CIRCUIT ELECTRICAL TESTING LIMITED
Company number 06281511 · Monitor this company
This analysis was written by an AI from the company's public filings. It may contain errors or omissions and is not financial or professional advice.
Credit Assessment: Circuit Electrical Testing Limited
1. Credit Opinion: CONDITIONAL
The company demonstrates a strongly positive financial trajectory with net assets nearly doubling from £76,771 to £150,117 in the latest year, continuing recovery from a nadir of £6,340 in 2022. However, a significant related party loan of £412,285 advanced to Croft Myl Ltd (controlled by the same directors) raises material concerns about asset recoverability and whether company resources are being deployed in the interests of all creditors. Any credit facility should be conditional upon satisfactory clarification of this inter-company exposure and appropriate covenants to protect the bank's position.
2. Financial Strength
Balance Sheet Composition (Year Ending 31 March 2026):
| Category | £ | % of Total Assets |
|---|---|---|
| Fixed Assets | 8,396 | 1.4% |
| Current Assets | 606,546 | 98.6% |
| Total Assets | 614,942 | 100% |
| Category | £ |
|---|---|
| Current Liabilities | 380,134 |
| Long-term Liabilities | 84,691 |
| Total Liabilities | 464,825 |
| Net Assets | 150,117 |
Key Observations:
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Gearing: Total liabilities to net assets ratio stands at 3.1:1, indicating moderate leverage. Bank debt totals approximately £253,729 (current overdraft/loans of £174,664 plus £79,065 due within 1-2 years), representing a substantial commitment relative to the equity base.
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Equity Trajectory: Shareholders' funds have improved significantly from £6,340 (2022) to £150,117 (2026), demonstrating genuine retained profit generation. However, the equity base remains thin relative to total assets, with net assets representing just 24.4% of total assets.
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Related Party Exposure: The £412,285 loan to Croft Myl Ltd represents 67% of total assets and 72% of debtors. This is an exceptionally concentrated exposure to a single related entity. The loan is unsecured and repayable on demand, but the ability to enforce repayment depends entirely on Croft Myl Ltd's solvency and liquidity. This warrants urgent investigation.
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Tangible Net Worth: If the related party loan were written off, net assets would fall to approximately -£262,168, rendering the company insolvent. This underscores the criticality of this asset to the balance sheet.
3. Cash Flow Assessment
Working Capital Position:
| Metric | 2026 | 2025 | Movement |
|---|---|---|---|
| Current Assets | £606,546 | £562,020 | +£44,526 |
| Current Liabilities | £380,134 | £415,086 | -£34,952 |
| Net Current Assets | £226,412 | £146,934 | +£79,478 |
| Current Ratio | 1.60 | 1.35 | +0.25 |
| Quick Ratio (ex-stock) | 1.52 | 1.29 | +0.23 |
Liquidity Analysis:
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Cash Position: Only £12,959 held at year-end against current liabilities of £380,134 – a cash coverage ratio of just 0.03:1. The business is heavily reliant on debtor collection and overdraft facilities to meet near-term obligations.
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Debtors Quality: Trade debtors of £131,182 are reasonable, but "other debtors" of £431,951 dominate the current asset book. The related party loan accounts for the vast majority of this balance. Stripping out the inter-company loan, the current ratio falls to approximately 0.48:1, revealing acute liquidity vulnerability.
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Bank Facilities: Bank loans and overdrafts of £174,664 (current) suggest significant reliance on revolving credit facilities. The reduction from £203,466 in 2025 indicates some deleveraging, which is positive.
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Working Capital Improvement: Net current assets improved by £79,478, driven by both asset growth and liability reduction. However, this improvement is substantially attributable to the increase in the related party loan (from £368,520 to £412,285), not operational cash generation.
Cash Flow Concern:
The company appears to be operating as a financing vehicle for its directors' other business interests. Cash generated from electrical testing operations appears to be flowing out to Croft Myl Ltd rather than being retained for debt service or working capital needs. This pattern is inconsistent with a borrower prioritising repayment obligations.
4. Monitoring Points
| Priority | Metric | Current Position | Target/Concern Threshold |
|---|---|---|---|
| Critical | Related party loan to Croft Myl Ltd | £412,285 | Must obtain financials of Croft Myl Ltd; consider requiring repayment schedule or security |
| Critical | Debtors concentration (inter-company) | 72% of total debtors | Should not exceed 30% without adequate security |
| High | Cash to current liabilities ratio | 0.03:1 | Minimum 0.15:1 |
| High | Bank debt to net assets | 1.69:1 | Monitor for further leveraging |
| Medium | Employee headcount | 18 (down from 20) | Investigate cause – cost reduction or attrition? |
| Medium | VAT creditor | £79,202 | Significant and growing; verify payment status |
| Low | Filing compliance | Up to date | Continue monitoring |
| Low | Net assets trajectory | £150,117 | Positive trend; ensure continuation |
Recommended Conditions for Facility Approval:
- Obtain and review the latest financial statements of Croft Myl Ltd to assess recoverability of the £412,285 loan
- Require a first charge or debenture over company assets as security
- Include a negative pledge preventing further advances to related parties without bank consent
- Mandate minimum cash coverage covenants (e.g., minimum current ratio of 1.5:1 excluding inter-company balances)
- Request personal guarantees from Mr and Mrs Nolan given their control and the inter-company exposure
- Monitor quarterly with particular focus on related party transaction movements