Credit Analysis: Fiveways Financial Planning Limited

1. Credit Opinion: APPROVE

This well-established financial planning firm presents a strong credit profile characterised by consistent profitability, excellent liquidity, and minimal leverage. Net assets have nearly tripled from £330k (2017) to £931k (2025), demonstrating sustained value creation. The cash position of £506k exceeds total liabilities by almost 2.8x, providing substantial debt service capacity. The only notable feature requiring context is the 2023-to-2024 decline in net assets from £1.23m to £871k, which appears to reflect a dividend distribution rather than trading deterioration, given that profitability resumed immediately in FY2025 with retained earnings increasing by £60k. The company merits approval on standard terms.

2. Financial Strength

Balance Sheet Summary (FY2025): - Net Assets: £931,038 (up from £871,196 in FY2024) - Total Assets: £1,112,448 - Total Liabilities: £181,095 (all current) - Shareholders' Funds: £931,038 - Share Capital: £8 (minimal)

Asset Composition: - Fixed Assets: £234,748 (21% of total) - Intangibles (Goodwill): £209,166 — amortising over 10 years from acquisition - Tangibles: £5,232 - Investments (subsidiary): £20,350 - Current Assets: £877,700 (79% of total) - Debtors: £371,763 - Cash: £505,937

Key Ratios: - Current Ratio: 4.84x (Current Assets £877,700 / Current Liabilities £181,095) - Quick Ratio: ~4.84x (service business, negligible inventory) - Gearing: Negligible — no long-term debt - Cash to Total Liabilities: 2.79x

Observations: The balance sheet is exceptionally strong for a SME. Liabilities are modest and entirely current, suggesting trade creditors and operational payables rather than debt. The company carries no long-term borrowings. Goodwill at £209k represents 22% of net assets, which is a consideration in a distressed scenario where intangible values may not be recoverable. However, the tangible net worth of approximately £722k remains robust.

The FY2023 spike to £1.23m net assets followed by the FY2024 reduction to £871k strongly suggests a substantial dividend distribution in FY2024 (approximately £354k). This is not unusual for owner-managed IFA firms and indicates the business generates sufficient surplus to reward shareholders while retaining adequate capital.

Long-term Trajectory: | Year | Net Assets | Cash | Retained Earnings Growth | |------|------------|------|--------------------------| | 2017 | £329,929 | £371,149 | — | | 2018 | £510,345 | £395,829 | £180,416 | | 2019 | £605,244 | £497,402 | £94,899 | | 2020 | £675,907 | £205,007 | £70,663 | | 2021 | £892,334 | £274,777 | £216,427 | | 2022 | £1,086,220 | £335,029 | £193,886 | | 2023 | £1,225,458 | £525,804 | £139,238 | | 2024 | £871,196 | £382,531 | (net distribution) | | 2025 | £931,038 | £505,937 | £59,842 |

The eight-year trend confirms consistent value creation, with the FY2024 dip attributable to shareholder distribution rather than trading losses.

3. Cash Flow Assessment

Liquidity Position: The company's liquidity is excellent. Cash of £505,937 provides substantial headroom against current liabilities of £181,095. The current ratio of 4.84x far exceeds the typical benchmark of 1.5x for service businesses.

Working Capital Analysis: - Net Current Assets: £696,605 - Debtors: £371,763 — likely a mix of fee income receivable and potentially platform-related receivables - Cash represents 57% of current assets, indicating strong conversion of profits to cash

Cash Flow Indicators (FY2025): - Cash increased by £123,406 (from £382,531 to £505,937) - Debtors decreased by £15,616 — improved collections - Current liabilities increased modestly by £6,680 - Retained earnings increased by £59,842

The combination of growing cash reserves, reducing debtors, and increasing retained earnings signals healthy operational cash generation. The business appears to convert profits to cash effectively, which is critical for debt service capability.

Debt Service Capacity: Based on retained earnings growth of approximately £60k (after dividends) and strong cash generation, the company could comfortably service moderate debt facilities. EBITDA is likely in the range of £100-120k (retained earnings plus amortisation of ~£42k), providing reasonable coverage for any new debt.

4. Monitoring Points

Additional Considerations:

1. Regulatory Environment: As an IFA firm (SIC 66110), the company operates under FCA regulation. Any regulatory sanctions or complaints could materially impact the business.

2. Key Person Risk: The business relies on Lawson and Bloodworth as PSCs and likely principal fee-earners. Appropriate key person insurance and succession planning should be confirmed.

3. Dividend Discipline: The FY2024 distribution of approximately £354k was substantial but appears sustainable given the accumulated reserves. Monitoring should ensure distributions remain within profit generation.

4. Goodwill Amortisation: Annual amortisation of approximately £42k will reduce this asset to zero by approximately FY2029. This is a non-cash expense but reduces reported net assets over time.

5. Subsidiary Investment: The £20,350 investment in a subsidiary should be understood — any contingent liabilities or inter-company transactions should be clarified.