SWEAT GUARD LTD

Credit Opinion: CONDITIONAL

The company shows a strong historical track record of growth in net assets, but the latest financial year (2024) reveals a significant reversal: net assets fell 19%, cash dropped by 88%, and retained earnings declined by £92,288, indicating a loss. While the balance sheet remains debt-light and solvent, the sharp deterioration in liquidity and profitability, combined with recent director resignations, introduces moderate risk. Credit could be extended on a secured basis, with a lower facility limit and enhanced monitoring covenants.

Financial Strength

• Net assets peaked at £495,575 in 2023 but fell to £403,287 in 2024 – a drop of £92,288 (18.6%). This is likely due to a trading loss in the year.
• Total liabilities remain low at £44,589 (all current), resulting in a very strong net-asset-to-liability ratio of 9:1. The company is not over-leveraged and has negligible external debt.
• Shareholders’ funds (all retained earnings) have grown from £1,728 in 2015 to over £403k, demonstrating long-term value creation.
• The capital structure is equity-heavy, with no long-term borrowings, giving the business a solid buffer against downturns.

Cash Flow Assessment

• Cash at bank plummeted from £245,288 to £28,783 – a decline of 88% year-on-year. This is a severe liquidity contraction.
• The cash outflow appears to have been partially used to fund a surge in trade debtors (from £180,101 to £357,975, up 99%). This suggests either extended credit terms to customers or potentially slower collections – both cash flow risks.
• Stocks reduced from £94,859 to £56,006, possibly reflecting inventory clearance, but also may indicate lower forward demand.
• Net current assets remain healthy at £398,175, but the composition has shifted heavily toward receivables. If debtor collectability weakens, liquidity could tighten quickly.
• The company has no short-term credit facilities evident on the balance sheet; its working capital is entirely self-funded.

Monitoring Points

1. Cash burn and debtor days – Require quarterly management accounts showing debtor ageing and cash flow forecasts. Any extension of payment terms to customers should be flagged.
2. Profitability recovery – The 2024 loss erased a significant portion of retained reserves. Request profit & loss projections for the next 12 months to confirm a return to profitability.
3. Director changes – Two directors resigned in December 2025 and another in September 2026. Assess succession plans and impact on operational control.
4. Covenants – Consider setting a minimum cash balance (e.g., £50k) and a maximum debtor-to-sales ratio to maintain liquidity headroom.
5. Security – Given the cash and asset base, a fixed charge over debtor book or stock, or a personal guarantee from the remaining directors, would strengthen the facility.