Credit Analysis: AMICUS ITS LIMITED

1. Credit Opinion: CONDITIONAL

Reasoning: The company demonstrates a reasonable equity base of £2.16M and consistent profitability (P&L reserves growing from £1.66M to £1.74M), indicating the business generates returns. However, significant concerns around liquidity constrain the credit opinion. Cash has deteriorated dramatically from £493k (2018) to just £57k (2025), while current liabilities have surged from £2.8M to £4.3M. With 99% of current assets concentrated in debtors, the company is heavily dependent on timely collections to meet obligations. Any material bad debt or collection delay could create a cash crisis. Credit facilities should be considered with appropriate covenants and monitoring.

2. Financial Strength

Balance Sheet Summary (April 2025):

Key Observations:

• Equity base is adequate but thinning: Net assets have declined from a peak of £2.66M (2022) to £2.16M (2025), representing an 18.6% erosion over three years. While still positive, the trajectory is concerning.

• Gearing is elevated: Total liabilities (£4.32M) represent approximately 2.0x net assets (£2.16M). The balance sheet is moderately leveraged.

• Tangible net worth: Deducting intangibles (£389k) from net assets leaves tangible net worth of approximately £1.77M – still positive but reduced.

• Share capital maintained: £420k share capital remains intact, with accumulated profits of £1.74M in P&L reserves, indicating historical profitability.

• Long-term liabilities reducing: Creditors falling due after one year decreased from £103k to £35k, which is positive.

3. Cash Flow Assessment

Liquidity Position:

Current Ratio: 1.38x (2025) – marginally acceptable but heavily dependent on debtor quality.

Quick Ratio: 1.38x – virtually identical as stock is negligible (£2k).

Cash Ratio: 0.013x – critically low. Cash covers just 1.3% of current liabilities.

Critical Concerns:

• Cash erosion: Cash has declined by 88% from £493k (2018) to £57k (2025). This sustained deterioration suggests the business is consuming more cash than it generates, or that cash is being absorbed by working capital.

• Debtors concentration: £5.9M in debtors represents 99% of current assets. The company is effectively reliant entirely on customer collections to service its obligations. Any deterioration in debtor days or bad debts would have immediate and severe consequences.

• Current liabilities surge: Current liabilities increased by £1.51M (54%) year-on-year. Without a P&L account filed, the composition is unclear, but this could reflect increased trade creditors, accrued costs, or group company liabilities.

• Working capital: Net current assets of £1.64M appear adequate on the surface, but the quality is poor given the debtor concentration and minimal cash buffer.

4. Monitoring Points

Recommended Covenant Conditions:

1. Minimum cash: Require maintenance of minimum £100k cash balance
2. Current ratio: Minimum 1.25x
3. Debtor days: Monitor and cap at 75 days
4. Financial filing: Require timely submission of full accounts (note: current filing is unaudited, small company regime)
5. Group exposure: Clarify nature of group company liabilities within creditors
6. Bad debt monitoring: Request quarterly aged debtor analysis

Additional Considerations:

• The company is wholly owned by Amicus Holdings Limited (>75% PSC), meaning group financial health is relevant. Intercompany balances should be understood.
• The business has traded since 1999 under various names (four previous names), suggesting acquisition history and rebranding – the intangible assets (£389k goodwill/software/customer contracts) reflect this.
• Employee headcount has reduced slightly (75 to 72), which may indicate cost management or natural attrition.
• The company operates in IT services (SIC 62020/62090), a competitive but generally resilient sector with recurring revenue potential.