API chiefs won’t rush sale
THE marketing of Poynton-based packaging business API Group to potential buyers is only likely to get underway by the end of the third quarter when its management team can demonstrate the impact of its major new laminates deal.
Chief executive Andrew Turner said that the company only expects work on the laminates contract with a major new client – said to be worth £10m to the firm this year and £15m-£20m a year thereafter – once a new line is installed and the contract has been running for around three months.
Given that the new £3m line is only likely to be operational next month, this means that the sale process is unlikely to begin until September.
Mr Turner said that if the business is to be put up for sale – as a pair of major shareholders who now hold more than 60% of its stock have demanded – he wants to make sure that “we are selling based on actual numbers rather than a potential figure”, which should then reflect on the price that is achieved for the business.
“Over 60% of our shareholders have indicated that they want a sale but we need to make sure that it is a process that is done at the best price for all shareholders,” he told TheBusinessDesk.com.
Mr Turner said the fact that the shareholders went public with their requests means that the entire market knows that the company is up for sale. However, he added that shareholders “can’t necessarily assume that something will come from this process”. It is understood that investment bank Altium is advising the firm.
He also indicated that management needed to ensure the process would be smooth with the least possible impact on the day-to-day running of the business.
API Group yesterday announced a 14% growth in sales in the year to March 31 to £113.9m (2011: £100m), while pre-tax profits rose by 77% to £5.1m (£2.9m). The company operates from three UK sites at Poynton, Salford and Livingston in Scotland. It also has a plant in the US.
Mr Turner said he was “very pleased” that three of the company’s four operating divisions contributed towards profit growth.
“We’ve come through a difficult period of increasing raw materials costs, and we’re now back to where we were around 12 months ago,” he said.
He also said the company had “two very strong years of cash flow” which, when accompanied by proceeds from the sale of its lossmaking Chinese joint venture in January last year, had helped it to reduce net debt to £3.6m by March 31, compared with £18.5m two years ago.
Charles Pick, an analyst at the company’s in-house broker Numis Securities said that it was “a shame in many senses that API may lose its independence” later on in the year just as it had published such a solid set of numbers.
He upgraded his recommendation on the firm from ‘Buy’ to ‘Add’, setting a target price of 70p on a stock which opened the day at 60p but crept up to 62p by close, giving the company a market cap of £47.5m.
