AUTOKLEEN LIMITED

Credit Opinion: APPROVE Autokleen Limited presents a very low credit risk profile. The company demonstrates exceptional financial strength, characterized by a robust asset base, minimal leverage, and strong liquidity. Net assets have grown consistently to £3.38 million, and the company holds cash reserves of £1.67 million, which alone are sufficient to cover total liabilities of £1.36 million. The recent capital expenditure indicates active investment in the business without reliance on external debt, and the company's long-standing track record since 1978 provides further confidence in its stability.

Financial Strength The balance sheet is exceptionally healthy. Net assets have grown steadily from £2.78 million in 2020 to £3.38 million as of November 2024, demonstrating sustained profitability and retention of earnings. The leverage position is highly conservative; total liabilities of £1.36 million are comfortably offset by total assets of £4.74 million, resulting in a debt-to-equity ratio of approximately 0.40x. Tangible assets stand at £1.76 million, representing a significant increase from £1.31 million in the prior year, driven by £595k in capital additions (likely property and/or plant machinery). This suggests management is reinvesting in the operational capacity of the business. The only long-term liability is a modest £275k obligation under finance leases, which is easily serviceable.

Cash Flow Assessment Liquidity is a major strength for Autokleen. The company reports net current assets of £1.89 million, yielding a current ratio of approximately 2.7x. Cash at bank stands at £1.67 million, providing an immediate liquidity buffer. Trade debtors stand at £1.28 million, which is notable relative to the company's size; while this is common in service/distribution businesses, it represents a working capital drag that should be monitored to ensure timely cash conversion. The reduction in creditors from £1.33 million to £1.08 million suggests the company is actively paying down its operational debts, which is a positive sign of cash flow generation.

Monitoring Points * Debtor Collection: With £1.28 million tied up in debtors, it is important to monitor the aged debtor profile and debtor days. Any significant lengthening in collection periods could impact cash flow. * Employee Reduction: Average employee numbers dropped from 10 to 8. While this may improve operational efficiency, it is worth monitoring to ensure it does not reflect operational constraints or impact the company's ability to generate revenue. * Capital Expenditure Returns: The significant investment in tangible assets in the latest period should be monitored to ensure it yields the expected operational returns and revenue growth in subsequent periods. * Related Party Transactions: As a family-controlled entity (Brian Henry Thomas holds >75% of voting rights), it is prudent to monitor any related party balances or director loans that could impact the company's liquidity.