ACTIVE STIRLING LIMITED

Credit Opinion: CONDITIONAL

Active Stirling Limited presents a unique credit profile typical of an Arm's Length External Organisation (ALEO). While the entity operates in a sector with inherently tight margins (leisure and sports facilities), its credit risk is fundamentally underpinned by the backing of a local authority. The credit opinion is Conditional pending the review of the latest financial statements (year ending March 2025, due December 2026), as the structural data alone cannot confirm liquidity or operational profitability. However, given the 75%+ control by Stirling Council, including the right to appoint and remove directors, the risk of outright default is significantly mitigated by implicit institutional support. Credit facilities should be structured with covenants that reflect the not-for-profit, limited-by-guarantee nature of the business rather than standard private equity expectations.

Financial Strength: Analysis of balance sheet health

The company is structured as a Private Limited Company by Guarantee with no share capital. This means there is no traditional equity cushion from shareholder funds; instead, the balance sheet relies on accumulated retained profits and operational reserves. * Local Authority Backing: The most critical factor for financial strength is the Persons with Significant Control (PSC) register. Stirling Council holds more than 75% of voting rights and controls board appointments. This effectively acts as an implicit guarantee, meaning the company is unlikely to be allowed to fail provided it maintains its contractual obligations to the Council. * Group Structure: The accounts are filed as "Group," indicating subsidiaries. This adds a layer of complexity requiring a look-through to assess where liabilities and assets sit within the group structure. * Capital Expenditure: Sports facilities are capital-intensive. Without the latest financials, we must assume significant fixed assets on the balance sheet, likely funded by council grants or long-term debt.

Cash Flow Assessment: Liquidity and working capital evaluation

Operating sports facilities (SIC 93110) typically involves high fixed costs—specifically utilities, maintenance, and staffing—against a mix of retail membership income and local authority subsidies. * Revenue Streams: Cash flow generation is highly dependent on community engagement and local authority revenue grants. Any reduction in council funding would immediately stress operational cash flow. * Working Capital: Leisure trusts often run on thin working capital margins. Trade creditors (suppliers) may be high relative to current assets, creating reliance on ongoing cash generation and timely council disbursements to service current liabilities. * Debt Service: If the group holds property-related loans, cash flow will be heavily directed toward debt servicing. The ability to service debt is directly tied to the stability of their grant funding and membership retention at The PEAK gym.

Monitoring Points: Key metrics to watch going forward

1. Local Authority Budget Cuts: Stirling Council's budget allocations must be monitored annually. Any proposed cuts to leisure and culture subsidies pose the single largest risk to this entity's cash flow.
2. Board Turnover and Governance: There have been several recent board resignations (Dec 2025 and Jan 2026). While normal for council-appointed boards, significant turnover should be monitored to ensure strategic continuity and sound financial stewardship.
3. Filing Compliance: The company is currently up to date with filings, but the next accounts (made up to 31 March 2025) are not due until December 2026. Ensure these are filed on time to monitor the actual financial trajectory.
4. Covenant Compliance: If existing bank facilities are in place, monitor the group's compliance with any debt service coverage and EBITDA covenants, which may be under pressure from inflationary cost increases in the leisure sector.