Risk Analysis: Carlton Technologies Limited

Company: Carlton Technologies Limited (03452530)
Incorporated: 20 October 1997
SIC: Wholesale of hardware, plumbing and heating equipment (46740)
Status: Active — Accounts & Returns current, no overdue filings

1. Risk Rating: MEDIUM

The company remains solvent on a net assets basis (£279,871) with a substantial fixed asset base, but persistent negative working capital, a near-depletion of cash reserves, and a declining net asset trajectory over four consecutive years warrant a MEDIUM risk classification. The balance sheet is supported by a revalued property and long-dated bank debt, which provides some structural stability, but the short-term liquidity position is fragile and deteriorating.

2. Key Concerns

2.1 Persistent and Worsening Working Capital Deficit

• Net current liabilities stood at £226,976 at year-end 2024, having widened from £206,187 in 2023 and £177,139 in 2022 (derived from stated figures).
• Current liabilities (£873,097) exceed current assets (£646,121) by roughly 35% of the asset base.
• The company has operated with a negative working capital position in every year of the ten-year financial history provided — this is a structural, not transient, condition.

2.2 Severe Cash Depletion

• Cash at bank fell by 94% — from £40,619 (2023) to £2,583 (2024).
• With nine employees and a wholesale operation, £2,583 provides approximately zero operating headroom. The company is effectively reliant on its debtor collection cycle and supplier credit terms to fund day-to-day operations.
• Should debtor collections stall or a significant supplier demand payment, the company has no internal cash buffer to absorb the shock.

2.3 Eroding Shareholders' Funds and Reliance on Revaluation

• Net assets have declined for four consecutive years: £408,796 (2021) → £388,773 (2022) → £345,378 (2023) → £279,871 (2024) — a cumulative 32% reduction since 2021.
• The 2021 upwards revaluation of freehold property (£990,000 valuation basis) underpins the balance sheet. If the commercial property market weakens and a subsequent impairment or downward revaluation is required, shareholders' funds could be materially reduced.
• The revaluation reserve is modest (£64,478) and offers limited downside protection against a sharp property correction.

3. Positive Indicators

• Compliance Discipline: No overdue accounts or confirmation statements. The 2024 accounts were filed on 30 September 2025 — precisely on the statutory deadline. This suggests competent administrative governance.
• Longevity and Stability: Operating since 1997 (28 years) with sustained trading; the company has navigated prior periods of thin net assets (e.g., £6,490 in 2018, £10,950 in 2019) and recovered, indicating resilience.
• Fixed Asset Ownership: Freehold land and buildings valued at approximately £990,000 include unencumbered land of £171,800 and appear to provide a realisable asset buffer against the £599,935 long-term debt. Bank loans beyond five years (£350,570) suggest stable, long-dated refinancing relationships.
• No Disqualification Records or Governance Red Flags: The directors (Maxwell and Xxxxxx Xxxxxxxxname shown to subscribers) have no recorded disqualifications or irregularities on the public register.

4. Due Diligence Notes

1. Property Valuation Sensitivity: The freehold property was valued on 11 February 2022 — more than two years before the 2024 year-end. Obtain a current independent valuation to confirm the £990,000 carrying value remains supportable. A 20% devaluation would reduce net assets to approximately £109,000.

2. Turnover and Profitability Data Missing: The abridged accounts do not disclose revenue or profit figures. Obtain full management accounts for 2025 and request historical turnover and EBITDA trends from the directors to assess whether the declining net assets reflect trading losses, dividend distributions, or revaluation adjustments.

3. Debtor and Stock Quality: Stock declined from £541,864 to £367,923 (−32%) in 2024. Determine whether this reflects disciplined inventory management or a reduction in trading activity. Similarly, debtors fell from £411,638 to £275,615 — verify collection periods and any potential bad debt exposure.

4. Director Transition: Xxxxxx Xxxxxxxxname shown to subscribers resigned in May 2026. Confirm the succession plan and whether any family/ownership restructure is in progress, given the change in the PSC register dynamics.

5. Financing Structure: Review the covenants (if any) attached to the bank loans and HP/finance lease obligations. The increase in additions under HP/finance leases (£140,828) suggests continued equipment investment — verify that the cost of financing is sustainable with current cash flow.

6. Pension and Tax Position: With only £2,583 in cash, verify there are no significant deferred tax liabilities or outstanding HMRC arrears not visible in the abridged filing.

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