D.A. PAK LIMITED

Investment Risk Analysis: D.A. PAK LIMITED (03546924)

1. Risk Rating: LOW–MEDIUM

The company demonstrates a solid 27-year trading history, consistent profitability, and growing net assets, supported by audited full accounts with an unqualified opinion and confirmed going concern status. However, thin cash reserves relative to turnover, meaningful leverage, and exposure to global supply chain volatility elevate the risk profile above a straightforward LOW rating.

2. Key Concerns

a) Thin Liquidity Buffer Cash stands at £233,337 against annual turnover of £13.17M — approximately 1.8% of revenue. While this has improved from the FY2023 trough of £154,909, it remains modest for a business with significant working capital demands (sourcing from UK, Europe, and Asia). Any disruption to debtor collections or supplier payment terms could create short-term liquidity pressure. The company does not appear to hold significant cash reserves as a buffer against the supply chain risks it explicitly identifies in its strategic report.

b) Leverage and Liability Profile Total liabilities of £5.08M significantly exceed net assets of £3.29M, representing a liability-to-equity ratio of approximately 1.54:1. While much of this may be trade payables and working capital financing typical of a distribution business, the absolute level of obligations relative to equity warrants scrutiny. Without a detailed breakdown of current vs. non-current liabilities in the available data, the precise maturity profile cannot be fully assessed.

c) Revenue Volatility and External Dependencies Turnover declined from £14.13M (FY2023) to £12.08M (FY2024) — a 14.5% drop — before recovering to £13.17M (FY2025). The company's own strategic report acknowledges ongoing exposure to the Ukraine conflict, Horn of Africa piracy affecting shipping lanes, UK inflation, and interest rate pressures. Raw material price fluctuations are identified as a principal risk. While management states its global supplier network mitigates some disruption, the revenue dip in FY2024 demonstrates the business is not immune to these pressures.

3. Positive Indicators

• Consistent Profitability: Profit after tax increased from £965,120 (FY2024) to £1,090,867 (FY2025), a 13% improvement, demonstrating earnings resilience despite external headwinds.
• Strengthening Balance Sheet: Net assets have grown steadily from £2.41M (FY2020) to £3.29M (FY2025), indicating retained earnings are being reinvested rather than extracted, and the equity base is expanding.
• Audited Full Accounts with Clean Opinion: The company files full (not abbreviated) audited accounts under FRS 102, with an unqualified auditor's report from Shorts Chartered Accountants. The auditors explicitly confirmed the going concern basis is appropriate with no material uncertainties identified for at least 12 months from authorisation.
• Compliance and Governance: All filings are current and not overdue. Three directors serve on the board, providing collective oversight. The company has proper qualifying third-party indemnity provisions in place under s.234 of the Companies Act 2006.
• Long Trading History: Incorporated in 1998, the company has operated for 27 years, suggesting an established market position and proven business model in the flexible bulk packaging sector.
• ESG and Sustainability Initiatives: The company has completed a baseline carbon footprint assessment (Scopes 1 & 2) and is implementing products with minimum 30% recycled materials in response to the UK Plastic Packaging Tax — demonstrating proactive regulatory adaptation.
• Clear Corporate Structure: PSC is D.A. Pak Holdings Limited (owning >75%), providing a transparent ownership structure with identified individuals holding significant influence.

4. Due Diligence Notes

1. Liability Maturity Profile: The available data does not split current vs. non-current liabilities. This is critical — if the £5.08M is predominantly short-term trade payables, the liquidity concern is more acute than if a significant portion is long-term debt. Request the full balance sheet breakdown.

2. Accounts Filing Date Anomaly: The accounts information shows "last made up to" 2026-03-31 with a next due date of 2027-12-31, yet the financial history and filed accounts text cover the year ended 31 March 2025. This discrepancy should be clarified — it may indicate a recent ARD change, a data processing lag, or a filing extension. Verify the current filing status directly with Companies House.

3. Working Capital Cycle: Given the global sourcing model (UK, Europe, Asia) and the thin cash position, investigate the company's debtor days, creditor days, and stock turnover. A distribution business importing from Asia typically faces long lead times that tie up working capital. Understanding whether the company uses trade finance or invoice discounting facilities would be valuable.

4. Related Party Transactions: As a subsidiary of D.A. Pak Holdings Limited, examine whether intercompany loans, guarantees, or transfer pricing arrangements exist that could affect the standalone financial position. The accounts text references multiple share classes (Ordinary Share Classes 1–4), which may indicate complex equity arrangements worth understanding.

5. Customer Concentration: The strategic report mentions "longevity of customer relationships" as a strength, but no disclosure of customer concentration risk is visible in the truncated accounts text. For a £13M turnover business, dependence on a small number of large customers could materially affect revenue stability.

6. Director Disqualification Checks: No disqualification records were identified in the provided data for the current directors (R.A. Xxxxxxxname shown to subscribers, J.A. Xxxxxxxname shown to subscribers, P.A. Xxxxxxxname shown to subscribers). This should be independently verified against the Insolvency Service database.

7. Audit Fee Independence: Verify that audit fees are proportionate to the company's size and that non-audit fees do not create independence concerns. The auditor (Shorts) is being proposed for reappointment, suggesting a stable but potentially long-standing relationship.

Names of the people mentioned are shown to subscribers. See subscription