Investment Risk Analysis: Belmont Packaging Ltd

1. Risk Rating: LOW

Justification: Belmont Packaging Ltd demonstrates a strong and improving financial trajectory over the past decade, with net assets growing from approximately £237k (2015) to nearly £2.9M (2024). The company maintains a healthy current ratio of approximately 2.74:1, carries manageable debt levels with declining liabilities, and shows consistent retained earnings growth indicating sustained profitability. The primary area of attention is the significant cash outflow in 2024, though this appears largely attributable to capital investment rather than operational distress.

2. Key Concerns

Concern 1: Significant Cash Decline

Cash at bank fell from £1,775,420 (2023) to £1,169,723 (2024), a reduction of approximately £606k (34%). While this coincides with substantial capital expenditure of £766,114 in fixed asset additions, the magnitude of the cash decline warrants monitoring to ensure operating cash flows remain sufficient to service obligations and fund ongoing operations.

Concern 2: Large "Other Debtors" Balance

Other debtors stand at £750,703 (up from £651,353 in 2023), representing over 54% of total debtors. This is a material figure that lacks transparency in filleted small company accounts. Without understanding the nature of these balances—whether related party, prepayments, or trade-related—there is a risk that recoverability or related party exposure may be understated.

Concern 3: Deferred Tax Provision Increase

Deferred tax provisions increased by £158,215 (from £253,882 to £412,097), a 62% rise year-on-year. While this may reflect timing differences from capital allowances on the significant plant and machinery investment, the growing deferred tax liability represents a future cash commitment that should be understood in the context of the company's tax planning and capital expenditure strategy.

3. Positive Indicators

• Consistent Profitability Trajectory: Retained earnings have grown every year for the past decade, from approximately £137k (implied 2015) to £2,844,683 (2024). This unbroken track record suggests a robust and sustainable business model.

• Strong Balance Sheet Position: Net assets of £2,944,683 against total liabilities of £985,693 provides a comfortable debt-to-equity ratio. Net current assets of £1,717,851 indicate the company can comfortably meet short-term obligations.

• Declining Total Liabilities: Liabilities have reduced from a peak of approximately £1.47M (2021-2022) to £985k (2024), suggesting deliberate deleveraging. Secured debts have also decreased from £179,698 to £126,608.

• Capital Investment Commitment: The £766,114 in fixed asset additions (predominantly £729,460 in plant and machinery) signals confidence in future demand and capacity expansion, rather than asset stripping or disinvestment.

• Regulatory Compliance: Accounts are filed on time (approved 12 June 2025 for year-end 31 December 2024), confirmation statements are current, and no overdue filings are noted.

4. Due Diligence Notes

1. Related Party Transactions: The ultimate controlling party is "A Box & Beyond Ltd," and Mrs Kate Hulley holds >75% of shares and voting rights individually. The relationship between these PSCs and any inter-company balances (potentially within "Other debtors" or "Other creditors") should be investigated. Related party transactions are not disclosed in filleted accounts.

2. Nature of "Other Debtors": At £750,703, this balance warrants clarification. Investigate whether this represents inter-company balances with A Box & Beyond Ltd, corporation tax prepayments, or other items. If related party balances, assess whether terms are commercial and recoverability is reasonable.

3. Santander Fixed and Floating Charge: A fixed and floating charge exists over all present and future assets. Confirm the terms, covenants, and whether any breach conditions exist. The secured debt balance of £126,608 appears modest relative to the asset base, but covenant compliance should be verified.

4. Profit and Loss Data: As a small company filing filleted accounts, no Profit & Loss statement or cash flow statement is available. Request management accounts to assess trading profitability, gross margins, and operating cash conversion—particularly given the cash decline in 2024.

5. Deferred Tax Composition: Seek clarification on the deferred tax provision of £412,097, specifically the timing differences giving rise to this balance and expected reversal dates. This is relevant for assessing future tax cash outflows.

6. Director Disqualification Checks: No disqualification records are included in the provided data. Verify the standing of both Paul Andrew Hulley and Kate Louise Hulley through the Insolvency Service register.

7. Employee and Operational Context: The company employs 33 people (up from 32). Given the significant capital investment, assess whether this reflects capacity expansion and whether the workforce and order book support the increased fixed asset base.