Jonathan Short, Founder and MD of AWS Eco Plastics Ltd

May 10 2010 by Peter McCusker, The Journal

Jonathan Short managed to raise £14m during the height of the credit crunch and then held his nerve as trade fell off a cliff and a £15m fire gutted his Tyneside factory. Peter McCusker talks to the founder of AWS Eco Plastics as he looks to a brighter future.

IN October 2008, as the ink was drying on a £4m funding package to complete a factory expansion, the main Chinese market for AWS Eco Plastics’ recycled plastic bottles disintegrated.

Just securing the funding package from Lloyds TSB Corporate Markets had been an achievement itself, coming weeks after the collapse of Lehman Brothers and the lockdown of the global financial system.

But the elation felt by AWS founder Jonathan Short, after securing the last component of a year-long £14m fundraising drive, was short-lived.

The managing director and founder of the Wallsend-based company explains: “We had just signed the deal with Lloyds. The ink was barely dry on the paper and then the Chinese market just collapsed.

“They had created a bubble in commodities – in plastic, coal, iron ore and copper. Prices dropped by 70% and there were no orders placed for two months.

“We had recycled plastic on containers at sea, the customer had paid their 30% deposit and they were ringing up saying the order was cancelled.

“We stopped shipping, and orders were just torn up. Our customers were in an extraordinary place. We have never seen some of them since.

“When the shipments arrived in China we would have had to pay storage charges, but we were helped by some of our customers who took the stock. There was nothing they could do with it but they held it in storage for us until the market returned.

“We just had to swallow it and ended up shutting our factory for six weeks. We reckon we lost £2m over the space of three months.”

Short launched AWS from a North Shields garage in 2000 and by 2007 it had grown to be one of the premier plastic bottle recycling companies in the UK, with a 40,000sq ft recycling facility in Lincolnshire.

AWS started off by buying plastic bottles from kerbside recycling companies, and bailing them for shipment to China where they are turned into fibre for the manufacture of items such as fleeces, duvets, pillows and car interiors.

The opening of the Lincolnshire plant provided AWS with the ability to turn the plastic into flakes prior to export, thus providing economies of scale that made the whole process more cost-effective and profitable.

In 2007 Short believed his work over the previous seven years had proved the viability of his business model and he was looking to grow rapidly.

The plan was to raise £14m to more than double the size of the recycling facility at Gainsborough, Lincolnshire

“In April 2007 we looked at two options which were the private equity investment route or a stock market floatation,” he recalls

“There was a lot of interest in what we are doing. We are in the right space – the green space – and we met with venture capitalists, private equity firms and stockbrokers.

“We had a few irons in the fire and as the process was taking place we won a couple of major contracts which were really well-timed as a demonstration of our capability to potential investors.

“Then out of the blue in September 2007, just as Northern Rock was beginning to collapse, E-Synergy (a private equity firm) said they wanted to see us and within the space of a few days we had done a deal.

“E-Synergy teamed up with Newcastle-based North Star Equity Investors and we had £2.5m.”