TXO SYSTEMS LTD

Credit Opinion: CONDITIONAL

TXO Systems Ltd is not a straightforward approval on current numbers. The balance sheet is strong and there is clear private equity sponsorship, but entity-level trading has deteriorated and cash generation is thin. I would support a facility only if it is properly secured, supported by the wider group, and subject to close financial monitoring. Unsecured lending should be declined.

Financial Strength

• Net assets improved materially to £29.8m at 31 December 2025, up from £16.35m at 30 June 2024. This is a substantial equity buffer and suggests additional group capital was injected, most likely in connection with the AirWay Group acquisition.
• Total liabilities stand at £18.7m, giving a total liability-to-net-asset ratio of roughly 0.63x. That is manageable for a business of this size.
• Equity represents approximately 61% of total assets — a sound capital position on the face of the balance sheet.
• However, the balance sheet may include significant acquisition-related intangibles/goodwill. Tangible asset backing and realisable net worth should be verified before relying on asset cover.
• A clean audit opinion is positive, and the auditor has confirmed no material going concern uncertainty.

Cash Flow Assessment

• Cash is low at £865k, down from £977k — a very narrow buffer for a business reporting £33.4m of revenue over the 18-month period.
• The company made an operating loss of £2.9m. Even after adding back the £1.7m of exceptional costs, the underlying operating result remains a loss. In the prior year it generated an operating profit of £1.7m, so the trend is clearly adverse.
• Revenue on a pro-rated basis declined by 8.2%, and gross margin fell from 41% to 39%. This points to pricing pressure and/or a weaker sales mix.
• The company is reliant on group facilities and intercompany support. The strategic report refers to strong group cash generation, but the standalone entity has limited liquidity of its own.
• Working capital details are not fully visible from the summary. Given the nature of the business — buying and selling telecom equipment — stock and receivables are likely significant. Monthly cash flow and debtor/inventory ageing should be reviewed.

Management Quality

• There has been a high level of director turnover: multiple appointments and resignations between 2024 and 2026, with the current register showing only one active director, Mr J Xxxxxxxname shown to subscribers.
• Some turnover is understandable following a private equity acquisition and restructuring, but it still raises governance and continuity questions.
• The company is under the control of TXO Delta Bidco Limited, ultimately backed by Towerbrook Capital Partners. This can provide financial strength, but it also means decisions may be driven by group strategy rather than the standalone entity.
• A group support letter, intercompany subordination, and guarantee arrangements would be essential conditions of any lending.

Monitoring Points

• Monthly cash position and available headroom under group facilities.
• Revenue and gross margin performance against budget — recovery after two weak periods.
• Movement in trade receivables and debtor days; bad debt experience.
• Stock levels and inventory ageing.
• Operating profit/EBITDA trend; the business needs to return to positive underlying profitability.
• Intercompany loan balances and any evidence of funds being upstreamed to the parent.
• Compliance with financial covenants, if any.
• Integration progress on recent acquisitions, particularly AirWay Group.
• Any further changes in directors or senior finance staff.

executiveSummary
TXO Systems Ltd has a strong, well-capitalised balance sheet and credible parent group backing, but the latest accounts show declining revenue, margin compression, and an underlying operating loss. Cash reserves are too thin for the company’s scale, so any credit facility should be secured, group-supported, and subject to tight monitoring. Conditional approval is appropriate for asset-based or guaranteed lending; unsecured exposure should not be taken in current circumstances.

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