HARLAN ELECTRICAL LTD

Executive Summary

Harlan Electrical Ltd demonstrates operational liquidity and asset growth but faces financial strain from increased borrowing and a steep decline in net equity. The company’s current asset base covers current liabilities, but rising finance obligations raise risk. Conditional credit approval is advised with stringent monitoring of cash flow, debt servicing, and equity position to ensure ongoing creditworthiness.

HARLAN ELECTRICAL LTD - Analysis Report

Company Number: 14305847

Analysis Date: 2025-07-20 16:59 UTC

1. Credit Opinion: CONDITIONAL APPROVAL
   Harlan Electrical Ltd is a newly incorporated electrical installation business showing moderate asset growth but a significant decrease in net equity in the latest year. The company carries finance lease and bank loan obligations which increase financial risk. While current assets exceed current liabilities, a sharp fall in net assets from £20,297 (2024) to £3,679 (2025) indicates depletion of reserves, possibly due to increased gearing or losses not explicitly disclosed. Directors appear to have relevant industry experience. Credit approval is recommended with conditions including regular monitoring of cash flow and capital structure, and possibly requiring personal guarantees or collateral due to the modest equity base and financing structure.

2. Financial Strength
   The balance sheet shows a fixed asset increase from £5,700 to £14,698, reflecting recent capital expenditure financed partly through hire purchase and bank loans totaling nearly £30,000 due after one year. Current assets remain stable around £50k, with cash improving to £8,259, but debtors decreased to £42,207. Current liabilities reduced to £31,590, improving net current assets to £18,876 from £14,597. However, net assets dropped sharply from £20,297 to £3,679, largely due to recognition of long-term finance obligations. Shareholders' funds are minimal at £3,579, indicating limited buffer for absorbing losses or shocks.

3. Cash Flow Assessment
   Cash at bank increased substantially to £8,259 from £379, suggesting improved liquidity. Net current assets of £18,876 provide a reasonable working capital cushion. However, the presence of bank loans (£3,621 short term and £20,708 long term) and hire purchase commitments (£12,743 total) increases fixed financial charges. Trade creditors are low at £1,410, reflecting good supplier payment discipline. Debtor levels decreased but remain significant (£42,207), so timely collection is critical. The company’s ability to meet short-term obligations appears adequate, but the rising debt profile demands close cash flow management.

4. Monitoring Points

• Monitor net asset position and equity levels to ensure no further erosion.
• Track cash flow closely, particularly debtor collection and the servicing of finance leases and bank loans.
• Review operating profitability and any losses affecting reserves, as P&L details are not provided.
• Watch for timely filing of accounts and compliance documents to avoid penalties.
• Evaluate management’s plans for debt reduction or equity injection to strengthen capital structure.
• Assess any contingent liabilities or off-balance sheet risks periodically.