CALEDONIA ASSET FINANCE LTD

Executive Summary

Caledonia Asset Finance Ltd demonstrates a stable financial position with increasing net assets and positive working capital, supported by timely statutory compliance. However, risks arise from significant finance lease commitments secured on assets, increased deferred tax liabilities, and reliance on related party funding. Further review of lease terms, tax provisions, and governance arrangements is recommended to fully assess financial sustainability and liquidity risks.

CALEDONIA ASSET FINANCE LTD - Analysis Report

Company Number: SC677643

Analysis Date: 2025-07-29 19:11 UTC

1. Risk Rating: MEDIUM
   The company's financial position shows moderate net assets and positive working capital, indicating an ability to meet short-term obligations. However, the presence of significant finance lease obligations and a material provision for deferred tax introduces some solvency and liquidity risk. The company is relatively young (incorporated in 2020) and operates in a specialized financial intermediation sector, which may carry operational risk.

2. Key Concerns:

• Finance Lease Obligations: The company has substantial obligations under finance leases (totaling approximately £124k within one year and £55k beyond one year), secured against tangible assets. This could pressure cash flows, especially if asset utilization or income generation is inconsistent.
• Deferred Tax Provision Increase: The deferred tax liability nearly doubled from £25.6k in 2023 to £47.7k in 2024, which may reflect timing differences or increased taxable temporary differences; this could affect future cash tax outflows.
• Concentration of Directors and Related Party Balances: All directors and secretary reside at the same address, with related party balances (£5.8k due to key management personnel and £33.5k due from related parties) that are interest-free and lack fixed repayment terms, potentially indicating dependency on director funding and associated governance risks.

3. Positive Indicators:

• Growing Net Assets and Working Capital: Net assets increased from £138.8k in 2023 to £147.2k in 2024, and net current assets are positive at £58.6k, showing improved liquidity relative to current liabilities.
• Tangible Asset Growth: Tangible fixed assets increased significantly (net book value rose from £102.6k to £191.2k), indicating investment in operational capacity.
• Compliance and Filing Status: All statutory filings (accounts and confirmation statements) are up to date with no overdue filings or penalties, suggesting good regulatory compliance.

4. Due Diligence Notes:

• Investigate the nature and terms of finance lease agreements, including asset utilization and lease maturity profile, to assess cash flow impact and refinancing risk.
• Review the composition and cause of the deferred tax provision increase and any potential future tax liabilities.
• Examine the substance and recoverability of related party balances as well as the governance structure given the concentration of directors and related parties at one address.
• Assess revenue trends and profitability (not disclosed here) to confirm operational sustainability and ability to service debts.
• Confirm whether the company’s growth strategy aligns with its asset base and liabilities, especially given the relatively small share capital (£200).