Investment Risk Analysis: SPEEDPAC LIMITED

1. Risk Rating: HIGH

Justification: The company carries deeply negative shareholders' equity (-£1,697,328), is entirely dependent on shareholder loans (£2.96M) to remain solvent, and has experienced a severe cash deterioration (77% decline year-on-year). While net assets appear positive when the shareholder loan is included, the underlying trading position is fundamentally impaired. The 40% workforce reduction signals significant operational distress.

2. Key Concerns

Concern 1: Structural Insolvency Risk

Shareholders' funds stand at -£1,697,328, with accumulated P&L losses of -£1,997,328. The company is technically insolvent on an equity basis and is sustained solely by the shareholders' loan of £2,961,092. This loan increased by £303,586 during 2024, indicating ongoing cash requirements that trading operations cannot fund. If shareholder support is withdrawn or limited, the company would be unable to meet its obligations.

Concern 2: Severe Cash Deterioration

Cash has fallen from £94,990 (2023) to £21,523 (2024) – a 77% decline. With £502,190 in current liabilities due within one year and only £971,067 in current assets (of which £79,442 is stock and £870,102 is debtors), the quality of liquid assets is concerning. Trade debtors have increased by £57,323 while cash has plummeted, potentially indicating slower customer payments or difficulty converting receivables to cash.

Concern 3: Significant Workforce Reduction and Lease Commitments

Employee headcount dropped from 47 to 28 – a 40% reduction that suggests either restructuring or contraction. Simultaneously, the company has £2,970,000 in outstanding operating lease commitments (down from £3,465,000), representing substantial fixed obligations. The combination of reduced operational capacity and large fixed commitments raises questions about the sustainability of the business model.

3. Positive Indicators

• Current Asset Coverage: Current assets (£971,067) exceed current liabilities (£502,190), providing a current ratio of approximately 1.93:1. Net current assets stand at £468,877, which offers some short-term buffer.

• Long-standing Business: Incorporated in 2000, the company has operated for 25 years, suggesting some resilience and market position in packaging activities (SIC 82920).

• Continued Shareholder Support: The increase in shareholders' loans from £2,657,506 to £2,961,092 demonstrates that owners are willing to continue funding the business, and the directors' going concern assessment is based on this support continuing.

• Regulatory Compliance: Accounts and confirmation statements are filed and up to date, with no overdue filings. The accounts were approved on 21 May 2025, within the statutory timeframe.

• Tangible Asset Base: The company holds £807,387 in tangible assets (plant, fixtures, computers), which may provide some security for creditors.

4. Due Diligence Notes

Priority Investigations:

1. Shareholders' Loan Terms: Critical to understand whether the £2.96M loan is repayable on demand, secured, or subordinated. If repayable on demand, this represents a callable liability that could trigger insolvency. Request the loan agreement and any related party disclosures.

2. Debtor Quality and Aging: Trade debtors of £547,365 represent 56% of current assets. Request an aged debtor analysis to assess recoverability. The £106,737 increase in "other debtors" and prepayments (from £273,324 to £322,737) also warrants scrutiny.

3. 2023 Restatement: The 2023 comparative figures for creditors are noted "as restated." Clarify the nature and quantum of this restatement, as it may indicate prior period errors or reclassifications.

4. Workforce Reduction Context: Determine whether the headcount reduction from 47 to 28 is a deliberate restructuring, seasonal adjustment, or involuntary contraction. This has significant implications for operational capacity and potential redundancy costs.

5. Lease Commitments Detail: The £2.97M in operating lease commitments is substantial. Obtain the lease schedule to understand timing, break clauses, and whether any leases can be renegotiated or terminated.

6. Xxxxxx Xxxxxxxxname shown to subscribers (PSC >75%): As the controlling shareholder with >75% ownership and the right to appoint/remove directors, his financial position and intentions are critical. Assess his other business interests and capacity to continue funding.

7. Xxxxxxxname shown to subscribers: This corporate director and PSC (25-50% ownership) should be investigated for financial health and the nature of its relationship with Speedpac. Related party transactions between the entities should be examined.

8. Profit & Loss Performance: The accounts filed under the small companies regime omit the profit and loss account. Request management accounts to understand whether the trading position is improving or deteriorating, particularly given the P&L reserve decline from -£1,748,546 to -£1,997,328 (an additional £248,782 loss).

9. Bank Loan Security: Both current and non-current bank loans are secured by fixed and floating charges. Confirm the terms, covenants, and whether any breaches have occurred or are forecast.

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