CREDIT ANALYSIS: PROLICHT UK LIMITED

1. CREDIT OPINION: CONDITIONAL

The business demonstrates a strongly positive financial trajectory with net assets growing from £149,902 (2021) to £355,373 (2025) and a healthy cash position of £313,405. However, the credit decision is conditional due to significant short-term creditor reliance (£975,059 due within one year), a debtor book of £1,002,013 that requires quality assessment, and the company's status as an apparent subsidiary of a German parent entity—meaning creditworthiness may depend on group structure and intercompany arrangements that are not transparent from these filings alone.

Key Conditional Requirements: - Parent company guarantee or comfort letter from Prolicht GmbH (or relevant German parent) - Debtor aging analysis to confirm collectibility of the £1M outstanding - Clarification of creditor composition (trade vs. intercompany) - Confirmation of ongoing parent company support arrangements

2. FINANCIAL STRENGTH

Balance Sheet Evolution

Positive Indicators: - Net assets have more than doubled over four years, reaching £355,373 - P&L reserves grew by £138,771 in 2025 alone (from £168,598 to £307,369), indicating strong profitability - Share capital stable at £48,004—no dilution or impairment indicators - Tangible fixed assets minimal (£860), suggesting asset-light operational model appropriate for an installation business

Concerning Indicators: - Gearing remains elevated: total liabilities to net assets ratio of 2.74:1 (improved from 7.6:1 in 2024, but still significant) - No long-term liabilities visible—all obligations are current, creating continuous refinancing pressure - The 2024 balance sheet showed exceptionally high debtors (£1.66M) and creditors (£1.645M), suggesting potential round-tripping of intercompany balances

Equity Quality

• Retained earnings represent 86.5% of total equity (£307,369 of £355,373)
• Share capital is modest at £48,004
• No dividend withdrawals evident from the reserve movements—profits are being retained, which is positive for creditors

3. CASH FLOW ASSESSMENT

Liquidity Position

Liquidity Assessment: The current ratio of 1.36x is adequate for a trading business, though not robust. More encouragingly, the cash ratio has improved from 0.09x to 0.32x, meaning the company now holds 32p in cash for every £1 of current liabilities versus just 9p the prior year.

Working Capital Dynamics

• Debtors: £1,002,013 (down from £1,660,761)—still represents 75% of current assets
• Stock: £14,651 (down from £42,227)—minimal inventory, consistent with project-based installation work
• Cash: £313,405—strong improvement, providing buffer for operational requirements

Debtor Concern: The debtor book remains the dominant asset. At £1M against annual turnover that can be estimated at approximately £1.5-2M (based on profit generation), debtor days appear high. This warrants investigation into: - Customer concentration risk - Aging profile (are debts current or overdue?) - Retention balances typical in construction/installation contracts - Related party receivables

Cash Generation

Cash increased from £152,461 to £313,405 (+£160,944) while debtors decreased by £658,748 and creditors decreased by £670,311. This suggests the company collected significant receivables and applied proceeds to reduce creditor balances while still growing cash reserves—a positive operational cash flow indicator.

4. MONITORING POINTS

Immediate Due Diligence Requirements

1. Group Structure: Obtain confirmation of the relationship with the German parent/shareholders (Stelzer and Schiedeck are PSCs with "significant influence or control" and are likely connected to Prolicht GmbH). Determine whether intercompany balances exist within creditors and debtors.

2. Debtor Quality: Request aged debtor analysis. The £1M outstanding requires verification of: - Aging profile - Top 10 customer concentrations - Provisions for bad/doubtful debts - Related party balances

3. Creditor Composition: Clarify what comprises the £975,059 current liabilities: - Trade creditors - Intercompany payables - Corporation tax - Accruals and deferred income - Any HP/lease obligations

4. Parent Support: Secure parent company guarantee or letter of comfort if lending is considered.

Ongoing Monitoring Metrics

Watch List

• Related party transactions: The accounts claim exemption from disclosing related party transactions with "wholly owned subsidiaries." This requires clarification as it suggests a complex group structure that may affect creditor priority.
• Creditor payment behaviour: Monitor for any slowing of trade creditor payments, which could indicate cash flow pressure
• Debtor concentration: If top 3 customers exceed 50% of the debtor book, concentration risk becomes critical
• Seasonal fluctuations: As an installation business, cash flow may be seasonal—ensure facilities accommodate working capital peaks

SECTOR CONSIDERATIONS

The company operates in electrical installation and building completion (SIC 43210/43390)—a sector characterized by: - Project-based revenue with milestone payments - Retention provisions (typically 2.5-5% held for 12 months) - Front-loaded cash requirements for materials and labour - Exposure to construction cycle and client solvency risk

The business model appears to be sign manufacturing and installation for retailers, which provides some diversification compared to general construction but remains sensitive to retail capital expenditure cycles.

RISK ASSESSMENT