PETER GILDING & CO. LIMITED

Credit Analysis: Peter Gilding & Co. Limited

1. Credit Opinion: APPROVE – CONDITIONAL

Reasoning: The company demonstrates solid payment capability with consistent profit generation (£767k PBT in 2025) and a strong cash position (£2.77m). The balance sheet is equity-funded with shareholders’ funds of £3.76m and a net asset position that, while reduced from prior years, remains healthy. The business has weathered a significant restructuring (consolidation of sites, retirement of founders) and a volatile trading environment (turnover swings from £56m to £23m and back to £26m). Management has shown adaptability and strategic focus, investing in operational efficiency, renewable energy, and geographic diversification. The condition is warranted due to declining net assets and margin compression, requiring ongoing monitoring of leverage and working capital.

2. Financial Strength

• Net Assets: £3.76m (2025) vs £5.96m (2024) – a decline of 37%. This is partly due to asset disposals (sale of older buildings) and dividends (£26k declared). The retained earnings position (P&L reserve not separately shown but implied in shareholders’ funds) has absorbed the reduction.
• Capital Structure: Total assets £10.5m against total liabilities £6.5m gives a debt-to-asset ratio of 62%. With no apparent bank debt highlighted, most liabilities are likely trade creditors and other payables. Equity accounts for 36% of total assets – adequate but worth watching if leverage increases.
• Shareholders’ Funds: £3.76m on paid-up share capital of £9,375 – substantial reserves built over decades. Majority owner Xxxxxx Xxxxxxxxname shown to subscribers (>75% control) provides stability.
• Tangible Net Worth: Appears solid; fixed assets likely include the new packhouse, solar panels, and remaining property. No indication of intangible dominance.

Assessment: Balance sheet is moderately leveraged, but the company holds significant cash (£2.77m) which could be used to reduce liabilities if needed. The decline in net assets year-on-year requires attention – likely a temporary effect of restructuring.

3. Cash Flow Assessment

• Cash Position: £2.77m (2025) down from £3.90m (2024) and £4.51m (2023). The cash burn is consistent with capital expenditure (new packhouse, solar panels) and the trading environment. Still, cash represents 26% of total assets – strong liquidity.
• Working Capital Indicators: Management monitors debtor days, creditor days, and stock turnover. Strategic report mentions credit insurance and strict credit control. With turnover of £26.4m and cash of £2.77m, the cash conversion cycle appears manageable.
• Internally Generated Cash Flow: CAPEX is funded from operations – a positive sign. PBT of £767k, after tax and depreciation, suggests free cash flow generation sufficient to service new debt without strain.
• Liquidity Risk: The company has a long-standing relationship with Barclays and periodically reviews debt requirements and headroom. No drawn debt mentioned, implying undrawn facilities or clean balance sheet.

Assessment: Cash flow is adequate. The decline in cash is explained by investment, not distress. The ability to self-fund CAPEX is a strong credit positive. However, margin pressure (gross profit 16.0% vs 17.5% last year) could squeeze cash generation if volumes drop further.

4. Monitoring Points

• Net Asset Trajectory: Continue to track shareholders’ funds – a further decline could signal erosion of the capital base. Covenant suggestions: maintain net assets above £3.0m.
• Gross Margin & Profitability: Monitor gross profit margin and PBT trends. Current margin is under pressure from supermarket competition and oversupply. A sustained fall below 14% would be concerning.
• Cash Conversion: Watch debtor days and stock turnover. With fresh produce, stock is perishable – any slowdown in inventory turnover could indicate demand issues.
• Leverage Ratios: While total liabilities are 62% of assets, any new borrowing should be capped relative to EBITDA (not provided but estimated around £1m). Suggest a debt/EBITDA covenant of ≤3x.
• Director Succession: Founders retired in 2025. New director appointment (Mrs J Gilding) is positive, but ensure management continuity is documented. The departure of key personnel is flagged as a risk.
• Turnover Volatility: Revenue has swung widely (2023: £45.7m, 2024: £23.4m, 2025: £26.4m). Fluctuations are partly due to supply chain disruption and strategic decisions. Need to understand normalised revenue run-rate.
• Related Party Transactions: With majority ownership, ensure all transactions with PSCs are at arm’s length – not currently a flagged issue, but standard due diligence.

Executive Summary

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