INSPIRIT PADDINGTON TOPCO LIMITED

Executive Summary

Inspirit Paddington Topco Limited is financially distressed with negative net assets and a troubled trading subsidiary now in administration. The group has experienced significant revenue and profitability decline, impaired cash flow, and material uncertainty over going concern. Given these factors, credit risk is high and approval for new credit facilities is not recommended without substantial mitigating factors or guarantees.

INSPIRIT PADDINGTON TOPCO LIMITED - Analysis Report

Company Number: 13679256

Analysis Date: 2025-07-29 18:45 UTC

1. Credit Opinion: DECLINE

Inspirit Paddington Topco Limited presents significant credit concerns. The company is a holding entity of a group whose main trading subsidiary, Pelta Medical Papers Ltd, entered administration in December 2024, indicating severe financial distress. The parent company’s own financials show a negative shareholders’ funds position of £-742,935 and net assets at £-9,024 as at 31 December 2023. Trading results for the subsidiary show a substantial operating loss (Trading EBITDA of -£2.6m in 2023 versus a positive £1.26m in 2022), coupled with a 21.8% revenue decline and a 29.8% drop in sales volume year-on-year. These factors, combined with the material uncertainty over going concern disclosed by the auditors, point to an inability to service new debt facilities or meet commercial obligations reliably. The recent acquisition of a European paper mill post year-end adds complexity and unproven risk without clear positive cash flow implications.

2. Financial Strength:

The balance sheet is weak. The parent company’s net assets are negative, reflecting accumulated losses and impairment from the troubled trading subsidiary. Current liabilities (£9,825) exceed current assets implied by negative net assets, indicating poor short-term financial cushioning. Capital employed fell from £12.4m in 2022 to £8.6m in 2023, showing a contraction in asset base. The ongoing investment in fixed assets (£1.1m additions) is insufficient to offset operational losses. The equity base is eroded, reducing financial flexibility and increasing reliance on external support from the controlling PSC (Inspirit Gp LLP).

3. Cash Flow Assessment:

No detailed cash flow statement is provided, but the strategic report and auditor’s commentary highlight negative trading cash flows due to operational losses. The energy cost hedging strategy locked the company into higher than market energy prices in 2023, worsening liquidity. The trading subsidiary’s entry into administration suggests cash flow pressures have become critical. Working capital is likely strained given negative net current assets and reduced sales volumes. The company's ability to generate positive operating cash flow is doubtful in the near term.

4. Monitoring Points:

• Monitor the outcome and impact of the trading subsidiary’s administration on group cash flow and liabilities.
• Watch for any further equity injections or financial support from the parent or PSC to sustain operations.
• Track recovery in sales volumes and trading profitability in the subsidiary and any new acquisitions.
• Review any restructuring plans or refinancing efforts that could restore going concern viability.
• Follow updates on energy cost management and hedging effectiveness as these materially affect margins.
• Assess any changes in management strategy or governance that address current weaknesses.