Credit Assessment: Floor Restorations Limited (01687815)

1. Credit Opinion: CONDITIONAL

A 43-year-old, family-controlled flooring contractor with a genuine recovery story and an unbroken record of retained profitability. The core business supports credit extension, but four issues prevent unconditional approval:

1. Shrinking profit retention – additions to equity have fallen steadily from ~£215k (FY2021) to ~£12k (FY2025), pointing to sustained margin compression in the trade.
2. Thin liquidity – cash of £81k against £2.08M of creditors falling due within one year; the current ratio is 1.05.
3. Limited transparency – accounts are unaudited (s.477 exemption) and filleted (no P&L filed), so turnover, margins and interest cover cannot be verified from the public record.
4. Unexplained "CVA Account" – a £209k debtor (~30% of net assets) that in UK practice usually denotes a Company Voluntary Arrangement. Whether it relates to this company's own historic arrangement or a related party's, its recoverability and provenance must be clarified.

Recommended conditions before drawdown: latest management accounts; aged debtor analysis with top-10 concentrations; written explanation of the CVA Account; schedule of existing borrowings and hire purchase commitments; appropriate security (charge over book debts/freehold) and/or personal guarantees from the Walker family; covenants on minimum net worth, current ratio, and dividend restrictions ahead of amortisation.

2. Financial Strength

*Before any dividends; movement in P&L reserve.

• Resilience proven: net assets fell to £92k by March 2020 (following two soft years and COVID onset), then rebuilt 7.6x over five years. The company also weathered a mid-2010s dip (£151k in FY2015). This is a business that recovers from shocks.
• Self-funded growth: equity is almost entirely retained earnings (£695k P&L reserve vs £5.1k paid-in capital). Note the step-change in total assets FY2023→FY2024 (£1.84M → £3.67M), indicating a significant expansion in contract activity.
• Leverage: true total liabilities are ~£2.75M (£2.08M current + £664k long-term), roughly 3.9x equity. Much is presumably trade credit, but £664k of long-term debt (likely vehicle finance) is real interest-bearing leverage.
• Asset quality is the weak point: motor vehicles make up £586k (46%) of the £1.26M fixed asset book – depreciating, likely finance-encumbered assets with modest resale value. Freehold property is modest at £154k NBV (though £99k was added this year). Collateral cover is weaker than the headline suggests.
• Headcount grew 42 → 45; no director disqualification records identified; filings are exemplary (FY2025 accounts filed ~13 months early).

3. Cash Flow Assessment

• Tight working capital: current ratio 1.05 (2024: 1.07); quick ratio (ex-stock) 0.87. Net current assets fell 37% to £101k. The company is effectively collecting debtors to pay creditors.
• Cash buffer is thin: £81k, down 33% year-on-year – likely under a month of payroll and overheads for a 45-person business. Any collection slowdown or bad debt transmits quickly into a liquidity problem.
• Debtor concentration: debtors are £1.74M, 80% of current assets, including trade debtors of £944k and the £209k CVA Account of uncertain quality. With small-company status capping turnover at £10.2M, implied debtor days run anywhere from ~35 to ~70 days