Accsys Technologies : 26 June - Preliminary results for the year ended 31 March 2024

Company

TIDM

Headline

Released

Number

26 June 2024

Accsys Technologies PLC AXS

Preliminary results for the year ended 31 March 2024

26 June 2024

8682T

AIM: AXS

Euronext Amsterdam: AXS

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

Accsys Technologies PLC

("Accsys", the "Group" or the "Company")

Preliminary results for the year ended 31 March 2024

Resilient Q4 performance with strategic progress on Accoya USA and operational transformation programme

	Year to	Year to	Year to	% 23-24
	31 March 2024	31 March 2023	31 March 2022	Change
Revenue	€136.2m	€162.0m	€120.9m	(16%)
Gross profit	€40.9m	€55.2m	€36.0m	(26%)
Gross margin	30%	34%	30%
Adjusted EBITDA1	€4.8m	€22.9m	€10.4m	(€18.1m)
Period end net debt	(€37.1m)	(€44.1m)	(€27.2m)	(€7.0m)
Accoya sales volume	56,568m3	63,344m3	59,649m3	(11%)

Financial overview

• FY24 results ahead of FY24² consensus - As a result of resilient trading in Q4 FY24 and cost saving initiatives, adjusted EBITDA at €4.8m.

1. Full year adjusted EBITDA adversely impacted by: lower sales volumes, increased mix of lower margin sales, a €3m proportional increase in our US Joint venture's EBITDA loss as it progresses its pre-operational activities and a change in accounting method for Hull, with ongoing running costs being treated as operating expenditure.

• 1. Good sales pricing discipline maintained through the year against competitors in a challenging market, resulting in maintenance of high ASP.
• Revenues at €136.2m - Impacted by lower sales volumes due to high customer inventory levels at the beginning of the financial year combined with a challenging macroeconomic trading environment for the construction and building materials sector, particularly in Q3. Revenues were also impacted by lower volumes and lower average sales prices for acetic acid and nonrecurrence of the energy price premium.
• 1. Resilient trading in Q4, driven by increased investment in sales and marketing and the addition of new distribution channels.
• Double digit year on year growth in sales volumes for Accoya Color and Accoya for Tricoya - Strong demand for Accoya Color decking; 14% year-on-yearAccoya for Tricoya sales growth.

Notes

1Adjusted EBITDA is defined as Operating profit/(loss) before exceptional items, depreciation and amortisation, and includes the Group's attributable share of the USA joint venture's underlying EBITDA (see note 3 to the financial statements).

²Accsys considers consensus FY24 Adjusted EBITDA to be €2.5 million as of 01 May 2024.

• Business transformation programme and working capital initiatives showing encouraging results - The
  Group's business transformation programme realised more than €3.0m annualised savings. Tight working capital management through FY24, including a €4.2m decrease in inventory levels during the year.

• 1. On a half yearly basis, H2 operating costs decreased €2.7m, 19% reduction on the prior year period reflecting management cost actions.
• Reduction in net debt - Net debt of €37.1m at 31 March 2024, a reduction of €7.0m from 31 March 2023
  (€44.1m), following the successful capital raise in November 2023, with €5.0m invested into our US Joint venture during the year.

Strategic highlights

• Accoya USA JV - Plant completed with commissioning underway and first batches expected to be produced in the coming weeks, adding 43,000m³ of additional production capacity.
• Transformation and reshaping of the business under new leadership to simplify operational processes, drive cost efficiencies, and focus on commercial and operational performance improvements.
• Sales and marketing acceleration to drive demand creation, including the addition of seven new distributors (four in EMEA and three in the USA) and three direct manufacturing customers (one in North America and two in Central and Eastern Europe).
• Focus on maximising returns on existing assets with our 'Solid Roots' operational reliability programme in Arnhem targeting efficiency improvements³.
• During FY24 the Company engaged a financial advisor to assist us in seeking a strategic and/or financing partner to complete the Hull plant. Accsys is on track to come to a resolution within H1 FY25 as previously outlined in the May trading update.
• The Group has set four operational targets for the year ahead: (1) Kingsport to be commercially operational by the end of summer 2024; (2) Improved incentive plans; (3) Deliver €3m operating cost savings in the year; (4) Solid Roots 500 bps reliability improvement in (Overall Equipment Effectiveness) OEE for key equipment in Arnhem.
• The Senior Leadership Team is undertaking a thorough review of the Company's strategy. An investor event will be held in H2 FY25 providing a full update on strategy.

Outlook

The Company has made a good start to FY25. While market headwinds in the building materials and construction industry persist and are expected until the end of the calendar year, Q1 sales for the Company are in line with expectations.

Starting in Q2, our North American sales will gradually transition from being supplied by our Arnhem, NL plant to our Kingsport plant (USA joint venture). To support this shift and the ramp up of sales from Kingsport, we will continue to accelerate our commercial efforts and invest in our sales and marketing, adopting a targeted approach by segment and geography. The Company has set a target to refill the lost capacity at Arnhem within 12 months of migrating to Kingsport on a run rate basis, which equates to double digit growth in underlying sales volume outside of North America during the period.

FY25 will continue to be transformative for the Company with our successful expansion in North America and resolution of Hull. In the coming year, we expect to leverage the benefits from greater economies of scale associated with the ramp-up of Accoya USA in Kingsport.

The Board remains confident about the long-term potential of Accsys and sees the opportunity to deliver approximately 100,000m³ production volume across Arnhem and Kingsport by the end of FY2027. With the Company's focus on driving operational excellence and maximising the potential of two production facilities, the Company is well placed to demonstrate long-term value creation and sustainable cash generation.

Notes

³At our main production site in Arnhem, the 'Solid Roots' programme is focused on developing Arnhem into a performance driven, mature manufacturing facility. The programme has set performance KPIs for metrics including the operational efficiency of key equipment.

Jelena Arsic van Os, Executive Chair of Accsys, commented:

"FY24 has been challenging with recessionary forces impacting demand in the construction and building materials market. We took decisive steps to counter these challenges and delivered a more resilient fourth quarter, with our full year results coming in ahead of updated market expectations. We have streamlined the business, begun to remove complexity, driven operational efficiencies, and invested in sales and marketing. These transformational measures make Accsys a leaner, more agile organisation with a greater focus on profitable and sustainable growth.

Operationally we have made significant strides. We are hugely excited to have completed the construction of the Accoya USA plant with commissioning well underway and production expected to commence this summer. The addition of a second Accoya

production plant marks a significant step forward for our Company. It strategically positions production nearer to our key North American market, ensuring customers reliable supply and deepening our operational resilience.

In the coming year we expect to take advantage of having two Accoya production plants. With our increased production flexibility and capacity, we will continue to invest and professionalise our commercial activities, particularly in North America. As inflation steadies and the construction market recovers, we are in a strong position to capitalise on demand and drive growth."

Ends

This announcement comprises inside information for the purposes of EU MAR and UK MAR. The person responsible for making this announcement is Nick Hartigan, General Counsel and Company Secretary, Accsys Technologies PLC.

For further information, please contact:

Dr Jelena Arsic Van Os, CEO	+44	(0) 20 7421 4300
Hans Pauli, Interim CFO
Accsys Technologies PLC	[e-mail]
Investor Relations
Deutsche Numis (London)
Oliver Hardy (NOMAD), Ben Stoop	+44	(0) 20 7260 1000
ABN Amro (Amsterdam)
Dennis van Helmond	+31	20 344 2000
Huijskens Sassen Communications (The Netherlands)
Clemens Sassen	+31	20 685 5955

There will be a presentation relating to these results at 10.00am UK time on 26 June 2024. The presentation will take the form of a webcast and conference call, details of which are below:

Webcast link (for audio and visual presentation):

Click on the link below or copy and paste ALL of the following text into your browser:

https://edge.media-server.com/mmc/p/n2mv8tvv

Phone Participants: for those participants who would like to ask a question live over the phone lines, please register on the following link. You will then be sent a confirmation email with a link to dial-in numbers.

https://register.vevent.com/register/BIfc9564bbac1244568f650bd0a860bb8d

Accsys Technologies PLC

CEO Review

Overview of the year

In FY24, our industry faced significant challenges, with macroeconomic pressures impacting on demand for construction and building materials. Our financial performance for the year did not meet our expectations. We informed the market about this in our September 2023 trading update. Amidst these difficulties, we took decisive steps to re-set and transform. Firstly, focusing on demand creation and, secondly, focusing on a leaner and more fit-for-purpose organisational set-up. Though it is still early days to see the full impact of these initiatives, they have shown good results so far.

Alongside the re-set of the business, we have made significant strategic progress in the establishment of two production centres, located in our core end markets of Europe and the USA. I am pleased to report that our Kingsport plant in the USA is in the final stages of commissioning and commercial production is expected later this summer.

During FY24 we engaged a financial advisor to assist us in seeking a strategic and/or financing partner to complete the Hull plant. The Company is on track to come to a resolution within H1 FY25 as previously outlined in the May trading update.

Our balance sheet was strengthened through improvement in working capital management and via our successful capital raise in November raising new gross proceeds of circa €24m. I would like to thank our new and existing shareholders for their belief in our strategic vision and for their support.

Demand creation

The Company has stepped-up investment in sales and marketing, including new recruits in North America, the addition of seven new distribution partners globally and a comprehensive commercial review, leading to a refreshed approach by geography and product segments. This activation resulted in a demand turnaround in Q4, with a resilient performance in the quarter, and overall results for FY24 were ahead of consensus expectations. Despite challenging market conditions we were resilient on pricing and held a high average sales price (ASP) throughout the year.

Reset and transformation

During the year, the Company underwent leadership changes to reduce overhead costs and simplify the organisational setup. Major efforts were directed towards creating a leaner, more effective operating model, reshaping the business to capitalise on long-term opportunities.

A business transformation programme has delivered savings of more than €3.0m annually. This has been achieved through overhead and opex reductions across our international operations.

At our main production site in Arnhem, the 'Solid Roots' programme was launched, focused on developing Arnhem into a performance driven, mature manufacturing facility. The programme has set performance KPIs for metrics including the operational efficiency of key equipment.

As part of the Group's transformation, we are introducing a set of four operational targets for the year ahead:

1. Kingsport to be commercially operational by the end of summer 2024; (2) Improved incentive plans; (3) Deliver €3m operating cost savings in the year; (4) Solid Roots 500 bps reliability improvement in (Overall Equipment Effectiveness) OEE for key equipment in Arnhem.

In addition, the Senior Leadership Team is undertaking a thorough review of our strategy. We have already begun to implement some near-term tactical actions focused on maximising the returns from existing assets. A full update on our strategy will be provided in H2 FY25.

Accsys Technologies PLC

CEO Review (continued)

International expansion

A key priority during FY24 has been the construction of our Accoya USA plant in Kingsport, Tennessee, our joint-venture with Eastman Chemical Company, a world leader in the production of acetyls. This plant adds 43,000m3 of capacity. Accsys holds a 60% interest in the joint-venture and Eastman 40%. Commissioning of the new plant is well on its way. North America is a highly attractive market for Accsys. With the new plant Accsys will be closer to North American Accoya customers and have a higher degree of product availability and supply flexibility globally. The combination of our recent expansion of Arnhem and the addition of the Kingsport plant doubles the Company's capacity compared to two years ago. This is a huge milestone and significant growth enabler for the business.

Summary of financial performance

Accsys delivered revenues of €136.2m, a 16% decrease on FY23. Macroeconomic conditions proved challenging during FY24 for the building materials, construction and residential housing markets globally, with high inflation and high interest rates depressing demand. Our customers entered the financial year with higher-than-average stock levels, having taken the opportunity to build up inventory following the recent expansion of Arnhem. This, combined with uncertain market conditions, adversely affected our sales volumes, particularly in Q3.

While market conditions remained challenging, our performance considerably improved in Q4, as we started to benefit from our increased investment in sales and marketing, new distributor relationships, strategic review of our organisational structure and our distributers' stock levels reverting to healthier levels.

Adjusted Group EBITDA at €4.8m for the year, a decrease of €18.1m on the prior year reflects the lower sales volumes, increased mix of lower margin sales for Accoya for Tricoya and a €3m proportional increase in the US joint venture's EBITDA loss as it progresses its pre-operational activities. As a result of cost savings measures put in place and improved trading in Q4, Adjusted EBITDA for FY24 was ahead of market consensus set at the time of our interim results.

Group gross margin was 30% (FY23: 34%), supported by pricing resilience in the tougher macroeconomic conditions and our strong product proposition.

Net debt of €37.1m at 31 March 2024, a reduction of €7.0m from 31 March 2023 (€44.1m), reflects the successful capital raise in November 2023.

Sales review

New distribution and increased investment in sales and marketing

The Company is once again proud to have had its products featured in many high-profile global projects throughout FY24, including featuring on buildings for brands such as ABB, Starbucks and Lidl.

In a strategic move to accelerate growth, we have significantly boosted our investment in sales and marketing and consolidated our sales, marketing and customer service functions, enhancing our capabilities and expanding our reach. We have expanded our distribution network and markets, adding seven new distributors globally, including two in Belgium, one each in Greece and Italy, and three in the USA.

To stimulate global product demand, we are actively developing our Approved Manufacturer Programme (AMP), forging strong partnerships with key manufacturers in the window, door, decking, and cladding sectors.

We have strengthened our North America commercial footprint by appointing a new Sales Director for North America and salespeople in the region. Alongside these appointments, the Company has continued to drive lead generation and brand awareness campaigns to promote our products to key audiences and support the sell-through of materials downstream.

Accoya Color

Accoya Color was launched in 2020 and since then we have seen good growth in demand. The product is manufactured at our site in Barry and Accsys has rights to IP on the colouring process. 

Accoya Color's unique proposition is proving to be very attractive to Accsys and customers in our target markets, particularly in the decking category where the surface-to-core grey colour has a strong design appeal as well as being low maintenance. The product has gained popularity in Central Europe, North America, France and Australia and New Zealand. This year it was launched into the UK.

Accoya's high level of performance and sustainability was recognised in several prestigious global industry awards in FY24, including The Architect's Newspaper Best of Products award for Accoya Color.

Accsys Technologies PLC

CEO Review (continued)

Accoya for Tricoya

We saw continued good demand for Accoya for Tricoya. Year on year we saw a 14% increase in demand for Accoya for Tricoya, driven primarily by demand for doors, windows and outdoor joinery.

Tricoya panels

We have revitalized the distribution of the Tricoya panels produced by Finsa and Medite in North America and APAC, generating €4.1m in FY24 and tripling last year's revenue.

Sales volume by end market	FY24	FY23	Change
	m3	m3	%
UK & Ireland	11,837	14,667	(19%)
Rest of Europe	13,233	16,584	(20%)
Americas	9,285	10,574	(12%)
Rest-of-World	4,866	6,326	(23%)
Accoya for Tricoya	17,347	15,193	14%
Total	56,568	63,344

Sustainability

Our commitment to responsible sourcing and manufacturing is recognised by leading accreditation bodies. We continue to focus on our goal of zero deforestation and this year we continued to source 100% of our raw wood from FSC® certified sources. We successfully recertified Cradle to Cradle® (C2C) gold certification for Accoya, as well as being awarded 'Platinum' level (the highest level) for 'Material Health'. Accoya, has held C2C certified status since 2010.

C2C certification is the global standard for products that are safe, circular, and responsibly made. Accoya wood is one of the very few building products to have acquired C2C certification on the stringent Gold-level.

Employee development

Our Company's success is driven by the skills, experience, and dedication of our team. Recognising this, we are deeply committed to investing in our people and their professional growth. In FY24, we are proud to have provided an average of 30.5 training hours per employee, underscoring our commitment to continuous development.

Additionally, we have created valuable career development opportunities for our senior operators through a temporary exchange program between our Kingsport and Arnhem facilities. This initiative not only supports the successful start-up of the Kingsport plant but also facilitates a crucial exchange of skills and knowledge between the regions.

Health & Safety (HSE)

Accsys has set 'Zero Harm' as a key target for our operations and is committed to developing best practice HSE across the Company. Health & Safety is a top priority for the Board. In FY24, we strengthened our HSE management by forming dedicated site-level HSE committees under the management of the Site Directors. These committees are actively engaged in implementing best practices that protect our people and environment and ensure rigorous compliance.

Innovation and supply chain

To build resilience and mitigate risk in our supply chain, our R&D and supply chain teams have been exploring alternative wood species to Radiata pine that will be suited to our manufacturing processes. This year we are in the final testing stages of Accoya Color made from fast growing FSC® certified Taeda pine from Argentina and Uruguay. We have also significantly increased our sourcing of FSC® certified Spanish and Chilean radiata pine for Tricoya production.

We are innovating to minimise our environmental impact across our operations, in accordance with our Environmental and Climate Change Policy. The Accoya USA facility will operate a closed loop system with acetic anhydride, reducing emissions and ensuring circularity.

Accsys Technologies PLC

CEO Review (continued)

Outlook

The Company has made a good start to FY25. While market headwinds in the building materials and construction industry persist and are expected until the end of the calendar year, Q1 sales for the Company are in line with expectations.

Starting in Q2, our North American sales will gradually transition from being supplied by our Arnhem, NL plant to our Kingsport plant (USA joint venture). To support this shift and the ramp up of sales from Kingsport, we will continue to accelerate our commercial efforts and invest in our sales and marketing, adopting a targeted approach by segment and geography. The Company has set a target to refill the lost capacity at Arnhem within 12 months of migrating to Kingsport on a run rate basis, which equates to double digit growth in underlying sales volume outside of North America during the period.

FY25 will continue to be transformative for the Company with our successful expansion in North America and resolution of Hull. In the coming year, we expect to leverage the benefits from greater economies of scale associated with the ramp-up of Accoya USA in Kingsport.

The Board remains confident about the long-term potential of Accsys and sees the opportunity to deliver approximately 100,000m3 production volume across Arnhem and Kingsport by the end of FY2027. With the Company's focus on driving operational excellence and maximising the potential of two production facilities, the Company is well placed to demonstrate long-term value creation and sustainable cash generation.

Jelena Arsic van Os Chief Executive Officer 25 June 2024

Accsys Technologies PLC

Finance Review

	FY24	FY23	Change %
Group Revenue	€136.2m	€162.0m	(16%)
Gross Profit	€40.9m	€55.2m	(26%)
Adjusted EBITDA	€4.8m	€22.9m	(€18.1m)
Statutory (loss) before tax	(€17.1m)	(€67.1m)	€50.0m
Free cashflow	€3.7m	(€13.6m)	€17.3m
Cash	€27.4m	€26.6m
Net debt	(€37.1m)	(€44.1m)

Accoya Sales volume

56,568m363,344m3(11%)

Statement of comprehensive income

Revenue for the year decreased by 16% to €136.2m (2023: €162.0m), primarily due to a 11% decrease in sales volume, lower average sales prices for Acetic acid and the Energy price premium (€3.9m) which was added as a surcharge to sales prices in the prior year to offset the significant increase in net acetyls costs.

Accoya sales volumes decreased by 11% to 56,568m3, impacted by a challenging macroeconomic trading environment for the construction and building materials sector, particularly in Q3. Trading improved in Q4 and this positive momentum has continued into the new financial year.

Accoya for Tricoya sales volumes increased by 14%, with revenues increasing by 13% to €23.9m. Accoya sales to our customers for the manufacture of Tricoya panels are currently used to develop the market for Tricoya products and now represent 31% of total Accoya sales volumes (2023: 24%). Tricoya panel revenue also increased by €2.7m during the year to €4.1m (2023: €1.4m), representing Accsys purchasing and selling Tricoya panels produced by our Accoya for Tricoya customers.

Other revenue, which predominantly relates to the sale of our acetic acid by-product into the acetyls market, decreased by 48% to €8.8m (2023: €16.8m), reflecting lower acetic acid sales prices and volumes. These sales act as a partial hedge to acetic anhydride costs which also decreased during the year. Net acetyls costs (proportional combination of acetic anhydride cost and acetic acid sales price) decreased on the prior year.

Raw wood input costs were higher year on year, with higher wood mix costs in addition to moderately higher average wood prices.

Cost of sales decreased by 11%, with 11% lower sales volumes and higher raw wood costs being partially offset by lower acetic anhydride costs.

Gross profit of €40.9m was 26% lower than in the prior year (2023: €55.2m) and gross profit margin fell by four percentage points to 30%. The lower gross margin reflects an increased proportion of lower margin Accoya for Tricoya sales and our use of higher-cost appearance grade wood for Accoya for Tricoya production during H1 FY24 as we have sought to continue to lower inventory levels which increased during 2022 in anticipation of the start-up of reactor 4. In H2 FY24 we returned to using less expensive Spanish radiata pine and other wood chip grade wood for Accoya for Tricoya production.

Underlying other operating costs (excluding depreciation and amortisation) increased from €31.6m to €32.3m. This is due to an increase in Tricoya UK's operating costs compared to the prior year (€0.9m) due to ongoing running costs being treated as operating expenditure in the year following the introduction of Tricoya UK's hold period in H2 FY23. It is also the result of increased investment in sales & marketing partially offset by lower administrative operating costs as a result of the business transformation programme.

Depreciation and amortisation charges increased by €1.3m to €9.6m following commercial production from reactor 4 in September 2022.

Underlying finance expenses increased €1.2m to €4.4m due to higher interest rates agreed during the November 2023 fundraise (explained further below), higher market interest rates on the variable rate borrowings during the year, primarily before the November 2023 fundraise and interest on Tricoya UK's NatWest facility not being capitalised post the introduction of the hold period for Tricoya UK in H2 FY23.

Accsys Technologies PLC

Finance Review (continued)

An impairment loss (exceptional non-cash item) of €7.0m was recognised in the first half relating to the Tricoya segment (2023: €86.0m) due to an increase in the discount rate used following an increase in market interest rates and the Company specific market volatility factor.

An exceptional operating cost of €1.2m has been recognised in the year for restructuring costs relating to the business transformation programme.

An exceptional financial income of €0.2m has been recognised related to US dollars held as cash for investment into Accoya USA, following the Fundraise in November 2023. This treatment did not meet the requirements for hedge accounting under IFRS 9, Financial Instruments, and therefore the foreign exchange gain on the revaluation of the US dollars has been accounted for in Finance Expenses as an Exceptional item. This treatment is similar to the prior year where an exceptional income of €1.4m was recognised.

An exceptional financial gain of €0.3m has been recognised in relation to the revaluation of the Value Recovery Instrument (''VRI'') (see note 23).

Accsys' share of its US joint venture (Accoya USA LLC) net loss, which is accounted for using the equity method, increased by €3.1m to €4.1m (2023 loss: €1.0m) as the entity increased its pre-operating activity through the year as it progresses towards commercial operations in summer 2024.

Adjusted EBITDA (Group EBITDA before exceptional items and including 60% of the US Joint venture's EBITDA) decreased by €18.1m to €4.8m due to the lower gross profit generated, referred to above and a €3m proportional increase in the US Joint venture's EBITDA loss as it progresses its pre-operational activities.

Underlying loss before tax increased by €20.4m to €9.4m (2023: profit of €11.0m). After taking into account exceptional items

(including the impairment loss and restructuring cost), loss before tax amounted to €17.1m (2023: €67.1m).

The tax charge of €0.8m was lower than the prior year (€2.8m) in line with the lower profitability during the year.

Underlying loss per share increased to €0.04 per share (2023: profit of €0.05 per share). A statutory loss per share was

recognised of €0.08 per share (2023: €0.19 per share).

Cash flow

Cash flows generated from operating activities before changes in working capital decreased by €13.8m to €8.9.m (2023: €22.7m), following the lower EBITDA generated during the year. Free cashflow (net cash from operating activities less capex) improved to €3.7m inflow (2023: €13.6m outflow) following a decrease in capex spend in the year, partially offset by lower cash generated from operating activities.

Inventory levels decreased by €4.2m with management action taken to decrease raw material levels during the year.

In November 2023, the Group completed a successful fundraise, raising new gross proceeds of circa €24m and agreed an amendment and extension to its bank facilities with ABN Amro. The proceeds from the fundraising allow Accsys to complete delivery of the Accoya plant in Kingsport, USA, strengthen its balance sheet and increase working capital headroom during the challenging macro trading environment experienced during the year. The fundraise included:

• A placing and subscription of new ordinary shares raising gross proceeds of approximately €13 million.
• The issue of approximately €21 million new Convertible Loan Notes and the refinancing and discharge of the existing 2022 €10 million convertible loan with De Engh BV Limited, the net raise of €11 million of new gross proceeds. The new convertible loan notes have a 6 year term, carry a fixed coupon of 9.5%, with interest rolled up and deferred for the first 2.5 years (see note 29 for further details).
• The ABN Amro facilities (€40.5 million term loan and €25 million revolving credit facility(RCF)) were extended by 18 months to 31 March 2026, and the $10 million cash collateral previously provided to ABN Amro was released, with €7.5 million utilised to repay the term loan. The amended facilities included an amortisation holiday until 30 June 2025, with rolled up interest of 3% on the delayed repayments. The term loan interest rates were amended to vary between 4.34% to 5.34% and the RCF margin to vary between 3% and 4%. The amendment included certain minimum liquidity covenants, in addition to the net leverage covenants and interest covenants previously contracted (see note 29 for further details).

At 31 March 2024, the Group held cash balances of €27.4m, a €0.8m increase in the year, attributable to the successful fundraise in November 2023 detailed above and positive operating cash generated during the year partially offset by loan repayments on the ABN Amro term loan (€12m) which included scheduled repayments of €4.5m and a repayment of €7.5m referred to above, the repayment of the €5m previously drawn on the ABN Amro RCF and €5m was invested into our US joint venture with Eastman (Accoya USA) during the year.

Accsys Technologies PLC

Finance Review (continued)

Financial position

Plant and machinery additions of €1.8m (2023: €21.4m) consisted primarily of maintenance capex for the Arnhem plant.

Trade and other receivables were at a similar level to the prior year at €17.6m (2023: €18.1m).

Trade and other payables reduced by €7.1m to €18.8m (2023: €25.9m), attributable to a decrease in operational creditors, and capex payables following the completion of the Arnhem expansion project and lower activity at the Tricoya UK plant in Hull.

Amounts payable under loan agreements decreased to €60.2m during the year (2023: €65.9m) following loan repayments on the ABN Amro loan (€12m), the net increase in convertible loans of €11m and following the capital raise, the repayment of the €5m drawn on the ABN Amro Revolving credit facility which remains available headroom.

Net debt decreased by €7m in the year to €37.1m (2023: €44.1m) following the successful capital raise in November 2023, with €5m invested into our US Joint venture during the year.

Going concern

The consolidated 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 for the 12 months from the date these financial statements are approved (the 'going concern period'). As part of the Group's going concern review, the Directors have assessed the Group's trading forecasts, working capital and liquidity requirements, and bank facility covenant compliance for the going concern period under a base case scenario and a severe but plausible downside scenario.

The cash flow forecasts used for the going concern assessment represent the Directors' best estimate of trading performance and cost implications in the market based on current agreements, market experience and consumer demand expectations. These forecasts indicate that, in order to continue as a going concern, the Group is dependent on achieving a certain level of performance relating to the production and sale of Accoya, and the management of its working capital.

In both scenarios, the Directors have assumed no commitment will be made to complete the construction and start-up of the Tricoya UK plant in Hull unless the Board definitively determines to proceed with the project and appropriate levels of funding arrangements are obtained to do so. In the base scenario, financial support is included for ongoing care & maintenance costs, whilst in the downside scenario, it is assumed that the Group discontinues its financial support in relation to the Tricoya UK plant.

The Directors' have also considered the possible quantum and timing of funding required to complete the plant currently being commissioned by Accoya USA LLC, and for the initial operational working capital requirements of the entity. Notwithstanding that the construction project benefits from certain contractual measures in place with the lead engineering, construction and procurement contractor, Accsys has a contractual obligation to fund its 60% share of Accoya USA LLC on a pro rata basis with its joint venture partner (Eastman Chemicals Company).

The Group is also dependent on the Group's financial resources including its existing cash position, banking and finance facilities (see note 29 for details).

The Directors considered a severe but plausible downside scenario against the base case with reduced Accoya sales volumes and increased funding into Accoya USA LLC and a reverse stress test was performed to determine the decrease in Accoya sales volume from the Arnhem plant required to breach banking covenants. The Directors do not expect the assumptions in the severe but plausible downside scenario or the reverse stress test scenario to materialise, but should they unfold, the Group has several mitigating actions it can implement to manage its going concern risk, such as deferring discretionary capital expenditure and implementing further cost reductions to maintain a sufficient level of liquidity and covenant headroom during the going concern period. The combined impact of the above downside scenarios and mitigations does not trigger a minimum liquidity breach or covenant breach at any point in the going concern period. In the reverse stress test, a decrease of approximately 10% on Accoya sales volume from the Arnhem plant compared to an equivalent prior year period or a decrease of approximately 20% compared to the equivalent base scenario period (both excluding North American sales which move to the Kingsport site once operational) was required to reach the banking covenant breach point.

The Directors believe that while some uncertainty always inherently remains in achieving the budget, in particular in relation to market conditions outside of the Group's control, after carefully considering all the factors explained in this statement, there is sufficient liquidity and covenant headroom such that there is no material uncertainty with respect to going concern and have prepared the financial statements on this basis.

Hans Pauli

Interim Chief Financial Officer

25 June 2024