Credit Analysis: BRAY & SON LIMITED

1. Credit Opinion: APPROVE

Bray & Son Limited presents a strong credit profile for commercial lending facilities. The company demonstrates consistent equity growth over a 23-year trading history, maintains a virtually debt-free capital structure, and holds substantial cash reserves. The recent acquisition (evidenced by new goodwill of £112,500) introduces moderate integration risk but does not undermine the overall financial resilience. The warehousing and storage sector provides relatively stable, recession-resistant revenue streams. Recommended for standard commercial terms.

2. Financial Strength

Balance Sheet Summary (2025 vs 2024):

Key Observations:

• Equity Trajectory: Net assets have tripled from £354,895 (2016) to £1,062,981 (2025). This represents sustained organic growth and profit retention over a decade. The business has compounded equity at approximately 13% annually.

• Leverage Position: The company is essentially unlevered. Long-term creditors stand at only £8,448 against equity of £1.06M. The debt-to-equity ratio is negligible at less than 1%. This provides substantial capacity for new borrowing.

• Goodwill Acquisition: The appearance of £112,500 in intangible assets (goodwill) in 2025 is a material development. This indicates the company has acquired another business. Goodwill is amortised over 10 years, suggesting an annual charge of ~£11,250. The acquisition warrants understanding of integration progress and whether the purchase price was justified by earnings contribution.

• Tangible Net Worth: Excluding goodwill, tangible net assets are £950,481 — still a robust position and well above prior year levels.

• Provisions: The £50,964 provision (up from £40,266) likely relates to deferred tax on property revaluation or unrealised gains. This is typical for asset-heavy warehousing businesses and not a concern.

3. Cash Flow Assessment

Liquidity Analysis:

Cash Flow Indicators:

• Retained Earnings Growth: £955,852 to £1,062,881 represents approximately £107,029 profit retained in the year. This is a healthy level for a business of this size.

• Cash Decline: Cash reduced by £49,466 despite profitability. This is explained by:

• Acquisition consideration (goodwill of £112,500)
• Increased debtors (£81,395 increase)
• Increased current liabilities (£64,460 increase)

The cash outflow for acquisition and working capital expansion is manageable given the starting cash position.

• Debtors Expansion: The 19% increase in debtors (from £431,307 to £512,702) is notable. This could indicate:
• Revenue growth (positive)
• Longer payment terms or slower collections (requires monitoring)
• Acquisition-related debtor consolidation

Without P&L data (small company exemption), debtor days cannot be precisely calculated, but the absolute level warrants attention.

• Working Capital Headroom: Net current assets of £786,457 provide substantial buffer. Even after the decline from £824,488, the current ratio of 4.7x is exceptionally strong — well above the 1.5x threshold typically required for lending covenants.

• Creditor Increase: Current liabilities rose 43.6% to £212,290. This likely includes acquisition-related trade creditors or deferred consideration. The company is not stretching trade payables aggressively — creditors are well-covered by current assets.

4. Monitoring Points

High Priority:

1. Acquisition Integration: The £112,500 goodwill entry signals a business purchase. Request details on: - Target company name and financials - Integration progress and synergy realisation - Whether deferred consideration remains outstanding - Impact on group cash flow and working capital

2. Debtor Quality: With debtors at £512,702 (38% of total assets), request: - Aged debtor schedule - Top 10 customer concentrations - Bad debt history and provision adequacy - Debtor days trend (if available from management accounts)

3. Revenue and Profitability: The company files under small company exemption, so no P&L is available. Request management accounts to assess: - Revenue trajectory - Operating margins - EBITDA for debt service coverage calculations

Medium Priority:

4. Cash Conversion: Monitor whether the debtor increase converts to cash in subsequent periods. A sustained increase in debtor days could indicate working capital stress.

5. Further Acquisition Activity: Given the 2025 acquisition, assess whether management intends further expansion. Additional leverage for acquisitions would alter the risk profile.

6. Provisions: Track the provision balance (£50,964). If this relates to property-related deferred tax, understand the potential crystallisation triggers.

Standard Monitoring:

7. Filing Compliance: Accounts are current and not overdue. Confirmation statement is up to date. No concerns.

8. Director Conduct: No disqualification records noted. The Bray family has operated this business for over two decades, demonstrating commitment and stewardship.

9. Sector Risk: Warehousing and storage for land transport is positioned well for current logistics demand. Monitor for any downturn in freight/transport volumes that could reduce storage demand.

Summary Assessment:

Bray & Son Limited is a well-established, family-owned warehousing business with a strong balance sheet, minimal leverage, and a proven track record of equity accumulation over 23 years. The 2025 acquisition introduces moderate integration risk but the financial position comfortably absorbs this. Liquidity is excellent with a 4.7x current ratio and £484k in cash. The primary information gap is the absence of P&L data due to small company filing exemptions, which should be addressed through management accounts. Credit appetite is positive — the business can comfortably service additional debt obligations.