G.E.M.S.(SW) LTD.
Company number 04467562 · 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 Analysis: G.E.M.S.(SW) LTD.
1. Credit Opinion: APPROVE
Rationale: This is a well-established, cash-rich business with an exceptionally strong balance sheet and no debt concerns. The company demonstrates consistent wealth accumulation over a 22-year trading history, with net assets growing from £64,924 (2017) to £167,434 (2024). The current ratio of 8.2x and cash reserves of £180,358 against total liabilities of just £23,089 indicate negligible default risk. The only caveat is key-person dependency given the two-person operation, but this is mitigated by the absence of any debt servicing obligations.
2. Financial Strength
Balance Sheet Composition (FY2024):
| Item | £ | % of Total Assets |
|---|---|---|
| Cash at bank | 180,358 | 94.5% |
| Trade debtors | 2,532 | 1.3% |
| Other debtors | 3,300 | 1.7% |
| Stocks | 2,725 | 1.4% |
| Tangible fixed assets | 1,895 | 1.0% |
| Total Assets | 190,883 | 100% |
| Liabilities | £ |
|---|---|
| Trade creditors | 140 |
| Taxation & social security | 18,317 |
| Other creditors | 4,632 |
| Deferred tax | 360 |
| Total Liabilities | 23,449 |
Key Observations:
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Equity position is dominant: Net assets of £167,434 represent 87.7% of total assets. The business is essentially self-funded with negligible external obligations.
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Cash is the primary asset: At 94.5% of total assets, the company holds an unusually high cash balance. This suggests either: (a) retained profits accumulating without distribution, or (b) advance payments received for contracted work. The consistent year-on-year cash growth suggests profitable trading rather than timing anomalies.
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Goodwill fully amortised: The original £45,000 goodwill (likely from an acquisition) has been written down to nil, meaning the balance sheet now reflects only tangible net asset value.
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Minimal leverage: Gearing is effectively zero. There are no long-term borrowings, and current liabilities consist almost entirely of tax obligations (£18,317) and other creditors (£4,632).
Net Asset Trajectory:
| Year | Net Assets | YoY Growth |
|---|---|---|
| 2017 | £64,924 | - |
| 2018 | £83,108 | +28.0% |
| 2019 | £98,201 | +18.2% |
| 2020 | £107,345 | +9.3% |
| 2021 | £86,170 | -19.7% |
| 2022 | £116,641 | +35.3% |
| 2023 | £139,898 | +19.9% |
| 2024 | £167,434 | +19.7% |
The 2021 dip (likely pandemic-related for an electrical installation business) recovered swiftly, and the growth trajectory has been restored. The compound annual growth rate over 7 years is approximately 14.6%.
3. Cash Flow Assessment
Liquidity Position:
| Metric | 2024 | 2023 |
|---|---|---|
| Current Assets | £188,988 | £159,401 |
| Current Liabilities | £23,089 | £21,346 |
| Current Ratio | 8.19x | 7.46x |
| Quick Assets (ex-stock) | £186,263 | £156,281 |
| Quick Ratio | 8.07x | 7.32x |
| Cash | £180,358 | £143,315 |
Working Capital Analysis:
- Net current assets of £165,899 provide substantial headroom for operational requirements.
- Working capital increased by £27,844 (20.2%) year-on-year, indicating strengthening liquidity.
- Debtors decreased from £12,893 to £5,832 (54.8% reduction), suggesting either improved collections or lower revenue in the period. Trade debtors specifically fell from £8,943 to £2,532.
Implied Profitability:
Retained earnings increased from £139,798 to £167,334, a rise of £27,536. This represents the minimum profit after tax retained in the business (assuming no dividends were paid, which appears likely given the minimal share capital of £100 and no dividend disclosures).
Cash Generation Quality:
Cash increased by £37,043 year-on-year, exceeding the retained earnings increase of £27,536. This £9,507 differential is explained by working capital movements—primarily the reduction in debtors and modest changes in creditors. The cash conversion appears strong.
Related Party Position:
Only £1,816 is owed to the directors (Mr & Mrs Macdonald), interest-free with no set repayment date. This is immaterial and indicates the business is not reliant on director funding.
4. Monitoring Points
Key Metrics to Watch:
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Revenue trend: The P&L is not filed (small company exemption). Request management accounts to verify turnover is stable or growing. The reduction in trade debtors from £8,943 to £2,532 warrants clarification—it may reflect faster collection or lower sales.
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Cash utilisation: £180,358 in cash for a 2-person operation is significant. Understand whether this is: (a) accumulated retained earnings awaiting deployment, (b) advance payments for contracted work, or (c) provisions for anticipated expenditures.
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Key-person risk: The business has only 2 employees (likely the director-shareholders). Any health or retirement event could impact operations. Consider requiring key-person insurance as a condition for larger facilities.
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Tax liability management: Taxation and social security of £18,317 represents 79.3% of current liabilities. Ensure this is being managed to current-year obligations and not accumulating arrears.
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Fixed asset replacement: Tangible assets are heavily depreciated (net book value of £1,895 against original cost of £31,702). Motor vehicles and equipment may require replacement, which could draw down cash reserves.
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Industry conditions: Electrical installation (SIC 43210) is subject to construction cycle fluctuations. Monitor order books and pipeline to ensure continued revenue generation.
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Director succession: Both PSCs are likely of mature age given the company's 22-year history. Understand succession planning and whether the business has longevity beyond the current owners.