In the wake of better-than-expected annual numbers to September, restructured API is starting to look an attractive recovery play under chief executive David Walton. After several years trotting out the old chestnuts of competition, SARS and Iraq, 2004 saw many of API's markets start to stabilise. Group sales surrendered 4% at £169.5m last year, mostly due to the ditching of non-core businesses in converted products, which, along with the metallised-paper operations, are areas of the business that are up for sale. And although group pre-tax losses grew to £23.8m (£7.1m), that figure actually included £21m of non-cash exceptionals related to disposals and write-downs in metallised paper. API's underlying operating profits edged up from £600,000 to £1.4m. Encouragingly, sales at the core foils and laminates arm edged up 5% to £111.8m, buoyed by an especially good year for laminates, and with both the US and European foils businesses improving margins on stable sales. So, having decided to exit from metallised-paper and converted products, the future lies with foils and laminates. Walton concedes that trading remains tough but prospects for 2005 are considerably brighter after a better-than-expected second half. Year-end borrowings stood at £10.5m, but proceeds from disposals could wipe out the bulk. Paul Jones at Numis now forecasts pre-tax profits of £1.2m for September 2005, rising to £1.6m by 2006. Speculative buy for recovery.