Editor’s Comment

The dream and demise of a market leader

The Bury – headquartered packaging manufacturer

The UK flexible packaging market has always been an enigma for me; on the one hand it is worth upwards of $1.6 billion, which is more than 10 per cent of the European market, and on the other hand it remains a net importer and highly fragmented.

Steven Pacitti

Success stories do exist, but sadly Pulse Flexible Packaging is no longer one of them after what started as a case of mild tachycardia developed into a weak – and now absent – pulse for one of the UK’s leading flexible packaging converters. Initial redundancies in the firm’s Bury site were followed by further lay-offs at Saffron Waldon in June as administrator KPMG continued to seek a buyer for the business and assets.

I last visited Pulse back in the spring of 2015, just a few months after a local management buyout of the UK operations of Printpack Enterprises. Greeted by an impressive panel of management figures in the company’s boardroom, I was told that Pulse was about to embark on an ambitious five-year investment plan to boost turnover from £57 million ($73m) to more than £80m ($103m) by 2018 after a decade of stagnation with the previous owner.

Not content with “making do with what we’ve got”, which was the sentiment of the previous owner, Pulse immediately bought new machinery to make a bold statement to its 330 staff. Pulse was, for want of a better phrase, racing to improve its profitability. In addition to the machinery purchase, Pulse enthused about its High Resolution Gravure (HRG) process, which it claimed was unique in the sector, a bold play itself for a printing process that has always been appreciated for its print repeatability.

The company’s mission appeared to be to nullify risk by expanding its portfolio through a combination of investments in shorter-run equipment and capacity, and digital-printing technology, and by securing more partnerships that would introduce new technologies to standard reclose options. Here, notably, the company had a deal with Velcro, a novel technology for pouches called Re-Seal It, and a project with Unilever for its HRG process on chocolate bar wrappers. It also committed to put money into pouch technology.

So, what has gone so very wrong for the company? Why are two factories closed, several hundred people out of work, and a one-time market leader reduced to an auction of equipment? Is it just a case of external effects on the UK flexible packaging sector, or is it something more fundamental in the business since the 2014 buyout?

Naturally, administrators KPMG could not be drawn on the subject other than confirming that the “position hasn’t changed since June”, which was when a press release confirmed the redundancies across both facilities, that nine staff were retained to support the wind down of the business, and that KPMG was in talks with a number of interested parties to acquire the business and buy assets.

Without a viable offer for the business at that time, and seemingly during the month since then, the business has ceased trading and the outlook is bleak. Indeed, online reports also suggest that the Pension Protection Fund (PPF) helped block the sale of Pulse Flexible Packaging after a potential buyer initiated plans to drop its pension scheme obligations.

In a recent blog, Barry Twigg, the chief executive of UK distributor National Flexible, suggested that Pulse took over a pension deficit of more than £130m ($168m) when it acquired the Printpack business from its American owners. There is said to be a significant shortfall in that fund. The considerable investment in new technology that followed in 2015 put added pressure on the bottom line and it seems to have been a risk that didn’t pay off. Indeed, it is reported that operational challenges this year, which led to an additional funding requirement, ultimately triggered the descent into administration in April.

The purchase of flexo and gravure printing presses, an extrusion coating and laminating line, slitter/rewinders and a pouch-making machine since the 2014 buyout also suggest a desire to quickly build sales, which is not an easy thing to do profitably. In fact, EBITDA losses of nearly £7m ($9m) were projected in the company’s financial year ending 31 March 2017.

The company’s £60m ($77m) in film sales has had to be re-allocated elsewhere, adds Twigg, and although most has remained within the UK, which is doubtless a good thing, it has led to an increase in lead times for printed film. Perhaps distributors like Twigg’s company could help out in that respect.

There’s no doubt that Pulse’s problems as a converter will have had some impact on film suppliers, especially as almost all of the raw materials are imported into the UK, and they were already being affected by the decline in Sterling and increasingly squeezed margins. Any tightening of credit at film supplier level may yet be the death knell for other struggling converters.

Beyond the obvious repercussions to the industry, there are some experienced flexible packaging industry people now in the market for a job, and a considerable amount of printing converting assets waiting to be sold.

I have even heard a rumour that a Turkish converter is interested in acquiring one of the redundant sites. I think we can safely say that the fall out from Pulse’s demise will be felt for a while yet across the industry, and that is a real shame.

let me know what you think