Credit Assessment: ALSKEA LTD

1. Credit Opinion: CONDITIONAL

The company demonstrates a consistent upward trajectory in net assets (from £189k in 2013 to £1.75M in 2019), indicating profitable operations and business growth. However, the near-zero cash position (£23) and heavy concentration in stock (88.5% of current assets) present material liquidity concerns that constrain an outright approval. Any credit facility should be conditional upon satisfactory security over property assets and appropriate covenant monitoring.

2. Financial Strength

Positive Indicators: - Net assets have grown consistently over seven years, reaching £1.75M by 2019 - Shareholders' funds strengthened year-on-year, suggesting retained profitability - Tangible assets of £1.34M provide potential security coverage - Net current assets positive at £813k

Concerning Factors: - Gearing is elevated at approximately 65.5% (total liabilities to total assets) - Share capital remains minimal at just £10, indicating reliance on retained profits rather than equity injection - Provisions of £167k suggest anticipated future liabilities - Long-term creditors of £239k add to overall leverage

The balance sheet shows a property-focused business with significant asset backing but high leverage relative to the sector.

3. Cash Flow Assessment

Critical Liquidity Concern: - Cash position has deteriorated dramatically: £190k (2014) → £23 (2019) - Current ratio stands at approximately 1.20:1 (£4.92M current assets / £4.11M current liabilities) - This ratio is marginal for a construction business where current assets are predominantly illiquid stock

Working Capital Structure: | Component | 2019 | 2018 | |-----------|------|------| | Stocks | £4,355,499 | £6,288,307 | | Debtors | £562,779 | £556,947 | | Cash | £23 | £23 | | Current Liabilities | £4,105,312 | £6,249,021 |

The 30.7% decline in stock from 2018 to 2019 may indicate property sales or write-downs, while current liabilities reduced by 34.3%, improving the working capital position. However, the business remains heavily dependent on converting stock to cash to meet obligations.

Director's Loan: The director owes the company £120,441 (2019: credit balance due from Xxxxxx Xxxxxxxxname shown to subscribers). While this improved from £156,399 in 2018, it represents a related-party exposure that could affect liquidity if not managed appropriately.

4. Monitoring Points

1. Cash Generation: Track cash position quarterly; the £23 balance provides no buffer for unexpected costs or delayed property sales

2. Stock Realisation: Monitor stock turnover and any impairment indicators; given stock represents 88.5% of current assets, any write-down would severely impact working capital

3. Current Ratio Covenant: Require minimum 1.25:1 current ratio to ensure adequate headroom

4. Director's Loan: Require reduction schedule for the £120k director advance; monitor for further inter-company balances

5. Leverage: Track total liabilities to total assets ratio; currently at 65.5%, which should not increase further

6. Filing Compliance: Accounts are currently up to date (next due May 2027); ensure timely filing continues

7. Sector Exposure: Construction is cyclical and vulnerable to economic downturns; monitor local property market conditions in the Dungannon/Co Tyrone area

8. Group Structure: PSC is Alskea Holdings Ltd (owns >75%); understand group cash flow dynamics and any inter-company obligations before extending credit

9. Abridged Accounts: The company files abridged, unaudited accounts under the small companies regime, limiting financial transparency; consider requesting full management accounts for credit decisions above standard thresholds

10. Employee Numbers: Staff increased from 46 to 47; monitor for significant changes that could indicate business contraction or expansion

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