Accsys Technologies PLC

Good day and thank you for standing by. Welcome to the Access Technologies PLC four year results presentation. At this time all participants are in a listen only mode. After the speaker's presentation there will be a question and answer session. To ask a question over the telephones you'll need to press star and one on your keypad and you can also submit questions via the web. Please be advised today's conference is being recorded. If you require any further assistance please press star zero.

like to hand the conference over to your first speaker today rob harris chief executive please go ahead thank you good morning everyone and welcome to our full year results presentation for the 2021 financial year and firstly i hope you're all safe and well and before we start as always i'd like to pause for a photo moment of our akoya product In this photo, we have a Koya decking showing its strength against the elements up on Banff Mountain in the Canadian Rocky Mountains. It's also a very symbolic choice of photo, as it's in the North American region where we are making good strategic progress. I'll give you more about that later. Moving on, we have the usual disclaimers that I know will be familiar to you, and thank you for adhering to that. In terms of this morning's agenda, firstly, I'm going to give you a quick initial overview of the results. Then Will Rudge is going to take you through the financials in more detail. I will then give an update on the whole Tricoya plant since the early June update. I know this is a key focus for analysts, shareholders, and many stakeholders on the call today. I'll then walk through the business review to update you on our strategic development and the Tricoya segment's positive tactical and strategic momentum. So looking across today's results, we have delivered a strong set of numbers for FY 2021. We've delivered a 4.5% increase in sales and a 10% growth in revenue. This is a really good performance given the backdrop of COVID-19 this year and given the fact that we are capacity constrained with greater demand than we can actually supply. Our sales and revenue result shows the business's resilience and that strong market demand for our product continues. Our sales, manufacturing and supply teams continue to do an outstanding job for Axis. These results are another step up in our profitability. We have grown gross margin by 290 basis points to 33% and are reporting a 44% growth in underlying EBITDA today to 10.1 million euros. We're also benefiting from good cash generation in the Akoya segment and margin gains through diligent pricing of this high-value, sustainable product for the construction sector. Beyond the financials, 2021 has been a year of strategic progress as well. We are moving ahead in our plans to expand in North America, the largest single market for Akoya, and are expanding capacity at Arnhem for Akoya production by 33%. While we have faced ongoing challenges in completing our new Tricoya plant at Hull, we have progressed the construction during the year to the final stages, but more about this later. Finally, and very importantly, we are investing in our organisational capability, people, talent, and our business processes to manage it and deliver the growth ahead, and importantly, providing a platform to grow sustainably. This is important. really important in our path to increase production capacity to 200,000 metres cubed by 2025 in our 5x growth target. I'll now hand over to Will for the financial results, please.

Thank you, Rob. Good morning, everyone. The first image you can see here is a great image of Akoya being used as a floating boat platform in Canada, a great example of Akoya's durability and stability in action. But I'll move quickly on to the next slide, the financial highlights. Rob's already touched on some of these. This first slide summarizes what we believe is a strong financial performance, and this is for the year to 31st of March, 2021. Revenue increased by 10%. The COIA sales volume is up 4.5%. The sales volume has recovered strongly with demand exceeding our production capacity following the impact of sales in the first quarter due to COVID-19. Revenue growth was supported by an increase in average sales prices. Price increases were implemented for all Accora customers from January 2020, the end of the previous year. In addition, from 1st of April 2020, the European markets were successfully transitioned into our direct sales and marketing channels from their previous exclusive license to Sardia, ending the previous discounted sales arrangements. A further price increase took effect from November 2020, including to address an expected increase in raw material costs. These increases have helped the acquire manufacturing margin increase by 340 basis points to 33.4%. We have seen a marginal increase in other operating costs in the second half of the year as we increase our investment in our organizational capability. However, with the gross margin improvements, this has overall resulted in a 44% increase in underlying group EBITDA to 10.1 million. This represents our third consecutive year of positive group underlying EBITDA and our second consecutive year of positive group underlying EBIT. The strong performance of the ECOI business has helped drive a 61% increase in group operating cash flow, and that has helped ensure we have maintained a robust balance sheet with a €13 million reduction in net debt. Moving on to the next slide, which looks at our sales mix in a bit more detail, The underlying demand from resulting sales here have helped demonstrate the resilience of the business. The chart on the right-hand side helps explain the year-on-year movement in acquire revenue split by region. In Q1, sales were disrupted, in particular in the UK and North America, due to COVID-19 impacting our customers' supply chains. We were able to focus efforts in other regions to stimulate additional sales, in particular in mainland Europe, the Nordic region, while also increasing sales to our Tricoya partners. From Q2, sales volumes recovered quickly in all regions, and we saw pickup in sales to North America in particular being a key region for us to target in the longer term, given the substantial market opportunity which we have confirmed exists there. The chart on the left-hand side shows the split of volumes by market. The Tricoya segment, with 26% of the total sales volumes, represent sales of lower price decoyer to our tri-coyer partners, with these volumes expected to be transferred to the hull plant once it is operational, and that will free up volume in Arnhem for full price decoyer sales. The rest of Europe region, just for confirmation, represents sales which in the previous year had been sold at discounted prices under the previous arrangement, Srdia, but during the year we're reporting upon, those were at normal prices. We'll move on to the next slide, please, which sets out our EBITDA progression in a bit more detail. This sets out how change in the ECOI business have helped drive the increase in the group underlying EBITDA from 7 million last year to 10.1 million this year. 4.8 million was an improvement due to high average sales prices. This is split across a few areas. First of all, the effect of the termination of the third-year contract and the end of the pricing discount that was previously in place, that was effective for the whole of the financial year compared to the previous year. In addition, there was an increase in material sold for the tri-coir production. But lastly, the largest component was the price increase to all the coir customers, firstly from 1st of January 2020, and then again a price increase from November 2020, helping improve our overall margins. 1.3 million of the improvement was attributable to increased sales volumes for the year as a whole, a 4.5% volume increase I mentioned earlier. This was offset by raw material prices, including wood and our net acetals costs, which increased marginally compared to the previous year. There was a more significant increase in acetic anhydride costs seen in the final quarter of the financial year, and that has continued into the into the beginning of the new financial year. However, we do also continue to benefit from the partial natural hedge we get due to the sale of the acetic acid byproduct, such that the impact on overall raw material costs has been more marginal. The increase in ACOIA operating costs reflects an increase in headcount for the year and an increase in spend on sales and marketing costs in preparation for the support of our capacity expansion plans. Increase in other group operating costs largely also reflects a higher headcount. We completed the recruitment of the majority of the remaining Hull operating team for the Triquoia plant in the second half of the year. In addition, we are investing in our overall organisational capability and have added a number of experienced new roles to reflect our growth in scale and our ambitions for growth. This has included new group heads of health and safety, for our technology centre, as well as for engineering, IT, CTARs management, and investor relations. Moving on to the next page, and looking a little bit more detail at profitability progression, both charts here show our longer-term trend over five years. Group EBITDA on the left-hand side, and the acquire segmental EBITDA and margin on the right-hand side. While the progression of the Akoya business has clearly driven the improvements in the group overall, I would like to highlight a couple of points. We had previously said that we believed a 30% gross manufacturing margin for the Akoya business was achievable. We have now achieved this for 18 months, and in particular, this was seen following the step-up of volume in FY20, which resulted from the benefit of the third Akoya reactor coming on stream and the associated economies of scale, which flowed from that 50% increase in capacity. However, over that same period, margins have also benefited from the higher sales prices. Looking ahead, we will continue to keep sales prices under review so that we are at least able to maintain these margin levels. However, we will also target further margin improvement, seeking to take advantage of further economies of scale as we benefit from additional capacity, in particular with the completion of the fourth aqua reactor due to be operational by the end of this new financial year. In addition, when the hull plant turns on for tri-coir, this will free up additional capacity in Arnhem for higher price to coir sales. Group profitability is then expected to benefit from the increase in overall sales volumes, as well as the higher 40% anticipated gross margin, which we continue to believe is achievable from the hull plant once it's operational. Moving on to the next chart, which looks at our cash flow, The net debt bridge in this slide shows that strong cash flow generation has helped to decrease net debt from €25 million to €12.2 million at the end of the year. As explained earlier, the Akoya business drove most of this, with a 27% increase in EBITDA resulting in €21.4 million of cash inflow. The TriKoya EBITDA reflects its pre-operating position, and that's expected to become positive following the start-up of the Hull plant. The R&D and corporate costs did increase compared to the prior year, reflecting the investment and organizational capability. However, we don't expect that to increase in line with revenue as we continue to grow. The decrease in operation working capital by 5.1 million is largely due to a decrease in inventory during the year, including the impact of some supply chain disruption as a result of COVID-19 and subsequent to that. Year-end inventory levels were lower than planned, and as a result, are being rebuilt in the new financial year, with a further increase expected ahead of new production capacity coming on stream. The CAPEX investment of €21 million includes €14.4 million for progress in the tricoil plant at Hull and €5 million for the fourth reactor in Arnhem. This investment was partially offset by CAPEX accruals of €9 million, reflecting the milestone nature of our construction contracts. The $3.2 million third-year termination fee was reported in the first half of the year, offset against our third-year loan at the start of the year. And then, finally, the Tricoya equity issuance reflects shares issued to our Tricoya consortium partners. If we move on to the balance sheet, and just note a couple of more points in respect of our overall position. Overall, we believe our balance sheet remains robust, In addition to the reduction in net debt I've just explained and the resulting net debt to EBITDA ratio, the group had cash balances of £47.6 million at the end of March. This cash balance, together with positive operating cash flow from the Akoya business and further undrawn banking facilities, ensure the group is well positioned looking ahead, including taking into account that much of this cash is expected to be invested in our key additional production capacity projects in Arnhem Hull. In addition, subsequent to the year end, we raised a further 35 million euros through a successful placing and open offer. The proceeds of this are principally intended to fund our 60% equity share of the planned Akoya plant in North America. Rob's got some further details on this a little bit later, and at this point I'll pass back to Rob.

Many thanks, Will. I'll now give an update on Hull before we go through the wider business. The image here is actually Tricoya panels. They are on a Swiss exterior cladding project. The interesting design you can see reflects Tricoya in its element. It's a high-value, high-performance wood element. Tricoya gives a lot of design freedom, and as you know, it's extremely stable and durable, three things that you do not get with regular MDF or regular wood panel products. I would now like to move on to building our Tricoya capacity in hull. As most of you know, we are building a world first of its kind Tricoya production plant at Hull in the UK. Across the full 2021 financial year, we have made fundamental progress in the construction of the plant, despite some continuing challenges with the pace of work and construction, which has been impacted through COVID-19 and the lead contractors' challenges. Last summer, construction progressed. and after the initial COVID shutdowns, activity on the site slowed down. Despite this, in October, we reached the milestone of installing the acetylation towers, which you can see here in the bottom right hand photo at 56 metres tall. This year, however, we have encountered further challenges in progress to completion and have reported additional updates to the market. Firstly, in April, we reported our expectation of a likely three to six month delay to the construction. This was based on our assessment of the remaining works we could see needed to be completed and concerns that the lead EPC contractor's schedule did not reflect this. This was due to a combination of late engineering changes and resource planning, principally people on the ground. Earlier this month, on the 7th of June, we reported that we had received a notice of purported termination of the EPC contract by the lead contractor, Angie Fabricom. Since that date, we have been working through the legal and contractual implications and working with ONJI Fabricon to establish the status of the outstanding works and our best route to completion through building the necessary resource and capability to get this job done. Today, I can now update you that the contract has now been terminated. This means that we have also now taken over the responsibility for the safety and the security of the site. We are taking over and gaining control. ONGI Fabricon has been demobilizing from the site over the last couple of weeks and are due to provide us with handover documentation. This will allow us to establish the status of works done and the works remaining, allowing us to take safe control of the project. At this stage, our analysis is indicating that we may not need to appoint another lead contractor to complete the works. This is simply because the works are at an advanced stage. No decision on this yet has been taken. We are only 11 working days into the purported contractual termination by Onji Fabricon and we are still completing a full evaluation. However, this is our current expectation and direction of travel. Additionally, in the last 11 days, we have been boosting our project management and project recovery capabilities on the Hull site. Finally, we are committed to doing the right thing for the affected people and to maintain safety as our top priority during this challenging time. While, as I say, Hull has been a challenging project for some time, I want to just recap for a minute on what we are trying to achieve with this plant. Let's just step back for a moment. I feel compelled to describe where we have come from on this journey with Tricoya, which could be described as on a bumpy road. However, the destination at the end of this journey remains an extremely attractive commercial opportunity. The whole project began in 2017 when the Tricoya Consortium was formed, which is a venture between Access and our commercial and investment partners, including Medite and Finns are on the panel side, and Ineos, formerly BP, on the assetile side. Through the consortium ownership structure of Access, Medite and Ineos, Access look-through interest of the whole plant is around 47%. The plant cost for the whole plant to date is circa 80 million euros, and the expectation is that once the plant starts, we will ramp the manufactured volumes up to the capacity over a three-year period. In my experience, this is prudent, even with new technology. Given the high value nature of the Tricoya product, we maintain our plans to hit break-even at only 40% capacity. While the plant is being built, we have been building market demand by chipping up Acoya wood and turning it into Tricoya, and working with our off-take partners to seed the market with Tricoya panels. This is building momentum, ready for when the plant turns on. This activity continues to confirm the compelling market opportunity for Tricoya-based wood panel products. The plant will run with a continuous production process rather than the batch process in Akoya in Arnhem. We will start with 40,000 metric tons capacity. The plan remains to be able to extend and add capacity to the existing site over time, which allows higher returns as with our extensions to existing sites with good economies of scale envisaged. Because we use wood chips as a feedstock in this process, we can use a wider range of feedstocks than those used for Akoya. Our tricoia feedstocks are expected to be more local and domestically sourced. Once we have established hull, like any new technology plant, we expect some coughing and splattering, and starting our tricoia plant will not be like turning the key on a new Mercedes. We know that. But once we work through this phase and we are ready with the technology learnings from this world's first project, we have an agreement already in place with Petronas in Malaysia, who want to partner with us there to build a tricoia plant. We anticipate being in a position to start the design of this Malaysian plant after about six months of operations at Hull. The other aspect to Hull is the product itself. In our marketing, we call Tricoya a new breed of MDF, and I think that is even a bit of an understatement. It's a game-changing, market-disrupting, new building material component. We, and most of our off-date partners, think it is a transformational product. The panels that Tricoya creates, unlike MDF, in that they don't shrink and they don't warp. They effectively don't absorb water. They offer a huge amount of design freedom, strong durability, low maintenance, and easily coated applications if required. You can see some examples here from the shop frontage used in London to holiday homes in Mustique. It's a great high value and high margin product. So in summary, there is a really significant potential for the Tricoya product and our technology globally. I'll now take you through an overview of our business and our segments. This is another good shot. Just quickly, it's a stunning residential project in the Napa Valley using a coir in the cladding. Many of you know us really well, so I'm going to walk through the next few slides pretty quickly as a summary to recap on what we do. our products, our market, and our strategy. The overview of our strategy is this. We have a great world-leading products and technology with a large market growth opportunity and a global growth strategy with a capacity build-out plan to increase our production capacity by 5x to 200,000 meters cubed by 2025. We sell two key products, Akoya, our solid wood product, and Tricoya, our chipped wood element. We make our products through unique and protective processes and technologies. We use acetylation, which is a bit like pickling. Essentially, our technology boosts nature. Our process transforms our wood into a high performance product that is highly stable. It doesn't shrink, it doesn't move, and it lasts a very long time. Two key things that are valuable in wood performance and why our customers actually love our products. It is also highly sustainable compared to competing materials from wood plastic composites, to aluminium, to PVC, or even tropical hardwoods. There is a significant global growth opportunity for our products. We operate within global wood production industry, which produces over 800 million, yes, over 800 million cubic meters of lumber and wood panel products annually. We also compete with adjacent non-wood construction materials. So actually, our total addressable market is even bigger. We segment our market further geographically, where our main focus is in Europe, North America, and Asia Pacific, and then by four product categories, windows, doors, cladding, and decking. From this segmentation, we envisage an estimated achievable market for our products of over 2.6 million cubic meters per annum for Tricoya and Acquia together. We currently have just around 2% of this estimate on our current annual capacity. So Axis has a really significant market growth opportunity in front of them. As a company, Axis has a clear purpose, changing wood to change the world. We pursue this clear purpose by acting in accordance with our values, being ambitious, respecting and valuing all our stakeholders, and being committed in all we do. We have a four-pillar strategy to grow demand for our products, expanding our capacity, and practicing excellence in our manufacturing, and importantly, yes, importantly, developing our processes and technology and investing in our talent to manage and deliver this growth. On the bottom right, we have our 5X production capacity growth target chart, and I know you're all familiar with this. We started in 2019 with 40,000 metres cubed and we aim to get to 200,000 metres cubed in 2025. So turning now to our Akoya business segment performance in 2021. The Akoya business performed strongly in FY21 with strong EBITDA and strong margin performance. Revenue growth was strongest in the last three quarters of the year after the impact in the first quarter from the COVID-19 disruption. We saw this most strongly in April when customer supply chains were initially disrupted. Sales volumes recovered strongly with demand exceeding our production capacity across the entire remainder of the year. Akoya's revenue performance has also been supported by an increase in average sales prices. We have benefited in the 2021 financial year from price rises in the prior year, and these were maintained through the COVID-19 period. plus the removal of the previous 30th discount arrangements in Europe have benefited our average selling prices this year. A further price increase also took effect in November 2020, which also helped to address expected increases in raw material costs. Looking at our regional trends, we have seen a particularly strong performance in the US in the second half. We are continuing to ramp up our sales and marketing activity, and increased allocation in the North American region to support our expansion plans there, which I'll come to just in a moment. This year, we have seen some higher than usual drawdown of the inventory stock we keep at Arnhem. This has been due to some supply chain disruption during the year, both COVID-19 and other effects impacting some shipping flows of raw materials. We have ended the year with lower than usual inventory levels, but we are rebuilding them into the new financial year. We also launched a new product during the year, Akoya Color. This is a true color wood product that is tinted throughout the entire material. The response from our customers has been really strong and demand has increased across the year. If we look at the strategic development to the next slide of Akoya. We are adding a fourth reactor to our Arnhem plant, which will add another 33% to current capacity. They are bringing the plant to a total annual production capacity of 80,000 metres cubed. We have forecast a three-year payback on this project. We expect this to complete at the end of 2022 financial year, and we are making good progress. The physical groundworks began in February, and since the new reactor itself has arrived on site, You can see this here in the bottom right picture. As I just mentioned, we see good scope to increase our Akoya Color product offering, and this is one of our development goals in looking at ways we can expand our ability to treat and convert regular Akoya to Akoya Color, a higher margin product. Our joint venture with Eastman Chemical in the US has moved further ahead since the half year. We have completed the independent market research we needed to validate the market opportunity and have identified an achievable market of up to 1 million metres cubed per acoya in North America. We are already building on our foundations and have established a beachhead on which we can ramp up and grow sales ahead of building this new dedicated plant. We have appointed five national distributors already that give us coast-to-coast reach and up to and including Canada. On top of this, our sales team are building and growing relationships through the ACOIA approved manufacturers program. Turning to the JV itself, we have moved our planning ahead. We have also updated the market in our main capital raise with further details on these plans and I need to summarize the key points of where we are today with this joint venture. Under the joint venture agreement, Access owns a 60% share with Eastman a 40% share. and we are planning to build a plant on the Eastman Chemical site in Kingsport, Tennessee. This is adjacent to their acetiles operations, which will give us the benefits and efficiencies the operational support and acetile supply. This location facilitates additional closed-loop recycling processes to further enhance the sustainability of our product. The site is in a good strategic location for transport links, and the plant will effectively duplicate the existing ACOIA technology we have in ACOIA Arnhem, essentially a copy-paste project. The initial plant will have two reactors, which is normally 40,000 meters cubed in capacity, with a potential for up to 160,000 meters cubed of capacity by adding further reactors in future for cost-effective expansion. From the timeline, you can see we are now working on the final feed, the engineering study. We expect to make the final investment decision this summer. And from that point, we expect construction to take approximately two years. From the point of becoming operational, we should reach EBITDA break-even after one year of operations. Since May, we have received the regulatory air permits and reached an advanced stage in appointing an EPC contractor for this project. The debt financing work is progressing well. and the key services contracts are in a fairly advanced stage. We expect the cost of the joint venture to be $130 million in total, and it will be funded by a combination of project finance debt by the joint venture and the equity contributions I described earlier. We saw strong support from our existing shareholders for the capital raise in May. Both the institutional placing and open offer were well oversubscribed, I'd like to thank our shareholders again for their support as we get ready to accelerate the US opportunity. We expect to achieve a leveraged pre-tax IRR of 20% and joint venture revenues of over 90 million US dollars at initial build capacity utilization. So building for sustainable growth is a recurring theme for us. We see the potential for product and businesses but we also need to get ready to manage growth through our organization, people, and processes in a sustainable way, not just sustainability in the green sense. ESG is a key part of this, a way of mapping our responsibilities, impacts, opportunities, and priorities, and it's integral to developing our organizational capabilities. We are growing our teams and developing new ones, such as our strategic global functions for health and safety, engineering, technology, asset sales management. This resulted in increasing our headcount by about 11% year on year and adding talent where it can have the most impact to this growth agenda. A great example is shifting our R&D to a center of excellence model to better support our products and teams as we grow across multiple sites. We've also published our first standalone sustainability report and new ESG framework in November and are taking the next step in our reporting by reporting to GRI and SASB ESG disclosure standards alongside our upcoming annual report and can share some key highlights here today. Our second annual employee engagement survey showed improvement across all areas and it was very, very encouraging to see specific improvements on topics identified as opportunities for improvement last year. A great overall measure is how many of our employees are proud to work for Axis. And actually, don't mind saying it, we improved on an already high score there to bring up to 82% of our employees. Safety is one of our highest operational priorities, and it was disappointing to see an increase in our lost time incident accident rate year on year. Albeit, in real terms, this was due to a single additional incident, two last year, three in FY21. Our goal is simply stated as zero LTIs. We have a new safety strategy underway and expect to see improvements from this over time with our new Think Safe, Act Safe program. In FY21, we updated our methodology for calculating the way that CO2 is locked into our products. in line with current best practice giving a total of nearly 50,000 tonnes of CO2 stored in the products we made and sold last year. This is equivalent to 122 million miles of car emissions. We also achieved a 24% reduction in emissions intensity, i.e. the CO2 equivalent emissions for producing one cubic metre of product, with 7.5% achieved solely through efficiency improvements. So to finish up today and in summary, we have delivered a strong financial performance and a further step forward in our profitability. We have a robust balance sheet supported by cash generative nature of the Akoya segment and we are well positioned to advance our growth plans. Our strong focus is on Hull and completing the work we need to bring this online and unlock the market potential for our Tricoya products. When we look ahead at the 2022 financial year, we expect revenue growth as we enlarge group production capacity as the fourth reactor at Ireland comes online. We will continue to invest in our organisational capability and talent. This will allow us to manage and deliver our growth plans. Group overheads will necessarily increase next year. So longer term, we expect to continue to achieve improving profitability as we increase the level of sales from our capacity expansions under our 5X plan. We will benefit from the economies of scale associated with higher operating levels, and once the fourth reactor and hull come online, our two current construction projects, we will effectively double our current capacity from 60,000 metres cubed to 120,000 metres cubed per annum. which is a significant step up for Axis. So to wrap up, we are very excited about the next phase in our growth journey and achieving the vision we have set for our Akoya, TriKoya, and Axis business as a whole. With that, Will and I will now take your questions, and thank you very much for listening.

Thank you. As a reminder, if you would like to ask a question over the phone, please press star and one on your keypad, and to cancel, it's the hash key, so that's star and one for telephone questions. You can also submit questions via the web. The first question today is from the line of Christian Shores from Numis. Please go ahead.

Thank you. Morning, everyone. I've got three questions, if that's okay. The first one, just on the U.S. or planned U.S. acquire plan. Thanks for going through that. Just in terms of exactly what needs to happen from here to get it complete. Is that the EPC contract needs to be signed and the debt put in place? Are those sort of the final things that need to be tidied up? And then related to that, I suppose, what lessons have you learned from the whole project in terms of potentially boarding in a Koya plant in the U.S.? The second one is on, you know, points to net debt, EBITDA, being, I think, 1.1, 1.2 times, and with EBITDA increasing at Arnhem, I just wonder what scope that gives you to perhaps refinance and maybe move to a more traditional debt structure, leveraging that Arnhem EBITDA. And then finally, as you pointed out, I think BP sold its chemicals business to INEOS, which is now a consortium member for Tricoya. I was just wondering, how conversations have gone with them and just assume they remain supportive of that project going forward.

Thank you. Shall I take the first one if I may, Christian? In terms of our plans for the US, things have been progressing well since August when we signed up the joint venture and we're doing the initial engineering, what we call the FEED, the Front End Engineering Design Process. In terms of the next two significant milestones, we're due to complete that engineering project and to get to final investment decision to allow us to appoint an EPC contractor. So those two key milestones, the appointment of the EPC contractor and the FID, the final investment decision, are anticipated to be in the summer of this year, so not too far away. In terms of your second part of the question around the US, clearly there are many lessons to be learned from Hull. We're very reflective on that, and we've translated those lessons into a different type of governance structure for the way we're managing the project in North America with Eastman. Eastman is a very proactive partner, very collaborative partner in this project. And building plants is what they do as part of their living. And they are taking a lead role in the EPC, in the planned EPC project. The project manager is likely to be an Eastman employee to assist us in successfully building out the project on time, on cost, or on budget. So yeah, there are lots of lessons to be learned there, as you mentioned. If I just go to your third question around INEOS and then hand back to Will on the net debt EBITDA ratio. In terms of the relationship with INEOS, they're a very supportive partner and they are geared around organic and inorganic growth on their assetiles business. They see the opportunity to supply increasing volumes of their industrial pickling agent to access across Europe. and potentially in other parts of the world. So at this stage, they're very focused on the growth opportunity that they can see to grow with us through supplying this critical raw material to the Axis portfolio of products. So overall, very supportive as we sit here today. Maybe I hand over to Will now on the net debt question.

Thanks, Rob. Christian, I think you're absolutely right to highlight the net debt to EBITDA ratio. I think over the next period of time, it is something we're going to be examining very closely and carefully as to whether there is an opportunity to put perhaps a more traditional financing structure in place. Our ambition, if we do that, would be to, in the first instance, reduce our cost of debt. I think, as I said earlier, our balance sheet is robust, and I think there is an opportunity for us to look at that very carefully. It's not been something we've been able to do over the last year, particularly with COVID causing disruptions more generally in the financial markets. But I hope that gives you an indication of how we're looking at it. So I think in line with perhaps how you might expect us to progress things.

Yes, excellent. Thank you very much, Greg.

Thank you, Christian.

Thank you. The next question is from the line of Toby Thorrington from Edison. Please go ahead.

Thanks. Morning all. Hopefully coming through clearly. I've got a few cash questions, please, and one sort of tricore business question. Actually, I just have a quick follow-up on Christian's last question, actually. Can you just confirm in the first instance what the current cost of debt is, Will, please?

It averages about 7%, but we have a number of facilities ranging from between 3% up to 9%. Yeah.

Okay. That's great. Thank you. On to my own questions. First of all, could you just update us on what the, if you like, the COVID cash benefit was in FY21 and, ergo, what's flowing out in, or has already flowed out in FY22, whether it's government support, salary top-up, or tax? That's the first question.

So I think you're right. We have elected to repay the government support we received during the year. It was about 600,000 euros that's been repaid post-year end. There was a further repayment of some salaries which had been reduced for four months earlier in the year. That's about another 200,000 euros in total.

Was there any cash tax benefit, Will?

Sorry, any what benefit?

Any cash tax tax deferral?

No. No other benefits taken from a tax perspective or otherwise. Okay.

That's great. Thank you. If I can move on to CapEx, slightly difficult question, I suspect. I'm sure you can provide the sort of expected Arnhem 4 reactor CapEx for this year. I guess the Tricoy CapEx is slightly more open-ended. Could you give us some sort of guidance on that, please?

I think I'll provide the guidance for the fourth reactor. I think during the last year, we incurred about 5 million euros on the fourth reactor project. If you recall, our expectation was a total of about 26 million euros, including the additional and upgraded wood handling equipment and the chemical storage. So the majority of that is still to be invested over the course of this year from a cash perspective. For the Tricoya plant, we're not in a position yet to provide that guidance. There is clearly still some more capex to be incurred. That is clear. But until we can complete the sort of the analysis, the gap analysis that Rob explained earlier, we can't be certain as to what that quantum will be or how long it will take. the duration of the remaining work may have an impact on the quantum as well.

Of course. That's understood. And I presume there's no provisioning one way or another against the whole situation in the year-end balance sheet. Would that be right?

So I think it depends exactly what you mean by the situation. So you may have seen, as I went through the net debt bridge, we do have some capex accruals in place where work is being carried out in advance of payments being made. As far as provisioning, there's no provision. I think the purported termination is a post-year end event. And as we said earlier, there's ongoing work to be completed and determined before we can set out exactly what the remaining costs and cash payments will be.

Yeah, understood. Sorry for asking the question two or three different ways. Understood, understood. Bearing with me, sorry, almost at the end now. Could you give us some feel for sort of natural inventory levels? Let's assume we're on the other side of Arnhem 4 being commissioned and running and Hull being commissioned and running. So let's say, you know, middle of next year, what's the sort of natural inventory level situation? for the group on that basis, would you say?

Can I try and answer in a slightly rounder way? I think we say in our results there's only about two and a half weeks of finished goods inventory at the year end. That is low. I think ideally we would normally like to have at least a month, normally a little bit more than a month of finished goods inventory at any one time. Raw materials tends to fluctuate a little bit more given the natural flow and the long lead times. Those inventory levels are also low at year end, but we would typically have another month or so, maybe more than that, of inventory at any one time. So you can see, even compared to last year, which is perhaps a more normalized level for our current operating level, our inventory levels are quite a lot less.

Yeah. OK. All right. I'll drive it off revenue numbers then. That's fine. Thank you. And final question you'll be pleased to hear. Regarding Tricoya, just wondering whether the sort of partnerships that you have, existing customers and prospectively other ones as well, whether you're aware through conversations whether either Medite or Fenza have been laying down sort of additional capacity or production lines in anticipation of Hull coming on stream?

Yeah, to Rob, I'll answer that. I mean, the beauty of the product is a drop-in product to their existing production process. So it's a substitution into that process. We are aware of investments that one of those companies has made in terms of the storage and handling of the product to facilitate that. So they have committed CapEx into the business to do that. But they say the beauty of the product is it's a drop-in to the existing wood chips into their traditional process.

Got it. Understood. That's great. Thank you very much.

Thank you. We'll now take analyst questions via the web app.

We've got one question that's come in from Tom Randall in Vestec, which is a three-part question. Firstly, how are you planning to react to current timber price volatility with the Koya pricing? Secondly, in the medium term, do you see scope for a coir manufacturing margin achieving 35%? And lastly, could future capacity expansion be more on a royalty model?

Okay. Should I take those? Okay. In terms of... Thank you, Tom. In terms of pricing of a coir, we've seen a lot of... movement in timber prices around the world. Lumber prices currently is a very frothy market. We've seen 40, 50, 60, 80% increases there. For what we've been doing on a coir and to some extent tricoir is a very disciplined segmented approach to our speciality product. We do not see the need to commoditize our product by becoming you know, opportunistic in pricing. And what we've got on our supply chains in principle raw materials are long-term relationships, long-term contracts on the supply of radiated pine for our aqua, which allows us to have relatively stable pricing because of the investment, the forestry managers and the production mills, the wood mills, the saw mills have to invest in producing a clear Akoya product. So they recognize they have additional margin built in there, and they're looking for price stability. So we have currently reasonably stable prices. We are having to pass some costs through, but on the principal raw material, the radiated pine, we have generally a stable price. And as Will explained, when it comes to the impact of the acetyls, we have this natural partial hedge on the anhydride and the acid, which again contributes to keeping our margins fairly stable and allows us not to become an opportunistic price player on the Akoya product. In terms of could we exceed 35% in terms of gross margin, it's, you know, Possible to do so, but at the end of the day, we have to be very focused on getting the right value proposition to the customer and how we segment for different applications, windows, doors, decking, and cladding, and how we bring on more value-add products into the range as well. So it's possible. I personally don't believe we've hit the glass ceiling, as I said on a previous call, on pricing. But this is a very frothy market at the moment, and we want to tread carefully through it to maintain the specialty nature of our product. In terms of your third question around the type of business model that we could deploy, as people know, we currently have a business model which involves 100% investment by access in some facilities. In some facilities, we have joint ventures or consortia. And our path to get to the 5X growth plan to 200,000 meters cubed from 40,000 meters cubed involves a combination of 100% owned access entities and joint venture arrangements. The key to that strategy is to demonstrate that we can replicate both the ACOIA and Tricoya technology and scale up internationally around the world. At that point, what that gives us is a choice, a choice to be continuing with either 100% ownership of new facilities by accessing new territories around the world, continue with the joint ventures, or potentially look at a license model for our technology once we've proven that we can copy-paste ACOIA internationally and we can copy-paste Tricoya internationally. That would give us the opportunity, if we choose to do it, for a licensing model as well. Thank you, Tom. Good question. Hopefully that answers your questions. Back to Sarah for, I guess, a further question.

I think that's all we've got time for on the web app. I'll just pass back to the leader to close the session, I think.

thank you in that case that does conclude the conference for today thank you all for participating and you may now disconnect thank you very much thank you very much thank you