Accsys continues to make positive progress and is now generating revenue from its latest investment at Arnhem. We expect the new, under-construction Tricoya facility to follow suit within the next year, at which point annual group revenue potential will be around €150m according to management. In the near term, we expect to see an EBITDA positive outturn in FY19.
Increased revenue, Arnhem profitability and a halved group EBITDA loss were the financial highlights in H119. Behind this, Accsys achieved a c 8% uplift in Accoya volumes or c 21,400m3 sold in the period, which included the third reactor at Arnhem coming on stream. Based on previously released five-month data, the implied September throughput was c 4,500m3 , which is approaching the enlarged annual capacity (ie 60,000m3 ) on a monthly run rate basis. Elsewhere, other costs appeared to be well controlled and the current investment phase resulted in a €34m net debt position at the end of September. As expected, no interim dividend was declared.
Encouragingly, with new capacity coming on stream, demand indicators remain supportive and management expects the group to become EBITDA positive in H219. This was already factored into our estimates, which are effectively unchanged following this release. In the remainder of this year, we see sustained higher throughput at Arnhem, further development of both Accoya and Tricoya markets – with an improving mix – and solid progress moving the new Hull Tricoya plant towards construction completion all as important benchmarks of progress. Discussions with potential partners for the construction of new plants in the US and Asia are ongoing, although no timeline or other details are available.
The Accsys share price is off its highs for the year (116p earlier this month) but has made strong progress during 2018, rising c 36% YTD. We have revisited the Arnhem/Accoya component of our DCF valuation and the current share price is consistent with a c 6% inflation uplift (in prices and opex). A strong pull through of demand on new Arnhem capacity and/or realising production output at Hull (affecting our volume and discount rate assumptions respectively) should both support a higher share price. In FY21, the first expected full year of operation of the Hull Tricoya plant, Accsys is valued at 1.6x revenue and 13.6x EV/EBITDA.