Accsys Technologies has, for the past two years, been a company where profitability had been postponed while much needed spending on expanding production capacity has been taking place in order to expand by ramping up turnover. The preliminary results for the year ended 31 March 2019 which were released on 25 June 2019, showed this game plan has started to work.
Accsys specialises in the acetylation of wood, a process that makes the wood stronger and prevents decay. Their primary focus is the production of Accoya solid wood and Tricoya wood elements, used for windows, doors, decking, cladding and other construction products
The company’s main activity has been the Accoya division, where there has been significant investment in a third reactor at the company’s plant at Arnhem in Holland. But the Tricoya business is also important. The Tricoya plant in Hull is another part of Accsys’s ambitious expansion plans.
Described as the world’s first dedicated chip acetylation plant for the manufacture of Tricoya. the facility has been involved in a deal with Medite, BP and financial partners BGF and Volantis, resulting in a large investment of Euros towards the plant in Hull which has been expected to be operational in the first half of 2019.
We last wrote about the company on 4 December 2018. This followed reports earlier in 2018 when the company has said “Demand for Accoya continues to be strong but as previously stated we are now operating at full capacity. Further growth will therefore be constrained until the third reactor is complete”.
A further report also company also said: “The new capacity should be available from the beginning of the next financial year starting 1 April 2018”. This expansion plan portended a 50 per cent increase in the company’s Accoya capacity to approximately 60,000 cubic metres”
The interim results for the six months ended 30 September 2018 showed there was progress of a kind. Total underlying revenue increased by 12 per cent to Euros 31.6m from Euros 28.3m in the comparable period in 2016-2017 even though Arnhem had yet to contribute significantly to output. There was a drop in underlying losses before taxation to Euros 4.5m compared to Euros 5.2m in the six months ended 30 September 2017; and net debt increased from Euros 23.1m to Euros 34.2m.
When the preliminary results for the year ended 31 March 2019 were released on 25 June 2019, the emphasis was on the advances made in the second half year. Total group revenue for the 2018/ 2019 year leapt 23 per cent to Euros 75.2m from Euros 60.9m.
EBITDA fell to Euros 0.9m from Euros 3.5m for the 12 months. The company was still loss making, but the reduction in losses was due to progress made in the second six months. Commenting on this CEO Paul Clegg said: ‘The Accoya capacity expansion at Arnhem has been a major boost to our financial performance enabling us to report positive EBITDA of Euros 2.3m in the second half”.
He added that significant capex investment of Euros of 48.2m during the year, reflecting capacity increases for both Accoya and Tricoya, and the purchase of the Arnhem land and buildings, contributed to an expected increase in net debt to Euros 50.1m
So, with the strategy of investing to expand capacity in order to grow revenue having seen to be working, it seems there is more to come. Following the completion of the third Arnhem reactor, plans are well underway to complete a fourth reactor to complete capacity at the Arnhem site.
The share price of the £120. 94m market cap Accsys stood at 103.50 pence last evening against a 52-week high of 123p and a low of 94p.