By Stewart Dalby

Accsys Technologies is a an Anglo-Dutch company listed on London’s AIM. The group specialises in an acetylation process that makes wood stronger. The company has two divisions, Accoya Wood, based in Arnhem in Holland and Tricoya Wood Elements, which is building a new plant in Hull in north west England. This project is in conjunction with Medite and Fingas and other investors who have injected Euros 41.3m into the scheme.

The strengthened solid wood acetylated by the Accoya division prevents decay. It is particularly suitable for exterior applications because of its durability and sustainability. Tricoya Wood Elements, is used for doors, decking, cladding and other construction products. Also, Accsys’ proprietary technology for the acetylation of wood chips produces high density fibreboard and particle board. Most of the company’s revenue has come from the Accoya Wood division.

Accsys’ acetylated wood prevents decay

It was not so long ago that the company reported it had a capacity problem. In reading through the preliminary results for the year ended 31 March 2018, which were published on 19 June 2018, one sentence stood out.

It 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”. The third reactor referred to expansion at the Arnhem plant.  The company said: “The new capacity should be available from the beginning of the next financial year starting on 1 April 2019.”

This was not the final word on the capacity shortage problem.  Scroll forward to 28 November 2019 and you will see the ‘Interim Results for the six months ended 30 September 2019’, were upbeat.

Total group revenue for the six months was 39 per cent to the good at Euros 44m against Euros 37.6m in the comparable period in 2018. Paul Clegg Accsys’ CEO at the time commented that: “Demand for our sustainable, high performance products continues to exceed supply, and our plans to increase capacity are on track.”

He didn’t say that the needed capacity increase had been achieved. He said it was ongoing. However, any lingering doubts that the capacity shortfall remains a problem for the company were firmly quashed by the release this week, on 23 June 2020, of the Preliminary Results for the year ended 31 March 2020.

Brokers such as Investec and Numis both said that results had materially exceeded their expectations. A key point reported in the results was that the Board substantially increased debt to charge up the company with various measures. They then brought down the debt through a successful equity raise

This was clever behaviour. What had happened is that the company had used some of its borrowed money, that is the Euros 50m debt, to get the third Accoya reactor operational for the full year.

  • This meant there was a 16 per cent volume increase in Accoya products sold, to 57,842 cubic metres. This compared to 49,716 metres in 2018-19.
  • Total underlying group revenue was Euros £90.9m a 21 per cent increase on the Euros 75.2m achieved in 2018-19.
  • There was a third sequential half year period of EBITDA growth
  • This was first time the group was profitable at the EBIT level. It was Euros 1.4m against a Euros 3.1m loss in 2018-19 (Underlying EBIT is defined as Operating profit/loss before exceptional items and other adjustments.)

Amid all this there was continuing progress with the company’s other projects such as a fourth reactor for Arnhem, the construction of an Accoya plant in the US in a joint venture with Eastman and a Tricoya plant in Malaysia with PETRONAS.

As for the Tricoya plant in Hull all work has resumed on the construction site following the easing of restrictions by the UK government. The time lost through Covid-19 together with new working practices means the plant is now expected to be completed in the first quarter of the new calendar year.

With regard to the debt, Accsys ended the financial year with a debt reduction to Euros 25.2m. This was due to proceeds of the December 2019 equity raise of Euros 43m offset by Euros 22m strategic investment in property, plant and equipment.

The share price of the £141.63m market cap Accsys stood at 86.80p last evening against a 52-week low of 65p and a high of 117p. Broker Investec has set a new target price of 134p on the back of the results. Numis’ target price is set at 145p