LONGCLIFFE QUARRIES LIMITED
Company number 00273400 · Monitor this company
This analysis was written by an AI from the company's public filings. It may contain errors or omissions and is not financial or professional advice.
Credit Analysis: Longcliffe Quarries Limited
1. Credit Opinion: APPROVE
Reasoning: Longcliffe Quarries Limited presents a strong credit profile underpinned by nearly a century of trading history, consistent profitability growth, and a substantial asset base with strong tangible security. The company is demonstrating positive financial trajectory with pre-tax profits increasing from £4.7M (2024) to £6.6M (2025), improved gross margins (36.0% to 37.4%), and enhanced turnover per employee. The family-ownership structure through Longcliffe Group Limited (>75% shareholder) provides stability and long-term orientation. Banking facilities have been renewed, and the directors express confidence in 2026 performance. The only cautionary notes relate to sector-specific energy price volatility and variable rate borrowing exposure, both of which appear manageable given the company's cash generation and balance sheet strength.
2. Financial Strength
Balance Sheet Health: Strong
| Metric | 2020 | 2019 |
|---|---|---|
| Total Assets | £45.3M | £38.3M |
| Total Liabilities | £12.4M | £9.5M |
| Net Assets | £11.5M | £11.5M |
| Cash | £1.7M | £1.4M |
| Shareholders' Funds | £11.5M | £11.5M |
Key Observations:
-
Asset-Heavy Business Model: The quarrying operation carries substantial fixed assets (freehold property, plant & machinery, investment property), providing strong tangible security for lending purposes. This is typical of the sector and offers good collateral coverage.
-
Modest Gearing: Total liabilities of £12.4M against total assets of £45.3M yields a debt-to-asset ratio of approximately 27%, indicating conservative leverage. The company is not over-reliant on debt.
-
Net Asset Stability: Net assets remained virtually flat at ~£11.5M between 2019-2020, suggesting profits were distributed or reinvested in capital expenditure rather than accumulated. Given the profit trajectory now showing £6.6M PBT in 2025, retained earnings should be strengthening.
-
Share Capital: At £145,474, the share capital is modest relative to the business size, with the majority of equity likely held in reserves and retained earnings within the Group structure.
-
Subsidiary Status: As a wholly-owned subsidiary of Longcliffe Group Limited (>75% ownership), there is a need to consider group structure implications. Inter-company balances and guarantees should be reviewed for any facility.
3. Cash Flow Assessment
Liquidity Position: Adequate with Seasonal Considerations
Profitability Trajectory: - PBT 2025: £6,588,990 (+39% YoY) - PAT 2025: £4,913,665 (+31% YoY) - Gross margin improvement: 36.0% → 37.4% - Revenue per employee: £279,000 (up from £249,000)
Working Capital Considerations: - The company reports favourable cash position and renewed banking facilities - Overdraft facilities available for short-term flexibility - Trade debtor credit policies and collection procedures appear sound (provisions noted) - Quarrying operations typically have working capital cycles influenced by seasonal demand and large contract customers
Debt Service Capacity: - Profit before tax of £6.6M provides substantial interest coverage - Variable rate borrowings create interest rate sensitivity, though directors assess this as manageable - Capital expenditure commitments are ongoing but supported by cash generation - Hire purchase obligations exist for plant/machinery (typical for sector)
Cash Flow Risk Factors: - Energy price volatility directly impacts operating costs - Recruitment challenges may create labour cost pressure - Inflationary environment affecting input costs - Variable rate debt exposure to interest rate movements
4. Monitoring Points
| Metric | Target/Rationale | Frequency |
|---|---|---|
| Profit Margins | Monitor gross margin maintenance above 35%; decline below 30% would signal cost pressure | Quarterly |
| Debt Service Coverage | Interest coverage should remain above 4x given current profitability | Semi-Annual |
| Working Capital Ratio | Current ratio should remain above 1.5x; quarrying can have seasonal fluctuations | Quarterly |
| Capital Expenditure vs. Depreciation | Ensure capex maintains or grows the asset base; sustained below-depreciation capex signals underinvestment | Annual |
| Energy Costs as % of Revenue | Flag if energy costs exceed historical norms; quarrying is energy-intensive | Quarterly |
| Dividend Extraction | Monitor dividend payments to parent; excessive extraction weakens subsidiary balance sheet | Annual |
| Group Inter-company Balances | Review any inter-company receivables/payables; ensure transactions are at arm's length | Annual |
| Banking Facility Compliance | Confirm ongoing compliance with covenants; variable rate facilities require monitoring | Semi-Annual |
| Employee Retention | Voluntary turnover improved to 6.7% (from 9.8%); reversal would signal operational risk | Annual |
| Planning Permissions & Reserves | Quarrying depends on mineral reserves and planning consent; monitor reserve life | Annual |
Additional Considerations
Strengths: - 90+ year trading history with family stewardship provides long-term orientation - Essential industry supplying construction and industrial minerals - Strong asset base with freehold property and mineral rights - Audited accounts by established firm (Shorts Chartered Accountants) - Net zero commitment by 2030 demonstrates forward planning - Low voluntary staff turnover (6.7%) indicates stable workforce
Weaknesses/Risks: - Subsidiary status means group-level decisions may impact this entity - Energy-intensive operations vulnerable to fuel price spikes - Variable rate borrowings create interest rate sensitivity - Recruitment challenges noted in strategic report - Quarrying faces regulatory and environmental planning risks
Sector Context: The quarrying and stone processing sector benefits from essential demand (construction, infrastructure, industrial applications) but is cyclical and capital-intensive. Longcliffe's focus on high-purity calcium carbonate for industrial applications provides some diversification away from pure construction dependence.