Earnings Call: H2 2020

Jun 23, 2020

Ladies and gentlemen, thank you for standing by, and welcome to Axis Technologies Plc Preliminary Results for the Year Ended 31st March 2020. At this time, all participants are in a listen only mode. There will be a presentation followed by a question and answer session. I must advise you the conference is being recorded today, Tuesday, 23rd June, 2020. I would now like to turn the conference over to your first speaker today, Rob Harris. Please go ahead. Good morning, and welcome, everyone, to the AXIS Technologies Plc Preliminary Results Presentation for the Year Ended 31st March 2020. Thank you for joining us today, and I hope you and your loved ones are all safe and well at these uncertain times. I've now been leading Axis Technologies Plc in my role as CEO for 7 months, and I'm very proud to be presenting these preliminary results today. During my time with Axis, I've learned that Axis is a very special company. We have a great strategy, great products, talented people and we are disrupting industries across the world with our sustainable value proposition and we're winning. As you know at Axis, we are very proud of our successes and we like to show some of the amazing projects from around the world that our products are used in, not least to break up the presentation a little with some great photos. Here we have a close-up of a coir wood used as sunscreening for the Niwa project in France, just outside Paris. Renowned architect, Kengo Kuma, collaborated with Michel Devine to create this residential construction with a reduced carbon footprint and strong natural atmosphere, choosing Ocoya for its looks, its performance and its sustainable credentials. Before moving on with our company presentation, if I pause for a moment for you each to reflect and digest the important disclaimer on the next slide. This is available when you download the presentation. I'll now move to the overview of Access. Some of you are very familiar with us as a business, but for those of you who aren't, I will give you a very quick overview of Access. During this presentation, I do not plan to read off these slides, but merely highlight the key messages and takeaways. At Access, we combine and apply our proprietary IP, know how, technology and ingenuity to create new sustainable wood products for use in the built environment. With our distinctive purpose of changing wood to change the world, we're proud to be seen as sustainable and a compelling investment. As many of you know, we were one of the first cohorts of companies awarded the LSE Green Economy Mark at the end of 2019. Our products are durable, stable and sustainable, opening new opportunities for sustainable choices in the building materials marketplace. For example, Okoya Wood, which is our original and most well known product, is cradle to cradle certified gold with a platinum rating for material health and it also holds many other eco labels and certifications. Today, we have our main operating facility, the Akoya production plant in Arnhem in the Netherlands and are constructing the world's 1st wood element acetylation plant for Tricoje production in Hull in the UK. This will provide us with a total of approximately 100,000 meters cubed of profitable manufacturing capacity next year, more than doubled from 2 years ago. And we have plans to do the same again by doubling the capacity once again within the next 5 years to 200,000 meters cubes, but more about that later in our presentation. We have our corporate head office in London and also our sales office in the USA. Our products, as you can see on the map, are distributed globally. In fact, you can find them on every single continent across the planet, including Antarctica. Yes, and actually, our durable, stable and sustainable product was used in Hillary's hut when it was renovated by the Antarctic Heritage Trust in 2017. They used tricoya panels to replace asbestos, interior walls and ceiling linings. Check the next slide, please. Here, in fact, is one of our projects for more exotic locations, this time Honolulu in Hawaii. This is a stunning private residence, making me actually a little envious, I hasten to add, as we contemplate the travel restrictions in the new normal COVID world we live in today. Ocoya was selected to provide not just a great finish, but also to withstand the year round sun in sea air. So let's now push on and provide an overview of our results for FY 'twenty. As before, I don't plan to read off these slides as the slide's available to download. The first thing to say is these are record results for Axis. They are record for the year ended March 31, 2020. This is the 1st year, in fact the 1st year ever, that Axis is reporting underlying positive EBIT for the group, an increase of nearly €5,000,000 year on year and underlying group EBITDA increasing to €7,000,000 Our underlying revenue grew by 21% year on year to €91,000,000 driven by continued strong demand with sales volumes up 16% and full year benefit of increased manufacturing capacity and higher selling prices driving growth in both revenue and profit. Our higher volumes, economies of scale and improved product mix increased underlying gross profit by 48% up to $27,500,000 In terms of business performance momentum, this is now our 3rd sequential half year period of EBITDA growth and the group is now, as I've already mentioned, also profitable at underlying EBIT level of £1,400,000 from a loss of £3,100,000 in financial year 2019. Later in this presentation, you will hear from Will Rudge about the positive performance momentum we continue to build. Additionally, during the period, we have delivered a $25,000,000 reduction in net debt to $25,200,000 resulting from proceeds from the December 2019 equity raise, offset by $22,000,000 of strategic investment in property, plant and equipment, primarily relating to the Tricoia plant in Hull. Our balance sheet remains robust even now due to the decisive and swift mitigating actions and management interventions during the COVID-nineteen pandemic. These actions were effectively implemented and we have been successful in preserving our valued resources through what I think are almost officially known now as challenging times, the COVID-nineteen pandemic, but more on this later. It is also very noteworthy that as access grows and as we learn to adapt and manage our growing pains, our focus on HSE has improved. I'm very pleased that we have maintained and developed our commitment to safety throughout this period and in fact recorded a 50% improvement in lost time incident rate for the second half of the year compared to the first half. We are heading a good way. Reflecting also on this period, we also commenced a detailed engineering design and procurement phases for the further expansion of the Arnhem plant with the addition of a 4th reactor and the subsequent planned addition of 33% new capacity. The whole Tricoia plant construction substantially progressed during FY 2020. However, this has been and continues to be a bumpy road. And although we have managed to continue construction throughout the entire COVID-nineteen pandemic, wrestling with government guidelines and social distancing to ensure the safety and well-being of our colleagues, we have suffered a delay due to the pandemic. At this time, I can say that the whole Tricoya plant is now anticipated to be operational in the Q4 of this financial year 2021. We are also now seeing good signs of recovery and improvement in our most effective markets as the world adapts, working practices changes and restrictions are eased. Before we take a more detailed look at the financials, I'll briefly start with an update on our current operation and how we are managing or to be more accurate, proactively managing the impacts of the COVID-nineteen pandemic on our business and the markets we are targeting for our growth. The first thing to say is that our priority is to ensure and will remain no harm to our people and to protect their well-being. Secondly, for COVID-nineteen, we needed to act responsibly with all the resources available to us. Thirdly, and specifically, we had and still have, I hasten to add, a good balance sheet. We have taken measures to protect this and tightly and incisively manage our cash flows to protect this valued resource. Cash is king and long live the king in access. Fourthly, we set out to ensure that we maintained our compelling strategic options and choices, not knowing how long this pandemic would or could last. And finally, we needed to be flexible, responsive and reliable to customer demands. As the situation developed, we scoped out contingency plans for a range of scenarios for how things could develop. We developed and implemented mitigating actions across the entire business. We adapted our manufacturing operations and supply chains to better balance supply and demand, not knowing if or when the demand or supply would return to normal. We also temporarily implemented salary reductions for the Board, the senior management and other senior staff, making appropriate use of the U. K. And Netherlands job retention schemes where possible. We reduced third party costs, put non essential hiring on hold and increased our focus on the proactive management of working capital. We moved with pace to establish safe working procedures across our sites to protect our valuable workforce. And I'm delighted to say that during this period, we successfully maintained operational activity during this turbulent time. And to date, our colleagues' well-being has been successfully protected. April saw the most substantial impact on sales with a 43% decrease in Acoya sales compared to the same period last year as our customers and their customers were impacted by the restrictions put in place to curb the pandemic. Working with great agility and flexibility, we are able to scale down production for a short period of time to operating 1 reactor at Arnhem as we sold off excess inventory and necessarily and rapidly scaled down our costs. This was followed by a quick scaling back up to 3 reactors as we realized new sales opportunities. We have learned a lot about customer responsiveness, flexibility and reliability during this time. At Arnhem, we have also undergone our planned annual maintenance stop during this time. This is earlier than scheduled, making the most of reactor downtime. And I'm pleased to say we are now operating and producing on all 3 reactors in Arnhem again as customer orders have increased. With our annual maintenance shutdowns behind us, this now gives us a clear runway to better satisfy customer demand and it is stimulated by our sales professionals as we return to the new normal and our demand grows. Encouragingly, we have and are seeing orders increasing again in recent weeks. We are managing our business day by day, week by week and month by month. And we continue to progress our strategic priorities and growth initiatives, though obviously taking care with all decisions as there's still ongoing uncertainty around the progress of the COVID-nineteen situation and its impacts. Our ambition and priorities remain to maximize EBITDA and preserve the capital raised in 2019 to fund our expansion projects. During this turbulent period, Axos has traveled on a bumpy road. And I believe we have emerged fitter and stronger than before. It is worth saying that we remain confident in the long term growth prospects for both AQUOIA and TRICOIA and their attractiveness in the market. And now we'll take a closer look at our record results for the year as I hand over to Will Rudge, our S. D, please. Thank you, Rob, and good morning, everybody. If I start off with the financial highlights page, I think Rob has touched upon some of these already. I think they do represent our best set of results. What we can see here is a 16% increase in our sales volumes driven by repeat business with demand for our products remaining strong throughout the period. It was enabled by the 3rd Akoya reactor commencing operation partway through the prior year and with sales really limited by production capacity for much of the financial year with COVID-nineteen only impacting sales in the final month in March. The 21% increase in underlying revenue is higher than the 16% increase in volumes due to the price increases, with us having implemented price increases on the 1st January each year for our acquired customers as well as changes in our sales product mix. Overall, this helped drive the 48% increase in our gross margin and that in turn enabled the significant improvement in EBITDA and EBIT, which Rob mentioned before. Worth noting, this is our 3rd sequential half year period of EBITDA growth. And ultimately, the EBIT positive figure of £1,400,000 is a relative milestone for Access as well. The figures you can see in front of you are our underlying results. They exclude exceptional items. And most notably, in this period, we recorded €3,200,000 of exceptional revenue. And this represented the fee payable by Surdia relating to the early termination of our commercial agreements with them. This is something we announced back in February as very much as planned and ultimately reduces our net debt from the 1st April. The net debt there for the end of 31st March 2020 was €25,000,000 And that decrease, as Rob said, was largely due to the issue of new equity in December, offset by the capital investment in Hull. And we'll look at that in a bit more detail in a couple of slides. If I can ask to move on to the next slide, please, which sets out our segmental income statements, a summary of them anyway. Here, just to remind you, we set out the key segments that we report, the Ocoia business, the Tricoia business. And for simplicity, we've combined the R and D and Corporate segments together here. What this shows and highlights is that the group's increased profitability is all being driven by the Ochoa business. The Ochoa segment has shown a 130% increase at an EBIT level, driven by 51% increase in gross profit, while the other operating costs increased by only 16.5%. The Tricolor segment remains in its pre operating phase. The costs there will continue to increase over the next financial year as we recruit the remainder of the team there with just over half the operating team having been recruited so far to support activities such as commissioning ahead of the plant start up at the end of the new financial year. The R and D costs remained stable. Therefore, we saw an increase in some corporate costs, and this is due to higher staff costs, principally including sub one relatively one off staff costs as well as training, recruitment and IT costs, we continue to increase our organizational capability to support our future growth. However, it's worth noting, we don't expect such costs to increase significantly as we continue to move forward. And as a result, overall, we expect there to be a significant increase in the group's overall profitability following the start up of the whole plant when that segment turns into a profit generating segment in its own right. If I can move on to the next slide, please, which just goes into a bit more detail about our revenue. Our revenue, 1st of all, increased in all regions, in all geographies around the world, as shown at the bottom right hand chart. On the pie chart on the left hand side, I think it's important again to highlight the 2 segments at the bottom of this chart, which together make up 48% of our total sales volumes for the year that we've just reported. Half of this was to sales to our licensee, Surdia. And so from 1st April 2020, so into the new financial year, we have been successfully now selling directly to Serdia's former customers following that early termination of our license agreement and other commercial agreements with Serdia. This early termination also enabled the orderly transition of customers to us, but importantly has also brought forward our ability to sell at non discounted prices in what is a key region for us covering much of Mainland Europe and Scandinavia. The remaining 24% represents the ongoing supply of what is lower grade coir material to our tricoir licensees, Medite and Finta, principally to Medite in the period. This is also at reduced prices reflecting that it is a lower grade. I think following the delay of the whole plant as a result of COVID-nineteen, those sales are now expected to continue for the whole of this new financial year, so longer than we had previously anticipated. But following this, we still continue to expect those sales to transition to the whole plant and that will free up that 24% of capacity in the Arnhem, a coir plant to be able to sell material to our normal coir customers at higher prices. I can move on to the next slide, please, on profitability. The improvement in profitability, as we said before, is all driven by the Achaia business, and the two charts here are focused on the Achaia segment. The gross manufacturing margin has increased to 30% for the year, an increase compared to 23% last year. This resulted from a number of items, most significantly the benefits of the economies of scale from operating the expanded 3 reactor plant for the full financial year, noting that a number of our costs in the Arnhem site are fixed or only partly variable. In addition, we implemented price increases to all our customers from January 2019 and again from January 2020, while our raw material costs remained relatively steady over the past financial year. We saw some margin increases in raw wood prices, with the cost of acetals marginally decreasing towards the very end of the financial year. Importantly, that 30% gross margin, which we've highlighted before as being effectively a target, is a margin which we continue to believe remains absolutely achievable over the longer term. The chart on the right hand side, I think, really highlights the benefits of the economies of scale again. This is looking at the underlying EBITDA margin of the acquired segment increasing to 19% compared to 11% the year before. And I think ultimately this helps reinforce our decision to progress the further expansion of the Arlen plant by the addition of a port reactor, which will again we expect to generate further economies of scale and potential improvements in our profitability. If I can move on to the next slide, please, which is the net debt chart. At the end of the year, we had €25,200,000 of net debt, and this consists of €57,000,000 of loans and €5,000,000 worth of lease liabilities, offset by €37,200,000 of cash. And much of that cash has, as I'm sure you're aware, been earmarked to fund our expansion plans. The slides that have a picture in the key moments during the financial year. So we started at €50,100,000 and ending at that €25,200,000 We recorded €2,400,000 of operating cash flow, which is an increase compared to only €300,000 a year before. And that operating cash flow is largely attributable to the EBITDA contribution from the Ocoya business, which was €16,900,000 And that in turn was offset by €2,800,000 worth of pre operating costs for the Tricoia business, €7,500,000 for R and D and corporate costs and a €5,400,000 of cash utilized to fund increased working capital in the period. In addition to that, we paid €2,400,000 worth of interest in the period on our loans as well as recognizing €3,100,000 worth of lease liabilities. And this is an accounting entry really only. It's almost a noncash entry. And under IFRS 16, which is accounting for leases, we have effectively bought a number of our operating leases onto our balance sheet. More significantly, you can see in the middle of the chart the €22,000,000 worth of CapEx invested in the period. The majority of this €18,700,000 was the investments in the whole site, which has continued to progress throughout the financial year. But then this has been offset by the issue of new shares, most significantly to AXIS shareholders in December 2019 with €43,000,000 net of fees being issued as a result of the placing an open offer which completed in December and a further €9,200,000 issued to our Tricoi consulting partners, Medite and BP, which is to fund their share of the whole plant cost overruns that were identified last year. Looking a little bit forward, net debt is expected to increase. While the acquired strength is continuing to expect to generate significant positive cash returns, we will also continue to invest with the completion of the Tricaya plant in Hull at the remainder of this financial year and the further expansion of the Acaya plant in Arden, which Rob will come onto in a bit more detail in a moment. However, there will be a reduction of €3,200,000 on the 1st April, resulting from the offset of the Serdia termination fee against the loan facility that we have with Serdia, which is otherwise ongoing. Working capital is also expected to marginally reduce over the next year. Noting we ended the financial year ending March 31, 2020, with relatively high inventory levels as we started to see the impact of COVID-nineteen, and therefore, we do expect to partially reduce this over the next few months. And with that, I will hand back to Rob. Thank you, Will. Before bringing us back to the strategic update and growth initiatives, If we can just look at this slide with Axis in action and another example of our pride in Axis. The MEN building in Madrid in Spain was renovated recently and makes extensive use of coir wood on both the exterior facade and as can be seen here rather fetching interior. The architectural firm at Om Studio chose our product for the durability, stability and sustainability coupled with the atmosphere and feeling that wood surfaces create. During the last 7 months, I've certainly enjoyed my role in Access, and I'm very proud in having the opportunity to present these trophy projects the business has won, like the MEN Building in Madrid. I would now like to take you through our strategic update and growth initiatives, which despite the bumps in the road from the COVID-nineteen pandemic, I'm delighted to say we are still on track and retain our compelling growth options by utilizing our strong balance sheet, which as I mentioned earlier, has been largely protected to date during this outbreak. Take the next slide please. The strategic update and growth initiatives can be summarized around the Arnhem plant expansion, progression of hull, development of our marketing strategy, ESG or in other words environmental, social and governance strategy and importantly rolling this all up into our outlook. The Arnhem expansion, we currently have our CapEx investment of $26,000,000 planned and on track opposite our previous commitments. We are progressing the expansion with a 4th reactor and a new chemical storage facility. This will consume 22,000,000 dollars of CapEx. We have now committed to the EPCM contractor, the engineering, procurement, construction and management partner who will be supporting this on this project. We are also in the planning stage for a new wood stacker and automated handling equipment, which would consume around about €4,000,000 of CapEx. During this time, we have spent considerable time adopting lessons learned from previous projects both good and bad. This expansion project is now progressing well and within previous committed time lines. Furthermore, our agreed milestones and timing of capital commitment is being diligently monitored in light of the continued COVID-nineteen uncertainty. We will adapt if needed and are not afraid to do so. So what does this really mean? Well, the front end engineering and design work has now been completed and contractors selected. The project is progressing within the timelines of our original commitments, and we have adopted many lessons learned from previous projects. It's also worthy of note that our reactor 3 expansion was at capacity within 9 months. This additional capacity is very much needed despite Hull also coming on stream. Expansion of the 4th reactor at Arnhem will add about 33% capacity, giving us an initial nameplate capacity of 80,000 meters cubed. It enables further growth from our loyal customers and provides us the ability to target new customers and stimulate demand, which we have held back on recently. This required investment is a total of around about €26,000,000 for the new reactor, chemical handling and automated wood stacker. As you know, we successfully installed Reactor 3 very close to budget. Reactor 4 is a copy paste of Reactor 3 with some improvements. The chemical storage and automated wood handling will allow for more efficient wood handling and productivity. We'll be able to do more flexible running of the reactors and it will require limited additional staff. Our 30% gross margin target, as you have seen in our results in Will's presentation, is possible and we remain confident we will achieve this. We anticipate a 3 year payback for this capital investment with potential upside even when this is based on our assumption of 2 year ramp up compared to only 9 months with the Reactor 3. We are pushing on with confidence and pace with clear stage gate decision making to ensure if COVID-nineteen returns and provides additional uncertainty, we have the scope to react to this risk, manage events and preserve our cash and future options. Take the next slide, please. For Tricoia in Hull, our plant has progressed. Construction work at Hull substantially progressed during financial year 2020. We have invested circa £60,000,000 to date and anticipate a total build cost of circa £90,000,000 including the project overrun. However, we do anticipate a delay due to COVID-nineteen. We have maintained construction activity on the site during the entire pandemic period, apropos at significantly reduced rates for nearly 3 months. Since the middle of May and in accordance with UK government guidelines, we currently have a full complement of contractors on-site. This is in the region of 160 contractor personnel engaged in this construction project. Our contractors and our own personnel are working within the constraints of social distancing. The disciplines involved are mechanical, electrical and civil engineering. Just imagine the challenges in installing electrical wiring in your home in your own home utilizing social distancing measures. So please understand that when I'm so delighted that we once again have a full complement of personnel on-site, Unfortunately, their productivity will be understandably reduced as we protect their health and well-being. However, as we learn and government guidelines change, productivity will no doubt improve. We currently expect to be operational from the Q1 of the calendar year 2021 compared to our previous indication of the Q4 of calendar year 2020. Please also note that the overall design and targeted output remain unchanged. We still anticipate 40% gross margins at capacity. And this plant is the first plant of its type anywhere in the world and that future plants will benefit from the learnings and design work at Hull. There is also room on the Hull site for additional expansion as we move forward and further grow the Axis business. So shifting gear to our customers, market demand and development of our marketing strategy. Can I take the next slide please? As access grows and our products and value proposition prove their appeal and time and time again in the marketplace, we are also evolving our marketing strategy. We are expanding our production capacity and are coupling this with growing both awareness and demand for our products to match the increased supply. For us, this often takes the form of accessing latent demand. Our products are favorable substitutes for many other building materials. So our challenge is to make sure people know that we offer this high performing sustainable choice. As you can see from the infographic here, our financial year 2020 sales of Ocoya and Ocoya to use to make Tricoia represented only around 2% of our total market estimation for our products. So currently, we are seeking a small percent of a small percent of a very large market opportunity. While we continue to focus on our priority markets and support our B2B business to business marketing, we are also expanding our reach into the consumer and end user space. Our business to business strategy has been very successful. For example, with the Acoya approved manufacturers program, we are training our customers' customer not just how to use Aquoia, but also building their strong networks of brand advocacy and happy ambassadors for the Ocoya brand. There is an opportunity to build demand at the end user level, so that consumers go to their local joinery already wanting a coia. And we are expanding our B2C business to consumer marketing efforts to reach into the market at this level, primarily through both highly accessible and more targeted digital channels. This includes the launch of the new Aquia website and brand strategy that focus on inspiration, product applications and a best in class where to buy section that can now connect end users to the right distributor or end product manufacturer for their location and project. Please take a look at www.acoya.com. With this approach, we will generate both push from the business that use acoia and pull from the people who would choose and live with acoia in their homes for decades to come. We will also continue to support our TRICOIA panel manufacturing partners as they market the panels for sale. I'll take the next slide please. Shifting gear into ESG, environmental, social and governance. As I mentioned before, our purpose is changing wood to change the world, with our products giving the world a choice to build sustainably. The world is generally beginning to recover for the initial impacts of COVID-nineteen and already there is a strong notion to build back better. And we believe we can help with that and we can help with just that. We are understandably proud of the sustainability of our product, but we know that there is more we can do in the ESG space as a business. We have a strong belief that we have a collective social responsibility to use and develop our technology to tackle climate change and prevent pollution. This lies at the very core of our business, and we are determined to improve how we monitor, assess and address environmental, social and government issues and impacts. To ensure we approach this in the right way, we have recently commenced a review of our ESG strategy with the assistance of an expert outside partner. We're pleased to be able to share some initial findings from our ESG materiality assessment in the upcoming annual report, we'll be both developing our strategy and publishing more information about this as the year progresses. I would now like to turn to our outlook before finishing off with Q and As. As previously described, we have in the main preserved our balance sheet and growth optionality through COVID to date. Our rapid response to the pandemic means that in the main, we have successfully preserved our resources and hence our strategic options, and we are ready to deploy in the right way and at the right time. I've also explained that our expansion of Arnhem is progressing and is on track as per our previous commitments. I have also explained that there remains uncertainty on Hull and we anticipate operations in the Q1 of calendar year 2021. Our strategic priorities, projects, planning and actions are towards our ambition of delivering 200,000 meters cubed of total annual production within 5 years. As you can see on the right hand side of this slide, that's a rather substantial increase from 40,000 meters cubed in 2018 and our current level of around 60,000 cubic meters. To do this, we are progressing the 4th reactor project from our Arnhem plant with considerable engineering and design work completed already, as I previously mentioned. Construction in Hull has resumed with new working protocols, and we look forward to bringing that online in the Q4 of the financial year 2021. I would now like to highlight that we continue to advance our international expansion projects. The Ocoia plant in the USA with Eastman's and specifically the Tricoia plant in Malaysia with Petronas. So how does this ambition of growing from around 60,000 cubic meters per year today to around 200,000 cubic meters really add up? If I could take a minute to walk you through the chart on the right hand side of this slide. The first bar is the current capacity of 60,000 cubes at Arnhem on Ocoya. This moved from 40,000 cubes in 2018, adding 20,000 cubes in the second half of twenty nineteen with a third reactor. The next uptick is the addition of the Hull facility in the Q1 of the calendar year 2021 with an additional 40,000 cubes of capacity. Shortly after, we anticipate a 4th reactor at Arnhem with an additional 20,000 cubes coming on stream, likely to be in the Q1 of calendar year 2022. Additionally, as I previously referenced, we are progressing both options in the U. S. And in Malaysia. The USA is anticipated to produce 40,000 cubes of a coir initially. The timeline on this project is on completion of forming the joint venture, we expect about 6 months for design work and then somewhere between 18 24 months for construction. So we're looking at somewhere between 2 and 2.5 years to have that plant operational from today. Our Malaysia plant for Tricoia is planned to produce 40,000 cubes. And at this stage, we target for that coming on stream in 2023. Although both the USA Acoya and Malaysia Tricoia are still prospective, we continue to advance our international expansion projects and discussions. During COVID-nineteen, both partners for these projects have reconfirmed their commitment to working with access and advancing as I previously described. USA Acoya was naturally slowed as our partner, Eastland Chemical, dealt with their own COVID challenges. They have since fully reengaged and we are progressing the drafting of both JV and license agreements. Petronas in Malaysia continues to be very keen and is even offered access support with commissioning of Hull. They fully recognize and support that would be appropriate to progress with engineering design for the plant in Malaysia until the Hull facility is commissioned. In the meantime, they are assessing utilities and land commitments, etcetera, to advance this project. I hope this gives you a further flavor of how we intend to build our future and grow to 200,000 meters cubes of capacity within 5 years. Finally, I'd just reiterate briefly about COVID-nineteen. We are seeing increased and increasing orders again following the interruption to our customers' business in April, and we will continue to manage our costs and production in an appropriate and responsible way. We are continuing our growth strategy and progressing our strategic initiatives. In summary, we've had record results for FY 2020. We've had a robust response and taken tough decisions tough decisions to navigate COVID-nineteen. There have been bumps in the road specifically for Hull Commissioning, but things are progressing positively. Our business growth drivers and fundamentals remain intact. We have strong demand from our chosen markets and this continues. And we have successfully protected our compelling strategic growth options with realism, specifically the 4th reactor at Alman, the USA and Malaysia options I've just described. Finally, if I can move to the final slide, which is access in action. Finally, we come back to the UK for this project, a great example of where we have engaged with and supported a social endeavor by providing funding and a coiled wood to this charity designed community focused cycle friendly cafe. Construction was finished and the cafe opened late last year and you can see how they've made a great use of our products for the decking and cladding. That brings the presentation to a close. So I'd now like to open up the call for questions, please. Thank you. We do have one question here over the phone. If we take that first, then we'll go to the web questions. The first question from the phone comes from Christian Haworth from Numis. Please go ahead. Good morning, everyone. Just 3 from me really, if that's okay. First of all, maybe in the short term, clearly, there has been some geographic differences in terms of sales and lockdowns, etcetera. Assuming that continues in terms of demand profile, how easy is it to shift product to different geographies? And I'm probably thinking more if the UK remains tougher. Just in practice, how easy is that? The second one, I think you sort of touched on, but I just want to confirm in regards to Eastman. I mean, from here, what exactly are the hurdles that need be met before I think everyone's ready to sign up a formal agreement? And then as far as the third one, very exciting potential opportunities in the U. S. For a coir plant and also in Malaysia for a tricoir plant. Clearly, as you mentioned, it has been a bit of a bumpy road in Hull. It has been the first plant of its kind. But would you expect that because you've got a working coir facility and by that stage, a working Tri Coia facility that the risks of building facilities in the U. S. And Malaysia would be much lower. And I assume the cost would be lower as well without having the overruns. But those are the 3 for me, if that's okay. Okay. Thank you, Christian. I've got a kick off of that, Will, and maybe you can chip in where necessary. The first one, Christian, around we have seen quite significant differences in geographical impacts of COVID-nineteen. As you've alluded to, the market geographical market that has been the largest taking the largest hit is the U. K. What this has encouraged us to do is to shift geographies in terms of supply chains into those markets and stimulate additional demand for our products, which we know was there, but we didn't have that additional capacity. By shifting that geographical focus, we've managed to really build on successes in Central Europe to sell larger quantities of Acoya. And subsequently, it's one of the main reasons that we've been able to get production at Arnhem back to full capacity. The second thing that we've done to adapt to those changes where some of our core markets like the U. K. And also the U. S. To some extent slowed more dramatically due to the different guidelines within those countries, we've actually shifted channels of how we access the market. And where we had a strategy to further promote into the consumer end of the market, we've accelerated that in some markets. And now we've actually had a coir being used and placed in big boxes in certain countries of the world for direct access by the consumer. The second question around Eastman and the hurdles. Actually, the program we had prior to COVID remains intact. Our partner at Eastman had to slow quite considerably with their own challenges around managing the COVID situation. The hurdles that we see at the moment are getting back on track with full commitment to completing the joint venture agreement and the license agreement. And we now have commitment from the Chief Exec of Eastman to do that, and we're progressing that quickly. Once we've got that done, we will then move into a phase of detailed engineering where we've ring fenced cash on our balance sheet complete that. That was part of our previous equity raise. And then we'll look in parallel to that to funding of that project. Finally, your question around Malaysia and further expansion. Do we see benefits by copy paste of these facilities? Yes. We are learning a huge amount on the scale up of these production facilities, and we expect to see those benefits flow through to both capital and operational costs. The position that you alluded to around Hull would we see a reduced risk to when we try and replicate that into Malaysia. Our simple position is here, and it's in full and deep collaboration with Petronas, is we want to get Hull commissioned and operational before we commit to doing the detailed design in Malaysia. And exactly to your point, Christian, to reduce the risk in the scale of that technology in a different geography in the world. So hopefully, that addresses those questions. And then, Will, if you want to add anything to that, please? Yes. Just on the cost. I think worth noting a couple of things. On the cost of the U. S. Plants, I think important to note, it's you can't compare it, for example, to the €22,000,000 we have earmarked for the 4th reactor. That is an expansion project. Clearly, when building up a new site on a new site in the U. S, there is a lot of other infrastructure work required. So it's not as simple as just taking £22,000,000 or £26,000,000 and doubling it. There are other costs associated with warehousing and infrastructure associated with a new site on top of that. And clearly, part of this next stage is to, as we do that detailed engineering, is to refine and come up with the more precise capital estimate. But it hopefully gives you an indication. And for the Malaysian plant, the other key point to note, the proposed one of the proposed key differences between the Malaysian opportunity and what we've done at Hull is around what we've, I think, we've termed a key team unit. So rather than piping in acetic anhydride as we are we'll be doing at Hull, we would be constructing a ketene unit, which would enable us to manufacture our own acetic anhydride and then recycle it. That is a reasonably sizable capital investment. However, it clearly changes the return profile of the investment as well, given the acetals is the most significant raw material cost going into the tricoir production process. Thank you very much. We do have a couple of questions here on the phone sorry, on the web. I'll read out the first question. What is your understanding of the current position of your inbound supply chain capability, wood and chemicals? Rob, should I take that one? Our understanding is very simple. Our inbound supply capability, and I assume this is relating to a COVID as there's COVID disruption, our inbound supply chain for chemicals has been uninterrupted. Our chemicals come from BP in Hull or from our supplier in Switzerland, and that has continued uninterrupted. There was some disruption with New Zealand Mills on the Woodside. However, that has been relatively short term and has been lifted and did not disrupt our own production levels as we had sufficient amount of inventory to see us through that short term disruption period. And I think if I can move it back, I can see there's another question. Could you please broadly outline the CapEx levels and Serdi and European markets progressing? I think if I touch upon CapEx levels for the next 2 years for FY 2021, we're expecting total CapEx to be just under €30,000,000 And similar for FY 2022, for Hull, we're expecting €15,000,000 or so for the in FY 2021 €10,000,000 FY22, although really that's a timing point and it depends on how the final payments on contracts sit on either side of the year end, given the delay we talked about earlier. And then for the rest of the group, which is primarily the Arnhem expansion and ongoing CapEx in Arnhem, about €14,000,000 in FY 'twenty one and about €18,000,000 in FY 'twenty two. And I can see there's a third question from the same person. How is the handover from Serdia and the European markets progressing? I mean, I think I touched upon that earlier. It's progressed very well indeed. I think the advantage of doing the earlier termination agreed very smoothly with Cerdia, effective in the 1st April, enabled us to plan that transition such that the customers in that region had uninterrupted supply. I think we've known who those customers are. We've been supporting Serdi with marketing throughout the last few years. So it's enabled a very smooth transition. And indeed, the ability to sell directly to customers in that region, I think, has probably been of particular benefit to us in this COVID period when we've been able to reprioritize some of our sales efforts into that region to help offset the reductions in other regions that we have seen. There are a couple of more web questions. The next one over the web is could you give some color on Acoya capacity utilization currently and how you see that increasing over the rest of the year? Okay. Yes, I think in terms of the Arnhem facility capacity utilization, we're currently running at 100%. We have all 3 reactors running. We took advantage of the initial downturn of COVID in April to bring forward our annual shutdown, as I mentioned in the presentation, to allow us to get that essentially out of the way such that when the demand starts to come back, we have a completely clear runway in terms of supply. So we're currently running all 3 reactors at 100% capacity. We will continue to monitor this, and we've learned how to be very responsive to bring that facility down if we need to, reactor by reactor and then ramp it back up. But as we're looking forward, we're certainly starting to see our demand profiles increasing. And our plan is to, for as long as we can, run those facilities at 100% capacity. Thank you. Thank you very much. The next web question, have you engaged in direct decoy sales in Asia as the marketing exclusive agreement with Diamond Wood expires and becomes non exclusive? Yes, I'll take that one. At this point, no, we have not done that. I think our priority has been focused on our core geographies in mainland Europe, U. S. A, U. K. We continue to have our preexisting customers who we continue to serve in other parts of Asia, where we have been serving them for the last 2 years, including optical Asia in particular. But at this point, there's been no change The next web question, it would be helpful to see some financial figures associated with the outlook timeline, particularly sales revenue and EBIT? If I touch upon that one, I think historically, we've not given detailed financial forecasts associated with our outlook, in particular, on a profitability basis. I think as those of us who've known us for a while, it's not always a precise science predicting our profitability. But I think what we hope, as we've shown you today, is a clear direction of travel and the ability to extrapolate the profit that is you can that can be generated from our existing operations. I think from a sales revenue perspective, the €90,000,000 from 3 COIA reactors can be extrapolated up to €120,000,000 for Aqua Reactors. And I think previously, we've said that the whole part is expected to have revenue of at least €40,000,000 for Anna once it's at a full capacity. And the Malaysian tricholium plant at this point would be a similar best estimate. And next WIP question, how much of the 43% sales drop in April was due to the annual maintenance shutdown? Yes. I'll take that one. The original plan was to do the annual maintenance shutdown in May. So principally, that drop was driven by the lack of demand from the marketplace. What I mean by that is, actually, although the customers still wanted the product and the demand or the latent demand is still there, it wasn't possible for us to get the products to the customers. So this was all driven by COVID at that time. So we saw a dislocation in our supply chains through the distributors that we've been using. So our position around May is we've completed the shutdown. And hence, as I described, we brought the plant back to 100% capacity. Thank Thank you very much. There are no further questions over the phone at this stage and no further questions over the web. Peter, please continue. Okay. I think that concludes the presentation from access today. We're delighted to present the results we've had, how we've preserved our future growth options. And thank you for your questions. And look forward to speaking with you again in the future. Thank you very much. Thanks very much, everyone. Have a good day.