Credit Assessment: Progressive Audio Visual Limited (CH 05006803)

Facility under consideration: Unsecured SME credit facilities Basis of assessment: Filed abridged accounts to 31 January 2025, statutory filings, and Companies House record. No management accounts, no P&L (correctly omitted under s444(2A)), no bank statements or aged debtor/creditor ledgers were available.

1. Credit Opinion: DECLINE

Reasoning:

The company is balance sheet insolvent. Shareholders' funds stand at negative £41,400 at 31 January 2025, with accumulated losses of £41,403 against £3 of issued share capital. On a strict net-asset test there is no equity cushion to absorb any adverse event — a single bad debt, stock write-off, or loss of a key customer pushes the position further negative, and there is no realistic prospect of the company trading back to positive net worth on current trajectory.

The balance sheet has contracted hard: total assets have fallen from £162,020 (FY2018) to £25,342 (FY2025) — an 84% reduction. Net assets moved from +£22,012 to −£41,400 over the same period. This is not a cyclical dip; it is sustained erosion.

Critically, the FY2025 improvement in liquidity was debt-funded, not earned. Cash rose £18,189 while long-term creditors rose £15,678 and retained profit contributed only c.£1,204. The company is plugging a working capital shortfall with borrowed money — the classic pattern we see ahead of a stress event in micro-retail.

There is also a material information gap: turnover, gross margin, and profitability are not disclosed. We cannot calculate interest cover, DSCR, or EBITDA. Lending without that visibility on a negative-equity borrower is not defensible.

What would change the view: 3 years of management accounts showing turnover ≥£250k and consistent pre-tax profit; confirmation that the £39,477 long-term creditor is a director's loan that is formally subordinated and undated; a personal guarantee from Mr L J Xxxxxxxname shown to subscribers supported by a statement of personal assets; and a debenture or asset security. On that basis a small, secured, PG-backed trade facility (low four figures) could be revisited. Unsecured lending: no.

2. Financial Strength

Reconciled position (per filed balance sheet, FY2025):

Note on data quality: the summary financial history supplied records "total liabilities" of £39,477 for FY2025, which reconciles only to the long-term creditor line. True total liabilities per the filed accounts are £66,742. I have used the filed balance sheet throughout. Any internal model drawing on the summary field would materially understate leverage.

Key ratios (FY2025): - Current ratio: 0.93x (FY2024: 0.40x) — still below 1.0, i.e. short-term obligations exceed short-term resources - Cash ratio: 0.76x — cash covers three-quarters of current liabilities; the balance depends on stock realisation - Quick ratio: 0.76x (no debtors to fall back on) - Gearing: not meaningful — negative equity - Fixed asset cover: effectively nil (fully depreciated, £1 NBV)

Assessment: The balance sheet is a shell. There is no tangible asset base, no freehold, no debtor book, and stock of only £4,500. Recovery on default would be negligible — this is effectively an unsecured exposure with no realistic exit. The one genuinely positive signal is that net current liabilities narrowed from £18,806 to £1,924, which shows the directors have actively managed the creditor position down. That is competent cash husbandry, but it is husbandry of a very small ship.

Scale: Two employees, micro-entity thresholds, £3 share capital. The company has no capacity to absorb a facility of any meaningful size.

3. Cash Flow Assessment

Liquidity: Cash of £20,841 is the strongest element of the file and represents a genuine improvement from £2,652. However, the source of that cash is the issue.

Cash flow bridge, FY2024 → FY2025:

Read plainly: 77% of the year's cash build came from new long-term borrowing, not trading. The company also paid down £4,245 of short-term creditors, which is prudent but consumed cash. On the disclosed numbers, underlying operating cash generation was broadly neutral to marginally positive.

Working capital: Net current liabilities of £1,924 mean the company is technically reliant on creditor forbearance to meet its day-to-day obligations. Day-to-day solvency is being maintained through the long-term creditor line — we need to know whether that creditor can demand repayment. If it is a director's loan, continued support is plausible but entirely discretionary and unprotected in an insolvency. If it is a third-party lender, there may be covenants or a repayment schedule we cannot see.

Volatility: The cash profile is erratic — £50,620 (FY2017), £508 (FY2018), £34,520 (FY2021), £2,652 (FY2024), £20,841 (FY2025). Swings of this magnitude on a £25k balance sheet indicate very thin operating margins and a business living hand-to-mouth on seasonal timing. Any facility would be drawn against a highly unpredictable liquidity profile.

Debt service: Unassessable. No interest line, no P&L. We cannot demonstrate that the company can service incremental debt — a fundamental barrier to approval.

4. Monitoring Points

If the relationship proceeds in any form (secured trade facility, or as a supplier exposure), track the following:

1. Nature and terms of the £39,477 long-term creditor — the single most important unknown. Confirm lender identity, whether it is a director's loan, whether it is subordinated, whether interest is accruing, and whether it is repayable on demand. Obtain a letter of subordination or written confirmation of no fixed repayment date.

2. Net current asset position — the FY2025 figure of −£1,924 must move sustainably positive. A return to the FY2024 level of −£18,806 would be an immediate trigger for withdrawal.

3. Cash cover of current liabilities — currently 0.76x. Flag any month where cash falls below 50% of current liabilities.

4. Filing compliance — currently clean: accounts to 31 Jan 2026 not yet due, confirmation statement not overdue. Any late filing or gazette notice is a red flag given the thin equity base.

5. Turnover and margin disclosure — request management accounts annually. Without revenue visibility this is an unmonitorable exposure. Watch specifically for any indication that gross margin is being sacrificed to hold volume.

6. Director conduct and related-party flows — Xxxxxx Xxxxxxxxname shown to subscribers holds 50–75% of shares, >75% of votes, and the right to appoint/remove directors; he is also company secretary. There is no disqualification record, which is reassuring. However, monitor for further director lending into (or drawings out of) the company — drawings would be a serious deterioration signal.

7. Sector exposure — SIC 47430 (specialist audio/video retail) faces structural pressure from online competition and discretionary consumer spend. Watch for stock ageing (£4,500 flat for two years suggests slow-moving lines) and any shift to lower-margin product mix.

8. Debtor book — nil at year end. If trade debtors reappear, obtain an aged listing and credit-check the top three accounts.

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