MACAULAY DEVELOPMENTS LTD

Executive Summary

Macaulay Developments Ltd demonstrates active business growth evidenced by rising work in progress but faces significant financial strain due to increased long-term debt and negative equity. While current liabilities have decreased, the company’s liquidity is pressured by reduced cash balances and high gearing. Conditional credit approval is recommended, with close monitoring of cash flows, project completions, and debt servicing capability to manage elevated financial risk.

MACAULAY DEVELOPMENTS LTD - Analysis Report

Company Number: 13555081

Analysis Date: 2025-07-19 12:52 UTC

1. Credit Opinion: CONDITIONAL APPROVAL
   Macaulay Developments Ltd is a relatively new building development company with a mixed financial profile. The company has shown significant growth in current assets—particularly work in progress stock—from £816k in 2023 to £1.27M in 2024, indicating active project development. However, the company’s net liabilities have widened sharply, with shareholders’ funds deteriorating from a positive £92k in 2023 to a negative £407k in 2024. This negative equity position is due to a substantial increase in long-term liabilities (bank borrowings and other creditors) from £990k to £1.63M within the year. The company’s ability to service these higher debts depends on successful project completions and cash flow generation going forward. Given the negative net assets and increased gearing, credit approval should be conditional on ongoing monitoring of cash flows, contract pipeline, and debt servicing capacity.

2. Financial Strength:
   The company’s fixed assets are minimal at £24.6k and have slightly decreased. Current assets rose significantly to £1.32M, mainly due to increased work in progress stock, reflecting ongoing projects. Current liabilities fell from £185k to £124k, improving short-term liquidity metrics. However, long-term liabilities have surged by over 60% to £1.63M, primarily bank borrowings (£1.2M) and other creditors. This has resulted in negative net assets of £407k, signaling balance sheet weakness and a reliance on external financing. The company is highly leveraged, which increases financial risk, especially if project sales are delayed or costs overrun. The small fixed asset base means limited collateral coverage for lenders.

3. Cash Flow Assessment:
   Cash at bank dropped significantly from £228k to £48k, which, combined with rising long-term debt, suggests pressure on liquidity. Debtors remain low at £5k, implying limited receivables turnover risk. The high level of work in progress stock ties up capital and could impair liquidity if projects are not converted to sales promptly. Current liabilities decreased, improving short-term liquidity, but the large increase in long-term borrowings implies reliance on external funding rather than operational cash generation. The company’s cash flow is likely volatile, dependent on project completions and client payments. There is no indication of overdrafts or short-term bank borrowing for 2024, which is positive, but cash reserves are thin relative to debt.

4. Monitoring Points:

• Track quarterly cash flow statements to ensure sufficient liquidity to meet interest and principal repayments.
• Monitor progress and sales of development projects to convert work in progress into cash.
• Watch debt covenants and refinancing risks given increased long-term borrowings.
• Review any changes in creditors’ payment terms or delays in receivables.
• Assess directors’ plans for improving equity or reducing leverage, such as capital injections or asset disposals.
• Keep an eye on profit and loss account trends once available to evaluate operational profitability and debt servicing capacity.