Annual Report and Financial Statements 2019
Changing wood
to change the world
Annual Report and Financial Statements 2019
Overview / Highlights
01
We’re a fast-growing business with a purpose.
We combine chemistry, technology and ingenuity
to make high performance wood products that
are extremely durable and stable, opening new
opportunities for the built environment.
By doing so, we give the world a choice to
build sustainably.
View the latest results online at:
www.accsysplc.com
Cabin by the sea
Location – Norway
Architect – Tommie Wilhelmsen
The entire exterior including the façade,
roof, outside deck and dock were all created
using uncoated Accoya®. The Accoya®
windows were coated black.
Overview
Major capacity expansion
and strategic progress
Accoya®:
• Completion of third reactor and operation at full capacity from Q4 2019,
annualised capacity increased by 50% to 60,000 cubic metres.
• Demand continues to exceed increased production.
• Plans progressing to add a fourth Accoya® reactor in Arnhem, to further
increase capacity to 80,000 cubic metres.
• Discussions progressing with potential partner concerning possible Accoya®
plant in USA given increasing demand.
Tricoya®:
• Construction work on the Hull plant continues to progress:
— Hull plant expected to be operational in mid-2020 calendar year.
— The longer term profitability of the Tricoya® plant and market opportunity
remains unchanged.
• Accoya® sales to MEDITE and FINSA increased by 49% to support seeding of
key European markets ahead of Tricoya® production in Hull.
• Work progressing with PETRONAS Chemicals Group (PCG) to evaluate the
feasibility of building and operating an integrated acetic anhydride and
Tricoya® wood chip production plant in Malaysia.
Financial performance
Total Group revenue
Gross profit
Group Underlying EBITDA1
€75.2m
€18.6m
€0.9m
2019
2018
€75.2m
€60.9m
2019
2018
€18.6m
€13.6m
(€3.5m)
€0.9m
2019
2018
Underlying loss before tax
Loss before tax
Net (debt) balance1
(€6.2m)
(€7.7m)
(€50.1m)
(€6.2m)
(€8.8m)
2019
2018
(€7.7m)
(€10.4m)
2019
2018
(€50.1m)
(€3.8m)
2019
2018
Accoya® wood sales revenue
Contents
Overview
1
Performance Highlights
2 Our Business at a Glance
4 Changing wood to
change the world
6 Our Investment
Proposition
8 Our Market
Strategic Report
12 Chairman’s Statement
14 Chief Executive’s Report
20 Our Business Model
22 Our Strategy
24 Tricoya® Consortium
26 Financial Review
30 Sustainability Report
33 Risk Management
Corporate Governance
40 Board of Directors
42 Senior Management Team
44 Chairman’s Introduction
to Governance
46 Corporate Governance
49 The QCA Corporate
Governance Code
54 Remuneration Report
69 Directors’ Report
73 Statement of Directors’
Responsibilities
Financial Statements
76
Independent Auditors’
Report
83 Consolidated Statement
of Comprehensive Income
84 Consolidated Statement
of Financial Position
85 Consolidated Statement
of Changes in Equity
86 Consolidated Statement
of Cash Flow
87 Notes to the Financial
Statements
123 Company Independent
Auditors’ Report
130 Company Financial
Statements
Shareholder Information
140 Shareholder Information
€70m
€60m
€50m
€40m
€30m
€20m
€10m
€0m
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
1.
Alternative performance measures (APMs) are defined in note 1 in the financial statements
and are prepared on a consistent basis for all periods presented.
Cover photo (right): The Orangery
Cover photo (bottom): Tricoya® Hull Plant
Location – UK
Location – UK
Photo: © Westbury Garden Rooms
Photo: © Accsys
02
Annual Report and Financial Statements 2019
Overview / Our Business at a Glance
03
Overview
Our Business at a Glance
Our Products
Where we operate
Tricoya® capacity
under construction
30,000
metric tonnes
Arnhem plant capacity
60,000m3
Tricoya® Hull Plant
Accoya® Arnhem Plant
Under construction,
operational mid-2020
50% capacity increase
completed in year
Current manufacturing
capacity
Total revenue
Capacity under
construction
60,000m3
(2018: 40.000m3)
€73.9m
(2018: €60.7m)
30,000 metric tonnes
Accoya® is the world’s leading high performance
sustainable wood. It is stable, durable and resists
rot. Warranted for 50 years for use above ground
and 25 years in ground or freshwater, Accoya®’s
properties match or exceed those of the best tropical
hardwoods, manufactured from abundantly available,
FSC® certified wood species and is Cradle to Cradle
Certified™ at the Gold level.
Accoya® is the material of choice for a wide range
of demanding applications from windows and doors,
decking to cladding, bridges to exterior structures
and applications that are presently only otherwise
feasible with non–sustainable or man-made materials.
Tricoya® wood chips are produced using sustainable,
FSC® certified wood species and are used to
manufacture Tricoya® panel products by our
licensees. Tricoya® panels demonstrate significantly
enhanced durability and exceptional dimensional
stability, allowing specifiers such as architects,
designers and joineries greater flexibility and scope
when designing. Tricoya® panels are used in a wide
variety of applications such as window components
and door skins, façade cladding, wet interiors, kitchen
carcasses, art installations and much more. Tricoya®
is also warranted for 50 years above ground and
25 years in ground or freshwater.
See page 24 for an explanation of the Tricoya® consortium.
Key developments in the year
•
Increased annual production
capacity by 50%
• Accoya® demand continues to
exceed increased production
Key developments in the year
• Agreement signed with PCG to evaluate the
feasibility of a Tricoya® plant in Malaysia
• Construction work on the Hull plant
continues, expected to be operational
mid-2020 calendar year
Our sustainable business model
Giving the world a choice to build
sustainably and creating value for
all our stakeholders.
Read more on page 20
Building &
Optimising Plants
I
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V
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S
Manufacturing
Sustain
a
b
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l
i
t
y
Sourcing
T
I
N
G
I
N
O
U
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F
U
T
U
R
E
R&D
Sales &
Distribution
Working
with Business
Partners
London Group
head office
Arnhem sales office
and R&D centre
Dallas sales office
Key
Accsys Operations
Product Distribution
Our Growth
Strategy
Our Investment
Proposition
Our Corporate
Governance
We have a clear growth
strategy that will help us
to extend our leadership
in the industry.
• Grow product demand
• Practice manufacturing
excellence
• Develop our technology
Creating long term,
sustainable shareholder
value.
• Substantial market
opportunity
• Sustainability
• Scalable growth
• World leaders in technology
• Build organisational capability
• Strong management team
Corporate governance
and social responsibility
lies at the very core of
our business.
• QCA Governance
Code compliant
• Experienced Board
of Directors
• Senior Independent
Director appointed
Read more on page 22
Read more on page 06
Read more on page 44
04
Annual Report and Financial Statements 2019
Overview / Why We Exist
05
Overview
Why We Exist
Changing wood…
We use our unique patented technology
to create consistently high performing,
sustainable wood products that enable new
opportunities for the built environment.
We use fast growing, sustainably sourced timber to create long life wood products with properties that can
compete with traditional non-sustainable building materials, such as tropical hardwoods, metal, plastic and
concrete. Our acetylation process boosts the already naturally occurring acetyl content of wood and by
doing so, reduces the ability of the wood to absorb water, rendering it more dimensionally stable and
because it is no longer digestible, extremely durable.
Our process is extremely efficient and locks carbon into a long-life product.
Our products are:
Durable
They are highly durable
and outperform the very
best tropical hardwoods.
Stable
With resistance to
shrinkage and swelling our
products offer outstanding
dimensional stability and
can be confidently used
in external applications in
varying moisture conditions.
Sustainable
They are produced from
fast growing, abundantly
available FSC® certified
wood species.
Warranted for
50 years
above ground and 25 years
in ground or freshwater
Tests have shown a reduction in
swelling caused by moisture
uptake of up to
75%
For other key product advantages, refer to Our Market page 08
…to change the world
Demand is growing for sustainable alternatives
to man-made and fossil based materials.
Our products give the world a choice to
build sustainably.
Sustainably sourced
By significantly enhancing the durability and
dimensional stability of fast-growing, abundantly
available certified wood species, Accoya® wood
provides compelling environmental advantages
over competing materials.
Cradle to Cradle CertifiedTM
at the Gold level and Platinum
(Material Health) certified
Accsys’ acetylation process that is used to manufacture
Accoya®, fits perfectly in the bio-cycle of the Cradle to
Cradle certified® concept.
Annual Yield (m3 sawn timber/ha/yr)
3
3
European Oak
Scots Pine
Teak
Red Meranti
4
4
Mahogany
4.5
European Spruce
5.5
Radiata Pine
10
See our Sustainability Report on pages 30 to 32
Cradle to Cradle Certified™ product
scorecard for Accoya®
Material Health
Material Reutilisation
Renewable energy and carbon management
Water stewardship
Social fairness
Overall Certification Level
Platinum
Gold
Gold
Gold
Gold
Gold
A large benefit of this certification is that, especially
at the higher certification levels (Gold & Platinum),
it contributes to several credits in recognised Green
Building Schemes such as LEED and BREEAM.
Product Categories
Our products encourage manufacturers, architects, specifiers and consumers to make sustainable building
material choices on multiple global applications, without compromising on performance.
Windows & Doors
Photo: Private Residence
Cladding
Photo: Private Residence
Decking
Photo: Helsinki Public
Library
Structural
Photo: The Ivy Restaurant
06
Annual Report and Financial Statements 2019
Overview / Our Investment Proposition
07
Overview
Our Investment Proposition
SUBSTANTIAL MARKET OPPORTUNITY
Our products provide a sustainable solution to
the increasing problem facing the substantial
and growing building materials industry. They are
natural building materials with low maintenance and
consistent qualities with at least the performance
properties of the highest performing, non-sustainable
man-made and fossil based materials including
plastics. In addition, they benefit from all the positive
attributes of wood (such as sustainability, strength,
beauty) without the downfalls (of poor durability
and stability).
As a result, our estimates, based upon expert advice
and detailed market studies, are that in excess of
2.6 million cubic metres per annum of Accoya® and
Tricoya® can be sold. This would be a small fraction
of the global solid wood industry.
This represents a long-term and substantial growth
opportunity, noting in the year ended 31 March 2019
we sold 49,716 cubic metres of Accoya®.
See Our Market on page 08
SCALABLE GROWTH
Our manufacturing process and modular industrial
design is based upon confidential know-how and
protected IP which can be expanded and replicated
world-wide.
Our existing Accoya® site in Arnhem increased its
production capacity during the year by 50%, to
60,000 cubic metres and detailed planning for a
further additional 20,000 cubic metres per annum
expansion has commenced. The new Tricoya® plant
in Hull is being constructed in such a way to enable
further significant expansion in due course.
Our consortium with MEDITE and BP is a good
example of what we can do with the right partners.
The Accsys business development team is developing
relationships with other potential partners around
the world to ensure new manufacturing capacity can
be developed to meet the long term global demand.
See Our Business Model on pages 20 to 21
SUSTAINABILITY
STRONG MANAGEMENT TEAM
Demand is growing for environmentally-friendly
alternatives in everyday life, and in every sector of
manufacturing. More and more regions are adopting
monitoring, reporting and regulation of the total
environmental impact of materials and construction
projects, and both consumers and businesses are
rejecting plastics in favour of more sustainable
materials.
We transform fast-growing, FSC® certified wood into
a building material with better characteristics than
man-made, intensely resource depleting and heavily
carbon-polluting alternatives. Our acetylated wood
not only competes on performance, but also benefits
the circular economy, locks away carbon for years,
and comes from completely sustainable sources.
We have obtained numerous certifications and
accreditations including Accoya® being Cradle
to Cradle Certified™ at the Gold level.
See Sustainability report on pages 30 to 32
WORLD LEADERS IN WOOD TECHNOLOGY
We have developed innovative, proprietary and
protected technologies which chemically modify
wood through a low emissions acetylation process.
The resulting products benefit from exceptional
dimensional stability, durability and many
other qualities as well as being environmentally
sustainable.
Our products are first in class and leading the
revolution of modified woods in a growing building
industry which is starting to recognise and adopt
the significant long term benefits of such materials.
See pages 18 to 19 in the Chief Executive’s report
Our Board and Senior Management team are highly
committed and experienced, with varied backgrounds
including from the wood, chemical, operations,
marketing and finance industries.
See pages 40 to 43 for details of the team
Visit our Investor Relations hub at
www.accsysplc.com/investor-relations
An Accoya® paradise for bird spotters
Location: The Netherlands
Architect: RO&AD Architecten
The ‘egg’ is the brainchild of RO&AD, the
architects behind many Dutch projects
including the Moses Bridge and the
Ravelijn Bridge.
The Accoya® wooden beams range from 1.7
metres to 2 metres, 12cm wide to 27cm to 30cm
high. The hide has an elevated concrete floor:
at 2.5m visitors have a great vantage point for
bird spotting.
Photo: © Katja Effting
08
Annual Report and Financial Statements 2019
Overview / Our Market
09
Overview
Our Market
Ever increasing concerns over pollution related to
plastics and other man-made materials means that
the superior qualities of our products are driving
customers to choose our environmentally-friendly
materials over established wood and man-made
materials including fossil based products. This
gives enormous scope to increase our penetration
of this vast global market.
Our technology
Accoya® and Tricoya® are based upon our proprietary
wood acetylation technology.
The physical properties of any material are determined
by its chemical structure. Wood contains an abundance
of chemical groups called ‘free hydroxyls’. Free hydroxyl
groups absorb and release water according to changes
in the climatic conditions to which the wood is exposed.
This is the main reason why wood shrinks and swells. It
is also believed that the digestion of wood by enzymes
initiates at the free hydroxyl sites – which is one of the
principal reasons why wood is prone to decay.
Acetylation effectively changes the free hydroxyls
within the wood into acetyl groups, which already
naturally exist in wood at lower levels. This is done
by reacting the wood with acetic anhydride, which
comes from acetic acid (commonly known as vinegar
in its diluted form). When the free hydroxyl group is
transformed to an acetyl group, boosting the acetyl
level, the ability of the wood to absorb water is greatly
reduced, rendering the wood more dimensionally
stable and, because it is no longer digestible,
extremely durable.
Potential market for Accoya®
and Tricoya® is in excess of
2.6 million m3
Total Accoya® sold in the last year
49,716m3
Market
We believe the potential market for Accoya®
and Tricoya® is in excess of 2.6 million cubic
metres annually.
In the year ended 31 March 2019 we sold 49,716 cubic
metres of Accoya®, however the total global solid
wood market is understood to exceed 400 million
cubic metres annually and we believe Accoya® sales in
excess of 1 million cubic metres annually are ultimately
achievable. While it may take some time for Accoya®
and Tricoya® to reach their full market potential
and may be limited by availability of manufacturing
capacity, we are confident that continued strong
sales growth can be generated.
Accoya® captures the market share in those
applications which require high performing, long
lasting, sustainable products. The impressive
durability and stability benefits are highly valued
in top end applications.
The majority of our Accoya® sales are to a network
of timber distributors which in turn supply a variety
of industries, principally for joinery (windows and
doors) and for decking and cladding. As we expand,
we expect that other opportunities will be developed
as we become able to meet the demands of larger
scale manufacturers and as we continue to develop
our product and its applications.
Tricoya® panels’ enhanced performance and moisture
resistance makes them particularly suited to external
applications including façades and cladding, soffits
and eaves, exterior joinery, wet interiors, door
skins, flooring, signage and marine uses. Tricoya®
displaces alternative more expensive or less easily
handled products and opens up major new market
opportunities in the construction sector.
The global market for Tricoya® panel products is
estimated to be in excess of 1.6 million cubic metres
and up to approximately 4.5 million cubic metres
per annum. This would equate to around 1% of
global MDF manufacturing capacity. Tricoya® panels
were introduced to the market by MEDITE in 2012,
manufactured using chipped Accoya® as a production
solution in the period before the dedicated wood
chip acetylation plant is completed. Sales of Tricoya®
panels have increased significantly each year since
MEDITE introduced them to the market in 2012.
Both products offer environmental advantages which
enable them to compete with a variety of other less
sustainable wood and man-made products. We believe
this will become more important as global attention
increases in respect of the potential harm that other
products, such as plastics and micro plastics can cause.
10
Annual Report and Financial Statements 2019
11
Strategic Report
12 Chairman’s Statement
14 Chief Executive’s Report
20 Our Business Model
22 Our Strategy
24 Tricoya® Consortium
26 Financial Review
30 Sustainability Report
33 Risk Management
As the general contractor, we work hard for continuous supply
chain engagement and Accsys performed admirably through
a complex project. Through this process, we always knew
where our materials were, and everything arrived as expected
and promised.
Once on site, the Accoya® has been easy to work with, and
presented no unexpected challenges. Finally, the finished
product looks great, and has met all of the designer and
owner expectations.”
Brad Nile, Andersen Construction
Changing wood to change the world in
North America
The Faculty of Forestry – Oregon State University
Extensive Accoya® use at the largest mass timber project in North America
When scoping their new campus buildings, the Faculty of Forestry at Oregon State
University were set on making a statement about the use of wood products in large
scale, high performance building design.
The buildings, designed by Michael Green Architects and built by Andersen
Construction, are the primary teaching and faculty building and an open plan
structural testing building.
The three-storey teaching building has a footprint of 80,687ft2 and has a unique
exterior combination of glass and Accoya® wood, on a cross-laminated timber
structure fabricated by D.R. Robinson. The building aptly demonstrates the
opportunity that exists for large scale, high performance timber buildings in
North America.
The 16,000ft2 A.A. ‘Red’ Emmerson Advanced Wood Products
Laboratory houses sophisticated manufacturing systems to take
innovative research to the next level. The laboratory building, also
clad with Accoya®, is the first large scale use of the Mass Plywood
building concept.
140,000 board feet of Accoya® cladding are being installed
on the two buildings. As part of the Accoya® specification
process, lead contractor Andersen Construction visited the
Accoya® plant and a number of other Accoya® installations
on buildings in the Netherlands.
Location: Oregon, USA
Architect: Michael Green
North America revenue
€9.1m
18%
(vs 2018)
12
Annual Report and Financial Statements 2019
Strategic Report / Chairman’s Statement
13
Strategic Report
Chairman’s Statement
“ I believe our improved financial performance and
clear strategy for building new manufacturing
capability demonstrates how we expect to
increase shareholder value over the coming years.”
This year, Accsys has continued to make significant
progress towards its strategic goals of:
(i)
becoming an EBITDA profitable business with
strong, long-term growth drivers, and
(ii) delivering that growth by providing consistently
high performing, sustainable wood products that
enable new opportunities for the built environment.
The completion of the 50% expansion of our Accoya®
plant was a notable milestone for the business and led
to increased sales from the new production capacity,
helping the Group to achieve an EBITDA positive
result for the year. The new financial year should see
the full benefits of this expansion as the plant reached
full capacity in the fourth quarter of the financial year,
leading us to believe we will see further growth in
underlying profitability in the near term.
Our Accoya® operations have seen underlying EBIT
for the division more than double from €2.0m to
€5.5m, providing a clear indication of the appetite in
the market and further potential returns from both
our technologies and our products.
To satisfy that demand, we are increasing our focus
on further developing our production capabilities.
We have commenced planning for a fourth Accoya®
reactor in Arnhem, as well as progressing discussions
concerning a potential Accoya® plant in North
America, a market where there is increasing demand.
There has been significant work undertaken to
construct the Tricoya® wood chip acetylation plant in
Hull. Though the delay we reported in March 2019 was
very disappointing, I am pleased to confirm that work
on the site is again progressing, and incorporates
the necessary reinforcement works. We now expect
the plant to be operational in mid-2020 calendar
year. We continue to see strong demand for Tricoya®
which reinforces our confidence that the long-term
profitability of the plant remains as expected.
The commencement of the feasibility study
concerning a potential Tricoya® plant in Malaysia
also represents an important milestone as we look
to expand into new markets, and we are very pleased
to be working with the PETRONAS Chemical Group
as we explore this opportunity.
Our focus on developing additional manufacturing
capability requires us to ensure we have the
organisational framework and appropriately skilled
staff to support our growth ambitions and strategic
direction. We expect to go from operating one facility
to operating four facilities in three continents in the
medium-longer term. This level of growth requires
significant investment in our employees to keep pace
with this growth.
Finally, we have also announced that Paul Clegg
will step down as CEO after ten years in the role.
Since 2009 the Group has restructured and grown
considerably and now has a solid platform as
reflected by these results. Both Paul and the Board
feel that at this important time in the Company’s
evolution, as it seeks to expand, build and operate
wood acetylation plants around the world, it requires
a CEO with extensive manufacturing expertise.
I and the rest of the Board wish to express our
appreciation for the very important contribution
Paul has made to the development of the business
throughout his time with Accsys. A search for a
new CEO is underway however I am grateful that
Paul has agreed to stay on as CEO and a Board
member, until the end of December, allowing
adequate time to complete the search for
his successor.
Patrick Shanley
Non-Executive Chairman
24 June 2019
I am grateful for the continued support of our many
stakeholders, who are crucial to our ongoing growth
and success. This group comprises: our commercial
partners such as MEDITE and BP, our customers who
have continued to support the Accoya® success
story despite the challenges of supply allocations,
our suppliers from New Zealand wood mills to our
creative agency partners and of course our growing
and loyal shareholder base. We also welcome Investec
Bank PLC on board as our new joint corporate broker
to work alongside Numis Securities. I must also make
a special mention to all of our staff, whose continued
passion for what we do is always a reminder of the
positive impact our business is achieving in the area
of sustainability.
We continue to ensure we put good governance at
the heart of what we do, and in this respect I am very
pleased that we were able to confirm full compliance
with the QCA Corporate Governance Code in
September 2018 and will continue to review this
on an annual basis.
The new financial year has started well, with the
third reactor continuing to operate at full capacity.
I believe our improved financial performance and
clear strategy for building new manufacturing
capability demonstrates how we expect to increase
shareholder value over the coming years.
L’Arbre Blanc (The White Tree) has taken advantage of Accoya® in its
‘folie architecture’
Becoming an architectural highlight for the city of Montpellier, at 56 metres L’Arbre Blanc
is a 17 storey common living space extended by 193 metal balconies each of which features
Accoya® wood decking.
Location: Montpellier, France
Architects: Sou Fujimoto, Nicolas Laisné and Manal Rachdi
Find out more about this project on www.accoya.com
For Chairman’s introduction to governance see
page 44
Group Underlying EBITDA
Accoya® Underlying EBIT
€0.9m
(€3.5m)
€0.9m
2019
2018
€5.5m
2019
2018
€2.0m
€5.5m
14
Annual Report and Financial Statements 2019
Strategic Report / Chief Executive’s Report
15
Strategic Report
Chief Executive’s Report
“ We are delighted to report continued increasing
demand for our sustainable alternatives to
tropical hardwoods, man-made plastics and
fossil based building materials.”
Introduction
2019 has been a year of strong operational and
financial progress. Demand from our existing
customers alone continued to exceed our increased
production capacity, demonstrating the growing call
for our sustainable, environmentally-friendly, high
performance wood products which are alternatives
to non-sustainably sourced tropical hardwood,
man-made plastics and highly carbon polluting
construction building materials. I would like to
thank all of our stakeholders and, in particular,
our employees for their continued support
throughout this period.
I am pleased to report that we are continuing to
increase our ability to supply that demand, with the
completion of the third reactor, our first significant
addition to manufacturing capacity. The expanded
plant reached full capacity in the fourth quarter of
the financial year and has already helped us deliver a
23% increase in revenues and underlying profitability
at an EBITDA level in the second half of the year. This
bodes well for further growth, sustainable revenue
and underlying profitability.
We are committed to a better, more sustainable
future – not just as a business, but with the impact
our activities and products have on the wider
world. Accoya® and Tricoya® are long-lasting,
environmentally responsible and consistently high
performing sustainable wood products that enable
new opportunities for the built environment. As we
improve and increase our supply capabilities, we
are moving the world towards a more sustainable,
circular economic model.
Looking ahead, we continue to develop our
organisational capability in all areas and have added
21 employees in the period to support the rapid
growth of the business. Our employees remain a
priority, with a continued focus on maintaining and
improving our health and safety standards and
practices across the Group.
Total Group revenue
Group Underlying EBITDA
€75.2m
€0.9m
2019
2018
€75.2m
€60.9m
(€3.5m)
€0.9m
2019
2018
I continue to be immensely excited by the potential for the Tricoya® development in Hull, and while the project
has been delayed due to civil construction issues, a tremendous amount of work has already been successfully
completed. The issues have been identified, addressed and are being overcome; we are now on track for
completion by mid-2020 calendar year. This will mean our manufacturing capacity will increase from 40,000 cubic
metres at the start of the 2019 financial year to the equivalent of approximately 100,000 cubic metres once the
Hull plant is delivered.
Accoya® – Global performance
Accoya® sales volume – cubic metres
Accoya® sales
Licence income
Acetic acid sales
Manufacturing margin
Underlying EBITDA
Year ended
31 March 2019
Year ended
31 March 2018
Six months ended
31 March 2019
Six months ended
30 September 2018
49,716
€66.9m
€1.0m
€5.5m
23.0%
€9.0m
42,676
€56.3m
€nil
€3.6m
21.8%
€4.6m
28,337
€38.8m
€0.5m
€3.2m
24.7%
€6.2m
21,379
€28.1m
€0.5m
€2.3m
20.7%
€2.8m
Note – H2 FY 18 manufacturing margin = 23.8%
Total Accoya® sales volume for the year ended
31 March 2019 increased by 16% to 49,716 cubic
metres (2018: 42,676 cubic metres). This volume
coupled with price increases led to total Accoya®
wood revenue increasing by 19% to €66.9m (2018:
€56.3m). When excluding sales to MEDITE and
FINSA for Tricoya® panel production, sales volumes
increased by 9% to 37,716 cubic metres (2018: 34,617
cubic metres).
The increase in sales volumes is attributable to
consistent and growing demand for our products,
with sales volumes limited only by our manufacturing
capacity throughout the year, even after the plant
expansion. We continue to effectively manage this
situation, with all customers being on allocation.
As we work to increase our production capabilities,
I am grateful for their understanding and ongoing
desire to work with us as we continue to build the
market for Accoya® in the longer term, supported by
the knowledge that Accsys offers a specialty product
that our distributors can sell at consistently high
margins throughout the cycle.
Sales volumes increased by 33% in the second half
of the year compared to the first half. While the
first half included our annual maintenance stop, of
more significance was the additional manufacturing
capacity from the third Accoya® reactor starting
up to benefit the second half. Sales increased in
the second half of the year as production ramped
up, to reach capacity levels in the final quarter of
the financial year, during which we sold 14,926 cubic
metres of Accoya®.
The 9% growth in Accoya® volumes (excluding sales
to MEDITE and FINSA for Tricoya®) continues to
be driven by repeat business, primarily for use in
windows, doors, decking and cladding, and has been
fulfilled by our reliable and consistent network of
global distributors. Demand has remained very strong
throughout the period and remains so into the new
financial year. Demand has continued to exceed our
production capacity throughout the year. As such,
we reduced the number of active distributors by
12 in the past 18 months to allow us to concentrate
volume allocation to our core markets whilst
further developing the relationships with our core
distributor base.
16
Annual Report and Financial Statements 2019
Strategic Report / Chief Executive’s Report
17
Strategic Report
Chief Executive’s Report continued
“ The strong demand for both Accoya® and Tricoya®
continues to be driven by both product quality and their
sustainable credentials, reflecting the increasing importance
for all building and construction activities to become more
environmentally responsible.”
Sales volumes by region are set out in the table below:
UK & Ireland
Tricoya®
Cerdia
Americas
Benelux
Asia-Pacific
RoW
The 49% increase in sales to our Tricoya® licencees,
MEDITE and FINSA, was higher than the average
increase to support the seeding of key European
markets ahead of the start-up of the Tricoya® plant
in Hull. As a result sales to the Americas grew at a
relatively lower rate year on year, also reflecting that
the previous financial year saw a significantly above-
average increase (43%) for the region. Demand
remains very strong in USA in what continues to
be a priority market. Sales in the Rest of the World
decreased as we prioritised allocations with our
more established regions and customers.
€1.0m of Accoya® licence related income was
reported in the year (2018: €nil), reflecting the
contractual milestones in place with our licensee
Cerdia (formerly called Rhodia).
Accoya® pricing and margin
The gross manufacturing margin (which excludes
licensing income) increased from 21.8% to 23.0%
largely due to higher prices and efficiencies
arising from higher production volumes. The gross
manufacturing margin improved from 20.7% in the
first half of the year to 24.7% in the second half
of the year, with the second half benefitting from
higher production volumes and no maintenance stop.
Margins also benefitted from the absence of some
one-off factors which influenced the previous year,
which included an additional production stop in
May 2017 associated with the expansion project.
2019
m3
13,419
12,000
10,640
5,602
4,179
3,553
323
49,716
2018
m3
Increase
%
11,994
8,059
9,464
5,495
3,405
3,540
719
42,676
12%
49%
12%
2%
23%
0%
(55%)
16%
Raw wood supply incurred small cost price increases
compared to the previous year, while acetyl prices
initially increased more significantly before eventually
decreasing toward the end of the year. The annual
price increase for Accoya® implemented in January
2019 to cover these raw material cost increases has
also benefitted gross margin into the 2019 calendar
year. We expect raw material prices to remain
relatively stable over the course of the next year.
Overall, margins continue to be significantly
influenced by the quantity of material sold for
Tricoya® production as well as to Cerdia, under our
off-take agreement, which together made up 46%
of total volume sold in the period (2018: 41%). These
discounted prices are expected to end in 2020 with
the start-up of the Hull plant and scheduled end of
the Cerdia off-take agreement, leading to higher
overall margins.
The new financial year will therefore further
benefit from economies of scale of operating the
expanded plant for the full year, with further margin
improvements expected from 2020 calendar year.
As a result, we continue to expect the Accoya®
business to achieve a 30% gross manufacturing
margin in the longer term.
Accoya® manufacturing capacity
We successfully completed the construction and
commissioning of the third Accoya® reactor in the
year, increasing our manufacturing capacity by 50%
to 60,000 cubic metres per annum. The new reactor
commenced operation in summer 2018, and the
successful resolution of some post-commissioning
teething issues led to a full ramp-up of production
levels. All three reactors have now been operating at
full capacity since the start of the 2019 calendar year,
and we have started the new financial year at the
same operating rate.
With demand continuing to exceed supply, our focus
has quickly turned to the next stage of the expansion:
the potential addition of a fourth reactor to take the
Arnhem site capacity to 80,000 cubic metres per
annum. We have commenced work on this project
with preliminary design and planning underway.
The third reactor project included some of the
chemical infrastructure for a fourth reactor, however
we expect that further work beyond the core fourth
reactor unit itself will be required to support full
speed operation of four reactors simultaneously.
This additional work will, however, have the potential
to improve efficiency of the entire Arnhem operation,
with the addition of new chemical storage facilities
and new wood handling equipment. Further details
of the required capital expenditure and how this
is to be financed will be confirmed as the detailed
planning progresses. We would expect the addition of
a fourth reactor to further improve gross margins as
a result of the economies of scale of operating on the
same site, and with only a limited increase in related
overhead costs.
We acquired the majority of the land and buildings
associated with our Accoya® plant in Arnhem in
August 2018. We acquired the assets for a total
of €23m from Bruil, the property development
company to whom we had previously sold the
land over a number of transactions and who
subsequently constructed our new offices,
laboratory, warehouse and distribution
centre. The purchase gives us full
ownership of a key asset and should
provide considerable strategic and
financial benefits to the Group over
time as we continue to explore ways
of further improving our processes
and the efficiency of the site.
We have also made further progress towards
the creation of a new Accoya® plant in the USA.
Discussions with a prospective partner there
are becoming more detailed as we explore
the challenges and opportunities associated
with the location. Such discussions are
encouraging given the scale of the potential
market for Accoya® in the USA which we
believe represents the largest global
market, however we expect it to take
a while longer before we can conclude
whether a partnership and the
resulting new Accoya® plant
will proceed.
An elegant five-star Accoya® wood hotel on the
shores of Lake Orta in Italy
This five-star boutique-hotel allows you to relax at the slow
pace of life at the water’s edge. It is in this spirit that Casa
Fantini, created by the architect Piero Lissoni, was designed.
Two buildings, one pre-existing and one new, are identifiable
by their contrasting façades. Facing the lake and blending
into the landscape through the choice of natural materials
such as stone and Accoya® wood for exterior cladding.
Location: Lake Orta, Italy
Architect: Piero Lissoni
Find out more about this project on www.accoya.com
Photo: © Giovanni Gastel
18
Annual Report and Financial Statements 2019
Strategic Report / Chief Executive’s Report
19
Strategic Report
Chief Executive’s Report continued
Tricoya® Consortium
The market for Tricoya® panels continues to grow,
with our partner MEDITE, who has been responsible
for the majority of sales so far, continuing to seed
new markets in the UK, Ireland and Northern Europe.
This has resulted in our sales of Accoya® for the
production of Tricoya® panels increasing by 49%
to 12,000 cubic metres during the year.
The construction of the first dedicated Tricoya® wood
chip acetylation plant in Hull has been substantially
progressed in the year, with €28m invested and several
significant milestones reached. Many of the wood
handling aspects of the plant have been constructed
and all equipment has been ordered, with most now
on site already. We have recruited the first employees
who will make up the ongoing operations team of 31,
and they are currently planning the commissioning
and start-up of the plant.
A delay in building means that we now expect the
plant to be operational in mid-2020 calendar year, as
we were notified by our lead contractor responsible
for the delivery of the project that certain structural
engineering issues needed to be addressed.
Principally this entailed the reinforcement of the
main tower foundations and steelwork.
I was very pleased to announce in January 2019
that we had signed an agreement with PETRONAS
Chemicals Group Berhad (‘PCG’) to evaluate the
feasibility of jointly funding, designing, building
and operating an integrated acetic anhydride and
Tricoya® production plant in Malaysia. It is envisaged
that Tricoya® wood elements produced at the
Malaysian plant would use acetic acid from PCG’s
existing joint venture in Malaysia. The plant would
then supply the wood panel industry within South
East Asia, under licence, as the key raw material for
the formation of Tricoya® panels for the use in the
substantial construction industry in the region.
Since January, our teams have been progressing work
on the various work streams which include evaluating
preliminary engineering studies, and regional
customer and market feasibility assessments. The
evaluation is expected to last for a period of at least
another 12 months before a decision is made as to
whether to proceed further.
Intellectual Property
We continue to focus on and invest heavily in the
generation and protection of intellectual property
(‘IP’) relating to the innovation associated with
“ We are delighted to be working with PETRONAS
Chemicals Group in Malaysia, and are encouraged by
the discussions with a potential partner in the USA.”
The issue related to civil works and does not relate
to Accsys’ Tricoya® acetylation technology, meaning
that there is no impact on the long-term expected
profitability of the project, with gross margin of
approximately 40% achievable once the plant reaches
near capacity levels over the next few years. This
issue is the responsibility of the contractor and work
is now progressing well to rectify the issue. The delay
is likely to add some additional costs associated with
our project team and related activities being required
for a longer period.
We expect demand from MEDITE and FINSA will utilise
the majority of the capacity of the Hull plant after it
ramps up operation. I remain very optimistic about
the potential for Tricoya® and the development of the
Hull plant, with the continued market demand for the
acetylated chips pointing to an encouraging return
on investment.
our acetylation processes and products, ensuring
ongoing differentiation and competitive advantage
in the market place. Accsys has increased its number
of patent applications in the recent period to 316,
in 50 countries. The number of granted patents
has significantly increased to 139, including patents
relating to key technologies in various countries
throughout the world.
Using a combination of patents and know-how, Accsys
continues to invest in the generation and protection
of core IP associated with our technology for the
acetylation of solid wood and wood chips, as well as
on complementary technologies for use with Accoya®
and Tricoya® wood products.
Management of valuable know-how remains an
essential element of safeguarding our innovations and
market position, with confidentiality protocols in place
to prevent unauthorised access to such know-how.
We also place strict contractual obligations on third
parties collaborating with Accsys, with particular
focus on minimising risks by ensuring Accsys’ know-
how is only shared when absolutely necessary.
Controls are also placed on receiving confidential
information, to prevent protection associated with
our internal research efforts being compromised.
Increased and regular training ensures Company-
wide awareness of the importance of protecting and
controlling our know-how. Critical attention continues
to be given to protecting Accsys Confidential
Information and IP as it expands its production
capabilities and licensing opportunities through
collaborations with third parties.
Our well-established trade mark portfolio continues
to grow geographically and covers the key distinctive
brands Accoya®, Tricoya® and the unique device
under which products are marketed, alongside the
corporate Accsys brand, including transliterations in
Arabic, Chinese and Japanese. All of our key brands
have now been registered in over 60 countries,
becoming valuable and recognisable names in the
timber and panel industries. Additional trade mark
registrations have increased the strength of the
Company brands, with more recent and ongoing
activity focused on securing protection for our
new Company logo.
Accsys continues to maintain an active watch on
the commercial and IP activity of third parties to
monitor and take action if its IP rights are infringed,
to identify potentially valuable third-party IP which
could be exploited via a strategic alliance, in-licence
or acquisition, and to obtain an early insight into any
IP which could potentially hinder our commercial
activity. The scope of the IP watch is under regular
review so as to align with the increased diversity of
our research programmes.
Careful IP management, effected via our qualified
in-house IP manager working in close conjunction with
our technology, engineering, product development,
marketing and commercial teams, and supported
where appropriate by external patent and trade mark
attorneys, ensures our IP portfolio is maintained,
protected, and grown in a cost-effective manner,
adding value to our manufacturing and licensing
businesses. The IP portfolio continues to be regularly
reviewed to ensure alignment with the Company
objectives, and to confirm fulfilment of obligations
to current and potential future licensees.
Outlook
The new financial year has started well. We continue
to be challenged by demand exceeding our
manufacturing capacity but the completion of the
third Accoya® reactor enabled significant growth for
our output and sales. We aim to continue to increase
both our production capabilities and the market’s
appetite for our uniquely attractive products.
Demand is being further driven by ongoing trends
towards ecologically responsible and sustainable
business practices.
The fourth reactor project represents the next
opportunity for a significant increase in our ability
to meet demand, and we will continue to explore
other ventures while developing the opportunities
in Malaysia and the USA.
It is with great pleasure that this year we have
reported underlying EBITDA-positive results, and I
am confident our profitability will continue to grow in
the medium and longer term as we benefit from our
increased capacity. The anticipated start-up of the
Tricoya® plant in Hull in 2020 will not only produce a
new revenue stream, but is expected to also free up
capacity in our Arnhem plant for more, higher-priced
Accoya® sales, improved efficiencies, and therefore
higher margins.
We believe that continued success will be delivered
by fulfilling our key strategic objectives: practicing
manufacturing excellence, growing product demand,
building our organisational capability and continuing
to develop our technology. All of our stakeholders will
continue to be instrumental in our future success and
in particular our employees who I would again like to
thank for their ongoing passion and commitment to
what we do.
We are Accsys, and we are changing wood to change
the world.
Paul H.A. Clegg
Chief Executive Officer
24 June 2019
20
Annual Report and Financial Statements 2019
Strategic Report / Our Business Model
21
Strategic Report
Our Business Model
Creating value for all our stakeholders
Our differentiators
We utilise the following resources and relationships, which
offer us a competitive advantage in our marketplace:
Our activities
We combine chemistry, technology and ingenuity to
make high performance wood products that are extremely
durable and stable, opening new opportunities for the
built environment.
We continue to prove the value
and quality of our products and
processes, opening up growth
opportunities for the Group.
How we are investing in our future
A key part of our business model involves focusing on growth opportunities,
to take advantage of the substantial global market opportunity we believe is
achievable with our products.
Our technology and IP
We have developed families of patents, providing robust
protection over our proprietary products and processes.
50 countries in which we hold 316 patents
and patent applications
Our people and engineering expertise
Our passionate employees are key to the successful execution
of the Group’s strategy, together with their valuable know-how
and a dedication to the future success of the Group.
15% headcount increase in the year
Environment
Accoya® & Tricoya® fit perfectly in the bio-cycle of the
circular economy.
Cradle to Cradle Certified™
at the Gold level
Strong industry relationships
We work with equipment manufacturers, wood suppliers, the
acetyls industry, testing and certification bodies, and other
system supply specialists, to help us develop our technology,
products and their place in the market.
Industry leading brands
Our brands Accoya® and Tricoya® are globally registered
trademarks, portraying our products’ sustainable, high quality
and long-term performance.
66 countries in which our products are
registered trademarks
Financial strength
Solid financial base to fund growth organically and through
further investment.
EBITDA positive for the Group this year
Accoya® Underlying EBITDA
€9.0m
94%
(vs 2018)
Sourcing
We obtain timber from FSC® certified, sustainable, fast-growing
forests, primarily in New Zealand and Europe.
Forest Stewardship Council® (FSC) certified
Building new plants and optimising existing sites
We develop and optimise existing sites and processes to benefit from existing skills and
leverage operational and financial scale.
We identify new international locations and appropriate partners to develop additional
capacity in order to meet our longer-term growth potential in global markets.
50%
increase in Accoya® manufacturing capacity
completed in the year to 60,000m3
Proprietary
manufacturing
We manufacture our
wood products using our
proprietary low emission,
acetylation wood modification
process at our existing plant
in the Netherlands.
49,716m3
Accoya® sold this year
Global sales and distribution
We work with a network of global distributors
to get our sustainable wood products to our
customers, who utilise Accoya® and Tricoya®
materials to create branded products such as
windows, doors, decking, cladding, façades and
other external applications.
23%
revenue growth this year which continues
to be driven by repeat business
Manufacturing
Sourcing
Building &
Optimising Plants
Sustai
n
a
b
i
l
i
t
y
I
N
V
E
S
T
I
N
G
I
N
O
U
R
F
U
T
U
R
E
R&D
Research and development (R&D)
We have developed innovative, proprietary and protected
technologies which chemically modify wood through a low
emissions acetylation process.
We continue to invest in R&D, focused on optimising our
existing product offering and technologies and investing
in focused technology solutions, which materially enhance
our productivity and cost of production.
Sales &
Distribution
Working with
Business Partners
Working with business partners
Working with business partners provides the
greatest prospect for taking advantage of
the substantial global market opportunity for
our products.
We continue to work with our partners in order to
achieve our objective of expanding the production
footprint globally, in particular, with partners which
have resources or technologies which complement
our own.
In January 2019 agreement signed with
PETRONAS Chemicals Group
to evaluate feasibility of jointly funding, designing,
building and operating a Tricoya® plant in Malaysia
Proven
sustainability
credentials
Our products are fully
recyclable and lock in CO2
during their longer lifespan.
We give the world a choice to
build sustainably, with our wood
products offering a sustainable
alternative to fossil fuel based
or man-made products.
See our Sustainability
Report on pages
30 to 32
22
Annual Report and Financial Statements 2019
Strategic Report / Our Strategy
23
Strategic Report
Our Strategy
The strategic priorities that will enable us to
achieve our goals and fulfil the substantial
growth potential in our markets.
1.
u r f
O
o u r Strategic Pill
a
r
s
3.
2.
4.
3. Develop our
technology
To develop technology
and IP programmes
based on evidence and
commercial viability.
4. Build
organisational
capability
To develop our people
and organisational
capability to enable
us to meet our
growth objectives.
1. Grow product
demand
To develop market
opportunities to drive
revenue growth.
Regional split available
on page 16.
2. Practice
manufacturing
excellence
To grow manufacturing
position in Europe and
establish new platforms
in key markets in support
of, and to enable, demand
growth.
1. Grow product demand
Ambition
Approach
Key results to be achieved for
year ending March 2020
• Construction of Hull Tricoya® plant
to generate additional capacity
in 2020. Develop market plan for
Tricoya® in Asia and enhanced
market plan for USA to support
possible Accoya® plant
• Meeting pent up demand for
Accoya® from expanded capacity
following a significant period of
customers being on sales allocation
Progress in year ended
March 2019
• Total volume sold increased by
16% to 49,716 cubic metres, (See
page 16 for regional split):
— Accoya® sales volumes
(excluding to MEDITE and
FINSA) increased by 9% to
37,716 cubic metres
— 49% increase in volume sold
for production of Tricoya®
panels; however
• Sales volumes continue to be
capacity constrained with all
customers on allocation
• Tricoya® feasibility plan agreed
with Petronas Chemicals
Group includes evaluation of
Tricoya® markets in region to
be carried out
To develop market
opportunities
to drive revenue
growth
KPIs:
Accoya® and
Tricoya® volume
sold by key target
geographies
• Focus on significant and
growth markets, for
example Original Equipment
Manufacturers and
Joinery market
• Working with our customers
to sell our products:
— Building long term
customer relationships
— Targeting repeat
business
— Develop critical mass
within key markets
• Build and protect
our brands
• Developing the substantial
environmental advantages
that our products offer
• Development of
partnerships to allow
the above in a cost
effective manner
2. Practice manufacturing excellence
Ambition
Approach
To grow
manufacturing
position in Europe
and establish new
platforms in key
markets in support
of, and to enable,
demand growth
• Safe operations, everywhere
• Develop and optimise
existing sites and
leverage operational
and financial scale
• Develop existing skills
to ensure continuous
improvement at all locations
KPIs, by
geography:
•
Operational
manufacturing
capacity
Manufacturing
capacity under
construction
Identify new international
locations and appropriate
partners to develop
additional capacity in order
to meet longer term growth
potential in global markets
• Product development
focused on significant
volume and value
propositions
• Ensuring adequate supply
of raw materials at
acceptable economics
Progress in year ended
March 2019
• Record production from Arnhem
plant of 48,787 cubic metres
• Third Accoya® reactor
construction successfully
completed, increasing capacity
by approximately 20,000 cubic
metres per annum
• Tricoya® plant construction
underway, although has incurred
a delay. This will have a capacity
of approximately 30,000 metric
tonnes of Tricoya® wood chips
per annum from mid-2020
Key results to be achieved for
year ending March 2020
• Tricoya® plant construction
expected to be near complete
ahead of operation in mid-2020
calendar year
• Front end engineering associated
with fourth Accoya® reactor and
related capacity improvements
in Arnhem
• Progress towards understanding
feasibility of locating a Tricoya®
plant in Malaysia
• Development of key supply chain
relationships and options in order
to support longer term ambition
3. Develop our technology
Ambition
Approach
To develop
technology and IP
programmes based
on evidence and
commercial viability
• Optimisation of existing
products and technologies
• Pursuit of focused
technology solutions
which materially enhance
productivity and cost
of production
Progress in year ended
March 2019
• Further progress made in
development of potential
coloured Accoya® and
other potential end product
developments which would
lead to new applications
Key results to be achieved for
year ending March 2020
• Finalisation of development of
coloured Accoya®
• Development of acetyls
programme focusing on
maximising value of our acid
bi-product
• Continued development of
application of acetylation to other
solid wood applications
• Fully define detailed and focused
technology development
programme for implementation
from 2019, based on existing
assets, know-how and
development programmes
4. Build organisational capacity
Ambition
Approach
To develop our
people and
organisational
capability to enable
us to meet our
growth objectives
• Develop, articulate and live
our values and culture
• Develop management and
leadership capabilities to
support growth ambition
• Develop the governance
appropriate for the growth
of the business
• Engagement and investment
of the whole workforce
Progress in year ended
March 2019
• Review of corporate governance
Key results to be achieved for
year ending March 2020
• Develop the framework of
creating and assessing fully
aligned employee objectives
and key results
• Develop Company’s
values programme
resulting in statement
confirming full compliance
with QCA Code
•
Implementation of new HR
tool to allow for greater
employee engagement
• Commenced review of corporate
brand, with particular focus on
internal stakeholders
• Undertaken review of many HR
related functions to identify
areas for development
24
Annual Report and Financial Statements 2019
Strategic Report / Tricoya® Consortium
25
Strategic Report
Tricoya® Consortium
The Tricoya® Consortium was formed on 29 March 2017, with its members comprising Accsys
Technologies, BP Chemicals, BP Ventures, MEDITE Europe DAC, BGF & Volantis (Lombard Odier) and
with project finance debt provided by RBS. BP and MEDITE also provide strategic benefits through
supply and sales off-take agreements respectively.
Tricoya® Consortium structure
MEDITE
BP Ventures
Accsys
Loan notes
Equity option
BGF/Volantis
(Lombard Odier)
11.5%
8.5%
76.0%
4.1%
MEDITE
TTL
(Owner of Tricoya IP)
BP Chemicals
8.0%
60.7%
31.3%
TVUK
(Hull plant operator)
Bank facility
Royal Bank
of Scotland
The Tricoya® Consortium:
•
Is working to achieve the market potential of
Tricoya® through:
The Tricoya® opportunity:
• Global market for Tricoya® panels estimated
in excess of 1.6 million cubic metres per annum:
— increasing production capacity;
— this equates to approximately 1.5% of global
— investing in Research & Development to
MDF manufacturing capacity.
further enhance the Tricoya® product and
its production processes;
• Tricoya® panel sales to date limited to market
seeding using chipped Accoya® at higher cost.
— marketing Tricoya®’s sustainable, enhanced
durability and exceptional dimensional
stability properties;
• Wholesale price of Tricoya® panels above that of
Accoya® reflecting its exceptional properties and
that it is a unique offering in the market.
• Construction of the Hull plant is expected to
address the increased global demand and
promote increased supply.
— seeding the market for Tricoya® products;
— pursuing additional licence or consortium
agreements worldwide to support Tricoya®’s
growth potential.
• Tricoya Ventures UK Limited (TVUK) – are building
and will operate and run the Tricoya® plant at
Saltend Chemicals Park, Hull, a site selected for its
adjacency to BP’s acetic anhydride plant. The plant
will produce Tricoya® chips to sell to the panel
industry as a feedstock.
• Tricoya Technologies Limited (TTL) – has signed
an agreement with PETRONAS Chemicals Group
(‘PCG’) to evaluate the feasibility of jointly funding,
designing, building and operating an integrated
acetic anhydride and Tricoya® production plant
in Malaysia.
Tricoya® revenue streams include:
• Sale of acetylated wood chips.
• Licence and royalty fees received from licensees
for panel forming IP and right to brand and sell
Tricoya® panels.
• Licence and royalty fees received by TTL for right
to use Tricoya® IP to manufacture Tricoya® chips.
• Sale of Acetic acid, which is a by-product of the
Tricoya® manufacturing process.
The Hull plant:
• Construction progressing, with the Hull
plant expected to be operational in mid-2020
calendar year.
•
Initial capacity of 30,000 tonnes of chip per annum,
sufficient to produce approximately 40,000 cubic
metres of Tricoya® panels.
• Licensee and sales agreements secured with
MEDITE & FINSA, with expectation the plant
will be significantly loaded from start-up.
• Plant expected to be EBITDA positive
operating at approximately 40% capacity.
• Full capacity expected to be reached
in approximately four years.
Sanctuary: ‘House of Heroes’ children’s recovery centre is
built with MEDITE TRICOYA® EXTREME
A hospital facility in Norrland, Sweden has been renovated extensively with
wood-based products, owing to the universal belief that natural materials help
people heal better. This serene and homely sanctuary functions as a temporary
home for families with young children suffering from long-term illness.
Designed by White Arkitekter, Hjältarnas Hus (House of Heroes) features
MEDITE TRICOYA EXTREME (MTX) panels along the outer walls, while the roof is
structured from glue-laminated wood (‘glulam’), overlaid with white metal sheets.
Location: Norrland, Sweden
Architect: White Arkitekter
26
Annual Report and Financial Statements 2019
Strategic Report / Financial Review
27
Strategic Report
Financial Review
“ €2.3m Group Underlying EBITDA recorded
in the second half of the year resulting in
positive Group Underlying EBITDA for the
full year of €0.9m.”
Statement of comprehensive income
Group revenue increased by 23% to €75.2m for
the year ended 31 March 2019 (2018: €60.9m).
Revenue from Accoya® wood increased by 19% to
€66.9m largely as a result of higher sales volumes
and higher average selling prices. Included within
Accoya® revenue, are sales for the manufacture of
Tricoya® panels, which increased to €11.8m (2018:
€7.8m). These sales are used to develop the market
for Tricoya® products, ahead of the start-up of the
Tricoya® plant, currently under construction in Hull.
Tricoya® wood revenue of €0.6m represented sales
of Tricoya® panels, purchased from our Tricoya®
licensees, to sell into other geographies in order to
provide initial market seeding material for the global
Tricoya® market.
Licence revenue of €1.6m (2018: €0.2m) was principally
attributable to our Accoya® licensee, Cerdia
International GmbH (‘Cerdia’) (previously named
Rhodia Acetow), reflecting the milestone nature of our
contract with them and licence income in our Tricoya®
segment. Other revenue of €6.0m (2018: €4.4m)
predominantly relates to the sale of acetic acid which
increased compared to the prior year given higher
production levels and higher acetic acid prices.
Gross margin increased from 22% to 25% compared
to the previous year due to higher licencing income
and an improved Accoya® manufacturing gross
margin. The increase in Accoya® manufacturing
gross margin from 22% to 23% was driven by higher
average selling prices, however, this was somewhat
Group Underlying EBITDA
H2 2019
Group cash flow generated
from operating activities
€2.3m
€0.3m
H2 2019
€2.3m
2019
€0.3m
H1 2019
(€1.4m)
(€3.8m)
2018
Year to
31 March
2019
Year to
31 March
2018 Change % H2 2019
H1 2019
H2 2018
Total Group Revenue
€75.2m €60.9m
23% €43.6m
€31.6m €32.6m
Gross profit
€18.6m
€13.6m
37% €11.6m
€7.0m
€8.0m
Underlying EBITDA
€0.9m
(€3.5m)
€2.3m
(€1.4m)
(€0.7m)
Underlying loss before tax
(€6.2m)
(€8.8m)
(€1.7m)
(€4.5m)
(€3.6m)
Statutory loss before tax
(€7.7m)
(€10.4m)
(€2.3m)
(€5.4m)
(€3.6m)
Year end cash balance
€8.9m
€39.7m
€8.9m €22.0m
€39.7m
Year end net (debt)
(€50.1m)
(€3.8m)
(€50.1m)
(€34.2m)
(€3.8m)
H2 2019
v H1 2019
Change %
H2 2019
v H2 2018
Change %
38%
66%
34%
45%
offset by an increase in the proportion of lower
margin sales. 46% of Accoya® sold in the year was
sold to Cerdia or for Tricoya®, both of which are at
discounted prices, compared to 41% in the prior
year. This proportion decreased in the second half
of the financial year and is expected to decrease
further in the new financial year, allowing for greater
volumes for non-discounted sales to other Accoya®
customers. The Accoya® manufacturing gross margin
increased to 25% in the second half of the financial
year as we benefited from higher prices and higher
production and sales volumes. Gross margins of 30%
for the Accoya® business continue to be achievable
in the longer term when taking account of higher
production volumes as well as excluding the impact
of the sales at discounted prices.
In addition, the previous year included an additional
plant shut down which was required as part of the
third reactor construction project and which was not
required in the current year.
Underlying other operating costs (excluding
depreciation and amortisation), increased from €17.1m
to €17.7m. This increase was largely due to higher
underlying staff costs which increased by €1.9m
to €14.1m due to inflationary salary increases and
an increase in average headcount by 21 compared
to the prior year. The increase in headcount is
predominantly attributable to an increase in Arnhem
operations staff following the commissioning of the
third Accoya® reactor and recruitment of the first
phase of staff for the Hull Tricoya® plant.
The increase in staff costs were partially offset
by a decrease in third party sales and marketing
expenditure and a decrease in R&D expenditure
during the year. The lower R&D expenditure
recognised in the consolidated statement of
comprehensive income was principally due to an
increased amount of patent related costs qualifying
for capitalisation.
Depreciation charges increased compared to the
prior year following the completion of the third
reactor and the purchase of the previously leased
Arnhem land and buildings, mentioned below.
Underlying finance expenses increased to €3.1m
(2018: €2.2m) due to interest payable on our loan
with Cerdia no longer being capitalised following the
completion of the third Accoya® reactor, together
with finance charges attributable to the lease
arrangements relating to the new building in Arnhem,
which was occupied in November 2017 and which was
subsequently replaced by loans with ABN AMRO and
Bruil following the purchase of the land and buildings
during the year.
An exceptional finance charge (€1.1m) has been
recognised in respect of the acquisition of the land
and buildings in Arnhem from Bruil as previously
reported in the first half of the financial year.
The non-cash charge reflects the difference between
the assets held under the finance lease and the
finance lease liability which was terminated at the
point the acquisition was completed. The prior year
included €1.6m of exceptional expenses. See note 5
for further details.
Other adjustments for the year include foreign
exchange differences on cash and loans held in
pounds sterling. The cash is held primarily in pounds
sterling to act as a cash flow hedge against future
sterling project expenditure on the new plant being
constructed in Hull. The effective portion of the cash
flow hedge is recognised in Other comprehensive
income. See note 5 for further details.
Underlying loss before tax decreased by €2.6m
to €6.2m (2018: €8.8m). After taking into account
exceptional items and other adjustments, loss before
tax decreased by €2.7m to €7.7m (2018: €10.4m).
The tax credit of €0.8m (2018: tax credit of €0.3m)
reflects a prior period adjustment and results from a
change to the Group’s transfer pricing policy to more
accurately reflect the Group’s business model.
Cash flow
Cash flow generated from operating activities of
€0.3m compared to €3.8m out-flow in the previous
year, reflects the improving operational cash flow
being generated by the Group.
At 31 March 2019, the Group held cash balances of
€8.9m, representing a €30.8m decrease in the year
from 31 March 2018. The decrease in cash in the year
is largely attributable to investment in tangible fixed
assets of €37.4m (excluding the land and buildings
purchase), offset by €5.7m in-flow from the issue of
new ordinary shares in Accsys to VP Participaties BV,
drawdown of €3m on the Tricoya® RBS facility and of
€1.8m on our working capital facility.
Loan repayments (including rolled up interest) of
€3.2m commenced during the year, with repayments
commencing to BGF, Cerdia and on the ABN AMRO/
Bruil borrowings mentioned below.
Loan receipts of €23m from ABN AMRO and Bruil
related to the land and buildings purchase in Arnhem,
affecting both investing and financing activities,
with the freehold purchase included within Property,
plant and equipment, offset by the termination of the
associated finance lease. See note 29.
28
Annual Report and Financial Statements 2019
Strategic Report / Financial Review
29
Strategic Report
Financial Review continued
Financial position
Plant and machinery additions of €36.7m
(2018: €31.1m) in the year principally consisted
of the construction of the third Accoya® reactor
(€8.4m) which was completed during the year and
the continuing Tricoya® plant construction in Hull
(€27.8m). Net additions of €9.8m were made in
the year as a result of the purchase of the land and
buildings in Arnhem, representing the purchase
price of €23.0m net with €13.2m of assets which
had previously been accounted for as a finance
lease. This purchase was financed by loans from
ABN AMRO and Bruil, set out below.
Trade and other receivables increased to €13.0m
(2018: €9.3m) largely as a result of increased sales in
the year compared to prior year and strong sales in
the month of March.
Inventory levels increased in the period to €14.0m
(2018: €13.1m), driven by an increase in finished goods
principally due to the start-up of Reactor 3 in the year,
increasing our production capacity by 50%. Levels of
Accoya® inventory remain low, with the finished goods
balance representing two to three weeks of sales.
The increase in trade and other payables to €20.0m
(2018: €18.0m) is primarily due to accruals associated
with the capital projects, which are due for payment
in the next financial year.
Amounts payable under loan agreements increased to
€56.9m (2018: €29.3m). New financing arrangements
in respect of the Arnhem property of €23m were
undertaken in the year, comprising of a €19m partially
amortising five year package from ABN AMRO, and a
commercial loan from the seller and former landlord,
Bruil, of €4m. The loans fully financed the purchase
of the land and buildings associated with the Group’s
Accoya® plant and logistics centre in Arnhem.
The financing terms will result in a lower overall
income statement charge over the next 20 years
and ownership of the land is expected to provide
enhanced strategic options, operational security and
greater flexibility in respect of the use of the land.
The purchase replaced the previously held finance
and operating lease which was terminated in the
year. The net impact of the above transaction was
to increase Property, plant and equipment by €9.8m
with net debt increasing by €10.9m.
The first €3m of the Tricoya® RBS €17.2m (€15m
net) facility was drawn down during the year, as
anticipated, in conjunction with funding the ongoing
construction of the Tricoya® plant in Hull.
The remainder of the Tricoya® RBS facility remains
as available headroom, as well as €4.2m available
headroom on the €6m working capital facility with
ABN AMRO.
Going concern
These 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 12 months from the
date these financial statements are approved.
As part of the Group’s going concern review,
the Directors have reviewed the Group’s trading
forecasts and working capital requirements for the
foreseeable future taking into account the banking
and finance facilities which are currently in place (see
note 29 for details of these facilities). These forecasts
indicate that, in order to continue as a going concern,
the Group is dependent on the achievement of
certain operating performance measures relating
to the production and sales of Accoya® wood from
the plant in Arnhem with the collection of ongoing
working capital items in line with internally agreed
budgets. The Directors have also considered the level
and timing of capital expenditure required in relation
to the new plant in Hull which is currently being built
and further expansion of the Arnhem operation (with
further details of the required capital expenditure
and how this is to be financed to be confirmed as the
detailed planning progresses).
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, there is no material uncertainty.
There are a sufficient number of alternative actions
and measures within the control of the Group that can
and would be taken in order to achieve the Group’s
medium and long term objectives including reducing/
deferring costs in some discretionary areas.
Therefore the Directors believe that the going
concern basis is the most appropriate on which
to prepare the financial statements.
William Rudge
Finance Director
24 June 2019
Charred Accoya® wood for cigar lounge
in Malaysia
A cigar lounge at architectural and design firm Quirk &
Associates headquarters in Malaysia makes stunning use
of Accoya® wood. Made by surface charring according to
the Shou Sugi Ban method, this is the first time Zwarthout’s
Marugame RAW product with a pigeon hunter profile has
been used in Malaysia.
Location: Malaysia
Manufacturer: Zwarthout
Find out more about this project on www.accoya.com
30
Annual Report and Financial Statements 2019
Strategic Report / Sustainability Report
31
Strategic Report
Sustainability Report
A strong belief that we have a collective social
responsibility to use and develop our technology
to tackle climate change and prevent pollution
lies at the very core of our business.
Our Corporate Vision
A strong belief that we have a collective social
responsibility to use and develop our technology
to tackle climate change and prevent pollution lies
at the very core of our business. Our innovative
acetylation technology enables us to sustainably
manufacture high performance, non-toxic wood
products that make a material difference to the
environment as well as offer ‘best in class’ durability,
dimensional stability and a wide spectrum of other
advantages over alternative fossil fuel dependent
or man-made products. This values-led vision also
provides an attractive opportunity for our employees,
distributors, licensees and other stakeholders.
We want to ensure that our business is not only a
commercial success, but also run in a responsible
fashion as we continue to advance technologies for
a better world.
Accsys has already developed and is commercially
producing Accoya® solid acetylated wood. We have
developed the process for the production of Tricoya®
acetylated wood elements, used for the production
of panel products. We are committed to increase the
use of these products globally through sales from
our manufacturing facilities, and on a substantially
larger scale by licensing our technologies to other
companies so that they too can manufacture these
sustainable wood-based products.
Accsys aims to reduce the use of environmentally
unfriendly building materials and products by the
utilisation of our propriety technology and the
introduction of our products around the world. The
planet continues to consume endangered materials
like tropical hardwood and non-renewable, high
emitting building materials such as plastics, concrete
and metals at an alarming rate. Our acetylated wood
products offer alternative, sustainable new materials
that resolve many of the environmental limitations
that commonly used building materials have, whilst
not compromising on performance. In fact, Accoya®
is the only building product perfectly fitting in the
bio-cycle of the circular economy while having the
same performance as typical techno-cycle building
products such as plastics and metals which cannot
be renewed and have a high carbon footprint.
Accsys is also committed to continuing R&D
concerning our products (applications and new
wood species) and processes. This ongoing
development is designed to increase the use
and improve the environmental and efficiency
benefits of our products. This will ensure we
continue to respond to the growing global
ambition of consumers to live sustainably,
reduce the growth of plastic pollution and
tackle climate change and in turn will benefit
many of our stakeholders.
Our products and the
environment
The main environmental benefit of our
Accoya® and Tricoya® acetylated wood
products is their use as a substitute
for other environmentally damaging
products including chemically
treated woods that use toxic
preservatives, unsustainably
sourced tropical timbers and
materials produced from
energy intensive or non-
renewable resources such
as metals (for example,
steel and aluminium) and
plastics (such as PVC).
Circular Economy Based on Renewable Materials (Bio-cycle)
A circular economy is one that is restorative and regenerative by design, and which aims to keep
products, components and materials at their highest utility and value at all times, distinguishing
between technical and biological cycles.
Source: Ellen MacArthur Foundation
Bio-cycle and techno-cycle are the two cycles within the circular economy principles. Materials from the
bio-cycle are organic whereas products from the techno-cycle are defined as from the man-made world.
Carbon footprint
During their growth, trees convert carbon dioxide
(CO2) through photosynthesis into cellulose and
lignin and emit oxygen in the process. As a result,
during their lifespan trees act as carbon sinks, as
CO2 is captured from the atmosphere and makes up
approximately half of the dry weight stored in the
wood of the tree. The carbon is stored in the living
tree, but will also remain stored once the tree is felled
and the wood of the tree is used for products such
as Accoya® and Tricoya®. As a consequence, CO2
is locked out of the natural carbon cycle during the
lifespan of the wood or wood product. Through decay
or incineration, the carbon will eventually be released
again into the atmosphere in the form of CO2.
In producing Accoya® wood, we improve this carbon
capture mechanism in two ways. Firstly by using fast
growing softwood species, such as radiata pine, as
input for our acetylation process. Per hectare, more
cubic metres of radiata pine can be grown (10 m3/ha/
year) compared to other wood species. Consequently,
a larger amount of carbon is sequestered compared
to slow growing wood species.
Secondly, through the acetylation process the
dimensional stability and durability (durability class 1
according to EN standard 350-1) of a wood species
are improved considerably, lengthening the product
lifespan. Thus Accoya® wood is able to act as a
longer term carbon sink that needs less additional
care, as compared to other woods. These unique
properties allow us to provide a warranty on Accoya®
wood for 50 years above ground and 25 years below
ground (please see our Certificates of Warranty for
full details).
For the complete story please watch our three minute movie: Accoya® – the sustainable building solution
www.youtube.com/accoya
Endlessly renewable ProductionProductsUseWasteSourcing 32
Annual Report and Financial Statements 2019
Strategic Report / Risk Management
33
Strategic Report
Sustainability Report continued
Accreditations
FSC® (CO12330)
Of the various schemes for sustainable forestry
available, the Forest Stewardship Council (FSC®) is
regarded as the leading and most comprehensive
certification programme available. Accoya® wood and
MEDITE® Tricoya® Extreme are FSC® certified. FSC®
certification is focused on benign environmental
performance but also safeguards social interests
for all stakeholders involved.
Cradle to Cradle® Certified
Accoya® is one of the very few building products to
have acquired Cradle to Cradle Certified™ at the
Gold Level. Cradle to Cradle® Certified provides a
means to tangibly and credibly measure achievement
in environmentally-intelligent design including
the use of environmentally safe healthy materials
and instituting strategies for social responsibility.
Accoya® also received Platinum status for the
category Material Health meaning manufacturers
are trusted with the way to communicate their
work towards chemically optimised products.
BREEAM & LEED
BREEAM and LEED are globally adopted and
recognised green building certification systems.
Both are based on various building related
environmental indicators including sustainable
energy, water and material use. For the latter
category the application of Accoya® can
contribute to several credits in both schemes.
Dubokeur®
The awarding body of the prestigious Dubokeur®
certification, Nederland’s Institute for Building
Ecology (NIBE), issues certificates only to the most
environmentally-friendly products within a particular
application, taking into account a range of stringent
factors based on LCA methodology. This certification
is of particular significance to our Dutch customers,
unequivocally positioning Accoya® as an outstanding
environmental choice for window frames according
to Dutch sustainable building regulations.
Nordic Swan Label
The outstanding green credentials of Accoya®
have been officially recognised by Europe’s Nordic
nations with the award of the Svanen Ecolabel.
The label, renowned for its rigor and transparency,
is the internationally recognised ecolabel for
Norway, Sweden, Denmark, Iceland and Finland
and was established in 1989 by the Nordic Council
of Ministers.
Singapore Green Label
For the South East Asian market we have attained
the highly regarded Green label of the Singapore
Environment Council. The Singapore Environment
Council (SEC) was set up to promote environmental
awareness in South East Asia.
Future Build UAE
The Future Build is a green building materials portal
that helps architects, engineers and contractors
– particularly in the United Arab Emirates and
wider region – confidently select and source
environmentally sustainable, third party certified
products to meet their projects’ environmental
objectives. Only products that have been assessed
and selected according to standards and criteria
set by Masdar City, Abu Dhabi, are listed. Accoya®
was rated as excellent or A.
Declare
The International Living Future Institute manages
the highly acclaimed and most rigorous proven
performance-based standard for green buildings,
the Living Building Challenge. The Declare label
shows that Accoya® consists of greater than 99%
of FSC® certified fast growing Radiata Pine, provides
no problems in the End of Life phase and is fully safe
regarding ingredients proven through the ‘Red List
Free’ statement.
Strategic Report
Risk Management
The Board has overall responsibility for
the management of risk at Accsys
As with all companies, the Group is exposed to a
number of risks and uncertainties. We are acutely
conscious that our ability to successfully identify,
evaluate and mitigate those risks and uncertainties
is of paramount importance as we seek to deliver on
our ambitious growth strategy.
At Accsys, the Board is ultimately responsible for
identifying, evaluating and mitigating the principal
risks faced by the Group. Ongoing management of
this process is delegated to the Audit Committee
which has, over the last three years and since
the appointment of its current Chairman, sought
to improve and increasingly ensure Accsys’ risk
processes are focused and robust. In 2017 the Board
began a review of the Terms of Reference for the
Audit Committee which led to enhanced provision
relating to risk, and in 2018, a new Risk Committee
was constituted.
The Risk Committee reports to the Audit Committee
on a regular basis, identifying updates to the risk
register and areas of concern. The same is reviewed
by the Audit Committee at its formal meetings ahead
of onward reporting to the Board.
The Risk Committee, chaired by the Finance Director
and encompassing the Senior Management Team,
is responsible for considering risk on an ongoing
basis and meets formally at least quarterly. The Risk
Committee has developed a detailed risk register
that, amongst other things, seeks to:
•
identify and rank key risk areas;
• allocate a Senior Management Team member
with day to day oversight of each risk;
• evaluate the likelihood and impact of each risk;
•
identify steps that are being taken to mitigate
the risk;
• traffic light those areas of particular concern.
Our risk management framework incorporates a top-down approach, setting the risk appetite
and identifying our principal risks, and a bottom-up approach to identify our operational risks
C o l l eagues
a m
e
Group Controls
adershi p t
nera ti o n
u
m
e
R
e
L
e
v
i
t
u
c
e
x
N
o
m
i
n
a
t
i
o
n
Board of
Directors
E
x
e
c
u
tiv
e Leaders
E
Review of
operational
controls
Audit
hip team
Colleagu e s
All employees have a role in the management of risk within the Group
34
Annual Report and Financial Statements 2019
Strategic Report / Risk Management
35
Strategic Report
Risk Management continued
The principal risks facing the Group and recorded on Accsys’ risk register as at the date of this Report are
included in the list below. The below is not exhaustive and as explained above, is subject to ongoing review
and change and consequently should not be read as in any order of priority.
Risk and Description
Mitigation
Movement
Health, Safety and Environment
The nature of the Group’s manufacturing
business and operation or construction
of industrial plants that utilise chemicals
under heat and pressure means HSE
events at our sites such as injury, damage,
explosion, contamination or death represent
ongoing high level risks with potentially
catastrophic impact.
Manufacturing
The Group’s ability to generate revenue
and drive EBITDA relies heavily on its
manufacturing capability. Operational
down-time in Arnhem, and a failure to
realise commercial operations at our new
manufacturing facilities in Hull and elsewhere
are likely to materially adversely impact our
financial results and ability to grow.
IT
As an IP rich Group with manufacturing
processes that depend on IT systems,
a failure of IT security, continuity or
inadequate management information
may have a serious impact on the
Group’s business.
Dedicated full time HSE Managers are appointed at
both our Arnhem and Hull sites, who report to each
site’s operational manager, with monthly reporting and
review to and by the Group’s Executive Committee
and on an ad hoc basis to the extent that events occur.
Safety Management Systems are regularly reviewed,
with a comprehensive audit programme (regulatory and
internal) in place. Our aim is to continuously increase
HSE awareness, and to that end, a Safety Awareness
Programme has been launched for all Group personnel.
HSE training for all personnel working in industrial areas
is mandatory and a priority.
At Arnhem, an increased emphasis on plant reliability
and integrity, including more detailed failure analysis,
structured preventative maintenance programmes and
associated procurement of high impact spare parts are
designed to mitigate down-time, as well as continually
seeking to learn from our operational history.
To mitigate further delays at our new plant in Hull,
we have increased project management resource and
implemented peer reviews of key design, construction
and scheduling data.
Accsys undertakes regular IT penetration testing and
review of its IT systems and implements infrastructure
upgrades where necessary. Staff training led by our
dedicated IT Managers on IT security is mandatory.
Movement in last 12 months
No Change
Higher
Lower
Risk and Description
Mitigation
Movement
Sale of Products
Demand for our products now far exceeds
supply. A failure to supply pent up demand
risks customers adopting alternative
technologies and products which may
adversely impact demand for future
production and sales growth.
During the last financial year, we completed the
expansion of our Arnhem plant with a third reactor, which
is now fully operational, increasing Accoya® production
capacity by 50%. We are planning for the construction of
a fourth Accoya® reactor and expect our Tricoya® plant
in Hull to be operational in mid-2020 calendar year.
Sales of products may also be impacted
by quality control failures which may lead
to reputational damage.
We continue to evaluate other new manufacturing
facilities, including in Malaysia with PETRONAS Chemicals
Group, as well as the potential for a plant in the US.
Product quality of all batches of Accoya® are checked as
part of our quality control procedures, but in addition,
we have recently invested in scanner technology to allow
us to identify and reduce internal product issues, such as
cracks, that would not otherwise be detected from the
visual inspections that are also carried out.
Our dedicated business development team is mandated
to develop strong relationships with actual and future
counter-parts, with a view to developing a pipe-line of
new business opportunities and develop and foster key
relationships. Our sales, marketing and licensee support
teams then seek to work with licensees with a view to
assisting them in the growth of their Accoya®
or Tricoya® businesses.
The Group has developed long term relationships with
key suppliers of raw materials. Over the last few years,
supply agreements have been entered into for both solid
wood addressing our Arnhem needs and acetic anhydride
for both our Arnhem and Hull plants. The Group is
currently considering its wood chip supply needs ahead
of commercial operation of the Hull plant in 2020.
Our supply chain team work closely with our production
and sales teams to ensure raw material supply is optimal,
developing clear internal policies to that end, whilst
keeping informed of and reviewing market dynamics
and participants.
Licensing/Partnering
A loss of demand for technology licences or
interest in partnering with us for new plants
may adversely impact our ability to realise
value from our IP and grow in line with
our strategy.
Likewise, a failure of our existing licensees
and business partners to perform as
expected under the terms of their
respective agreements is likely to be
prejudicial to us.
Supply of Raw Materials
As well as needing utilities, the production
of Accoya® and Tricoya® requires the
procurement and supply of two key raw
materials: raw wood (whether in solid form
or chip) and acetic anhydride.
A failure to secure the supply of raw
materials in the right volumes and at the
right times will hinder our ability to produce
and sell our products, which in turn is likely
to materially adversely affect our revenue
and EBITDA.
36
Annual Report and Financial Statements 2019
Strategic Report / Risk Management
37
Strategic Report
Risk Management continued
Risk and Description
Mitigation
Movement
Risk and Description
Mitigation
Movement
Finance
As with all businesses, a failure in financial
planning may materially prejudice the
Group. As Accsys continues to grow, its
financing needs, both debt and equity,
are likely to increase. A failure to secure
appropriate finance, comply with agreed
financing covenants and implement and
operate robust internal systems and
controls are all essential if the Group’s
growth aspirations are to succeed.
There is also the risk the Group is adversely
effected by the movement in foreign
exchange rates, which may result in
significant, unexpected financial gains
or losses.
Significant internal time and attention is given to
reviewing our financing needs as the Group continues
to grow. Strong relationships have been formed and
agreements entered into over recent years with both
equity and debt providers so as to mitigate risk in
this area.
The Group’s risk management strategy is to minimise the
financial risk associated with exchange rate movements
by using foreign exchange hedging. Where possible, the
Group will use natural hedges where assets and liabilities
exist in the same currency, otherwise it will use foreign
exchange derivatives such as forward contracts to
minimise the risk.
Protection of Intellectual Property and Trade Secrets
The Group’s technologies, processes and
products use and are distinguished by
its proprietary and valuable intellectual
property, including patents and trademarks,
as well as trade secrets. A loss of its
intellectual property or trade secrets, or
failure to develop the same, may materially
weaken the competitive advantage that the
Group currently enjoys.
The Group’s dedicated IP Manager, together with
external IP attorneys, are responsible for maintaining
and developing our IP portfolio. Ongoing reporting,
monitoring and evaluation of research and development
and other IP activity, both internally and externally helps
ensure that the Group’s IP is protected and grown.
Confidentiality and IP Agreements are put in place with
counter-parts to control risk and training given to Group
personnel to help ensure awareness of the need to
protect our IP.
Litigation and Disputes
Litigation and other disputes may require
the investment of significant time and money
to resolve, which even with a successful
outcome, may be distracting or detrimental
to the Group’s interests during a period
of growth. Disputes with key contractual
counter-parts may also have broader
adverse operational implications.
The Group seeks to mitigate the risk of disputes by
developing strong relationships with key business
counter-parts and keeping in regular communication
with them on business matters, so as to address and
resolve any issues at an early stage.
Movement in last 12 months
No Change
Higher
Lower
Personnel
The Group employs many highly experienced
personnel that have deep knowledge of
our business, technologies, processes and
products. A loss of personnel who hold
highly valuable information or who are highly
knowledgeable about the Group may have a
material adverse impact on us.
Detailed reviews of departmental needs aim to ensure
that the Group is able to appropriately resource
its organisational needs at a time of rapid growth.
Evaluations are carried out to identify those functions
that are of critical importance for the Group and
individuals within those functions that are themselves
critical and/or are considered of high potential.
The highly qualified personnel required by
the Group in various capacities are sometimes
in short supply in the labour market. An
inability to swiftly replace personnel that
leave the Group or expand our workforce
with additional personnel may limit the rate
at which we are able to grow our business.
Governance, Compliance and Law
A failure to maintain appropriate governance
structures may lead to poor decision
making and operational performance and/
or may increase the risk of the Group
failing to comply with law and regulation
and appropriately adapt to changes in law
and regulation that are relevant to it.
Investor and Public Relations
The loss of the support and confidence
of shareholders, suppliers and customers
arising from either our own poor
performance or from the actions of third
parties may result in a diminished ability for
us to raise new capital and implement new
projects to grow our business.
The Group also operates a long term incentivisation plan
and has constituted an employee benefit trust, both of
which seek to reward, incentivise, motivate, attract and
retain critical personnel by way of share based awards
with deferred vesting.
As noted on page 44 in this document, in 2018, Accsys
carried out a review of corporate governance. As a result of
that review, it has adopted the QCA Corporate Governance
Code, which it now reports against on a comply or explain
basis. In addition to the disclosures set out in these Report
and Accounts, Accsys’ current Statement of Compliance
relating to the QCA Code explains how Accsys complies
with the Code and in turn mitigates risk. A copy of our
current QCA Compliance Statement can be found at
https://www.accsysplc.com/qca-compliance/
The Group seeks to keep in regular contact with its
key stakeholders through a variety of means, including
public shareholder and trade announcements, face to
face meetings, investor days and live bi-annual web-cast
presentations of financial results amongst others. In
doing so, the Group seeks to keep stakeholders informed
on a regular and transparent basis which in turn is
designed to mitigate risks in this area.
Accsys has recently appointed both an internal Investor
Relations professional, as well as a second broker,
Investec Bank PLC, who each now work alongside our
other broker Numis Securities, with a mandate to
grow our investor base, access to capital and share
price for the benefit of all shareholders. The Group
is also currently seeking to enhance its internal and
trade communications capability with the appointment
of new personnel and communication agencies.
38
Annual Report and Financial Statements 2019
39
Corporate Governance
40 Board of Directors
42
Senior Management Team
44 Chairman’s Introduction
to Governance
46 Corporate Governance
49 The QCA Corporate Governance
Code
54 Remuneration Report
69 Directors’ Report
73 Statement of Directors’
Responsibilities
We chose to use Accoya® wood because
of its very light colour, its durability and its
great dimensional stability. We applied a
clear Teknos coating on the wood to further
prolong the holding of its natural hue.”
Charlotte Brussieux, Kengo Kuma
Changing wood to change the world in
Europe
‘NIWA’ residence – Vanves, France
Inspiring residential development features Accoya® wood
In collaboration with Japanese architect Kengo Kuma and Michel Desvigne, both internationally
renowned landscapers, the Niwa real estate programme (garden in Japanese) has just opened
near Paris. This programme was overseen by Bouygues Immobilier, and Accoya® wood was
selected as the natural choice for the pergolas and sunshades.
The programme was spread over four fragmented levels: the higher the height, the larger
the façade, allowing the creation of large terraces with green spaces, offering visual
breakthroughs on an interior Japanese garden style.
The building was constructed with a reduced carbon footprint and the strong presence
of plants, and the installation of an automated pneumatic waste collection system,
contributed to the quality of this urban development. The choice of sustainable and
environmentally friendly materials such as Accoya® was also part of the specification.
The architect chose to apply a Teknos coating to the Accoya® sunshades in order
to preserve its light colour and natural appearance. They dress the façades
and gently let in the light, contributing to the freshness in these apartments.
Accoya® pergolas above the entrance porches also provide a naturally framed
glimpse of the interior garden, while providing subtle shade and cover.
Location: Vanves, France
Architect : Kengo Kuma
Europe revenue
€59.6m
27%
(vs 2018)
Image © Thierry Favatier
40
Annual Report and Financial Statements 2019
Governance / Board of Directors
41
Governance
Board of Directors
Patrick Shanley
Non-Executive Chairman
Paul Clegg
Chief Executive Officer
William Rudge
Finance Director
Nick Meyer
Non-Executive Director
Sue Farr
Non-Executive Director
Sean Christie
Non-Executive Director
Background and Experience
Patrick, born April 1954, has extensive
board room experience in the chemicals
sector, having previously been Chief
Financial Officer of Courtaulds PLC
and Acordis BV, Chief Executive Officer
of Corsadi BV, Chairman of Cordenka
Investments BV and Chairman of Finacor
BV. With effect from 2nd December
2015, Patrick has been appointed Non-
Executive Chairman of Gattaca PLC
(formerly Matchtech Group PLC). Patrick
began his career working for British
Coal where he qualified as a Chartered
Management Accountant. He has a
strong operational, restructuring,
merger and acquisition background
within a manufacturing environment.
Paul, born May 1960, assumed the role
of Chief Executive Officer on 1 August
2009. Paul had been a Non-Executive
Director of the Group since April 2009
and had been working with the Group as
part of the Chairman’s Office since mid-
2008. Prior to this, he was CEO of Cowen
International, subsequent to its sale by
Société Générale in 2006. Before this, he
ran SG Cowen International, part of the
Société Générale Group, from 2000 to
2006. Paul started in investment banking
in 1981 at The First Boston Corporation.
Since then he has held senior positions
at various investment banks including
James Capel and Schroders. Paul was
previously a Non-Executive Director
of Synairgen Plc.
William, born February 1977, had been
the Financial Controller for Accsys
since joining the Company in January
2010 before being appointed Finance
Director on 1 October 2012. Prior to this
he qualified as a chartered accountant
with Deloitte in 2002 and subsequently
gained a further six years’ experience in
their audit and assurance department,
focusing on technology companies
including small growth companies and
multinational groups. William spent a
year working at Cadbury PLC, including
as Financial Controller at one of their
business units, before joining Accsys
in 2010.
External Appointments
Non-Executive Chairman of Gattaca PLC
Non-Executive Director at Peel Hunt LLP
None
Committee Membership
Audit Committee
Nomination Committee (Chairman)
Remuneration Committee
Nick, born December
1944, has extensive board
room experience in the
timber industry, having
previously been Chairman of
Montague L Meyer Limited,
Deputy Chairman and
Chief Executive of Meyer
International PLC. Nick is
currently Executive Chairman
of Consolidated Timber
Holdings Group Limited, an
innovative and substantial
group of companies which
imports, distributes and
processes sustainable timber
and timber products. Nick
is also a former president of
the Timber Trade Association
of the United Kingdom.
Sean, born October 1957,
was Group Finance Director
of Croda International PLC
from 2006 to 2015, a global
manufacturer of speciality
chemicals. Prior to joining
Croda in 2006, Sean was
Group Finance Director of
Northern Foods PLC. He also
served as a Non-Executive
Director of KCOM Group
PLC until 2007, of Eminate
Limited, a wholly owned
subsidiary of The University
of Nottingham, of Cherry
Valley Farms Limited until
its sale in 2010 and of
Produce Investments PLC.
He is a Fellow of both the
Chartered Institute of
Management Accountants
and the Association of
Corporate Treasurers. Sean
has extensive knowledge of
all aspects of finance and
strategy in major businesses
and is an experienced Audit
Committee Chairman.
Sue, born Leap Year
Day 1956 is a highly
experienced marketing and
communications professional
who joined the Accsys
Board in November 2014.
Sue became part of the
executive management team
at Chime Communications
PLC in 2003 and in 2017
was appointed as Special
Advisor. Prior to that she was
Europe MD of leading PR firm
Golin Harris, the BBC’s first
ever Director of Marketing
and Communications, and
Director of Corporate
Affairs for Thames Television.
She was a Non-Executive
Director of Motivcom PLC
from 2008–2014, a Trustee
of the Historic Royal
Palaces from 2007–2013 and
previously a Non-Executive
Director of Dairy Crest
Group PLC and Millennium
& Copthorne Hotels PLC.
She has been Chairman
of both the Marketing
Group of Great Britain and
The Marketing Society.
A previous Advertising
Woman of the Year, she
was awarded an Honorary
Doctorate by the University
of Bedfordshire in 2010.
Executive Chairman of
Consolidated Timber
Holdings Group Limited
Non-Executive Director of
British American Tobacco
PLC and Helical PLC
Non-Executive Director of
Applied Graphene Materials
PLC, Turner & Townsend Ltd
and Optibiotix Health PLC
Trudy Schoolenberg
Non-Executive Director
(Senior Independent Director)
Trudy has nearly 30 years’
experience working for
blue-chip companies in the
chemicals, engineering and
high performance product
sectors, including over 20
years with Royal Dutch Shell
where she led business
strategy and growth plans for
Shell Chemicals, a business
unit with a multi-billion dollar
turnover. She joined the
Accsys Board on the 1st April
2018. As well as strategy
and growth experience, Dr
Schoolenberg has strong
operational knowledge,
gained both during her time
at Shell and thereafter at
Akzo Nobel, where following
supply chain and research and
development roles on Akzo’s
$4 billion decorative paints
Board, she subsequently had
responsibility for delivering
a new manufacturing plant
in Newcastle.
Non-Executive Director of
The Netherlands Petroleum
Stockpiling Agency (COVA),
Spirax-Sarco Engineering
PLC (Senior Independent
Director) and Low & Bonar
PLC (Senior Independent
Director)
Audit Committee
Nomination Committee
Remuneration Committee
Audit Committee
Nomination Committee
Remuneration Committee
(Chairman)
Audit Committee (Chairman)
Nomination Committee
Remuneration Committee
Audit Committee
Nomination Committee
Remuneration Committee
42
Annual Report and Financial Statements 2019
Governance / Senior Management Team
43
Governance
Senior Management Team
We believe that our employees are key to our success and our high staff retention is reflective of their
commitment to the future of the Company. Group activities are driven and managed by a Senior Management
Team of which we are particularly proud. Experts in their fields, the Senior Management Team boasts a broad
range of sector knowledge and specialism. Committed to ensure we deliver on our plans for growth and
commercial success; it’s their hard work and advice that has supported Accsys Technologies PLC’s growth.
The Senior Management Team includes the two Executive Directors and the following individuals:
Hans Pauli
Director of Corporate
Development*
Angus Dodwell
Legal Counsel and
Company Secretary*
Eddie Pratt
Director of Business
Development
Hal Stebbins
Director, Quality, Supply
Chain & Customer Service
John Alexander
Wim Dokter
Natalia Bikkenina
Pierre Lasson
Director of Sales and Product
Development
Site Director – Manufacturing
and Engineering*
Head of Human Resources*
General Manager Tricoya
Technologies Limited*
Experience
Hans has held senior
financial positions across
the banking and bio-tech
sectors and has significant
experience in investment,
manufacturing, licensing and
distribution. Hans holds a BA
in Business Administration
and has completed an MA in
Fiscal Economics from the
University of Amsterdam.
His commercial career
began in the banking
sector where he worked
for various institutions
including Barclays, where he
gained investment and M&A
experience. He then worked
for a number of bio-tech
companies, including, most
recently, Euronext listed
OctoPlus N.V.. Hans is a
Non-Executive Director of
BioTech VC, MedSciences.
Eddie has been with Accsys
since 2003, and uses his in-
depth knowledge of Accsys
to develop new markets and
partnerships for Accsys
and its branded products.
Eddie’s earlier career was
in investment banking,
receiving his training with
JP Morgan and working at its
affiliate Saudi International
Bank where he specialised
in corporate and project
finance.
Angus is responsible for all
legal matters with the Accsys
Group and is Company
Secretary. Angus qualified
as a corporate solicitor with
international law firm Ashurst
Morris Crisp (now known as
Ashurst LLP) in September
2002. After gaining further
experience in private
practice, he has since spent
over ten years working in-
house for growth companies,
advising on a broad range
of corporate, commercial
and other business matters.
Angus joined the Group
in September 2008 and is
based in London.
Hal has spent most of
his career leading global
marketing, sales, and services
operations for a variety of
businesses including IBM’s
forest products solutions
team. When he joined Accsys
in 2007, Hal was initially
responsible for the Group’s
first worldwide marketing
strategy. Since then Hal
has led the growth of our
international distributorship
and licensing management.
Currently he leads teams
responsible for wood and
chemical supply critical to
production, customer service,
and quality assurance.
John is responsible for
Group sales and product
development, managing
a team across the globe.
Following degrees in
Forestry and Forest
Products plus an MSc
in Timber Engineering,
John’s career in the wood
product industry started at
Jeld-Wen, USA, the world’s
largest manufacturer of
windows and doors. He
then moved to BSW Timber,
the largest forestry and
sawmilling group in the UK
before joining Accsys in
2010 as Head of Product
Development. John took on
his current role in 2015.
Wim joined Accsys in January
2019, overseeing the Arnhem
plant including management
of all facets of the day to day
manufacturing, production
and processes. He holds
a PhD from Technical
University Eindhoven and
has built a broad experience
base in operations leadership
and transformation,
having worked for various
companies in the chemical
and food industries,
with responsibilities
for manufacturing,
technology, maintenance
and engineering. He has
developed specific expertise
in operations excellence and
continuous improvement/
Lean Management.
Natalia is responsible for
all aspects of global HR,
including responsibility for
developing a comprehensive
global HR strategy which
supports business growth
and expansion, attracts
and retains top talent and
drives high performance.
Natalia joined the Accsys
Group in September 2017
having worked in a number of
international industrial and
technology businesses. In her
role, Natalia will also use her
experience of working for
start-ups and high growth
companies to facilitate
the Group expansion plan.
Natalia has a degree in
Languages and an MBA.
Pierre holds a PhD in
chemical engineering
and has more than 30
years’ experience in the
petrochemical industry.
Before joining Accsys in
2015, Pierre has held various
positions in research,
production, product
development, business
management, and sales
and marketing for global
petrochemical companies
such as Solvay, BP Solvay
Polyethylene, BP, Innovene,
and Ineos. He was appointed
General Manager of Tricoya®
Technologies in 2012 and has
led the company since its
inception. He is also
the General Manager
of Tricoya Ventures
UK Limited.
Note: * are also member of the Executive Committee
44
Annual Report and Financial Statements 2019
Governance / Chairman’s Introduction to Governance
45
Governance
Chairman’s Introduction to Governance
“ The Board believes that leadership and
governance play a key part in achieving
its strategic aims.”
Dear fellow shareholder, you will have seen my
introduction to the Annual Report and read the
Strategic Report on pages 12 to 37. Here I wish to
provide some further detail on the key areas of focus
for us during the year:
QCA Code adoption
In 2018 Accsys conducted a corporate governance
review in preparation for the changes to governance
requirements for AIM companies (AIM Rule 26). As a
result of such review the Company adopted the QCA
Code and shall follow and report against the QCA Code
on a comply-or-explain basis.
At Accsys, we hold a strong belief that we have a
collective social responsibility to use and develop our
technology to tackle climate change and pollution,
and such belief, together with health and safety,
remains a fundamental priority of our business.
Our innovative acetylation technology enables us to
sustainably manufacture wood products that make a
material difference to the environment as well as offer
‘best in class’ durability, dimensional stability and a
wide spectrum of other advantages over alternative
fossil fuel dependent or man-made products.
This values-led vision also provides an attractive
opportunity for our employees, distributors, licensees
and other stakeholders. We want to ensure that our
business is not only a commercial success, but also run
in a responsible fashion as we continue to advance
technologies for a better world.
Since our values are based on ‘changing wood to
change the world’, the Board believes that leadership
and governance play a key part in achieving its
strategic aims, and providing long term benefit and
success for the business and our shareholders. As
such, corporate governance and social responsibility
lies at the very core of our business and it is the
Board’s job to ensure that corporate governance
and social responsibility remains a key focus.
Key Governance Changes during the Year
During the financial year there were two key changes
to our Board composition and a change to our
Management structure:
Firstly, following an independent review of the
Board and its Directors, Dr Trudy Schoolenberg
was appointed to the Board on 1 April 2018 as a
Non-Executive Director to add operational expertise
and also carry out the role of Senior Independent
Director. More information on Trudy’s background
is set out on page 41.
Secondly, the combined Nomination and
Remuneration Committee was disaggregated into a
separate Nomination Committee and Remuneration
Committee with effect from 1 January 2019, allowing
for more focused and dedicated time to be spent
to on each important area of Board and Executive
Team composition and remuneration respectively.
The terms of reference for each Committee have
also been updated and are available on the Corporate
Governance page of our website, www.accsysplc.com.
Finally, in addition to our Senior Management
Team (which continues to function as before), we
constituted an Executive Committee, comprised of
the Executive Directors, the Company Secretary and
certain other members of the Senior Management
Team, with responsibility for implementing all key
strategic initiatives determined by the Board and
providing clear direction to the Group with the aim
of connecting our day to day operations with our
broader strategy. This change comes about as a result
of our accelerating growth, the increasing complexity
of our business, and to improve the efficiency of
managing the Group.
In the statements in this section we outline the
Company’s approach to corporate governance
and the QCA Code. For further detail on each
section please refer to the Statement of
Compliance of the QCA Code which can be
found at https://www.accsysplc.com.
Patrick Shanley
Non-Executive Chairman
24 June 2019
2
1
4
29%
2
71%
1
2
Composition of the Board
Diversity of the Board
Non-Executive Director tenure
Non-Executive Chairman
Non-Executive Directors
Executive Directors
Female
Male
0–3 years
3–7 years
7–9 years
9+ years
See our Compliance with the QCA Corporate
Governance Code on pages 49 to 53
46
Annual Report and Financial Statements 2019
Governance / Corporate Governance
47
Governance
Corporate Governance
Further details of the Company’s corporate
governance arrangements are set out below:
The Board of Directors
During the year the Board comprised a Non-Executive
Chairman, one Senior Independent Non-Executive
Director, three further Non-Executive Directors
and three Executive Directors. The Board ended the
financial year with two Executive Directors with Hans
Pauli resigning as a Director on 31 December 2018.
The Board meets regularly and is responsible for
strategy, performance, approval of major capital
projects and the framework of internal controls. To
enable the Board to discharge its duties, all Directors
receive appropriate and timely information. Briefing
papers are distributed to all Directors in advance
of Board meetings. All Directors have access to the
advice and services of the Company Secretary. The
appointment and removal of the Company Secretary
is a matter for the Board as a whole. In addition,
procedures are in place to enable the Directors
to obtain independent professional advice in the
furtherance of their duties, if necessary, at the
Company’s expense.
During the year, all serving Directors attended the
scheduled Board meetings that were held. In addition
to the scheduled meetings, a number of ad hoc
meetings were also convened and there is frequent
contact between all the Directors in connection with
the Company’s business including Audit, Nomination
and Remuneration Committee meetings which are
held as required, but as a minimum twice per annum.
Directors are subject to re-election by the
shareholders at Annual General Meetings. The
Articles of Association provide that Directors will
be subject to re-election at the first opportunity
after their appointment and the Board submit to
re-election at intervals of three years.
Day to day operating decisions are made by the
Senior Management Team of which the Chief
Executive Officer and Finance Director are members.
Audit Committee composition,
role and report for the year
The Audit Committee has primary responsibility
for monitoring the quality of internal controls and
ensuring that the financial performance of the
Company is properly measured and reported on.
The responsibilities of the Audit Committee include
approving certain related party transactions, and
identifying irregularities in the management of the
Company’s business, inter alia, through consultation
with the Company’s external auditors, and remedial
measures to the Board of Directors. The Audit
Committee considers the independence and
objectivity of the external auditors on an annual
basis, with particular regard to non-audit services.
The Audit Committee meets at least twice a year and
has unrestricted access to the Company’s auditors.
Currently, the members of the Audit Committee are
Sean Christie (Chairman), Patrick Shanley, Nick Meyer,
Trudy Schoolenberg and Sue Farr.
Key matters addressed by the Committee
during the year
• Financial reporting:
— review of the integrity of key financial
announcements (including the interim results);
— review of the Annual Report and Financial
Statements to confirm the report as a whole
was fair, balanced and understandable;
— reviewed and discussed PwC’s reports to
the committee;
— reviewed the going concern basis of accounting
and the longer-term forecasts;
— reviewed new accounting pronouncements
and any potential impact for the Group’s
financial reporting.
• External audit matters:
— reviewed the independence, objectivity and
effectiveness of PwC;
— reviewed PwC’s external audit plan taking
account of the scope, materiality and audit risks
and agreeing the audit fees;
— monitored the value of non-audit services
provided by PwC, ensuring the services
do not affect the auditors’ objectivity and
independence.
Internal financial control
The Board is responsible for establishing and
maintaining the Company’s system of internal
financial control and places importance on
maintaining a strong control environment. The key
procedures which the Directors have established
with a view to providing effective internal financial
control are as follows:
• the Company’s organisational structure has clear
lines of responsibility;
• the Company prepares a comprehensive annual
budget that is approved by the Board. Monthly
results are reported against the budget and
variances are closely monitored by the Directors;
• the Board is responsible for identifying the major
business risks faced by the Company and for
determining the appropriate courses of action
to manage those risks.
The Directors recognise, however, that such a
system of internal financial control can only provide
reasonable, not absolute, assurance against material
misstatement or loss.
Relation with shareholders
Communications with shareholders are given
high priority.
There is regular dialogue with shareholders including
presentations after the Company’s preliminary
announcement of the year-end results and six
monthly results. The Board uses the Annual General
Meeting to communicate with investors and welcomes
their participation. The Chairman aims to ensure
that the Directors are available at Annual General
Meetings to answer questions.
• Risk management:
— undertook a detailed review of the Group’s risk
register and the related mitigations, ensuring
that risks are appropriately identified, evaluated
and mitigated, as appropriate. See Risk section
from page 33.
• Corporate governance:
— reviewed changes in the field of corporate
governance and the most appropriate
corporate governance code for Accsys to
adopt and report against.
Nomination Committee
The Nomination Committee regularly reviews the
structure, size and composition (including the skills,
knowledge, experience and diversity) of the Board,
consults and advises on the same in relation to the
Executive Committee, and makes recommendations
with regard to any changes to the Board and consults
and advises regarding material changes to the
Executive Committee. In exercising this role, the
Directors shall have regard to the recommendations
put forward in the Quoted Companies Alliance
Corporate Governance Code. Currently, Patrick
Shanley chairs the Nomination Committee and
the other members are Sue Farr, Sean Christie,
Trudy Schoolenberg and Nick Meyer.
Remuneration Committee
The Remuneration Committee has primary
responsibility for the determination of the framework
or broad policy for the remuneration of the Chair
and Executive Directors, including pension rights and
compensation payments. It also consults and advises
on the same in relation to the Executive Committee.
It will also review the performance of the Executive
Directors and determine matters relating to their
remuneration. Engagement of the Company with its
Directors regarding the terms of their remuneration,
require approval of the Remuneration Committee.
The Remuneration Committee approves the granting
of share options and other equity incentives to the
Executive Directors pursuant to any share option
scheme or equity incentive scheme in operation from
time to time, as well as the overall amount of any share
awards to the Executive Committee. Currently, Sue
Farr chairs the Remuneration Committee and the
other members are Patrick Shanley, Sean Christie,
Trudy Schoolenberg and Nick Meyer.
48
Annual Report and Financial Statements 2019
Governance / The QCA Corporate Governance Code
49
Governance
Corporate Governance continued
Governance
The QCA Corporate Governance Code
Directors’ attendance record
The attendance of individual Directors at meetings of the Board and its Committees in the year under review was
as follows:
Number of
meetings
Sean Christie
Paul Clegg
Sue Farr
Hans Pauli
Patrick Shanley
Nick Meyer
William Rudge
Trudy
Schoolenberg
Board1
Audit Committee2
Nomination &
Remuneration
Committee3
Nomination
Committee4
Remuneration
Committee5
Attended Serving Attended Serving Attended Serving Attended Serving Attended Serving
8
12
7
5
9
6
12
7
12
12
12
9
12
12
12
12
3
3
3
1
3
3
3
3
3
–
3
–
3
3
–
3
3
2
3
–
3
3
2
3
3
–
3
–
3
3
–
3
2
1
2
–
2
2
1
2
2
–
2
–
2
2
–
2
3
2
3
–
3
3
1
3
3
–
3
–
3
3
–
3
Whilst all Directors are not members of the Board Committees they attend by invitation.
Figures in the left hand column denote the number of meetings attended and figures in the right hand column
denote the number of meetings held whilst the individual held office.
Notes
1.
During the year there were eight full Board meetings, three of which were convened on an ad hoc basis. In addition four ad hoc
meetings of a Committee of the Board of Directors were convened. William Rudge and Paul Clegg attended all full Board and
Committee meetings. Patrick Shanley attended seven full Board meetings and two Committee meetings. Sean Christie attended
six full Board meetings and two Committee meetings. Sue Farr attended six full Board meetings and one Committee meeting.
Nick Meyer attended six full Board meetings and no Committee meetings. Trudy Schoolenberg attended six full Board meetings
and one Committee meeting. Hans Pauli who resigned as a director on 31 December 2018 attended four out of the five full Board
meetings held during his tenure as a Director and one Committee meeting.
2.
Messrs Clegg and Rudge attended for part of the Audit Committee meetings held on 12 June 2018, 13 November 2018 and
21 March 2019. Hans Pauli attended part of the Audit Committee meeting held on 13 November 2018.
3. Until the 31 December 2018 the Nomination and Remuneration Committee served a dual purpose but the functions were then split into
two separate Committees as of 1 January 2019. Paul Clegg was in attendance for the whole of the meeting of this Committee held on
16 May 2018 while William Rudge was in attendance for part only. Messrs Clegg and Rudge attended the entire meeting of this
Committee held on 11 June 2018.
4. The Nomination Committee was constituted as a separate Committee following the split of the functions previously carried out by
the Nomination and Remuneration Committee on 31 December 2018. Paul Clegg attended one meeting of this Committee held on
21 March 2019 with William Rudge attending part of this meeting.
5.
The Remuneration Committee was constituted as a separate Committee following the split of the functions previously carried out
by the Nomination and Remuneration Committee on 31 December 2018. Messrs Clegg and Rudge attended the whole of the meeting
of this Committee held on 11 March 2019. Paul Clegg was in attendance for the whole of the meeting of this Committee held on
21 March 2019.
Set out below are the ten principles of the Code and a summary explanation of how the Company currently
complies with each key principle.
Further Reading
See pages 20 to 23
for information on
our business model
and strategy.
See www.accsysplc.com
(‘Investors’ page) for the
Company’s Corporate
Governance QCA
Compliance Statement.
See www.accsysplc.com
(‘Investors’ page) for the
Company’s Corporate
Governance QCA
Compliance Statement.
Governance
Principle
1. Establish
a strategy
and business
model which
promote long-
term value for
shareholders
2. Seek to
understand
and meet
shareholder
needs and
expectations
Compliant Explanation
The Company’s strategy is to i) drive revenue growth by
increasing the Accoya® and Tricoya® volume sold and number
of distributors by developing market opportunities into
core business; ii) grow manufacturing capacity; iii) develop
its people and organisational capability to enable Accsys to
meet its growth objectives; and iv) develop technology and IP
programmes to focus on value and growth, and to manage risk.
Further information on our business model and strategy can be
found at page 20 to 23.
Our Statement of Compliance explains in further detail the
Company’s key strengths which in turn promote long-term
value for shareholders.
Communications with shareholders are given high priority
to ensure that its strategy, business model and performance
are clearly understood. There is regular dialogue with
shareholders including webcast presentations after the
Company’s preliminary announcement of the year-end results
and six monthly results, regular Regulatory News Service
announcements and trading updates.
During 2019, the Chairman and the Senior Independent Director
invited the Company’s ten largest shareholders to meet to
discuss areas of importance, providing key shareholders with
an opportunity to give feedback to the Board and discuss any
areas of concern.
Accsys also organises bi-annual investor roadshows in the UK and
Netherlands offering significant shareholders an opportunity
to discuss the business, management and strategy of the
Company with the Executive Directors. It also remains informed of
shareholders’ views via regular dialogue with its corporate brokers.
The Board uses the Annual General Meeting to communicate
with investors and welcomes their participation. The Chairs of
the Board and all Board Committees, together with all other
Directors, routinely attend the AGM and are available to answer
questions from investors.
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Governance / The QCA Corporate Governance Code
51
Governance
The QCA Corporate Governance Code continued
Governance
Principle
3. Take into
account wider
stakeholder
and social
responsibilities
and their
implications
for long-term
success
4. Embed
effective risk
management,
considering
both
opportunities
and threats,
throughout the
organisation
Further Reading
See pages 20 to 21
and 30 to 32 for
further information
on stakeholder and
social responsibilities.
See www.accsysplc.com
(‘Investors’ page) for the
Company’s Corporate
Governance QCA
Compliance Statement,
CSR Policy and Modern
Slavery Statement.
See pages 33 to 37
for further information
on risk and risk
management.
See www.accsysplc.com
(‘Investors’ page) for the
Company’s Corporate
Governance QCA
Compliance Statement,
CSR Policy, Modern
Slavery Statement and
Terms of Reference
Audit Committee.
See the Audit
Committee Report
at page 46.
Compliant Explanation
The Company’s business model identifies that investment in key
resources on which the business relies – Accsys’ intellectual
property, expertise, innovation, research and development,
branding, employees and relationships with numerous third
parties including business partners, equipment manufacturers,
wood suppliers, distributors and customers – underpins all
that Accsys does. Investment from the Company’s other key
stakeholders, its shareholders and finance providers, makes
this possible.
The Board are regularly updated on engagement and feedback
from Accsys’ stakeholders to enable the Board to consider
such views during relevant decision making processes. In
addition, during 2019 the Board invited all personnel to attend
‘Meet the Board Lunches’ at its London, Arnhem and Hull
offices, providing an informal forum to facilitate and encourage
engagement and open dialogue between the Board and the
Company’s workforce. Following good attendance and positive
feedback thus far, the intention is to repeat these informal
lunches on an annual basis.
Accsys is also aware of the impact its business and operations
have on the wider community and places great importance on
community and social responsibility. The Company is committed
to continuing research and development concerning its
products and processes.
The Board meets regularly and is responsible for strategy,
performance, approval of major capital projects and the
framework of internal controls. To enable the Board to
discharge its duties, all Directors receive appropriate and
timely information. Briefing papers are distributed to all
Directors in advance of Board meetings.
The Board is responsible for establishing and maintaining the
Company’s system of internal financial control and places
importance on maintaining a strong control environment. The
key internal procedures which the Directors have established
with a view to providing effective internal financial control
include clear lines of responsibility within the organisation
structure, a comprehensive annual budget that is approved
by the Board and the identification of major business risks
to enable appropriate action. Furthermore, monthly results
are reported against the budget and variances are closely
monitored by the Directors.
The Audit Committee is responsible for monitoring compliance
with accounting and legal requirements and for reviewing
the annual and interim financial statements prior to their
submission for approval by the Board.
The Risk Committee regularly meet and update a risk register
which outlines the nature of the risk and any mitigating factors
required to protect against such risks. The Risk Committee
reports on the risk register to the Audit Committee and
thereafter the Audit Committee reports on the same to
the Board.
The process to mitigate risks within the business can be found
at pages 33 to 37.
Further Reading
See pages 46 to 48
for further information
on the composition and
role of the Board.
See page 48 for
further information
on attendance at
Board meetings.
See www.accsysplc.com
(‘Investors’ page) for the
Company’s Corporate
Governance QCA
Compliance Statement,
CSR Policy, Modern
Slavery Statement,
Terms of Reference
Audit Committee, Terms
of Reference Nomination
Committee and Terms of
Reference Remuneration
Committee.
See pages 40 and 41
for the biographies of
Board members.
See www.accsysplc.com
(‘Investors’ page) for the
Company’s Corporate
Governance QCA
Compliance Statement.
Governance
Principle
5. Maintain the
Board as a well-
functioning,
balanced
team led by
the Chair
6. Ensure that
between them
the Directors
have the
necessary
up-to-date
experience,
skills and
capabilities
Compliant Explanation
The Board comprises of the Non-Executive Chairman, four
other Non-Executive Directors, one of whom acts as Senior
Independent Director, and two Executive Directors. All Non-
Executive Directors (including the Chairman) continue to be
considered to be independent and are able to scrutinise matters
and challenge the Executive Directors on an unencumbered basis.
The Board has constituted three standing Committees,
the Audit Committee, the Nomination Committee and the
Remuneration Committee, with ad hoc committees constituted
as required. Further information on the Board’s committees is
provided for on pages 46 and 47.
In addition to regular scheduled Board meetings, there is
frequent contact between all the Directors in connection
with the Company’s business including Audit, Nomination and
Remuneration Committee meetings which are held as required,
but as a minimum twice per annum.
Non-Executive Directors’ terms of appointment provide that
they will spend as much time as necessary and/or reasonably
requested by the Board for the fulfilment of their duties. This is
anticipated to be in the order of 20 (or more) days per annum,
although this is not definitive. All Executive Directors are
engaged on a full time basis.
Further information on the composition and roles of the Board
can be found at pages 46 to 48, including attendance at, and
number of, Board meetings and committee meetings.
The Board is satisfied that it has the appropriate skills and
balance of sector, financial and public markets skills and
experience as well as an appropriate balance of personal
qualities and capabilities and where appropriate each Director
keeps his/her skills up-to-date, for example by the completion
of the Group’s online training programme, attendance at
seminars, briefings and through literature.
Biographies of Board members can be found on pages 40 and 41.
Expert advisors support the Group’s businesses and contribute
relevant industry and commercial experience. These advisors
are drawn from industry, finance, legal and other advisory
groups. For example, Deloitte LLP (Deloitte) was appointed by
the Nomination and Remuneration Committee as independent
adviser to the Committee with effect from 9 January 2018
(before the Committee was disaggregated into two separate
committees) and assisted the Board in the drafting of the new
Remuneration Policy as approved at the 2018 AGM. Further
information on the engagement and role of external advisors
can be found in our Statement of Compliance of the QCA Code.
All Directors have access to the advice and services of the
Company Secretary and in-house Legal Counsel. Following
an independent review of the Board and its Directors, Trudy
Schoolenberg was appointed to the Board in 2018 as a Non-
Executive Director to add operational expertise and also carry out
the role of Senior Independent Director. In addition, procedures
are in place to enable the Directors to obtain other independent
professional advice (legal or otherwise) in the furtherance of their
duties, if necessary, at the Company’s expense.
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53
Governance
The QCA Corporate Governance Code continued
Governance
Principle
7. Evaluate Board
performance
based on clear
and relevant
objectives,
seeking
continuous
improvement
Compliant Explanation
Further Reading
The Board undertakes an annual review process whereby
each Director completes a ‘Board and Director Review and
Evaluation Paper’, ensuring that the Board regularly undertakes
a formal and rigorous evaluation of its own performance and
that of its Committees and individual Directors.
See www.accsysplc.com
(‘Investors’ page) for the
Company’s Corporate
Governance QCA
Compliance Statement.
In addition, the performance of the Board, each Director
and corporate governance generally was evaluated in 2017,
by an independent corporate governance consultant.
As noted above, this review precipitated the enhancement
of the Board’s operational expertise and the appointment
of a Senior Independent Director with the appointment of
Trudy Schoolenberg. Such external review will take place
every three years, with the next review in 2020.
The results of Board evaluation are shared with the Board
as a whole while the results of any individual assessments
remain confidential between the Chairman and the Director
concerned. The results of the most recent Board evaluation
were discussed at the Board meeting in March 2019 and no
major concerns were identified.
The results of the evaluation (both internal and external)
otherwise determined that each Director continues to be
effective and continues to demonstrate commitment to their
respective roles.
8. Promote a
corporate
culture which
is based on
ethical values
and behaviours
Since Accsys is an eco-friendly company that combines chemistry
and technology to create high performance, sustainable wood
building products, a focus on corporate and social responsibility
lies at the very core of its business. This is further demonstrated
in our Corporate and Social Responsibility policy (available at
www.accsysplc.com ‘Investors’ page) and Sustainability Report
on pages 30 to 32.
See www.accsysplc.com
(‘Investors’ page) for the
Company’s Corporate
Governance QCA
Compliance Statement,
CSR Policy and
Sustainability Report.
Accsys aims to reduce the use of environmentally-unfriendly
building materials and products by the utilisation of its
propriety technology and the introduction of its products
around the world. The planet continues to consume
endangered materials like tropical hardwood and non-
renewable, high emitting building materials such as plastics,
concrete and metals at an alarming rate. Accsys’ acetylated
wood products offer alternative, sustainable new materials that
resolve many of the environmental limitations that commonly
used building materials have, whilst not compromising on
performance. At present, Accoya® is the only building product
perfectly fitting in the bio-cycle of the circular economy while
having the same performance as typical techno-cycle building
products such as plastics and metals which cannot be renewed.
The strategy and business model of the Company in relation to
ethical values is readily promoted throughout and evident from
the Company’s accreditations, a list of which can be found in
the Statement of Compliance of the QCA Code.
Accsys’ approach to ethical values within the Group is further
set out in its CSR Policy (available at www.accsysplc.com
‘Investors’ page) and the Company’s 2019 Sustainability
Report on pages 30 to 32 of this report.
Governance
Principle
9. Maintain
governance
structures
and processes
that are fit for
purpose and
support good
decision making
by the Board
10. Communicate
how the
company is
governed and
is performing
by maintaining
a dialogue with
shareholders
and other
relevant
stakeholders
Compliant Explanation
Further Reading
See www.accsysplc.com
(‘Investors’ page) for the
Company’s Corporate
Governance QCA
Compliance Statement,
CSR Policy, Modern
Slavery Statement,
Terms of Reference
Audit Committee,
Terms of Reference
Nomination Committee
and Terms of Reference
Remuneration
Committee.
See www.accsysplc.com
(‘Investors’ page) for the
Company’s Corporate
Governance QCA
Compliance Statement
and News.
See the Audit
Committee Report
at page 46.
See the Remuneration
Report at page 54.
The Board meets regularly and is responsible for strategy,
performance, approval of major capital projects and the
framework of internal controls. To enable the Board to
discharge its duties, all Directors receive appropriate and
timely information. Briefing papers are distributed to all
Directors in advance of Board meetings.
During the year, the Board meetings are usually held in London
with site visits now scheduled to take place annually in Hull
and Arnhem to ensure the Board has a deep understanding
of the Group’s operations. In addition to the scheduled
meetings there is frequent contact between all the Directors
in connection with the Company’s business including Audit,
Nomination and Remuneration Committee meetings which
are held as required, but as a minimum twice per annum.
Day to day operating decisions are made by an Executive
Committee of which the Chief Executive Officer and Finance
Director are members.
The Board is responsible for the long-term success of the
Company. There is a formal schedule of matters which are
reserved for the Board, including matters relating to strategy
and management, structure and capital, financial reporting and
controls, internal controls, contracts, communications, board
memberships, remuneration, delegation of authority, corporate
governance and Group policies.
The Company regularly communicates with shareholders including
presentations after the Company’s preliminary announcement
of the year-end results and six monthly results and bi-annual
webcasts. The Board uses the Annual General Meeting to
communicate with investors and welcomes their participation.
Furthermore, the Company issues regular news to its
stakeholders via RNS, all of which are displayed on the
Company website (News). Other constitutional and governance
information, including relating to shareholder meetings and
the outcome of shareholder votes, can also be found on the
Company Website (Corporate Governance).
As noted above, the Board has constituted three standing
Committees, the Audit Committee, Nomination Committee and
Remuneration Committee, with ad hoc committees constituted
as required.
The Audit Committee Report can be found at page 46 and
Remuneration Report can be found at page 54, each of which
reviews the work of the respective committee during the year.
As stated above, the combined Nomination and Remuneration
Committee was disaggregated into a separate Nomination
Committee and Remuneration Committee with effect from
1 January 2019. Since that date, both the Nomination Committee
and Remuneration Committee have reviewed and updated their
respective Terms of Reference. The Nomination Committee has
also been engaged in the recent Board and Director evaluation
carried out early in 2019 together with consideration of the
Chairman’s tenure as nine years of service approaches later
this year.
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Governance / Remuneration Report
55
Governance
Remuneration Report
On behalf of the Board,
I am pleased to present our
Remuneration Report for the
year ended 31 March 2019.
We obtained shareholder approval for our
Remuneration Policy at last year’s AGM following
a review of our remuneration framework and
engagement with major investors. Limited changes
were made to our Remuneration Policy last year
and one year on the Board continues to believe
that the Policy implemented is appropriate and
the remuneration structure and mechanisms align
shareholder and Executive Director interests as
we continue in a period of rapid growth.
This year’s Remuneration Report sets out the
Remuneration Policy approved last year on pages
57 to 62 of the Report, with the remainder of the
Report (pages 63 to 68) setting out how we propose
to implement the Policy for the year ahead and
summarising the outcomes in respect of the year
ended 31 March 2019. This part of the Report will be
subject to an advisory vote at our AGM.
Remuneration outcomes for the year ended
31 March 2019
As discussed in detail on pages 17 and 18 of this
Annual Report, the Group made progress in the year
with the two key capacity expansion projects whilst
maintaining momentum in sales growth despite the
challenges of operating at production capacity for
much of the year. The first part of the expansion
of the Arnhem plant has been completed and the
Tricoya® plant in Hull is due to be operational in mid-
2020 calendar year although this is following a delay.
The financial performance of the Group has improved,
resulting in a positive EBITDA result for the year.
The annual bonus for the year was based on a
combination of financial and operational objectives,
with targets set at the start of the year. EBITDA fell
between the minimum and maximum targets and
therefore part of this component was awarded.
Sales of Accoya® and strong progress in the
execution of our Accoya® expansion programme
resulted in a payout on those operational components
together with sales growth which was constrained
by production capacity. However the delay reported
in respect of the Hull plant resulted in nil payment
for that component. Overall, and taking into account
personal performance, the bonus outcomes were
between 25–70% of the maximum (25–70% of
salary) for the Executive Directors. The Committee
believes this outcome is an appropriate reflection
of performance in the year.
Further detail on the individual outcomes and
performance against the targets is set out on
page 65 of this report.
There was no LTIP award vesting in the period to
31 March 2019. However the first LTIP award granted
on a rolling annual basis in 2016, which was based on
EBITDA measured to 31 March 2019 and share price
growth (versus a comparator group) measured to
the date of vesting, is due to vest in June 2019. The
estimated level of vesting is expected to be 50% of
the maximum amount.
Remuneration Policy considerations review
We retain a simple and transparent overall structure with key components and features of our framework
as follows:
Salary
• Market competitive and not excessive.
Benefits and
pension
• Any percentage increase to salaries is normally in line with those awarded to the wider workforce.
• Benefits consist of car allowance, private medical insurance, life insurance and travel.
• Pension allowance of 10% of salary (CEO) and 8% (Finance Director), the latter being aligned with
other employees in the business.
Annual Bonus • Annual maximum (for FY20) of 100% of salary.
• Based on a mix of financial, strategic and operational objectives, with stretching targets.
• Clawback provisions apply.
LTIP
• Award sizes (for FY20) of 100% of salary (CEO) and 75% of salary (Finance Director).
• Based on stretching three year performance targets (see below).
• Vested awards are subject to an additional two year holding period, aligned with best practice for UK-
listed companies and in excess of typical practice for AIM-listed companies.
• Malus and clawback provisions apply.
• Executive Directors are expected to build up and retain a shareholding of at least 200%
of salary.
Shareholding
guidelines
Our Policy retains the flexibility to offer incentive
award opportunities above those set out above if
appropriate in the circumstances. It retains the
discretions which already exist in our current Policy
for the Committee to provide a maximum bonus
opportunity up to the formal cap of 200% of salary in
respect of a particular financial year or to make annual
LTIP awards of up to 300% of salary.
Board changes
Following an internal review of its Board and
Executive structure, Hans Pauli stepped down as an
Executive Director of the Company with effect from
31 December 2018. Mr Pauli has remained a member
of the Company’s Senior Management team, having
continued responsibility for corporate and business
development. As noted in the Chairman’s Statement,
Paul Clegg is to step down as the Company’s CEO later
in 2019. Details relating to Paul Clegg’s remuneration
in the year ending 31 March 2020, including the
terms of his departure will be set out in next year’s
remuneration report.
LTIP awards for 2019 – Improving
strategic alignment
As reported last year, our LTIP has evolved significantly
over recent years, with the implementation of rolling
annual awards in line with best practice, as well as
improving alignment of performance measures to the
delivery of our long-term strategy. Our business has
clearly defined strategic objectives to execute over the
coming years and we believe that increasing alignment
of our incentives to the delivery of these objectives is
right for the business and our shareholders.
The majority of the LTIP (60%) is based on Group
EBITDA per share. This is designed to ensure our
LTIP drives and rewards long-term profit delivery
from our expansion plans.
The remainder (40%) is based on Sales Volume,
being a performance measure directly linked to
the successful execution of our ambitious capacity
expansion plans over the coming years, which
the Board has identified as the critical strategic
objective to which we should be aligning incentives
throughout the senior team. Recognising that this
is a non-financial performance measure, vesting
of this component will be subject to meeting
a threshold level of financial performance, to
provide an affordability safeguard for investors.
The LTIP award to be made during 2019 will be
subject to stretching performance targets for both
performance measures, as described in full on page
66. Maximum vesting requires EBITDA per share of
€0.22 and Sales Volume of 100,000m3 to be achieved
in the year ending 31 March 2022, which are very
challenging targets requiring exceptional execution
of our expansion plans.
LTIP awards to be made in 2019 will be 75% of salary
for the Finance Director, in line with our Policy.
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57
Governance
Remuneration Report continued
Salaries, benefits and pensions for the year
ended 31 March 2020
During the year, the Committee undertook a review
of executive remuneration, using an independent
adviser, to ensure it reflected market and shareholder
expectations.
In the current financial year, the salary of William
Rudge, Finance Director will be adjusted to reflect an
inflationary increase of 2.5%, in line with other staff.
Following the UK auto-enrolment pension regulations,
the Company pension of William Rudge has been
adjusted from a contribution of 5% of gross base
salary to 8% of gross base salary with effect from
1 April.
During the year, as permitted under its Policy, Accsys
has enhanced its benefit offering to all employees,
with the introduction of a Group Income Protection
Plan and an Individual Dental Insurance Plan. These
benefits also apply to the Executive Directors.
2019 AGM
The Remuneration Committee remains committed
to operating remuneration arrangements which align
with our strategic priorities and the best interests of
our shareholders. I continue to believe the approach
we have adopted is appropriate and responsible and
I look forward to receiving your support at our AGM.
Yours sincerely
Sue Farr
Chair of the Remuneration Committee
24 June 2019
* Context for executive pay
This report is prepared in accordance with the UK regulations
for reporting executive pay. Our dual listing on AIM in the UK
and NYSE Euronext in the Netherlands, combined with our UK
incorporated status, means that we come within the definition of
a ‘quoted company’ in the UK Companies Act. Accordingly, and
exceptionally amongst AIM companies, we are legally required
to comply with the regulations for reporting and approval of
Directors’ remuneration by companies listed on the main market,
including a binding vote on the Directors’ remuneration policy.
Directors’ Remuneration Policy
The Directors’ Remuneration Policy is effective for all payments made to Directors from 18 September 2018,
being the date of the AGM in which it was approved.
Element
Purpose and operation
Maximum
Performance
measures
Base
salary
An appropriate level of fixed remuneration to
reflect the individual’s skills and experience.
There is no prescribed maximum.
N/A
Salaries are normally reviewed annually
by the Committee, taking into account
relevant factors that may include: individual
performance, corporate performance,
changes to an individual’s role and
responsibilities, and appropriate
market data.
Any percentage increase to salaries would
normally be in line with those awarded to
the wider workforce. Larger increases may
be awarded in circumstances considered
appropriate by the Committee, such as an
increase in the size of the business or the
responsibilities of the role, or changes in
the competitive marketplace.
There is no prescribed maximum.
N/A
The level of benefits is set at an appropriate
market rate.
Benefits
To provide a market competitive
benefits package.
Benefits may comprise a car allowance,
private medical insurance, life insurance
and reimbursed business expenses
(including any associated tax liability)
incurred when travelling in performance
of duties.
The Committee may determine that other
benefits be provided where appropriate
(for example – relocation costs).
Pension
Contributions to the Company’s pension
scheme, or an equivalent cash supplement
is provided.
Current contributions are 10% of
salary (CEO) and 8% of salary for the
Finance Director.
N/A
The maximum allowable contribution is 15%
of base salary.
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59
Governance
Remuneration Report continued
Element
Purpose and operation
Maximum
Performance measures
Annual
Incentive
Plan
To drive and reward the delivery of
business objectives for the financial
year.
The bonus is discretionary and any pay-
out is determined by the Committee
based on performance. Targets are
set and assessed by the Committee
each year.
Amounts may be satisfied in cash, or
at the Committee’s discretion, shares.
Clawback provisions apply.
Long Term
Incentive
Plan (LTIP)
To reward Executive Directors for the
delivery of long-term performance and
align their interests with shareholders.
Awards are made under, and subject to
the terms of, the 2013 LTIP approved by
shareholders at the 2013 AGM.
Awards may be in the form of nil or
nominal cost options, or any other form
allowed by the Plan rules.
Awards vest over a period of at least
three years, subject to performance.
Vested shares are subject to an
additional holding period of at least
two years.
Clawback and dividend equivalent
provisions apply (see notes to the table).
The current
maximum annual
opportunity for all
Executive Directors
is 100% of salary.
The Committee
retains discretion to
provide a maximum
opportunity of up
to 200% of salary
in respect of a
particular financial
year.
Award levels in
respect of a financial
year are currently
up to 100% of
salary for Executive
Directors.
The Committee
retains discretion to
make annual awards
of up to 300%
of salary.
Awards will normally be based on
a combination of financial and
non-financial goals measured over
one financial year, with at least
50% normally assessed against
financial metrics.
The Committee retains discretion
to adjust performance measures
and targets during the year to
take account of events outside of
management control which were
unforeseen when the measures
and targets were initially set.
Performance targets are measured
over a period of at least three
financial years, using performance
measures aligned to the delivery
of the strategy and long-term
shareholder value. Performance
targets for awards in 2019 are:
• Group EBITDA per share (60%);
• Group sales volume (40%).
25% of awards vests for attaining
threshold level of performance.
The Committee retains discretion
to use different or additional
performance measures or weightings
to ensure that awards remain
appropriately aligned to the business
strategy and objectives.
Non-financial performance measures
will normally be subject to a financial
underpin.
The Committee will consider the
Group’s overall performance before
determining the final vesting level.
Shareholding
guidelines
To increase long term alignment
between executives and shareholders.
N/A
N/A
Executive Directors are expected to
build up and retain a beneficial holding
of at least 200% of base salary.
Notes to the Policy table:
1.
LTIP awards which vest under this Policy may benefit from the right to receive an amount equal to the value
of, if applicable, any dividends which would have been paid on vested shares up to the time of vesting (or
where the award is subject to a holding period, up to the time of release).
2.
3.
4.
5.
6.
7.
The Annual Incentive Plan and LTIP contain clawback provisions in the event of a material misstatement of
results, censure by a regulatory authority or any other serious damage to the Company reputation, or fraud
or gross misconduct. The cash and, if applicable, share elements of the Annual Incentive Plan may be clawed
back for a period of three years from the date on which the Annual Incentive Plan payment is made. Awards
under the LTIP may be cancelled or reduced (prior to vesting), or clawed back for a period of three years
post vesting.
The remuneration framework for other employees is based on broadly consistent principles used to
determine the policy for Executive Directors. All executives and senior managers are generally eligible to
participate in some form of annual incentive arrangement. Participation in the LTIP is extended to executives
and senior managers, with LTIP performance conditions generally consistent across all levels. Individual
salary and pension levels and incentive award sizes vary according to the level of seniority and responsibility.
The choice of the performance measures applicable to the Annual Incentive Plan (currently EBITDA, sales volume,
and operational measures) reflects the Committee’s view that incentives should be aligned to the Group’s key
annual financial and strategic objectives. For the LTIP, the measures for the 2019 award (EBITDA per share
and sales volume) provide a suitable balance between incentivising the execution of the Company’s long-term
capacity expansion programme and ensuring the delivery of profit growth alongside that operational delivery.
For both the Annual Incentive Plan and the LTIP, the Committee sets challenging targets taking into account the
Board’s objectives for the business. Performance conditions may be amended or substituted by the Committee
if an event occurs which causes the Committee to determine an amended or substituted performance condition
would be more appropriate and not materially more or less difficult to satisfy.
The Committee reserves the right to make any remuneration payments and/or payments for loss of office
(including exercising any discretion available to it in connection with such payments) notwithstanding that
they are not in line with the Policy set out above where the terms of the payment either agreed: (i) prior
to the Policy set out above came into effect; (ii) during the term of, and were consistent with, any previous
policy approved by shareholders; or (iii) at a time when the relevant individual was not a Director of the
Company and, in the opinion of the Committee, the payment was not in consideration for the individual
becoming a Director of the Company.
Under the rules of the LTIP, the terms of any award may be adjusted to take account of a Company
reorganisation, such as a variation of capital, rights issue, demerger or special dividend.
In respect of the shareholding guideline, vested but unexercised LTIP shares will count towards the guideline
(on a net of tax basis). It is anticipated that the level of shareholding set out in the guideline will normally
be met within five years of appointment as an Executive Director (or from the approval of this Policy). The
Committee will take into account LTIP vesting levels and personal circumstances when assessing progress
against the guideline.
8.
There are no changes from the previous remuneration policy approved by shareholders at the 2018 AGM.
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61
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Remuneration Report continued
Application of the Remuneration Policy
The potential pay-out under the Policy for each Executive Director under three different illustrative performance
scenarios was set out in the policy reported in the Annual Report for the year ended 31 March 2018.
Outside appointments
Subject to Board approval, Executive Directors are permitted to accept (and retain the fees from) outside
appointments on external boards as long as these are not deemed to interfere with the business of the Group.
Recruitment Remuneration policy
The Company’s recruitment policy aims to give the Committee sufficient flexibility to secure the appointment
and promotion of high-calibre executives to strengthen the management team and secure the skill sets to deliver
our strategic aims.
The recruitment package for a new Executive Director would normally be set in accordance with the terms of
the Policy Table for Executive Directors. Salaries would be set at an appropriately competitive level to reflect the
skills and experience of the individual and the scope of their role. The Committee may agree that the Company
will meet certain relocation expenses as it considers appropriate.
Where an individual forfeits remuneration with a previous employer as a result of appointment to the Company,
the Committee may offer compensatory payments or awards to facilitate recruitment. Any such payments or
awards would be in such form as the Committee considers appropriate and would normally reflect the nature,
time horizons, and performance requirements attaching to that remuneration. There is no limit on the value of
such compensatory awards, but the Committee’s intention is that the value awarded would be, in the view of
the Committee, no higher than the amount forfeited.
For an internal appointment, any variable pay element awarded in respect of the prior role may either continue
on its original terms or be adjusted to reflect the new appointment as appropriate.
Directors’ service contracts
The notice periods under the service contracts of the current Executive Directors are summarised in the
following table:
Name
Paul Clegg
William Rudge
Notice period from
individual (months)
Notice period from
company (months)
12
6
12
6
Executive Directors’ service contracts, which do not contain expiry dates, provide that compensation provisions
for termination without notice will include salary, certain fixed benefits, and pension. In the case of William Rudge,
sums may be paid in instalments and cease if the individual finds an alternative role.
Following a change of control, if the Company terminates Paul Clegg’s employment in breach of or in accordance
with the terms of his service contract, or if Paul Clegg terminates the employment in response to a fundamental
breach of contract by the Company, or in accordance with the terms of his service contract, then he will be
entitled to a termination payment comprising 12 months base pay and benefits, plus an amount in respect of
bonus of at least the level of the average of historic bonus levels (or a higher discretionary amount awarded in
respect of Company and personal performance in the financial year of termination), unpaid expenses and the
value of accrued holiday entitlement. The inclusion of a component in respect of annual bonus reflects the legacy
contractual terms of this agreement and would not be in included in the service contract for a new appointment.
The Company’s general policy on recruiting a new Executive Director is to provide a service contract terminable
after six months. However the Committee reserves the right to introduce a longer notice period (of up to 12
months) which would reduce to six months over time. Provisions for compensation for termination would
normally follow that described above for William Rudge.
Termination policy summary
In addition to a payment in lieu of notice referred to above, a departing Executive Director may be eligible for
incentive awards, which will be treated in accordance with the rules of the relevant plan, as summarised in the
table below:
Incentive plan
Summary of leaver provisions
Annual Incentive
Plan
In certain ‘good leaver’ 1 circumstances, an individual may remain eligible for an annual bonus with
respect to the financial year of cessation (pro-rated for time, unless the Committee determines
otherwise). Any payment will remain subject to performance (as determined by the Committee)
and is normally payable after the end of the financial year.
LTIP
Unvested awards normally lapse on cessation of employment.
However, in certain ‘good leaver’1 circumstances as defined in the Plan rules, awards will vest.
In such circumstances:
• awards will normally vest on their original vesting date;
• the Committee will determine the extent of vesting based on the satisfaction of the
performance conditions; and
• awards will be reduced pro-rata to reflect the proportion of the vesting period that has
elapsed at cessation.
Vested awards will normally remain subject to any Holding Period.
1.
Death, injury, ill-health, disability, redundancy, retirement or the sale of their employing entity out of the Group, or for any other
reason at the Committee’s discretion.
The Committee reserves the right to make any other payments in connection with a Director’s cessation of office
or employment where the payments are made in good faith in discharge of an existing legal obligation (or by way
of damages for breach of such an obligation) or by way of settlement of any claim arising in connection with the
cessation of a Director’s office or employment or for any fees for outplacement assistance and/or the Director’s
legal and/or professional advice fees in connection with his cessation of office or employment.
Change of control
In the event of a change of control of the Company:
• A payment under the Annual Incentive Plan shall be determined by applying the performance targets (on such
basis as the Committee considers appropriate) and calculated on an appropriate time pro-rata basis.
• LTIP awards will vest. The proportion of the award which shall vest will be determined at the discretion of
the Committee having regard to the extent to which the performance targets have been achieved and the
proportion of the vesting period that has elapsed. Any holding period will cease to apply. Alternatively, the
Committee may permit or require awards to be rolled-over into equivalent awards from the acquiring company.
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Remuneration Report continued
Policy Table for Non-Executive Directors (‘NEDs’)
Element
Purpose and operation
Chairman
and NEDs
Fees for the Chairman and for the NEDs are set by the Board
(excluding the NEDs).
Fees are based on the responsibilities and time commitment of the
role. The Chairman receives a single fee. NED fees include a base fee
and may include additional fees for other Board or Committee duties.
Fees are paid in cash. NEDs are not eligible to participate in incentive
arrangements or receive pension provision or other benefits.
Non-Executive Directors may be reimbursed for business expenses
(and any associated tax liabilities) incurred when travelling in
performance of duties.
Maximum
Performance
measures
N/A
There is no
prescribed maximum
annual increase or
fee level.
Fee levels are
reviewed on a
periodic basis, with
reference to the
time commitment of
the role and market
levels in companies
of comparable size
and complexity.
NED contracts
The NEDs, including the Chairman, have letters of appointment which set out their duties and responsibilities.
Appointment is for a fixed term of three years, terminated by three months’ notice on either side.
Name
Nick Meyer
Patrick Shanley
Sean Christie
Sue Farr
Trudy Schoolenberg
Unexpired term
(months)
11
5
17
17
21
Consideration of employment conditions elsewhere in the Group
As explained in the general policy section of the Remuneration Policy, the Committee takes into account Group-
wide pay and employment conditions. The Committee reviews the average Group-wide base salary increase and
bonus costs and is responsible for all discretionary and all employee share arrangements. The Committee did not
consult with employees in preparing the Directors’ Remuneration Policy.
Consideration of shareholder views
The Committee undertook a consultation exercise with major shareholders in respect of the development of this
Remuneration Policy in 2018, and the feedback received was taken into account in finalising the Policy.
During each year, the Committee considers shareholder feedback received in relation to the AGM, plus any
additional feedback received through other means of dialogue. The Committee also regularly reviews the
Policy in the context of published shareholder guidelines.
Implementation of the Remuneration Policy for the year ending 31 March 2020
A summary of how the Directors’ Remuneration Policy will be applied during the year ending 31 March 2020 is set
out below.
Base salary
The Remuneration Committee has determined that base salaries for the Executive Directors will increase as
follows with effect from 1 July 2019:
Paul Clegg
William Rudge
2019
£268,612
£150,794
2018
% increase
£262,060
£147,116
2.5%
2.5%
The Group’s employees are, in general, receiving salary increases averaging approximately 2.5%.
Pension arrangements
In accordance with the Policy, the Finance Director will receive pension contributions (or cash supplements) of
8% of base salary. The pension contributions (or cash supplements) for the CEO is set out on page 57. As noted
above, in respect of the Finance Director, this is an increase of 3% from the previous financial year and is in-line
with new auto-enrolment pension regulations.
Annual bonus
For the year ending 31 March 2020, the maximum annual bonus opportunity will be 100% of salary in accordance
with the Policy. Payouts will be determined based on the delivery of stretching financial, operational and personal
objectives with the weightings for the various components as follows:
Group EBITDA (excluding Tricoya®)
Capacity expansion (including Arnhem expansion & construction of Hull)
Sales Volume (total Accoya® volumes sold)
Personal objectives
Weighting (% of bonus)
CEO
Finance Director
50%
30%
20%
–
37.5%
22.5%
15%
25%
The Committee believes that the underlying targets are commercially sensitive and cannot be disclosed at this
stage. The Committee retains the discretion to award a bonus in excess of 100% (but within the policy limit of
200%) in the event of exceptional events resulting in significant unexpected value creation for the Group.
Long-term incentives
For the year ending 31 March 2020, annual LTIP awards will be made in line with the Policy, as shown in the
following table. As noted in the Chairman’s statement, Paul Clegg is to step down as the Company’s CEO later
in 2019, and therefore will not receive an LTIP award during the year ending 31 March 2020.
Name
William Rudge
2019 (% of salary)
75%
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Annual Report and Financial Statements 2019
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65
Governance
Remuneration Report continued
The extent to which 2020 LTIP awards will vest after three years will be dependent on two independent
performance conditions as follows:
Metric
Vesting (% of maximum)
EBITDA per share in FY22
Sales Volume in FY22 (m3)
Weighting
(% of award)
60%
40%
Threshold
Stretch
Maximum
25%
0.10
75%
0.14
100%
0.22
82,000
86,000
100,000
• Vesting is on a straight-line basis between the vesting points shown in the schedule above.
•
Appropriate adjustments may be made to ensure fair and consistent performance measurement over the performance period in line
with the business plan and intended stretch of the targets at the point of award.
• EBITDA per share targets are set and determined so as to exclude licensing income.
• Sales Volume is defined as combined sales volume (in cubic metres, or equivalent) of Accoya® and Tricoya®.
• Vesting of the Sales Volume component will be subject to the achievement of a threshold level of EBITDA.
In line with the Policy, upon vesting, the 2020 LTIP awards will be subject to an additional holding period which
expires on the fifth anniversary of the date of grant together with the claw-back provisions as set out in further
detail in the Remuneration Policy.
Non-Executive Directors
The fees for the Non-Executive Directors are shown in the table below.
Chairman fee
Basic NED fee
Additional fees:
Senior Independent Director
Committee chairmanship fee per committee
2019
£76,715
£40,800
£5,100
£5,100
2018
% increase
£76,715
£40,800
£5,100
£5,100
0.0%
0.0%
0.0%
0.0%
Remuneration received by Directors in the year ended 31 March 2019 (audited)
Directors’ remuneration for the year ended 31 March 2019 (and for the prior year ended 31 March 2018) is shown
in the following tables:
Executive Directors
Paul Clegg
Hans Pauli7
William Rudge
Non-Executive Directors
Sean Christie
Sue Farr
Montague John "Nick" Meyer
Patrick Shanley5
Trudy Schoolenberg8
Currency
Salary/
Fees
Benefits
in Kind1
Annual
bonus2
LTIPs
vested/
expected
to vest 3 Pension4
2019
Total
2019
Total
EUR
£
€
£
£
£
£
£
£
261
166
146
46
46
41
79
46
18
183
2
2
–
–
–
–
–
42
96
–
–
–
–
–
216
65
61
–
–
–
–
–
26
704
809
9
7
–
–
–
–
–
284
284
312
358
46
46
41
79
46
52
52
46
90
52
Executive Directors
Paul Clegg
Hans Pauli6
William Rudge
Non-Executive Directors
Sean Christie
Sue Farr
Montague John "Nick" Meyer
Patrick Shanley5
Currency
Salary/
Fees
Benefits
in Kind 1
Annual
bonus 2
LTIPs
vested/
expected
to vest 3 Pension4
2018
Total
2018
Total
EUR
£
€
£
£
£
£
£
256
215
144
45
45
40
75
19
5
2
–
–
–
–
141
109
79
–
–
–
–
–
–
–
–
–
–
–
26
12
442
502
341
341
7
232
264
–
–
–
–
45
45
40
75
51
51
46
86
Figures shown in thousands. Figures are shown in the currency in which the majority of remuneration received. The final column
converts remuneration into the Company’s reporting currency using the monthly exchange rate when the costs are incurred.
1.
2.
Taxable benefits for the Executive Directors in the year included a car allowance (for the CEO only), private medical insurance,
life insurance and reimbursed business expenses.
Represents annual bonus paid in cash in respect of the relevant financial year (further detail for the year ended 31 March 2019 is
shown below).
3. For 2019 an estimated amount is shown in respect of vesting of the 2016 LTIP award. The value of this award has been based on the
share price as at 31 March 2019. This award will vest at the end of June 2019. For 2018 there was no LTIP award vesting by reference
to performance to 31 March 2018 and therefore there is no value to report for 2018.
4. Paul Clegg receives cash in lieu of pension.
5. Patrick Shanley amounts include actual amounts paid in both GBP and EUR.
6. Hans Pauli amounts include actual amounts paid in GBP for the period to 31 March 2018.
7.
Hans Pauli amounts for 2019 represent the remuneration received for the period to 31 December 2018, when he resigned as a Director.
8. Trudy Schoolenberg was appointed as a Director from 1 April 2018.
Annual bonus for the year ended 31 March 2019 (audited)
For the year ended 31 March 2019, the maximum annual bonus opportunity was 100% of salary in accordance with
the Policy. Payouts were determined based on performance, taking into account the delivery of stretching financial
and operational objectives with the weightings for the various components as follows:
Group EBITDA
(excluding Tricoya®)
Completion and Operation
of Arnhem Plant
Progression with Hull Plant
Sales Volume (total Accoya®
volumes sold)
Personal Objectives
Weighting – CEO (% of bonus)
Weighting – FD (% of bonus)
Maximum
Outcome
Maximum
Outcome
50%
15%
15%
20%
–
42%
15%
0%
13%
–
37.5%
31.5%
11.25%
11.25%
15%
25%
11.25%
0%
9.75%
12.5%
The actual performance targets remain commercially sensitive and cannot be disclosed at this time. Bonus
outcome for Hans Pauli for the period was 25%.
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67
Governance
Remuneration Report continued
Group EBITDA fell below the stretching threshold and therefore part of this component was awarded. Sales
of Accoya® and progress in the execution of the Arnhem expansion programme resulted in a payout on this
operational components together with sales growth which was constrained by production capacity. However the
delay in the Hull plant resulted in nil payout in respect of this component. Overall, taking into account personal
performance, the bonus outcomes were between 25–70 of the maximum (25–70% of salary) for the Executive
Directors, with the amounts awarded shown in the single figure table on page 64. The Committee believes this
outcome is an appropriate reflection of the performance of the business and Executives in the year.
LTIP vesting in respect of performance to the year ended 31 March 2019 (audited)
The 2016 LTIP awards (see table below) vest by reference to EBITDA performance over a three year period
ending 31 March 2019 (50% weighting) and share price growth against the FTSE AIM All Share Index (excluding
the Resource and Financial Sectors) measured from the date of grant of award to the date of vesting (50%
weighting). These awards are due to vest at the end of June 2019. The EBITDA targets have not been met and
this part of the award will lapse. As at 31 March 2019, the element relating to share price growth is expected
to vest in full, resulting in overall vesting of 50% of the maximum award.
Scheme interests awarded during the year (audited)
During the year, the following LTIP awards were made to the Executive Directors:
Paul Clegg
Hans Pauli2
William Rudge
Type of Award
Basis of award
granted
100% of salary
Nil cost options
50% of salary
75% of salary
Face value
of award1
€000s
% of maximum
vesting for
threshold
performance
295
110
124
25%
25%
25%
Performance
Period
Three years to
18 June 2021
1.
Face value determined using share price determined two days prior to date of grant.
2.
Hans Pauli award made in June 2018 with full value awarded shown. Resigned as a Director on 31 December 2018.
The performance targets for these awards are as follows:
Metric
Vesting (% of maximum)
EBITDA per share in FY21
Total Sales Volume
Weighting
(% of award)
60%
40%
Threshold
Maximum
25%
€0.05
100%
€0.13
70,000m3
85,000m3
• Vesting is on a straight-line basis between threshold and maximum.
•
Appropriate adjustments may be made to ensure fair and consistent performance measurement over the performance period in line
with the business plan and intended stretch of the targets at the point of award.
• EBITDA per share targets are set and determined so as to exclude licensing income.
• Sales Volume is defined as combined sales volume (in cubic metres, or equivalent) of Accoya® and Tricoya®.
• Vesting of the Sales Volume component will be subject to the achievement of a threshold level of EBITDA.
Payments to past Directors (audited)
Hans Pauli stepped down as an Executive Director of the Company with effect from 31 December 2018 and
has remained a member of the Company’s Senior Management Team. He has continued to receive payments in
respect of his employment in that role.
Payments for loss of office (audited)
There were no payments for loss of office during the year.
Statement of Directors’ shareholding and share interests (audited)
Paul Clegg
Hans Pauli
William Rudge
Sean Christie
Sue Farr
Montague John 'Nick' Meyer
Patrick Shanley
Trudy Schoolenberg
Shares beneficially
held1 as at
31 March 2019
Vested but
unexercised LTIPs
Unvested LTIP
awards2
716,432
376,527
192,000
72,258
25,000
29,745
70,981
–
1,259,449
286,069
159,173
841,270
304,429
281,308
–
–
–
–
–
–
–
–
–
–
1.
Includes shares held by connected persons.
2.
Includes 50% of the 2016 LTIP expected to vest in June 2019 based on share price growth target. 50% of award based on EBITDA
targets will not vest and has therefore been excluded from this amount.
There has been no change in the beneficial holding of the Directors between the year end and the date of
this report.
The unvested LTIP awards consist of 2016, 2017 and 2018 LTIP awards. The performance condition for the 2018
award is summarised in the section above and for the 2017 and 2016 awards, in the tables below:
2017 LTIP
Metric
Vesting (% of maximum)
EBITDA per share in FY20
Share Price Growth vs Comparator Group
Weighting (% of
award)
50%
50%
Threshold
25%
€0.04
Median
Target
50%
€0.06
Maximum
100%
€0.08
N/A Upper Quartile
•
•
Vesting is on a straight-line basis between points in the schedule. There is no vesting for performance below Threshold.
EBITDA based on total group EBITDA including licensing income. Appropriate adjustments may be made to the EBITDA per share
metric to ensure fair and consistent performance measurement over the performance period in line with the business plan and
intended stretch of the targets at the point of award.
•
Comparator Group is the constituent companies of the FTSE AIM All Share Index (excluding the Resource and Financial Services Sectors).
2016 LTIP
Metric
Vesting (% of maximum)
EBITDA per share in FY19
Share Price Growth vs Comparator Group
Weighting (% of
award)
50%
50%
Threshold
25%
€0.06
Median
Target
50%
€0.08
Maximum
100%
€0.10
N/A Upper Quartile
• Vesting is on a straight-line basis between points in the schedule. There is no vesting for performance below Threshold.
•
EBITDA based on total group EBITDA including licensing income. Appropriate adjustments may be made to the EBITDA per share
metric to ensure fair and consistent performance measurement over the performance period in line with the business plan and
intended stretch of the targets at the point of award.
•
Comparator Group is the constituent companies of the FTSE AIM All Share Index (excluding the Resource and Financial Services Sectors).
Relative importance of spend on pay
During the year ended 31 March 2019, the total pay for all Group employees decreased by 2% to €11,119,000
(2018: €11,293,000). There were no dividends or share buybacks in either year.
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Remuneration Report continued
Governance
Directors’ Report
Performance graph and CEO remuneration
The following graph shows the Company’s performance for the past ten years on the London Stock Exchange
AIM compared with the performance of the FTSE AIM All Share index. The FTSE AIM All Share index has been
selected for this comparison as it is a broad based index which the Directors believe most closely reflects the
performance of companies with similar characteristics as the Company’s. A logarithmic scale has been used in
order to more clearly set out the performance of Accsys’ shares in more recent periods.
Accsys TSR Index
FTSE AIM All Share TSR index
300
200
100
0
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
At 31 March
Since joining in 2009, the CEO’s total remuneration together with the proportion attributable to bonus or vested
incentives is as set out in the table below:
2010
€’000
2011
€’000
2012
€’000
2013
€’000
2014
€’000
2015
€’000
2016
€’000
2017
€’000
2018
€’000
2019
€’000
Total remuneration
386
283
604
627
676
783
613
1,632
502
809
% Bonus of Total
% Bonus of Cap
36%
0% 46% 46%
51% 54% 36% 18% 32% 26%
N/A
N/A
N/A
N/A
N/A
68% 33% 48% 28% 36%
% vested LTIPs of maximum
N/A
N/A
N/A
N/A
N/A
N/A
N/A
58% N/A
50%
As no formal cap or maximum bonus existed before 2015, no figure has been disclosed setting out this percentage.
Consideration of matters relating to Directors’ remuneration
The Nomination and Remuneration Committee consisted of Sue Farr (Chairman), Patrick Shanley, Nick Meyer,
Trudy Schoolenberg and Sean Christie. All Non-Executive Directors (including the Chairman on appointment) are
considered to be independent. To ensure appropriate focus on both Remuneration and Nomination Committee
matters, with the potential for differing membership, the Board approved the disaggregation of the Nomination
and Remuneration Committee into a separate Remuneration Committee and Nomination Committee, each with
their own updated terms of reference with effect from 1 January 2019. Membership (and Chairmanship) of the
Remuneration Committee remains per the previously combined Committee as stated in this paragraph.
Following appointment in 2018, Deloitte LLP (Deloitte) continues to be engaged as independent adviser to the
Committee. The Committee is satisfied that Deloitte remains independent of the Company and that the advice
provided is impartial and objective. Deloitte is a founding member and signatory of the Code of Conduct for
Remuneration Consultants, details of which can be found at www.remunerationconsultantsgroup.com.
Their total fees for the provision of remuneration services to the Committee during the financial year to
31 March 2019 were £21,280 (plus VAT).
Statement of voting at general meeting
The AGM held on 18 September 2018 included the following resolutions:
An ordinary resolution was passed in respect of the approval of the Directors’ Remuneration Report (excluding
the Remuneration Policy) for the year ended 31 March 2018. 53,090,639 (99.98%) votes were cast for the
resolution, 6,983 against and 4,110 withheld.
An ordinary resolution was passed in respect of the approval of the Directors’ Remuneration Policy for the year
ending 31 March 2018. 52,090,499 (99.98%) votes were cast for the resolution, 7,123 against and 1,004,110 withheld.
The Directors present their report together with the audited consolidated financial statements for the year
ended 31 March 2019.
Results and dividends
The consolidated statement of comprehensive income for the year is set out on page 83, and shows the loss
for the year.
The Directors do not recommend the proposal of a final dividend in respect of the current year, consistent with
the prior year.
Principal activities and review of the business
The principal activities of the Group are the production and sale of Accoya® solid wood and Tricoya® wood
elements, technology and product development as well as the licensing of technology for the production and
sale of Accoya® and Tricoya® via the Company's subsidiaries, Titan Wood Limited, Titan Wood B.V., Titan Wood
Technology B.V., Titan Wood Inc., Tricoya® Technologies Limited and Tricoya® Ventures UK Limited (collectively
the ‘Group’). Manufactured through the Group’s proprietary acetylation processes, these products exhibit
superior dimensional stability and durability compared with alternative natural, treated and modified woods
as well as more resource intensive man-made materials. A review of the business is set out in the Chairman’s
Statement on pages 12 and 13 and the Chief Executive’s Report on pages 14 to 19. Accsys Technologies PLC
is a public limited company, which is listed on London Stock Exchange AIM and Euronext Amsterdam,
and incorporated and domiciled in the UK. The address of its registered office is set out on page 140.
Business model and Strategy
The Business model and Strategy section, from page 20, sets out the Company’s strategy, business model and
key performance indicators.
Financial instruments
Details of the use of financial instruments by the Company and its subsidiary undertakings are set out in Note 31
of the financial statements.
Share issues
On 18 July 2018, 6,231,070 ordinary shares were issued to VP Participaties BV, the investment company of the
Van Puijenbroek family, at a price of €0.92 per share.
173,915 shares were issued on 25 June 2018 to an Employee Benefit Trust (‘EBT’) at nominal value.
70,175 shares were issued on 18 February 2019 to an employee following the exercise of nil cost options,
granted in 2013 under the Company's 2013 Long Term Incentive Plan (‘LTIP’).
Principal risks and uncertainties
The business, financial condition or results of operations of the Group could be adversely affected by any of the
risks set out in the Strategic Report. The Group’s systems of control and protection are designed to help manage
and control risks to an appropriate level rather than to eliminate them.
The Directors consider that the principal risks to achieving the Group’s objectives are set out in the
Strategic Report.
70
Annual Report and Financial Statements 2019
Governance / Directors’ Report
71
Governance
Directors’ Report continued
Greenhouse gas (‘GHG’) emissions
The table below represents all the emission sources required under the Companies Act 2006 (Strategic Report
and Directors’ Reports) Regulations 2013 for our manufacturing facility in Arnhem, the Netherlands.
Global GHG emissions data for period 1 April 2018 to 31 March 2019
Electricity, heat, steam and cooling for own use – GROSS
Electricity, heat, steam and cooling for own use – NET
(including Renewable Energy Credits)
Combustion of fuel & operation of production facility (MP4),
in Arnhem, the Netherlands
TOTAL – GROSS
External carbon offsets (Voluntary Carbon Offsetting
through BP Target Neutral)
TOTAL – NET (including Renewable Energy Credits/
Carbon offsets)
Chosen intensity measurement: Emissions per cubic metre
Accoya® produced – GROSS
Chosen intensity measurement: Emissions per cubic
metre Accoya® produced – NET (including Renewable
Energy Credits/Carbon offsets)
Notes:
2018–2019
kg CO2eq
4,330,655
2017–2018
kg CO2eq
3,234,185
2016–2017
kg CO2eq
2,804,839
2,901,234
1,941,139
1,511,794
4,034,842
8,365,497
3,117,809
6,351,994
3,109,664
5,914,503
(1,852,140)
(1,524,000)
(1,524,000)
5,083,935
3,534,948
3,097,458
171
104
162
90
155
81
•
•
•
•
•
We have reported on all the emission sources required under the Companies Act 2006 (Strategic Report and Directors’ Reports)
Regulations 2013 for our manufacturing facility in Arnhem, the Netherlands.
Due to unavailability of data, GHG emissions related to our offices and staff travel are not included in the figures above.
Emissions have been calculated following the GHG Protocol – Corporate Accounting and Reporting (revised edition) using the
following databases: IPCC 2006 Guidelines for National Greenhouse Gas Inventories, 2007 IPCC Fourth Assessment Report and
Eco-Invent v3.3.
Note that following Environmental Reporting Guidelines of Defra (2013), carbon offsets may be accounted for separately as a ‘NET’
figure, while the original electricity consumption figures should be presented as a ‘GROSS’ figure.
Following the same (Defra 2013) guidelines, the emissions associated with our supply chain (inputs and outputs) are not included
in the figures above, for readers that are interested in the supply chain related figures we refer to our publicly available carbon
footprint report: http://www.accoya.com/wp-content/uploads/2013/09/Verco-Cradle-to-gate-carbon-footprint-update-2012.pdf
and Environmental Product Declaration (EN 15804): https://www.accoya.com/wp-content/uploads/2015/06/NEPD-376-262-EN-
Accsys-Technologies-Accoya-Wood.pdf.
•
Previously outsourced parts of the operations have been brought in-house, following the expansion in Arnhem and included in the
above figures (in the 2017–2018 & 2018–2019 years).
Further details concerning the environmental impact of our products as a whole are detailed in the Sustainability
Report on pages 30 to 32, including an assessment of the overall life cycle of Accoya®.
Directors
The Directors of the Company during the year and up to the date of signing the financial statements were:
Sean Christie
Paul Clegg
Sue Farr
Montague John ‘Nick’ Meyer
Hans Pauli (resigned 31 December 2018)
William Rudge
Patrick Shanley
Trudy Schoolenberg
Directors’ indemnities
The Company maintains Directors’ and officers’ liability insurance which gives appropriate cover for legal action
brought against its Directors. The policy was in force throughout the period and at the date of the approval of
these financial statements.
Employment policies
The Group operates an equal opportunities policy from recruitment and selection, through training and
development, appraisal and promotion to retirement. It is our policy to promote an environment free from
discrimination, harassment and victimisation, where everyone will receive equal treatment regardless of gender,
colour, ethnic or national origin, disability, age, marital status or sexual orientation. All decisions relating to
employment practices will be objective, free from bias and based solely upon work criteria and individual merit.
15% of employees in the year ended 31 March 2019 were female. 21% of the Senior Management team were female
and two of the Board of Directors were female.
Health and safety
Health and safety is the priority at all levels of the Group, in particular taking into account the chemical industry
in which Accsys operates. Group companies have a responsibility to ensure that all reasonable precautions are
taken to provide and maintain working conditions for employees and visitors alike, which are safe, healthy and in
compliance with statutory requirements and appropriate codes of practice.
The avoidance of occupational accidents and illnesses is given a high priority. Detailed policies and procedures
are in place to minimise risks and ensure appropriate action is understood in the event of an incident. A
dedicated health and safety officer is retained at the Group’s manufacturing facilities in Arnhem and Hull.
Significant shareholdings
So far as the Company is aware (further to formal notification), the following shareholders held legal or beneficial
interests in ordinary shares of the Company exceeding 3%:
• Teslin Participaties Cooperatief U.A.
• Henderson Group PLC
• Decico BV
• Majedie UK Equity Fund
• VP Participaties B.V.
•
Invesco Limited
• The London & Amsterdam Trust Company Limited
• FIL Limited (formerly known as Fidelity International Limited)
• Pershing Securities Limited (via Pershing Nominees Limited)
• Saad Investments Company Limited
• Zurab Lysov
There are no restrictions in respect of voting rights.
12.42%
5.94%
5.07%
5.06%
5.00%
4.87%
4.51%
4.26%
4.17%
3.92%
3.71%
Going concern
The Directors have formed a judgement, at the time of approving the financial statements that there is a reasonable
expectation that the Group has access to adequate resources to continue in operational existence for at least the
next 12 months. Further details are set out in note 1 to these financial statements.
72
Annual Report and Financial Statements 2019
Governance / Statement of Directors’ Responsibilities
73
Governance
Directors’ Report continued
Governance
Statement of Directors’ Responsibilities
in respect of the financial statements
Corporate Governance
The Company’s statement on corporate governance can be found in the Corporate Governance Report on pages 46
to 48 of these financial statements. The Corporate Governance Report forms part of this Directors’ Report and is
incorporated into it by cross-reference.
Disclosure of information to auditors
Each of the persons who is a Director at the date of the approval of the Annual Report confirms that:
• So far as the Director is aware, there is no relevant audit information of which the Company’s auditors
are unaware; and
• The Director has taken all the steps that they ought to have taken as a Director in order to make themself aware
of any relevant audit information and to establish that the Company’s auditors are aware of that information.
This confirmation is given and should be interpreted in accordance with the provisions of s418 of the Companies
Act 2006.
Independent auditors
PricewaterhouseCoopers LLP have expressed their willingness to continue in office as auditors and a resolution
to re-appoint them will be proposed at the annual general meeting.
Directors’ responsibilities pursuant to DTR4
The Directors confirm to the best of their knowledge:
• The Group financial statements have been prepared in accordance with International Financial Reporting
Standards (‘IFRSs’) as adopted by the European Union and Article 4 of the IAS Regulation and give a true
and fair view of the assets, liabilities, financial position and profit or loss of the Group.
• The Annual Report includes a fair review of the development and performance of the business and the
financial position of the Group and the parent Company, together with a description of the principal risks
and uncertainties that they face.
By order of the Board
Angus Dodwell
Company Secretary
24 June 2019
Directors’ responsibilities
The Directors are responsible for preparing the Annual Report, the Directors’ Remuneration Report and the
financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that
law the Directors have prepared the Group financial statements in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union, and the parent Company financial statements
in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting
Standards, comprising FRS 101 ‘Reduced Disclosure Framework’, and applicable law). Under company law the
Directors must not approve the financial statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and parent Company and of the profit or loss of the Group and parent
Company for that period. In preparing these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• state whether applicable IFRSs as adopted by the European Union have been followed for the Group
financial statements and United Kingdom Accounting Standards, comprising FRS 101, have been followed
for the Company financial statements, subject to any material departures disclosed and explained in the
financial statements;
• make judgements and accounting estimates that are reasonable and prudent; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the
Group and parent Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain
the Group and parent Company’s transactions and disclose with reasonable accuracy at any time the financial
position of the Company and the Group and parent Company and enable them to ensure that the financial
statements and the Directors’ remuneration report comply with the Companies Act 2006 and, as regards the
Group financial statements, Article 4 of the IAS Regulation.
The Directors are also responsible for safeguarding the assets of the Group and parent Company and hence for
taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the company’s website. Legislation in the
United Kingdom governing the preparation and dissemination of financial statements may differ from legislation
in other jurisdictions.
The Directors consider that the Annual Report and accounts, taken as a whole, is fair, balanced and
understandable and provides the information necessary for shareholders to assess the Group and parent
Company’s performance, business model and strategy.
Each of the Directors, whose names and functions are listed in Corporate Governance confirm that, to the best
of their knowledge:
• the Company financial statements, which have been prepared in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 ‘Reduced
Disclosure Framework’, and applicable law), give a true and fair view of the assets, liabilities, financial position
and loss of the Company;
• the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the
European Union, give a true and fair view of the assets, liabilities, financial position and loss of the Group; and
• the Strategic Report (including but not limited to Chairman's Statement, Chief Executive's Report and
Financial Review) includes a fair review of the development and performance of the business and the position
of the Group and Company, together with a description of the principal risks and uncertainties that it faces.
In the case of each Director in office at the date the Directors’ Report is approved:
• so far as the Director is aware, there is no relevant audit information of which the Group and Company’s
auditors are unaware; and
• they have taken all the steps that they ought to have taken as a Director in order to make themselves
aware of any relevant audit information and to establish that the Group and Company’s auditors are aware
of that information.
74
Annual Report and Financial Statements 2019
75
Financial Statements
Independent Auditors’ Report
76
83 Consolidated Statement
of Comprehensive Income
84 Consolidated Statement
of Financial Position
85 Consolidated Statement
of Changes in Equity
86 Consolidated Statement
of Cash Flow
87 Notes to the Financial Statements
123 Company Independent Auditors’
Report
130 Company Financial Statements
Shareholder Information
140 Shareholder Information
Our primary focus for this project was
quality; we wanted to design a boardwalk
built to last, that curves between the
trees and offers many places to stop, rest
and enjoy the natural setting and views.
Accoya® was the natural choice.”
Grant Calder, Flexure
Changing wood to change the world in
Asia Pacific
Noosa Boardwalk – Sunshine Coast, Australia
Accoya® wood under the sun and beside the sea
Australia’s iconic Sunshine Coast has received a makeover: a 400-metre-long
boardwalk with Accoya® wood used for all decking, seating and stairs – as well
as a locally hand-carved surfboard-shaped shower.
The boardwalk has been designed to be in keeping with the natural setting,
retaining 99% of the existing coastal rainforest and highlighting Noosa’s
World Surfing Reserve and Unesco-biosphere reserve status. It has already
received the coveted Regional Green Space Award from the Australian
Institute of Horticulture.
The boardwalk has undergone substantial refurbishment in the form
of seating, viewing points and LED lighting, all done to improve the
experience for visitors as they traverse the location and take in the
stunning views.
Noosa Shire Council commissioned the project, with architect
Grant Calder of Flexure overseeing the design and build.
Minimal environmental impact both during the construction
and after completion was a major factor for the project.
Accoya® wood was the natural choice, with its high
performance characteristics and sustainable credentials
well suited to the project and the beautiful sun-drenched
and sea-sprayed environment.
Location: Noosa, Australia
Architect: Grant Calder, Flexure
Asia Pacific revenue
€6.1m
16%
(vs 2018)
76
Annual Report and Financial Statements 2019
Financial Statements / Independent Auditors’ Report
77
Independent Auditors’ Report
to the members of Accsys Technologies PLC
Report on the audit of the Group financial statements
Opinion
In our opinion, Accsys Technologies PLC’s Group financial statements (the “financial statements”):
• give a true and fair view of the state of the Group’s affairs as at 31 March 2019 and of its loss and cash flows
for the year then ended;
• have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as
adopted by the European Union; and
• have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the
Group financial statements, Article 4 of the IAS Regulation.
We have audited the financial statements, included within the Annual Report and Financial Statements (the
‘Annual Report’), which comprise: the Consolidated Statement of Financial Position as at 31 March 2019;
the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Cash Flow, and the
Consolidated Statement of Changes in Equity for the year then ended; and the notes to the financial statements,
which include a description of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and
applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for
the audit of the financial statements section of our report. We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public
interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical
Standard were not provided to the Group.
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the
financial statements. In particular, we looked at where the Directors made subjective judgements, for example in
respect of significant accounting estimates that involved making assumptions and considering future events that
are inherently uncertain.
We gained an understanding of the legal and regulatory framework applicable to the Group and the industry
in which it operates, and considered the risk of acts by the Group which were contrary to applicable laws and
regulations, including fraud. We designed audit procedures at Group and significant component level to respond
to the risk, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk
of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery
or intentional misrepresentations, or through collusion. We focused on laws and regulations that could give rise
to a material misstatement in the Group and company financial statements, including, but not limited to, the
Companies Act 2006, Pensions legislation, UK tax legislation and equivalent local laws and regulations applicable
to significant component teams and testing particular classes of transactions. Our tests included, but were
not limited to, review of correspondence with the regulators, enquiries of management including internal legal
counsel, review of significant component auditors’ work. There are inherent limitations in the audit procedures
described above and the further removed non-compliance with laws and regulations is from the events and
transactions reflected in the financial statements, the less likely we would become aware of it.
As in all our audits we also addressed the risk of management override of controls, including evaluating whether
there was evidence of bias by the Directors that represented a risk of material misstatement due to fraud.
Capability of the audit in detecting irregularities, including fraud
Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance
with laws and regulations related to taxes impacting different territories, and we considered the extent to
which non-compliance might have a material effect on the financial statements. We also considered those laws
and regulations that have a direct impact on the preparation of the financial statements such as the Companies
Act 2006 and applicable listing rules. We evaluated management’s incentives and opportunities for fraudulent
manipulation of the financial statements (including the risk of override of controls), and determined that the
principal risks were related to posting inappropriate journal entries to achieve desired financial results and
management bias in accounting estimates. The Group engagement team shared this risk assessment with the
component auditors so that they could include appropriate audit procedures in response to such risks in their
work. Audit procedures performed by the Group engagement team and/or component auditors included:
We have provided no non-audit services to the Group in the period from 1 April 2018 to 31 March 2019.
• understanding management’s assessment of the risk and the overall control environment in place, including
Our audit approach
Overview
Overall Group materiality: €750,000 (2018: €609,000), based on 1% of total revenue.
Materiality
We performed audit work over the complete financial information for three
reporting units which accounted for approximately 87% (2018: 87%) of the Group’s
revenue. These operating reporting units comprised the operating business in the
Netherlands, UK and centralised functions.
Audit Scope
We identified five reporting units, three of which were significant due to their size.
This comprised the operating businesses in the Netherlands and the UK and
centralised functions.
Key audit
matters
We conducted specific audit procedures on certain balances and transactions in
respect of the remaining two reporting units. These procedures related to elimination
of intergroup / investment balances as well as substantive procedures over non-
current assets in one unit.
Going concern.
Impairment of non-current assets.
Cost capitalisation of Property, Plant and Equipment.
the ‘tone from the top’;
• enquiries with management and the Group’s legal counsel, including consideration of known or suspected
instances of fraud and non-compliance with laws and regulations and examining supporting calculations where
adjustments have been made in respect of these;
• reading key correspondence with external legal counsel in relation to compliance with certain laws and
guidelines;
• substantive testing of journal entries, particularly focused around the year end and journals posted to
revenue / other unusual account combinations; and
• challenging the assumptions and judgements made by management in their significant accounting estimates
for bias that could result in material misstatement due to fraud (e.g. impairment of assets, inventory provision,
depreciation and amortisation rates).
There are inherent limitations in the audit procedures described above and the further removed non-compliance
with laws and regulations is from the events and transactions reflected in the financial statements, the less likely
we would become aware of it. Also, the risk of not detecting a material misstatement due to fraud is higher than
the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example,
forgery or intentional misrepresentations, or through collusion.
78
Annual Report and Financial Statements 2019
Financial Statements / Independent Auditors’ Report
79
Independent Auditors’ Report continued
to the members of Accsys Technologies PLC
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance
in the audit of the financial statements of the current period and include the most significant assessed risks
of material misstatement (whether or not due to fraud) identified by the auditors, including those which had
the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the
efforts of the engagement team. These matters, and any comments we make on the results of our procedures
thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete list of all risks
identified by our audit.
Key audit matter
How our audit addressed the key audit matter
Going concern
As the Group continues to
develop and expand there are a
number of factors that potentially
impact on its ability to continue as
a going concern. These include:
Continued loss making
performance as the Group
looks to increase production
capacity to leverage continuing
investments being made; and
Significant planned capital
expenditure over the next 12
months at Hull for the Tricoya®
businesses as part of that
investment.
As a result of this continued
investment the financing balances
available to the Group over the
next 12 to 18 months are forecast
by management to reduce from
the balances held at 31 March
2019. As such we have included
going concern as a significant risk.
Our audit included a number of specific procedures as set out below:
Obtaining and auditing management’s own going concern assessment. This
included:
Recalculating the arithmetic accuracy of management’s model;
Ensuring that the model covered an appropriate period and included correct
cash balances in the opening position and subsequent movements; and
Challenged the key assumptions included in the model, namely (i) the trading
position agreed to the Board approved forecast, (ii) challenged management
on the extent and timing of future expenditure of capital amounts including
the appropriateness of contingencies held given the current state of progress
of projects and the agreements in place with the contractors, (iii) considered
managements’ history of ability to forecast and (iv) considered mitigating
measures available to management should they be required and their amount
and timing.
As a result of our challenge management produced an updated paper that
considered additional downside sensitivities around production levels and
capital expenditure. Their updated paper also expanded on the mitigating
measures available to management should they be required and explained why
they were satisfied that the current forecasts were robust given previous
variances to budget.
Debated the position with management and reviewed Board minutes to ensure
that the position in the model could be corroborated to other supporting
information from the Board; and
Reported our approach and findings to the Audit Committee in our written
report.
Management’s disclosure on the going concern basis of preparation is
consistent with our understanding based on the procedures performed.
For our conclusion, please refer to page 81.
Key audit matter
How our audit addressed the key audit matter
Impairment of non-current assets
At 31 March 2019 the Group
carried €4.2m of goodwill (2018:
€4.2m), €6.6m of other intangible
assets (2018: €6.4m), and
€105.3m of tangible fixed assets
(2018: €60.8m).
Management is required to
perform an annual impairment
review of goodwill held within
intangible assets in accordance
with IAS 36. In addition
management should assess for
impairment indicators in respect
of other assets held.
We focussed on this as a
significant risk principally due
to the significant size of these
balances and the fact that there is
an element of judgement behind
some of the assumptions that
support the carrying value of the
goodwill, other intangibles and
tangible fixed assets.
Our audit included a number of specific procedures as set out below:
Assessing the appropriateness and consistency of the identification of Cash
Generating Units, (“CGUs”). Management has identified two CGUs which is
consistent with the prior year;
Understanding and auditing management’s impairment calculations (value-in-
use) for each of the two CGUs. This included:
• Verifying that the basis for the value-in-use calculations was a Board
approved budget for FY20 consistent with the going concern analysis;
• Recalculating the carrying value of each of the CGU’s by agreeing balances
back to the financial records; and
• Debating and challenging management’s key assumptions used in the model
for future years (Revenue growth, EBITDA margin, discount rate). We
have involved valuation specialists in assessing the reasonableness of the
discount rate, validated future revenue expectations given knowledge of the
capacity of the plant in future years, consideration and challenge of margins
based on previous and expected performance.
Performed a sensitivity analysis on the key assumptions in the impairment
model prepared by management and debated and challenged management on
the likelihood of those sensitivities;
Reviewed compliance with the disclosure requirements of IAS 36 given the
outcome reached;
Reviewed for indicators of impairment on other assets currently being
depreciated / amortised utilising our knowledge of the business;
Board minute review and discussions with management;
Challenged management to perform a downside sensitivity; and reported our
approach and findings to the Audit Committee.
Based on our procedures we consider management’s key assumptions to be
within a reasonable range and concur with their position of no impairment
charge in the year to 31 March 2019. The disclosures appropriately describe the
inherent degree of subjectivity in the estimates, including specific disclosures
on the key assumptions most sensitive to change.
80
Annual Report and Financial Statements 2019
Financial Statements / Independent Auditors’ Report
81
Independent Auditors’ Report continued
to the members of Accsys Technologies PLC
Key audit matter
How our audit addressed the key audit matter
Cost capitalisation of Property, Plant and Equipment
During the year the Group
has capitalised €18.4m
(FY18: €25.0m) of costs
relating to the Arnhem
expansion, including
the land and building
purchase, and a further
€27.8m (FY18: €16.7m) of
costs on the construction
of a Tricoya® plant in
Hull. While the majority of
the costs are external (c
€0.4m of internal costs
have been capitalised)
there is a risk with such
large amounts that some
inappropriate costs are
incorrectly capitalised.
There is also the risk that
the accounting for the
termination of the finance
lease and purchase of the
asset is incorrect.
Our audit procedures included the following tests:
Substantively verified a sample of external costs capitalised to external supporting
documentation to ensure they meet the capitalisation criteria of IAS 16;
Challenging management’s assessment to ensure costs sampled (both internal and
external) were directly attributable to the expansion project. We confirmed that the
majority of costs capitalised were external and the value of internal costs capitalised was
€0.4m;
Discussions with the finance team but also the operational staff which not only
improved our understanding of the overall project but also helped us audit the
accounting given the type and stage of completion of the projects;
The Group audit team performed site visits to both Arnhem and Hull during May /
June 2019. This allowed us to physically assess the project builds as well as increase our
knowledge of the projects;
Consulted with our accounting specialists on the treatment for the termination of the
finance lease and simultaneous purchase;
We considered the overall capitalisation and the accounting thereof in light of our
understanding from reading board minutes as well as discussions with management; and
Reported our approach and findings to the Audit Committee.
Based on our procedures we consider the capitalisation during the year to 31 March
2019 to be appropriate.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the
financial statements as a whole, taking into account the structure of the Group, the accounting processes and
controls, and the industry in which it operates.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds
for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit
and the nature, timing and extent of our audit procedures on the individual financial statement line items and
disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial
statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall Group materiality
€750,000 (2018: €609,000).
How we determined it
1% of total revenue.
Rationale for benchmark applied
Given that the business is in a growth stage and low / break-even levels of profit
/ loss, revenue was considered the most appropriate measure used, and is a
generally accepted auditing benchmark. This is consistent with the prior year.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall
Group materiality. The range of materiality allocated across components was between €270,000 and
€700,000. Certain components were audited to a local statutory audit materiality that was also less than our
overall Group materiality.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit
above €37,000 (2018: €30,000) as well as misstatements below that amount that, in our view, warranted
reporting for qualitative reasons.
Conclusions relating to going concern
ISAs (UK) require us to report to you when:
• the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is
not appropriate; or
• the Directors have not disclosed in the financial statements any identified material uncertainties that may cast
significant doubt about the Group’s ability to continue to adopt the going concern basis of accounting for a
period of at least twelve months from the date when the financial statements are authorised for issue.
We have nothing to report in respect of the above matters. We have included our work on going concern as a key
audit matter above.
However, because not all future events or conditions can be predicted, this statement is not a guarantee as to
the Group’s ability to continue as a going concern. For example, the terms on which the United Kingdom may
withdraw from the European Union are not clear, and it is difficult to evaluate all of the potential implications on
the Group’s trade, customers, suppliers and the wider economy.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements
and our auditors’ report thereon. The Directors are responsible for the other information. Our opinion on the
financial statements does not cover the other information and, accordingly, we do not express an audit opinion
or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial statements or
our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent
material inconsistency or material misstatement, we are required to perform procedures to conclude whether
there is a material misstatement of the financial statements or a material misstatement of the other information.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report based on these responsibilities.
With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures
required by the UK Companies Act 2006 have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, ISAs (UK)
require us also to report certain opinions and matters as described below.
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic
Report and Directors’ Report for the year ended 31 March 2019 is consistent with the financial statements and
has been prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the group and its environment obtained in the course of the
audit, we did not identify any material misstatements in the Strategic Report and Directors’ Report.
82
Annual Report and Financial Statements 2019
Financial Statements / Consolidated Statement of Comprehensive Income
83
Independent Auditors’ Report continued
to the members of Accsys Technologies PLC
Consolidated Statement of Comprehensive Income
for the year ended 31 March 2019
Responsibilities for the financial statements and the audit
Responsibilities of the Directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities set out on page 73, the Directors are
responsible for the preparation of the financial statements in accordance with the applicable framework and for
being satisfied that they give a true and fair view. The Directors are also responsible for such internal control
as they determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless the Directors either intend to liquidate the Group or to cease operations, or have
no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s
website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the Company’s members as a body in
accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving
these opinions, accept or assume responsibility for any other purpose or to any other person to whom this
report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• certain disclosures of Directors’ remuneration specified by law are not made.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee, we were appointed by the Directors on 1 April 2011 to
audit the financial statements for the year ended 31 March 2011 and subsequent financial periods. The period of
total uninterrupted engagement is nine years, covering the years ended 31 March 2011 to 31 March 2019.
Other matters
We have reported separately on the Company financial statements of Accsys Technologies PLC for the year
ended 31 March 2019 and on the information in the Directors’ Remuneration Report that is described as having
been audited.
Darryl Phillips (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
24 June 2019
Year ended 31 March 2019
Year ended 31 March 2018
Exceptional
items and
other
adjustments*
€’000
Underlying
€’000
Note
Exceptional
items and
other
adjustments*
€’000
Total
€’000
Underlying
€’000
66,949
634
1,614
5,956
–
–
–
–
66,949
56,331
634
1,614
–
200
5,956
4,380
–
–
–
–
Total
€’000
56,331
–
200
4,380
Accoya® wood revenue
Tricoya® panel revenue
Licence revenue
Other revenue
Total revenue
3
75,153
–
75,153
60,911
–
60,911
Cost of sales
Gross profit
Other operating costs excluding
depreciation and amortisation
Other gains
EBITDA
Depreciation and amortisation
Total other operating costs1
Operating (loss)/gain
Finance income
Finance expense
Loss before taxation
Tax credit
Loss for the year
(56,517)
–
(56,517)
(47,270)
–
(47,270)
18,636
–
18,636
13,641
–
13,641
4
5
4
4
8
10
11
(17,733)
24
(17,709)
(17,140)
(2,184) (19,324)
–
903
–
24
–
–
32
32
927
(3,499)
(2,152)
(5,651)
(3,965)
–
(3,965)
(3,078)
–
(3,078)
(21,698)
24
(21,674)
(20,218)
(2,184) (22,402)
(3,062)
–
(3,117)
(6,179)
24
(3,038)
(6,577)
(2,152)
(8,729)
–
–
–
–
–
(1,529)
(4,646)
(2,174)
502
(1,672)
(1,505)
(7,684)
(8,751)
(1,650)
(10,401)
12
782
–
782
251
–
251
(5,397)
(1,505)
(6,902)
(8,500)
(1,650)
(10,150)
Gain/(loss) arising on translation
of foreign operations
Gain/(loss) arising on foreign
currency cash flow hedges
Total other comprehensive (loss)/income
54
–
54
–
11
11
54
(56)
–
(56)
11
65
–
(56)
202
202
202
146
Total comprehensive loss for the year
(5,343)
(1,494)
(6,837)
(8,556)
(1,448) (10,004)
Total comprehensive loss for
the year is attributable to:
Owners of Accsys Technologies PLC
Non-controlling interests
(4,337)
(1,006)
(1,494)
(5,831)
(7,592)
(1,448)
(9,040)
–
(1,006)
(964)
–
(964)
Total comprehensive loss for the year
(5,343)
(1,494)
(6,837)
(8,556)
(1,448) (10,004)
Basic and diluted loss per ordinary
share
14
€(0.04)
€(0.05) €(0.07)
€(0.08)
The notes on pages 87 to 122 form an integral part of these financial statements.
* See note 5 for details of exceptional items and other adjustments
1. Total operating costs includes other operating costs excluding depreciation and amortisation & depreciation and amortisation
84
Annual Report and Financial Statements 2019
Financial Statements / Consolidated Statement of Changes in Equity
85
Consolidated Statement of Financial Position
as at 31 March 2019
Consolidated Statement of Changes in Equity
for the year ended 31 March 2019
Registered Company 05534340
Non-current assets
Intangible assets
Property, plant and equipment
Financial asset at fair value through profit or loss
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Corporation tax receivable
FX derivative asset
Current liabilities
Trade and other payables
Obligation under finance lease
Short term borrowings
Corporation tax payable
Net current assets
Non-current liabilities
Obligation under finance lease
Other long term borrowing
Net assets
Equity
Share capital
Share premium account
Other reserves
Accumulated loss
Own shares
Foreign currency translation reserve
Capital value attributable to owners of Accsys Technologies PLC
Non-controlling interest in subsidiaries
Total equity
Note
16
17
18
21
22
23
28
29
28
29
24
25
9
2019
€’000
10,790
105,272
–
116,062
14,008
13,038
8,857
478
143
36,524
(19,963)
(246)
(6,176)
(34)
(26,419)
2018
€’000
10,653
60,835
–
71,488
13,125
9,335
39,698
1,347
–
63,505
(18,012)
(1,323)
(2,062)
(17)
(21,414)
10,105
42,091
(1,775)
(50,733)
(52,508)
(12,849)
(27,235)
(40,084)
73,659
73,495
5,900
145,429
109,521
(217,348)
(9)
43
43,536
30,123
73,659
5,576
140,036
109,425
(211,830)
(15)
(11)
43,181
30,314
73,495
The financial statements on pages 83 to 122 were approved by the Board of Directors on 24 June 2019 and
signed on its behalf by
Paul Clegg
Director
William Rudge
Director
The notes on pages 87 to 122 form an integral part of these financial statements.
Share
capital
Ordinary
€000
Share
premium
€000
Other
reserves
€000
Own
Shares
€000
Foreign
currency
translation
reserve
€000
Accumulated
Loss
€000
Total equity
attributable
to equity
shareholders
of the
company
€000
Non-
Controlling
interests
€000
Total
Equity
€000
4,531
128,792
113,460
(33)
45
(202,944)
43,851
12,620
56,471
202
–
(56)
(9,186)
(9,040)
(964) (10,004)
–
–
–
13,007
(1,763)
–
–
–
–
–
18
–
–
–
(4,237)
–
–
–
–
–
–
300
–
–
–
–
300
1,063
13,007
(1,763)
–
–
300
1,063
–
13,007
–
(1,763)
(4,237)
18,658
14,421
5,576
140,036
109,425
(15)
(11)
(211,830)
43,181
30,314
73,495
–
–
–
5,421
(28)
11
–
–
–
–
–
–
6
–
–
–
85
–
54
(5,896)
(5,831)
(1,006)
(6,837)
–
–
–
–
–
382
(4)
–
–
–
382
326
5,421
(28)
–
–
–
–
382
326
5,421
(28)
85
815
900
Shares issued
1,045
Balance at
31 March 2017
Total comprehensive
income/(expense)
for the period
Share based
payments
Premium on
shares issued
Share issue costs
Issue of subsidiary
shares to non-
controlling interests
Balance at
31 March 2018
Total comprehensive
income/(expense)
for the period
Share based
payments
Premium on
shares issued
Share issue costs
Issue of subsidiary
shares to non-
controlling interests
Balance at
31 March 2019
–
–
–
–
–
–
–
–
–
–
Shares issued
324
5,900
145,429
109,521
(9)
43
(217,348)
43,536
30,123
73,659
Share capital is the amount subscribed for shares at nominal value (note 24).
Share premium account represents the excess of the amount subscribed for share capital over the nominal value
of these shares, net of share issue expenses. Share issue expenses comprise the costs in respect of the issue by
the Company of new shares.
See note 25 for details concerning Other reserves.
Non-controlling interests relates to the investment of various parties into Tricoya Technologies Limited and
Tricoya Ventures UK Limited (notes 9 and 26).
Own shares represents a total of 173,915 shares issued to an Employee Benefit Trust (‘EBT’) at nominal value on
25 June 2018. These shares shall vest if the employees remain in employment with the Group to the vesting date,
being 1 July 2019 (subject to certain other provisions including good-leaver, take-over and Committee discretion
provisions) (note 15).
Foreign currency translation reserve arises on the re-translation of the Group’s USA subsidiary’s net assets
which are denominated in a different functional currency, being US dollars.
Accumulated losses represent the cumulative loss of the Group attributable to the owners of the parent.
The notes on pages 87 to 122 form an integral part of these financial statements.
86
Annual Report and Financial Statements 2019
Financial Statements / Notes to the Financial Statements
87
Consolidated Statement of Cash Flow
for the year ended 31 March 2019
Loss before taxation before exceptional items and other adjustments
Adjustments for:
Amortisation of intangible assets
Depreciation of land, property, plant and equipment
Net finance expense
Equity-settled share-based payment expenses
Currency translation (gains)/losses
Cash flows generated from/(used in) operating activities
before changes in working capital
Exceptional Items in operating activities (see note 5)
Cash inflows/(outflows) from operating activities before
changes in working capital
(Increase)/decrease in trade and other receivables
Increase in deferred income
(Increase) in inventories
Increase in trade and other payables
Net cash generated used in operating activities before tax
Tax received/(paid)
Net cash generated by/(absorbed by) operating activities
Cash flows from investing activities
Interest received
Proceeds from disposal of property, plant and equipment
Investment in property, plant and equipment
Investment in intangible assets
Net cash used in investing activities
Cash flows from financing activities
Proceeds from loans
Other finance costs
Proceeds from trade facility draw down
Interest paid
Repayment of finance lease
Repayment of loans/rolled up interest
Proceeds from issue of share capital
Proceeds from issue of subsidiary shares to non-controlling interests
Share issue costs
Net cash from financing activities
Net decrease in cash and cash equivalents
Effect of exchange rate changes on cash and cash equivalents
Opening cash and cash equivalents
Closing cash and cash equivalents
The notes on pages 87 to 122 form an integral part of these financial statements.
2019
€’000
(6,179)
611
3,354
3,117
382
(38)
1,247
–
2018
€’000
(8,751)
582
2,496
2,174
300
268
(2,931)
(1,617)
1,247
(4,548)
(3,693)
994
(882)
960
(1,374)
1,674
300
70
–
(48,166)
(749)
(48,845)
26,000
(93)
1,825
(1,157)
(12,209)
(3,208)
5,747
900
(28)
17,777
(30,768)
(73)
39,698
8,857
215
–
(1,331)
3,908
(1,756)
(2,013)
(3,769)
45
32
(29,530)
(397)
(29,850)
7,500
(325)
–
(716)
(322)
–
14,079
14,420
(1,771)
32,865
(754)
(721)
41,173
39,698
Notes to the Financial Statements
for the year ended 31 March 2019
1. Accounting Policies
Basis of accounting
The Group’s financial statements have been prepared under the historical cost convention (except for certain
financial instruments and equity investments which are measured at fair value), in accordance with International
Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board as endorsed by the
European Union, interpretations issued by the IFRS Interpretations Committee (IFRS IC) and with those parts of
the Companies Act 2006 applicable to companies preparing their financial statements under adopted IFRS.
Going Concern
These 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 12 months from the date these
financial statements are approved.
As part of the Group’s going concern review, the Directors have reviewed the Group’s trading forecasts and
working capital requirements for the foreseeable future taking into account the banking and finance facilities
which are currently in place (see note 29 for details of these facilities). These forecasts indicate that, in order
to continue as a going concern, the Group is dependent on the achievement of certain operating performance
measures relating to the production and sales of Accoya® wood from the plant in Arnhem with the collection of
ongoing working capital items in line with internally agreed budgets. The Directors have also considered the level
and timing of capital expenditure required in relation to the new plant in Hull which is currently being built and
further expansion of the Arnhem operation (with further details of the required capital expenditure and how this
is to be financed to be confirmed as the detailed planning progresses).
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, that there is no material uncertainty.
There are a sufficient number of alternative actions and measures within the control of the Group that can and
would be taken in order to achieve the Group’s medium and long term objectives including reducing/deferring
costs in some discretionary areas.
Therefore the Directors believe that the going concern basis is the most appropriate on which to prepare the
financial statements.
Exceptional Items
Exceptional items are events or transactions that fall outside the ordinary activities of the Group and which by
virtue of their size or incidence, have been separately disclosed in order to improve a reader’s understanding
of the financial statements. These include items relating to the restructuring of a significant part of the Group,
impairment losses (or the reversal of previously recorded exceptional impairments), expenditure relating to the
integration and implementation of significant acquisitions and other one-off events or transactions. See note 5
for details of exceptional items.
Business combinations
Where the Company has the power, either directly or indirectly, to govern the financial and operating
policies of another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary.
The consolidated financial statements present the results of the Group as if they formed a single entity.
Inter-company transactions and balances between Group companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of business combinations using the purchase
method. In the consolidated statement of financial position, the acquirer’s identifiable assets, liabilities, and
contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired
operations are included in the consolidated statement of comprehensive income from the date on which control
is obtained.
As allowed under IFRS 1, some business combinations effected prior to transition to IFRS, were accounted for using
the merger method of accounting. Under this method, assets and liabilities are included in the consolidation at
their book values, not fair values, and any differences between the cost of investment and net assets acquired were
taken to the merger reserve. The majority of the merger reserve arose from a corporate restructuring in the year
ended 31 March 2006 which introduced Accsys Technologies PLC as the new holding company.
Further details concerning the Tricoya® Consortium are included in note 9.
88
Annual Report and Financial Statements 2019
Financial Statements / Notes to the Financial Statements
89
1. Accounting Policies continued
Revenue from contracts with customers
Revenue is measured at the fair value of the consideration receivable. Revenue is recognised to the extent
that it is highly probable that a significant reversal will not occur based on the consideration in the contract.
The following specific recognition criteria must also be met before revenue is recognised.
Manufacturing revenue
Revenue is recognised from the sale of goods and is measured at the amount of the transaction price
received in exchange for transferring goods. The transaction price is the expected consideration to be
received, to the extent that it is highly probable that there will not be a significant reversal of revenue in
the future. When a customer provides untreated wood to be processed by the Group in order to produce
Accoya®, revenue is recognised when the Group’s performance obligations under the relevant customer
contract have been satisfied, which is before the finished Accoya® has been collected by the customer.
Manufacturing revenue includes the sale of Accoya® wood, Tricoya® panels and other revenue, principally
relating to the sale of acetic acid.
Licensing fees and Marketing income
Licence fees and marketing income are recognised over the period of the relevant agreements according
to the specific terms of each agreement or the quantities and/or values of the licensed product sold.
The accounting policy for the recognition of licence fees is based upon satisfaction of the performance
obligations set out in the contract such as an assessment of the work required before the licence is
signed and subsequently during the design, construction and commissioning of the licensees’ plant, with
an appropriate proportion of the fee recognised upon signing and the balance recognised as the project
progresses to completion. Marketing revenue, when the Company acts as principal, is recognised based on
the actual work completed in the period. The amount of any cash or billings received but not recognised as
income is included in the financial statements as deferred income and shown as a liability.
Finance income
Interest accrues using the effective interest method, i.e. the rate that discounts estimated future cash receipts
through the expected life of the financial instrument to the net carrying amount of the financial asset.
Finance expense
Finance expenses include the fees, interest and other finance charges associated with the Group’s loan notes and
credit facilities, which are expensed over the period that the Group has access to the loans and facilities.
Foreign exchange gains or losses on the loan notes are included within finance expenses.
Interest on borrowings directly relating to the construction or production of qualifying assets is capitalised
until such time as the assets are substantially ready for their intended use or sale. Where funds have been
borrowed specifically to finance a project, the amount capitalised represents the actual borrowing costs
incurred. Where the funds used to finance a project form part of general borrowings, the amount capitalised
is calculated using a weighted average of rates applicable to relevant general borrowings of the Group during
the construction period.
Finance expense also includes an allocation of finance charges in respect of the sale and leaseback of the Arnhem
land and buildings (the majority of the land and buildings were repurchased during the year, with finance charges
being incurred up to the purchase date, further details on this repurchase are included in note 5 and 28), and
the lease of London Office fit out and furniture, accounted for as a finance lease. The total finance charge
(calculated as the difference between the total minimum lease payments and the liability at the inception of the
lease) is allocated over the life of the lease using the sum-of-digits method.
Share based payments
The Company awards nil cost options to acquire shares of the Company to certain Directors and employees.
The Company has also awarded bonuses to certain employees in the form of the award of deferred shares of
the Company.
The fair value of options and deferred shares granted are recognised as an employee expense with a
corresponding increase in equity. The fair value is measured at grant date and is charged to the consolidated
statement of comprehensive income over the vesting period during which the employees become unconditionally
entitled to the options or shares.
The fair value of share options granted is measured using a modified Black Scholes model, taking into account the
terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to
reflect the actual number of share options that vest only where vesting is dependent upon the satisfaction
of service and non-market vesting conditions.
Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to
vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is
based on the number of options which eventually vest. Market vesting conditions are factored into the fair value
of the options granted. The cumulative expense is not adjusted for failure to achieve a market vesting condition.
Dividends
Equity dividends are recognised when they become legally payable. Interim equity dividends are recognised when
paid. Final equity dividends are recognised when approved by the shareholders at an annual general meeting.
Pensions
The Group contributes to certain defined contribution pension and employee benefit schemes on behalf of its
employees. These costs are charged to the consolidated statement of comprehensive income on an accruals basis.
Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the consolidated
statement of comprehensive income except to the extent that it relates to items recognised directly in equity,
in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or
substantively enacted at the reporting date together with any adjustment to tax payable in respect of previous
years. Current tax includes the expected impact of claims submitted by the Group to tax authorities in respect
of enhanced tax relief for expenditure on research and development.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes. The following temporary differences
are not provided for:
• the initial recognition of goodwill;
• the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a
business combination;
• differences relating to investments in subsidiaries to the extent that they will probably not reverse in the
foreseeable future.
The amount of deferred tax provided is based on the expected manner of realisation or settlement of the
carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date.
Recognition of deferred tax assets is restricted to the extent that it is probable that future taxable profits will be
available against which the temporary differences can be utilised.
Notes to the Financial Statements continuedfor the year ended 31 March 2019
90
Annual Report and Financial Statements 2019
Financial Statements / Notes to the Financial Statements
91
1. Accounting Policies continued
Foreign currencies
The individual financial statements of each Group company are presented in the currency of the primary
economic environment in which it operates (the functional currency). For the purposes of the consolidated
financial statements, the results and financial position of each Group company are expressed in euro, which
is the functional currency of the parent Company, and the presentation currency of the consolidated
financial statements.
In preparing the financial statements of the individual companies, transactions in currencies other than
the entity’s functional currencies are recognised at the rates of exchange prevailing on the dates of the
transactions. At each reporting date, monetary assets and liabilities that are denominated in foreign
currencies are retranslated at the rates prevailing at that date. Non-monetary items that are measured
in terms of historical cost in a foreign currency are not retranslated.
Exchange differences are recognised in profit or loss in the period in which they arise.
For the purposes of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign
operations are translated at exchange rates prevailing on the reporting date. Income and expense items are
translated at the average monthly exchange rates prevailing in the month in which the transaction took place.
Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in the
foreign currency translation reserve. Such translation differences are reclassified to profit and loss only on
disposal or partial disposal of the overseas operation.
Foreign exchange hedging
The Group has adopted IFRS 9 hedge accounting in respect of the cash flow hedging instruments that it uses
to manage the risk of foreign exchange movements impacting on future cash flows and profitability.
The Group has prospectively assessed the effectiveness of its cash flow hedging using the ‘hedge ratio’
of quantities of cash held in the same currency as future foreign exchange cash flow quantities related to
committed investment in plant and equipment. The Group has undertaken a qualitative analysis to confirm that
an ‘economic relationship’ exists between the hedging instrument and the hedged item. It is also satisfied that
credit risk will not dominate the value changes that result from that economic relationship.
At the end of each reporting period the Group measures the effectiveness of its cash flow hedging and
recognises the effective cash flow hedge results in Other Comprehensive Income and the Hedging Effectiveness
Reserve within Equity, together with its ineffective hedge results in Profit and Loss. Amounts are reclassified
from the Hedging Effectiveness Reserve to Profit and Loss when the associated hedged transaction affects
Profit and Loss. Further details are included in note 5.
Government grants
Government grants are recognised at their fair value where there is reasonable assurance that the grant will be
received and the Group will comply with the attached conditions. When the grant relates to an expense item, it
is recognised as income over the period necessary to match the grant on a systematic basis to the costs that it
is intended to compensate. Where the grant relates to an asset they are credited to a deferred income account
and released to the statement of comprehensive income over the expected useful life of the relevant asset on a
straight line basis.
Goodwill
Goodwill arising on the acquisition of a subsidiary undertaking is the difference between the fair value of the
consideration paid and the fair value of the identifiable assets and liabilities acquired. It is capitalised, and is
subject to annual impairment reviews by the Directors. Any impairment arising is charged to the consolidated
statement of comprehensive income. Where the fair value of the identifiable assets and liabilities acquired is
greater than the fair value of consideration paid, the resulting amount is treated as a gain on a bargain purchase
and has been recognised in the consolidated statement of comprehensive income.
Other intangible assets
Intellectual property rights, including patents, which cover a portfolio of novel processes and products, are
shown in the financial statements at cost less accumulated amortisation and any amounts by which the carrying
value is assessed during an annual review to have been impaired. At present, the useful economic life of the
intellectual property is considered to be 20 years.
Internal development costs are incurred as part of the Group’s activities including new processes, process
improvements, identifying new species and improving the Group’s existing products. Research costs are
expensed as incurred. Development costs are capitalised when all of the criteria set out in IAS 38 ‘Intangible
Assets’ (including criteria concerning technical feasibility, ability and intention to use or sell, ability to generate
future economic benefits, ability to complete the development and ability to reliably measure the expenditure)
have been met. These internal development costs are amortised on a straight line basis over their useful
economic life, between 8 and 20 years.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any impairment charged.
Cost includes the original purchase price of the asset as well as costs of bringing the asset to the working
condition and location of its intended use. Depreciation is provided at rates calculated to write off the cost less
estimated residual value of each asset, except freehold land, over its expected useful life on a straight line basis,
as follows:
Plant and machinery
These assets comprise pilot plants and production facilities. These facilities
are depreciated from the date they become available for use over their
useful lives of between 5 and 20 years
Office equipment
Useful life of between 2 and 5 years
Leased land and buildings
Land held under a finance lease is depreciated over the life of the lease
Freehold land
Freehold land is not depreciated
Impairment of non-financial assets
The carrying amount of non-current non-financial assets of the Group is compared to the recoverable amount
of the assets whenever events or changes in circumstances indicate that the net book value may not be
recoverable, or in the case of goodwill, annually. The recoverable amount is the higher of value in use and the
fair value less cost to sell. In assessing the value in use, the expected future cash flows from the assets are
determined by applying a discount rate to the anticipated pre-tax future cash flows. An impairment charge is
recognised in the consolidated statement of comprehensive income to the extent that the carrying amount
exceeds the assets’ recoverable amount. The revised carrying amounts are amortised or depreciated in line with
Group accounting policies. A previously recognised impairment loss, other than on goodwill, is reversed if the
recoverable amount increases as a result of a reversal of the conditions that originally resulted in the impairment.
This reversal is recognised in the consolidated statement of comprehensive income and is limited to the carrying
amount that would have been determined, net of depreciation, had no impairment loss been recognised in
prior years. Assets are grouped at the lowest levels for which there are separately identifiable cash flows
(cash generating units) for purposes of assessing impairment.
Leases
Operating lease payments are recognised as an expense in the consolidated statement of comprehensive income
on a straight-line basis over the lease term.
Assets held under finance leases are recognised as assets of the Group at their fair value or, if lower, at the
present value of the minimum lease payments, each determined at the inception of the lease. The corresponding
liability to the lessor is included in the consolidated statement of financial position as a finance lease obligation.
Lease payments are apportioned between finance expenses and reduction of lease obligation so as to achieve a
constant rate of interest on the remaining balance of the liability.
Notes to the Financial Statements continuedfor the year ended 31 March 2019
92
Annual Report and Financial Statements 2019
Financial Statements / Notes to the Financial Statements
93
1. Accounting Policies continued
Inventories
Raw materials, which consist of unprocessed timber and chemicals used in manufacturing operations, are valued
at the lower of cost and net realisable value. The basis on which cost is derived is a first-in, first-out basis.
Finished goods, comprising processed timber, are stated at the lower of weighted average cost of production
or net realisable value. Costs include direct materials, direct labour costs and production overheads (excluding
the depreciation/depletion of relevant property and plant and equipment) absorbed at an appropriate level
of capacity utilisation. Net realisable value represents the estimated selling price less all expected costs to
completion and costs to be incurred in selling and distribution.
Financial assets
Financial assets and financial liabilities are recognised in the Group’s consolidated statement of financial position
when the Group becomes party to the contractual provisions of the instrument.
Financial assets are initially measured at fair value and in the case of investments not at fair value through profit
or loss, fair value plus directly attributable transaction costs.
Except where a reliable fair value cannot be obtained, unlisted shares held by the Group are classified as fair value
through other comprehensive income and are stated at fair value. Gains and losses arising from changes in fair
value are recognised directly in other comprehensive income, with dividends recognised in profit or loss. Where
it is not possible to obtain a reliable fair value, these investments are held at cost less provision for impairment.
Loans and receivables, which comprise non-derivative financial assets with fixed and determinable payments that
are not quoted on an active market, are initially recognised at fair value plus transaction costs that are directly
attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective
interest rate method, less provision for impairment.
Trade and other receivables
Trade receivables are initially recognised at fair value and are subsequently measured at amortised cost
using the effective interest rate method, less allowance for impairments. The Group has elected to apply
the IFRS 9 practical expedient option to measure the value of its trade receivables at transaction price, as
they do not contain a significant financing element. The Group applies IFRS 9’s ‘simplified’ approach that
requires companies to recognise the lifetime expected losses on its trade receivables. At the date of initial
recognition, the credit losses expected to arise over the lifetime of a trade receivable are recognised as an
impairment and are adjusted, over the lifetime of the receivable, to reflect objective evidence reflecting
whether the Group will not be able to collect its debts.
Cash and cash equivalents
Cash and cash equivalents in the consolidated statement of financial position comprise cash at bank and in
hand and short-term deposits, including liquidity funds, with an original maturity of three months or less.
For the purpose of the statement of consolidated cash flow, cash and cash equivalents consist of cash and
cash equivalents as defined above, net of outstanding bank overdrafts.
Financial liabilities
Other financial liabilities
Trade payables and other financial liabilities are initially recognised at fair value and subsequently carried at
amortised cost using the effective interest method.
Loans and other borrowings are initially recognised at the fair value of amounts received net of transaction
costs and subsequently measured at amortised cost using the effective interest method. There have been
no modifications to the terms of the Group’s loan agreements requiring disclosure under IFRS 9.
Share capital
Financial instruments issued by the Group are treated as equity only to the extent that they do not meet the
definition of a financial liability. The Group’s shares are classified as equity instruments.
Segmental Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief
Executive. The Chief Executive is responsible for allocating resources and assessing performance of the
operating segments and has been identified as steering the committee that makes strategic decisions.
Alternative Performance Measures
The Group presents certain measures of financial performance, position or cash flows in the Annual Report and
financial statements that are not defined or specified according to IFRS. These measures, referred to as Alternative
Performance Measures (APMs), are prepared on a consistent basis for all periods presented in this report.
The most significant APMs are:
Net debt
A measure comprising short term and long-term borrowings (including finance lease obligations) less cash
and cash equivalents. Net debt provides a measure of the Group’s net indebtedness or overall leverage.
Underlying EBITDA
Operating (loss)/gain before Exceptional items and other adjustments, depreciation and amortisation.
Underlying EBITDA provides a measure of the cash-generating ability of the business that is comparable
from year to year.
Underlying EBIT
Operating (loss)/gain before Exceptional items and other adjustments. Underlying EBIT provides a measure
of the operating performance that is comparable from year to year.
Effective interest rate
Net interest expense (excluding capitalisation of interest) expressed as a percentage of trailing 13-month
average net debt provides a measure of the cost of borrowings.
2. Accounting judgements and estimates
Estimates and judgements are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances.
Accounting estimates
Useful economic lives of property, plant and equipment
The annual depreciation charge for property, plant and equipment is sensitive to changes in the estimated
useful economic lives and residual values of the assets. The useful economic lives and residual values are re-
assessed annually. They are amended when necessary to reflect current estimates, based on technological
advancement, future investments, economic utilisation and the physical condition of the assets. See note 17
for the carrying amount of the property plant and equipment, and note 1 for the useful economic lives for
each class of assets.
Inventories
The Group reviews the net realisable value of, and demand for, its inventory on a monthly basis to provide
assurance that recorded inventory is stated at the lower of cost and net realisable value after taking into
account the age and condition of inventory.
Commercial negotiations
The Group is party to a number of commercial negotiations in the ordinary course of business. Management
consults with internal and external experts, and utilises its best estimate to account for any relevant
financial effect from these negotiations (including the value of amounts to be capitalised and any payables
or provisions required to settle such negotiations), when they become apparent.
Notes to the Financial Statements continuedfor the year ended 31 March 2019
94
Annual Report and Financial Statements 2019
Financial Statements / Notes to the Financial Statements
95
2. Accounting judgements and estimates continued
Accounting judgements
In preparing the Consolidated Financial Statements, management has to make judgments on how to apply the
Group’s accounting policies and make estimates about the future. The critical judgments that have been made in
arriving at the amounts recognised in the Consolidated Financial Statements and the key sources of uncertainty
that have a significant risk of causing a material adjustment to the carrying value of assets and liabilities in the
next financial year are discussed below:
Revenue recognition
The Group has considered the criteria for the recognition of fee income from licensees over the period of
the agreement and is satisfied that the recognition of such revenue is appropriate. The recognition of fees
is based upon satisfaction of the performance obligations set out in the contract such as an assessment of
the work required before the licence is signed and subsequently during the construction and commissioning
of the licensees’ plant, with an appropriate proportion of the fee recognised upon signing and the balance
recognised as the project progresses to completion. The Group also considers the recoverability of amounts
before recognising them as income. Revenue is recognised to the extent that it is highly probable that a
significant reversal will not occur.
Goodwill
The Group tests annually whether goodwill has suffered any impairment in accordance with the accounting
policy stated above. The recoverable amounts of cash-generating units have been determined based on
value in use calculations. These calculations require the use of judgements in relation to discount rates and
future forecasts (See note 16). The recoverability of these balances is dependent upon the level of future
licence fees and manufacturing revenues. While the scope and timing of the production facilities to be
built under the Group’s existing and future agreements remains uncertain, the Directors remain confident
that revenue from own manufacturing, existing licensees, new licence or consortium agreements will be
generated, demonstrating the recoverability of these balances.
Intellectual property rights (IPR) and property, plant and equipment
The Group tests the carrying amount of the intellectual property rights and property, plant and equipment
whenever events or changes in circumstances indicate that the net book value may not be recoverable.
These calculations require the use of estimates in respect of future cash flows from the assets by applying a
discount rate to the anticipated pre-tax future cash flows. The Group also reviews the estimated useful lives
at the end of each annual reporting period (See note 16 & 17). The price of the Accoya® wood and the raw
materials and other inputs vary according to market conditions outside of the Group’s control. Should the
price of the raw materials increase greater than the sales price or in a way which no longer makes Accoya®
competitive, then the carrying value of the property, plant and equipment or IPR may be in doubt and
become impaired. The Directors consider that the current market and best estimates of future prices
mean that this risk is limited.
Financial asset at fair value through profit or loss
The Group has an investment in listed equity shares carried at nil value. The investment is valued at cost
less any impairment as a reliable fair value cannot be obtained since there is no active market for the shares
and there is currently uncertainty around the future funding of the business. The Group makes appropriate
enquiries and considers all of the information available to it in order to assess whether any impairment has
occurred (See note 18).
Taxation
The tax charge for the year ended 31 March 2019 has reduced compared to the prior year as a result of
a change to the group’s transfer pricing policy to more accurately reflect the business model.
Consolidation of subsidiaries
The Group considers all relevant facts and circumstances when assessing whether it meets the IFRS 10
requirements to consolidate Tricoya Technologies Limited (TTL) and Tricoya Ventures UK Limited (TVUK).
The Group has consolidated the results of TTL and TVUK as subsidiaries, as it exercises the power to govern
the entities in accordance with IFRS 10. See note 9.
New standards and interpretations in issue at the date of authorisation of these
financial statements:
New standards, amendments and interpretations
The following amendments to Standards and a new Interpretation have been adopted for the financial year
beginning on 1 April 2018 and have had no significant impact on the Group or parent Company’s results:
•
IFRS 15 – Revenue from contracts with customers;
• Annual improvements 2014 – 2016 cycle;
• Amendments to IAS 40 – Investment property;
• Amendments to IFRS 2 – Share based payments;
• Amendments to IFRS 4 – Insurance contracts;
•
IFRIC 22 – Foreign currency transactions and advance consideration.
IFRS 9 – Financial instruments was early adopted in the previous financial year beginning 1 April 2017.
New standards, amendments and interpretations not yet adopted
At the date of authorisation of these financial statements, the following Standards and Interpretations which
have not been applied in these financial statements were in issue but not yet effective (and in some cases had
not yet been adopted by the EU):
• Annual improvements 2015 – 2017 cycle;
• Amendments to IAS 19 – Employees Benefits;
• Amendments to IAS 28 – Investments in associates and joint ventures;
• Amendments to IFRS 9 – Financial instruments;
•
IFRIC 23 – Uncertainty over income tax treatments.
The above standards are expected to be adopted when they become mandatorily effective.
The Group continues to assess the impact of IFRS 16 Leases which will be effective for periods beginning
1 January 2019, and will be adopted by the Group in the financial year beginning 1 April 2019. The standard
provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases
unless the lease term is 12 months or less or the underlying asset is of low value. The most significant impact
of IFRS 16 will be that the Group’s leased properties, which are currently classified as operating leases, will
be recognised as a lease liability with a corresponding ‘Right of use’ asset in the Consolidated Statement of
Financial Position. The Group expects to adopt the modified retrospective approach to transition. Our initial
estimated impact is to recognise right-of-use assets and associated lease liabilities of between €1.8 million
to €2.2 million.
The Directors do not expect that the adoption of any of the remaining Standards and Interpretations listed
above to have a material impact on the financial statements of the Group in future periods.
Notes to the Financial Statements continuedfor the year ended 31 March 2019
96
Annual Report and Financial Statements 2019
Financial Statements / Notes to the Financial Statements
97
3. Segmental reporting
The Group’s business is the manufacturing of and development, commercialisation and licensing of the associated
proprietary technology for the manufacture of Accoya® wood, Tricoya® wood elements and related acetylation
technologies. Segmental reporting is divided between corporate activities, activities directly attributable to
Accoya®, to Tricoya® or Research and Development activities.
Accoya®
Year ended 31 March 2019
Year ended 31 March 2018
Accoya® Segment
Exceptional
items &
Other
Adjustments
€’000
Underlying
€’000
Accoya® wood revenue
Licence revenue
Other revenue
Total Revenue
Cost of sales
Gross profit
Other operating costs excluding
depreciation and amortisation
EBITDA
Depreciation and amortisation
Profit/(Loss) from operations
66,949
1,043
5,916
73,908
(55,960)
17,948
(8,955)
8,993
(3,508)
5,485
–
–
–
–
–
–
–
–
–
–
TOTAL
€’000
Underlying
€’000
66,949
56,331
1,043
5,916
73,908
–
4,380
60,711
(55,960)
(47,270)
17,948
13,441
Exceptional
items &
Other
Adjustments
€’000
–
–
–
–
–
–
(8,955)
(8,797)
8,993
(3,508)
5,485
4,644
(2,661)
1,983
(348)
(348)
–
(348)
TOTAL
€’000
56,331
–
4,380
60,711
(47,270)
13,441
(9,145)
4,296
(2,661)
1,635
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 all costs associated with the operation of the Arnhem manufacturing
site, including directly attributable administration, sales and marketing costs.
See note 5 for explanation of Exceptional items and other adjustments.
Average headcount = 117 (2018: 105)
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.
Accoya® segmental underlying EBITDA
Accoya® Licence Income
Other income, predominantly for marketing services
Accoya® segmental underlying EBITDA (excluding Licence Income)
Accoya® segmental gross profit
Accoya® Licence Income
Other income, predominantly for marketing services
Accoya® manufacturing gross profit
Gross Accoya® Manufacturing Margin
2019
€’000
8,993
(1,043)
(172)
7,778
17,948
(1,043)
(172)
16,733
23.0%
2018
€’000
4,644
–
(253)
4,391
13,441
–
(253)
13,188
21.8%
Tricoya®
Year ended 31 March 2019
Year ended 31 March 2018
Tricoya® Segment
Exceptional
items &
Other
Adjustments
€’000
Underlying
€’000
Exceptional
items &
Other
Adjustments
€’000
TOTAL
€’000
Underlying
€’000
Tricoya® panel revenue
Licence revenue
Other revenue
Total Revenue
Cost of sales
Gross profit
Other operating costs excluding
depreciation and amortisation
EBITDA
Depreciation and amortisation
Profit/(Loss) from operations
634
571
40
1,245
(557)
688
(2,586)
(1,898)
(242)
(2,140)
–
–
–
–
–
–
24
24
–
24
634
571
40
1,245
(557)
688
(2,562)
(1,874)
(242)
(2,116)
–
200
–
200
–
200
(2,456)
(2,256)
(197)
(2,453)
–
–
–
–
–
–
(763)
(763)
–
(763)
TOTAL
€’000
–
200
–
200
–
200
(3,219)
(3,019)
(197)
(3,216)
Revenue and costs are those attributable to the business development of the Tricoya® process and
establishment of Tricoya® Hull Plant.
See note 5 for explanation of Exceptional items and other adjustments.
Average headcount = 12 (2018: 4), 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.
Corporate
Year ended 31 March 2019
Year ended 31 March 2018
Corporate Segment
Exceptional
items &
Other
Adjustments
€’000
Underlying
€’000
Exceptional
items &
Other
Adjustments
€’000
TOTAL
€’000
Underlying
€’000
Accoya® wood revenue
Licence revenue
Other revenue
Total Revenue
Cost of sales
Gross result
Other operating costs excluding
depreciation and amortisation
Other Gain
EBITDA
Depreciation and amortisation
Loss from operations
–
–
–
–
–
–
(5,119)
–
(5,119)
(175)
(5,294)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
TOTAL
€’000
–
–
–
–
–
–
(5,119)
(4,537)
–
(5,119)
(175)
–
(4,537)
(166)
(918)
32
(886)
–
(5,455)
32
(5,423)
(166)
(5,294)
(4,703)
(886)
(5,589)
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.
See note 5 for explanation of Exceptional items and other adjustments.
Average headcount = 21 (2018: 19)
Notes to the Financial Statements continuedfor the year ended 31 March 2019 98
Annual Report and Financial Statements 2019
Financial Statements / Notes to the Financial Statements
99
3. Segmental reporting continued
Research and Development
Analysis of Revenue by geographical area of customers:
Research & Development Segment
Year ended 31 March 2019
Year ended 31 March 2018
Exceptional
items &
Other
Adjustments
€’000
Underlying
€’000
Exceptional
items &
Other
Adjustments
€’000
TOTAL
€’000
Underlying
€’000
Accoya® wood revenue
Licence revenue
Other revenue
Total Revenue
Cost of sales
Gross result
Other operating costs excluding
depreciation and amortisation
EBITDA
Depreciation and amortisation
Loss from operations
–
–
–
–
–
–
(1,073)
(1,073)
(41)
(1,114)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
TOTAL
€’000
–
–
–
–
–
–
(1,073)
(1,073)
(41)
(1,350)
(1,350)
(54)
(155)
(155)
–
(1,505)
(1,505)
(54)
(1,114)
(1,404)
(155)
(1,559)
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).
Average headcount = 9 (2018: 10)
Total
UK and Ireland
Rest of Europe
Americas
Benelux
Asia-Pacific
Rest of World
2019
€’000
32,099
19,487
9,316
7,982
6,099
170
75,153
2018
€’000
25,799
15,273
8,153
5,998
5,252
436
60,911
Revenue generated from three customers exceeded 10% of Group revenue of 2019. This included 73% of the
revenue from the rest of Europe and relates to a mixture of Accoya®, Licensing, and Other Revenue. In addition,
two other customers represented 34% and 34% respectively, of the revenue from the United Kingdom and
Ireland and relate to Accoya® revenue. Revenue generated from three customers exceeded 10% of Group
revenue in 2018 (79% of the revenue from the rest of Europe, and 37% and 30% respectively, of the revenue
from the United Kingdom and Ireland).
Assets and liabilities on a segmental basis:
Accoya®
2019
€’000
Tricoya®
2019
€’000
Corporate
2019
€’000
R&D
2019
€’000
TOTAL
2019
€’000
Accoya®
2018
€’000
Tricoya®
2018
€’000
Corporate
2018
€’000
R&D
2018
€’000
TOTAL
2018
€’000
Non-current assets
62,648
49,949
3,421
44
116,062
46,411
21,521
3,485
71
71,488
Current assets
25,504
9,288
(3,184)
4,916
36,524
25,112
36,095
(2,084)
4,382
63,505
Current liabilities
(17,251)
(8,358)
(771)
(39)
(26,419)
(14,034)
(8,318)
983
(45)
(21,414)
Year ended 31 March 2019
Year ended 31 March 2018
Net current assets
8,253
930
(3,955)
4,877
10,105
11,078
27,777
(1,101)
4,337
42,091
TOTAL
Exceptional
items &
Other
Adjustments
€’000
Underlying
€’000
67,583
1,614
5,956
75,153
(56,517)
18,636
(17,733)
–
903
(3,965)
(3,062)
–
(3,117)
(6,179)
–
–
–
–
–
–
24
–
24
–
24
–
(1,529)
(1,505)
TOTAL
€’000
Underlying
€’000
67,583
56,331
1,614
5,956
75,153
200
4,380
60,911
(56,517)
(47,270)
18,636
13,641
Exceptional
items &
Other
Adjustments
€’000
–
–
–
–
–
–
TOTAL
€’000
56,331
200
4,380
60,911
(47,270)
13,641
(17,709)
(17,140)
(2,184)
(19,324)
–
927
(3,965)
(3,038)
–
(4,646)
(7,684)
–
(3,499)
(3,078)
(6,577)
–
(2,174)
(8,751)
32
(2,152)
–
(2,152)
–
502
32
(5,651)
(3,078)
(8,729)
–
(1,672)
(1,650)
(10,401)
Accoya®/Tricoya® revenue
Licence revenue
Other revenue
Total Revenue
Cost of sales
Gross profit
Other operating costs excluding
depreciation and amortisation
Other Gain
EBITDA
Depreciation and amortisation
Profit/(Loss) from operations
Finance income
Finance expense
Loss before taxation
See note 5 for details of Exceptional items and other adjustments.
Non-current
liabilities
(30,336)
(3,316)
(18,856)
– (52,508)
(21,974)
(334)
(17,776)
– (40,084)
Net assets
40,565
47,563
(19,390)
4,921
73,659
35,515
48,964
(15,392)
4,408
73,495
Analysis of non-current assets (Other than financial assets and deferred tax):
UK
Other countries
Un-allocated – Goodwill
2019
€’000
53,679
58,152
4,231
116,062
2018
€’000
26,782
40,475
4,231
71,488
The segmental assets in the current year were predominantly held in the UK and mainland Europe (Prior Year
UK and mainland Europe). Additions to property, plant, equipment and intangible assets in the current year
were predominantly incurred in the UK and mainland Europe (Prior Year UK and mainland Europe). There are
no significant intersegment revenues.
Notes to the Financial Statements continuedfor the year ended 31 March 2019 100
Annual Report and Financial Statements 2019
Financial Statements / Notes to the Financial Statements
101
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, the offices in Dallas and London and certain pre-operating costs associated with the
plant in Hull:
Sales and marketing
Research and development
Other operating costs
Administration costs
Exceptional Items and other adjustments
Other operating costs excluding depreciation and amortisation
Depreciation and amortisation
Total other operating costs
2019
€’000
3,286
1,073
4,591
8,783
(24)
17,709
2018
€’000
3,967
1,404
4,134
7,635
2,184
19,324
3,965
3,078
21,674
22,402
Administrative costs include cost associated with Business Development and Legal departments, Intellectual
Property as well as Human Resources, IT, Finance, Management and General Office and includes the costs of
the Group’s head office costs in London and the US Office in Dallas.
Exceptional Items
An exceptional finance charge of €1.1m has been recognised as an exceptional finance expense in respect of the
acquisition of the land and buildings in Arnhem from Bruil. The non-cash charge reflects the difference between
the assets held under the finance lease and the finance lease liability which was terminated at the point the
acquisition was completed.
In the prior year, €1.4m annual bonus paid in July 2017, which was attributable to the year ended 31 March 2017,
was recorded in the year ended 31 March 2018 as an exceptional cost with the accrual for the financial year
ended 31 March 2018 attributable bonus included in underlying operating costs. The double charge in the prior
period resulted from a re-alignment of the timing of recognition of bonuses reflecting the more structured
annual bonus scheme now in place compared to previous years. In addition the bonus paid in the year ended
31 March 2018 relating to the year ended 31 March 2017 included one-off targets relating to the formation of
the Tricoya® consortium.
Other restructuring costs in the prior year related to changes required following the completion of the Tricoya®
consortium in March 2017.
Other Adjustments
Foreign exchange differences in the Tricoya® segment have occurred due to pounds sterling held within
the consortium for the ongoing Hull plant build. The Group has mitigated this currency exchange risk by
adopting hedge accounting in respect of the Tricoya® plant construction under IFRS 9, Financial Instruments.
The effective portion of the foreign exchange movement is recognised in other comprehensive income, with the
ineffective portion recognised in operating costs.
The total cost of €17,709,000 in the current period includes €2,562,000 in respect of the Tricoya® segment,
compared to €3,219,000 in the previous period.
Foreign exchange differences also arise on the pounds sterling denominated loan notes, entered into in a prior
period. These exchange rate differences are included as finance expenses.
Group average headcount increased from 138 in the period to 31 March 2018, to 159 in the period to 31 March 2019.
During the period, €748,000 (2018: €396,000) of internal development and patent related costs were capitalised
and included in intangible fixed assets, including €600,000 (2018: €337,000) which were capitalised within
Tricoya Technologies Limited (‘TTL’). In addition €395,000 of internal costs have been capitalised in relation to
the expansion of our plant in Arnhem, Netherlands (2018: €446,000) and €46,000 of internal costs have been
capitalised in relation to our plant build in Hull, UK (2018: €109,000). Both are included within tangible fixed assets.
5. Exceptional items and other adjustments
Termination of finance lease on acquisition of land and buildings – Finance expense
Bonuses paid relating to year ending 31 March 2017
Restructuring costs
Gain from disposal of assets
Total exceptional items
2019
€’000
(1,140)
–
–
–
2018
€’000
–
(1,386)
(231)
32
Foreign exchange differences arising on Tricoya® cash held – Operating costs
Foreign exchange differences arising on Loan Notes – incl. in Finance expense
Foreign exchange differences on Tricoya® cash held – Other comprehensive income
Revaluation of FX forwards used for cash flow hedging – Other comprehensive income
Total other adjustments
Tax on exceptional items and other adjustments
Total exceptional items and other adjustments
24
(389)
(132)
143
(354)
–
(567)
502
202
137
–
(1,494)
(1,448)
6. Employees
Staff costs (including Directors) consist of:
Wages and salaries
Social security costs
Other pension costs
Share based payments
2019
€’000
11,119
1,747
731
454
2018
€’000
11,293
1,509
739
258
14,051
13,799
The average monthly number of employees, including Executive Directors, during the year was as follows:
(1,140)
(1,585)
Operating
Sales and marketing, administration, research and engineering
2019
90
69
159
2018
85
53
138
Notes to the Financial Statements continuedfor the year ended 31 March 2019 102
Annual Report and Financial Statements 2019
Financial Statements / Notes to the Financial Statements
103
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
€60 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 (sufficient to manufacture
40,000 cubic metres of panels) and scope to expand.
Structurally, Accsys, BP Ventures, MEDITE, BGF and Volantis have invested into TTL in 2017. 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 have invested €21.2 million in the Tricoya® Project, including €14.6 million as equity in TVUK by BP Chemicals
and €6.6 million as equity in TTL by BP Ventures. All funding was received by 31 March 2019, with €0.9m being
received in the year ended 31 March 2019.
MEDITE have invested €11.0 million in the Tricoya® Project, including €7.0 million as equity in TTL and
€4.0 million as equity in TVUK. All funding was received by 31 March 2018, with €nil being received in the
year ended 31 March 2019.
During the year the Group increased its shareholding from 75.1% to 76.0% from the issue of 1,320,970 shares as
a result of its continued supply of lower priced Accoya® to MEDITE, to enable continued market development
ahead of the completion of the Hull Plant.
In the year ended 31 March 2017, BGF and Volantis invested an aggregate of £19.0 million as financial investors
into both the Group and TTL. BGF and Volantis invested on similar terms but are investing separately, with BGF
accounting for 65% of the £19.0 million total.
In the year ended 31 March 2017, TVUK entered a six-year €17.2 million (€15.0 million net) finance facility
agreement with The Royal Bank of Scotland PLC in respect of the construction and operation of the Hull Plant.
As at 31 March 2019 the Group have utilised €3.6m (2018: €0.3m) of the facility.
The Group has consolidated the results of TTL and TVUK as subsidiaries, as it exercises the power to govern the
entities in accordance with IFRS 10. The non-controlling interests in both entities have been recognised in these
Group financial statements.
7. Directors’ remuneration
Directors’ remuneration consists of:
Directors’ emoluments
Company contributions to money purchase pension schemes
Compensation of key management personnel included the following amounts:
Paul Clegg
Hans Pauli1
William Rudge
Salary, bonus
and short term
benefits
€’000
Share based
payments
charge
€’000
Pension
€’000
527
210
280
1,017
30
9
8
47
70
19
25
114
2019
€’000
1,307
47
1,354
2019
Total
€’000
627
238
313
1,178
2018
€’000
1,291
49
1,340
2018
Total
€’000
516
351
272
1,139
The Group made contributions to 2 (2018: 2) 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 increased by 21% and 14% respectively,
when excluding the impact of foreign exchange.
1.
Hans Pauli amounts above for 2019 represent the remuneration received for the period to 31 December 2018, when he resigned as
a Director.
8. Operating (loss)/gain
This has been arrived at after charging:
Staff costs
Depreciation of property, plant and equipment
Amortisation of intangible assets
Operating lease rentals
Foreign exchange (gains)/losses
Research & Development (excluding staff costs)
Loss on disposal of property, plant and equipment
Fees payable to the Company’s auditors for the audit
of the Company’s annual financial statements
Fees payable to the Company’s auditors for other services:
– audit of the Company’s subsidiaries pursuant to legislation
– audit related assurance services
Total audit and audit related services:
No other services were provided by the Company’s auditors in the year (2018: nil).
2019
€’000
2018
€’000
14,051
3,354
611
966
(62)
606
–
74
169
19
262
13,799
2,496
582
1,306
834
997
3
85
147
25
257
Notes to the Financial Statements continuedfor the year ended 31 March 2019 104
Annual Report and Financial Statements 2019
Financial Statements / Notes to the Financial Statements
105
9. Tricoya Technologies Limited continued
The ‘TTL Group’ income statement and balance sheet, consisting of TTL and its subsidiary TVUK, are set
out below:
TTL Group income statement:
Revenue
Cost of sales
Gross Margin
Operating costs:
Staff costs
Research & development (excluding staff costs)
Intellectual Property
Sales & Marketing
Depreciation & Amortisation
EBIT
EBIT attributable to Accsys shareholders
TTL Group balance sheet:
Non-current assets
Intangible assets
Property, plant and equipment
Current assets
Receivables due within one year
Cash and cash equivalents
FX Derivative Asset
Current liabilities
Trade and other payables
Net current assets
Net assets
Value attributable to Accsys Technologies
Value attributable to Non-controlling interests
Consolidated
2019
€’000
Consolidated
2018
€’000
1,246
(590)
656
200
–
200
(1,959)
(1,898)
(204)
(210)
(486)
(242)
(223)
(381)
(376)
(197)
(2,445)
(2,875)
(1,439)
(1,911)
2019
€’000
2018
€’000
3,773
46,176
49,949
2,256
6,890
143
9,289
3,390
18,119
21,509
1,340
34,754
–
36,094
(11,674)
(8,639)
(2,385)
27,455
47,564
48,964
17,441
18,650
30,123
30,314
10. Finance income
Interest receivable on bank and other deposits*
2019
€’000
–
2018
€’000
–
*
€70,000 interest received in the year ended 31 March 2019 (31 March 2018: €45,000) in relation to cash balances held in Tricoya
Ventures UK Ltd was netted off with borrowing costs incurred, with the net borrowing cost amount related to the Hull project
capitalised and included within property, plant and equipment.
11. Finance expense
Arnhem land and buildings lease finance charge
Unwinding of Arnhem finance lease charge – exceptional item
Foreign exchange loss/(gain) on loan notes
Interest on loans
Other finance expenses
12. Tax credit
(a) Tax recognised in the statement of comprehensive income comprises:
Current tax credit
UK Corporation tax on profits for the year
Research and development tax expense/(credit) in respect of current year
Overseas tax at rate of 15%
Overseas tax at rate of 25%
Deferred Tax
Utilisation of deferred tax asset
Total tax credit reported in the statement of comprehensive income
2019
€’000
274
1,140
389
2,739
104
4,646
2018
€’000
575
–
(502)
1,540
59
1,672
2019
€’000
2018
€’000
–
55
55
26
(863)
–
(782)
–
(248)
(248)
(9)
6
–
(251)
Notes to the Financial Statements continuedfor the year ended 31 March 2019
106
Annual Report and Financial Statements 2019
Financial Statements / Notes to the Financial Statements
107
12. Tax credit continued
(b) The tax credit for the period is lower than the standard rate of corporation
tax in the UK (2018 & 2019: 19%) due to:
Loss before tax
Expected tax credit at 19% (2018 – 19%)
Expenses not deductible in determining taxable profit
(Over)/Under provision in respect of prior years
Tax losses for which no deferred income tax asset was recognised
Effects of overseas taxation
Other temporary differences
Research and development tax credit in respect of prior years
Research and development tax credit in respect of current year
Total tax credit reported in the statement of comprehensive income
2019
€’000
2018
€’000
(7,684)
(10,401)
(1,460)
(1,976)
115
(863)
1,468
(97)
–
194
(139)
(782)
110
(29)
1,860
34
(2)
15
(263)
(251)
The standard rate of corporation tax in the UK changed from 20% to 19% with effect from 1 April 2017.
Deferred taxes at the balance sheet date have been measured using these enacted tax rates and reflected
in these financial statements. The UK corporation tax rate is due to be reduced to 17% in April 2020.
13. Dividends Paid
Final Dividend €Nil (2018: €Nil) per Ordinary share proposed
and paid during year relating to the previous year’s results
2019
€’000
2018
€’000
–
–
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
Underlying
Total
Underlying
Total
2019
2018
Weighted average number of
Ordinary shares in issue (‘000)
Loss for the year attributable to
owners of Accsys Technologies PLC (€’000)
Basic and diluted loss per share
116,343
116,343
111,250
111,250
(4,391)
(5,896)
€ (0.04)
€ (0.05)
(7,536)
€ (0.07)
(9,186)
€ (0.08)
Basic and diluted losses per share are based upon the same figures. IAS 33 ‘Earning per share’ defines Dilutive
share options as share options which would decrease profit per share or increase loss per share. Equity options
are disclosed in note 30, which if exercised, would decrease 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 certain members of staff including 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.
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:
Date of grant
18 June 2008
8 December 2008
1 August 2011
19 September 2013 (LTIP)
24 June 2016 (LTIP)
20 June 2017 (LTIP)
18 June 2018 (LTIP)
Total
Number of outstanding
options at 31 March
Weighted average remaining
contractual life, in years
2019
–
–
2018
8,498
25,211
90,000
115,000
2,177,675
2,247,850
482,827
1,015,030
1,046,076
1,087,842
1,138,843
–
4,935,421
4,499,431
2019
2018
–
–
2.3
4.5
7.3
8.3
9.3
6.6
0.3
0.7
3.3
5.5
8.3
9.3
–
6.9
Movements in the weighted average values are as follows:
Outstanding at 31 March 2017
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at 31 March 2018
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at 31 March 2019
Weighted
average
exercise price
Number
€ 0.31
3,929,279
€ 0.00
€ 2.15
€ 0.00
€ 0.00
€ 0.15
€ 0.00
€ 0.02
€ 0.00
€ 6.12
€ 0.10
1,087,842
(245,044)
(249,700)
(22,946)
4,499,431
1,170,159
(630,285)
(70,175)
(33,709)
4,935,421
The exercise price of options outstanding at the end of the year ranged between €nil (for LTIP options) and
€0.50 (2018: €nil and €9.90) and their weighted average contractual life was 6.6 years (2018: 6.9 years).
Of the total number of options outstanding at the end of the year, 2,267,675 (2018: 126,236) had vested and were
exercisable at the end of the year.
Notes to the Financial Statements continuedfor the year ended 31 March 2019 108
Annual Report and Financial Statements 2019
Financial Statements / Notes to the Financial Statements
109
15. Share based payments continued
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.
2013 LTIP Award performance conditions and 2016 outcome
The LTIP in 2013 awarded 4,103,456 nil cost options and 2,472,550 vested in the financial year end 31 March
2017. 2,177,675 nil cost options remain as at 31 March 2019 after allowing for forfeitures and options exercised
in the year.
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
three year performance period (i.e. year end March 2019) and a further two year holding period. In addition,
awards are also subject to malus/claw-back provisions. The 2016 LTIP EBITDA award performance metrics
are measured to 31 March 2019, with the award set to vest in June 2019. As at 31 March 2019 the expected
vesting amount is estimated to be 482,827 share options.
Metric
Vesting (% of maximum)
EBITDA per share in FY19
Share Price Growth vs Comparator Group
Weighting
(% of award)
50%
50%
Threshold
25%
€0.06
Median
Target
50%
€0.08
Maximum
100%
€0.10
N/A
Upper Quartile
• Vesting is on a straight-line basis between points in the schedule. There is no vesting for performance below Threshold.
•
•
EBITDA based on total group EBITDA including licensing income. Appropriate adjustments may be made to the EBITDA per
share metric to ensure fair and consistent performance measurement over the performance period in line with the business
plan and intended stretch of the targets at the point of award.
Comparator Group is the constituent companies of the FTSE AIM All Share Index (excluding the Resource and Financial
Services Sectors).
Element
Grant date
Share price at grant date (€)
Exercise price (€)
Expected life (years)
Contractual life (years)
Vesting conditions (Details set out above)
Risk free rate
Expected volatility
Expected dividend yield
Fair value of option
Element A
(Share price
growth)
Element B
(EBITDA per
share)
27 Jun 16
27 Jun 16
0.81
0.00
3
10
Share Price
-0.64%
20%
0%
0.81
0.00
3
10
EBITDA
-0.64%
20%
0%
€0.187
€0.749
Awards made in June 2017 and LTIP Award performance conditions
During the prior year, a total of 1,087,842 LTIP awards were made primarily to members of the Senior
Management Team including the Executive Directors:
The performance targets for 937,014 of these awards are as follows:
Metric
Vesting (% of maximum)
EBITDA per share in FY20
Share Price Growth vs Comparator Group
Weighting
(% of award)
50%
50%
Threshold
25%
€0.04
Median
Target
50%
€0.06
N/A
Maximum
100%
€0.08
Upper Quartile
•
•
•
Vesting is on a straight-line basis between points in the schedule. There is no vesting for performance below Threshold.
EBITDA based on total group EBITDA including licensing income. Appropriate adjustments may be made to the EBITDA per
share metric to ensure fair and consistent performance measurement over the performance period in line with the business
plan and intended stretch of the targets at the point of award.
Comparator Group is the constituent companies of the FTSE AIM All Share Index (excluding the Resource and Financial
Services Sectors).
Element
Grant date
Share price at grant date (€)
Exercise price (€)
Expected life (years)
Contractual life (years)
Vesting conditions (Details set out above)
Risk free rate
Expected volatility
Expected dividend yield
Fair value of option
Element A
(Share price
growth)
Element B
(EBITDA per
share)
20 Jun 17
20 Jun 17
0.88
0.00
3
10
Share Price
-0.60%
20%
0%
0.88
0.00
3
10
EBITDA
-0.60%
20%
0%
€0.203
€0.814
The remaining 150,828 of the awards made in summer 2017 were specific to individuals dedicated to the
Tricoya® consortium with performance measures linked to progress and development of the Tricoya®
plant and its subsequent operation.
The fair value of these options were €0.814 on their Grant date.
All of the above awards, made in summer 2017 are subject to a three year performance period (i.e. year end March
2020) and a further two year holding period. In addition, awards are also subject to malus/claw-back provisions.
Awards made in June 2018 and LTIP Award performance conditions
During the year, a total of 1,170,160 LTIP awards were made primarily to members of the Senior Management
Team including the Executive Directors:
The performance targets for 993,220 of these awards are as follows:
Metric
Vesting (% of maximum)
EBITDA per share in FY21
Total sales volume (subject to Group EBITDA being breakeven
or positive)
Weighting
(% of award)
60%
40%
Threshold
Maximum
25%
€0.05
100%
€0.13
70,000
85,000
•
•
Vesting is on a straight-line basis between points in the schedule. There is no vesting for performance below Threshold.
EBITDA based on total group EBITDA including licensing income. Appropriate adjustments may be made to the EBITDA per
share metric to ensure fair and consistent performance measurement over the performance period in line with the business
plan and intended stretch of the targets at the point of award.
Notes to the Financial Statements continuedfor the year ended 31 March 2019
110
Annual Report and Financial Statements 2019
Financial Statements / Notes to the Financial Statements
111
15. Share based payments continued
16. Intangible assets
Element
Grant date
Share price at grant date (€)
Exercise price (€)
Expected life (years)
Contractual life (years)
Vesting conditions (Details set out above)
Risk free rate
Expected volatility
Expected dividend yield
Fair value of option
Element A
(EBITDA per
share)
Element B
(Sales volume
growth)
19 Jun 18
19 Jun 18
0.91
0.00
3
10
0.91
0.00
3
10
EBITDA
Sales volume
growth
-0.55%
-0.55%
20%
0%
20%
0%
€0.842
€0.842
The remaining 176,940 of the awards made in summer 2018 were specific to individuals dedicated to the
Tricoya® consortium with performance measures linked to progress and development of the Tricoya®
plant and its subsequent operation.
The fair value of these options were €0.842 on their Grant date.
All of the above awards, made in summer 2018 are subject to a three year performance period (i.e. year
end March 2021) and a further two year holding period. In addition, awards are also subject to malus/
claw-back provisions.
2005 and 2008 Share Option schemes
Awards made in earlier years had no impact on the income statement in the current or prior period and given
the smaller number of options remaining, no details have been disclosed.
Employee Benefit Trust – Share bonus award
Following a share issue on 25 June 2018 as part of the annual bonus, in connection with the employee
remuneration and incentivisation arrangements for the period from 1 April 2017 to 31 March 2018, 173,915
(2018: 295,874) new Ordinary shares were held by an Employee Benefit Trust, the beneficiaries of which are
primarily other senior employees. Such new Ordinary shares vest if the employees remain in employment with
the Company at the vesting date, being 1 July 2019 (subject to certain other provisions including regulations,
good-leaver, take-over and Remuneration Committee discretion provisions). As at 31 March 2019, the
Employment Benefit Trust was consolidated by the Company and the 173,915 shares are recorded as Own
Shares within equity. During the period, 295,874 Ordinary shares awarded in the prior year vested.
Cost
At 31 March 2017
Additions
At 31 March 2018
Additions
At 31 March 2019
Accumulated amortisation
At 31 March 2017
Amortisation
At 31 March 2018
Amortisation
At 31 March 2019
Net book value
At 31 March 2019
At 31 March 2018
At 31 March 2017
Internal
Development
costs
€’000
Intellectual
property
rights
€’000
Goodwill
€’000
Total
€’000
5,942
73,292
4,231
83,465
396
6,338
458
6,796
1,163
307
1,470
326
1,796
5,000
4,868
4,779
–
73,292
290
73,582
71,463
275
71,738
285
72,023
1,559
1,554
1,829
–
4,231
396
83,861
–
748
4,231
84,609
–
–
–
–
–
4,231
4,231
4,231
72,626
582
73,208
611
73,819
10,790
10,653
10,839
The carrying value of internal development costs, intellectual property rights and goodwill on consolidation are
split between two cash generating units, representing the Accoya® and Tricoya® segments. The recoverable
amount of internal development costs, intellectual property rights and goodwill relating to each unit 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 12 years, including a six year forecast and six
years of 2% growth plus assumptions concerning a terminal value and based on a pre-tax discount rate of 10%
per annum (2018: 12%). 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 total volume of forecast Accoya®
and Tricoya® manufactured is significantly lower than projected sales in future years.
Notes to the Financial Statements continuedfor the year ended 31 March 2019 112
Annual Report and Financial Statements 2019
Financial Statements / Notes to the Financial Statements
113
17. Property, plant and equipment
18. Financial asset at fair value through profit or loss
Cost or valuation
At 31 March 2017
Additions
Foreign currency translation loss
At 31 March 2018
Additions
Termination of finance lease
Foreign currency translation profit
Land and
buildings
€’000
Plant and
machinery
€’000
Office
equipment
€’000
Total
€’000
1,645
37,756
1,379
40,780
10,433
–
31,104
–
12,078
68,860
17,997
(12,099)
–
41,490
(4,742)
–
116
(19)
1,476
1,541
–
12
41,653
(19)
82,414
61,028
(16,841)
12
At 31 March 2019
17,976
105,608
3,029
126,613
Shares held in Cleantech Building Materials PLC
2019
€’000
–
2018
€’000
–
Accsys Technologies PLC has previously purchased a total of 21,666,734 unlisted ordinary shares in Diamond
Wood China. On 23 December 2016, Cleantech Building Materials PLC acquired Diamond Wood China.
On 19 April 2017 Cleantech Building Materials acquired the 21,666,734 shares previously owned by the Company
and in return the Company has been issued with 520,001 shares in Cleantech Building Materials PLC, a listed
company trading on the Nasdaq First North market in Copenhagen and the Wiener Boise of the Vienna
Stock Exchange.
There continues to be no active market for these shares as at 31 March 2019, and there is significant uncertainty
over the future of Cleantech Building Materials PLC. As such a reliable fair value cannot be calculated and the
investment is carried at a nil value (2018: nil).
The historical cost of the listed shares held at 31 March 2019 is €10m (2018: €10m). However, a provision for the
impairment of the entire balance of €10m continues to be recorded as at 31 March 2019.
658
17,428
1,013
19,099
During the prior year Accsys sold 21,479 shares at €1.50 per share resulting in a gain of €32,000. A total of
498,522 shares were held at 31 March 2019.
Accumulated depreciation
At 31 March 2017
Charge for the year
Disposals
Foreign currency translation loss
At 31 March 2018
Charge for the year
Termination of finance lease
Foreign currency translation profit
At 31 March 2019
Net book value
At 31 March 2019
At 31 March 2018
At 31 March 2017
275
–
–
933
299
(953)
–
279
2,806
(2,651)
–
19,610
17,697
11,145
987
85,998
49,405
20,328
2,024
3
–
197
–
(19)
2.496
3
(19)
19,455
1,191
21,579
249
–
12
1,452
1,577
285
366
3,354
(3,604)
12
21,341
105,272
60,835
21,681
Included within property, plant and equipment are assets with an initial cost of €2,276,000 (2018: €18,962,000)
and a net book value at 31 March 2019 of €1,847,000 (2018: €15,141,000) which has been accounted for as a
finance lease (See note 28). During the period the land and buildings in Arnhem which were previously subject
to a finance lease were purchased from the landlord resulting in the finance lease, and related operating lease
being terminated. The net impact of the above transaction was to increase fixed assets by €9.8m with net debt
increasing by €10.9m.
In addition, plant and machinery assets with a net book value of €47,136,000 are held as assets under construction
and are not depreciated, relating to the Hull Plant (31 March 2018: €19,326,000 relating to the Hull Plant, and
€14,768,000 relating to the Arnhem plant expansion).
19. Deferred taxation
The Group has a deferred tax asset of €nil (2018: €nil) relating to trading losses brought forward.
The Group also has an unrecognised deferred tax asset of €27m (2018: €25m) which is largely in respect of
trading losses of the UK subsidiaries. The deferred tax asset has not been recognised due to the uncertainty of
the timing of future expected profits of the related legal entities which is dependent on the profits attributable
to licensing and future manufacturing income.
20. Subsidiaries
A list of subsidiary investments, including the name, country of incorporation and proportion of ownership
interest is given in note 4 to the Company’s separate financial statements.
21. Inventories
Raw materials and work in progress
Finished goods
2019
€’000
9,733
4,275
14,008
2018
€’000
10,285
2,840
13,125
The amount of inventories recognised as an expense during the year was €50,174,355 (2018: €42,893,599).
The cost of inventories recognised as an expense includes a net credit of €87,090 (2018: credit of €31,402) in
respect of the inventories sold in the period which had previously been written down to net realisable value.
Notes to the Financial Statements continuedfor the year ended 31 March 2019 114
Annual Report and Financial Statements 2019
Financial Statements / Notes to the Financial Statements
115
22. Trade and other receivables
24. Share capital
Trade receivables
Other receivables
Prepayments
2019
€’000
10,725
839
1,474
13,038
2018
€’000
6,659
157
2,519
9,335
The Directors consider that the carrying amount of trade and other receivables is approximately equal to their
fair value. The majority of trade and other receivables is denominated in euros, with €798,000 of the trade and
other receivables denominated in US dollars (2018: €714,000).
The age of receivables past due but not impaired is as follows:
Up to 30 days overdue
Over 30 days and up to 60 days overdue
Over 60 days and up to 90 days overdue
Over 90 days overdue
2019
€’000
2,287
766
1
2
2018
€’000
350
–
–
3
3,056
353
In determining the recoverability of a trade receivable the Group considers any change in the credit quality
of the trade receivables from the date credit was initially granted up to the reporting date. Included in the
provision for doubtful debts are individually impaired trade receivables and accrued income with a balance
of €25,002,000 (2018: €25,002,000) due from Diamond Wood.
Movement in provision for doubtful debts:
Balance at the beginning of the year
Net increase/(release) of impairment if not required
Balance at the end of the year
23. Trade and other payables
Trade payables
Other taxes and social security payable
Accruals and deferred income
2019
€’000
2018
€’000
25,002
25,001
–
1
25,002
25,002
2019
€’000
7,936
338
11,689
19,963
2018
€’000
9,458
228
8,326
18,012
Allotted – Equity share capital
117,988,305 Ordinary shares of €0.05 each
(2018: 111,513,145 Ordinary shares of €0.05 each)
In year ended 31 March 2018:
2019
€’000
2018
€’000
5,900
5,900
5,576
5,576
On 24 April 2017 a total of 20,323,986 of €0.05 Ordinary shares were issued at €0.69 per share, in accordance
with the Company’s capital raise announced on the 29 March 2017.
97,720 shares were issued on 23 June 2017 to an Employee Benefit Trust (‘EBT’) at nominal value.
198,154 shares were issued on 27 September 2017 to an Employee Benefit Trust (‘EBT’) at nominal value.
106,189 shares were issued on 27 September 2017 to an employee following the exercise of nil cost options,
granted in 2013 under the Company’s 2013 Long Term Incentive Plan (‘LTIP’).
143,511 shares were issued on 26 February 2018 to an ex-employee. 118,511 of these Shares were issued and
allotted following the exercise of nil cost options, granted in 2013 under the Company’s 2013 Long Term
Incentive Plan (‘LTIP’), with the balance of 25,000 Shares issued as part of the individual’s severance terms.
In year ended 31 March 2019:
On 18 July 2018, 6,231,070 ordinary shares were issued to VP Participaties BV, the investment company of the
Van Puijenbroek family, at a price of €0.92 per share. Proceeds of €5,704,000 were received net of expenses
of €28,000.
173,915 shares were issued on 25 June 2018 to an Employee Benefit Trust (‘EBT’) at nominal value. In addition,
of the Ordinary Shares which had been issued to the EBT in the previous year, 295,874 Ordinary Shares vested
on 01 July 2018. Of these beneficiaries elected to sell 128,213 Ordinary Shares in the market, with sale date of
2 August 2018.
70,175 shares were issued on 18 February 2019 for the benefit of an employee following the exercise of nil cost
options, granted in 2013 under the Company’s 2013 Long Term Incentive Plan (‘LTIP’).
Notes to the Financial Statements continuedfor the year ended 31 March 2019 116
Annual Report and Financial Statements 2019
Financial Statements / Notes to the Financial Statements
117
25. Other reserves
Capital
redemption
reserve
€000
Merger
reserve
€000
Hedging
Effectiveness
reserve
€000
Other
reserve
€000
Total
Other
reserves
€000
The Group recognised an increase in other reserves as summarised below.
Transactions with non-controlling interests
Balance at 31 March 2018
148
106,707
306
2,264
109,425
Opening Balance
Total comprehensive income/(expense) for the period
Issue of subsidiary shares to non-controlling interests
–
–
–
–
11
–
–
85
11
85
Balance at 31 March 2019
148
106,707
317
2,349
109,521
The closing balance of the capital redemption reserve represents the amounts transferred from share capital on
redemption of deferred shares in a previous year.
The merger reserve arose prior to transition to IFRS when merger accounting was adopted.
The hedging effectiveness reserve reflects the total accounted for under IFRS 9 in relation to the Tricoya®
segment (see note 1).
The other reserve represents the amounts received for subsidiary share capital from non-controlling interests
net with the carrying amount of non-controlling interests issued (see note 26).
26. Transactions with non-controlling interests
In the year ended 31 March 2018:
On 5 September 2017, TTL issued 284,716 shares to Titan Wood Limited. On 9 February 2018, TTL issued
495,571 shares to Titan Wood Limited. As a result the non-controlling interests’ shareholdings were
amended to:
BP Ventures (8.8%), MEDITE (11.9%), BGF (2.7%), Volantis (1.5%)
On 20 September 2017, Tricoya Ventures UK Limited (‘TVUK’) issued Ordinary shares to non-controlling
interests for consideration of €11.50 million. In addition on the 6 October 2017, Tricoya Ventures UK Limited
(‘TVUK’) issued Ordinary shares to non-controlling interests for consideration of €2.92 million. As a result
the non-controlling interests’ shareholdings remained unchanged at:
BP Chemicals (30%), MEDITE (8.2%)
In the year ended 31 March 2019:
On 4 June 2018, TTL issued 339,940 shares to Titan Wood Limited. On 20 September 2018, TTL issued
289,140 shares to Titan Wood Limited. On 22 March 2019, TTL issued 691,890 shares to Titan Wood Limited.
As a result the non-controlling interests’ shareholdings were amended to:
BP Ventures (8.5%), MEDITE (11.5%), BGF (2.6%), Volantis (1.5%)
On 27 December 2018, TVUK issued Ordinary shares to non-controlling interests for consideration of
€0.90 million. As a result the non-controlling interests’ shareholdings were amended to:
BP Chemicals (31.3%, MEDITE 8.0%)
The total carrying amount of the non-controlling interests in TTL and TVUK at 31 March 2019 was €30.12 million
(2018: €30.31 million).
Carrying amount of non-controlling interests issued
Consideration paid by non-controlling interests
Share issue costs relating to non-controlling interests
Excess of consideration paid recognised in Group’s equity
2019
€’000
2,840
(815)
900
–
2,925
2018
€’000
7,077
(18,658)
14,420
1
2,840
27. Commitments under operating leases
The Group leases land, buildings and machinery under non-cancellable operating lease agreements. The total
future value of the minimum lease payments that are due is as follows:
Operating lease payments due
Within one year
In the second to fifth years inclusive
In greater than five years
2019
€’000
755
785
1,030
2,570
2018
€’000
1,063
2,428
5,339
8,830
The majority of commitments under operating leases relate to the Group’s offices in UK, U.S.A. and Arnhem,
together with the land in Hull used for the Tricoya® plant.
The decrease in operating lease commitments in the year includes €5.7m relating to the cancellation of the Bruil
operating lease associated with the land and buildings purchase in Arnhem.
28. Commitments under finance leases
During the prior periods various agreements were reached relating to the sale and leaseback of the land and
buildings in Arnhem, of which a large portion of these were accounted for as a finance lease. In April 2018,
agreements were reached to purchase the land and buildings associated with the Accoya® plant and logistics
centre in Arnhem from the landlord, Bruil, for the purchase price of €23m. In the prior year, a finance lease
liability of €12.0m was recorded as at 31 March 2018. This was terminated following the purchase, therefore
reducing the present value of the lease obligations in the current year.
A further lease agreement with Bruil was entered into in the prior period relating directly to infrastructure work
associated with the expansion of the chemical plant. This continues to be accounted for as a finance lease for a
total of €1.7m as at 31 March 2019 (2018: €1.9m).
In addition, during a prior period, agreements were entered into for the lease of office fit-out and furniture for
the London head office for a total of €0.1m (2018: €0.2m).
These transactions have resulted in a finance lease creditor of €2.0m as at 31 March 2019.
Amounts payable under finance leases:
Within one year
In the second to fifth years inclusive
After five years
Less: future finance charges
Present value of lease obligations
Minimum lease payments
2019
€’000
257
890
2,706
(1,832)
2,021
2018
€’000
1,390
5,317
15,702
(8,237)
14,172
Notes to the Financial Statements continuedfor the year ended 31 March 2019
118
Annual Report and Financial Statements 2019
Financial Statements / Notes to the Financial Statements
119
29. Commitments under loan agreements
Amounts payable under loan agreements:
Within one year
In the second to fifth years inclusive
After five years
Less future finance charges
Present value of loan obligations
2019
€’000
2018
€’000
7,485
60,366
2,713
(13,655)
56,909
2,581
26,816
10,717
(10,817)
29,297
The change in total borrowings in the period of €27.6m principally consisted of an increase of a €23.0m cash
flow arising from new financing arrangements in respect of the Arnhem property sale, explained further
below, €3.0m drawdown of the Tricoya® RBS facility, €1.8m drawdown on the working capital facility, net with
repayments in the year of €0.2m.
Facilities relating to purchase of Arnhem land and buildings:
On 1 August 2018 the Group entered into a package of facilities to fully finance the purchase of the land
and buildings in Arnhem. The partially amortising package of loans includes the following:
–
–
–
€14.0m loan with ABN Amro Bank. The loan is partially repayable over a five year term with a final
payment of €9.25m. Interest is fixed at 3% and the loan is secured on the land and buildings.
€5.0m lease loan with ABN Asset Based Finance is repayable over a five year term with an implied
interest rate of approximately 3%. The loan is secured on the first two Accoya® reactors.
€4.0m loan with Bruil, the seller and previous landlord. The balance is repayable from July 2021 to
July 2023 with interest fixed at 5%. The loan is unsecured.
Loan Notes:
On 29 March 2017 the Group issued £16.3 million (€18.4 million) of unsecured fixed rate loan notes, due 2021.
£10.5 million of Loan Notes in principal were issued to Business Growth Fund (‘BGF’), with £5.8 million in principal
issued to Volantis. The BGF loan notes are subject to a 7% fixed interest rate for the duration of their term and
the Volantis loan notes are subject to a 7% fixed interest rate until 31 December 2018, with the interest rate fixed
at 9% thereafter. Interest is rolled up until 31 December 2018 on both loans, with further roll up of interest on
the Volantis loan until six-monthly redemption payments of both loans commence on 31 December 2021 and end
on 30 June 2023.
BGF is an investment company that provides long-term equity funding to growing UK companies to enable them
to execute their strategic plans. Volantis is a global asset management firm specialising in alternative investment
strategies and is owned by Lombard Odier.
Cerdia Production Facility:
On 29 December 2016 the Group drew down €2.0 million of its €9.5 million term loan facility with Cerdia
Production GmBH. The Group has since drawn down €5.5m on 03 November 2017 and €2.0 million on 29 March
2018. The facility was used to design, procure and build the third reactor of the Arnhem Plant. This facility is
secured against the third reactor of the Arnhem chemical plant and associated assets and is subject to interest
at 7.5% per annum. At 31 March 2019, the Group had €9.7m (2018: €9.9m) borrowed under this facility. Quarterly
repayments of the loan commenced on 21 December 2018 until November 2025, with €916,000 repaid in the year
ended 31 March 2019.
Tricoya® facility:
On 29 March 2017 the Company’s subsidiary, Tricoya Ventures UK Limited entered into a six-year €17.2 million
(€15.0 million net) finance facility agreement with the Royal Bank of Scotland PLC in respect of the construction
and operation of the Hull Plant. The facility is secured by fixed and floating charges over all assets of Tricoya
Ventures UK Limited. At 31 March 2019, the Group had €3.6m (2018: €0.3m) borrowed under the facility.
Two drawdowns of the loans were undertaken in the period, totalling €3.0m. The facility is to be drawn down
as required, and facility repayments will commence 12 months after practical completion of the Hull Plant.
Interest will accrue at Euribor plus a margin, with the margin ranging from 325 to 475 basis points.
Trade receivable and inventory facilities:
Working capital facility
In May 2018 the Group amended its working capital facility with ABN Commercial Finance, initially agreed in
2011. The facility is now a €6.0m credit facility secured upon the receivables and inventory of the Accoya®
manufacturing business committed for a period of 5 years. At 31 March 2019, the Group had used €1.8m
(2018: €nil) of this facility.
Bank guarantee facility
In August 2016 the Group amended its credit facility agreement with ABN AMRO Bank N.V., which had
been initially agreed in 2013. The facility is a contingent liability facility enabling the Group to issue bank
guarantees in order to support the working capital and other operational commitments of the Group with
a limit of €1.5m.
Both facilities are subject to interest at 2% above the ABN AMRO base rate.
Reconciliation to net debt:
Cash and cash equivalents
Less:
Amounts payable under loan agreements
Amounts payable under finance leases (note 28)
Net debt
2019
€’000
8,857
2018
€’000
39,698
(56,909)
(29,297)
(2,021)
(50,073)
(14,172)
(3,771)
30. Equity options
On 2 February 2016 the Company’s subsidiary, Tricoya Technologies Limited, issued Warrants to subscribe for up
to 175,000 of its Series A Preference Shares in favour of BP Ventures Limited (100,000) and Titan Wood Limited
(75,000) at a price of €2.00 per Warrant Share during the ‘Exercise Period’, which started on 2 February 2016
and runs to the earlier of either (i) 2 February 2021; (ii) the date of an Exit; and (iii) exercise of the Option.
On the 29 March 2017, the Company announced the formation of the Tricoya® Consortium and as part of this,
funding was agreed with BGF and Volantis (see note 29). In addition to the issue of the Loan Notes the Company
granted options over Ordinary Shares of the Company to BGF and Volantis exercisable at a price of £0.62 per
Ordinary Share at any time until 31 December 2026 (the ‘Options’).
5,838,954 Options were issued to BGF and 3,217,383 Options were issued to Volantis. In addition, the Company
agreed to use its reasonable endeavours to obtain shareholder authority at the subsequent General Meeting to
grant to BGF a further option in respect of 2,610,218 Ordinary Shares and to grant to Volantis a further option in
respect of 1,438,284 Ordinary Shares (the ‘‘Additional Options’’).
The necessary resolutions were passed at the General Meeting held on 21 April 2017 and accordingly the
Additional Options have been converted to Options, such that at 31 March 2019 a total 13,104,839 Options exist
(with 8,449,172 attributable to BGF and 4,655,667 attributable to Volantis). This represents 11.1% of the enlarged
issued share capital of the Company as at 31 March 2019.
Notes to the Financial Statements continuedfor the year ended 31 March 2019
120
Annual Report and Financial Statements 2019
Financial Statements / Notes to the Financial Statements
121
31. Financial instruments
Finance lease
Finance lease creditors of €2,021,000 as at 31 March 2019 (2018: €14,172,000) largely relates to the
infrastructure work for the chemical plant in Arnhem, which has a 20 year lease period with the ability
to extend further (See note 28).
Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern
while maximising the return to shareholders.
The capital structure of the Group consists of cash and cash equivalents and equity attributable to owners of
the parent Company, comprising share capital, reserves and accumulated losses.
The Board reviews the capital structure on a regular basis. As part of that review, the Board considers the cost
of capital and the risks associated with each class of capital. Based on the review, the Group will balance its
overall capital structure through new share issues and the raising of debt if required.
No final dividend is proposed in 2019 (2018: €nil). The Board deems it prudent for the Company to protect as
strong a statement of financial position as possible during the current phase of the Company’s growth strategy.
Categories of financial instruments
Financial asset at fair value through profit or loss
Loans and receivables
Trade receivables
Other receivables
FX derivative asset
Money market deposits in euro
Money market deposits in sterling
Money at call in euro
Money at call in US dollars
Money at call in sterling
Financial liabilities at amortised cost
Trade payables
Finance lease payable
Other payables
Loan notes and other long term borrowings
2019
€’000
–
2018
€’000
–
10,725
6,659
839
143
52
3,526
3,308
864
1,107
(7,936)
(2,021)
–
(56,909)
(46,302)
157
–
1,325
17,067
7,506
165
13,635
(9,458)
(14,172)
–
(29,297)
(6,413)
Money market deposits have interest rates fixed for less than three months at a weighted average rate of 0.19%
(2018: 0.36%). Money market deposits are held at financial institutions with high credit ratings (Standard &
Poor’s rating of A).
All assets and liabilities mature within one year except for the finance leases, for which details are given in note
28 and loans, for which details are given in note 29.
Trade payables are payable on various terms, typically not longer than 30 days with the exception of some major
capex items.
Market risk
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and
interest rates.
Financial risk management objectives
The Group’s treasury policy is structured to ensure that adequate financial resources are available for the
development of its business whilst managing its currency, interest rate, counterparty credit and liquidity risks.
The Group’s treasury strategy and policy are developed centrally and approved by the Board.
Foreign currency risk management
The Group’s functional currency is the euro with the majority of operating costs and balances denominated in
euros. An increasing proportion of costs will be incurred in pounds sterling as the Group’s activities associated
with the Tricoya® plant in Hull increase, although future revenues will be in euros or other currencies. The
group’s Loan Notes, which were issued to fund these UK based operations, are denominated in pounds sterling.
A smaller proportion of expenditure is incurred in US dollars and pounds sterling. In addition some raw materials,
while priced in euros, are sourced from countries which are not within the Eurozone. The Group monitors any
potential underlying exposure to other exchange rates. The Group holds a proportion of the cash associated
with the Tricoya® Consortium in pounds sterling to reflect the expected costs associated with the construction
of the plant in Hull and accordingly is accounted for as a cash flow hedge (see note 5).
Interest rate risk management
The Group’s borrowings are limited to fixed rate loans with BGF, Volantis, Cerdia, ABN Amro and Bruil, together
with the remaining Arnhem finance lease and the lease of the office fit out and furniture in London. The interest
rate in respect of the loan facility agreed with RBS Bank is variable, based on Euribor plus a variable margin.
Therefore the Group is not significantly exposed to interest rate risk in relation to financial liabilities. Surplus
funds are invested in short term interest rate deposits to reduce exposure to changes in interest rates. The
Group does not currently enter into any interest rate hedging arrangements, although will review the need to
do so in respect of the variable interest rate loan facility with RBS Bank.
Credit risk management
The Group is exposed to credit risk due to its trade receivables receivable from customers and cash deposits
with financial institutions. The Group’s maximum exposure to credit risk is limited to their carrying amount
recognised at the balance sheet date.
The Group ensures that sales are made to customers with an appropriate credit history to reduce the risk where
this is considered necessary. The Directors consider the trade receivables at year end to be of good credit
quality including those that are past due (see note 22). The Group is not exposed to any significant credit risk
exposure in respect of any single counterparty or any group of counterparties with similar characteristics other
than the balances which are provided for as described in note 22.
The Group has credit risk from financial institutions. Cash deposits are placed with a group of financial
institutions with suitable credit ratings in order to manage credit risk with any one financial institution.
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board, which has built an appropriate liquidity
risk management framework for the management of the Group’s short, medium and long term funding and
liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves and
banking facilities by continuously monitoring forecast and actual cash flows and matching the maturity profile
of financial assets and liabilities.
Fair value of financial instruments
In the opinion of the Directors, there is no material difference between the book value and the fair value of all
financial assets and financial liabilities.
Notes to the Financial Statements continuedfor the year ended 31 March 2019 122
Annual Report and Financial Statements 2019
Financial Statements / Company Independent Auditors’ Report
123
32. Capital Commitments
Contracted but not provided for in respect of property, plant and equipment
2019
€’000
15,049
2018
€’000
34,461
Included in the above, are amounts relating to the Engineering, Procurement and Construction contracts
relating to the Tricoya® plant under construction in Hull.
33. Post Balance Sheet Events
There have been no material reportable events since 31 March 2019.
Company Independent Auditors’ Report
to the members of Accsys Technologies PLC
Report on the audit of the Company financial statements
Opinion
In our opinion, Accsys Technologies PLC’s Company financial statements (the “financial statements”):
• give a true and fair view of the state of the Company’s affairs as at 31 March 2019;
• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards, comprising FRS 101 “Reduced Disclosure Framework”, and applicable
law); and
• have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report and Financial Statements (the
‘Annual Report’), which comprise: the Condensed Company Balance Sheet as at 31 March 2019; and the notes to
the financial statements, which include a description of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and
applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for
the audit of the financial statements section of our report. We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public
interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical
Standard were not provided to the Group or the Company.
We have provided no non-audit services to the Group and its subsidiaries in the period from 1 April 2018 to
31 March 2019.
Our audit approach
Overview
Materiality
Overall materiality: €700,000 (2018: €434,000). For holding companies such as
the PLC we often use a benchmark based on the asset base, however, as we are
constrained by the Group materiality and allocation to our components an amount of
€700,000 was judged to be appropriate.
Audit Scope
We have performed a full scope audit of the financial statements of the parent
company.
Key audit
matters
Recoverability of investments in Group subsidiaries.
Going concern.
Notes to the Financial Statements continuedfor the year ended 31 March 2019 124
Annual Report and Financial Statements 2019
Financial Statements / Company Independent Auditors’ Report
125
Company Independent Auditors’ Report continued
to the members of Accsys Technologies PLC
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the
financial statements. In particular, we looked at where the Directors made subjective judgements, for example in
respect of significant accounting estimates that involved making assumptions and considering future events that
are inherently uncertain.
We gained an understanding of the legal and regulatory framework applicable to the Company and the industry
in which it operates, and considered the risk of acts by the Company which were contrary to applicable laws and
regulations, including fraud. We designed audit procedures to respond to the risk, recognising that the risk of
not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from
error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations,
or through collusion. We focused on laws and regulations that could give rise to a material misstatement in the
Company’s financial statements, including, but not limited to, the Companies Act 2006 and UK tax legislation. Our
tests included, but were not limited to, review of correspondence with the regulators, enquiries of management
including internal legal counsel and testing of particular classes of transactions. There are inherent limitations in
the audit procedures described above and the further removed non-compliance with laws and regulations is from
the events and transactions reflected in the financial statements, the less likely we would become aware of it.
As in all our audits we also addressed the risk of management override of controls, including evaluating whether
there was evidence of bias by the Directors that represented a risk of material misstatement due to fraud.
Capability of the audit in detecting irregularities, including fraud
Based on our understanding of the Company and industry, we considered those laws and regulations that have
a direct impact on the preparation of the financial statements such as the Companies Act 2006, the Listing
Rules and UK tax and HMRC legislation. We evaluated management’s incentives and opportunities for fraudulent
manipulation of the financial statements (including the risk of override of controls), and determined that the
principal risks were related to posting inappropriate journal entries to achieve desired financial results and the
manipulation of exceptional items and management bias in accounting estimates. Audit procedures performed by
the engagement team included:
• understanding management’s assessment of the risk and the overall control environment in place, including
the ‘tone from the top’;
• enquiries with management and the Group’s legal counsel, including consideration of known or suspected
instances of fraud and non-compliance with laws and regulations and examining supporting calculations where
adjustments have been made in respect of these;
• reading key correspondence with external legal counsel in relation to compliance with certain laws and
guidelines;
• substantive testing of journal entries, particularly focused around the year end and journals posted to
revenue / other unusual account combinations; and
• challenging the assumptions and judgements made by management in their significant accounting estimates
for bias that could result in material misstatement due to fraud (e.g. impairment of assets, depreciation and
amortisation rates).
There are inherent limitations in the audit procedures described above and the further removed non-compliance
with laws and regulations is from the events and transactions reflected in the financial statements, the less likely
we would become aware of it. Also, the risk of not detecting a material misstatement due to fraud is higher than
the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example,
forgery or intentional misrepresentations, or through collusion.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance
in the audit of the financial statements of the current period and include the most significant assessed risks
of material misstatement (whether or not due to fraud) identified by the auditors, including those which had
the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the
efforts of the engagement team. These matters, and any comments we make on the results of our procedures
thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete list of all risks
identified by our audit.
Key audit matter
How our audit addressed the key audit matter
Recoverability of investments in group subsidiaries
The parent Company held assets in
subsidiaries of €181.3m (2018: €176.6m) at
31 March 2019 comprising €15.2m (2018:
€14.8m) of investment in subsidiaries and
€166.1m (2018: €161.8m) of amounts owed
from Group undertakings.
An impairment may be required if there
are indicators which reflect a permanent
decline in value or that receivables cannot
be recovered. Should such indicators
exist, management are required to carry
out an impairment review. The current
market value of the Group being less
than the carrying value of the assets at 31
March 2019 is one such indicator and as a
result an impairment analysis was carried
out by management.
Our audit included the procedures set out below:
Understanding and auditing management’s impairment calculations
(value-in-use) for the overall asset of €181.3m. This included:
– Verifying that the basis for the value-in-use calculations was a Board
approved budget for FY20, consistent with that used in the going
concern analysis;
– Recalculating the carrying value of the investment assets by agreeing
balances back to the financial records;
– Debating and challenging management’s key assumptions used in the
model for future years (Revenue growth, EBITDA margin, discount rate).
We have involved valuation specialists in assessing the reasonableness
of the discount rate, validated future revenue expectations given
knowledge of the capacity of the plant in future years, consideration
and challenge of margins based on previous performance.
Obtained and analysed other data points such as Broker valuations;
Performed a sensitivity analysis on the key assumptions in the
impairment model and debated and challenged management on the
likelihood of those sensitivities;
Review of compliance with the disclosure requirements of FRS101 given
the outcome reached; and
Reported our approach and findings to the Audit Committee.
Based on our procedures we consider management’s key assumptions
to be within a reasonable range. We note however that minor changes
in assumptions could lead to an impairment. The disclosure in note
7 appropriately describes the inherent degree of subjectivity in the
estimates, including specific disclosures on the key assumptions most
sensitive to change.
126
Annual Report and Financial Statements 2019
Financial Statements / Company Independent Auditors’ Report
127
Company Independent Auditors’ Report continued
to the members of Accsys Technologies PLC
Key audit matter
How our audit addressed the key audit matter
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Going concern
As the Group continues to develop and
expand there are a number of factors that
potentially impact on its ability to function
as a going concern. These include:
Continued loss making performance as
the Group looks to increase production
capacity to leverage continuing
investments being made; and
Significant planned capital expenditure
over the next 12 months at Hull for the
Tricoya® businesses as part of that
investment.
As a result of this continued investment
the balances available to the Group over
the next 12 to 18 months are forecast by
management to reduce from the balances
held at 31 March 2019. As such we have
included going concern as a significant
risk.
Our audit work included the following procedures:
Obtaining and auditing management’s own going concern assessment.
This included:
Recalculating the arithmetic accuracy of management’s model;
Ensuring that the model covered an appropriate period and included
correct cash balances in the opening position and subsequent
movements; and
Challenged the key assumptions included in the model, namely (i) the
trading position agreed to the Board approved forecast, (ii) challenged
management on the extent and timing of future expenditure of capital
amounts including the appropriateness of contingencies held given
the current state of progress of projects and the agreements in place
with the contractors, (iii) considered management’s history of ability to
forecast result and (iv) considered mitigants available to management
should they be required and their amount and timing,
As a result of our challenge management produced an updated paper
that considered additional downside sensitivities around production
levels and capital expenditure. Their updated paper also expanded on
the mitigants available to management should they be required and
explained why they were satisfied that the current forecasts were
robust given previous variances to budget
Debated the position with management and reviewed Board minutes to
ensure that the position in the model could be corroborated to other
supporting information from the Board; and
Reported our approach and findings to the Audit Committee in our
written report.
Management’s disclosure on the going concern basis of preparation is
consistent with our understanding based on the procedures performed.
For our conclusion, please refer to page 127.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the
financial statements as a whole, taking into account the structure of the Company, the accounting processes and
controls, and the industry in which it operates.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds
for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit
and the nature, timing and extent of our audit procedures on the individual financial statement line items and
disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial
statements as a whole.
Overall materiality
€700,000 (2018: €434,000).
How we determined it
Allocation of Group materiality.
Rationale for benchmark applied
Accsys Technologies PLC (the Company) is not a revenue generating entity
within the Group, it is ultimate parent holding company. We have considered the
materiality level typically used for such companies (e.g. 1% of total assets) and the
amount which would be allocated for Group purposes as a reporting component
of the Accsys Technologies PLC Group. We have used the lower of these measures.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit
above €35,000 (2018: €30,000) as well as misstatements below that amount that, in our view, warranted
reporting for qualitative reasons.
Conclusions relating to going concern
ISAs (UK) require us to report to you when:
• the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is
not appropriate; or
• the Directors have not disclosed in the financial statements any identified material uncertainties that may
cast significant doubt about the Company’s ability to continue to adopt the going concern basis of accounting
for a period of at least 12 months from the date when the financial statements are authorised for issue.
We have nothing to report in respect of the above matters.
However, because not all future events or conditions can be predicted, this statement is not a guarantee as to
the Company’s ability to continue as a going concern. For example, the terms on which the United Kingdom may
withdraw from the European Union are not clear, and it is difficult to evaluate all of the potential implications on
the Company’s trade, customers, suppliers and the wider economy.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements
and our auditors’ report thereon. The Directors are responsible for the other information. Our opinion on the
financial statements does not cover the other information and, accordingly, we do not express an audit opinion
or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial statements or
our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent
material inconsistency or material misstatement, we are required to perform procedures to conclude whether
there is a material misstatement of the financial statements or a material misstatement of the other information.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report based on these responsibilities.
With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures
required by the UK Companies Act 2006 have been included.
128
Annual Report and Financial Statements 2019
Financial Statements / Company Independent Auditors’ Report
129
Company Independent Auditors’ Report continued
to the members of Accsys Technologies PLC
Based on the responsibilities described above and our work undertaken in the course of the audit, the
Companies Act 2006 and ISAs (UK) require us also to report certain opinions and matters as described below.
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report
and Directors’ Report for the year ended 31 March 2019 is consistent with the financial statements and has been
prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the company and its environment obtained in the course of the audit,
we did not identify any material misstatements in the Strategic Report and Directors’ Report.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in
accordance with the Companies Act 2006.
Responsibilities for the financial statements and the audit
Responsibilities of the Directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities set out on page 73, the Directors are
responsible for the preparation of the financial statements in accordance with the applicable framework and for
being satisfied that they give a true and fair view. The Directors are also responsible for such internal control
as they determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Company’s ability to
continue as a going concern, disclosing as applicable, matters related to going concern and using the going
concern basis of accounting unless the Directors either intend to liquidate the Company or to cease operations,
or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s
website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the Company’s members as a body in
accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving
these opinions, accept or assume responsibility for any other purpose or to any other person to whom this
report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the Company, or returns adequate for our audit have not
been received from branches not visited by us; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• the financial statements and the part of the Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee, we were appointed by the Directors on 1 April 2011 to
audit the financial statements for the year ended 31 March 2011 and subsequent financial periods. The period of
total uninterrupted engagement is nine years, covering the years ended 31 March 2011 to 31 March 2019.
Other matter
We have reported separately on the Group financial statements of Accsys Technologies PLC for the year ended
31 March 2019.
Darryl Phillips (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
24 June 2019
130
Annual Report and Financial Statements 2019
Financial Statements / Notes to the Company Financial Statements
131
Condensed Company Balance Sheet
as at 31 March 2019
Registered Company 05534340
Fixed assets
Investments in subsidiaries
Property, plant and equipment
Financial asset at fair value through profit or loss
Current assets
Debtors
Cash at bank and in hand
Creditors: amounts falling due within one year
Net current assets
Note
2019
€’000
2018
€’000
4
6
5
7
8
15,224
14,842
73
–
114
–
15,297
14,956
166,110
161,870
425
1,373
166,535
163,243
(12,988)
(13,578)
153,547
149,665
Creditors: amounts falling due after more than one year
9/10
(18,843)
(17,720)
Notes to the Company Financial Statements
for the year ended 31 March 2019
1. Accounting policies
The principal accounting policies applied in the preparation of these financial statements are set out below.
These policies have been consistently applied to all the years presented, unless otherwise stated.
Basis of preparation
The separate financial statements of Accsys Technologies PLC (‘the Company’) have been prepared in
accordance with Financial Reporting Standard 101, ‘Reduced Disclosure Framework’ (FRS 101) for the year ended
31 March 2019. The financial statements have been prepared under the historical cost convention, as modified by
the revaluation of land and buildings and derivative financial assets and financial liabilities measured at fair value
through profit or loss, and in accordance with the Companies Act 2006.
The preparation of financial statements in conformity with FRS 101 requires the use of certain critical accounting
estimates. It also requires management to exercise its judgement in the process of applying the Company’s
accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions
and estimates are significant to the financial statements are disclosed in note 2 of the Group financial statements.
The following exemptions from the requirements of IFRS have been applied in the preparation of these financial
statements, in accordance with FRS 101:
• The Company has taken advantage of the exemption in FRS 101, and has not disclosed information required by
the standard as the consolidated financial statements, in which the Company is included, provide equivalent
disclosures for the Group under IFRS 7 ‘Financial instruments: disclosures’.
• The Company has taken advantage of the exemption available under FRS 101 and not disclosed related party
150,001
146,901
transactions with wholly owned subsidiary undertakings.
Net assets
Capital and reserves
Called up Share capital
Share premium account
Reserve for own shares
Capital redemption reserve
Profit and loss account
Total shareholders’ funds
11
12
12
12
12
13
5,900
5,576
145,429
140,036
(9)
148
(1,467)
(15)
148
1,156
150,001
146,901
The financial statements were approved by the Board and authorised for issue on 24 June 2019 and signed on its
behalf by:
Paul Clegg
Director
William Rudge
Director
The notes on pages 131 to 139 form an integral part of the parent Company financial statements.
• The Company has taken advantage of the exemption available under FRS 101 and the requirements of IAS 7
to not disclose a Statement of Cash Flows.
As permitted under section 408 of the Act the Company has elected not to present its own profit and loss
account for the year. The loss for the financial year was €3,001,000 (2018: loss of €2,010,000). The results of
the parent Company are disclosed in the reserves reconciliation in note 12.
Going concern
The Company financial statements are prepared on a going concern basis, which assumes that the Company will
continue in operational existence for the foreseeable future, and at least 12 months from the date these financial
statements are approved.
As part of the Company’s going concern review, the Directors have reviewed the Company’s trading forecasts
and working capital requirements for the foreseeable future taking into account the banking and finance facilities
which are currently in place (see note 29 in the Group financial statements for details of these facilities). These
forecasts indicate that, in order to continue as a going concern, the Company is dependent on the achievement
of certain operating performance measures relating to the production and sales of Accoya® wood from the
plant in Arnhem with the collection of ongoing working capital items in line with internally agreed budgets. The
Directors’ have also considered the level and timing of capital expenditure required in relation to the new plant
in Hull which is currently being built and further expansion of the Arnhem operation (with further details of the
required capital expenditure and how this is to be financed to be confirmed as the detailed planning progresses).
The Directors believe that while some uncertainty always inherently remains in achieving the budget, in
particular in relation to market conditions outside of the Company’s control, that there is no material uncertainty.
There are a sufficient number of alternative actions and measures within the control of the Company that can
and would be taken in order to achieve the Company’s medium and long term objectives including reducing/
deferring costs in some discretionary areas.
Therefore the Directors believe that the going concern basis is the most appropriate on which to prepare the
financial statements.
132
Annual Report and Financial Statements 2019
Financial Statements / Notes to the Company Financial Statements
133
Notes to the Company Financial Statements continued
for the year ended 31 March 2019
1. Accounting policies continued
Investments
Except where a reliable fair value cannot be obtained, unlisted shares held by the Company are stated at
historical cost less any provision for impairment.
Share based payments
When the parent entity grants options over equity instruments directly to the employees of a subsidiary
undertaking, then in the parent Company financial statements the effect of the share based payment is capitalised
as part of the investment in the subsidiary as a capital contribution, with a corresponding increase in equity.
The fair value of the options granted is measured using a modified Black Scholes model, taking into account the
terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to
reflect the actual number of share options that vest only where vesting is dependent upon the satisfaction
of service and non-market vesting conditions.
Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to
vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is
based on the number of options which eventually vest. Market vesting conditions are factored into the fair value
of the options granted. The cumulative expense is not adjusted for failure to achieve a market vesting condition.
Deferred taxation
Deferred taxation is provided in full in respect of taxation deferred by timing differences between the treatment
of certain items for taxation and accounting purposes except for deferred tax assets which are only recognised
to the extent that the Company anticipates making sufficient taxable profits in the future to absorb the reversal
of the underlying timing differences. Deferred tax balances are not discounted.
Dividends
Equity dividends are recognised when they become legally payable. Interim equity dividends are recognised when
paid. Final equity dividends are recognised when approved by the shareholders at an annual general meeting.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any impairment charged.
Cost includes the original purchase price of the asset as well as costs of bringing the asset to the working
condition and location of its intended use. Depreciation is provided at rates calculated to write off the cost less
estimated residual value of each asset, except freehold land, over its expected useful life on a straight line basis,
as follows:
Office equipment:
Useful life of between 2 and 5 years.
Financial liabilities
Other financial liabilities
Trade payables and other financial liabilities are initially recognised at fair value and subsequently carried at
amortised cost using the effective interest method.
Accounting judgements
In preparing the Financial Statements, management has to make judgments on how to apply the accounting
policies and make estimates about the future. The critical judgments that have been made in arriving at the
amounts recognised in the Financial Statements and the key sources of uncertainty that have a significant
risk of causing a material adjustment to the carrying value of assets and liabilities in the next financial year
are discussed below:
Financial asset at fair value through profit or loss
The Company has an investment in listed equity shares carried at nil value. The investment is valued at
cost less any impairment as a reliable fair value cannot be obtained since there is no active market for the
shares and there is currently uncertainty around the future funding of the business. The Company makes
appropriate enquiries and considers all of the information available to it in order to assess whether any
impairment has occurred.
Carrying value of intercompany receivables and investments in subsidiaries
The recoverable amounts of these balances have been determined based on value in use calculations.
These calculations require the use of judgements in relation to discount rates and future forecasts.
The recoverability of these balances is dependent upon the level of future licence fees and manufacturing
revenues relating to group companies. While the scope and timing of the production facilities to be built
under the Group’s existing and future agreements remains uncertain, the Directors remain confident
that revenue from own manufacturing, existing licensees, new licence or consortium agreements will
be generated, demonstrating the recoverability of these balances.
2. Profit and loss account
A loss of €3,001,000 (2018: loss of €2,010,000) is dealt with in the Company financial statements of Accsys
Technologies PLC. The Directors have taken advantage of the exemption available under section 408 of
the Companies Act 2006 and not presented a profit and loss account for the Company. Fees payable to
the Company’s auditors for the audit of the Company’s annual financial statements was €74,000
(2018: €85,000). Fees payable to the Company’s auditors for the audit of the Company’s subsidiaries
was €169,000 (2018: €147,000) and fees payable for other services were €nil (2018: €nil).
The information disclosed in the Group’s consolidated financial statements under IFRS2 ‘Share-based
payment’ is within note 15, providing further information regarding the Company’s equity settled share
based payment arrangements.
3. Employees
The Company had no employees other than Executive Directors (2019: 2 and 2018: 3) during the current
or prior year. Hans Pauli stepped down as an Executive Director on 31 December 2018.
Non-Executive Directors received emoluments in respect of their services to the Company of €292,000
(2018: €233,000). Details have been included in the Remuneration Report. The Company did not operate
any pension schemes during the current or preceding year.
134
Annual Report and Financial Statements 2019
Financial Statements / Notes to the Company Financial Statements
135
Notes to the Company Financial Statements continued
for the year ended 31 March 2019
4. Investments in subsidiaries
The principal activities of these companies were as follows:
Cost
At 31 March 2017
Share based payments
At 31 March 2018
Share based payments
At 31 March 2019
Impairment
At 1 April 2017 and 1 April 2018 and 31 March 2019
Net book value
At 31 March 2019
At 31 March 2018
At 31 March 2017
€’000
19,222
300
19,522
382
19,904
4,680
15,224
14,842
14,542
The Directors believe that the carrying value of the investments are supported by the underlying net assets and
future profitability.
The following were the principal subsidiary undertakings at the end of the year and have all been included in the
financial statements:
Subsidiary undertakings
Titan Wood Technology BV (Netherlands)
Titan Wood BV (Netherlands)
Titan Wood Limited (UK)
Titan Wood Inc (USA)
Tricoya Technologies Limited (UK)1
Tricoya Ventures UK Limited (UK)1
2019
% shares
and voting
rights held
2018
% shares
and voting
rights held
100
100
100
100
76
46
100
100
100
100
75
46
Class
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
The shares in Titan Wood BV, Titan Wood Inc, Tricoya Technologies Ltd and Tricoya Ventures UK Ltd are held
indirectly by the Company.
1. Non-controlling interests shareholdings are detailed in note 9 & 26 of Group financial statements.
Titan Wood Technology B.V.1
The provision of technical and engineering services to licensees, and the technical
development of acetylation opportunities.
Titan Wood B.V.1
Titan Wood Limited2
The manufacture and sale of Accoya®, acetylated wood.
Establishing global market penetration of Accoya® and Tricoya® as the premium
wood and wood elements brands respectively for external applications requiring
durability, stability and reliability through the licensing of the Group’s proprietary
process for wood acetylation.
Titan Wood Inc.3
Provision of Sales, Marketing and Technical services.
Tricoya Technologies Limted2
Engaged in the commercialisation of technology for the production of Tricoya®
Wood Elements around the world.
Tricoya Ventures UK Limited2
The construction and operation of manufacturing plant for Tricoya® wood chips as
the premium wood elements brand for external applications requiring durability,
stability and reliability.
Registered office of subsidiaries:
1. P.O. Box 2147, 6802 CC, Arnhem, The Netherlands
2. Brettenham House, 19 Lancaster Place, London, WC2E 7EN, United Kingdom
3. 5000 Quorum Drive, Suite 620, Dallas, Texas 75254, U.S.A
5. Financial asset at fair value through profit or loss
Shares held in Cleantech Building Materials PLC
2019
€’000
–
2018
€’000
–
Accsys Technologies PLC has previously purchased a total of 21,666,734 unlisted ordinary shares in
Diamond Wood China. On 23 December 2016, Cleantech Building Materials PLC acquired Diamond Wood
China. On 19 April 2017 Cleantech Building Materials acquired the 21,666,734 shares previously owned by
the Company and in return the Company has been issued with 520,001 shares in Cleantech Building Materials
PLC, a listed company trading on the Nasdaq First North market in Copenhagen, Wiener Boise of the Vienna
Stock Exchange.
There continues to be no active market for these shares as at 31 March 2019, and there is significant uncertainty
over the future of Cleantech Building Materials PLC. As such a reliable fair value cannot be calculated and the
investment is carried at a nil value (2018: nil).
The historical cost of the listed shares held at 31 March 2019 is €10m (2018: €10m). However, a provision for the
impairment of the entire balance of €10m continues to be recorded as at 31 March 2019.
During the prior year the Company sold 21,479 shares at €1.50 per share resulting in a gain of €32,000. A total of
498,522 shares were held at 31 March 2019.
136
Annual Report and Financial Statements 2019
Financial Statements / Notes to the Company Financial Statements
137
Notes to the Company Financial Statements continued
for the year ended 31 March 2019
6. Property, plant and equipment
Cost or valuation
At 31 March 2017
Additions
Disposals
At 31 March 2018
Additions
Disposals
At 31 March 2019
Accumulated depreciation
At 31 March 2017
Charge for the year
At 31 March 2018
Charge for the year
At 31 March 2019
Net book value
At 31 March 2019
At 31 March 2018
At 31 March 2017
Office
equipment
€’000
Total
€’000
208
208
–
–
208
–
–
208
52
42
94
41
135
73
114
156
–
–
208
–
–
208
52
42
94
41
135
73
114
156
Included within property, plant and equipment are assets which have been accounted for as a finance lease
(see note 9).
7. Debtors
Amounts owed by Group undertakings
Prepayments and accrued income
2019
€’000
2018
€’000
166,014
161,775
96
95
166,110
161,870
The balance of amounts owed by Group undertakings increased in the year largely as a result of the share issue
proceeds being invested by way of intercompany loans to the Company’s subsidiaries.
The amounts owed by Group undertakings currently have no repayment plans in place, however the intention
is for the Group’s subsidiaries to repay this balance in the future. A repayment plan will be determined and
commence for the loan when the subsidiaries have surplus cash and the Group requires the cash for other
purposes. The Directors have considered the recoverability of the balances, taking into account the net assets
as well as the long term expected performance of the subsidiaries and do not consider that any impairment is
currently required. The recoverable amount 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
12 years, including a six year forecast and six years of 2% growth plus assumptions concerning a terminal value
and based on a pre-tax discount rate of 10% per annum (2018: 12%). The key assumption used in the value in use
calculations is the level of future licence fees and manufacturing revenues prudently estimated by management
over the budget period. These have been based on past experience and expected future revenues but are
limited to existing assets and those under construction.
The Directors have considered whether a reasonably possible change in assumptions may result in an
impairment. An impairment would arise if either the discount rate increased by 2.8% or the revenue growth
rate decreased by 2%. Accordingly a degree of risk remains over the carrying value given the relative
uncertainty of the future results.
8. Creditors: amounts falling due within one year
Trade creditors
Amounts owed to Group undertakings
Obligation under finance lease
Short term borrowings
Accruals and deferred income
The amounts owed to Group undertakings are payable upon demand and are unsecured.
9. Commitments under finance leases
2019
€’000
433
11,699
16
762
78
2018
€’000
154
11,719
31
1,446
228
12,988
13,578
Amounts payable under finance leases:
Within one year
In the second to fifth years inclusive
After five years
Less: future finance charges
Present value of lease obligations
Minimum lease payments
2019
€’000
2018
€’000
16
20
–
(2)
34
31
77
–
(6)
102
Agreements were entered into in the previous period for the lease of office furniture and fit-out for the London
head office, resulting in a finance lease creditor of €34,000 as at 31 March 2019 (2018: €102,000).
10. Commitments under loan agreements
Amounts payable under loan agreements:
Within one year
In the second to fifth years inclusive
After five years
Less future finance charges
Present value of loan obligations
2019
€’000
2018
€’000
851
25,088
–
1,786
19,390
5,788
(6,352)
(7,869)
19,587
19,095
The balance relates to Loan Notes issued to BGF and Volantis. Further details can be found in note 29 of the
Group financial statements.
138
Annual Report and Financial Statements 2019
Financial Statements / Notes to the Company Financial Statements
139
Notes to the Company Financial Statements continued
for the year ended 31 March 2019
11. Called up Share capital
Allotted – Equity share capital
117,988,305 Ordinary shares of €0.05 each
(2018: 111,513,145 Ordinary shares of €0.05 each)
In year ended 31 March 2018:
2019
€’000
2018
€’000
5,900
5,900
5,576
5,576
Own shares represents 295,874 Ordinary shares issued to an Employee Benefit Trust (‘EBT’) at nominal value.
This includes 97,720 shares issued on 23 June 2017 to an Employee Benefit Trust (‘EBT’) at nominal value and
198,154 shares issued on 27 September 2017 to an Employee Benefit Trust (‘EBT’) at nominal value.
On 24 April 2017 a total of 20,323,986 of €0.05 Ordinary shares were issued at €0.69 per share, in accordance
with the Company’s capital raise announced on the 29 March 2017.
679,435 €0.05 Ordinary shares had been issued to the EBT at nominal value on 27 June 2016 of which
679,435 Ordinary shares vested on 1st July 2017. 106,189 shares were issued on 27 September 2017 have been
conditionally issued and allotted to an employee following the exercise of nil cost options, granted in 2013 under
the Company’s 2013 Long Term Incentive Plan (‘LTIP’). 143,511 shares were issued on 26 February 2018 to an
ex-employee. 118,511 of these Shares have been conditionally issued and allotted following the exercise of nil
cost options, granted in 2013 under the Company’s 2013 Long Term Incentive Plan (‘LTIP’), with the balance
of 25,000 Shares conditionally issued and allotted as part of the individual’s severance terms.
In year ended 31 March 2019:
On 18 July 2018, 6,231,070 ordinary shares were issued to VP Participaties BV, the investment company of the
Van Puijenbroek family, at a price of €0.92 per share. Proceeds of €5,704,000 were received net of expenses
of €28,000.
173,915 shares were issued on 25 June 2018 to an Employee Benefit Trust (‘EBT’) at nominal value. In addition, of the
Ordinary Shares which had been issued to the EBT in the previous year, 295,874 Ordinary Shares vested on 01 July
2018. Of these beneficiaries elected to sell 128,213 Ordinary Shares in the market, with sale date of 02 August 2018.
70,175 shares were issued on 18 February 2019 to an employee following the exercise of nil cost options, granted
in 2013 under the Company’s 2013 Long Term Incentive Plan (‘LTIP’).
12. Reserves
The profit and loss account includes €8,010,000 of non-distributable reserves arising from the liquidation of
Accsys Chemicals Limited in the year ended 31 March 2007. The profit and loss account also includes €8,732,000
of non-distributable reserves relating to share based payments.
Called up
Share capital
€000
Share
premium
account
€000
Capital
redemption
Reserve
€000
Own
Shares
€000
Profit and
loss account
€000
Total
Shareholders
Funds
€000
Balance at 1 April 2017
4,531
128,792
148
(33)
2,866
136,304
Loss for the financial year
Share based payments
Shares issued
Premium on shares issued
Share issue costs
–
–
1,045
–
–
–
–
–
13,007
(1,763)
–
–
–
–
–
–
–
18
–
–
(2,010)
(2,010)
300
–
–
–
300
1,063
13,007
(1,763)
Balance at 31 March 2018
5,576
140,036
148
(15)
1,156
146,901
Loss for the financial year
Share based payments
Shares issued
Premium on shares issued
Share issue costs
–
–
324
–
–
–
–
–
5,421
(28)
–
–
–
–
–
–
–
6
–
–
(3,001)
(3,001)
382
(4)
–
–
382
326
5,421
(28)
Balance at 31 March 2019
5,900
145,429
148
(9)
(1,467)
150,001
13. Reconciliation of movements in shareholders’ funds
Loss for the financial year
Share based payments charged to subsidiaries
Proceeds from issue of shares
Share issue costs
Net increase in shareholders’ funds
Opening shareholders’ funds
Closing shareholders’ funds
14. Dividends Paid
Final Dividend €Nil (2018: €Nil) per Ordinary share proposed
and paid during year relating to the previous year’s results
2019
€’000
(3,001)
382
5,747
(28)
3,100
2018
€’000
(2,010)
300
14,070
(1,763)
10,597
146,901
136,304
150,001
146,901
2019
€’000
2018
€’000
–
–
15. Deferred taxation
The Company has an unrecognised deferred tax asset of €1.7m (2018: €1.7m) which is largely in respect of trading
losses. The deferred tax asset has not been recognised due to the uncertainty of the timing of future expected
profits of the fellow subsidiary (in which the Company is in the same tax group) attributable to licensing activities.
140
Annual Report and Financial Statements 2019
Shareholder Information
Accsys Technologies PLC is a public limited company incorporated in the United Kingdom
Directors
Sean Christie
Paul Clegg
Sue Farr
Nick Meyer
William Rudge
Trudy Schoolenberg
Patrick Shanley
Non-Executive Director
Chief Executive Officer
Non-Executive Director
Non-Executive Director
Finance Director
Non-Executive Director
Non-Executive Chairman
Company Secretary
Angus Dodwell
Company Number
05534340
Registered Office
Brettenham House
19 Lancaster Place
London
WC2E 7EN
Bankers
Registrars
Barclays Bank
One Churchill Place
London
E14 5HP
Royal Bank of Scotland
250 Bishopsgate
London
EC2M 4AA
ABN AMRO Bank
Velperweg 37
6824 BM Arnhem
The Netherlands
SLC Registrars
Elder House, St Georges Business Park
Brooklands Road, Weybridge
Surrey, KT13 0TS
Independent Auditors
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory auditors
1 Embankment Place
London, WC2N 6RH
Lawyers
Slaughter & May
One Bunhill Row
London
EC1Y 8YY
Joint Broker and Nomad
Numis Securities Ltd
The London Stock Exchange Building
10 Paternoster Square
London, EC4M 7LT
Joint Broker
Investor Relations
Investec Bank PLC
30 Gresham Street
London
EC2V 7QP
FTI Consulting
200 Aldersgate Street
Barbican
London, EC1A 4HD
Changing wood
to change the world
Accsys Technologies PLC
Brettenham House
19 Lancaster Place
London
WC2E 7EN
+44 (0)20 7421 4300
Accsys Technologies 2019, Accsys Technologies is a trading name of Titan Wood Limited. Accsys®, Accoya®, Tricoya® and the Trimarque Device
are registered trademarks owned by Titan Wood Limited (‘TWL’), a wholly owned subsidiary of Accsys Technologies PLC, and may not be used
or reproduced without written permission from TWL, or in the case of the Tricoya® registered trademark, from Tricoya Technologies Limited,
who have exclusive rights to exploit the Tricoya® brand. © Accsys Technologies PLC 2019
www.accsysplc.com
www.accoya.com
www.tricoya.com