ELLIS CONSTRUCTION SERVICES LTD

Credit Opinion: CONDITIONAL

Ellis Construction Services Ltd has a strong balance sheet for an SME: positive net assets of £1.688m, low gearing and no material long-term debt. However, 2026 liquidity has weakened materially: debtors rose 45% to £1.434m while cash halved to £196k. The accounts are unaudited and abridged, with no profit and loss account filed, so turnover, margins, EBITDA and interest cover cannot be measured from the public record.

I would conditionally support a modest, monitored working-capital facility, sized against verified eligible receivables. I would not recommend unsecured term debt beyond clearly demonstrated free cash flow until debtor quality and contract profitability are evidenced.

Key conditions / information required - Latest management accounts, including P&L, balance sheet and cash flow. - Aged debtor ledger, top-five customer concentration and details of any balances over 60/90 days. - Confirmation of no HMRC/VAT/PAYE arrears or legal disputes. - Contract pipeline and confirmation that debtor growth reflects trading growth rather than collection weakness. - Facility structured as overdraft/revolving working capital or invoice-based lending, with quarterly management information and covenant monitoring. - Depending on facility size, consider debenture and/or directors’ guarantees as appropriate.

Financial Strength

The balance sheet is conservatively financed overall. Net assets increased to £1.688m from £1.441m, and shareholders’ funds are almost entirely retained earnings. Total creditors plus provisions are about £682k, giving gearing of roughly 40% of shareholders’ funds. There is no long-term debt beyond a small prior-year balance of £4,953 that has now cleared.

The weakness is asset quality, not solvency. Debtors now represent about 77.5% of total assets and 77.5% of current assets. Cash covers only about 35% of current liabilities. The current ratio remains strong at 3.35x, but much of that strength depends on collecting receivables. Current asset investments of £220k are carried at market value, but the note includes listed and unlisted investments; unlisted holdings should not be treated as cash-equivalent. No material contingent liabilities or post-balance-sheet events were disclosed.

Cash Flow Assessment

The abridged accounts do not include a cash flow statement, but balance sheet movements explain the cash outflow. Retained earnings rose about £247k and depreciation was £171k, but debtors absorbed about £445k, investments absorbed £132k and capital expenditure was £129k. Creditors provided roughly £100k. That broadly explains the £197k fall in cash.

This is not automatically a distress signal: the company remains profitable on a retained-earnings basis and has substantial net current assets. But cash conversion is weak, and the business is funding growth or slower collections through its balance sheet. For credit purposes, repayment capacity depends heavily on debtor collection. A facility should be repayable from receivables conversion, not from uncertain future profits.

Business Resilience

The company has traded since 2008 and operates in civil engineering/road surfacing, a cyclical sector exposed to weather, contract timing, material costs and customer payment behaviour. It has only 7 employees, so key-person and contract concentration risks are relevant. Against that, low leverage, positive reserves and tangible fixed assets provide a reasonable cushion. The equal PSC split between Andrew and Xxxxxx Xxxxxxxxname shown to subscribers, both directors, should be monitored for governance and succession, but there is no adverse insolvency or disqualification data in the provided record.

Management Quality

Filings are up to date: accounts are not overdue and the confirmation statement is not overdue. The accounts are prepared by an external accountant and have been consistently filed. However, the unaudited abridged format limits transparency: no turnover, gross margin, EBITDA or cash flow statement is available. The £2 share capital means the equity base is entirely retained earnings, so dividend policy and profit retention should be monitored.

Monitoring Points

• Debtor ageing and concentration: top customers, >60/>90-day balances, bad-debt provisions and credit notes.
• Debtor days and cash conversion once turnover is available from management accounts.
• Cash headroom and cash ratio; current ratio and net current assets.
• HMRC/VAT/PAYE arrears, county court judgments and legal disputes.
• Contract pipeline, margin delivery and exposure to any single customer or contract.
• Investment valuation and liquidity, especially unlisted holdings.
• Capital expenditure and any hire-purchase/finance lease commitments.
• Filing compliance and any change in directors, PSCs or ownership.

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