Company Number: 12677396

Analysis Date: 2025-07-29 12:34 UTC

1. Credit Opinion: DECLINE
   Aeromech Engineering Ltd exhibits significant financial stress as of the latest accounts dated 30 June 2024. The company shows negative net assets of £6,688 and a large working capital deficit of £24,682, indicating an inability to cover short-term liabilities with current assets. The sharp deterioration in liquidity and solvency compared to prior years, coupled with increased bank loans and overdrafts of £22,080, raises serious concerns over the company’s ability to meet debt obligations. Without clear evidence of turnaround plans or external support, the company poses a high credit risk.

2. Financial Strength:
   The balance sheet reveals a declining trajectory. Total fixed assets stand at £23,992, but these are overshadowed by current liabilities of £35,205, dominated by bank loans and overdrafts and tax liabilities. The company’s net liabilities position contrasts sharply with prior years’ positive net assets (£2,322 in 2023). The negative retained earnings of £6,689 suggest accumulated losses. The absence of shareholders’ equity undermines financial resilience and ability to absorb further losses or shocks.

3. Cash Flow Assessment:
   Cash holdings have fallen from £9,105 in 2023 to £4,987 in 2024, reducing liquidity buffers. Debtors have increased to £5,536 but are insufficient to offset trade and bank liabilities due imminently. The large net current liability position and increased short-term bank borrowings point to strained working capital management. The director’s loan of £5,174 to the company without formal repayment terms indicates informal internal financing but also potential cash flow pressure.

4. Monitoring Points:

• Liquidity ratios and working capital trends in the next accounts cycle
• Bank loan covenants and whether the company remains compliant
• Cash flow forecasts and debtor collection effectiveness
• Any restructuring or equity injection to restore net asset value
• Director’s plans for addressing the negative equity and operational losses
• Payment behaviour to suppliers and tax authorities for risk of defaults