Sold to Glasgow businessman Craig Hyslop in a pre-pack deal, the company will continue under the auspices of his company Spirit Labels Ltd, incorporated 4 November, with 16 of the 18 original staff transferred under TUPE.
Spirit Label Solutions, founded in early 2023, started trading with a bang in January 2024 having invested £5m in a state-of-the-art factory with entirely digital kit and full digital embellishment.
Turning over £886,000 in its first eight months of trading, the business achieved a gross profit of £374,000 up to 31 August 2024, but weighed down by its heavy investment, saw a resultant net loss of £521,000.
Furnished with a £1.5m director’s loan from founding CEO and majority shareholder Alex Mulvenny, the business also brought in funds from FSE, part of the Investment Fund for Scotland, alongside grant funding from Scottish Enterprise, as well as hire purchase agreements with several banks and a deferred payment agreement with a British label machine manufacturer.
Thus leveraged, the company was then hit by a significant downturn in the Scottish whisky industry, caused by poor sales to India and Asia, according to the administrators’ report, filed to Companies House by joint administrators Michelle Elliot and Callum Carmichael of FRP Advisory.
Sales then fell significantly short of budgeted expectations, and the company faced a funding requirement of around £500,000; the directors began to hold discussions with external parties over a potential solvent sale, but “were unable to agree terms for a solvent sale that were acceptable to all the directors”, the administrators said.
“Efforts to secure additional funding also proved unsuccessful.”
FRP was formally engaged on 10 October to set up a pre-pack sale, or, failing that, wind down the business. Options including a CVA were considered, but deemed unsuitable.
Because Spirit Label Solutions had no formal contracts in place with customers, the business had to be marketed discreetly, with a sales teaser sent to nine parties on 14 October.
Craig Hyslop was one of two parties to send back offers; having been accepted, he successfully negotiated terms with Spirit Label Solutions’ major creditors to carry on the business with its major printing kit. He was in no way a related party to the original Spirit Label Solutions business.
The agreed consideration was £150,000, including a deferred element of £30,000 to be paid on 6 December and backed by a personal guarantee from Hyslop. The administrators said this would give him time to negotiate settlement agreements with the finance companies.
CCL Label had made an asset-only offer, but this was withdrawn at the end of October.
All told, the company owed nearly £2m to finance companies, £1.5m to Mulvenny, and just shy of £950,000 in deferred liabilities and trade and expense debts, leaving a total deficiency of more than £4.3m at the time of sale.
