Risk Assessment: STAKAPAL LIMITED

1. Risk Rating: MEDIUM

Justification: While the company demonstrates strong liquidity and an improving balance sheet trajectory since 2021, the historical equity erosion from approximately £5.5m (2020) to £1.0m (2021) represents a material unexplained decline of ~£4.5m. The significant and growing intercompany balance with parent Staknstore Limited (£600,000, representing 43% of current liabilities) introduces dependency risk. The absence of filed profit and loss data limits full assessment of operational performance.

2. Key Concerns

Concern 1: Unexplained Historical Equity Collapse

Between 2020 and 2021, net assets fell from £5,548,481 to £1,049,241—a reduction of approximately £4.5 million (82% decline). Over the same period, total liabilities surged from £541,213 to £3,220,307 while cash remained broadly stable. This transformation requires explanation: whether it resulted from a dividend extraction, intercompany restructuring, asset write-downs, or operational losses cannot be determined from balance sheet data alone. The net asset position, while recovering steadily since 2021, remains at approximately 35% of pre-2021 levels.

Concern 2: Growing Intercompany Obligations

Amounts owed to group undertakings increased from £400,000 (2024) to £600,000 (2025), a 50% year-on-year increase. This intercompany payable constitutes the single largest creditor balance and 43% of total current liabilities. As Staknstore Limited holds >75% of shares and voting rights, there is inherent related-party risk regarding the terms, repayment expectations, and potential for this balance to be called upon or restructured at short notice.

Concern 3: Limited Profitability Visibility

The company files under the small companies regime and has not delivered an Income Statement, as permitted under Section 444 of the Companies Act 2006. Consequently, revenue, cost of sales, operating profit, and profit margins are undisclosed. Without this, it is impossible to assess whether the improving net asset position reflects trading profitability, asset revaluations, or other movements. The reduction in trade debtors from £480,974 to £235,755 (51% decline) and reduction in employee count from 35 to 33 may indicate contracting activity.

3. Positive Indicators

• Strong and Growing Cash Position: Cash at bank increased from £1,484,286 (2024) to £2,468,249 (2025), a 66% improvement. Cash now covers 177% of current liabilities, providing substantial liquidity headroom.

• Consistent Net Asset Recovery: Net assets have grown each year since the 2021 low point—£1,049,241 → £1,219,151 → £1,455,964 → £1,622,405 → £1,957,631. This represents a compound recovery trajectory of approximately 87% over four years, suggesting underlying trading viability.

• Healthy Working Capital: Net current assets of £1,702,103 (current ratio of 2.22x) indicate the company can comfortably meet short-term obligations without recourse to external funding.

• Long-Established Operation: Incorporated in 1967, the company has operated for over 57 years, suggesting resilience through multiple economic cycles. The manufacturing nature of the business (fabricated metal products, cantilever racking) provides tangible asset backing.

• Regulatory Compliance: All filings are current with no overdue accounts or confirmation statements. The accounts were approved and authorised for issue on 14 May 2026, within the statutory timeframe.

• Deferred Tax Reduction: The deferred tax provision decreased from £42,425 to £22,969, with a credit of £19,456 to the income statement, which may indicate timing differences unwinding favourably or reduced future tax liabilities.

4. Due Diligence Notes