ENCOMPASS CORPORATION GROUP HOLDINGS LIMITED

Executive Summary

Encompass Corporation Group Holdings Limited is a growing compliance automation software company with strong market recognition and equity backing. Despite robust revenue growth and strategic acquisitions, the company faces liquidity constraints and ongoing operating losses, requiring conditional credit approval dependent on continued capital support and close cash flow monitoring. The company’s strong equity base and increasing ARR provide a sound platform for future profitability improvements.

ENCOMPASS CORPORATION GROUP HOLDINGS LIMITED - Analysis Report

Company Number: 12535966

Analysis Date: 2025-07-29 14:12 UTC

1. Credit Opinion: CONDITIONAL APPROVAL
   Encompass Corporation Group Holdings Limited is an active private limited company operating primarily as a holding company in the compliance automation software sector. The company demonstrates strong market positioning and growth, evidenced by a 21.6% revenue increase in 2023 and a 45% growth in contracted Annual Recurring Revenue (ARR). However, the group continues to operate at a loss and is investing heavily in growth and acquisitions, which presents a risk to near-term profitability and liquidity. The credit approval is conditional on continued capital support and monitoring of cash flow adequacy to cover operating and investment needs.

2. Financial Strength:
   The group’s financial structure shows very substantial shareholders’ funds (£60.3m as of 31 December 2023), indicating significant equity backing. Fixed assets stand at £74m, reflecting investments likely tied to intellectual property or capitalised development costs. However, current assets are minimal (£268k) compared to current liabilities (£1.5m), resulting in negative working capital and potential short-term liquidity pressure. This is a marked contrast to prior years (e.g., 2022 current assets £11.9m vs current liabilities £10.5k). The reduction in current assets and increase in short-term liabilities suggests that much of the liquidity might be tied up in long-term assets or that recent acquisitions have affected working capital structure. The company’s balance sheet is strong on equity but weak on short-term liquidity.

3. Cash Flow Assessment:
   Cash on hand has dramatically reduced from £10.9m in 2022 to £268k in 2023, indicating significant cash utilisation over the year, likely due to acquisitions and investment in product development. Current liabilities have increased substantially, raising concerns about the company’s ability to meet short-term obligations from liquid resources. The company’s strategic focus on revenue growth and operational efficiency improvements is positive, but the operating loss and cash burn necessitate close monitoring of cash flow forecasts and capital raising plans. The company states a going concern basis with no identified material uncertainties, but liquidity remains a key risk.

4. Monitoring Points:

• Liquidity and working capital trends, especially cash balances versus short-term liabilities.
• Progress towards profitability and operating cash flow generation to reduce dependence on external capital.
• Impact and integration success of recent acquisitions (CoorpID and Blacksmith KYC) on revenues and costs.
• Client retention and revenue renewal rates to sustain ARR growth and reduce churn.
• Management of cybersecurity and regulatory compliance risks given the company’s sensitive data environment.
• Continued corporate governance adherence and director conduct, noting no disqualifications or red flags.
• Economic and currency risk exposure given global operations.