UK CNC COMPONENTS LTD

Executive Summary

UK CNC Components Ltd shows strained liquidity with negative net current assets and reliance on hire purchase finance, posing high solvency risk. While net assets have slightly improved and regulatory filings are up to date, significant concerns remain regarding cash flow and debtor management. Further investigation into operational cash flows and financing arrangements is necessary to evaluate ongoing viability.

UK CNC COMPONENTS LTD - Analysis Report

Company Number: 13800667

Analysis Date: 2025-07-29 15:56 UTC

1. Risk Rating: HIGH
   The company exhibits a strained liquidity position with persistent net current liabilities over the past three years and very limited cash reserves. Although net assets have improved slightly into positive territory in 2024, the weak working capital and reliance on hire purchase financing indicate elevated solvency risk.

2. Key Concerns:

• Negative net current assets for multiple years (e.g., -£18,149 in 2024) signal ongoing liquidity challenges, raising doubts about its ability to meet short-term obligations without refinancing.
• Heavy reliance on hire purchase contracts totaling £17,100 (long term) and £5,940 (short term) suggests financial leverage and fixed repayment obligations, which could strain cash flows.
• Significant decline in trade debtors from £46,605 in 2023 to £2,599 in 2024 may reflect reduced sales or collection issues, potentially impacting operational cash inflows.

3. Positive Indicators:

• The company moved from negative shareholders’ funds (£-1,071 in 2023) to a small positive equity position (£2,294 in 2024), indicating some improvement in net asset base.
• Directors have maintained timely filings with no overdue accounts or confirmation statements, demonstrating regulatory compliance and governance discipline.
• The business operates in machining (SIC 25620), a specialized industrial sector that may have niche market demand, supporting potential operational sustainability.

4. Due Diligence Notes:

• Investigate the cause of the sharp reduction in trade debtors in 2024 and whether this is due to decreased sales volume, improved collections, or write-offs.
• Review cash flow statements and management forecasts to assess ongoing liquidity management and the company's ability to service hire purchase and other liabilities.
• Obtain details on hire purchase agreements’ terms, repayment schedules, and impact on future cash flow to evaluate refinancing risk.
• Clarify the company’s revenue trends and profitability, as income statement data is not publicly filed due to small company exemption.
• Assess any contingent liabilities or off-balance sheet commitments that might exacerbate financial risk.

Executive Summary:
UK CNC Components Ltd faces high liquidity and solvency risks evidenced by consecutive years of negative working capital and a dependency on hire purchase financing. Despite a modest recovery in net assets and compliance with filing requirements, limited cash reserves and a sharp drop in debtors raise operational concerns. Further due diligence on cash flow, debtor quality, and financing obligations is recommended to better understand financial stability and sustainability.