WHOLESALE DOMESTIC HOLDINGS LIMITED

Executive Summary

Wholesale Domestic Holdings Limited shows positive revenue and profit growth with strengthened equity, reflecting improving financial health. However, the company’s negative working capital position and modest cash reserves pose a liquidity risk. Conditional credit approval is recommended with active monitoring of cash flow, working capital, and operational risks to ensure continued debt service capability.

WHOLESALE DOMESTIC HOLDINGS LIMITED - Analysis Report

Company Number: SC688940

Analysis Date: 2025-07-29 20:58 UTC

1. Credit Opinion: CONDITIONAL APPROVAL Wholesale Domestic Holdings Limited demonstrates consistent revenue growth (7.1% increase in 2023) and improved profitability with a gross margin of 57% and an operating margin of 10.6%. The company operates in a competitive but established market niche with a 60-year history, indicating business resilience. However, the group shows ongoing net current liabilities (negative working capital) of £1.24m in 2023, although this has improved from £2.56m in 2022. Long-term debt is significant (£3.87m) but stable. The conditional approval is recommended, subject to close monitoring of liquidity and working capital improvements, as the company’s ability to meet short-term obligations is currently strained.

2. Financial Strength: The balance sheet reflects a healthy asset base with total fixed assets of approximately £8.1m and intangible assets of £1.9m. Net assets have increased significantly from £1.41m in 2022 to £2.35m in 2023, driven by retained earnings growth. Shareholders’ funds have increased accordingly. The company has substantial current liabilities exceeding current assets by £1.24m, indicating a working capital deficit, which is a weakness. Long-term liabilities remain stable. Overall financial strength is fair, supported by profitability and equity growth, but liquidity pressure remains a concern.

3. Cash Flow Assessment: Cash at bank is modest (£74k) compared to current liabilities of £6.73m. Debtors have increased significantly to £2.45m, which suggests sales growth but also potential collection risk. Stock levels remain high at £2.97m. Negative net current assets indicate working capital strain, which may impact short-term cash flow. The company needs to manage debtor collections and inventory turnover efficiently to improve liquidity. Interest coverage is reasonable with operating profit of £2.17m against interest expenses of £0.41m, indicating ability to service debt from operations.

4. Monitoring Points:

• Working capital trends: Monitor current assets vs current liabilities quarterly to ensure improvement.
• Debtor collection and stock management efficiency to sustain liquidity.
• Profit margins and operating cash flows to ensure ongoing debt service capability.
• Currency and freight cost risks, as highlighted by management, which could impact margins.
• Any changes in long-term debt levels or refinancing needs.
• Directors’ changes and governance stability, noting the recent resignation of one director.