PCH reports reduced loss for 2008, looks set for profit this year

LIAM CASEY’s PCH International has posted a reduced loss for 2008 and is on track to record a profit for this year.

Figures released yesterday by the China-focused supply chain management firm show pretax losses fell from $9.5 million to $4.4 million last year. Turnover also dropped, falling from $119.9 million to $114.2 million, but margins were better, increasing on average from 11 to 16 per cent.

Much of the margin improvement was driven by a growing focus on attachments for mobile smartphones, which PCH designs, produces and supplies on behalf of handset companies. The firm has also developed expertise in accessories for e-book readers and in portable solar devices.

PCH’s business model sees the firm assist consumer brand technology companies in the design of products before organising for them to be made in China and then packaging them itself. PCH also supplies the products directly to customers, thus reducing the time it takes for devices to get to market and reducing client firms’ need for inventory.

Mr Casey described 2008 as “a turnaround year” during which the company invested heavily and tweaked its model. The focus this year would be on “getting back to profitability” and bringing in new clients. Sales are up 20 per cent so far and margins are holding steady, he said.

The firm employs 800 people, including 550 at its facility in Shenzhen, south China. In April – PCH, named after California’s Pacific Coast Highway – opened its fifth facility in China in Tianjin, the country’s sixth-largest city.

Mr Casey, a former Ernst Young entrepreneur of the year, owns 53 per cent of the company, with the remainder controlled by two Silicon Valley venture capital houses that invested in PCH last September. At that stage the business was valued at roughly $50 million, but Mr Casey said yesterday the “quality” of the investor was more important to him than the amount raised. It was “too early to say” if the firm was destined for flotation in medium term, but he acknowledged that he could have an appetite for an “exit” in time.

Tougher economic conditions have, he said, benefited PCH in that decision-making has accelerated as companies look to protect their working capital.

Access to top executives in household-name technology firms has improved, he added.

Notes to the accounts take account of the tough world of consumer electronics, however, including a warning that “the loss of key customers could threaten the future trading ability of the group”. Mr Casey said yesterday the firm has “never lost a customer”.

The accounts also refer to the loss of a $20 million banking facility, but Mr Casey said this was not a concern for the company and would be replaced.