Credit Analysis: ANGLO RECYCLING TECHNOLOGY LIMITED

1. Credit Opinion: CONDITIONAL APPROVE

Rationale: The company demonstrates a solid balance sheet with consistent net asset growth (£836k in 2019 to £1.12M in 2025) and conservative leverage (debt-to-equity ratio of 0.34). However, the dramatic deterioration in the cash position and significant working capital movements in the latest year warrant enhanced monitoring and potential covenant structuring. The absence of a filed profit and loss account limits visibility into trading performance, requiring additional information requests.

2. Financial Strength

Balance Sheet Summary (Year Ending 31 October 2025):

Assessment: STRONG

The balance sheet shows consistent equity growth over the review period, with retained profits building year-on-year. The P&L reserve increased by £75,331 in the latest year, confirming profitability. Total liabilities represent just 34% of equity, indicating minimal leverage and substantial capacity to absorb shocks.

The company owns tangible fixed assets of £274,548 (including freehold property per the accounting policies) providing collateral security. Share capital has been maintained at £435,000 throughout, demonstrating no equity extraction by shareholders.

Concerning Trend: While net assets grew, total assets declined from £1.66M (2023) to £1.56M (2025), suggesting potential asset disposals or write-downs.

3. Cash Flow Assessment

Working Capital Position (2025):

Current Ratio: 3.38x (2025) vs 4.08x (2024) — remains healthy but declining Quick Ratio: 2.03x (2025) — adequate liquidity excluding stock

Assessment: REQUIRES ATTENTION

The cash position has deteriorated dramatically — from £414,830 (2023) to £79,722 (2025), an 81% decline over two years. This cash has been absorbed into:

1. Debtors increased by £297,002 (75.3%) — This is the most significant concern. A 75% increase in trade debtors suggests either substantial revenue growth (positive) or deteriorating collection practices and extended credit terms (negative). Without P&L data, the driver is unclear.

2. Stocks increased by £86,164 (20.1%) — Moderate stock build could indicate preparation for anticipated demand or slow-moving inventory. Given the manufacturing nature of the business, some stock holding is expected, but the trend warrants monitoring.

3. Current liabilities increased by £122,981 (47.7%) — The company is stretching supplier payments or taking on short-term obligations, potentially to fund the working capital investment.

Cash Conversion Concern: The business appears to be consuming cash to fund working capital growth. If debtors are not collected timely, this could create liquidity pressure despite the apparently healthy current ratio.

4. Monitoring Points

Key Metrics to Watch:

1. Debtor Days: Request detailed aging analysis. The 75% increase in debtors significantly outpaces likely revenue growth. Monitor for bad debt risk and concentration.

2. Cash Position: The £79,722 cash balance provides limited headroom. Track monthly cash flow to ensure the business can service obligations. A minimum cash threshold covenant may be appropriate.

3. Stock Turnover: Assess whether the £514,810 stock holding is moving efficiently or includes obsolete/non-performing inventory, particularly given the specialized manufacturing nature.

4. Creditor Days: The 47.7% increase in current liabilities may indicate supplier payment stretching. Monitor trade creditor aging to ensure no supply chain disruption risk.

5. Related Party Transactions: With Mr Simon Kingston Macaulay holding >75% shareholding, monitor for potential preferential transactions or extraction of value (dividends, management charges, loans).

6. Profit & Loss Performance: Request detailed P&L statements. The company files under the small companies regime and has elected not to include P&L in filed accounts. Understanding margin trends, revenue sustainability, and operating cost structure is essential for ongoing credit assessment.

Suggested Covenant Structure:

• Minimum net current assets of £750,000
• Maximum debtors/turnover ratio (once turnover confirmed)
• Cash interest cover (once debt service obligations confirmed)
• Notification of any dividend payments exceeding £50,000

Positive Indicators:

• 37-year trading history demonstrates business resilience
• No long-term debt outstanding as at 2025 year-end
• Provisions reduced from £72,405 to £59,344, suggesting liability management
• Filing compliance is current with no overdue submissions
• No disqualification records against directors