MKODO LIMITED

Credit Opinion: APPROVE

MKODO LIMITED presents a strong credit profile supported by consistent revenue growth, robust profitability, and a healthy net asset base. The company has demonstrated a clear upward trajectory in turnover (from £10.3m in 2022 to £14.0m in 2024) and net assets (from £2.9m to £7.1m over the same period). Profit before tax of £2.6m in 2024 provides substantial debt service capacity. The audit opinion is unqualified, and all filings are up to date. The main concern is the low cash balance (£88k) relative to turnover and liabilities, but this appears to reflect investment in growth rather than distress. Group support and strong cash generation mitigate liquidity risk. Approval is recommended subject to standard covenants and monitoring.

Financial Strength

• Net Assets: £7.1m (2024) up from £5.0m (2023) – a 43% increase, indicating strong retained earnings and capital accumulation.
• Gearing: Total liabilities of £2.1m against shareholders’ funds of £7.1m give a debt-to-equity ratio of 0.3:1, which is conservative.
• Asset Growth: Total assets nearly doubled from £4.1m (2022) to £9.7m (2024), reflecting capitalised development costs and investment in fixed assets.
• Profitability: Net profit margin (after tax) of 15.2% (2024) and 15.8% (2023) shows healthy and stable margins.
• Balance Sheet Quality: Full audited accounts under FRS 102 with no qualified opinion. No evidence of material going concern uncertainties.

Cash Flow Assessment

• Cash Position: £88k (2024) is very low for a £14m turnover business, representing less than one week of revenue. This is a key weakness.
• Cash Trend: Cash has declined from £1.2m (2018) to current levels, suggesting heavy reinvestment. The strategic report confirms investment in product development (GeoLocs) and infrastructure.
• Working Capital: Net current assets not explicitly stated, but total current assets are likely significant given total assets of £9.7m and fixed assets (intangible/development) likely form a large portion. Need to monitor debtor days and creditor terms.
• Liquidity Risk: Mitigated by strong profitability and likely group support (parent company mentioned in currency risk mitigation). The company also maintains an overdraft facility? Not disclosed, but standard for such firms.

Monitoring Points

• Cash Conversion Cycle: Track debtor days and cash generation from operations. The low cash balance requires close watch – any deterioration in receivables collection could strain liquidity.
• Debt Service Coverage: Ensure EBITDA comfortably covers interest and principal payments. Current profit levels suggest ample headroom, but formal covenant testing recommended.
• Capital Expenditure: Continued high investment may pressure cash further. Ensure capex plans are funded from retained earnings or committed facilities.
• Sector Risk: iGaming is subject to regulatory changes. Monitor any adverse legislative developments in key markets.
• Director Changes: Two directors resigned in 2026 (after year-end). Ensure succession is stable and management quality remains strong.
• Group Dependency: Reliance on parent company for currency hedging and potential financial support. Review group financials if available.