T.P.U. LTD.
Company number 05467940 · 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.
Credit Analysis: T.P.U. LTD (05467940)
1. Credit Opinion: CONDITIONAL APPROVE
Reasoning: T.P.U. LTD demonstrates a strongly improving financial trajectory with net assets growing from £5,692 (2019) to £261,816 (2025)—a transformational recovery over six years. The balance sheet is sound with a current ratio of 2.08x and debt-to-equity of 0.91x. However, the significant debtor inflation (from £145,774 to £297,829, a 104% increase year-on-year) alongside declining cash (£260,486 to £129,921) warrants investigation before full approval. The company's existing secured borrowings on plant and vehicles also limit available collateral.
2. Financial Strength
Balance Sheet Summary (Year Ending 31 March 2025):
| Metric | 2025 | 2024 | Movement |
|---|---|---|---|
| Total Assets | £448,798 | £441,874 | +£6,924 |
| Net Assets | £261,816 | £245,135 | +£16,681 |
| Shareholders' Funds | £261,816 | £245,135 | +£16,681 |
| Net Current Assets | £233,162 | £218,632 | +£14,530 |
Key Ratios:
| Ratio | 2025 | 2024 | Assessment |
|---|---|---|---|
| Current Ratio | 2.08x | 1.98x | Strong |
| Quick Ratio | 1.98x | 1.82x | Strong |
| Debt-to-Equity | 0.91x | 1.02x | Improving |
| Gearing (Long-term Debt/Equity) | 0.09x | 0.11x | Low leverage |
Analysis:
The balance sheet has strengthened materially over recent years. Net assets have grown consistently since the near-insolvency position in 2019 (£5,692), demonstrating strong retained profit generation. The P&L reserve has accumulated to £261,814, representing virtually all equity—share capital remains nominal at £2.
Long-term liabilities are modest (£22,617) and declining, while provisions (£12,000 deferred tax) reflect profitable operations. The company carries minimal structural debt, with bank loans totaling only £11,667 across current and non-current positions.
Concern: Existing bank loans and hire purchase creditors are secured on company assets. This encumbrance reduces collateral available for additional facilities and indicates asset-backed borrowing already in place for vehicles and equipment (£38,220 of motor vehicles under hire purchase).
3. Cash Flow Assessment
Working Capital Analysis:
| Component | 2025 | 2024 | Movement |
|---|---|---|---|
| Stocks | £21,048 | £35,614 | -£14,566 |
| Trade Debtors | £180,622 | £67,029 | +£113,593 |
| Other Debtors | £117,207 | £78,745 | +£38,462 |
| Cash | £129,921 | £260,486 | -£130,565 |
| Trade Creditors | £46,023 | £74,881 | -£28,858 |
Critical Observation—Debtor Inflation:
Trade debtors have increased by 169% (£67,029 to £180,622) without a corresponding increase in creditor days. This pattern suggests either: - Significant revenue growth in the final quarter of the financial year (positive if collectable) - Lengthening payment terms or slow-paying customers (negative—potential bad debt risk) - Concentration risk with one or two large contracts
The cash decline of £130,565 appears directly correlated with the debtor increase, indicating the business has funded customer credit from its own liquidity rather than external borrowing.
Creditor Position: Trade creditors decreased from £74,881 to £46,023, suggesting the company is paying suppliers faster—potentially to secure discounts or maintain supply terms. Taxation and social security creditors also fell significantly (£68,631 to £38,224), indicating lower profitability or earlier tax settlement.
Cash Generation Concern: While net assets grew by £16,681, operating cash appears weaker. The combination of rising debtors, falling cash, and reduced creditor cover suggests cash conversion may be deteriorating despite reported profitability.
4. Monitoring Points
Immediate Investigation Required:
-
Debtor Aging Analysis: Request detailed aged debtor report. The 169% increase in trade debtors requires explanation—identify top 10 debtors, aging profile, and any provisions for doubtful debts.
-
Revenue Verification: Without a filed P&L (permitted for small companies), profitability must be inferred. Request management accounts to verify turnover growth justifying debtor levels.
-
Cash Conversion Cycle: Monitor debtor days, creditor days, and stock days quarterly. Target debtor days below 60 for this sector.
-
Other Debtors Composition: £117,207 in "other debtors" is significant—require breakdown (deposits, prepayments, intercompany, etc.).
Ongoing Covenants/Conditions:
-
Minimum Cash Threshold: Require minimum cash of £75,000 throughout the facility period.
-
Maximum Debtor Days: Covenant at 75 days maximum average collection period.
-
Debt Service Coverage: If lending, require minimum 1.25x debt service coverage ratio.
-
Negative Pledge: Existing secured borrowings on assets limit collateral; ensure any new facility ranks pari passu or receives adequate security.
Sector Considerations:
-
Construction/Electrical Sector Risk: Trade debtors in this sector can be vulnerable to main contractor insolvency. Monitor customer creditworthiness and consider retention risk.
-
Working Capital Seasonality: Electrical installation businesses often experience seasonal fluctuations—request quarterly management accounts to assess cyclicality.
Management Quality Assessment
Positive Indicators: - Consistent profit retention and equity rebuilding since 2019 - Timely filing record—no overdue accounts or confirmation statements - Stable workforce (17 employees maintained) - Nearly 20-year trading history demonstrates resilience - Family ownership (David and Trevor Linehan) provides continuity
Areas for Scrutiny: - The dramatic debtor increase requires management explanation - Cash management in FY2025 appears less disciplined than FY2024 - No dividend history evident—all profits retained, which may indicate either reinvestment strategy or inability to distribute