Accsys Technologies — Accoya volume rising, more capacity on stream

Accsys Technologies (AIM: AXS)

Last close As at 19/04/2024

GBP0.56

−3.00 (−5.08%)

Market capitalisation

GBP135m

More on this equity

Research: Industrials

Accsys Technologies — Accoya volume rising, more capacity on stream

AGM comments point to operational progress at Arnhem and an on-track construction schedule for the new Tricoya facility at Hull. Accsys has set out a clear development plan for the group; while we are not placing undue weight on a short trading period, we are encouraged to see that growing revenues and production volumes have been achieved in the year to date.

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Industrials

Accsys Technologies

Accoya volume rising, more capacity on stream

AGM update

General industrials

24 September 2018

Price

101.0p

Market cap

£113m

£/€1.12

Net cash (€m) at end March 2018

3.8

Shares in issue

111.4m

Free float

90.6%

Code

AXS

Primary exchange

LSE

Secondary exchange

Euronext Amsterdam

Share price performance

%

1m

3m

12m

Abs

10.0

27.7

26.7

Rel (local)

12.7

31.8

24.2

52-week high/low

101.0p

73.4p

Business description

Accsys Technologies is a chemical technology company focused on ‘sustainability’ via the development and commercialisation of a range of transformational technologies based upon the acetylation of solid wood and wood elements.

Next events

H119 results

20 November

Analyst

Toby Thorrington

+44 (0)20 3077 5721

Accsys Technologies is a research client of Edison Investment Research Limited

AGM comments point to operational progress at Arnhem and an on-track construction schedule for the new Tricoya facility at Hull. Accsys has set out a clear development plan for the group; while we are not placing undue weight on a short trading period, we are encouraged to see that growing revenues and production volumes have been achieved in the year to date.

Year end

Revenue (€m)

EBITDA*
(€m)

PBT*
(€m)

EPS*
(c)

P/E
(x)

EV/EBITDA
(x)

03/17

56.5

(1.5)

(4.5)

(0.06)

N/A

N/A

03/18

60.9

(3.5)

(8.8)

(0.07)

N/A

N/A

03/19e

70.9

2.0

(6.0)

(0.05)

N/A

83.3

03/20e

94.9

7.8

(4.0)

(0.05)

N/A

22.9

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Progress to date in FY19

In the first five months of FY19, Accoya’s solid wood production volume was 4.9% ahead of the prior year at 16,918m3. The first two reactors at Arnhem have been effectively running at capacity since H217; the third came on stream in July and has made a modest (unspecified) contribution to this outturn. It adds a further 20,000m3 annual capacity, a 50% increase on what was previously available. With revenue c 5.3% up y-o-y and taking production volume as a proxy for sales suggests average pricing is slightly up. No new profit information was included in the statement. Otherwise, references to the expected Hull Tricoya facility construction phase and aspirations for new overseas partnerships were consistent with previous comments.

Realistic FY19 estimates

In FY18, Accsys sold 42,676m3 of Accoya wood, implying c 26,500m3 of sales in the final seven months of that year. On the same basis, just over 32,000m3 volume sales are required to hit our FY19 model assumption. In the context of c 10,000m3 more capacity availability y-o-y in H2 and allowing for some ramping of output this looks achievable in our view, subject to generating increasing demand for the higher-throughput potential. Additionally, our estimates assumed unchanged pricing and, as noted above, YTD progress appears to be slightly ahead of this.

Valuation: Pricing progress supports valuation uplift

The company’s share price has made what appears to be a decisive break from its c 14-month 70–80p trading range, rising c 28% since the end of June this year. Successful execution of visible development milestones should continue to aid sentiment, in our view. Our DCF illustrated some sensitivities in support of higher valuation levels (eg price inflation, further JVs and/or a lower Tricoya WACC in due course). We note the current share price is consistent with c 3–4% price and overhead cost inflation, compared to c 2% in our earlier illustration. Using conventional multiples, Accsys is valued at 2.3x our projected FY19 sales, reducing to 1.5x by FY21, at which point the EV/EBITDA multiple would be 12.9x.

Exhibit 1: Financial summary

€ms

2012

2013

2014

2015

2016

2017

2018

2019e

2020e

2021e

March

UK GAAP

UK GAAP

UK GAAP

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

15.002

18.822

33.512

46.077

52.769

56.529

60.911

70.943

94.873

114.500

Cost of Sales

 

 

(15.050)

(15.474)

(25.753)

(33.842)

(34.597)

(42.175)

(47.270)

(51.339)

(66.887)

(78.976)

Gross Profit

 

 

(0.048)

3.348

7.759

12.235

18.172

14.354

13.641

19.604

27.986

35.524

EBITDA

 

 

(10.386)

(7.944)

(4.111)

(1.275)

2.384

(1.484)

(3.500)

1.989

7.786

13.451

Operating Profit (before GW and except.)

(12.545)

(10.200)

(6.488)

(3.750)

(0.288)

(4.197)

(6.577)

(2.625)

0.701

5.416

Intangible Amortisation

 

 

0.000

0.000

0.000

0.000

0.000

0.000

0.000

0.000

0.000

0.000

Exceptionals

 

 

(2.281)

0.000

(0.726)

(2.670)

0.000

0.033

(1.650)

0.000

0.000

0.000

Other

 

 

0.000

(0.430)

(0.905)

(1.098)

0.000

0.000

0.000

0.000

0.000

0.000

Operating Profit

 

 

(14.826)

(10.630)

(8.119)

(7.518)

(0.288)

(4.164)

(8.227)

(2.625)

0.701

5.416

Net Interest

 

 

(0.086)

(0.038)

(0.071)

(0.135)

(0.178)

(0.300)

(2.174)

(3.400)

(4.700)

(4.700)

Profit Before Tax (norm)

 

 

(12.631)

(10.238)

(6.559)

(3.885)

(0.466)

(4.497)

(8.751)

(6.025)

(3.999)

0.716

Profit Before Tax (FRS 3)

 

 

(14.912)

(10.668)

(8.190)

(7.653)

(0.466)

(4.463)

(10.401)

(6.025)

(3.999)

0.716

Tax

 

 

0.536

(0.355)

(0.699)

(0.607)

(0.402)

(0.666)

0.251

(0.769)

(1.231)

(1.499)

Profit After Tax (norm)

 

 

(12.095)

(11.023)

(8.163)

(5.590)

(0.868)

(5.163)

(8.500)

(6.794)

(5.230)

(0.783)

Profit After Tax (FRS 3)

 

 

(14.376)

(11.023)

(8.889)

(8.260)

(0.868)

(5.129)

(10.150)

(6.794)

(5.230)

(0.783)

 

 

 

 

 

 

 

 

 

 

 

 

Average Number of Shares Outstanding (m)

 

80.7

83.9

87.5

88.5

89.6

90.4

111.2

111.5

111.7

111.7

EPS - normalised (€)

 

 

(0.15)

(0.13)

(0.09)

(0.06)

(0.01)

(0.06)

(0.07)

(0.05)

(0.05)

(0.01)

EPS - FRS 3 (€)

 

 

(0.18)

(0.13)

(0.10)

(0.09)

(0.01)

(0.06)

(0.08)

(0.05)

(0.05)

(0.01)

Dividend per share (€)

 

 

0.0

0.0

0.0

0.0

0.0

0.0

0.00

0.00

0.00

0.00

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Margin (%)

 

 

-0.32

17.8

23.2

26.6

34.4

25.4

22.4

27.6

29.5

31.0

EBITDA Margin (%)

 

 

-69.2

-42.2

-12.3

-2.8

4.5

-2.6

-5.7

2.8

8.2

11.7

Operating Margin (before GW and except.) (%)

-83.6

-54.2

-19.4

-8.1

-0.5

-7.4

-10.8

-3.7

0.7

4.7

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE SHEET

 

 

 

 

 

 

 

 

 

 

 

 

Fixed Assets

 

 

34.715

31.425

29.413

29.562

31.252

32.520

71.488

112.826

119.659

117.042

Intangible Assets

 

 

7.579

8.226

8.333

10.014

10.980

10.839

10.657

10.440

10.223

10.006

Tangible Assets

 

 

25.614

22.271

20.740

19.548

20.272

21.681

60.831

102.386

109.436

107.036

Investments

 

 

1.522

0.928

0.340

0.000

0.000

0.000

0.000

0.000

0.000

0.000

Current Assets

 

 

32.387

29.638

26.161

24.066

22.590

61.268

63.505

46.326

45.759

43.349

Stocks

 

 

3.120

4.860

6.053

7.894

8.345

11.796

13.125

14.255

14.572

13.205

Debtors

 

 

3.000

3.439

4.091

3.912

4.967

7.402

9.178

10.275

14.391

18.347

Cash

 

 

24.574

20.467

15.185

10.786

8.186

41.173

39.698

19.698

14.698

9.698

Current Liabilities

 

 

(3.649)

(3.621)

(5.821)

(10.701)

(9.842)

(14.599)

(21.414)

(23.323)

(27.434)

(30.943)

Creditors

 

 

(3.385)

(3.357)

(5.557)

(10.437)

(9.488)

(14.144)

(18.029)

(19.938)

(24.049)

(27.558)

Short term borrowings

 

 

(0.264)

(0.264)

(0.264)

(0.264)

(0.354)

(0.455)

(3.385)

(3.385)

(3.385)

(3.385)

Long Term Liabilities

 

 

(1.960)

(1.924)

(1.871)

(1.799)

(1.947)

(22.718)

(40.084)

(69.128)

(76.514)

(68.760)

Long term borrowings

 

 

(1.960)

(1.924)

(1.871)

(1.799)

(1.947)

(22.718)

(40.084)

(69.128)

(76.514)

(68.760)

Other long term liabilities

 

 

0.000

0.000

0.000

0.000

0.000

0.000

0.000

0.000

0.000

0.000

Net Assets

 

 

61.493

55.518

47.882

41.128

42.053

56.471

73.495

66.701

61.471

60.688

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOW

 

 

 

 

 

 

 

 

 

 

 

 

Operating Cash Flow

 

 

(3.717)

(8.938)

(3.257)

(3.873)

0.452

(1.304)

(1.756)

0.877

7.243

14.149

Net Interest

 

 

(0.019)

(0.038)

(0.102)

(0.138)

(0.186)

(0.248)

(0.671)

(3.200)

(4.500)

(4.500)

Tax

 

 

0.000

0.795

0.344

0.263

0.229

(0.745)

(2.013)

(0.769)

(1.231)

(1.499)

Capex

 

 

0.888

0.501

(1.054)

(1.108)

(4.052)

(2.608)

(29.895)

(59.952)

(13.897)

(5.397)

Acquisitions/disposals

 

 

0.000

0.000

0.000

0.000

0.956

18.317

0.000

0.000

0.000

0.000

Financing

 

 

(0.178)

3.597

(1.130)

0.461

0.124

0.050

26.728

0.000

0.000

0.000

Dividends

 

 

0.000

0.000

0.000

0.000

0.000

0.000

0.000

0.000

0.000

0.000

Net Cash Flow

 

 

(3.026)

(4.083)

(5.199)

(4.395)

(2.477)

13.462

(7.607)

(63.044)

(12.386)

2.753

Opening net debt/(cash)

 

 

(27.596)

(22.350)

(18.279)

(13.050)

(8.723)

(5.885)

(18.000)

3.771

52.815

65.201

HP finance leases initiated

 

 

0.000

0.000

0.000

0.000

0.000

0.000

0.000

0.000

0.000

0.000

Other

 

 

(2.220)

0.012

(0.030)

0.068

(0.361)

(1.347)

(14.164)

14.000

(0.000)

(0.000)

Closing net debt/(cash)

 

 

(22.350)

(18.279)

(13.050)

(8.723)

(5.885)

(18.000)

3.771

52.815

65.201

62.447

Source: Company data, Edison Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER

Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Accsys Technologies and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER

Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Accsys Technologies and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

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GVC Holdings — Strong growth amid integration

GVC has announced a strong set of H118 results, with pro-forma net gaming revenues (NGR) increasing 8% to £1,717m, driven by an impressive 18% growth in Online. The integration of Ladbrokes Coral is on track, with an additional £30m capex synergies identified. GVC is now a leading player in the global gaming market and is well placed to continue gaining share across all its key territories. M&A are likely to remain a feature and there is significant potential upside from the US, which is not in our estimates. The stock trades appropriately towards the top of its peer group, at 10.3x EV/EBITDA and 13.5x P/E for 2018e.

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