Credit Analysis: DEACONCAPITAL LIMITED (06214040)

1. Credit Opinion: CONDITIONAL

DeaconCapital Limited presents a mixed credit profile. While the balance sheet shows strong equity and no external debt, the company operates as a holding vehicle for DeaconCapital Asset Management LLP, with significant inter-company exposure and reliance on investment profit allocations. Credit approval is conditional upon obtaining group guarantees and satisfactory review of the underlying LLP's financial performance. The inter-company debtor of £400,000—representing 76% of current assets—creates concentration risk that cannot be ignored.

2. Financial Strength

Balance sheet has strengthened materially, but structural concerns remain.

Positive indicators: - Net assets nearly doubled year-on-year, driven by retained profits of approximately £383,567 - No external borrowings visible on the balance sheet - Equity is comfortably positive with a healthy P&L reserve - Unqualified audit opinion received

Structural concerns: - The company is a holding entity with £440,001 in subsidiary investments (100% of DeaconCapital Asset Management LLP, increased from 95%). The parent's financial health is entirely dependent on the LLP's performance and profit distributions - A new inter-company debtor of £400,000 has appeared—amounts owed by group undertakings now dominate current assets. Realizability depends on the LLP's liquidity and willingness/ability to pay - The ultimate controlling party (Emile Chammas) controls the company through Deaconcapital Holding Limited, which owns >75% of shares. This creates potential for related-party transactions that may not prioritize creditor interests

Net current assets improved dramatically from £32,214 to £401,781, but this is misleading—remove the £400,000 inter-company debtor and net current assets drop to just £1,781, barely positive.

3. Cash Flow Assessment

Liquidity appears adequate but is vulnerable to inter-company settlement risk.

The current ratio of 4.22x appears robust. However, the composition of current assets is concerning:

• Inter-company debtor: £400,000 (76% of current assets) – This is an unsecured balance from group undertakings with no stated repayment terms. In a distress scenario, recovery depends entirely on the LLP's solvency and cash position
• Cash: £126,474 – Reasonable cash buffer, but the corporation tax liability of £108,442 is due within one year, effectively consuming most of the cash position
• No trade debtors – The company has no third-party receivables, confirming its role as a pass-through vehicle

Corporation tax has more than doubled from £52,360 to £108,442, reflecting the significant profit generated. This is a mandatory cash outflow that will reduce liquidity by approximately £108,000 when settled.

Working capital reality: After adjusting for the inter-company debtor (which may not be readily realizable) and the corporation tax liability, effective working capital is extremely thin. The company is operationally dependent on group cash flows.

Revenue model: Turnover is defined as "profit allocations from investments." This is inherently lumpy and discretionary—the LLP is not obligated to distribute profits, and distributions depend on its own profitability and regulatory capital requirements.

4. Monitoring Points

Critical metrics to watch:

1. Inter-company debtor movement – The £400,000 balance should be monitored for collection. If this balance grows or remains static over multiple periods, it suggests the LLP cannot or will not settle, raising questions about its own liquidity

2. DeaconCapital Asset Management LLP financial health – Any credit exposure ultimately depends on this entity. Request and review the LLP's filed accounts, focusing on: - Regulatory capital adequacy (FCA requirements) - Profitability and profit distribution history - Client assets under management and revenue stability - Any regulatory actions or complaints

3. Corporation tax settlement – Confirm the £108,442 liability is paid on schedule. Failure to settle tax liabilities is a strong indicator of cash stress

4. Related party transactions – Monitor for new inter-company balances, loans, or guarantees that could subordinate the company's creditors

5. Profit sustainability – The £383,567 retained profit is substantial relative to the company's size. Assess whether this reflects recurring management fee income or one-off investment gains

6. Group structure changes – The increase in LLP ownership from 95% to 100% suggests group restructuring. Understand the rationale and any implications for creditor positions

7. Filing compliance – The company changed its year-end from April to March (2023 year ended April 30, 2025 year ended March 31). Monitor that future filings remain timely

Recommended facility structure (if proceeding): - Require parent company guarantee from Deaconcapital Holding Limited and/or personal guarantee from Emile Chammas - Limit exposure relative to verified third-party cash flows, not inter-company balances - Include covenants requiring minimum net assets and timely corporation tax payments