NBC ENVIRONMENT LTD
Company number 03475126 · Monitor this company
This analysis was written by an AI from the company's public filings. It may contain errors or omissions and is not financial or professional advice.
Commercial Credit Assessment: NBC Environment Ltd
1. Credit Opinion: CONDITIONAL
Rationale: The company demonstrates strong profitability and an improving balance sheet trajectory, with backing from Rollins UK Holdings Ltd (ultimately part of NYSE-listed Rollins Inc., a major US pest control group). However, the critically low cash position (£5,778), significant debtor book (£1.74M), and recent change of control create material liquidity and integration risks that warrant mitigating conditions.
Recommended Conditions: - Parent company guarantee from Rollins UK Holdings Ltd - Minimum liquidity covenant (suggest £250k minimum cash/available facilities) - Quarterly management accounts to monitor debtor collection and cash conversion - Limit exposure to 12-month revolving facilities only
2. Financial Strength
Balance Sheet Summary (April 2022):
| Metric | Apr-22 | Dec-20 | Movement |
|---|---|---|---|
| Net Assets | £701,056 | £167,826 | +317% |
| Shareholders' Funds | £701,056 | £167,826 | +317% |
| Tangible Fixed Assets | £253,439 | £202,377 | +25% |
| Net Current Assets | £594,193 | £458,596 | +30% |
Positive Indicators: - Significant improvement from negative equity position of (£408,613) in 2019 to £701,056 by April 2022 - Modest long-term liabilities at £98,423 (down from £495,034) - Provisions of only £48,153 - Share premium of £89,994 indicates historical capital injection
Concerning Factors: - Minimal share capital (£101) and limited tangible asset base - Goodwill fully amortised/written off following liquidation of related asset - Heavy reliance on debtors for asset backing (£1.74M of £1.90M current assets)
Gearing Assessment: Conservative. Long-term debt represents only 14% of net assets. The company is equity-funded rather than leveraged, which provides resilience but may indicate limited access to or appetite for debt facilities.
3. Cash Flow Assessment
Liquidity Position - SIGNIFICANT CONCERN:
| Metric | Apr-22 | Dec-20 |
|---|---|---|
| Cash | £5,778 | £343,433 |
| Debtors | £1,739,468 | £1,504,608 |
| Current Liabilities | £1,310,767 | £1,468,847 |
| Current Ratio | 1.45:1 | 1.31:1 |
| Quick Ratio | 1.33:1 | 1.18:1 |
Critical Issue - Cash Depletion: Cash has fallen 98.3% from £343,433 to just £5,778 despite generating £910,373 profit after tax. This is the primary credit concern. Where has the cash gone?
Cash Absorption Analysis: - Profit for period: £910,373 - Dividends paid: (£100,000) - Increase in debtors: (£234,860) - Increase in stocks: (£80,312) - Decrease in long-term creditors: £396,611 - Net cash impact: Significantly negative despite profitability
The company is profitable on paper but cash-starved. The debtor book represents approximately 20% of annualised turnover (£6.77M annualised), which may be normal for B2B contract work but creates collection dependency.
Working Capital Assessment: Current ratio of 1.45:1 appears adequate, but is heavily dependent on debtor collection. If debtors aged beyond 90 days, the company could face a liquidity crisis without parent support.
Interest Coverage: Operating profit of £1,213,936 against interest of £73,909 gives coverage of 16.4x - very strong. The company can comfortably service its debt costs.
4. Monitoring Points
| Metric | Current | Watch Level | Critical Level |
|---|---|---|---|
| Cash Balance | £5,778 | <£200k | <£50k |
| Debtor Days (est.) | ~75 days | >90 days | >120 days |
| Current Ratio | 1.45:1 | <1.2:1 | <1.0:1 |
| Operating Margin | 14.3% | <10% | <5% |
| Net Assets | £701k | <£400k | <£200k |
Key Monitoring Requirements:
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Cash Position - Monthly: The near-zero cash balance must be tracked monthly. Any further deterioration requires immediate escalation.
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Debtor Collection - Monthly: Request aged debtor schedule quarterly. The £1.74M debtor book is the company's primary liquidity source. Monitor days sales outstanding and bad debt provisions.
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Parent Company Support: Confirm Rollins UK Holdings Ltd willingness to provide financial support if needed. Obtain comfort letter or guarantee.
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Integration Risk: Following the acquisition (evidenced by director changes in April 2022 - Dickson resigned, US directors appointed), monitor for operational disruption, key staff departures, or customer attrition.
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Filing Compliance: Next accounts due 30 September 2026. Ensure timely filing to maintain visibility.
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Dividend Policy: £100,000 dividend paid in period. Monitor whether parent extracts cash through dividends rather than retaining for working capital.
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Trade Creditor Days: Current creditors of £1.31M relative to cost of sales suggests approximately 96 days. Monitor for stretching of supplier terms.
Additional Context
Ownership Structure: Rollins UK Holdings Ltd holds >75% of shares and voting rights. Rollins Inc. (parent) is a NYSE-listed pest control conglomerate with revenues exceeding $2.7B. This provides significant comfort regarding ultimate recourse, though appropriate guarantees must be documented.
Business Resilience: Pest control is a relatively defensive, non-discretionary service with recurring contract revenue. The company has operated since 1997 (albeit under various names) and has national coverage with local agents. Emergency response capability suggests essential service positioning.
Management Quality: Recent transition from UK to US-dominated board creates uncertainty. The departing MD (Dickson) had significant industry experience. New directors appear to be Rollins group appointees rather than operational management. Seek clarity on day-to-day management capability.