AEROMECH ENGINEERING LTD

Executive Summary

Aeromech Engineering Ltd is currently in a financially vulnerable position with negative net assets and significant liquidity pressures. The company's ability to service debt and sustain operations is questionable without material improvement or external support. Credit facilities are not recommended until a credible recovery plan is demonstrated.

AEROMECH ENGINEERING LTD - Analysis Report

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