STRATA HOMES GROUP LIMITED

Executive Summary

Strata Homes Group Limited shows a credible recovery in operational performance with significant debt reduction achieved recently, supported by a large shareholder capital base and restructured banking facilities. Despite continuing statutory losses and tight liquidity, the company’s strategic focus on cash generation and balanced sales models supports conditional credit approval. Ongoing monitoring of debt servicing capability, profitability, and liquidity is essential to mitigate risks from connected party debt and sector challenges.

STRATA HOMES GROUP LIMITED - Analysis Report

Company Number: 13132559

Analysis Date: 2025-07-20 12:53 UTC

1. Credit Opinion: CONDITIONAL APPROVAL
   Strata Homes Group Limited is an active private limited company operating in the housebuilding sector with a significant shareholder capital base (£20.79m share capital). The company has shown improvement in its operational performance with an underlying operating profit of £0.4m for the year ended June 2024, turning around from a loss in the previous year. However, the company still reports a statutory loss before tax of £8.2m largely due to legacy impairments and restructuring costs. The reduction in net debt from approximately £60m in January 2024 to £20.4m by June 2024 demonstrates effective management of leverage and liquidity risk. The extension and restructuring of the Lloyds Bank debt facility to June 2026 with planned reductions in facility limits reflect a cautious approach to debt servicing. The presence of connected party debt with high compound interest and accrued unpaid interest introduces a degree of credit risk that requires monitoring. Overall, credit approval is warranted provided ongoing compliance with loan covenants, continued reduction in debt levels, and improvement in profitability.

2. Financial Strength:
   The balance sheet shows a modest net asset position of £41,987 at the company level, reflecting a strengthened net worth aided by an £18m cash dividend receipt. The group's consolidated net assets declined from £65.5m in 2021 to £26.8m in 2023, but financial year 2024 shows some recovery. Fixed assets are relatively low (£93k), consistent with the nature of a holding company. Current liabilities exceed current assets resulting in negative net working capital (£-3,048), indicating tight short-term liquidity. The company’s gearing remains high with total net debt reported at £68.6m including connected party debt. The substantial shareholder funds and long-term debt restructuring provide some buffer, but the company remains reliant on effective cash and debt management for financial stability.

3. Cash Flow Assessment:
   Cash holdings at the company level are nil, but group cash improved to £18.6m as at June 2024. The group successfully reduced net working capital net debt by nearly £40m within five months, highlighting strong cash flow management. The company relies on intercompany cash flows and the group debt facility with Lloyds Bank Plc, with current headroom of £34.6m on the £55m facility. However, the significant interest costs on debt, especially connected party debt at 5% monthly compound interest, alongside accrued unpaid interest, may pressure liquidity unless addressed. Focus on cash generation through improved sales and reduced debt service costs is critical. The group’s strategy to balance open market sales with lower risk Pre-Sold (Partnership) models may help stabilize cash flow.

4. Monitoring Points:

• Continued adherence to debt covenants and timely reduction of facility limits as scheduled.
• Progress on profitability improvement and reduction of statutory losses, particularly addressing legacy impairments.
• Management of connected party debt interest accruals and repayment plans.
• Working capital trends and liquidity position, ensuring current liabilities do not exceed current assets significantly.
• Sales pipeline execution and margin improvement as per strategic plan, monitoring gross margins against sector benchmarks.
• Impact of macroeconomic factors (interest rates, inflation) on customer demand and pricing strategies.