Industry Analysis: City Screen Printers (U.K.) Limited

1. Industry Classification

SIC Code 13100 – Preparation and Spinning of Textile Fibres

City Screen Printers (U.K.) Limited is classified under SIC code 13100, placing it within the UK textile manufacturing sector – specifically the preparatory stages of textile production involving fibre processing and spinning. Despite the company name suggesting screen printing capabilities, its formal classification indicates upstream textile processing activity. The company has been operating since 1987, making it a 38-year veteran of an industry that has undergone profound structural transformation in the UK.

Key sector characteristics: - The UK textile manufacturing sector has contracted significantly over recent decades, with output declining as production shifted to lower-cost economies - Leicester and the East Midlands remain one of Britain's remaining textile clusters, benefiting from established supply chains and specialised labour pools - The sector is characterised by high energy intensity, exposure to raw material price volatility (particularly cotton and synthetic fibres), and intense import competition - Typical businesses in this space are small-to-medium, family-owned enterprises – precisely the profile this company exhibits

The company's location on Earls Way Industrial Estate in Thurmaston, Leicester, positions it within the historic East Midlands textile corridor, which still accounts for a disproportionate share of remaining UK textile manufacturing output.

2. Relative Performance

Balance Sheet Strength vs. Industry Norms

The company displays a financial profile that is notably robust relative to typical small textile manufacturers:

Key observations on relative performance:

Asset Contraction: Total assets have declined from £3.43m (2016) to £1.52m (2025), representing a 56% reduction over the period. While some of this reflects the accounting year-end change (May to November 2016, then November year-ends), the persistent downward trajectory in recent years – from £1.93m (2021) to £1.52m (2025) – suggests deliberate balance sheet restructuring or business contraction rather than organic decline.

Profitability Indicators: Although the Profit & Loss account is not delivered (permitted under small companies regime), the movement in retained earnings provides insight. Retained earnings fell from £892,043 to £874,680, a reduction of £17,363. Given that the company paid dividends or experienced losses, this modest decline actually suggests the business generated near-breakeven or slightly negative trading results – significantly underperforming the sector's typical modest margins of 3-5% on turnover.

Employee Productivity: With 6 employees (down from 10 the prior year) and net assets of ~£149k per employee, the company sits above typical textile SME benchmarks. However, the 40% workforce reduction is striking and suggests either significant automation investment, business model restructuring, or workforce optimisation under financial pressure.

Stock Levels: Inventory increased from £391,458 to £586,458 (a 50% increase) despite reducing employee headcount. This may indicate slower stock turnover, potential obsolescence risk, or strategic raw material purchasing – a common tactic when textile businesses anticipate input price inflation.

3. Sector Trends Impact

Macro-Industry Forces Affecting Performance

1. Secular Decline in UK Textile Manufacturing The UK textile sector has experienced decades of contraction, with manufacturing output falling approximately 70% since the 1990s. City Screen Printers operates in a sector where annual revenue growth is typically negative in real terms. The company's declining asset base broadly mirrors this secular trend, though its continued solvency and cash reserves demonstrate resilience beyond the typical failing enterprise.

2. Energy Cost Inflation Textile preparation and spinning are energy-intensive processes. The period 2021-2024 saw dramatic increases in UK industrial gas and electricity prices, with energy costs rising 100-200% for many manufacturers. The reduction in employees from 10 to 6 may partly reflect production scaling-back in response to unviable energy economics, whilst the increased stock levels could represent work-in-progress that became uneconomical to process further.

3. Supply Chain Disruption and Raw Material Volatility Post-Brexit customs arrangements and global shipping disruptions have increased lead times and costs for imported textile fibres. The company's Leicester location within an established textile cluster provides some insulation through local supply networks, but the 50% increase in stock holdings suggests the business may be carrying higher inventory as a buffer against supply uncertainty.

4. Sustainability and Reshoring Trends A modest counter-trend exists in UK textile manufacturing, with some brands seeking domestic supply chains for traceability and sustainability credentials. The company's longevity and established presence could position it to capture reshoring demand, though there is limited evidence in the financials of growth capitalising on this trend.

5. Digital Transformation Pressure Traditional textile preparation businesses face pressure to invest in automation and digital process control. The company's fixed asset base of £155,103 (net book value) on a cost base of £1,087,595 suggests an ageing asset portfolio with significant accumulated depreciation (£932,492). The relatively modest capital expenditure of £29,129 in the year, partially offset by £29,070 in disposals, indicates minimal reinvestment – a concern for long-term competitiveness.

4. Competitive Positioning

Strengths Relative to Sector Competitors

1. Exceptional Balance Sheet Liquidity: With £469k in cash and virtually no long-term debt, the company has financial resilience that most textile SMEs cannot match. Many competitors in this sector operate with minimal cash reserves and heavy reliance on overdraft facilities. This liquidity provides optionality – whether for investment, weathering downturns, or ultimately facilitating an orderly wind-down.

2. Low Gearing: The elimination of long-term bank loans (down from £5,962 to £0) and minimal current borrowings (£5,831) means the business carries negligible financing costs – a significant competitive advantage in a low-margin sector.

3. Established Market Presence: A 38-year trading history in a sector characterised by high attrition rates demonstrates adaptability and customer retention capabilities. The company has survived multiple economic cycles and structural industry changes.

4. Leicester Cluster Positioning: Location within the East Midlands textile corridor provides access to specialised labour, supplier networks, and customer ecosystems that newer entrants cannot easily replicate.

Weaknesses and Concerns

1. Declining Trajectory: Net assets have fallen from £1,243,162 (2016) to £894,680 (2025), representing a 28% erosion of shareholder value over the period. While some of this may reflect dividend extraction, the pattern is consistent with a business in managed decline rather than growth mode.

2. Workforce Contraction: The 40% reduction in employees (10 to 6) raises questions about operational capacity and future revenue potential. In a labour-intensive industry, this scale of workforce reduction typically signals significant production volume decline.

3. Ageing Asset Base: With net book value of only £155,103 on a gross cost of £1,087,595, the fixed asset portfolio is approximately 86% depreciated. The plant and machinery (predominantly textile processing equipment) has an NBV of just £155,103, suggesting much of the production infrastructure is approaching or past its economic life. Low reinvestment levels (£29k additions) are insufficient for meaningful capital replacement.

4. Rising Stock Relative to Activity: The 50% increase in inventory against a backdrop of workforce reduction and declining debtors suggests potential working capital inefficiency or deteriorating stock turn – a warning signal in textile manufacturing where fashion and seasonal cycles can render inventory obsolete rapidly.

5. Debtor Collection: Trade debtors of £442,218 against the context of a 6-person operation suggests either extended credit terms or slow collection – a common cash flow drag in textile supply chains where smaller processors often lack leverage over larger buyers.

Competitive Assessment

City Screen Printers occupies a niche survivor position within the UK textile manufacturing landscape. It is neither a market leader nor a distressed enterprise, but rather a long-established family business demonstrating the "slow fade" pattern common to SMEs in structurally declining sectors. The Dakri family's controlling ownership (>75% held by Hussein Yusuf Dakri) enables strategic flexibility but may limit access to external growth capital.

The financial profile is consistent with a business that has prioritised balance sheet strength over growth investment – maintaining liquidity and eliminating debt while allowing the operational asset base to age. This strategy preserves optionality but risks competitive obsolescence if production capabilities become technically outdated relative to customer requirements.