. Increasing Company-wide awareness of the importance of protecting and controlling our know-how
is a key initiative with particular focus on minimising risks when collaborating with third parties. 
 
Our well established trade mark portfolio continues to grow geographically and covers the key distinctive brands Accoya®,
Tricoya® and the Trimarque Device under which products are marketed, alongside the corporate Accsys® brand, including
transliterations in Ductch, Arabic, Chinese and Japanese. All of our key brands have now been registered in over 50
countries, and have become valuable house-hold names in the timber and panel industries. 
 
Accsys continues to maintain an active watch on the commercial and IP activity of third parties to monitor and take actions
if its IP rights are being infringed, to identify potentially valuable third party IP which could be exploited via a
strategic alliance, in-licence or purchase of third party IP and to obtain an early insight into third party IP which could
potentially hinder our proposed commercial activity. 
 
Both the patent and trade mark portfolios, together with other protected IP, including material under copyright and domain
names, continue to be regularly reviewed to ensure alignment with the Company objectives and to confirm obligations to
licensees are being fulfilled. 
 
Careful IP management, effected via our qualified in-house IP manager working in close conjunction with our technology,
engineering, product development, marketing and commercial groups, and supported where appropriate by external patent and
trade mark attorneys, ensures our IP portfolio is not only maintained and protected, but is grown in a cost effective
manner, adding value to our manufacturing and licensing businesses. 
 
Outlook 
 
The creation of the Tricoya Consortium and expansion of the plant in the Netherlands are both substantial and hugely
exciting projects for Accsys. In total, they will enable the Accsys Group to grow significantly over the next few years to
meet the increasing demand for Tricoya and Accoya, which we continue to believe, having undertaken detailed market
assessments, is in excess of 2.6 million cubic meters per annum. 
 
The new financial year has started well, with Accoya sales growth comparable to the second half of the last financial year,
although growth will be temporarily constrained as the year progresses now that we will be operating at or near our
capacity. Our immediate focus is therefore on ensuring the expansion in Arnhem is completed and in this respect, we
continue to expect the construction to be completed by the end of 2017 calendar year. Following a period of commissioning,
we expect the full benefit of the expansion to be obtained in the financial year ending March 2019, with demand expected to
result in further sales growth. 
 
Paul Clegg 
 
Chief Executive Officer 
 
19 June 2017 
 
Accsys Technologies PLC 
 
Financial review 
 
Income statement 
 
Revenue 
 
Total revenue for the year ended 31 March 2017 increased by 7% to E56.5m (2016: E52.8m). Within this total, Accoya® wood
revenue increased by 17% to E50.7m (2016: E43.5m) as a result of sales volumes increasing by 18%. Accoya® revenue includes
E7.8m of sales to Medite for the manufacture of Tricoya, a 18% increase (2016: E6.6m). Licence income decreased from E2.8m
to E1.6m, where the higher revenue in 2016 reflected the new agreements with our Accoya licensee Rhodia Acetow (formerly
Solvay Acetow) in the prior period. 
 
Other revenue of E4.3m (2016: E6.5m) included E0.3m relating to the Sales & Marketing agreement with Solvay, which was
agreed at the same time as the 76,000 cubic meter off-take agreement. The remainder is largely attributable to sales of
acetic acid, a by-product from the acetylation process. The prior year included E1.3m in respect of the expired Global
Marketing agreement with Solvay, with a further E0.9m of income recorded in respect of monies received attributable to the
Tricoya project, neither of which was repeated in the current period, as expected. 
 
Gross margin 
 
Gross profit margin reduced from 34% to 25%, as a result of lower licence and other revenue as set out above, and an
increase in cost of sales. The Accoya gross manufacturing margin decreased from 27% to 23% as a result of full year impact
of the Solvay discount, the volume of lower margin material sold to Medite and the higher cost of raw wood. Part of this
higher raw wood cost was due to an increase in prices from New Zealand suppliers and part was attributable to short term
changes to the product mix used in production resulting from supply chain issues but which enabled us to maintain
production volumes. We continue to expect a gross margin from the manufacture of Accoya of 30% to be achievable as we
benefit from the additional manufacturing capacity and improved sales mix. 
 
Following the additional capacity from the third reactor becoming available but in advance of the Hull plant being
completed, our percentage gross margin will depend on our customer sales mix. We continue to expect a gross margin from the
manufacture of Accoya of 30% to be achievable thereafter as we benefit from the additional manufacturing capacity and
improved sales mix. 
 
Other operating costs 
 
Other operating costs (excluding exceptional items) reduced by 1% to E18.3m (2016: E18.5m). The reduction in operating
costs is largely due to foreign exchange movements, with a E0.3m decrease in staff costs and a further E0.4m decrease in
other operating costs attributable to foreign exchange resulting from the weakening of sterling following the Brexit vote
in June 2016. This is off-set by increased office and facility costs of E0.5m due to the head office move to London and
increasing costs for our expanding plant in Arnhem. In addition, payroll, intellectual property ('IP') and legal costs
increased as a result of higher activity levels, including increased Tricoya related IP costs in the period. Headcount
increased to an average of 124 (2016: 121), with staff costs excluding the impact of foreign exchange, increasing by 3% to
E11.3m. This included a share based payment charge of E0.9m (2016: E1.0m). 
 
Exceptional items 
 
An exceptional gain of E0.6m arose on the sale of the land in Arnhem for E4.2m, which had a book value of E3.6m. The sale
to Bruil was subject to a lease arrangement. See note 5. 
 
An exceptional expense of E0.5m also recorded in the period, in relation to advisory fees for business development
activities as the Group pursued a one-off long-term opportunity. 
 
Loss from operations 
 
The loss from operations increased to E3.8m (2016: loss of E0.3m) due to the reduction in gross margin described above,
offset by the decrease in operating costs, as explained above. Excluding exceptional items, the loss from operations
increased to E3.9m (2016: E0.3m). 
 
Finance income 
 
Finance income of E2,000 (2016: E10,000) represents interest receivable on bank deposits. 
 
Finance expense 
 
The finance expense of E0.6m (2016: E0.2m) includes the interest element arising on the payments attributable to the sale
and leaseback of part of the Group's land and buildings in Arnhem, together with finance charges arising on the London
office fit-out lease. The balance also includes interest and other finance charges relating to the Loan Notes issued to in
the period to Business Growth Fund and Volantis relating to the Tricoya project (E0.3m) (see note 29). This also includes
any finance charges payable in respect of the Group's working capital facilities. 
 
Research & Development expenditure 
 
E1.8m was incurred on research and development activities in the period (2016: E2.0m). E0.2m (2016: E0.1m) has been
capitalised as an intangible asset (see note 16). 
 
Taxation 
 
The net tax charge of E0.7m (2016: E0.4m) primarily represents a tax charge arising from manufacturing offset by R&D tax
credits of E0.2m (2016: E0.2m) attributable to activities carried out in the current year. 
 
Dividends 
 
No final dividend is proposed in 2017 (2016 final dividend: ENil). The Board deems it prudent for the Company to maintain
as strong a balance sheet as possible during the current phase of the Company's growth strategy. 
 
Earnings per share 
 
Basic and diluted loss per share was E0.05 (2016 basic and diluted loss per share was E0.01). 
 
Balance sheet 
 
Intangible assets 
 
Intangible asset additions of E0.4m (2016: E1.5m) predominantly relate to capitalised internal development costs for both
Accoya and Tricoya related activities. The prior period included E1.0m relating to the Front End Engineering Design package
for the construction of the world's first Tricoya® plant. 
 
Property, plant and equipment 
 
Property, plant and equipment balance increased by E1.4m to E21.7m (2016: increase of E2.8m). The increase was due to
additions of E4.1m relating to the on-going project to expand the Arnhem Accoya plant through the addition of the third
reactor, including E0.6m relating to capitalised internal staff costs. A further E1m is attributable to new finance lease
arrangement (see note 28). E1.4m relates to the construction of the Tricoya plant in Hull and E0.5m relates to technology
improvements and significant maintenance items at the Arnhem plant. 
 
This is off-set by E3.6m relating to the disposal of the land in Arnhem to Bruil for proceeds of E4.2m, which resulted in
an exceptional gain of E0.6m. Bruil has also agreed to construct and lease a significant new warehouse and office facility
which is expected to be completed in the new financial year. The total depreciation charge in the year of E2.1m relates
predominantly to the existing Arnhem plant. 
 
Available for sale investments 
 
Accsys Technologies PLC has previously purchased a total of 21,666,734 unlisted ordinary shares in Diamond Wood China
Limited. The historical cost of the unlisted shares held at 31 March 2017 is E10m (2016: E10m). However, a provision for
the impairment of the entire balance of E10m continues to be recorded as at 31 March 2017 (see note 18). 
 
Inventory 
 
The Group had total inventory balances of E11.8m (2016: E8.3m). Finished goods consisting of Accoya represented E5.3m
(2016: E5.8m) and raw materials and work in progress, primarily consisting of unprocessed lumber, being E6.5m (2016:
E2.5m). The increase is attributable to the planned increase in inventory in light of the bottleneck issues reported in the
first half of the year, together with the planned increase in sales in the new financial year. 
 
Cash and cash equivalents 
 
The Group had cash of E41.2m at 31 March 2017 (2016: E8.2m). The increase in the year is mainly due to E19.8m net proceeds
from the issue of Loan Notes and borrowings (see note 29, E18.3m net proceeds from issue of share capital in Tricoya
Technologies Limited and Tricoya Ventures UK Limited to non-controlling interests (see note 9) and E4.2m proceeds from the
sale and leaseback of land in Arnhem as part of our plant expansion project. 
 
E0.3m of cash out-flow was attributable to cash-flows from operating activities before changes in working capital
(excluding exceptional items) (2016: E3.5m in-flow), as a result of the increase in operating loss to E3.9m (excluding
exceptional items). 
 
E0.5m of cash-outflow was attributable to changes in working capital (2016: E3.0m out-flow), including E3.3m increase in
inventories, E2.9m increase in trade and other receivables off-set by E5.7m increase in trade and other payables. 
 
E2.6m out-flow in respect of investing activities (2016: E4.0m), included E0.4m in respect of capitalised development costs
(2016: E0.4m) and E4.7m in respect of tangible fixed assets (2016: E2.6m) including in respect of the expansion of plant in
Arnhem and initial work for the plant in Hull, off-set by E4.2m proceeds from the sale of the land in Arnhem. 
 
Trade and other receivables 
 
Trade and other receivables have increased to E7.6m (2016: E5.6m). Within this, prepayments increased from E0.7m to E3.3m,
in part due to costs being incurred in respect of the Company's Firm Placing and Open Offer which completed in April 2017. 
 
Trade and other payables 
 
Trade and other payables increased to E12.5m (2016: E8.1m). Included within this, trade payables increased to E6.6m (2016:
E4.7m), due to an increase in expenditure on tangible fixed assets for both the Accoya plant in Arnhem, and the Tricoya
plant in Hull. In addition accruals increased from E2.1m to E4.7m due in part to the costs associated with the Company's
capital raise. 
 
Finance lease creditor 
 
The Group has previously entered into a sale and leaseback agreement for part of the Arnhem land and buildings. The first
phase resulted in proceeds of E2.2m which has been accounted for as a finance lease. At 31 March 2017 there are E1.9m of
payments committed to over the remaining life of the lease (2016: E2.0m) (see note 28). The second part of the previous
sale and leaseback of the land in Arnhem was completed in February 2013 and accounted for as an operating lease. 
 
The sale of the remaining plot of land completed in August 2016 and under the agreement with the purchaser, Bruil, they
will construct and then lease to Accsys new warehouse and office facilities. The construction is not expected to complete
until later in the new financial year and therefore no lease has been recognised in the period.  A further lease agreement
with Bruil was entered into in the period relating directly to infrastructure work associated with the expansion of the
chemical plant. This has been accounted for as a finance lease, with a new asset and liability of E0.9m being recognised as
at 31 March 2017. 
 
Long Term Borrowing 
 
Amounts payable under loan agreements increased to E20.1m (2016:Enil). The Group has entered into loan arrangements during
the period: 
 
A E17.2m project finance facility with the Royal Bank of Scotland Plc was entered into but remained undrawn as at 31 March
2017. The facility has been agreed at the Tricoya Consortium level and is secured upon the Tricoya plant, with the proceeds
to be applied to the construction of the Tricoya plant and working capital. 
 
E18.1m net proceeds were received in respect of Loan Notes issued by Accsys Technologies PLC to to Business Growth Fund
('BGF') and Volantis. The loan notes are unsecured, with interest of 7-9% payable after two years. The net proceeds have
been applied by the Group within the Tricoya Consortium, enabling Accsys to retain a 74.6% interest in TTL. 
 
E2.0m was drawn down in the period under the Rhodia Acetow loan facility, which was entered into in the previous period.
The loan facility is secured upon the Arnhem plant, with interest of 7.5%, expected to be payable after the expected
start-up of the third reactor. A further E7.5m of the facility remains available and is expected to be utilised to fund the
remaining cost of the third reactor. 
 
Non-controlling interests 
 
Part of the agreements relating to the formation of the Tricoya Consortium on 29 March 2017 included equity investment by
the consortium members. During the period a total of E19.1m of equity was issued by TTL and TVUK to BP, Medite, BGF and
Volantis. (see CEO's report for further details). This has resulted in an increase in the non-controlling interest of
E12.6m as at 31 March 2017 (2016: E0.1m). The difference between the cash received and non-controlling interest recorded
arises from the Tricoya Consortium agreements recognising Accsys's contribution of IP and historical development work, with
an implied pre-funding valuation of E35m. 
 
Capital structure 
 
Details of the issued share capital, together with the details of the movements in the Company's issued share capital in
the year are included in note 24. The Company has one class of ordinary shares which carry no right to fixed income. Each
share carries the right to one vote at general meetings of the Company. Details of non-controlling interests associated
with TTL and TVUK are summarised above and set out in note 9. 
 
There are no specific restrictions on the size of a holding nor on the transfer of the Company's shares, which are both
governed by the general provisions of the Articles of Association and prevailing legislation. The Directors are not aware
of any agreements between holders of the Company's shares that may result in restrictions on the transfer of securities or
on voting rights. 
 
Details of employee share schemes are set out in note 15. No person has any special rights of control over the Company's
share capital and all issued shares are fully paid. 
 
Going concern 
 
The financial statements are prepared on a going concern basis, which assumes that the Group will continue in operational
existence for the foreseeable future, and at least 12 months from the date these financial statements are approved. 
 
As part of the Group's going concern review, the Directors have reviewed the Group's trading forecasts and working capital
requirements for the foreseeable future, including taking into account the proceeds from the Firm Placing and Open offer
which was successfully completed on 23 April 2017. These forecasts indicate that, in order to continue as a going concern,
the Group is dependent on the achievement of certain operating performance measures relating to the production and sales of
Accoya wood from the plant in Arnhem and the collection of ongoing working capital items in line with internally agreed
budgets. 
 
The Directors have considered the internally agreed budgets and performance measures and believe that appropriate controls
and procedures are in place or will be in place to make sure that these are met. The Directors believe, while some
uncertainty inherently remains in achieving the budget, in particular in relation to market conditions outside of the
Group's control, that there are a sufficient number of alternative actions and measures that can be taken in order to
achieve the Group's medium and long term objectives. 
 
Therefore, the Directors believe that the going concern basis is the most appropriate on which to prepare the financial
statements. 
 
William Rudge 
 
Finance Director 
 
19 June 2017 
 
Accsys Technologies PLC 
 
Directors Report for the year ended 31 March 2017 
 
The Directors present their report together with the audited consolidated financial statements for the year ended 31 March
2017. 
 
Results and dividends 
 
The consolidated statement of comprehensive income for the year is shows the loss for the year. 
 
The Directors do not recommend the proposal of a final dividend in respect of the current year, consistent with the prior
year. 
 
Principal activities and review of the business 
 
The principal activities of the Group are the production and sale of Accoya® solid wood and Tricoya® wood elements,
technology and product development as well as the licensing of technology for the production and sale of Accoya® and
Tricoya® via the Company's subsidiaries, Titan Wood Limited, Titan Wood B.V., Titan Wood Technology B.V., Titan Wood Inc.,
Tricoya Technologies Limited and Tricoya Ventures UK Limited (collectively the 'Group'). Manufactured through the Group's
proprietary acetylation processes, these products exhibit superior dimensional stability and durability compared with
alternative natural, treated and modified woods as well as more resource intensive man-made materials. A review of the
business is set out in the Chairman's statement and the Chief Executive's report.  Accsys Technologies PLC is incorporated
in the United Kingdom. 
 
Business model and Strategy 
 
The Business model and Strategy section sets out the Company's strategy, business model and key performance indicators. 
 
Financial instruments 
 
Details of the use of financial instruments by the Company and its subsidiary undertakings are set out in Note 31 of the
financial statements. 
 
Share issues 
 
On 4 July 2016, a total of 673,355 of E0.05 Ordinary shares were issued to an Employee Benefit Trust ('EBT'). 
 
On 15 August 2016, a total of 63,909 of E0.05 Ordinary shares were issued and released to employees together with 63,909 of
E0.05 Ordinary shares issued to an employee trust on 14 August 2015. 
 
On 9 February 2017, a total of 16,302 of E0.05 Ordinary shares were issued and released to employees together with 16,302
of E0.05 Ordinary shares issued to an employee trust on 26 January 2016. 
 
A further 20,323,986 E0.05 Ordinary shares were issued after the year end, on 24 April 2017, following the Company
successfully completing a Firm Placing and Open Offer, raising E14m (before fees). 
 
Principal risks and uncertainties 
 
The business, financial condition or results of operations of the Group could be adversely affected by any of the risks set
out below. The Group's systems of control and protection are designed to help manage and control risks to an appropriate
level rather than to eliminate them. 
 
The Directors consider that the principal risks to achieving the Group's objectives are those set out below. 
 
(a)           Economic and market conditions 
 
The Group's operations comprise the manufacture of Accoya® wood and Tricoya® wood elements, technology and product
development and licensing the technology to manufacture and sell Accoya® and Tricoya® wood elements to third parties. The
cost and availability of key inputs affects the profitability of the Group's own manufacturing whilst also impacting the
potential profitability of third parties interested in licensing the Group's technology. The price of key inputs and
security of supply are managed by the Group, partly through the development of long term contractual supply agreements. 
 
An element of the Group's strategy for growth envisages the Group selling new or existing products and services into other
countries or into new markets. However, there can be no assurance that the Group will successfully execute this strategy
for growth. The development of a mass market for a new product or process is affected by many factors, many of which are
beyond the control of the Group, including the emergence of newer and more competitive products or processes and the future
price of raw materials. If a mass market fails to develop or develops more slowly than anticipated, the Group may fail to
achieve sustainable profitability. 
 
(b)           Regulatory, legislative and reputational risks 
 
The Group's operations are subject to extensive regulatory requirements, particularly in relation to its manufacturing
operations and employment policies.  Changes in laws and regulations and their enforcement may adversely impact the Group's
operations in terms of costs, changes to business practices and restrictions on activities which could damage the Group's
reputation and brand. 
 
(c)           Employees 
 
The Group's success depends on its ability to continue to attract, motivate and retain highly qualified employees. The
highly qualified employees required by the Group in various capacities are sometimes in short supply in the labour market.
There are risks associated with operating a chemical plant and accordingly the health and safety of our staff is made a
priority. We continuously seek improvements to exceed industry expectations by challenging our methods, improving our
reporting and continuing to learn 
 
(d)           Intellectual property 
 
The Group's strategy of exploiting its technology via manufacturing, partnerships and licensing depends upon maintaining
effective protection of its intellectual properties worldwide. Protection is afforded by a combination of trademarks,
patents, confidentiality agreements and the structuring of legal contracts relating to key licensing, engineering and
supply arrangements. Unauthorised use of the Group's intellectual property may adversely impact its ability to exploit the
technology and lead to additional expenditure to enforce legal rights. The wide geographical spread of our products
increases this risk due to the increasingly varied and complex laws and regulations in which we seek to protect the Group's
intellectual property. 
 
Further details of how risks and uncertainties relate to our strategy and performance in the year are shown in the
Strategic report. 
 
Greenhouse gas ('GHG') emissions 
 
The table below represents all the emission sources required under the Companies Act 2006 (Strategic Report and Directors'
Reports) Regulations 2013 for our manufacturing facility in Arnhem, the Netherlands. 
 
 Global GHG emissions data for period 1 April 2016 to 31 March 2017                                                                          
                                                                                                                     2017        2016        2015       
                                                                                                                     kg CO2eq    kg CO2eq    kg CO2eq   
 Electricity, heat, steam and cooling for own use - GROSS                                                            2,804,839   3,309,630   3,135,167  
 Electricity, heat, steam and cooling for own use - NET (including Renewable Energy Credits)                         1,511,794   1,651,470   88,714     
 Combustion of fuel & operation of production facility (MP4), in Arnhem, the Netherlands                             3,109,664   2,726,868   2,939,167  
 Total - Gross                                                                                                       5,914,503   6,036,498   6,074,334  
 External carbon offsets (VCS 2015)                                                                                  -1,524,000  -1,420,000  -          
 TOTAL - NET (including Renewable Energy Credits)                                                                    3,097,458   2,958,338   3,027,882  
 Chosen intensity measurement: Emissions per cubic meter Accoya produced - GROSS                                     155         181         178        
 Chosen intensity measurement: Emissions per cubic meter Accoya produced - NET (including Renewable Energy Credits)  81          88          89         
 
 
Notes: 
 
-       We have reported on all the emission sources required under the Companies Act 2006 (Strategic Report and Directors'
Reports) Regulations 2013 for our manufacturing facility in Arnhem, the Netherlands. 
 
-       Due to unavailability of data, GHG emissions related to our offices and staff travel our not included in the
figures above. 
 
-       Emissions have been calculated following the GHG Protocol - Corporate Accounting and Reporting (revised edition)
using the following databases: IPCC 2006 Guidelines for National Greenhouse Gas Inventories, 2007 IPCC Fourth Assessment
Report and Eco-Invent v3.3. 
 
-       Note that following Environmental Reporting Guidelines of Defra (2013), carbon offsets may be accounted for
separately as a "NET" figure, while the original electricity consumption figures should be presented as a "GROSS" figure. 
 
-       Following the same (Defra 2013) guidelines, the emissions associated with our supply chain (inputs and outputs) are
not included in the figures above, for readers that are interested in the supply chain related figures we refer to our
publicly available carbon footprint report:
http://www.accoya.com/wp-content/uploads/2013/09/Verco-Cradle-to-gate-carbon-footprint-update-2012.pdf and Environmental
Product Declaration (EN 15804):
https://www.accoya.com/wp-content/uploads/2015/06/NEPD-376-262-EN-Accsys-Technologies-Accoya-Wood.pdf. 
 
-       For 2014, following Environmental Reporting Guidelines of Defra (2013), carbon offsets due to e.g. purchase of
Renewable Energy Credits may be accounted for separately as a "NET" figure, while the original electricity consumption
figures are presented as a "GROSS" figure. 
 
-       In the current and prior year, Accsys has offset its CO2 emissions mainly through investing in verified carbon
offset projects instead of through Renewable Energy Credits (see external carbon offsets) resulting in an amended
presentation as recommended under the Defra guidelines. 
 
Further details concerning the environmental impact of our products as a whole are detailed in the Sustainability Report,
including an assessment of the overall life cycle of Accoya. 
 
Directors 
 
The Directors of the Company during the year and up to the date of signing the financial statements were: 
 
Sean Christie 
 
Paul Clegg 
 
Sue Farr 
 
Montague John 'Nick' Meyer 
 
Hans Pauli 
 
William Rudge 
 
Patrick Shanley 
 
Directors' indemnities 
 
The Company maintains directors' and officers' liability insurance which gives appropriate cover for legal action brought
against its Directors. 
 
Employment policies 
 
The Group operates an equal opportunities policy from recruitment and selection, through training and development,
appraisal and promotion to retirement. It is our policy to promote an environment free from discrimination, harassment and
victimisation, where everyone will receive equal treatment regardless of gender, colour, ethnic or national origin,
disability, age, marital status or sexual orientation. All decisions relating to employment practises will be objective,
free from bias and based solely upon work criteria and individual merit. 
 
17% of employees in the period were female. 10% of the senior management team were female and one of the Board of Directors
was female. 
 
Health and safety 
 
Health and safety is the priority at all levels of the Group, in particular taking into account the chemical industry in
which Accsys operates. Group companies have a responsibility to ensure that all reasonable precautions are taken to provide
and maintain working conditions for employees and visitors alike, which are safe, healthy and in compliance with statutory
requirements and appropriate codes of practice. 
 
The avoidance of occupational accidents and illnesses is given a high priority. Detailed policies and procedures are in
place to minimise risks and ensure appropriate action is understood in the event of an incident. A dedicated health and
safety officer is retained at the Group's manufacturing facilities in Arnhem and Hull. 
 
Significant shareholdings 
 
So far as the Company is aware (further to formal notification), the following shareholders held legal or beneficial
interests in ordinary shares of the Company exceeding 3%: 
 
·      Todlin N.V.                                                                                            6.50% 
 
·      Henderson Group PLC                                                                          5.94% 
 
·      Royal Bank of Canada                                                                          5.73% 
 
·      Majedie UK Equity Fund                                                                        5.06% 
 
·      Invesco Limited                                                                                     4.87% 
 
·      The London & Amsterdam Trust Company Limited                               4.51% 
 
·      FIL Limited (formerly known as Fidelity International Limited)             4.26% 
 
·      INEOS                                                                                                   4.24% 
 
·      Saad Investments Company Limited                                                    3.92% 
 
·      Zurab Lysov                                                                                          3.71% 
 
There are no restrictions in respect of voting rights. 
 
Going concern 
 
The Directors have formed a judgement, at the time of approving the financial statements, including taking into account the
proceeds from the Firm Placing and Open offer which was successfully completed on 23 April 2017, that there is a reasonable
expectation that the Group has access to adequate resources to continue in operational existence for at least the next 12
months. Further details are set out in note 1 to these financial statements. 
 
Corporate Governance 
 
The Company's statement on corporate governance can be found in the corporate governance report of these financial
statements. The corporate governance report forms part of this directors' report and is incorporated into it by
cross-reference. 
 
Disclosure of information to auditors 
 
Each of the persons who is a Director at the date of the approval of the Annual Report confirms that: 
 
·      So far as the Director is aware, there is no relevant audit information of which the Company's Auditors are unaware;
and 
 
·         The Director has taken all the steps that he ought to have taken as a Director in order to make himself aware of
any relevant audit information and to establish that the Company's Auditors are aware of that information. 
 
This confirmation is given and should be interpreted in accordance with the provisions of s418 of the Companies Act 2006. 
 
Independent Auditors 
 
PricewaterhouseCoopers LLP have expressed their willingness to continue in office as auditors and a resolution to
re-appoint them will be proposed at the annual general meeting. 
 
Directors' responsibilities pursuant to DTR4 
 
The Directors confirm to the best of their knowledge: 
 
·      The Group financial statements have been prepared in accordance with International Financial Reporting Standards
('IFRSs') as adopted by the European Union and Article 4 of the IAS Regulation and give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Group. 
 
·      The annual report includes a fair review of the development and performance of the business and the financial
position of the Group and the parent Company, together with a description of the principal risks and uncertainties that
they face. 
 
By order of the Board 
 
Angus Dodwell 
 
Company Secretary 
 
19 June 2017 
 
Accsys Technologies PLC 
 
Corporate Governance 
 
Details of the Company's corporate governance arrangements are set out below. The Board of Directors acknowledges the
importance of the Principles set out in The UK Corporate Governance Code issued by the Financial Reporting Council. Neither
the 2010 or 2012 UK Corporate Governance Code are compulsory for AIM listed or Euronext listed companies. The Board has
applied the principles as far as practicable and appropriate for a relatively small public company. 
 
The Board of Directors 
 
During the period the Board comprised a Non-executive Chairman, three Non-executive Directors and three Executive
Directors. 
 
The Board meets regularly and is responsible for strategy, performance, approval of major capital projects and the
framework of internal controls. To enable the Board to discharge its duties, all Directors receive appropriate and timely
information. Briefing papers are distributed to all Directors in advance of Board meetings. All Directors have access to
the advice and services of the Company Secretary. The appointment and removal of the Company Secretary is a matter for the
Board as a whole. In addition, procedures are in place to enable the Directors to obtain independent professional advice in
the furtherance of their duties, if necessary, at the Company's expense. 
 
During the year, all serving Directors attended the quarterly Board meetings that were held. In addition to the scheduled
meetings there is frequent contact between all the Directors in connection with the Company's business including Audit and
Nomination and Remuneration committee meetings which are held as required, but as a minimum twice per annum. 
 
Directors are subject to re-election by the shareholders at Annual General Meetings. The Articles of Association provide
that Directors will be subject to re-election at the first opportunity after their appointment and the Board submit to
re-election at intervals of three years. 
 
Day to day operating decisions are made by the Senior Management Team of which the Chief Executive Officer, the Executive
Director, Corporate Development and Finance Director are members. 
 
Audit Committee 
 
The Audit Committee consisted of Sean Christie (Chairman), Patrick Shanley, Nick Meyer and Sue Farr. The Audit Committee
meets at least twice a year and is responsible for monitoring compliance with accounting and legal requirements and for
reviewing the annual and interim financial statements prior to their submission for approval by the Board. The Committee
also discusses the scope of the audit and its findings and considers the appointment and fees of the external auditors. The
Audit Committee continues to believe that it is not currently appropriate for the Company to maintain a dedicated internal
audit function due to its size. 
 
The Audit Committee considers the independence and objectivity of the external auditors on an annual basis, with particular
regard to non-audit services. The non-audit fees are considered by the Board not to affect the independence or objectivity
of the auditors. The Audit Committee monitors such costs in the context of the audit fee for the period, ensuring that the
value of non-audit service does not increase to a level where it could affect the auditors' objectivity and independence.
The Board also receives an annual confirmation of independence from the auditors. 
 
Nominations & Remuneration Committee 
 
The Nominations and Remuneration Committee consists of Sue Farr (Chairman), Patrick Shanley, Sean Christie and Nick Meyer.
The Committee's role is to consider and approve the nomination of Directors and the remuneration and benefits of the
Executive Directors, including the award of share options and bonus share awards. In framing the Company's remuneration
policy, the Nominations & Remuneration Committee has given full consideration to Section D of The UK Corporate Governance
Code. 
 
Internal Financial Control 
 
The Board is responsible for establishing and maintaining the Company's system of internal financial control and places
importance on maintaining a strong control environment. The key procedures which the Directors have established with a view
to providing effective internal financial control are as follows: 
 
·      The Company's organisational structure has clear lines of responsibility; 
 
·      The Company prepares a comprehensive annual budget that is approved by the Board.  Monthly results are reported
against the budget and variances are closely monitored by the Directors; and 
 
·      The Board is responsible for identifying the major business risks faced by the Company and for determining the
appropriate courses of action to manage those risks. 
 
The Directors recognise, however, that such a system of internal financial control can only provide reasonable, not
absolute, assurance against material misstatement or loss. 
 
Relations with shareholders 
 
Communications with shareholders are given high priority. 
 
There is regular dialogue with shareholders including presentations after the Company's preliminary announcement of the
year-end results and six monthly results. The Board uses the Annual General Meeting to communicate with investors and
welcomes their participation. The Chairman aims to ensure that the Directors are available at Annual General Meetings to
answer questions. 
 
Directors' attendance record 
 
The attendance of individual Directors at meetings of the Board and its committees in the year under review was as
follows: 
 
                             Board               Audit Committee             Nomination & Remuneration Committee    
 Number of meetings          Attended  Serving1                   Attended2  Serving                                Attended3  Serving    
                                                                                                                                          
 Michael 'Sean' Christie     9         13                         3          3                                      5          6          
 Paul Clegg                  13        13                         1          -                                      2          -          
 Sue Farr            

- More to follow, for following part double click  ID:nRST5354Ic