HAFREN WATER LIMITED
Company number 03921245 · 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.
Commercial Credit Assessment: HAFREN WATER LIMITED
1. Credit Opinion: APPROVE
Reasoning: Hafren Water Limited presents a strong credit profile underpinned by a robust balance sheet, exceptional liquidity, and a 25-year operating history. The company carries no visible debt, maintains a current ratio exceeding 6:1, and holds cash reserves that cover total current liabilities more than four times over. While the most recent year shows a marginal decline in net assets (£2,267 decrease), this is minor within the context of a £335k equity base and follows a sustained period of growth. The environmental consulting sector provides relatively resilient, non-cyclical revenue streams. The company qualifies for small company filing exemptions, which limits full P&L visibility, but the balance sheet signals financial discipline and conservative management.
2. Financial Strength
Balance Sheet Summary (Year Ending 31 March 2025):
| Metric | 2025 | 2024 | Movement |
|---|---|---|---|
| Total Assets | £392,817 | £388,513 | +£4,304 |
| Total Liabilities | £63,053 | £57,175 | +£5,878 |
| Net Assets | £334,669 | £336,936 | -£2,267 |
| Shareholders' Funds | £334,669 | £336,936 | -£2,267 |
| Cash | £256,111 | £218,515 | +£37,596 |
Long-term Trajectory: Net assets have more than doubled over the past decade, growing from £145,494 (2016) to £334,669 (2025). This represents compound growth of approximately 9.7% annually — a solid record of value accumulation.
Capital Structure: The company is essentially debt-free. No bank borrowings, debentures, or long-term liabilities are evident. The entire capital base is funded by equity (£100 share capital + £334,569 retained profits). This is a highly conservative structure that provides significant headroom for leverage if required.
Tangible Fixed Assets: Minimal at £6,540, reflecting the asset-light nature of a consulting business. Additions of £3,454 in computer equipment suggest ongoing investment in operational capability.
Provision: A new provision of £1,635 appeared in 2025. This is immaterial in scale but should be noted — it may relate to an employment matter given the headcount reduction from 13 to 11 employees.
Assessment: Balance sheet health is strong. The company has substantial equity cushion, no gearing, and ample capacity to absorb shocks.
3. Cash Flow Assessment
Liquidity Position:
| Metric | 2025 | 2024 |
|---|---|---|
| Current Assets | £392,817 | £388,513 |
| Current Liabilities | £63,053 | £57,175 |
| Net Current Assets | £329,764 | £331,338 |
| Current Ratio | 6.23:1 | 6.79:1 |
| Quick Ratio (excl. stock) | 6.23:1 | 6.79:1 |
Note: No stock/inventory is held, so current and quick ratios are identical.
Cash Analysis: Cash at bank stands at £256,111, representing 65% of total assets and covering current liabilities 4.06 times. This is an exceptionally liquid position. Cash has grown by £37,596 (17.2%) year-on-year, suggesting positive operating cash generation.
Debtors: Trade debtors increased from £118,811 to £132,769 (+11.7%). This warrants monitoring — it may indicate growth in revenue or a slight deterioration in collection speed. The debtor days calculation would require turnover data (not disclosed), but the absolute increase is moderate.
Other debtors dropped dramatically from £51,187 to £3,937, suggesting settlement of a significant intercompany or related party balance. This likely explains the movement in working capital composition.
Creditors: Trade creditors remain stable at £14,465 (2024: £14,513). Corporation tax payable increased from £12,968 to £16,653, which is consistent with profitable trading. Other taxation and social security decreased slightly.
Working Capital Assessment: Net current assets of £329,764 remain substantial. The company can comfortably meet all near-term obligations from cash alone, without needing to realise debtors or generate additional revenue.
4. Monitoring Points
| Metric | Current Position | Watch Threshold | Rationale |
|---|---|---|---|
| Cash Balance | £256,111 | Below £150,000 | Primary liquidity indicator; significant decline would signal cash burn |
| Net Assets Trend | £334,669 | Below £300,000 | Further erosion would indicate sustained losses |
| Trade Debtors | £132,769 | Above £180,000 | Rising debtors without revenue visibility may indicate collection issues |
| Current Ratio | 6.23:1 | Below 3:1 | Would still be adequate but would represent material deterioration |
| Employee Count | 11 | Below 8 | Further reductions may indicate business contraction |
| Provisions | £1,635 | Significant increase | Employment-related provisions could signal restructuring costs |
| Parent Company Status | The Environmental Protection Group Ltd | Any insolvency events | PSC holds 75%+ control; parent distress could impact trade |
| Filing Timeliness | Current | Any overdue filings | Late filing signals governance concerns |
Additional Considerations:
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P&L Opacity: The company has elected not to file its profit and loss account. While permitted under the small companies regime, this limits visibility on revenue, margins, and profitability trends. The marginal decline in net assets suggests the company may have reported a small loss or paid dividends in 2025.
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Headcount Reduction: The drop from 13 to 11 employees could indicate cost reduction, natural attrition, or business contraction. Given this is a consulting business, headcount is a reasonable proxy for revenue capacity.
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Corporate Structure: The company is 75%+ owned by The Environmental Protection Group Limited, which also holds voting control and director appointment rights. Credit decisions should consider the financial health of the parent entity, particularly if intercompany transactions exist.
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Sector Context: Environmental consulting (SIC 74901) benefits from regulatory drivers (water quality, environmental compliance) which provide relatively stable demand. However, the sector is people-dependent and vulnerable to key person risk.