Many printers receive government grants. These are the freebies for business development, training, sales skills, lean manufacturing, innovation, exporting, carbon management and regional regeneration among others.
The lead agencies for government grants are AusIndustry, and Enterprise Connect which offers a free health check of the business, followed by specialist advice in a range of areas.
Grants can be substantial, the ill-fated Focus Press for instance got a mind boggling $6.1m in government money on a dollar for dollar basis for its Wollongong security print business. Melbourne digital print operator PMI just received $2.6m, while Geelong based Trade Envelopes scored $1.2m. These big money grants are all under some form of regional regeneration programme, which often happens when a major employer leaves town.
Printers can also get funding to tackle issues like lean manufacturing, innovation, training and carbon management, exporting, marketing. Some of the money comes from outright grants, all paid for by the government, some like the R&D Tax Incentive in the form of tax rebates, which can be up to 45c in the dollar for everything spent on innovation development.
Although the funding is available under various programmes, at the same time, governments are not in the habit of giving away money. Governments are driven by political imperatives, like for example job creation, or innovation. Job creation for obvious reasons, innovation because the government recognises this is where the country’s wealth will come from in the future, so knows it needs to support innovators. For the printers, it’s often a case of reading the landscape, being opportunistic and pitching the right message to get an AusIndustry grant.
[Related: More printers getting government grants]
Applying for grants can be a minefield, knowing what is available, what you need to do, and what your likely outcome will be. Karin Robinson, senior consultant at HorizonOne which specialises in getting the R&D Tax Incentive for businesses says, “Many grants and entitlements can be applied for by the owners or directors of print businesses, but it can be an onerous process. This is where consultants come in, we know the process, know what is necessary, and know the likely outcome, so we take the pain away. Even accountants use specialist consultants like us.”
One government agenda is jobs. When Ford announced it was closing down operations in Australia, hitting the northern Melbourne suburb of Broadmeadows and Geelong very hard and resulting in the loss of 1200 direct jobs there not to mention more jobs in the car parts industry, Melbourne digital printer PMI ImageWorks based in Moreland, in Melbourne’s north near Broadmeadows, announced it would embark on a $6.1m expansion plan, including promising to add 110 new staff, after winning a $2.6m government grant.
The Moreland-based firm currently has about 30 staff, meaning the investment will massively expand the size of its business and operations in high-tech digital-to-consumer printing. It has flagged the expansion creating an ambitious 110 jobs, almost quadrupling its workforce. The company’s chief executive Chris Zapris did not return calls for this article.
Trade Envelopes secured a $1.2m government grant to build a new facility in Geelong and create 36 new jobs. This was an Australian and Victorian Government funded initiative, along with Ford Australia and it was established to encourage new investment in the region in the wake of Ford closing down from Australia by 2016, with 300 job losses expected by the end of this year alone. The money will fund up to half the cost of any investment that will create new jobs and begins before June 2016.
Trade Envelopes managing director Toby Pitt said the grant was part of a $2.4m investment and would help Trade Envelopes slash its imported envelope volumes by 30 per cent.
He says the company had to go through a rigorous application process. “There is a fairly extensive list of things you have to show the government,’’ Pitt says. “You have to show your background in doing this sort of project, you’ve got to have all your projections for the next few years, you have to talk about what the machinery will be doing. You need to talk about how many staff you have. It’s an innovation investment program so you have to tick boxes on training people, what innovation you’re planning to do. There’s a multitude of fairly stringent things you have got to write up and go through it all, with budgets and PLs.”
He says the key here was to create manufacturing jobs in the wake of Ford’s departure from Geelong. “It’s like Newcastle, Pitt says. “If you put a bit of money in and target it and you can use it for business, you can turn it around pretty quickly.
“The big issue there is you’ve got the 1000 direct workers, but then you have all the engineering workers. We require engineers and sparkies on weekly and monthly basis for the machinery so if you can bring back some manufacturing businesses, then you can mitigate some of that loss.”
His main focus in the application was to talk up the number of jobs it would create. “You had to talk about how many full time employees you are going to have directly, and how many you’re going to have outside of that,’’ he says. “So transportation, box supplies, consumables, local IT sales for comotuer and hardware all that goes into the pie of what you will deliver to the area,”
The key, he says, is to talk up the government’s return on investment.
“It’s not that I know how to bullshit people but I think I know what the government and other people want to hear,’’ he says. “If you’re going for one of these grants, it’s fairly simple. If I’m the government, what do I want to read about? I want to read about training young people for apprenticeships. Tick the box for apprentices and training, I’ve set up factories before so we can tick that box, innovation with digital, tick that box. It’s a matter of ticking all the boxes and working out what the government wants to do through this plan and tailoring your project and your proposal to meet those requirements
“The whole thing is based on how much money you will get to how many jobs. If you apply for $1m and you’re going to create 10 jobs, that’s $100,000 per full term employee you have no chance of getting the grant. We were $35,000 per employee and if you look at that and say what’s the return on investment for the government.”
Keeping in mind that the 30 per cent of the grant went back on tax, and that new workers would be paying taxes and the company would be paying payroll tax and stamp duty, he is confident the government would be getting its money back in two years.
Another company to get a grant was Focus Press which secured a $6.1m grant in 2012 to establish a new state of the art printing facility that was at the time tipped to employ up to 190 people in the Illawarra region. Again like the Trade Envelopes and PMI grants, it was politically driven. Focus was the biggest recipient of a $30m aid package for the region, which followed the decision by BlueScope Steel to axe 800 jobs at its Port Kembla facility. The Federal government contributed $20m to the package, with the NSW State government and BlueScope each pitching in $5m.
Focus Press managing director David Fuller told ProPrint at the time that it would create jobs in the area. Two months after opening Wollongong the whole Focus Group went belly up, with the loss of all jobs. There will be some very red faces at the government department, which is not pursuing its money.
David Fuller did not return calls.
Former Austrade chief economist Tim Harcourt, now a professor at the University of New South Wales, says government grants always had a political edge. “Grants were often put in marginal seats,’’ Harcourt says. There was some evidence that the Coalition put them in rural and regional seats. There were no exporters there. And you could probably make the case that Labor put them in urban and industrial centres for the same reason.
“It does happen. I remember at Austrade I would say it should go to X, Y and Z and they would say they want to put them in A, B and C for other reasons.”
Nonetheless, he says the system is a lot tighter now and the grants are tracked over several years.
Printing Industries Association chief executive Bill Healey, who has been fairly close to government throughout his career, says public funds have political drivers.
“Over the years because of different political realities public funds that the government administers have gone to a range of areas that some would argue are justified, others would argue it’s because of the political clout of the people wanting it,’’ Healey says.
“The car industry is a classic example. The argument in the car industry was that this wasn’t propping up an industry, it was an industry policy issue. The same in relation to farmers, it’s a disaster relief package.
“The issue about Geelong and Illawarra is that what does happen is when a significant area undergoes a major structural change in the economy such as the closure of Bluescope Steel in Wollongong or the closure of the Ford motor plants in Melbourne and Geelong. The state and federal governments and the corporation involved tend to initiate an industry restructuring package. It becomes a regional restructuring initiative and what happens is they invite businesses to apply for funding to undertake employment related activities in the region.”
Healey says there are serious questions about the way the government manages the process. The Focus Press story was a case in point. “There needs to be adequate industry input to ensure that the decisions are made on a sound basis,’’ Healey says. “We had absolutely no discussion in relation to the one in North Melbourne and we would say given the intense nature of the competition at the moment, that’s a concern.
“In the Illawarra, we had a printing industry working group and there was no reference to that group as to whether the proposal should have been considered. Anyone at the time would have questioned the ambitious nature of the job generation that was built into the proposal. I’m concerned that one of the ones in North Melbourne also has the target of 100 new jobs and there has been no discussion of the implications for what is a tight competitive market.
“Because these things are done firstly across two tiers of government plus the corporate sector, the analysis of the outcomes of the proposals aren’t as imbedded as closely as what a more industry attuned review would show.
“These proposals have been vetted by reasonably capable people who analyse them but they analyse them from a distance and perhaps they are not robust enough. Their understanding of the industry means their analysis is not robust enough to identify flaws.
“Now our back of the envelope calculations is that 100 jobs is broadly equal to $250,000 of turnover per job. That means he is going to have to generate $40m of new business to create new jobs. Alternatively, he is going to win the business from someone else. “
“I would have hoped, and we can only assume that this will be the case, that the people that have vetted and reviewed the applications have built in sufficient processes to ensure that any use of these funds are applied to new business and not to rearrange the deck chairs.”
He says that instead of being used to fill holes when a company closes, the government should think more strategically than just giving the money to particular companies.
“All you are doing is you are favouring one company over another,’’ he says. “It means one business will have far greater capacity to take on their competitors. The answer doesn’t lie in a single enterprise response. It requires a more regional response.”
This is one of the conundrums of major grant awards. For the recipient it is great news, or should be, jobs are created, gleaming new factory kitted out, but for the competition it is bad news. If your rival suddenly gets a new production facility for just 50 per cent of the cost then his market prices may reflect this. This is what Bill Healey is getting it.
Whether the Focus Press debacle will reflect badly on print businesses looking for major grants remains to be seen, it depends if the Illawarra regional regeneration body talks to other bodies in similar situations, and that has to be likely.
However it will not affect the smaller grants, or those that are entitlements like the R&D Tax Incentive. The key is
Grant Case Study: Crystal Printing Solutions
Perth-based Crystal Printing Solutions last year began operating a new solar power unit after commissioning an energy optimisation unit. The unit was valued at $380,000 and was partly financed by a $147,000 Clean Technology grant Crystal received in 2012, This was part of $2.2m worth of energy efficiency grant that the Gillard government allocated to printing and packaging companies. All this came under the Clean Energy Technology Investment program which was about a $650m scheme set up as part of the introduction of the carbon tax for industry to put in applications for projects that would reduce the amount of greenhouse emissions
Crystal managing director Arnold Whiteside says the grant has since been discontinued by the Abbott Government as part of its dismantling of the carbon tax. As Whiteside said, you ‘had to be in the running’. And certainly it meant finessing the numbers to meet the government’s agenda.
“We put in an application wrapped around a press upgrade and tried to stretch the envelope with the press, being a modern press, using less electricity,’’ White says. “To try to get the numbers to stack up, we included a solar PV system plus a couple of other things like power optimisation. We weren’t successful for the press but they did come back and approve us to install the PV and power optimisation. So we accepted their offer of the $147,000 towards a cost of $380,000 that we outlaid to put in the solar system and the power optimisation.”
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