CREDIT ANALYSIS: BEAVERCOURT LIMITED

1. Credit Opinion: CONDITIONAL APPROVE

Beavercourt Limited presents a fundamentally sound credit profile with strong equity growth, low leverage, and healthy liquidity. However, conditions are recommended given: (a) significant related party exposure including intercompany balances and director loans, (b) the dramatic increase in trade creditors from £15k to £154k year-on-year, and (c) the small operational footprint (2 employees) which concentrates key-person risk. Approval recommended for facilities up to approximately £150,000-£200,000, with requirements for group structure clarification and ongoing monitoring of related party transactions.

2. Financial Strength

Balance Sheet Trend – Consistent Improvement

Key Strengths: - Net assets have grown approximately 14-fold over the past decade (£40,830 to £568,178), demonstrating sustained profitable trading - Shareholders' funds increased by £96,207 in the latest year (20.4% growth), indicating strong retained profitability - Gearing is conservative: total liabilities represent only 37.3% of equity - No long-term debt visible on the balance sheet - Tangible net worth of £568,178 provides substantial cushion for creditors

Concerns: - The 2024 position appears anomalous – liabilities dropped to just £19,867 before rising to £212,085 in 2025. This volatility warrants explanation (likely timing of trade creditor payments around year-end) - Share capital remains at just £2 (200 shares at 1p each), meaning virtually all equity is accumulated profits – no fresh capital injection from shareholders

3. Cash Flow Assessment

Liquidity Position – Strong

The current ratio of 3.52x is robust for a construction business. Cash of £336,234 alone covers current liabilities 1.59 times over, providing comfortable headroom.

Working Capital Composition Concerns:

Several items require scrutiny:

• Other Debtors (£162,935): Doubled year-on-year. Without clarification, this could represent intercompany receivables, retention balances, or other items. The lack of trade debtors (£1,148) is unusual for a construction company and suggests revenue may be recognised through other mechanisms or the company operates as a subcontractor with different payment terms.

• Stock Increase (£18k to £110k): A 511% increase in stocks could indicate materials purchased for a significant contract. This requires monitoring for potential obsolescence or write-down risk.

• Trade Creditors Surge (£15k to £154k): The tenfold increase likely reflects project-related purchasing timing. However, if this represents stretched supplier terms, it could indicate cash flow pressure despite the healthy cash position.

Related Party Exposure: - BC UK Construction Ltd owes the company £65,428 (slightly up from £64,708) - Directors are owed £28,760 (interest-free, repayable on demand) – this was nil in 2024 - The intercompany receivable from BC UK Construction Ltd represents approximately 19% of total debtors and 11.5% of total assets – material concentration risk

4. Monitoring Points

Immediate Actions Required: 1. Group Structure Clarification: BC UK Construction Ltd holds 75%+ of shares and also shows 25-50% ownership in PSC records. The intercompany relationship and any cross-guarantees must be understood before extending credit 2. Other Debtors Breakdown: Request aged analysis of the £162,935 other debtors – understand recoverability and whether any relate to group companies 3. Trade Creditor Increase: Obtain explanation for the significant increase and confirm suppliers are being paid within terms

Ongoing Monitoring: 1. Related Party Balances: Monitor intercompany receivable from BC UK Construction Ltd and any director loan movements quarterly 2. Stock Levels: Track whether the £110k stock converts to revenue or risks write-down 3. Creditor Days: Calculate and monitor trade creditor payment terms – the construction sector often sees supply chain stress during downturns 4. Profit & Loss Performance: The company files under the small companies regime and has elected not to file a P&L. Request management accounts to verify trading profitability aligns with balance sheet growth 5. Contract Pipeline: As a 2-employee construction company, business continuity depends on contract flow. Request forward order book 6. Key Person Risk: With only 2 employees (likely the directors), consider what happens if either becomes unavailable – assess succession or key-person insurance

Financial Covenants (if facility granted): - Minimum net assets: £400,000 - Current ratio: Not below 1.5x - Limit related party receivables to no more than 25% of total assets without prior consent