REG - Accsys Technologies - Preliminary Results <Origin Href="QuoteRef">ACCS.L</Origin> - Part 4
20/06/2017 07:06
- Part 4: For the preceding part double click ID:nRST5354Ic
E'000 E'000 E'000 E'000 E'000
Accoya wood revenue 50,655 - - - 50,655
Licence revenue 1,576 - - - 1,576
Other revenue 4,268 30 - - 4,298
Total Revenue 56,499 30 - - 56,529
Cost of sales (42,175) - - - (42,175)
Gross profit 14,324 30 - - 14,354
Other operating costs (10,648) (1,518) (4,344) (1,763) (18,273)
Exceptional Items 635 - (517) - 118
Other operating costs (net) (10,013) (1,518) (4,861) (1,763) (18,155)
Profit/(Loss) from operations 4,311 (1,488) (4,861) (1,763) (3,801)
Profit/(Loss) from operations 4,311 (1,488) (4,861) (1,763) (3,801)
Depreciation and amortisation 2,357 171 133 52 2,713
EBITDA 6,668 (1,317) (4,728) (1,711) (1,088)
EBITDA (before exceptional items) 6,033 (1,317) (4,211) (1,711) (1,206)
2016
Accoya Tricoya Corporate Research & Development TOTAL
E'000 E'000 E'000 E'000 E'000
Accoya wood revenue 43,466 - - - 43,466
Licence revenue 2,774 75 - - 2,849
Other revenue 5,451 1,003 - - 6,454
Total Revenue 51,691 1,078 - - 52,769
Cost of sales (34,597) - - - (34,597)
Gross profit 17,094 1,078 - - 18,172
Other operating costs (10,273) (1,250) (4,998) (1,939) (18,460)
Profit/(Loss) from operations 6,821 (172) (4,998) (1,939) (288)
Profit/(Loss) from operations 6,821 (172) (4,998) (1,939) (288)
Depreciation and amortisation 2,398 143 84 47 2,672
EBITDA 9,219 (29) (4,914) (1,892) 2,384
EBITDA (before exceptional items) 9,219 (29) (4,914) (1,892) 2,384
Note in respect of restatement of segmental reporting note: In the previous year the results had been allocated between
Manufacturing, R&D and Administation/Business Development segments. Following the formation of the Tricoya Consortium,
results have been allocated to reflect the business more appropriately. As a result E1.9m of Accoya related licence and
other revenue previously included in the Licensing, Management and Business Development segment has been included the
Accoya segment (2016: E4.3m). In addition all Accoya specific costs previously included in the Licensing, Management and
Business Development segment including E3.5m of Sales & Marketing, Information Technology and Intellectual Property costs
have been allocated to the Accoya segment (2016: E3.4m).
Corporate
Corporate costs are those costs not directly attributable to Accoya, Tricoya or Research and Development activities. This
includes management and the Group's corporate and general administration costs including the head office in London.
Headcount = 15 (2016: 14)
Accoya
Revenue includes the sale of Accoya®, licence income and other revenue, principally relating to the sale of acetic acid and
other licensing related income.
All costs of sales are allocated against manufacturing activities in Arnhem unless they can be directly attributable to a
licensee. Other operating costs include depreciation of the Arnhem property, plant and equipment together with all other
costs associated with the operation of the Arnhem manufacturing site, including directly attributable administration, sales
and marketing costs. Headcount = 96 (2016: 92)
The below table shows details of reconciling items to show both Accoya EBITDA and Accoya Manufacturing gross profit, both
including and excluding licence and licensing related income, which has been presented given the inclusion of items which
can be more variable or one-off.
2017 2016
E'000 E'000
Accoya segmental underlying EBITDA 6,033 9,219
Accoya Licence Income (1,576) (2,774)
Other income, predominantly for marketing services (338) (1,570)
Accoya segmental underlying EBITDA (excluding. Licence Income) 4,118 4,875
Accoya segmental gross profit 14,324 17,094
Accoya Licence Income (1,576) (2,774)
Other income, predominantly for marketing services (338) (1,570)
Accoya manufacturing gross profit 12,410 12,750
Tricoya
Revenue and costs are those attributable to the business development of the Tricoya® process and establishment of Tricoya
Hull Plant. Headcount = 4 (2016: 3), noting a substantial proportion of the costs to date have been incurred via recharges
from other parts of the Group or have resulted from contractors.
Research and Development
Research and Development costs are those associated with the Accoya® and Tricoya® processes. Costs exclude those which have
been capitalised in accordance with IFRS. (see note 16). Headcount = 9 (2016: 12)
Assets and liabilities cannot be readily allocated to the three segments and therefore no additional segmental information
has been disclosed.
Analysis of Revenue by geographical area of customers: 2017 2016
E'000 E'000
UK and Ireland 25,307 21,426
Rest of Europe 12,984 14,085
Benelux 7,992 7,764
Americas 5,810 4,846
Asia-Pacific 4,009 4,382
Rest of World 427 266
56,529 52,769
Revenue generated from three customers exceeded 10% of Group revenue of 2017. This included 93% of the revenue from the
rest of Europe and relates to a mixture of Accoya and licensing revenue. In addition two other customers represented 33%
and 31% respectively, of the revenue from the United Kingdom and Ireland and relates to Accoya revenue. Revenue generated
from three customers exceeded 10% of Group revenue in 2016. (47% of the revenue from the rest of Europe, and 38% and 32%
respectively, of the revenue from the United Kingdom and Ireland).
Analysis of non-current assets (Other than financial assets and deferred tax): 2017 2016
E'000 E'000
UK 7,766 7,806
Other countries 20,513 19,215
Un-allocated - Goodwill 4,231 4,231
32,520 31,252
The segmental assets in the current year and the previous year were predominantly held in Europe. Additions to property,
plant, equipment and intangible assets in the current year and the previous year were predominantly incurred in Europe.
There are no significant intersegment revenues.
4. Other operating costs
Other operating costs consist of the operating costs, other than the cost of sales, associated with the operation of the
plant in Arnhem and the offices in Dallas and London (pre December 2015 Windsor):
2017 2016
E'000 E'000
Sales and marketing 3,773 3,745
Research and development 1,711 1,892
Depreciation and amortisation 2,713 2,672
Other operating costs 3,243 3,752
Administration costs 6,833 6,399
Exceptional Items 517 -
18,790 18,460
Note: allocation of operating costs includes representing of 2016 numbers in line with the updated segmental analysis as
per note 3.
During the period, E525,000 (2016: E420,000) of development costs were capitalised and included in intangible fixed assets,
including E462,000 (2016: E282,000) which were capitalised within Tricoya Technologies Limited ('TTL'). In addition
E637,000 of internal costs have been capitalised and are included within tangible fixed assets in relation to the expansion
of our plant in Arnhem, Netherlands (2016: E367,000).
Other operating costs largely relate to costs associated with the Group's manufacturing office in the Netherlands,
excluding research & development costs.
Administration costs also include the costs associated with the Group's head office in London, the US office in Dallas
together with business development and management costs. Exceptional costs in the current year are set out in note 5.
5. Exceptional items
Agreements were reached in August 2016 for the sale and leaseback for the land in Arnhem, resulting in proceeds of E4.2m
received in the period and a gain of E0.6m as a result of the book value of the land being lower. Under the arrangements,
the landlord has agreed to construct a new warehouse and office building which will be connected to the Group's existing
manufacturing site. This building will be built by the landlord and leased to the Group over a 20 year period with further
option to renew. The landlord is the same landlord that the Group sold land and buildings to in 2011 and 2012 associated
with the existing manufacturing plant.
The above exceptional gain was partly offset by E0.5m of costs incurred in the period in relation to advisory fees for
business development activities as the Group pursued a one-off long-term opportunity.
6. Employees
2017 2016
E'000 E'000
Staff costs (including Directors) consist of:
Wages and salaries 8,783 8,403
Social security costs 1,186 1,144
Other pension costs 617 567
Share based payments 908 1,009
11,494 11,123
The average monthly number of employees, including Executive Directors, during the year was as follows:
Number Number
Sales and marketing, administration, research and engineering 78 75
Operating 46 46
124 121
7. Directors' remuneration
2017 2016
E'000 E'000
Directors' remuneration consists of:
Directors' emoluments 1,317 1,302
Company contributions to money purchase pension schemes 51 55
1,368 1,357
Compensation of key management personnel included the following amounts:
Salary, bonus and short term benefits Share based payments charge
2017 2016
Pension Total Total
E'000 E'000 E'000 E'000 E'000
Paul Clegg 486 30 210 726 1,020
Hans Pauli 326 12 87 425 426
William Rudge 262 9 62 333 322
1,074 51 359 1,484 1,768
The Group made contributions to 2 (2016: 3) Directors' personal pension plans, with Paul Clegg receiving cash in lieu of
pension from 1 April 2016.
The figures in the above table are impacted by foreign exchange noting that the remuneration for P Clegg and W Rudge are
denominated in Pounds Sterling. Their total remuneration decreased by 18% and increased by 17% respectively, when excluding
the impact of foreign exchange.
8. Operating loss
2017 2016
E'000 E'000
This has been arrived at after charging:
Staff costs 11,494 11,123
Depreciation of property, plant and equipment 2,157 2,148
Amortisation of intangible assets 556 524
Operating lease rentals 1,239 933
Foreign exchange (gains)/losses (403) 47
Research & Development (excluding staff costs) 873 634
Loss on disposal of property, plant and equipment 79 35
Fees payable to the Company's auditors for the audit of the Company's annual financial statements 65 74
Fees payable to the Company's auditors for other services:
- audit of the Company's subsidiaries pursuant to legislation 112 106
- audit related assurance services 22 27
Total audit and audit related services: 199 207
- tax compliance services 87 107
- all other services* 289 10
Total tax and other services: 376 117
* Note: Other services payable to the Company's auditors excludes E0.3m attributable to the Firm Placing and Open offer
which completed in the subsequent financial year, and will be deducted from share premium.
9. Tricoya Technologies Limited
Tricoya Technologies Limited ("TTL") was incorporated in order to develop and exploit the Group's Tricoya® technology for
use within the worldwide panel products market, which is estimated to be worth more than E60 billion annually.
On 29 March 2017 the Group announced the entry into and successful completion of its agreements for the financing,
construction and
operation of the world's first Tricoya wood elements acetylation plant in Hull with its TTL consortium investors, being BP,
Medite, BGF and
Volantis.
The Hull plant will have an initial production capacity of 30,000 tonnes per annum (tpa) (sufficient to manufacture 40,000
cubic meters of panels) and scope to expand. Approximately 40% of the plant's output is expected to be sold or paid for
under an off-take agreement with Medite; cash flow break-even is at approximately 40% production capacity. The plant is
expected to cost approximately E61m, with a further approximately E15m required for continued market seeding, marketing, IP
development and engineering functions to cash breakeven.
Structurally, Accsys, BP Ventures, Medite, BGF and Volantis have invested into TTL. TTL has then invested, alongside BP
Chemicals and Medite, in Tricoya Ventures UK Limited ("TVUK"), a special purpose subsidiary of TTL that will construct, own
and operate the Hull Plant.
BP will invest a total of E20.3 million in the Tricoya Project. BP Ventures, BP's venture capital arm, invested E6.6
million as equity into TTL by 31 March 2017 to benefit from the long-term opportunity that the Tricoya Consortium believes
exists in respect of exploiting Tricoya globally. BP Chemicals will contribute up to E13.7 million as equity in TVUK,
aligning its interest with the plant it is supplying. E2.3 million of the E13.7 million TVUK equity funding had been
received by 31 March 2017, with the remaining E11.4 million to be invested during the construction of the Hull plant.
Medite's investment in the Tricoya Project will be E11 million, with E7 million invested as equity into TTL and up to E4
million as equity into TVUK, thereby aligning its interest in both the manufacturing and the longer term global success of
Tricoya. At 31 March 2017 all E7 million of TTL equity funding and E0.9 million of the TVUK equity funding had been
received, with the remaining E3.1 million to be invested during the construction of the Hull plant.
TTL will invest E28.5 million in TVUK, having invested E5.2m in March 2017 and committed to contribute a further E23.3m
during construction of the Hull plant.
In October 2012 the Group contributed all of its Tricoya intellectual property and historical development into TTL by way
of exclusive licence, with rights for TTL to exploit the same on a global basis.
The Group agreed and funded a further E18.4 million of cash investment in March 2017 by way of equity subscription in TTL,
resulting in a total equity interest of 74.6%. This equity subscription is funded by the Group's issue of Loan Notes to BGF
and Volantis.
The Group is expected to increase its total equity interest in TTL to 75.9% over the next two years as a result of the
continued supply by the Group of lower priced Accoya® to Medite to enable continued market development ahead of the
completion of the Hull Plant.
BGF and Volantis have invested an aggregate of £19 million as financial investors into both the Group and TTL. BGF and
Volantis have agreed to invest on similar terms but are investing separately, with BGF accounting for 65% of the £19
million total.
In addition, TVUK has entered a six-year E17.2 million (E15 million net) finance facility agreement with The Royal Bank of
Scotland Plc in respect of the construction and operation of the Hull Plant.
The Group has consolidated the results of both TTL and TVUK (TTL Group) as subsidiaries, as it exercises the power to
govern the entities, as required by IFRS 10 guidance. The non-controlling interests in both entities has been recognised in
these Group financial statements.
The TTL Group consists of Tricoya Technologies Limited and its subsidiary, Tricoya Ventures UK Limited. The TTL Group
income statement and balance sheet are set out below:
TTL Group income statement:
Consolidated Consolidated
2017 2016
E'000 E'000
Revenue - 318
Costs:
Staff costs (1,145) (864)
Research & development (excluding staff costs) (200) (142)
Intellectual Property (606) (303)
Sales & marketing (12) (214)
Amortisation (171) (143)
EBIT (2,134) (1,348)
EBIT attributable to Accsys shareholders (1,991) (1,338)
TTL Group balance sheet:
2017 2016
E'000 E'000
Non-current assets
Intangible assets 3,246 3,065
Property, plant and equipment 1,440 -
4,686 3,065
Current assets
Receivables due within one year 612 230
Cash and cash equivalents 36,386 1,519
36,998 1,749
Current liabilities
Trade and other payables (3,900) (2,220)
Net current assets 33,098 (471)
Net assets 37,784 2,594
Value attributable to Accsys Technologies 25,164 2,533
10. Finance income
2017 2016
E'000 E'000
Interest receivable on bank and other deposits 2 13
11. Finance expense
2017 2016
E'000 E'000
Arnhem land sale and leaseback finance charge 173 181
Foreign exchange loss on loan notes 257 -
Other loan note related finance expenses 13 -
Other finance expenses 117 10
560 191
12. Tax expense
2017 2016
E'000 E'000
(a) Tax recognised in the statement of comprehensive income comprises:
Current tax expense
UK Corporation tax on profits for the year - -
Research and development tax credit in respect of current year (274) (256)
(274) (256)
Overseas tax at rate of 15% 12 (29)
Overseas tax at rate of 25% 928 687
Deferred Tax
Utilisation of deferred tax asset - -
Total tax charge reported in the statement of comprehensive income 666 402
2017 2016
E'000 E'000
(b) The tax credit for the period is lower than the standard rate of
corporation tax in the UK (2017: 20%, 2016: 20%) due to:
Loss profit before tax (4,359) (466)
Expected tax credit at 20% (2016 - 20%) (872) (93)
Expenses not deductible in determining taxable profit 176 120
(Over)/Under provision in respect of prior years (114) 183
Tax losses for which no deferred income tax asset was recognised 1,593 294
Effects of overseas taxation 40 145
Other temporary differences 117 9
Research and development tax credit in respect of prior years (34) (58)
Research and development tax credit in respect of current year (240) (198)
Total tax charge reported in the statement of comprehensive income 666 402
Changes to the UK corporation tax rates were substantively enacted as part of Finance Bill 2015 (on 26 October 2015) and
Finance Bill 2016 (on 7 September 2016). These include reductions to the main rate to reduce the rate to 19% from 1 April
2017 and to 17% from 1 April 2020. Deferred taxes at the balance sheet date have been measured using these enacted tax
rates and reflected in these financial statements.
13. Dividends Paid
2017 2016
E'000 E'000
Final Dividend ENil (2016: ENil) per Ordinary share proposed
and paid during year relating to the previous year's results - -
14. Loss per share
The calculation of loss per ordinary share is based on loss after tax and the weighted average number of ordinary shares in
issue during the year.
Basic and diluted earnings per share 2017 2017 2016
Before exceptional items Total Total
Weighted average number of Ordinary shares in issue ('000) 90,442 90,442 89,568
Loss for the year (E'000) (5,000) (4,882) (858)
Basic and diluted loss per share E (0.06) E (0.05) E (0.01)
Basic and diluted losses per share are based upon the same figures. There are no dilutive share options as these would
increase the loss per share.
15. Share based payments
The Group operates a number of share schemes which give rise to a share based payment charge. The Group operates a Long
Term Incentive Plan ('LTIP') in order to reward members of the senior management team and the executive directors. As part
of the award of nil costs options under the LTIP in 2013, the recipients relinquished all share options that they held
which had been awarded under the 2005 and 2008 Share Option plans. Other employees continue to hold options awarded under
these earlier schemes.
In addition, the Group operated an Employee Share Participation Plan, which was available to all employees, and also made
awards under the Employee Benefit Trust. Details of all these schemes are given below.
Options - total
The following figures take into account options awarded under the LTIP, together with share options awarded in previous
years under the 2005 and 2008 Share Option schemes.
Outstanding options granted are as follows:
Number of outstanding Weighted average remaining
options at 31 March contractual life, in years
Date of grant 2017 2016 2017 2016
28 March 2007 - 115,586 - 1.0
20 November 2007 48,444 48,444 0.6 1.6
18 June 2008 8,498 8,498 1.3 2.3
8 December 2008 25,211 37,110 1.7 2.7
27 July 2010 164,321 164,321 3.3 4.3
1 August 2011 140,000 140,000 4.3 5.3
19 September 2013 (LTIP) 2,472,550 4,103,456 6.5 7.5
24 June 2016 (LTIP) 1,070,255 - 9.3 -
Total 3,929,279 4,617,415 6.9 6.9
Movements in the weighted average values are as follows:
Weighted
average
exercise
price Number
Outstanding at 31 March 2015 E 0.48 4,812,589
Forfeited during the year E 0.00 (175,174)
Exercised during the year E 0.50 (20,000)
Outstanding at 31 March 2016 E 0.50 4,617,415
Granted during the year E 0.00 1,070,255
Forfeited during the year E 0.04 (1,642,805)
Expired during the year E 9.15 (115,586)
Outstanding at 31 March 2017 E 0.30 3,929,279
The exercise price of options outstanding at the end of the year ranged between Enil (for LTIP options) and E12.90 (2016:
Enil and E12.90) and their weighted average contractual life was 6.7 years (2016: 6.9 years).
Of the total number of options outstanding at the end of the year, 183,532 (2016: 183,532) had vested and were exercisable
at the end of the year. No options were exercised in the current year (2016: 20,000).
Long Term Incentive Plan ('LTIP')
In 2013, the Group established a Long Term Incentive Plan, the participants of which are key members of the Senior
Management Team, including Executive Directors. The establishment of the LTIP was approved by the shareholders at the AGM
in September 2013.
A prerequisite of participation in the LTIP in 2013 was for the beneficiaries to agree to the cancellation of their entire
outstanding share options, providing the Company with a 5% reduction in the level of dilution to make the new awards. A
cancellation was agreed as the most appropriate action as it would focus the management team on the new LTIP and not on
historical awards or arrangements.
LTIP overview
Under the LTIP, awards can be granted on a discretionary basis to key members of the management team. In 2013, an initial
'one off' grant was made in order to focus the management team on the growth of the Company over the next three years.
Awards were granted in the form of nil-cost options and consist of the following 'elements':
Element Objective Description
A Retention based award to lock-in executives whohave contributed to theturnaround In consideration to agreeing to the cancellation of the participant's existing options, a proportion of the new share awards were to vest on continuity of employment over the next three years.To ensure there is no value shift to the participants via the cancellation, this element required an additional three years of services from the participant and were to be forfeited if the share price at the end of the performance
period was below E0.65.
B Performance based shareaward This element aligned the participant to the future success of the Company by linking the level of vesting to EBITDA and share price growth against the constituents of the MSCI Europe Index (or another other broad based European index as deemed appropriate by the Remuneration Committee).
C Exceptional performancemultiplier This element ensured that if significant value was created for shareholders then participants would be entitled to receive an appropriate proportion of this value.
2013 LTIP Award performance conditions and 2016 outcome
Element A - Vesting was contingent upon continued employment for three years and share price not falling below E0.65 at the
end of the performance period, being the three years ending 20 August 2016. 100% of this element vested.
Element B - was measured against two equally weighted performance conditions:
Threshold Target Maximum 2016 Outcome
EBITDA (50% of Element B) E0m E1.6m E4m E2.38m2 equated to 78% of this element vesting
Share price growth(50% of Element B) Median of the constituents ofthe MSCI Europe Index 60th percentile of theconstituents of the MSCIEurope Index Upper quartile of theconstituents of the MSCIEurope Index Share price growth of 14% was between the 50th and 60th percentile equating to 29.5% of this element vesting
Potential Vesting level1 25% 60% 100%
Notes:
1. Vesting is on a straight line basis between the respective EBITDA and share price targets.
2. Includes E0.3m adjustment made to reflect circumstances not foreseen at time of award grant
Element C - This element was to vest in full if the share price is at or above E1.30 at the end of the performance period.
This was not met and nil awards vested.
4,103,456 nil cost options awarded in 2013 were unvested as at 1 April 2016. Of these, 2,472,550 vested in the period as a
result of meeting the performance conditions set out above, with the remaining 1,630,906 being forfeited.
Awards made in June 2016 and LTIP Award performance conditions
Following the vesting of the LTIPs awarded in September 2013, a further award was made to members of the Senior Management
Team, including Executive Directors. A total of 1,070,255 nil cost options were awarded.
The LTIP plan rules were amended in November 2015 such that awards made in summer 2016 are subject to a 3 year performance
period (i.e. year end March 2019) and a further 2 year holding period. In addition, awards are also subject to malus/
claw-back provisions.
Element A (Share price element)
In relation to 50% of award, the performance target will be achieved in relation to:
· 25% for this Element if the share price growth is greater than the median of the comparator group; and
· 100% for this Element if the share price growth is greater than the upper quartile of the comparator group
with straight-line vesting between these points.
Element B (EBITDA element)
In relation to 50% of award, the performance target will be achieved in relation to:
· 25% for this Element if EBITDA is greater than or equal to E0.06 per Share;
· 50% for this Element if EBITDA is greater than or equal to E0.08 Share; and
· 100% for this Element if EBITDA is greater than or equal to E0.10 Share
with straight-line vesting between these points.
The comparator group for the purposes of Element A is the constituent companies of the FTSE AIM All Share Index (excluding
the Resource and Financial Services Sectors) as determined by the Remuneration Committee.
Element Element A Element B
(Share price growth) (EBITDA per Share)
Grant date 27 Jun 16 27 Jun 16
Share price at grant date (E) 0.81 0.81
Exercise price (E) 0.00 0.00
Expected life (years) 3 3
Contractual life (years) 10 10
Vesting conditions (Details set out above) Share Price EBITDA
Risk free rate -0.64% -0.64%
Expected volatility 20% 20%
Expected dividend yield 0% 0%
Fair value of option E 0.187 E 0.749
2005 and 2008 Share Option schemes
The following share options awarded under the Group's 2005 and 2008 Share Option schemes continued to exist. No options
were granted under the 2005 or 2008 Share Option schemes in the current or previous period.
Options granted on 20 November 2007 vest to one third of the options granted upon achievement of each of the following:
· Annual Accoya® wood production exceeds 23,000m3 in a financial year
· Annual Accoya® wood sales revenue exceeds E26 million in financial year
· The second pair of reactors in the wood modification plant are processing more than 25 batches per month
Once vested these options may be exercised until 20 November 2017. At 31 March 2016, 48,444 (2015: 48,444) of these options
were outstanding at an exercise price of E12.90.
Options granted on 18 June 2008 vest to one third of the options granted upon achievement of each of the following:
· Announcement of audited Annual Accoya® wood sales revenue exceeds E20 million in financial year
· Announcement of audited annual Group distributable earnings exceeding E15 million
· Announcement of audited cumulative E75 million gross licence revenue recognised under Group accounting
policies
Once vested these options may be exercised until 18 June 2018. At 31 March 2016, 8,498 (2015: 8,498) of these options were
outstanding at an exercise price of E9.90.
Options granted on 8 December 2008 vest to one third of the options granted upon achievement of each of the following:
· Announcement of audited Annual Accoya® wood sales revenue exceeds E20 million in financial year
· Announcement of audited annual Group distributable earnings exceeding E15 million
· Announcement of audited Cumulative E75 million gross licence revenue recognised under Group accounting
policies
Once vested these options may be exercised until 8 December 2018. At 31 March 2016, 37,110 (2015: 37,110) of these options
were outstanding at an exercise price of E4.85.
Options granted on 27 July 2010 were partially exchanged in the period for new awards issued under the LTIP. 30% of the
options vest on achievement of median TSR. Once vested, these options may be exercised until 27 July 2020. Full vesting of
the options granted occurs upon achievement of upper quartile TSR measured over the three year period. At 31 March 2016,
164,321 (2015: 164,321) of these options were outstanding at an exercise price of E1.20.
Options granted on 1 August 2011 were partially exchanged in the period for new awards issued under the LTIP. 30% of the
options vest on achievement of median TSR. Full vesting of the options granted occurs upon achievement of upper quartile
TSR measured over the three year period. Once vested, these options may be exercised until 1 August 2021. At 31 March 2016,
140,000 (2015: 160,000) of these options were outstanding at an exercise price of E0.50.
TSR is measured on a relative basis compared to the FTSE Small Cap index over a three year period from grant date. Unless
discretion is exercised by the Nomination & Remuneration Committee, all options are forfeit following an option holder's
termination of contract.
The fair value of share options granted under the 2005 and 2008 Share Option Schemes during the previous years was
calculated based on a modified Black-Scholes model assuming inputs shown below for more recent awards:
Grant date August 2011 July 2010
Share price at grant date (E) 0.50 1.70
Exercise price (E) 0.50 1.70
Expected life (years) 3 3
Contractual life (years) 10 10
Risk free rate 1.54% 2.30%
Expected volatility 85% 60%
Expected dividend yield 0% 0.0%
Fair value of option E 0.200 E 0.532
The figures in the table and notes above have been adjusted to reflect the 5 for 1 share consolidation which became
effective on 12 September 2014. Volatility was estimated by reference to the historic volatility since October 2005 when
the Company's shares were listed on AIM. The resulting fair value is expensed over the vesting period of the options on the
assumption that a proportion of options will lapse over the service period as employees leave the Group.
Employee Benefit Trust - Share bonus award
Following a share issue on 4 July 2016 as part of the annual bonus, in connection with the employee remuneration and
incentivisation arrangements for the period from 1 April 2015 to 31 March 2016, 679,435 (2016: 951,295) new Ordinary shares
were held by an Employee Benefit Trust, the beneficiaries of which are primarily the Executive Directors and Senior
Managers. Such new Ordinary shares vest if the employees remain in employment with the Company at the vesting date, being 1
July 2017 (subject to certain other provisions including regulations, good-leaver, take-over and nomination and
remuneration committee discretion provisions). As at 31 March 2017, the Employment Benefit Trust was consolidated by the
Company and the 679,435 shares are recorded as Own Shares within equity. During the period, 938,449 Ordinary shares awarded
in the prior year vested.
Employee Share Participation Plan
During the prior year, the Company operated the Employee Share Participation Plan (the 'Plan'). The Plan was intended to
promote the long term growth and profitability of Accsys by providing employees with an opportunity to acquire an ownership
interest in new ordinary shares ('Shares') in the Company as an additional benefit of employment.
Under the terms of the Plan, the Company issues these Shares to a trust for the benefit of the subscribing employees. The
Shares are released to employees after one year, together with an additional Share on a 1 for 1 matched basis provided the
employee has remained in the employment of Accsys at that point in time (subject to good leaver provisions). The Plan is in
line with industry approved employee share plans and wass open for subscription by employees twice in the year following
release of annual and half yearly financial results. The maximum amount available for subscription by any employee is
E5,000 per annum.
During the year ended 31 March 2017 the plan was not open for subscription. However during the year, 1 for 1 Matching
shares were awarded in respect of subscriptions that were made in the previous year as a result of all participants
continuing to remain in employment at the point of vesting. 63,909 Matching shares were issued to employees in July 2016
and 16,302 shares were issued in January 2017.
16. Intangible assets
Internal Intellectual
Development property
costs rights Goodwill Total
E'000 E'000 E'000 E'000
Cost
At 31 March 2015 4,037 73,292 4,231 81,560
Additions 1,490 - - 1,490
At 31 March 2016 5,527 73,292 4,231 83,050
Additions 415 - - 415
At 31 March 2017 5,942 73,292 4,231 83,465
Accumulated amortisation
At 31 March 2015 358 71,188 - 71,546
Amortisation 249 275 - 524
At 31 March 2016 607 71,463 - 72,070
Amortisation 556 - - 556
At 31 March 2017 1,163 71,463 - 72,626
Net book value
At 31 March 2017 4,779 1,829 4,231 10,839
At 31 March 2016 4,920 1,829 4,231 10,980
At 31 March 2015 3,679 2,104 4,231 10,014
The carrying value of internal development costs, intellectual property rights and goodwill on consolidation are considered
part of a single cash generating unit which incorporates the manufacturing and licensing operations given the manufacturing
reliance on IP of the Group. The recoverable amount of internal development costs, intellectual property rights and
goodwill relating to this operation is determined based on a value in use calculation which uses cash flow projections
based on board approved financial budgets. Cash flows have been projected for a period of 6 years plus assumptions
concerning a terminal value and based on a pre-tax discount rate of 13% per annum (2016: 20%). The key assumption used in
the value in use calculations is the level of future licence fees and manufacturing revenues estimated by management over
the budget period. These have been based on past experience and expected future revenues. The Directors have considered
whether a reasonably possible change in assumptions may result in an impairment. An impairment would arise if the Group
failed to secure future licence or licence related income and if the total volume of forecast Accoya and Tricoya
manufactured is lower than projected sales in future years.
17. Property, plant and equipment
Land and Plant and Office
buildings machinery equipment Total
E'000 E'000 E'000 E'000
Cost or valuation
At 31 March 2015 5,251 28,365 822 34,438
Additions - 2,474 435 2,909
Disposals - (114) (10) (124)
Foreign currency translation (loss) - - (9) (9)
At 31 March 2016 5,251 30,725 1,238 37,214
Additions - 7,102 133 7,235
Disposals (3,606) (71) - (3,677)
Foreign currency translation (loss) - - 8 8
At 31 March 2017 1,645 37,756 1,379 40,780
Accumulated depreciation
At 31 March 2015 424 13,732 734 14,890
Charge for the year 117 1,912 119 2,148
Disposals - (76) (12) (88)
Foreign currency translation (loss) - - (8) (8)
At 31 March 2016 541 15,568 833 16,942
Charge for the year 117 1,869 171 2,157
Disposals - (9) - (9)
Foreign currency translation (loss) -
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