ALARMTECH FIRE & SECURITY LTD

Executive Summary

AlarmTech Fire & Security Ltd is a young company showing growth in assets and debtors but has a thin equity base and slight working capital deficit. Liquidity is tight due to increased current liabilities, especially tax-related, and reliance on hire purchase finance. Conditional credit approval is recommended with rigorous monitoring of cash flow, debtor collection, and liability payments to safeguard credit exposure.

ALARMTECH FIRE & SECURITY LTD - Analysis Report

Company Number: SC733216

Analysis Date: 2025-07-20 13:51 UTC

1. Credit Opinion: CONDITIONAL APPROVAL
   AlarmTech Fire & Security Ltd is an active private limited company operating in the security systems service sector. The company is relatively new (incorporated in 2022) and has demonstrated modest growth in current assets and debtors over the last financial year. However, the firm shows a slight working capital deficit (£300 negative net current assets as of May 2024) and a very low net asset base (£143). The company relies on hire purchase contracts for fixed assets, which imposes financial leverage and repayment obligations. Directors have taken dividends recently, which may impact liquidity. Given these factors, the company can be considered for credit facilities but with conditions, including close monitoring of liquidity, debt servicing capacity, and covenant compliance.

2. Financial Strength:
   The balance sheet shows fixed assets of approximately £13,669 (net book value), down from £17,509 the previous year, indicating depreciation and limited new asset investment. Current assets increased substantially to £34,580 mainly due to a rise in trade and other debtors (£28,068), suggesting growing sales but also potential collection risk. Current liabilities almost tripled to £34,880, primarily due to a significant increase in taxation and social security liabilities (£29,598), which may reflect accrued payroll taxes or VAT. Long-term liabilities from hire purchase contracts remain significant at £10,500, representing financial commitments beyond one year. Overall shareholders’ funds remain minimal (£143), indicating a thin equity buffer and higher financial risk.

3. Cash Flow Assessment:
   Cash on hand remains low (£6,512), although improved from the previous year (£2,836). The company’s net current liabilities position and high short-term liabilities, especially taxation and social security, may pressure liquidity. The presence of interest-free directors’ loans with no fixed repayment terms provides some flexibility but also indicates reliance on related-party funding. The company’s ability to generate positive operating cash flow is uncertain due to the absence of an income statement, but dividend payments to directors (£42,496) suggest some profitability or at least cash availability, though this reduces internal cash reserves. Working capital management, debtor collection efficiency, and timely payment of liabilities are key concerns.

4. Monitoring Points:

• Monitor liquidity ratios monthly, focusing on cash balances and net current assets.
• Track debtor aging and collection performance to mitigate credit risk from customers.
• Review payment of tax and social security liabilities to avoid penalties or enforcement action.
• Assess compliance with hire purchase repayment schedules to prevent asset repossession risks.
• Watch dividend distributions to ensure they do not impair operational cash flow or creditor security.
• Keep oversight of management changes and related-party transactions to ensure transparency and governance.