Credit Analysis: TOM BATTYE COACHING LIMITED

1. Credit Opinion: CONDITIONAL

The company demonstrates a solid balance sheet with net assets of £122k and strong liquidity, but the significant deterioration between FY2025 and FY2026 (net assets fell 25.7% from £164,500 to £122,225) requires explanation before full credit confidence can be established. The micro-entity filing status also limits financial visibility. Approval is recommended subject to satisfactory explanation of the recent decline and confirmation that it reflects dividend extraction rather than trading deterioration.

2. Financial Strength

Balance Sheet Summary (FY2026): - Net Assets: £122,225 (down from £164,500 in FY2025) - Share Capital: £1 (nominal) - Retained Earnings: £122,224 (accumulated profits) - Total Liabilities: £25,465 (down from £40,869)

Long-term Trajectory: The company has demonstrated impressive growth over its trading history, with net assets growing from £42 in FY2019 to £164,500 in FY2025 - a remarkable accumulation. This suggests consistent profitability over multiple years.

Recent Decline Concern: The £42,275 drop in net assets year-on-year is material. Without a P&L statement (micro-entity exemption), the cause is unclear. Possible explanations include: - Dividend extraction by the sole shareholder (likely and benign) - Trading losses (concerning if sustained) - Repayment of director loans (positive)

Liability Reduction: Total liabilities have fallen consistently from £46,496 (FY2022) to £25,465 (FY2026), indicating active deleveraging - a positive signal.

Capital Structure: The business is effectively debt-free from a traditional lending perspective, with liabilities likely comprising trade creditors and accrued expenses rather than institutional debt.

3. Cash Flow Assessment

Liquidity Position: - Current Assets: £141,450 (+ £150 prepayments) - Current Liabilities: £25,465 - Current Ratio: 5.6x (exceptionally strong) - Net Current Assets: £116,135

The company has ample headroom to meet short-term obligations. A current ratio above 5x indicates minimal liquidity risk.

Working Capital Quality: Without a breakdown of current assets, we cannot determine the split between cash and trade debtors. A coaching business typically has low receivables and high cash conversion, but this cannot be confirmed from micro-entity accounts.

Cash Generation Inference: The accumulation of £122k in retained profits from a £1 share capital over approximately 16 years suggests strong cumulative cash generation, likely averaging £7-8k per annum retained after dividends.

Debt Service Capacity: With minimal liabilities and no apparent interest-bearing debt, the company has significant capacity to take on and service new debt obligations.

4. Monitoring Points

Key Monitoring Requirements:

1. Clarification of FY2026 Decline: Obtain confirmation from the director whether the £42k reduction represents dividend extraction. If trading losses, request management accounts to assess severity.

2. Key Person Dependency: The business has one employee (the director/owner). Any credit facility should consider the impact of director incapacity. Consider key person insurance as a condition.

3. Revenue Visibility: Request recent management accounts or VAT returns to verify turnover trends, particularly given the asset decline in FY2026.

4. Current Asset Composition: Seek confirmation of cash versus trade debtor balances to assess true liquidity quality.

5. Future Filing Compliance: Continue monitoring that accounts and confirmation statements remain filed on time.

Sector Context: Leadership coaching is discretionary expenditure that tends to be cyclical. Corporate training budgets are typically cut during economic downturns, creating revenue vulnerability. However, the business has survived through COVID-19 and grown substantially, demonstrating some resilience.