China’s loss is Salford’s gain, says API
API Group’s site at Salford could be the biggest beneficiary of the firm’s decision to extricate itself from its costly joint venture in China.
Speaking to TheBusinessDesk.com following the company’s announcement of a 26% rise in sales to £100m in the year to March 31 and a profit from continuing operations of £2.6m, finance director Chris Smith said that the sale of its 51% share in its Chinese business to its joint venture partner freed up both management time and financial resources to concentrate on its core operations in the UK.
“There’s been a step change in our performance. We’ve returned to the level of £100m of turnover which we we’d been known for previously, but that’s stripping aside the contribution from the Chinese business. As we’ve said before, closing the Chinese business doesn’t really have a big impact on he top line, but it makes a big difference to our bottom line.
“China was a big risk but there were big opportunities there. But for the last four years we’ve been troubleshooting and the losses were unsustainable. It didn’t move enough with the times and took up a lot of management time.”
The Chinese division lost £4.1m during the last financial year, and a similar amount in the previous year. Smith argued that its closure and a dramatically reduced interest burden – net debt drooped by £10m to £8.5m at the year end – meant that API can begin taking investment decisions again.
For instance, he said that money would be spent in both its laminates business at its Poynton headquarters and at its foils business in plant which can boost capacity while simultaneously providing efficiency savings.
“These are big ticket items that can cost £3m-£4m each. We know what we want to do and where and we’re in the process of making sure there’s a rigour applied to investment decisions.”
Moreover, it is also planning to invest in its security holograph business based in Salford in innovations that will allow broaden its offer.
The division prints security holographs found on currencies and identity cards, as well as on tickets or on authenticating products such as software packages. It even provides holographs on cigarette packets in China.
“We believe we could be a bigger player in the security holographic business,” he said.. It’s a very fragmented sector and we’re one of the bigger players – in the top five or ten in Europe.
“The margins are good and the product differentiation is good but it is a resource-hungry business,” he said. You have to have a big pipeline in place and work off the assumption that you’ll get 10% of that.”
