MCCORMICK & SON LIMITED
Company number 07741153 · 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: MCCORMICK & SON LIMITED
1. Credit Opinion: CONDITIONAL
The credit opinion is CONDITIONAL with significant reservations. While the most recent FY2026 accounts show meaningful improvement from a perilous FY2025 position, the company's financial trajectory over the past decade has been one of severe and sustained deterioration. Net assets have declined by 83% from £471,039 in FY2017 to £78,856 in FY2026, with a near-insolvent low point of £21,256 just twelve months prior. The company remains highly geared with long-term bank debt of £119,909 exceeding total equity, and the recent resignation of a director (and 25-50% shareholder) introduces governance and stability concerns. Any credit facility should carry robust covenants, be limited to moderate exposures, and require regular monitoring.
2. Financial Strength
Balance Sheet Health – Materially Weakened
| Metric | FY2026 | FY2025 | FY2022 | FY2017 |
|---|---|---|---|---|
| Net Assets | £78,856 | £21,256 | £190,405 | £471,039 |
| Shareholders' Funds | £78,756 | £21,156 | £190,405 | £471,039 |
| Share Capital | £100 | £100 | £100 | £100 |
The balance sheet tells a concerning story of sustained erosion. The company's equity base has been depleted to a fraction of its historical levels, with the P&L reserve of £78,756 representing the entirety of retained capital beyond the nominal £100 share capital. The near-zero position at FY2025 (net assets of just £21,256) indicated the company was dangerously close to insolvency territory.
Goodwill: The balance sheet carries £800,000 in acquired goodwill (net book value £22,227 after amortisation of £777,773), suggesting the practice was purchased. The 15-year amortisation schedule indicates this acquisition occurred around 2011-2012, coinciding with incorporation. The heavy debt load appears linked to this acquisition.
Gearing: Long-term creditors (£119,909) exceed net assets (£78,856), giving a debt-to-equity ratio of approximately 1.52x. This is elevated for a dental practice and limits financial flexibility.
Tangible Net Worth: Stripping out the remaining goodwill of £22,227 leaves tangible net assets of just £56,629 – an extremely thin cushion for a business with £321,468 in total assets.
3. Cash Flow Assessment
Liquidity – Improved but Volatile
| Metric | FY2026 | FY2025 | FY2024 |
|---|---|---|---|
| Current Assets | £201,007 | £118,965 | £274,606* |
| Current Liabilities | £111,801 | £129,126 | £142,776* |
| Net Current Assets | £89,206 | (£10,161) | £131,830* |
| Cash | £50,268 | £2,199 | £33,836 |
| Current Ratio | 1.80x | 0.92x | 1.92x |
*Estimated from net assets and long-term liabilities data
The FY2025 current ratio of 0.92x was a red flag – the company had negative working capital and only £2,199 in cash. This represented acute liquidity stress. The FY2026 position shows significant improvement with a current ratio of 1.80x and cash of £50,268.
Working Capital Drivers: - Trade debtors increased from £78,233 to £81,736 (modest) - Other debtors jumped significantly from £38,533 to £69,003 – this warrants investigation as it may represent delayed income recognition or related-party balances - Trade creditors are negligible (£1), which is unusual and may indicate the practice operates on a cash/insurance-reimbursement basis - Taxation and social security payable decreased from £60,673 to £50,187
Debt Service: Total bank debt stands at £150,290 (£30,381 current + £119,909 long-term), reduced from £195,379 in FY2025. The £45,089 reduction suggests active debt repayment, which is positive. However, the debt service burden relative to the thin equity base remains a concern.
Cash Volatility: Historical cash positions have been extremely volatile (ranging from £2,199 to £110,068 over the period), raising questions about cash flow predictability and working capital management.
4. Monitoring Points
| Metric | Current | Target/Watch Level | Risk |
|---|---|---|---|
| Net Assets | £78,856 | >£50,000 | Decline toward insolvency |
| Current Ratio | 1.80x | >1.25x | Liquidity stress |
| Cash Position | £50,268 | >£25,000 | Operational continuity |
| Net Debt | £100,022 | Declining trend | Over-leverage |
| Other Debtors | £69,003 | Investigate | Potential quality issues |
| Director Stability | 1 director | Minimum 2 | Key-person risk |
Key Concerns for Ongoing Monitoring:
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Director Resignation: name shown to subscribers resigned on 22 May 2026, leaving name shown to subscribers as sole director. As a 25-50% shareholder, the departing director's ongoing involvement (or lack thereof) and any potential share redemption or extraction should be monitored. The PSC register may require updating.
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Revenue Visibility: The company has opted not to file a Profit & Loss Account (per section 444(1) CA 2006), meaning turnover, gross margin, and operating profit trends are opaque. This significantly limits credit assessment capability. Requesting management accounts should be a condition of any facility.
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Other Debtors: The 79% increase in other debtors to £69,003 requires explanation. This could represent loans to directors, deferred income, or other items that may affect asset quality.
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Sustained Decline Trajectory: One year of improvement does not reverse a nine-year decline. The underlying causes (whether revenue decline, cost inflation, profit extraction, or debt service burden) must be understood.
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Key-Person Risk: As a dental practice, the departure of one of two dentist-directors could materially impact revenue generation capacity.
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Debt Maturity Profile: Understanding when the £119,909 in long-term bank debt matures and the repayment schedule is critical. If large balloon payments are due, this could create future liquidity stress.