CAUSEWAY TECHNOLOGIES LIMITED

1. Risk Rating: MEDIUM

Justification: The business demonstrates strong recurring revenue growth, positive EBITDA, and robust operating cash conversion, and its statutory filings are current. However, the company’s balance sheet has deteriorated materially, with net assets moving from positive £1.5m in 2024 to negative £7.3m in 2025 following consecutive after-tax losses. Short-term liquidity appears adequate, but the erosion of shareholder funds and rising total liabilities indicate heightened solvency risk that requires close monitoring.

2. Key Concerns

• Negative equity and consecutive losses: The accounts state that shareholder’s funds decreased to negative £7.3m at 31 December 2025, from positive £1.5m in 2024 and £18.0m in 2023. After-tax losses were £8.6m in 2025 and £16.4m in 2024. This represents a rapid erosion of the balance sheet over two years.
• Rising liabilities and dependence on external financing: Total liabilities have increased from approximately £128.1m (2023) to £151.9m (2024) and £171.2m (2025), against total assets of £215.1m. The accounts reference £145m of term facilities provided by Goldman Sachs, held by a wholly owned subsidiary; it is not clear from the data provided whether these obligations sit at this company level or are supported by upstream guarantees.
• Customer and sector concentration: The accounts state that approximately 84% of annual recurring revenue is contracted with UK clients and that the business serves the construction and maintenance lifecycle. The directors identify customer attrition, adverse market conditions, and inflationary pressures in clients’ supply chains as principal risks.

3. Positive Indicators

• Recurring revenue model and growth: The accounts state that recurring software revenue represented 94% of total Group revenue in 2025, with ARR of £81.8m and TCV of £296.6m, both up on the prior year.
• Cash generation: Operating cash flow before investments and exceptional costs was £30.9m, representing 107% cash conversion. Cash reserves increased to £17.4m at year-end 2025 from £10.1m in 2024.
• Profitability before non-cash items: Group EBITDA was £17.8m in 2025 (2024: £8.9m), and adjusted EBITDA was £28.8m, a 23% increase.
• Regulatory standing: The company is active, not in liquidation or administration, and both accounts and confirmation statement filings are shown as not overdue. The accounts include an unqualified auditor’s opinion from Saffery LLP.

4. Due Diligence Notes

• Reconcile the discrepancy between the reported net assets (negative £7.3m) and shareholders’ funds (negative £12.6m) in the data extract, and determine whether the financial history figures are company-only or group-level.
• Review the maturity profile of total liabilities, particularly current liabilities due within one year, relative to the £17.4m cash position.
• Clarify the group borrowing structure: which entities are parties to the £145m Goldman Sachs facilities, and whether Causeway Technologies Limited is a borrower, guarantor, or non-obligor.
• Analyse the composition of the after-tax losses to determine how much is non-cash (e.g., amortisation, depreciation, share-based payments) versus cash expenditure.
• Confirm the ownership and control structure, given two separate corporate entities are each recorded as holding more than 75% of shares, voting rights, and board appointment rights.