Credit Assessment: Hillcrest Nurseries Limited (03452666)

1. Credit Opinion: CONDITIONAL APPROVE (small facility only, with security)

Hillcrest Nurseries is a long-established family-run retail horticulture and farm shop business in Suffolk. The company was technically balance-sheet insolvent in FY2024 (negative shareholders' funds of £9,700) but has recovered to a positive position of £25,715 in FY2025. While the 27-year trading history and recent recovery are positive, the underlying balance sheet remains fragile with a significant working capital deficit and minimal equity cushion. Any credit exposure should be modest, fully secured, and supported by personal guarantees from the principal shareholder.

2. Financial Strength

Balance Sheet Health: Weak but Stabilising

Key concerns: - Total liabilities of £216,331 vs total assets of £134,275 – the company is technically over-geared; total outside liabilities are 1.6x total assets - Net assets of only £25,715 represent a wafer-thin equity buffer – any modest loss would wipe this out - Stock has risen 44% (£52,645 → £75,862) – possible over-stocking or slower turnover, which warrants investigation - Hire purchase/finance lease obligations exist (note references to "HirePurchaseContracts" with both current and 1-5 year portions) - Deferred tax provision of £12,105 adds to the obligation stack

Positives: - Recovery from negative position is meaningful – suggests either retained profit, capital injection, or both - Long-term creditors have reduced by 50% (£44,722 → £22,257), indicating deleveraging - Professional accountants (Knights Lowe, Bury St Edmunds) prepare the accounts - Audit-exempt small company regime – filings are timely with no overdue returns - Shareholder funds of £25,715, while modest, are now positive

3. Cash Flow Assessment

Liquidity: Stretched

• Net current liabilities of £59,799 – current liabilities exceed current assets, meaning the company cannot meet all short-term obligations from liquid resources
• Current ratio: 0.69x (FY2025) – well below the 1.5x comfort threshold
• Cash position is stable but minimal (£15,231) – equates to roughly one month's operating costs in a small retail business
• Quick ratio (excluding stock) is concerning: (£15,231 + £43,182) / £194,074 = 0.30x

Working Capital Concerns: - The negative working capital position means Hillcrest is reliant on continued trade credit from suppliers, hire purchase arrangements, and possibly owner/director loans to remain operational - However, the working capital position has improved by £33,000 year-on-year (from -£92,764 to -£59,799), showing active management of the balance sheet - The £33,000 reduction in long-term creditors suggests cash was used to repay debt rather than build reserves - Absence of turnover/profit figures (small company exemption) prevents calculation of free cash flow or debt service coverage, which is a credit information gap

Business Resilience Indicators: - Diversified income streams: plant nursery, farm shop, deli, butchers, coffee shop – reduces single-channel dependency - Family ownership and 27-year trading history suggest committed, patient capital - Consumer-facing retail/hospitality – exposed to discretionary spending pressure in an economic downturn - Single director structure – key person dependency on Xxxxxx Xxxxxxxxname shown to subscribers

4. Monitoring Points

For an ongoing credit relationship, key metrics to track:

1. Quarterly management accounts – turnover, gross margin, and EBITDA. Without these we cannot assess true debt service capability.
2. Net current asset/liability position – if working capital deficit widens beyond £70,000, this signals supplier pressure or stock build-up.
3. Stock turn – the 44% rise in stock should be verified; aged stock is a hidden cash drag in plant retail (perishable inventory).
4. Equity trajectory – net assets must be maintained above £20,000 to provide a meaningful loss-absorption buffer.
5. Hire purchase commitments – monitor the £22,257 long-term creditor reduction schedule.
6. Confirmation statement and accounts – next due October 2027; ensure no late filings.
7. Confirmation of HMRC compliance – VAT and PAYE standing (not visible in this data).
8. Director's personal credit position – given the PSC holds >75% and the company relies on her stewardship, a personal credit check is strongly recommended.
9. Stocktaking visits – physical verification of nursery stock and farm shop inventory.

Executive Summary

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