Accsys Technologies PLC (AXS) Earnings Call Transcript & Summary

Welcome, everyone, to Accsys Technologies PLC Preliminary Results Presentation for Year Ended 31st of March 2026. Today's speakers are Dr. Jelena Arsic van Os, Chief Executive Officer of Accys Technologies; and Sameet Vhora, the company's Chief Financial Officer. Jelena and Sam will take you through an overview of the business and financial performance for the year before we open the floor for questions. Please note that we will be prioritizing questions from analysts. We will be showing some video during the presentation. You have the option to click on the enlarged button to make the video large. With this, I would like to pass over to our speakers.

Good morning, everyone, and thank you for joining us. Before we begin, I would like to draw your attention to this image. It shows soon to open Google headquarters in London, featuring an Accoya facade. This is one of our largest projects to date and we are incredibly proud to have been specified for such a landmark development. Financial year '26 was an excellent year in which Accsys delivered strong strategic and financial progress marked with robust growth and a significant improvement in profitability. Against the challenging macroeconomic backdrop, we delivered record global Accoya sales volumes that increased by 21% and with growth across all our key regions and the particularly strong performance in North America. We significantly increased group revenue by 20% on a like-for-like basis reflecting resilient demand for our premium products, continued pricing discipline and the increasing strength of our commercial platform. We are expanding our reach. During the year, we broadened our distribution network and expanded our product offering. In its first full financial year of trading, the joint venture achieved EBITDA profitability and volume increase of 60%. This performance reinforces the strategic importance of local manufacturing in North America, our key growth market. The most encouraging aspect of FY '26 is the quality of the growth we delivered. Adjusted EBITDA increased by 96% to EUR 21.2 million, and adjusted EBITDA margin improved to 11.6%, bringing us very close to our Phase 1 focused target of 12%. Gross profit margin also remained strong at 30.9%, above our 30% target. Underlying basic earnings per share was 2.1 cents in a material improvement compared to a loss per share of 0.05 cents in the prior year, all driven by the significant improvement in profitability. Financial year '26 was a year of disciplined capital and balance sheet management with improved leverage ratio and operating cash flow at target level. In October 2025, we completed refinancing on improved terms, strengthening our capital structure and enhancing our financial flexibility to support the future growth. All in all, financial year '26 was a year of strong operational execution, market share gains and a step-changing profitability while derisking the balance sheet and building momentum in North America. The first phase of the focus strategy concludes in March 2027 and was designed to be transformational for the business with ambitious targets established at the time in the response to the trading environment of FY '24. This slide highlights significant progress made against our key strategic metrics over the past 3 years. During this period, our sales run rate increased from 65,000 to 97,000 cubic meters, adjusted EBITDA margin improved from 3.5% to 11.6% and gross profit was sustained consistently above 30%. Net debt leverage ratio reduced from 4.4% to below 2x and cash flow conversion is on 75% target. Most importantly, FY '26 demonstrated that Accsys has evolved into a fundamentally stronger business. The company has a clear and achievable strategy and the derisked profile vis-a-vis unfinished large capital projects. Today, Accoya is produced at 3 production sites localized in the key markets for wood building materials. Finally, our customers are at the center of everything we do. We continue to elevate our sales, marketing and customer support. Our teams are standing behind this fantastic progress, and I'm taking this opportunity to thank all our colleagues across the globe for their efforts and dedication. As we look ahead, our priorities remain clear: innovation, higher capacity utilization, further improvement in profitability and returns and continuing deleveraging. With this, I will pass now over to Sam to provide a detailed overview of our financial performance.

Thank you, Jelena. Over the next few slides, I'm going to talk you through the financial results for the year in more detail. This slide summarizes the strong financial performance for the financial year. I'll go into more detail on the financial performance in the next couple of slides by highlighting some of them now. Starting with sales volumes. Group sales volumes were up 6% to 6,384 cubic meters compared to the prior year. However, when you exclude the 3,800 cubic meters of sales made by the group to North America in the prior year before the Accoya USA JV commenced operations, the group sales volumes were up by 13% on a like-for-like basis with strong demand in all regions. Total sales volumes, which includes all of the sales volumes in the JV and more clearly shows global demand for Accoya increased by 21% to 77,237 cubic meters. Accoya U.S.A. saw 60% like-for-like sales volume growth to 1,853 cubic meters, a standout results. Group revenue increased by 12% to EUR 153 million on a reported basis and 20% on a like-for-like basis. Aggregator revenue, which includes 50% of the revenue for the JV was up 24% to EUR 183 million. Gross profit was EUR 6 million higher than the prior year at EUR 47.4 million, and the gross profit margin increased by 130 basis points on a like-for-like basis to 13.9% and remained above our target level of 30%. Underlying EBITDA, which excludes the results of the joint venture increased by 26% to EUR 21.1 million compared to EUR 16.8 million in the prior year with a 110 basis points increase in the underlying EBITDA margin to 16.1%. This reflects a strong sales volume and revenue growth maintaining a gross margin above 30% and the cost control discipline we have over operating costs. It was really pleasing to see that the Accoya USA joint venture is EBITDA profitable in its first sort financial year of trading compared to a loss of EUR 6 million in the prior year. Adjusted EBITDA, our main profitability performance measure was up by 96% to EUR 21.2 million with an impressive 430 basis points increase in the margin to 11.6%, which is just below the 12% target that we have set for the end of Phase 1 of our strategy. Statutory profit after tax was EUR 6.5 million after the recognition of a tax credit of EUR 7 million in the year, following approval from the tax authorities of the advanced pricing agreement that was in place for the years FY '17 to '25. Accordingly, underlying earnings per share was 2.1 cents compared to a loss per share of 0.05 cents in the prior year. Turning to cash flow. Operating cash flow was EUR 15.8 million, up EUR 5.1 million on the prior year, with a cash conversion of 75%, in line with our strategic target level and up 11 percentage points compared to the prior year. After CapEx of GBP 5.5 million, free cash flow was GBP 10.3 million, up 17% year-on-year. Net debt at 31st of March 2026 stood at EUR 41.4 million, EUR 1.2 million lower than the prior year, with the leverage ratio improving significantly to below 2x. I'll discuss the changes in revenue, profitability and net debt in more detail in the coming slides. Going into more detail on our revenue performance for the year. As I previously mentioned, group revenue increased by 12% on a reported basis to EUR 153 million excluding the EUR 10.3 million of revenue from sales made in North America from Ireland before the JV started operations, which equated to 7% of the volume for the prior year. Like-for-like revenue growth was 20%. The sales growth that we've seen during the year across all regions has fully replaced the North America volumes transferred to the JV. Despite the challenging macroeconomic environment, we have maintained strong pricing discipline with a 1.7% increase in average Accoya sales price for the year. We saw a favorable sales mix benefit to revenue in the year across our product range. We experienced substantial growth for our premium Accoya Color products with global sales volumes up 51%, supported by capacity expansion and operational improvements at our Barry coloring facility. Color now makes up a high proportion of group sales volumes than the prior year. Sales in the JV increased by EUR 7.4 million during the year and this is primarily made up of color tolling that the Barry coloring facility undertakes for the JV. License and royalty income from the JV was EUR 2.6 million higher than the prior year as the group receives a royalty based on sales made by the JV. The final licensee payment was also received during the year, following successful completion of the performance test of the Kingsport plant, thereby granting exclusivity for the North American market to the joint venture. Other revenue represents Tricoya panel sales and sales of acetate, which were broadly in line with the prior year. aggregated revenue, which includes 60% of the joint venture's revenue increased by 24% to EUR 183 million. On a constant currency basis, aggregated revenue grew by 26%, given the weakness of the dollar against the euro with the dollar weakening by 7% over the course of the year. On the face of it, the reported gross profit margin increased by 60 basis points to 13.9% for the year. However, the prior year includes sales that were made in North America from [indiscernible] prior to the joint venture commencing commercial operations. These sales amounted to 3,802 cubic meters, which represented 7% of group sales volumes that contributed EUR 4 million of gross margin in the prior year and EUR 2.9 million to EBITDA as the average sales price in North America is higher than all other regions. Therefore, a more representative way to look at gross margin progression in the prior year is to exclude the EUR 4 million from the comparator, resulting in the like-for-like gross margin improving by EUR 10 million to EUR 47.4 million and 130 basis points to 30.9%. This EUR 4 million gross margin reduction from transfer volumes has been more than offset by group sales volume growth, favorable sales mix and higher average sales prices together with the receipt of royalties and licenses from the JV. Our main production costs related to raw material spend on raw wood and net acetyls which when combined, represent approximately 61% of the bill of materials cost. Raw wood costs were slightly higher than the prior year, as higher appearance grade raw wood costs were partly offset by lower wood grade chip costs. We saw an improvement in gross margin arising on net acetyls from improved utilization of the acetic anhydride in the production process, a change in the supply mix and favorable FX as the U.S. dollar weakened against the euro. The gross margin at 30.9% continues to remain above our strategic target level of 30%. This slide shows the adjusted EBITDA progression during the year, reflecting the strong financial performance. We saw a 96% increase in adjusted EBITDA from EUR 10.8 million to EUR 21.2 million and a 430 basis point increase in the adjusted EBITDA margin to 11.6%, which is closer to the 12% target we set for the end of Phase 1 of our focus strategy, and it's very encouraging to see. Operating costs increased by EUR 3.7 million during the year, which is primarily driven by strategic headcount additions in our commercial and operational organization to support growth. And we have also strengthen local management teams in key areas. Following on from the business transformation program that was undertaken in FY '24, the average number of staff in the group for FY '26 is at the same level as that in FY '24. But we have rebalanced the mix adding commercial revenue-generating FTEs and strengthening operations while at the same time reducing corporate headcount. Accordingly, we have still retained EUR 0.8 million of savings from the FY '24 business transformation program with operating costs representing 17% of revenue in FY '26 compared to 20% in FY '24, and we continue to maintain our disciplined approach to cost control. During FY '26, there are no further costs associated with [indiscernible] after the business was placed into liquidation in December 2024. The joint venture was EBITDA profitable for the year with our 60% share of the EBITDA profit amounted to EUR 0.1 million in its first sort of financial year of trading despite the imposition of tariffs on wood imports into the USA, which commenced in October 2025. This is a substantial improvement in EBITDA profitability of EUR 6.1 million year-on-year compared to the EUR 6 million loss recorded in the prior year. From a segmental perspective, EBITDA from our Accoya segment increased from GBP 20.5 million to EUR 24.7 million with a healthy margin of 16.1%, up from 15% in the prior year. This growth is primarily due to the strong sales growth, the improvement in gross margin and cost control discipline. Corporate costs amounted to EUR 3.6 million and were EUR 0.1 million lower than the prior year, but importantly, EUR 1 million lower than in FY '24. Corporate costs now amounts to 2.3% of revenue compared to 2.7% in FY '25 and 3.4% in FY '24. Therefore, underlying EBITDA, excluding the JV, increased by 26% from EUR 16.9 million to EUR 21.1 million. The margin improved by 150 basis points to 13.8%, reflecting the strong underlying profitability of the group. As I mentioned before, adjusted EBITDA increased by 96% from EUR 10.8 million to EUR 21.2 million with a 430 basis point increase in margin to 11.6%. This slide shows the evolution of net debt during the year. Net debt at the end of March 2026 stood at EUR 41.4 million a decrease of EUR 1.2 million compared to the start of the financial year. Debt reduction and deleveraging the balance sheet remains our key priority from a capital allocation perspective had a net leverage ratio reduced from 2.52x to 1.96x at the end of March 2026. Excluding the EUR 26 million of convertible loan notes and associated accrued interest within the net debt total, then the leverage ratio is 0.74x. Subsequent to year-end in June 2026 following the end of the peak interest period for the convertible loan note, EUR 2.5 million of accrued CL interest will be converted into equity, thereby reducing the debt further in FY '27. We experienced an increase in net working capital of EUR 8.8 million in the year, which is primarily related to higher inventory levels within the group and amounts owed by the JV. The increase in inventory was planned to ensure product availability to support strong demand, particularly in Accoya color, following the expansion of capacity at Barry. Accordingly, operating cash flow conversion was 75% in line with our Phase I target. CapEx of EUR 5.5 million during the year, and this included expansionary growth CapEx of EUR 2.6 million on increasing our star storage in Arnhem and making health safety and environmental improvements in the [indiscernible] of EUR 0.6 million. Free cash flow increased by 17% to EUR 10.3 million and the free cash flow margin improved by 20 basis points to 6.7%. We also invested GBP 3 million into the joint venture to support its ramp-up given the substantial growth seen during the year. Net interest paid and accrued amounted to EUR 5 million, of which EUR 2.2 million related to interest accrued on the convertible loan rates. During the year, we also finalized the APA agreements with the Dutch and U.K. tax authorities come in the years FY '17 to '25. This resulted in tax received of EUR 0.7 million in respect to previous tax years. In October 2025, we completed the refinancing of our debt facility with a new EUR 55 million facility with ABN AMRO and HSBC on improved financial terms which will save the group approximately EUR 2 million in cash annually. The refinancing strengthens our capital structure enhances financial flexibility and further derisk our profile positioning us to execute our strategy and growth plans with greater confidence and resilience. So in summary, we are very pleased with the FY '26 financial performance and are well positioned as we enter the final year of Phase 1 of the focus strategy. I'll now hand you back to Jelena, who will take you through the business review.

Thank you, Sam. I want to spend a few minutes to look at the specific market dynamics in FY '26. It has been a challenging period for the construction and building materials sector even before the current Middle East conflict become. Persistently higher costs and interest rates have delayed recovery and constrained overall construction activities, while geopolitical developments have added further uncertainty. In the U.S., tariffs have added another layer of pressure. These factors are especially impacting the new build sector. The renovation, refurbishment and infrastructure sectors on the other hand, have been more robust. Against this backdrop, luxury sector and timber construction, which helps support Accoya adoption has continued to show good momentum, reflecting long-term sustainability drivers and the growth preference for the natural materials in design. In Europe, the new legislation like EUR EU deforestation regulation increases demand from verified traceable FCS certified wood. This reduces the availability of high-risk tropical hardwood, limiting growth of competitive material mid- to long term. As mentioned on earlier slide, refurbishment and renovation have been among the more resilient segments of the market. Accoya performance on durability and dimensional stability makes it a superior choice for doors and windows versus other wood alternatives. We have an extraordinary strong reputation for these applications in the U.K. and Ireland. We are also growing our North America presence with expanded partnership amongst leading window and low manufacturers. Demand for Accoya is also supported by the premium residential and luxury segment which tend to be less sensitive to borrowing costs and operate with different dynamics to the broader housing market. In the U.S., we are also seeing a clear structural shift towards modified wood over traditional timber driven by performance, durability and reliability. In the U.S., modified wood is growing at around 14% annually, while traditional wood categories are in decline. Accoya is outperforming both with growth of around 16% as we continue to take share. Looking in more detail on our regional performance. Accoya continued to gain share across all geographies in FY '26. We North America remains our largest addressable market at approximately 8.6 million cubic meters. Europe and the U.K. combined have an addressable market of 1.9 million cubic meters. We achieved 12% growth in the U.K. and Ireland, our most established market, as we continue to build our strong reputation for [indiscernible] applications as well as gaining for facade specifications. Europe grew 21% with a good performance in Germany, driven primarily by good demand in the outdoor living market for decking outdoor furniture and playgrounds. We have positive momentum in Belgium after onboarding a recent distributor where we are regaining presence in windows and doors markets. Across the rest of the world, we saw 9% growth with bright spots in Australia and New Zealand as our partnership with our distributors continue to develop. Accoya for Tricoya sales grew at a more moderate pace, 8% year-on-year due to overall market dynamics. Accoya had outstanding growth in the U.S. with 60% volume growth year-to-year. This was largely driven by premium residential projects. Looking ahead, we see opportunity to build our presence and specification in the commercial sector, where construction starts are up 10% on a rolling basis as of April 2026. We received highest growth from our existing customer base who know and work with Accoya for a longer while we intensified the force and onboarding of new 10 distributors. To further support sales, we also increased availability of our Accoya Color and introduced our first finished Accoya decking range. These actions supported 51% growth in our Accoya Color product. Last but not least, average sales price showed an increase of 1.7% in FY '26. This includes price increases in the U.S. to manage the impact of tariffs. A few words specifically on Accoya USA on a stand-alone basis. Accoya USA's Accsys joint venture is now Chemicals, where Accsys holds 60% in equity share. Reflecting the 60% volume growth, revenue increased by 178% from EUR 18.1 million to EUR 50.5 million versus previous year. During delivered EBITDA profitability was EUR 10.2 million year-on-year improvement. This trend was encouraging, and we have another significant following target in front of us for financial year '27 with focus to bring joint venture to cash breakeven. We have added 3 new distributors in FY '26 and intensified relationship with direct U.S. windows and doors manufacturers. Volume and revenue growth is the most impacting lever on the performance of the joint venture. Significant effort was put in the new business development. We will increase commercial headcount in the U.S. and added dedicated specification selling in New York, focusing on the most prominent architectural firms in the country. Tariff impacts were managed actively by pricing and negotiations with the sawmills. We continue to see Accoya specified for incredible products worldwide. In the North America, we are seeing strong demand in premium and luxury residential as illustrated by disputiful Accoya platform in Canada. Accoya is also being used on a growing number of high-profile public sector projects, including the Edelman Fossil park & Museum in the U.S. and the inside leader in England. In Europe, Aqua continues to be selected for design-led commercial applications, such as the new star headquarters in Spain. Our presence in landscaping projects is also strengthening, particularly in the U.K. from the Parkinson's U.K. Garden at the Charles Flower Show, which received the BBC PP Tors Award to the Queen Elisabeth Memorial Park in London regions park, where Acorea was chosen for the benches. These projects are all made possible for support of our distribution network and approved manufacturers. I would like now to share a short video of our longest-standing North American partner, Spitz Group, who have more than 15 years of experience with Accoya and have been a significant contributor to the outstanding sales growth of Accoya in North America this year. Let's hear the reflections on our partnership. [Presentation]

Reflecting on our operational capabilities, we made substantial progress over the past 3 years in transforming access into a leaner and more efficient organization. This work has strengthened our foundations and given us a stronger platform for growth. As previously mentioned, the gross profit margin increased by 130 bps to 30.9% and we also maintained savings delivered through the FY '24 transformation program even after investing in headcount to support the growth. We continue to invest in our assets as well. There's additional storage capacity for anhydride and acetic acid was commissioned in Arnhem, which has enabled simultaneous reactor feeding, increasing our flexibility and enabling a 5% increase in available production capacity. We also improved gas efficiency across our operations, contributing to an 8% reduction in scope 1 carbon emissions. At our Barry facility, we expanded capacity and improved heating efficiencies to support the growth of Accoya Color. As a technology-led company, we continue to focus on innovation, developing enhanced fire-resistant Accoya solutions extending our product range and exploring new wood species to support customer adaptation and long-term growth. IP protection remains a priority. And this year, we had 13 granted patents adding further protection to our core acetylation process and further improvements on Accoya and Tricoya technologies. IP was also obtained for cleaning up a post assetization asset streams. Both in Accoya and Tricoya wall panel have achieved U.S. We wild urban interface compliance, enabling their use in the areas at high risk of wildfire. In parallel, through collaboration with external coating partners, we have advanced a new fire plus solutions for Accoya. Our durability performance remains a clear differentiator. A growing number of coatings were approved with industry-leading warranties of up to 15 years on Accoya for both OPEC and translucent finishes something that remains unique within the wood sector. This brings us to the outlook. Looking ahead, the group remains focused on innovation, market share gains, increasing capacity utilization and driving further sustainable improvements in profitability. While macroeconomic conditions remain uncertain with some inflationary pressures arising from the conflicts in the Middle East, we are well positioned to manage the potential impact through the product differentiation, geographical diversification and pricing discipline. The Board will continue to monitor developments closely and respond as appropriate. While mindful of the dynamic macroeconomic backdrop, trading is in line with the Board's expectations for FY '27 and the group is on track to deliver against its Phase I focus targets. With the milestones passed in 2026, Accsys is now entering a new phase of growth with a substantial potential to deliver further significant shareholder value through our market-leading sustainable products, proprietary IP, large addressable growing markets and established manufacturing footprint. Accsys is transforming we are growing and we are delivering. Thank you very much for your attention. We are open now for the questions.

[Operator Instructions] We will now take the first question from the line of Adrian Kearsey from Panmure Liberum Limited.

Guys fantastic result this morning. A couple of questions, if I may. In terms of -- you signed up some new distributor clients over the period. But the requires a degree of education, how quickly do they typically take before you sign up a distributor before they start generating sort of a meaningful contribution to the top line?

Hi Adrian, I will take this to the answer. So thank you very much for your question. Well, as you rightly said so, we did put a new distributors this year, 10 of them. And it takes usually 6 to 12 months to really get them and get them going and get their sales out to outpace their stock build. When you get a new distributor, the first thing they use, they buy a stock, and then they are trying to get their business -- new business development growing because Accoya is a technical product and need to educate also the manufacturers or their customers, how to use it -- how to actually benefit maximally on the fantastic performance of Accoya. So it does take them a little bit of time to get used to it. And we put most of our attention of our technical support and salespeople to pass that onboarding period as we call it.

Okay. And sort of technical question on the balance sheet, if I may. Are the convertible loan notes, they're now in the money. Can you remind us of the key conversion terms and also the interest rate benefit that you'll see once they get converted?

Yes. So yes, I mean, the convertible loan notes were issued as part of November 23 equity raise. And the principal value at the time was EUR 21 million. and they go from November 23 to November 29 at a fixed coupon rate of 9.5% per year. So the first 2.5 years, no interest was payable. It was a payment in kind, a pick interest period. So the interest is just accrued that interest period, the 2.5-year period ended just a couple of weeks ago. And then the loan note holders who are amongst our largest shareholders, and have been long-term investors in the company are very, very supportive of the business, could make a choice between let's take their interest in either cash or equity. And given the that the significant increase in share price where it's essentially what more than doubled since we've done our Capital Markets Day last year. And you're right, the [indiscernible] are in the money, the conversion of strong price is EUR 0.83 per share, and we're about EUR 0.90, EUR 0.91 per share. Some of the loan note holders decided to take EUR 2.5 million of that interest in equity. So that will -- when the shares are issued in the fee July that will reduce our net debt by EUR 2.5 million and then save us EUR 2.5 million at 9.5% of interest just on that single decision made.

We will now take the next question from the line of Martijn den Drijver from ABN Amro at BH. Martin, your line is open. Due to no response, we will go with the next question. And our next question comes from the line of Alex Brook from Canaccord Genuity Corp.

Yes, very interested in hearing a bit more about your move to your own product, the decking collection through -- it will be the first time you've gone directly to end customers. And impact of that is [indiscernible]

Alex, thank you very much for your question. Indeed, this is the decking collection by Accoya is our first attempt. And if you like, this year, we tested the approach in Australia with our long-term distributors there, but also we are continuing to test it in Germany and Switzerland as well. This allow us to actually provide Accoya to be closer to the end consumers so that the project developers can go to the retail distribution place and pick up already profiled and finished decking that you can install. So we are trying to move a little bit further, keeping the portion of the value that is now being given away. And also, at the same time, trying not to fiercely compete with some of our distributors who are actually doing decking themselves. So it was very important to have a specific branding for our new decking program and also to do the pace, if you like, roll out so that we can accommodate the market and do not have a competition with our direct customers.

Okay. That's I guess the competition was the obvious question. My second question is really about renewal profile in Accoya USA for the year, you have given EBITDA, but that it's growing very rapidly. Can you just talk a little about the kind of seasonal profile of that business, which I think is a bit different to [indiscernible]

Well, U.S. wood building material market is certainly one of its massive. It is one of the largest and most profitable in the world. If you drive around the U.S., you see is being built in which is not necessarily the case if you are in U.K. or Europe or somewhere else. So it is a very specific market. Our Accoya is targeting premium sector. So as you saw in the presentation, most of our projects are either luxury private villa, residential wheels or big industrial -- big industrial or commercial projects where specification selling is a very important selling step and it starts certainly a year or 2 years before you even build something. So that's why it is very important that you have a pipeline of projects in your portfolio and a specification effort to take care, that you continue having those beautiful projects in the pipeline. We have a significant -- as I said, we had a significant growth with our existing distributors. Because they are working with Accoya for a very long time and also their approved manufacturers, so manufacturers of planning or decking with whom they are working their customers. They had already years of experience, and they are broadening and winning market share because of fantastic performance of the product. So if the architect will use it once, he take how is informed and he wants to use it again. So I think from the dynamics perspective, U.S. is much more dynamic than Europe or U.K. And in the U.S., it's much more dynamic and size-wise, is much bigger. So 60% growth was needed for us as well in the U.S., and we also need to do another one almost the same percent in this financial year because we are focusing to bring Accoya USA as fast as possible to the -- from this EBITDA breakeven position to the cash breakeven position for the -- as soon as possible, so to say, for next year.

We will now go to the next question from the line of Martijn den Drijver from ABN Amro AHS.

Thank you, operator. Can you hear me now?

Yes, we can, Martin.

Okay. Great. Exactly hear you guys in the previous step as well. congrats with the results. I listened to the answer on the new distributors which obviously makes sense. But can you talk a little bit -- this is specifically a core U.S. the existing distribution partners. Can you talk a little bit about how far they are in terms of adoption, penetration relative to your own targets? Do you get a bit of a sense how these could contribute to growth in fiscal 2027?

So as I already mentioned, Martin, good to hear you. As I already mentioned to Alex, the most growth we saw this year in the U.S. was coming from our existing distributor, not necessarily from the new one. So we did introduce quite a lot of new ones. They bought initial stock and they're working with that stock and be reordering again, but it does take some time to really get them going and not competing with another Accoya project, but building their own market share in the area where we pick for them. For the existing distributors, I will just give you an example of our largest distributor, Spitz Group, which you heard in the video as well. So they would have a very large OEMs that are one of the largest companies in America to do the acquired decking or [indiscernible] cleaning on a project. So they will be present worldwide. Delta is one of our largest customers that is a direct customer of Accoya and I believe last year, we had the video of Delta explaining why do they believe in our project. Now Delta is now building a second factory, so they are doubling their capacity and they are probably 1 of the largest promoters of Accoya product range. So we continue -- we obviously are also seeing is that manufacturers, we believe in [indiscernible] are also expanding their presence in the market because they're very satisfied how the products are performing in the place.

In general sense you're just very happy with how the existing distributors are doing. But is there some sort of level that you can share with us about where they should be going and where they are today? Are they at 60% of your target? Are they at 30% of your target? Are they just perhaps a bit more color on such a metric?

So if you see our targets for the next year, we are -- we said that we want to be at around 100,000 run rate in volume. Of this, 30% was for Accoya U.S.A., 100 in the last quarter and for the Accys 70%. That position would allow joint venture to be on a breakeven cash position, and it is what gives us utilization of the plant around 60%, 65%. If you would see what does it mean for the -- if I look at my existing customers, existing distributors, long-standing distributors, they would probably utilize more than half of that capacity. And then the rest would pick up the other half. They are also focusing on the areas of -- a big luxury high-end construction focus on natural materials. And usually, you see that in California, you see that in the areas of Eastern cost of U.S. So New York, you see it in the Colorado space in Texas and Chicago area. Canada is also an important market for us. And as we now have a new distributor in Mexico, we started to see some new projects coming from Caribbean and Mexico that are quite helpful with that volume build.

That's very helpful. And moving back to [indiscernible] if I may. You mentioned specifically the stale storage, the stacker capacity, some other efficiency improvements. How should we think of that gross profit margin then in 2027 because you did 130 basis points underlying 2026, is that achievable again in 2027? And if not, why not?

So let me pick that one. Yes, you are absolutely right, we made quite a lot of significant operational improvements in Ireland. I mean, the expansion of the Cal storage added 500% stores initial capacity to our anhydride 300% to Arctic as which -- that resulted in about a 5% increase in our production capacity plus other projects that we are continuing to be working on working on blood belt initiatives, Lean Six Sigma, all of these. I think when you look at -- we are -- our target is a gross margin of above 30%, and we would fully expect to be above the 30% that we just achieved for FY '26 and FY '27. But when you do look at it, our 61% of our cost base for the bill of material is the raw material cost, so would the net stales cost. So to the extent that there is inflationary pressure on that. You can't just keep on increasing your pricing to offset that but we would expect to be above the 3.9% in FY '27, probably not 130 basis points leap because a lot of that was to do with prior year, the normalization effect of the volume being transferred to North America, but we will be above [indiscernible]

Understood. Moving on to color. You've doubled capacity now to 14,000 tonnes cubic meters by adding a second shift. And obviously, can you share with us roughly what was the actual output [indiscernible] in 2026? And where do you see that going in 2027? And can you maybe remind us what the price premium was in 2026 or is in 2026 that Color demands of normal core of Accoya?

So Accoya Color output was around 80 -- 8,000 cubic meters in FY [indiscernible] compared with the 5,400 cubic meters in FY '25. And the price premium is around 25%, in the U.S. a little bit more. But this is certainly one of the nicest and fastest-growing product ranges we have today.

Just to come back to that, so you did 2,600 cubic meters more in 1 year. Is that the type of growth rate that would be reasonable to assume in 2027?

We are -- well, we do expect the circle to continue to grow we -- if it is going to do exactly the same what we are going to see, but it is certainly one of our fastest-growing rates we have.

Understood. One more question, and then I'll move back into queue. On your Phase II, the segment up to mice, given that you've almost achieved your 2027 targets in fiscal 2026. How do you feel about the time line of that Stage 2 optimized strategy? And it requires between brackets only 20,000 cubic meters of volume increases in 4 years, relatively cautious. Can you share your thoughts?

Yes. So we are actually -- I just wanted to remind you that all of the phases of focused strategies well defined at the time when we -- the only business reality we saw was the financial year '24. And at that time, when you put those targets in place, they look extremely aggressive. Now if you look at it from perspective today because a lot of hard work was put in it and the company did progress and transform reasonably, that now looks -- it is needed to review it. If you look at the other points, what -- if you look in a little bit more detail what we say, what we wanted to do in the optimized state was to review the coloring -- color locations. And you see, we are selling quite a lot of color now in the U.S. from Barry. So there is an option of localizing production in the U.S., which is one of the things that we are quite busy at the moment. When we are looking at the KPIs that needs to be achieved and you're saying, yes, it takes you only so little to get there. That is true. So in the sense to get the targets from the Phase I, we probably are going to change those as we go forward. We are now in our strategy review for the Phase II and Phase III in order to present again in a new Capital Market Day that we are planning in September of FY '27, changes on the Phase II and Phase III of our strategy. So there are a couple of things from the Phase II that we have already started to do now. KPI targets almost on the target. So we still have the improvement in profitability, significant because we said Phase II is around 15% and the volume growth there is big. And we will certainly start thinking about when new capacity should come, and when we are talking about new capacity, we assume that, that new reactor would be in the U.S. and we certainly have to start somewhere middle of next year with the design and plans for that expansion to come in year 3 in America.

We will now take the next question from the line of Toby Sorin ton from Equity Development.

All coming through later clear?

Yes, yes.

Just a supplementary question, first of all, on color for these. I think you mentioned around 8,000 cube total production in FY '26. Just curious to know how much of that would have gone to the U.S., please?

So of that, Toby, about 2,000 went to -- just over 2,000 went to the U.S. And that was over 100% growth year-on-year for the North American market.

Great. On the restated Royalty and license income line, obviously, increased year-on-year quite a bit. I think Sam, you mentioned there was a one-off figure in there as well. Can you help us out a bit in terms of how you would expect that to move? Is there a base number, which is flat? And then there's an amount linked to U.S. volumes. How should we think of the even I mean --

Yes, I mean the return that Accys gets got from the joint venture was a one-off license fee, which is EUR 5 million, and that was effectively done in 3 stores. The first one was at signing the JV agreement. The second one was after construction of the plant. And the third one was effectively after the final performance test was done. So of that EUR 5 million was spent into 3 equal tranches. So the last tranche from say, EUR 1.6 million was then recognized in FY '26. So there's no more license fee income in terms of cessation plant to come and then we get an ongoing percentage royalty of every dollar that they sell -- is our returns. So it's just a single-digit royalty.

Right. So it would drag down by 1.75 million year-on-year because of the exclusion of the one-off and then it will increase with the underlying volume in the U.S. Is that probably right?

Yes, that's correct.

Okay. Just on tax to P&L on the cash question. Please, can you give us some sort of guidance what you'd expect the underlying tax rate to be through the P&L and the cash?

Yes. So I mean, we have -- I mean, you saw there is a one-off tax credit in the accounts because we [indiscernible] agreements. I mean going forward, I'd expect -- I mean, the Netherlands operation is highly profitable. We effectively have corporate costs in the U.K., plus also the profitability the barrier operation in the U.K. I'd expect essentially blended effective rate of 20% on PBT for the group, excluding the JV and cash just slightly lower, probably around 15% because we do have some tax losses in the Netherlands that we can utilize going forward.

Perfect. And lastly, an operational one. Can you tell us what the expectation is for maintenance shutdowns timing thereof in the U.K. and the U.S. and possibly vary this year.

No. But the -- usually, we have our big maintenance shutdowns in -- are in October. It is -- it was October last year, it will be October this year as well. and we are planning to be down for the most of the months, maybe there will be 1 week of manufacturing and then the rest is the rest is really all repairs and the maintenance work that we have. Barry already had in the beginning smooth shutdown to face the shutdown to replace some of the heat exchangers in the kilns. So we are not expecting a big shutdown in Barry. And in the U.S., they have their maintenance stop in June, and they are not expecting to have any other maintenance stop until as of the year.

We will now take the next question. from the line of Edward Press from Berenberg.

Thank you for the presentation. Just one in relation to Germany, where I know you noted the strong growth. Have you got a sense of what has been driving this from a sort of high level? Is it a growing market for wood products. I don't know, maybe regulatory changes or something like that, that's supporting demand? Or is it a case that Accsys has actually has been growing share and taking it from competitors?

So as I said, in Germany, we had quite a lot of pull from that outdoor living space predominantly from backing outer furniture and playgrounds. So if you see in Accsys or Accoya is gaining significant share because the state -- it is becoming quite popular in -- especially in Switzerland. But also in Germany to have natural materials to have a good performing materials, long-lasting materials being used in those applications. And we do gain share from the tropical hardware. They are getting more difficult to source in those countries. And going forward, it is going to become even more difficult with all of these regulations that are now being put in place.

We will now take the next question from the line of Alastair Stewart from Progressive Equity Research.

Good morning, both of you, thanks very much. Just a few questions actually most might have been answered already. But I'm looking at slide 18. A few questions on the sales growth by geographical markets. you've just covered the question of Germany being strong. Stripping out Germany, have you got a rough idea how much lower that plus 21% year-on-year growth would be? That's the first question. Any -- then on U.K. and Ireland, any -- I'm not looking to press figures, but I imagine Ireland was stronger than the 12% growth between the 2. The housing market has been very strong there. Rest of the world, it's a smaller market, obviously, 9% growth. Do you -- is that a market you're going to concentrate much on for growth. Obviously, our prime target is North America. But do you see the rest of the world catching up with the other North America markets. So, I think that's about it.

Yes. Thank you, Alastair. So just to understand -- so let's start with the U.K. because that's closest to come. growth is really coming predominantly from the Windows and dose application in the U.K. This is our largest, most established market. And U.K. for us is larger than, if you like, Ireland because we do see a bulk of our business going the joinery segment. So there, we saw 12% as a result. We are selling a lot of Tricoya into Ireland to [indiscernible] but that is not being calculated in those numbers that we are giving before. Now when you look at Germany, Germany was growing 41% business year-over-year, yes.

So -- that's for a country under economic stress or margin if they're doing better.

Yes. But for us, that is tough. We look at it not as Germany only. We do it in the DACH region. So it is Germany, Austria and Switzerland. If you see in that cluster, we did show significant growth of 41%. And then the rest of the world, we had -- and when we look at specifically Asia Pacific was around 7%. And then the Rest of the World was in a slight decline for us. Rest of the World is usually Middle East and East was, as we know, not really the right place to be in the last few months. So in Asia Pacific, we were growing 7%. That was slightly under our target and expectations because we had 2 of our distributors basically merging together, so they were optimizing the stock they had. But we are noting now that their development that they kind of did that exercise, and they are now back to business and it looks and we get orders again and they look good. So there is some reshuffling in the per country of the region, but overall, the overall good demand.

So on that basis, it sounds like with seeking now a new -- sort of a distributor and hopefully, the Middle East situation improving, that 9% could improve in the next couple of years?

Well, we are expecting to beat the underlying market that is so is it going to -- and our target is to grow double-digit growth across all regions. That is in basic what we are focusing on. It will all depend, as you can imagine, how long, I mean, underlying demand is going to be driven by consumer confidence and interest rates, and how long this conflict is going to sustain. So you also can notice that our distributors and the uncertainty comes, then everybody is also very careful with the stock, they are careful how much money they have invested sitting there. They want to see if the -- how fast situation. So everybody is optimizing whatever optimizing their cash flows as much as we can. We have information that cash sales outflow of Accoya, for instance, for the U.K. and the first of 10 of our distributors is higher than what they are buying. So that means that they are trying to -- they sell through is higher than sell-in. That means that they are destocking a little bit. But this is normal, and we see this regularly. And hopefully, if deal comes through on Friday and there is more certainty on the macroeconomics the debt can have a positive impact on consumer confidence and hopefully, later on, on the overall demand. But as I said, we are focusing on the long-term projects, long-term specification selling, luxury sector that is a little bit less exposed. But you can imagine we are not completely thrilled by macro economy. So we do what we can do and we control what we can control. So and the rest we leave it to the market to regulate.

We will now take the next question from the line of Martijn den Drijver from ABN Amro BHS.

Thank you, operator. I have 3 more. Jelena, can you talk a little bit about what you're going to do in terms of your sales and marketing for 2027. Are you still adding FTEs? Are you -- how should we think about those 2 aspects of OpEx here for 2027?

Well, we -- if you want to make the sales increase or accelerate sales in '27, we already put the people in place to deliver that. So I'm not expecting that we will be adding significant number of people now. We have people who we already added in FY '26. We're now being fully trained and they are being exposed to the market and expected to deliver that revenue to us. So I'm expecting 1 or 2 here and there, but very, very limited number. It's going to be added in FY '26 -- sorry, FY '27, yes.

And then 2 questions for Sam, if I may. On the working capital, you made substantial investments in inventory to facilitate growth and have a buffer in relation to trade wars or how that may develop. How should we think of working capital in 2027? Will that buffer decline? I know there's still going to be growth, but how should we think about working capital? And then my second question...

I think the -- I mean you're right. I mean you saw in FY '27, there was a net working capital outflow, which is driven by inventory and also just most I think really the sort of expansion of the coloring is the large driver behind that increase, where we saw 51% color growth in FY '26 and we're expected to see significant double-digit color growth in FY '27. So the coloring production process is quite different from depilation process because we're covering the impregnation type is very, very short a couple of hours, but it's actually the drying time, which can be up to 2 weeks. So your work in progress with color is quite substantial, but also as Barry does the coloring for the Accoya USA as well, in fact, you buy the work from Accoya U.S.A. processes it and then sell it back to acquire U.S.A. So I would still expect to see a working capital outflow in terms of higher inventory levels, really 2 reasons. One is to solve that significant growth we expect in FY '27 from a volume perspective as we go to the 100,000 cubic meter run rate, but also because of the stronger market color, I'd expect to see what [indiscernible] relation to inventory level. So probably around EUR 3 million to EUR 5 million working capital outflow on inventory for FY '27.

That's very helpful. And then my final question is also for you, Sam. You made a EUR 3 million investment into the JV. Should we take into anything into account for 2027 as well given the high growth?

Yes. I think what we did with the be partner, [indiscernible] a very supportive JV partner. We 60%, 60% volume growth that we saw last year. And we're -- again, we're expecting very substantial double-digit volume growth this year. So we decided we had to ramp up maybe in terms of higher levels of inventory and that was a combination of [indiscernible] plus and also working capital outflow. But yes, I mean, if we're going to see significant double-digit growth that we're expecting, then I'd probably expect low euro millions, maybe again 2 million to 2 million to 3 million investment in the JV, again, and it's really there to support their growth in FY '27

Thank you very much. That would be, I think, the last question we are going to have today. And please let me just close this call. Financial year '26 was a year to be proud of for Accsys and we are very determined to continue on this journey. Thank you very much, and this call is being over.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.