JCS JOINERY LTD

Executive Summary

JCS JOINERY LTD shows asset growth and business expansion but faces tight liquidity due to high short-term liabilities and low cash. Credit is conditionally approved contingent on improved working capital management and regular monitoring of cash flow and debt servicing. Close scrutiny of liquidity metrics and operational efficiency is essential to mitigate repayment risks.

JCS JOINERY LTD - Analysis Report

Company Number: 14434489

Analysis Date: 2025-07-29 14:17 UTC

1. Credit Opinion: CONDITIONAL APPROVAL
   JCS JOINERY LTD is a relatively new company (incorporated October 2022) operating in joinery installation. The latest accounts to 31 October 2024 show growth in fixed assets and shareholders’ funds but reveal weakening liquidity and working capital positions, with net current liabilities worsening from £6k negative in 2023 to £78.5k negative in 2024. The company carries significant short- and long-term liabilities including bank loans and hire purchase obligations totalling over £535k due within one year and £323k after one year. These elevated liabilities vs current assets and very low cash balance (£1,150) imply tight liquidity and potential difficulty in meeting short-term obligations. However, the company shows growth in fixed assets (from £115k to £477k) and net assets (from £61k to £75k), indicating investment and expansion. Given these mixed factors, credit approval should be conditional on regular monitoring of liquidity, cash flow forecasts, and possibly requiring security or personal guarantees.

2. Financial Strength:

• Fixed assets increased substantially to £477,696, driven by acquisitions of plant, machinery, and investments, showing reinvestment and growth.
• Current assets (£457,575) mainly consist of stock (£427,800), with significantly lower debtors (£28,625) and minimal cash (£1,150), suggesting inventory-heavy working capital.
• Current liabilities have more than doubled to £536,080, creating a net current liabilities deficit of £78,505, which is a concern for short-term solvency.
• Long-term liabilities have increased sharply to £323,301, mainly bank loans and finance lease obligations, increasing financial leverage and debt servicing risk.
• Net assets stand at £75,890, a modest equity base relative to total liabilities, indicating limited buffer against financial stress.

3. Cash Flow Assessment:

• The very low cash position and negative working capital indicate potential cash flow constraints.
• High trade creditors (£326k) and other short-term liabilities require prompt settlement, but low cash and debtor balances limit liquidity flexibility.
• The increase in stock levels may tie up cash and increase risk of obsolescence or write-downs.
• Debt repayments including hire purchase and bank loans will place further strain on cash flows.
• The company needs to maintain tight control of receivables and stock turnover and ensure robust cash flow forecasting to avoid liquidity shortfalls.

4. Monitoring Points:

• Liquidity ratios (current ratio, quick ratio) to track ongoing short-term solvency.
• Cash flow forecasts and actual cash balances monthly to anticipate and manage liquidity gaps.
• Stock turnover rates and debtor collection periods to ensure working capital efficiency.
• Debt servicing capability including interest and principal payments relative to operating cash flows.
• Any changes in credit terms with suppliers and customers that may affect cash flow timing.
• Directors’ actions and business strategy to improve profitability and reduce reliance on debt financing.

Executive Summary:
JCS JOINERY LTD is a growing joinery installation company with expanding asset base but currently strained liquidity and high debt levels. The company’s limited cash reserves and negative working capital pose short-term repayment risks, warranting conditional credit approval with close monitoring of cash flow and financial leverage. The directors need to demonstrate effective working capital management and debt servicing to maintain creditworthiness.