Credit Analysis: AVERILLO PROPERTY MANAGEMENT SERVICES LIMITED

1. Credit Opinion: CONDITIONAL

The company demonstrates adequate liquidity with a debt-free balance sheet and strong cash position, but significant volatility in historical earnings and the micro-scale nature of the business warrant a conditional approach. Credit facilities should be limited in size, short-term in nature, and supported by a personal guarantee from the controlling shareholder (Mr. Nellemose). The recent recovery in profitability is encouraging, but the track record shows substantial swings that introduce repayment uncertainty.

Key conditioning factors: - Maximum facility size should not exceed 50% of shareholders' funds at any time - Personal guarantee required from PSC (Mr. Nellemose, >75% shareholder) - Quarterly monitoring of financial performance - No tangible asset security available — cash is the primary asset

2. Financial Strength

Balance Sheet Summary (FY2025): | Item | 2025 | 2024 | Movement | |------|------|------|----------| | Cash at bank | £29,652 | £11,738 | +153% | | Total creditors | £14,783 | £5,167 | +186% | | Net current assets | £14,869 | £6,571 | +126% | | Shareholders' funds | £14,869 | £6,571 | +126% |

Positive indicators: - No bank borrowings — the company carries no institutional debt, meaning no competing claims on cash flow - Cash represents 100% of assets — the balance sheet is entirely liquid, with no fixed assets or intangibles that could become impaired - Current ratio of 2.0x (£29,652 / £14,783) — adequate headroom over short-term obligations - Retained earnings growth — profit retention of approximately £8,298 in FY2025 (retained earnings increased from £6,471 to £14,769)

Concerning indicators: - Volatile equity trajectory — shareholders' funds have ranged from £250 (2018) to £26,218 (2022) over the past decade, indicating significant earnings variability - Minimal share capital — only £100 issued, providing negligible loss-absorption capacity from paid-in capital - Creditor concentration risk — taxation and social security liabilities jumped from £220 to £5,592, suggesting either a significant profit spike or underpayment in prior periods - Related party relationships — the registered office is shared with "Averillo & Associates" (the company's accountants), indicating the directors operate connected businesses from the same premises; this warrants scrutiny for inter-company balances or transactions not visible in these accounts

Creditworthiness assessment: The balance sheet is thin but liquid. The company cannot offer tangible security, and equity has proven volatile. However, the absence of debt and strong current cash position provide a foundation for modest credit exposure.

3. Cash Flow Assessment

Liquidity position: The company's liquidity is currently strong, with cash of £29,652 against total liabilities of £14,783. This provides a cash coverage ratio of 2.0x, meaning the company could settle all known liabilities from cash reserves and still retain approximately £14,869 in working capital.

Estimated profitability: Based on the movement in retained earnings (£6,471 to £14,769 = £8,298 increase), and adjusting for the taxation liability of £5,592, estimated pre-tax profit for FY2025 is approximately £13,890. This represents a significant improvement over FY2024, where retained earnings increased by approximately £-8,098 (from £14,669 to £6,571), suggesting a loss in that year.

Working capital dynamics: - Debtors: Notably absent from the balance sheet — the company appears to operate on a cash-received basis, which is positive for cash conversion - Creditors: The increase to £14,783 (including £9,191 in "other creditors") should be investigated — this may include amounts due to related parties or accrued expenses - No stock/inventory — typical for a bookkeeping services business

Cash flow sustainability concern: The historical pattern shows the company can move from profit to loss quickly. FY2022 showed shareholders' funds of £26,218, dropping to £14,669 in FY2023 and further to £6,571 in FY2024 before recovering. This volatility suggests cash generation is inconsistent and heavily dependent on the principals' ability to secure and retain clients.

Debt service capacity: Assuming current profitability is maintained, the company could service modest debt repayments. At estimated pre-tax profit of ~£14,000, annual debt service capacity of approximately £5,000-£7,000 (after tax and necessary reinvestment) appears feasible. However, given the earnings volatility, any facility should incorporate headroom for down years.

4. Monitoring Points

Specific monitoring requirements:

1. Inter-company transactions: Request full disclosure of all transactions with Averillo & Associates and any other connected entities. The shared registered office and accounting function create scope for preferential creditor treatment.

2. "Other creditors" composition: The £9,191 in other creditors should be clarified — determine whether this includes related party balances, accrued director fees, or trade creditors.

3. Key person risk: With only 2 employees and Mr. Nellemose holding >75% control, the business is highly dependent on two individuals. Monitor for any changes in directorships or PSC registrations.

4. Earnings consistency: Request management accounts quarterly to verify that FY2025's profitability improvement is being sustained and is not a one-off event.

5. Tax compliance: The significant increase in taxation liabilities (£220 to £5,592) warrants confirmation that all HMRC obligations are current and no enforcement action is pending.

6. Director changes: Note that Rosemary Mander appears in both current and resigned director records — clarify the current position and ensure Companies House records are accurate.