Company Number: 13019633

Analysis Date: 2025-07-20 12:48 UTC

1. Credit Opinion: CONDITIONAL APPROVAL. Davicon Group Limited is an established private limited company with a solid market position in mezzanine floor design and manufacture. The company has demonstrated revenue growth (13% increase to £19.3m in 2024) and improved operating margins, indicating operational progress. However, it still reports an operating loss (£151k) and net loss (£292k) due primarily to goodwill amortisation. The company carries significant liabilities, resulting in net current liabilities and a negative working capital position. The directors have managed credit risk prudently, and the going concern assumption is supported by the auditor. Lending should be considered with conditions such as maintaining strict monitoring of liquidity and profitability and possibly requiring additional security or guarantees.

2. Financial Strength: The balance sheet shows fixed assets of £5.43m (including goodwill of £4.24m) and current assets of £6.36m against current liabilities of £7.28m, yielding net current liabilities of £0.92m. Long-term liabilities are £6.01m, leading to net assets of £467k, down from £507k in the prior year. Shareholders’ funds are negative at £-2.14m, reflecting accumulated losses. The high level of goodwill and intangible assets raises some impairment risk if profitability does not improve. The company’s capital structure is leveraged, and net asset value is modest relative to turnover.

3. Cash Flow Assessment: Cash on hand is minimal (£126k), and the company runs a working capital deficit, indicating tight liquidity. Debtors are substantial (£5.79m), but the company’s credit risk management and credit insurance mitigate concerns somewhat. Cash flow pressures could arise if debtor collections slow or if operational costs increase. The company’s ability to generate positive cash flow depends on converting its order book and maintaining cost control. Monitoring of cash conversion cycle and debtor ageing is critical.

4. Monitoring Points:

• Operating profitability and progress towards sustained positive EBITDA.
• Cash flow from operations and debtor collection efficiency.
• Changes in working capital, especially inventories and payables.
• Goodwill impairment indicators given the carrying value.
• Order book development and pipeline conversion rates.
• Management of credit risk and any changes in credit insurance coverage.
• Compliance with any loan covenants or financing terms.