I.T. ALLIANCE N.I. LIMITED

Credit Opinion: DECLINE On a standalone basis, I.T. Alliance N.I. Limited presents an unacceptable credit risk due to severe balance sheet insolvency and persistent losses. The company’s net liabilities stand at £523,822, and it operates with a significant working capital deficit of £524,353. While operating performance improved in 2019, the bottom line remains a loss, heavily suppressed by substantial interest charges. The entity's ongoing viability is entirely dependent on the continued forbearance of related party/group creditors, who are owed £5.57 million. Without an explicit, legally binding parent company guarantee, credit exposure is unwarranted. If a group guarantee is secured, this decision could be revisited as a CONDITIONAL approval.

Financial Strength: The financial strength is critically impaired. The company has been technically insolvent since 2016, with net assets deteriorating from a positive £376,279 in 2015 to a deficit of £523,822 by the end of 2019. Accumulated losses have reached £623,822, entirely eroding the £100,000 share capital. The balance sheet is heavily distorted by intercompany financing: £4.5 million in "Other debtors" (likely group receivables) and £5.57 million in "Other creditors" (likely group payables). This related-party net balance means the company is fundamentally a pass-through vehicle reliant on group treasury. Tangible fixed assets are negligible at just £531, offering zero collateral value for secured lending.

Cash Flow Assessment: Liquidity is exceptionally tight and non-existent on a standalone basis. Current assets total £5.64 million, but £4.5 million of this is tied up in long-term "Other debtors," leaving only £762k in trade debtors and £158k in cash to service £6.17 million in current liabilities. This results in a severe working capital shortfall. Operationally, the company showed improvement: turnover fell 13% to £4.02M, but gross profit margins remained healthy at approximately 24%, and operating profit swung to a positive £92k (from a £22k loss in 2018). However, £116k in interest charges—presumably on group debt—pushed the pre-tax position back to a £24k loss. The company cannot service third-party debt from its own operational cash flows.

Monitoring Points: - Group Support: Verify the exact nature of the £5.57M "Other creditors" and secure a formal parent company guarantee or letter of comfort if any credit facility is to be considered. - Intercompany Balances: Monitor the collectability of the £4.5M "Other debtors" due after one year, as this represents the company's primary asset. - Revenue Trajectory: Investigate the 13% drop in turnover and assess whether the 2019 operating profit improvement is sustainable amidst Covid-19 related disruptions noted by the directors. - Interest Burden: Track the £116k annual interest charge, which currently exceeds the company's standalone operating cash generation capability.